(Dow Jones Newswires circulated the following story by Kristina Peterson on October 20, 2009.)
WASHINGTON, D.C. — The U.S. Supreme Court agreed Tuesday to consider an appeal from a Union Pacific Corp. (UNP) unit and a Japanese shipping agency seeking to resolve claims with several insurance companies over goods damaged during the land portion of an overseas journey.
In order to streamline international commerce, shippers often subcontract with different companies to transport and insure cargo on land and sea. At issue in this case, Union Pacific Railroad Co. v. Regal-Beloit Corp., is whether an international maritime treaty, a domestic law or private contracts should determine who bears liability for goods damaged while traveling inland.
Two Wisconsin companies and their foreign insurers sued the Union Pacific Railroad, the Kawasaki Kisen Kaisha Ltd. (9107.TO) shipping agency and its U.S. unit, K-Line America Inc., in 2005 after cargo traveling from Shanghai and Hong Kong to the U.S. was allegedly damaged when the Union Pacific train derailed in Oklahoma.
When the Wisconsin companies sued the railway and shipping company, the defendants said the parties agreed to a subcontract that specified lower liability and that disputes must be heard in Tokyo courts. But the cargo companies argued that a domestic law applies to the cargo’s travel on land. Under that law, the defendants would be responsible for paying higher damages and disputes would be heard in the U.S.
The Los Angeles District Court ruled in favor of Union Pacific, recognizing the subcontracts as valid. But on appeal, the 9th U.S. Circuit Court of Appeals in San Francisco reversed the decision, ruling that carriers could not make contracts clashing with the domestic law.
The Ninth Circuit sent the case back to the lower level to determine if the railway had at least initially offered the required minimum liability protections, which Union Pacific claims to have done.
The case is Union Pacific Railroad Company v. Regal-Beloit Corp., 08-1554.