Saturday, May 17, 2014

Norfolk Southern Railway Co. v. Kirby case brief summary

Norfolk Southern Railway Co. v. James N. Kirby Pty Ltd (2004)
  • Contract of carriage included a land transport segment that was more than “incidental” and a train wreck ensued
  • Kirby, an Australian Co., sold machinery to the GM plant in Huntsville, AL.  Kirby hired ICC to arrange for delivery. ICC issued a bill of lading to Kirby. ICC hired Hamburg to transport the goods.  Hamburg in turn hired Norfolk Southern for the land portion of transportation.  The train derailed and Kirby and its insurance company sued Norfolk for the value of the machinery (note that Kirby had separately insured the cargo and under the bills of lading the carriers were limited in liability through the Carriage of Goods by Sea Act which limited to $500 per package)
    • District court held Norfolk’s liability limited to $500 under COGSA; 11th Circuit reversed
  • “the shore is now an artificial place to draw a line. Maritime commerce has evolved along with the nature of transportation and is often inseparable from some land-based obligations. The international transportation industry clearly has moved into a new era –the age of multimodalism, door-to-door transport based on efficient use of all available modes of transportation by air, water, and land.”
  • “Conceptually, so long as a bill of lading requires substantial carriage of goods by sea, its purpose is to effectuate maritime commerce – and thus it is a maritime contract.  Its character as a maritime contract is not defeated simply because it also provides for some land carriage.”
  • Test: “If a bill’s sea components are insubstantial, then the bill is not a maritime contract.”

Norfolk Southern Railway Co. v. Kirby - Kirby sold 10 containers of machinery to GM plant in Huntsville. Kirby hired International Cargo Control – ICC to arrange for “through” delivery. ICC issued BoL to Kirby.  Kirby accepted contractual liability limitation for ICC below the machinery’s true value= $500 if damaged at sea - Other amount by land – 666.67 Special Drawing Rights. ICC hired Hamburg Sud to transport the containers. BoL adopts Cogsa rule -$500. Hamburg hired Norfolk to get the goods from Savannah to Huntsville.  Norfolk train derailed causing $1.5M in damages. Kirby and its Insurance Company sued Norfolk. Norfolk argued that Kirby could not get more than what was limited.
·         Did the $500 limitation in the ICC apply to the land carrier?
o   Yes. The ICC Bill’s Himalaya Clause  stipulated that the conditions for limited liability apply to claims relating to performance of the contract against any servant, agent or other person, whose services have been used to perform the contract
o   BoLs should be interpreted like any other contracts – Herd
·         Did the $500 limitation in the Hamburg bill of lading apply to Norfolk although neither the seller nor its agent ICC had any relationship with it?
o   Yes. When an intermediary contracts with a carrier to transport goods , the cargo owner’s recovery against the carrier is limited by the liability limitation to which the intermediary and carrier agreed
o   Not agent in the classic sense but agent for a single purpose
§  Intermediaries entrusted with goods are “agents” only in their ability to contract for liability limitations with carriers downstream
·         Carriers may not know when they are dealing with an intermediary rather than a cargo owner
·         If liability limitations with owners were reliable while those with intermediaries were not, carriers would likely want to charge the latter higher rates
·         Transaction costs would increase if we required a seller to know every party it relies on – Kirby can protect the difference with insurance


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