Norfolk Southern Railway Company v. James N. Kirby, Proprietary Limited

PETITIONER: Norfolk Southern Railway Company
RESPONDENT: James N. Kirby, Pty Ltd., dba Kirby Engineering, and Allianz Australia Insurance Limited
LOCATION: City of New London Town Hall

DOCKET NO.: 02-1028
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Eleventh Circuit

CITATION: 543 US 14 (2004)
GRANTED: Jan 09, 2004
ARGUED: Oct 06, 2004
DECIDED: Nov 09, 2004

ADVOCATES:
Carter G. Phillips - argued the cause for Petitioner
David C. Frederick - argued the cause for Respondents
Deputy Solicitor General Hungar - argued the cause for the United States as amicus curiae urging reversal
Thomas G. Hungar - argued the cause for Petitioner, on behalf of the United States, as amicus curiae

Facts of the case

James Kirby hired International Cargo Control (ICC) as a shipping intermediary to arrange a shipment of goods from Australia to Alabama. ICC issued Kirby a bill of lading (a contract that set shipping terms). The bill invoked liability limitations provided by the Carriage of Goods by Sea Act (COGSA). The bill also included a Himalaya Clause, which extended ICC's limitations of liability to companies ICC hired. ICC hired Hamburg Sud to transport the goods. Hamburg Sud issued ICC a bill of lading that also invoked COGSA protections and included a Himalaya Clause. Hamburg Sud carried the goods on a ship to Georgia and subcontracted Norfolk Southern Railroad to transport the goods inland to Alabama.

The train derailed and Kirby sued Norfolk Southern to recover the $1.5 million in damages he claimed the derailment caused his goods. The district court ruled Norfolk Southern could limit its liability to Kirby on the basis of the Himalaya clause in the Hamburg Sud contract. The 11th Circuit Court of Appeals reversed and ruled the Hamburg Sud bill did not limit Norfolk Southern's liability to Kirby because Kirby was not bound by its terms.

Question

  1. Did federal law govern the interpretation of the ICC and Hamburg Sud bills of lading (contracts)? 2. Was Norfolk entitled to the protection of the liability limitations in both bills?

Media for Norfolk Southern Railway Company v. James N. Kirby, Proprietary Limited

Audio Transcription for Oral Argument - October 06, 2004 in Norfolk Southern Railway Company v. James N. Kirby, Proprietary Limited

Audio Transcription for Opinion Announcement - November 09, 2004 in Norfolk Southern Railway Company v. James N. Kirby, Proprietary Limited

John Paul Stevens:

The opinion of the Court in Norfolk Southern Railway against Kirby Engineering will be announced by Justice O'Connor.

Sandra Day O'Connor:

This case comes to us on writ of certiorari to the Court of Appeals for the Eleventh Circuit.

This is a maritime case about a train wreck.

James Kirby, an Australian Manufacturing Company, sold 10 containers of machinery to a General Motors plant located outside Huntsville, Alabama.

It hired International Cargo Control, which I will call ICC, an Australian freight forwarding company, to arrange the delivery.

Because it does not itself actually moved cargo, ICC then hired Hamburg Sud, a German ocean shipping company to transport the machinery.

Hamburg Sud intern hired Norfolk Southern Railway to transport the machinery on its final leg from the port in Savannah, Georgia to the destination in Huntsville.

The Norfolk train carrying the goods derailed in route causing an alleged 1.5 million in damages.

Kirby and its insurers sued Norfolk Railroad in Federal District Court in Georgia alleging tort and contract claims.

Norfolk argued that Kirby's potential recovery could not exceed the amounts set forth in the liability limitations in the two contracts negotiated for the machinery's carriage, a contract between Kirby and ICC, and a contract between ICC and Hamburg Sud.

The District Court granted Norfolks motion for partial summary judgment.

A divided panel of the Eleventh Circuit reversed.

In an opinion filed with the Clerk of the Court today, we reverse the Eleventh Circuit judgment.

As a preliminary matter, we hold that federal law governs the interpretation of the two contracts at issue.

We think that the two contracts here are maritime contracts because their primary objective is to accomplish the transportation of goods by sea from Australia to the eastern coast of the United States.

While some state and Australian concerns are certainly implicated, they cannot be accommodated without defeating the federal interest in preserving the uniform meaning of maritime contracts and the uniformity of maritime law more generally.

Turning to the merits, we hold that Norfolk can take a shelter in the liability limitations contained in both of the contracts or as the shipping industry calls them, Bills of Lading.

The first bill of lading that ICC issued to Kirby says that its liability limitation should extend to any servant agent or other person including any independent contractor whose services have been used in order to perform the contract.

The plain language of that clause indicates that per its intent to extend liability limitations broadly.

Hunstville is about 366 miles inland from Savannah, and the parties must have anticipated that a land carrier services would be necessary for the contract's performance.

It is clear to us that a railroad like Norfolk was an intended beneficiary of the broadly written clause.

The second bill of lading that Hamburg Sud issued to ICC extends the limitation of the carriage of goods by Sea Act the limit of $500 per package unless expressly provided otherwise to potential damages on land in the course of delivery.

Applying a rule for our precedent about common carriage, we hold that Kirby is bound by the liability limitation in the contract between Hamburg Sud and the ICC.

While ICC was not Kirby's agent in every sense, it was for a single limited purpose in negotiating down stream limitations on liability.

Thus, it was able to bind Kirby when making a contract with Hamburg Sud about liability.

This rule tracks practices in the international shipping industry.

It promotes non-discrimination on common carriage and we think, produces an equitable result.

Accordingly, Kirby cannot recover more than $500 per package from Norfolk and the judgment is unanimous.