United States District Court, S.D. New York
April 9, 2004.
SONY COMPUTER ENTERTAINMENT INC., SONY COMPUTER ENTERTAINMENT AMERICA and MITSUI SUMITOMO INSURANCE CO., LTD., Plaintiffs
NIPPON EXPRESS CO., LTD. NIPPON EXPRESS U.S.A. (ILLINOIS) INC., Defendants and Third-Party Plaintiffs v. NORFOLK SOUTHERN RAILWAY COMPANY, HYUNDAI MERCHANT MARINE CO., LTD., and H & M INTERNATIONAL TRANSPORTATION INC., Third-Party Defendants
The opinion of the court was delivered by: LOUIS STANTON, District Judge
Memorandum and Order
Plaintiffs move for partial summary judgment holding defendant Nippon
Express U.S.A. (Illinois) Inc. ("Nippon") liable for the full amount of
the plaintiffs' actual loss. Nippon cross-moves for summary judgment
holding that Nippon's liability is limited. Nippon does not contest that
the loss was caused by its agent Norfolk Southern's negligence. Facts
Plaintiff Sony Computer Entertainment engaged Nippon to deliver four
containers of Sony Playstation game platforms from Japan to Sony Computer
Entertainment America in Pitman, New Jersey. Nippon issued two waybills
for the transport and delivery of the containers; the waybills
incorporated by reference Nippon's standard bill of lading. Nippon, a
non-vessel-operating common carrier, in turn engaged Hyundai Merchant
Marine Co. ("Hyundai") to carry the containers from Tokyo to a U.S. east
coast container yard. Hyundai issued its own bill of lading to Nippon.
Hyundai transported the containers to Seattle by ship, from Seattle to
Chicago via the Burlington Northern Santa Fe Railroad, and from Chicago
to Croxton Yard in New Jersey via the Norfolk Southern Railway. Norfolk
Southern issued EDI (Electronic Data Interchange) waybills, incorporating
by reference the Norfolk Southern Circular in effect at the time, to
On the nights of October 22 and 23, 2001, unknown persons entered the
open rear gate of Croxton Yard with tractors and stole two of the four
containers, holding 1908 cartons of Playstations claimed to be worth over $1,300,000. The containers were in Norfolk Southern's custody at
the time of the theft.
Plaintiffs first sued Norfolk Southern, who claimed the benefit of a
clause in its Circular that it asserted limited its liability to
$500,000. Plaintiffs ultimately settled with Norfolk Southern for that
amount. They now sue Nippon for the balance of their loss.
The court has diversity jurisdiction pursuant to 28 U.S.C. § 1332.
Plaintiffs Sony Computer Entertainment and Mitsui Sumitomo Insurance are
Japanese corporations, and Sony Computer Entertainment America is a
California corporation. Defendant Nippon is an Illinois corporation. This
action has been discontinued, by stipulation, as against named defendant
Nippon Express Co., Ltd. The citizenship of Hyundai and Norfolk Southern
is immaterial because, as impleaded parties, they "fall within the
ancillary jurisdiction of the courts and thus do not affect the court's
original determination of whether diversity exists." 13B Wright &
Miller, Federal Practice and Procedure § 3608, at pp. 453-44 (1984); see also Fidelity
and Deposit Co. v. City of Sheboygan Falls, 713 F.2d 1261, 1266 (7th
Cir. 1983). The matter in controversy exceeds $75,000.
2. The Package Limitation
Nippon's bill of lading contains what is known as a Himalaya Clause,
which states that:
"Carrier" means Nippon Express U.S.A. (Illinois),
Inc., the Underlying Carrier, the ship, her owner,
Master, demise charterer, and if bound thereby,
the time charterer and any substitute carrier,
whether the owner, operator, charterer or Master
shall be acting as carrier or bailee, as well as
any of the agents, servants, and/or employees of
the foregoing parties, including, but not limited
to, stevedores, container yards, container freight
stations, intermodal inland carriers (rail, truck,
local truckers, and barge).
The effect of the Himalaya Clause is to include all the agents and
sub-contractors of the carrier within the terms of the initial bill of
lading. Here, the clause explicitly includes intermodal inland rail
Nippon's bill of lading also contains a clause that caps its potential
liability. Clause 8.2(a) states that:
Compensation shall not, however, exceed U.S.
$500.00 per container, package, or unit unless
with the consent of the Carrier, the Merchant has
declared a higher value for the goods, such higher
value has been stated in the space provided on
this Bill of Lading, ad valorem, freight shall be
paid, in which case such higher value shall be the limit. However, the
Carrier shall not, in any case, be liable for an
amount greater than the actual loss to the person
entitled to make the claim and the Carrier will
not be liable for a claim for lost profits or
That clause's $500 per package limitation mirrors the $500 per package
limitation on liability in the Carriage of Goods by Sea Act,
46 U.S.C. § 1304(5) ("COGSA").
In addition to the language in Clause 8.2(a) discussing the Ad Valorem
rate, Nippon's Waybill has a place on its front for the shipper to
declare value. In the box headlined "Particulars Furnished by Shipper,"
there is the following line: "Declared Value USD ______. If Merchant
enters a value, the Ad Valorem rate will be charged." Sony Computer is an
experienced shipper who used Nippon many times in the past. The waybill
provided fair opportunity for Sony to avoid the $500 per unit limitation
by declaring a higher value and paying a higher price. See General
Electric Co. v. MV Nedlloyd, 817 F.2d 1022, 1029 (2nd Cir. 1987)
("the language on the back of the Nedlloyd document incorporating COGSA's
provisions and the space for declaring excess value on the front are
sufficient notice of the limitation of liability and the means of
Plaintiff has lost 1908 cartons, thus capping potential liability under
the bill of lading at $954,000. The limitation clause, combined with the Himalaya Clause, limits
the liability of "the Carrier" (collectively Nippon, and its agents
Hyundai and Norfolk Southern) to $954,000. Nippon is thus potentially
liable for only $454,000, because Norfolk Southern has already paid
$500,000 to the plaintiff. See Thyssen, Inc. v. S.S. Eurounity,
21 F.3d 533, 540-541 (2nd Cir. 1994) (the COGSA $500 limitation
"establishes that a plaintiff is entitled to a single recovery not to
exceed the equivalent of $500 per package" even if there are multiple
3. Application of "law of that country" to the Inland
Clause 7.3 is an alternative liability provision, under which the
application of the particular principles governing liability depends on
the location of the loss:
If it can be proved where the loss or damage
occurred, the liability of the Carrier for the
loss or damage to the goods will be as follows:
(a) With resp ect to loss or dama ge occurring
duri ng the period of carriage by sea, to
the extent prescribed by COGS A or the
applicab le national legi slat ion of othe r
nati ons, as provided for [in] Clause 3 (Par
amou nt Clause) here of and in accordan ce
with this Bill of Lading.
(b) With respect to loss or damage occurring
during the period of carriage by land or
inland waterways in any country for which this
carrier has assumed responsibility of carriage,
in accordance with the applicable law of that
country, the inland carrier's contract s
of carriage and tariffs in force, and this
Bill of Ladi ng.
The parties suggest various arguments as to what the applicable law is,
referring to (a) COGSA, and (b) the Harter Act, and (c) the Carmack
Under the heading "PARAMOUNT CLAUSE," Clause 3.1 of the bill of lading
Except as otherwise provided herein, for shipments
by sea originating from or destined to the United
States of America, its territories or possessions
and between coastal port [sic.], this
Bill of Lading shall have affect [sic.]
subject to the provisions of the Carriage of Goods
by Sea Act of the United States of America,
approved April 16, 1936 (COGSA), 46 U.S.C. § 1300-1315,
which is incorporated herein and made a
part hereof, and nothing herein contained shall be
[a] surrender by the Carrier of any of its rights
and immunities or an increase of any of its
responsibilities, liabilities, or limitation of
liability under said Act.
Clause 3.2 further provides that:
The provisions stated in said Act except as
specifically provided otherwise herein shall
govern before loading on and after discharge from
the vessel and throughout the entire time the
Goods are in the custody of the Carrier.
Thus, by contract COGSA applies to all the stages of the shipment,
including the loss in the Croxton Yard. "COGSA only applies by its own force, however, during `the period from the
time when the goods are loaded on to the time when they are discharged
from the ship.'" See Hartford Fire Insurance Co. v. Orient Overseas
Containers Lines (UK) Ltd., 230 F.3d 549
, 557 (2nd Cir. 2000);
46 U.S.C. § 1301 (e), 1302. Therefore to the extent COGSA applies
to this loss, it applies only by contract, not by its own force, as the
loss occurred during inland transport.
Application of COGSA to this inland loss thus adds a separate,
consistent source of the $500 per package limitation.
b) Harter Act, 46 U.S.C. § 190
This Act, which forbids clauses relieving vessels of liability for
damage to cargo, was largely superseded by COGSA and does not apply here.
Harter "governs the responsibilities of carriers until `proper delivery'
of the cargo has been made." Colgate Palmolive Co. v. M/V "Atlantic
Conveyor," 1996 WL 742861, at *3 (S.D.N.Y. Dec. 1, 1996). "Proper
delivery occurs when the cargo is ready for inland transport."
Id. at *5. The loss here occurred following cross-country
transport to New Jersey, long after the cargo was prepared for inland transport under the meaning of
the Harter Act, so it does not apply.
c) The Carmack Amendment
The Carmack Amendment, 49 U.S.C. § 11706, governs the liability of
rail carriers such as Norfolk Southern. Under § 11706(e), rail
carriers are liable "for the actual loss or injury to the property."
Section 11706(c)(1) provides that:
A rail carrier may not limit or be exempt from
liability imposed under subsection (a) of this
section except as provided in this subsection. A
limitation of liability or of the amount of
recovery or representation or agreement in a
receipt, bill of lading, contract, or rule in
violation of this section is void.
The effect of that provision in § 11706, however, is diluted by the
Staggers Rail Act, 49 U.S.C. § 10502 (e), which provides: "Nothing in
this subsection or section 11706 of this title shall prevent rail
carriers from offering alternative terms."
Norfolk Southern sets out such alternative terms in Section 8.2.1(3) of
NS offers two alternative liability provisions:
"Standard" liability and "Carmack" liability.
UNLESS LANGUAGE EXPRESSLY SELECTING "CARMACK" IS
INCLUDED IN THE ORIGINAL SHIPPING INSTRUCTIONS,
ANY TENDER OF FREIGHT FOR TRANSPORTATION UNDER
THIS CIRCULAR WILL BE ACCEPTED UNDER "STANDARD" LIABILITY COVERAGE
PROVIDED AND NOT UNDER "CARMACK" COVERAGE.
Since it appears that "Carmack" coverage was not selected, the
Playstations were shipped under Norfolk Southern's "Standard" coverage,
which is legitimate under the Staggers Rail Act, and therefore §
11706(c)(1) of the Carmack Amendment does not affect the validity of the
No "applicable law of that country" under Clause 7.3(b) of the bill of
lading affects Nippon's liability for the inland loss.
4. Effect of Norfolk Southern's $250,000 Liability
Norfolk Southern's "Standard" liability coverage is described in
Section 8.3.3(e) of its Circular under the heading "Standard Liability
Provisions and Restrictions":
Unless amended by written agreement signed by an
authorized NS official prior to shipment (see
"Counteroffer" in Terms and Conditions" in
"General Contract Conditions" section), NS's
liability for loss, damage or delay to any
shipments under this circular shall be limited to
the lesser of the destination value of the cargo
Nippon argues that this $500,000 limit (two containers at $250,000
each) is all that plaintiffs may recover from this loss. Since they have been paid $500,000 by Norfolk Southern, says
Nippon, they can recover nothing further from Nippon.
Nothing in Norfolk's Circular extends Norfolk's liability limitation to
Nippon.*fn1 Norfolk's Circular deals only with Norfolk Southern's
liability, and does not purport to address the relationship between the
shipper and Nippon.
The relevant provision in Nippon's bill of lading is Clause 7.3(b). It
provides that the liability of the Carrier will be " . . . in
accordance with the inland carrier's contracts of carriage and tariffs in
force" as well as with the "law of that country" and with "this Bill of
Lading." Nippon argues that the reference to the inland carrier's [i.e.
Norfolk Southern's] contract of carriage adopts Norfolk's liability
limitation clause as the one between plaintiffs and Nippon. To give such
an effect to the reference to the inland carrier's "contracts of
carriage" would annul the specific $500 limitations of liability to which
the parties agreed in Nippon's bill of lading, and which is required by
COGSA, which the parties agreed would apply. As stated above, Nippon's bill of lading not only stipulated the $500
limitation as one of its own terms, it also specified in Clause 3.2 that
"except as specifically provided otherwise herein," COGSA would apply to
inland as well as ocean losses "throughout the entire time the goods are
in the custody of the carrier."
The allusion to the inland carrier's contracts was general, as one of
three items to be considered in determining the liability of the carrier
(the other two being the law of that country and the terms of Nippon's
bill of lading). That broad reference is not specific enough to qualify
the Norfolk Southern's different liability limitation as one
"specifically provided otherwise herein" and thus sub
silentio emasculate the $500 figure in COGSA. Furthermore, the
clause allowing for exceptions, if "specifically provided," applies only
to the effect to be given COGSA. The bill of lading nowhere allows an
exception to its own specific $500 limitation, which use of the Norfolk
figure would flatly contradict.
Accordingly, the limitation in Norfolk Southern's circular does not
reduce the amount specified in Nippon's contract with the plaintiffs,
although the actual amount paid by Norfolk Southern is properly deducted
from the amount otherwise to be paid by Nippon. Conclusion
Defendant Nippon's liability is limited to a sum not exceeding the
principal amount of $454,000. Pursuant to the agreement of the parties,
the proof of the actual amount of damages will take place later.