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SONY COMPUTER ENTERTAINMENT v. NIPPON EXPRESS CO.

April 9, 2004.

SONY COMPUTER ENTERTAINMENT INC., SONY COMPUTER ENTERTAINMENT AMERICA and MITSUI SUMITOMO INSURANCE CO., LTD., Plaintiffs
v.
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 Hyundai.

  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.

  Discussion

  1. Jurisdiction

  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 carriers.
  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 consequential damages.
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 avoiding it").

  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 defendants).

 
3. Application of "law of that country" to the Inland Loss
  Clause 7.3 is an alternative liability provision, under which the application of the particular ...

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