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AMER. HOME ASS. CO. v. HAPAG LLOYD CONT. LINIE

United States District Court, S.D. New York


July 19, 2004.

AMERICAN HOME ASSURANCE COMPANY A/S/O CATERPILLAR, INC., Plaintiff,
v.
HAPAG LLOYD CONTAINER LINIE, GMBH; DANZAS, INC.; BURLINGTON NORTHERN AND SANTE FE RAILWAY COMPANY AND MATSON INTERMODAL SYSTEM, Defendants.

The opinion of the court was delivered by: SHIRA SCHEINDLIN, District Judge

OPINION AND ORDER

I. INTRODUCTION

  American Home Assurance Company ("American Home"), insurer for Caterpillar, Inc. ("Caterpillar"), filed this breach of contract, bailment, and tort action against Danzas AEI ("Danzas"), Hapag Lloyd Container Linie, GmbH ("Hapag Lloyd"), Matson Intermodal Systems ("Matson"), and Burlington Northern and Sante Fe Railway Company ("BNSF") on July 23, 2003. American Home seeks to recover for damage to Caterpillar's goods as a result of a train derailment that occurred while the goods were in transit between Illinois and Singapore.

  American Home now moves for partial summary judgment, seeking to strike BNSF's limitation of liability defense. American Home submits that no factual dispute exists and that it is entitled to judgment against BNSF as a matter of law because BNSF's agreement with Matson, containing a limitation of liability clause, does not bind Caterpillar. BNSF opposes American Home's motion and cross-moves for partial summary judgment on its right to limit liability. In support of its cross-motion, BNSF contends that no factual dispute exists and that BNSF's agreement with Matson validly limits BNSF's liability to American Home to $500.00 per package of cargo.

  II. FACTS

  A. The Claim

  American Home seeks $234,536.00 for the total loss, during shipment, of cargo owned by Caterpillar. The cargo, two engines and spare parts, originated in Morton, Illinois, and was damaged while en route to Singapore. The damage occurred when the BNSF train carrying the cargo derailed between Chicago and Long Beach, California.*fn1 Long Beach was the port of departure for the vessel scheduled to carry the goods to Singapore.*fn2

  B. The Parties

  American Home is a U.S. corporation with an office in New York City. Hapag Lloyd is a foreign corporation with an office in Piscataway, New Jersey. Danzas is a foreign corporation with an office in Newark, New Jersey. Matson is a U.S. corporation with an office in San Francisco, California. BNSF is a U.S. corporation with an office in Topeka, Kansas.*fn3

  C. The Contractual Relationship

  Caterpillar booked the entire Illinois-Singapore shipment of the two engines and spare parts with defendant Danzas.*fn4 Danzas then contracted with Hapag Lloyd, with whom Caterpillar had a service contract, to transport the cargo from Chicago to Singapore, via California. Hapag Lloyd, in turn, hired Matson to arrange the Chicago-California leg.*fn5 Matson then employed BNSF for the rail transportation between Chicago and Los Angeles.*fn6

  D. The Contracts

  The agreement between BNSF and Matson contains a provision, Item 62(3), which states that "the liability of BNSF will be no greater than" Hapag Lloyd's liability for shipments that "move[] under the terms of a through intermodal ocean bill of lading."*fn7 A separate agreement, the Express Cargo Bill, contains provisions concerning Hapag Lloyd's liability.*fn8 Clause 7(2) of the Express Cargo Bill limits Hapag Lloyd's liability to $500.00 per package "where the Carriage is to or from a port or final destination in the United States."*fn9 Pursuant to the terms of the Express Cargo Bill, disputes arising under it are to be governed by German law.*fn10

  III. LEGAL STANDARD

  Summary judgment is permissible "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law."*fn11 "An issue of fact is `genuine' if `the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'"*fn12 A fact is material when it "might affect the outcome of the suit under the governing law."*fn13

  The party seeking summary judgment has the burden of demonstrating that no genuine issue of material fact exists.*fn14 Once the moving party has met its burden, the nonmoving party must present "specific facts showing that there is a genuine issue for trial."*fn15 That is, the non-moving party "must do more than simply show that there is some metaphysical doubt as to the material facts."*fn16 "The `mere existence of a scintilla of evidence' supporting the non-movant's case is also insufficient to defeat summary judgment."*fn17 Moreover, "[s]tatements that are devoid of any specifics, but replete with conclusions, are insufficient to defeat a properly supported motion for summary judgment."*fn18 Conclusory statements, conjecture or speculation cannot by themselves create a genuine issue of material fact.*fn19

  "Summary judgment is only proper in contract disputes if the language of the contract is `wholly unambiguous.'"*fn20 "If the language is susceptible to different reasonable interpretations, and `where there is relevant extrinsic evidence of the parties' actual intent,' then the contract's meaning becomes an issue of fact precluding summary judgment."*fn21 "Ascertaining whether or not a writing is ambiguous is a question of law for the trial court."*fn22 "An `ambiguous' word or phrase is one capable of more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business."*fn23 "`If the court finds that the contract is not ambiguous it should assign the plain and ordinary meaning to each term and interpret the contract without the aid of extrinsic evidence' and it may then award summary judgment."*fn24

  In determining whether a genuine issue of material facts exists, the court must construe the evidence in the light most favorable to the non-moving party and draw all inferences in that party's favor.*fn25 Accordingly, the court's task is not to "weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial."*fn26 Summary judgment is therefore inappropriate "if there is any evidence in the record that could reasonably support a jury's verdict for the non-moving party."*fn27

  IV. DISCUSSION

  A. The BNSF-Matson Agreement's Limited Liability Clause

  BNSF asserts that it is entitled to limit its liability under the terms of the BNSF-Matson Agreement.*fn28 Item 62(3) of the BNSF Intermodal Rules and Policies Guide, which the BNSF-Matson Agreement expressly adopts, provides:

If a shipment moves under the terms of a through intermodal ocean bill of lading with BNSF as a participating rail carrier, the liability of BNSF will be no greater than the liability of the ocean carrier issuing the bill of lading.*fn29
In order for the above liability limitation to apply, first, the Express Cargo Bill must constitute a "through" bill of lading; second, Hapag Lloyd must have "issued" the Express Cargo Bill; and, third, the BNSF-Matson Agreement must bind Caterpillar.

  1. Is the Express Cargo Bill a "Through Bill of Lading"?

  The Second Circuit has defined a through bill of lading as a document "by which a carrier agrees to transport goods from origin to destination, even though different carriers (such as a railroad, trucker, or air carrier) may perform a portion of the contracted shipment."*fn30 Therefore, the Express Cargo Bill is a through bill of lading because, pursuant to it, Hapag Lloyd agreed to transport the goods from Chicago to Singapore.*fn31

  American Home argues that whether a through bill of lading exists is a factual issue that cannot be resolved on summary judgment.*fn32 In support of this argument, it cites Hyosung (America) Inc. v. Burlington Northern Sante Fe Railway Corp.*fn33 However Hyosung does not support American Home's argument. Although the court said in dicta that "the issue of whether a bill of lading is a through bill of lading is predominantly a factual question," the court went on to find the contract at issue to be a through bill of lading and granted defendant's motion for summary judgment.*fn34 Other courts have similarly concluded, on summary judgment, that contracts are through bills of lading.*fn35

  2. Did Hapag Lloyd "Issue" the Express Cargo Bill?

  American Home further argues that because Hapag Lloyd never actually issued the Express Cargo Bill, its terms do not apply. However, "[i]t is not unusual to issue a bill of lading after a carrier has taken possession of cargo[,] and courts have regularly held that this does not prevent parties from being bound by its terms."*fn36 Here, the parties agree that the Express Cargo Bill is the document Hapag Lloyd would have issued for the Caterpillar shipment if the cargo had reached Long Beach.*fn37 Accordingly, the Express Cargo Bill governs the rights of the parties.

  3. Does the BNSF-Matson Agreement Bind Caterpillar?

  Although Hapag Lloyd issued a through bill of lading, as required to trigger Item 62(3) of the BNSF-Matson Agreement, that agreement only limits BNSF's liability with respect to Caterpillar, the original shipper, if the terms of the agreement bind Caterpillar. In Nippon Fire & Marine Insurance Co. v. Skyway Freight Systems, Inc., the Second Circuit held that a secondary carrier could limit its liability to the original shipper through the terms of the contract between the primary and secondary carriers.*fn38 In that case, the shipper sought to recover damages for missing laptop computers that had last been in the secondary carriers' possession.*fn39 The district court rejected plaintiff's assertion that "secondary carriers should not be permitted to lawfully bind [shipper] to some unknown terms," and held that the terms of the agreement between the primary and secondary carriers bound the shipper.*fn40 In affirming the district court, the Court of Appeals recognized the "validity of the limitations of liability in the [secondary carriers'] own respective contracts with [the primary carrier] — which . . . preclude both [the primary carrier] and [the shipper] from asserting . . . claims against the secondary carriers."*fn41

  The instant case raises the issue of whether BNSF's contract with Matson (containing a limitation of liability clause) can bind Caterpillar, the shipper. Like the shipper in Nippon, Caterpillar was not a party to the BNSF-Matson Agreement. Because the Nippon court recognized that carriers can bind a shipper to a liability limitation in the carriers' own agreement,*fn42 the BNSF-Matson Agreement validly limits BNSF's liability to American Home (standing in the shoes of the shipper). In sum, the limitation on liability contained in Item 62(3) of the BNSF-Matson Agreement binds Caterpillar.

  B. The Liability of the Ocean Carrier Issuing the Bill of Lading

  The BNSF-Matson Agreement provides that "the liability of BNSF will be no greater than the liability of the ocean carrier issuing the bill of lading." Hapag Lloyd is the "ocean carrier issuing the bill of lading."*fn43 Therefore, BNSF's liability cannot exceed Hapag Lloyd's liability. To determine Hapag Lloyd's liability, I turn to the Express Cargo Bill.

  1. Choice of Law

  The Express Cargo Bill contains a choice of law provision that provides:

Except as otherwise provided specifically herein any claim or dispute arising under this Express Cargo Bill shall be governed by the Law of the Federal Republic of Germany and determined in the Hamburg courts to the exclusion of the jurisdiction of any other place.*fn44
  The question, then, is whether, pursuant to this provision, German law governs interpretation of the Express Cargo Bill. Federal courts apply the choice of law rules of the state in which they sit. Pursuant to New York law, "[a]bsent fraud or a violation of public policy, a court is to apply the law selected in the contract as long as the state selected has sufficient contacts with the transaction."*fn45 The fact that defendant is a corporation formed under the laws of the state selected in the choice of law provision is not, alone, enough to trigger the provision.*fn46

  With this in mind, I conclude that the express choice of law provision is not controlling. Hapag Lloyd is a German corporation,*fn47 but there appears to be no other connection between Germany and the transaction giving rise to this dispute. Under these circumstances, I will apply New York law.*fn48

  2. Clause 7(2) of the Express Cargo Bill

  Clause 7(2) of the Express Cargo Bill provides:

. . . [W]here the Carriage is to or from a port or final destination in the United States, the Carrier's limitation of liability in respect of the Goods shall not exceed U.S. $500.00 per package or, when the Goods are not shipped in packages, U.S. $500.00 per customary freight unit.*fn49
  American Home argues that clause 7(2) cannot apply to the shipment from Chicago to Singapore, because neither is a "port or final destination in the United States."*fn50 However, the BNSF train carrying the cargo, which derailed on the way from Chicago to Long Beach, was unquestionably from a port in the United States and headed to a port in the United States. As a result, the liability limitation in Clause 7(2) validly limits Hapag Lloyd's, and thus BNSF's, liability to "$500.00 per package or, when the goods are not shipped in packages, U.S. $500.00 per customary freight unit."*fn51

  C. Tort and Bailment Claims

  In addition to its common carrier contract claim, American Home seeks recovery on both bailment and tort theories. Liability limitation clauses "limit recovery not only for breach of contract, but also based on other legal theories, including negligence, bailment, or conversion."*fn52 As a result, the liability limitation in clause 7(2) of the Express Cargo Bill applies to each of American Home's theories of recovery. V. CONCLUSION

  For the foregoing reasons, American Home's motion for partial summary judgment is denied. BNSF's motion for partial summary judgment on its right to limit liability is granted. The Clerk of the Court is directed to close this motion [docket #s 27, 29]. A conference is scheduled for August 2, 2004, at 4:00 p.m.

  SO ORDERED.


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