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American Home Assurance v. Moller-Maersk

United States District Court, S.D. New York

March 31, 2014


Page 278

For American Home Assurance Company, as subrogee of Crown Equipment Corporation, Plaintiff: Edward C. Radzik, LEAD ATTORNEY, Christopher J. Dicicco, Matthew Todd Loesberg, Marshall, Dennehey, Warner, Coleman & Goggin, New York, NY.

For A.P. Moller-Maersk A/S, and/or Maersk Lines doing business as Maersk-Sealand, Defendant: Paul D Keenan, LEAD ATTORNEY, Christopher J. Merrick, Keenan Cohen & Howard P.C., Jenkintown, PA; Jennifer Ashley Ramme, Landman Corsi Ballaine & Ford P.C., New York, NY; Ronald E Joseph, Landman Corsi Ballaine & Ford PC, New York, NY.

For Panalpina, Inc., Cross Claimant: Peter J. Zambito, LEAD ATTORNEY, Dougherty, Ryan, Giuffra, Zambito & Hession, New York, NY.

For A.P. Moller-Maersk A/S, and/or Maersk Lines, Cross Defendant: Jennifer Ashley Ramme, Ronald E Joseph, Landman Corsi Ballaine & Ford P.C., New York, NY.

For BNSF Railway Company, Counter Defendant: Jennifer Ashley Ramme, Kathryn Chapman Tondel, Ronald E Joseph, Landman Corsi Ballaine & Ford P.C., New York, NY.


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Paul G. Gardephe, United States District Judge.

This action, formerly before the Honorable Barbara S. Jones,[1] arises from a 2006 train derailment near Newberry Springs, California. Plaintiff American Home Assurance, the subrogee of Crown Equipment Corporation, seeks to recover damages that the derailment caused to Crown's cargo, which was in the process of being shipped from Ohio and Indiana to Australia. Defendant A.P. Maersk, an ocean carrier, agreed to transport the goods pursuant to the terms of a " through bill of lading" - essentially a single shipping contract that covered the entire journey. Maersk subcontracted with BNSF Railway Company to complete the domestic rail portion of the trip.

As a result of prior rulings in this action by Judge Jones and Chief Judge Preska, the narrow questions before this Court are whether (1) Maersk is liable to American Home under the Carmack Amendment to the Interstate Commerce Act; or (2) whether Maersk agreed that its liability for cargo damage would be determined in accordance with the Carmack Amendment. For the reasons set forth below, this Court concludes that Maersk is not a " rail carrier" under the Carmack Amendment, and that it did not agree that its liability would be determined in accordance with the Carmack Amendment. Accordingly, Maersk's motion for summary judgment (Dkt. No. 108) will be granted.


Crown, a manufacturer of forklift machinery and mechanical parts, booked an international shipment of goods with Maersk, and then purchased insurance from American Home to cover the full value of its cargo. (Def. R. 56.1 Stmt. (Dkt. No. 111) ¶ 4, 11; Pltf. R. 56.1 Stmt. (Dkt. No. 114) ¶ 4, 11) Having paid Crown's insurance claim, American Home now seeks full recovery for the damaged cargo under the Carmack Amendment, a statute that regulates domestic rail carriers and provides for near strict liability. (Cmplt. (Dkt. No. 1) at 1) Because Crown had covenanted not to sue any of Maersk's subcontractors,[2] American Home chose to sue Maersk rather than BNSF.

In December 2006, Crown shipped three containers of construction equipment from its facilities in Ohio and Indiana to Australia. (Def. R. 56.1 Stmt. (Dkt. No. 111) ¶ 1)[3] Crown's freight forwarder, Panalpina, Inc., contracted with Maersk to arrange delivery of the goods from Illinois to their final destination in Australia. (Id. ¶ 3) The contract between Panalpina and Maersk provided that Maersk's standard form bill of lading would apply. (Id. ¶ 6) " A bill of lading 'records that a carrier has received goods from the party that wishes to ship them, states the terms of carriage, and serves as evidence of the contract for

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carriage.'" Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp., 561 U.S. 89, 94, 130 S.Ct. 2433, 2439, 177 L.Ed.2d 424 (2010) (quoting Norfolk Southern R. Co. v. James N. Kirby, 543 U.S. 14, 18-19, 125 S.Ct. 385, 160 L.Ed.2d 283 (2004)). The bill of lading at issue here was intended to be a " through" bill of lading, i.e., a bill of lading that covered both the land-based and ocean segments of the journey. (Def. R. 56.1 Stmt. (Dkt. No. 111) ¶ 9)

Although Maersk never issued a physical copy of its standard form bill of lading, it did issue electronic versions, and the parties do not dispute that the standard form bill of lading set forth the contractual terms of their relationship.[4] (Id. ¶ 8) Maersk's bill of lading contains several provisions that are relevant to this action.

First, the bill of lading provides for different loss calculations depending on where the damage to a shipment occurs. For example, consistent with the Carriage of Goods by Sea Act (COGSA), the bill limits Maersk's liability to $500 per shipment " where the Carriage is Port-to-Port" or " where the stage of Carriage where loss or damage occurred is not known." (See Merrick Decl., Ex. G (Dkt. No. 110) ¶ ¶ 5.1 & 6.1(c)). '" [I]f the loss or damage is known to have occurred during Carriage inland in the USA," however, Maersk's liability is determined " in accordance with the contract of carriage or tariffs of any inland carrier.. . . " (Id. ¶ 6.2(d)) Second, the bill of lading permits Maersk to subcontract " any part" of the transportation " on any terms whatsoever." (Id. ¶ 14.1 (" The carriers shall be entitled to subcontract on any terms whatsoever the whole or any part of the carriage." )) Third, the bill includes a so-called " Himalaya Clause," which purports to extend the bill's liability protections to third-party subcontractors.[5] (Id. ¶ 4.2 (providing that a " subcontractor shall have the benefit of all Terms and Conditions of whatsoever nature herein contained or otherwise benefitting the Carrier" )) Fourth, the bill includes a covenant requiring the " Merchant," i.e., the shipper, not to sue any entity other than Maersk, including Maersk's subcontractors. (Id. ¶ 4.2 (" The Merchant undertakes that no claim or allegation whether arising in contract, bailment, tort or otherwise shall be made against any servant, agent or Subcontractor of the Carrier. . . . " ))

Pursuant to its bill of lading, Maersk arranged transportation for the entire journey and subcontracted with BNSF to provide rail carriage in the United States. (Def. R. 56.1 Stmt. (Dkt. No. 111) ¶ 7) The subcontract was governed by a pre-existing agreement between BNSF and Maersk (" the International Transportation Agreement" ), which incorporates BNSF's Intermodal Rules & Policies Guide by reference.[6] (BNSF R. 56.1 Stmt. (Dkt. No. 41) ¶ ¶ 7-8) Item 63(3) of BNSF's Rules provides that (1) it shall not be liable for any loss or damages to goods absent proof of negligence, and (2) in any event, its liability will be limited to $250,000 per shipment. (Lenck Aff., Ex. F (Dkt. No. 30))

BNSF accepted delivery of the shipments at its rail depots in Illinois on December

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15, 2006, and December 18, 2006, and issued three separate movement waybills. (BNSF R. 56.1 Smt. (Dkt. No. 41) ¶ ¶ 14, 18-19) BNSF and American Home dispute whether these waybills constitute additional bills of lading or merely documents similar to shipping receipts. (Compare Id. at ¶ ¶ 17-20 with Pltf. Dec. 4, 2009 R. 56.1 Stmt. (Dkt. No. 45) ¶ ¶ 17-20) What is not disputed is that the train carrying these shipments derailed near Newberry Springs, California, and that Crown's cargo was damaged. (Pltf. March 8, 2012 R. 56.1 Stmt (Dkt. No. 68) ¶ ¶ 3-4) BNSF's investigation determined that the derailment was due to a track defect in a rail system side joint bar. (Id. ¶ 5)


American Home filed this lawsuit on November 30, 2007, naming Maersk and Panalpina as defendants and alleging claims for breach of contract, bailment and negligence. (Cmplt. (Dkt. No. 1) at 3-5) The case was assigned to Judge Jones. On February 6, 2008, Maersk impleaded BNSF pursuant to Fed.R.Civ.P. 14(c). (Third-Party Cmplt. (Dkt. No. 7) ¶ 16) In its third-party complaint, Maersk sought indemnification from BNSF. (Id. at 5) In a February 13, 2009 stipulation, American Home agreed to the dismissal of Panalpina from this action. (Dkt. No. 22)

Maersk and BNSF both moved for partial summary judgment in November 2009. (Dkt, Nos. 29, 38) BNSF argued that its liability to American Home, if any, is limited to $500 per package under COGSA. (BNSF Partial Summary Judgment Br. (Dkt. No. 40) at 17-19) Maersk sought, inter alia, summary judgment on its indemnity claim against BNSF. (Def. Partial Summary Judgment Br. (Dkt No. 28)) American Home, in opposing the motions, argued that the Carmack Amendment, and not COGSA, governs this case and that BNSF and Maersk are both liable under its terms. (Pltf. Opp. Br. (Dkt. No. 43) at 7-9)

The primary issue in this round of summary judgment briefing is which of two statutes -- the Carmack Amendment or COGSA -- applies to the rail portion of an international multi-modal shipping contract such as that at issue here. That issue is critically important, because these statutes impose radically different liability regimes on cargo carriers. The Carmack Amendment, which by its terms applies to rail and motor carriers, " imposes something akin to strict liability on shippers[.]" Mitsui Sumitomo Ins. Co. Ltd. v. Evergreen Marine Corp., 621 F.3d 215, 216 (2d Cir. 2010). COGSA, which covers ocean carriers, provides a more carrier-friendly negligence regime that includes a $500 per package damages limitation. Id.[7]

On February 11, 2011, Judge Jones issued a memorandum opinion and order denying BNSF's and Maersk's motions in their entirety. Am. Horne Assur. Co. v. Panalpina, Inc., 07 CV 10947 BSJ, 2011 WL 666388 (S.D.N.Y. Feb. 16, 2011) (Dkt. No. 58). Judge Jones accepted American ...

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