34:2 - Waid - Piloting in Post-Kirby Waters
Introduction: Multimodal carriage of goods has become the state of the art in international trade. Contracts for carriage of goods now frequently involve a through bill of lading, whereby the same contract governs the entire shipment, even though multiple carriers and multiple modes of transportation are used. Unfortunately, the United States lacks a uniform statutory liability scheme covering multimodal carriage of goods. What the United States does have is a cluster of statutes that relate to land, air, and sea transportation individually. The interplay between these statutes has produced much confusion. The Supreme Court recently resolved some of this confusion by announcing that state law does not apply to through bills of lading that qualify as maritime contracts in Norfolk Southern Railway Company v. Kirby. Kirby still leaves much unresolved and a recent circuit split over the applicability of the Carmack Amendment, a land-based statute, does nothing to resolve the ambiguity surrounding multimodal carriage of goods.
In announcing its opinion in Sompo Japan Insurance Company of America v. Union Pacific Railroad Company, the Second Circuit departed from the established rule that the Carmack Amendment to the Interstate Commerce Act only applies to the domestic inland leg of an international multimodal shipment of goods when a separate bill of lading is issued. In coming to its conclusion, the Second Circuit rejected the holdings of the Pennsylvania Supreme Court, the Fourth, Sixth, Seventh and Eleventh Circuits, and narrowly interpreted the Supreme Court’s decision in Norfolk Southern Railway Company v. Kirby. The problem with Sompo is not its departure from well-established precedent. The problem with Sompo is that when the court looked to the contractual extension of Carriage of Goods by Sea Act’s terms and the Carmack statutory requirements, it saw two dramatically different schemes of liability whose terms could not be reconciled. By holding that the carrier’s through bills of lading did not meet the limitation of liability requirements of Carmack, Sompo creates enormous uncertainty in the world of international carriage of goods. As a result of this decision, inland carriers are now exposed to unlimited liability if they are operating under any of a number of standard through bills of lading. Ultimately this confusion is part of a larger problem: the lack of a multimodal statutory regime. The burden of developing such a scheme lies at the feet of the legislature. Until the legislature takes action, all parties involved in this billion-dollar industry need to know that the contracts they are operating under are eventually going to be enforced and may be subject to the Second Circuit’s holding that could allow for greater liability than the parties contemplated.
This article addresses the two statutes at issue in the current circuit split: COGSA and the Carmack Amendment. Because the split primarily concerns the applicability of the Carmack Amendment, the author pays particular attention to that statute’s legislative history and judicial interpretation. In addition, the author outlines the facts and opinion of Sompo. While the author agrees with the Second Circuit on the issue of whether Carmack applies, it is his contention that the Second Circuit went astray at several key points in its analysis. The author also argues that the Circuit’s holding unreasonably confuses an already complex issue. Only Congress can properly fix this state of affairs by developing a unified statute to govern the liability of multimodal carriage. But, until the issue is legislated, courts should be loath to make this bad situation worse. As such, in this article the author suggests a course of action for circuit courts that have not yet dealt with the issue and put forward steps that the Supreme Court should take to resolve this circuit split.
Access this article in full length on LexisNexis or Westlaw or order a reprint. For reprint and subscription information, visit the Transportation Law Journal subscription Web site.
In announcing its opinion in Sompo Japan Insurance Company of America v. Union Pacific Railroad Company, the Second Circuit departed from the established rule that the Carmack Amendment to the Interstate Commerce Act only applies to the domestic inland leg of an international multimodal shipment of goods when a separate bill of lading is issued. In coming to its conclusion, the Second Circuit rejected the holdings of the Pennsylvania Supreme Court, the Fourth, Sixth, Seventh and Eleventh Circuits, and narrowly interpreted the Supreme Court’s decision in Norfolk Southern Railway Company v. Kirby. The problem with Sompo is not its departure from well-established precedent. The problem with Sompo is that when the court looked to the contractual extension of Carriage of Goods by Sea Act’s terms and the Carmack statutory requirements, it saw two dramatically different schemes of liability whose terms could not be reconciled. By holding that the carrier’s through bills of lading did not meet the limitation of liability requirements of Carmack, Sompo creates enormous uncertainty in the world of international carriage of goods. As a result of this decision, inland carriers are now exposed to unlimited liability if they are operating under any of a number of standard through bills of lading. Ultimately this confusion is part of a larger problem: the lack of a multimodal statutory regime. The burden of developing such a scheme lies at the feet of the legislature. Until the legislature takes action, all parties involved in this billion-dollar industry need to know that the contracts they are operating under are eventually going to be enforced and may be subject to the Second Circuit’s holding that could allow for greater liability than the parties contemplated.
This article addresses the two statutes at issue in the current circuit split: COGSA and the Carmack Amendment. Because the split primarily concerns the applicability of the Carmack Amendment, the author pays particular attention to that statute’s legislative history and judicial interpretation. In addition, the author outlines the facts and opinion of Sompo. While the author agrees with the Second Circuit on the issue of whether Carmack applies, it is his contention that the Second Circuit went astray at several key points in its analysis. The author also argues that the Circuit’s holding unreasonably confuses an already complex issue. Only Congress can properly fix this state of affairs by developing a unified statute to govern the liability of multimodal carriage. But, until the issue is legislated, courts should be loath to make this bad situation worse. As such, in this article the author suggests a course of action for circuit courts that have not yet dealt with the issue and put forward steps that the Supreme Court should take to resolve this circuit split.
Access this article in full length on LexisNexis or Westlaw or order a reprint. For reprint and subscription information, visit the Transportation Law Journal subscription Web site.
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