Kirby v. Norfolk South'n

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DMC/SandT/30/02
James N. Kirby Pty, Ltd. v. Norfolk Southern Railway Company

United States Eleventh Circuit Court of Appeals: Edmondson, Carnes and Siler: August 8, 2002
Maritime: Bill of Lading: FIATA Multimodal Transport Bill of Lading: United States Carriage of Goods by Sea Act, COGSA: Clause Paramount: Himalaya Clause: Freight Forwarder: NVOC: Inland Rail Carrier: Whether Inland Rail Carrier May Rely on Protections of COGSA By Virtue Of Himalaya Clause In Ocean Carrier’s and/or Freight Forwarder’s Bills of Lading
Summary
The United States Court of Appeals for the Eleventh Circuit (Alabama, Georgia, Florida) held that an inland rail carrier was not entitled to rely on the ‘Himalaya’ Clause1 in an Australian freight forwarder’s multimodal bill of lading or in a performing carrier’s multimodal bill of lading , in order to limit its liability pursuant to US$500-per-package limitation under the US COGSA.

DMC Category Rating: Developed

Case Note contributed by Thomas H. Belknap Jr. and LeRoy Lambert, attorneys with the law firm Healy & Baillie LLP, New York, Contributors to the Website for the United States

1. A Himalaya clause is a clause in a contract of carriage which sets out to extend to persons other than the carrier, the defences and limitations available to the carrier.

Facts
The plaintiff shipper, James Kirby, contracted with a freight forwarder, International Cargo Control, to carry a consignment of 10 containers of machinery for General Motors from Sydney, Australia to Huntsville, Alabama, in the USA, via Savannah, Georgia. ICC issued to Kirby a bill of lading on the FIATA FBL form, covering the entire journey, and then sub-contracted with Hamburg Sud to perform the carriage. Hamburg Sud issued a bill of lading to ICC as shipper for the entire journey, and performed the carriage, sub-contracting with Norfolk Southern for rail carriage from Savannah to Alabama. The cargo was damaged as a result of a train derailment. Cargo interests claimed damages amounting to US$1.5 million. The rail carrier contended it was entitled to limit its liability to US$500 per package under COGSA, pursuant to the terms of either the ICC bill of lading or the bill of lading of the performing carrier. As each container was a 'package' for these purposes, the railroad's liability would have been limited to US$10,000 in all. 

The Himalaya clause in ICC’s FBL extended the benefit of the carrier’s defences and limitations to "any servant, agent or other person, including any independent contractors whose services have been used to perform the contract."

The Himalaya clause in the Hamburg Sud bill of lading extended the benefit to "all agents, servants, employees, representatives, all participating (including inland) carriers and all stevedores, terminal operators, warehousemen…and all independent contractors whatsoever."

Judgment
As to the Hamburg Sud performing carrier’s bill, the Court held that the Kirby was not a party to it and could not be bound by its terms (which, if applicable, would have been adequate to protect the railroad), because ICC had not been acting as agent for Kirby in entering into the bill of lading as shipper with the performing carrier. Instead, the forwarder was acting as principal in its own right. The dissenting judge questioned this finding.

As to the ICC bill, the Court held that the wording of the Himalaya Clause in the FBL form was not specific enough to extend to an inland carrier, such as the railroad, under the Court’s "clarity of language" test. A Himalaya Clause purporting to protect "a well-defined class of identifiable persons" will be enforced, but the FBL’s description of "any servant, agent, or other person including any independent contractor whose services have been used in order to perform the contract" could not extend to include the rail carrier because it was, in fact, a sub-contractor of Hamburg Sud, the performing carrier, and had not been engaged by ICC. The court was reluctant to extend the application of the Himalaya clause in the FBL too widely. It accepted that the clause could protect operators "at the fringes of the sea regime", such as terminals and stevedores, but it felt that - in the absence of very specific wording in the contract - extending the protection to an inland transport company was taking things too far. The court also felt that to extend the Himalaya clause to inland transportation was incompatible with the "network" system of liabilities that the FBL adopted for carriage pre- and post-shipment.

The court did, however, accept that a carrier may extend the protections of COGSA to an inland carrier, provided it does so by the use of very clear language.

Comment
Fortunately, the solution to this problem is simple. The Himalaya Clause should be drafted to include "all participating (including inland) carriers", as was the case here with the Hamburg Sud bill of lading.  

 

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