Federal Insurance Company v. Union Pacific Railroad Company
651 F.3d 1175
9th Cir.2011Background
- Text International insured its goods and, as subrogee, pursued claims against UP and APL after UP’s inland derailment destroyed the goods.
- The through bill of lading contained a paramount clause extending COGSA to the inland leg and Hague Rules outside the vessel phase.
- UP was a subcontractor for inland carriage; APL contracted with Text as the ocean carrier to move goods from Singapore to Alabama.
- FIC argued the Carmack Amendment applied or, alternatively, that the Harter Act barred the covenant not to sue, but Kawasaki v. Regal-Beloit required reconsideration.
- The district court granted summary judgment in favor UP, enforcing the covenant not to sue under the Hague Rules/COGSA framework.
- The Ninth Circuit affirmed, holding the Harter Act did not apply and the covenant not to sue was enforceable, with damages recoverable from APL.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| What regime governs the inland leg? | FIC argued Harter Act applicability survives Kawasaki division. | UP contends Hague Rules/COGSA apply via paramount clause, displacing Harter Act. | Hague Rules/COGSA govern via paramount clause. |
| Is the covenant not to sue enforceable under Hague Rules/COGSA? | Covenant would unlawfully limit shipper’s recovery from carrier/subcontractors. | Covenant permits exclusive liability of carrier for subcontractor negligence. | Covenant not to sue is enforceable. |
| Does the covenant reduce carrier liability or merely affect enforcement mechanics? | It reduces shipper’s ability to pursue all defendants, relaxing liability. | It affects enforcement mechanics without reducing liability guaranteed by the statute. | It affects enforcement mechanics, not liability reduction. |
| Does the covenant conflict with COGSA’s prohibitions on relieving liability for negligence? | No, as largely a contractual enforcement mechanism within Hague Rules. | COGSA § 3(8) prohibits contracts that lessen liability for negligence. | Covenant permissible under Hague Rules/COGSA. |
| Does subrogation or the Master Intermodal Transportation Agreement affect the outcome? | Possible damages under UP’s agreement; remand needed for factual record. | Waived due to failure to develop factual record post-remand. | Remand not required; waiver resolved in favor of enforceability. |
Key Cases Cited
- Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp., 130 S. Ct. 2433 (Supreme Court 2010) (reversed circuit ruling; Carmack Amendment not here applicable)
- Fireman’s Fund Ins. Co. v. M/V DSR Atlantic, 131 F.3d 1336 (9th Cir. 1997) (contract clauses affecting enforcement do not contravene COGSA)
- Norfolk Southern Ry. Co. v. Kirby, 543 U.S. 14 (U.S. 2004) (validating carrier-subcontractor liability limitation under COGSA)
- Sea-Land Serv., Inc. v. Lozen Int’l., LLC, 285 F.3d 808 (9th Cir. 2002) (paramount clause enforceability and Hague Rules/COGSA interplay)
- N. River Ins. Co. v. Fed Sea/Fed Pac Line, 647 F.2d 985 (9th Cir. 1981) (COGSA vs. Harter Act coexistence and preemption by contract)
- Starrag v. Maersk, Inc., 486 F.3d 607 (9th Cir. 2007) (where COGSA extends by contract, Harter Act displaced)
- Sunkist Growers, Inc. v. Adelaide Shipping Lines, Ltd., 603 F.2d 1327 (9th Cir. 1979) (COGSA and Hague Rules framework in carrier liability)