703 F.3d 604
2d Cir.2013Background
- May 24, 2008 Ethicon enters into LSA with UPS for transport of pharmaceutical products; LSA sets liability caps of $250,000 per shipment for finished goods and $100,000 for others.
- UPS uses its subsidiary WDS to transport; WDS had contracted IMSCO to provide drivers under SSA.
- SSA contains no liability limitation for IMSCO and states IMSCO/its employees are not agents of WDS; IMSCO to maintain $2 million per-vehicle insurance and indemnify WDS for excess liability.
- March 26, 2009 shipment governed by LSA transported by IMSCO drivers; accident near Little Rock damages parcels and injures driver, who dies.
- RSA pays Ethicon $769,726.38; RSA sues UPS, WDS, IMSCO, and TFE; district court partly grants RSA summary judgment against UPS for $250,000 and finds no limitation for IMSCO/TFE; bifurcation and negligence issues disputed.
- District court ultimately holds IMSCO liable for $500,000 plus interest, ruling limitations do not extend to IMSCO absent clear contractual intent; IMSCO appeals.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Carmack extends liability limits to third-party subcontractors. | RSA contends Carmack-Amendment does not automatically extend limits. | IMSCO argues Carmack or contract should extend to third parties. | No; limits do not extend absent contractual intent. |
| Whether federal common law of bailment extends LSA limits to all sub-bailees. | RSA asserts common law extends limitations to sub-bailees. | IMSCO argues no extension without contract language. | No extension absent contractual intent. |
| Whether the district court properly applied the negligence burden-shifting framework. | RSA required proof of prima facie negligence and that IMSCO failed to rebut. | IMSCO contends misapplication of burden-shifting. | District court correctly applied the presumption/burden framework; affirmed. |
Key Cases Cited
- Leather’s Best, Inc. v. S.S. Mormaclynx, 451 F.2d 800 (2d Cir. 1971) (prescribes two-step negligence burden-shifting framework for bailees)
- Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14 (S. Ct. 2004) (contract interpretation governs whether liability limitations extend to third parties)
- Robert C. Herd & Co. v. Krawill Mach. Corp., 359 U.S. 297 (1959) (limits extend only where contract language shows intent to do so)
- Toyomenka, Inc. v. S.S. Tosaharu Maru, 523 F.2d 518 (2d Cir. 1975) (contractual intent required to extend liability limitations to third parties)
- Royal & Sun Alliance Ins., PLC v. Ocean World Lines, Inc., 612 F.3d 138 (2d Cir. 2010) (Himalaya-like clauses needed to extend liability limits to non-contracting third parties)