Sompo Japan Insurance Co. of America v. Norfolk Southern Railway Co.
762 F.3d 165
| 2d Cir. | 2014Background
- Multiple manufactured-goods shipments traveled from Asia to the U.S. under through bills of lading issued by Yang Ming (ocean carrier) and Nippon Express (an NVOCC intermediate). After ocean transit, rail carriers (BNSF, Norfolk Southern, and KCSR) performed inland carriage; a Norfolk Southern train (operated by KCSR) derailed near Dallas in April 2006, destroying cargo.
- Yang Ming’s through bill of lading contained an Exoneration Clause stating that, other than the issuing Carrier, no person (including Underlying Carriers and subcontractors) shall be liable to the cargo owner; the bills also include Himalaya clauses extending defenses/limits to subcontractors.
- Plaintiffs Sompo and Nipponkoa (insurers/subrogees of cargo owners) sued the Railroads initially under the Carmack Amendment and state-law claims; summary judgment proceedings and appeals followed.
- The Supreme Court’s decision in Regal-Beloit held Carmack inapplicable to through bills covering shipments originating overseas, so the cases were remanded for state-law adjudication of claims and defenses (including the Exoneration Clauses).
- On remand the district court held the Yang Ming Exoneration Clause unambiguous and enforceable against cargo-owner subrogees (Sompo), granted summary judgment for the Railroads on those claims, but granted summary judgment to Nipponkoa (as assignee of Yang Ming) on a contractual indemnity claim under the Intermodal Transport Agreement (ITA).
- The Second Circuit affirmed: (1) the Yang Ming Exoneration Clause unambiguously channels liability to the issuing carrier and is enforceable against cargo-owner subrogees (Kirby agency principles apply to intermediaries); and (2) Nipponkoa’s indemnity judgment was proper (Railroads waived arguments now advanced and Norfolk Southern waived insisting on a payment-precondition).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court exceeded the appellate mandate by allowing Railroads to assert Exoneration Clause defenses on remand | Sompo: remand limited to plaintiffs’ new grounds; Defendants’ defenses exceed mandate | Railroads: remand left "further proceedings" open, defenses properly raised | Court: remand permissive; consideration of defenses did not violate mandate |
| Whether Railroads waived the Exoneration Clause defense by not pleading/raising it earlier | Sompo: Railroads should have pleaded/raised defense earlier; defense waived | Railroads: defense irrelevant while Carmack governed; timely raised after Regal-Beloit | Court: no waiver — defense appropriately litigated on remand; no undue prejudice |
| Interpretation and enforceability of Yang Ming Exoneration Clause (does it bar suits against underlying carriers) | Sompo: clause ambiguous (definitions conflict), industry practice and intent show it shouldn’t exonerate underlying carriers; public policy forbids exonerating common carriers for negligence | Railroads: clause unambiguously channels liability to issuing carrier; Himalaya Clause extends defenses; clause is an allocation/enforcement mechanism, not immunity from negligence | Court: clause unambiguous when read sensibly (specific controls general); enforceable; does not absolve underlying carriers of liability to issuing carrier; public-policy objections fail |
| Whether Nippon Express (intermediary/NVOCC) could bind cargo owner to Yang Ming’s Exoneration Clause | Sompo: intermediary lacked authority to bind cargo owner to such a clause | Railroads: Kirby allows intermediary to bind cargo owner for liability limitations negotiated with carriers | Court: Kirby applies; intermediary is agent for limited purpose of negotiating liability limits; Sompo bound by clause |
| Whether Nipponkoa (assignee of Yang Ming) could recover indemnity from Norfolk Southern under ITA | Railroads: indemnity claim fails because Yang Ming had not paid damages (no loss to indemnify) and/or was time-barred at assignment | Nipponkoa: assignment valid; Railroads waived or are estopped from asserting payment-precondition/time-bar defenses | Court: Railroads waived the argument that Yang Ming had no potential liability at assignment; Norfolk Southern waived insisting on pre-payment; indemnity judgment affirmed; KCSR’s untimely challenge rejected |
Key Cases Cited
- Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp., 561 U.S. 89 (2010) (Carmack Amendment does not apply to shipments originating overseas under a single through bill of lading)
- Norfolk S. Ry. Co. v. James N. Kirby, Pty Ltd., 543 U.S. 14 (2004) (intermediary can bind cargo owner to liability limitations negotiated with carriers; Himalaya clause principles)
- Sompo Japan Ins. Co. of Am. v. Union Pac. R. Co., 456 F.3d 54 (2d Cir. 2006) (prior Second Circuit holding that Carmack applied to international through bills, later abrogated by Regal-Beloit)
- United States v. Atlantic Mut. Ins. Co., 343 U.S. 236 (1952) (discusses public-policy concerns about carriers limiting recovery to shippers)
- Hart v. Pennsylvania R. Co., 112 U.S. 331 (1884) (common-law principle that carriers generally may not contract away liability for their own negligence)