Supreme Court Asked To Clear Up Maritime Contracting Circuit Split
An ocean carrier and its on-land rail subcontractor have asked the U.S. Supreme Court to resolve the uncertainty in maritime contracting created by an apparent conflict between the Seventh Circuit and a recent Second Circuit decision that arise from the interpretation of the U.S. Supreme Court’s case of Kawasaki Kisen Kaisha, Ltd. v. Regal-Beloit, 561 U.S. 89 (2010), a case that involved the same trainwreck as the present appeal.
In the Regal-Beloit case, the U.S. Supreme Court held that the Carriage of Goods by Sea Act governed the ocean carrier’s and railroad’s responsibilities between receipt and delivery by the ocean carrier of the cargo (which it obtained in China) through the ocean carrier’s bill of lading. Under the bill of lading and the Act, however, no relevant provisions governed the now litigated claims, which relate to claims concerning the cargo loading before delivery to the ocean carrier and not claims against the “shipper.”
The Seventh Circuit decided the dispute on the basis of the terms of a different party’s bill of lading–the prime transportation contractor, a non-vessel operating common carrier and the first intermediary for the shipper. The ocean carrier was the prime transportation contractor’s subcontractor and as the second intermediary, then subcontracted with “downstream” providers including the railroad. The prime transportation contractor’s bill of lading, which the Seventh Circuit found could bind the shipper to all its terms, contained clauses warranting safe and suitable stowage of cargo in sealed containers delivered for carriage, with indemnity for damage caused by breach. The ocean carrier and the railroad allegedly never saw the prime transportation contractor’s bill of lading before the pending litigation commenced, and thus take issue with the Seventh Circuit’s suggestion that they could have insisted on additional protections in the prime contractor’s bill of lading that could have built in a presumption that where a derailment is caused by a merchant’s good breaking through the floor of a shipping container, the container presumably was mispacked.
The ocean carrier and railroad claim that under Supreme Court precedent, intermediaries involved in unimodal and intermodal shipments in U.S. trades are deemed to have authority to bind the cargo interests who use them to the terms of all contracts those intermediaries make to move their cargoes. “Otherwise, the terms of carriage would be left up to the vagaries of contracting by the intermediary with his anonymous customer. Those terms could very well be inadequate to protect ‘downstream’ contractors or the public.”
We will follow the case and report any developments.
