Supreme Court hears oral argument in Norfolk Southern v. Kirby case
The U.S. Supreme Court listened to oral arguments Wednesday in the case of “Norfolk Southern Railway Co. v. James N. Kirby Pty,” focusing on the issue of whether a railroad can be protected by a Himalaya clause negotiated between a steamship line and a freight forwarder.
Himalaya clauses are stipulations in bills of lading that extend the liability protections of ocean carriers to other parties associated with the carriers in the handling of cargo. The clause in the case being argued specifically covered “all agents, servants, employees, representatives, and participating (including inland) carriers and all stevedores, terminal operators, warehousemen, carpenters, ship cleaners, surveyors and all independent contractors whatsoever.”
In the case at hand, the derailment of a Norfolk Southern train on Oct. 9, 1997, damaged 10 containers of auto assembly line equipment en route to Huntsville, Ala. The shipment had originated in Australia, and traveled to Savannah, Ga., on a Hamburg Sud container vessel.
A federal district court ruled that Norfolk Southern was protected by the Himalaya clause in the Hamburg Sud bill of lading, which meant the railroad under the U.S. Carriage of Goods by Sea Act (COGSA) would be liable only for $5,000 under COGSA's $500 per-package limitation — each of the 10 containers being considered a single package.
That decision was appealed to the U.S. Court of Appeals for the 11th Circuit, which reversing the lower court, which had determined the shipper was not bound by the Hamburg Sud bill of lading because a non-vessel-operating common carrier had been used as an intermediary. The appellate panel also ruled that Norfolk Southern was not a clearly designated beneficiary of the Himalaya clause. A visiting judge on the appellate court strongly dissented from the majority opinion, asserting that the railroad was protected.
Without the extension of COGSA's protections beyond the limits of an ocean voyage, Norfolk Southern would face either full liability, $1.5 million under the Carmack Amendment for the shipment's total value, or about $450,000 under a default provision of liability limits in the Hague-Visby Rules.
Norfolk Southern, in briefs filed before the Supreme Court, had also asked the high court to define the role of a NVO as being an agent instead of a carrier. Such a ruling would work against a longstanding effort by NVOs to be perceived as carriers instead of agents.
The Supreme Court's justices line of inquiry Wednesday suggested they would focus narrowly on the liability of a railroad carrying goods for a shipping line, and not broadly on the status of NVOs. Justice Stephen Breyer pointedly asked why, in all of his reading of briefs filed with the case, “can’t I find specific facts?” defining lines of responsibility in ocean shipping. He appeared taken aback when told, “the answer to your question is set out in the marketplace.”
“Why should we even have to decide this issue?” asked Justice Sandra Day O’Connor, who also wondered why a state tort case would come up under diversity jurisdiction.
The Supreme Court is likely to rule on this case next spring. One admiralty attorney who was present for the oral arguments said it was possible that the justices would reject the case as having received improper certiorari, meaning that it should not have gone beyond the ruling of the appeals court.
Carter G. Phillips argued the side of Norfolk Southern. David C. Frederick spoke for the cargo interests.
