Part of a shipment of polyester flags and rubber mats from a Chinese company, Chesta, was damaged or lost when a BNSF train derailed.
An intermodal container containing the cargo arrived from Shanghai in Los Angeles and then was put on a BNSF train for inland carriage to the consignee and owner of the cargo, Magnet Works.
C.H. Robinson International (CHR) arranged the shipment and contracted with Hyundai Merchant Marine (HMM) for the complete move.
The train carrying the cargo was traveling near Panhandle, Texas on June 20, when BNSF said it was struck by an 81 mph gust of wind.
CHR contended the derailment was also caused by BNSF operating the subject train over 20 mph with a double-stack train configuration, which increased the risk of a blow-over.
But BNSF said the crew was operating the train at 44 mph, far less than both the Federal Railroad Administration’s authorized maximum allowable 80 mph freight train speed for “Class V” track and BNSF’s maximum allowable train speed of 70 mph.
Magnet Works’ cargo was strewn amongst the wreckage, but BNSF recovered 480 cartons. Some unrecoverable cargo was taken to a landfill.
Magnet Works had insured the cargo with Atlantic Specialty Insurance. CHR settled a lawsuit from Atlantic for $180,000.
Meanwhile, CHR sued BNSF in California and filed a suit against HMM in China.
In the California suit, CHR asserted several causes of action and both it and BNSF made motions for summary judgment.
In its decision, (C.H. Robinson International, et al. v. Burlington Northern Santa Fe, LLC, et al. U.S. District Court, Central District of California. No. CV 14-3677. May 14.), the court concluded BNSF’s contract with HMM/Hyundai Intermodal Inc. (HII) precluded CHR from suing the railroad for loss or damage to the cargo.
HMM issued a sea waybill for the shipment that BNSF maintained incorporated HMM’s bill of lading. HII contracted with BNSF for the carriage of the cargo by rail. BNSF contended that HII was acting as an agent for HMM.
CHR contested the incorporation of the HMM bill of lading into the sea waybill, and also challenged the HII’s agency relationship.
When HII submitted its bill of lading electronically to BNSF the railroad automatically created a waybill in its computer system that incorporated an intermodal international transportation service agreement, called MA32 Amendment 15, and a BNSF intermodal rules and policies guide (IR&PG).
The court found CHR was contractually precluded from suing the railroad for loss or damage to the cargo and granted summary judgment in favor of BNSF as to each of CHR’s causes of action.
The bulk of the court’s opinion dealt with BNSF’s contention that the terms of the contract it executed with HMM/HII and the terms of the contract that CHR executed with HMM, each independently precluded CHR from suing BNSF.
The relevant BNSF contract, the court noted, was the BNSF waybill which the railroad said incorporated, by reference, an IR&PG provision that stated “Only the shipper (the party indicated on the BNSF price authority and paying BNSF for the rail transportation) may initiate and maintain a claim for cargo loss and damage or a suit against BNSF. A person who is not party to the price authority with BNSF will have no claim or cause of action….”
The court found HMM, through its agent HII, was the party to the “price authority” with BNSF and the party that paid BNSF for the movement of the cargo. Since CHR did not contend that it was the party to the price authority that paid BNSF or offer evidence of an assignment of rights from HMM, BNSF argued that CHR had no claim or cause of action against the railroad for loss or damage to cargo.
CHR, however, argued it was not bound to the “direct suit prohibition” in the IR&PG, because there was no evidence that HII was acting as HMM’s agent when it agreed to the BNSF waybill for land carriage and the BNSF waybill did successfully incorporate the IR&PG into the agreement.
The railroad submitted a declaration from Richard D. Kessler, director of cargo claims for BNSF. He stated HII was acting as an agent for HMM when it contracted with BNSF for carriage of the cargo from Los Angeles to St. Louis.
BNSF also produced a “service and volume contract” between BNSF and HMM that the court found was “undisputed by any evidence by CHR, that HII contracted with BNSF as HMM’s agent.”
As to CHR’s argument that the IR&PG was not appropriately incorporated by reference into the BNSF waybill, the court said the Supreme Court has determined that the types of contracts at issue in this case are governed by federal maritime law. Under federal maritime law it is not necessary to use any particular language to incorporate by reference the terms of another document. Reference in a contract to another writing, sufficiently described, incorporates that writing.
When HII submitted its bill of lading electronically to BNSF requesting the shipment from Los Angeles to St. Louis, the railroad’s computer system automatically created a waybill which identified MA-32 as the contract that governed the carriage arrangement, and MA-32 said the shipment was governed by the IR&PG.
CHR described the reference to MA-32 as “cryptic” and contended BNSF had not submitted any evidence to establish that the MA-32 was available for review, but the court said this argument was flawed, stating “The MA-32 was not a ‘cryptic’ or ‘secret’ document to HMM.”
CHR also argued that even if the terms of the IR&PG govern the relationship between HMM and BNSF, it did not follow that CHR was bound to those terms.
But the Supreme Court in Norfolk So. Ry. Co. v. Kirby, 543 U.S. 14, 22-29 (2004) found “When an intermediary contracts with a carrier to transport goods, the cargo owner’s recovery against the carrier is limited by the liability limitation to which the intermediary and carrier agreed.”
Here, the court said “BNSF has demonstrated that HMM agreed to the contractual terms, and, under binding Supreme Court precedent, HMM is CHR’s agent for the purpose of negotiating limitations on liability.”
The court concluded that, pursuant to the contract between HMM and BNSF, CHR is precluded from suing BNSF for loss or damage to the cargo.
This column was published in the September 2015 issue of American Shipper.
