Himalaya protection limited
Raytheon arranged to ship a generator from Houston to Algeria on a CNAN ship. After the generator was loaded, another piece of equipment called a 'water brake' was dropped and damaged the generator, effectively reducing it to scrap.
Raytheon sought damages of $250,000, bringing an action against Shippers Stevedoring Co., alleging negligence, breach of contract, and breach of implied warranty of workmanlike performance. (Raytheon v. Seaboard Explorer II. CV No. H-09-1447. S.D. Texas. July 28.)
Shippers argued it was entitled to limitations on liability under the Carriage of Goods at Sea Act (COGSA) that would have been in the bill of lading that CNAN would have issued to Raytheon if the shipment had gone as planned. Because the accident happened during cargo loading, the bill of lading was not actually issued.
Under 5th Circuit precedent, Shippers argued it should be able to take advantage of a so-called 'Himalaya Clause' that would have extended protections in the bill of lading, including a one-year statute of limitations and a limitation of liability of $500 per package under COGSA.
(The 'Himalaya clause,' an exemption clause in contracts extending protection to contractors, gets its name from a case where a passenger injured in a gangplank fall, successfully sued the captain and boatswain on the steamship Himalaya in an English court in 1954 after recovery against the carrier was limited.)
Shippers argued Raytheon's claims should be dismissed because it filed suit more than a year after the accident, and thus failed to comply with COGSA's statute of limitations, or that its 'potential liability be limited to $500 under the COGSA package limit.'
Raytheon argued that since the accident occurred while Shippers was performing stevedoring services for different cargo under a different bill of lading, the carrier's protections under the generator bill of lading do not extend to Shippers.
The court said the key question was, at what time did Shippers' course of employment connected to the Raytheon bill of lading end? If, as Raytheon argued, it ended when Shippers safely loaded the generator into the hold of the ship, then the stevedore was not entitled to assert the carrier's COGSA limitations under the Himalaya Clause. But, if the course of employment ended later, Shippers might be entitled to the COGSA limitations.
The court said Shippers implied that 'any action it took in connection with employment for any party during the life of the bill of lading would have been covered under the protections of the Himalaya clause,' adding, 'this interpretation is contrary to the plain meaning of the Himalaya clause ' '
The court determined 'Shippers' course of employment connected to the generator bill of lading had ended before the accident in which the generator was damaged.'
Because Shippers produced no evidence it acted in the course of employment of the generator's bill of lading at the time of the accident, the court concluded it was not entitled to claim the COGSA limitations on liability in this action, and granted Raytheon summary judgment.
True for rail, true for road
What's true for rail is true for the road, the 2nd Circuit Court of Appeals has determined. (Royal & Sun Alliance Insurance PLC v. Ocean World Lines Inc. 2nd Cir. Nos. 08-4324-cv, 08-4481-cv. July 20)
In June, U.S. Supreme Court in Kawasaki Kisen Kaisha Ltd., et al. v. Regal-Beloit Corp., determined that an intermodal shipment that originated overseas, moved under a through bill of lading, and was damaged in a railroad derailment, was moving under an 'essentially maritime' contract.
As a result, the court said, the shipment was subject to the Carriage of Goods at Sea Act (COGSA), not the so-called 'Carmack Amendment' which covers domestic shipments. The same logic must apply to a road shipment, said the 2nd Circuit.
With its decision, the Supreme Court resolved a split between the circuits ' holding 4th, 6th, 7th and 11th Circuit Court of Appeals had interpreted the Carmack/COGSA issue correctly, and the 9th and the 2nd Circuits had it wrong.
The 2nd Circuit said it now must 'follow the holding of Regal-Beloit and rejected Royal & Sun's arguments for Carmack liability and concluded the defendants in the case were entitled to COGSA's $500-per-package limitation.
The twist here was the dispute involved not a rail shipment, but a printing press that was damaged when a truck crashed into an overpass.
The 2nd Circuit said the two versions of the Carmack amendment in the U.S. Code ' one for railroads, the other for motor carriers and freight forwarders ' 'are substantially the same' and that the policy arguments made by the Supreme Court in its decision are equally applicable to both modes.
Bounced back into state court
The same Supreme Court decision also was discussed in a decision that determined a dispute over cargo should be heard in state, not federal court. (KITO Group Ltd. v. RF Intern. Ltd. D. Ct., No. 3:09cv1371. July 28.)
KITO Group originally brought suit in state court in Connecticut against logistics companies RF International (RFI) and Ocean World Lines (OWL), saying it had separately contracted with them to ship trampoline accessories from China ' RFI to a customer in British Columbia, OWL to a customer in Utah.
KITO brought five state-law claims against each defendant in Connecticut, but the defendants removed the case to federal court.
The defendants argued the claims were preempted by the Carmack Amendment, but the judge in this case cited Kawasaki Kisen Kaisha Ltd., et al. v. Regal-Beloit, and said only bills of lading issued by a receiving carrier inside the United States are governed by Carmack. It said RFI and OWL failed to show Carmack applies, particularly as KITO alleged they agreed to ship the goods from overseas.
COGSA only applies to 'contracts for carriage of goods by sea to or from ports of the United States in foreign trade,' and the defendants proffered no evidence either shipment was received at U.S. port, the court said.
To invoke federal admiralty jurisdiction the defendants had to satisfy conditions of location and connection with maritime activity. But in the case of OWL, KITO alleged the injury occurred in Utah, a landlocked state; and with RFI, the injury occurred in Vancouver, on land and outside the United States.
The district court determined it lacked subject-matter jurisdiction over any of KITO's claims and remanded the case to Connecticut Superior Court, Judicial District of Middlesex, in Middletown, Conn.
