Source: https://oconnorlibrary.org/supreme-court/norfolk-southern-r-co-v-james-n-kirby-pty-ltd-2004
Timestamp: 2020-08-04 16:33:40
Document Index: 177703705

Matched Legal Cases: ['§1303', '§1304', '§1304', '§1292', '§2', '§1333', '§740', '§1', '§1']

Norfolk Southern R. Co. v. James N. Kirby Pty Ltd - Supreme Court Opinions | Sandra Day O'Connor Institute Digital Library
Supreme Court Opinions > Norfolk Southern R. Co. v. James N. Kirby Pty Ltd
JAMES N. KIRBY,
Pty Ltd., dba Kirby Engineering, and Allianz Australia Insurance Limited
Decided November 9, 2004
Citation: 543 U.S. 14 Docket: 02–1028 Audio: Listen to this case's oral arguments at Oyez
This controversy arises from two bills of lading (essentially, contracts) for the transportation of goods from Australia to Alabama. A bill of lading records that a carrier has received goods from the party that wishes to ship them, states the terms of carriage, and serves as evidence of the contract for carriage. See 2 T. Schoenbaum, Admiralty and Maritime Law 58–60 (3d ed. 2001) (hereinafter Schoenbaum); Carriage of Goods by Sea Act (COGSA), 49 Stat. 1208, 46 U. S. C. App. §1303. Respondent James N. Kirby, Pty Ltd. (Kirby), an Australian manufacturing company, sold 10 containers of machinery to the General Motors plant located outside Huntsville, Alabama. Kirby hired International Cargo Control (ICC), an Australian freight forwarding company, to arrange for delivery by “through” ( i.e., end-to-end) transportation. (A freight forwarding company arranges for, coordinates, and facilitates cargo transport, but does not itself transport cargo.) To formalize their contract for carriage, ICC issued a bill of lading to Kirby (ICC bill). The bill designates Sydney, Australia, as the port of loading, Savannah, Georgia, as the port of discharge, and Huntsville as the ultimate destination for delivery.
In negotiating the ICC bill, Kirby had the opportunity to declare the full value of the machinery and to have ICC assume liability for that value. Cf. New York, N. H. & H. R. Co. v. Nothnagle, 346 U. S. 128, 135 (1953) (a carrier must provide a shipper with a fair opportunity to declare value). Instead, and as is common in the industry, see Sturley, Carriage of Goods by Sea, 31 J. Mar. L. & Com. 241, 244 (2000), Kirby accepted a contractual liability limitation for ICC below the machinery’s true value, resulting, presumably, in lower shipping rates. The ICC bill sets various liability limitations for the journey from Sydney to Huntsville. For the sea leg, the ICC bill invokes the default liability rule set forth in the Carriage of Goods by Sea Act. The COGSA “package limitation” provides:
“Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package lawful money of the United States... unless the nature and value of such goods have been declared by the shipper before shipment and inserted into the bill of lading.” 46 U. S. C. App. §1304(5).
For the land leg, in turn, the bill limits the carrier’s liability to a higher amount.[ Footnote 1 ] So that other downstream parties expected to take part in the contract’s execution could benefit from the liability limitations, the bill also contains a so-called “Himalaya Clause.”[ Footnote 2 ] It provides:
Having been hired by Kirby, and because it does not itself actually transport cargo, ICC then hired Hamburg Südamerikanische Dampfschiflahrts-Gesellschafft Eggert & Amsinck (Hamburg Süd), a German ocean shipping company, to transport the containers. To formalize their contract for carriage, Hamburg Süd issued its own bill of lading to ICC (Hamburg Süd bill). That bill designates Sydney as the port of loading, Savannah as the port of discharge, and Huntsville as the ultimate destination for delivery. It adopts COGSA’s default rule in limiting the liability of Hamburg Süd, the bill’s designated carrier, to $500 per package. See 46 U. S. C. App. §1304(5). It also contains a clause extending that liability limitation beyond the “tackles”—that is, to potential damage on land as well as on sea. Finally, it too contains a Himalaya Clause extending the benefit of its liability limitation to “all agents... (including inland) carriers... and all independent contractors whatsoever.” App. 63, cl. 5(b).
The District Court granted Norfolk’s motion for partial summary judgment, holding that Norfolk’s liability was limited to $500 per container. Upon a joint motion from Norfolk and Kirby, the District Court certified its decision for interlocutory review pursuant to 28 U. S. C. §1292(b).
Our authority to make decisional law for the interpretation of maritime contracts stems from the Constitution’s grant of admiralty jurisdiction to federal courts. See Art. III, §2, cl. 1 (providing that the federal judicial power shall extend to “all Cases of admiralty and maritime Jurisdiction”). See 28 U. S. C. §1333(1) (granting federal district courts original jurisdiction over “[a]ny civil case of admiralty or maritime jurisdiction”); R. Fallon, D. Meltzer, & D. Shapiro, Hart and Wechsler’s The Federal Courts and the Federal System 733–738 (5th ed. 2003). This suit was properly brought in diversity, but it could also be sustained under the admiralty jurisdiction by virtue of the maritime contracts involved. See Pope & Talbot, Inc. v. Hawn, 346 U. S. 406, 411 (1953) (“[S]ubstantial rights... are not to be determined differently whether [a] case is labelled ‘law side’ or ‘admiralty side’ on a district court’s docket”). Indeed, for federal common law to apply in these circumstances, this suit must also be sustainable under the admiralty jurisdiction. See Stewart Organization, Inc. v. Ricoh Corp., 487 U. S. 22, 28 (1988). Because the grant of admiralty jurisdiction and the power to make admiralty law are mutually dependent, the two are often intertwined in our cases.
Applying the two-step analysis from Kossick, we find that federal law governs this contract dispute. Our cases do not draw clean lines between maritime and non-maritime contracts. We have recognized that “[t]he boundaries of admiralty jurisdiction over contracts—as opposed to torts or crimes—being conceptual rather than spatial, have always been difficult to draw.” 365 U. S., at 735. To ascertain whether a contract is a maritime one, we cannot look to whether a ship or other vessel was involved in the dispute, as we would in a putative maritime tort case. Cf. Admiralty Extension Act, 46 U. S. C. App. §740 (“The admiralty and maritime jurisdiction of the United States shall extend to and include all cases of damage or injury... caused by a vessel on navigable water, notwithstanding that such damage or injury be done or consummated on land”); R. Force & M. Norris, 1 The Law of Seamen §1:15 (5th ed. 2003). Nor can we simply look to the place of the contract’s formation or performance. Instead, the answer “depends upon... the nature and character of the contract,” and the true criterion is whether it has “reference to maritime service or maritime transactions.” North Pacific S. S. Co. v. Hall Brothers Marine Railway & Shipbuilding Co., 249 U. S. 119, 125 (1919) (citing Insurance Co. v. Dunham, 11 Wall. 1, 26 (1871)). See also Exxon Corp. v. Central Gulf Lines, Inc., 500 U. S. 603, 611 (1991) (“[T]he trend in modern admiralty case law... is to focus the jurisdictional inquiry upon whether the nature of the transaction was maritime”).
We have reiterated that the “ ‘fundamental interest giving rise to maritime jurisdiction is “the protection of maritime commerce.” ’ ” Exxon, supra, at 608 (emphasis added) (quoting Sisson v. Ruby, 497 U. S. 358, 367 (1990), in turn quoting Foremost Ins. Co. v. Richardson, 457 U. S. 668, 674 (1982)). The conceptual approach vindicates that interest by focusing our inquiry on whether the principal objective of a contract is maritime commerce. While it may once have seemed natural to think that only contracts embodying commercial obligations between the “tackles” ( i.e., from port to port) have maritime objectives, the shore is now an artificial place to draw a line. Maritime commerce has evolved along with the nature of transportation and is often inseparable from some land-based obligations. The international transportation industry “clearly has moved into a new era—the age of multimodalism, door-to-door transport based on efficient use of all available modes of transportation by air, water, and land.” 1 Schoenbaum 589 (4th ed. 2004). The cause is technological change: Because goods can now be packaged in standardized containers, cargo can move easily from one mode of transport to another. Ibid. See also NLRB v. Longshoremen, 447 U. S. 490, 494 (1980) (“ ‘[C]ontainerization may be said to constitute the single most important innovation in ocean transport since the steamship displaced the schooner’ ” (citation omitted)); G. Muller, Intermodal Freight Transportation 15–24 (3d ed. 1995).
Contracts reflect the new technology, hence the popularity of “through” bills of lading, in which cargo owners can contract for transportation across oceans and to inland destinations in a single transaction. See 1 Schoenbaum 595. Put simply, it is to Kirby’s advantage to arrange for transport from Sydney to Huntsville in one bill of lading, rather than to negotiate a separate contract—and to find an American railroad itself—for the land leg. The popularity of that efficient choice, to assimilate land legs into international ocean bills of lading, should not render bills for ocean carriage nonmaritime contracts.
Having established that the ICC and Hamburg Süd bills are maritime contracts, then, we must clear a second hurdle before applying federal law in their interpretation. Is this case inherently local? For not “every term in every maritime contract can only be controlled by some federally defined admiralty rule.” Wilburn Boat Co. v. Fireman’s Fund Ins. Co., 348 U. S. 310, 313 (1955) (applying state law to maritime contract for marine insurance because of state regulatory power over insurance industry). A maritime contract’s interpretation may so implicate local interests as to beckon interpretation by state law. See Kossick, supra, at 735. Respondents have not articulated any specific Australian or state interest at stake, though some are surely implicated. But when state interests cannot be accommodated without defeating a federal interest, as is the case here, then federal substantive law should govern. See Kossick, supra, at 739 (the process of deciding whether federal law applies “is surely... one of accommodation, entirely familiar in many areas of overlapping state and federal concern, or a process somewhat analogous to the normal conflict of laws situation where two sovereignties assert divergent interests in a transaction”); 2 Schoenbaum 61 (“Bills of lading issued outside the United States are governed by the general maritime law, considering relevant choice of law rules”).
This is a simple question of contract interpretation. It turns only on whether the Eleventh Circuit correctly applied this Court’s decision in Robert C. Herd & Co. v. Krawill Machinery Corp., 359 U. S. 297 (1959). We conclude that it did not. In Herd, the bill of lading between a cargo owner and carrier said that, consistent with COGSA, “ ‘the Carrier’s liability, if any, shall be determined on the basis of $500 per package.’ ” Id., at 302. The carrier then hired a stevedoring company to load the cargo onto the ship, and the stevedoring company damaged the goods. The Court held that the stevedoring company was not a beneficiary of the bill’s liability limitation. Because it found no evidence in COGSA or its legislative history that Congress meant COGSA’s liability limitation to extend automatically to a carrier’s agents, like stevedores, the Court looked to the language of the bill of lading itself. It reasoned that a clause limiting “ ‘the Carrier’s liability’ ” did not “indicate that the contracting parties intended to limit the liability of stevedores or other agents.... If such had been a purpose of the contracting parties it must be presumed that they would in some way have expressed it in the contract.” Ibid. The Court added that liability limitations must be “strictly construed and limited to intended beneficiaries.” Id., at 305.
The Court of Appeals’ ruling is not true to the contract language or to the intent of the parties. The plain language of the Himalaya Clause indicates an intent to extend the liability limitation broadly—to “ any servant, agent or other person (including any independent contractor)” whose services contribute to performing the contract. App. to Pet. for Cert. 59a, cl.10.1 (emphasis added). “Read naturally, the word ‘any’ has an expansive meaning, that is, ‘one or some indiscriminately of whatever kind.’ ” United States v. Gonzales, 520 U. S. 1, 5 (1997) (quoting Webster’s Third New International Dictionary 97 (1976)). There is no reason to contravene the clause’s obvious meaning. See Green v. Biddle, 8 Wheat. 1, 89–90 (1823) (“[W]here the words of a law, treaty, or contract, have a plain and obvious meaning, all construction, in hostility with such meaning, is excluded”). The expansive contract language corresponds to the fact that various modes of transportation would be involved in performing the contract. Kirby and ICC contracted for the transportation of machinery from Australia to Huntsville, Alabama, and, as the crow flies, Huntsville is some 366 miles inland from the port of discharge. See G. Fitzpatrick & M. Modlin, Direct-Line Distances 168 (1986). Thus, the parties must have anticipated that a land carrier’s services would be necessary for the contract’s performance. It is clear to us that a railroad like Norfolk was an intended beneficiary of the ICC bill’s broadly written Himalaya Clause. Accordingly, Norfolk’s liability is limited by the terms of that clause.
Respondents object to our reading of Great Northern, and argue that this Court should fashion the federal rule of decision from general agency law principles. Like the Eleventh Circuit, respondents reason that Kirby cannot be bound by the bill of lading that ICC negotiated with Hamburg Süd unless ICC was then acting as Kirby’s agent. Other Courts of Appeals have also applied agency law to cases similar to this one. See, e.g., Kukje Hwajae Ins. Co. v. The M/V Hyundai Liberty, 294 F. 3d 1171, 1175–1177 (CA9 2002) (an intermediary acted as a cargo owner’s agent when negotiating a bill of lading with a downstream carrier).
We think reliance on agency law is misplaced here. It is undeniable that the traditional indicia of agency, a fiduciary relationship and effective control by the principal, did not exist between Kirby and ICC. See Restatement (Second) of Agency §1 (1957). But that is of no moment. The principle derived from Great Northern does not require treating ICC as Kirby’s agent in the classic sense. It only requires treating ICC as Kirby’s agent for a single, limited purpose: when ICC contracts with subsequent carriers for limitation on liability. In holding that an intermediary binds a cargo owner to the liability limitations it negotiates with downstream carriers, we do not infringe on traditional agency principles. We merely ensure the reliability of downstream contracts for liability limitations. In Great Northern, because the intermediary had been “entrusted with goods to be shipped by railway, and, nothing to the contrary appearing, the carrier had the right to assume that [the intermediary] could agree upon the terms of the shipment.” 232 U. S., at 514. Likewise, here we hold that intermediaries, entrusted with goods, are “agents” only in their ability to contract for liability limitations with carriers downstream.
The bill provides that “the Freight Forwarder shall in no event be or become liable for any loss of or damage to the goods in an amount exceeding the equivalent of 666.67 SDR per package or unit or 2 SDR per kilogramme of gross weight of the goods lost or damaged, whichever is the higher, unless the nature and value of the goods shall have been declared by the Consignor.” App. to Pet. for Cert. 57a, cl. 8.3. An SDR, or Special Drawing Right, is a unit of account created by the International Monetary Fund and calculated daily on the basis of a basket of currencies. Liability computed per package for the 10 containers, for example, was approximately $17,373 when the bill of lading issued in June 1997, $17,231 when the goods were damaged on October 9, 1997, and $9,763 when the case was argued. See International Monetary Fund Exchange Rate Archives, http://www.imf.org/external/np/fin/rates/param_rms_mth.cfm (as visited Nov. 5, 2004, and available in Clerk of Court’s case file). Respondents claim that liability computed by weight is higher. The machinery’s weight is not in the record. In any case, because we conclude that Norfolk is also protected by the $500 per package limit in the second bill of lading at issue here, see Part III–B, infra, and thus cannot be liable for more than $5,000 for the 10 containers, each holding one machine, the precise liability under the ICC bill of lading does not matter.