Opinion ID: 794145
Heading Depth: 2
Heading Rank: 3

Heading: The ECB

Text: 12 While the ECB contains several provisions, such as Clause 7(2), related to Hapag Lloyd's liability as the carrier, the parties agree that it also contains a Himalaya Clause at Clause 5(1) extending the application of the Carriage of Goods by Sea Act, 49 Stat. 1207, 46 U.S.C.App. §§ 1300 et seq. (COGSA) — including its $500 per package limitation on liability, see id. § 1304(5) — to certain downstream parties expected to take part in the shipment before the goods are loaded on and after they are discharged from Hapag Lloyd's ship. 2 The Himalaya Clause states in relevant part: 13 The provisions set forth in COGSA shall (except as may be otherwise specifically provided herein) also govern before the Goods are loaded on and after they are discharged from the Vessel provided, however, that the Goods at said time are in the actual custody of the Carrier or any Sub-Contractor. 14 The sole factual point in dispute with respect to the applicability of the Himalaya Clause to BNSF on appeal is whether the rail carrier is a sub-contractor within the meaning of the ECB. In considering the issue, we are mindful of the Supreme Court's recent admonition that there is no special rule for [interpreting] Himalaya Clauses. Kirby, 543 U.S. at 31, 125 S.Ct. 385. In other words, they must be construed like any other contracts: by their terms and consistent with the intent of the parties. Id. The ECB defines `Sub-Contractor[s]' as: 15 [O]wners and operators of vessels (other than the Carrier), Underlying Carriers, stevedores, terminal and groupage operators, road and rail transport operators and any independent contractors employed by the Carrier in the performance of the Carriage. 16 American Home concedes, as it must, that BNSF is an underlying carrier, 3 but contends that BNSF is not a sub-contractor, because it was employed by Matson not Hapag Lloyd. Therefore, American Home argues that BNSF is a sub-sub-contractor of Hapag Lloyd and, as such, is not entitled to COGSA's $500 per package limitation. We disagree. 17 In making that argument, American Home fails to appreciate the nature of the relationship between Hapag Lloyd and Matson. Article 3 of Matson's standard terms and conditions, incorporated into the contract between Matson and Hapag Lloyd, states: 18 [Matson] is a shipper's agent, and will act for [Hapag Lloyd] in arranging for the transportation of the Units. [Matson] does not itself provide transportation or assume carrier or insurance obligations. 19 When a duly constituted agent acts in accordance with his instructions ... he has power to affect the legal relations of the principal to the same extent as if the principal had so acted. Restatement (Second) of Agency § 12 cmt. a (1958). Matson, in accordance with Hapag Lloyd's instructions, engaged BNSF to transport the engines from Chicago to Long Beach. Thus, BNSF was employed by Hapag Lloyd, even though the rail carrier dealt with Matson in arranging the shipment. 20 It is the nature of the relationship between Matson and Hapag Lloyd that distinguishes this case from those relied on by American Home. In each of those cases, the intermediary entity, unlike Matson, remained obligated to the carrier to perform a service that it had contracted out to a third party, whereas here, Matson's sole obligation was to arrange the transportation, not provide it. In Tokio Marine and Fire Ins. Co. v. Nippon Yusen Kaisha Lines, 466 F.Supp. 212 (W.D.Wash.1979), for instance, the applicable bill of lading extended the liability limitation to any `servant, agent or sub-contractor of the Carrier.' Id. at 213. The court determined that a third party was not a beneficiary of that provision, where the carrier subcontracted its obligation to discharge the cargo in question to the Port of Seattle which in turn contracted with [the third party] to fulfill its obligation to the carrier. Id. 21 Similarly, in Toyomenka, Inc. v. S.S. Tosaharu Maru, 523 F.2d 518 (2d Cir. 1975), this Court refused to allow a security company hired by the stevedore, not the carrier, to benefit from a Himalaya Clause extending the liability limitation to `all servants, agents and independent contractors... [u]sed or employed by the Carrier. ' Id. at 521 (emphasis in original). Unlike Matson, however, the stevedore was contractually obligated to provide the very same service it contracted out to the security company — protecting the goods after they had been discharged from the ship. See Toyomenka, Inc. v. S.S. Tosaharu Maru, 392 F.Supp. 450, 451 (S.D.N.Y. 1974). As such, the security company was properly deemed to be an independent contractor of the stevedore, not the carrier. See Toyomenka, 523 F.2d at 522. 4 By contrast, Matson discharged its obligations to Hapag Lloyd under the contract by engaging BNSF to transport the engines from Chicago to Long Beach. Matson was under no obligation to provide such transportation. Given that the sole purpose of the agency relationship between Matson and Hapag Lloyd was to arrange for the transportation of the engines on Hapag Lloyd's behalf, it is clear that BNSF was employed by Hapag Lloyd and thus entitled to limit its liability to $500 per package pursuant to the Himalaya Clause in the ECB.