Court Opinion

ID: 807628
Source: CourtListenerOpinion
Date Created: 2012-08-29 14:43:51+00
Date Added: 2024-06-11T18:00:26.132592
License: Public Domain

In the

United States Court of Appeals
               For the Seventh Circuit

Nos. 11-2949 & 11-2967

K AWASAKI K ISEN K AISHA, L TD., “K” L INE
A MERICA, INC., and U NION P ACIFIC R AILROAD C O .,

                                                Plaintiffs-Appellants,
                                  v.

P LANO M OLDING C O .,
                                                 Defendant-Appellee.

            Appeals from the United States District Court
        for the Northern District of Illinois, Eastern Division.
            No. 07 C 5675—Harry D. Leinenweber, Judge.

     A RGUED M ARCH 27, 2012—D ECIDED A UGUST 29, 2012

  Before F LAUM, W ILLIAMS, and T INDER Circuit Judges.
  F LAUM, Circuit Judge. On April 21, 2005, a Union
Pacific Railroad Co. train derailed in Oklahoma causing
extensive damage to both the railroad and the train’s
cargo. Kawasaki Kisen Kaisha, Ltd. (“Kawasaki”), “K”
Line America, Inc. (“KAM”) (collectively “K-Line”), and
Union Pacific Railroad Co. (“Union Pacific”) (collectively
2                                  Nos. 11-2949 & 11-2967

“appellants”) blame Plano Molding Co. (“Plano”) for the
derailment, alleging Plano’s steel injection molds were
improperly packed, broke through their crate, and fell
onto the track. Appellants now attempt to hold Plano
liable for certain damages caused by the derailment, and
seek indemnification for claims made against them by
others who suffered losses in the accident. The district
court granted Plano’s motion for summary judgment.
For the reasons set forth below, we reverse in part,
affirm in part, and remand.

                     I. Background
    A. Factual Background
   Plano is an Illinois corporation that designs, manufac-
tures, and sells plastic storage boxes, including tackle
boxes. Identifying a need for new molds, Plano con-
tacted CMT International, Inc. (“CMT”), a service
provider that assists customers in the United States
who wish to purchase products from Asia. After estab-
lishing Plano’s mold specifications, CMT solicited bids
from manufacturers in Taiwan and China. CMT presented
Plano with the bids, and Plano selected Kunshan, a Chi-
nese company, as its fabricator. The purchase orders
(“POs”) between CMT and Plano were for the “design,
engineer, construct and supply” of two steel injection
molds for use in Plano’s Illinois factory.
  It is undisputed that World, a non-vessel operating
common carrier, was selected to coordinate the molds’
transportation from China to the United States. The
original terms of carriage were Free on Board Shanghai
Nos. 11-2949 & 11-2967                                     3

(“FOB Shanghai”). The term FOB indicates that the
buyer takes ownership of the goods as soon as it passes
over the rail of the ship. At World’s suggestion, in a series
of emails between Robb Yunger (“Yunger”) of Plano,
John Wember (“Wember”) of World, and Amna Shah
(“Shah”) of CMT, the parties agreed to alter the
delivery terms from FOB Shanghai to Delivered Duty
Paid (“DDP”). Under DDP terms, the buyer does not
take ownership until the goods arrive at its door. World
representative Wember explained that ensuring the
correct shipping terms was paramount because “if any-
thing were to happen in transit you want your paper-
work to reflect the true terms.” Despite this discussion,
the World bill of lading indicates that World was the
consignee, consistent with FOB Shanghai shipping
terms. Even so, CMT sent Plano an invoice dated July 14,
2005. This invoice charged Plano for the price of the
molds, as well as shipping; CMT paid World directly
for certain shipping costs, billing Plano later. CMT also
paid the import duty and custom cleared service charge,
and then invoiced Plano. These facts suggest that it
was CMT that arranged the transportation with World
under DDP terms.
  As the freight forwarder, World contracted with THI
Group LTD (“THI”) and K-Line to ship the molds from
China to Illinois. K-Line subcontracted the movement
within the United States, from California to Illinois, to
Union Pacific. K-Line supplied the shipping container
to THI, and the molds were packed on-site at Kunshan.
THI delivered the goods, packed in the container, to K-Line
4                                  Nos. 11-2949 & 11-2967

in Shanghai. K-Line transported the molds from China
to the United States, transferring the molds to a Union
Pacific in California. The train derailed near Tyrone,
Oklahoma on April 21, 2005, causing $2 million in
damage to K-Line customers’ cargo and separately
costing Union Pacific about $2 million.
  Plano received World’s bill of lading via email on
April 3, 2005, the day the molds were placed on the
shipping vessel in Shanghai. The World bill of lading
contained a “Himalaya clause” granting World’s sub-
contractors all warranties and indemnities defined in
the World bill of lading. Relevant to this case, under the
World bill of lading, when a container is packed by a
party other than World, the “Merchant” warrants “that
the stowage and seals of the containers are safe
and proper and suitable for handling and carriage and
indemnifies [World] for any injury, loss or damage
caused by breach of this warranty.” (emphasis added).
Section 2.3 of the World bill of lading defines “Merchant”
as “the Shipper, the Receiver, the Consignor, the Con-
signee, the Holder of this Bill of Lading and any person
having a present or future interest in the Goods or any
person acting on behalf of any of the above-mentioned
persons.”
  K-Line issued its own bill of lading which contained
a similar indemnification provision:
    If Goods received by Carrier are in Container(s)
    into which contents have been packed by or on
    behalf of Merchant, Merchant warrants that the
    stowage and securing of the contents of the Con-
Nos. 11-2949 & 11-2967                                        5

   tainer(s) and their closing and sealing are safe and
   also warrants that Container(s) and contents
   thereof are suitable for Carriage. . . . In the event of
   Merchant’s breach of said warranties, Carrier
   shall not be responsible for any loss of or damage
   to or in connection with goods and Merchant
   shall be liable for loss of or damage to any prop-
   erty, or for personal injury . . . and shall defend,
   indemnify and hold Carrier harmless against all
   loss, damage, liability, cost or expense . . . .
The definition of “Merchant” in K-Line’s bill of lading was
similarly inclusive defining a “Merchant” as “shipper,
consignor, consignee, owner and receiver of goods, and
holder, and anyone acting on behalf of any such person.”

 B. Procedural Background
  Following the derailment of the Union Pacific train near
Tyrone, Oklahoma, in April of 2005, eight complaints
were filed in the Southern District of New York by
owners of cargo damaged by the derailment, or their
subrogated insurers, against Kawasaki, KAM, and Union
Pacific. Union Pacific also sued Kawasaki and KAM
for damage to the railroad property. Kawasaki and
KAM filed third-party complaints against Plano, World
Commerce Services LLC (“World”) and CMT for indem-
nity or contribution. Union Pacific filed a third-party
complaint against Plano and CMT on the same
grounds. Four other cargo damage cases were filed
in California.
6                                   Nos. 11-2949 & 11-2967

  The third-party complaints against CMT and Plano
were dismissed by the district court in New York for
lack of personal jurisdiction, and Kawasaki and KAM
then filed an action in the Northern District of Illinois
against Plano and CMT. The Illinois action and the
eight New York actions were centralized for consoli-
dated, pre-trial proceeding in the Southern District of
New York. Union Pacific filed a complaint in intervention.
  All cargo claims have settled, as have appellants’ claims
against World and CMT, leaving only the claims of
Kawasaki, KAM, and Union Pacific against Plano. The
Southern District of New York transferred the case to
the Northern District of Illinois, where the district court
granted Plano’s motion for summary judgment. This
appeal followed.

                      II. Discussion
  We review de novo the district court’s grant of sum-
mary judgment. O’Leary v. Accretive Health, 657 F.3d 625,
630 (7th Cir. 2011). Summary judgment is appropriate
where the movant demonstrates that there exists no
genuine dispute as to an issue of material fact, and he
is entitled to judgment as a matter of law. FED. R. C IV.
P. 56(a). The court must review the record in the light
most favorable to the non-moving party and construe
all reasonable inferences in that party’s favor. Righi v.
SMC Corp., 632 F.3d 404, 408 (7th Cir. 2011). Here, we
apply federal maritime law because jurisdiction exists
under 28 U.S.C. § 1333. See Norfolk S. Ry. Co. v. Kirby,
543 U.S. 14, 24-25 (2004) (finding bills of lading involving
Nos. 11-2949 & 11-2967                                   7

overseas shipment of goods to be maritime contracts
even where the last leg of the journey was by rail).
  Appellants unsuccessfully sought damages and in-
demnification from Plano in the district court,
asserting theories grounded both in contract and tort.
Though we conclude that appellants’ negligence claims
were properly rejected, we find unresolved questions
of fact material to the determination of one of appellants’
contract claims. Therefore, we affirm the district court
as to the contract claim based on K-Line’s bill of lading
but reverse as to the contract claim based on World’s bill
of lading. We also affirm the district court’s decision
regarding the negligence claims. We remand for further
proceedings consistent with this opinion.

 A. Contract Claims
  Appellants assert that Plano is liable for injuries
caused by the train derailment under both the K-Line and
World bills of lading. Under both bills of lading, Plano
could likely be considered a “Merchant” and thus subject
to liability if it breached the warranty to safely and ade-
quately package the molds it handed over for shipment.
First, appellants argue that World was acting as Plano’s
agent under a non-traditional agency theory, and there-
fore legally bound Plano to the K-Line bill of lading. In
the alternative, appellants argue that Plano is liable
under K-Line’s bill of lading because Plano accepted its
terms through conduct. Finally, appellants contend that
Plano contracted directly with World, and is therefore
8                                   Nos. 11-2949 & 11-2967

bound to the World bill of lading, which contains explicit
warranties for packaged cargo and applies to K-Line
and Union Pacific through the Himalaya clause.
  A bill of lading can serve many functions. Most funda-
mentally, it is an acknowledgment of the receipt for
goods. Cargill Ferrous Intern. v. Sea Phoenix MV, 325
F.3d 695, 703 (5th Cir. 2003). But it can also be evidence
of title, or more importantly, serve as evidence of a
contract of carriage. Id. “The bill of lading is the basic
transportation contract between the shipper-consignor
and the carrier; its terms and conditions bind the
shipper and all connecting carriers.” S. Pac. Transp. Co. v.
Commercial Metals Co., 456 U.S. 336, 342 (1982); see also
C.A.R. Transp. Brokerage Co. v. Darden Rests., Inc., 213 F.3d
474, 478-79 (9th Cir. 2000). “Contracts for carriage of
goods by sea must be construed like any other contracts:
by their terms and consistent with the intent of the par-
ties.” Kirby, 543 U.S. at 31. The question here is whether
Plano can be bound to the K-Line and World bills of
lading as the purchaser of the molds.

    1. K-Line Bill of Lading
  Appellants first attempt to bind Plano to the K-Line
bill of lading under a non-traditional agency theory.
Under traditional approach, an agency relationship
requires that a principal direct an agent to act for the
principal’s benefit, the agent to consent, and the principal
to have the power to control the agent’s actions. United
States v. Aldrige, 642 F.3d 537, 541 (7th Cir. 2011). But as
Nos. 11-2949 & 11-2967                                     9

the Supreme Court articulated in Kirby, maritime con-
tracts for transport are often not susceptible to such a
traditional analysis. 543 U.S. at 34. Instead, the Supreme
Court set forth a modified test which nonetheless finds
an agency relationship in narrow circumstances. Id.
Here, appellants attempt to bind Plano to the K-Line bill
of lading, contending that World acted as its agent
under the Kirby approach. However, as we will ex-
plain, the non-traditional analysis is very limited in its
application, and its employment here is inappropriate.
  When a buyer or owner of goods needs to transport
his items, the owner will often contract with a freight
forwarder to assist in the shipment. Sometimes this
forwarder is entrusted with those goods as a first-tier
carrier, but decides to sub-contract the movement to
another second-tier carrier. This was the case in Great
N. Ry. Co. v. O’Connor, 232 U.S. 508, 514-15 (1914). There,
the Court established that a first-tier carrier can enter
into enforceable contracts with second-tier carriers
without the express consent of the owner. Id. Specifically,
the Court held that the agreement between the first-
and second-tier carriers to put a ceiling on the value
of owner’s goods was enforceable against the owner,
even though the owner had never agreed to the lower
value. Id. This was because the second-tier carrier “had
the right to assume that the [first-tier carrier] could agree
upon the terms of the shipment.” Id. The result, of course,
was that when the owner’s goods were damaged in
transit, her recovery from the second-tier carrier was
limited to the value negotiated by the first- and second-
tier carriers. The Court relied on Great N. Ry. Co. in
Kirby, which expanded on this principle. 543 U.S. at 34.
10                                   Nos. 11-2949 & 11-2967

   In Kirby, a cargo owner hired an intermediary freight
forwarding company to facilitate the transport of his
goods from Australia to the United States. Id. The interme-
diary then hired a shipping company to transport the
goods, and the shipping company subcontracted the
overland portion of the trip. Id. at 19. Following an over-
seas journey, the cargo was damaged while being
carried by rail. Id. at 18. There, the intermediary had
negotiated a liability limitation with the shipping com-
pany, which was also passed along to the subcontracting
railroad. Id. at 32-33. The railroad argued that its liability
to the cargo owner was capped by a limitation of
liability negotiated by the upstream carrier; plaintiff
cargo owner maintained that it was not bound by the
limitation because it did not agree to those terms.
Id. The Court sided with the railroad holding that an in-
termediary can bind “a cargo owner to the liability lim-
itations it negotiates with downstream carriers. . . .” Id.
at 34. In reaching this conclusion, the Court held that
an intermediary can serve as the owner’s agent for “a
single, limited purpose: when [the intermediary] con-
tracts with subsequent carriers for limitation on liabil-
ity.” Id.
  An intermediary’s authority to act as the cargo owner’s
agent is narrowly tailored; it would be unsustainable
to recognize an intermediary as an agent for the cargo
owner in “every sense” because of the potential to
expose the owner to unauthorized liability. Kirby, 543
U.S. at 33. As the Supreme Court has recognized, “inter-
mediaries, entrusted with goods, are ‘agents’ only in
Nos. 11-2949 & 11-2967                                        11

their ability to contract for liability limitations with
carriers downstream.” Id. at 35.1 As we recently explained:
    The idea is that if A engaged B to handle a ship-
    ment, among other things, A has delegated to B the
    choice between a lower price with a strict limita-
    tion of liability and a higher price without one,
    when B engages the services of Carrier C.

1
  Though appellants argue that the recent Supreme Court case
of Kawasaki v. Regal-Beloit, 130 S. Ct. 2433, 2488 (2010), extends
this principle, they misconstrue the import of that case. Regal-
Beloit dealt with the same derailment at issue here, but the
question before the Court differed significantly. There, the
Court examined whether the venue provisions set forth in a
through bill of lading, which dictated that the entire journey
would be governed by the Carriage of Goods by Sea Act, would
apply to the domestic part of the import’s journey by a rail
carrier, despite prohibitions or limitations in another federal
statute, the Cermack Amendment. 130 S. Ct. at 2439. The Court
answered in the affirmative, holding that the agreed upon
forum-selection terms in the bill of lading bound the cargo
owners. In so holding, the Court found that Cermack’s provi-
sions do not apply to a shipment originating overseas under
a through bill of lading. Id. at 2446. Though the Court deter-
mined that the bill of lading bound the cargo owners, the
facts in that case are distinct. There, the owners contracted
directly with K-Line, raising no questions related to first- or
second- tier carrier liability. Id. What we can take from Regal-
Beloit is the Court’s conclusion that where a cargo owner
agrees to a bill of lading, liability and venue rules contained
therein will be enforceable. Id. at 2448.
12                                    Nos. 11-2949 & 11-2967

Nipponkoa Ins. Co. v. Atlas Van Lines, Inc., ___ F.3d ___, 2012
WL 2580120 (7th Cir. 2012). Though appellants urge us to
classify World as Plano’s agent under this non-traditional
Kirby theory, thereby rendering Plano liable under the K-
Line bill of lading, we must pause to consider whether the
application of this non-traditional theory is appropriate.
Upon review, we agree with the district court that it is not.
  The Supreme Court has limited the assumption of an
agency relationship between an intermediary and a
shipper who contracts for the intermediary’s services to
a narrow circumstance: where an intermediary makes a
contract for liability limitations with carriers downstream.
Kirby, 543 U.S. at 35. While the non-traditional agency
theory is intended to facilitate commerce, the Court has
nonetheless cautioned against recognizing an inter-
mediary as the cargo owner’s agent for all purposes. Id. at
33; In re M/V Rickmers Genoa Lit., 622 F. Supp. 2d 56, 73 n.23
(S.D.N.Y. 2009) (“If taken literally, the notion that con-
signors and consignees can be assumed to be in a princi-
pal/agent relationship would expose consignees to poten-
tially limitless liability for the conduct and contracts
of their consignors.”).
  Here appellants attempt to limit their own liability
for damages caused by the train derailment by seeking
reimbursement and damages from Plano.2 In a broad
sense, this goal is consistent with Great Northern and

2
  They ask that we hold Plano liable under the K-Line bill of
lading, which contains a warranty and limitation of liability
clause regarding goods packaged by someone other than the
carrier.
Nos. 11-2949 & 11-2967                                 13

Kirby, where the carriers sought to limit their liability
to cargo owners in accordance with their negotiated bills
of lading. Similarly, K-Line’s warranty regarding crated
cargo comports with the Supreme Court’s concern for
ease of commerce, and the practical need of a second-
tier carrier to be able to trust and rely on agreements
it forms with a first-tier carrier on behalf of, or in the
interest of, a cargo owner. Though we recognize this
congruence, we must acknowledge the very limited
circumstances in which the Supreme Court has recog-
nized the non-traditional agency relationship. The Court
has employed this approach exclusively where a carrier
and an intermediary negotiated a maximum value for
the transported goods, absent consent from the goods’
owner. In recognizing an agency relationship, the Court
has protected the second-tier carrier by limiting its
liability to the owner of goods damaged in transit to
the value negotiated with the intermediary. In contrast,
here appellants use the K-Line bill of lading as a sword
to obtain indemnification and damages from Plano,
rather than a shield to avoid liability. Appellants wish
to hold Plano accountable as a “Merchant” that broke
its warranty regarding the fitness of its goods for ship-
ment. But, Plano was not a party to the K-Line bill
of lading, nor did Plano actually load the molds into the
crate. Moreover, as we will explain below, there is a
question of fact regarding the actual role Plano played
in obtaining World’s services. Remember, Plano hired
CMT to facilitate the purchase of the molds from China.
We are unconvinced that the Kirby Court envisioned
the result for which appellants advocate. Though World
14                                  Nos. 11-2949 & 11-2967

was certainly authorized to arrange the molds’ shipment
from China to the United States, we doubt that it could
make guarantees on behalf of Plano, which if breached,
could subject Plano to substantial liability. Given the
Supreme Court’s restraint in recognizing non-traditional
agency relationships, we are unwilling to find one here.
  Appellants next argue that Plano is liable under the K-
Line bill of lading because Plano accepted the bill’s terms
by its conduct throughout the transaction. Although a
bill of lading is a contract between a shipper and a
carrier, it can nonetheless bind a non-party buyer
where there is consent to be bound. Rickmers, 622
F. Supp. 2d at 71. It is undisputed that Plano is not a party
to the K-Line bill of lading, which names THI as the
shipper and World as the consignee. Whether Plano
can nonetheless be bound must be determined by
looking to general principles of contract formation
and interpretation.
   A non-party buyer may accept the terms of the bill of
lading where it files a lawsuit under the bill, and attempts
to benefit from its terms. Steel Warehouse Co. v. Abalone
Shipping Ltd., 141 F.3d 234, 237 (5th Cir. 1998). Here,
it is undisputed that Plano did not file a lawsuit under
the K-Line bill of lading, so this theory of liability is
foreclosed to appellants. Appellants note that Plano filed
an insurance claim to recover the value of the damaged
goods, but present no evidence that Plano in fact
sought any benefits under the K-Line bill of lading in
connection with its claim. Moreover, appellants’ sugges-
tion that Plano accepted the bill of lading by receiving
Nos. 11-2949 & 11-2967                                  15

a “special rate” offered by K-Line for the transport is
supported by no authority and is not relevant to this
determination.
  Acceptance may also be shown through an agency
relationship between the shipper and the intermediary.
Rickmers, 622 F. Supp. 2d at 72. As discussed above, the
non-traditional agency analysis articulated in Kirby is not
appropriate here. The use of traditional agency
principles to bind consignees to bills of lading, however,
was called into question by the Supreme Court. Kirby,
543 U.S. at 34. In Kirby, the Court stated that when con-
sidering whether an intermediary can bind a shipper to
the terms of a carrier’s bill of lading, “reliance on
agency law is misplaced” because the traditional indicia
of agency, a fiduciary relationship and control by the
principal, are generally lacking in relationships between
cargo owners and freight forwarders. Id. To the extent
that this analysis is proper to determine whether the
shipper accepted the terms of the bill of lading, we
agree with the district court that World was not acting
as Plano’s agent. Under a traditional analysis, an agency
relationship requires a manifestation by the principal to
the agent that the agent may act on his account, consent
by the agent to so act, and the power by the principal to
control the agent’s conduct regarding the entrusted
matters. Aldrige, 642 F.3d at 541. Here, the agency test
must fail because Plano did not have the power to
control World. As we discuss below, the record is unclear
regarding what role Plano played in engaging World.
Moreover, Plano did not direct World as to which
shipper to select, or how to conduct its business. Though
16                                  Nos. 11-2949 & 11-2967

Plano had a relationship with K-Line, the record does
not indicate that Plano demanded that World contract
with K-Line, much less THI or Union Pacific. Appellants
point to no fact in the record which convinces us that
Plano had the ability to, or did, control World.
  For the foregoing reasons, Plano cannot be held to the
terms of the K-Line bill of lading.

     2. The World Bill of Lading
  Turning to appellants’ final theory of contract liability,
asserting that Plano is bound to the terms of the World
bill of lading as a contracting party, we must consider
Plano’s role in obtaining World as the freight forwarder
for the molds’ transportation. Appellants argue that
Plano was a party to the contract, and was therefore
aware of and accepted the terms of the World bill of
lading. Plano maintains that it was CMT that contracted
with World, and that its role was limited to a mere unin-
volved purchaser. The importance of this factual deter-
mination can be seen in Rickmers. In Rickmers, an injured
carrier sought to hold a purchaser of goods liable under
bills of lading asserting that the purchaser was the
ultimate consignee of the goods and fit within the
bills’ definition of “Merchant.” 622 F. Supp. 2d at 71. In
rejecting the arguments of the carrier, the Rickmers
court held that though the purchaser likely fell within
the broad scope of the Merchant clause contained in
the bills of lading, the purchaser was not a party to
Nos. 11-2949 & 11-2967                                        17

either bill, nor did it ever consent to be bound.3 Id. at 72-73.
Though Rickmers, as a district court decision is not
binding here, we nonetheless find its analysis persua-
sive. Plano similarly argues that it was removed from
all shipping terms because CMT handled the transporta-
tion of the molds from China to the United States.
  The district court found it undisputed that CMT, not
Plano, “hired” World, and the court determined that
CMT was not Plano’s agent, but a broker that filled its
order. Accordingly, Plano was not a party to the World
bill of lading. The district court also concluded that
Plano could not be bound by the World bill of lading
because it did not negotiate its terms or seek benefits
under it. Appellants, however, maintain that Plano con-
tracted with World directly, or in the alternative, that
there are facts sufficient to create a question of fact as to
this issue. The resolution of this question is important

3
  In Rickmers, the purchaser, ESM Group, bought SS-89, a
desulphurizing reagent in steelmaking, from its wholly-owned
subsidiary, ESMT. While en route on the high seas, the
goods allegedly caused an explosion on board the transporting
vessel. ESMT arranged for the SS-89 to be shipped to the
United States. The carrier asserted a breach of contract claim
against the buyer, ESM Group, who had no hand in arranging
the transport. The court declined to find ESM Group liable to
the carrier because it was not a party to the bill of lading, nor
did it consent to be bound. Id. at 71. There, the bill of lading
contained a provision stating that broadly defined “merchants”
would indemnify the carrier against any claim or loss arising
out of the carriage of dangerous goods.
18                                  Nos. 11-2949 & 11-2967

because if Plano engaged World to handle the shipment
on its own behalf, it could be found liable to K-Line
and Union Pacific by the plain terms of the World bill
of lading. Contrary to the conclusion of the district court,
we find the evidence surrounding the Plano-CMT-World
transaction murky at best, and conclude that conflicts
in the record regarding this point create a material ques-
tion of fact requiring remand.
  There are several facts which weigh on the determina-
tion of Plano’s relationship with World. It is undisputed
that Plano selected World as its forwarder, and instructed
CMT to contact World regarding the shipment. But evi-
dence suggests that it was Plano, not CMT, that actually
arranged the shipment with World. The record also
indicates that it was Plano’s obligation to arrange the
molds’ transportation. First, Samuel Wu of CMT testified
that Plano shipped the molds to the United States
“FOB Shanghai.” Under that term, Plano, not CMT, was
responsible for arranging shipment. Also consistent with
this term, the World bill of lading listed Plano as the
consignee. Wu confirmed in his deposition that Plano
did arrange the molds’ transportation. Plano executive
Yunger similarly confirmed that when a mold is shipped
FOB, the entity making the order arranges for the goods’
transportation. He denies, however, that Plano had any
role in arranging the shipment for the molds at issue.
This assertion is contradicted by Wember of World
who testified that CMT had no role in booking the ship-
ment, and that World had no direct dealings with
CMT; instead, he dealt directly with Yunger at Plano.
Wember also testified that Yunger initially contacted
Nos. 11-2949 & 11-2967                                  19

World regarding the molds’ shipment and points to an
email sent by Yunger to Wember, copying CMT representa-
tives, where Yunger states “I want to ship the molds
FCL in terms to shipper where FOB Shanghai we can
use a 20-foot container. Please arrange shipping and
billing with EnJinn, CMT and/or Plano same as last
molds except these molds are from China.” 4
  A series of emails sent between Yunger, Wember, and
Shah raise questions regarding the true terms of the
shipment. In one email, Yunger asked World to begin
arranging the shipment under FOB terms. World then
replied that the shipment should be made DDP and not
FOB. The parties appear to agree to alter the delivery
terms, with Wember emphasizing that correct shipping
terms were paramount because “if anything were to
happen in transit you want your paperwork to reflect
the true terms.” Despite these emails, the bill of lading
reflects FOB shipping terms, listing World as the con-
signee. The shipping terms are significant in terms of
ownership. Under an FOB arrangement, Plano would
take ownership once the cargo goes over the rail of the
ship. Under a DDP arrangement, Plano would only take
ownership when the goods arrived at its door, and CMT
was responsible for transporting the goods to Illinois.
  Although the World bill of lading indicates that the
goods were shipped FOB, Wember testified that this was
an error. He claims that the true purchase terms between

4
  The shipping term FCL indicates that all cargo belongs to
one consignee, a “full container load.”
20                                 Nos. 11-2949 & 11-2967

Plano and CMT were DDP, and that CMT, not Plano,
should have been listed as the consignee on World’s bill of
lading; however, he admitted that no correction or
change was ever made. Further complicating matters is
that CMT sent Plano an invoice dated July 14, 2005. This
invoice charged Plano for the price of the molds, as well
as shipping; CMT paid World directly for certain
shipping costs, billing Plano later. CMT also paid the
import duty and custom cleared service charge, and then
invoiced Plano. These facts suggest DDP shipping terms,
whereby CMT, rather than Plano, would make the ship-
ping arrangements.
  On this record, we are unable to ascertain whether
CMT or Plano arranged the molds’ shipment with
World. Without this determination, we cannot conclude
whether or not Plano engaged World in a manner that
would impose liability as a contracting party, and
subject Plano to liability under the World bill of lading.
As to this narrow issue, we reverse the district court’s
grant of summary judgment and remand for further
consideration.

 B. Negligence Claims
   Appellants assert that the train derailment was caused
by the inadequate packing and bracing of Plano’s molds.
Accordingly, they maintain that Plano may be held
liable for damages caused by the accident because it
owed the carriers a duty to supply a properly packed
container. Appellants seek to impose this duty on
Plano arguing that: (1) it was on notice of the carrier’s
Nos. 11-2949 & 11-2967                                  21

inability or incompetence to properly pack goods; (2) it
had “unique knowledge” of “inherent risks” presented
by the molds and failed to warn of the foreseeable
danger; (3) Plano exercised substantial control over the
molds’ shipment; and (4) Plano is liable for World’s acts
because World acted as Plano’s agent. The district court
disagreed and found no evidence to suggest that the
parties who packed and shipped the container were
unable to do so properly, or that Plano was aware of any
risk inherent to shipping the molds. It also determined
that Plano exercised no control over World or THI, and
found no agency relationship. We affirm the district
court’s finding regarding negligence.
   Under federal maritime law, buyers do not typically
owe carriers and fellow cargo owners a duty of care.
Aslanidis v. U.S. Lines, Inc., 7 F.3d 1067, 1077 (2d Cir.
1993) (“[I]mposing liability on the purchaser of goods
would be both unjustified and illogical.”). This is because
“[a]s between carrier, shipper, and consignee, the con-
signee would be least likely to possess the necessary
knowledge to have avoided any difficulty arising
from improper packaging.” Atkins Kroll & Co. v. Kedlloyd
Line, 210 F. Supp. 315, 317 (N.D. Cal. 1962). However,
some courts have held that a different rule might
obtain where the buyer had unique knowledge of the
known risks associated with its product. Rickmers, 622
F. Supp. 2d at 65. Further, a buyer might be subject to
liability if it was on notice of some incompetence on the
part of the shipper. Id. A duty may be found where
harm is reasonably foreseeable. Schur v. L.A. Weight Loss
Centers, Inc., 577 F.3d 752, 766 (7th Cir. 2009). We focus,
22                                 Nos. 11-2949 & 11-2967

then, on whether the derailment was reasonably foresee-
able given Plano’s decision to use World, or because of
the inherent risk of shipping the molds. It was not.
  First, we examine whether the record suggests that
Plano was on notice that World was incapable of safely
and effectively transporting the molds. As an initial
matter, the record indicates that Kunshan loaded the
molds into wooden crates, K-Line supplied a shipping
container, and THI loaded the crates into the K-
Line container. Plano did not actively participate in
loading the molds. Moreover, Plano had no reason to
question the competence of World, Kunshan, or THI.
World had shipped molds to Plano twenty to thirty times
previously—there is no evidence that Plano ever had
any problems with World’s performance, or that
World’s performance was ever negligent or defective
in any way. Furthermore, there is nothing to hint at any
prior knowledge of incompetence on the part of
Kunshan or THI.
  Next, we consider whether Plano had any unique
knowledge regarding the risks inherent in transporting the
molds. Appellants suggest that transporting the molds
posed a heightened risk because of the “concentrated
footprint” of the molds; the molds were small in size,
compared to their weight. Given this footprint, Plano
allegedly should have accounted for the weight distribu-
tion within the containers. Though appellants cite to
several cases to show that Plano had a duty to warn, unlike
those cases, the steel molds at issue here contained no
inherent risk such as toxic contamination, explosion, or
Nos. 11-2949 & 11-2967                                  23

spontaneous combustion. Edwards v. California Chemical
Co., 245 So. 2d 259 (Fl. Ct. App. 1971) (shipment of Ortho
Standard Lead Arsenate, a “highly toxic” product re-
quiring users to “wear protective clothing and employ
a respirator”); Barney v. Burntsenbinder, 64 Barb. 212
(1872) (cargo of highly explosive nitroglycerine). To the
extent that appellants claim that the weight of the
molds made them dangerous, the evidence does not
support the conclusion that Plano had specific knowledge
about the “weight of the steel molds and the risk of
shipping [the] molds without the appropriate use
of blocking, bracing, or load spreading material.” The
weight of the molds was fully disclosed on the face of
both the World and K-Line bills of lading, and no party
has questioned the accuracy of the weight as recorded
on these documents. Though Plano did select the size
of the container because it believed the combined weight of
the molds did not exceed the container’s capacity,
nothing suggests that Plano was aware of any risk pre-
sented by the size of the container. Moreover, K-Line
itself supplied the container. Finally, appellants agree
that the weight of the molds was within the weight capac-
ity of a properly maintained 20-foot K-Line container.
  Appellants also maintain that the derailment that
occurred in Oklahoma was foreseeable, and cite to Regal-
Beloit for support. 130 S. Ct. at 2448. This reference is
misplaced. In Regal-Beloit, the Court did not evaluate
the knowledge of any party or evaluate whether it was
foreseeable that the molds themselves would break
through their crates. Instead, the Court simply observed
that it was a “foreseeable event that cargo might be dam-
24                                 Nos. 11-2949 & 11-2967

aged during carriage.” Id. As we explained above, there
is no evidence to show that it was foreseeable that the
molds would break through their crates and cause a
derailment, and the Court certainly was not suggesting
that Plano should have foreseen that such an accident
would have transpired.
  Finally, appellants argue that Plano was liable for the
alleged negligence of World and THI because apparent
authority created an agency relationship between
Plano and World, and because Plano exerted substantial
control over World and THI during the shipping process.
As we concluded previously, World was not acting
as Plano’s agent, and appellants’ assertion of apparent
authority does not alter our conclusion. Appellants
argue that Plano’s act of giving World the steel molds
for shipment cloaked World with apparent authority to
act on Plano’s behalf. But Plano cites to nothing in the
record to show that K-Line or Union Pacific believed
that World was acting as Plano’s agent. Moreover, as
noted supra, Part II.A.2, there is a question of fact
regarding whether Plano or CMT engaged World as a
contracting party.
  The record simply does not support the assertion
that Plano exercised substantial control over either World
or THI during the shipping process. As to World, appel-
lants point to the fact that Plano “ordered” World to
ship the molds “FCL”, that Plano provided World with
the specifications of the molds, and that Plano instructed
CMT on when to initiate the shipping procedure. These
few instructions, however, do not show that Plano “con-
Nos. 11-2949 & 11-2967                                25

trolled” World. Rather, Plano simply provided basic
instructions to World regarding the molds’ shipment.
Plano did not instruct World on which carriers to
employ, and no Plano employees had any communica-
tions with THI, the company that carried out the
loading and stowage of the molds.
  Plano had no indication that World, Kunshan, or THI
would be unable to properly package and transport its
steel molds from China to the United States, nor did
Plano have any special knowledge of any unique
danger the molds would pose during transit. Moreover,
Plano did not form an agency relationship with either
World or THI. Accordingly, Plano owed no special
duty of care to the carriers, and cannot be held liable
for negligence.

                    III. Conclusion
  For the foregoing reasons, we R EVERSE the district
court’s grant of summary judgment as to appellants’
contract claims based on the World bill of lading and
R EMAND for further disposition consistent with this
opinion. We A FFIRM the district court’s grant of summary
judgment as to appellants’ negligence claims.

                         8-29-12