Supreme Court rules ôHimalayaö clause protects railroad
In a decision rendered more quickly than anticipated, the U.S. Supreme Court ruled unanimously Tuesday in the case of 'Norfolk Southern vs. James. N. Kirby Pt Ltd.' that a railroad, as a participant in multimodal carriage, is entitled via a 'Himalaya' clause to an ocean carrier's bill of lading liability limitation under the Carriage of Goods by Sea Act (COGSA).
The decision means Norfolk Southern, which had faced a possible maximum $1.5 million tab after a train derailment in which 10 containers of machinery were damaged during the land portion of an international shipment, is likely to be liable only for $5,000, or 10 times COGSA's $500-per-package limitation of liability, each container being considered one package.
'A single Himalaya Clause,' which extends an ocean carrier's liability protections to its agents, 'can cover both sea and land carriers downstream ' confusion and inefficiency will inevitably result if more than one body of law governs a given contract's meaning,' wrote Justice Sandra Day O'Connor, who delivered the high court's opinion.
'Under a conceptual rather than spatial approach, the fact that the bills (of lading) call for the journey's final leg to be by land does not alter the contracts' essentially maritime nature,' O'Connor said.
'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,' she wrote.
'The intermediary (meaning non-vessel-operating common carrier) is not the cargo owner's agent in every sense, but it can negotiate reliable and enforceable liability limitations with carriers it engages,' O'Connor wrote for the full court, which heard oral arguments in this case Oct. 6.