Supreme Court sides with carriers

Supreme Court sides with carriers    The U.S. Supreme Court has found an agreement between a shipper and an ocean carrier to litigate disputes about cargo damage in Tokyo is binding, even though the damage occurred during its transit through the United States under a through bill of lading.
   A divided court ruled 6-3 in favor of container-shipping company “K” Line and the Union Pacific Railroad in a decision handed down Monday that found the Carmack Amendment does not apply to a shipment originating overseas under a single through bill of lading.
   The court reversed the Ninth Circuit in a decision that combined appeals of two lower court cases. (Kawasaki Kisen Kaisha Ltd., et al. v. Regal-Beloit Corp. and Union Pacific Railroad v. Regal-Beloit Corp. et al.)
   The court backed the 'K' Line and UP contention that the Carriage of Goods at Sea Act governed the cases. COGSA requires a carrier to issue to the cargo owner a bill containing specified terms, and does not limit the parties' ability to adopt forum selection clauses, including the ability to have disputes heard overseas.
   And while COGSA only applies to shipments between U.S. and foreign ports, it allows the parties to extend certain terms by contract to cover the entire period in which cargo is under a carrier's responsibility, including inland transport.

Pexold

   'I'm very disappointed. I think the decision, overall, is bad for shippers,' said George Pezold, attorney and executive director of the Transportation & Logistics Council, a non-profit of some 350 companies that are shippers and receivers of cargo. He submitted a friend of the court brief to the Supreme Court on behalf of the council.
   'Most of the loss and damage that occurs on these long, multimodal movements is not on the ship, it is on the inland portion, either on a truck or a railroad,' from incidents such as derailments, fires, trucking accidents, thefts and hijackings, he said.
   'The effect of this decision is to make it difficult or impossible for many shippers to get redress against the people who are actually causing the loss and damage,' he said. 'I don't think the Supreme Court realizes the public policy aspects of what they are doing.'

Kimball

   But the decision is a welcome one for both liner companies and railroads, said John Kimball of Blank Rome, who was part of the team that represented 'K' Line. If the Ninth Circuit court decision had been affirmed it would have resulted in a big change in the way that they do business, requiring revision to bills of lading and insurance coverage, he said.
   Kimball did not believe the case was detrimental to cargo interests, saying it 'leaves things where we thought they were.'
   Chet Hooper, an attorney with Holland and Knight, said that prior to Monday’s decision, the law in this area was “in a shambles” because of a split between the Ninth and Second circuits, which had taken a different view of the issue than the Fourth, Sixth, Seventh and Eleventh Circuits.
   If the Carmack Amendment were to apply, foreign forum selection clauses forcing a shipper to have a cargo dispute heard overseas would not be enforceable. But Kimball said, 'It's in the bill of lading and it is not like it is a huge surprise. They've agreed to it.'
   By having COGSA apply, a carrier's liability is limited, whereas under Carmack amendment has no limit of liability, he said.
   'From the carrier point of view, that's a very important thing because the carrier is typically insured based on the application of COGSA and based on the package limit.' Had that changed, it probably would have resulted in increased cost for insurance for carriers because they would have had greater exposure.
   Pezold said the decision means it will be more difficult for insurers to subrogate claims.
   'It is not going to be practical at all or realistic to expect people to go to Hong Kong or Shanghai or Barcelona, Spain, to bring a lawsuit, and you are going to be subject to different legal regimes that may or may not be acceptable or favorable in terms of our jurisprudence,' he said.
   He believes shippers will see their insurance premiums go up because 'it will be prohibitively expensive or impossible to take on smaller cargo losses and basically the insurance company is going to have to eat it and it is going to have to go into the premiums.'
   Big shippers might be able to get forum selection clauses to their liking put into service contracts, Pezold said.
   'But frankly, what we are seeing with the capacity situation in the ocean markets right now, many ocean carriers are handling you their own boilerplate and saying, 'take it or leave it,' and a lot of these things are not negotiable. It does not help you if you are a small importer,' he said. ' Chris Dupin