(L), 08-4481-cv (XAP) Royal & Sun Alliance Insurance, PLC v. Ocean World Lines, Inc.

08-4324-cv (L), 08-4481-cv (XAP)
Royal & Sun Alliance Insurance, PLC v. Ocean World Lines, Inc.
UNITED STATES COURT OF APPEALS 1
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FOR THE SECOND CIRCUIT
____________________________________
August Term, 2008
(Argued: August 5, 2009 Decided: July 20, 2010)
Docket Nos. 08-4324-cv (L), 08-4481-cv (XAP)
____________________________________
Royal & Sun Alliance Insurance, PLC
Plaintiff-Appellant,
– v. –
Ocean World Lines, Inc.,
Defendant-Third-Party-Plaintiff-Appellee,
Yang Ming Marine Transport Corp., Djuric Trucking, Inc.,
Third-Party-Defendants-Appellees.1
Before: CALABRESI, B.D. PARKER, and RAGGI, Circuit Judges.
In a case involving the applicability of the Carmack Amendment, Royal & Sun
Alliance Insurance, PLC appeals the judgment entered by the United States District Court
for the Southern District of New York (Hellerstein, J.). Consistent with the Supreme
Court’s recent holding in Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp., --- S.Ct. ---,
2010 WL 2471056 (June 21, 2010), the judgment of the District Court is AFFIRMED.
1 We direct the Clerk of the Court to amend the official caption as noted.
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DAVID L. MAZAROLI, New York, N.Y., for
Plaintiff-Appellant.
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PETER D. CLARK, Clark, Atcheson & Reisert,
North Bergen, N.J., for Defendant-Third-Party-
Plaintiff-Appellee.
JOSEPH DE MAY, JR. (Paul M. Keane, of
counsel), Cichanowicz Callan Keane Vengrow &
Textor, LLP, New York, NY, for Third-Party-
Defendants-Appellees.
CALABRESI, Circuit Judge:
The Supreme Court has recently held that the Carmack Amendment “does not
apply to a shipment originating overseas under a single through bill of lading.” Kawasaki
Kisen Kaisha Ltd. v. Regal-Beloit Corp., --- S.Ct. ---, 2010 WL 2471056, at *8 (June 21,
2010). This Court had previously held otherwise. See Sompo Japan Ins. Co. of Am. v.
Union Pac. R.R. Co., 456 F.3d 54, 60-69 (2d Cir. 2006); see also Rexroth Hydraudyne
B.V. v. Ocean World Lines, Inc., 547 F.3d 351, 355 (2d Cir. 2008). Although Sompo was
the law of this Circuit at the time of the district court’s decision, we now, of course,
follow the holding of Regal-Beloit and therefore AFFIRM the judgment of the United
States District Court for the Southern District of New York (Hellerstein, J.).
BACKGROUND
I. The Journey of the Printing Press
In this case, a printing press was shipped on a three-leg journey from Germany to
Indiana, and was damaged during the last leg of the journey when the truck carrying the
press crashed into an overpass. The five most important entities in this story are:
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1. White Horse Machinery Ltd. (“White Horse”), who is not a party to this case. 1
White Horse was the exporter and shipper of the printing press. 2
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2. Royal & Sun Alliance Insurance, PLC (“Royal & Sun”), who is the Plaintiff- 3
Appellant. Royal & Sun insured White Horse’s shipment and became subrogated
to its rights.
3. Ocean World Lines, Inc. (“OWL”), who is the Defendant-Third-Party-Plaintiff- 6
Appellee. OWL is the non-vessel-operating common carrier (“NVOCC”)2 that
issued a bill of lading to White Horse, promising delivery to the consignee via
shipping and carriage that OWL would arrange.
4. Yang Ming Marine Transport Corp. (“Yang Ming”), who is one of the two Third-
Party-Defendants-Appellees. Yang Ming, a vessel-operating common carrier
(“VOCC”),3 is the owner of the vessel that took the printing press across the
ocean in the first leg of the journey. Yang Ming issued a sea waybill to OWL.
5. Djuric Trucking, Inc. (“Djuric”), who is the other Third-Party-Defendant-
Appellee. Djuric is the owner of the truck which carried the printing press during
the third leg of the trip, and which crashed into an overpass, damaging the
printing press. Djuric did not issue its own bill of lading.
2 “A Nonvessel Operating Common Carrier (NVOCC) by water is one who holds himself
or herself out to provide transportation for hire by water in interstate commerce, or in
commerce from the United States who assumes or has liability for safe transport and who
does not operate the vessel on which the goods are transported. Thus an NVOCC is
comparable to a surface freight forwarder who undertakes to deliver the cargo to
destination. An NVOCC will issue a bill of lading to the shipper but does not undertake
the actual transportation of the cargo. Instead the NVOCC delivers the shipment to an
ocean carrier for transportation.” 1-1 Saul Sorkin, Goods in Transit § 1.15(8) (footnote
omitted).
3 A vessel-operating common carrier, unlike an NVOCC, does operate its own vessels.
Cf. 46 U.S.C. § 40102(17) (defining “ocean common carrier” as “vessel-operating
common carrier”).
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A. The Course of the Shipment 1
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On June 15, 2006, OWL issued a bill of lading4 to White Horse. The bill of
lading described the printing press, and provided that seven packages consisting of the
printing press would be shipped from Bremerhaven, Germany, to Bourbon, Indiana. The
transport was to be intermodal.5 OWL, being a NVOCC, is a middleman that does not
own and operate its own vessels. Instead, it enters into service contracts whereby it
purchases large blocks of cargo space at a discount from vessel-operating common
carriers (VOCCs). It then contracts with shippers to ship smaller amounts of cargo in that
space. In this particular instance, OWL’s bill of lading provided that the shipment would
go to Norfolk, Virginia, on the M/V Yang Ming Milano, owned by the VOCC Yang
Ming. Final delivery was to be made thereafter in Bourbon, Indiana. On June 16, 2006,
the day after OWL’s bill of lading was issued to White Horse, Yang Ming issued a sea
waybill6 to OWL. This bill of lading similarly indicated that Yang Ming would take the
press from Bremerhaven, Germany to Bourbon, Indiana, by way of the port of Norfolk,
Virginia.
On July 5, 2006, Yang Ming arranged for Djuric to pick up the packages in
Chicago, Illinois and deliver them to their final destination. The packages arrived in
Chicago from Norfolk, having been carried there by the Norfolk Southern Railroad. On
4 “A bill of lading is simply an acknowledgment by a carrier that it has received the
goods for shipment. Second, it is a contract of carriage; third, if the bill is negotiated, it
controls possession of the goods and is one of the indispensible documents in financing
the movement of commodities and merchandise.” 1-2 Saul Sorkin, Goods in Transit §
2.01 (footnote and internal quotation marks omitted).
5 Intermodal transport, also known as multimodal transport, is transport consisting of
multiple modes of transport—that is, more than one of truck, rail, sea, and air. 1-3 Saul
Sorkin, Goods in Transit § 3.01.
6 A sea waybill is like a bill of lading, except that bills of lading are negotiable, while
waybills are not. See Sompo, 456 F.3d at 56 n.4 (citing 1 T. Schoenbaum, Admiralty
Law § 10-11 (4th ed. 2006)).
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July 6, 2007, a Djuric truck picked up the printing press and subsequently crashed into a
bridge overpass, damaging the cargo. Royal & Sun paid White Horse’s claim, and
sought to recover from OWL its outlay of £63,824.62, which, at the time the complaint
was filed, converted to $125,851.38.
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B. The Bills of Lading
The printing press traveled under the OWL bill of lading and the Yang Ming sea
waybill. The terms and circumstances of each are as follows.
1. The OWL Bill of Lading
The OWL bill of lading, issued on June 15, 2006, contained numerous boilerplate
terms, as is typical for bills of lading. First, it included a Clause Paramount, which
provided that the transportation would be subject to the $500 per-package liability
limitation of the Carriage of Goods by Sea Act (“COGSA”), 46 U.S.C. § 30701 note.7
Like most Clauses Paramount, this one extends COGSA beyond the tackle-to-tackle
period.8 Second, Clause 5(D)(3) of the bill of lading provided:
If COGSA applies then the liability of the Carrier shall not exceed
US$500 per package or customary freight unit unless the value of the
Goods has been declared on the face hereof with the consent of the Carrier
and extra freight has been paid in which case Clause 10 shall apply and the
declared value (if higher) shall be substituted for the limit and any partial
loss or damage shall be adjusted pro-rata on the basis of such declared
value.
7 “A maritime bill of lading in international trade will generally contain a provision often
referred to as a Clause Paramount, which states that the bill of lading is subject to the
provisions of the Carriage of Goods by Sea Act of the United States.” 1-2 Saul Sorkin,
Goods in Transit § 2.03(3).
8 The tackle-to-tackle period is the time between the loading of the goods onto the ship
and their discharge from the ship. 1-5 Saul Sorkin, Goods in Transit § 5.13(1)(c).
“[R]outine bill of lading clauses explicitly provide for COGSA’s application . . . to the
times outside of the tackle-to-tackle period.” 2A-V Michael F. Sturley, Benedict on
Admiralty § 43 (2008); see also id. n.5 (collecting numerous cases involving such
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J.A. 82, 88. White Horse, as is typical for most shippers, did not declare the value of the
packages; instead, White Horse bought insurance from Royal & Sun.
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Third, the OWL bill of lading included what is known as a Himalaya Clause. A
Himalaya Clause extends contractual protections that would otherwise apply only to the
entity issuing the bill of lading to the subcontractors of the issuing entity as well.10
2. The Yang Ming Sea Waybill
The Yang Ming sea waybill, accepted by OWL, also contained several terms
relevant to this litigation. First, the Yang Ming waybill also had its own Himalaya
Clause and Clause Paramount, both rolled into clause 7(1) of the bill:
[I]n the event that this Bill covers shipments to or from the United States,
then COGSA shall be compulsorily applicable and shall (except as may be
otherwise specifically provided elsewhere herein) also govern before the
Goods are loading [sic] on and after they are discharged from the Vessel
provided, however, that the Goods at said times are in the actual custody
of the carrier or any Underlying Carrier or Sub-Contractor.
J.A. 183. The waybill defined “Underlying Carrier” as “any water, rail, motor, air or
other carrier utilized by the Carrier for any parts of the transportation the shipment [sic]
covered by this Bill.” Id. A “Sub-Contractor” was defined to include “owners and
operators of Vessels (other than the Carrier), stevedores, slot chartered owners, terminal
and groupage operators, Underlying Carrier, road and rail transport operators and any
independent contractor employed by the Carrier in performance of the Carriage.” Id.
Second, the COGSA $500 per-package limitation was spelled out in clause 23(3):
9 In practice almost all shippers decline to declare a value, because a maritime insurance
company is generally willing to assume the risk of loss or damage for a cheaper price
than the carrier would be. See 3-13 Saul Sorkin, Goods in Transit § 13.16(1)(c).
10 “A Himalaya Clause is a provision in an ocean carrier’s bill of lading which purports to
extend to agents and servants of the ocean carrier, and sometimes to others, the defenses
and limitations of liability of the ocean carrier provided for in the bill of lading and the
Carriage of Goods by Sea Act (COGSA).” 3-14 Saul Sorkin, Goods in Transit § 14.15.
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In the event this Bill covers the Goods moving to or from a port of final
destination in the United States, the Carrier’s limitation of liability in
respect to the Goods shall in no event exceed U.S. dollars $500 per
package . . . .
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Id. Clause 23(4) allowed a shipper to avoid the package limitation by declaring a higher
value for the cargo and paying a correspondingly higher rate:
The aforementioned limitations of liability set forth in this provision shall
be applicable unless the nature and value of the Goods have been declared
by the Merchant before shipment and agreed to by the Carrier, and are
inserted in this Bill and the Applicable “ad valorem” freight rate, as set out
in Carrier’s Tariff, is paid.
Id. OWL did not declare a higher value for the cargo or pay the higher rate.
II. Proceedings in the District Court
On April 10, 2007, Royal & Sun, asserting the rights of White Horse by virtue of
subrogation, sued OWL in the Southern District of New York, and sought $125,851.38 in
damages. OWL filed its answer on June 29, 2007, and on July 3, 2007, it impleaded
Yang Ming and Djuric pursuant to Fed. R. Civ. P. 14(c). As permitted by Rule 14(c),
OWL not only requested contribution and indemnity from Yang Ming and Djuric, but
also demanded judgment in Royal & Sun’s favor against them.11 On December 20, 2007,
OWL moved for partial summary judgment on the ground that it could not be liable to
Royal & Sun for more than the $500 per-package limitation, or $3500 in total. The next
day, Djuric and Yang Ming moved to dismiss all claims against them on the ground of a
forum selection clause in the Yang Ming sea waybill, or, in the alternative, for partial
11 See Fed. R. Civ. P. 14(c)(2) (“The third-party plaintiff may demand judgment in the
plaintiff’s favor against the third-party defendant. In that event, the third-party defendant
must defend under Rule 12 against the plaintiff’s claim as well as the third-party
plaintiff’s claim; and the action proceeds as if the plaintiff had sued both the third-party
defendant and the third-party plaintiff.”).
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summary judgment on the ground that they were protected by the $500 per-package
limitation.
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Oral argument on these motions was held before the district court on February 19,
2008. On August 19, 2008, the district court issued an opinion and order that granted
OWL’s summary judgment motion and denied Yang Ming and Djuric’s motion to
dismiss, or, in the alternative, for summary judgment. Royal & Sun Alliance Ins. PLC v.
Ocean World Lines, Inc., 572 F. Supp. 2d 379 (S.D.N.Y. 2008). The district court held
that the liability of OWL, as a NVOCC, was not governed by the Carmack Amendment
but rather by COGSA, and that, therefore, the $500 per-package limitation applied as
between OWL and Royal & Sun. Id. at 396. The court then refused to apply Yang
Ming’s forum selection clause, holding that Yang Ming could not limit to a particular
court Royal & Sun’s right to sue. On that basis, the court denied Yang Ming’s and
Djuric’s motion to dismiss. Id. at 397. Lastly, the court held that Yang Ming and Djuric,
though liable to OWL to the extent of OWL’s liability to Royal & Sun, were not
otherwise liable to Royal & Sun beyond the $500 per-package limitation. Id. at 398-400.
Royal & Sun now appeals on the liability limitation issues.13
DISCUSSION
I. Standard of Review
12 The motion also presented another ground for dismissal of the claims against Djuric—
that the Yang Ming bill of lading contained a covenant not to sue Yang Ming’s
subcontractors. The district court rejected that argument. See Royal & Sun Alliance Ins.
PLC v. Ocean World Lines, Inc., 572 F. Supp. 2d 379, 397-98 (S.D.N.Y. 2008). Djuric
does not cross-appeal that determination.
13 Yang Ming and Djuric originally cross-appealed the district court’s denial of their
motion to dismiss on the forum-selection ground. At oral argument, counsel for those
parties agreed that they would withdraw the cross-appeal if we were to hold that the
COGSA $500 per-package liability limitation applied to them. Because we so hold, we
deem the cross-appeal withdrawn and we do not address it.
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We review a district court’s grant of summary judgment de novo. E.g., Sousa v.
Roque, 578 F.3d 164, 169 (2d Cir. 2009).
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II. Carmack and Intermodal Through Bills of Lading After Regal-Beloit
Royal & Sun advances several arguments on why the Carmack Amendment, 49
U.S.C. § 14706, and not the COGSA $500 per-package limitation, should apply to OWL.
In light of Regal-Beloit, we readily reject all of these arguments.
A. Regal-Beloit
In Regal-Beloit, the Supreme Court held that the Carmack Amendment “does not
apply to a shipment originating overseas under a single through bill of lading.” 2010 WL
2471056, at *8. “Carmack applies only to transport of property for which Carmack
requires a receiving carrier to issue a bill of lading, regardless of whether that carrier
erroneously fails to issue such a bill.” Id. at *10. There is a two-part test for whether a
Carmack bill of lading must be issued:
First, the rail carrier must “provid[e] transportation or service subject to
the jurisdiction of the [STB].” Second, that carrier must “receiv[e]” the
property “for transportation under this part,” where “this part” is the STB's
jurisdiction over domestic rail transport. Carmack thus requires the
receiving rail carrier—but not the delivering or connecting rail carrier—to
issue a bill of lading.
Id. at *8 (quoting 49 U.S.C. § 11706(a)) (alterations in original).
The holding of Regal-Beloit is based on the second part of that test:
[F]or Carmack’s provisions to apply the journey must begin with a
receiving rail carrier, which would have to issue a Carmack-compliant bill
of lading. It follows that Carmack does not apply if the property is
received at an overseas location under a through bill that covers the
transport into an inland location in the United States. In such a case, there
is no receiving rail carrier that “receives” the property “for [domestic rail]
transportation,” [49 U.S.C.] § 11706(a), and thus no carrier that must issue
a Carmack-compliant bill of lading. The initial carrier in that instance
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receives the property at the shipment’s point of origin for overseas
multimodal import transport, not for domestic rail transport.
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Id. at *10 (second alteration in original).
Regal-Beloit’s application of those principles to the facts of Regal-Beloit is
straightforward. In that case, a VOCC, “K” Line, received cargo in China for intermodal
transport to inland destinations in the United States under bills of lading which provided
that COGSA would govern the entire journey. “K” Line then subcontracted with the
Union Pacific Railroad Company for rail carriage to the final destinations. “K” Line
transported the cargo to the port of Long Beach, California, without incident, but Union
Pacific’s train subsequently derailed in Oklahoma, and allegedly destroyed the cargo.
See id. at *4-5.
The Court held that Carmack did not apply to “K” Line or to Union Pacific,
because neither was a receiving rail carrier for Carmack purposes. “K” Line received the
cargo in China for intermodal transport, not in the United States for rail transport. “That
‘K’ Line chose to use rail transport to complete one segment of the journey under . . .
essentially maritime contracts does not put ‘K’ Line within Carmack’s reach and thus
does not require it to issue Carmack bills of lading.” Id. at *10 (internal quotation marks
and citation omitted). Union Pacific also was not a receiving rail carrier, for “[a] carrier
does not become a receiving carrier simply by accepting goods for further transport from
another carrier in the middle of an international shipment under a through bill.” Id.
Rather, “Union Pacific was a mere delivering carrier, which did not have to issue its own
Carmack bill of lading.” Id.
B. Carmack Does Not Apply in the Case Before Us
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Applying the holding and principles of Regal-Beloit, we conclude that Carmack is
inapplicable to OWL, Yang Ming, and Djuric.
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As an initial matter, one might ask whether Regal-Beloit, which interpreted the
version of Carmack that applies to rail carriers, 49 U.S.C. § 11706, must also be followed
where, as here (because Djuric is a motor carrier), what is at issue is the version of
Carmack that covers motor carriers and freight forwarders, 49 U.S.C. § 14706. We
believe that Regal-Beloit applies in this context too. The two sentences in § 11706(a) that
the Supreme Court interpreted in Regal-Beloit, see 2010 WL 2471056, at *8-10, are
substantially the same as the first two sentences in § 14706(a)(1). The only difference is
that they refer to rail carriers instead of motor carriers and freight forwarders.14 And the
policy arguments made by the Court are equally applicable here. The Court says that a
contrary result “would in effect outlaw through shipments under a single bill of lading,”
id. at *11, that “[n]one of Carmack’s legislative versions have applied to the inland
domestic rail segment of an import shipment from overseas under a through bill,” id. at
*12, and that “[a]pplying two different bill of lading regimes to the same through
shipment would undermine COGSA and international, container-based multimodal
transport,” id. at *13. The validity of these points does not turn on whether the cargo was
14 Compare 49 U.S.C. § 11706(a) (“A rail carrier providing transportation or service
subject to the jurisdiction of the Board under this part shall issue a receipt or bill of lading
for property it receives for transportation under this part. That rail carrier and any other
carrier that delivers the property and is providing transportation or service subject to the
jurisdiction of the Board under this part are liable to the person entitled to recover under
the receipt or bill of lading.”), with 49 U.S.C. § 14706(a)(1) (“Motor carriers and freight
forwarders.—A carrier providing transportation or service subject to jurisdiction under
subchapter I or III of chapter 135 shall issue a receipt or bill of lading for property it
receives for transportation under this part. That carrier and any other carrier that delivers
the property and is providing transportation or service subject to jurisdiction under
subchapter I or III of chapter 135 or chapter 105 are liable to the person entitled to
recover under the receipt or bill of lading.”).
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damaged on a truck or on a train. We therefore apply Regal-Beloit’s interpretation of §
11706(a) to § 14706(a)(1) as well.
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Under Regal-Beloit, all three defendants are subject to the $500 liability limitation
of COGSA rather than to Carmack, because none of them “‘receiv[ed]’ the property ‘for
transportation under this part,’ where ‘this part’ is the STB’s jurisdiction over domestic
[motor] transport [and freight forwarders].” 2010 WL 2471056, at *8 (quoting 49 U.S.C.
§ 11706(a)). Djuric, like Union Pacific in Regal-Beloit, “was a mere delivering carrier”
rather than the initial carrier. See id. at *10. Similarly, Yang Ming and OWL are in the
position of “K” Line in Regal-Beloit: they obtained the property “for overseas transport
across an ocean and then to [an] inland destination[] in the United States,” and their
decision to use motor transport for one leg of the journey does not render them subject to
Carmack. Id.15
III. Royal & Sun’s Contractual Arguments
15 Royal & Sun argues that all three defendants are “motor carriers” subject to STB
jurisdiction as defined in 49 U.S.C. § 13102(14), and that OWL and Yang Ming are
“freight forwarders” as defined in 49 U.S.C. § 13102(8). We need not address that
contention. Even if we assume arguendo that all three defendants are STB-regulated
carriers or freight forwarders, only one of the two Regal-Beloit requirements for
Carmack’s applicability would be satisfied. Not only must the defendants a) be STB-
regulated carriers or freight forwarders, but b) one of them also must receive the property
for domestic transport. See Regal-Beloit, 2010 WL 2471056, at *8. As explained above,
the latter requirement is not satisfied here. Moreover, although Carmack does provide
that “[a] freight forwarder is both the receiving and delivering carrier,” 49 U.S.C. §
14706(a)(2), we take this statement to mean only that when a freight forwarder “receives”
property for domestic motor or rail transportation within the meaning of § 14706(a)(1),
the forwarder is treated as both the receiving and delivering carrier for Carmack
purposes. Section 14706(a)(2) does not mean that a freight forwarder, if it plays any role
in transport under an intermodal through bill of lading originating across the ocean, is
required to issue a Carmack bill of lading. To hold otherwise would be to say that the
plaintiff in Regal-Beloit would have won, if only it had called “K” Line a freight
forwarder. We decline to create such an end run around Regal-Beloit.
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In addition to arguing that Carmack applies to the defendants of its own force,
Royal & Sun claims that various defendants contracted into Carmack liability. We reject
these arguments also.
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A. OWL Bill of Lading Clause 5(B)(2)
Royal & Sun first asserts that OWL contracted into Carmack liability by virtue of
clause 5(B)(2) of its bill of lading. That clause states that OWL’s liability for loss or
damage to the cargo shall be determined
[b]y the provisions contained in any . . . national law, which provisions
cannot be departed from by private contract to the detriment of the
Merchant, and would have applied if the Merchant had made a separate
and direct contract with the Carrier in respect of the particular stage of the
carriage where the loss or damage occurred and received as evidence
thereof any particular document which must be issued in order to make
such . . . national law applicable[.]
J.A. 87. Because its provisions can be departed from by private contract, the Carmack
Amendment, however, is not such a national law. See 49 U.S.C. §§ 14101(b)(1),
14706(c)(1)(A); see also Sompo, 456 F.3d at 59-60 (discussing parties’ ability to contract
out of the Carmack Amendment in the rail context). OWL, therefore, did not contract
into Carmack liability.
B. Yang Ming Sea Waybill Clause 7(2)(B)
Royal & Sun’s second contractual argument is that clause 7(2)(B) of Yang Ming’s
waybill renders Yang Ming subject to Carmack. But clause 7(2)(B) begins with the
words, “In the event clause 7(1) is held inapplicable to such Multimodal Transportation.”
J.A. 183. That is, clause 7(2)(B) applies only if clause 7(1), the Clause Paramount, is
invalidated. Because no such invalidation has occurred, Yang Ming did not agree to
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IV. Conclusion
Having rejected all of Royal & Sun’s arguments for Carmack liability, we
conclude that the defendants are entitled to the COGSA $500 per-package limitation.
Accordingly, we AFFIRM the judgment of the district court.

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