OPINION OF THE COURT
NORFOLK SOUTHERN R. CO. V. JAMES N. KIRBY,PTY LTD.
543 U. S. ____ (2004)
SUPREME COURT OF THE UNITED STATES
NO. 02-1028
NORFOLK SOUTHERN RAILWAY COMPANY, PETI- TIONER
v. JAMES N. KIRBY, PTY LTD., dba KIRBY ENGINEERING, and
ALLIANZ AUSTRALIA INSURANCE LIMITED
on writ of certiorari to the united states court of
appeals for the eleventh circuit
[November 9, 2004]
Justice O’Connor delivered the
opinion of the Court.
This is a maritime case about a
train wreck. A shipment of machinery from Australia was destined
for Huntsville, Alabama. The intercontinental journey was
uneventful, and the machinery reached the United States unharmed.
But the train carrying the machinery on its final, inland leg
derailed, causing extensive damage. The machinery’s owner sued the
railroad. The railroad seeks shelter in two liability limitations
contained in contracts that upstream carriers negotiated for the
machinery’s delivery.
I
This controversy arises from two
bills of lading (essentially, contracts) for the transportation of
goods from Australia to Alabama. A bill of lading records that a
carrier has received goods from the party that wishes to ship them,
states the terms of carriage, and serves as evidence of the
contract for carriage. See 2 T. Schoenbaum, Admiralty and Maritime
Law 58–60 (3d ed. 2001) (hereinafter Schoenbaum); Carriage of Goods
by Sea Act (COGSA), 49 Stat. 1208, 46 U. S. C. App. §1303.
Respondent James N. Kirby, Pty Ltd. (Kirby), an Australian
manufacturing company, sold 10 containers of machinery to the
General Motors plant located outside Huntsville, Alabama. Kirby
hired International Cargo Control (ICC), an Australian freight
forwarding company, to arrange for delivery by “through”
(
i.e., end-to-end) transportation. (A freight forwarding
company arranges for, coordinates, and facilitates cargo transport,
but does not itself transport cargo.) To formalize their contract
for carriage, ICC issued a bill of lading to Kirby (ICC bill). The
bill designates Sydney, Australia, as the port of loading,
Savannah, Georgia, as the port of discharge, and Huntsville as the
ultimate destination for delivery.
In negotiating the ICC bill,
Kirby had the opportunity to declare the full value of the
machinery and to have ICC assume liability for that value. Cf.
New York, N. H. & H. R. Co. v.
Nothnagle,
346 U. S. 128, 135
(1953) (a carrier must provide a shipper with a fair opportunity to
declare value). Instead, and as is common in the industry, see
Sturley, Carriage of Goods by Sea, 31 J. Mar. L. & Com. 241,
244 (2000), Kirby accepted a contractual liability limitation for
ICC below the machinery’s true value, resulting, presumably, in
lower shipping rates. The ICC bill sets various liability
limitations for the journey from Sydney to Huntsville. For the sea
leg, the ICC bill invokes the default liability rule set forth in
the Carriage of Goods by Sea Act. The COGSA “package limitation”
provides:
“Neither the carrier nor the ship shall in any
event be or become liable for any loss or damage to or in
connection with the transportation of goods in an amount exceeding
$500 per package lawful money of the United States . . . unless the
nature and value of such goods have been declared by the shipper
before shipment and inserted into the bill of lading.” 46 U. S. C.
App. §1304(5).
For the land leg, in turn, the bill limits the
carrier’s liability to a higher amount.[
Footnote 1] So that other downstream parties expected to
take part in the contract’s execution could benefit from the
liability limitations, the bill also contains a so-called “Himalaya
Clause.”[
Footnote 2] It
provides:
“These conditions [for limitations on liability]
apply whenever claims relating to the performance of the contract
evidenced by this [bill of lading] are made against any servant,
agent or other person (including any independent contractor) whose
services have been used in order to perform the contract.” App. to
Pet. for Cert. 59a, cl. 10.1.
Meanwhile, Kirby separately insured the cargo for
its true value with its co-respondent in this case, Allianz
Australia Insurance Ltd. (formerly MMI General Insurance,
Ltd.).
Having been hired by Kirby, and because it
does not itself actually transport cargo, ICC then hired Hamburg
Südamerikanische Dampfschiflahrts-Gesellschafft Eggert &
Amsinck (Hamburg Süd), a German ocean shipping company, to
transport the containers. To formalize their contract for carriage,
Hamburg Süd issued its own bill of lading to ICC (Hamburg Süd
bill). That bill designates Sydney as the port of loading, Savannah
as the port of discharge, and Huntsville as the ultimate
destination for delivery. It adopts COGSA’s default rule in
limiting the liability of Hamburg Süd, the bill’s designated
carrier, to $500 per package. See 46 U. S. C. App. §1304(5). It
also contains a clause extending that liability limitation beyond
the “tackles”—that is, to potential damage on land as well as on
sea. Finally, it too contains a Himalaya Clause extending the
benefit of its liability limitation to “all agents . . . (including
inland) carriers . . . and all independent contractors whatsoever.”
App. 63, cl. 5(b).
Acting through a subsidiary, Hamburg Süd hired
Petitioner Norfolk Southern Railroad (Norfolk) to transport the
machinery from the Savannah port to Huntsville. Delivery failed.
The Norfolk train carrying the machinery derailed en route, causing
an alleged $1.5 million in damages. Kirby’s insurance company
reimbursed Kirby for the loss. Kirby and its insurer then sued
Norfolk in the United States District Court for the Northern
District of Georgia, asserting diversity jurisdiction and alleging
tort and contract claims. In its answer, Norfolk argued, among
other things, that Kirby’s potential recovery could not exceed the
amounts set forth in the liability limitations contained in the
bills of lading for the machinery’s carriage.
The District Court granted Norfolk’s motion
for partial summary judgment, holding that Norfolk’s liability was
limited to $500 per container. Upon a joint motion from Norfolk and
Kirby, the District Court certified its decision for interlocutory
review pursuant to 28 U. S. C. §1292(b).
A divided panel of the Eleventh Circuit
reversed. It held that Norfolk could not claim protection under the
Himalaya Clause in the first contract, the ICC bill. It construed
the language of the clause to exclude parties, like Norfolk, that
had not been in privity with ICC when ICC issued the bill. 300
F. 3d 1300, 1308–1309 (2002). The majority also suggested that
“a special degree of linguistic specificity is required to extend
the benefits of a Himalaya clause to an inland carrier.”
Id., at 1310. As for the Hamburg Süd bill, the court held
that Kirby could be bound by the bill’s liability limitation “only
if ICC was acting as Kirby’s agent when it received Hamburg Süd’s
bill.”
Id., at 1305. And, applying basic agency law
principles, the Court of Appeals concluded that ICC had not been
acting as Kirby’s agent when it received the bill.
Ibid.
Based on its opinion that Norfolk was not entitled to benefit from
the liability limitation in either bill of lading, the Eleventh
Circuit reversed the District Court’s grant of summary judgment for
the railroad. We granted certiorari to decide whether Norfolk could
take shelter in the liability limitations of either bill,
540 U. S. 1099 (2004),
and now reverse.
II
The courts below appear to have
decided this case on an assumption, shared by the parties, that
federal rather than state law governs the interpretation of the two
bills of lading. Respondents now object. They emphasize that, at
bottom, this is a diversity case involving tort and contract claims
arising out of a rail accident somewhere between Savannah and
Huntsville. We think, however, borrowing from Justice Harlan, that
“the situation presented here has a more genuinely salty flavor
than that.”
Kossick v.
United Fruit Co.,
365 U. S. 731, 742
(1961). When a contract is a maritime one, and the dispute is not
inherently local, federal law controls the contract interpretation.
Id., at 735.
Our authority to make decisional
law for the interpretation of maritime contracts stems from the
Constitution’s grant of admiralty jurisdiction to federal courts.
See Art. III, §2, cl. 1 (providing that the federal judicial
power shall extend to “all Cases of admiralty and maritime
Jurisdiction”). See 28 U. S. C. §1333(1) (granting federal
district courts original jurisdiction over “[a]ny civil case of
admiralty or maritime jurisdiction”); R. Fallon, D. Meltzer, &
D. Shapiro, Hart and Wechsler’s The Federal Courts and the Federal
System 733–738 (5th ed. 2003). This suit was properly brought in
diversity, but it could also be sustained under the admiralty
jurisdiction by virtue of the maritime contracts involved. See
Pope & Talbot, Inc. v.
Hawn,
346 U. S. 406, 411
(1953) (“[S]ubstantial rights . . . are not to be determined
differently whether [a] case is labelled ‘law side’ or ‘admiralty
side’ on a district court’s docket”). Indeed, for federal common
law to apply in these circumstances, this suit
must also
be sustainable under the admiralty jurisdiction. See
Stewart
Organization, Inc. v.
Ricoh Corp.,
487 U. S. 22, 28 (1988).
Because the grant of admiralty jurisdiction and the power to make
admiralty law are mutually dependent, the two are often intertwined
in our cases.
Applying the two-step analysis from
Kossick, we find that federal law governs this contract
dispute. Our cases do not draw clean lines between maritime and
non-maritime contracts. We have recognized that “[t]he boundaries
of admiralty jurisdiction over contracts—as opposed to torts or
crimes—being conceptual rather than spatial, have always been
difficult to draw.” 365 U. S., at 735. To ascertain whether a
contract is a maritime one, we cannot look to whether a ship or
other vessel was involved in the dispute, as we would in a putative
maritime tort case. Cf. Admiralty Extension Act, 46 U. S. C.
App. §740 (“The admiralty and maritime jurisdiction of the United
States shall extend to and include all cases of damage or injury .
. . caused by a vessel on navigable water, notwithstanding that
such damage or injury be done or consummated on land”); R. Force
& M. Norris, 1 The Law of Seamen §1:15 (5th ed. 2003). Nor can
we simply look to the place of the contract’s formation or
performance. Instead, the answer “depends upon . . . the nature and
character of the contract,” and the true criterion is whether it
has “reference to maritime service or maritime transactions.”
North Pacific S. S. Co. v.
Hall Brothers Marine
Railway & Shipbuilding Co.,
249 U. S. 119, 125
(1919) (citing
Insurance Co. v.
Dunham, 11 Wall.
1, 26 (1871)). See also
Exxon Corp. v.
Central Gulf
Lines, Inc.,
500 U. S. 603, 611
(1991) (“[T]he trend in modern admiralty case law . . . is to focus
the jurisdictional inquiry upon whether the nature of the
transaction was maritime”).
The ICC and Hamburg Süd bills are maritime
contracts because their primary objective is to accomplish the
transportation of goods by sea from Australia to the eastern coast
of the United States. See G. Gilmore & C. Black, Law of
Admiralty 31 (2d ed. 1975) (“Ideally, the [admiralty] jurisdiction
[over contracts ought] to include those and only those things
principally connected with maritime transportation” (emphasis
deleted)). To be sure, the two bills call for some performance on
land; the final leg of the machinery’s journey to Huntsville was by
rail. But under a conceptual rather than spatial approach, this
fact does not alter the essentially maritime nature of the
contracts.
In
Kossick, for example, we held that
a shipowner’s promise to assume responsibility for any improper
treatment his seaman might receive at a New York hospital was a
maritime contract. The seaman had asked the shipowner to pay for
treatment by a private physician, but the shipowner, preferring the
cheaper public hospital, offered to cover the costs of any
complications that might arise from treatment there. We
characterized his promise as a “fringe benefit” to a shipowner’s
duty in maritime law to provide “ ‘maintenance and
cure.’ ” 365 U. S., at 736–737. Because the promise was in
furtherance of a “peculiarly maritime concer[n],”
id., at
738, it folded into federal maritime law. It did not matter that
the site of the inadequate treatment—which gave rise to the
contract dispute—was in a hospital on land. Likewise, Norfolk’s
rail journey from Savannah to Huntsville was a “fringe” portion of
the intercontinental journey promised in the ICC and Hamburg Süd
bills.
We have reiterated that the
“ ‘fundamental interest giving rise to maritime jurisdiction
is “the protection of maritime
commerce.” ’ ”
Exxon,
supra, at 608 (emphasis added) (quoting
Sisson v.
Ruby,
497 U. S. 358, 367
(1990), in turn quoting
Foremost Ins. Co. v.
Richardson,
457 U. S. 668, 674
(1982)). The conceptual approach vindicates that interest by
focusing our inquiry on whether the principal objective of a
contract is maritime commerce. While it may once have seemed
natural to think that only contracts embodying commercial
obligations between the “tackles” (
i.e., from port to
port) have maritime objectives, the shore is now an artificial
place to draw a line. Maritime commerce has evolved along with the
nature of transportation and is often inseparable from some
land-based obligations. The international transportation industry
“clearly has moved into a new era—the age of multimodalism,
door-to-door transport based on efficient use of all available
modes of transportation by air, water, and land.” 1 Schoenbaum 589
(4th ed. 2004). The cause is technological change: Because goods
can now be packaged in standardized containers, cargo can move
easily from one mode of transport to another.
Ibid. See
also
NLRB v.
Longshoremen,
447 U. S. 490, 494
(1980) (“ ‘[C]ontainerization may be said to constitute the
single most important innovation in ocean transport since the
steamship displaced the schooner’ ” (citation omitted));
G. Muller, Intermodal Freight Transportation 15–24 (3d
ed. 1995).
Contracts reflect the new
technology, hence the popularity of “through” bills of lading, in
which cargo owners can contract for transportation across oceans
and to inland destinations in a single transaction. See 1
Schoenbaum 595. Put simply, it is to Kirby’s advantage to arrange
for transport from Sydney to Huntsville in one bill of lading,
rather than to negotiate a separate contract—and to find an
American railroad itself—for the land leg. The popularity of that
efficient choice, to assimilate land legs into international ocean
bills of lading, should not render bills for ocean carriage
nonmaritime contracts.
Some lower federal courts appear
to have taken a spatial approach when deciding whether intermodal
transportation contracts for intercontinental shipping are maritime
in nature. They have held that admiralty jurisdiction does not
extend to contracts which require maritime and nonmaritime
transportation, unless the nonmaritime transportation is merely
incidental—and that long-distance land travel is not incidental.
See, e.g., Hartford Fire Ins. Co. v. Orient
Overseas Container Lines, 230 F. 3d 549, 555–556 (CA2
2000) (“[T]ransport by land under a bill of lading is not
‘incidental’ to transport by sea if the land segment involves great
and substantial distances,” and land transport of over 850 miles
across four countries is more than incidental); Sea-Land Serv.,
Inc. v. Danzig, 211 F. 3d 1373, 1378 (CA Fed.
2000) (holding that intermodal transport contracts were not
maritime contracts because they called for “substantial
transportation between inland locations and ports both in this
country and the Middle East” that was not incidental to the
transportation by sea); Kuehne & Nagel (AG & CO)
v. Geosource, Inc., 874 F. 2d 283, 290 (CA5 1989)
(holding that a through bill of lading calling for land
transportation up to 1,000 miles was not a traditional maritime
contract because such “extensive land-based operations cannot be
viewed as merely incidental to the maritime operations”). As a
preliminary matter, it seems to us imprecise to describe the land
carriage required by an intermodal transportation contract as
“incidental”; realistically, each leg of the journey is essential
to accomplishing the contract’s purpose. In this case, for example,
the bills of lading required delivery to Huntsville; the Savannah
port would not do.
Furthermore, to the extent that
these lower court decisions fashion a rule for identifying maritime
contracts that depends solely on geography, they are inconsistent
with the conceptual approach our precedent requires. See
Kossick, 365 U. S., at 735. Conceptually, so long as a
bill of lading requires substantial carriage of goods by sea, its
purpose is to effectuate maritime commerce—and thus it is a
maritime contract. Its character as a maritime contract is not
defeated simply because it also provides for some land carriage.
Geography, then, is useful in a conceptual inquiry only in a
limited sense: If a bill’s sea components are
insubstantial, then the bill is not a maritime contract.
Having established that the ICC
and Hamburg Süd bills are maritime contracts, then, we must clear a
second hurdle before applying federal law in their interpretation.
Is this case inherently local? For not “every term in every
maritime contract can only be controlled by some federally defined
admiralty rule.” Wilburn Boat Co. v. Fireman’s Fund
Ins. Co., 348
U. S. 310, 313 (1955) (applying state law to maritime contract
for marine insurance because of state regulatory power over
insurance industry). A maritime contract’s interpretation may so
implicate local interests as to beckon interpretation by state law.
See Kossick, supra, at 735. Respondents have not
articulated any specific Australian or state interest at stake,
though some are surely implicated. But when state interests cannot
be accommodated without defeating a federal interest, as is the
case here, then federal substantive law should govern. See
Kossick, supra, at 739 (the process of deciding
whether federal law applies “is surely . . . one of accommodation,
entirely familiar in many areas of overlapping state and federal
concern, or a process somewhat analogous to the normal conflict of
laws situation where two sovereignties assert divergent interests
in a transaction”); 2 Schoenbaum 61 (“Bills of lading issued
outside the United States are governed by the general maritime law,
considering relevant choice of law rules”).
Here, our touchstone is a concern
for the uniform meaning of maritime contracts like the ICC and
Hamburg Süd bills. We have explained that Article III’s grant of
admiralty jurisdiction “ ‘must have referred to a system of
law coextensive with, and operating uniformly in, the whole
country. It certainly could not have been the intention to place
the rules and limits of maritime law under the disposal and
regulation of the several States, as that would have defeated the
uniformity and consistency at which the Constitution aimed on all
subjects of a commercial character affecting the intercourse of the
States with each other or with foreign states.’ ” American
Dredging Co. v. Miller, 510 U. S. 443, 451
(1994) (quoting The Lottawanna, 21 Wall. 558, 575 (1875)).
See also Yamaha Motor Corp., U. S. A. v.
Calhoun, 516 U. S. 199, 210
(1996) (“[I]n several contexts, we have recognized that vindication
of maritime policies demanded uniform adherence to a federal rule
of decision” (citing Kossick, supra, at 742;
Pope & Talbot, 346 U. S., at 409; Garrett v.
Moore-McCormack Co., 317 U.S. 239, 248–249 (1942)));
Romero v. International Terminal Operating Co.,
358 U.S. 354, 373 (1959) (“[S]tate law must yield to the needs of a
uniform federal maritime law when this Court finds inroads on a
harmonious system[,] [b]ut this limitation still leaves the States
a wide scope”).
Applying state law to cases like
this one would undermine the uniformity of general maritime law.
The same liability limitation in a single bill of lading for
international intermodal transportation often applies both to sea
and to land, as is true of the Hamburg Süd bill. Such liability
clauses are regularly executed around the world. See 1 Schoenbaum
595; Wood, Multimodal Transportation: An American Perspective on
Carrier Liability and Bill of Lading Issues, 46 Am. J. Comp. L.
403, 407 (Supp. 1998). See also 46 U. S. C. App. §1307
(permitting parties to extend the COGSA default liability limit to
damage done “prior to the loading on and subsequent to the
discharge from the ship”). Likewise, a single Himalaya Clause can
cover both sea and land carriers downstream, as is true of the ICC
bill. See Part III–A, infra. Confusion and inefficiency
will inevitably result if more than one body of law governs a given
contract’s meaning. As we said in Kossick, when “a
[maritime] contract … may well have been made anywhere in the
world,” it “should be judged by one law wherever it was made.” 365
U. S., at 741. Here, that one law is federal.
In protecting the uniformity of
federal maritime law, we also reinforce the liability regime
Congress established in COGSA. By its terms, COGSA governs bills of
lading for the carriage of goods “from the time when the goods are
loaded on to the time when they are discharged from the ship.” 46
U. S. C. App. §1301(e). For that period, COGSA’s “package
limitation” operates as a default rule. §1304(5). But COGSA also
gives the option of extending its rule by contract. See §1307
(“Nothing contained in this chapter shall prevent a carrier or a
shipper from entering into any agreement, stipulation, condition,
reservation, or exemption as to the responsibility and liability of
the carrier or the ship for the loss or damage to or in connection
with the custody and care and handling of goods prior to the
loading on and subsequent to the discharge from the ship on which
the goods are carried by sea”). As COGSA permits, Hamburg Süd in
its bill of lading chose to extend the default rule to the entire
period in which the machinery would be under its responsibility,
including the period of the inland transport. Hamburg Süd would not
enjoy the efficiencies of the default rule if the liability
limitation it chose did not apply equally to all legs of the
journey for which it undertook responsibility. And the apparent
purpose of COGSA, to facilitate efficient contracting in contracts
for carriage by sea, would be defeated.
III
A
Turning to the
merits, we begin with the ICC bill of lading, the first of the
contracts at issue. Kirby and ICC made a contract for the carriage
of machinery from Sydney to Huntsville, and agreed to limit the
liability of ICC and other parties who would participate in
transporting the machinery. The bill’s Himalaya Clause
states:
“These conditions [for limitations on
liability] apply whenever claims relating to the performance of the
contract evidenced by this [bill of lading] are made against
any servant, agent or other person (including any
independent contractor) whose services have been used in order to
perform the contract.” App. to Pet. for Cert. 59a,
cl. 10.1 (emphasis added).
The question presented is whether the
liability limitation in Kirby’s and ICC’s contract extends to
Norfolk, which is ICC’s sub-subcontractor. The Circuits have split
in answering this question. Compare, e.g., Akiyama
Corp. of America v. M. V. Hanjin Marseilles, 162
F. 3d 571, 574 (CA9 1998) (privity of contract is not required
in order to benefit from a Himalaya Clause), with
Mikinberg v. Baltic S. S. Co., 988
F. 2d 327, 332 (CA2 1993) (a contractual relationship is
required).
This is a simple question of
contract interpretation. It turns only on whether the Eleventh
Circuit correctly applied this Court’s decision in Robert C.
Herd & Co. v. Krawill Machinery Corp., 359 U. S. 297 (1959). We
conclude that it did not. In Herd, the bill of lading
between a cargo owner and carrier said that, consistent with COGSA,
“ ‘the Carrier’s liability, if any, shall be determined on the
basis of $500 per package.’ ” Id., at 302. The
carrier then hired a stevedoring company to load the cargo onto the
ship, and the stevedoring company damaged the goods. The Court held
that the stevedoring company was not a beneficiary of the bill’s
liability limitation. Because it found no evidence in COGSA or its
legislative history that Congress meant COGSA’s liability
limitation to extend automatically to a carrier’s agents, like
stevedores, the Court looked to the language of the bill of lading
itself. It reasoned that a clause limiting “ ‘the Carrier’s
liability’ ” did not “indicate that the contracting parties
intended to limit the liability of stevedores or other agents. . .
. If such had been a purpose of the contracting parties it must be
presumed that they would in some way have expressed it in the
contract.” Ibid. The Court added that liability
limitations must be “strictly construed and limited to intended
beneficiaries.” Id., at 305.
The Eleventh Circuit, like
respondents, made much of the Herd decision. Deriving a
principle of narrow construction from Herd, the Court of
Appeals concluded that the language of the ICC bill’s Himalaya
Clause is too vague to clearly include Norfolk. 300 F. 3d, at 1308.
Moreover, the lower court interpreted Herd to require
privity between the carrier and the party seeking shelter under a
Himalaya Clause. Id., at 1308. But nothing in
Herd requires the linguistic specificity or privity rules
that the Eleventh Circuit attributes to it. The decision simply
says that contracts for carriage of goods by sea must be construed
like any other contracts: by their terms and consistent with the
intent of the parties. If anything, Herd stands for the
proposition that there is no special rule for Himalaya
Clauses.
The Court of Appeals’ ruling is
not true to the contract language or to the intent of the parties.
The plain language of the Himalaya Clause indicates an intent to
extend the liability limitation broadly—to “any servant,
agent or other person (including any independent
contractor)” whose services contribute to performing the contract.
App. to Pet. for Cert. 59a, cl.10.1 (emphasis added). “Read
naturally, the word ‘any’ has an expansive meaning, that is, ‘one
or some indiscriminately of whatever kind.’ ” United
States v. Gonzales, 520 U. S. 1, 5 (1997)
(quoting Webster’s Third New International Dictionary 97 (1976)).
There is no reason to contravene the clause’s obvious meaning. See
Green v. Biddle, 8 Wheat. 1, 89–90 (1823)
(“[W]here the words of a law, treaty, or contract, have a plain and
obvious meaning, all construction, in hostility with such meaning,
is excluded”). The expansive contract language corresponds to the
fact that various modes of transportation would be involved in
performing the contract. Kirby and ICC contracted for the
transportation of machinery from Australia to Huntsville, Alabama,
and, as the crow flies, Huntsville is some 366 miles inland from
the port of discharge. See G. Fitzpatrick & M. Modlin,
Direct-Line Distances 168 (1986). Thus, the parties must have
anticipated that a land carrier’s services would be necessary for
the contract’s performance. It is clear to us that a railroad like
Norfolk was an intended beneficiary of the ICC bill’s broadly
written Himalaya Clause. Accordingly, Norfolk’s liability is
limited by the terms of that clause.
B
The question arising
from the Hamburg Süd bill of lading is more difficult. It requires
us to set an efficient default rule for certain shipping contracts,
a task that has been a challenge for courts for centuries. See,
e.g., Hadley v. Baxendale, 9 Exch. 341,
156 Eng. Rep. 145 (1854). ICC and Hamburg Süd agreed that Hamburg
Süd would transport the machinery from Sydney to Huntsville, and
agreed to the COGSA “package limitation” on the liability of
Hamburg Süd, its agents, and its independent contractors. The
second question presented is whether that liability limitation,
which ICC negotiated, prevents Kirby from suing Norfolk (Hamburg
Süd’s independent contractor) for more. As we have explained, the
liability limitation in the ICC bill, the first contract, sets
liability for a land accident higher than this bill does. See
n. 1, supra. Because Norfolk’s liability will be
lower if it is protected by the Hamburg Süd bill too, we must reach
this second question in order to give Norfolk the full relief for
which it petitioned.
To interpret the
Hamburg Süd bill, we turn to a rule drawn from our precedent about
common carriage: 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. The intermediary is certainly not automatically
empowered to be the cargo owner’s agent in every sense. That would
be unsustainable. But when it comes to liability limitations for
negligence resulting in damage, an intermediary can negotiate
reliable and enforceable agreements with the carriers it
engages.
We derive this rule from our
decision about common carriage in Great Northern R. Co. v.
O’Connor, 232 U. S. 508 (1914). In
Great Northern, an owner hired a transfer company to
arrange for the shipment of her goods. Without the owner’s express
authority, the transfer company arranged for rail transport at a
tariff rate that limited the railroad’s liability to less than the
true value of the goods. The goods were lost en route, and the
owner sued the railroad. The Court held that the railroad must be
able to rely on the liability limitation in its tariff agreement
with the transfer company. The railroad “had the right to assume
that the Transfer Company could agree upon the terms of the
shipment”; it could not be expected to know if the transfer company
had any outstanding, conflicting obligation to another party.
Id., at 514. The owner’s remedy, if necessary, was against
the transfer company. Id., at 515.
Respondents object to our reading
of Great Northern, and argue that this Court should
fashion the federal rule of decision from general agency law
principles. Like the Eleventh Circuit, respondents reason that
Kirby cannot be bound by the bill of lading that ICC negotiated
with Hamburg Süd unless ICC was then acting as Kirby’s agent. Other
Courts of Appeals have also applied agency law to cases similar to
this one. See, e.g., Kukje Hwajae Ins. Co. v.
The M/V Hyundai Liberty, 294 F. 3d 1171, 1175–1177
(CA9 2002) (an intermediary acted as a cargo owner’s agent when
negotiating a bill of lading with a downstream carrier).
We think reliance on agency law is
misplaced here. It is undeniable that the traditional indicia of
agency, a fiduciary relationship and effective control by the
principal, did not exist between Kirby and ICC. See Restatement
(Second) of Agency §1 (1957). But that is of no moment. The
principle derived from Great Northern does not require
treating ICC as Kirby’s agent in the classic sense. It only
requires treating ICC as Kirby’s agent for a single,
limited purpose: when ICC contracts with subsequent carriers
for limitation on liability. In holding that an intermediary binds
a cargo owner to the liability limitations it negotiates with
downstream carriers, we do not infringe on traditional agency
principles. We merely ensure the reliability of downstream
contracts for liability limitations. In Great Northern,
because the intermediary had been “entrusted with goods to be
shipped by railway, and, nothing to the contrary appearing, the
carrier had the right to assume that [the intermediary] could agree
upon the terms of the shipment.” 232 U. S., at 514. Likewise, here
we hold that intermediaries, entrusted with goods, are “agents”
only in their ability to contract for liability limitations with
carriers downstream.
Respondents also contend that any
decision binding Kirby to the Hamburg Süd bill’s liability
limitation will be disastrous for the international shipping
industry. Various participants in the industry have weighed in as
amici on both sides in this case, and we must make a close
call. It would be idle to pretend that the industry can easily be
characterized, or that efficient default rules can easily be
discerned. In the final balance, however, we disagree with
respondents for three reasons.
First, we believe that a limited
agency rule tracks industry practices. In intercontinental ocean
shipping, carriers may not know if they are dealing with an
intermediary, rather than with a cargo owner. Even if knowingly
dealing with an intermediary, they may not know how many other
intermediaries came before, or what obligations may be outstanding
among them. If the Eleventh Circuit’s rule were the law, carriers
would have to seek out more information before contracting, so as
to assure themselves that their contractual liability limitations
provide true protection. That task of information gathering might
be very costly or even impossible, given that goods often change
hands many times in the course of intermodal transportation. See 1
Schoenbaum 589; Wood, 46 Am. J. Comp. L., at 404.
Second, if liability limitations
negotiated with cargo owners were reliable while limitations
negotiated with intermediaries were not, carriers would likely want
to charge the latter higher rates. A rule prompting downstream
carriers to distinguish between cargo owners and intermediary
shippers might interfere with statutory and decisional law
promoting nondiscrimination in common carriage. Cf. ICC v.
Delaware, L. & W. R. Co., 220 U. S. 235, 251–256
(1911) (common carrier cannot “sit in judgment on the title of the
prospective shipper”); Shipping Act, 46 U. S. C. App. §1709
(nondiscrimination rules). It would also, as we have intimated,
undermine COGSA’s liability regime.
Finally, as in Great
Northern, our decision produces an equitable result. See 232
U. S., at 515. Kirby retains the option to sue ICC, the carrier,
for any loss that exceeds the liability limitation to which they
agreed. And indeed, Kirby has sued ICC in an Australian
court for damages arising from the Norfolk derailment. It seems
logical that ICC—the only party that definitely knew about and was
party to both of the bills of lading at issue here—should bear
responsibility for any gap between the liability limitations in the
bills. Meanwhile, Norfolk enjoys the benefit of the Hamburg Süd
bill’s liability limitation.
IV
We hold that Norfolk
is entitled to the protection of the liability limitations in the
two bills of lading. Having undertaken this analysis, we recognize
that our decision does no more than provide a legal backdrop
against which future bills of lading will be negotiated. It is not,
of course, this Court’s task to structure the international
shipping industry. Future parties remain free to adapt their
contracts to the rules set forth here, only now with the benefit of
greater predictability concerning the rules for which their
contracts might compensate.
The judgment of the
United States Court of Appeals for the Eleventh Circuit is
reversed, and the case is remanded for further proceedings
consistent with this opinion.
It is so ordered.
Footnote 1
The bill provides that “the
Freight Forwarder shall in no event be or become liable for any
loss of or damage to the goods in an amount exceeding the
equivalent of 666.67 SDR per package or unit or 2 SDR per
kilogramme of gross weight of the goods lost or damaged, whichever
is the higher, unless the nature and value of the goods shall have
been declared by the Consignor.” App. to Pet. for Cert. 57a,
cl. 8.3. An SDR, or Special Drawing Right, is a unit of
account created by the International Monetary Fund and calculated
daily on the basis of a basket of currencies. Liability computed
per pack- age for the 10 containers, for example, was approximately
$17,373 when the bill of lading issued in June 1997, $17,231 when
the goods were damaged on October 9, 1997, and $9,763 when the case
was argued. See International Monetary Fund Exchange Rate Archives,
http://www.imf.org/external/np/fin/rates/param_rms_mth.cfm (as vis-
ited Nov. 5, 2004, and available in Clerk of Court’s case
file). Respondents claim that liability computed by
weight is higher. The machinery’s weight is not in the record. In
any case, because we conclude that Norfolk is also protected by the
$500 per package limit in the second bill of lading at issue here,
see Part III–B, infra, and thus cannot be liable for more
than $5,000 for the 10 containers, each holding one machine, the
precise liability under the ICC bill of lading does not
matter.
Footnote
2
Clauses extending
liability limitations take their name from an English case
involving a steamship called Himalaya. See Adler
v. Dickson, [1955] 1 Q. B. 158
(C. A.).
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