CNA Insurance Company v. Hyundai Merchant Marine Co., L, et al

Filing

OPINION and JUDGMENT filed : The judgment against Hyundai Merchant Marine Co., Ltd. is AFFIRMED. The judgments against Norfolk Southern Railway Company and Burlington Northern Santa Fe Railway Company are VACATED, and the case is REMANDED to the district court so that it may reconsider the question of prejudgment interest. Decision for publication. Alice M. Batchelder (AUTHORING), Chief Judge; Deborah L. Cook and Kathleen McDonald O'Malley (DISSENTING FROM SECTION III.B OF THE MAJORITY'S OPINION), Circuit Judges. The Honorable Kathleen M. O'Malley, Circuit Judge for the United States Court of Appeals for the Federal Circuit, is sitting by designation. [12-6118, 12-6201] *N.B. The file name (14a0053p.06) and a spacing error at the point of Judge O'Malley's portion of the opinion have been corrected.--[Edited 03/26/2014 by CL]

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RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 14a0053p.06

UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
X
CNA INSURANCE COMPANY, a/s/o Corning,
Inc.,
Plaintiff-Appellee/Cross-Appellant, -Nos. 12-6118/6201
>
v.
,
HYUNDAI MERCHANT MARINE CO., LTD.;
NORFOLK SOUTHERN RAILWAY COMPANY;
BURLINGTON NORTHERN SANTA FE RAILWAY COMPANY,
Defendants-Appellants/Cross-Appellees. N
Appeal from the United States District Court
for the Western District of Kentucky at Louisville.
No. 3:07-cv-00141—Charles R. Simpson III, District Judge.

Argued: July 24, 2013
Decided and Filed: March 26, 2014
Before: BATCHELDER, Chief Judge; COOK and O’MALLEY, Circuit Judges.*
_________________
COUNSEL
ARGUED: Paul D. Keenan, KEENAN COHEN & HOWARD P.C., Jenkintown,
Pennsylvania, for Appellants/Cross-Appellees. Edward C. Radzik, MARSHALL
DENNEHEY WARNER COLEMAN & GOGGIN, New York, New York, for
Appellee/Cross-Appellant. ON BRIEF: Paul D. Keenan, KEENAN COHEN &
HOWARD P.C., Jenkintown, Pennsylvania, for Appellants/Cross-Appellees. Edward
C. Radzik, MARSHALL DENNEHEY WARNER COLEMAN & GOGGIN, New York,
New York, Henry S. Alford, Rebecca Grady Jennings, MIDDLETON REUTLINGER,
Louisville, Kentucky, for Appellee/Cross-Appellant.
BATCHELDER, C.J., delivered the opinion of the court in which COOK, J.,
concurred, and O’MALLEY, J., concurred in part. O’MALLEY, J. (pp. 51–54),
delivered a separate opinion dissenting from section III.B of the majority’s opinion.

*

The Honorable Kathleen M. O’Malley, Circuit Judge for the United States Court of Appeals for
the Federal Circuit, sitting by designation.

1

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_________________
OPINION
_________________
ALICE M. BATCHELDER, Chief Judge. At its core, this appears to be a simple
case: Corning hired Hyundai to transport cargo overseas, Hyundai’s subcontractors
accidentally destroyed the cargo during transit, and nobody wants to pay for it. After
some significant legal decisions and a jury trial, the district court found Hyundai and the
subcontractors liable to CNA for the loss, though it refused CNA’s request for
prejudgment interest. Both sides appeal and, as one might expect, this is not nearly as
simple as it would seem. Based on the reasoning that follows, we AFFIRM in part,
REVERSE in part, and REMAND for reconsideration consistent with this opinion.
I.
The Corning facility in Harrodsburg, Kentucky, makes 4-foot by 4-foot sheets
of very thin fusion-drawn flat-glass for use in LCD flat-screen televisions and computer
monitors.1 Corning packs these sheets into custom-made wooden crates, each holding
approximately 500 sheets. These crates are sized so that exactly 12 (three across and
four deep) fit into a standard 20-foot steel intermodal shipping container leaving only
negligible space (less than four inches). This is called “cubing out” the shipping
container and eliminates the need for additional packing or securing.
Corning ships its glass, in these containers, to Corning Display Technologies in
Tainan, Taiwan (an entirely separate company), which buys all the glass that Corning
can produce and also buys more from other vendors. Consequently, Corning ships as
many containers per day as it can fill, usually several, and has been doing so for years.
Despite the expected fragility of such thin glass and the high volume of shipments,
Corning has had virtually no problems with shipping by rail and the damage rate has
been extremely low (estimated at one or two sheets for every few crates).
1

Each sheet is actually 1300 mm x 1340 mm, or approximately 4'3" x 4'5". And each sheet is
0.635 mm thick, or 0.025 inches thick, which is thinner than typical posterboard (which is 1/32 inch, or
0.03125 inches, thick).

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As of 2006, Corning and Hyundai Merchant Marine had for several years been
parties to a Service Contract in which Corning agreed to ship and Hyundai agreed to
carry Corning’s cargo from certain locations in the United States to certain locations in
Asia: specifically, as relevant here, from Harrodsburg to Tainan for the shipment of the
aforementioned glass (and the return shipment of the empty crates).2 Corning dealt
exclusively with Hyundai as the sole carrier for a through shipment; Corning had no role
in selecting or contracting with any other carriers in the chain; and Corning made a
single payment to only Hyundai. The Service Contract contained other pertinent
provisions:
4.A.

“[Hyundai] shall be deemed an independent contractor with
respect to [Corning] and nothing herein contained shall be
construed to be inconsistent with that relationship or status. . . .”

9.A.

“Indemnification — [Hyundai] shall indemnify and hold
[Corning] harmless from any and all liability, expense (including
reasonable attorney’s fees), cause of action, suit, claim or
judgment . . .”

13.A

“Choice of Law — This Agreement shall be, insofar as relevant,
governed by the terms of the Shipping Act of 1984, and
otherwise by the laws of the State of New York and of the United
States of America.”

15.C. Incorporates Hyundai’s Regular Form Bill of Lading provisions,
unless they conflict, in which case the terms of the Service
Contract control. (The only relevant conflict here is that this
Service Contract expressly deems Hyundai as Corning’s
independent contractor, whereas the Hyundai Regular Form Bill
of Lading attempts to deem Hyundai as Corning’s agent).

2

While the fact that the contract includes return carriage of the crates from Tainan to Harrodsburg
could affect the analysis that follows, we find that it does not affect the outcome of this decision so we will
not discuss it further.

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The Hyundai Regular Form Bill of Lading3 contains certain pertinent provisions as well:
2(B). Clause Paramount — extending COGSA4 to cover all times
“when the goods are in the custody of [Hyundai].”
4.

Subcontracting —
(B)

(C)

“[Corning] warrants that no claim shall be made against
any of [Hyundai]’s Subcontractors or any Subcontractor’s
Subcontractor, except Carriers where otherwise
appropriate, . . . If any such claims should nevertheless be
made, [Corning] shall indemnify [Hyundai]. . . .”

(D)

5.

“[Hyundai] shall be entitled to subcontract on any terms
the whole or any part of the handling, storage[,] or
carriage of the Goods and any duties undertaken by
[Hyundai] in relation to the Goods.”

Himalaya Clause — “Without prejudice to the foregoing,
in regard [to a claim] against a Subcontractor regarding
handling, storage[,] or carriage of the Goods, every such
Subcontractor shall have the benefit of all provisions in
this Bill of Lading as if such provisions were expressly
for the Subcontractor’s benefit.”

Responsibility for Loss or Damage —
(B)(2) “If [Corning] establishes that [Hyundai] is liable for the
. . . damage to . . . the Goods, and subject to the
provisions of this Bill of Lading, including Article 21; . . .
[then] with respect to . . . damage caused during the
handling, storage, or carriage of the Goods by
[Hyundai]’s Subcontractor, such liability shall be to the
extent to which such Subcontractor would have been
liable to [Corning] if it had made a direct and separate
contract with [Corning] in respect of such handling,
storage, or carriage.”

3

The record contains two slightly different versions of Hyundai’s Regular Form Bill of Lading.
We are using the version used by the district court, as the parties expressed no objection to that choice in
either the district court or here. More importantly, the differences in the versions do not change the
substance of the agreement as pertinent here.
4

COGSA is the Carriage of Goods by Sea Act, 46 U.S.C. § 30701. The key feature of COGSA,
as it pertains here, is that it allows the ocean carrier to limit its liability and even sets out a default
limitation of liability of $500 per package while the cargo is on the ship (“between the tackles”). COGSA
also allows the ocean carrier to extend this limitation of liability to the overland portions of the journey
(“beyond the tackles”) with a properly written Clause Paramount in the bill of lading. This feature of
COGSA makes the Clause Paramount particularly important.

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Limitation of Liability for Loss or Damage –
(A)

“Subject to subpart (B) below, for the purpose of
determining the extent of [Hyundai]’s liability for . . .
damage to the Goods, [Corning] agrees that the sound
value of the Goods is [Corning]’s net invoice cost, plus
freight and insurance premium, if paid. [Hyundai] shall
not be liable for any loss of profit or any consequential
loss.”

(B)

“Insofar as . . . damage to . . . the Goods was caused
during the part of the custody or carriage to which the
applicable version of the Hague Rules applies:
(1) “Neither [Hyundai] nor the Vessel shall be liable for
. . . damage in an amount exceeding the minimum
allowable limit per package . . . , which [under] COGSA
. . . is U.S. $500 per package, . . . unless the value (and
nature) of the Goods higher than this amount has been
declared in writing by [Corning] before receipt of the
Goods by [Hyundai] and inserted on the face of this Bill
of Lading, and extra freight has been paid as
required. . . .”
(2) “Where the Goods have been packaged into a
container . . . by or on behalf of [Corning], it is expressly
agreed that the number of such containers . . . shall be
considered to be the number of packages . . . for the . . .
application of th[is] limitation of liability. . . .”

It is undisputed that this Service Contract governs the claims in this case.
Based on this Service Contract — which anticipated the shipment of multiple 20foot-standard shipping containers, every weekday, from the Corning facility in
Harrodsburg, Kentucky, to Corning Display Technologies in Tainan, Taiwan — Hyundai
coordinated or performed each of the six (6) legs of this journey, as an intermodal
shipment via a single through bill of lading.
Hyundai subcontracted with a motor carrier (DHL) to pick up the containers at
Corning’s facility in Harrodsburg and drive them to the railhead in Louisville. A single
truck would carry a single container, and Corning would provide the driver with a
“straight” bill of lading for the journey to Louisville, as verification that the cargo in the

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sealed container departed in good condition. The truck driver did not issue a bill of
lading to Corning, in its own right or on behalf of Hyundai.
Hyundai subcontracted with a rail carrier (Norfolk Southern Railway Co.,
pursuant to an “Intermodal Transportation Agreement,” which incorporates Norfolk
Southern’s Rules, including an option to select Carmack-based liability5 at a higher
price, which Hyundai did not select6) to unload the containers from the truck at the
Louisville railhead, load them onto a flatcar, and carry the containers by train to
Chicago. It is noteworthy that standard flatcar loading for such containers provides for
three (3) containers per flatcar: two (2) 20-foot containers placed on the flatcar with their
“noses” (closed ends) touching in the middle so that their doors are exposed at either
end, and a 40-foot container placed on top of the two 20-foot containers. All containers
remain sealed. Norfolk Southern did not issue any bill of lading, either in its own right
or on behalf of Hyundai.
Hyundai subcontracted with another rail carrier (Burlington Northern Santa Fe
Railway Co., “BNSF,” pursuant to an “International Transportation Agreement,” which
incorporates BNSF’s Rules and also offers the option to select Carmack liability at a
higher price, which Hyundai did not select) to take possession of the flatcar in Chicago
and carry the containers by train to the railhead in Tacoma, Washington. The containers
were not removed from the flatcar; the entire flatcar was transferred into BNSF’s
custody (a “steel wheel” interchange). It is noteworthy that both Norfolk Southern and
BNSF maintain detailed records, via computer, of the handling of the trains and railcars,
including movement on the line and at the terminal, coupling and decoupling, and any

5

The Carmack, 49 U.S.C. § 11706, liability scheme, particular to road and rail carriers under the
jurisdiction of the United States Surface Transportation Board (STB), is central to this appeal and is
introduced in Section II.A, infra.
6

This is noteworthy because the Surface Transportation Board has permitted rail carriers to avoid
Carmack liability for container carriage, so long as the carrier offers Carmack coverage (even at a higher
price) to the shipper and the shipper declines. See Babcock & Wilcox Co. v. Kan. City S. R.R., 557 F.3d
134, 142 n.6 (3d Cir. 2009) (relying on 49 U.S.C. § 10502(e) and § 11706). Here, both rail carriers offered
Carmack coverage to Hyundai (at a higher price) and Hyundai declined — but neither rail carrier nor
Hyundai ever offered a Carmack coverage option to Corning.

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rough handling. BNSF did not issue any bill of lading, either in its own right or on
behalf of Hyundai.
Hyundai had a third rail carrier (Tacoma Municipal Beltline Railway, “TMBR,”
apparently a wholly-owned subsidiary of Hyundai) take possession of the flatcar at the
railhead in Tacoma and carry the containers by train to the Washington United Terminal
(WUT) seaport. Because TMBR operates over two hundred miles of rail in and around
the Tacoma railhead and seaport, it appears that this was necessary carriage and not
merely a switching service. TMBR did not issue any bill of lading, either in its own
right or on behalf of Hyundai.
Hyundai, an ocean carrier, would unload the containers from the railcars at the
WUT seaport and load them onto a ship for sea carriage to the seaport in Kaohsiung,
Taiwan. It is at this point that Hyundai would issue a bill of lading specific to the cargo
at hand. This was an “ocean” bill.
Hyundai subcontracted with a motor carrier (not named in the record, and terms
unknown) to pick up the containers at the Kaohsiung seaport and carry them by truck to
Corning Display Technologies in Tainan, Taiwan.7 Nothing in the record suggests that
this motor carrier issued any bill of lading, either in its own right or on behalf of
Hyundai. To summarize the six legs of the journey:
1.

DHL motor carriage (truck) – Harrodsburg to Louisville;

2.

Norfolk Southern rail carriage (train) – Louisville to Chicago;

3.

BNSF rail carriage (train) – Chicago to Tacoma;

4.

TMBR rail carriage (train) – Tacoma to WUT seaport;

5.

Hyundai sea carriage (ship) – WUT to Kaohsiung, Taiwan, seaport;

6.

Unknown motor carriage (truck) – Kaohsiung to Tainan.

This journey would take weeks to complete, door-to-door from Harrodsburg to Tainan.

7

It is suggested in the record that Hyundai did not subcontract this part of the trip, and that either
Corning or Corning Display Technologies contracted with this motor carrier directly. Either way, it is not
relevant to the analysis herein.

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On February 21, 2006, Corning shipped several standard 20-foot containers, as
it had done every weekday for years, but unlike those thousands of other shipments, two
of these containers (identified as HMDU2347259 and HMDU2262167) were damaged
on the way to Tainan.
As was usual, Corning prepared its own straight bill of lading for each container.
Each truck driver signed the Corning straight bill upon accepting the container, thus
acknowledging that he had received the container from Corning in good condition.
Neither truck driver issued Corning a bill of lading; in fact, no carrier ever issued a bill
of lading for any cargo at any point during this shipment. Correspondingly, Corning
never declared a value for this cargo prior to shipment.
The truck drivers transferred the containers to Norfolk Southern in Louisville on
that same day, February 21, 2006. Norfolk Southern placed both containers on the same
flatcar, presumably — because the record contains no evidence to the contrary — with
noses touching in the middle and a 40-foot container set on top. Norfolk Southern did
not record or report any damage to either container at that point. Norfolk Southern
transferred the flatcar to BNSF in Chicago on February 26, 2006. BNSF did not record
or report any damage to either container at that point. BNSF transferred the flatcar to
TMBR in Tacoma on March 4, 2006. TMBR did not record or report any damage to
either container at that point. These containers were intended to be loaded onto the
Hyundai vessel “Hyundai Duke” for overseas shipment to Taiwan.
On March 5, 2006, Hyundai unloaded the containers from the flatcar onto the
dock. Sometime thereafter, a WUT employee observed that the two containers were
visibly damaged; the front (nose) end of each container was “bulging,” or buckled
outward. When the containers were opened for inspection, it was discovered that some
of the wooden crates were visibly damaged and some of the glass within had broken.
There was no report of any damage to any other container on any other car from this
train (including the 40-foot container presumably set atop these two).
On March 7, 2006, Marc Cash, the “Assistant Manager for Outbound Trouble
Shooting” for Hyundai, sent an email to Corning, to inform Corning of the situation:

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Good afternoon, please note that the below 2 units arrived via the rail
into WUT and the container were bulging, which is an indicator that the
cargo may not have been properly secured.
HDMU2347259
HDMU2262167
...
Upon consultation with HMMA/Claims,[8] we are arranging a survey and
Transload to take place tomorrow, Wednesday March 8th approximately
1:00 PM. I will be speaking with the surveyor directly after the initial
viewing, and will be able to provide further evidence of the cause. Since
the commodity is shown as ‘Flat Glass’, it is possible there may be some
cargo damage.
Hyundai contracted Craig Burgess of Cullen Maritime Services, Inc. (Seattle,
Washington), to perform an on-site survey of the damage. Burgess confirmed that both
containers and four (4) of the crates within were visibly damaged and speculated that the
damage was due to aggressive “humping” during the rail carriage. Humping is a means
of moving and connecting rail cars during transfer or interchange in which the cars come
to a sudden stop. Burgess also opined that the loading and packing of the crates within
the containers, by Corning in Harrodsburg, appeared to have been satisfactory. The
record does not contain a written report by Burgess or Cullen Maritime.
On March 10, 2006, Marc Cash sent a follow-up email to John Wagner of
Corning to report on the information obtained from Burgess:
Good afternoon John, pleasure to speak with you today.
As per our telecon, the Transload and Survey took place 3/9, and the
results were that in the opinion of the surveyor the bulging of the nose of
the 2 containers was due to aggressive humping of the Flatcars by the rail
carriers. The surveyor found no issue with your loading and stowage of
the cargo in the containers.
Apparently, Cash sent photos of the damage (both containers and crates) to
Wagner sometime thereafter and, on March 14, 2006, Wagner responded to Cash via
email:
8

“HMMA/Claims” refers to the Hyundai Merchant Marine of America, Inc. Claims Department.

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Marc:
I have shared the photos of the damaged crates with our plant in
Harrodsburg, KY. The amount of force the product was subjected to in
the humping incident has likely damaged the glass. There is reason to
suspect that any or all of the crates have damage from the shock, not just
the four where you found the external splintering of the wood. I would
like both containers returned to origin for inspection at no cost to
Corning.
Please advise arrangements and ETA so we can plan for the inspection.
If damage is found we will be processing a claim.
Note that, at this point, both Cash (Hyundai) and Wagner (Corning) had accepted that
a rail carrier’s humping of the flatcars caused the damage. But later (much later, it turns
out), Norfolk Southern and BNSF disproved this assumption by producing logs to show
that no humping or rough handling had occurred during the carriage of these two
containers. Cash replied to Wagner that same day:
Good afternoon John, please note the we will make immediate
arrangements to return these 2 containers to Harrodsburg, KY for further
examination.
Please note that I have spoken to, and added to this distribution,
personnel from our National Claims Dept. for further coordination and
direction from this point forward to ensure smooth handling of any
concerns. The contact person for HMMA Claims is as follows:
Mr. Todd Frare
...
I will advise once cargo is railbilled and scheduled to depart Tacoma for
Harrodsburg, KY.
Hyundai unloaded the 24 crates from the damaged containers, loaded them into
two different containers, and shipped them back to Harrodsburg, via the same route by
which they had arrived. Meanwhile, Corning filed an insurance claim with its insurer,
CNA. When the cargo arrived back in Harrodsburg, CNA scheduled its own survey of
the crates to fully assess the damage.
Mark Ohlson of Riverlands Marine Surveyors and Consultants, Inc. (Louisville,
Kentucky), conducted a survey on March 31 and April 6, 2006, and prepared a written
report dated April 19, 2006 (Riverlands Report), for CNA. In the Riverlands Report,
Ohlson noted that Robert Craig, a Marine Surveyor representing Hyundai, was also

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present. When Corning opened the containers and removed the crates, Ohlson found that
all but four (4) of the 24 crates exhibited visible damage to the crate itself or the glass
inside. When they opened two (2) of the apparently undamaged crates for inspection,
both revealed damaged glass. Ohlson attributed the damage to the likelihood of
“humping” during the rail transport, but this was almost certainly based not on any
evidence but on Burgess’s speculation during the initial on-site survey in Tacoma and
Cash’s adoption and repetition of that assertion in his email to Corning. Ohlson also
opined that Corning’s method of stowing and packing had been suitable for the
shipping.9 Finally, Ohlson declared the shipment a total loss and recommended that the
glass be disposed of and the crates returned to their manufacturer for refurbishment.
CNA paid Corning $664,679.88 on the claim and was subrogated to Corning’s
right to sue for recovery. On September 27, 2006, CNA filed suit in the Southern
District of New York, naming three defendants: Hyundai, Norfolk Southern, and BNSF
(hereinafter “the Carriers”). CNA claimed breach of the Service Contract, liability for
bailment, and negligence. CNA cited the Carmack Amendment, 49 U.S.C. § 11706, in
the opening paragraph (jurisdiction section) of its complaint.
The Carriers moved to transfer venue to the Eastern District of Kentucky, arguing
that it would have been an appropriate venue originally and would be more convenient
for the parties and any witnesses, given that the carriage began at the Corning facility in
Harrodsburg, in the Eastern District of Kentucky. CNA opposed the transfer and moved,
in the alternative, for a transfer to the Western District of Washington, where the damage
was discovered. The animosity between the attorneys, if not the parties, became clear
immediately. The court “granted” the Carriers’ motion and transferred the case, not to
the Eastern District as requested, but to the Western District of Kentucky, specifically
Louisville. While this appears to have been a mistake, the parties proceeded in the
Western District of Kentucky, and any objection or error has long since been waived.

9

Given that Hyundai personnel had loaded the crates into new containers in Tacoma for return
shipment, this assertion was based either on Corning’s standard practices or the statement from the initial
on-site survey in Tacoma.

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The Carriers moved for summary judgment on three bases: (1) that CNA had not
pled Carmack claims, so the absence of contractual privity prevented CNA from suing
the rail carriers; (2) that the Service Contract’s10 Subcontracting Clause prohibited CNA
from suing the rail carriers; and (3) that the Carriers were entitled to enforcement of the
$500-per-package COGSA limitation of liability, arguing for a limit of $12,000 for the
24 crates.11 The district court rejected the Carriers’ argument that CNA had not pled
Carmack claims, found that CNA had done so, and held that the case would proceed
solely under Carmack, apparently on the basis that the damage had undisputedly
occurred while the cargo was in the possession of a rail carrier.12 The court next
10

Unless specified, any reference to the Service Contract includes reference to the Form Bill of
Lading, which was specifically incorporated therein, except for provisions that conflicted with the Service
Contract itself.
11

It is unclear why the Carriers’ attorney sought $500 per crate ($12,000) when the limitation of
liability provision (Form Bill of Lading § 21(B)(2), as incorporated into the Service Contract) specifically
states that a “package” is a “container” packed by Corning, which at least implies that there were actually
only two such “packages” damaged here. Thus, under a strict reading, Hyundai would have been liable
for only $1,000 on this shipment.
12

On appeal here, the Carriers argue that CNA “withdrew” or “waived” its breach-of-contract,
bailment, and negligence causes of action in the district court, and chose instead to proceed solely on its
Carmack cause of action. This contention mischaracterizes the district court proceedings on this issue and
is ultimately unsupportable and untrue.
In their motion for summary judgment, filed July 1, 2008, the Carriers stated near the end of their
argument that CNA “ha[d] not asserted a cause of action under the Carmack Amendment.” R. 78 at p. 25.
This was a reasonable contention, given that CNA’s complaint contained three express causes of action
(breach of contract, bailment, and negligence) and only referred to Carmack in the jurisdiction section, not
as a cause of action. R. 38 (Complaint). In its response memorandum, dated August 1, 2008, CNA
answered that it had raised three causes of action under Carmack:
“It is acknowledged that [CNA]’s claims for breach of contract, negligence, and
bailment are encompassed and preempted by the Carmack Amendment, and as such,
[CNA] has no state law claims against [the Carriers], but rather one comprehensive
claim under the Carmack Amendment.”
R. 84 at 11 (emphasis added). In their sur-reply, dated August 15, 2008, the Carriers did not contend that
CNA had withdrawn or waived the three common-law causes of action but instead reiterated their belief
that CNA had not pled Carmack and argued, in the alternative, for summary judgment on the common-law
causes of action because Carmack preempted them. R. 88 at 12. In ruling on the motion, the district court
held that Carmack encompassed the claims:
“CNA alleges causes of action against [the Carriers] sounding in breach of contract,
bailment, and negligence, as encompassed by the Carmack Amendment. . . . Generally,
and in part, the Carmack Amendment imposes liability for the actual loss or injury to
property caused by rail carriers. It is undisputed that the Cargo was damaged while in
the possession of one or both Rail [Carriers].”
R. 102 at 3 (Memorandum Opinion, March 16, 2009). The district court also included a footnote in this
passage:
“While [the Carriers] argue preliminarily that CNA has failed to explicitly plead claims
[under] the Carmack Amendment, the court is satisfied that CNA’s Complaint clearly
alleges comprehensive claims under the Carmack Amendment as opposed to individual

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explained that the Subcontracting Clause did not make the rail carriers “immune from
suit”; instead, it merely “obligate[ed] Corning to indemnify Hyundai for any resultant
claims by any Subcontractor against Hyundai arising out of these same facts.” Finally,
the court explained that because the Clause Paramount, as it is written in the Service
Contract, does not expressly extend COGSA’s $500-per-package limit of liability to the
subcontractor rail carriers, it does not apply to them; and because it applies only to
damage occurring to inland cargo while that cargo is in Hyundai’s custody, it does not
apply to Hyundai in these circumstances. Consequently, the court denied the Carriers’
attempts to limit their liability.
CNA had also moved for summary judgment, seeking to strike the Carriers’
limitation-of-liability defenses on two theories: (1) that the Indemnification Clause in
the Service Contract provided for full remuneration for the loss of the cargo; and (2) that
the Carmack Amendment barred the rail carriers from any attempted limitation of
liability.13 The court rejected CNA’s first theory, explaining that the Indemnification

common law causes of action.”
R. 102 at 3 n.2 (quotation marks and citations omitted). Thus, CNA did not withdraw or waive its breachof-contract, bailment, or negligence causes of action in the district court, but rather sought to preserve these
causes of action as encompassed within the Carmack claim. Even if it could be said that CNA withdrew
or waived these causes of action, CNA did so only on the understanding that Carmack preempted them and
the case would proceed under Carmack. There is simply no basis to conclude, as the Carriers would have
us do, that if the district court had deemed Carmack inapplicable at the summary judgment stage and left
CNA with only the common law causes of action, that CNA would have nonetheless still withdrawn or
waived those causes of action, i.e., that it would have dismissed its case altogether. Instead, as CNA has
made clear throughout, CNA would have pursued these three common-law causes of action under diversity
jurisdiction, as alleged in its complaint. See also fn.13 and fn. 14, infra.
13

CNA moved for summary judgment on July 1, 2008, the same day the Carriers had filed their
motion (see forgoing footnote), and argued that Carmack governed “by force of law.” R. 79 at 16. The
Carriers replied:
“With respect to the provisions of the Carmack Amendment applicable to rail carriers,
it is notable that the Carmack Amendment does not ‘govern’ claims of breach of
contract, bailment[,] and negligence; rather, the Carmack Amendment completely
preempts such causes of action.”
R. 85 at 23; see also R. 85 at 25 (“If the Carmack Amendment is applicable to the instant matter, then all
of the claims pled by [CNA] are preempted.”). CNA disagreed in its sur-reply, insisting that “these causes
of action are found to be authorized by the Carmack Amendment and do not constitute ‘state law causes
of action.’” R. 87 at 12 (relying on Travelers Prop. Cas. Co. v. A.D. Transp. Express, Inc., No. 04-5830,
2007 WL 2571957, *2 n.3 (D.N.J. Aug. 31, 2007) (holding the same)). As noted in the foregoing footnote,
CNA did not withdraw or waive its breach-of-contract, bailment, or negligence causes of action in the
district court. The Carriers contention that CNA did so is unfounded and untrue.
As an aside, we find it irritating and somewhat troubling that we had to explore this non-issue in
such depth solely because the Carriers’ counsel misrepresented it to us in his brief and at oral argument.
To be sure, this was a complicated case with a lengthy procedural history and we will assume that counsel

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Clause obligates Hyundai to indemnify Corning against third-party claims, but “has no
bearing on Hyundai’s liability to Corning for the loss of the Cargo.” The court did not
specifically decide the Carmack argument, but instead granted the motion based on its
finding that the Service Contract’s limitations of liability did not apply to any of the
Carriers.
The case proceeded to a jury trial under a single Carmack cause of action.14
CNA proved its Carmack prima facie case (i.e., the cargo was tendered in good
condition, it arrived in damaged condition, and actual damages were quantified), so the
burden shifted to the Carriers’ to demonstrate one of the five excepted causes.15 The
Carriers attempted to prove that the damage was due to Corning’s “improper” stowing
and packing, inasmuch as it had left three inches of space (in the 20-foot container)
between the crates and the end wall. CNA easily rebutted this contention. The real
mystery was how the damage actually occurred — the railroads demonstrated that there
had been no “humping,” as had been speculated, nor was that even a plausible cause
given that the containers had likely been positioned on the flatcar nose-to-nose. Also,
the railroads demonstrated that no other containers on that train had been damaged. It
appears likely that the containers were damaged after being removed from the flatcar,
but the case was neither presented nor defended that way.
The jury found for CNA, holding the Carriers jointly and severally liable for
$498,509.91 (which is exactly 75% of the $664,679.88 claim, to the penny). Notably,
there is no provision under Carmack for contributory negligence or a partial award, and
the court did not instruct the jury that it could issue a partial award, so this appears to
have been improper. But CNA did not protest the verdict to the district court or appeal

was merely mistaken and not duplicitous in his contentions. Nevertheless, we encourage him to be more
thorough and cautious in the future.
14

As a final comment on the Carriers’ contention that CNA withdrew or waived its breach-ofcontract cause of action, we note that CNA actually sought to argue its breach-of-contract theory at trial.
The district court refused, holding that this was an “either/or” proposition in which CNA was barred from
arguing breach of contract by proceeding under Carmack.
15

See Section II.A, infra, which presents Carmack’s burden-shifting framework.

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it here. CNA did move for pre-judgment interest under New York law (9%) or,
alternatively, federal law, but the district court denied that motion.
Meanwhile, the Carriers moved for judgment as a matter of law, arguing (1) that
Carmack did not apply to Hyundai because it is not a rail carrier; (2) that the Surface
Transportation Board had exempted intermodal rail transportation from Carmack unless
the shipper selects it and pays extra for it, which Corning did not do; and (3) that
Carmack does not permit lawsuits by Corning, the shipper, against Norfolk Southern or
BNSF, because they are mere connecting carriers under Carmack. Because the district
court had already considered and rejected these arguments in its summary judgment
decisions, the Carriers relied on an intervening Supreme Court decision to raise these
issues anew, namely Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp., 561 U.S. --,
130 S. Ct. 2433 (June 21, 2010). The district court denied the motions, explaining:
[T]he court finds that [Kawasaki] Kisen . . . does not preclude the
liability of Hyundai [] under the Carmack Amendment in this case. The
[Kawasaki] case is inapplicable herein. The court further finds that the
evidence supports the jury’s award of damages against all three
defendants for the full value of the freight.
The Carriers appealed.

CNA cross-appealed, contesting the court’s denial of

prejudgment interest.
II.
The preliminary and overriding question in this appeal concerns the meaning and
application of the Carmack Amendment. That is, we must determine whether Carmack
actually applies here.
A.
The Carmack Amendment to the Interstate Commerce Act, originally enacted in
1906 and currently codified at 49 U.S.C. § 11706, states in pertinent part:
(a)

A rail carrier providing transportation or service subject to the
jurisdiction of the [Surface Transportation] Board under this part

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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 [Surface Transportation] Board under this part
are liable to the person entitled to recover under the receipt or bill
of lading.
The liability imposed under this subsection is for the actual loss
or injury to the property caused by - (1)

the receiving rail carrier;

(2)

the delivering rail carrier; or

(3)

another rail carrier over whose line or route the
property is transported in the United States or
from a place in the United States to a place in an
adjacent foreign country when transported under
a through bill of lading.

Failure to issue a receipt or bill of lading does not affect the
liability of a rail carrier.
A delivering rail carrier is deemed to be the rail carrier
performing the line-haul transportation nearest the destination but
does not include a rail carrier providing only a switching service
at the destination.
(b)

The rail carrier issuing the receipt or bill of lading under
subsection (a) of this section or delivering the property for which
the receipt or bill of lading was issued is entitled to recover from
the rail carrier over whose line or route the loss or injury
occurred the amount required to be paid to the owners of the
property, as evidenced by a receipt, judgment, or transcript, and
the amount of its expenses reasonably incurred in defending a
civil action brought by that person.

(c)(1) A rail carrier may not limit or be exempt from liability imposed
under subsection (a) of this section except as provided in this
subsection. A limitation of liability . . . in a receipt, bill of lading,
contract, or rule in violation of this section is void.
49 U.S.C. § 11706 (certain paragraph breaks added). These provisions also apply to
motor carriers, see 49 U.S.C. § 14706(a)(1) (virtually identical for motor carriers), and

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freight forwarders.16 See Royal & Sun Alliance Ins. v. Ocean World Lines, Inc., 612
F.3d 138, 145 (2d Cir. 2010).
Though it might not be obvious from the text, “Carmack’s original premise is
that the [initial] receiving carrier is liable for damage caused by the other [subsequent]
carriers in the delivery chain,” Kawasaki, 130 S. Ct. at 2446. The current version of
Carmack makes the final, or “delivering,” carrier liable to the shipper as well. So, the
aggrieved shipper need only sue the initial (“receiving”) or final (“delivering”) carrier
and need not seek out the carrier actually at fault, nor must the plaintiff-shipper
determine the circumstances by which the loss or damage actually occurred.
In a Carmack claim, the Supreme Court has set out a burden-shifting framework,
in which the shipper may establish a prima facie case with a showing of three basic
elements:
(1)

that the initial (“receiving”) carrier received the cargo in good
condition,

(2)

that the cargo was lost or damaged, and

(3)

the amount of actual loss or damages.

Thereupon, the burden shifts to the defendant-carrier to show both that it was not
negligent and that the damage was instead due to one of five excepted causes: (1) an act
of God; (2) an act of terrorism or war; (3) an act of the shipper itself; (4) an act of public
authority; or (5) the inherent vice or nature of the goods. Missouri Pac. R.R. v. Elmore
& Stahl, 377 U.S. 134, 137-38 (1964).

16

There are no “freight forwarders” in this case, although both parties have, at times, improperly
suggested that there are. Simply put, “[f]reight forwarders consolidate less than [a] carload [of] freight into
carloads for shipment.” Chicago, Milwaukee, St. Paul & Pac. R.R. v. Acme Fast Freight, 336 U.S. 465,
467 (1949); see also id. at n.2. That did not happen here. More specifically: “Freight forwarders generally
make arrangements for the movement of cargo at the request of clients and are vitally different from
carriers, such as vessels, truckers, stevedores[,] or warehouses, which are directly involved in transporting
the cargo. Unlike a carrier, a freight forwarder does not issue a bill of lading, and is therefore not liable
to a shipper for anything that occurs to the goods being shipped.” Prima U.S. Inc. v. Panalpina, Inc.,
223 F.3d 126, 129 (2d Cir. 2000); see also Norfolk S. R.R. v. Kirby, 543 U.S. 14, 18 (2004) (“A freight
forwarding company arranges for, coordinates, and facilitates cargo transport, but does not itself transport
cargo.”).

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If the defendant-carrier meets this burden, it wins. If not, then the shipper
prevails based on its establishing the — very low threshold — prima facie case. Recall
that this named defendant-carrier (either the receiving or delivering carrier, or both) may
attempt to recover any judgment from the intermediate carrier that was actually at fault
for the loss or damage. 49 U.S.C. § 11706(b).
B.
“Common carrier liability” at common law was “of an extraordinary character,
and cover[ed] every risk that the property c[ould] be subject to, except a loss by the act
of God or by an unavoidable accident, [or] by the public enemy.” St. Louis, I. M. & S.
R.R. v. Knight, 122 U.S. 79, 88 (1887). The carrier’s alternative was to limit its liability
by contract with the shipper, which, due to the “extraordinary liability which the law
impose[d],” almost every carrier chose to do. See id. As a result, there was no uniform
law for carrier liability, but instead, every case was dependent on the contract between
the carrier and the shipper, typically embodied in a bill of lading.
It also bears mention that, pre-Carmack, there were hundreds of rail carriers
operating their own rail lines as part of a massive, interconnected, nationwide system.
So a shipment from Harrodsburg, Kentucky, to Tacoma, Washington, might pass
through a half-dozen or more carriers, each of whom would operate under the contract
(bill of lading) that the shipper had formed with the initial carrier, even though the
shipper, and possibly even the initial carrier, had no knowledge of who these subsequent
carriers might be. This made it very difficult, if not impossible, for the shipper to locate
the carrier actually responsible for loss or damage to the cargo during transit.
As enacted in 1906, the Carmack Amendment partially codified the common law
by adopting a form of common-carrier liability, and restricted the carrier’s right to limit
that liability by contract. In Atlantic Coast Line R.R. v. Riverside Mills, 219 U.S. 186
(1911), the Supreme Court considered an early challenge to Carmack and clarified that
the Amendment placed full liability on the initial “receiving” carrier and prohibited any
attempt to contractually limit that liability:

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Reduced to the final results, the Congress has said that a receiving
[i.e., initial] carrier, in spite of any stipulation to the contrary, shall be
deemed, when it receives property in one state, to be transported to a
point in another, involving the use of a connecting carrier for some part
of the way, to have adopted such other carrier as its agent, and to incur
carrier liability throughout the entire route, with the right to
reimbursement for a loss not due to his own negligence.
Id. at 205. The Court portrayed this as an agency construct: “The liability of the [initial]
receiving carrier which results in such a case is that of a principal for the negligence of
his own agents [i.e., the subsequent connecting or delivering carriers].” Id. at 206.
Otherwise stated:
In substance[,] Congress has said to such [initial] carriers: ‘If you
receive articles for transportation from a point in one state to a place in
another, beyond your own terminal, you must do so under a contract to
transport to the place designated. If you are obliged to use the services
of independent carriers in the continuance of the transit, you must use
them as your own agents, and not as agents of the shipper.’. . . The
[initial] receiving carrier is, as principal, liable not only for its own
negligence, but for that of any agency it may use, although, as between
themselves, the company [i.e., carrier] actually causing the loss may be
primarily liable.
Id. at 206-07. The Court rejected statutory and constitutional challenges. The Court’s
underlying, though unstated, premise is that there is a single contract for the shipment
of the goods — either an actual contract, such as in a bill of lading, or a constructive
contract based on Carmack’s governing regulation — and that contract is between the
shipper and only the initial (receiving) carrier.
Two years later, in Adams Express Co. v. Croninger, 226 U.S. 491, 505-06
(1913), the Court explained that Congress had, with the Carmack Amendment, fully
preempted state law concerning the liability of interstate rail and road carriers. The
Court also restated and clarified:
The significant and dominating features of th[e] [Carmack] [A]mendment
are these:

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First. It affirmatively requires the initial carrier to issue a receipt or bill
of lading therefor, when it receives property for transportation from a
point in one state to a point in another.
Second. Such initial carrier is made liable to the lawful holder thereof
for any loss, damage, or injury to such property caused by it.
Third. [The initial carrier] is also made liable for any loss, damage, or
injury to such property caused by any common carrier, railroad, or
transportation company to which such property may be delivered, or over
whose line or lines such property may pass.
Fourth. It affirmatively declares that no contract, receipt, rule, or
regulation shall exempt such [initial] common carrier, railroad, or
transportation company from the liability hereby imposed.
Id. at 504 (quotation marks omitted); see also Norfolk & W. R.R. v. Dixie Tobacco Co.,
228 U.S. 593, 594-95 (1913) (explaining that Carmack “requires any common carrier
receiving property for transportation from a point in one state to a point in another to
issue a receipt or bill of lading for the same; makes the [initial] receiving carrier liable
for loss caused by any common carrier in transitu; and provides that no contract shall
exempt it from the liability thus imposed”).
Note that an actual or tangible bill of lading is not necessary to impose liability
on the initial carrier under Carmack’s plain terms, 49 U.S.C. § 11706(a) (“Failure to
issue a receipt or bill of lading does not affect the liability of a rail carrier.”), or Atlantic
Coast Line’s constructive-contract premise, 219 U.S. at 206 (“If you receive articles for
transportation . . . , you must do so under a contract to transport to the place
designated.”), and that Adams Express, 226 U.S. at 504, treats “contract, receipt, rule,
or regulation” as equally powerless to limit the carrier’s liability. Thus, Carmack’s
requirement that the initial carrier issue the shipper a bill of lading is not a requirement
to form an actual contract, though that is certainly acceptable and typically anticipated;
it is a requirement that the initial carrier issue the shipper a receipt for the cargo as
acknowledgment of the constructive contract making that carrier solely liable to the
shipper for the entire carriage.

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Because the shipper’s contract (actual or constructive), as embodied in or
symbolized by the initial carrier’s bill of lading to the shipper, is the sole agreement
governing the duration of the carriage and is between the shipper and only the initial
carrier, making subsequent carriers mere agents of the initial carrier, any overlapping
bill(s) of lading issued by any subsequent carriers are void. Missouri, K & T R.R. v.
Ward, 244 U.S. 383, 387 (1917). That is:
For the purpose of fixing the liability, the several carriers must be treated,
not as independent contracting parties, but as one system; and the
connecting lines become in effect mere agents [of the initial carrier],
whose duty it is to forward the goods under the terms of the contract
made by their principal, the initial carrier.
Id. at 387-88. Thus, in Missouri, K & T, the Court upheld the shipper’s suit against two
subsequent rail carriers under the terms of the initial shipper’s bill of lading (contract)
and voided a subsequent, overlapping bill of lading. See also Texas & Pac. R.R. v.
Leatherwood, 250 U.S. 478, 481 (1919).
Note that the Missouri, K & T Court allowed the shipper to sue and recover from
subsequent rail carriers, despite the absence of contractual privity between the shipper
and those carriers:
While the receiving carrier is . . . responsible for the whole carriage, each
connecting [carrier] may still be sued [by the shipper] for damages
occurring on its line; and the liability of such participating carrier is fixed
by the applicable valid terms of the original bill of lading.
Missouri, K & T, 244 U.S. at 387. This is an expansion of Carmack beyond its terms:
here, the subsequent carriers are not acting as agents for the initial carrier to complete
the carriage; rather the initial carrier is made the agent for the subsequent carriers to bind
them to a contract with the shipper.
Ten years later, in Missouri Pacific R.R. v. Porter, 273 U.S. 341 (1927), the
Court considered an overseas export of goods shipped under a single through bill of
lading (albeit separated into two sub-parts: one for rail transport from Arkansas to
Georgia and another for sea transport from Georgia to England). The emphasis in Porter

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was the Court’s holding that Congress had occupied the entire field regulating interstate
bills of lading, thereby invalidating any coincident state laws.17 In its analysis, however,
the Court opined (perhaps in dicta) that the Carmack Amendment would not apply to the
domestic overland part of an international, overseas shipment under a through bill of
lading:
The question is whether Congress has entered upon the regulation of
provisions in bills of lading affecting liability of railroads for loss of
property received by them for transportation over an interstate inland
route to a seaport for delivery to a foreign vessel for ocean carriage to a
nonadjacent foreign country. . . . The defendants . . . rightly say that the
Carmack Amendment . . . does not apply to such a shipment.
Id. at 345; see also Reider v. Thompson, 339 U.S. 113, 120 (1950) (Frankfurter, J.,
dissenting) (asserting that “[t]he conclusion of the Porter case” was “that the Carmack
Amendment does not apply to an unbroken transaction of commerce with a nonadjacent
foreign country”). Ultimately, the Court held that the situation presented was governed
by the general statute concerning bills of lading and the federal courts’ interpretation and
application of that statute (i.e., federal common law).
If this passage were a legal holding, then Carmack plainly would not apply to the
domestic portion of an overseas export under a through bill of lading, even if the initial
receiving carrier otherwise fell within Carmack’s coverage. But the Court has, since
then, expressly limited this as a holding and has treated this issue as an open question,
so it is likely dicta.
In Mexican Light & Power Co. v. Texas Mexican R.R., 331 U.S. 731 (1947), the
Court considered a shipment of cargo under two overlapping bills of lading, as in
Missouri, K & T, and again found the second bill void. The first bill (from the initial
carrier, Pennsylvania R.R.) covered carriage from Pennsylvania to Laredo, Texas, for
export to El Oro, Mexico, with a caveat that the purchaser’s agent would meet the
shipment in Laredo, presumably to arrange for border crossing. Id. at 732-33. More

17

Recall that the Court had already established, in Adams Express, 226 U.S. at 505, that the
Carmack Amendment fully preempted state law concerning the liability of interstate rail and road carriers.

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importantly, the shipper had paid Pennsylvania R.R. for shipment all the way to the
Mexican border; i.e., through Laredo, but not actually out of the country (so not
technically an export). When the subsequent (“connecting”) carrier (Texas Mexican
R.R.) stopped in Laredo, it issued another bill of lading, for the trip from Laredo to El
Oro. But because Pennsylvania R.R. had paid Texas Mexican R.R. to deliver the
shipment all the way to the border, Texas Mexican did not receive any further payment
for the second bill of lading. At the border, the shipment was transferred to the National
Railway of Mexico, in whose custody it was later damaged. The shipper sued Texas
Mexican R.R. under Carmack, as the putative initial (receiving) carrier on the second bill
of lading. The Court rejected Carmack liability for Texas Mexican, explaining:
[U]nless the connecting carrier has received a consideration for the bill
of lading in addition to that which flowed under the bill of lading issued
by the initiating carrier, the Carmack Amendment makes such second bill
of lading void. It can neither enlarge the liability of the connecting
carrier nor contract that of the initiating carrier.
...
[Because] the so-called bill of lading [issued by Texas Mexican R.R.] did
not evidence any new and independent undertaking, when judged by the
rigid requirements by which bills of lading are valid under the Carmack
Amendment, . . . the shipment over the Texas-Mexican [R.R. line]
legally moved only under the original bill of lading[;] the Pennsylvania
[R.R.] was never displaced as the initial carrier[;] and . . . therefore the
Texas-Mexican [R.R.] was not liable for damage that occurred on the
Mexican [National] Railroad.
Id. at 734-35. Note that this exclusion of Texas Mexican R.R. because it was merely a
subsequent connecting carrier is a reversal from Missouri, K & T, 244 U.S. at 387, in
which the Court permitted the shipper to sue two subsequent rail carriers. This is
peculiar because the Court cited to, quoted from, and relied on Missouri, K & T in
holding that the subsequent bill of lading was void.
In Reider v. Thompson, 339 U.S. 113 (1950), the Court considered an overseas
import of goods shipped under two non-overlapping bills of lading; one for the sea
transport from Buenos Aires to New Orleans and another for the rail transport from New

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Orleans to Boston. The Court held that the absence of a through bill meant that the trip
comprised two separate journeys, each covered by its own separate bill of lading, the
second of which (the overland, rail portion) fell under Carmack, even though the first
(overseas) part would not. The Court explained:
There was no through bill of lading from Buenos Aires to Boston. . . .
The contract for ocean transportation terminated at New Orleans.
Having terminated, nothing of it remained for the new, separate, and
distinct domestic contract of carriage to ‘supplement’ [i.e., overlap]. . .
. If the various parties dealing with this shipment separated the carriage
into distinct portions by their contracts, it is not for courts judicially to
meld the portions into something they are not. The test is not where the
shipment originated, but where the obligation of the carrier as receiving
carrier originated. Thus it is not significant that the shipment in this case
originated in a foreign country, since the foreign portion of the journey
terminated at the border of the United States. The obligation as receiving
carrier originated when respondent [railroad] issued its original through
bill of lading at New Orleans. That contract of carriage was squarely
within the provisions of the statute.
Id. at 117 (citations omitted). Because there were two independent contracts, the Court
put the first (oversea) contract aside and considered only the second (entirely domestic,
overland) contract individually. In this light, the Court was not considering “an
unbroken transaction of commerce with a nonadjacent foreign country,” id. at 120
(Frankfurter, J., dissenting), and it distinguished Missouri Pacific R.R. v. Porter, 273
U.S. at 345 (which had stated that Carmack would not apply to the “inland route to a
seaport” as part of an overseas shipment in foreign commerce):
The Court [in Missouri Pacific R.R. v. Porter] briefly alluded to the
coverage of the Carmack Amendment. But the sole issue in [that] case
was whether federal regulation of bills of lading had covered the field to
the exclusion of state regulation of the same subject matter. The Court’s
discussion of the Carmack Amendment [in that case] does not control our
decision in this case.
Reider, 339 U.S. at 116 n.1.
Nonetheless, the Reider Court’s reasoning implied that the use of a through bill
(from Buenos Aires to Boston) would have altered the outcome, suggesting that its

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outcome could have been consistent with Porter, or at least not inconsistent with it. That
is, had the shipper and ocean carrier entered a single through contract, from Buenos
Aires to Boston, with the rail carrier at New Orleans a mere subcontractor to the ocean
carrier, then the “obligation of the carrier as receiving carrier” vis-a-vis the shipper
would have originated with the ocean carrier in Buenos Aires, and that carrier would not
be subject to Carmack. Thus the shipper would have no grounds to invoke Carmack,
either against the ocean carrier as the “receiving” carrier or against the rail carrier, a
mere “connecting” carrier under the single through contract.
One lingering question would be whether Carmack applied separately to the rail
component of the journey; that is, whether the rail carrier in New Orleans would have
been a Carmack “receiving carrier” vis-a-vis the ocean-carrier-as-shipper, under the view
that its obligation began in New Orleans.18 Likely not. In Reider, 339 U.S. at 118, the
Court found it important that, because “the shipment in this case could not have moved
an inch beyond New Orleans under the ocean bill[,] the Carmack Amendment required
[the rail carrier] to issue a . . . bill of lading for the carriage from New Orleans to
Boston.” Applying that reasoning the other way, under a through bill the shipment
would certainly continue through New Orleans under the ocean bill, so the rail carrier
would not have needed to issue a bill of lading to continue the carriage to Boston.
Moreover, because the rail carrier would receive no additional consideration for the
second bill of lading beyond that already paid by the ocean carrier under the through bill,
that second bill would have been void under the Carmack analysis in Mexican Light &
Power, 331 U.S. at 734. Regardless, the Court has since rejected this ocean-carrier-asshipper argument expressly. See Kawasaki, 130 S. Ct. at 2445 (“A carrier does not
become a [Carmack] receiving carrier simply by accepting goods for further transport
from another carrier in the middle of an international shipment under a through bill.”).
Thus, though far from definitive, a composite of the Court’s Carmack case law
as of Reider reasonably appeared to hold that Carmack: (1) fully preempted state law

18

at 2455.

This theory was one of Justice Sotomayor’s contentions in her dissent in Kawasaki, 130 S. Ct.

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as to an interstate rail carrier’s liability; (2) mandated a single contract for carriage (i.e.,
the receiving carrier’s bill of lading), such that any subsequent and overlapping contract
would be void; (3) either allowed or disallowed a shipper’s lawsuit against a
“connecting” carrier, without clear explanation; and (4) would likely not apply to an
overseas through contract, i.e., “an unbroken transaction of commerce with a
nonadjacent foreign country.” Unfortunately, the Court’s ensuing cases concerning the
Carmack Amendment confused as much as, or more than, they clarified.
In Norfolk Southern R.R. v. Kirby, 543 U.S. 14 (2004), the Court did not discuss
or even mention the Carmack Amendment, but its analysis affects our Carmack analysis
nonetheless. Kirby involved two overlapping bills of lading (i.e., contracts), both of
which were through bills for an import of goods from Australia to Alabama via the port
at Savannah, Georgia. The shipper (Kirby) hired an intermediary (ICC) to arrange the
carriage; ICC hired an ocean carrier (Hamburg Sud) to perform the through carriage; and
Hamburg Sud hired a rail carrier (Norfolk Southern) to complete the overland portion.
ICC issued a bill of lading directly to Kirby; Hamburg Sud issued a second bill to ICC,
without Kirby’s knowledge. Each bill contained a Clause Paramount, extending
COGSA’s terms to cover the overland portions of the carriage, and a Himalaya Clause,
extending the bills’ limitations of liability to the subcontractors. Norfolk Southern
operated under these two bills and did not issue any bill of its own. When the train
derailed, Kirby sued Norfolk Southern for breach of contract and negligence. Norfolk
Southern invoked the limitations of liability in the bills of lading. The Eleventh Circuit
held that neither bill limited Norfolk Southern’s liability to Kirby: the Hamburg Sud bill
did not bind Kirby, and the ICC bill did not reach Norfolk Southern. But the Supreme
Court disagreed and — interpreting the bills (contracts) under federal maritime law —
reversed, holding that both bills limited Norfolk Southern’s liability to Kirby. Id. at 36.
For our purposes, the most critical aspect of the opinion is the Court’s complete
omission of any reference to Carmack, which is particularly odd given that (1) it is a railcarrier-liability case concerning the defendant rail carrier’s attempt to limit its liability
to the shipper, i.e., at the very core of Carmack; (2) the Court framed its first issue as a

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conflict between federal and state law, id. at 22,19 even though Carmack fully preempts
state law concerning rail carrier liability,20 (3) at least one amicus brief — the United
States, acting on the Court’s invitation — expressly brought the potential Carmack
applicability to the Court’s attention;21 and (4) Carmack came up again at oral argument,
albeit as merely a passing reference.22 There can be little doubt that if Carmack applied
it would significantly alter the analysis and outcome (e.g., prohibiting Norfolk Southern
from limiting its liability by contract, voiding the overlapping Hamburg Sud bill of
lading, and applying its burden-shifting framework to resolve Kirby’s merits analysis).
Consequently, the most reasonable explanation for the Court’s omission is that it
determined, sub silentio, that Carmack did not apply.
Instead, the Court applied COGSA in assessing the rail carrier’s liability. The
Court acknowledged that COGSA would not apply to the rail carrier “by its terms,”
unless the parties extended it by contract, and explained that the parties had done just
that in the bills of lading:
By its terms, COGSA governs bills of lading for the carriage of goods
from the time when the goods are loaded on [to the ship] to the time
19

See Kawasaki, 130 S. Ct. at 2438-39 (“Kirby held that bill of lading provisions permissible
under COGSA can be invoked by a domestic rail carrier, despite contrary state law.”).
20

See Missouri Pacific R.R. v. Porter, 273 U.S. at 345; Adams Express, 226 U.S. at 505.

21

The United States Solicitor General, accepting the Court’s invitation to submit an amicus curiae
brief, noted the potential applicability of the Carmack Amendment and advised that “[i]t is unsettled
whether the Carmack Amendment applies to land transport under international, multimodal through bills
of lading, such as the bills in this case.” Brief of Amicus Curiae United States, Norfolk Southern R.R. v.
Kirby, 2003 WL 22762727 at *11.
The Solicitor General further suggested that Kirby may have waived the Carmack issue when it
“was not raised in the lower courts or in [its] brief in opposition.” Id. Kirby replied that it had not waived
the Carmack issue but, rather, had argued only the issues decided by the district court on summary
judgment and raised to the circuit court on interlocutory appeal. Brief of Respondent Kirby, Norfolk
Southern R.R. v. Kirby, 2003 WL 22977857 at *9 n.11.
It is questionable whether Kirby could have waived Carmack if it were, in fact, the controlling
law. But assuming, arguendo, that Kirby could and did waive Carmack, even though it applied, it is
unlikely that the Court would omit the controlling law without explanation. It is more likely that the Court
found that Carmack did not apply.
22

See Oral Argument Transcript, Norfolk Southern R.R. v. Kirby, No. 02-1028, 2004 WL
2348277 at *24. See also Wm. Baldwin, Comment, Land Versus Sea; Carmack v. COGSA: Why the
Carmack Amendment Should Not Apply to Inland Portions of Multimodal Shipments, 82 Tul. L. Rev. 731,
743 (2007) (finding it peculiar that the Kirby Court ignored the Carmack aspect of the case “even though
the issue was mentioned briefly during oral arguments”).

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when they are discharged from the ship. For that period, COGSA’s
‘package limitation’ operates as a default rule. But COGSA also gives
the option of extending its rule by contract. As COGSA permits, [ICC
and] Hamburg Sud in [their] bill[s] of lading chose to extend the
[COGSA] default rule to the entire period in which the machinery would
be under [their] responsibility, including the period of the inland
transport. [They] would not enjoy the efficiencies of the default rule if
the liability limitation [they] chose did not apply equally to all legs of the
journey for which [they] undertook responsibility. And the apparent
purpose of COGSA, to facilitate efficient contracting in contracts for
carriage by sea, would be defeated.
Id. at 29 (citations and certain quotation marks omitted). That is, to the extent that
Carmack would have applied to the rail carriage in this case, the two “extension” clauses
in the bills of lading — the Clause Paramount (contractually extending COGSA to the
overland portions of the carriage) and the Himalaya Clauses (contractually extending
COGSA to the rail carrier subcontractor) — trumped Carmack, rendered it wholly
inapplicable (to the point of omission), and replaced it with COGSA.
Put another way, parties to a maritime contract for intermodal through carriage
(i.e., ocean carriage containing a rail leg) can contract for COGSA coverage throughout,
and exclude Carmack entirely, with a properly written Clause Paramount and Himalaya
Clause. This premise begets three questions, which — not coincidentally — are the
three questions the Court answered in Kirby: (1) what is a maritime contract; (2) what
is a sufficient Himalaya Clause; and (3) can an intermediary really limit the
subcontractor’s liability to the shipper without the shipper’s knowledge or consent.
The Court emphasized its “conceptual approach” to identifying maritime
contracts: “so long as a bill of lading requires substantial carriage of goods by sea . . .
it is a maritime contract [but] . . . [i]f a bill’s sea components are insubstantial, then the
bill is not a maritime contract.” Id. at 27 (emphasis added). Most pertinent for our
purposes here, this test draws no distinction between imports and exports, and actually
rejects “a rule . . . that depends solely on geography.” Id. As written, even if the Kirby
shipment had left Alabama bound for Australia via the port at Savannah, one would
expect the Court to have employed the same test and reached the same result.

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Next, the Court held that Himalaya Clauses that are written broadly (i.e.,
covering “any” servant or contractor) must also be read broadly, to include any
foreseeable subcontractors as intended beneficiaries, thus rejecting a rule of “linguistic
specificity or privity.” Id. at 31. That is, despite the parties’ failure to specifically
include a rail carrier in the Himalaya Clause, the term “any” and the necessity of rail
carriage to complete the journey established the rail carrier’s inclusion:
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.
Id. at 32. This was a direct reversal of the Eleventh Circuit’s rule.
Finally, the Court held that the intermediary can act as the shipper’s agent for the
single, limited purpose of binding the shipper “to the liability limitations it negotiates
with downstream carriers.” Id. at 34. The shipper is not without recourse, however, as
the shipper may sue the intermediary for any loss that exceeds the limit to which the
intermediary bound the shipper. Id. at 35.
So Kirby appears to contain two of our recurring, underlying, but often unstated
premises. The first would be that Carmack does not apply to an unbroken transaction
of commerce with an overseas foreign country. The other is that a shipper may sue a
subsequent carrier under a through contract (here a subcontractor’s subcontractor),
despite the absence of express contractual privity between the shipper and that carrier.
See Kawasaki, 130 S. Ct. at 2456 n.8 (Sotomayor, J., dissenting) (“In Kirby, . . . we took
as a given that the shipper could sue the inland rail carrier, even though the shipper was
not a party to the rail carrier’s bill of lading with an intermediary.”).
In its most recent case, Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp.,
561 U.S. --, 130 S. Ct. 2433, 2438-39 (2010), the Court considered this same scenario
again — an overseas import of goods shipped under a through bill of lading — but this
time addressed the Carmack issue. This case involved an import from China to

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Oklahoma via the port at Long Beach, California.23 The shipper (Regal-Beloit) hired
an ocean carrier (Kawasaki Kisen, a.k.a. K-Line) to perform the through carriage, and
K-Line hired a rail carrier (Union Pacific R.R.) to complete the overland portion. KLine issued a through bill of lading to Regal-Beloit; Union Pacific did not issue any bill
of lading. The K-Line bill of lading contained five pertinent provisions: (1) a Himalaya
Clause, extending limitations of liability to K-Line’s subcontractors (e.g., Union
Pacific); (2) a Subcontracting Clause, authorizing K-Line to subcontract at its discretion;
(3) a Clause Paramount, extending COGSA’s terms to cover the entire journey,
including the overland portions; (4) a Choice of Law Clause, designating Japanese law;
and (5) a Forum Selection Clause, designating the Tokyo District Court.
When the train derailed in Oklahoma, Regal-Beloit sued K-Line and Union
Pacific in California state court, and the case was removed immediately to federal
district court. After the district court dismissed based on the Tokyo Forum Selection
Clause (premised on its underlying holding that the Clause Paramount extended the
COGSA bill of lading to the rail portion of the journey and the Himalaya Clause
extended it to cover Union Pacific), the Ninth Circuit reversed, holding that “the
Carmack Amendment . . . trumped the [COGSA-based contract, and its] forum- selection
clause.” Id. at 2440. On certiorari, the Court said “[t]he forum selection provision . . .
gives rise to the dispute here,” but framed the issue far more broadly as “whether
Carmack applies to the inland segment of an overseas import shipment under a through
bill of lading.” Id. And:
The instant cases present a question neither raised nor addressed in
Kirby. It is whether the terms of a through bill of lading issued abroad
by an ocean carrier can apply to the domestic part of the import’s journey
by a rail carrier, despite prohibitions or limitations in another federal
statute. That statute is known as the Carmack Amendment and it governs
the terms of bills of lading issued by domestic rail carriers. 49 U.S.C.
§ 11706(a).

23

There were actually four shippers, with four bills of lading, to four different locations in the
Midwestern United States. But because all relevant aspects are identical, we will treat this as one shipper
and one shipment.

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Id. at 2439. The Court chose not to explain why this question was left unaddressed in
Kirby, despite expressly acknowledging the similarity of the fact patterns, id. at 2438,
and asserting that “[m]uch of what the Court said in Kirby applies to the present case[],”
id. at 2442. Moreover, the Court did not pick up or begin where Kirby left off, with the
preeminence of maritime contracts.
The Court began by deconstructing the text of the Carmack statute, saying:
“Carmack divides the realm of rail carriers into three parts: (1) receiving rail carriers;
(2) delivering rail carriers; and (3) connecting rail carriers.” Id. at 2442. A “receiving
rail carrier” is the initial carrier to receive the cargo from the shipper “at the journey’s
point of origin” and the only carrier that must issue a bill of lading pursuant to
Carmack’s requirements; a “delivering rail carrier” is the last carrier to deliver the cargo;
and a “connecting carrier” is any and every carrier in between. Id. at 2443. The Court
emphasized that the term “receiving rail carrier” is a statutory term of art, as defined
above, not just “any rail carrier that in the colloquial sense ‘received’ the property from
another carrier.” Id.
The Court then pivoted on the “receiving rail carrier” term, explaining that this
term not only categorizes a particular carrier under Carmack (for purposes of identifying
the liable carrier and the carrier responsible for the bill of lading), but also determines
whether Carmack even applies to a shipment. The Court held that Carmack applies only
to shipments for which there is a receiving carrier required to issue a Carmack bill of
lading — meaning, a road or rail carrier that is both subject to STB jurisdiction and
receiving cargo from the shipper at the journey’s point of origin. Id. at 2443. No
“receiving carrier” means no Carmack bill of lading, which means no Carmack
applicability (despite the involvement of carriers that would qualify as “connecting” or
“delivering” rail carriers). Id.; see also id. at 2449 (concluding that “[b]ecause the
journey included no receiving rail carrier that had to issue bills of lading under Carmack,

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Carmack does not apply”). This was a novel approach in that no court had previously
assessed Carmack’s applicability quite this way.24
So Carmack’s threshold question is whether the carriage begins with an asdefined “receiving rail carrier”; i.e., as the Court put it, “ascertaining the shipment’s
point of origin is critical to deciding whether the shipment includes a receiving rail
carrier,” id. at 2443. The analysis, to which we have added some bracketed explanatory
language, follows:
[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 [from the shipper, and the journey begins] 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 . . . rail carrier
[subject to the jurisdiction of the STB] that receives the property [directly
from the shipper to begin the journey in the form of] domestic rail
transportation, and thus no carrier that must issue a Carmack-compliant
bill of lading. The initial carrier in that instance receives the property at
the shipment’s [overseas] point of origin[, which is not subject to the
jurisdiction of the United States STB,] for overseas multimodal import
transport, not for domestic rail transport. . . .
The present cases illustrate the operation of these principles.
Carmack did not require K Line to issue bills of lading because K Line
was not a . . . rail carrier [hence, not subject to the United States STB’s
jurisdiction]. K Line[, an ocean carrier,] obtained the cargo [from RegalBeloit, at the journey’s point of origin] in China for overseas transport
across an ocean [by ship] and then to inland destinations in the United
States [by rail, via subcontractor Union Pacific]. K Line shipped this
property under COGSA-authorized through bills of lading. That K Line
chose to use rail transport to complete one segment of the journey under
these essentially maritime contracts does not put K Line within
24

The dissent contested the majority’s point-of-origin requirement for “receiving” carriers and
insisted that Carmack applies to any carrier under the STB’s jurisdiction, essentially any road or rail carrier
in the United States:
Once a first domestic rail carrier subject to the [Surface Transportation] Board’s
jurisdiction receives property in the United States, Carmack attaches, regardless of
where the property originated. Carmack then applies to any other rail carrier subject to
the Board’s jurisdiction in the chain of transportation, no matter whether the ultimate
destination of the property is in the United States or elsewhere, for the period the carrier
is traveling within the United States.
Id. at 2451 (Sotomayor, J., dissenting; joined by Stevens and Ginsburg, JJ.).

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Carmack’s reach and thus does not require [K Line] to issue Carmack
bills of lading [as a Carmack-defined ‘receiving carrier’].
As for Union Pacific, it was also not a receiving rail carrier under
Carmack. The cargo owners conceded at oral argument that, even under
their theory, Union Pacific was a mere delivering carrier, which did not
have to issue its own Carmack bill of lading. This was a necessary
concession.[25] 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. After all, Union
Pacific was not the ‘initial carrier’ for the carriage [from the point of
origin].
Id. at 2444-45 (quotation marks and citations omitted; paragraph break and emphasis
added).26
Despite the included reference to “essentially maritime contracts” and the
associated allusion to Kirby, this Carmack-focused analysis is clearly different from
Kirby’s “conceptual approach” to maritime-contract-applicability analysis, see Kirby,
543 U.S. at 27. Under Kirby’s “conceptual approach,” one would consider the entire
journey described in the through bill as a single journey and decide whether that journey
contained “substantial” sea carriage, thereby making the through bill a “maritime
contract” and invoking the predominant interest in the uniform application of maritime
law over conflicting interests (or laws). Id. at 28-29. Reciprocally, if the journey
contained only “insubstantial” sea carriage, the through bill would be some other type
of contract, see id. at 27 (“If a bill’s sea components are insubstantial, then the bill is not
a maritime contract.”), perhaps a railroad contract if rail carriage were the predominant
portion of the journey. But under the analysis from the forgoing passage from
Kawasaki, 130 S. Ct. at 2444-45, Carmack can never apply to a through carriage
originating overseas, no matter how “insubstantial” the sea portion of the carriage might

25
26

The inclusion of this sentence is curious, and both its basis and purpose are unexplained.

It is perhaps noteworthy that the Court’s express designation of Union Pacific as the Carmackdefined “delivering” carrier did not alter the analysis, which is based entirely on the Carmack receiving
carrier.

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be or how overwhelming the rail portion of the carriage might be,27 because carriage
originating overseas could not satisfy Kawasaki’s requirement for a receiving rail carrier.
At this point in its opinion, the Court had answered the question before it (as the
Court had framed it), holding that Carmack does not apply to the inland segment of an
overseas import shipped under a through bill of lading because there is no “receiving
carrier.” And the Court announced that it “need not address the instance where goods
are received at a point in the United States for export.” Id. at 2444. The Court, however,
continued:
If a [rail] carrier like Union Pacific . . . w[ere] . . . a receiving carrier
under Carmack, this would in effect outlaw through shipments under a
single bill of lading. This is because a carriage like the one in the present
case would require two bills of lading: one that the overseas carrier (here,
K Line) issues . . . under COGSA, and a second one that the first
domestic rail carrier (here, Union Pacific) issues . . . under Carmack.
Kirby noted 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. The Court sees no reason to read
COGSA and Carmack to outlaw this efficient mode of international
shipping by requiring these journeys to have multiple bills of lading.
Id. at 2445. So, although expressly declining to decide whether Carmack applies to
overseas exports that begin with a rail carrier (i.e., a Carmack receiving rail carrier), the
Court nonetheless offered this bit of reasoning, which is as applicable here to exports as
it is to imports.
Further, the Court declared that “the interpretation of Carmack the Court now
adopts attains the most consistency between Carmack and COGSA.” Id. at 2447. The
Court’s discussion is confined to imports, but it is difficult if not impossible to

27

Consider, for example, an import from Havana, Cuba, destined for Tacoma, Washington, via
the Port of Miami. Under the “conceptual approach” in Kirby, 543 U.S. at 27, the 230-mile sea portion
would appear insubstantial in relation to the 3,300-mile overland portion, thereby signifying a railroad
contract and not a maritime contract. Because numerous cases (from Adams Express to Kirby) have held
that federal law (specifically Carmack) preempts state law, while Kirby would preclude federal maritime
law and Kawasaki would preclude Carmack, it appears that some type of federal common law would
govern this situation.

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distinguish an export situation when viewed in light of these policy arguments. Consider
this part of the discussion, which includes bracketed language relative to exports:
Applying two different bill of lading regimes to the same through
shipment would undermine COGSA and international, container-based
multimodal transport. As Kirby explained, 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.
If Carmack applied to an inland segment of a shipment [to or]
from overseas under a through bill, then one set of liability and venue
rules would apply when cargo is damaged at sea (COGSA) and another
almost always would apply when the damage occurs on land (Carmack).
Rather than making claims by cargo owners easier to resolve, a court
would have to [first] decide where the damage occurred to determine
which law applied. As a practical matter, this requirement often could
not be met; for damage to the content of containers can occur when the
contents are damaged by rough handling, seepage, or theft, at some
unknown point. Indeed, [such an] approach would seem to require rail
carriers to open containers at the port to check if damage has been done
during the sea voyage [or, reciprocally, require sea carriers to open the
containers at the port to check if damage had been done during the rail
carriage].
This disruption would undermine international
container-based transport. The Court will not read Congress’
nonsubstantive recodification of Carmack in 1978 to create such a drastic
sea change in practice in this area.
Applying Carmack’s provisions to international import [or
export] shipping transport would also undermine the purpose of COGSA,
to facilitate efficient contracting in contracts for carriage by sea. Th[is]
case[] provide[s] an apt illustration. The sophisticated cargo owner[]
here [i.e., Regal-Beloit] agreed to maritime bills of lading that applied to
the inland segment through the Himalaya Clause and authorized K Line
to subcontract for that inland segment on any terms whatsoever. [RegalBeloit] thus made the decision to select K Line as a single company for
[its] through transportation needs, rather than contracting for rail services
[itself]. The through bills provided the liability and venue rules for the
foreseeable event that the cargo was damaged during carriage. Indeed,
[Regal-Beloit] obtained separate insurance to protect against any excess
loss. . . .
...
Congress has decided to allow parties engaged in international
maritime commerce to structure their contracts, to a large extent, as they

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see fit. It has not imposed Carmack’s regime, textually and historically
limited to the carriage of goods received for domestic rail transport, onto
what are essentially maritime contracts.
Id. at 2447-49 (paragraph break inserted; editorial marks, quotation marks, and citations
omitted) (language relative to “exports” added in brackets). Clearly, the validity of these
points does not turn on whether the shipment was an import or an export.
Thus, in light of the foregoing, the rule of Kawasaki appears to be that Carmack
does not apply to the overseas shipment of goods — import or export — shipped under
a single through bill of lading. This is consistent with the Court’s prior dicta and
outcomes. See Missouri Pacific R.R. v. Porter, 273 U.S. at 345; Reider, 339 U.S. at 117;
id. at 120 (Frankfurter, J., dissenting) (“the Carmack Amendment does not apply to an
unbroken transaction of commerce with a nonadjacent foreign country”); Kirby, 543
U.S. at 29. And lower courts are coming to that same view.
C.
The courts that have considered whether Carmack applies to the inland segment
of an overseas export have come down on both sides of the question; some initially
applying Carmack based on the existence of the receiving carrier (i.e., a rail carrier that
is both subject to STB jurisdiction and receiving cargo from the shipper at the journey’s
point of origin), but more recently rejecting it based on the arguments and rationale
favoring COGSA and maritime contracts.
In the only Sixth Circuit case of significance on this issue, American Road
Service Company v. Consolidated Rail Corporation, 348 F.3d 565, 568 (6th Cir. 2003),
we held that Carmack “does not extend to a shipment under a through bill of lading
unless a domestic segment of the shipment is covered by a separate domestic bill of
lading.” Because this opinion concerned an import, predated Kirby and Kawasaki, and
included reasoning that has since been rejected, it is of limited value for our present
purposes, even though it is generally consistent with Kirby and Kawasaki.

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Since Kawasaki, the Southern District of New York has issued conflicting
opinions on Carmack’s applicability to the rail leg of an overseas export under a through
bill. In American Home Assurance Co. v. Panalpina, Inc., No. 07-cv-10947, 2011 WL
666388 (S.D.N.Y. Feb. 6, 2011), the court considered an export of forklifts, from Illinois
to Australia via a California port, under a single through bill (containing a Himalaya
Clause, a Clause Paramount, and COGSA coverage). When the train derailed, the
shipper sued the rail carrier (BNSF) and the court relied on Kawasaki’s “receiving rail
carrier” analysis, holding that “Carmack applies when the first rail carrier in the chain
of transportation accept[s] the cargo at the shipment’s point of origin” and that “Carmack
provides the default legal regime governing the inland leg of a multimodal shipment
originating within the United States and traveling on a through bill of lading.” Id. at *4.
This was not appealed. In Hartford Fire Insurance Co. v. Expeditors International, No.
10-cv-5643, 2012 WL 2861433 (S.D.N.Y. July 9, 2012), the court considered an export
of solar panels, from Massachusetts to France via a New York port, under a single
through bill, and granted summary judgment to a connecting carrier based on
Kawasaki’s receiving-carrier analysis. The court added some reasons for rejecting
Carmack:
There are two additional reasons why Carmack does not apply in
this instance.
First, [the] plaintiff sued based upon the Bill of Lading issued by
[the receiving carrier] and thus, is bound by its terms. The Bill of Lading
clearly states that COGSA applies to [the receiving carrier] and its
subcontractors.
Second, . . . Congress has not imposed Carmack’s regime onto
what are essentially maritime contracts. Where 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. The Bill of Lading —
and the undisputed facts regarding the transport — evidence that a
substantial part [of the contract] depended [on] carriage of the goods to
France via sea.
For all of those reasons, the [c]ourt finds that COGSA, not the
Carmack Amendment, applies to the question of liability before the
[c]ourt.

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Id. at *6 (quotation marks and citations omitted). This was not appealed. Finally, in
Royal & Sun Alliance Insurance v. Service Transfer, Inc., No. 12-cv-97, 2012 WL
6028991 (S.D.N.Y. Dec. 4, 2012), the court considered the export of human plasma,
from Kentucky to Austria via a Virginia port, under a single through bill, and rejected
Carmack applicability even though the initial carrier (a truck, not a train) was subject to
STB jurisdiction and putatively subject to Carmack, explaining:
Being the first carrier does not necessarily make [initial-carrier]
STI the ‘receiving’ carrier for the purposes of Carmack coverage.
Instead, the ‘receiving’ carrier is the ‘principal’ party to the contract
governing the subject shipment and is responsible for the whole carriage.
In other words, it is the carrier which holds unity of responsibility for the
transportation to [the] destination. . . .
...
Here, it is undisputed that STI was not the carrier responsible for
the entire course of the shipment. [The shipper] signed the single
Waybill and paid [the coordinating carrier] a single ‘all-in’ through rate
to handle the shipment of goods from Kentucky through to its final
destination in Austria. Therefore, STI did not function as a ‘receiving’
carrier, and the Carmack Amendment does not apply.
This outcome is consistent with the Supreme Court’s emphasis on
efficiency in international maritime trade.
Id. at *4 (footnote and certain quotation marks omitted) (citing Missouri K & T v. Ward,
244 U.S. at 388, and Mexican Light & Power, 331 U.S. at 734). While this proposition
is somewhat difficult to reconcile with Kawasaki, the court did rely on Kawasaki for a
follow-up (broader) proposition:
Although the Supreme Court has not addressed the present
circumstances, where goods are received at a point in the United States
for export, the same reasoning [the Court used in rejecting Carmack in
Kawasaki] applies to those contracts which create a single transaction for
shipments across inland segments to overseas destinations.
Id. This case was not appealed. Based on these cases, the Southern District of New
York seems to have done a turnabout on this, from applying Carmack originally to now
rejecting it outright.

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In Norfolk Southern Railway v. Sun Chemical, 735 S.E.2d 19 (Ga. Ct. App.
2012), the Georgia Court of Appeals considered an export of ink from Kentucky to
Brazil via a port in Savannah, Georgia, under a through bill issued by the ocean carrier
(subcontracting the rail carrier, Norfolk Southern). When the train derailed, Sun
Chemical sued Norfolk Southern under Carmack. The Georgia court relied on Kirby to
construe the bill of lading as a maritime contract, thereby precluding Carmack. Id. at 27.
The court also opined that while Kawasaki had expressly excluded the export scenario
from its decision, it had nonetheless “also answered the broader question” and rejected
Carmack applicability “in a case involving a through bill of lading for land and sea
transit of goods, [in which] a domestic rail carrier not in privity with the owner of the
goods . . . ha[d] made alternate contractual arrangements with the owner’s agent.” Id.
at 25. Finally, the court discussed in some detail the aforementioned cases from the
Southern District of New York, concluding:
We think that the Southern District of New York’s more recent decision
in Expeditors implements Kirby’s and Kawasaki Kisen’s objectives of
promoting efficient maritime contracting more effectively than the earlier
Panalpina decision, and that federal law requires us to uphold the
bargained-for terms of the through bill of lading before us, including its
binding of Sun to its downstream agent Riss’s refusal of the Carmack
liability offered by Norfolk Southern.
Id. at 27. The end result, then, was the denial of Carmack applicability in this export
case.
D.
This brings our attention back to the predominant question in the present case.
Does Carmack apply to the road and rail legs of an overseas export shipped under a
single through bill? Although the Supreme Court left this question unanswered, it
nonetheless provided guidance for future decisions, from which the prevailing trend is
that Carmack does not apply to this situation.

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Under the Kirby “conceptual approach,” 543 U.S. at 27-29, we must first
determine whether the shipping contract (bill of lading) at issue is a maritime contract28
and, if so, enforce that contract under maritime law,29 over any conflicting interests or
laws. Here, the Service Contract governs the carriage from Harrodsburg to Tainan, a
journey which contains substantial sea carriage,30 making the Service Contract a
“maritime contract.” See id. As a maritime contract, it would effectively preempt any
Carmack applicability and instead govern by its own terms. Id. There can be little doubt
that this theory comports with Kirby’s grand view, in general, of maritime contracts.
Any doubt would come from Kawasaki, particularly if we invert Kawasaki’s
holding mechanistically to fit it to our facts, fail to follow it all the way through, and
perhaps add language that is not actually there. This presents a beguiling conclusion to
which at least one court appears to have leapt, while overlooking the logical chasm
beneath. See Panalpina, 2011 WL 666388 at *4.
Under the Kawasaki “receiving-carrier approach,” 130 S. Ct. at 2442-45, we
determine whether the carriage begins with a Carmack-defined “receiving carrier”31 and,
if not, then disregard Carmack and enforce the contract on its terms. See also id. at 2449
(“Because the journey included no receiving rail carrier that had to issue bills of lading
under Carmack, Carmack does not apply.”). But what of our present facts — when the
28

“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.” Kirby, 543 U.S. at 27
(emphasis added).
29

The application of federal maritime law actually requires a “two-step analysis.” Kirby,
543 U.S. at 23. In the first step, the contract must be a “maritime contract.” Id. at 23-27. In the second,
the case must not “so implicate local interests as to beckon interpretation by state law.” Id. at 27-29.
There are no local interests in the present case, certainly none more pervasive than those in Kirby, and
therefore this second step is easily satisfied here.
30

The sea carriage portion of this journey, from Tacoma to Kaohsiung, is approximately 6,225
miles across the Pacific Ocean, which is undoubtedly “substantial.” This is not in dispute, nor is it open
to reasonable dispute. For comparison purposes, the overland portions of this journey total approximately
2,500 miles. Having said that, we do not read Kirby as holding, nor do we hold here, that distances (alone
or relative) are determinative of whether the sea portion of the journey is “substantial”; Kirby leaves the
definition of “substantial” open to future consideration.
31

Recall that a Carmack-defined “receiving carrier” is a road or rail carrier that is both subject
to the jurisdiction of the United States Surface Transportation Board and receiving the cargo from the
shipper at the journey’s point of origin, such that it is required under Carmack to issue a Carmack bill of
lading. Kawasaki, 130 S. Ct. at 2443.

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carriage does begin with a Carmack-defined receiving carrier? It is tempting simply to
say that Kawasaki requires the result that Carmack does apply when carriage does begin
with a Carmack-defined receiving carrier. But Kawasaki does not hold that, expressly
or otherwise. In fact, Kawasaki expressly declined to so hold. Id. at 2444 (“Today’s
decision need not address the instance where goods are received at a point in the United
States for export.”). The opinion does state that “for Carmack’s provisions to apply the
journey must begin with a receiving rail carrier,” id., but even that is actually a limitation
on Carmack, not an assertion of Carmack applicability. Following the Kawasaki opinion
all the way through — including the discussion of Kirby and COGSA — the inverse of
the holding is almost as clear as the holding, albeit not as easily stated as a bright-line
rule: when the journey does begin with a Carmack-defined receiving carrier, Carmack
may still not apply to a multimodal through bill with a substantial sea component, for all
the reasons set out in Kirby, such as the practical benefits of through shipments under
a single bill of lading, the nuisance or dilemma that a disputed question of fact (i.e., the
actual location of the loss or damage) could dictate the determination of the governing
law concerning liability or venue, the inefficiencies of encouraging carriers to open the
containers at transfer, and the power of congressional intent in drafting COGSA. Id. at
2447-49.
Here, the Service Contract governs the carriage from Harrodsburg to Tainan, a
journey which does begin with a Carmack-defined receiving road carrier, but which also
implicates all of the Kirby-based concerns articulated in Kawasaki. Because this is a
through carriage under a single contract, applying Carmack to the road and rail
portions32 would cut the through bill into separate components (land and sea),
effectively “outlawing” the use of the through bill. See Kawasaki, 130 S. Ct. at 2445.
In this case, the containers never made it on to the ship, so the court was not presented
with a contested question of fact concerning the location of the damage (land or sea) as
a predicate to its foremost legal decision, but this would have been a significant issue if
a Kaohsiung port employee had discovered the damage rather than the Tacoma
32

Note that Carmack, by its own terms, applies to road and rail and would not apply to the
oversea portion.

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employee. Even under the present facts, the Carriers dwelled on CNA’s inability to
prove where the damage actually occurred.33 And, just as Kirby and Kawasaki portend,
under a scheme in which venue, choice of law, liability, etc., depend on the particular
location of the loss or damage, the carriers proceeding with this on-going Service
Contract would be well advised to open the sealed containers at transfer to protect their
individual interests. Consequently, applying Carmack to the road and rail portions of
this single, intermodal journey would undermine the benefits that Congress sought under
COGSA and the parties sought in the Service Contract. See id. at 2449 (“Congress has
decided to allow parties engaged in international maritime commerce to structure their
contracts, to a large extent, as they see fit.”).
As a result, based on the foregoing analysis, considered in light of the
aggregation of Supreme Court case law, particularly Kirby and Kawasaki, as well as our
general agreement with the post-Kawasaki federal and state court decisions, we hold that
the Carmack Amendment does not apply to the road or rail leg of an intermodal overseas
export shipped under a single through bill of lading.34 Therefore, the district court erred
by applying Carmack in this case as it did.
We also recognize, however, that the district court’s initial decision in March
2009 was prior to Kawasaki, and its post-Kawasaki decision in September 2012 was
without the benefit of the developing decisions from other courts.35 While we must
nonetheless conclude that the district court’s decision was in error, we will also consider,

33

In fact, the Carriers’ begin their appellate brief to this court with these two sentences: “This
case is about a shipment of freight that was damaged at some point in transit. It has not been established
how the freight was damaged, where the freight was damaged, or exactly when it was damaged.” And this
is after a jury trial.
34

In the district court, CNA had asserted, and the court had relied upon, Carmack as the basis for
federal jurisdiction. But in its complaint, CNA also properly asserted diversity jurisdiction. 28 U.S.C.
§ 1332. Therefore, the inapplicability of Carmack does not divest this case of federal subject matter
jurisdiction. And we would perhaps be remiss if we overlooked the fact that, because this is a maritime
contract, federal jurisdiction exists pursuant to federal maritime law. See Wilburn Boat Co. v. Fireman’s
Fund Ins. Co., 348 U.S. 310, 313 (1955) (“Since the [contract] here sued on is a maritime contract the
Admiralty Clause of the Constitution brings it within federal jurisdiction.”).
35

Note, for example, how the Southern District of New York did a complete reversal, from
applying Carmack in February 2011, Panalpina, 2011 WL 666388, to rejecting it in December 2012, Royal
& Sun, 2012 WL 6028991.

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based on the peculiar facts and circumstances of this case, whether some portion of that
error was ultimately harmless. That is, whether it would be prudent to affirm some
portion of the judgment in the context of a proper analysis.
III.
In its complaint, CNA asserted three causes of action, purportedly arising under
Carmack: breach of contract, bailment, and negligence. In ruling on the summary
judgment motions, the district court held that because Carmack applied, it encompassed
and preempted these separate causes of action and the case would proceed as a single
Carmack cause of action.36 As explained in the foregoing section, this was in error;
Carmack did not apply by its own terms. Instead, the district court should have
disregarded Carmack and enforced the Service Contract on its terms.37
Meanwhile, because it had applied Carmack and preempted the individual causes
of action, the district court did not address the Carriers’ motions for summary judgment
on CNA’s tort-based causes of action, bailment and negligence. The Carriers had argued
that CNA could not maintain causes of action in tort because their duties arose solely by
contract and, therefore, inasmuch as the Service Contract controlled the case, the only
viable claim was for breach of that contract.
Under either federal maritime law or New York law,38 a plaintiff cannot maintain
a tort cause of action based on a defendant’s breach of duties that arose solely out of

36

See footnotes 12, 13, and 14, supra, for the background and particulars of this decision. See
also Section II.A, supra, for Carmack’s burden-shifting framework. At trial, CNA proved its Carmack
prima facie case (i.e., the cargo was tendered in good condition, it arrived in damaged condition, and actual
damages were quantified), so the burden shifted to the Carriers to demonstrate one of the five excepted
causes. The Carriers attempted to prove that the damage was due to Corning’s “improper” stowing and
packing. CNA rebutted this contention and the jury found for CNA, awarding $498,509.91 in damages.
The court awarded post-judgment interest, but denied pre-judgment interest.
37

One term in particular bears mention and some clarification. The Choice of Law provision, §
13.A, dictates that New York state law and federal law govern. Of course, we just established in Section
II.D., supra, that the Service Contract is a maritime contract pursuant to Kirby, 543 U.S. at 27-29, and
therefore maritime law governs here. But we relegate this discrepancy to a footnote because “New York
law . . . also requires application of federal maritime law to maritime cases.” Sundance Cruises Corp. v.
Am. Bureau of Shipping, 7 F.3d 1077, 1081 (2d Cir. 1993).
38

The Service Contract specifies either federal or New York law in its choice of law provision.

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their contract. Int’l Ore & Fertilizer Corp. v. SGS Control Servs., Inc., 38 F.3d 1279,
1283 (2d Cir. 1994) (citing East River S.S. Corp. v. Transam. Delaval Inc., 476 U.S.
858, 872-73 (1986) (federal maritime), and Clark-Fitzpatrick, Inc. v. Long Island R.R.,
516 N.E.2d 190 (N.Y. 1987) (New York)); see also Fireman’s Fund Ins. Co. v. Orient
Overseas Container Line Ltd., 763 N.Y.S.2d 427, 432 (N.Y. Civ. Ct. 2003). The
plaintiff’s cause of action against such defendant lies in breach of contract.
It is undisputed here that the Carriers’ duties arose out of the Service Contract;
this case contains no duty (nor breach of any duty) that was not anticipated by and
included in the Service Contract. Consequently, we conclude as a matter of law that
CNA cannot maintain any actions in bailment or negligence against the Carriers; its
cause of action is limited to breach of the Service Contract. Therefore, the district
court’s denial of these tort causes of action — effectively dismissing them — was
ultimately correct and we can affirm this part of the judgment. See Schlaud v. Snyder,
717 F.3d 451, 459 n.6 (6th Cir. 2013) (noting that we may affirm on any basis supported
by the record).
CNA’s sole colorable cause of action is for breach of the Service Contract. Had
the district court denied Carmack applicability and dismissed the tort claims, it would
have been left with CNA’s breach of contract claim and the Carriers’ defenses thereto.
It is noteworthy that the only two parties to the Service Contract are CNA39 as the
shipper and Hyundai as the carrier. The rail carriers are unnamed “subcontractors” who
neither negotiated nor signed the Service Contract. Due to their differing circumstances,
we analyze the breach of contract claims against each differently.40

39

Because CNA, as subrogee, is prosecuting this case as if it were Corning, we will refer to CNA
as the merchant- or shipper-side party to the Service Contract, even though Corning is the actual party to
the contract.
40

Throughout the proceedings, the Carriers have had joint representation. More than once, the
district court asked counsel whether separate representation was warranted. Each time, counsel (and the
Carriers’ representatives) answered that the co-defense posed no conflict of interest and that they were
satisfied with the joint representation. Consequently, we proceed from the premise that the Carriers have
waived any contention that their individual interests are inconsistent or that their defenses diverge in any
significant way. The Carriers received the defense they wanted.

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A.
The rail carriers, Norfolk Southern and BNSF, are Hyundai’s “subcontractors”;
they are not parties to the Service Contract and, therefore, not in privity with CNA. But,
as explained in Kirby, 543 U.S. at 32, because the journey contained substantial overland
carriage, CNA and Hyundai “must have anticipated that a land carrier’s services would
be necessary for the contract’s performance,” thereby making Norfolk Southern and
BNSF “intended beneficiaries.”
“[T]o the extent a third-party qualifies as an intended beneficiary, it may enforce
contract terms in its favor.” In re M/V Rickmers Genoa Litig., 622 F. Supp. 2d 56, 72
(S.D.N.Y. 2009) (citing Restatement 2nd of Contracts § 304) (footnote omitted). Thus,
in Kirby, the rail carrier’s status as an intended beneficiary (along with the “broadly
written Himalaya Clause” in that case) allowed that rail carrier to invoke that contracts’
limitation of liability clauses. Kirby, 543 U.S. at 32.
But, more to the point here, “qualifying as an intended beneficiary in no way
creates contractual obligations on the part of the intended beneficiary.” In re M/V
Rickmers, 622 F. Supp. 2d at 72 (emphasis in original) (citing Stein Hall & Co. v. S.S.
Concordia Viking, 494 F.2d 287, 291 (2d Cir. 1974) (“While the carrier and the shipper
can extend certain contractual protections, such as the limitation on damages, to . . .
third-party beneficiaries, they cannot contract to bind an unconsenting third party.”)).
The “methods for actually binding an intended beneficiary to a bill of lading are
[1] showing that the third party exhibited acceptance to be so bound and [2] through an
agency relationship with one of the contracting parties. Absent such a showing,
contractual obligations cannot be imposed on an intended beneficiary.” Id. (internal
citation omitted).
Neither Norfolk Southern nor BNSF exhibited any agreement to be bound by the
Service Contract (or the Hyundai Regular Form Bill of Lading incorporated therein).
To the contrary, each contracted with Hyundai independently, under its own standard
transportation agreement. Moreover, the Service Contract, § 4.A, expressly disclaims
an agency relationship that would allow Hyundai to act as an agent on behalf of CNA,

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asserting instead that “[Hyundai] shall be deemed an independent contractor with respect
to [CNA].”41 To be sure, Kirby, 543 U.S. at 33-34, holds that an intermediary (such as
Hyundai) necessarily acts as an agent for the shipper (here, CNA) in relation to the
subcontractors (here, Norfolk Southern and BNSF), but not “in the classic sense.”
Rather, the intermediary acts as the shipper’s “agent for a single, limited purpose: when
[the intermediary] contracts with subsequent carriers for limitation on liability.” Id. at
34 (emphasis in original). That is, Hyundai was not CNA’s agent for purposes of
binding Norfolk Southern or BNSF.42
More importantly, Kirby, 543 U.S. at 31, held 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.” Here, the Service Contract evinces the parties’ clear
intent not to bind subcontractors (such as Norfolk Southern and BNSF) to CNA, nor to
hold them directly liable to CNA for damage to the cargo. As just mentioned, the
Service Contract deems Hyundai an independent contractor, and reiterates that “nothing
herein contained shall be construed to be inconsistent with that relationship or status.”
This intent to bind only Hyundai is also evident in the Form Bill of Lading. Section 4(B)
allows Hyundai to subcontract at its complete discretion. In Section 4(C), “[Corning]
warrants that no claim shall be made against any of [Hyundai]’s Subcontractors or any
Subcontractor’s Subcontractor.”

And Section 5(B)(2) specifically provides for

Hyundai’s liability for damage to the cargo by a subcontractor. Considering these terms

41

Of course, merely labeling Hyundai an “independent contractor” does not necessarily make it
so. See, e.g., Langfitt v. Fed. Marine Terminals, Inc., 647 F.3d 1116, 1121 (11th Cir. 2011) (discussing
the factors commonly employed to distinguish an agent from an independent contractor). Corning hired
Hyundai to conduct the entire carriage, paid Hyundai a flat rate, and had no control over any aspect of
Hyundai’s performance. Hyundai had complete control over the manner and means of performance; the
selection, terms, payment, and right to terminate subcontractors; its equipment and materials; and the
opportunity to profit. Corning hired Hyundai to perform the predetermined carriage and paid the rate that
Hyundai charged for completion of that carriage. This was not an agency relationship.
42

In Section II.B, supra, we acknowledged that the Supreme Court in Missouri, K & T, 244 U.S.
at 387, treated the initial carrier as an agent for the subsequent carriers to bind them to the contract with
the shipper, and accordingly upheld the shipper’s lawsuit against them. But that was a Carmack case —
and an outlier in the Carmack line of cases at that — while this is a straight breach of contract without
Carmack considerations. Given the arm’s length transactions between the rail carriers and Hyundai,
including the rail carriers’ transportation agreements on which their relationships are based, there is no
basis to hold that Hyundai was acting as an agent for the rail carriers in this case.

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in this Service Contract as being indicative of the intent of the parties, we find that these
subcontractors are not directly liable to CNA.
We conclude as a matter of law that CNA cannot maintain a breach of contract
action against the rail carrier defendants, Norfolk Southern and BNSF, in this case. The
district court erred by denying their motion for summary judgment on this ground. We
reverse the district court’s decision and vacate the ensuing judgments against these two
defendants, Norfolk Southern and BNSF.
B.
Hyundai is a party to the Service Contract and is in privity with CNA.43 This is
a straight forward breach-of-contract action in which we analyze the Service Contract,
pursuant to federal maritime law, to determine the parties’ agreed-upon liability scheme
as applied to the present circumstances. For example, the contracts at issue in Kirby
contained “broadly written” Clauses Paramount and Himalaya Clauses (as specifically
worded in those contracts) that excluded Carmack, extended COGSA throughout the
carriage, and even extended the contracts’ provisions to the subcontractor’s
subcontractor despite the absence of contractual privity. Correspondingly, we must
consider the specific clauses as written in the Service Contract and apply them
appropriately.
We consider first the Clause Paramount, Form Bill of Lading § 2(B), which
extends COGSA inland (beyond the tackles) “when the goods are in the custody of
[Hyundai].” The district court held that because the cargo was in the custody of a rail
carrier subcontractor when damaged, the Clause Paramount did not apply, inasmuch as,

43

Again, because CNA, as subrogee, is prosecuting this case as if it were Corning, we refer to
CNA as the merchant- or shipper-side party to the Service Contract, even though Corning is the actual
party to the contract.

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by its terms, it applies only to damage occurring to cargo in Hyundai’s custody.44 The
district court was correct in this interpretation.
We are further persuaded that this is correct upon consideration of the next
provision at issue, which provides for Hyundai’s liability when the goods are in the
custody of a subcontractor:
[W]ith respect to . . . damage caused during the handling, storage, or
carriage of the Goods by [Hyundai]’s Subcontractor, such liability shall
be to the extent to which such Subcontractor would have been liable to
[CNA] if it had made a direct and separate contract with [CNA] in
respect of such handling, storage, or carriage.
Form Bill of Lading § 5(B)(2). That is, Hyundai proposed (in its Regular Form Bill of
Lading), and the parties agreed to, a separate scheme to govern Hyundai’s liability for
damage to the cargo under circumstances in which a subcontractor, such as a road or rail
carrier, damaged the goods.45
So pursuant to this provision, Hyundai is liable “to the extent to which [a road
or rail carrier] would have been liable to [the shipper] if it had made a direct and separate
contract with [the shipper]” for that carrier’s portion of the journey. Of course, if a road
or rail carrier made a separate contract with the shipper for carriage, it would be subject
to Carmack. See, e.g., Reider, 339 U.S. at 117. Under Carmack, it would be unable to
limit its liability by contract.46 49 U.S.C. § 11706(c)(1); Adams Express, 226 U.S. at
44

In so doing, the district court further concluded as a matter of contract interpretation that the
Service Contract’s limitation-of-liability provisions did not apply in the present circumstances. That is,
even though the district court applied Carmack as the overriding law and CNA had moved to deny the
limitation of liability on the basis that Carmack prohibits such limitations, see 49 U.S.C. § 11706(c)(1),
the district court did not base this decision on Carmack.
45

At oral argument, the Carriers’ counsel speculated that this provision was merely a means by
which CNA could sue the subcontractors directly, thus governing the subcontractors’ liability. We do not
read this provision that way. Moreover, because, in § 4(C), “[CNA] warrant[ed] that no claim shall be
made against any of [Hyundai]’s Subcontractors,” we must conclude that § 5(B)(2) governs Hyundai’s
liability for the subcontractors’ conduct.
46

Certainly, a rail carrier may avoid Carmack liability for container carriage if it offers Carmack
coverage to the shipper and the shipper declines. See Babcock & Wilcox, 557 F.3d at 141 n.6 (relying on
49 U.S.C. § 10502(e) and § 11706). Because Hyundai stands in the shoes of the rail carrier here, Hyundai
could have either been compensated for or avoided Carmack liability by offering Carmack coverage to the
shipper, Corning/CNA. But because Hyundai did not offer any Carmack coverage option, Hyundai cannot
avoid Carmack liability on this basis. Moreover, the district court determined as a matter of contract

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504. And the court would ultimately determine the liability pursuant to Carmack’s
burden-shifting framework. See Missouri Pac. R.R., 377 U.S. at 137-38.
Based on the foregoing, we conclude as a matter of law and pursuant to the terms
of the Service Contract, that CNA’s claim for breach of contract by Hyundai for
“damage caused during the handling, storage, or carriage of the Goods by [Hyundai]’s
Subcontractor” — be it DHL, Norfolk Southern, BNSF, or TMBR — must be resolved
under Carmack. Because the district court proceeded on the theory, which the jury later
confirmed by its verdict, that the damage occurred while the cargo was in the custody
of either Norfolk Southern or BNSF, the court was ultimately correct in its application
of Carmack to determine Hyundai’s liability and we can affirm this portion of the
decision. See Schlaud, 717 F.3d at 459 n.6 (we may affirm on any basis supported by
the record).
While the district court erred by applying Carmack to this case as a general
principle, that error was ultimately harmless because the court would have properly
applied Carmack under a straight forward breach-of-contract action. See Fed. R. Civ.
P. 61 (instructing that “[a]t every stage of the proceeding, the court must disregard all
errors and defects that do not affect any party’s substantial rights”); 28 U.S.C. § 2111
(“On the hearing of any appeal or writ of certiorari in any case, the court shall give
judgment after an examination of the record without regard to errors or defects which
do not affect the substantial rights of the parties.”); see also Rosencrantz v. Lafler, 568
F.3d 577, 588-92 (6th Cir. 2009) (discussing harmless error). We affirm the district
court’s judgment against Hyundai, in favor of CNA, on the jury award of $498,509.91
in damages.
IV.
CNA contends that the district court erred by denying its motion for prejudgment
interest. In its denial, the district court’s stated rationale was that “[t]he verdict was

interpretation that the Service Contract’s limitations of liability did not apply to the present circumstances,
regardless of Carmack. We agree and affirm that portion of the district court’s decision.

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rendered in this case on the Carmack Amendment claim only [and] [t]he Carmack
Amendment does not specifically provide for the recovery of pre-judgment interest . .
. .” As explained in the foregoing sections, the district court erred by applying Carmack
to this case as a general principle; this case is properly decided on the Service Contract
and the applications of the pertinent provisions therein. Therefore, the decision is not
based on “the Carmack Amendment claim only,” and this aspect of the district court’s
rationale for denying prejudgment interest is insupportable. The Service Contract
controls.
We are also unpersuaded by the court’s additional rationale that “this is not a
case in which one party has had the use of the other party’s money.” By failing to
reimburse Corning for the cost of the damaged glass at the time of the accident (and
thereby forcing Corning to file a claim with CNA), Hyundai did have the use of
Corning’s (or CNA’s) money during that time. Having said that, the award of
prejudgment interest is a matter of discretion, see Werner Enters. v. Westwind Maritime
Int’l, 554 F.3d 1319, 1328 (11th Cir. 2009), and additional factors may affect the
determination.
We necessarily remand this case for reconsideration of the question of
prejudgment interest in light of the pertinent provisions of the Service Contract as
applied to the present decision. We also direct the court’s attention to In re ClassicStar
Mare Lease Litigation, 727 F.3d 473, 494-97 (6th Cir. 2013), which amplifies our
current view of prejudgment interest.
V.
Based on the foregoing, we AFFIRM the judgment against defendant Hyundai,
REVERSE and VACATE the judgments against defendants Norfolk Southern and
BNSF, and REMAND this case to the district court so that it may reconsider the
question of prejudgment interest.

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_______________________
DISSENTING IN PART
_______________________
KATHLEEN M. O’MALLEY, Circuit Judge, dissenting in part. I agree with
most of the findings in the thorough and thoughtful majority opinion. Specifically, I
agree that the Carmack Amendment does not apply to the road or rail leg of an
intermodal overseas export shipped under a single through bill of lading. I also agree
that CNA cannot maintain actions in bailment or negligence against the carriers, and that
its cause of action is limited to a claim for breach of the Service Contract. Finally, I
agree that CNA’s breach of contract action is available only against Hyundai, not the rail
carrier defendants.

And, I agree that Hyundai is liable, by contract, for the

subcontractor’s conduct. It is the next conclusion—the one set forth in section III.B. of
the majority opinion—with which I cannot agree.
I do not believe that Hyundai’s contractual liability to Corning (and, hence to
CNA) “must be resolved under Carmack” as the majority holds. Instead, because
Hyundai was authorized as Corning’s agent to limit the subcontractor’s liability, and did
so by and on behalf of Corning, I believe Hyundai’s liability is limited to that same
extent. Because I believe the majority misreads Form Bill of Lading § 5(B)(2) and
improperly construes the extent of Hyundai’s liability, I respectfully dissent from the
majority’s conclusion that Hyundai is liable to CNA to the full extent of the liability
specified in the Carmack Amendment.
Form Bill of Lading § 5(B)(2) states that, “with respect to . . . damage caused
during the handling, storage, or carriage of the Goods by [Hyundai]’s Subcontractor,
such liability shall be to the extent to which such Subcontractor would have been liable
to [Corning] if it had made a direct and separate contract with [Corning] in respect of
such handling, storage, or carriage.”1 Based on this provision, the majority finds
Hyundai liable to CNA to the extent of liability imposed by the Carmack Amendment.
The majority finds that, if the rail carriers had separately and directly contracted with
1

The Service Contract incorporates Hyundai’s Form Bill of Lading.

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Corning, those contracts would have been subject to the Carmack Amendment because
the subcontractors are domestic rail carriers. Maj. Op. at 48–49. As such, the majority
concludes that these rail carriers would have been unable to limit their liability by
contract in the absence of an express waiver by Corning, and that Hyundai also may not
limit its pass-through liability. Id. The majority reaches this conclusion based on the
proposition that “a rail carrier may avoid Carmack liability for container carriage if it
offers Carmack coverage to the shipper and the shipper declines.” Id. at 51 n.46 (citation
omitted). Because it finds that “Hyundai stands in the shoes of the rail carrier here,” the
majority concludes that Hyundai cannot avoid Carmack liability on this basis because
“Hyundai did not offer [Corning] any Carmack coverage option.” Id. What the majority
fails to recognize, however, is that the rail carriers did offer Carmack coverage to
Corning, through its agent, and that Corning affirmatively waived that coverage. While
Hyundai must fulfill the carrier’s obligations to Corning, it actually stood in Corning’s
shoes for purposes of defining the scope of that liability.
The Service Contract states that “[p]arties agree to allow [Hyundai] to contract
or establish agency as may be necessary to provide inland transportation or door to door
services in international commerce if called for in the rates spelled out in Appendix C.”
Service Contract, RE:78-6, Page ID #496 at ¶ 2(A) (emphasis added). Then, section
4(B) of the Form Bill of Lading provides Hyundai with the authority to “subcontract on
any terms the whole or any part of the handling, storage[,] or carriage of the Goods and
any duties undertaken by [Hyundai] in relation to the Goods.” (emphasis added).
Further, Form Bill of Lading § 5(A) states that “[Hyundai], in making arrangements for
transportation . . . or handling before loading or after discharge acts only as [Corning’s]
agent and assumes no responsibility therefor.” These provisions, taken together, allowed
Hyundai to establish agency for purposes of entering into agreements with other carriers
on any terms. And Hyundai, acting as Corning’s agent as outlined in section 5(A),
proceeded to subcontract the rail portions of the shipment. Hyundai, fully within its
authority, then refused full Carmack liability from the subcontractors, and, accordingly,
limited the liability of the subcontractors. Consequently, the analysis should end here,
as we know the amount of liability Corning set for the subcontractors through its agent,

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Hyundai. Although Hyundai is ultimately accountable for that liability, it was also
authorized to limit its terms.
While the majority points out that Hyundai is defined at places in the Service
Contract as an independent contractor, nothing precluded Hyundai from acting as both
an independent contractor and an agent, depending upon the activity in question.
“[N]othing about the title independent contractor invariably precludes someone from
being an agent under appropriate circumstances.” United States v. Hudson, 491 F.3d 590,
595 (6th Cir. 2007) (citing Restatement (Second) of Agency § 2(3) (“An independent
contractor . . . may or may not be an agent.”)); Eyerman v. Mary Kay Cosmetics, Inc.,
967 F.2d 213, 219 (6th Cir. 1992) (noting that “a person may be both an independent
contractor and an agent”). Thus, the fact that Hyundai acted as an independent
contractor who could not bind the carriers to a direct contract with Corning—pursuant
to its express authorization to do so in both the Service Contract and the Form Bill of
Lading—does not conflict with Hyundai’s ability to act as the agent of Corning for
purposes of limiting the scope of the carriers’ liability. Hyundai can and did properly
limit the subcontractor’s liability on behalf of Corning.2
In this regard, I specifically disagree with the majority’s conclusion that Form
Bill of Lading § 5(B)(2) placed Hyundai in the “shoes” of the rail carriers. Section
5(B)(2) states that Hyundai’s “liability shall be to the extent to which the Subcontractor
would have been liable to [Corning] if it had made a direct and separate contract with
[Corning] in respect of such handling, storage, or carriage.” (emphases added). This
provision does not actually place Hyundai in the subcontractor’s shoes, it only holds
Hyundai liable to the extent the subcontractor would have been liable to Corning under
such circumstances. As such, the hypothetical analysis called for under § 5(B)(2) should
not consider whether Hyundai itself offered Corning any Carmack coverage option; it
should look to what the subcontractor offered to Corning through its agent. It appears,
moreover, that the purpose of this provision was to assist Hyundai in segmenting liability
2

While it may seem odd that Corning would give Hyundai the authority to limit its own liability
by limiting that of the carriers, that is precisely the arrangement Corning chose. Notably, this is consistent
with Corning’s overall choices—waiving liability in return for lower shipping charges and choosing,
instead, to buy insurance from CNA to cover any damages to the goods transported.

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among the subcontractors in circumstances where the parties could assess the damage
to the goods against a particular subcontractor; the majority reads far too much into it.
For these reasons, I believe that Hyundai is contractually liable to CNA to the
extent, and only to the extent, acting on behalf of Corning, it held the carriers liable: to
the tune of $10,000.00, and no more. See BNSF Rules, RE: 79-12 at Item 64, Page ID
#769; NS Rules, RE: 78-14 at Item 8.6.2, Page ID #591. I note, moreover, that, even if
we were to assume that Hyundai did not act as Corning’s agent when limiting the
carriers’ liability, we could not, as the majority does, assume that Corning would not
have waived Carmack liability if it had contracted directly with the rail carriers. I
believe that we would need to remand for a determination of the amount of liability
Corning would have contracted for with the subcontractors based upon a consideration
of all relevant evidence. On this point, the agreement between Corning and Hyundai is
highly relevant. Of particular note, Corning did not request full liability under COGSA
by declaring the full value, despite having the option of receiving a greater scope of
liability in return for payment of a higher fee. Instead, Corning purchased additional
insurance through CNA to cover this difference in liability coverage, opting to pay lower
freight costs. Thus, it seems likely Corning would have taken the same approach in a
direct and separate contract with the subcontractors vis-à-vis its option for Carmack
liability, with its attendant higher cost, by declining full Carmack liability.
For the foregoing reasons, I respectfully dissent from the majority’s finding that
Hyundai is liable to CNA under the Carmack Amendment; I would limit Hyundai’s
liability to $10,000.