Kawasaki Kisen Kaisha, Ltd. et al v. CMT International, Inc.

Filing 78

MEMORANDUM Opinion and Order Signed by the Honorable Harry D. Leinenweber on 7/27/2011:Mailed notice(wp, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

KAWASAKI KISEN KAISHA, LTD.,
and “K” LINE AMERICA, INC.,
Plaintiffs,
and

Case No. 07 C 5675

UNION PACIFIC RAILROAD CO.,
Hon. Harry D. Leinenweber
Intervening Plaintiff,
v.
PLANO MOLDING CO.,
Defendant.

MEMORANDUM OPINION AND ORDER
Before the Court is Defendant Plano Molding Co.’s (“Plano”)
Motion for Summary Judgment.

Plaintiffs Kawasaki Kisen Kaisha,

Ltd. (“KL”) and “K” Line America, Inc. (“KAM”) (collectively, “KLine”), as well as intervening plaintiff Union Pacific Railroad Co.
(“Union Pacific”) (collectively the “Plaintiffs”), have brought
breach of contract and negligence claims against Plano.

They seek

to hold Plano liable for damages suffered by Plaintiffs in a Union
Pacific train derailment and seek indemnification for claims made
against Plaintiffs by others who suffered losses in the derailment.
Plaintiffs allege the derailment occurred because steel injection
molds ordered by Plano broke through their shipping container and
the floor of the rail car and fell onto the rail bed, where they

were struck by the next railcar.

For the reasons that follow,

Plano’s Motion for Summary Judgment is granted.
I.
The

instant

case

BACKGROUND

was originally

brought

by

K-Line

as

a

Third–Party Complaint against Plano and CMT International, Inc.
(“CMT”) in the Southern District of New York in response to a
lawsuit against Plaintiffs by Indemnity Insurance Co. seeking to
recover for cargo shipments damaged in the train derailment.
Because that court did not have personal jurisdiction over Plano
and CMT, the suit was dismissed and re–filed in this Court.

The

Multi-District Litigation Panel subsequently transferred the case
to

the

Southern

District

of

New

York

pursuant

to

28

U.S.C.

§ 1407(a) for consolidated pretrial proceedings with other cases
involving common questions of fact. Those consolidated proceedings
have concluded, and the case has been returned to this Court to
decide Plano’s fully briefed Motion for Summary Judgment.
The

following

facts

are

taken

from

the

parties’

Local

Rule 56.1 statements, deposition testimony, and exhibits. Plano is
an Illinois corporation that designs, manufactures, and sells
storage boxes, including fishing tackle boxes, tool boxes, and
cosmetic organizers.
these products.

Plano uses steel injection molds to make

In November 2004, Plano decided to order two new

injection molds and sent out specification sheets to various mold
makers, including CMT.

CMT obtained price specifications from

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Kunshan Yuanjin Plastic & Electronic Co., Ltd. (“Kunshan”), a
Chinese company.

Kunshan manufactured the steel molds at issue

here.
At the request of Plano, CMT retained World Commerce Services,
LLC, (“World”), a non-vessel operating common carrier, which in
turn arranged the shipment of the steel molds from China to
Illinois.
consolidate

(Non-vessel
cargoes

common

belonging

carriers

to

charter a ship to carry them.)

many

are

middlemen

different

shippers

who
and

World then contracted with THI

Group, Inc. (“THI”), a Chinese corporation, to handle the booking
of the shipment of steel molds.

THI contracted with KL, a Japanese

corporation that is an ocean common carrier, to transport the steel
molds from Shanghai to Illinois.
World issued a bill of lading identifying Kunshan as the
shipper and Plano as the consignee, or the entity designated to
receive

goods

from

the

carrier.

KL

issued

a

waybill

identified THI as the shipper and World as the consignee.

that

The KL

waybill incorporated the terms and conditions of KL’s bill of
lading.
Kunshan

loaded

the

steel

molds

into

wooden

supplied the shipping container for the molds.

crates.

KL

THI loaded the

steel molds into the shipping container and delivered the sealed
container to KL.

After receiving the container, KL transported it

to California, transferring the molds to Union Pacific in Los

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Angeles.

Union Pacific then began transport of the molds from

California to Illinois, where they were to be delivered to Plano.
While en route, the train derailed near Tyrone, Oklahoma, on
April 25, 2005. Plaintiffs allege the derailment was caused by the
improper loading of the steel molds in their shipping container.
Specifically, they contend that the molds were packed in a manner
that concentrated their weight in too small an area.

For the

purposes of this motion, Plano does not dispute Plaintiff’s theory
as to the cause of the derailment.
shipping

containers,

as

well

railcars and other equipment.

as

The derailment damaged KL’s
the

Union

Pacific’s

tracks,

Plaintiffs settled virtually all of

the cargo claims, and now seek indemnity from Plano under the
indemnity provisions of the KL and World bills of lading.
II.
Plaintiffs

assert

LEGAL STANDARD

admiralty

jurisdiction

under

§ 1333, so the Court will apply federal maritime law.

28

U.S.C.

In re M/V

Rickmers Genoa Litigation, 622 F.Supp.2d 56, 64 (S.D.N.Y. 2009);
see Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 24–25 (2004)(finding
bills of lading to involving overseas shipment of goods to be
maritime contracts where the last leg of the journey was by rail).
Summary judgment is appropriate even though the record shows
that there is no genuine dispute as to an issue of material fact.
FED. R. CIV. P. 56(a).

This means that if, after adequate time for

discovery, the non-moving party cannot establish the existence of
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an element essential to that party’s case, and on which the party
bears the burden of proof, summary judgment should be granted.
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

In addressing

a motion for summary judgment, the court must review the record in
the light most favorable to the non-moving party and draw all
reasonable inferences in that party’s favor.

Vanasco v. National-

Louis Univ., 137 F.3d 962, 965 (7th Cir. 1998).

However, a genuine

issue of fact is not shown by “some metaphysical doubt as to the
material facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio
Corp., 475 U.S. 574, 586 (1986).

Rather, a genuine issue of

material fact exists only if a reasonable jury could return a
verdict for the non-moving party. Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 249 (1986).
III.

ANALYSIS

Plaintiffs’ breach of contract claims rest on obligations they
assert Plano owed them under the World and KL bills of lading,
while their negligence claims contend that Plano knew, or should
have known, that the steel molds posed a significant risk of harm
if they were not properly loaded, and that Plano breached its duty
to ensure that the molds were safely packed.
A.
Essentially,

The Contract Claims

Plaintiffs

argue

they

are

entitled

to

indemnification, and to recover damages for their own losses,
because Plano falls into the definition of “Merchant” as set forth
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in both the KL and the World bills of lading.

Plano asserts that

it was not a party to either bill of lading and did not accept
their terms.

A bill of lading “is the basic transportation

contract between the shipper-consignor and the carrier; its terms
and conditions bind the shipper and all connecting carriers.”
S. Pac. Transp. Co. v. Commercial Metals Co., 456 U.S. 336, 342–43
(1982).

“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.”

Kirby, 543 U.S. at 31.

Courts have

recognized that bills of lading should be carefully construed, and
should be construed against the carrier.

Maersk, Inc. v. Neewra,

Inc., 687 F.Supp.2d 300, 330 (S.D.N.Y. 2009).
1.

The KL Bill of Lading

Plaintiffs contend that Plano is a “Merchant,” as defined in
KL’s bill of lading, so it was obligated under Clause 11 of that
bill to ensure the steel molds were properly secured and the
container they were shipped in was sound.

Clause 1(h) of the bill

of lading provides:
Merchant includes the shipper, consignor, consignee,
owner and receiver of Goods, and Holder, and anyone
acting on behalf of any such person, including but not
limited to agents, servants, independent contractors and
freight forwarders.
Clause 11 of the KL Bill of Lading provides:
If Goods received by Carrier are in Container(s) into
which contents have been packed by or on behalf of
Merchant, Merchant warrants that the stowage and securing
of the contents of the Container(s) and their closing and
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sealing are safe and proper and also warrants that
Container(s) and contents thereof are suitable for
Carriage in accordance with the terms hereof including
Clause 15. In the event of Merchant’s breach of said
warranties, Carrier shall not be responsible for any loss
or damage to any property, or for personal injury, death
or the consequences of any other accidents or events
whatsoever and shall defend, indemnify and hold Carrier
harmless against all loss, damage, liability, cost or
expense, including attorneys’ fees, arising out of or in
any way connected with said accidents or events.
Merchant shall inspect Container(s) when the same are
furnished by or on behalf of Carrier, and they shall be
deemed to have been accepted by Merchant as being in
sound and suitable condition for the purpose of Carriage
contracted herein.
It is undisputed that Plano is not named in the KL bill of
lading, which names THI as the shipper and World as the consignee.
The question is whether Plano can nonetheless be bound, which is
determined

by

looking

to

the

general

principles

of

contract

formation and interpretation. In re M/V Rickmers, 622 F.Supp.2d at
71 (citing Kirby, 543 U.S. at 31).

Simply put, the buyer cannot be

deemed to fall under a “Merchant” clause unless the buyer is a
party to the bill of lading or has consented to be bound by its
terms.

In re M/V Rickmers, 622 F.Supp.2d at 72; see United States

v. Waterman S.S. Corp., 471 F.2d 186, 189 n. 4 (5th Cir. 1973)(“A
party cannot unilaterally employ definitions to bind another by
provisions to which the other has not consented to be bound.”).
Nonetheless, Plaintiffs argue that Plano can be bound by the
bill because it had a future interest in the goods, and was thus a
third-party beneficiary to the contract, and the consignee, World,
and the shipper, THI, were its agents. Courts have recognized that
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an intended beneficiary to a bill of lading may be bound through an
agency relationship with one of the contracting parties. In re M/V
Rickmers, 622 F.Supp.2d at 72; see Taisheng Int’l Ltd. v. Eagle
Mar. Servs. Inc., No. Civ. A. H-05-1920, 2006 WL 846380, at *4–5
(S.D. Tex. March 30, 2006)(finding sufficient evidence at dismissal
stage that shipper acted as consignee’s agent, binding consignee to
the bill of lading).
Here, however, the Court finds as a matter of law that World
was not Plano’s agent, but an independent contractor.

It is true

that

World

in

certain

circumstances,

intermediaries

assumed to be agents for the cargo owner.

like

are

For example, “when an

intermediary contracts with a carrier to transport goods, the cargo
owner’s recovery against the carrier is limited by the liability
limitation to which the intermediary and carrier agreed.”

Kirby,

543 U.S. at 33; see Nebraska Wine & Spirits, Inc. v. Burlington N.
R.R. Co., No. 91-0103-CV-W-2, 1992 WL 328938, at *3–4 (W.D. Mo.
Sept. 29, 1992)(holding that owner of goods was bound to the
conditions of shipping agreed to by shipper and freight forwarder).
The cases that Plaintiffs cite for the proposition that Plano may
be

bound

by

constructive

the

bills

notice

of

of

lading

their

terms

because
deal

it

with

had

actual

or

limitations

on

liability of the carrier, not a situation in which a carrier seeks
to impose liability on a cargo owner for the alleged actions of an
intermediary or the shipper of the goods.
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In fact, the Supreme

Court

has

held

that

“the

intermediary

is

certainly

not

automatically empowered to be the cargo owner's agent in every
sense.

That would be unsustainable.”

Kirby, 543 U.S. at 33; see

In re M/V Rickmers, 622 F.Supp.2d at 73 n.23 (“If taken literally,
the notion that consignors and consignees can be assumed to be in
a

principal/agent

relationship

would

expose

consignees

to

potentially limitless liability for the conduct and contracts of
their consignors.”).

This observation is particularly apt in this

case, where Plano did not pack or ship the goods at issue, nor did
it supervise the entities that did.
The applicability of an agency theory of liability must be
considered on a case-by-case basis.

In re M/V Rickmers, 622

F.Supp.2d at 73 n.23. “An agency relationship exists only if there
has been a manifestation by the principal to the agent that the
agent may act on his account, and consent by the agent so to act.”
Restatement (Second) of Agency § 15 (1958).

Authority to act can

be created by written or spoken words of the principal, which,
reasonably interpreted, makes the agent believe that the principal
wants him to act on the principal’s behalf.

Id. at § 26.

A

principal has the power to control the agent’s conduct regarding
matters entrusted to the agent.

Id. at § 14.

As opposed to an agent, an independent contractor is a person
employed by another to perform work, but who follows the employer’s
instructions only as to the results of the work, and not the means
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by which the work is accomplished.

Carter v. American Oil Co., 139

F.3d 1158, 1162 (7th Cir. 1998).

The most significant factor in

determining whether an independent contractor relationship exists
is the right to control the manner and means by which the work is
to be performed.

Knight v. United Farm Bureau Mut. Ins. Co., 950

F.2d 377, 378 (7th Cir. 1991).

While the existence of an agency

relationship is generally a question of fact, courts may make the
determination
undisputed.

as

a

matter

of

law

if

the

relevant

facts

are

Carter, 139 F.3d at 1162.

In arguing that World was Plano’s agent, Plaintiffs point to
deposition testimony of Robb Yunger (“Yunger”), Plano’s former vice
president of engineering.

Yunger testified he told World that

Plano wanted to ship the molds in a 20-foot container and ship them
FCL, meaning that the molds would be the only cargo in the
container.
KL.

World then arranged transportation of the molds with

Yunger testified that he was aware the molds were going to be

shipped on a KL vessel and then taken by train from California to
Chicago.
Plaintiffs also point out that World had a long-standing
relationship with Plano in that between March 2003 and March 2005,
World arranged several shipments of steel injection molds for
Plano. John Wember (“Wember”), a former employee of World involved
in this transaction, testified in a deposition that Plano had the
opportunity to reject using KL as the shipper for the steel molds,

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but did not do so.

Wember was then asked if Plano agreed to use

KL, to which he responded, “they trusted us to get it here as fast
as possible.”
Although Plaintiffs describe Plano’s instructions to World as
“highly specific instructions” that show Plano had the right to
control World, it is undisputed that CMT hired World, although it
did so at Plano’s request.

Plano did not direct World as to what

shipper to select, nor did it pay World.

(CMT paid World.)

The

few instructions outlined above do not serve to create a question
of fact as to an agency relationship between World and Plano.

An

employer of an independent contractor may set minimum performance
and quality standards without creating an agency relationship
between the parties.

19 Williston on Contracts § 54:3 (4th ed.

2010).
It also is significant that Yunger did not consider World to
be Plano’s agent, nor did Plano supply the instrumentalities for
World to carry out its work.

Plano had used World for prior

transactions, but Plano had no financial interest in it.

World

apparently was paid by the job to arrange shipping, a task in which
it specialized and which was beyond the scope of Plano’s regular
business.

These are all factors that point to the existence of an

independent contractor relationship.

See id. at § 54:2; Julian

Cooke, et al., Voyage Charters § 18.77 (3d ed. 2007)(“The general
rule is that a party who procures shipment for the ultimate benefit

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of a consignee does not thereby contract with the carrier as agent
of the consignee.”).

Similarly, CMT, which hired World, was not

Plano’s agent, but a broker that filled its order.
As to THI, there is no evidence that Plano supervised its
loading of the molds or had any communications with THI as to how
the molds should be loaded into the shipping container.

KL

essentially argues that THI was World’s subagent in carrying out
the instructions Plano gave to World regarding the shipment.

But

because those instructions were insufficient to create an agency
relationship

between

Plano

and

World,

they

are

likewise

insufficient to create an agency relationship between Plano and
THI.

Therefore, because Plano was not a party to the KL bill of

lading, nor a principal of a party to the bill of lading, it cannot
be bound by it.
2.

The World Bill of Lading

Additionally, Plaintiffs contend that Plano falls within the
definition of a “Merchant” in the World bill of lading, which is
defined in Clause 2.3 as including:

“the Shipper, the Receiver,

the Consignor, the Consignee, the Holder of this Bill of Lading and
any person having a present or future interest in the goods or any
person acting on behalf of the above-mentioned persons.”

Further,

the World bill provides in Clause 10 that when a container is
“packed by merchant” and the carrier receives the goods already
packed, the “Merchant warrants that the stowage and seals of the

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containers are safe and proper and suitable for handling and
carriage and indemnifies Carrier for any injury, loss, or damage
caused by this breach of warranty.”

Although not a party to the

World Bill of Lading, Plaintiffs claim protection under Clause 3,
a so-called “Himalaya Clause,” which passes all protections of the
carrier onto the carrier’s agents and independents contractors.
The first consideration relevant to the World Bill of Lading is
whether the Plaintiffs, who were not parties to it, may nonetheless
enforce it.

World’s bill of lading identifies itself as the

carrier, and provides, in Clause 3:
Carrier shall be entitled to subcontract directly or
indirectly on any terms the whole or any part of the
handling, storage, or carriage of the goods and all
duties undertaken by Carrier in relation to the goods.
Every servant, agent, subcontractor, including subsubcontractors), or any person whose services have been
used to perform this contract shall be entitled to the
rights, exemptions from, or limitations of, liability,
defenses and immunities set forth herein.
This “Himalaya Clause,” by its plain language, extends World’s
protection
contractor.

to

Plaintiffs,

including

Union

Pacific

as

KL’s

See Kirby, 543 U.S. at 31–32.

Plano is the named consignee on the World bill of lading.
Plano argues that it is undisputed that this was an error based on
the testimony of Yunger and Wember to that effect.

In an email to

Wember prior to shipment, Yunger requested that CMT be listed as
the consignee.

Further, Wember testified that the true consignee

should have been CMT because Plano’s purchase term was DDP, meaning

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that Plano was not to take possession of the goods until they
arrived at its door.

Wember testified that at the time of the

derailment, the molds belonged to CMT.

However, he also testified

that Plano was never removed from the bill of lading as the named
consignee.

Plaintiffs also note that World had previously named

Plano as the consignee on at least 13 prior bills of lading.
However, even if the Court were to find a question of fact as
to whether Plano was the true named consignee, that does not
address the issue of whether it can be bound by the bill of lading
when it did not negotiate the terms of that bill and has not sought
benefits under it.

Taisheng Intern. Ltd.,

2006 WL 846380, *3.

Nor is there any agency relationship that binds Plano.

Here, the

World bill of lading was issued by THI at the direction of World.
As explained above, neither World nor THI were Plano’s agents, so
Plano cannot be bound through those entities.

As such, Plano is

entitled to summary judgment on Plaintiffs’ claims under the World
bill of lading.
B.

The Negligence Claim

Plaintiffs allege that Plano had a duty of care to ensure the
proper securing of the steel molds because it instructed World as
to how to pack and ship them. Additionally, Plaintiffs allege that
that duty of care extended to Plano’s agent, World, and World’s
subagent, THI.

As discussed above, however, neither World nor THI

was an agent of Plano.

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Whether a duty of care exists is a question of law. Staples v.
Krack Corp.,

186 F.3d 977, 979 (7th Cir. 1999).

Under the federal

maritime common law, buyers do not typically owe carriers and
fellow cargo owners a duty of care.

In re M/V Rickmers, 622

F.Supp.2d at 65 (citing Aslanidis v. U.S. Lines, Inc., 7 F.3d 1067,
1077 (2d Cir. 1993)).

The reason behind this is that typically,

“[a]s between carrier, shipper, and consignee, the consignee would
be least likely to possess the necessary knowledge to have avoided
any difficulty arising from improper packaging.”
Co. v. Nedlloyd Line,

Atkins Kroll &

210 F.Supp. 315, 317 (D.C. Cal. 1962).

As

Plano argues, if a buyer of products overseas is potentially liable
for the incorrect packaging of goods that it did not pack, load, or
ship,

a

party

ordering

goods

overseas

could

be

subject

to

potentially limitless tort liability.
Some courts have held that a different rule might obtain where
the buyer had unique knowledge of the known risks associated with
its product.

M/V Rickers, 622 F.Supp.2d at 65 (citing Aslandis, 7

F.3d at 1077).

Further, a buyer might be subject to liability if

it was on notice of some incompetence on the part of the shipper.
Id.

(citing

Di

Gregorio

v.

N.V.

Stoomvaart

Maatschappij

“Nederland,” 411 F.Supp. 331, 335 (S.D.N.Y. 1975)). Here, there is
no evidence that Plano was on notice that the parties who packed
and shipped the container were unable to do so properly.
there

any

evidence

that

Plano

was

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aware

of

a

risk

Nor is
from

concentrating the weight of the molds in too small an area.
such,

Plano

is

entitled

to

summary

judgment

on

As

Plaintiffs’

negligence claim.
IV.

CONCLUSION

For the reasons stated herein, Defendant Plano Molding Co.’s
Motion for Summary Judgment is granted.

IT IS SO ORDERED.

Harry D. Leinenweber, Judge
United States District Court
DATE: 7/27/2011

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