ACE USA et al v. Union Pacific Railroad Company, Inc.

Filing 164

MEMORANDUM AND ORDER sustaining Defendant Union Pacific Railroad Company's 127 Motion for Summary Judgment. Further, that Plaintiffs' 106 Motion for Partial Summary Judgment On Defendant's Defenses is overruled to the extent that it pertains to defendants Section 10709 defense, and overruling plaintiffs motion for summary judgment on defendants other defenses as moot. Signed by Chief Judge Kathryn H. Vratil on 8/15/2011. (mg)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
ACE USA and ACE EUROPEAN GROUP
LIMITED,

)
)
)
Plaintiffs,
)
)
v.
)
)
UNION PACIFIC RAILROAD COMPANY, )
INC.,
)
)
Defendant.
)
________________________________________ )

CIVIL ACTION
No. 09-2194-KHV

MEMORANDUM AND ORDER
Insurance companies ACE USA and ACE European Group Limited bring suit as subrogees of
AGC Soda Corporation (“AG Soda”) against Union Pacific Railroad Company, Inc. Plaintiffs allege
that defendant is liable under the Carmack Amendment to the Interstate Commerce Act,
49 U.S.C. § 11706, for water damage to soda ash which Union Pacific transported from Wyoming to
Texas in June and July of 2007, the cost of removing the damaged ash from the railcars and the cost of
remediating soil contamination caused by the damaged ash. This matter comes before the Court on
Plaintiffs’ Motion For Partial Summary Judgment On Defendant’s Defenses (Doc. #106) filed April 5,
2011 and Defendant Union Pacific Railroad Company’s Motion For Summary Judgment (Doc. #127)
filed May 31, 2011. For the following reasons the Court sustains defendant’s motion for summary
judgment and overrules plaintiffs’ motion.
Legal Standards

Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show no genuine issue as to any material fact and
that the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c); Anderson

v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Vitkus v. Beatrice Co., 11 F.3d 1535, 1538-39
(10th Cir. 1993). A factual dispute is “material” only if it “might affect the outcome of the suit under
the governing law.” Liberty Lobby, 477 U.S. at 248. A “genuine” factual dispute requires more than
a mere scintilla of evidence. Id. at 252.
The moving party bears the initial burden of showing the absence of any genuine issue of
material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Hicks v. City of Watonga, 942 F.2d
737, 743 (10th Cir. 1991). Once the moving party meets its burden, the burden shifts to the nonmoving
party to demonstrate that genuine issues remain for trial as to those dispositive matters for which it
carries the burden of proof. Applied Genetics Int’l, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238,
1241 (10th Cir. 1990); see also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87
(1986); Bacchus Indus., Inc. v. Arvin Indus., Inc., 939 F.2d 887, 891 (10th Cir. 1991). The nonmoving
party may not rest on its pleadings but must set forth specific facts. Applied Genetics, 912 F.2d at 1241.
The Court views the record in the light most favorable to the nonmoving party. Deepwater Invs.,
Ltd. v. Jackson Hole Ski Corp., 938 F.2d 1105, 1110 (10th Cir. 1991). It may grant summary judgment
if the nonmoving party’s evidence is merely colorable or is not significantly probative. Liberty Lobby,
477 U.S. at 250-51. In a response to a motion for summary judgment, a party cannot rely on ignorance
of facts, on speculation, or on suspicion, and may not escape summary judgment in the mere hope that
something will turn up at trial. Conaway v. Smith, 853 F.2d 789, 794 (10th Cir. 1988). Essentially, the
inquiry is “whether the evidence presents a sufficient disagreement to require submission to the jury or
whether it is so one-sided that one party must prevail as a matter of law.” Liberty Lobby, 477 U.S. at
251-52.

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Facts

Unless otherwise noted, the following material facts are uncontroverted.
As noted above, plaintiffs are two insurance companies, ACE USA and ACE European Group,
which bring suit as subrugees of AG Soda. Plaintiffs assert that AG Soda was the owner and consignee
of soda ash which was damaged by flood waters while defendant transported it from Green River,
Wyoming to Port Arthur, Texas under a bill of lading from Solvay Chemicals Co.1 On June 25, 2007,
Solvay issued to Union Pacific bill of lading number 80816562 (“Solvay Bill of Lading”) which
provided the terms and conditions for the shipment. Doc. #128, Ex. 27.
The Solvay Bill of Lading referenced an agreement between defendant and the American
National Soda Ash Corporation (“ANSAC”), known as UP-C-35322.2 The parties agree that UP-C35322 governed their relationship. The Solvay Bill of Lading also incorporated by reference “all the

1

Solvay and AG Soda were separate corporate entities with shared ownership interests
in a joint venture which mined soda ash in Green River, Wyoming. The parties dispute whether AG
Soda is the true consignee. The bill of lading provides as follows:

TO: Ship To and Destination – (mail or street address of consignee – for purposes of
notification only)
AG SODA
c/o KINDER MORGAN TERMINAL -ASAHI ACCT
COKE DOCK ROAD
PORT ARTHUR, TX 77640
Phone : [phone]
Memorandum Of Union Pacific Railroad Company In Support Of Motion For Summary Judgment Or
Alternatively For Partial Summary Judgment (Doc. #128) filed May 31, 2011, Ex. 26.
Defendant’s invoice, Doc. #128 Ex. 32, and electronic receipt, Doc. #128, Ex. 31, name
American Natural Soda Ash Corporation as the consignee.
2

ANSAC is a separate corporate entity with operations at Port Arthur, Texas. It is
essentially a logistics company that facilitates exportation of soda ash.
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terms and conditions of the Uniform Domestic Straight Bill of Lading set forth (1) in Uniform Freight
Classification in effect on the date hereof, if this is a rail or rail water shipment or (2) in the applicable
motor carrier classification or tariff if this is a motor carrier shipment, or (3) as otherwise agreed to in
writing by the shipper, railroad(s) and motor carrier(s).” Solvay Bill of Lading, Doc. #128, Ex. 26. The
parties dispute what terms and conditions this provision incorporates by reference.
UP-C-35322 is titled “RAIL TRANSPORTATION CONTRACT PURSUANT TO 49 U.S.C.
SECTION 10709.” It also contains a provision labeled “LIABILITY AND CLAIMS” which provides
as follows:

Customer agrees not to file any claim for freight loss or damage when the amount of
proven loss or damage is less than Two Hundred Dollars ($200.00) per railcar (Minimum
Claim Amount). If Customer’s proven loss or damage is determined to be in excess of
the Minimum Claim Amount, the Minimum Claim Amount shall be deducted from any
claim against Railroad for loss or damage to Commodity. In all other respects, claims
shall be processed in accordance with 49 U.S.C. Section 11706 and 49 C.F.R. Part 1005.
UP-C-35322, Doc. #128, Ex. 27 at 3.
The threshold question is whether the Carmack Amendment to the Interstate Commerce Act,
49 U.S.C. § 11706, or the Solvay Bill of Lading, UP-C-35322 and the terms and conditions incorporated
therein, provide the standard for defendant’s liability.
Analysis
Plaintiffs’ complaint seeks damages under the Carmack Amendment to the Interstate Commerce
Act, 49 U.S.C. § 11706. The parties’ motions for summary judgment raise numerous grounds for
summary judgment,3 but the central question is whether the Carmack Amendment governs the parties’

3

Plaintiffs’ motion argues the following: (1) Union Pacific’s liability is governed by the
Carmack Amendment, (2) plaintiffs have standing to assert a claim against Union Pacific under the
Carmack Amendment, (3) the voluntary payment doctrine does not apply, (4) Union Pacific cannot
(continued...)
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relationship. If the Carmack Amendment does not apply, defendant is entitled to summary judgment.
I.

Carmack Amendment
The Carmack Amendment regulates the liability of rail carriers. It provides that any rail carrier

that delivers property and provides transportation or service subject to the jurisdiction of the Surface
Transportation Board is “liable to the person entitled to recover under the receipt or bill of lading.”
49 U.S.C. § 11706(a).4 Under Section 11706, a rail carrier subject to the Board’s jurisdiction may not

3

(...continued)
establish an “act of God” defense under the Carmack Amendment and (5) plaintiffs are entitled to
receive prejudgment interest on their ultimate recovery.
Defendant’s motion argues the following: (1) defendant’s liability is governed by a
Section 10709 contract – not the Carmack Amendment, (2) plaintiffs did not a submit a timely viable
claim, (3) plaintiffs lack standing to sue for various reasons, (4) plaintiffs are not entitled to recover
damages for cleaning or repairing the rail cars, or for soil remediation, (5) an “act of God” caused the
damage, (6) plaintiffs’ claim is prohibited by contract and (7) defendant’s liability is limited by
contract.
4

The parties do not dispute that the transportation or service at issue here is subject to
the jurisdiction of the Surface Transportation Board. Section 11706(a) provides in full as follows:
(a) A rail carrier providing transportation or service subject to the jurisdiction of the
Board under this part shall issue a receipt or bill of lading for property it receives for
transportation under this part. That rail carrier and any other carrier that delivers the
property and is providing transportation or service subject to the jurisdiction of the
Board under this part are liable to the person entitled to recover under the receipt or
bill of lading. 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.
(continued...)
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limit or be exempt from this liability, except that it may establish rates for transportation of property
under which (1) the rail carrier’s liability “is limited to a value established by written declaration of the
shipper or by a written agreement between the shipper and the carrier,” or (2) “specified amounts are
deducted, pursuant to a written agreement between the shipper and the carrier, from any claim against
the carrier with respect to the transportation of such property.” 49 U.S.C. § 11706(c).5

4

(...continued)
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.
49 U.S.C. § 11706(a).
5

49 U.S.C. § 11706(c) provides in full as follows:

(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 or of
the amount of recovery or representation or agreement in a receipt, bill of lading,
contract, or rule in violation of this section is void.
(2) A rail carrier of passengers may limit its liability under its passenger rate
for loss or injury of baggage carried on trains carrying passengers.
(3) A rail carrier providing transportation or service subject to the jurisdiction
of the Board under this part may establish rates for transportation of property
under which-(A) the liability of the rail carrier for such property is limited to a value
established by written declaration of the shipper or by a written
agreement between the shipper and the carrier; or
(B) specified amounts are deducted, pursuant to a written agreement
between the shipper and the carrier, from any claim against the carrier
with respect to the transportation of such property.
(d)(1) A civil action under this section may be brought in a district court of the United
States or in a State court.
(continued...)
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Section 10709 provides a mechanism, however, for rail carriers and purchasers of rail services
to avoid the Carmack Amendment by contract. 49 U.S.C. § 10709(a)-(c); see Babcock & Wilcox Co.
v. Kan. City S. Ry. Co., 557 F.3d 134, 138 (3d Cir. 2009) (Section 10709 enables shippers and carriers
to sidestep federal regulation of transportation agreements by entering into private contracts); Dow
Chem. Co. v. Union Pac. Corp., 8 F. Supp.2d 940, 941-42 (S.D. Tex. 1998) (purpose of Section 10709
is to allow parties to alter federal mandates or avoid federal control and oversight over rail contracts).
Under Section 10709, rail carriers and purchasers of rail services may enter into a private contract for
specified services under specified rates and conditions. 49 U.S.C. § 10709(a). Such contract exclusively
governs the parties’ duties in connection with services provided under the contract and is not subject to
the rail regulations in Part A of Subtitle IV of Title 49 of the United States Code, which includes the
Carmack Amendment. 49 U.S.C. § 10709(a)-(c).6
5

(...continued)
49 U.S.C. § 11706(c).
6

49 U.S.C. § 10709(a)-(c) provide in full as follows:

(a) One or more rail carriers providing transportation subject to the jurisdiction of the
Board under this part may enter into a contract with one or more purchasers of rail
services to provide specified services under specified rates and conditions.
(b) A party to a contract entered into under this section shall have no duty in
connection with services provided under such contract other than those duties specified
by the terms of the contract.
(c)(1) A contract that is authorized by this section, and transportation under such
contract, shall not be subject to this part, and may not be subsequently challenged
before the Board or in any court on the grounds that such contract violates a provision
of this part.
(2) The exclusive remedy for any alleged breach of a contract entered into under this
section shall be an action in an appropriate State court or United States district court,
unless the parties otherwise agree. This section does not confer original jurisdiction on
(continued...)
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II.

Solvay Bill Of Lading And UP-C-35322
Both parties agree that the Solvay Bill of Lading, and any other contract, terms or conditions

incorporated therein, governed the parties’ relationship. See Pretrial Order (Doc. #131) filed June 1,
2011 at 2; see also Plaintiffs’ Memorandum Of Law In Support Of Their Motion For Partial Summary
Judgment On Defendant’s Defenses (Doc. #107) filed April 5, 2011 at 21-22; Doc. #128 at 52-54. The
parties also agree that UP-C-35322 is incorporated into the bill of lading. Doc. #107 at 21; Doc. #128
at 52; Doc. #131 at 8. Defendant argues that the Uniform Domestic Straight Bill of Lading, specifically
the Uniform Freight Classification 6000-M, and UP Circular 16-E are also incorporated into the bill of
lading. Doc. #128 at 46-48; Doc. #131 at 8. Defendant further argues that it is entitled to summary
judgment because the terms and conditions in these documents bar plaintiffs’ claim. Doc. #131 at 8-9;
see Doc. #128 at 48-55. Plaintiffs argue that neither the Uniform Freight Classification 6000-M nor the
UP Circular 16-E is incorporated into the bill of lading. They also argue that the Carmack Amendment
does apply because UP-C-35322 expressly incorporates the Carmack Amendment liability provisions.
Doc. #107 at 20-22.

The Court need not determine whether the Solvay Bill of Lading incorporates the Uniform
Freight Classification 6000-M or the UP Circular 16-E because UP-C-35322 is clearly a Section 10709
contract and both parties agree that UP-C-35322 applies. As noted above, whether the Carmack

6

(...continued)
the district courts of the United States based on section 1331 or 1337 of title 28, United
States Code.
49 U.S.C. § 11706(a)-(c).
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Amendment applies is a matter of contract interpretation.7 When determining the meaning of contract
terms, the Court begins with the plain language of the agreement. Liggatt v. Employers Mut. Cas. Co.,
273 Kan. 915, 921, 46 P.3d 1120, 1125 (2002); Fayard v. Design Cmte. of Homestead Subdivision, 230
P.3d 299, 303-04 (Wyo. 2010). The interpretation and legal effect of unambiguous contract terms are
matters of law for the Court. See Shamberg, Johnson & Bergman, Chtd. v. Oliver, 289 Kan. 891, 90102, 220 P.2d 333, 339 (2009); Davidson Land Co. v. Davidson, 247 P.3d 67, 71 (Wyo. 2011).
To support their argument that the Carmack Amendment governs the parties’ relationship,
plaintiffs rely solely on the last sentence in the “LIABILITY AND CLAIMS” section of UP-C-35322.
That section states in full as follows:
Customer agrees not to file any claim for freight loss or damage when the amount of
proven loss or damage is less than Two Hundred Dollars ($200.00) per railcar (Minimum
Claim Amount). If Customer’s proven loss or damage is determined to be in excess of
the Minimum Claim Amount, the Minimum Claim Amount shall be deducted from any
claim against Railroad for loss or damage to Commodity. In all other respects, claims
shall be processed in accordance with 49 U.S.C. Section 11706 and 49 C.F.R. Part 1005.
UP-C-35322, Doc. #128, Ex. 27 at 3 (emphasis added). Plaintiff argues that because UP-C-35322
requires all claims to be processed in accordance with the Carmack Amendment and certain
implementing regulations, the contract expressly incorporates the Carmack Amendment’s liability

7

Other federal courts which have considered whether a contract properly invokes
Section 10709 have applied the law of the state in which the federal district court sits. See, e.g.,
Babcock & Wilcox, 557 F.3d at 143; Dow Chem., 8 F. Supp.2d at 941-42. Here, defendant argues –
and plaintiff does not dispute – that under Kansas choice of law principles, the substantive law of
Wyoming should apply because defendant and Solvay entered into the contract at issue in Wyoming.
In Kansas, the principle of lex loci contractus determines which law the court will apply.
Stafford v. Crane, 382 F.3d 1175, 1182 (10th Cir. 2004). In most instances, this means that Kansas
courts apply the substantive law of the state where the contract was made. Id. (citing Dragon v.
Vanguard Indus., 277 Kan. 776, 784, 89 P.3d 908, 914 (2004)). Here, the record does not contain
sufficient evidence to determine where defendant and Solvay entered into the agreement for purposes
of lex loci contractus. Regardless, for purposes of this order, the applicable law of Kansas and
Wyoming are substantially the same.
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provisions. The plain language of UP-C-35322 belies plaintiff’s argument.
First, the title of UP-C-35322 is “RAIL TRANSPORTATION CONTRACT PURSUANT TO
49 U.S.C. SECTION 10709.” UP-C-35322, Doc. #128, Ex. 27 (Doc. #128-28) at 1. The title clearly
indicates the parties’ intent to be governed by a private contract and not the Carmack Amendment.
Second, as defendant argues, the plain language of the liability and claims provision is expressly limited
to how “claims shall be processed” – it does not evince any intent to incorporate the Carmack
Amendment liability provisions. See Doc. #128 at 52-54. Moreover, the regulations to which the
provision refers – 49 C.F.R. Part 1005 – refer exclusively to claims processing, and not liability.8 Thus,
as the District Court for the Southern District of Texas held in a similar case, “it is clear that the intent
of the parties was not to bring the entire contract within the parameters fo the Carmack Amendment,”
but only, for whatever reason, to subject claims “to the specific claim processes described in that
Amendment.” Dow Chemical, 8 F. Supp.2d at 941-42.
Based on the plain language of UP-C-35322, the Solvay Bill of Lading and UP-C-35322
constitute a Section 10709 contract. Therefore, the terms of defendant’s agreement with Solvay govern
the parties’ relationship under Section 10709 – not the Carmack Amendment. For these reasons the
Court sustains defendant’s motion for summary judgment. The Court need not, and does not, determine
whether defendant’s contract with Solvay incorporates terms and conditions beyond the Solvay Bill of

8

Section 1005.1, which sets forth the applicability of Part 1005, provides that “this part
shall govern the processing of claims for loss, damage, injury, or delay to property transported or
accepted for transportation” under the Interstate Commerce Act. 49 C.F.R. § 1005.1 (emphasis added).
The subsequent provisions create a framework for processing claims, specifically claim filing
requirements (49 C.F.R. § 1005.2), acknowledgment of claims (49 C.F.R. § 1005.3), investigation of
claims (49 C.F.R. § 1005.4) and time requirements on disposition of claims (49 C.F.R. § 1005.5).
Thus, 49 C.F.R. Part 1005 does not govern a rail carriers liability for claims, but merely sets forth a
process for filing and processing claims.
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Lading and UP-C-35322. The Court does not address any of defendant’s other arguments for summary
judgment. Plaintiffs’ only claim is for violation of the Carmack Amendment. Because the Carmack
Amendment does not apply, defendant is entitled to summary judgment. Accordingly, the Court
overrules plaintiffs’ motion to the extent that it seeks summary judgment on defendant’s Section 10709
defense, and overrules plaintiffs’ motion for summary judgment on defendant’s other defenses as moot.
IT IS THEREFORE ORDERED that Defendant Union Pacific Railroad Company’s Motion
For Summary Judgment (Doc. #127) filed May 31, 2011 be and hereby is SUSTAINED.

IT IS FURTHER ORDERED that Plaintiffs’ Motion For Partial Summary Judgment On
Defendant’s Defenses (Doc. #106) filed April 5, 2011 be and hereby is OVERRULED to the extent that

it pertains to defendant’s Section 10709 defense. The Court overrules plaintiffs’ motion for summary
judgment on defendant’s other defenses as moot.
Dated this 15th day of August, 2011 at Kansas City, Kansas.
s/ Kathryn H. Vratil
KATHRYN H. VRATIL
United States District Judge

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