Regal-Beloit Corporation v. Kawasaki Kisen Kaisha Ltd.

FILED
FOR PUBLICATION FEB 17 2009
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
REGAL-BELOIT CORPORATION; No. 06-56831
VICTORY FIREWORKS, INC.; PICC
PROPERTY & CASUALTY COMPANY D.C. No. CV-06-03016-DSF
LIMITED SHANGHAI BRANCH;
ROYAL SUN ALLIANCE INSURANCE
CO. LTD., OPINION
Plaintiffs - Appellants,
v.
KAWASAKI KISEN KAISHA LTD.; K-
LINE AMERICA, INC.; UNION
PACIFIC RAILROAD COMPANY,
Defendants - Appellees.
Appeal from the United States District Court
for the Central District of California
Dale S. Fischer, District Judge, Presiding
Argued and Submitted June 1, 2008
Pasadena, California
Filed
Before: Stephen Trott, Sidney R. Thomas and Raymond C. Fisher, Circuit Judges.
Opinion by Judge Fisher
RAYMOND C. FISHER, Circuit Judge:
This case requires us to determine which federal statute governs “a maritime
case about a train wreck,” where the parties’ agreement for carriage of goods from
China into the United States by sea and then by rail included a Tokyo forum
selection clause that would violate one federal law, but would be enforceable under
another. See Norfolk S. Ry. Co. v. Kirby, 543 U.S.14, 18 (2004). Regal-Beloit and
several other named plaintiffs contracted with defendant Kawasaki Kisen Kaisha,
Ltd. (“K-line”) to ship their goods from China to various American Midwestern
destinations via the Port of Long Beach in California.1 K-line issued a through bill
of lading to each shipper to cover the shipment from China all the way to the
inland destinations, designating the Carriage of Goods by Sea Act as the law to
govern the carriers’ responsibility during the entire shipment. Although K-line’s
1
Plaintiffs in this case include the following parties: Regal-Beloit is a non-
California corporation with an office in Beloit, Wisconsin that purchased a cargo
of electric motors to be shipped from Shanghai, China to Indianapolis, Indiana;
Victory is a corporation authorized to do business in California with an office in
Ellsworth, Wisconsin that purchased a cargo of fireworks to be shipped from
Beihai, China to Minneapolis, Minnesota; PICC is a foreign insurance corporation
with an office in Shanghai that was the subrogated insurer of a cargo of electric
motor parts to be shipped from Shanghai, China to Milwaukee, Wisconsin; and
Royal & Sun was the subrogated insurer of a cargo of retainer nail castings to be
shipped from Zhangjiagang, China to Chicago, Illinois. Actions brought by the
above plaintiffs were consolidated under Regal-Beloit’s named complaint on
August 7, 2006. All shipments entered the United States via the Port of Long
Beach. We generally refer to the plaintiffs collectively as “Plaintiffs.” We also
generally refer to defendants Kawasaki Kisen Kaisha, K-line America and Union
Pacific Railroad Company as “Defendants.”
2
own ocean liner carried the goods from China to Long Beach, its United States
agent, K-line America (“KAM”), subcontracted with United Pacific Railroad
Company (“UPRR”) to transport these goods from Long Beach to the inland
destinations. K-line is KAM’s corporate parent, handling its domestic business
dealings through KAM, including dispatching and receiving vessels and
negotiating its inland shipping with domestic carriers like UPRR. Plaintiffs’ cargo
was allegedly damaged when UPRR’s train derailed in Oklahoma. Plaintiffs filed
a breach of contract suit against Defendants in California Superior Court. After
UPRR removed the case to the district court, K-line and KAM moved to dismiss
under the Tokyo forum selection clause in K-line’s initial agreement with
Plaintiffs. The district court granted the motion to dismiss, determining that the
parties successfully avoided the strict venue limitations that apply by default to the
rail portions of these shipments as a matter of federal law under the Carmack
Amendment. The dismissal provides us jurisdiction under 28 U.S.C. § 1291.
The outcome of this case turns on the answers to two questions, the first
being which statutory framework should apply: the Carmack Amendment
(“Carmack”), which provides the default rules governing the inland rail leg of a
shipment between a foreign country and a point in the United States, or the
Carriage of Goods by Sea Act (“COGSA”), which is what the parties contractually
3
agreed would govern? 2 A reasonable forum selection clause typically is
enforceable under COGSA, but such a clause is valid under Carmack only if the
parties fulfill one of Carmack’s two statutory methods for contracting out of the
statute’s venue restrictions. Applying this circuit’s precedent dictates that
contractually extending COGSA to the inland rail leg cannot trump the statutory
force of Carmack’s default responsibility regime unless the parties properly agree
to opt out of Carmack and thereby remove the statutory barrier to choosing
COGSA as the governing law. We therefore reach a second question: which of
Carmack’s two statutory opt out provisions applies to a contract for rail service
that, like the contract here, has been exempted from regulation by the Surface
Transportation Board? Unlike the district court, we conclude that the applicable
requirements for opting out of Carmack are found in 49 U.S.C. § 10502, instead of
§ 10709. We thus reverse and remand to the district court to determine whether the
2
Carmack has been codified at several different sections of Title 49 since
their enactments. “Originally codified at 49 U.S.C. § 20(11), Carmack was
recodified in 1978 at 49 U.S.C. § 11707 and then recodified again in 1996 at 49
U.S.C. § 14706. The current version of Carmack is codified at 49 U.S.C. §
11706.” Sompo Japan Ins. Co. v. Norfolk S. Ry. Co., 540 F. Supp. 2d 486, 492 n.4
(S.D.N.Y. 2008) [hereinafter Sompo II] (internal citations omitted). COGSA was
enacted in 1936 and amended § 25 of former Title 49. In 1981, it was codified as
amended as an appendix to Title 46 at 46 U.S.C. §§ 1301-1315. Congress
recodified portions of Title 46 of the United States Code as positive law in October
2006, and COGSA is now located in the notes section of 46 U.S.C. § 30701.
4
parties contracted out of Carmack’s venue restrictions under § 10502 so as to make
the Tokyo forum selection clause valid and enforceable.
BACKGROUND
To ship their goods, Plaintiffs each entered into an intermodal through bill of
lading with K-line that covered the entire transport from China to the Midwest.3 In
pertinent part, the bills of lading included the following provisions:
1. (Definitions & Tariff) . . . (b) ‘Carrier’ means [K-line], her
owners, operators and charterers whether acting as carrier or bailee. . .
. (d) ‘Connecting Carrier’ means carriers (other than Carrier),
contracted by or acting on behalf of Carrier, participating in Carriage
of Goods by land, water or air under this Bill of Lading. . . . (j)
‘Vessel’ includes the vessel named on the face hereof, any vessel,
lighter, barge, ship, watercraft or any other means of water transport
and any other vessel owned, operated, chartered or employed (in
whole or in part) by Carrier or any Connecting Carrier and used in
whole or in part for carriage of Goods under this Bill of Lading.
2. (Governing Law and Jurisdiction) The contract evidenced by or
contained in this Bill of Lading shall be governed by Japanese law
except as may be otherwise provided for herein, and any action
thereunder or in connection with Carriage of Goods shall be brought
before the Tokyo District Court in Japan, to whose jurisdiction
Merchant irrevocably consents.
3
A bill of lading is a contract that “records that a carrier has received goods
from the party that wishes to ship them, states the terms of carriage, and serves as
evidence of the contract for carriage.” Kirby, 543 U.S. at 18-19. “Through” bills of
lading specifically cover both oceanic and inland legs of a journey in a single
document. See id. at 25-26. “Intermodal” refers to the use of more than one
method of transport during a single shipment. See id. at 25.
5
....
4. (Responsibility for Shipments To, From or Through US
Territories) (1) With respect to Goods shipped to, from, or through
US Territories, Carrier’s responsibilities during the entire period (and
not just during Water Carriage) from the time of receipt of Goods to
the time of delivery of Goods shall be governed by [COGSA] and
[COGSA] shall be deemed incorporated herein during the entire
aforesaid period . . . .4
5. (Sub-Contracting: Exemptions, Immunities, Limitations, etc. of
Participant(s)) (1) Carrier shall be entitled to sub-contract on any
terms whatsoever Carriage, including without limitation, the loading,
unloading, storing, warehousing, handling and any and all duties
whatsoever undertaken by Carrier in relation to Goods by any of the
following: (I) any Connecting Carrier . . . . (2) . . . [E]very such vessel
and Such Participant(s) shall have the benefit of all provisions herein
benefiting [sic] Carrier as if such provisions were expressly for their
benefit; and, in entering into this contract, Carrier, to the extent of
those provisions, does so not only on its own behalf, but also as agent
and trustee for such vessel and Participant(s).5
K-line’s ocean carriers shipped the cargo from China to Long Beach. From
there, the cargo was transferred to UPRR, with whom KAM had contracted to
transport the cargo from the Port of Long Beach to the various inland destinations.
4
A clause such as this, “which identifies the law that will govern the rights
and liabilities of all parties to the bill of lading,” is often referred to as a “clause
paramount.” Sompo Japan Ins. Co. of Am. v. Union Pac. R.R. Co., 456 F.3d 54, 56
(2nd Cir. 2006) [hereinafter Sompo I].
5
A clause such as this, which extends a bill of lading’s defenses and
limitations to downstream parties who have subcontracted with the Carrier, is often
referred to as a “Himalaya clause.” See Kirby, 543 U.S. at 20 & n.2.
6
This agreement was memorialized in the Exempt Rail Transportation Agreement
(“ERTA”), which explicitly stated that “[l]iability for freight loss and damage to
lading while under the control of [UPRR] shall be governed by MITA [the Master
Intermodal Transportation Agreement].” The MITA provided that the MITA plus
any bills of lading constituted the entire contract between the parties, and included
its own forum selection clause that stated that “[a]ll lawsuits for freight loss or
damage must be filed in a court of competent jurisdiction in Omaha, Douglas
County, Nebraska.” The MITA also (1) prohibited the interpretation of its terms
under foreign law; (2) explicitly provided that “[t]his MITA and any agreements,
price documents or contracts that reference this MITA have been made under 49
U.S.C. § 10709”; and (3) expressly established that “Carmack liability coverage is
not available for any Shipments that originate outside the borders of the United
States of America.”
Unfortunately, the UPRR train carrying the aforementioned cargo derailed in
Tyrone, Oklahoma. Based on the alleged damage to the cargo, Plaintiffs filed suits
against Defendants in Los Angeles County Superior Court. UPRR removed the
cases to the Federal District Court for the Central District of California. Once the
cases were removed, Defendants moved to dismiss the actions, relying on the
Tokyo forum selection clause in the bills of lading. The district court granted their
7
motion. See Regal-Beloit Corp. v. Kawasaki Kisen Kaisha, Ltd., 462 F. Supp. 2d
1098, 1105 (C.D. Cal. 2006).
The district court concluded that the Tokyo forum selection clause was
reasonable, and that KAM and UPRR could enjoy its benefits under the Himalaya
Clause. See id. at 1102-03. It went on to determine that Carmack’s venue
restrictions applied neither to the overseas leg of the cargo shipment, which were
instead governed by COGSA, nor to the inland leg of the cargo shipment. See
id. at 1103-04. With respect to the inland leg, the district court explained that
although this transport would typically be subject to Carmack’s restrictions, here
the parties entered into the bills of lading under 49 U.S.C. § 10709, thereby
enabling the parties to contract out of the Carmack Amendment’s terms. See id.We disagree. Under our case law, Carmack – not COGSA – must govern
Defendants’ liability for the inland rail transport here. Therefore, Tokyo is an
acceptable forum under the provisions of Carmack only if the parties satisfied the
applicable requirements under either § 10709 or § 10502 for contracting out of
Carmack’s default venue restrictions. As we explain below, a careful reading of
Carmack reveals that § 10709 does not govern the kind of carriage at issue in this
case and the district court therefore erred by applying that section instead of §
8
10502. Accordingly, we reverse and remand so the district court can determine in
the first instance whether the parties complied with § 10502.
S TANDARD OF R EVIEW
We reject Defendants’ argument that we must apply the abuse of discretion
standard of review, which applies only to a district court’s factual finding
regarding a forum selection clause’s reasonableness. See Kukje Hwajae Ins. Co., v.
The “M/V Hyundai Liberty,” 408 F.3d 1250, 1254 (9th Cir. 2005). Here, the
parties concede that the forum selection clause is reasonable. Instead, the dispute
turns on which statutory law applies and whether this body of law voids the forum
selection clause regardless of its reasonableness. We review these issues of
statutory interpretation de novo. See Chateau des Charmes Wines Ltd. v. Sabate
USA Inc., 328 F.3d 528, 530 (9th Cir. 2003); Richards v. Lloyd’s of London, 135
F.3d 1289, 1292 (9th Cir. 1998) (en banc).
DISCUSSION
I. Statutory Provisions
Because of their centrality to our analysis, we summarize the relevant
provisions of Carmack and COGSA before turning to the question of which statute
applies here.
9
Congress added the Carmack Amendment to the Interstate Commerce Act in
1906. Carmack, which governs rail and motor carriers that are under the
jurisdiction of the Surface Transportation Board (“the Board,” previously referred
to as the Interstate Commerce Committee, or “the ICC”), narrowly limits the
venues in which a claim against carriers under the Board’s jurisdiction may be
brought. Carmack dictates that:
[a] civil action under this section may only be brought (i) against the
originating rail carrier, in the judicial district in which the point of origin
is located; (ii) against the delivering rail carrier, in the judicial district in
which the principal place of business of the person bringing the action is
located if the delivering carrier operates a railroad or a route through such
judicial district, or in the judicial district in which the point of destination is
located; and (iii) against the carrier alleged to have caused the loss or
damage, in the judicial district in which such loss or damage is alleged
to have occurred.
49 U.S.C. § 11706(d)(2)(A). A “judicial district” is defined as “a judicial district
of the United States” or “the applicable geographic area over which [a state] court
exercises jurisdiction.” 49 U.S.C. § 11706(d)(2)(B). Given these restrictions,
forum selection clauses are generally forbidden under Carmack. Notably,
however, Congress has since added a series of provisions designed to deregulate
aspects of the railroad industry. See Tokio Marine & Fire Ins. Co. v. Amato
Motors, Inc., 996 F.2d 874, 877 (7th Cir. 1993). Collectively referred to as the
Staggers Rail Act, these provisions establish two mechanisms by which rail and
10
motor carriers can contract out of Carmack’s restrictions if they satisfy the
applicable statutory requirements. See 49 U.S.C. §§ 10502(a), 10502(e), 10709(a),
10709(c)(1).
By its terms, COGSA covers transport only between a foreign and American
port “from the time when the goods are loaded on to the time when they are
discharged from the ship” – commonly referred to as “tackle-to-tackle.” 46 U.S.C.
§ 30701 Notes Sec. 1(e). COGSA does, however, explicitly authorize sea carriers
and shippers to extend its rules contractually to cover inland transportation or
transportation between two American ports. See 46 U.S.C. § 30701 Notes Sec. 7,
13. Unlike Carmack, COGSA does not include any venue restrictions that would
prohibit the enforcement of a forum selection clause.
II. The Carmack Amendment vs. COGSA
It is undisputed that the responsibility clauses in the bills of lading purport to
extend the application of COGSA to the entire period of transport, and that the
Himalaya Clause extends the full benefits of the bills of lading to all of the
carrier’s subcontractors “as if such provisions were expressly for their benefit.”
Nevertheless, Plaintiffs argue that Carmack’s venue restrictions should still govern
because Carmack’s statutory force “trumps” the parties’ attempt to contractually
11
extend COGSA.6 Defendants respond that Carmack cannot apply to the inland rail
carriage because the entire shipment was governed by through bills of lading,
whereas a separate domestic bill of lading is necessary for Carmack to apply to
inland transport. In the alternative, Defendants assert that even if the Carmack
Amendment could apply in the absence of a separate bill of lading for the domestic
carriage, in this case COGSA should govern in light of the parties’ express
agreement to extend COGSA’s provisions to all subcontractors, as reflected in the
bills of lading. Defendants fairly argue that policies recently endorsed by the
Supreme Court – such as uniformity in the law of maritime contracts and
contractual autonomy for sophisticated shippers and carriers – recommend
applying COGSA here. See Kirby, 543 U.S. at 29. These policies
6
We reject Plaintiffs’ claim that Carmack should automatically apply under
the law of the case doctrine because the district court originally denied UPRR’s
motion to transfer venue by applying Carmack. The district court clarified in a
later order that Carmack’s venue limiting provision did not apply. Even if it had
not, the district court’s earlier decision would not bind our reasoning under the law
of the case doctrine, which generally precludes courts “from reconsidering an issue
that has already been decided by the same court, or a higher court in the identical
case.” United States v. Alexander, 106 F.3d 874, 876 (9th Cir. 1997) (emphasis
added). We also reject Plaintiffs’ assertion that UPRR conceded Carmack’s
applicability in its motion to remove the proceedings to federal court. The
motion’s statement that “[t]he first cause of action in the [complaint] . . . contains
the elements required to plead a claim against UPRR under the Carmack
Amendment,” was not a concession that Carmack applies, but instead simply an
argument that federal question jurisdiction was appropriate.
12
notwithstanding, according to the statutory language and our holding in Neptune
Orient Lines, Ltd. v. Burlington N. & Santa Fe Ry. Co., 213 F.3d 1118 (9th Cir.
2000), Carmack supplies the default regime governing the inland rail shipment
here. We therefore hold that COGSA applies only if the parties properly opted out
of Carmack.
A.
Before we turn to Defendants’ joint arguments, we reject the K-line
defendants’ threshold assertion that Carmack cannot apply to ocean carriers and
their agents. To support their argument, however, K-line and KAM quote
selectively from Carmack. By its terms, Carmack applies to “[a] rail
carrier providing transportation or service subject to the jurisdiction of the Board
under this part,” 49 U.S.C. § 11706(a), where a “rail carrier” is “a person providing
common carrier railroad transportation for compensation.” 49 U.S.C. § 10102(5).
Critically, the statute goes on to define “railroad” as including “a bridge, car float,
lighter, ferry, and intermodal equipment used by or in connection with a railroad.”
49 U.S.C. 10102(6)(A) (emphasis added). Moreover, the Board’s jurisdiction,
which is coextensive with Carmack’s coverage, includes “transportation that is by
railroad and water, when the transportation is under common control,
management, or arrangement for a continuous carriage or shipment.” 49 U.S.C. §
1310501(a)(1)(B) (emphasis added). Here, K-line shipped the cargo from China to
the Port of Long Beach on K-line’s ocean liner, issued bills of lading that covered
the cargo from its place of origin to the final destinations in the United States and
contracted with UPRR to ship the cargo from the Port of Long Beach to the
Midwest through its agent KAM, who acted on K-line’s behalf in receiving its
vessel and providing for the inland transport. The K-line defendants therefore
provided “continuous carriage or shipment” that was “by railroad and water” via
“intermodal equipment used by or in connection with a railroad.” As a result,
Carmack applies to K-line and its agent.
Applying Carmack to K-line is also consistent with the purpose of
Carmack’s liability regime, which is “to relieve shippers of the burden of searching
out a particular negligent carrier from among the often numerous carriers handling
. . . goods.” Reider v. Thompson, 339 U.S. 113, 119 (1950). Because Plaintiffs
dealt directly with K-line to arrange a shipment that included domestic rail
carriage, we uphold Carmack’s objectives by applying the statute to K-line and its
agent.
Few opinions have squarely addressed the potential application of Carmack
to ocean carriers and their agents and no Supreme Court or Ninth Circuit precedent
appears to address this issue. Nevertheless, most of the limited federal
14
jurisprudence on this question either states that Carmack applies to an ocean carrier
and its agent or implicitly suggests that it could. See United States v. Miss. Valley
Barge Line Co., 285 F.2d 381, 391-94 (8th Cir. 1960) (Blackmun, J.) (holding that
Carmack applied to a water carrier that was the contracting carrier when there was
a common arrangement as indicated by a through bill of lading); Kyodo USA Inc. v
Cosco N. Am. Inc., No. 01-CV-499, 2001 WL 1835158, at *3-5 (C.D. Cal. July 23,
2001) (holding that Carmack could apply to an ocean carrier); Canon USA Inc. v.
Nippon Liner System, Ltd., No. 90 C 7350, 1992 WL 82509, at *5-8 (N.D. Ill.
April 17, 1992) (applying Carmack to an ocean carrier); Nelson v. Agwilines, Inc.,
70 F.Supp. 497, 500 (S.D.N.Y. 1946) (noting that although “[o]rdinarily a carrier
that is wholly a carrier by water is not subject to regulation by [the Board,] [m]any
carriers by water have through bill of lading arrangements with railroads, which
make the carriers by water subject to regulation by [the Board]”). Until recently,
only two authorities, neither of which we find persuasive, explicitly held that
Carmack does not apply to an ocean carrier: a decision from the Florida Supreme
Court and a subsequent decision from the Federal District Court for the Southern
District of Florida that relied on the previous state court decision. See King Ocean
Cent. Am., S.A. v. Precision Cutting Servs., Inc., 717 So. 2d 507, 513 (Fla. 1998)
(holding that “an ocean carrier’s liability was not contemplated or covered under
15
the Carmack Amendment”); PT Indonesia Epson Indus. v. Orient Overseas
Container Line, Inc., 219 F. Supp. 2d 1265, 1269 (S.D. Fla. 2002) (following King
Ocean’s analysis and determining that “the Carmack Amendment does not
necessarily apply to the through bill of lading issued by [the ocean carrier]”);
contra, Kyodo, 2001 WL 1835158 at *4 (unpublished district court opinion in this
circuit explicitly refusing to endorse King Ocean’s analysis).
Since this case was argued, however, the Second Circuit has construed
Carmack’s definition of a “rail carrier” not to reach two categories of common
carriers: (1) an entity “that merely arranges” for goods to be transported by sea and
then transferred to a railroad for inland transport, but never itself actually moves
the goods; and (2) a common carrier, such as an ocean carrier, that does not
conduct rail services or “‘hold out’ that service to the public.” Rexroth
Hydraudyne B.V. v. Ocean World Lines, Inc., 547 F.3d 351, 362, 364 (2d Cir.
2008). K-line and KAM urge us to follow Rexroth and exempt them as well. We
do not read Rexroth so broadly, and in any event decline to apply its limitation of
Carmack to the intermodal transport arrangement here.
In Rexroth, the plaintiff shippers contracted with a non-vessel-operating
common carrier (“NVOCC”) that acted as a middleman, arranging for ocean and
inland rail carriage “from receipt to delivery.” Id. at 356. As the term implies, the
16
NVOCC provided no services on any vessel it owned nor did it otherwise
physically handle the shipment itself. See id. at 361-62. Instead the NVOCC
subcontracted with “an ocean carrier that provide[d] the ocean passage,” who in
turn subcontracted through its American agent to “arrange[] rail carriage for the
inland leg.” Id. at 356. Nearly all the Second Circuit’s reasoning addressed this
middleman, emphasizing that an entity without “any contact with the shipped
goods or any performance in the carrying of those goods” merely arranges for
railroad transportation and therefore does not provide transportation as required for
Carmack liability. Id. at 361-62. Even if we were to accept this reasoning, it
would not apply to K-line’s arrangement because there was no middleman between
K-line and Plaintiffs. Rather, Plaintiffs dealt directly with K-line, who actually
transported the cargo on its ocean liner and had sustained contact with the shipped
goods.
Rexroth also summarily excluded the ocean carrier defendant whose services
were most analogous to those K-line provided here, saying that the ocean carrier
did “not own or operate rail lines or other equipment used in connection with a
railroad.” Id. at 363 (emphasis added). The Second Circuit did not address the
statutory definition of railroad transportation we have discussed above, but instead
simply concluded without factual explanation that the ocean carrier neither
17
conducted nor held itself out as conducting railroad transportation. See id. at 364.
Thus we do not know the nature or substance of the ocean carrier’s direct
interactions, if any, with the shipper. We do know that here, K-line held itself out
to the public and contracted with Plaintiffs to transport their goods all the way
from China to their inland destinations – by sea utilizing K-line’s vessel and by rail
utilizing UPRR. In so doing, K-line and its agent, KAM, engaged in railroad
transportation subject to the Board’s jurisdiction by providing Plaintiffs with
continuous carriage by water and rail, utilizing intermodal equipment in connection
with a railroad. See 49 U.S.C. §§ 10102(6)(A), 10501(a)(1)(B).
In sum, we do not read Rexroth to categorically exclude ocean carriers from
Carmack liability. The plain language of the statute and a careful application of the
Second Circuit’s reasoning support our conclusion that K-line and KAM provided
railroad transportation covered by Carmack.7 We therefore hold that Carmack
applies to ocean carriers and their agents under the circumstances here.
7
The Second Circuit also seemed to suggest that because ocean carriers fall
under the jurisdiction of the Federal Maritime Commission (“FMC”), they cannot
also be regulated by the Board. See Rexroth, 547 F.3d at 357. The FMC has
jurisdiction to “regulate ocean shipping lines operating between the United States
and foreign countries,” “monitor[] agreements between ocean common carriers”
and “enforc[e] a number of prohibitions against discriminatory and unreasonable
rates and practices.” Transpacific Westbound Rate Agreement v. Fed. Maritime
Comm’n, 951 F.2d 950, 951 (9th Cir. 1991). Nothing in the FMC’s jurisdictional
statute makes its jurisdiction exclusive. See 46 U.S.C. § 40301.
18
B.
Defendants jointly argue that Carmack cannot apply to a shipment from a
foreign country into the United States under a through bill of lading, and therefore
the parties’ contractual extension of COGSA, with its more liberal rules regarding
venue, should control here. In support of their argument, Defendants highlight that
four circuits have held that “the Carmack Amendment does not apply to a shipment
from a foreign country to the United States (including an ocean leg and overland
leg to the final destination in the United States) unless the domestic, overland leg is
covered by a separate bill of lading.” Altadis USA, Inc. ex. rel. Fireman’s Fund
Ins. Co. v. Star Line, LLC, 458 F.3d 1288, 1291 (11th Cir. 2006) (emphasis added);
see Am. Road Serv. Co. v. Consol. Rail Corp., 348 F.3d 565, 569 (6th Cir. 2003);
Shao v. Link Cargo (Taiwan) Ltd., 986 F.2d 700, 703 (4th Cir. 1993); Capital
Converting Equip., Inc. v. LEP Transp., Inc., 965 F.2d 391, 394 (7th Cir. 1992);
but see Sompo I, 456 F.3d at 57, 60-69 (holding that Carmack applies to the
domestic rail portion of a continuous intermodal shipment originating in a foreign
country even where the transport was under a single through bill of lading that
incorporated COGSA beyond the tackle-to-tackle phase). Despite this weight of
authority, our own precedent expressly forecloses Defendants’ argument in this
circuit. In Neptune Orient Lines, Ltd. v. Burlington N. & Santa Fe Ry. Co., 213
19
F.3d 1118, 1119 (9th Cir. 2000), we held that “the language of [Carmack] also
encompasses the inland leg of an overseas shipment conducted under a single
‘through’ bill of lading . . . .” See Nippon Yusen Kaisha v. Burlington & N. Santa
Fe Ry. Co., 367 F. Supp. 2d 1292, 1298 n.4 (C.D. Cal. 2005); Chubb Group of Ins.
Cos. v. H.A. Transp. Sys., Inc., 243 F. Supp. 2d 1064, 1068 n.3 (C.D. Cal. 2002).8
Contrary holdings in the Fourth, Sixth, Seventh and Eleventh Circuits rest
on the notion that the Board lacks jurisdiction over intermodal shipments into the
United States from a point in a foreign country under a through bill of lading. See,
e.g., Am. Road Serv. Co., 348 F.3d at 568 (“The [Board]’s jurisdiction 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.”). The Second
Circuit has disagreed, holding that a plain reading of the Board’s jurisdictional
statute applies Carmack to any rail transportation in the United States, even if it
originated in a foreign country under a through bill of lading. See Sompo I, 456
F.3d at 64. As we noted above, Carmack’s reach is coextensive with the Board’s
jurisdiction, see 49 U.S.C. § 11706(a); therefore our conclusions regarding the
8
Although some district courts within the Ninth Circuit have held that the
Carmack Amendment did not apply when the cargo at issue was shipped pursuant
to a single through bill of lading, these opinions predate Neptune. See, e.g., Tokio
Marine & Fire Ins. Co., Ltd. v. Kaisha, 25 F. Supp. 2d 1071, 1081 (C.D. Cal.
1997).
20
extent of the Board’s jurisdiction, expressed in Neptune, determine Carmack’s
reach as well. Crucially, Neptune interpreted our precedent and Carmack’s
language to apply to “shipments to or from overseas ports” without any
requirement for a separate domestic bill of lading for the inland carriage. Neptune,
213 F.3d at 1119 (citing F.J. McCarty Co. v. S. Pac. Co., 428 F.2d 690, 692 (9th
Cir. 1970)).
Defendants’ attempt to relegate Neptune’s interpretation of Carmack to the
status of dictum is unavailing. There is no indication that Neptune “did not make a
deliberate decision to adopt the rule of law it announced.” United States v.
Johnson, 256 F.3d 895, 915 (9th Cir. 2001). Consequently, the absence of a
separate bill of lading does not remove this shipment from Carmack’s venue
restrictions.
C.
Defendants next argue that even if the Carmack Amendment could apply to
the inland leg of an international transport conducted under a single through bill of
lading, here the parties’ explicit contractual extension of COGSA inland should
take precedence. Given COGSA’s statutory language, Neptune’s holding is fatal to
this argument. Neptune’s import becomes clear when analyzed in light of the
distinctions and interactions between three sections of COGSA, currently codified
21
at 46 U.S.C. § 30701 Notes Sec. 7, 12 & 13.9 In relevant part, the text of these
sections is as follows:
• Section 7: Nothing contained in this chapter [this note] shall
prevent a carrier or a shipper from entering into any agreement,
stipulation, condition, reservation, or exemption as to the
responsibility and liability of the carrier or the ship for the loss
or damage to or in connection with the custody and care and
handling of goods prior to the loading on and subsequent to the
discharge from the ship on which the goods are carried by sea.
46 U.S.C. § 30701 Notes Sec. 7.
• Section 12: Nothing in this chapter [this note] shall be
construed as superseding any part of [the Harter Act], or of any
other law which would be applicable in the absence of this
chapter [this note], insofar as they relate to the duties,
responsibilities, and liabilities of the ship or carrier prior to the
time when the goods are loaded on or after the time they are
discharged from the ship. 46 U.S.C. § 30701 Notes Sec. 12
(emphasis added).
• Section 13: This chapter [this note] shall apply to all contract
for carriage of goods by sea to or from ports of the United
States in foreign trade. . . . The term ‘foreign trade’ means the
transportation of goods between the ports of the United States
and ports of foreign countries. Nothing in this chapter [this
note] shall be held to apply to contracts for carriage of goods by
sea between any port of the United States or its possessions, and
any other port of the United States or its possession: Provided,
however, That any bill of lading or similar document of title
which is evidence of a contract for the carriage of goods by sea
between such ports, containing an express statement that it shall
be subject to the provisions of this chapter [this note], shall be
subjected hereto as fully as if subject hereto by the express
9
Previously 46 U.S.C. app. §§ 1307, 1311 and 1312, respectively.
22
provisions of this chapter [this note]. 46 U.S.C. § 30701 Notes
Sec. 13.
Reading these three sections together reveals two interrelated reasons why the
contractual extension of COGSA to the inland leg of an intermodal, international
transport cannot supersede the requirements imposed by Carmack.
First, although Section 7 “confirms that nothing in COGSA constrains the
parties” from contractually extending COGSA’s protections beyond the tackle-to-
tackle period, it “leav[es] open the possibility that something else might constrain
them.” Michael F. Sturley, Freedom of Contract and the Ironic Story of Section 7
of the Carriage of Goods by Sea Act, 4 B ENEDICT’S M ARITIME B ULL. 201, 203
(Third/Fourth Quarter 2006) (emphasis added) [hereinafter Freedom of Contract].
Section 12 “completes the story that Section 7 merely begins,” by explicitly
confirming that this contractual autonomy is constrained by the presence of any
other law that would govern the parties before loading or after discharge. Id. at
203. In light of Neptune, the Carmack Amendment is just such an “other law” to
which Section 12 mandates that the contractual inland extension of COGSA must
yield. See Sompo I, 456 F.3d at 72-73 (relying in part on Section 12 to “hold that
23
the contractual provision extending COGSA’s terms inland must yield to
Carmack”).10
Second, Section 13’s language has an important negative implication for our
interpretation of the legal force of a contractual extension of COGSA under
Section 7. See id. at 70. Through Section 13, “Congress explicitly provided that
contracts extending [COGSA’s] reach in ways other than over land – in particular,
contractual extensions covering trade between United States ports (or ‘coastwide
trade’) – do have statutory force” and can “supersede prevailing federal statutes.”
Id. at 69-70.11 Congress did not include any comparable language with respect to a
contractual extension of COGSA to inland transport under Section 7, simply
stating that nothing within COGSA prevents parties from doing so. “‘[W]here
Congress includes particular language in one section of a statute but omits it in
another section of the same Act, it is generally presumed that Congress acts
intentionally and purposely in the disparate inclusion or exclusion.’” Camacho v.
10
The congressional debates about COGSA reflect a similar understanding.
As Senator White explained, “[t]he legislation supersedes the so-called ‘Harter
Act’ from the time the goods are loaded on the ship to the time they are discharged
from the ship. Otherwise our law remains precisely as it is, unaffected and
unimpaired by the proposed legislation.” 1 T HE L EGISLATIVE H ISTORY OF THE
C ARRIAGE OF G OODS BY S EA A CT AND THE T RAVAUX P RÉPARATOIRES OF THE
H AGUE R ULES 589 (Michael F. Sturley ed. 1990) (emphasis added).
11
In the absence of such an extension, another federal statute, the Harter Act,
applies to shipments between domestic ports. See Sompo I, 456 F.3d at 69 n.15.
24
Bridgeport Fin. Inc., 430 F.3d 1078, 1081 (9th Cir. 2005) (quoting Russello v.
United States, 464 U.S. 16, 23 (1983)). “Therefore, that Congress, in enacting
[Section 7], omitted language similar to the language in [Section 13] is persuasive
evidence that Congress did not wish for period of responsibility clauses [adopted
under Section 7] to have the force of statute with the capability to supersede federal
law.” Sompo I, 456 F.3d at 71; see Freedom of Contract at 204 (noting this textual
distinction “is compelling evidence that indirectly confirms what Section 12 says
directly – that Section 7 was not intended to permit a private contract to override
otherwise applicable law”).12
Read together, these provisions make clear that “contracts extending
COGSA beyond the tackles must give way to conflicting law.” Sompo I, 456 F.3d
at 71.13 Per Neptune, Carmack is a conflicting law here. Although, as we have
12
The Second Circuit recently reaffirmed this core holding of Sompo I. See
Rexroth, 547 F.3d at 355 (“It is clear from Sompo that a ‘contractual provision
extending COGSA’s terms inland must yield to Carmack’ if Carmack is
applicable.”) (quoting Sompo I, 456 F.3d at 73).
13
We briefly distinguish earlier decisions containing general statements that
the contractual extension of COGSA could supersede other statutes. See Starrag v.
Maersk, Inc., 486 F.3d 607, 615 (9th Cir. 2007); Sea-Land Serv., Inc. v. Lozen
Int’l, L.L.C., 285 F.3d 808, 817 (9th Cir. 2002); N. River Ins. Co. v. Fed Sea/Fed
Pac Line, 647 F.2d 985, 987 (9th Cir. 1981). First, none of these cases addressed a
potential conflict between COGSA and Carmack. Second, the original source for
all of these statements is Pan Am. World Airways, Inc. v. Cal. Stevedores & Ballast
Co., 559 F.2d 1173 (9th Cir. 1977). See N. River, 647 F.2d at 987 (citing Pan
(continued...)
25
discussed, the Eleventh Circuit has allowed the contractual extension of COGSA
inland, that court disagrees with ours about the reach of Carmack where the parties
have used a through bill of lading. Compare Neptune, 213 F.3d at 1119 (“The
language of [Carmack] also encompasses the inland leg of an overseas shipment
conducted under a single ‘through’ bill of lading . . . .”) with Altadis, 458 F.3d at
13(...continued)
Am.); Sea-Land, 285 F.3d at 817 (citing N. River); Starrag, 486 F.3d at 615 (citing
Sea-Land). Importantly, Pan American addressed “a contract for carriage between
a port in the continental United States and a port in a United States possession.”
559 F.2d at 1175 n.3. In other words, Pan American dealt with an extension of
COGSA to coastwide trade, and therefore triggered Section 13’s explicit mandate
that such extensions should apply “as fully as if subject [thereto] by the express
provisions of [COGSA].” Id. (quoting 46 U.S.C. § 1312). Its holding therefore
has no bearing on the legal weight that should be afforded to inland contractual
extensions of COGSA under Section 7. See N. River, 647 F.2d at 988-89 (noting
this distinction). Finally, none of these opinions ultimately relied on their
statements that the contractual extension of COGSA could supersede a federal
statute in order to reach their holding. See Starrag, 486 F.3d at 615 (noting that
“where the parties contractually extend the COGSA to cover the damage, the
Harter Act does not apply,” but ultimately concluding that “even if the Harter Act
applied,” it would not prohibit the challenged limited liability clause); Sea-Land,
285 F.3d at 817 (noting that “because COGSA is incorporated by contract into Sea-
Land’s bills of lading, ‘it, rather than the Harter Act, controls,’” but only after it
had already concluded that the Harter Act did not apply to the case at bar in the
first place); N. River, 647 F.2d at 987, 989 (noting that “[w]hen COGSA is
incorporated by contract, it, rather than the Harter Act, controls” within the context
of a case that ultimately turned on the interaction between the contractual extension
of COGSA and another contractual term). “[W]e are not bound by a holding . . .
‘where it is merely a prelude to another legal issue that commands the panel’s full
attention . . . .’” V.S. ex rel. A.O. v. Los Gatos-Saratoga Joint Union High Sch.
Dist., 484 F.3d 1230, 1232 n.1 (9th Cir. 2007) (quoting United States v. Johnson,
256 F.3d 895, 915 (9th Cir. 2001)).
26
1291 (“The case law has established that the Carmack Amendment does not apply
to a shipment from a foreign country to the United States . . . unless the domestic,
overland leg is covered by a separate bill of lading.”). Because here Carmack is
federal law conflicting with the parties’ contractual extension of COGSA, we
cannot follow the Eleventh Circuit by validating COGSA’s inland reach.
Defendants argue that policy considerations of contractual autonomy,
efficiency and uniformity of maritime liability rules weigh in favor of allowing
shippers and carriers to extend COGSA inland. The Supreme Court recently
endorsed these policy objectives by emphasizing that “[c]onfusion and inefficiency
will inevitably result if more than one body of law governs a given contract’s
meaning.” Kirby, 543 U.S. at 29. The unanimous Court in Kirby further observed
that an inability to extend COGSA’s default rules to inland transport, so that entire
shipments could be governed by the same liability regime, would defeat “the
apparent purpose of COGSA[] to facilitate efficient contracting in contracts for
carriage by sea.” Id.; see Royal Ins. Co. of Am. v. Orient Overseas Container Line
Ltd., 525 F.3d 409, 419 (6th Cir. 2008) (“Kirby’s reasoning affirms the broader
principle that courts should evaluate maritime contracts in their entirety rather than
treating each of the multiple stages in multimodal transportation as subject to
separate legal regimes, which would be an obstacle to uniform and efficient
27
liability rules.”). Ignoring a contractual provision incorporating COGSA seems
particularly inappropriate where, as here, “the parties to the bill of lading were
sophisticated business entities that should rarely be released from contractual
obligations.” Raymond T. Waid, Comment, Piloting in Post-Kirby Waters:
Navigating the Circuit Split Over Whether the Carmack Amendment Applies to the
Land Leg of an Intermodal Carriage of Goods on a Through Bill of Lading, 34
T RANSP. L.J. 113, 143 (Summer 2007).
Nonetheless, and mindful of these policy considerations, Kirby does not
control here. There, the Court held that state law did not apply to a bill of lading
that extended COGSA inland, where COGSA and the state law conflicted. Kirby,
543 U.S. at 28-29. Focusing as it did on the need for state law to yield to federal
law in the maritime context, the Court did not have occasion to consider which of
two conflicting federal laws should govern a maritime shipment with an inland leg.
See Sompo I, 456 F.3d at 75 (“We cannot interpret the Kirby Court’s language
concerning the policy underlying COGSA . . . as implying that a contract extending
COGSA inland should supersede an otherwise applicable federal law.”) (emphasis
in original). The policy of uniformity in maritime shipping law, however
compelling, must give way to controlling statutes and precedent. Given Neptune’s
holding that Carmack applies and the conspicuous absence in COGSA of language
28
allowing parties to give superseding statutory force to their contractual extensions
of COGSA inland under Section 7, we hold that a mere contractual extension of
COGSA is not sufficient by itself to overcome Carmack.
Nevertheless, Carmack – including its restrictive venue provisions – is
merely a set of default rules. To the extent Carmack sanctions alternative
provisions, a properly adopted alternative forum selection clause would eliminate
Carmack as a conflicting “other law” superseding the parties’ contractual extension
of COGSA. Neptune did not reach this issue and does not hold otherwise. As
explained above, COGSA’s Section 7 cannot give such contracts statutory force.
But Carmack itself does contain two provisions for avoiding the statutory defaults:
49 U.S.C. §§ 10502 & 10709. We next turn to these two possible Carmack opt-
outs.
III. Contracting for Alternative Terms under Carmack
As discussed, whereas COGSA would allow a reasonable alternative forum
selection clause, Carmack strictly limits the venues in which a party may bring a
claim. See 49 U.S.C. § 11706(d)(2)(A). In this case, Tokyo does not fit into any
of the categories to qualify as an acceptable forum under Carmack. See Regal-
Beloit, 462 F. Supp. 2d at 1103.14 Accordingly, the Tokyo forum selection clause’s
14
We agree with the district court’s conclusion that “[i]f applicable, the
(continued...)
29
enforceability turns on whether the parties complied with the applicable
requirements for opting out of Carmack.
Congress created two different mechanisms – § 10502 and § 10709 – by
which some rail services may be exempted from certain requirements usually
imposed by Carmack. These dual provisions require us to resolve whether the
parties entered into a § 10502 or a § 10709 contract and, relatedly, what each
provision requires for avoiding Carmack. We conclude that § 10502 is the only
proviso the parties here could have followed to contract out of Carmack’s venue
restrictions. Because the district court instead analyzed the contracts under
§ 10709, we remand for an application of §10502, the requirements of which we
clarify below.
A.
Once again, we preface our analysis by looking to the relevant statutory
language. Section 10502(f) authorizes the Board to exempt from Carmack
“transportation that is provided by a rail carrier as part of a continuous intermodal
movement.” Here, “rail carrier” is subject to the same “Definitions” section we
applied above to conclude that even an ocean carrier like K-line is a rail carrier
14
(...continued)
Carmack Amendment would limit venue in this case to California, Oklahoma, or
Wisconsin.” Regal-Beloit, 462 F. Supp. 2d at 1103.
30
when contracting to provide inland rail transportation. See 49 U.S.C. § 10102(providing definitions for “this part”).15 Thus, K-line is a rail carrier for purposes
of determining whether it provides transportation that is exempt under the Board’s
§ 10502 authority. It is undisputed that the Board has exempted the transportation
at issue here. See 49 C.F.R. § 1090.2 (“[R]ail TOFC/COFC service and highway
TOFC/COFC service provided by a rail carrier either itself or jointly with a motor
carrier as part of a continuous intermodal freight movement is exempt from the
requirements of 49 U.S.C. subtitle IV. . . .”).16
The Board’s action relieves carriers providing such exempt transportation
from certain regulatory burdens, such as rate regulation. See, e.g., 49 U.S.C.
§ 10701. Carmack’s liability and venue rules are not so plainly waived, however.
The statute mandates that “[n]o exemption order issued pursuant to this section
shall operate to relieve any rail carrier from an obligation to provide contractual
terms for liability and claims which are consistent with the provisions of section
11706 of this title.” 49 U.S.C. § 10502(e). Nonetheless, § 10502(e) also provides
that carriers and shippers thus exempted are not unalterably bound by the liability
15
Specifically, “‘[t]his part’ refers to 49 U.S.C. Subtitle IV, Part A, which
includes Carmack.” Sompo II, 540 F. Supp. 2d at 494.
16
These acronyms respectively refer to “trailer on flatcar” and “container on
flatcar” service.
31
and venue restrictions in Carmack’s § 11706, because “[n]othing in this subsection
or section 11706 of this title shall prevent rail carriers from offering alternative
terms. . . .” Id. These two clauses of § 10502(e) are not inconsistent: carriers
providing exempt transportation are obliged to provide terms consistent with
Carmack’s venue and liability protections to their shipper customers, but are
ultimately free to contract for terms different from those in § 11706. Courts have
concluded that the “combined effect” of § 10502 and § 11706 is to permit carriers
providing exempt transportation to contract for terms that are different from
Carmack’s defaults so long as they first offer the shipper the option of full
Carmack protections, presumably at a higher rate. See Sompo I, 456 F.3d at 60(collecting authority). If the carrier fails to make this initial offer, however, “then
the shipper may sue the carrier under Carmack.” Id.17
On the other hand, avoiding Carmack’s default rules under § 10709 is
simpler: “[o]ne or more rail carriers providing transportation subject to the
jurisdiction of the Board . . . may enter into a contract with one or more purchasers
of rail services to provide specified services under specified rates and conditions.”
49 U.S.C. § 10709(a) (emphasis added). Under such an agreement for nonexempt
transportation, carriers “have no duty in connection with services provided under
17
The Second Circuit’s recent limitation of Sompo I in Rexroth, 547 F.3d at360 n.15, discussed Sompo I’s interpretation of § 10502 with approval.
32
such contract other than those duties specified by the terms of the contract.” 49
U.S.C. § 10709(b). Moreover, “[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,” 49 U.S.C. § 10709(c)(1) (emphasis
added) – “this part” encompassing the Carmack Amendment.
The terms of these two different provisions evidence a clear distinction
between § 10502 contracts and § 10709 contracts. The distinction is based on
whether the transportation at issue in the contract is exempt from Board regulation.
Whereas § 10502 requires carriers providing exempt transportation to offer
Carmack protections before they can successfully contract for alternative terms,
§ 10709 contains no such language – indeed, it explicitly contemplates that
nonexempt carriers’ contracts alone control. Defendants argued successfully
before the district court that they entered into a § 10709 contract with Plaintiffs,
and thus were not required to offer Carmack protections as a prerequisite for their
extension of COGSA to the inland segment of the transport. Defendants point to
the MITA, which was incorporated by the ERTA and explicitly states “[t]his
MITA and any agreements, price documents or contracts that reference this MITA
have been made under 49 U.S.C. § 10709.” Plaintiffs argue on appeal that
33
Defendants could not have entered into even a legitimate § 10709 contract without
first offering full Carmack protections.18 We disagree with both parties’ reasoning.
Plaintiffs are incorrect that § 10709 requires offering Carmack protections. See
Sompo II, 540 F. Supp. 2d at 494 (collecting district court cases); but see id. at
495-98 (discussing cases that “have varied wildly” on this issue). In any event,
Defendants are mistaken that simply asserting in a contract that it was made under
§ 10709 makes it so. The contract here had to be a § 10502 contract because it
concerned exempt transportation, and must therefore be analyzed on remand under
the requirements of that section.
B.
The parties’ confusion is understandable given the “muddled state of the
law.” Sompo II, 540 F. Supp. 2d at 498 & n.8 (citing “[s]everal courts [that] have
18
Although Plaintiffs did not explicitly raise this argument in their
opposition to the motion to dismiss, we exercise our discretion to address it here.
See Self-Realization Fellowship Church v. Ananda Church of Self-Realization, 59
F.3d 902, 912 (9th Cir. 1995). Plaintiffs had no reason to address the potential
inapplicability of § 10709 below because this was not raised by Defendants in their
motions to dismiss, which instead were limited to the assertion that COGSA, rather
than Carmack, should govern. Defendants only added that they were exempt from
the Carmack’s requirements under § 10709 in their reply briefs. It is unreasonable
to require Plaintiffs to argue that a particular provision did not apply before
Defendants even suggested that this provision authorized their contracts. Reaching
the argument is appropriate because this issue presents a purely legal question, see
id., and Defendants will not be prejudiced, as they have fully briefed this issue on
the merits, see United States v. Fonseca-Caro, 114 F.3d 906, 907 n.2 (9th Cir.
1997) (per curiam).
34
noted that this issue has not been adequately addressed”). Congress has not
provided any guidance regarding how to read § 10502 and § 10709 in tandem, and
very few courts have squarely confronted the question.19
We cannot adopt either of the parties’ arguments, however, as each would
render one of the statutory provisions practically meaningless. Plaintiffs’ argument
that a carrier can form a § 10709 contract only if it first offers the shipper full
Carmack protections essentially converts all § 10709 contracts into § 10502
contracts. Cf. Sompo II, 540 F. Supp. 2d at 494 (“Most courts have concluded that
[the statutory] language indicates that § 10709 contracts are not subject to
Carmack, and need not offer a full Carmack liability option before properly
limiting carrier liability.”). Defendants’ argument, however, effectively nullifies
§ 10502 because it would allow any carrier – even those exempted under § 10502 –
to avoid § 10502’s prerequisites simply by stating that its contract was pursuant to
§ 10709.20 It would be “nonsensical for . . . § 10502 to permit a certain category of
19
The parties have therefore been forced to rely on unpublished district
court decisions to support their respective arguments. See Tamini Transformatori
S.R.L. v. Union Pac. R.R., No. 02 Civ. 129, 2003 WL 135722 (S.D.N.Y. Jan. 17,
2003) (supporting Plaintiffs’ argument); Tokio Marine & Fire Ins. Co. v. Mitsui
O.S.K. Lines, Ltd., No. CV 02-3617, 2003 WL 23181013 (C.D. Cal. June 27, 2003)
(supporting Defendants’ argument).
20
We are particularly troubled by the potential for such an outcome where,
as here, the statement that the agreement is governed by § 10709 is buried within
(continued...)
35
rail contracts to offer specific rates and terms but require an initial offer of full
Carmack liability and . . . § 10709 to permit the same category of rail contracts to
offer specific rates and terms with no such requirement of an initial offer of full
Carmack liability.” Id. at 499 (emphasis in original); see also id. (“Section 10709
simply cannot be used as a tool to extract contracts governing exempted rail
carriers that operate one leg of a continuous intermodal movement from the
regulatory demands of § 10502 and Carmack.”). When the Board exempted the
category of transportation at issue here, the providers of that transportation,
including Defendants, gained the benefits of deregulated rates. The Board’s
exemption removed this transportation “from the requirements of 49 U.S.C.
subtitle IV,” 49 C.F.R. § 1090.2, which includes the provision setting standards
for rates, see 49 U.S.C. § 10701. But Subtitle IV also includes § 10709.
Consequently, carriers providing exempt transportation gain the benefits of
deregulation, but lose the opportunity to contract for preferable terms under §
10709 without first offering Carmack terms.
20
(...continued)
several layers of incorporated text, of which the shipper had no direct knowledge.
See Sompo II, 540 F. Supp. 2d at 500 (“First, it is not clear that the shippers . . . are
on actual notice of either the ITAs or the rail carrier circulars or have the
opportunity to review them and, second, there are too many steps incorporated by
reference to properly charge the shippers with notice of their terms.”).
36
In keeping with Congress’ specification of two distinct methods for carriers
to avoid the requirements imposed by Carmack, we therefore hold that a carrier
providing nonexempt transportation may contract under § 10709 without offering
Carmack protections, but a carrier providing exempt transportation must proceed
under § 10502, which does require such an offer. See Sompo II, 540 F. Supp. 2d at
499. Accordingly, Defendants here could not have entered into a § 10709 contract
notwithstanding the MITA’s clause declaring otherwise. Defendants accept that
§ 10502 covers exempt transportation, but argue that carriers providing exempt
transportation could nevertheless still choose to contract under § 10709. Our
interpretation of the relationship between § 10502 and § 10709 forecloses this
argument.21
C.
21During oral argument, Defendants attempted to elude § 10502’s
requirements, asserting that: (1) § 10502 applies only to “common carrier”
contracts, (2) § 10709 applies only to “private” contracts and (3) the instant
contract falls into the latter category. We reject this argument. First, the argument
was waived. See United States v. Kimble, 107 F.3d 712, 715 n.2 (9th Cir. 1997)
(noting that arguments which are “not coherently developed in [the] briefs” are
abandoned); Acosta-Huerta v. Estelle, 7 F.3d 139, 144 (9th Cir. 1992) (noting that
“issues raised in a brief which are not supported by argument are deemed
abandoned”). Second, this argument appears to have no basis in our case law or
statutes. We found no authority that distinguishes between § 10709 and § 10502
contracts in the manner Defendants suggest. Furthermore, neither § 10709 nor §
10502 uses the terms “private contract” or “common carrier contract” and neither
of these phrases is included in the statute’s “definitions.” See 49 U.S.C. § 10102.
37
In sum, § 10502 provides the only acceptable method through which these
parties might have agreed to the Tokyo forum selection clause. To comply with §
10502, K-line needed to offer Carmack’s protections when contracting with
Plaintiffs. K-line argues that it did so, pointing to a clause in the MITA that reads,
“[o]n domestic shipments that originate in the United States, Shippers may, at their
option, select the liability provisions set forth in 49 U.S.C. § 11706.” We are
skeptical that reference to Carmack in connection with shipments originating in the
United States, appearing in the MITA instead of in the bills of lading, could fulfill
§ 10502’s requirement that Carmack protections be offered. Perhaps more
compellingly, K-line points to Clause 5(1) of the bills of lading, which allows K-
line to subcontract with rail carriers “on any terms whatsoever.” From this, it
might be inferred that by making the choice to allow K-line to do all the
subcontracting on “any terms whatsoever,” Plaintiffs implicitly considered and
rejected Carmack terms. Plaintiffs counter that no evidence of an offer of these
terms exists and that another part of the MITA seems to preclude Carmack from
applying.22
22
The parties’ disagreement about what was offered in the bills of lading by
way of the later provisions of the MITA is unsurprising because the interactions
among the bills of lading, the MITA and ERTA are far from clear. Although the
MITA states that “all Shipments are subject to this MITA” regardless of their
billing method (including a bill of lading), it also establishes that “this MITA . . .
(continued...)
38
It is improper for us, on this record, to decide in the first instance whether
the parties’ negotiation and acceptance of their numerous, cross-referenced
agreements included an offer of Carmack terms or an understanding that Carmack
terms were available but were rejected. Section 10502(a) says only that the
Carmack terms must be offered, not necessarily that they appear in the written
agreement. Thus, on remand, the district court may develop the record with
respect to the parties’ understanding of whether Carmack terms were on the table
when they executed the bills of lading.
Conclusion
As a matter of policy, it may be that sophisticated commercial entities
should be able to freely decide by contract the liability regime that is to govern the
shipment of goods from a foreign country to their ultimate destination in the
22
(...continued)
as well as the terms and condition of . . . ocean or rail carrier’s Bills of Lading . . .
shall constitute the entire contract for transportation between the parties.” The
terms of the MITA do not make clear, then, whether the MITA’s or the bills of
lading’s terms take precedence in the case of a conflict. This becomes increasingly
complex because the ERTA never explicitly incorporated the MITA’s venue
provisions, and it is unclear whether its more general incorporation language
would encompass these restrictions. Finally, the MITA establishes that changes
can be made to its terms if they are “approved in writing prior to the issuance of
any shipping document,” or “through a document signed by a duly authorized
manager of UPRR.” The record does not indicate whether any such authorization
occurred. This factual morass may benefit from further development before the
district court on remand.
39
United States, and do so utilizing a single bill of lading. Nonetheless, given the
language of the relevant federal statutes and our own precedent, we hold that
COGSA does not govern the inland transport at issue here unless the parties opted
out of Carmack in accordance with the requirements of 49 U.S.C. § 10502. We
further hold that § 10709 cannot apply here given the exempt status of the
transportation involved. Because the district court did not consider whether the
parties opted out of Carmack’s default rules under § 10502, thereby clearing the
way for COGSA to apply by contractual extension, we remand for that
determination.
REVERSED and REMANDED.
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Counsel Listing
Dennis Cammarano, Long Beach, California, for the plaintiffs-appellants.
Alan Nakazawa, Cogswell Nakazawa & Chang, LLP, Long Beach,
California, for the defendants-appellees Kawasaki Kisen Kaisha, Ltd. and K-Line
America, Inc.
Leslie G. McMurray, Valley Village, California, for the defendant-appellee,
Union Pacific Railroad Company.
41