Second Circuit Bases Decision in Royal & Sun Multimodal Carriage Case on Recent Supreme Court Ruling in Regal-Beloit
Our June 30, 2010 Maritime Alert reported the U.S. Supreme Court’s decision in Kawasaki Kisen Kaisho Ltd. et al. v. Regal-Beloit Corp., et al. 561 U.S.___, 2010 WL 2471056 (2010). It explained how the Regal-Beloit decision would allow uniformity and predictability in the law governing the multimodal carriage of goods by not switching laws to the U.S. Carmack Amendment 49 U.S.C. § 11706 during the U.S. inland leg of multimodal carriage. It also indicated that a similar case, Royal & Sun Alliance Insurance, PLC v. Ocean World Lines, Inc., 572 F. Supp. 2d 379, 2008 AMC 2237 (S.D.N.Y. 2008), appeal docketed, No. 08-4481 (2d Cir. Sept. 3, 2008), was pending in the Second Circuit.
On July 20, 2010, the Second Circuit decided the Royal & Sun case – and provided the expected uniformity by deciding it according to the ruling in Regal-Beloit.
The Royal & Sun district judge, Alvin K. Hellerstein, had decided the case when the law in the Second Circuit held that the Carmack Amendment would govern the U.S. inland leg of a multimodal move. Nevertheless, he did not decide it in accordance with that law. Instead, Judge Hellerstein said, in a very thorough opinion, that he could not distinguish the Norfolk Southern Ry. Co. v. Kirby Pty Ltd., 543 U.S. 14 (2004) facts from the facts in Royal & Sun, and stated bluntly that he wished to follow the precedent set by the Supreme Court rather than the precedent set by the Second Circuit.
Now that the Supreme Court has reversed the Second Circuit law by its decision in Regal-Beloit, the Second Circuit has been forced to affirm Judge Hellerstein’s opinion.
Background on Royal & Sun
The facts in Royal & Sun are typical of a multimodal move. A cargo shipper contracted with a Non-Vessel Operating Common Carrier (NVOCC), which contracted with a Vessel Operating Common Carrier (VOCC) for sea carriage. The VOCC in turn contracted with a railroad for the inland U.S. carriage. Finally, the railroad contracted with a trucking company to complete the inland move. The cargo was damaged when the trucking company “low bridged” the cargo by attempting to drive under an overpass that was not as high as the truck. All carriers in the move were given the benefit of the Carriage of Goods by Sea Act (COGSA) package limitation through the NVOCC’s Himalaya Clause.
In applying COGSA to an accident involving the trucking company, the Second Circuit even reiterated the multimodal carriage policy arguments that were made by the Supreme Court in Regal-Beloit:
[T]he policy arguments made by the Court are equally applicable here. The [Supreme] Court says that a contrary result “would in effect outlaw through shipments under a single bill of lading,” [Regal-Beloit, 2010 WL 2471056] at *11, that “[n]one of Carmack’s legislative versions have applied to the inland domestic rail segment of an import shipment from overseas under a through bill,” id. at *12, and that “[a]pplying two different bill of lading regimes to the same through shipment would undermine COGSA and international, container-based multimodal transport,” id. at *13. Royal & Sun Alliance, Slip op. at 11.
In its ruling, the Second Circuit reinforced COGSA and the uniformity sought by the Supreme Court.