Supreme Court Backs “K” Line, UP in Liability Case

Supreme Court Backs “K” Line, UP in Liability Case

The U.S. Supreme Court on Monday rejected a claim that domestic shipping law covers liability for damages to international intermodal shipments moving inland, affirming the liability is governed by the Carriage of Goods by Sea Act.

By a 6-3 vote, the high court backed Japanese ocean carrier “K” Line and Union Pacific Railroad in rejecting a claim that the 1906 Carmack Amendment to the Interstate Commerce Act applied to goods moving on international through bills of lading. Carmack only applies in cases where a rail carrier receives goods from a shipper.

“It follows that Carmack does not apply if the property is received at an overseas location under a through bill that covers the transport into an inland location in the United States,” Associate Justice Anthony Kennedy wrote. “In such a case, there is no receiving rail carrier that ‘receives’ the property … and thus no carrier that must issue a Carmack-compliant bill of lading.”

UP and "K" Line appealed the case from the 9th U.S. Circuit Court of Appeals. Kennedy rejected the argument made by attorneys representing a group of shippers led by Regal-Beloit that effectively “K” Line was a rail carrier that was obligated to issue a bill of lading under the Carmack Amendment.

“Carmack did not require ‘K’ Line to issue bills of lading because ‘K’ Line was not a receiving rail carrier,” according to Kennedy’s opinion. “‘K’ Line obtained the cargo in China for overseas transport across an ocean and then to inland destinations in the United States.”

However, in a dissenting opinion, Associate Justice Sonia Sotomayor wrote that domestic carrier UP should have issued a bill on receipt of the cargo.

“Unless they have permissibly contracted around Carmack’s requirements, rail carriers in the United States such as petitioner Union Pacific are subject to those requirements,” Sotomayor wrote. “To avoid this simple conclusion, the Court contorts the statute and our cases, misreads the statutory history, and ascribes to Congress a series of policy choices that Congress manifestly did not make.”

-- Contact R.G. Edmonson at bedmonson@joc.com.