Railroad Legal Issues and Resources (2015)

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21 B. General Statutory Issues 238 The digest discusses the statutory issues and differences among the various Buy America provisions, including their coverage and applicability; exceptions, exclusions, and waivers; and bid certification and potential penalties, as well as multiple funding sources with Buy America provisions.75 C. Buy America Provisions and the Federal Railroad Administration 238 The digest discusses first, in some detail the Federal Railroad Administration (FRA) High-Speed Intercity Passenger Rail (HSIPR) Buy America provision76 and, second, the Amtrak Buy America provision.77 D. Buy America Provisions and the Federal Transit Administration 240 The digest analyzes the Buy America provision applicable to the Federal Highway Administration (FHWA),78 followed by an explanation of the Buy America provision that applies to the Federal Transit Administration (FTA).79 V. CARMACK AMENDMENT AND LIABILITY FOR LOST OR 242 DAMAGED GOODS A. Introduction 242 Many issues may arise under the Carmack Amendment concerning a railroad’s liability when, for example, a train transporting cargo derails. Sections B and C discuss statutes, regulations, and cases affecting the liability of railroads under the Carmack Amendment. Section D discusses the applicability of the Carriage of Goods by Sea Act (COGSA) and the Harter Act. Sections E through G consider whether the Carmack Amendment applies to an international shipment on a through bill of lading when a freight forwarder contracts for the inland rail portion, as well as other issues. Section H discusses articles that address, for instance, whether the Carmack Amendment applies to intermodal exports and whether the Supreme Court has misinterpreted the Carmack Amendment and COGSA. 75 Id. at 4–9. 76 Id. at 9–14. 77 Id. at 26 (footnote omitted). 78 Id. at 39–52. 79 Id. at 52.

22 Statutes and Regulations 242 B. The Carmack Amendment’s Effect on the Liability of 242 Railroad Carriers The Carmack Amendment, enacted in 1906 to amend the Interstate Commerce Act,80 imposes strict liability on common carriers for goods that are lost or damaged or not delivered on time, limits the liability of a carrier to the value of the damaged goods, and preempts state and common law claims in these instances.81 Cases 245 C. Applicability of the Carmack Amendment 245 1. Preemption of All Claims Under State Law 245 The Carmack Amendment bars all claims that would permit a railroad to be held liable under state law.82 2. Intrastate Shipment that Was Part of an Interstate Shipment 246 In Chartis Mexico, S.A. v. HLI Rail and Rigging,83 a federal district court in New York held that for shipments originating overseas under a single through bill of lading the initial carrier is liable for the inland portion of the transportation and, thus, is exempt from the Carmack Amendment. 3. Claims Brought Against the Originating Rail Carrier in the Judicial 247 District Where the Point of Origin Is Located The Carmack Amendment allows claims to be brought against originating rail carriers in the judicial district where the point of origin is located, as well as allows one court to exercise control over all claims subject to the Amendment. 84 80 See 49 U.S.C. §§ 11706 and 14706 (2014). 81 Regulations applicable to the Carmack Amendment are set forth in 49 C.F.R. pts. 1005 and 1035. 82 Gulf Rice Arkansas, LLC v. Union Pacific R.R. Co., 376 F. Supp. 2d 715, 719 (S.D. Tex. 2005). 83 Chartis Mexico, S.A. v. HLI Rail and Rigging, 2014 U.S. Dist. LEXIS 33745, at *1 (S.D.N.Y. Mar. 13, 2014), on reconsideration by, modified by, in part, summary judgment granted in part, 2015 U.S. Dist. LEXIS 15909 (S.D.N.Y., Feb. 9, 2015). 84 49 U.S.C. § 11706(d)(2)(A) (2014); Pacer Global Logistics, Inc. v. Amtrak, 272 F. Supp. 2d 784, 788 (E.D. Wis. 2003).

23 Statutes and Regulations 248 D. Applicability of the Carriage of Goods by Sea Act and the 248 Harter Act The Carmack Amendment may not apply when shipments originate overseas under a single through bill of lading or the shipper and carrier contract to limit the liability of intermediary carriers and freight forwarders. When the initial carrier is an ocean carrier, COGSA will apply,85 whereas the Harter Act applies to contracts of carriage of goods by sea between U.S. ports and between the United States and foreign ports.86 Cases 250 E. Carmack Amendment Inapplicable When the Parties 250 Contract Otherwise When parties engaged in maritime commerce enter into a contract and select COGSA to govern any dispute arising under the contract, the Carmack Amendment will not apply to the rail segment of an international shipment because the Carmack Amendment only applies to property for which a receiving rail carrier has issued a bill of lading.87 F. International Shipment on a Through Bill of Lading When a 252 Freight Forwarder Contracted for the Inland Portion The Carmack Amendment’s applicability also is limited when a shipment originated overseas under a single through bill of lading that covers the inland segment of the transportation.88 G. Effect on a Subcontractor of Covenants Not to Sue in a Through 253 Bill of Lading In Federal Insurance Company v. Union Pacific R. Co.,89 the Ninth Circuit held that a covenant not to sue in a through bill of lading between the shipper and the ocean carrier 85 49 Stat. 1207, codified at 46 U.S.C. § 30701 (note) (2012); GERARD J. MANGONE, UNITED STATES ADMIRALTY LAW 85 (1997). 86 46 U.S.C. § 30704 (2014) (previously codified at 46 U.S.C. § 193 (2000)). 87 Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp., 130 S. Ct. 2433, 2445, 177 L. Ed. 2d 440, 444 (2010). 88 Norfolk Southern Railway Co. v. Sun Chemical Corp., 735 S.E.2d 19, 28–29 (Ga. Ct. App. 2012), cert. denied, 2013 Ga. LEXIS 403 (Ga., Apr. 29, 2013). 89 651 F.3d 1175, 1180 (9th Cir. 2011).

24 precluded liability of the ocean carrier’s subcontractor Union Pacific to the property insurer Federal Insurance Company after a Union Pacific train derailed and destroyed the property. Articles 254 H. Recent Criticism of Laws Limiting Railroad Liability 254 Several articles have discussed the overlap of the Carmack Amendment and COGSA and the courts’ conflicting interpretations of the Carmack Amendment. 1. Need for a Uniform Law 255 A law review article published prior to Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp., supra, Part V.E, argues that the Carmack Amendment should apply to the inland segment of intermodal transportation, because the law on liability will not be uniform or predictable “if the law…change[s] with the geographical location of the cargo or with the mode of transportation.”90 2. Whether the Carmack Amendment Applies to 255 Intermodal Exports Another law review article argues that the Kawasaki case, supra, Part V.E, was wrongly decided and that an exemption under the Carmack Amendment of the inland segment of an overseas shipment eliminates the amendment’s application to a substantial amount of trade.91 3. Alternative Reasoning for the Kawasaki Decision 256 Another article critical of the Kawasaki decision argues that the Supreme Court misinterpreted the plain language of COGSA and the Carmack Amendment, noting that some lower court decisions after Kawasaki have stated that the Carmack Amendment applies to export shipments on through bills of lading.92 4. Judicial Split on Applicability of Carmack or COGSA to 257 International Shipments An article in the Transportation Law Journal argues that applying the Carmack Amendment to inland segments of international shipments subject to a through bill of lading will increase litigation and create uncertainty through conflict between contractual terms and 90 William P. Byrne, Loss and Damage Freight Claims, 36 TRANSP. L. J. 145, 174 (2009). 91 Patrick M. Talbot, How Swiftly the Carmack Amendment is Washed Away, 42 J. MAR. L. & COM. 631, 633–34 (2011). 92 O. Shane Balloun, The Derailment of a Transport Statute: How Regal-Beloit Shipwrecked the Carmack Amendment on the Shoals of the COGSA, 37 TUL. MAR. L. J. 379, 380, 394 (2013).