Eleventh Circuit Holds That an Inland Carrier is Not a Third-Party Beneficiary of a Himalaya Clause in a Multi-Modal Bill of Lading
April, 2003
by Kimbley A. Kearney and
In Kirby v. Norfolk Southern Railway Co., 2002 A.M.C. 2113, 300 F.3d 1300 (11th Cir.), the Eleventh Circuit Court of Appeals held that a railroad’s liability for damaged cargo was not limited under Himalaya clauses in either of two carriers’ bills of lading. A Himalaya clause extends the carrier’s defenses and limitations of liability under the bill to the carrier’s agents and subcontractors.
Facts
Plaintiff Kirby, an Australian company, had sold certain machinery to the General Motors plant in Huntsville, Alabama. In fulfilling its obligation to deliver the machinery, Kirby hired International Cargo Control (ICC), a freight forwarder, to coordinate and facilitate the transport. ICC issued Kirby a bill of lading containing a Himalaya clause that extended the limitations of ICC’s liability to “any servant, agent or other person including any independent contractors whose services have been used to perform the contract.”
ICC then sub-contracted with Hamburg Sud, a German ocean shipping company, to transport the machinery on the ocean leg of the journey, from Sydney to Savannah, Georgia. Hamburg Sud issued its own bill of lading to ICC. Hamburg Sud’s bill also contained a Himalaya clause limiting its liability to “all agents, servants, employees, representatives, all participating (including inland) carriers and all stevedores, terminal operators, warehousemen, crane operators, watchmen, carpenters, ship cleaners, surveyors and all independent contractors whatsoever.”
Hamburg Sud’s American subsidiary hired railway company Norfolk Southern to perform the inland transport from Savannah to Huntsville. Norfolk Southern did not issue its own bill of lading, but acted under Hamburg Sud’s. While en route, the train derailed and caused $1.5 million in damages to the cargo.
Kirby sued Norfolk Southern for its damages. Norfolk Southern claimed that its liability was limited under the Himalaya clauses in the bills of lading issued by ICC and Hamburg Sud. The District Court for the Northern District of Georgia agreed, finding Norfolk Southern was a beneficiary of Hamburg Sud’s Himalaya clause, thus operating to limit the railway’s liability.
Analysis
The Eleventh Circuit Court of Appeals, over one dissent, reversed and remanded. Initially, the court found that the Hamburg Sud bill of lading – issued to ICC – did not bind Kirby because ICC was not acting as Kirby’s agent under that bill. Thus, Hamburg Sud’s Himalaya clause did not extend to Norfolk Southern to limit its liability.
The court went on to consider whether Norfolk Southern’s liability might still be limited under ICC’s bill of lading. The court applied the “clarity of the language” test, under which a Himalaya clause is enforceable only if it expresses a clear intent to extend to a well-defined class of readily identifiable beneficiaries. Under that test, the court found that Norfolk Southern, as a sub-sub-contractor and an inland carrier, was not a third party beneficiary of the Himalaya clause in ICC’s bill of lading. However, the court clarified that it was not holding that an inland carrier could never claim the benefit of a Himalaya clause – only that to do so, a special degree of specificity of language is required. Had the parties here intended for Norfolk Southern to be covered by the Himalaya clause, they could have easily added “inland carriers” to the list of designated beneficiaries, as Hamburg Sud had done.
In so holding, the court explicitly recognized that its “clarity of the language” test was at odds with the approach employed in other circuits. The Ninth Circuit, for example, determines who may benefit from a Himalaya clause by comparing the nature of the services performed by the party seeking to invoke the clause to the carrier’s responsibility under the carriage contract. See e.g. Akiyama Corp. of Am. v. M.V. Hanjin Marseilles, 162 F.3d 571 (9th Cir. 1998).
Learning Point:
As the holding of this case makes clear, the courts of appeal are applying different standards for determining who may claim the benefits of limited liability under Himalaya clauses in carriers’ bills of lading. Incidentally, the case is currently pending before the United States Supreme Court on a petition for writ of certiorari, the Solicitor General having been invited to file a brief expressing the views of the United States. However, until such time as the Supreme Court decides to take up the issue, inland carriers can protect themselves by ensuring that the Himalaya clauses in the bills of lading under which they operate include very specific language clearly identifying them as intended beneficiaries.
Back to CM Report of Recent Decisions (2003v2) 2003 Volume 2 Table of Contents
