Background
National Railway Equipment shipped four locomotives via rail carriers to North Carolina, but the locomotives derailed during Hurricane Florence. NRE’s insurer, Certain Underwriters at Lloyd’s, paid NRE and sued the rail carriers, Evansville Western Railway and CSX Transportation, to recoup its payment under the Carmack Amendment. The carriers argued their liability was capped by the rates NRE’s logistics manager selected when placing the orders. The district court granted summary judgment for Evansville Western Railway and denied Lloyd’s motion for judgment as a matter of law against CSX, limiting recovery to the contractual caps.
The court’s reasoning
The court reviewed the grant of summary judgment and the denial of a motion for judgment as a matter of law de novo. Under the Carmack Amendment, a carrier may limit liability if it gives the shipper a reasonable opportunity to choose between liability levels, obtains the shipper’s agreement, and issues a bill of lading. The court distinguished the case from ABB Inc. v. CSX Transportation, noting that unlike the shipper in that case, the logistics manager here was aware of the published rates and the liability caps associated with them. The manager affirmatively chose lower rates because the shipper had its own insurance. The court found the Standard Transportation Commodity Code used in the bills of lading was an ambiguous term that, when interpreted with the shipper’s course of dealing and testimony, evidenced an agreement to the limited liability rates. The record established that the shipper understood the code selected the carrier’s rate with a liability cap of twenty-five thousand dollars for Evansville Western Railway and ten thousand dollars for CSX.
What it means going forward
The decision reinforces that rail carriers can enforce liability caps when shippers have actual knowledge of the rates and liability limits and affirmatively select the lower-cost option, even if the bill of lading does not explicitly state the dollar amount of the cap.