Kawasaki Kisen Kaisha v. Regal-Beloit Corp., Union Pacific Railroad Co., v. Regal-Beloit Corp.


Whether the Carmack Amendment applies to the inland portion of an intermodal shipping agreement when the parties agreed to a bill of lading that specified the Carriage of Goods by Sea Act to control.

Oral argument: 
March 24, 2010

Respondent, Regal-Beloit, (“Regal”) a manufacturer of electric motors, brought suit against Petitioners, Kawasaki Kisen Kaisha (“K-line”), and Union Pacific Railroad (“UPRR”), the shippers of the motors. Regal alleges that goods were damaged while they were traveling on a UPRR train that derailed in Oklahoma. K-line and UPRR sought and were granted dismissal at the trial level, pursuant to a forum selection clause in the bill of lading between the parties. Regal claims that the bill of lading clause should not apply because the Carmack Amendment governs this transaction, while Petitioners claim that it does not and urge that their contract be upheld. The Ninth Circuit held that the Carmack Amendment applied and reversed the lower court. This case highlights a conflict between the forum selection clause in the bill of lading and the Carmack Amendment, which preempts state and common law claims and provides that it be the exclusive remedy for interstate shipping, and also narrowly restricts the venues in which disputes may be heard. The court must decide whether the Carmack Amendment will apply in this case, where the shipping involved not only domestic rail travel from California to Midwest destinations, but also included an international carriage by sea from China to California. The Court’s decision in this case will impact manufacturers and shippers across all industries. Petitioners additionally charge that a decision for Regal may upset the settled expectations of the international shipping industry, while Regal contends that a decision for Petitioners denying the Carmack Amendment’s applicability could potentially lead to litigation chaos.

Questions as Framed for the Court by the Parties 

(1) Whether the Carmack Amendment to the Interstate Commerce Act of 1887, which governs certain rail and motor transportation by common carriers within the United States, 49 U.S.C. §§ 11706 (rail carriers) & 14706 (motor carriers), applies to the inland rail leg of an intermodal shipment from overseas where the shipment was made under a "through" bill of lading issued by an ocean carrier that extended the Carriage of Goods by Sea Act, 46 U.S.C. § 30701 Note, to the inland leg, there was no domestic bill of lading for rail transportation, and the ocean carrier privately subcontracted for rail transportation.


Regal-Beloit (“Regal”), an electric motor company, contracted with Kawasaki Kisen Kaisha (“K-Line”), a shipping company, to have K-Line ship Regal’s goods from Shanghai, China, to several cities in the American Midwest. . K-Line and Regal entered into an intermodal bill of lading which covered the entire duration of the shipment, that is, from the goods’ journey beginning in China until their arrival at the inland destinations in America.

Under the bill of lading, K-line designated the Carriage of Goods by Sea Act (“COGSA”) as the law dictating the carriers’ responsibilities to the contracting company. The bill of lading also contained a Governing Law and Jurisdiction clause designating Japanese law as controlling the bill of lading and requiring that “any action thereunder or in connection with Carriage of Goods shall be brought before the Tokyo District Courts in Japan.”

The goods entered America via the Port of Long Beach in California. K-Line used its own ocean liner to carry the goods from China to Long Beach and then subcontracted with Union Pacific Railroad (“UPRR”) to ship the goods from California to the inland destinations. The agreement between K-line and UPPR, the Exempt Rail Transportation Agreement, provided that “[liability for freight loss and damage to lading while under the control of [UPPR] shall be governed by MITA [the Master Intermodal Transportation Agreement].” Furthermore, the MITA contained a forum selection clause designating a court of competent jurisdiction in Omaha, Nebraska, to hear disputes. While traveling through Tyrone, Oklahoma UPRR’s train derailed, and the goods were allegedly damaged.

Plaintiff, Regal Beloit, sued the defendants, K-Line and UPRR, in Los Angeles County Superior Court, California for damage to the goods. The defendants removed to Federal District Court for the Central District of California and K-Line filed a motion to dismiss, arguing that the forum selection clause in the bill of lading required suit to be brought in Tokyo. The district court granted the motion to dismiss despite Regal’s arguments that COGSA does not govern the inland transport of the goods unless the parties opt out of the Carmack Amendment, which they had not done. The Carmack Amendment governs rail and motor carriers that are also subject to jurisdiction of the Surface Transportation Board (“STB”). The Carmack Amendment preempts state and common law claims against shipping companies and provide the exclusive remedy for interstate shipping disputes about damages to goods. Furthermore, the Carmack Amendment limits the venues in which disputes may be heard.

The Ninth Circuit Court of Appeals overruled the district court’s dismissal and held that the Carmack Amendment does indeed govern the defendants’ liability for the destruction of goods during the inland portion of the shipment. The Circuit Court ruled that the forum selection clause designating Tokyo as the appropriate forum is valid only if the parties contracted out of the Carmack provisions. According to the Circuit Court, the parties did not satisfy the requirements of § 10709 or § 10502 of the Interstate Commerce Act, which allow parties to contract out of the Carmack Amendment. The Supreme Court granted certiorari to decide whether the Ninth Circuit correctly applied the Carmack Amendment.


Does the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. § 11706, apply to international ocean carriers or through shipments from foreign countries where the Surface Transportation Board (“STB”) has concurrent jurisdiction over foreign trade ocean carriages?

Petitioners, Kawasaki Kisen Kaisha Ltd. and “K” Line America, Inc. (“K-Line”) and Union Pacific Railroad (“UPRR”), argue that the Carmack Amendment to the Interstate Commerce Act (“ICA”), 49 U.S.C. § 11706, does not apply to import shipments from a foreign country to inland points in the United States, and hence, the Surface Transportation Board (“STB”) has no concurrent jurisdiction over ocean carriages. See Brief of Petitioner, K-Line at 17. K-Line does not dispute that the STB has jurisdiction over transportation by rail carriers and none over international transportation by ocean carriers where it is regulated by the Federal Maritime Commission. See Brief of K-Line at 6. In this case, however, K-Line contends that the Carmack Amendment does not apply, based on its language, relevant case law, and its purpose, noting that the Carmack Amendment was designed to cover operations to rail carriers and domestic rail transportation only. See Id. at 21. K-Line contends that because it falls outside the Carmack Amendment’s scope, it is not a “rail carrier” within the meaning of the ICA. See Id. at 18?19, 23. K-Line also cites Norwalk Southern Railway Co. v. Kirby, a case holding that a shipment involving carriage of goods by sea from a foreign country under bills of lading, was maritime in nature and hence implicated the Carriage of Goods by Sea Act’s (“COGSA”) default rules rather than the Carmack Amendment. See Id. at 16?17 (citing Norwalk Southern Railway Co. v. Kirby, 543 U.S. 14 (2004)). Because the Carmack Amendment did not apply to the shipment in Kirby, UPRR contends that it should likewise not apply here. See Brief of Petitioner, UPRR at 16.

In contrast, Respondent, Regal-Beloit Corporation, et al. (“Regal”), asserts that K-Line qualifies as a “rail carrier” for purposes of Carmack Amendment scrutiny. See Brief of Respondent, Regal at 80. In making this argument, Regal first notes that a “rail carrier” means “a person providing common carrier railroad transportation for compensation, but does not include street, suburban, or interurban electronic railways not operated as part of the general system of rail transportation.” See Id. at 81. Regal then suggests that the terms “railroad” and “transportation” are broadly defined by 49 U.S.C. § 10102(6), and that therefore, when K-Line shipped cargo from China to inland destinations in the Midwestern United States using its own containers, it provided “railroad transportation” as a “rail carrier” under 49 U.S.C. §10102(5). See Id. at 81?82. Hence, in Regal’s view, because K-Line performed transportation services commonly performed by rail carriers, it is subject to STB’s jurisdiction.

Does the Carmack Amendment apply to the inland portion of an intermodal shipment under maritime contracts where there is no separate bill of lading or does COGSA displace the Carmack Amendment’s applicability?

UPRR looks to the pre-1978 statutory language of the Carmack Amendment, which it argues clearly shows that it does not apply here. See Brief of UPRR at 16. In making this argument, UPRR notes that the pre-1978 statute suggests that the Carmack Amendment applies only to shipments “from any point in the United States to a point in an adjacent foreign country.” Id. Moreover, the text of the 1978 bill states that the ICA should be codified “without [making] substantive changes” and that the codification “may not be construed as making a substantive change in the law replaced.” Id. at 20?21. Moreover, interpreting the Carmack Amendment any other way, UPRR maintains, would not comport with the purpose of the statute, which was to provide a remedy for shippers to claim lost or damaged shipment by requiring the carrier to provide through carriage. See Brief of K-Line at 19. Unlike that scenario, UPRR argues that, because shippers in ocean carriage carry common carrier liability throughout the trip, there is no need for a Carmack-type remedy. See Id. at 19. Instead, the appropriate statute to apply to the inland portion of through shipments, UPRR suggests, is COGSA, not the Carmack Amendment, since it is a settled rule of law; moreover, applying the latter would disrupt efficient shipping practices and upset regulatory authority. See Id. at 19, 20, 21.

In response, Regal contends that rather than looking to the pre-1978 statutory language, the better approach is to apply the congressionally-enacted statute as it currently exists. See Brief of Regal at 21. In Regal’s view, the plain meaning of the statute is unambiguous and clear: the Carmack Amendment applies to the shipments at issue in this case. See Id. at 24, 28. Regal points to the plain language, which reads that “transportation in the United States [is] between a place in . . . the United States and a place in a foreign country,” 49 U.S.C. §10501(a)(2)(F); since the carriage at issue was transported from China to Indianapolis, Milwaukee, Minneapolis, or Chicago (each “a place in . . . the United States”) the Carmack Amendment undisputedly describes the shipments at issue here. See Id. at 28, 30.

Despite these rebuttals, K-Line raises a series of supplemental points in support of their claim that the Carmack Amendment should not be construed to cover transportation by ocean carriers under maritime contracts. First, K-Line contends that the Carmack Amendment’s definition of “property” applies only to property received for domestic rail transportation, not for cargo that is shipped by ocean under a through bill of lading. See Brief of Petitioner K-Line at 30?31. Because K-Line was not required to use rail to transport the shipper’s cargo, it argues that it did not receive the cargo for transportation as contemplated by the railroad clause of the Carmack Amendment. See Id. at 31?32. Second, K-Line contends that applying the Carmack Amendment here would conflict with 46 U.S.C. § 30701 Note § 7 of COGSA, which explicitly deals with international transportation under through bills of lading. See Id. at 33. Third, K-Line asserts that the Carmack Amendment would impose far greater liability by forcing carriers to be liable for loss or damage caused by a rail carrier than simply allowing the parties to contractually limit liability under COGSA. See Id. at 34?35. The Petitioners also contend that applying Carmack in maritime through transportation would create confusion, inefficiency, and unnecessary litigation costs. See Id. at 36. Finally, Petitioner UPRR asserts that because the parties contractually opted out of ICA altogether, the Carmack Amendment has no application here. See Brief of UPRR at 17.

Regal counters these points and first argues that the Carmack Amendment applies even if there is no separate bill of lading for the domestic inland portion of a intermodal shipment. See Brief of Regal at 30. Regal refers to the statutory text to rebut any claim of differentiation in a bill of lading requirement. See Id. at 31. Next, in response to K-Line’s argument that the Carmack Amendment would conflict with §7 of COGSA, Regal counters K-Line’s point that the Carmack Amendment would conflict with § 7 of COGSA by arguing that while COGSA provides a limited liability to the parties to inland transportation, as a matter of contract, these terms do not amount to the force of statutory law because there is another mandatory federal law directly on point, and as such, it must defer to the actual statute. See Id. at 40. Third, in response to K-Line’s argument that applying the Carmack Amendment would yield inconsistency, confusion, and inefficiency, Regal suggests that the best way to promote uniformity is to apply the Carmack Amendment to all rail transportation, including the inland portions of a through shipment from foreign countries. See Id. at 43. Doing so, in Regal’s view, would ensure that all of a ship’s cargo is subject to the same liability rules in the event of a derailment. See Id. at 43?44. In Regal’s view, any other result would create inconsistent liability regimes. See Id. at 44. Finally, contrary to UPRR’s contention, Regal maintains that the parties did not validly contract around their obligations under the Carmack Amendment since it is not possible to contract around the statute. See Id. at 55.


“This is an important case for the business community, because it affects, either directly or indirectly, almost every business in the country.”

This case will resolve a split in the circuits surrounding the application of the Carmack Amendment, which preempts state and common law claims against shipping companies, provides the exclusive remedy for damage to goods claims in interstate shipping, and limits the venues available to hear disputes. This case concerns the Carmack Amendment’s application to the inland portion of international shipping contracts as well as the circumstances under which parties may contract out of its strict venue rules pursuant to § 10709 of the Interstate Commerce Act.

Petitioners and amici, the International Group of Protection and Indemnity (P& I) Clubs, et al., argue that the Ninth Circuit’s decision undercuts the uniformity rationale that underlies the Supreme Court’s decision in Norfolk Southern Ry. Co. v. James N. Kirby Pty Ltd. Petitioner Union Pacific Railroad (“UPRR”) argues that, in Kirby, the Supreme Court instructed that federal maritime policy must allow shippers to use uniform and consistent rules for intermodal contracts. UPRR highlights the efficiency benefits that uniform terms across an intermodal contract create. UPRR contends that the Ninth Circuit’s decision leads to inefficiencies, including the application of different law to containers of goods depending on whether the containers are on a ship or rail car. Association of American Railroads (“AAR”) expands on this efficiency argument by pointing out that uniform terms allow railroads and ocean carriers to make contracts on a “bulk” basis rather than being concerned with the contents of individual containers, thus saving the time and expense of individual negotiations over each distinct container. . AAR contends that this allows railroads to load a large number of containers onto a single train without distinguishing containers based on value of the goods inside, furthering the efficiency goal.

Respondent Regal-Beloit (“Regal”) and Amici Transportation and Logistics Council and American Institute of Marine Underwriters (“AIMU”) argue that the uniformity concerns in Kirby are actually better served by applying the Carmack Amendment. Regal contends that the simplest way to achieve uniformity is to apply the Carmack Amendment to all long-haul rail transportation in the United States. According to Regal, if the Carmack Amendment does not apply here, then different liability regimes would apply to purely domestic shipments than what would apply to intermodal international shipments, despite the fact that the same train can carry goods from either type of shipment. That is, because one train, traveling from California to Oklahoma, can carry multiple containers, and one container may have originated in China, and another in California, if that train crashes, Regal argues that different law would apply in the litigation for the China container than the California container. Regal argues that with over 100 shippers providing service at the Port of Long Beach and hundreds of containers on each train, the result is chaos, not uniformity. AIMU takes this argument further by hypothesizing how the litigation would unfold in the case of a derailed train if the Court were to overturn the lower court. AIMU points out that with possibly dozens of containers on board, each with separate bills of lading and forum selection clauses, a single accident could be litigated in dozens of countries, leaving the witnesses to shuttle from trial to trail, country to country.

AAR, on the other hand, urges the court to consider the expectations of participants in this multi-billion dollar form of commerce. AAR contends that allowing Regal to avoid its contractual obligations and litigate the case in Tokyo permits different legal regimes to apply to a single transaction, creating much uncertainty in contracts for international commerce — especially for U.S. railroads.

Petitioner UPRR argues that using the parties’ bill of lading will not disrupt settled expectations in the transportation industry, contrary to Regal’s claim, because most countries outside the United States use regional conventions that provide mandatory laws governing rail transportation. As an example, UPRR argues that if the accident at issue here had occurred in Europe, the bill of lading would essentially give way to the inland legal regime in use in the region where the accident occurred. UPRR additionally argues that the transportation industry has dealt with these mandatory laws previously without difficulty, and has not incurred the effects that Regal and its amici portend.


In this case the Court will determine whether the Carmack Amendment to the Interstate Commerce Act of 1887, which governs rail and motor transportation by common carriers within the United States, applies to the inland rail leg of an intermodal shipment from overseas where the shipment was made under a through bill of lading that extended the Carriage of Goods by Sea Act to the inland leg. The parties offer differing accounts of the statutory language and proper legislative history of the relevant federal statutes. Additionally, the parties each point to precedents to support their positions on whether the Carmack Amendment applies.

Edited by