Second Circuit Affirms Summary Judgment Opinion Allocating Financial Responsibility For April 2006 Texas Train Derailment

In an April 2006 train derailment near Dallas, much of a train’s cargo, which included tractors, copying machines, and other manufactured goods, was destroyed.  The goods were manufactured in Japan, shipped across the Pacific, and loaded onto railcars in California.  Following the derailment, the Japanese insurers, who were subrogees of the cargo owners, filed suit against the railroads to recover damages.  The case originally proceeded focusing on the plaintiffs’ federal causes of action under the Carmack Amendment, which addresses carrier liability for lost or damaged goods in interstate shipments and would have preempted most of, if not all of, the plaintiffs’ state law claims.  While the case was proceeding, however, the U.S. Supreme Court held in Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit that the Carmack Amendment does not apply to shipments that originate overseas under a single through bill of lading.

Accordingly, the cases were remanded to the district court.  The district court granted summary judgment to the railroad defendants against an insurer of one of the cargoes based on an Exoneration Clause contained in a bill of lading that “unambiguously and validly” relieved the railroads of liability to the cargo owners, in whose shoes the insurer stood.  Separately, the district court granted summary judgment to the insurer of one of the automotive parts’ cargoes for contractual indemnification from the railroads because it was the assignee of the ocean carrier’s contract with the railroad in which the railroad agreed that it would indemnify the ocean carrier for loss of or damage to freight if caused by a railroad accident, derailment, or collision caused by the railroad’s negligence.

Yesterday, the Second Circuit affirmed the district court’s summary judgment order in its entirety.

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