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[W] Regal-Beloit Corp. v. Kawasaki Kisen Kaisha

February 4, 2009; withdrawn February 17, 2009

REGAL-BELOIT CORPORATION; VICTORY FIREWORKS, INC.; PICC PROPERTY & CASUALTY COMPANY LIMITED SHANGHAI BRANCH; ROYAL SUN ALLIANCE INSURANCE CO. LTD., PLAINTIFFS-APPELLANTS,
v.
KAWASAKI KISEN KAISHA LTD.; K-LINE AMERICA, INC.; UNION PACIFIC RAILROAD COMPANY, DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the Central District of California Dale S. Fischer, District Judge, Presiding. D.C. No. CV-06-03016-DSF.

The opinion of the court was delivered by: Fisher, Circuit Judge

FOR PUBLICATION

OPINION

Argued and Submitted June 10, 2008-Pasadena, California

Before: Stephen Trott, Sidney R. Thomas and Raymond C. Fisher, Circuit Judges.

OPINION

This case requires us to determine which federal statute governs "a maritime case about a train wreck," where the parties' agreement for carriage of goods from China into the United States by sea and then by rail included a Tokyo forum selection clause that would violate one federal law, but would be enforceable under another. See Norfolk S. Ry. Co. v. Kirby, 543 U.S.14, 18 (2004). Regal-Beloit and several other named plaintiffs contracted with defendant Kawasaki Kisen Kaisha, Ltd. ("K-line") to ship their goods from China to various American Midwestern destinations via the Port of Long Beach in California.*fn1 K-line issued a through bill of lading to each shipper to cover the shipment from China all the way to the inland destinations, choosing the Carriage of Goods by Sea Act as the law to govern the carriers' responsibility during shipment. Although K-line's own ocean liner carried the goods from China to Long Beach, its United States agent, Kline America ("KAM"), subcontracted with United Pacific Railroad Company ("UPRR") to transport these goods from Long Beach to the inland destinations. K-line is KAM's corporate parent, handling its domestic business dealings through KAM, including dispatching and receiving vessels and negotiating its inland shipping with domestic carriers like UPRR. Plaintiffs' cargo was allegedly damaged when UPRR's train derailed in Oklahoma. Plaintiffs filed a breach of contract suit against Defendants in California Superior Court. After UPRR removed the case to the district court, K-line and KAM moved to dismiss under the Tokyo forum selection clause in K-line's initial agreement with Plaintiffs. The district court granted the motion to dismiss, determining that the parties successfully avoided the strict venue limitations that apply by default to the rail portions of these shipments as a matter of federal law under the Carmack Amendment. The dismissal provides us jurisdiction under 28 U.S.C. § 1291.

The outcome of this case turns on the answers to two questions, the first being which statutory framework should apply: the Carmack Amendment ("Carmack"), which provides the default rules governing the inland rail leg of a shipment between a foreign country and a point in the United States, or the Carriage of Goods by Sea Act ("COGSA"), which is what the parties contractually agreed would govern?*fn2 A reasonable forum selection clause typically is enforceable under COGSA, but such a clause is valid under Carmack only if the parties fulfill one of Carmack's two statutory methods for contracting out of the statute's venue restrictions. Applying this circuit's precedent dictates that contractually extending COGSA to the inland rail leg cannot trump the statutory force of Carmack's default responsibility regime unless the parties properly agree to opt out of Carmack and thereby remove the statutory barrier to choosing COGSA as the governing law. We therefore reach a second question: which of Carmack's two statutory opt out provisions applies to a contract for rail service that, like the contract here, has been exempted from regulation by the Surface Transportation Board? Unlike the district court, we conclude that the applicable requirements for opting out of Carmack are found in 49 U.S.C. § 10502, instead of § 10709. We thus reverse and remand to the district court to determine whether the parties contracted out of Carmack's venue restrictions under § 10502 so as to make the Tokyo forum selection clause valid and enforceable.

BACKGROUND

To ship their goods, Plaintiffs each entered into an intermodal through bill of lading with K-line that covered the entire transport from China to the Midwest.*fn3 In pertinent part, the bills of lading included the following provisions:

1. (Definitions & Tariff) . . . (b) 'Carrier' means [K-line], her owners, operators and charterers whether acting as carrier or bailee. . . . (d) 'Connecting Carrier' means carriers (other than Carrier), contracted by or acting on behalf of Carrier, participating in Carriage of Goods by land, water or air under this Bill of Lading. . . . (j) 'Vessel' includes the vessel named on the face hereof, any vessel, lighter, barge, ship, watercraft or any other means of water transport and any other vessel owned, operated, chartered or employed (in whole or in part) by Carrier or any Connecting Carrier and used in whole or in part for carriage of Goods under this Bill of Lading.

2. (Governing Law and Jurisdiction) The contract evidenced by or contained in this Bill of Lading shall be governed by Japanese law except as may be otherwise provided for herein, and any action thereunder or in connection with Carriage of Goods shall be brought before the Tokyo District court in Japan, to whose jurisdiction Merchant irrevocably consents.

4. (Responsibility for Shipments To, From, or Through US Territories) (1) With respect to Goods shipped to, from, or through US Territories, Carrier's responsibilities during the entire period (and not just during Water Carriage) from the time of receipt of Goods to the time of delivery of Goods shall be governed by [COGSA], and [COGSA] shall be deemed incorporated herein during the entire aforesaid period . . . .*fn4

5. (Sub-Contracting: Exemptions, Immunities, Limitations, etc. of Participant(s)) (1) Carrier shall be entitled to sub-contract on any terms whatsoever Carriage, including without limitations, the loading, unloading, storing, warehousing, handling and any and all duties whatsoever undertaken by Carrier in relation to Goods by any of the following (I) any Connecting Carrier . . . . (2) . . . [E]very such vessel and Such Participant(s) shall have the benefit of all provisions herein benefiting [sic] Carrier as if such provisions were expressly for their benefit; and, in entering into this contract, Carrier, to the extent of those provisions, does so not only on its own behalf, but also as agent and trustee for such vessel and Participant(s).*fn5

K-line's ocean carriers shipped the cargo from China to Long Beach. From there, the cargo was transferred to UPRR, with whom KAM had contracted to transport the cargo from the Port of Long Beach to the various inland destinations. This agreement was memorialized in the Exempt Rail Transportation Agreement ("ERTA"), which explicitly stated that "[l]iability for freight loss and damage to lading while under the control of [UPRR] shall be governed by MITA [the Master Intermodal Transportation Agreement]." The MITA provided that the MITA plus any bills of lading constituted the entire contract between the parties, and included its own forum selection clause that stated that "[a]ll lawsuits for freight loss or damage must be filed in a court of competent jurisdiction in Omaha, Douglas County, Nebraska." The MITA also (1) prohibited the interpretation of its terms under foreign law; (2) explicitly provided that "[t]his MITA and any agreements, price documents or contracts that reference this MITA have been made under 49 U.S.C. § 10709"; and (3) expressly established that "Carmack liability coverage is not available for any Shipments that originate outside the borders of the United States of America."

Unfortunately, the UPRR train carrying the aforementioned cargo derailed in Tyrone, Oklahoma. Based on the alleged damage to the cargo, Plaintiffs filed suits against Defendants in Los Angeles County Superior Court. UPRR removed the cases to the Federal District Court for the Central District of California. Once the cases were removed, Defendants moved to dismiss the actions, relying on the Tokyo forum selection clause in the bills of lading. The district court granted their motion. See Regal-Beloit Corp. v. Kawasaki Kisen Kaisha, Ltd., 462 F. Supp. 2d 1098, 1105 (C.D. Cal. 2006).

The district court concluded that the Tokyo forum selection clause was reasonable, and that KAM and UPRR could enjoy its benefits under the Himalaya Clause. See id. at 1102-03. It went on to determine that Carmack's venue restrictions applied neither to the overseas leg of the cargo shipment, which were instead governed by COGSA, nor to the inland leg of the cargo shipment. See id. at 1103-04. With respect to the inland leg, the district court explained that although this transport would typically be subject to Carmack's restrictions, here the parties entered into the bills of lading under 49 U.S.C. § 10709, thereby enabling the parties to contract out of the Carmack Amendment's terms. See id.

We disagree. Under our case law, Carmack - not COGSA - must govern Defendants' liability for the inland rail transport here. Therefore, Tokyo is an acceptable forum under the provisions of Carmack only if the parties satisfied the applicable requirements under either § 10709 or § 10502 for contracting out of Carmack's default venue restrictions. As we explain below, a careful reading of Carmack reveals that § 10709 does not govern the kind of carriage at issue in this case and the district court therefore erred by applying that section instead of § 10502. Accordingly, we reverse and remand so the district court can determine in the first instance whether the parties complied with § 10502.

STANDARD OF REVIEW

We reject Defendants' argument in favor of the abuse of discretion standard of review, which applies only to a district court's factual finding regarding a forum selection clause's reasonableness. See Kukje Hwajae Ins. Co., v. The "M/V Hyundai Liberty," 408 F.3d 1250, 1254 (9th Cir. 2005). Here, the parties concede that the forum selection clause is reasonable. Instead, the dispute turns on which statutory law applies and whether this body of law voids the forum selection clause regardless of its reasonableness. We review these issues of statutory interpretation de novo. See Chateau Des ...


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