On January 21, 2014, the United States Supreme Court denied  certiorari in the case of CSX Transportation, Inc. v. ABB Inc., thereby  letting stand a troubling precedent from the United States Court of  Appeals for the Fourth Circuit. In ABB, a divided panel of the Fourth  Circuit had refused to enforce a plain and unambiguous limitation  of liability for freight loss and damage claims on the basis that the  tariff containing that limitation of liability was incorporated generally,  rather than specifically, in the bill of lading governing the shipment.  

The case involved a shipper, ABB, who regularly shipped electrical equipment via a rail  carrier, CSX. ABB utilized a form shipping contract that contained a clause that expressly  incorporated the governing “classification or tariff” published by CSX. The form contract  further acknowledged that the shipper agreed to all such classifications and tariffs and was  familiar with the terms and conditions set forth in those classifications and tariffs. CSX’s  “Price List 4605” stated that “[c]arriers’ maximum liability for lading loss or damage will not  exceed $25,000 per shipment” and invited shippers to contact a CSX sales representative  if they desired full liability coverage.

At one point in the parties’ relationship, ABB tendered to CSX an electrical transformer  worth $1.3 million to be transported from St. Louis, Missouri, to Pittsburgh, Pennsylvania.  The parties utilized the shipping contract mentioned above. Unfortunately, the transformer  was found at destination to be damaged from unknown causes. ABB ultimately sued CSX to  recover approximately $550,000 in damages.

The district court held that CSX’s liability was limited to $25,000 pursuant to the limitation of liability  contained in its “Price List 4605” and incorporated into the parties’ contract. ABB appealed. The  Fourth Circuit reversed and found that although the parties’ contract incorporated the limitation of  liability contained in CSX’s “Price List 4605,” the Carmack Amendment required that any limitation  of liability be incorporated with “specificity” such that no doubt can exist that the shipper was  actually aware of the limitation of liability. This decision conflicted with contrary court decisions in  other jurisdictions, such as Werner Enterprises, Inc. v. Westwind Maritime International, Inc., 554  F.3d 1319 (11th Cir. 2009).

As the ABB decision is now good law in the Fourth Circuit, any motor carrier that moves goods  within the Fourth Circuit’s jurisdiction now faces the prospect of litigating the enforceability of its  liability limits if those limits were included in a tariff or price list incorporated into the bill of lading.  For instance, one nearly universal feature of many bills of lading, including a Uniform Straight Bill  of Lading, is an acknowledgment on the face of the bill of lading incorporating a carrier’s tariff by  general reference. Similarly, certain carriers use “pro stickers” that are affixed to bills of lading and  contain general language that alerts the shipper to the fact that the carrier has a tariff in place.  Furthermore, many carriers alert their customers to various terms and conditions posted on their  websites in a variety of other ways—by referencing the website on a rate confirmation or other  shipping documents or by communicating the existence of the website to its customers in emails,  correspondence or the like. The ABB decision subjects these customary methods of incorporating a  limitation of liability to attack.  

The practical turmoil created by the ABB decision is particularly acute in light of the fact that such a  tremendous volume of truck traffic occurs throughout the states constituting the Fourth Circuit. For  instance, as of 2011, a total of 7,138,000 trucks were registered in Maryland (1,683,000), North  Carolina (2,743,000), South Carolina (1,726,000), Virginia (2,954,000) and West Virginia (732,000).  Of course, this figure does not include the millions of trucks domiciled in other jurisdictions that  regularly cross into these states as well. The states constituting the Fourth Circuit serve as a vital  conduit for truck transportation throughout the northeast and the south and serve as the origin  or destination of a significant volume of truck transportation between the east and west coasts,  including over 1,209,822 containers imported and exported from the Port of Virginia alone in 2012.

In short, in light of the U.S. Supreme Court’s denial of certiorari in the ABB case, carriers are  well advised to review current business practices to ensure that limitations of liability are being  incorporated as specifically as possible into every customer transaction. Shippers and carriers will  both benefit from using precision in their contracting practices.