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.