The plaintiff, MSC Mediterranean Shipping Co SA (MSC), is a foreign corporation doing business as an ocean transportation common carrier in the US. The defendant, BNSF Railway Co (BNSF), is a corporation primarily engaged in the freight-rail transportation business as a common carrier of goods by rail for hire. Epson America Inc (Epson) was the shipper and consignee that contracted with MSC to have its cargo transported from the Philippines to Indiana. The plaintiff alleged that incidents of pilferage affected several containers of Epson's cargo that MSC transported, using BNSF as its subcontractor.

After its cargo was pilfered, Epson asserted a claim against its insurer, Tokio Marine America Insurance Co (Tokio Marine). Tokio Marine paid Epson. After its payment, Tokio Marine, as subrogee of Epson, filed an action in the District Court for the Southern District of New York against MSC for the amounts it paid to Epson for the pilfered cargo, plus interest and costs.

To recuperate the losses MSC incurred from its settlement in the Tokio Marine action, MSC brought this suit against BNSF asserting three causes of action: (1) equitable indemnification; (2) contribution; and (3) breach of contract for BNSF's alleged breach of its transportation contract with MSC. The defendant brought a motion to dismiss the first and second causes of action of the plaintiff. The plaintiff sought to amend its statement of claim.

Held: The Court grants, in part, the defendant's motion and grants, in part, the plaintiff's motion.

MSC issued sea waybills for the carriage of cargo from the Philippines to Indiana via Los Angeles. They list Epson as both the shipper and consignee. MSC's bills contain a 'Clause Paramount' expressly incorporating US COGSA 'throughout the entire time the Goods are in the Carrier's custody, including before loading and after discharge as long as the Goods remain in the custody of the Carrier or its Subcontractors ... .' The MSC conditions also contain a Himalaya clause which provides that MSC's subcontractors are third-party beneficiaries of the contractual terms set forth in MSC's conditions.

MSC subsequently subcontracted a portion of the cargo shipment to BNSF. MSC and BNSF's transport contract terms are set out in the BNSF Intermodal Rules and Policies Guide (the Rules). The Rules provide that '[i]n no event will BNSF's total liability for cargo loss or damage exceed $200,000 per shipment, unless the cargo is shipped as part of BNSF's Shipment Protection Program', and, '[i]f a shipment moves under the terms of a through bill of lading issued by ... [an] ocean carrier' with limited liability terms, 'the cargo liability of BNSF will be no greater than the limitation of liability as stated on that bill of lading'.

Because the defendant raises a pre-emption argument, the Court finds it appropriate to address this threshold issue first. US COGSA, as noted by the Ninth Circuit, 'governs the liabilities of parties to a bill of lading for the carriage of goods by the sea': Akiyama Corp of Am v MV Hanjin Marseilles 162 F 3d 571, 572 (9th Cir 1998) (CMI1584).

Further, a 'bill of lading may contractually expand COGSA coverage to third parties with a Himalaya Clause': Norfolk S Ry Co v Kirby 543 US 14, 36 (2004) (CMI1454). The plaintiff's bill of lading with Epson, as the shipper and consignee, extends COGSA coverage to the defendant, as the plaintiff's subcontractor.

There is not much authority directly addressing whether COGSA pre-empts a carrier's federal maritime indemnification and contribution claims arising out of a subcontractor's purported breach of duty to deliver goods in suitable condition. In fact, whether COGSA completely pre-empts other sources of law, such as state law, appears to be an unresolved question. See Cont'l Ins Co v Kawasaki Kisen Kasha Ltd 542 F Supp 2d 1031, 1034 (ND Cal 2008): 'Neither the Supreme Court nor the Ninth Circuit has spoken directly to the question of whether COGSA completely preempts state law. The courts that have reached the question have come to differing conclusions.'

The plaintiff relies on one Ninth Circuit case to assert that COGSA does not pre-empt indemnification and contribution claims: States SS Co v Am Smelting & Ref Co 339 F 2d 66, 69 (9th Cir 1964):

We conclude that a distinction between the cause of action presented here and those that have been held to be governed by Section 3(6) [of COGSA] is clearly drawn. The instant action is in reality one for indemnification, the right to which arises from the carrier's alleged violation of the duty of due diligence imposed upon him by law.

The plaintiff reads this language to support its broad proposition that COGSA neither pre-empts nor applies to indemnification and contribution causes of action brought under federal maritime law.

That case, however, considered the narrow question of whether COGSA's one-year statute of limitations provision time-barred the plaintiff's suit seeking indemnification and contribution. Specifically, the plaintiff in that case sought indemnity for 'salvage services which were rendered and which enabled the vessel to continue the voyage'. Ultimately, the Ninth Circuit found that the statute of limitations did not bar such action. In so holding, the Court concluded that the term - cargo 'loss or damage' - was applicable to 'claims which relate directly to a breach of a carrier's duty to make timely delivery of the goods in good order and condition'. The Court reasoned that COGSA's statute of limitation provision applied to 'instances involving damage direct to the cargo ... where there has been delay in, or failure of, delivery or departure'. In terms of its relevance here, the opinion did not rule that COGSA pre-empts indemnity and contribution claims brought under federal maritime law.

Absent authority directly on point, the Court declines to rule at this time because the parties have not clearly framed the issue. Instead, the parties' briefs present a dispute of whether the plaintiff may recover an amount of damages exceeding the limited liability provision established in its transportation contract by way of the incorporated Rules.

Authoritative case law on this issue - namely whether a limited liability clause in a transportation contract between an upstream carrier and its subcontractor encompasses the upstream carrier's indemnity and contribution claims - is also quite scarce. To support its position, however, the plaintiff cites three Ninth Circuit cases - all of which neither discussed nor interpreted the effects of a contractual limited liability provision like the one before this Court. Taken together, these opinions appear to stand for the mere proposition that a party suffering harm from cargo damage or loss may raise a tort-based claim and is not limited to only raising a contractual-based claim. However, they do not suggest that courts may simply disregard or render any contractual limited liability provision void or unenforceable. In effect, a party may raise a tort-based claim against a carrier for cargo loss, but the option to do so does not negate or invalidate enforcement of the parties' contractual terms limiting the amount of damages a plaintiff may ultimately recover for a defendant's actions causing cargo loss. The plaintiff does not cite, and the Court did not discover, any authority that voids a limited liability provision or otherwise finds it unenforceable under these given circumstances. As such, the provision is enforceable.

Furthermore, Plaintiff's argument that the limited liability language does not encompass indemnification or contribution claims ignores the language of the provision. The plaintiff does not argue the Rules are ambiguous, and the phrase 'in no event' is absolute and unambiguous. As such, interpreting the limited liability provision to be inapplicable to certain types of claims (ie indemnification, negligence, or conversion) solely arising out of the defendant's alleged actions causing cargo loss or damage would not be reasonable. Read as a whole, the Rules contemplate the exact circumstances that the plaintiff finds itself in now. The Rules establish that Tokio Marine cannot directly sue the defendant for freight loss. Thus, prohibited from directly suing the defendant, Tokio Marine foreseeably could, and indeed did, sue the plaintiff for the cargo loss, thereby triggering the plaintiff's present indemnification and contribution claims against the defendant. With this in mind, the plaintiff, as a sophisticated party to the contract, cannot now argue that the limited liability terms do not apply to its indemnification and contribution claims.

Accordingly, to the extent that the plaintiff is seeking to recover on each of its causes of action, it cannot recover USD 269,869.09 for indemnity, another USD 269,869.09 for contribution, and another USD 269,869.09 for breach of contract because the Rules limit the total liability amount for the defendant's alleged failure to deliver the cargo.

Finally, the plaintiff's proposed amended complaint seeks to include additional facts to 'further support [its] claims for equitable indemnity and contribution'. However, pursuant to the limited liability provision applicable to all claims arising out of cargo loss, the plaintiff cannot, as a matter of law, assert such claims to circumvent the limited liability amount established in the Rules. Thus, the plaintiff may amend its complaint, but with the understanding that its potential maximum recovery is limited by the parties' shipment contract.