In April 2006, a train derailed near Dallas, Texas, destroying manufactured goods shipped from Asia to the southern US under through bills of lading. Nippon Express, a non-vessel operating common carrier (NVOCC), issued through bills of lading to two cargo owners and hired Yang Ming, an ocean carrier, to perform the ocean leg and arrange the land leg; a third cargo owner contracted with Yang Ming directly. Yang Ming subcontracted part of the inland rail carriage to Norfolk Southern under an Intermodal Transportation Agreement (ITA), and Norfolk Southern enlisted Kansas City Southern Railway (KCSR). Sompo and Nipponkoa, subrogees of the cargo owners, sued the railroads. The Yang Ming bill of lading contained an 'Exoneration Clause' providing that, other than the Carrier, no person whatsoever, including underlying carriers and subcontractors, shall be deemed liable with respect to the goods, together with a Himalaya clause extending the bill's exemptions and limitations to such persons.

The litigation was first pursued under the Carmack Amendment, but after Kawasaki Kisen Kaisha Ltd v Regal-Beloit Corp 561 US 89 (2010) (CMI1455) held that the Carmack Amendment does not apply to a shipment originating overseas under a single through bill of lading, the cases were remanded and the plaintiffs' State law claims reinstated. The railroads then invoked the exoneration clause for the first time. The District Court granted summary judgment to the railroads on Sompo's claims, but for Nipponkoa on its separate claim for contractual indemnification under the ITA, which it asserted as assignee of Yang Ming. Both results were appealed. Sompo argued, among other things, that the defence was barred by the mandate rule and waived; that the clause was ambiguous and should be construed against the railroads; that it violated the public policy against a common carrier stipulating for immunity from its own negligence; and that Nippon Express had no authority to bind the cargo owners to the clause.

Held: Judgments of the District Court affirmed in full.

Neither the mandate rule nor waiver barred the exoneration clause defence. The prior appeal decided only the applicability of the Carmack Amendment; the summary judgment practice on remand was, for all practical purposes, the railroads' first opportunity to litigate the defence, and the plaintiffs suffered no prejudice.

The exoneration clause unambiguously relieved the railroads of liability to the cargo owners and their subrogees. Although the bill's definition of 'Carrier' included underlying carriers, the only reasonable interpretation was that Yang Ming, the issuing carrier, and no one else, shall be liable; the contra proferentem rule applies only where the language is susceptible of two reasonable interpretations, and the specific provision controls the general.

The clause was not void as against public policy. Properly understood, it does not exonerate a carrier from its own negligence but is 'simply an ordering mechanism'. It concentrates all liability to the cargo owner in the issuing carrier, requiring the cargo owner to sue Yang Ming, which may in turn sue the underlying carriers, who remain liable to Yang Ming for their negligence. Enforcement offends neither of the concerns animating the common law rule, ensuring full compensation to the cargo owner and inducing care on the part of the carrier, and there is no reason to prohibit parties from channelling cargo claims through the carrier that issues the through bill of lading.

Norfolk Southern Railway Co v James N Kirby Pty Ltd 543 US 14 (2004) (CMI1454) controls the question of authority. An intermediary is the cargo owner's agent for the limited purpose of contracting with subsequent carriers for limitation on liability. Nippon Express therefore bound the cargo owners to the exoneration Clcuse when it contracted with Yang Ming, and the railroads were entitled to invoke the clause by virtue of the bill's Himalaya clause. The exoneration clause is 'simply another form of liability limitation': while the package limits in Kirby limited the amount recoverable, the exoneration clause limits the entities against which the plaintiff may recover.

As to Nipponkoa's assigned indemnification claim, the railroads' principal argument was that Yang Ming had been discharged of all liability by the one-year time bar in its bill of lading before the assignment was waived, having been raised for the first time in a second motion for reconsideration. To the extent that the ITA required Yang Ming to pay claims before seeking indemnification, Norfolk Southern waived that requirement by its conduct: rather than object, it affirmatively provided Nipponkoa with an assignment form, encouraging Nipponkoa to proceed against it directly. KCSR's contention that it was not a party to the ITA was never made below and could not be raised on appeal.