Opinion
Civil Action No. H-04-0588.
December 2, 2004
MEMORANDUM AND ORDER
Plaintiff, Hyundai Merchant Marine Co., Ltd. ("Hyundai"), brings this indemnity action against defendant, The Burlington Northern and Santa Fe Railway Co. ("BNSF"). Pending before the court is The Burlington Northern and Santa Fe Railway Company's Motion for Summary Judgment (Docket Entry No. 14). For the reasons discussed below, the court will deny the motion.
I. Factual and Procedural Background
Plaintiff Hyundai is a Korean company that ships cargo on marine vessels to and from ports around the world. At various times when business required it to move shipments across land to or from ports, Hyundai entered into contracts with defendant BNSF in order to obtain the railway's transportation services. This case arises from Hyundai's payment of $52,824.05 to various cargo claimants who suffered loss or damage for which Hyundai alleges BNSF is ultimately responsible.
The contracts between Hyundai and BNSF include limitations periods for the filing of claims for loss or damage. Rules that were in effect beginning in January of 1999 required a suit to be filed within one year of BNSF's denial of the underlying claim or, if no claim was filed with the company, within one year of the shipment delivery date. Rules in effect in January of 2002 make the filing of a claim with BNSF a prerequisite to initiating a lawsuit and shorten the limitations period to nine months following the denial of a claim. BNSF argues that the contracts provide for a nine-month period from the date of loss or damage within which claims could be submitted to it.
II. Standard of Review
An order granting summary judgment is proper when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). A "genuine" dispute over a fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 106 S.Ct. 2505, 2510 (1986). A fact is "material" if it "might affect the outcome of the suit under the governing law."Id.
The party moving for summary judgment has the "initial responsibility of informing the district court of the basis for its motion." Celotex Corp. v. Catrett, 106 S.Ct. 2548, 2553 (1986). In considering a summary judgment motion the court is to resolve any doubts and draw any inferences in favor of the nonmoving party. Evans v. City of Houston, 246 F.3d 344, 348 (5th Cir. 2001).
III. Analysis
BNSF moves for summary judgment on the grounds that each of the ten claims that are the basis of Hyundai's indemnity action is time-barred according to the terms of the parties' Contract of Carriage. In the alternative, according to BNSF, six out of ten claims are time-barred under the federal Carmack Amendment ( 49 U.S.C. § 14706). Hyundai responds that neither limitations period applies to an indemnity action for claims paid to shippers of cargo. Hyundai cites two previous indemnity cases that support its position and urges the court to give them issue-preclusive effect. Although the court concludes that the prior decisions do not give rise to collateral estoppel, Fifth Circuit precedent nevertheless compels the court to deny BNSF's motion for summary judgment.
The Burlington Northern and Santa Fe Railway Company's Motion for Summary Judgment, Docket Entry No. 14, pp. 1-2.
Id. at 2.
Plaintiff's Response to Defendant's Motion for Summary Judgment, Docket Entry No. 15, pp. 1-2.
Id. at 3-6.
In this circuit collateral estoppel precludes a party from litigating an issue already raised in an earlier action to which it was a party if (1) the issue at stake is identical to the one involved in the earlier case, (2) the issue was actually litigated in the prior action, and (3) the determination of the issue was a necessary part of the judgment in that action. See Petro-Hunt, L.L.C. v. United States, 365 F.3d 385, 397 (5th Cir. 2004). The issue must also have been determined by a valid and final judgment. Stripling v. Jordan Production Co., LLC, 234 F.3d 863, 868 (5th Cir. 2000). Mutuality is an additional prerequisite only when the party to be estopped is the United States. Petro-Hunt, L.L.C., 365 F.3d at 397 n. 61. Non-mutual collateral estoppel means that if a litigant has fully and fairly litigated an issue and lost, third parties unrelated to the original action can bar the litigant from relitigating that same issue in a subsequent case. United States v. Mollier, 853 F.2d 1169, 1175 n. 7 (5th Cir. 1988).
Under the law of this circuit, the cases cited by Hyundai do not give rise to collateral estoppel. In the earlier case,Atlantic Mutual v. Orient Overseas Container Line, 1992 WL 226953 (W.D. Wash. 1992), an apparent BNSF predecessor ("Burlington Northern Railroad") unsuccessfully moved for summary judgment against an indemnity claimant. Because the court's rejection of Burlington Northern's limitations defense did not terminate the "whole case," see Fed.R.Civ.P. 56(d), the order was an interlocutory one and thus not immediately appealable. See Zimzores v. Veterans Admin., 778 F.2d 264, 266 (5th Cir. 1985). In Avondale Shipyards, Inc. v. Insured Lloyd's, 786 F.2d 1265 (5th Cir. 1986), the Fifth Circuit held that an interlocutory partial summary judgment order could not be given preclusive effect. See id. at 1269-72. The court reaffirmed the rule that partial summary judgment orders lack the finality necessary for preclusion and concluded that a later consent judgment, which made no reference to the earlier order, did not breathe preclusive effect into the partial summary adjudication. Id. at 1270, 1272. The Atlantic Mutual court's rejection of the BNSF predecessor's summary judgment motion on limitations grounds is as far from an adjudication of the whole case as the partial summary judgment order in Avondale, and there is nothing before this court indicating that a later judgment accords the earlier order the requisite finality.
The court also notes that there is nothing in the record suggesting that the Atlantic Mutual court's decision regarding the limitations argument was a necessary part of a final judgment.
The court acknowledges that its conclusion that the Atlantic Mutual order is due no preclusive effect stands in contrast to the Third Circuit's determination in the other cited case,Burlington Northern R.R. Co. v. Hyundai Merch. Marine Co., 63 F.3d 1227 (3d Cir. 1995). In part following Third Circuit precedent stating that finality was a "more `pliant' concept" for the purposes of issue preclusion, the court held, in a case similar to the present, that the Atlantic Mutual court's decision on timeliness estopped relitigation of the issue. See id. at 1233, 1233 n. 8, 1239. Although Hyundai asks this court to apply issue-preclusive effect to the Third Circuit decision, that decision does not itself constitute a determination of the merits of the limitations issue. In other words, the issue was not actually litigated in that case — that was precisely the point of the court's application of collateral estoppel. Therefore, this court does not accord the Third Circuit case any issue-preclusive effect.
Plaintiff's Response to Defendant's Motion for Summary Judgment, Docket Entry No. 15, p. 5.
The court must therefore reach the merits of BNSF's summary judgment motion. Here, the Fifth Circuit's decision in Hercules, Inc. v. Stevens Shipping Co., 698 F.2d 726 (5th Cir. 1983) (en banc), cited by the Atlantic Mutual court, 1992 WL 226953, at *3-4, and by Hyundai, controls. Applied to the present facts, the Hercules, Inc. reasoning persuades the court that the contractual loss or damage limitations provision is inapplicable to Hyundai's indemnity claim.
Id. at 2-5.
As an initial matter, the court concludes that maritime law governs Hyundai's indemnity action. The Fifth Circuit has followed the rule that the "body of law establishing the indemnitee's primary liability governs his claim for indemnity or contribution against a third party." Marathon Pipe Line Co. v. Drilling Rig Rowan/Odessa, 761 F.2d 229, 235 (5th Cir. 1985). In Marathon this meant that an indemnity claim brought by a defendant liable to a plaintiff under general maritime law was itself governed by that body of law, even though the third-party defendant against whom the indemnity claim was directed would be liable to the plaintiff for that same damage according to state, not maritime, law. Id. at 235-36. In the present case Hyundai's liability to the cargo claimants arises from the bills of lading pursuant to which Hyundai transported the cargo from port to port aboard its marine vessels either before or after BNSF took possession. Since the Supreme Court has instructed that the "`nature and subject matter' of the contract at issue should be the crucial consideration in assessing admiralty jurisdiction," Exxon Corp. v. Central Gulf Lines, Inc., 111 S.Ct. 2071, 2076 (1991), the court concludes that the cargo claimants' actions against Hyundai are governed by maritime law. Although this does not bring the Hyundai-BNSF contracts within maritime jurisdiction themselves, it does mean, according to the rule cited in Marathon Pipe Line Co., that Hyundai's indemnity claim sounds in admiralty.
The maritime choice of law places the current case squarely under the Hercules, Inc. decision, which also dealt with the timeliness of a maritime indemnity claim. In that case the Fifth Circuit held that because a "cause of action for indemnity arises separately from and after liability has been established," a defendant could bring an indemnity claim against a third-party defendant even though the plaintiff was barred by a contractual limitations provision from recovering directly from that third party for the loss/damage at issue. Hercules, Inc., 698 F.2d at 735. The court was wary that a contrary ruling could enable those in the third-party defendant's position to "conniv[e]" with the plaintiff to concentrate full liability on the defendant alone: If the plaintiff could be convinced to file suit no earlier than the day after the expiration of the limitations provision, that plaintiff could still recover in full from the defendant while the third party, shielded from indemnity claims, escaped all liability. See id. As the court noted, if the third party were truly responsible for the plaintiff's injuries, a legal regime permitting such "connivance" would seem to make the defendant an insurer to the plaintiff, "without express language calling this fact to [the defendant's] attention." See id.
Although in this action the party seeking indemnity is also the entity — as opposed to the cargo claimants — that had contracted and agreed to a limitations provision with the party from whom the indemnification is sought, this distinction does not command a different result than the one reached in Hercules, Inc. The Hercules, Inc. reasoning about indemnity claims and the unique problems associated with barring them applies equally well to the current situation. Were a loss or damage limitations provision like the one here at issue held to apply to indemnity claims, one in Hyundai's position would essentially be at the mercy of the whim or timing of cargo claimants. Cargo claimants might, for whatever reason, choose to bring suit only after the limitations period had expired, and, since the Fifth Circuit has clearly instructed that indemnity claims arise only after primary liability has been established, the party in Hyundai's position could not be faulted for failing to bring its indemnity claim any earlier. Were BNSF's argument accepted one in BNSF's position would be empowered to plot with cargo claimants to concentrate liability on a potentially innocent party. That potentially innocent party, of course, would be an unwitting (at least to the extent that the limitations provision makes no explicit mention of indemnity suits) insurer to the cargo claimants. This was precisely the result the Hercules, Inc. court sought to avoid.
As the Fifth Circuit stated in Hercules, Inc., the limitations period for maritime indemnity claims is "generally determined by the equitable doctrine of laches." Id. at 733. Since this doctrine, and not the parties' contract or the Carmack Amendment, governs, the court concludes that BNSF has not demonstrated that it is entitled to summary judgment on limitations grounds.