Plano Molding designs and manufactures plastic storage boxes, including tackle boxes for fishermen. When it needed steel molds for its Illinois factory it contracted with CMT International, a company that assists American customers that wish to purchase products in Asia.
CMT solicited bids from manufacturers, and Plano selected Kunshan, a Chinese company, to fabricate the molds.
World Commerce Services was selected to coordinate the transportation. The bill of lading from World Commerce contained a “Himalaya clause” that granted World’s subcontractors the warranties and indemnities defined in the bill of lading.
World contracted with THI Group and “K” Line to ship the molds from China to Illinois, and “K” Line, in turn, subcontracted shipping within the United States to the Union Pacific Railroad.
The molds, which weighed a collective 25,000 pounds, were on a UP train moving through Oklahoma on April 21, 2005, when they broke through the bottom of the container they were being transported in and fell onto the track while the train was traveling at about 70 mph. The train derailed, causing $4 million of damage to UP and “K” Line’s customers.
UP and “K” Line claimed the molds were not properly secured and sought to hold Plano liable for the damage.
World’s bill of lading stated if any party other than World packs the shipping container, the merchant warrants “that the stowage and seals of the containers are safe and proper and suitable for handling and carriage and indemnifies [World] for any injury, loss or damage caused by breach of this warranty.”
After the accident, complaints were filed in the U.S. District Court for the Southern District of New York by owners of cargo damaged in the derailment and other parties in the suit. “K” Line filed suit against Plano and CMT in the U.S. District Court for Northern Illinois, but it was consolidated for pre-trial proceedings in the New York district court with eight other actions. All other claims settled, leaving only the “K” Line and UP suit against Plano, which the New York district court transferred back to its Northern Illinois counterpart.
On July 27, 2011, the Northern Illinois district court granted Plano’s motion for summary judgment on the plaintiffs’ breach of contract and negligence claims, finding because it was not a party to the “K” Line bill of lading, nor a principal of a party to the bill of lading, it could not be bound by it.
The plaintiffs appealed, and the 7th Circuit affirmed the decision regarding the negligence claims and plaintiffs’ breach of contract claims under the “K” Line bill of lading. However, the 7th Circuit found unresolved questions of fact material to the determination of contract claims of the plaintiffs based on World’s bill of lading and sent the case back to Illinois district court. The 7th Circuit said in analyzing the contention by “K” Line and UP that Plano is bound by the terms of World’s bill of lading as a contracting party, “we must consider Plano’s role in obtaining World as the freight forwarder for the molds’ transportation.” The 7th Circuit said this question was important, because “if Plano engaged World to handle the shipment on its own behalf, it could be found liable to K-Line and Union by the plain terms of the World bill of lading.”
The 7th Circuit said the evidence surrounding the Plano/CMT/World transaction “murky at best,” requiring questions of fact that required remand to the trial court.
Two trials were held:
- After a one-day bench trial on June 24, 2013, the Illinois district court ruled Plano could be found liable to “K” Line and UP by the plain terms of the World bill of lading. Before the second trial began, the parties stipulated to referring the issue of damages calculation, if necessary to a magistrate judge.
- The second trial, beginning Oct. 15, was a three-day affair that the court characterized as a “classic ‘battle of the experts.’” In the opinion of the plaintiffs’ expert, the crates containing the molds were loaded improperly so their weight was not distributed sufficiently, and they were not lashed, causing bouncing. The expert said this caused stress on the cross-members of the containers. Plano’s experts said the container was defective, pointing to what they said were poor welds on the container floor.
Neither side in the dispute presented witnesses involved in loading the container, and the court said it understood acquiring such information from a foreign jurisdiction can be difficult. It said the limited evidence it had “demonstrates that it is more likely than not that the molds were secured within the container.”
The court ruled in Plano’s favor, finding “the derailment was caused when the weakened welds of the container’s cross-members failed, allowing the crates with the molds inside to fall through the floor.”
It ruled the plaintiffs “failed to prove that Plano had breached the World bill of lading.” (Kawasaki Kisen Kaisha, Ltd., “K” Line America and Union Pacific Railroad v. Plano Molding.
N.D. Ill. No. 07-5675. Dec. 30, 2013.)
While “K” Line and UP suggested “to the extent there is any uncertainty about the exact stowage of the molds, the court should draw an adverse inference against Plano,” because it was in a better position to get such information. The court declined to do so, saying prior cases cited by the plaintiff “do not stand for the broad application of such an inference in circumstances such as these.”
“The dismissal of the claims under the K-Line bill of lading wasn’t just an important victory for our client,” said Allen Wasserman, a partner at Locke Lord, the law firm that represented Plano. “It was a victory for all businesses and individuals that ship goods under a bill of lading. As the District Court and the Seventh Circuit recognized, no business should be exposed to liability under a bill of lading that it was not a party to, or which its agent did not enter into.”
The decision has been appealed to the 7th Circuit.