ABB Inc. v. CSX Transportation, Inc. and Transportation and Logistics Council, Inc., No. 12-1674

Decided June 7, 2013

The Fourth Circuit Court of Appeals reversed the portion of the district court’s judgment in favor of CSX Transportation Inc. (CSX) on its claimed liability limitation of $25,000. The court concluded that the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. § 11706, subjected CSX to full liability for the shipment, and that the parties did not modify CSX’s level of liability by written agreement as permitted in that statute.

In March 2006, rail carrier CSX transported an electrical transformer worth about $1.3 million from shipper ABB Inc.’s plant in St. Louis, Missouri to a customer in Pittsburgh, Pennsylvania. ABB filed a complaint in the district court alleging the transformer was damaged in transit and that CSX was liable for over $550,000 – the full amount of the damage. CSX denied full liability, and alternatively contended that even if the court found CSX liable for the cargo damage, the parties had agreed in the bill of lading to limit CSX’s liability to a maximum of $25,000. The Fourth Circuit disagreed.

The court discussed the history of interstate freight shipments. Congress enacted the Interstate Commerce Act in 1887 to regulate the transportation industry. Until 1995, carriers were required to file their rates, or “tariffs”, publicly with the ICC. In 1995 this requirement was abolished to ease regulatory burdens on the transportation industry. The Carmack Amendment “creates a national scheme of carrier liability for goods damaged or lost during interstate shipment under a valid bill of lading.” In other words, the Carmack Amendment constrains carriers’ ability to limit liability by contract. All rail carriers remain fully liable for damage caused to its freight unless the shipper has agreed otherwise in writing. However, the Carmack Amendment has an exception allowing for limited liability, which is a very narrow exception to the general rule imposing full liability on the carrier. The court’s analysis centered on the requirements of this exception to the Carmack Amendment to exempt a carrier from liability.

The court analyzed two documents: (1) the bill of lading governing the March 2006 shipment and (2) the CSX Price List 4605. The bill of lading (“BOL”) was a partially completed copy of ABB’s standardized bill of lading. Although the BOL included general information about the shipment, it did not include a price for the shipment or indicate the level of liability assumed by CSX for lost or damaged cargo. The Price List was “issued” by CSX on November 18, 2005 and became “effective” on December 14, 2005. The section of Price List 4605 titled “Price Restrictions” listed 18 provisionary rules, one of which required the shipper to negotiate directly with the carrier to receive coverage for full liability. Although no direct negotiation occurred, none of ABB’s representatives were aware of Price List 4605 prior to the March 2006 shipment.

However, the Fourth Circuit decision really turned on the BOL because, as the court recognized, the Carmack Amendment imposes the burden of securing limited liability on the carrier, CSX, not on the shipper, ABB. On its face, the BOL governing the March 2006 shipment was silent regarding the extent of CSX’s liability. The space on the BOL labeled “rate authority,” where a notation regarding rate and liability normally would be listed, was left blank. Moreover, the BOL did not contain any references to an identifiable classification, a rate authority code, a price list, or any other indication that the carrier assumed only limited liability. The court rejected CSX’s argument that the Price List 4605 is incorporated by reference into the BOL through standardized language appearing on the BOL, indicating that the shipper agreed to the terms and conditions in “the classification or tariff which governs the transportation of this shipment.”  The court subsequently found the BOL was an insufficient writing to constitute exemption from the Carmack Amendment and to limit CSX’s (the carrier) liability. The court believed its ruling will encourage parties to employ precise bills of lading, which reflect fully and specifically the parties’ choice of liability terms, and to memorialize these terms in writing as Congress intended by passage of the Carmack Amendment.

Full Opinion

– Sarah Bishop

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