Altadis USA, Inc. v. Sea Star Line, LLC, et al. (02/12/2007)

Questions presented: Does the Carmack Amendment apply to the inland leg of a mulimodal shipment to a place in the United States to a place in a territory of the United States, even if the inland carrier does not issue a separate bill of lading for the inland leg?

BY KATHERINE GLOVER, MEDILL NEWS SERVICE

A couple thousand cigars are shipped by sea from Puerto Rico to Jacksonville, Fla., and then by land to Tampa, Fla. in March 2003. Somewhere near Jacksonville, the cigars disappear.

A single contract covers the shipment for its entire journey across both land and sea – a contract that gives the shipper only one year to sue the carrier for losses. But a federal law governing interstate train and truck cargo says all contracts must grant at least a two-year statute of limitations. Does the federal law apply in this case, or does the original contract stand?

This was the issue brought up in Altadis USA, Inc. v. Sea Star Line, LLC, and American Trans-Freight, Inc. Altadis owned the merchandise, Sea Star was the ocean carrier, and ATF handled overland transport for Sea Star. After the Supreme Court accepted the case, the three companies agreed to a settlement, and on February 12, lawyers for Altadis filed a motion to dismiss.

But the issues still stand.

"I feel confident that at some point another case will come up, and presumably the lawyer will remind the court that they have already found this cert worthy, and the court will say, ah yes, let's try this again," said Michael Sturley, a law professor at the University of Texas at Austin who represented Altadis in its Supreme Court appeal.

Sea Star Line signed a contract – called a bill of lading – to bring Altadis' goods from Puerto Rico to Tampa in March 2003. But although there was a single contract, it covered two distinct legs – first Sea Star brought the merchandise by sea to the port in Jacksonville, and then ATF, under contract with Sea Star, was to bring the goods by land to Tampa. After receiving the goods, however, the ATF driver parked his truck overnight in the driveway of a gas station. In the morning, the goods were gone.

Altadis sued Sea Star and ATF in Florida, and the case was moved to federal court. The Florida Middle District Court granted summary judgment to Sea Star and ATF. Altadis appealed. Altadis did not dispute that more than a year had passed before the company filed the proper paperwork, but Altadis argued that the Carmack Amendment, a federal law governing rail and truck cargo, required a minimum of two years for a shipping contract statute of limitations.

In August, 2006, the 11th U.S. Circuit Court of Appeals ruled in favor of ATF and Sea Star. The court said the Carmack Amendment did not apply.

First of all, the court said, the companies used a through bill of lading – a single contract covering both legs of the journey. "The case law has established that the Carmack Amendment does not apply to a shipment from a foreign country to the United States (including an ocean leg and overland leg to the final destination in the United States) unless the domestic, overland leg is covered by a separate bill of lading," the decision said. And although this case involved a shipment from Puerto Rico – a U.S. territory, not a foreign country – the court said the same standard still applied.

Secondly, the court said, the bill of lading specifically incorporated the Carriage of Goods by Sea Act, a maritime shipping law, thus strengthening Sea Star and ATF's position that COGSA and its one-year statute of limitations should apply rather than the Carmack Amendment.

But a footnote in the court's decision acknowledged a conflict between circuits. The 11th Circuit based its decision on a precedent established by four different courts, but the 9th Circuit had ruled that the Carmack Amendment did apply even to an inland leg of a shipment covered by a through bill of lading. The 11th Circuit dismissed the 9th Circuit decision, however, writing, "[the] discussion is limited to a single sentence, cites no authority for its position, and does not discuss the opposing case law."

But according to Altadis' petition, at around the same time the 11th Circuit made its decision in Altadis v. Sea Star, the 2nd U.S. Circuit issued "a comprehensive and correctly reasoned decision holding to the contrary," thus creating a 4-2 split in the circuit courts on this issue.

"The timing ... underscores that the time is ripe for this Court to resolve the conflict and to bring much needed clarity to this critical issue of transportation law," Altadis' petition said.

The case was dismissed on February 12. Lawyers for the three companies declined to discuss the details of the settlement.

"When the price is right you settle, and it was a favorable resolution," said James Carbin of Duane Morris LLP, who represented ATF.

Sturley, a lawyer for Altadis, said ATF had agreed to financially compensate Altadis. "In essence, my clients were offered everything they would have gotten if they'd won at the Supreme Court and then won on remand," Sturley said.

Sturley, who is also a law professor specializing in maritime law, said he was disappointed but not surprised that the case settled.

"The issue is hugely important," Sturley said. "In the aggregate there are over a trillion dollars worth of multi-modal shipments in the country each year. But the fact that it's a big issue in the aggregate doesn't mean it's a big issue in each individual case"

Sturley said a majority of the cases that would benefit from a clarification in this law are those that never get to court. "Most cases never even get to lawyers," he said. "It's just insurance handlers working it out. But if you don't know what the rules are, it's a lot harder."

In the meantime, said Timothy Armstrong, a Florida-based attorney who represented Sea Star Line, "As far as I'm concerned the 11th Circuit [decision] is the controlling law in this part of the country."