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Babcock & Wilcox Co. v. Kansas City Southern Railway Co.

February 18, 2009


Appeal from the United States District Court for the District of New Jersey (D.C. No. 06-cv-06015) District Judge: Honorable Dickinson R. Debevoise.

The opinion of the court was delivered by: Restani, Judge


Argued: November 21, 2008

Before: BARRY and CHAGARES, Circuit Judges, and RESTANI,*fn1 Judge.


Plaintiff-appellee The Babcock & Wilcox Company ("B&W") commenced this action under the Carmack Amendment to the Interstate Commerce Act ("ICA"), 49 U.S.C. § 11706, against defendants-appellants Kansas City Southern Railway Company ("KCSR") and Norfolk Southern Railway Company ("NSR") (collectively "the Railroads") to recover damages to its boiler. The Railroads appeal from an order of the United States District Court for the District of New Jersey denying their motion to dismiss for lack of subject matter jurisdiction and granting B&W's cross-motion for summary judgment. We will vacate the judgment of the District Court and remand the matter with instructions to dismiss for lack of subject matter jurisdiction.


The following facts are undisputed. In October 2004, B&W, a manufacturer of power generation equipment, and KCSR entered into a rail transportation agreement.*fn2 The agreement provided for the transportation of "steel power boilers, parts or attachments" from West Point, Mississippi to Newark, New Jersey. (Contract 2--3, App. 38--39.) In November 2004, pursuant to the agreement and a bill of lading, the Railroads transported a boiler for B&W. The parties stipulated that the Railroads received the boiler in good order and condition. (Joint Stipulation ¶ 2, App. 41.) In December 2004, NSR became aware that the boiler was damaged, having been allegedly sideswiped by another train at a rail yard while in NSR's care. NSR then notified B&W of the damages.

In May 2006, after NSR denied B&W's damage claim, B&W commenced this action under the Carmack Amendment to the ICA, 49 U.S.C. § 11706*fn3 , against the Railroads to recover $42,814.48 in damages. The parties later stipulated that the Railroads' maximum liability under the agreement was $25,000. (Joint Stipulation ¶ 4, App. 41.) The Railroads moved to dismiss the complaint for lack of subject matter jurisdiction. They argued that the agreement was not a common carrier transportation agreement under the ICA but a private contract entered into under 49 U.S.C. § 10709*fn4 . (Defs.' Mot. to Dismiss 3--5, Docket Entry No. 10-3.) The Railroads contended that the only basis for federal jurisdiction would have been diversity jurisdiction under 28 U.S.C. § 1332, which was not satisfied because the damages sought did not meet the $75,000 amount in controversy requirement for such jurisdiction. (Id. at 4.) B&W responded that the agreement was not a § 10709 contract because the agreement did not state that it was made pursuant to § 10709. (Pl.'s Mem. in Opp'n to Defs.' Mot to Dismiss & in Supp. of Cross Mot. for Summ. J. 7--10, Docket Entry No. 13.) B&W also cross-moved for summary judgment on its § 11706 claim.

The District Court denied the Railroads' motion to dismiss. The court concluded that it had jurisdiction because "there [was] no evidence suggesting that the parties had any intention of invoking § 10709." Babcock & Wilcox Co. v. Kansas City S. Ry. Co., Civ. No. 06-6015, 2007 WL 4440163, at *2 (D.N.J. Dec. 17, 2007). The court stated that "in order to invoke section 10709, a contract must specifically incorporate the same" but that it found no such incorporation in the agreement. Id. at *3. The court rejected the Railroads' argument that the agreement's content evinced the parties' intent to invoke § 10709. Id. The court also found no evidence of intent at the time of execution of the agreement to invoke § 10709. Id. Exercising jurisdiction, the District Court granted B&W's cross-motion for summary judgment and entered judgment in the amount of $25,000 in favor of B&W. Id. at *4. The Railroads now appeal, challenging only the ruling on jurisdiction.


This Court has jurisdiction to review a final judgment under 28 U.S.C. § 1291. We review the question of whether the District Court had subject matter jurisdiction de novo. Emerald Investors Trust v. Gaunt Parsippany Partners, 492 F.3d 192, 197 (3d Cir. 2007). If we conclude that the District Court lacked subject matter jurisdiction, "we [will] direct it to dismiss the case even at this late stage of the litigation." Id.


The Railroads maintain that the District Court did not have subject matter jurisdiction over this action because the agreement was not a common carrier transportation agreement under the ICA but, rather, a private contract entered into under 49 U.S.C. § 10709. They claim that the District Court erred in concluding that a § 10709 contract must reference the statute and in determining that the agreement's terms do not evince intent to invoke § 10709.

I. Self-Description Requirement

Whether § 10709 contracts must be self-described is an open question in this Court. Review of the legislative history of § 10709 and the history of the corresponding federal regulations, however, indicate that the law currently imposes no such requirement.

A. Legislative and Regulatory History

In 1887, Congress enacted the ICA to regulate interstate transportation and established the Interstate Commerce Commission ("ICC") to administer the Act. Emerson Elec. Supply Co. v. Estes Express Lines Corp., 451 F.3d 179, 183 (3d Cir. 2006). The ICA initially did not set forth provisions governing carrier liability for loss of or damage to goods being transported. Id. In 1906, Congress enacted the Carmack Amendment, which required carriers to issue a receipt or bill of lading for property received for transportation and held carriers liable for any loss, damage, or injury to the property resulting from the transportation thereof in claims arising out of the receipt or bill of lading. Id. The purpose of the Carmack Amendment was "'to relieve shippers of the burden of searching out a particular negligent carrier from among the often numerous carriers handling an interstate shipment of goods.'" Union Pac. R.R. Co. v. Greentree Transp. Trucking Co., 293 F.3d 120, 124 (3rd Cir. 2002) (quoting Reider v. Thompson, 339 U.S. 113, 119 (1950)). The provision of the Carmack Amendment governing the liability of rail carriers, 49 U.S.C. § 11706, holds rail carriers liable for "the actual loss or injury to property." 49 U.S.C. § 11706(a). District courts "have original jurisdiction of an action brought under [§ 11706] . . . if the matter in controversy for each receipt or bill of lading exceeds $10,000." 28 U.S.C. § 1337(a) (2000). The amount in controversy here is $25,000.

In 1976 and 1980, the Railroad Revitalization and Regulatory Reform Act and Staggers Rail Act ("Staggers"), respectively, were enacted to deregulate the railroad industry to enable it to compete efficiently in the transportation industry. Staggers Rail Act of 1980, Pub. L. No. 96-448, 94 Stat. 1895; Railroad Revitalization and Regulatory Reform Act of 1976, Pub. L .No. 94-210, 90 Stat. 31. Under Staggers, 49 U.S.C. § 10713 (the predecessor to § 10709) enabled shippers and carriers to sidestep federal regulation of transportation agreements by entering into private contracts. Staggers Rail Act of 1980, § 208; H.R. Rep. No. 96-1430, at 100 (1980) (Conf. Rep.), reprinted in 1980 U.S.C.C.A.N. 4110, 4132; see also 49 U.S.C. § 10713 (1994) (repealed 1996) (current version at 49 U.S.C. § 10709 (2000)). Such private contracts are not governed by the ICA, including § 11706, and the "exclusive remedy" for any actions arising out of such a contract "shall be an action in an appropriate State court or United States district court, unless the parties otherwise agree." 49 U.S.C. § 10713(h)(i)(2) (current version at 49 U.S.C. § 10709(c)(2)). Section 10709 now clarifies that the section "does not confer original jurisdiction on the district courts of the United States based on [28 U.S.C. §§ 1331*fn5 or 1337*fn6 ]." 49 U.S.C. § 10709(c)(2).

Predecessor § 10713 required rail carriers to file with the ICC any § 10713 private contract along with a summary of non-confidential contract information. 49 U.S.C. § 10713(b). Section 10713 granted the ICC authority to determine the essential terms to be made available to the public. Id. The filing requirements were enacted to achieve a balance between protecting the confidentiality of private contracts, making information available to enable parties with standing to exercise their rights to challenge the contracts, and enabling the ICC to exercise its remaining regulatory function of approving or disapproving contracts. See generally Burlington N. R.R. Co. v. Pub. Util. Comm'n of Tex., 812 F.2d 231, 235--236 (5th Cir. 1987); Water Transp. Ass'n v. I.C.C., 722 F.2d 1025, 1030--32 (2d Cir. 1983).

To implement the filing requirements of § 10713, the ICC promulgated regulations in 49 C.F.R. Part 1039 (1983) (repealed 1987) (current version at 49 C.F.R. Part 1313 (2008)). Railroad Transportation Contracts, 47 Fed. Reg. 50,261, 50,262--64 (Nov. 5, 1982). The ICC defined "contract" as follows:

Section 1039.1 Definition of the term "contract."

(a) A contract subject to this section is a written agreement . . . entered into by one or more rail carriers with one or more purchasers of rail services, to provide specified ...

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