Leocal v. Ashcroft (03-583) and Norfolk Southern Railway Co. v. James N. Kirby, Pty Ltd. (02-1028)

November 9, 2004 Supreme Court Update

Greetings, Court fans!
The Court issued its first opinions of the session today. Perhaps in the spirit of unity professed by the President and Senator Kerry, both opinions were unanimous and uncontroversial. (Alas, for all of you who bet that Booker and Fanfan would be decided first, we're sorry to say that you'll have to pay up.) It appears that Chief Justice Rehnquist won the internal race to get out the first opinion, though Justice O'Connor (always a serious competitor in this regard) authored the other opinion released today. On to the opinions:
In Leocal v. Ashcroft, No. 03-583 (Rehnquist, C.J.), the Court held that a conviction under Florida Stat. § 316.193(3)(c)(2) for driving under the influence (DUI) and causing serious bodily injury does not constitute a "crime of violence" under 18 U.S.C. § 16 and therefore cannot be used as a basis for deporting a lawful permanent resident of the United States. Section 16 defines a crime of violence as: "(a) an offense that has as an element the use, attempted use, or threatened use of physical force against the person or property of another, or (b) any other offense that is a felony and that, by its nature, involves a substantial risk that physical force against the person or property of another may be used in the course of committing the offense." The Government contended that Leocal's DUI offense constituted the "use" of force under Section 16(a) or, alternatively, a felony that involved a substantial risk of the use of force under Section 16(b). The Court disagreed.
The Court first found that the natural and ordinary meaning of the word "use" in the phrase "use . . of physical force" in the statute is the intentional availment of force. The Court eschewed the Government's attempt to parse the phrase and provide dictionary definitions of "use," and instead focused on the ordinary and natural meaning of the term within the context of the statute. The Court then found that Section 16(b) encompassed crimes that have a substantial risk of intentional physical force against another, such as a burglary, but that do not actually result in the use of physical force in that case. Section 16(b) did not, according to the Court, alter the requirement that the use of force be intentional. Therefore, the Court held that a conviction under Florida's DUI statute, which does not require proof of mens rea and thus encompassed acts that were merely negligent or less, could not constitute a "crime of violence" under Section 16. The Court found further support for its conclusion in the fact that Congress separately listed DUI offenses and "crimes of violence" in another statute, indicating Congress' apparent belief that "crimes of violence" did not encompass DUI offenses. In closing, the Court expressly reserved the question of whether an offense requiring proof of the reckless use of force was a "crime of violence."
The O'Connor fans are probably thinking: If Rehnquist beat her to the punch with the first opinion, despite being ill, surely that's because O'Connor's case was juicier, right? Well . . . you be the judge. In Norfolk Southern Railway Co. v. James N. Kirby, Pty Ltd., No. 02-1028 (O'Connor, J.), the Court held that federal law governs the interpretation of maritime contracts, even if they encompass a significant land component, and that in such cases contractual liability limits for the original shipper can be extended to all downstream carriers, including rail companies. The Court also held that downstream shippers can further limit their exposure to a cargo owner through additional liability limits in their contracts with intermediate carriers. Most of you can stop here.
For the truly intrepid, here's the full story -- but be warned, the syllabus alone is four pages long. As Justice O'Connor stated in the first line of the opinion, "[t]his is a maritime case about a train wreck." Kirby had ten containers of machinery it needed to ship from Sydney, Australia to Huntsville, Alabama, and it hired a company called ICC to arrange for delivery. In its contract with ICC, Kirby did not declare the full value of the machinery but rather agreed to a $500/package cap on ICC's liability for the sea leg of the trip. For the land leg of the trip, the contract specified a liability formula that yielded a somewhat higher figure. The contract also contained a "Himalaya Clause" -- stemming from an old English case involving a ship of that name -- extending these liability limits to any agents or independent contractors of ICC. ICC then hired a German company, Hamburg Sud, to ship the cargo from Sydney to Savannah, Georgia and then on to Huntsville. The ICC-Hamburg Sud contract adopted a straight $500/package liability cap for Hamburg and had its own Himalaya Clause for any Hamburg Sud agents. Finally, Hamburg Sud hired Norfolk to move the cargo by rail from Savannah to Huntsville. Unfortunately, Norfolk's train derailed, and Kirby sued Norfolk for $1.5 million in damages for the lost machinery. The district court capped Norfolk's liability at $500/package (i.e., $5000), but the Eleventh Circuit reversed, on the ground that Norfolk was not in privity with ICC (so it could not benefit from ICC's land-leg liability formula) and because ICC was not Kirby's agent when it hired Hamburg Sud (so Norfolk could not benefit from Hamburg Sud's $500/package cap either).
The Supreme Court reversed, capping Norfolk's liability at $5000. First, the Court held that federal law governed the interpretation of the two shipping contracts (some of you may recall that, just before argument, the Court asked the parties and the SG to weigh in on that very issue). Kirby argued that the case was just a garden-variety diversity case, but the Court disagreed, quoting Justice Harlan's phrase that "the question presented here has a more genuinely salty flavor than that." Kossick v. United Fruit Co., 365 U.S. 731, 732 (1961). The Court's authority to make law for maritime contracts stems from its admiralty jurisdiction (Art. III, s. 2, cl. 1), so even though Kirby brought the case in diversity, the Court examined whether it would also have admiralty jurisdiction. That inquiry is "conceptual" rather than purely "geographic" or "spatial." Because both contracts had as their primary objective the shipping of goods by sea from Australia to the southern USA, the contracts were maritime in nature even though they necessarily involved a land component: "so long as a bill of lading requires substantial carriage of goods by sea, its purpose is to effectuate maritime commerce -- and thus it is a maritime contract." The Court also determined that the case was not "inherently local" -- which would have required that state (or Australian) law govern -- because no state interest trumped the federal interest in uniform interpretation of maritime contracts. On the merits, the Court held that the Kirby-ICC contract's land-leg liability formula applied to Norfolk by virtue of the Himalaya Clause, which protected "any" agent who contributed to the contract's performance. The Court further held that the ICC-Hamburg Sud contract's even lower $500/package limit also applied to Norfolk, adopting a default rule that a carrier's liability limits vis-a-vis an intermediary also protect the carrier against the cargo owner (and that Hamburg Sud's cap was passed on to Norfolk via the ICC-Hamburg contract's Himalaya Clause). The Court agreed that ICC was not Kirby's agent for all purposes in contacting with Hamburg Sud, but held nonetheless that an intermediary can negotiate enforceable liability limits with subcontractors. The Court rejected Kirby's argument that this default rule would be disastrous for the shipping industry, on the grounds that; (1) based on the briefs of various amici, the rule tracks industry practice; (2) if limits negotiated with cargo owners were enforceable but limits negotiated with intermediaries were not, carriers would discriminate between the two in their shipping rates; (3) the result was equitable -- Kirby could still sue ICC, the only company that knew about and was party to both contracts, for the difference between the two liability caps it negotiated; and (4) future parties could always negotiate around the default rule. The upshot: Norfolk is essentially off the hook, at least as to Kirby -- and the Court just transformed disputes over contracts contemplating international shipping into potential federal questions.
For those of you still with us, thanks as always for reading, and we welcome your comments and suggestions.
Kim & Ken
From the Appellate Practice Group at Wiggin and Dana. For more information, contact Kim Rinehart, Ken Heath, Aaron Bayer, or Jeff Babbin at 203-498-4400