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The Supreme Court unanimously held 11/9/04 that, under federal law, (1) a bill of lading’s so-called “Himalaya Clause,” which extends liability limitations to “downstream” parties whose services are used to perform the contract, is to be construed according to ordinary rules of contract interpretation; and (2) as a default rule, “when an intermediary contracts with a carrier to transport goods, the cargo owner’s recovery against the carrier is limited by the liability limitation to which the intermediary and the carrier agreed.” In this case, a cargo owner hired International Cargo Control (ICC) to arrange for delivery from Australia to Huntsville, Alabama. ICC in turn hired Hamburg Süd, which in turn hired Norfolk Southern Railway for the land leg of the journey, during which the cargo was damaged. Reversing the judgment of the Eleventh Circuit, the Supreme Court held that Norfolk was entitled to the protection of the liability limitations in two bills of lading. The broad language of the bill issued by ICC to the cargo owner extended the limitation of liability to subcontractors like Norfolk, despite the absence of a contract directly between ICC and Norfolk. In addition, the cargo owner was bound by the clause in the bill issued by Hamburg Süd to ICC, because an intermediary such as ICC acts as the cargo owner’s agent for the limited purpose of contracting with subsequent carriers, such as Hamburg Süd, for limitations on liability. This decision is important to any business that engages in international trade by sea.

Decision Below: 300 F.3d 1300 (11th Cir. 2002).