The Rise of the Exoneration Clause: The Second Circuit Holds a Downstream Covenant Not To Sue Enforceable in Sompo Japan Insurance Co. of America v. Norfolk Southern Railway Co.

Alana Riksheim | Note

In the spring of 2006, a train carrying a range of manufactured good from East Asia, including tractors, automotive parts, and copy machines, derailed outside of Dallas, Texas. Much of the cargo was destroyed. Assigning liability in the wake of the derailment required untangling the web of intermodal carriage contracts governing the damaged shipments. Two cargo owners contracted with Nippon Express U.S.A. (Nippon Express), a non-vessel-operating common carrier, or NVOCC, to arrange the transportation of their products from Japan to Georgia. Nippon Express vested responsibility for the goods’ entire journey with the ocean carrier Yang Ming Marine Transport Corporation (Yang Ming). Yang Ming subsequently engaged Norfolk Southern Railway Company (Norfolk Southern) to provide for rail carriage stateside. A third cargo owner negotiated directly with Yang Ming, rather than through an NVOCC.