Federal Court Dismisses Rail Indemnity Tariff Challenge
Date: May 09, 2014
On May 8, 2014, a North Dakota federal court dismissed the complaint filed by Agrium, Inc. seeking to enjoin enforcement of a Canadian Pacific Railway (CP) tariff provision that requires shippers of toxic inhalation hazard (TIH) materials, such as chlorine and anhydrous ammonia, to indemnify CP against liabilities it may incur while transporting shippers’ TIH materials, except to the extent that CP itself is negligent. In other words, the tariff requires TIH shippers to indemnify CP for the negligence of third parties, even when the TIH shipper is not at fault.
The court’s dismissal of Agrium’s complaint was not on the merits, but rather on the timing. Specifically, the court concluded that Agrium’s claims are not ripe for decision, because Agrium is asking for an advisory opinion on the lawfulness of the CP tariff absent any allegation of breach of contract or actual injury. According to the court, “Until there is an actual TIH incident which causes injury to a third party and potentially exposes Canadian Pacific and Agrium to liability, there is no case and controversy ripe for consideration.”
This decision means that TIH shippers will continue to face uncertainty as to whether they will incur liability for any future TIH release during rail transportation that is not their fault. Indeed, if other courts follow this decision, there will have to be an actual TIH incident before a federal court will consider the enforceability of any tariff indemnity requirement. Currently, the Union Pacific Railroad (UP) is the only other major railroad with an indemnity requirement similar to CP’s.
Despite this federal court decision, TIH shippers still may challenge these tariffs before the Surface Transportation Board, which has jurisdiction to regulate common carrier railroad practices. A challenge to UP’s indemnity tariff presently is pending before the Board.
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