TIH Indemnity Fight Moves to Federal Court

Transportation Update

Date: November 15, 2013

The ongoing dispute between railroads and shippers of toxic inhalation hazard (TIH) materials over liability for third-party negligence branched out into a new forum in October with the filing of a complaint in North Dakota federal court by Agrium, Inc. against Canadian Pacific Railroad (CP). Agrium produces anhydrous ammonia, which is a TIH material most commonly used in agriculture as a nitrogen fertilizer, but also is essential to many critical industrial applications. Agrium seeks to enjoin CP from enforcing Item 54 of CP Tariff 8, which requires TIH shippers to indemnify CP against liabilities it may incur while transporting shippers’ TIH materials, except to the extent that CP itself is negligent. Thus, the TIH shipper must indemnify CP for the negligence of third parties, even when the TIH shipper is not at fault.

Agrium has challenged the CP indemnity on the grounds that CP’s tariff:

  • Contravenes North Dakota law and public policy because the indemnity is not a term that was mutually agreed to as part of a valid contract, but instead is a unilateral tariff established without Agrium’s consent.
  • Violates North Dakota law precluding recovery of attorneys’ fees incurred in civil actions because the tariff is not a voluntary agreement.
  • Contravenes the Federal Employers’ Liability Act (FELA), the Locomotive Inspection Act (LIA) and the Safety Appliance Act (SAA) because those laws impose strict liability upon CP, which is inconsistent with the tariff’s allocation of responsibility, and those laws do not permit indemnification through a unilaterally established tariff.
  • Contravenes the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) because it imposes strict liability upon CP, which is inconsistent with the tariff’s allocation of responsibility, and does not permit indemnification through a unilaterally established tariff.
  • Contravenes North Dakota’s comparative fault statute and public policy addressing actions by persons seeking to recover damages for death or injury to persons or property, which cannot be altered by a unilateral tariff.

CP has responded to Agrium’s complaint by filing a motion to dismiss on the following grounds:

  • The issues are not ripe for adjudication because there is no impending injury to Agrium from CP’s tariff. There has been no incident involving Agrium’s TIH shipments that exposes CP to liability and for which CP may require indemnification from Agrium.
  • Agrium lacks standing because it has not suffered a particularized and imminent injury to a protected interest under FELA, LIA or SAA.
  • The Surface Transportation Board (STB) has exclusive and primary jurisdiction. Agrium’s state law causes of action are preempted by federal laws and regulations in the interest of national uniformity. Agrium’s FELA and CERCLA claims are preempted by the Interstate Commerce Act.
  • Agrium has not stated viable claims for relief because it only vaguely refers to federal and state common laws and public policy, does not allege any violation of statutes, conflates a legal duty with economic responsibility and disregards CERCLA’s express acceptance of contractual indemnities.

Agrium has not yet filed its response to CP’s motion to dismiss.

This is just the latest round in a long-running dispute between railroads and TIH shippers over the railroads’ attempts to shift liability to their customers. Round one was fought in federal court when Union Pacific Railroad (UP) issued a tariff that required indemnification even for UP’s own negligence. That dispute was resolved when UP repealed the tariff and replaced it with one that required indemnification for third-party negligence. Round two was fought at the STB when UP asked the agency to declare that its new tariff was reasonable. The STB denied UP’s request and three months later UP issued a new tariff in an attempt to address the agency’s concerns. TIH shippers, however, have gone back to the agency, claiming that UP’s new tariff suffers from the same deficiencies as its old one. The STB has yet to rule on that claim. In the meantime, CP’s Tariff 8 also has been the subject of a challenge before the Canadian Transport Agency, which recently determined that it lacked jurisdiction over most of the claims against CP.

Thompson Hine will issue further bulletins as this matter progresses before the STB and the courts.

FOR MORE INFORMATION

For more information, please contact:

Karyn A. Booth
202.263.4108
Karyn.Booth@ThompsonHine.com

Sandra L. Brown
202.263.4101
Sandra.Brown@ThompsonHine.com

Jeffrey O. Moreno
202.263.4107
Jeff.Moreno@ThompsonHine.com

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