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The liability imposed by 49 U.S.C.S. § 20 is the liability imposed by the common law upon a common carrier, and may be limited or qualified by special contract with the shipper, provided the limitation or qualification be just and reasonable, and does not exempt from loss or responsibility due to negligence.
This appeal contested the validity under the Interstate Commerce Act, and under general equitable principles, of the arbitration clause in an interstate carrier's standard-form bill of lading utilized in connection with its nationwide business of transporting individually owned automobiles from point to point within the United States. The principal argument is that the arbitration clause is invalid because it compels private shippers to arbitrate their claims in New York, which may be entirely remote, inconvenient and expensive to them in connection with their claims. Since the amount of damages involved is usually in the vicinity of $1,000, resulting from harm to the automobile en route while being driven by one of the carrier's casual drivers, the cost of appearing in New York for arbitration frequently constitutes a bar, the argument runs, to pursuing even plainly valid claims. The specific order appealed from was granted by the district court. Pursuant to 9 U.S.C. § 4, it directs that arbitration be compelled in the manner provided in the bill of lading, i.e., in New York. It also orders the respondent State Farm Mutual Automobile Insurance Co. (State Farm), as subrogee of Joseph Romagnoli, an automobile shipper, to stay proceedings in an action at law commenced against Aaacon in the State of California until arbitration has been completed.
Was the arbitration clause, which compelled private shippers to arbitrate their claims in New York, valid?
The court reversed the order of the trial court and held that the arbitration clause, which compelled private shippers to arbitrate their claims in New York, constituted a limitation of liability, and was therefore invalid. The court ruled that appellee's exposure to the possibility of having to defend against appellant's claim on the merits in California was a liability encompassed by the statutory prohibition against any limitation of liability, and that the right of a shipper to sue a carrier in a convenient forum of the shipper's choice was a right that Congress intended to codify. The court held that 49 U.S.C.S. § 20(11) preserved to a shipper his common law right of action against a carrier in any forum in which an action could properly be brought. The court held that when appellant signed the agreement with appellee purportedly incorporating the bill of lading on the reverse side, the tariff upon which that bill of lading was based had been rejected by the Interstate Commerce Commission and was therefore void under 49 U.S.C.S. § 317(a).