Managers and the Legal Environment 7th Edition by David Madsen, Constance Bagley

Exercise 10

The Southern Pacific Transportation Company was transporting eighteen boxcars loaded with bombs belonging to the U.S. government from Hawthorne, Nevada, to Port Chicago, California, pursuant to a contract with the Navy. While in Southern Pacific's yard in Roseville, California, the boxcars exploded, causing personal injuries and property damage and resulting in a lawsuit.
Assume that Southern Pacific used due care in transporting the bombs. Is it nonetheless liable for the damage caused by the explosion? Should the government be liable? How could Southern Pacific have protected itself from this lawsuit? Who would be liable if, instead of bombs exploding, deadly chemicals were spilled while being transported? [ Chavez v. Southern Pacific Transportation Co., 413 F. Supp. 1203 (E.D. Cal. 1976); Indiana Harbor Belt Railroad v. American Cyanamid Co., 916 F.2d 1174 (7th Cir. 1990).]