Third Circuit affirms dismissal of airline’s declaratory judgment action on forum non conveniens grounds

November 22, 2010

Delta Air Lines, Inc. v. Chimet, S.p.A. (3d Cir. (Pa.) Aug. 30, 2010).  Chimet, an Italian company with no U.S. offices, contracted with Delta in 2007 to transport over 100 kilograms of platinum (allegedly worth over US$4 million) from Italy to a consignee in Philadelphia, Pennsylvania.  The platinum was stolen before delivery was made, allegedly in Philadelphia.

Under Article 22(3) of the Montreal Convention, Delta’s liability for the cargo loss would be limited to 19 Special Drawing Rights (currently equivalent to about US$30) per kilogram unless Chimet had declared a higher value.  The parties’ dispute centered on whether Chimet had declared a higher value.  In particular, the parties disagreed about the meaning of the entry “VAL VAL VAL VAL” on the air waybill and about certain other entries on that document and on the delivery receipt.

Delta filed an action in federal court in Pennsylvania seeking a declaratory judgment that its liability was limited pursuant to the Montreal Convention.  Chimet moved to dismiss on forum non conveniens grounds, and the court granted the motion.

On appeal, Delta first argued that the trial court had abused its discretion by failing to give the required “considerable deference” to Delta’s choice of forum.  The appeals court disagreed, holding that the trial court had given such deference by evaluating, and rejecting, Chimet’s arguments that Delta’s choice of forum deserved no deference.

Next, Delta argued that the trial court had abused its discretion in analyzing the Gulf Oil Corp. v. Gilbert forum non conveniens factors.  In Gilbert, a 1947 case, the Supreme Court “provided a list of ‘private interest factors’ affecting the convenience of the litigants, and a list of ‘public interest factors’ affecting the convenience of the forum.”

As to the private interest factors, Delta contended that the dispute over whether Chimet had declared a higher value should be resolved by reference to the air waybill alone, and that consideration of other evidence, all of which (except for the delivery receipt) was located in Italy, was unnecessary.  The appeals court disagreed, holding that the Montreal Convention does not preclude “consideration of extrinsic evidence to determine the terms of the contract of carriage.”  The court further held that Chimet had met its burden of proving that testimony regarding this disputed issue could only be obtained from persons who resided in Italy, who were thus beyond the subpoena power of the U.S. courts.  The court also held that an additional factor supporting Chimet’s argument was its “stated desire” to join certain Italian companies, which could not be joined in any U.S. litigation, as defendants in the case.  Thus, the appeals court concluded that the private interest factors supported dismissal.

The appeals court came to the same conclusion regarding the public interest factors.  It held that the “locus of the allegedly culpable conduct” was Italy, not Pennsylvania, because the parties’ dispute centered on whether Chimet had made a declaration of value when it delivered the cargo to Delta in Italy, and that “the circumstances under which the shipment of cargo was lost in Pennsylvania are not relevant to determining whether Delta’s liability is limited under the Montreal Convention.”


Shipper’s cargo damage complaint held adequate under Montreal Convention

August 20, 2009

UPS Supply Chain Solutions, Inc. v. American Airlines, Inc. (N.D. Ill. Aug. 14, 2009).  For a cargo damage claim, Article 31(2) of the Montreal Convention requires that “the person entitled to delivery must complain to the carrier forthwith after the discovery of the damage,” and, at the latest, within 14 days from the date of receipt of the cargo.  Article 31(3) requires that such complaint be “in writing.”  Article 31 does not contain any further requirements regarding the contents or form of the complaint.

In this case, American had agreed to transport 80 drums of fish oil for UPS from Japan to Illinois.  Upon arrival, the cargo spoiled because the drums were not refrigerated.  Within the 14-day notice period, a UPS employee sent a letter to American stating as follows:

This is to inform you that our customer is refusing this shipment due to the fact that is [sic] was left in a ULD and not kept cool.  From what I understand the freight was left outside in a container during days reaching 80 degree’s [sic] and the product spoiled. The product was valued well over $80,000 USD.  Please advise what the airline plans to do with this product.  All your help is deeply appreciated.

American moved for summary judgment on the grounds that the letter failed to give adequate notice of UPS’s complaint because it did not contain an express statement of UPS’s intent to hold American liable for the cargo damage.  The court rejected American’s argument, holding that the text of Article 31 only required that the complaint give notice that the cargo had been damaged and that UPS’s letter had adequately done just that.


Second Circuit enforces cargo waybill’s liability limitation clause

September 13, 2007

Eli Lilly Do Brasil, Ltda v. Federal Express Corp. (2d Cir. N.Y. Sept. 11, 2007).  While in FedEx’s custody in Brazil, the shipper’s cargo was stolen.  The cargo was worth about $800,000, but FedEx’s waybill limited the carrier’s liability for stolen goods to $20 per kilogram, or about $28,000 if the limitation applied.  The shipper had declined to exercise its option to declare a higher value for the cargo and pay for additional coverage.

The shipper, a Brazilian company, sued FedEx in the Southern District of New York and the parties filed cross-motions for partial summary judgment.  FedEx contended that the waybill limited its liability, while the shipper contended that Brazilian law applied.  According to the shipper, the waybill’s liability limitation would be unenforceable under Brazilian law if it could prove that FedEx had acted with gross negligence.

The Second Circuit affirmed the trial court’s ruling in FedEx’s favor.  Like the trial court, the Second Circuit performed a choice of law analysis to determine whether U.S. federal common law or Brazilian law applied.  The court recognized that Brazil had significant contacts with the parties and the contract but held that such contacts were trumped by U.S. federal common law, which would apply the contract as written, thereby protecting “the parties’ justified expectations” that their “freely undertaken contractual obligations” would be enforced.  In making this ruling, the court was influenced by the facts that both parties were “sophisticated commercial entities” and that the shipper had passed on its option to declare a higher value for the cargo.


Court rules that shipper waited too long before raising stink about spoiled fish

May 19, 2007

O’gray Import & Export v. British Airways PLC (D. Md. May 4, 2007).  The shipper engaged British Airways to transport smoked fish from Ghana to BWI.  On September 8, 2005, the U.S. Food and Drug Administration released the cargo to the shipper but also placed a hold on the fish due to a suspicion of mold; the FDA subsequently denied entry of the shipment.  Despite being on “clear notice of potential problems” with the cargo, the shipper did not note any complaint when it signed the air waybill on September 8.  On October 19, the shipper mailed a claim for damages to British Airways.  British Airways denied the claim because it did not comply with the air waybill’s requirement that any claim for cargo damage be made in writing to the airline within 14 days “from receipt of the goods.”

The shipper filed a lawsuit against British Airways seeking as damages the value of the cargo.  British Airways moved for summary judgment on the grounds that the shipper had failed to comply with the notice requirements of Article 26 of the Warsaw Convention, which had been adopted by the air waybill.  (Ghana is a party to the Warsaw Convention but not to the Montreal Convention, which succeeded the Warsaw Convention in 2003.)  The shipper, knowing that the Warsaw Convention’s notice requirements do not apply to “destroyed” cargo, argued in response that the cargo was “destroyed” as of September 8 rather than “damaged” as of that date.

The court granted British Airways’s motion.  The court explained that for cargo to be considered “destroyed,” the destruction must be “total and obvious.”  The court found that it was not “obvious” on September 8 that the fish were spoiled, reasoning that if the spoilage had been “obvious” that day, the FDA would have denied the cargo’s entry rather than holding the fish for further testing.  Thus, the court held that Article 26 of the Warsaw Convention and the air waybill imposed a duty on the shipper to provide notice of its claim with 14 days of September 8 and that the shipper had failed to meet this deadline.

Note:  Article 26(2) of the Warsaw Convention provides as follows:  “In the case of damage, the person entitled to delivery must complain to the carrier forthwith after the discovery of the damage, and, at the latest, within seven days from the date of receipt in the case of baggage and fourteen days from the date of receipt in the case of cargo.  In the case of delay the complaint must be made at the latest within twenty-one days from the date on which the baggage or cargo have been placed at his disposal.”


Court rules that airline must eat asparagus loss

May 14, 2007

Wea Farms v. American Airlines, Inc. (S.D. Fla. Apr. 18, 2007).  A Peruvian farmer delivered asparagus to American in Lima for shipment to Miami International Airport.  American did not notify the consignee of the asparagus’ arrival in Miami until more than 18 hours had elapsed.  During that time, the asparagus was exposed to the summer heat in Miami and not placed in any type of refrigerated storage.  Not surprisingly, the asparagus suffered severe heat damage and was a total loss.

The shipper sued American for the fair market value of the asparagus at the time it was delivered to the airline.  At the trial, American argued that it was absolved from liability under its tariffs and Article 18.2 of the Montreal Convention because the asparagus had been delivered to it by the shipper in “defective packaging.”

The court found that American or its cargo agent, not the shipper, had been responsible for the packaging.  The court also found that even the shipper had been responsible for the packaging, the proximate cause of the damage to the asparagus was American’s negligence in waiting over 18 hours to contact the consignee while the asparagus sat in the hot summer weather.  Accordingly, the court held American liable to the shipper for the fair market value of the asparagus at the time of delivery.


Dog dies after flight but owner’s lawsuit survives airline’s summary judgment motion

April 3, 2007

Ing v. American Airlines (N.D. Cal. Feb. 5, 2007).  Willie, “a young English Bulldog,” was shipped in a kennel in the cargo compartment of a flight from JFK to San Francisco in August 2005.  Upon arrival, Willie was sick and his owner requested that he be allowed to take Willie to a veterinarian.  American refused to release Willie to his owner and the dog died several hours later, while still in the airline’s custody.

Willie’s owner sued the airline, alleging causes of action for negligence, gross negligence, trespass to chattel, conversion, intentional infliction of emotional distress, breach of bailment contract, breach of contract and violations of certain California statutes.  American moved for summary judgment on the grounds that the owner’s state tort and statutory claims were preempted and that its contract liability was limited to $50 by the air waybill.

The court held that the federal Airline Deregulation Act and federal common law preempted the owner’s state tort and statutory causes of action but only with respect to the period of time the dog was being shipped.  As to the owner’s contract causes of action, the court held that the air waybill’s $50 limitation of liability governed unless a jury were to find that American breached the air waybill through conduct rising to the level of intentional destruction or theft of the dog.  The court held that because a jury could reasonably conclude that American did engage in such conduct by refusing to release the ailing dog to his owner upon request, summary judgment was not proper.

Finally, the court held that once the owner requested that the airline release the dog, a reasonable jury could conclude that “American’s conduct after the flight landed was a separate incident unrelated to shipping the dog.”  Accordingly, the court denied the airline’s summary judgment motion to the extent it applied to the owner’s post-shipping claims.


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