Boehringer Mannheim Diagnostics v. PAN AM., ETC.

• Decision Date: 24 November 1981
• Docket Number: Civ. A. No. H-80-1421.
• Citation: 531 F. Supp. 344
• Parties: BOEHRINGER MANNHEIM DIAGNOSTICS, INC. f/k/a Hycel, Inc., Plaintiff, v. PAN AMERICAN WORLD AIRWAYS, INC., Defendant.
• Court: U.S. District Court — Southern District of Texas

531 F. Supp. 344

BOEHRINGER MANNHEIM DIAGNOSTICS, INC. f/k/a Hycel, Inc., Plaintiff, v. PAN AMERICAN WORLD AIRWAYS, INC., Defendant.

Civ. A. No. H-80-1421.

United States District Court, S. D. Texas, Houston Division.

November 24, 1981.

COPYRIGHT MATERIAL OMITTED

Alden D. Holford, Burgess & Holford, Houston, Tex., for plaintiff.

T. M. Wall, Hutcheson & Grundy, Houston, Tex., for defendant.

MEMORANDUM OPINION

ELY, Senior Circuit Judge, Sitting by Designation.

Plaintiff Hycel, Inc. ("Hycel")¹ seeks recovery against defendant Pan American World Airways, Inc. ("Pan Am") under the Warsaw Convention² for damage to its Super 17 Blood Chemistry Analyzer (the "Analyzer") that allegedly occurred during defendant's shipment of the Analyzer from Brazil to Houston, Texas. Defendant denies liability and also contends that in any event the Convention limits its liability to $9.07 per pound.³ For the reasons set forth in the following opinion the Court rejects defendant's contentions and holds defendant liable for the full amount of the repair cost of the Analyzer, reasonable attorney's fees, and prejudgment interest from the date plaintiff received the damaged Analyzer.

I. The Shipment

In the spring of 1978 Hycel exhibited one of its large automated blood analyzers, a "Super 17," at the 1978 Department of Commerce Trade Show held at the United States Trade Center in Sao Paulo, Brazil. Hycel used the Analyzer to run simulated tests that demonstrated how the machine automatically determined the chemical makeup of a patient's blood.

After the four-day trade show Metropolitan Transports, Inc., a Brazilian firm, repacked the Analyzer for its transport to Viracopos Airport in Brazil and its return to the United States. Testimony by the firm's vice-president indicated there was no damage to the instrument at the time it was repacked and no reports of damage during its transport to Viracopos Airport. Pan Am contracted for carriage of the Analyzer by issuing its Air Waybill No. 026-21569564 on June 27, 1978, while the Analyzer was still at the United States Trade Center, and received the instrument at its Viracopos Airport facility on July 14, 1978. Pan Am made no objections to the condition of the crated Analyzer upon its arrival at the airport.

Because Pan Am had no direct flights from Brazil to Houston, Texas, it loaded the crated Analyzer onto a freight plane bound for New York City, then transferred the crate in New York to a passenger plane, a Boeing 747, in which the Analyzer traveled to Intercontinental Airport at Houston, Texas. The transfer in New York required laying the 1860-pound crate on its side so that it would clear the shorter 64-inch-high doors of the passenger plane. Testimony at trial indicated Pan Am employees tilted the crate by using a somewhat risky procedure in which two or three forklifts push and then catch the crate as it falls. There was no direct testimony to show whether the crate actually was damaged during this process.

On August 22, 1978, a delivery truck arrived to pick up the Analyzer at Pan Am's Houston airport facility for transport to Hycel's plant. The driver and a Pan Am employee discovered then that the crated Analyzer had been damaged. The crate apparently had sustained a severe impact that dented and separated the plywood near the top edge and punched a hole in the top surface. After making a notation of the hole and the damage on the delivery ticket, the driver transported the Analyzer to Hycel. Hycel's traffic manager accepted and signed for the Analyzer, also noting on the ticket the damage and the need for a full inspection. Later the same day Hycel's export coordinator notified Pan Am by letter of the company's intent to file a claim against the airline for the damage to the Analyzer.

II. Liability

A. The Warsaw Convention

Both parties agree that the Warsaw Convention, which governs the liability of air carriers in international transportation, applies to this case.⁴ Plaintiff seeks to hold defendant liable under Article 18(1) of the Convention, which subjects carriers to liability "for damage sustained in the event of ... damage to ... any goods, if the occurrence which caused the damage so sustained took place during the transportation by air." The Convention defines "transportation by air" to "comprise the period during which the baggage or goods are in charge of the carrier, whether in an airport or on board an aircraft." Warsaw Convention art. 18(2). Thus, plaintiff need show only that the Analyzer was in good condition when transportation by air began, i.e., when defendant took charge of the instrument, and that it was damaged when transportation by air was completed. See, e.g., Dalton v. Delta Airlines, Inc., 570 F.2d 1244, 1245 (5th Cir. 1978).

Defendant contends that plaintiff has failed to show that the Analyzer was in good condition upon its arrival at defendant's Viracopos Airport facility on July 14, 1978. Under the Convention, however, plaintiff receives the benefit of a presumption that, subject to proof to the contrary, damage has been the result of an event that took place during the transportation by air if the prior transportation by land "takes place in the performance of a contract for transportation by air, for the purpose of loading, delivery, or transshipment." Warsaw Convention art. 18(3).

Undisputed evidence shows that defendant's Air Waybill for the transport of the Analyzer was issued on June 27, 1978. Since the Waybill is prima facie evidence of the conclusion of the contract, see Warsaw Convention art. 11(1), land transportation of the Analyzer after June 27 must be deemed transportation for the purpose of loading or delivery in the performance of a contract for transportation by air within the meaning of Article 18(3). The Court must presume, therefore, that the damage occurred during the transportation by air, unless defendant proves to the contrary. Defendant has come forward with no such evidence.

Further, and apart from the presumption of Article 18(3), plaintiff has produced sufficient evidence to establish that the Analyzer was not damaged when it arrived at Viracopos Airport. Testimony by the vice-president of the Brazilian company that repacked the Analyzer at the United States Trade Center indicated the instrument was not damaged then nor during its delivery to Viracopos Airport. It is undisputed that defendant took no exception to the Analyzer's condition upon its arrival at Viracopos on July 14, 1978.⁵ Plaintiff has met its burden of proof on this issue.

The Court also rejects defendant's contention that it took "all necessary measures to avoid the damage or that it was impossible for it to take such measures" and is thus relieved of liability under Article 20(1) of the Convention. Defendant asserts that because the crated Analyzer was "topheavy" and had no markings to warn of its weight or delicate nature defendant's employees had no way of knowing the risk involved in attempting to lay the Analyzer on its side.

The Court is not persuaded that these facts exonerate defendant from liability for the extensive damage caused the Analyzer in this case. The crate's obviously enormous weight and height should have alerted defendant's employees to the risks inherent in tilting the crate, and the employees in any event could have prevented the sharp blow through more careful handling.⁶ Similarly, the Court rejects defendant's contention that plaintiff contributed to the damage by its negligence in not marking warnings on the crate.

B. Texas Common Law

On the basis of the facts established in this case the Court is of the opinion that defendant is additionally liable to plaintiff under the Texas common law of negligence by operation of the doctrine of res ipsa loquitur. Plaintiff has established (1) that the care and handling of the Analyzer, from its arrival at Viracopos Airport in Brazil to its delivery at Intercontinental Airport — Houston, was under the management and control of defendant, and (2) that the damage to the Analyzer would not ordinarily have occurred in the absence of negligence.

The Court, therefore, applies the doctrine of res ipsa loquitur as limited by Texas courts⁷ and holds the evidence sufficient to infer negligence on the part of defendant. See Mobil Chemical Company v. Bell, 517 S.W.2d 245, 250-57 (Tex.1974); Honea v. Coca-Cola Bottling Co., 143 Tex. 272, 183 S.W.2d 968, 969 (1944). Defendant's liability under Texas law for attorney's fees is discussed in part III(C) infra.

III. Damages

A. Cost of Repair

The parties have agreed that the correct measure of damages is the reasonable cost to plaintiff of repairing the damaged Analyzer.⁸ Plaintiff has amply documented its expenditure of $34,054.04 in parts, labor, and overhead for the repair of the Analyzer, taking into account $5,447.60 erroneously included in plaintiff's work order and $4,000.00 erroneously omitted.⁹ Defendant objected at trial that plaintiff's figures do not reflect the cost of repair in 1978, the date of damage, since the actual repair occurred in spring of 1980. Plaintiff's witnesses, however, testified that repair costs in 1978 would have been the same, and defendant offered no evidence to the contrary.

B. The Warsaw Convention Limitation of Liability

We come now to the core of the parties' dispute over damages: whether the limitation of the carrier's liability for damage to goods as set out in Article 22 of the Warsaw Convention — 250 French gold francs per kilogram — is to be converted to U.S. dollars with reference to the former "official" price of gold or with reference to the current free-market price of gold. Plaintiff and defendant have thoroughly and ably briefed the issue, and they have accurately noted the lack of American precedent on this issue. After reviewing the Convention's language and history, and after considering the arguments of policy advanced by counsel for both sides, the Court concludes that defendant...