Chubb & Son v. Asiana Airlines

• Decision Date: 01 August 1999
• Docket Number: Docket No. 99-7617
• Citation: 214 F.3d 301
• Parties: (2nd Cir. 2000) CHUBB & SON, INC., As subrogee of Samsung Semiconductor, Plaintiff-Appellant, v. ASIANA AIRLINES, Defendant-Appellee
• Court: U.S. Court of Appeals — Second Circuit

Page 301

214 F.3d 301 (2nd Cir. 2000)

CHUBB & SON, INC., As subrogee of Samsung Semiconductor, Plaintiff-Appellant, v. ASIANA AIRLINES, Defendant-Appellee.

Docket No. 99-7617

August Term, 1999

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

Argued: November 19, 1999

Decided: June 08, 2000

Appeal from the judgment of the United States District Court for the Southern District of New York (Lorretta A. Preska, Judge) entered September 23, 1998, granting partial summary judgement to Asiana Airlines and thereby limiting its liability to $706.00.

Reversed and Remanded.

Daniel G. McDermott, Donovon Parry Carbin McDermott & Radzik, New York, New York (William E. Ecenbarger, Jr., Donovon Parry Carbin McDermott & Radzik, New York, New York, of counsel) for Plaintiff-Appellant.

Christopher Carlsen, Condon & Forsyth LLP, New York, New York (Barry S. Alexander, Condon & Forsyth LLP, New York, New York, of counsel) for Defendant-Appellee.

Before: KEARSE, PARKER, POOLER, Circuit Judges.

PARKER, Circuit Judge:

Chubb & Son, Inc. ("Chubb"), as subrogee of Samsung Semiconductor, Inc. ("Samsung Semiconductor"), appeals from the judgment of the United States District Court for the Southern District of New York (Lorretta A. Preska, Judge) entered September 23, 1998, granting partial summary judgement to Asiana Airlines ("Asiana") and thereby limiting its liability to $706.00.

On this appeal we must determine under customary international law whether this dispute is governed by a treaty of the United States. Initially operating under the assumption that the dispute was governed by the Convention for the Unification of Certain Rules Relating to International Transportation by Air, Oct. 12, 1929, 49 Stat. 3000 (1934), 137 L.N.T.S. 11, reprinted in note following 49 U.S.C. § 40105 (the "Original Warsaw Convention"), the parties cross-moved for partial summary judgment as to whether Asiana could invoke Article 22(2) of the Original Warsaw Convention to limit its liability to $20.00 per kilogram of cargo lost, or $706.00. Sometime thereafter, Asiana sought leave to file a supplemental motion for summary judgment, asserting that the United States and South Korea ¹ were not in treaty relations with regard to the Original Warsaw Convention because South Korea did not adhere to the Original Warsaw Convention, but adhered only to the amending agreement, known as the "Hague Protocol" and officially entitled "Protocol to Amend the Convention for the Unification of Certain Rules Relating to International Carriage by Air signed at Warsaw on 12 October 1929." Adhering to the Hague Protocol had the effect of adherence to the Convention as amended by the Protocol (the "Amended Warsaw Convention"). See Hague Protocol, Sept. 28, 1955, 478 U.N.T.S. 371, 387, art. XXIII(2). The court below concluded that the United States and South Korea were parties to a treaty consisting of the articles common to the Original Warsaw Convention and the Amended Warsaw Convention, and applied that treaty to limit Asiana's liability to $706.00. For the reasons that follow, we reverse the order of the district court and remand for further proceedings.

I. BACKGROUND

A. The Undisputed Facts of the Underlying Dispute

The facts relevant to the determination of this appeal are undisputed. In 1995, Asiana, a South Korean corporation, agreed with Samsung Electronics Co., Ltd. ("Samsung"), another South Korean corporation, that Asiana would ship seventeen parcels of computer chips from Seoul, South Korea, to San Francisco, California pursuant to Asiana air waybill No. 988-0497-2951 (the "Waybill"), with Samsung Semiconductor as the intended recipient. The Waybill provided that shipment of the seventeen parcels would be made on Asiana Flight 214 from Seoul, South Korea to San Francisco, California on August 10, 1995. The Waybill did not refer to any other stops en route and Flight 214 had no other scheduled stops.

The seventeen parcels were delivered to Asiana for shipment. Due to an excess of goods to be shipped, however, Asiana transported the parcels on Asiana Flight 202 from Seoul, South Korea to Los Angeles, California, and thereafter trucked the parcels to San Francisco. Asiana did not inform Samsung or Samsung Semiconductor in writing of this change, nor did it conform the Waybill to this change. Upon delivery in San Francisco, two of the seventeen parcels were missing. Neither party has been able to locate the parcels. The two missing parcels weighed a combined 35.3 kilograms and contained $583,000 worth of computer chips.

The owner and intended recipient of the computer chips, Samsung Semiconductor (a subsidiary of Samsung), had insured the chips against loss or damage through a cargo insurance policy issued by Chubb. Upon Samsung Semiconductor's claim of loss, Chubb paid Samsung Semiconductor $583,000 plus an additional amount based on the terms of the cargo insurance policy.

B. The Proceedings Below

On July 3, 1996, Chubb, as subrogee of Samsung Semiconductor, commenced this action against Asiana in the District Court for the Southern District of New York, seeking to recover the value of the lost computer chips, plus the remaining amount paid by it under the terms of the cargo insurance policy. The parties cross-moved for partial summary judgement on the issue of whether Asiana could invoke Article 22(2) of the Original Warsaw Convention to limit its liability. Judge Preska referred the motion to Magistrate Judge Peck for a report and recommendation.

Asiana argued that it could invoke Article 22(2), which limits an air carrier's liability to $20.00 per kilogram of cargo lost, here $706.00, and offered $800.00 to settle the case. Chubb argued that Asiana could not avail itself of the liability limitation in Article 22(2) because it failed to comply with Article 8(c) of the Original Warsaw Convention. Article 9 of the Original Warsaw Convention precludes an air carrier from availing itself of the liability limitation in Article 22(2) if "the air waybill does not contain all the particulars set out in article 8(a) to (i), inclusive, and (q)." Original Warsaw Convention, supra, art. 9, 49 Stat. at 3017. Article 8(c) requires that the air waybill contain "[t]he agreed stopping places" for the shipment. Original Warsaw Convention, supra, art. 8(c), 49 Stat. at 3016. In this case, the Waybill did not contain any stopping places, but Asiana nonetheless stopped in Los Angeles. Magistrate Judge Peck issued a well-reasoned and well-supported Report and Recommendation, recommending that Chubb's motion be granted and Asiana's motion be denied because, having failed to comply with Article 8(c), Asiana could not limit its liability under Article 22(2).

While the parties' objections to the Report and Recommendation were pending before the district court, Asiana sought leave to file a supplemental motion for summary judgment, questioning the court's subject matter jurisdiction pursuant to 28 U.S.C. § 1331. Up until this point, the parties and the court had assumed subject matter jurisdiction based on their belief that the dispute arose under a treaty of the United States, i.e., the Original Warsaw Convention. Because this issue potentially affected subject matter jurisdiction, the district court granted leave.

Asiana argued that the United States and South Korea were not in treaty relations with regard to the Original Warsaw Convention because the United States adhered only to the Original Warsaw Convention and South Korea adhered only to the Hague Protocol, which had the effect of adhering to the Amended Warsaw Convention. Asiana argued that the district court nevertheless had jurisdiction under a treaty consisting of all of the articles common to the Original Warsaw Convention and the Amended Warsaw Convention (hereinafter referred to as the "Truncated Warsaw Convention"). Chubb agreed that the district court had jurisdiction, but contended that the Original Warsaw Convention applied. On September 18, 1998, the district court granted Asiana's supplemental motion for partial summary judgment, agreeing with Asiana that the United States and South Korea were parties to this Truncated Warsaw Convention, and finding that Asiana's liability under this "treaty" was limited to $706.00. As a result the district court denied the prior-cross motions as moot.

The district court discussed the interplay between the Original Warsaw Convention and the Hague Protocol and reasoned that the United States and South Korea had agreed to be bound by all of the provisions of the Original Warsaw Convention to which they both adhered. See Chubb & Son, Inc. v. Asiana Airlines, 1998 WL 647185, at *2-*3 (S.D.N.Y. Sept. 22, 1998). The court observed that States that adhere to a multilateral treaty enter into treaty relations with the other States that adhere to the treaty, regardless of whether those States adhere to the treaty contemporaneously. See id. at *5 Thus, according to the court, the United States and South Korea entered into treaty relations when South Korea adhered to the amended version of the treaty. See id. at *6.

In reaching this conclusion, the court relied on In re Korean Air Lines Disaster of September 1, 1983, 664 F. Supp. 1463 (D.D.C. 1985), aff'd, 829 F.2d 1171 (D.C. Cir. 1987), aff'd sub nom. Chan v. Korean Air Lines, Ltd., 490 U.S. 122 (1989),² and Hyosung (America), Inc. v. Japan Air Lines, Ltd., 624 F. Supp. 727 (S.D.N.Y. 1985), the only two cases that discuss the existence of treaty relations between the United States and South Korea with regard to international carriage by air. See Chubb, 1998 WL 647185, at *6. The court interpreted both cases to hold that treaty relations between the United States and South Korea existed to the extent of those portions of the Original Warsaw Convention to which they both adhered, i.e., the Truncated Warsaw Convention. See id. at *5. The court noted, however, that unlike this case, the courts in Korean Air Lines Disaster...