Continental Ins. v. Federal Express Corp.

• Decision Date: 29 June 2006
• Docket Number: No. 03-57214.,No. 03-57162.,03-57162.,03-57214.
• Parties: CONTINENTAL INSURANCE COMPANY, a corporation, Plaintiff-Appellee, v. FEDERAL EXPRESS CORPORATION, a corporation, Defendant-Appellant. Continental Insurance Company, a corporation, Plaintiff-Appellant, v. Federal Express Corporation, a corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

454 F.3d 951

CONTINENTAL INSURANCE COMPANY, a corporation, Plaintiff-Appellee, v. FEDERAL EXPRESS CORPORATION, a corporation, Defendant-Appellant.

Continental Insurance Company, a corporation, Plaintiff-Appellant, v. Federal Express Corporation, a corporation, Defendant-Appellee.

No. 03-57162.

No. 03-57214.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted October 17, 2005.

Filed June 29, 2006.

Robert J. Taitz, argued, and David R. Shane, Shane & Taitz, Greenbrae, CA, for the defendant-appellant/appellee.

Timothy R. Lord, Bernadette M. Chala, argued, Lewis Brisbois Bisgaard & Smith, LLP, Costa Mesa, CA, for the plaintiff-appellee/appellant.

Appeal from the United States District Court for the Central District of California; Nora M. Manella, District Judge, Presiding. D.C. No. CV-00-00696-NMM.

Before HUG, PREGERSON, and CLIFTON, Circuit Judges.

HUG, Circuit Judge.

This appeal is from a stipulated judgment for $109,023.24 in favor of Continental Insurance Company ("Continental") for goods lost in shipment by Federal Express Corporation ("FedEx"). We have jurisdiction because the parties reserved the right to appeal the district court's rulings on the applicability of the Original Warsaw Convention and its subsequent amending agreements, the Hague Protocol and the Montreal Protocol No. 4.

I. BACKGROUND

On March 31 and April 15, 1999, FedEx and Comet Electronics Co., Ltd., entered into a contract of carriage, whereby FedEx agreed to ship by air packages containing integrated circuits and memory modules from Hong Kong to Pasadena, California, with delivery to Viken Electronics. Four packages never arrived. The insurer of these cargoes, Continental, was subrogated to the rights of Viken Electronics, the consignee and owner of the goods. Continental filed an action against FedEx in the California Superior Court, alleging causes of action for loss of cargoes under the Warsaw Convention, negligence, breach of contract, breach of the duty to care for property and bailment, and conversion. Continental alleged the losses of shipments "including, but not necessarily limited to, air waybill number[s] 8101 8095 3045 . . . [and] 8101 8095 3137" ("3045" and "3137"). FedEx removed the case to the United States District Court for the Central District of California. It is undisputed that the Warsaw Convention preempts the state law causes of action.

A. First Motion for Partial Summary Judgment.

FedEx sought partial summary judgment that its liability was limited as to waybills 3045 and 3137 under the amended version of the Warsaw Convention presently in force between Hong Kong and the United States, which it alleged either to be The Hague Protocol of 1955 ("The Hague Protocol")¹ or the Montreal Protocol No. 4 (1975).² Compared to the Original Warsaw Convention, both versions substantially relax pre-conditions to limited liability.

The Original Warsaw Convention presumes liability of the carrier for goods lost or destroyed while entrusted to the carrier, but limits permissible recovery unless a special declaration of value is made when the goods are delivered to the carrier, and the shipper has paid a supplementary sum according to the value. See Original Warsaw Convention art. 22(2). However, Article 9 provides that "the carrier shall not be entitled to avail himself of the provision of this convention which excludes or limits his liability . . . if the air waybill does not contain all of the particulars set out in Article 8(a) to (i), inclusive and (q)."³ Article 8(i) requires the air bill to contain the weight of the goods. By contrast, The Hague Protocol only requires notice of stop-over destinations on the waybill. The Montreal Protocol No. 4 abandons the cargo documentation provisions of the Original Warsaw Convention entirely, permitting limitation of liability even in the absence of an air waybill.

Before the district court ruled on FedEx's first motion, Continental broadened the scope of its suit to include two additional waybills — 8101 8095 3067 and 8101 8095 3056 ("3067" and "3056"). FedEx maintained that Continental was barred from pursuing claims for additional waybills. However, the district court also permitted Continental to proceed on waybills 3067 and 3056.

Because weight notations appeared on the waybills in evidence for 3045 and 3137, FedEx stated "for the purposes of this motion only, Federal Express will concede that this matter is governed solely by the Original Warsaw Convention." Obviously, this concession was made because the waybills complied with all the requirements of the Original Warsaw Convention, including the weight requirement. Thus, partial summary judgment was granted for FedEx on those two waybills.

The district court permitted Continental to proceed on waybills 3067 and 3056 because Continental's complaint stated that the action involved the loss of shipments "including but not necessarily limited to, air waybill numbers 3045 and 3137." The copies of waybills number 3067 and 3056 did not contain the weight of the goods shipped on the copies of the waybills before the court; therefore, the district court denied partial summary judgment limiting liability as to those shipments.

B. Second Motion For Partial Summary Judgment.

FedEx's second motion for partial summary judgment referenced waybills 3067 and 3056 specifically. Because the billing copies of waybills 3067 and 3056, on which the cargo weights were clearly marked, were then in evidence, FedEx conceded again only for purposes of summary judgment that the Original Warsaw Convention applied. However, this time the district court ruled that waybills 3067 and 3056 were technically deficient under Article 8 of the Original Warsaw Convention because the sender's copies, which omit the cargoes' weight, had also been entered into evidence.

C. Law Of The Case Doctrine.

In telephonic conferences on July 7 and July 30, 2003, the district court relied on FedEx's limited concessions and held that the Original Warsaw Convention was the law of the case, thereby barring further consideration at trial of what treaty governs, and, in the district court's view, resolving all outstanding legal issues. Only the factual question of damages remained. To posture the case for appeal, the parties stipulated to damages and entered a consent judgment, which explicitly reserved their rights of appeal. We have jurisdiction over this appeal of the stipulated judgment due to this reservation of the right to appeal. See U.A. Local 342 Apprenticeship & Training Trust v. Babcock & Wilcox Construction Co., 396 F.3d 1056, 1058 (9th Cir.2005).

FedEx appeals the district court's use of the law of the case doctrine and challenges the district court's holding that the Original Warsaw Convention controls the case and precludes consideration of The Hague Protocol or the Montreal Protocol No. 4.

II. DISCUSSION OF FEDEX'S APPEAL

We review de novo a district court's interpretation of treaties to which the United States is a party. Motorola, Inc. v. Federal Express Corp., 308 F.3d 995, 999 n. 6 (9th Cir.2002). We review applications of law of the case doctrine for abuse of discretion. Milgard Tempering, Inc. v. Selas Corp. of America, 902 F.2d 703, 715 (9th Cir.1990). Here, the district court abused its discretion in applying the law of the case doctrine for two reasons.

First, the court misunderstood the effect of its summary judgment rulings. FedEx sought summary judgment on whether liability is limited even if the Original Warsaw Convention applies. It did not concede that this applied for the purposes of trial if the motion was denied. Denying summary judgment rendered no decision on what law governed; no actual ruling on the issue of applicable law was made. The record bears this out: nowhere is it evident that the court actually analyzed the treaties in force. By invoking the law of the case doctrine to prevent judicial consideration of a dispositive legal issue not yet ruled upon for the purposes of trial, the district court abused its discretion.

Second, the district court erred by applying the Original Warsaw Convention to this case. Given that various nations have ratified either the Original Warsaw Convention or its various amending agreements, the question as to what law applies has ordinarily been determined on a "lowest common denominator" basis. See, e.g., G.D. Searle & Co. v. Federal Express Corp., 248 F.Supp.2d 905, 907-09 (N.D.Cal. 2003); see also Paul S. Dempsey, International Air Cargo & Baggage Liability And The Tower Of Babel, 36 GEO. WASH. INT'L L. REV. 239, 240 (2004). The latest treaty ratified by both origin and destination countries supplies the governing law. The most recent common treaty in force between Hong Kong and the United States is not the Original Warsaw Convention, but The Hague Protocol.

A. Hong Kong.

From July 1, 1997, the People's Republic of China resumed the exercise of sovereignty over Hong Kong from the United Kingdom, becoming a Special Administrative Region ("SAR") of China. Prior to that date, the U.K. had ratified treaties and other international agreements on Hong Kong's behalf. Upon changing status to a SAR, Hong Kong neither automatically ceased to honor its past obligations nor automatically became subject to China's agreements. Rather, China issued a joint statement with the U.K. to the effect that certain enumerated treaties to which China was a party would be applied to Hong Kong from July 1, 1997, while certain treaties to which China was not yet a party, but which applied to Hong Kong prior to July 1, 1997, would continue to apply. See The Position Of The People's Republic Of China And The United Kingdom On Multilateral Treaties Applying To The Hong Kong Special Administration Region, 36 I.LM. 1671, 1676-1678 (1997). This document gave renewed effect in Hong Kong to both The Hague Protocol and the Original Warsaw Convention. See id. at 1678, 1684; see also DEPT. OF STATE,...