Fujitsu Ltd. v. Federal Express Corp.

Citation247 F.3d 423
Decision Date01 August 2000
Docket NumberDocket No. 00-7343
Parties(2nd Cir. 2001) FUJITSU LIMITED, Plaintiff-Appellee, v FEDERAL EXPRESS CORPORATION, Defendant-Appellant
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Appeal from a judgment in the United States District Court for the Southern District of New York (Alvin K. Hellerstein, Judge), in favor of the Plaintiff, Fujitsu Limited, in the amount of $726,400 based on causes of action sounding in breach of contract and negligence.

Affirmed.

[Copyrighted Material Omitted] WARREN DEAN, Federal Express Corp., Memphis, Tennessee (R. JEFFERY KELSEY on brief) and PATRICK J. KEATING, Kaplan, Begy & Von Ohlen, Chicago, Illinois (Nicholas E. Pantelopoulos, Biedermann, Hoenig, Massamillo & Ruff on brief), for Appellant

WILLIAM R. CONNOR, III, Bingham, Englar, Jones & Houston, New York, N.Y. (John MacCrate III on brief), for Appellee Before: STRAUB, SOTOMAYOR, Circuit Judges, and SPATT, District Judge.1

SPATT, District Judge:

This case primarily concerns interpretation of the Warsaw Convention treaty governing the liability of international cargo shippers for damage to returned goods while in their possession. We find that the shipment at issue was not a return as defined by Article 12 of the Warsaw Convention and that the carrier's shipment of the goods back to the departure destination at the consignee's direction involved a second acceptance under Article 9, requiring the carrier to create a complete and correct air waybill in order to avail itself of the Convention's limited liability provisions. Because the carrier failed to furnish a complete and correct air waybill upon acceptance of the goods, we affirm the district court's grant of partial summary judgment in favor of the Plaintiff on the carrier's defense of limited liability. We also reject the carrier's argument that the entry into force of the Hague Protocol, which amended the Warsaw Convention, during the pendency of this case (but after the events giving rise to this case) precludes the application of the unamended Warsaw Convention. We find that the district court correctly applied the unamended provisions of the Warsaw Convention. Finally, we affirm the district court's assessment of damages and determination that spoliation sanctions were not warranted.

BACKGROUND

On May 30, 1996, Plaintiff-Appellee Fujitsu Limited ("Fujitsu") shipped a container of silicon wafers from Narita, Japan to Ross Technologies, Inc. ("Ross") in Austin, Texas, using Defendant-Appellant Federal Express ("FedEx") as the cargo carrier. Accompanying the container was an air waybill-- a document serving as a bill of lading for goods transported by air, BLACK'S LAW DICTIONARY 70 (6th ed. 1990)-- designated as "AWB3691," specifying the consignor and consignee, weight, contents, destination, and route of the container.

On May 31, 1996, the container arrived in Austin and was placed in a bonded cargo cage to await clearance through customs by the Customs Agent for Ross. FedEx does not release goods to their consignees until the goods actually have cleared customs and all import and customs duties have been paid. In this case, Ross' Customs Agent faxed a notification to FedEx that Ross was rejecting the shipment. Pursuant to FedEx's procedures, it contacted Fujitsu and Ross to determine what should be done with the cargo. FedEx policy provided that cargo refused by the consignee would not be moved without written instructions and a guarantee of payment.

According to a June 3, 1996 comment in the FedEx computer tracking system concerning a telephone call, Fujitsu orally instructed FedEx to return the goods to Japan. However, a separate document in the record, on Ross letterhead and dated June 4, 1996, indicates that Ross issued written instructions to FedEx to return the goods to Fujitsu in Japan and informed FedEx that Ross would incur all shipping charges. On July 27, 1996, after the return shipment was completed, FedEx sent an invoice billing Ross $493.00 for the return of the shipment to Japan. The trial court found that "[Ross] decided not to accept the merchandise, and engaged Federal Express to return the merchandise to the consignor in Tokyo at the consignee's expense."

FedEx proceeded to prepare the goods for shipment back by re-labeling and moving the cargo from the customs cage to an outbound staging area. The goods were flown from Austin to the main FedEx hub in Memphis. No air waybill was created in Austin, but in Memphis, FedEx created a new air waybill, designated AWB 3010, listing Ross as the shipper and indicating that the goods were to be shipped from Austin to Narita. AWB 3010 was not completely filled out, but did specifically contain a legend stating "RETURN OF [AWB 3691]" typed across the middle right-hand side of the air waybill form. Fujitsu contends that this legend appeared only on one copy of AWB 3010, not all of them. FedEx asserts that it issued a new air waybill only to accommodate the needs of its computerized package tracking system, not because a new shipping contract was created for the return shipment.

FedEx air waybill numbers also serve as package tracking numbers, which appear on the air waybills in both numerical and barcode form. That tracking number is scanned into the FedEx computer system at various points during transit, in order to track the status of particular shipments. However, when a shipment is returned by FedEx, the computer system requires that a new tracking number (and, therefore, a new air waybill number) be issued. The computer system does not permit the use of the original air waybill number to track the return of the cargo to the original shipper, and as a result of this technological requirement, FedEx's standard policies for return of international shipments require that new air waybills be issued.

The goods apparently left Austin in good condition, but sat in Memphis for a week before being shipped to Japan. On June 24, 1996, the shipment arrived in Japan. At that time, Fujitsu observed that the outer container was broken and covered with an oily substance which had permeated into some of the interior boxes. Fujitsu opened one of the interior boxes and discovered that the oily substance was also on the exterior of the sealed aluminum bags containing the wafers. Fujitsu did not open any of the bags to determine whether the oily substance had penetrated any of the bags.

Fujitsu reported the damage to FedEx immediately. FedEx eventually acknowledged that the damage occurred to the container while in its possession. At some point in July 1996, upon instructions from its insurance carrier, Fujitsu disposed of the container and wafers. FedEx had not requested an opportunity to inspect the wafers prior to that time.

Fujitsu then brought this action against FedEx grounded in breach of contract and negligence. FedEx raised the defense that, under the Warsaw Convention treaty governing international cargo shipments, it carried the cargo with a proper air waybill and was thus entitled to a limitation on its liability to $9.07 per pound, or a total of about $1,200 for the entire shipment. On November 30, 1999, Judge Hellerstein granted partial summary judgment to Fujitsu, finding that air waybill AWB3010 did not comply with the requirements of the treaty, and that the shipment from Austin to Japan could not be considered to be covered by AWB3691, the initial air waybill. A bench trial on damages was held on February 22 and 23, 2000, and at the close of the trial, Judge Hellerstein found FedEx liable to Fujitsu for damages in the amount of $726,640.

FedEx appeals, claiming (i) that the trial court erred in finding that the return shipment was not covered by the waybill of the originating shipment; (ii) that the court improperly found that an amendment to the Warsaw Convention known as the Hague Protocol was inapplicable; (iii) that the court's findings regarding damages were incorrect; and (iv) that the court erred in denying FedEx's request for a finding of spoliation relating to Fujitsu's destruction of the container and wafers.

DISCUSSION

This Court reviews the District Court's grant of summary judgment de novo. While all factual ambiguities must be resolved in favor of the nonmoving party, "the nonmoving party may not rely on conclusory allegations or unsubstantiated speculation." Scotto v. Almenas, 143 F.3d 105, 114 (2d Cir. 1998). The court "is not to weigh the evidence but is instead required to view the evidence in the light most favorable to the party opposing summary judgment, to draw all reasonable inferences in favor of that party, and to eschew credibility assessments." Weyant v. Okst, 101 F.3d 845, 854 (2d Cir. 1996). Summary judgment is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits... show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c).

A. The Warsaw Convention's limitation of liability

International transportation of persons, baggage, and goods by air are governed by the series of laws, treaties, and individual contracts collectively referred to as the Warsaw Convention "system," deriving that name from the international agreement commonly referred to as the "Warsaw Convention." Convention for the Unification of Certain Rules relating to International Transportation by Air, opened for signature Oct. 12, 1929, 49 Stat. 3000 (1934), 137 L.N.T.S. 11, reprinted in note following 49 U.S.C.A. § 40105 ("Original Warsaw Convention"); see El Al Israel Airlines, Ltd. v. Tsui Yuan Tseng, 525 U.S. 155, 160 (1998); Chubb & Son, Inc. v. Asiana Airlines, 214 F.3d 301, 306 (2d Cir. 2000), petition for cert. filed, 69 U.S.L.W. 3335 (U.S. Nov. 2, 2000) (No. 00-720). The Warsaw Convention sets forth uniform rules of liability for loss,...

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