Indem. Ins. Co. of N. Am. P. v. Expeditors Int'l of Wash., Inc.

• Court: U.S. District Court — Southern District of New York
• Writing for the Court: J. PAUL OETKEN, District Judge
• Decision Date: 19 February 2019
• Docket Number: 17-CV-2575 (JPO)
• Citation: Indem. Ins. Co. of N. Am. P. v. Expeditors Int'l of Wash., Inc., 17-CV-2575 (JPO) (S.D. N.Y. Feb 19, 2019)
• Parties: INDEMNITY INSURANCE COMPANY OF NORTH AMERICA as subrogor of GE AVIATION MATERIALS, L.P., Plaintiff, v. EXPEDITORS INTERNATIONAL OF WASHINGTON, INC., et al., Defendants.

INDEMNITY INSURANCE COMPANY OF NORTH AMERICA as subrogor of GE AVIATION MATERIALS, L.P., Plaintiff, v. EXPEDITORS INTERNATIONAL OF WASHINGTON, INC., et al., Defendants.

17-CV-2575 (JPO)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

February 19, 2019

OPINION AND ORDER

J. PAUL OETKEN, District Judge:

Plaintiff Indemnity Insurance Company of North America ("Indemnity") brings this action against Defendants Expeditors International of Washington, Inc. ("Expeditors") and China Airlines, Inc. ("China Airlines"), in connection with damage allegedly sustained by cargo during international transport. Invoking the Convention for the Unification of Certain Rules for International Carriage by Air, S. Treaty Doc. No. 106-45 (May 28, 1999) ("Montreal Convention"), Indemnity asserts claims for breach of contract, breach of bailment obligations, and negligence. (Dkt. No. 1 ("Compl.") at 3-5.) Following the close of discovery, each party moved for summary judgment under Federal Rule of Civil Procedure 56. (Dkt. Nos. 30, 35, 40.) For the reasons that follow, the motions are denied.

I. Background

The following facts are drawn from the Complaint and the parties' Rule 56.1 statements and are not subject to genuine dispute unless otherwise noted.

This case involves an insurance company's attempt to recover for damage allegedly sustained by a commercial jet engine as it was transported by air from Florida to Taiwan. GE Aviation Materials, L.P. ("GE") is an aviation company that assembles, sells, and overhauls aircraft engines. (Dkt. No. 36 ¶ 5.) GE owned the jet engine at issue at the time of transport. Plaintiff Indemnity is an insurance company that insures GE and issued a policy covering the engine. (Dkt. No. 36 ¶ 4.)

Defendant Expeditors is an "international transportation service provider" which "operates as an intermediary in all modes of transportation." (Dkt. No. 36 ¶ 2.) As relevant here, Expeditors' services include functioning as an "indirect air carrier," also known as an "air freight forwarder." (Dkt. No. 36 ¶ 1.) In that capacity, Expeditors is party to a framework agreement called the Global Air Freight Transportation Contract ("Global Contract"), which governs the air shipment of cargo that Expeditors undertakes for certain shippers. (Dkt. No. 51 ¶ 6; Dkt. No. 39-1.)¹ Expeditors also maintains a "Conditions of Contract" for "International Air Transportation." (Dkt. No. 52-2.)

Defendant China Airlines is a "foreign air carrier," which operates as a "direct air carrier." (Dkt. No. 36 ¶ 3.) As a direct carrier, China Airlines is hired by shippers and indirect carriers to transport cargo internationally.

In March 2015, GE reached out to Expeditors to arrange transport of a commercial jet engine from Tamarac, Florida, to Taipei, Taiwan, to be delivered to Evergreen Aviation Technologies ("Evergreen"). (Dkt. No. 34-2 at 8-9.) In approving Expeditors' proposed price for the transport, GE's Material Control and Logistics Manager, Jerry Yen, instructed that "[i]t's very important to make sure the engine is under correct tie-down throughout the entire trip."(Dkt. No. 34-2 at 6; see Dkt. No. 32 ¶ 1.) Expeditors' regional account manager for GE, Jennifer Schmitt, responded "well noted on the tie down." (Dkt. No. 34-2 at 5; Dkt. No. 34-3 at 6.) Schmitt did not ask Yen for any clarification regarding the proper tie-down procedures, and Yen offered no specific instructions. (Dkt. No. 34-3 at 20:19-20:21.)

Expeditors issued an air waybill to GE in connection with the arrangement, and the waybill did not specify any special transit requirements for the engine. (Dkt. No. 36 ¶ 15; Dkt. No. 34-7.) On April 8, 2015, Expeditors arranged to have China Airlines transport the jet engine cargo (Dkt. No. 36 ¶ 15; Dkt. No. 40-1 ¶ 2), but in doing so did not provide "any specific loading and stowage instructions" to China Airlines (Dkt. No. 39 ¶ 5). An air waybill was issued between China Airlines and Expeditors in connection with this agreement. (Dkt. No. 31 ¶ 11; Dkt. No. 34-8.)

The parties agree that the engine at issue was used and was being sent to Evergreen for an overhaul. (Dkt. No. 36 ¶¶ 10-11; Dkt. No. 38-1 at 27:4-10.) But they dispute the precise condition of the engine at the time China Airlines picked it up for transport, specifically whether the engine was certified airworthy.²

Between April 8 and April 11, 2015, China Airlines transported the engine from Florida to Taiwan. (Dkt. No. 40-1 ¶¶ 3-4.) The second air waybill was stamped, acknowledgingdelivery of the engine, on April 11, 2015. (Dkt. No. 36 ¶ 32; Dkt. No. 39-4.) Upon receipt of the engine, Evergreen created a shop finding report documenting that it "found inappropriate tie down on the cradle" of the engine. (Dkt. No. 34-9 at 2; see also Dkt. No. 31 ¶ 12.) Evergreen sent GE a shop finding report to this effect,³ and told GE that it proposed to perform repairs. (Dkt. No. 34-11 at 3.) Evergreen inspected the engine and performed repairs, including replacing bearings. (Dkt. No. 51 ¶ 20; Dkt. No. 38-1 at 92:15-21.)⁴

Evergreen sent GE an invoice for service to the engine in the amount of $176,066.57. (Dkt. No. 31 ¶ 16; Dkt. No. 34-12.)⁵ GE paid the invoice, and Indemnity compensated GE for the payment. (Dkt. No. 31 ¶ 17; Dkt. No. 41-1 ¶ 17; Dkt. No. 34-13.)

On April 16, 2015, Jerry Yen from GE forwarded Evergreen's shop finding report to Jennifer Schmitt and another Expeditors employee, informing them of the "inappropriate tie down" and that GE would "hold Expeditors response [sic] for" the cost of repairs. (Dkt. No. 31 ¶¶ 12-13; Dkt. No. 34-11 at 2.) On April 17, Schmitt responded to Yen, "We will handle via the cargo claims group. Please let me know if you need information on how to handle." (Dkt. No. 34-11 at 2; see also Dkt. No. 31 ¶ 15.) On June 14, 2015, Yen emailed Schmitt with an invoice for the repairs to the engine. (Dkt. No. 34-11 at 1.) Schmitt forwarded the invoice to GE's ScottWallace on July 9, 2015, stating that she did not "think a claim has been filed" for this engine. (Dkt. No. 34-11 at 1.)

In April 2016, a third-party claims consultant contacted Expeditors' claims department on behalf of GE and Indemnity, seeking to recover for the damage to the engine. (Dkt. No. 43-1 at 1-2.) Expeditors ultimately rejected GE's attempts to recover through its internal claims process. (Dkt. No. 52-1.)

On April 10, 2017, acting as the subrogee for GE, Indemnity initiated this action against Expeditors and China Airlines. (Dkt. No. 1.) In its Answer to the Complaint, Expeditors asserted a crossclaim against China Airlines seeking contribution or indemnification to the extent of Expeditors' liability. (Dkt. No. 9 at 5.) On March 23, 2018, Indemnity filed a motion for summary judgment under Rule 56. (Dkt. No. 30.) The following day, Expeditors and China Airlines moved for summary judgment as well. (Dkt. Nos. 35 & 40.)

II. Legal Standard

Summary judgment under Rule 56 is appropriate where "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A fact is material if it "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is genuine if, considering the record as a whole, a rational jury could find in favor of the non-moving party. See Ricci v. DeStefano, 557 U.S. 557, 586 (2009).

"On summary judgment, the party bearing the burden of proof at trial must provide evidence on each element of its claim or defense." Cohen Lans LLP v. Naseman, No. 14 Civ. 4045, 2017 WL 477775, at *3 (S.D.N.Y. Feb. 3, 2017) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986)). "If the party with the burden of proof makes the requisite initial showing, the burden shifts to the opposing party to identify specific facts demonstrating a genuine issuefor trial, i.e., that reasonable jurors could differ about the evidence." Clopay Plastic Prods. Co. v. Excelsior Packaging Grp., Inc., No. 12 Civ. 5262, 2014 WL 4652548, at *3 (S.D.N.Y. Sept. 18, 2014). The court views all "evidence in the light most favorable to the non-moving party," and summary judgment may be granted only if "no reasonable trier of fact could find in favor of the nonmoving party." Allen v. Coughlin, 64 F.3d 77, 79 (2d Cir. 1995) (second quoting Lunds, Inc. v. Chem. Bank, 870 F.2d 840, 844 (2d Cir. 1989)) (internal quotation marks omitted).

III. Discussion

A. Jurisdiction

"Federal courts have a duty to inquire into their subject matter jurisdiction sua sponte, even when the parties do not contest the issue." D'Amico Dry Ltd. v. Primera Maritime (Hellas) Ltd., 756 F.3d 151, 161 (2d Cir. 2014). If a court determines that it lacks subject matter jurisdiction, it must dismiss the action under Federal Rule of Civil Procedure 12(h)(3). Inquiring into its jurisdiction here, the Court concludes that the Montreal Convention does not govern this dispute, and thus Indemnity cannot establish federal question jurisdiction as alleged in the Complaint. However, because the action satisfies the requirements for diversity jurisdiction, dismissal under Rule 12(h)(3) is not warranted.

1. Applicability of the Montreal Convention

Indemnity asserts in the Complaint that jurisdiction exists under 28 U.S.C. § 1331, because the claims arise under the Montreal Convention,⁶ a multilateral treaty governing international air transport, to which the United States is a party. (Compl. ¶ 8.) China Airlinesdisagrees, contending that the Montreal Convention does not govern this dispute. (Dkt. No. 46 at 3-4; Dkt. No. 40-2 at 3-4.)⁷

The Montreal Convention "applies to all international carriage of persons, baggage or cargo performed by aircraft." Montreal Convention, art. 1 ¶ 1. "International carriage" is defined as "any carriage in which . . . the place of departure and the place of destination, whether or not there be a break in the carriage or a transhipment, are situated either within the...