Ins. Co. Of N. Am. v. Fed. Express Corp.

• Decision Date: 10 March 1999
• Docket Number: No. 98-56309,98-56309
• Citation: 189 F.3d 914
• Parties: (9th Cir. 1999) INSURANCE COMPANY OF NORTH AMERICA, a corporation; ZOMAYA GROUP, INC., a corporation, Plaintiffs-Appellants, v. FEDERAL EXPRESS CORPORATION, a corporation,Defendant-Appellee
• Court: U.S. Court of Appeals — Ninth Circuit

Page 914

189 F.3d 914 (9th Cir. 1999)

INSURANCE COMPANY OF NORTH AMERICA, a corporation; ZOMAYA GROUP, INC., a corporation, Plaintiffs-Appellants, v. FEDERAL EXPRESS CORPORATION, a corporation,Defendant-Appellee.

No. 98-56309

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted March 10, 1999--San Francisco, California

Decided August 30, 1999

[Copyrighted Material Omitted] Marsha L. Morrow (argued), Long & Levit, San Francisco, California, for the plaintiffs-appellants.

Patrick J. Keating (argued), Kaplan, Begy, & von Ohlen, Chicago, Illinois, David R. Shane (argued), Shane & Taitz, San Francisco, CA, for the defendant-appellee.

Appeal from the United States District Court for the Central District of California; Christina A. Snyder, District Judge, Presiding. D.C. No. CV-97-09155-CAS.

Before: Diarmuid F. O'Scannlain, Kim McLane Wardlaw, and William A. Fletcher, Circuit Judges.

WARDLAW, Circuit Judge:

At approximately 11:00 p.m. on December 20, 1995, a shipment of computer memory modules disappeared from the storage area of the Memphis, Tennessee hub of the Federal Express Corporation ("Federal Express"). The intended recipient, Zomaya Group, Inc. ("Zomaya"), and its insurer, Insurance Company of North America,¹ sued Federal Express for a loss of $745,000 in California Superior Court. After Federal Express removed the case to federal court, the district court granted summary judgment in favor of Federal Express, limiting Federal Express' liability to $2,494.25 under the terms of the Convention for the Unification of Certain Rules Relating to International Transportation by Air, Oct. 12, 1929, 49 Stat. 3000, 3014, T.S. No. 876 (1934), reprinted in note following 49 U.S.C. S 40105 (the "Warsaw Convention " or the "Convention"). We have jurisdiction under 28 U.S.C. S 1291, and we affirm.

I

The facts are not in dispute. Zomaya, a business in Irvine, California, purchased $638,500 worth of computer memory modules from Zorin Systems Corp. ("Zorin"), a Canadian company. When Zorin shipped the memory modules to Zomaya, it used a computer terminal provided by Federal Express. This terminal automates the preparation of certain shipping documents, including international air waybills.² The terminal generates air waybills onto two-sided proprietary Federal Express labels. The reverse side of the label sets forth the "CONDITIONS OF CONTRACT FOR INTERNATIONAL SHIPMENTS" (hereinafter the "conditions"). The conditions expressly incorporate the "FedEx Service Guide" and all applicable tariffs.³ The conditions also contain a contractual limitation of liability⁴ and disclaim any agreement as to specific stopping places for the shipment, providing: "You agree that this shipment may be carried via intermediate stop- ping places that we deem appropriate." Finally, the correlative passage in the applicable "FedEx Service Guide " reserves to Federal Express the right to route its shipments as it sees fit.⁵

On December 16, 1995, a Federal Express courier picked up the shipment of computer modules from Zorin in Mississauga, Ontario, Canada. Four days later, the shipment vanished from a "secure" holding facility located in the Federal Express hub on the grounds of the Memphis International Airport, where many international shipments are held while awaiting clearance through United States Customs. Although the investigating authorities made no arrests, the undisputed facts strongly suggest that the computer modules were stolen by an employee of Federal Express.

Zomaya sued Federal Express in California Superior Court for negligence and wilful misconduct in connection with the cargo loss. Federal Express removed the case to federal district court for the Central District of California under 28 U.S.C. SS 1331, 1332, and 1441. Federal Express asserted that its liability was governed by the Warsaw Convention and thereby limited to $9.07 per pound of lost cargo. Zomaya countered by arguing that Federal Express could not avail itself of the Warsaw Convention's limited liability provisions for two reasons, either of which would preclude limited liability under the Convention. First, Zomaya claimed that the air waybill provided by Federal Express did not list Memphis as an "agreed stopping place" as required by Article 8(c) of the Convention. Alternatively, Zomaya argued that Federal Express was guilty of "wilful misconduct" as defined in Article 25. Zomaya and Federal Express filed cross-motions for summary judgment.

The district court awarded summary judgment to Federal Express. The court first concluded that the air waybill complied with the particulars set forth in Article 8. Specifically, the court determined that Federal Express satisfied the "agreed stopping places" requirement of Article 8(c), relying on the air waybill's preprinted disclaimers. As to the wilful misconduct issue, the district court applied California law and held that the theft of the cargo by a Federal Express employee could not be imputed to Federal Express under the terms of the Warsaw Convention. Accordingly, the district court limited Federal Express' liability to $9.07 per pound of computer modules shipped, which amounted to $2,494.25.

Zomaya timely appealed the district court's grant of summary judgment, renewing the arguments it had forwarded before the district court. Our review is de novo. See Margolis v. Ryan, 140 F.3d 850, 852 (9th Cir. 1998).

II

The Warsaw Convention is an international treaty governing the liability of air carriers engaged in the international transportation of passengers and cargo. The Convention creates a presumption of air carrier liability but, in turn, substantially limits that liability. See Warsaw Convention, Arts. 18, 22(2). Under this regime, an air carrier may be held strictly liable for loss or damage to goods incurred during the course of international transportation, but the Convention places a $9.07-per-pound ceiling on recovery. See id. To invoke this limited liability protection, a carrier must comply with the Convention's many procedural and substantive provisions. Three such provisions shape our analysis here. Specifically, we are called upon to determine the scope of Federal Express' liability under (1) Articles 8 and 9, which govern the issuance of air waybills; and (2) Article 25, which deprives a carrier of limited liability for damage caused by its "wilful misconduct."

We address each issue in turn.⁶

A

Zomaya first contends that the district court erred in holding that the air waybill provided by Federal Express complied with the requirements set forth in Article 8 of the Convention. Article 8 enumerates seventeen "particulars" to which an air waybill must conform. See Warsaw Convention, Art. 8(a)-(q). The penalty for noncompliance with these particulars is found in Article 9, which cautions that "if the air waybill does not contain all the particulars set out in article 8(a) to (i), inclusive, . . . the carrier shall not be entitled to avail himself of the provisions of this convention which exclude or limit his liability." Id., Art. 9.

As relevant here, Article 8(c) requires that any "agreed stopping places" must appear on the air waybill. ⁷ Zomaya argues that the air waybill's failure to indicate that the shipment would make an intermediate stop in Memphis violates the "agreed stopping places" mandate of Article 8(c). Conversely, Federal Express argues that it was under no obliga- tion to disclose the stop in Memphis. We agree with Federal Express.

Our analysis begins, as it must, with the text of the Convention. See El Al Israel Airlines, Ltd. v. Tseng , 525 U.S. 155, 119 S. Ct. 662, 671, 142 L. Ed. 2d 576 (1999) ("Our inquiry begins with the text of [the Convention] . . .."); Eastern Air lines, Inc. v. Floyd, 499 U.S. 530, 534, 111 S. Ct. 1489, 1493, 113 L. Ed. 2d 569 (1991) ("When interpreting a treaty, we begin with the text of the treaty and the context in which the written words are used.") (internal quotation marks omitted). As the Supreme Court directed in Chan v. Korean Air Lines, Ltd., 490 U.S. 122, 134, 109 S. Ct. 1676, 1683, 104 L. Ed. 2d 113 (1989):

We must thus be governed by the text--solemly adopted by the governments of many separate nations--whatever conclusions might be drawn from the intricate drafting history that petitioners and the United States have brought to our attention. The lat ter may of course be consulted to elucidate a text that is ambiguous. But where the text is clear, as it is here, we have no power to insert an amendment.

(internal citation omitted).

Employing these principles of construction, it becomes clear that we must end our inquiry precisely where it begins. The text of Article 8(c) requires only that the air waybill contain "agreed stopping places." Here, the parties did not agree that the shipment of computer modules would stop in Memphis. Rather, the air waybill made it perfectly clear that there were no agreed stopping places. Federal Express explicitly reserved the right to route the shipment as it saw fit. Accordingly, Federal Express was under no obligation to disclose the intermediate stop in Memphis. The text of Article 8(c) is not susceptible to any other conclusion, and therefore, the district court did not err in holding that Federal Express had issued a conforming air waybill.

B

Zomaya next argues that the district court erred in concluding that Federal Express had not committed wilful misconduct under Article 25 of the Convention when one of its employees stole the shipment of computer modules. Article 25 provides:

(1) The carrier shall not be entitled to avail himself of the provisions on this convention which exclude or limit his liability, if the damage is caused by his wilful misconduct or by such default on his part as, in accordance with the law of the court to which the case is submitted, is considered to be equivalent to wilful misconduct.

(2) Similarly the carrier shall not be entitled to avail...