Kemper Ins. Companies v. Federal Exp. Corp.

• Court: U.S. District Court — Southern District of Florida
• Writing for the Court: Middlebrooks
• Citation: Kemper Ins. Companies v. Federal Exp. Corp., 170 F.Supp.2d 1241 (S.D. Fla. 2001)
• Decision Date: 25 June 2001
• Docket Number: No. 99-320-CIV.,99-320-CIV.
• Parties: KEMPER INSURANCE COMPANIES, Plaintiff, v. FEDERAL EXPRESS CORPORATION, et. al., Defendants.

Page 1241

170 F.Supp.2d 1241

KEMPER INSURANCE COMPANIES, Plaintiff, v. FEDERAL EXPRESS CORPORATION, et. al., Defendants.

No. 99-320-CIV.

United States District Court, S.D. Florida.

June 25, 2001.

Alan Howarth, Esq., Gallagher and Howarth, Haydenvill, MA, Robert Kahn, Esq., Miami Beach, FL, for Plaintiff.

Mark Dearman, Esq., Dearman & Gerson, Plantation, FL, Timothy Ginn, Esq., Cynthia Collins, Esq., Federal Express Corporation, Legal Department, Memphis, TN, for Defendant.

ORDER AND FINAL JUDGMENT

MIDDLEBROOKS, District Judge.

This CAUSE comes before the Court upon Plaintiff's Post-Trial Motion for Judgment as a Matter of Law, filed March 29, 2001. This Court has reviewed the submissions of the parties, and the record, and is advised in the premises.

This suit is an action by Plaintiff, Kemper Insurance Companies ("Kemper") to recover the value of 23 shipments of jewelry tendered to Defendant, Federal Express Corporation ("FedEx"). The shipments were lost or stolen by FedEx's employees while in FedEx's care, custody, and control. On March 6, 2001, this Court denied FedEx's Motion for Partial Summary Judgment based on it contractual limitation of liability with Plaintiff because a genuine issue of material fact existed as to whether FedEx's actions, or lack thereof, amounted to wilful misconduct in regard to apparent employee theft. The parties went to trial on that specific issue, and this Court entered a directed verdict for FedEx at the close of Plaintiff's case. Kemper then moved for directed verdict on the thirteen (13) shipments governed by the Warsaw Convention on the basis that under Article 9 FedEx is precluded from enforcing the limitation of liability because of FedEx's failure to comply with the requirements of Article 8(c). Kemper also moved for directed verdict on the seven domestic and three non-Warsaw Convention, international shipments on the basis that under federal common law, FedEx's maximum declared value of $500 does not comply with the requirements of the released value doctrine. For the following reasons, this Court concludes that Kemper is not entitled to judgment as a matter of law with respect to any of these shipments.

I. Factual Background

Twenty three jewelry shipments, from Holmes One Service, Inc. ("Holmes") or its insureds, were tendered to FedEx between December 1997 and August 1998 and lost or stolen while in FedEx's care, custody, and control. Kemper underwrote the cargo insurance on the shipments, and has paid claims totaling $303,796 on the shipments. For all of these shipments, FedEx's July 1, 1997 Service Guide was in effect as each of the airbills in this case explicitly incorporated the terms of the Service Guide. In the Service Guide, shippers are advised of FedEx's limit of liability:

Declared Value and Limits of Liability

A. The declared value of any shipment represents our maximum liability in connection with a shipment, including, but not limited to any loss, damage, delay, misdelivery, nondelivery ....

Exposure to and risk of any loss in excess of the declared value is either assumed by the shipper or transferred to an insurance carrier through the purchase of an insurance policy. You should contact an insurance agent or broker if insurance coverage is desired. WE DO NOT PROVIDE INSURANCE OF ANY KIND.

B. Our liability with regard to any package is limited to the sum of $100 unless a higher value is declared on the airbill for the package at the time of tender ....

D. If no value is declared, the declared value and our liability will be limited to the actual value or $100, whichever is less.

The Service Guide further provides:

Liabilities Not Assumed

WE WILL NOT BE LIABLE FOR ANY DAMAGES, WHETHER DIRECT, I INCIDENTAL, SPECIAL, OR CONSEQUENTIAL, IN EXCESS OF THE DECLARED VALUE OF A SHIPMENT, WHETHER OR NOT WE KNEW OR SHOULD HAVE KNOWN THAT SUCH DAMAGES MIGHT BE INCURRED, INCLUDING, BUT NOT LIMITED TO LOSS OF INCOME OR PROFITS

In accordance with this liability limitation, shippers are allowed to declare a value up to $50,000 for general freight items; however, for "items of extraordinary value", including jewelry, shippers only can declare a maximum value of $500. Terms in the Service Guide allow a shipper to declare a value for a shipment at the time of tender by either writing the value on the paper airbill or by entering the value in the Powership meter. For all twenty-three shipments at issue in this suit, no value was declared at all by the shippers. Instead, the shippers chose to purchase private insurance with Kemper and transfer the risk of loss to them.

Of these shipments, thirteen of the 23 shipments are international shipments governed by the Warsaw Convention (Shipment Nos. 2-6, 9, 10, 12, 13, 15, 17, 21 and 23); three are international, but not governed by the Warsaw Convention (Shipment Nos. 1, 8 and 16); and the remaining seven are domestic (Shipment Nos. 7, 11, 14, 18-20 and 22). These non-Warsaw Convention and domestic shipments are governed by federal common law.

II. Analysis

A. Warsaw Convention Shipments

The parties acknowledge that thirteen of the shipments at issue (nos. 2-6, 9, 10, 12, 13, 15, 17, 21, and 23) are governed by the Warsaw Convention. Kemper argues that FedEx's limitation of liability should not apply to these shipments because the airway bills did not comply with Article 8(c) of the Convention. Under 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 warns 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. Article 8(c) requires that any "agreed stopping places" must appear on the air waybill.¹ Here, Kemper argues that because FedEx's airway bill does not list any "agreed stopping places," the contractual limitation of liability is inapplicable. This Court disagrees.

The terms and conditions of the Service Guide and the international airway bills provided that there were no agreed stopping places for these shipments. In this case, it is undisputed that the airway bills incorporated the Service Guide explicitly by reference, stating on the reverse side that "by giving us your package to deliver, you agree to all terms on this Airbill and in our current Service Guide, which is available upon request." The Service Guide then states, "YOU AGREE THAT THERE ARE NO STOPPING PLACES WHICH ARE AGREED AT THE TIME OF TENDER OF THE SHIPMENT AND WE RESERVE THE RIGHT TO ROUTE THE SHIPMENTS IN ANY WAY WE DEEM APPROPRIATE" (emphasis in original). Addressing this precise circumstance, the Ninth Circuit concluded:

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.

Insurance Co. of North America v. Federal Exp. Corp., 189 F.3d 914, 919 (9th Cir. 1999). This Court finds this reasoning persuasive and concludes that FedEx's airway bill was valid under Article 8(c) of the Convention. Kemper cites Sotheby's v. Fed. Exp. Corp., 97 F.Supp.2d 491 (S.D.N.Y.2000) to claim that FedEx must list agreed stopping places even despite its disclaimer on the airway bill and Service Guide. However, as acknowledged in footnote five of that opinion, the Sotheby's case is distinguishable from the Insurance Co. decision because the Sotheby's case involved an airway bill that did not expressly incorporate the Service Guide nor its stopping place disclaimer. Accordingly, Sotheby's reasoning on this point is inapplicable to this case where, like in Insurance Co., the Service Guide and its disclaimer were incorporated expressly by the airway bill. FedEx therefore is entitled to a liability limitation of $9.07 a pound, since a greater value was not declared, under the terms of the Warsaw Convention.

B. Remaining Shipments Governed by Federal Law

As explained in prior orders and as the parties agree, whether these remaining shipments are bound by the limitation liability provisions contained in the airway bills and Service Guide is a matter of federal common law. Under federal common law, carriers may limit their liability to the value of the shipment if "(1) the shipper has reasonable notice of the rate structure and (2) is given the option to pay a higher price for greater protection." Kemper Ins. Cos. v. Federal Exp. Corp., 115 F.Supp.2d 116, 122 (D.Mass.2000); see also Hill Constr. v. American Airlines, Inc., 996 F.2d 1315, 1317 (1st Cir.1993); Deiro v. American Airlines, Inc., 816 F.2d 1360, 1365 (9th Cir.1987). This requirement that the carrier give the shipper an option of greater protection in order to properly limit its liability is called the "released or declared value doctrine." See Deiro, 816 F.2d at 1365; see also Neal v. Republic Airlines, Inc., 605 F.Supp. 1145 (N.D.Ill.1985). If the liability provision satisfies this doctrine, then its terms are enforceable. See Read-Rite Corp. v. Burlington Air Express, Ltd., 186 F.3d 1190, 1197 (9th Cir.1999).

In this case, Kemper seeks to invalidate the limitation provisions outlined in the airway bill and Service Guide by arguing that FedEx's policy of only allowing shippers to declare a value of $500 for items of extraordinary value like jewelry violates the released value doctrine. Kemper contends that because the Service Guide plainly states that any effort to declare a value in excess of the $500 maximum is null and void, FedEx offers no...