Motorola, Inc. v. Federal Exp. Corp.

• Decision Date: 16 October 2002
• Docket Number: No. 00-17374.,00-17374.
• Citation: 308 F.3d 995
• Parties: MOTOROLA, INC., a corporation; Fireman's Fund Insurance Company, a corporation, Plaintiffs-Appellees, v. FEDERAL EXPRESS CORPORATION, Defendant, and Kuehne & Nagel, Inc., Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

308 F.3d 995

MOTOROLA, INC., a corporation; Fireman's Fund Insurance Company, a corporation, Plaintiffs-Appellees, v. FEDERAL EXPRESS CORPORATION, Defendant, and Kuehne & Nagel, Inc., Defendant-Appellant.

No. 00-17374.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted February 13, 2002.

Filed October 16, 2002.

COPYRIGHT MATERIAL OMITTED

Stephen R. Ginger, Condon & Forsyth, Los Angeles, CA, for the defendant-appellant.

Michael J. Cummins, Gibson & Robb, San Francisco, CA, for the plaintiffs-appellees.

Appeal from the United States District Court for the Northern District of California; William H. Alsup, District Judge, Presiding, D.C. No. CV-99-03659-WHA.

Before REINHARDT and FISHER, Circuit Judges, and MOLLOY, District Judge.^*

FISHER, Circuit Judge:

In this appeal, Kuehne & Nagel, Inc. ("K&N") challenges the district court's award of $244,080 and prejudgment interest to Motorola, Inc. Motorola brought claims under the Warsaw Convention arising out of damage to cargo sustained during transit from Texas to Japan after it hired K&N to transport the cargo. K&N principally contends that the district court erred in determining the liability limitation based on the weight of the entire shipment rather than only on the weight of the damaged component; that, in any event, the damaged portion of the shipment did not affect the value of the remainder of the shipment; and that prejudgment interest is not allowable under the Warsaw Convention. We disagree. We hold that Article 22 of the Warsaw Convention provides for liability limitation based on the entire weight of the shipment where, as here, the damaged portion of the cargo affects the value of the entire shipment. Additionally, we hold that prejudgment interest is available under the Warsaw Convention and that the district court properly awarded such interest to make full restitution to the injured party.

FACTUAL AND PROCEDURAL HISTORY

Motorola, an electronics equipment manufacturer, hired K&N, an indirect carrier and freight forwarder, to transport a cellular telephone base station system, valued at almost five million dollars, from Dallas, Texas to Tokyo, Japan. Motorola hired another company, Relocation Services, Inc., to package the cargo into approximately 20 crates for shipping. K&N then arranged for Federal Express ("FedEx"), a direct air carrier, actually to transport the cargo via airplane to Tokyo. Between July 10 and 15, 1997, FedEx transported the cargo in a series of six flights. K&N issued a single air waybill covering the entire shipment and stating that there was no apparent damage to the cargo prior to transport. When the cargo arrived at the airport in Tokyo, K&N noted that a portion of the cargo was damaged. Upon receipt of the cargo, Motorola found that the damaged crate contained the system's cabinet-like common control frame, which consisted of printed circuit board cards and wiring. Motorola was forced to replace the equipment at a cost of $459,330.70 and waited six weeks for the replacement's arrival. The total weight of the shipment was 12,204 kilograms. The weight of the damaged crate was approximately 680 kilograms.

Motorola and Fireman's Fund Insurance Company, Motorola's insurance carrier, subsequently filed suit in California state court against K&N and FedEx, alleging breach of contract and negligence. After FedEx removed the case to federal court, K&N filed a cross-claim for indemnity and contribution from FedEx and all parties subsequently filed for summary judgment.² The court granted partial summary judgment for K&N, finding the cargo suffered at least some damage while in FedEx's custody. Additionally, the court ruled that, under the Warsaw Convention, the liability limitation would be calculated according to the weight of the entire shipment — and not just that of the damaged portion — if Motorola proved at trial that the damaged portion of the cargo affected the value of the entire shipment.³ The court left for trial the questions of whether the overall shipment was affected and the extent of damage done to the property.

The district court conducted a two-day bench trial. After Motorola presented its case, K&N rested without presenting any evidence. The court found in favor of Motorola and awarded damages of $244,080, based on the weight of the entire shipment, and subsequently awarded Motorola prejudgment interest. On appeal, K&N challenges both damages and the award of prejudgment interest. We affirm on all counts.

DISCUSSION

I. Liability Limitations

A. Affected Weight Standard

The parties agree that this action falls within the parameters of the Warsaw Convention, an international treaty governing the liability that arises from the "international transportation of persons, baggage or goods performed by an aircraft for hire." See Warsaw Convention for the Unification of Certain Rules relating to International Transportation by Air, October 12, 1929, art. 1, 49 Stat. 3000, T.S. No. 876 (1934), reprinted in note following 49 U.S.C. § 40105. "The Convention creates a presumption of air carrier liability but, in turn, substantially limits that liability." Ins. Co. of N. Am. v. Fed. Express Corp., 189 F.3d 914, 917 (9th Cir.1999); see Dazo v. Globe Airport Sec. Svcs., 295 F.3d 934, 937-38 (9th Cir.2002). The Convention sets forth uniform rules of liability for loss, damage or delay of international shipments by air, and embodies a tradeoff between the interests of carriers and shippers. Among its provisions is the rule that cargo carriers are entitled to a limitation of liability based on the weight of the shipment, presently set at $20 per kilogram. See Trans World Airlines, Inc. v. Franklin Mint Corp., 466 U.S. 243, 255, 104 S.Ct. 1776, 80 L.Ed.2d 273 (1984); Warsaw Convention art. 22. The relevant section of Article 22 provides:

In the transportation of checked baggage and of goods, the liability of the carrier shall be limited to a sum of 250 francs [$20] per kilogram, unless the consignor has made, at the time when the package was handed over to the carrier, a special declaration of the value at delivery and has paid a supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless he proves that that sum is greater than the actual value to the consignor at delivery.

Art. 22(3).⁴ The Convention preempts state and federal claims falling within its scope. See id. at art. 24 (stating that claims for personal injuries, for damage to, or loss of, baggage or goods and for damages occasioned by travel delays, "however founded, can only be brought subject to the conditions and limits set out in this convention.").

K&N argues that the liability limitation should be calculated based only on the weight of the damaged portion of the shipment. Motorola maintains, and the district court agreed, that the defendants' liability limitation under the Convention should be calculated based on the weight of the entire shipment, approximately 12,204 kilograms, and not simply the weight of the damaged crate, approximately 680 kilograms.⁵ The text and drafting history of the Warsaw Convention are silent on this question. Accordingly, we may look to, among other things, evidence of the postratification understanding of the Convention's contracting parties to determine whether the Convention includes the "affected weight standard." El Al Israel Airlines, Ltd. v. Tseng, 525 U.S. 155, 167, 119 S.Ct. 662, 142 L.Ed.2d 576 (1999); Chan v. Korean Air Lines, Ltd., 490 U.S. 122, 134, 109 S.Ct. 1676, 104 L.Ed.2d 113 (1989); Hosaka v. United Airlines, 305 F.3d 989, 993-94 (9th Cir. 2002).

Under the 1955 Hague Protocol, which amended the Warsaw Convention, the affected weight standard is made an explicit part of Article 22.⁶ It states:

In the case of loss, damage or delay of part of registered baggage or cargo, or of any object contained therein, the weight to be taken into consideration in determining the amount to which the carrier's liability is limited shall be only the total weight of the package or packages concerned. Nevertheless, when the loss, damage or delay of a part of the registered baggage or cargo, or of an object contained therein, affects the value of other packages covered by the same baggage check or the same air waybill, the total weight of such package or packages shall also be taken into consideration in determining the limit of liability.

Article 22(2)(b) (emphasis added).

The evidence suggests that the parties to the Hague Protocol understood the incorporation of the affected weight standard as a mere clarification of the Warsaw Convention or, at any rate, that they understood the new language to be no less advantageous to the shipper than existing Warsaw Convention language. The minutes of the Hague Protocol say nothing to suggest that the new language expressly articulating use of the affected weight standard substantively changed the Convention. The carriers' own representative, the International Air Traffic Association, did not argue that the amended version substantively changed Article 22 by increasing the carriers' liability, only that it "had reached the conclusion that there was ambiguity in the present Convention as to problems of settlement for partial loss." See International Conference on Private Air Law: Vol. I, Minutes of Twentieth Meeting, Sept. 19, 1995 at p. 252. Moreover, the United States delegation opposed the amended version, and voiced its preference for the unamended version, because it believed the new version reflected a decrease in carriers' liability under Article 22. The delegation interpreted the unamended version to "[m]ean that when a passenger or shipper lost one of a number of articles being carried, he would think that he had available to him the entire liability of the carrier as determined by the total weight of the articles." Id. In hearings before the United States Senate Foreign Trade...