North American Phillips Corp. v. Emery Air Freight Corp.

• Decision Date: 17 July 1978
• Docket Number: D,No. 385,385
• Citation: 579 F.2d 229
• Parties: NORTH AMERICAN PHILLIPS CORPORATION, Plaintiff-Appellant, v. EMERY AIR FREIGHT CORPORATION, Defendant-Appellee. ocket 77-7379.
• Court: U.S. Court of Appeals — Second Circuit

Page 229

579 F.2d 229

NORTH AMERICAN PHILLIPS CORPORATION, Plaintiff-Appellant, v. EMERY AIR FREIGHT CORPORATION, Defendant-Appellee.

No. 385, Docket 77-7379.

United States Court of Appeals Second Circuit.

Argued Dec. 14, 1977.

Decided July 17, 1978.

C. Raymond Nelson, New York City, Rein, Mound & Cotton, New York City, for plaintiff-appellant.

John V. McAuliffe, New York City, Bigham, Englar, Jones & Houston, New York City, for defendant-appellee.

Before OAKES, VAN GRAAFEILAND, Circuit Judges, and BARTELS, ^* District Judge.

VAN GRAAFEILAND, Circuit Judge:

In 1971, North American Phillips (Norelco) retained Emery Air Freight ¹ to ship 1250 cartons of electric razors from a warehouse in Nevada to Norelco's Long Island plant. Because Emery had no facilities or personnel in Nevada, it used Parcel Delivery Service of Reno, Nevada, as its agent. On November 3, 1971, a Service representative went to the warehouse to check and label the cargo. He received and signed a document entitled "Straight Bill of Lading Short Form" but apparently did not deliver an airway bill as required by 14 C.F.R. § 296.73. Subsequently, the razors were transported to San Francisco by truck and then to New York City by air. On arrival, the cargo was loaded onto two trucks for delivery to Norelco. One of the trucks, carrying 795 cartons of razors, was hijacked en route, and the cargo was stolen.

On December 7, 1971, Norelco submitted a written claim to Emery for $114,003.00, the value of the lost cargo. On December 21, 1971, Emery informed Norelco that the claim was governed by the provisions of Emery's tariff, which limited its liability for negligence to $.50 per pound in the absence of a higher declared value. Because Norelco had not declared a higher value at the time of shipment, Emery tendered a check for.$10,527.50, its maximum liability under the tariff. Norelco held the check for over a year, returning it on December 28, 1972, and reasserting its claim for the full $114,003.00. Thereafter, it filed suit in the Supreme Court of the State of New York. Emery removed the action to the United States District Court for the Southern District of New York on the ground that plaintiff's claim arose under federal law. 28 U.S.C. § 1441(b).

In the district court, Emery raised three defenses to Norelco's claim. It asserted that under its tariff all suits against it had to be instituted within one year of the disallowance of a claim and that plaintiff's suit was not timely. It also contended that the tariff relieved it of liability for losses not due to its negligence and that it had not been negligent. Lastly, it argued that, even if negligent, its liability was limited to $.50 per pound. Norelco countered that the tariff was inapplicable because no airwaybill was delivered at the time of shipping, and that therefore the common law, not the tariff, governed Emery's liability.

After considering the pleadings, pre-trial depositions, and stipulated facts, the district judge ruled in defendant's favor, holding that delivery of an airwaybill was not a prerequisite to the application of the tariff. The district judge decided that Emery was not negligent and could avail itself of the exculpatory provision in the tariff. He also found that the action was not begun within the one-year period and therefore was time barred. His opinion is reported at 432 F.Supp. 519.

Appellant and appellee are Delaware corporations doing business in the State of New York, and there was no diversity of citizenship justifying removal of appellant's action to federal court under 28 U.S.C. § 1441(a). Appellee proceeded therefore under § 1441(b), which authorizes removal where the plaintiff's claim is one over which the federal courts would have original jurisdiction because the claim arises under the laws of the United States. ² In recent years, several courts have held that claims similar to appellant's did not arise under the laws or statutes of the United States. See, e. g., Security Insurance Co. v. National Airlines, Inc., 413 F.Supp. 493 (E.D.La.1976); Frenkel v. Western Union Telegraph Co., 327 F.Supp. 954 (D.Md.1971); Cf. Phillips Petroleum Co. v. Texaco Inc., 415 U.S. 125, 94 S.Ct. 1002, 39 L.Ed.2d 209 (1974). For this reason, we raised the question, Sua sponte, whether original federal jurisdiction existed in the district court to pass upon appellant's claim and requested the parties to brief this issue. ³ We now hold that the district court did have jurisdiction.

Section 403(b) of the Federal Aviation Act of 1958, 49 U.S.C. § 1373(b)(1), contains language which is similar to that of the Interstate Commerce Act, 49 U.S.C. §§ 2, 3, 6(7), 906(c), the Federal Communications Act, 47 U.S.C. § 202(a), and the Motor Carrier Act, 49 U.S.C. § 317(b). ⁴ The purpose of these provisions was to establish a uniformity and equality of rates in all interstate transactions to which the several statutes applied. Western Union Telegraph Co. v. Esteve Brothers & Co., 256 U.S. 566, 572, 41 S.Ct. 584, 65 L.Ed. 1094 (1921); New York, New Haven & Hartford Railroad v. ICC, 200 U.S. 361, 391-92, 26 S.Ct. 272, 50 L.Ed. 515 (1906); United States v. Associated Air Transport, Inc., 275 F.2d 827, 832-34 (5th Cir. 1960); Lichten v. Eastern Airlines, Inc., 189 F.2d 939, 941 (2d Cir. 1951).

Limitations of liability and cargo valuations are inherent parts of the rates, and the statutory mandate of uniformity must therefore apply to the liabilities which attend the carriage of goods. Western Union Telegraph Co. v. Esteve Brothers & Co., supra, 256 U.S. at 571-73, 41 S.Ct. 584; Kansas City Southern Railway v. Carl, 227 U.S. 639, 653, 33 S.Ct. 391, 57 L.Ed. 683 (1913). If a shipper in one state could hold a carrier to a higher standard or degree of liability than a shipper in another state who has paid the same rate, the first shipper would be getting a preference not granted to the second. ⁵ Vaigneur v. Western Union Telegraph Co., 34 F.Supp. 92, 93 (E.D.Tenn.1940). This, the various commerce acts prohibit. Western Union Telegraph Co. v. Esteve Brothers & Co., supra, 256 U.S. at 571, 41 S.Ct. 584.

Although the liability of air carriers is not created by statute, as is the case with surface carriers, See 49 U.S.C. § 20(11), the prohibition against unlawful preferences is equally strong with regard to the former as the latter. Twentieth Century Delivery Service, Inc. v. St. Paul Fire and Marine Insurance Co., 242 F.2d 292, 299 (9th Cir. 1957). For example, 49 U.S.C. § 1472(d) makes it unlawful to give or receive rebates or commissions in shipments by air. ⁶ It follows that both the rights and liabilities as between an airline and a shipper are determined by the shipper's valid tariffs. Tishman & Lipp, Inc. v. Delta Air Lines, 413 F.2d 1401, 1403 (2d Cir. 1969). In some cases, this conclusion is reached by treating the tariff rate as a matter of law instead of contract. See Western Union Telegraph Co. v. Esteve Brothers & Co., supra, 256 U.S. at 572, 41 S.Ct. 584; Carter v. AT&T, 365 F.2d 486, 496 (5th Cir. 1966), Cert. denied, 385 U.S. 1008, 87 S.Ct. 714, 17 L.Ed.2d 546 (1967); United States v. Associated Air Transport, Inc., supra, 275 F.2d at 833; American Railway Express Co. v. American Trust Co., 47 F.2d 16, 18 (7th Cir. 1931); Blair v. Delta Air Lines, Inc., 344 F.Supp. 360, 365 (S.D.Fla.1972), Aff'd on opinion below,477 F.2d 564 (5th Cir. 1973); Slick Airways, Inc. v. United States, 292 F.2d 515, 519 (Ct.Cl.1961). In other cases, it is said that the tariff becomes part of the contract between the parties. Tishman & Lipp, Inc. v. Delta Air Lines, supra, 413 F.2d at 1405; Lichten v. Eastern Air Lines, Inc., supra, 189 F.2d at 940; Mao v. Eastern Air Lines, Inc., 310 F.Supp. 844, 846 (S.D.N.Y.1970); Rosch v. United Air Lines, 146 F.Supp. 266, 267 (S.D.N.Y.1956); Mack v. Eastern Air Lines, 87 F.Supp. 113, 115 (D.Mass. 1949). Regardless of the rationale, it is clear that a carrier's valid federal tariffs which are applicable to the shipment at issue govern not only the nature and extent of its liability, but also the nature and extent of the shipper's right of recovery. It is in this light that we must examine the question of federal jurisdiction.

Whether a suit arises under a law of the United States must be determined from plaintiff's complaint, not defendant's answer. Peyton v. Railway Express Agency, Inc., 316 U.S. 350, 353, 62 S.Ct. 1171, 86 L.Ed. 1525 (1942). The court must ascertain from the complaint whether federal law is a pivotal issue in the case, one that is basic in the determination of the conflict between the parties. Gully v. First National Bank, 299 U.S. 109, 117-18, 57 S.Ct. 96, 81 L.Ed. 70 (1936); Ivy Broadcasting Co. v. AT&T, 391 F.2d 486, 489 (2d Cir. 1968). However, the lack of any reference to federal law in the complaint is not controlling. Sylgab Steel & Wire Corp. v. Strickland Transportation Co., 270 F.Supp. 264, 267 (E.D.N.Y.1967); 1A Moore's Federal Practice P 0.160 at 185-87 (2d ed. 1974). Congress has created a broad, comprehensive scheme covering the interstate shipment of freight, aimed at preventing preferential treatment among shippers and establishing national equality of rates and services. This has occupied the field to the exclusion of state law. Illinois Produce International, Inc. v. Reliance Insurance Co., 388 F.Supp. 29, 35 (N.D.Ill.1975); Milhizer v. Riddle Airlines, Inc., 185 F.Supp. 110, 112 (E.D.Mich.1960), Aff'd, 289 F.2d 933 (6th Cir. 1961); Cf. Vogelsang v. Delta Air Lines, Inc., 302 F.2d 709, 712 (2d Cir.), Cert. denied, 371 U.S. 826, 83 S.Ct. 46, 9 L.Ed.2d 65 (1962). But see Litvak Meat Co. v. Baker, 446 F.2d 329, 334-37 (10th Cir. 1971). The allegations of appellant's complaint show that its claim is based upon the loss of goods during interstate transportation by appellee as a common carrier for hire. From the substance of these allegations, it is clear that the complaint sets forth a claim arising under federal law. Blair v....