Royal Ins. Co. (U.K.) v. Fountain Technologies
| Decision Date | 04 November 1997 |
| Docket Number | No. 96 Civ. 1659 (AGS)(AJP).,96 Civ. 1659 (AGS)(AJP). |
| Citation | 984 F.Supp. 724 |
| Parties | ROYAL INSURANCE CO. (U.K.) a/s/o Highmead Technologies, Ltd., Plaintiff, v. FOUNTAIN TECHNOLOGIES, INC., a Corporation d/b/a GALAXCO, Kamino International Transport, Inc. and Cargo Max, Inc., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Jamie F. Campise, Marcigliano & Campise, New York City, for Plaintiff.
Patrick J. Corbett, Bigham Englar Jones & Houston, New York City, for Defendants.
Before the Court is a Report and Recommendation (the "Report") of United States Magistrate Judge Andrew J. Peck dated September 29, 1997, recommending that the Court deny plaintiff's motion to strike defendant Kamino International Transport's ("Kamino") defense of limited liability and grant Kamino's cross-motion to limit its liability to $50 per package. Having received the Report, both parties' objections to the Report, and both parties' responses to the objections, and having conducted a de novo review of the record, the Court hereby rejects certain of the Magistrate Judge's findings of fact and conclusions of law,1 and adopts the recommendations only in part.
There is no question that a shipper and a carrier are free to negotiate a contract which proportions the carrier's rate to the risk to which it is exposed. See U.S. Gold Corp. v. Federal Exp. Corp., 719 F.Supp. 1217, 1224 (S.D.N.Y.1989). The Report correctly notes that federal common law permits a common carrier to limit its liability for harm to cargo in exchange for a low carriage rate. See Deiro v. American Airlines. Inc., 816 F.2d 1360, 1365 (9th Cir.1987). A liability limitation provision, however, is enforceable only if "the shipper was given the option of additional recovery upon paying a greater rate...." Williams Dental Co. v. Air Express Int'l, 824 F.Supp. 435, 441 (S.D.N.Y.), aff'd mem., 17 F.3d 392 (2d Cir.1993). The question, then, becomes whether Fountain Technologies, Inc. ("Fountain") was given a fair opportunity to declare a higher value in exchange for paying a higher rate.
The Report recognizes that even in the absence of a writing,2 a court may find that a carrier is entitled to limited liability based upon its prior course of dealings with a shipper. See, e.g., Calvin Klein Ltd. v. Trylon Trucking Corp., 892 F.2d 191, 193 (2d Cir.1989). More specifically, the Report finds that "Fountain was familiar with Kamino's standard invoice and air waybill." (R & R at 20.) The Report also notes that "Kamino's standard air waybill invites Kamino's customer, in return for a higher shipping rate, to declare a higher value for the goods being shipped than that assigned the goods in the absence of such a declaration." (Id.) While these are both accurate statements of fact, they do not support the Report's conclusion that Fountain had had an opportunity to declare a higher value under the particular circumstances of this case.
The computers in question disappeared while en route by truck from a Brooklyn warehouse to Newark Airport. An air way-bill, had it been issued, would have been a contract for carriage only from Newark Airport to London.3 It would not have covered transportation from Brooklyn to Newark. Thus, the provisions of the air waybill permitting Fountain to declare a higher value are not, by their terms, applicable to the period of time in which the computers vanished. A genuine issue of material fact therefore remains as to whether anything else in the prior course of dealings between the parties put Fountain on notice that it could declare a higher value for purposes of the truck journey from Brooklyn to Newark. This issue of fact, of course, precludes a grant of summary judgment. Fed.R.Civ.P. 56(c).
In addition, we have no evidence before us as to whether the shipment in question, consisting of 290 computers, was in any way similar to previous shipments, either in quantity or in value. Assuming arguendo that Fountain, based upon the prior course of dealings, knew that it could declare a higher value for purposes of the trucking portion, and also assuming that, in the past, Fountain had not elected to declare a higher value, we would still need to know whether this was a typical shipment in order to predict how Fountain would have acted in regard to this shipment.
In sum, the Court adopts the recommendation that we deny plaintiff's motion to strike defendant Kamino's defense of limited liability, although not on the grounds set forth in the Report, and rejects the recommendation that we grant Kamino's cross-motion to limit its liability to $50 per package.
For the reasons set forth above, Magistrate Judge Peck's Report is rejected. Summary judgment is denied on Royal Insurance Co.'s motion to strike the Eighth Affirmative Defense of Kamino International, Inc. Summary judgment is also denied on Kamino International, Inc.'s motion to limit its liability.
SO ORDERED.
REPORT AND RECOMMENDATION
This case involves an international shipment of computers that was hijacked en route to its final destination. Presently before the Court is plaintiff's motion to dismiss defendant Kamino International Transport's defense of limited liability, and Kamino's cross-motion to limit its liability to $50 per package. Decision of the motions requires the Court's determination of several issues. The first issue is whether defendant Kamino is a common carrier (thereby responsible for loss while the cargo was in the trucker's possession) or merely a freight forwarder (thus liable only for its own negligence) A consideration of the relevant factors leads the Court to conclude that Kamino is a common carrier. The second and third issues are whether the Warsaw Convention and Carmack Amendment are applicable, and the Court determines that they are not. Finally, the Court finds that Kamino's liability limitation is enforceable because of the parties' lengthy prior course of dealings that included certain limitations.
Highmead Technologies, Ltd. is a computer wholesaler located in England. (Plf.3(g) ¶ 1.) Plaintiff Royal Insurance Co. (U.K.) Ltd. issued an insurance policy to Highmead covering shipments of goods in transit. (Plf.3(g) ¶ 2.) By virtue of Royal's payment to Highmead for the loss at issue in the instant case, Royal is suing as subrogee of Highmead. (Plf.3(g) ¶¶ 3, 4.)
Fountain Technologies, Inc. manufactures personal computers. (Plf.3(g) ¶ 5.) Galaxco assembled Fountain's computer systems. (Plf.3(g) ¶ 6.)
Kamino is in the business of transporting goods by means of a combination of its own efforts and arranging for other companies to carry out its jobs. (Galella Aff. ¶¶ 3, 10; Galella Dep. at 104.) Kamino offered "door to door" service, including pick up, airport transfers and customs clearances. (Plf.3(g) ¶¶ 9, 13; Kamino 3(g) ¶ 5; Galella Aff. ¶¶ 3, 5; Galella Dep. at 26.) Kamino charged an all inclusive, set fee; it did not merely pass through its costs and charge a fee on top of those costs. (See Galella Aff. ¶ 3; Galella Dep. at 27-28, 51-53.) Kamino decided what direct air or trucking carriers to use, and any savings from Kamino using a less expensive direct carrier were not passed on to Kamino's customer. (Galella Dep. at 51-53, 102-03.)
Kamino provided these services to Fountain since 1992, and to Highmead since February 1994. (Galella Aff. ¶ 2.) Kamino had shipped computers from Fountain to Highmead on numerous occasions, sometimes at Fountain's behest and sometimes at Highmead's; Kamino's prior dealings with Fountain and Highmead consisted of at least 20 shipments for each. (Galella Aff. ¶ 2; Al-Najjar Dep. at 140-41.)
In late February 1995, Highmead contracted to buy 290 computers from Fountain, to be shipped from Galaxco's location in Brooklyn, New York to Highmead in England. (Plf.3(g) ¶ 10; Galella Dep. at 103.) Fountain instructed Kamino, by fax, to transport the computers from Galaxco's facility in Brooklyn to Highmead in England. (Plf.3(g) ¶ 12.) Fountain did not give Kamino any other instructions as to the manner of shipment. (Plf.3(g) ¶ 14.) Kamino hired Cargo Max, Inc. to transport the shipment from Galaxco in Brooklyn to Newark Airport, where it would then be loaded on an airplane for carriage to England. (Plf.3(g) ¶ 13; Galella Dep. at 51-53.)
Ronald Artis, a Cargo Max employee, acknowledged receipt of the shipment at Galaxco's Brooklyn warehouse. However, the shipment never arrived at Newark Airport; during the trip from Brooklyn to Newark, the shipment was hijacked, stolen or otherwise lost. (Plf.3(g) ¶ 16.) Because this shipment never arrived at the airport, no invoice, air waybill or any other document was ever issued with respect to this shipment, although Kamino had drafted an air waybill for this shipment and given it an air waybill number. (Plf.3(g) ¶¶ 10, 17, 22; Kamino 3(g) ¶¶ 4, 10, 12; Galella Dep. at 12-15; see Corbett 3/13/97 Aff. Ex. 7.)
Typically, Kamino would issue two documents to the shipper after the goods were tendered for air carriage. (See Plf.3(g) ¶ 22; Galella Aff. ¶ 6; Kamino 3(g) ¶¶ 4, 12; Galella Dep. at 36-37.) Kamino would issue an invoice containing a provision limiting Kamino's liability to $50 per package. (See Galella Aff. ¶ 6; Kamino Ex. D: Standard Kamino Invoice; see also Plf. 3(g) ¶ 20; Kamino 3(g) ¶ 12; Galella Dep. at 35-37.) The $50 per package limitation reads as follows:
It is agreed that if the property covered by this bill is entrusted or delivered to any express company, truckman, steamship, railroad or other carrier whether named in this receipt or not (which Kamino Air Transport, Inc. is hereby authorized to do: subject to all the usual conditions of transportation of such carrier...
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