Opinion
99 Civ. 9061 (BSJ); 99 Civ. 9063 (BSJ)
June 14, 2001
ORDER OPINION
INTRODUCTION
In two separate actions, Plaintiffs Diamond Marquise 2000 and Diamond Universe, designers, manufacturers, and wholesalers of jewelry, seek contract damages of $94,294.00 and $137,659.00, the market value of each of two packages containing diamonds and gold jewelry shipped from New York to Cozumel, Mexico. The packages, allegedly insured by Defendants Val-Ex., Inc., Simat-USA, Inc. ("Simat-USA"), Si-Mat Spedizioni S.R.L., and Delvag Luftahrtversicherungs-AG ("Delvag"), arrived in Cozumel. However, the first package was missing all of its contents, while the second package was missing most of its contents. Plaintiffs allege Defendants breached their contractual obligation to pay Plaintiffs the full value of the lost merchandise in both packages.
In each action, Delvag, a German insurance company, filed a third-party complaint against Delta Airlines, Inc. ("Delta") and Aerovias de Mexico S.A. de C.V. ("Aeromexico"), seeking indemnification. In the action relating to the second package, Delta also filed a second third-party complaint against Mexicana Airlines, Inc. ("Mexicana"), seeking indemnification and contribution in the event that Delta is found liable to third-party Plaintiff Delvag.
Third-party Defendants Delta, Aeromexico, and Mexicana now move pursuant to Fed.R.Civ.P. Rule 56 for summary judgment on Delvag's third-party complaint. The airlines seek dismissal on the ground that they did not receive timely written notice of claims as required by Article 26 of the Warsaw Convention. Also pending before the Court is Delvag's motion for summary judgment against Plaintiffs Diamond Universe and Diamond Marquise 2000 on the ground that Plaintiffs breached their contractual obligations and therefore have no cause of action against Delvag. The two separate actions are consolidated for purposes of this motion. For the reasons set forth below, the airlines' motions for summary judgment are granted, and Delvag's motion for summary judgment is denied.
BACKGROUND
The following facts are undisputed unless otherwise noted. Plaintiffs Diamond Marquise 2000 and Diamond Universe, both subsidiaries of Chandra Corp., contracted separately with Defendant Val-Ex, Inc. to ship packages containing diamonds and gold jewelry to Cozumel, Mexico. Defendant Simat-USA provided the packaging for the two shipments, and contracted with Defendant Delvag to insure the packages. Both packages were tampered with before they arrived in Cozumel. Upon arrival, the first package was missing all of its contents, which were valued at $94,294.00. The second package was missing most of the diamonds and jewelry; the missing contents were valued at $137,659.00. Plaintiffs allege that each Defendant insured the packages and that each Defendant breached its contractual obligations when it refused to compensate Plaintiffs in the amount of $231,853.00, the combined value of the missing goods.
The first package was delivered to Delta at Kennedy International Airport on December 7, 1998. Delta assigned the package Air Waybill number 006-3377 2771. Delta flew the package to Miami, at which point it was transferred into the custody of Mexicana. Mexicana flew the package to Cozumel. At some point during the shipment the package was tampered with and the goods were stolen. When it arrived at customs in Cozumel on December 10, 1998, the jewelry was missing and the package contained only empty pouches. Mexican Customs immediately filed a "damage report" informing Aeromexico that contents were missing. See Exh. I2 to Delvag's Opp. Memo. Plaintiffs allege in the complaint that the consignees "discovered" the damage on December 31, 1998, three weeks after the package arrived in Cozumel. Delvag claims Simat-USA provided written notice of this damage to the airlines one week later, on January 6, 1999.
The second package was delivered to Delta at Kennedy International Airport on December 10, 1998. Delta assigned the package Air Waybill number 006-3377 2826. The story of the shipment of this package mirrors that of the first package, except that Aeromexico, rather than Mexicana, transported the goods from Miami to Cozumel, and that when Mexican customs received the shipment from Aeromexico on December 14, 1998, it was missing most, rather than all, of the jewelry. Mexican Customs did not file a "damage report" for the second package. Plaintiffs' complaint alleges that the consignees "discovered the damage" on January 7, 1999, again three weeks after the package arrived in Cozumel. Delvag claims Simat-USA provided written notice of the damage to the airlines on January 8, 1999. Summary Judgment Standard
Under Rule 56(c), Fed.R.Civ.P., a motion for summary judgment may be granted if the moving party demonstrates that there is no genuine issue of material fact to be tried and the party is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 323-23(1986). To defeat a properly supported motion for summary judgment, the nonmoving party must come forward with affirmative evidence showing a genuine issue of material fact exists for trial. See Celotex, 477 US. at 324. On this summary judgment motion, the airline defendants have presented admissible evidence demonstrating that they did not receive timely notice of potential claims relating to the packages in question, in violation of the Warsaw Convention. Delvag has not presented any evidence disputing this material fact. Accordingly, the airline defendants' motions for summary judgment are granted.
The Warsaw Convention
There is no dispute that the Warsaw Convention governs this transaction. The Warsaw Convention, when applicable, supersedes state law and policy and is the supreme law of the land. See Chan v. Korean Air Lines, 490 U.S. 122(1989); Air France v. Saks, 470 U.S. 392(1985); Trans World Airlines v. Franklin Mint Corp., 466 U.S. 243(1984). The Convention requires that:
Convention for the Unification of Certain Rules Relating to International Transportation by Air, 49 Stat. 3000-3026, TS No. 876, 137 L.N.T.S. 11, reprinted at 49 U.S.C. § 1502(1988) ["Warsaw Convention"].
[i]n case of damage, the person entitled to delivery must complain to the carrier . . . at the latest, within 3 days from the receipt in the case of baggage and 7 days from the date of receipt in the case of goods.
Warsaw Convention, Art. 26(2). This provision is intended to insure prompt notification of carriers and to limit their exposure to liability. See Hitachi Data Systems Corp. v. United Parcel Service. Inc., 76 F.3d 276, 279 (9th Cir. 1995); Lokken v. Federal Exp. Corp., No. 99 Civ. 0585(THK), 2000 WL 193121 (S.D.N.Y. Feb. 16, 2000). The Convention permits an airline to extend the notice period, as Delta did in its contract of carriage, extending the notice period to fourteen days after receipt of the package. See Affidavit of Michael Edge, Exh. E. Plaintiffs do not allege that Aeromexico or Mexicana had similar contractual provisions extending the notice period. Thus, under the Convention, parties with claims against Aeromexico and Mexicana were required to provide notice to the airlines within seven days of receipt. The Convention further requires that notice be in writing, and "[f]ailing complaint within the times aforesaid, no action shall lie against the carrier, save in the case of fraud on his part." See Warsaw Convention Art. 26(3) 26(4). Plaintiffs have made no allegation of fraud against the airlines, therefore the single issue before this Court is whether the airlines received prompt notification of claims in accordance with Article 26(2) and Delta's contract of carriage.
As one court noted:
[T]he most obvious purpose served by the notice requirement . . . is to enable airlines who conduct business on an international scale, using a host of different . . . crews and other employees and a variety of changing flight schedules, to investigate damage claims as soon as possible after the events which allegedly caused the damage. If prompt notice was not required, a carrier would often be unable to conduct any detailed investigation into the causes of alleged damage, in large part because of the inability to identify, weeks or months after the damage has occurred, which employees played a role in processing the baggage or goods in question, or whether there is a possibility that the damage was caused in whole or in part by the negligence of the complaining party.Denby v. Seaboard World Airlines Inc., 575 F. Supp. 1134, 1143 (E.D.N.Y. 1983), rev'd on other grounds, 737 F.2d 172 (2d Cir. 1984).
See Warsaw Convention, Art. 33 ("Nothing contained in this convention shall prevent the carrier [from] . . . making regulations which do not conflict with the provisions of this convention."); see also Onyeanusi v. Pan Am, 952 F.2d 788, 792 (3d Cir. 1992) (time limit for notification extended by air waybill).
First, Delvag claims the airlines had timely notice of the claims based upon two letters sent by Simat-USA to Delta, informing Delta of the damage to the first package in a January 6, 1999 letter, and the second package in a January 8, 1999 letter. Second, they note that Mexican customs filed a damage report for the first package on December 10th and argue that the report is sufficient notice. Finally and alternatively, Delvag argues that because one of the packages arrived empty, and the other package arrived with most of its contents missing, the packages should be treated as "lost," and not "damaged," and therefore the airlines were not entitled to written notice. The Court disagrees.
No damage report was filed for the second package.
First, the letters allegedly sent by Simat-USA to Delta do not constitute timely notice pursuant to Article 26. The time period to provide notice starts running after the consignee receives the package. During a conference with the Court on June 8, 2001, the parties agreed that the date of delivery by the airlines to the Mexican Customs office, in this case, was the date of receipt by the consignee pursuant to Article 26. There is no dispute that the Cozumel customs office received the first package on December 10th and the second package on December 14th. In addition, Aeromexico and Mexicana provided the sworn testimony of Steven G. Connolly that the consignee received the first package on December 10, 1998, and the second package on December 19, 1998. See Connolly Decl. ¶¶ 4-5. Since it is undisputed that the consignee received the first package on December 10th, pursuant to the 14 day notice period in Delta's contract of carriage, Plaintiffs had until December 24th to dispatch notice to Delta and according to the Convention's seven day notice period to Aeromexico and Mexicana by December 17th. The letter allegedly sent by Simat-USA on January 6th, twenty-seven days after receipt of the first package, did not constitute timely notice.
Since it is also undisputed that the consignee received the second package by at least December 19th, in accordance with Delta's contract of carriage and Article 26, Plaintiffs had until January 2nd to dispatch notice to Delta, and until December 26th to notify Aeromexico and Mexicana. Accordingly, Simat's January 8th letter did not constitute timely notice.
Second, the Mexican Customs damage report does not satisfy the Convention's notice requirements. The report, which was sent by Customs to Aeromexico, merely stated that "[o]n receipt of the package accompanied by Waybill no. 006-3377 2771 in the warehouse of this customs office, it was found to have been opened and with contents [sic] missing." Exh. I1 to Delvag Opp. Memo. Article 26(2) provides that "the person entitled to delivery must complain to the carrier forthwith after the discovery of the damage." Warsaw Convention, Art. 26(2) (emphasis added). In this case Mexican Customs, not the person entitled to delivery of the packages, provided the letter that Delvag argues constitutes notice. As previously noted, the primary purpose of the notice provision of the Warsaw Convention is to enable the carrier to assess the possibility and amount of its liability and to essentially begin the process of defending itself. See Denby v. Seaboard World Airlines, 737 F.2d 172 (2d Cir. 1984) (citing Fothergill v. Lloyd's Airlines, 2 L.R. 295 (H.L. 1980)). While in this case the airlines were notified by Mexican Customs that there was damage to the first package, that notification, in and of itself, is insufficient to satisfy the Article 26(2) requirements because it does not indicate a potential claim on the part of the person entitled to delivery. See Onyeanusi v. Pan American World Airways, Inc., 952 F.2d 788 (3rd Cir. 1992) (written notice required even when air carrier is aware of damage); see also Stud v. Trans Int'l Airlines, 727 F.2d 880 (9th Cir. 1984); CPH Int'l Inc. v. Phoenix Assurance Co. of New York, No. 92 Civ. 2729(SS)(NRB), 1994 WL 259810 (S.D.N.Y. June 9, 1994).
Finally, Delvag's claim that no notice was necessary because the packages should be treated as "lost" and not "damaged" is unavailing. As an initial matter, it is undisputed that both packages were in fact delivered to their destinations. With respect to the second package, which arrived in Cozumel with some of its contents intact, Courts have held that such a package is considered "damage" under the Warsaw Convention. See Denby v. Seaboard World Airlines, Inc., 575 F. Supp. 1134, 1141 (E.D.N Y 1983), rev'd other grounds, 737 F.2d 172 (2d Cir. 1984) ("Loss of one or more whole packages . . . may need no written notice. But delivery of a package or container with part of its contents missing is damage and requires notice as held in Fothergill."); see also Dalton v. Delta Airlines, Inc., 570 F.2d 1244, 1246 (5th Cir. 1978); Butler's Shoe Ltd. v. Flying Tiger Line, Inc., 504 F. Supp. 1239, 1242 (N.D.Ill. 1981).
The fact that the first package contained none, rather than some, of its contents, does not dictate a different result. It would frustrate the purpose of the notice requirement, see Denby 575 F. Supp. at 1143, if consignees were relieved of their duty to provide notice merely because the package arrived at its destination with all of its contents missing, rather than almost all of its contents missing. The Second Circuit's reasoning in Denby in its discussion of Fothergill, supports this conclusion. In Fothergill, the plaintiff found only some of the articles missing from his suitcase — a partial loss — which triggered the notice provision under the Convention. In discussing the case, the Second Circuit said:
We read the frequent references to `partial loss' in Fothergill as distinguishing loss of contents from non-delivery of the suitcase, not as meaning that a different result would have been reached if, on arriving at home. Mr. Fothergill had discovered that all of the contents in his suitcase had been removed and replaced by wrapping paper.Denby, 737 F.2d at 179 (emphasis added).
Accordingly, the Court rejects Delvag's claim that the packages were "lost" under the Convention and that consequently no notice was needed. Since Plaintiffs failed to provide timely notice of their claims "no action shall lie against the carrier, save in the case of fraud on his part." Warsaw Convention, Art. 26(4). Plaintiffs do not claim fraud on the part of the airlines; thus, they may bring no claim.
Also pending before this Court is Delvag's motion for summary judgment against Plaintiffs Diamond Marquise 2000 and Diamond Universe. Delvag claims that the Plaintiffs violated their contractual obligations to ensure that their rights against the airlines were protected. According to Delvag, since Plaintiffs did not preserve their rights against the airlines, they have no cause of action against Delvag.
After reviewing the submissions in the light most favorable to the non-moving Plaintiffs, see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250(1986), the Court finds that summary judgment is unwarranted. Summary judgment is not appropriate when genuine issues of material fact exist to be tried. See Celotex Corp. v. Catrett, 477 U.S. 317, 323-23(1986). Genuine issues of material fact exist as to whether Plaintiffs were parties to an insurance contract with Delvag and therefore whether Delvag has standing to hold Plaintiffs to any contractual obligation. Since genuine issues of material fact exist to be tried, Delvag's motion for summary judgment is denied.
CONCLUSION
For the foregoing reasons the airline defendants' motions for summary judgment are granted and judgment is entitled in their favor. Delvag's motion for summary judgment is denied. The remaining parties are directed to submit a case management plan for discovery order on or before June 21, 2001.