Opinion
07 CV 194 (CM).
June 4, 2008
DECISION AND ORDER GRANTING DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT
Defendants World Courier, Inc. and World Courier UK Limited (collectively, "World Courier") have moved for partial summary judgment on the issue of damages in this action, which was brought by Plaintiff Vigilant Insurance Company ("Vigilant"). Vigilant's suit arises out of damage to a mulitmodal international shipment of pharmaceuticals sent by Fisher Clinical Services UK Limited ("FCS-UK") to the Fisher Clinical Services ("FCS") facility in Allentown, PA. The plaintiff seeks relief under the Convention for the Unification of Certain Rules Relating to International Transportation by Air, Oct. 12, 1929, 49 Stat. 3000, T.S. No. 876 (1934) (the "Warsaw Convention") and certain amendments thereto. Plaintiff also asserts that World Courier cannot avail itself of the liability limitations of the Warsaw Convention, because it did not issue the Air waybill in a timely manner, as required by Article 8 of the Warsaw convention. Plaintiff asserts a tort claim based on World Courier's alleged status as a common carrier or bailee, and a common law breach of contract claim as well.
The defendants seek summary judgment on their sixteenth and seventeenth affirmative defenses. They request an order declaring that: (1) plaintiff's claims are governed exclusively by the Montreal Convention, and (2) defendants' liability for damage to the shipment is limited by relevant provisions of the Montreal Convention.
Convention for the Unification of Certain Rules for International Carriage by Air, May 28, 1999, Treaty Doc. No. 106-45, at 27 (2000), 2242 U.N.T.S. 350.
Defendants' motion is granted. If the defendants do not notify the court that they intend to contest liability, the court can and will enter judgment for the plaintiffs in the amount of $298.08.
FACTS
There is no genuine dispute about the following material facts.
A. The parties
Plaintiff Vigilant is a New York corporation with its principal place of business in New Jersey. (Compl. ¶ 1.) Plaintiff provides insurance for Pfizer Research Development ("Pfizer"). (Id.)
Defendant World Courier UK Limited is a corporation organized under the laws of England with its principal place of business in London. (Answer ¶ 2.) World Courier is a specialized service-provider catering to the medical and pharmaceutical industries. (Mazaroli Aff. Ex. 2.)
B. The invoices
In early January 2006, World Courier contracted to transport a shipment of pharmaceutical products from FCS-UK in West Sussex, England to FCS in Allentown, Pennsylvania. (Marciano Aff. ¶ 5.) FCS-UK regularly retained World Courier for pharmaceutical shipments. (Smith Decl. ¶ 5.) The ultimate beneficiary of the shipment was Pfizer. (Id. ¶ 6.)
World Courier's invoice to FCS-UK for the shipment indicates that the total charge was £411.60. (Marciano Aff. Ex. E.) This price consisted of: (1) a £220.00 base charge rate, (2) a £147.00 overweight charge, (3) a 20% standard discount, and (4) a £118.00 fee for transporting the shipment from Philadelphia International Airport to the FCS facility. (Id.) These are all the charges FCS-UK paid to World Courier in connection with the shipment. (Id.)
According to the invoice FCS-UK provided to Pfizer, the shipment consisted of 450 bottles of pharmaceuticals, each containing 30 L-Malate Salt Capsules with a potency of 12.5 mg. (Marciano Aff. Ex. C.) The bottles had a per unit value of $24.24 and a total value of $327,240.00. However, they were "For clinical trial use only" and had "No commercial value; Value for customs purposes only." (Id.)
C. The waybill and liability limitation
FCS-UK booked this particular shipment through the World Courier electronic booking process. (Smith Decl. ¶ 12.) Based on the information FCS-UK provided, World Courier generated air waybill 123028136 (the "air waybill") for the shipment. (Id.) The air waybill, which contains similar information to that in the invoice, is dated January 5, 2006. (Smith Decl. Ex. I.) The air waybill states that the declared value for customs was $327,240, and that the weight of the shipment was 11.5 kg. (Id.)
Regarding the shipment's handling, the World Courier air waybill states: "Storage Conditions: Controlled Ambient: At or Below 25°C." (Id.) This type of shipment is intended to ensure that the pharmaceuticals are not exposed to extreme temperatures that may damage them. (Smith Decl. ¶ 8.) FCS-UK asserts that the fees charged by World Courier for this service are "higher than the charges assessed by non-specialized transportation service-providers who do not commit to maintain the above-mentioned temperature-control parameters." (Id.)
The front portion of the air waybill provides that "WORLD COURIER'S LIABILITY IS LIMITED." (Smith Decl. Ex. 1.) The waybill limits liability to the "shipment's declared value, depreciated value, replacement, cost, repair cost, or U.S. $150, whichever is less." (Id.) Shippers can obtain higher recovery amounts in the event of loss or damage to their shipments by declaring a carriage value and paying a surcharge. However, "Under no circumstances shall World Courier be liable for special, consequential, indirect, or incidental damages or losses." (Id.)
The section "declared value for carriage" on the air waybill is blank. FCS-UK did not check the box marked "CHECK IF SURCHGARGE IS ELECTED." (Id.) It did not pay any surcharge. (Id.)
The waybill further states that the shipment ". . . may be subject to the rules relating to liability under the Warsaw Convention and other international treaties and provisions." (Id.)
D. Damage during transportation
World Courier subcontracted part of the door-to-door services to US Airways and Priority Express. (Mazaroli Aff. Ex. 1; Marcino Aff. ¶¶ 22-30.) On January 9, 2007 the shipment was transported from London Heathrow Airport to Philadelphia International Airport. (Marcino Aff. ¶ 22.) The US Airways waybill noted that the shipment should be kept in a controlled ambient environment of between 15°C and 25°C. (Marcino Aff. Ex. F.)
When the shipment arrived in Philadelphia, it was stored in the US Airways' warehouse at the airport, where it was refrigerated until it was cleared for delivery two days later. (Marcino Aff. ¶¶ 25-29.) Priority Express picked up the shipment and delivered it to FCS an hour and fifteen minutes later. (Id. ¶¶ 28-30.) Two days later, FCS informed World Courier that the shipment had been damaged. (Id. ¶ 32.)
E. Investigations into damage
World Courier's investigation revealed that US Airways had stored the shipment at +5°C, a temperature colder than was specified on the US Airways waybill. (Marcino Aff. Ex. A.) The investigations also revealed that the shipment had been soaked during transit. (Id.) Atlantic Marine Inspections performed an investigation on behalf of the plaintiff's affiliate, Chubb Group Insurance companies (Marcino Aff. Ex. B.) It confirmed that the shipment had been contaminated by a liquid that was not water and that the cartons emitted a foul odor. (Id.)
It was, however, lower than 25°C, which was the only specification on the World Courier Waybill. (Marcino Aff. Ex. D.)
After Atlantic Marine Inspections investigators conferred with Pfizer, Pfizer's Quality Assurance Manager determined that all 450 bottles in the shipment should be destroyed. (Marcino Aff. ¶ 38.) The report stated, "The product cannot be tested for product stability because it is a clinical drug used for cancer treatment. Therefore, the shipment's integrity has been severely compromised and the entire quantity of product is being rejected and will have to be discarded." (Marcino Aff. Ex. B.)
F. Procedural History
On January 10, 2007, plaintiff filed its Complaint. (Compl.) The case was assigned to me from the late Judge Casey on May 18, 2007. World Courier filed a motion for partial summary judgment regarding its sixteenth and seventeenth affirmative defenses on August 31, 2007. (Def's Mem. Supp. Summ. J.) Defendants have also moved under Federal Rule of Civil Procedure 26(c) for a protective order staying discovery pending the resolution of their partial summary judgment motion. This aspect of the motion is now moot.
DISCUSSION
A. Standard of ReviewUnder Federal Rule of Civil Procedure 56(c), the court will grant summary judgment if the evidence offered shows that there is no genuine issue as to any material fact and that the movants are entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317 (1986). If a plaintiff fails to establish an essential element of his claim, "there can be `no genuine issue as to any material fact,' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Id. at 322-33. On a motion for summary judgment, the court views the record in the light most favorable to the non-movants and resolves all ambiguities and draws all reasonable inferences against the movants. See United States v. Diebold, Inc., 369 U.S. 654, 655 (1962); Donahue v. Windsor Locks Bd. of Fire Commn'rs, 834 F.2d 54, 57 (2d Cir. 1987).
B. The Montreal Convention Applies
The Warsaw Convention was the original treaty governing international air carrier liability for passengers, baggage and cargo. Warsaw Convention Art. 1(1). Plaintiff's complaint pleads the Warsaw Convention as the basis for its first and second causes of action. (Compl. ¶¶ 6, 13.) However, plaintiff presumably realized its claim actually arises under the Montreal Convention, since its Memorandum of Law in Opposition to Defendants' Motion for Partial Summary Judgment does not refer to the Warsaw Convention at all. (Pl.'s Mem. Opp. Summ. J.)
Plaintiff's complaint pleads erroneously. (Compl. ¶¶ 6, 13.) The Montreal Convention replaced the Warsaw Convention as the treaty governing international carrier liability. See Paradis, 348 F. Supp. 2d at 106. The Montreal Convention entered into force in the United States on November 4, 2003, and in the United Kingdom on June 28, 2004. Current List of Parties to the Montreal Convention, available at http://www.icao.int/icao/en/leb/mtl99.pdf. The Montreal Convention applies to "all international carriage of persons, baggage or cargo performed by aircraft for reward." Montreal Convention, Art. 1(1). The convention defines "international carriage" as a shipment whose place of departure and place of destination "are situated . . . within the territories of two States Parties." Id. Art. 1(2). The convention further specifies that "carriage by air" includes "the period during which the cargo is in the charge of the carrier." Id. Art. 18(3).
The Montreal Convention replaced the Warsaw Convention; however, since many similar provisions remain, courts use cases interpreting the Warsaw Convention to interpret similar Montreal Convention provisions. See, e.g., Baah v. Virgin Atlantic Airways Ltd., 473 F. Supp. 2d 591, 595-596 (S.D.N.Y. 2007); Paradis v. Ghana Airways Ltd., 348 F. Supp. 2d 106, 110 n. 4-5 (S.D.N.Y. 2006), aff'd, 194 Fed. Appx. 5 (2d Cir. 2006).
The Montreal Convention applies to this case. The shipment at issue took place after this convention had been signed, and satisfies the requirement that the place of departure and place of destination be situated "within the territories of two State parties." See, e.g., Baah, 473 F. Supp. 2d at 593 (finding that the Montreal Convention applied to plaintiff's alleged physical injuries sustained during a flight); Booker v. BWIA West Indies Airways Ltd., No. 06-CV-2146, 2007 U.S. Dist. LEXIS 33660, at *10-11. (E.D.N.Y. May 8, 2007) (unpublished) (finding that plaintiff's claims for stolen and damaged baggage fell under Article 1 of the Montreal Convention). The damage to the shipment at the US Airways' warehouse falls under "carriage by air" as defined by Article 18. (Marcino Aff. ¶¶ 25-29.)
Plaintiff argues that "no provision of the Montreal Convention . . . would support an argument that its limitation applies to a specialized accessorial service contract such as controlled ambient care." (Pl.'s Mem. Opp. Summ. J. 6.) However, Article 1 of the Montreal Convention does not suggest that "a specialized accessorial service contract" would not fall under its reach. Montreal Convention, Art. 1(1). The article specifies that the convention applies to "all international carriage of . . . cargo." Id. (emphasis added).
C. The Montreal Convention Preempts All Claims
Courts interpret the Montreal Convention as having complete preemptive effect over claims within its scope. El Al Israel v. Tseng, 525 U.S. 155, 175 (1999); King v. Am. Airlines, 284 F.3d 352, 356-57 (2d Cir. 2002); Shah v. Pan Am. World Servs., Inc., 148 F.3d 84, 97-98 (2d Cir. 1998); Booker, 2007 U.S. Dist. LEXIS 33660, at *7; Paradis, 348 F. Supp. 2d at 111. Article 29 of the Montreal Convention states:
In the carriage of . . . cargo, any action for damages, however founded, whether under this Convention or in contract or in tort or otherwise, can only be brought subject to the conditions and such limits of liability as are set out in this Convention. . . . In any such action, punitive, exemplary or any other non-compensatory damages shall not be recoverable.
Montreal Convention, Art. 29. The convention applies to all actions for damages to cargo shipped between member states. Id.
Plaintiff's first cause of action is for damages under the Warsaw Convention. (Compl. ¶¶ 4-10.) However, as the Second Circuit has noted, the Montreal Convention is "an entirely new treaty that unifies and replaces the system of liability that derives from the Warsaw Convention." Ehrlich v. Am. Airlines, Inc., 360 F.3d 366, 371, n. 4 (2d Cir. 2004). Therefore, plaintiff's first cause of action should be dismissed. To avoid additional motion practice, I will, however, deem the complaint amended so that the first cause of action alleges a claim under the Montreal Convention.
The second cause of action alleges, "[P]ursuant to the Warsaw Convention, including article 9, defendants may not avail themselves of the provision of the Convention which allegedly exclude or limit their liability," because "Defendants' air waybills were not issued in a timely manner and did not comply with, or contain all the particulars required by, the Warsaw Convention, including Article 8." (Compl. ¶¶ 12-13.) This cause of action also incorrectly refers to the Warsaw Convention and so should be dismissed. Id. The question is whether I should permit amendment of this claim as well. The answers is no. Under the Montreal Convention, even if World Courier's waybill was not issued in a timely manner or did not meet the requirements of the Convention, "Non-compliance with the provisions of Articles 4 to 8 shall not affect the existence or the validity of the contract of carriage which shall, nonetheless, be subject to the rules of this Convention including those relating to limitation of liability." Montreal Convention, Art. 9. It would, therefore, be futile for plaintiff to amend the second cause of action.
The third and fourth causes of action, for tort and contract damages under state law, are preempted by the Montreal Convention. (Compl. ¶¶ 14-20.) Article 29 of the Montreal Convention states that "any action for damages, however founded" falls under the Convention's limits of liability. Montreal Convention, Art. 29. In Paradis the court held that plaintiff's breach of contract claim for damages when his flight was cancelled was preempted by both the Montreal and Warsaw conventions because they "preempt all state law claims within their scope." 348 F. Supp. 2d at 114. Similarly, the Booker court held that the Montreal Convention preempted plaintiff's state law claims for stolen and damaged baggage. 2007 U.S. Dist. LEXIS 33660. Plaintiff is thus left with no viable common law claim for damages. The third and fourth causes of action, like the second, must be de minimus. D. Article 22 of the Montreal Convention Limits World Courier's Liability
Defendants' motion is an attempt to obtain a directive that plaintiff's damages under his only viable cause of action (the first, as deemed amended) are limited in accordance with the Montreal Convention. Defendant is correct.
Article 22(3) of the Montreal Convention states:
In the carriage of cargo, the liability of the carrier in the case of destruction, loss, damage or delay is limited to a sum of 17 Special Drawing Rights per kilogram, unless the consignor has made, at the time when the package was handed over to the carrier, a special declaration of interest in delivery at destination and has paid a supplementary sum if the case so requires.
Montreal Convention, Art. 22(3). The Booker court used Article 22 to limit a carrier's liability for passenger's stolen and damaged baggage. 2007 U.S. Dist. LEXIS 33660, at *16. Similarly, in deciding a motion for partial summary judgment for damages inChips Plus, Inc. v. Federal Express Corp., 281 F. Supp. 2d 758, 767 (E.D. Pa. 2003), the court found that Federal Express' liability for damage to a shipment of electronic parts was limited by Article 22. The plaintiff in Chips Plus, Inc. had also failed to make a special declaration of interest in delivery and had not paid a supplementary sum. Id.
The Special Drawing Right ("SDR") is a fluctuating international reserve asset created by the International Monetary Fund. See http://www.imf.org/external/np/exr/facts/sdr.htm. As of August 24, 2007, seventeen SDRS equaled $25.92. The weight of the shipment here was 11.5 kg, yielding damages in the amount of $298.08.
Although the Montreal Convention does not allow a carrier to limits its liability where the damage to passengers or passenger baggage was willful or reckless, this stipulation does not apply to cargo. See Montreal Convention, Art. 22(5). This case does not involve passengers or passenger baggage.
The liability limitations of the Montreal Convention apply to the shipment in this case, and regulate plaintiff's recovery. It is undisputed that FCS-UK failed to make a special declaration of interest and did not pay a supplementary sum. (Marcino Aff. ¶¶ 18-20.) The portions of the Waybill requesting a declared value for carriage and surcharge are blank. (Smith Decl. Ex. 1.)
Plaintiff argues that FCS-UK did pay a surcharge, because World Courier's rates are higher than those of other shippers. (Pl.'s Mem. Opp. Summ. J. 6.) However, plaintiff offers no evidence to support this conclusory statement. (Id.) Moreover, plaintiff cites to no rule of law or regulation that requires all shippers to charge the same rates, so a higher rate charge for a shipment does not constitute a surcharge. (Id.)
Under Article 22(3) of the Montreal Convention, plaintiffs recovery is limited to Seventeen Special Drawing Rights, or $298.08.
E. The Praxair Material Deviation Doctrine Does Not Apply to this Case
Although the plaintiff invokes the "material deviation" doctrine to negate the liability limitations in the Montreal Convention, this doctrine does not apply to the facts in this case.
The material deviation doctrine has been used in a narrow set of circumstances to negate limitation of liability provisions used by domestic, interstate carriers where "the shipper paid an additional charge to ensure specialized safety measures to reduce the risk of damage to cargo [and] the carrier fail[ed] to perform those very measures which resulted in damage to the cargo."Nippon Fire Marine Ins. Co. v. Skyway Freight Systems, Inc., 45 F. Supp. 2d 288, 292-03 (S.D.N.Y. 1999) (quoting Praxair, Inc. v. Mayflower Transit, Inc., 919 F. Supp. 650, 656 (S.D.N.Y. 1996)). No court has used the material deviation doctrine in a case where international air carriage was governed by an international treaty. As the Second Circuit stated in Ehrlich, 360 F.3d at 370, the Montreal Convention was designed to "establish uniformity in the aviation industry."
Many courts in the Southern District of New York have declined to apply the material deviation doctrine to air cargo carriage even in the context of domestic, interstate shipments. InKrystaltech International v. American International Freight, Inc., 2000 WL 502865, at *5 (S.D.N.Y. April 26, 2000), the court refused to apply the doctrine to a case in which damage was done to a shipment that was marked "Do not unwrap," which the defendant unwrapped and damaged. In reaching this result, the court noted, "A special shipment can easily be protected by indicating special shipping instructions or declaring a higher value on the air waybill. No such additional conditions were placed on either the Pilot or AIA air waybill." Id. Other courts have also declined to apply the doctrine to domestic cases. See, e.g., Nippon Fire Marine Ins. Co., 45 F. Supp. 2d at 292-293;Rafaella Gallery, Inc. v. Taizoy Oriental Rugs, 818 F. Supp. 53, 54 (S.D.N.Y. 1993); Krumplet v. United Parcel Serv., Inc., 824 N.Y.S.2d 753, 753 (N.Y. Civ. Ct. 2006).
In contrast, in Nipponkoa Ins. Co. v. Watkins Motor Lines, Inc., 431 F. Supp. 2d 411, 415 (S.D.N.Y. 2006), the court did allow the use of the material deviation doctrine where separately negotiated security guidelines specified that they "were `material' and no deviation therefrom was permitted."
Even if the material deviation doctrine did apply to the shipment in this case, plaintiffs claim would not fall within the doctrine. Material deviation applies where an additional fee has been paid for a specific service that the carrier failed to use.Nippon Fire Marine Ins. Co., 45 F. Supp. 2d at 292-93 (quotingPraxair, 919 F. Supp. at 656). Here, no additional amount was paid for an additional service. (Smith Decl. Ex. 1.) The World Courier invoice demonstrates that FCS-UK was not charged an additional fee for controlled ambient service. (Marcino Aff., Ex. E.) The fact that World Courier allegedly charges fees higher than other carriers (Smith Decl. ¶¶ 7-8.) does not satisfy the requirement that an additional fee be charged. See Nipponkoa, 431 F. Supp. 2d at 415. The Nipponkoa court explained, "a carrier must have made a `separate, risk-related promise (special to the particular shipment at issue)' to allow a shipper to avoid a liability limitation under the material deviation doctrine." Id. at 418 (quoting Hill Constr. Corp. v. Am. Airlines, 996 F.2d 1315, 1319 (1st Cir. 1993)). Unlike the shipper in Nipponkoa, who had separately negotiated insurance provisions with its carrier to increase the limitation of liability, here no such separate negotiation took place. 431 F. Supp. 2d at 415. Consequently, even if this court were to accept the material deviation doctrine's applicability to cases falling under the Montreal Convention, plaintiff's claims would still fail.
CONCLUSION
For the foregoing reasons, Defendants' motion for partial summary judgment declaring damages in the first cause of action to be limited under the Montreal Convention is granted. Plaintiff's second, third and fourth causes of action are dismissed as preempted by the Montreal Convention. The maximum amount of damages available to plaintiff is seventeen special drawing rights, or $298.08. Counsel for defendants has 10 business days to contact the court if the defendants are going to contest liability. If they do not contest liability, I will instruct the Clerk of the Court to enter judgment in accordance with this decision and to close the file.
This constitutes the decision and order of the court.