U.S. Third Circuit

INTERNATIONAL LAW – Warsaw Convention – Limited Liability of Carriers

Warner-Lambert Company v. LEP Profit International Inc., etc.,

No. 06-3244, 06-3340, 06-3341; Third Circuit; opinion by Rendell, U.S.C.J.; partial dissent by Fuentes, U.S.C.J.; filed February 27, 2008. Before Judges Rendell, Fuentes and Chagares. On appeal from the District of New Jersey, 99-cv-03618; 99-cv-03619; 00-cv-00228. [Sat below: Judge Hayden.] DDS No. 08-8-9775 [21 pp.]

Warner-Lambert Company appealed from the District Court’s entry of final judgment limiting the liability of Federal Express Corporation, LEP Profit International Inc., and LEP International (Japan), Ltd., pursuant to Article 22(2) of the Warsaw Convention, for cargo destroyed when a FedEx plane crashed on July 31, 1997, while attempting to land at Newark International Airport. The shipment had left Japan on July 30, 1997, destined, ultimately, for Puerto Rico. LEP Profit and LEP Japan individually performed various functions in connection with the transport of the shipment at issue, such as arranging and coordinating transportation, engaging outside contractors (including FedEx), and preparing necessary documentation and air waybills. The District Court held that LEP Profit and LEP Japan acted as “indirect carriers” with respect to the shipment at issue, subjecting them to common carrier liability under the Warsaw Convention, as opposed to liability as “freight forwarders.” Warner-Lambert, LEP Profit, and LEP Japan appealed.

Held: LEP Profit and LEP Japan acted as “indirect carriers” with respect to the shipment at issue, subjecting them to common carrier liability; FedEx was not entitled to the benefit of the limited liability provision of the Warsaw Convention because the carriers failed to list a stop of the flight that crashed as one of the “agreed stopping places” on the air waybill.

The Third Circuit explained that the characterization of LEP Profit and LEP Japan as either “indirect carriers” or “freight forwarders” turned on the involvement of each in the arrangement and oversight of the shipment. The District Court examined the functions performed by each and concluded that they had acted as indirect carriers. The Third Circuit affirmed this aspect of the District Court’s order.

The Third Circuit noted that the extent of FedEx’s liability (and consequently of LEP Profit and LEP Japan) depended on how the court read Article 8(c), which, together with Article 9, excepts from the limitation of liability carriers who fail to list “agreed stopping places” on the air waybill of the Warsaw Convention. Here, the relevant transportation of goods was from Japan to Puerto Rico, with stops in Anchorage and Newark, where the plane crashed. None of the air waybills prepared in connection with the shipment listed Anchorage, nor did they indicate that once Flight 78 (the FedEx flight from Tokyo to Anchorage) terminated in Anchorage, the cargo would be transferred onto Flight 14, which in turn would terminate at Newark Airport. Warner-Lambert used this omission as its basis for imposing liability on FedEx, LEP Profit and LEP Japan for the full value of the goods rather than the $9.07 per pound limitation under the Warsaw Convention.

Reasoning that “the driving force of 8(c) as a whole is to ensure notice and acknowledgment, not as to every stop, but as to stops [that] pertain to and indicate the international character of the shipment of the flight,” the District Court held that FedEx was entitled to limited liability under the convention because the origin of the shipment and the destination were in different countries.

The Third Circuit disagreed with the District Court’s conclusion that the strictures of Article 8(c) are satisfied as long as the air waybill gives the shipper notice of the international nature of the shipment. Based on the convention’s plain text, the drafting history of Article 8, and its overall structure, the Third Circuit did not find its application to be so limited. Rather, it agreed with the jurisprudence of the Court of Appeals for the Second Circuit, which requires the listing of all stopping places contemplated by the carrier. In addition, it noted that another purpose for the need to list “agreed stopping places” is the desire of shippers to know precisely where their goods would be landing so as to anticipate the applicability of other laws, potential risks and customs regulations.

The Third Circuit noted that the Hague Protocol, which became effective in 1999, changed the relevant provision to require listing of only those stopping places that give international character to an otherwise single-country flight.

Finally, the Third Circuit found that the mere listing of Flight 78 on the air waybills at issue was not sufficient to satisfy the requirements of Article 8(c). Thus, having failed to satisfy the requirement that Anchorage be listed as an “agreed stopping place,” the Third Circuit concluded, pursuant to Article 9, that no carrier involved in this case, whether direct or indirect, could avail itself of the limited liability provisions of the Warsaw Convention. Accordingly, the District Court’s grant of summary judgment in favor of FedEx was reversed.

Judge Fuentes concurred that LEP Profit and LEP Japan acted as “indirect carriers.” However, in dissent, he said that FedEx was entitled to benefit from the limited liability provision of the Warsaw Convention. Judge Fuentes stated that the primary purpose of the contracting parties to the convention was to limit the liability of air carriers, and that the court should read Article 8(c) as requiring that carriers list only those “agreed stopping places” that might impact the international character of the flight.

� By Debra McLoughlin

For appellants: LEP Profit International, Inc. – Andrew R. Spector, of the Fla. Bar (Hyman Spector & Mars) and James F. Campise, of the N.Y. bar (Cozen & O’Connor); LEP International (Japan) Ltd. – Keith B. Dalen, of the N.Y. bar (Hill, Rivkins & Hayden) and James A. Saville Jr. (Hill Rivkins & Hayden). For appellees: Federal Express Corporation – Robert C. von Ohlen Jr., of the Ill. bar (Kaplan, von Ohlen & Massamillo); Warner Lambert Company – Robert G. Rose and John P. Scordo (Day Pitney).