Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_04-cv-00672/USCOURTS-cand-3_04-cv-00672-9/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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United States District Court

For the Northern District of California

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAMGAMO BIOSCIENCES, INC.

Plaintiff,

v.

CARGOLUX AIRLINES

INTERNATIONAL, S.A.; RGP

INTERNATIONAL FREIGHTS LTD.;

AEROGROUND, INC.; AEROGROUND

TRANSPORTATION SERVICES, INC.;

MISTER CARGO LTD.; INTERSPED

LOGISTICS GROUP, INC.; BECKMAN

COULTER UNITED KINGDOM, LTD.; and

Does 1-20;

Defendants.

___________________________________/

No. C-04-0672 JSW (EMC)

REPORT AND RECOMMENDATION

GRANTING PLAINTIFF’S MOTION

FOR DEFAULT JUDGMENT

(Docket No. 70)

Plaintiff Samgamo Biosciences, Inc., moves for default judgment as to Defendants Intersped

Logistics Group (“Intersped”), RGP International Freights Ltd. (“RGP”), and Mister Cargo, Ltd.

(“Mr. Cargo”), on its common carrier, negligence, and breach of contract causes of action. Having

reviewed the service of process, the complaint, and the proof of damages, this court hereby

recommends that Plaintiff’s motion for default judgment be GRANTED.

I. FACTUAL BACKGROUND

On January 12, 2004, Samgamo Biosciences filed suit in California Superior Court to

recover damages incurred in the international shipping of a Robot/Thermal Cycler (“Cargo”). The

defendants were 15 “Carrier Defendants” (five named and 10 unknown defendants under fictitious

names), and 11 “Shipper Defendants” (Beckman Coulter United Kingdom (“Beckman”) and 10

under fictitious names, identities unknown by the Plaintiffs). Compl. ¶¶ 2-10. 

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The Plaintiffs claim that they have incurred damages in the amount of $216,594 (the price of

the Cargo) based on the facts alleged in the complaint: On April 11, 2002, Beckman agreed to sell

the Cargo to Samgamo, purported to be in good order and condition. Compl. ¶ 12. Beckman

decommissioned and repackaged the Cargo for shipment from its facility in the United Kingdom to

Samgamo’s facility in Richmond, California. Compl. ¶ 12. On or about October 3, 2002, the

Carrier Defendants accepted the Cargo for shipment to be carried overland and by air from London,

England to Richmond, California. Compl. ¶ 13. The Cargo was delivered in a damaged and

unsalvageable condition on October 9, 2002. Compl. ¶ 14; Cammarano Decl. in Support of Pls.’

Req. to Enter Default Judgments, Ex. 6, p. 3. The Plaintiffs alleged six causes of action: (1)

Damage to Cargo, (2) Negligence/ Gross Negligence/ Wilful Misconduct, (3) Breach of Contract,

(4) Breach of Warranty, (5) Breach of Bailment, and (6) Breach of Contract for Sale of Goods. 

On February 18, 2004, Defendant Cargolux Airlines removed the case to federal court,

claiming that the case arose under “The Convention for the Unification of Certain Rules Relating to

International Carriage by Air, Signed at Warsaw on 12 October 1929 (49 U.S.C. 40105) (“The

Warsaw Convention”). 

Defaults were entered against three of the named Defendants who had not responded to the

complaint: Intersped Logistics Group (“Intersped”), RGP International Freights Ltd. (“RGP”), and

Mister Cargo, Ltd. (“Mr. Cargo”). On June 14, 2005, Samgamo moved for entry of default

judgments against these three Defendants. The other Defendants have been dismissed.

On August 9, 2005, Judge White referred the motion for default judgment to this Court for a

report and recommendation.

During the pendency of this case, Plaintiffs provided supplemental evidence which clarified

or amplified the facts: Beckman had actually sold the Cargo to Gendaq, Samgamo’s United

Kingdom affiliate, in 2000. Beckman was then hired in 2002 to decommission the Cargo for

transport from Gendaq, in England, to Samgamo, in the United States. See Pls.’ Supplemental

Briefing at 2. Defendant Mr. Cargo issued a “door to door” master air waybill for the Cargo, to be

delivered from “Beckman” in London to “Gendaq,” in Point Richmond, California. See Pls.’

Second Supplemental Briefing, Ex. 15. RGP was hired to package the Cargo and transport it to the

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1

 The Aeroground cargo terminal is a contract cargo terminal for Cargolux Airlines. See Pls.’

Third Supplemental Briefing, Ex. 2.

2

 The Cargo Surveyer was hired by Chubb Group of Insurance Companies. FIC is one of the

Chubb Group of Insurance Companies. See Dhurjon-Singh Decl. in Supp. of Pls.’ Req. to Enter Default

Judgments ¶ 2.

3

air carrier; Beckman assisted in disassembling the Cargo at Gendaq’s facility in September 2002. 

See Pls.’ Supplemental Briefing, Ex. 14, Ex. 8, Item 3. RGP took the Cargo for the purpose of recrating for transport to the United States. See id. The Cargo was in good order upon delivery to

RGP in Manchester, England. See Daley Decl. in Supp. of Pls.’ Supplemental Briefing, Ex. 14 ¶ ¶

5-6; Pls. Third Supplemental Briefing, Ex. 1. Mr. Cargo hired Cargolux Airlines to transport the

Cargo by air to San Francisco International Airport (“SFO”). See id; Pls.’ Second Supplemental

Briefing, Ex. 15. RGP is identified as the shipper on Cargolux’s air waybill. See Pls.’ Second

Supplemental Briefing, Ex. 16. Cargolux transported the Cargo to SFO, where it was delivered to

the Aeroground Cargo Terminal.1

 See Pls.’ Third Supplemental Briefing, Ex. 2. The Cargo was

then delivered by Intersped by ground from the Aeroground Cargo Terminal, which is 3 miles

outside of SFO, to Plaintiffs in Richmond, California. See id. The delivery slip signed by the

Intersped representative who took delivery of the Cargo at the Cargolux terminal did not note any

damage to the Cargo. See Dhurjon-Singh Decl. Ex. 4. The damage was discovered after delivery to

Samgamo.

The real party in interest in this action is Federal Insurance Company (“FIC”), the subrogated

underwriter of Samgamo. FIC paid $216,574.00 to Samgamo for the damage to the Cargo on June 9,

2003. See Dhurjon-Singh Decl. in Supp. of Pls.’ Req. to Enter Default Judgments ¶¶ 2,11;

Cammarano Decl. in Support of Pls.’ Req. to Enter Default Judgments, Ex. 7; Pls’ Third

Supplemental Briefing, Cammarano Decl., ¶ 12. The monetary damages of $216,574.00 reflects the

value of the damaged Cargo, which was not in salvagable condition, and considered a total loss. On

November 4, 2002, Beckman Coulter quoted the replacement value of the Cargo as being

$235,933.00. See Pls.’ Supplemental Briefing, Ex. 8, Item 16. A Cargo surveyor hired by FIC2

agreed that (1) since the Cargo was very shock and moisture sensitive and could have sustained

concealed damages and (2) due to the high cost of labor for dismantling and testing the Cargo, the

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 The cargo surveyor additionally concluded that since the Cargo was the product of the high

tech industry, it could already be outdated six to eight months after date of manufacture and therefore

would not be economical to repair, contributing to the conclusion that none of the Cargo was

salvageable. See Pls.’ Supplemental Briefing, Ex. 11.

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Cargo was considered a constructive and total loss, and no parts of the Cargo were salvageable.3 See

Dhurjon-Singh Decl. in Supp. of Pls.’ Req. to Enter Default Judgments, Ex. 5. Plaintiffs have

received $29,000 from settling Defendants, and therefore $187,574.00 represents the remaining

value of the damages due Plaintiffs from the three defaulting Defendants herein.

II. DISCUSSION

A. Service of Process

This Court finds that Plaintiff Samgamo has provided evidence of effective proof of service

on each of the defaulting Defendants. An authorized agent for service of process at Intersped was

personally served. See Proof of Service Re Summons and Complaint on Defendant Intersped

Logistics Group, Inc. Mr. Cargo was served on February 18, 2005 in accordance with the Hague

Convention. See Proof of Service of Summons and Complaint on Defendant Mister Cargo, Ltd., Ex.

B (solicitor and office of Supreme Court of England of Wales left the documents at Mister Cargo

Ltd.’s registered office and served the documents by special delivery on Mister Cargo’s place of

business; these methods of delivery conform with British law. See Wallace Affidavit ¶¶ 1-3.). RGP

was also served in accordance with the Hague Convention on March 15, 2005. See Proof of Service

of Summons and Complaint on Defendant RGP International Freight Limited, Ex. B (authorized

server served RGP by serving documents to RGP’s registered office, consistent with British law).

B. Choice of Law

This case was removed to federal court based on Defendant Cargolux’s assertion that the

case arose under the Warsaw Convention. See Notice of Removal of Action Under 28 U.S.C.

Section 1441 (b). The Warsaw Convention applies “to all international transportation of persons,

baggage, or goods performed by aircraft for hire.” 49 U.S.C. § 40105, Art. 1(1). The removal was

not opposed. The Warsaw Convention thus applies in the first instance to the shipment at issue in

this case.

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 As noted above, RGP was hired to package the Cargo and did so at their facility which was not

on airport grounds, and Intersped was hired to pick up the Cargo from a terminal outside the airport and

deliver the Cargo to the Plaintiffs in Richmond, California.

5

 As the claims against Intersped and RGP arise under federal common law and have merit, there

is no need to address the alternative state law causes of action.

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If a contract for transportation by air includes transportation by land outside of the airport,

damage is presumed to have taken place during transportation by air, subject to proof to the

contrary. See 49 U.S.C. § 40105, Art. 18(1-3). However, the Warsaw Convention does not apply to

any damage occurring outside an airport, e.g., during ground transportation. See Victoria Sales

Corp. v. Emery Air Freight, Inc., 917 F.2d 705, 707 (2d Cir. 1990).

While the Warsaw Convention clearly applies to Mr. Cargo, Plaintiffs have provided

evidence that RGP’s and Intersped’s actions contributing to the damage of the Cargo took place

outside of the airport and not in the course of air transportation.4 The Intersped representative took

delivery of the goods without exception to the condition of the Cargo. This is prima facie evidence

that the Cargo was in good order when received by Intersped at the Cargolux terminal outside San

Francisco International Airport. Louisiana Southern Ry. Co. v. Anderson, Clayton, and Co., 191

F.2d 784, 786 (5th Cir. 1951). Since the Cargo was damaged upon receipt by Samgamo, it may be

inferred that the damages occurred while Intersped transported it by land to Samgamo after it left the

airport.

Accordingly, the Warsaw Convention does not apply. Rather, Plaintiff’s common carrier

claims against Intersped arise under federal common law. See Read-Rite Corp. v. Burlington Air

Express, Ltd., 186 F.3d 1190, 1195 (9th Cir. 1999) (holding that in the absence of the Warsaw

Convention, federal common law governed actions arising from loss or damage to cargo shipped by

an air carrier). 

Likewise, RPG’s alleged failure to properly pack the Cargo occurred on land in Manchester

prior to shipment by air from London. The Warsaw Convention does not apply to Plaintiff’s claims

against RPG.5

As noted above, the claims against Mr. Cargo, as the issuer of the door to door air waybill,

which covered air transportation from England to the United States, is covered by the Warsaw

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Convention. See 49 U.S.C. § 40105, Art. 18(1-3). The Warsaw Convention provides the exclusive

remedy for claims which its provisions govern, so all state-law claims against Mr. Cargo are preempted. See 49 U.S.C. § 40105, Art. 24.

C. Legal Standard

The disposition of a motion for default judgment lies within the discretion of the court. See

Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). Factors to guide the Court’s discretion

include: 

(1) the possibility of prejudice to the plaintiff; (2) the merits of

plaintiff’s substantive claim; (3) the sufficiency of the complaint; (4)

the sum of money at stake in the action; (5) the possibility of a dispute

concerning material facts; (6) whether the default was due to

excusable neglect, and (7) the strong policy underlying the Federal

Rules of Civil Procedure favoring decisions on the merits.

Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). 

After examining the factors, the Court finds that default judgment should be granted against

RGP, Intersped, and Mr. Cargo. Because the Warsaw Convention and federal common law dealing

with common carriers provide for strict liability, and Samgamo has plead that the damage to the

Cargo occurred during transport and as a result of deficient packing, Samgamo has stated a valid,

prima facie claim under either the federal common law of common carriers or the Warsaw

Convention. 49 U.S.C. § 40105, Art. 18(1) (Providing that “the carrier shall be liable for damage

sustained . . . if the occurrence which caused the damage so sustained took place during the

transportation by air”); Bailey v. Morgan Drive-Away, Inc., 647 F. Supp. 648, 653 (D. Kan. 1986)

(noting strong policy of imposing strict liability on common carriers at common law); Lousiana

Southern Ry., 191 F.2d at 785 (noting that at common law the common carrier is held to “strict

accountability”). Therefore, the second and third Eitel factors weigh in favor of default judgment. 

The other Eitel factors also support entry of default judgment. For example, Samgamo will

be prejudice if default judgment is not granted, since it will be without remedy. See Pepsico, Inc. v.

Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 2002) (“If Plaintiffs’ motion for default

judgment is not granted, Plaintiffs will likely be without other recourse for recovery.”). As to a

dispute concerning material facts, Rule 8 of the Federal Rules of Civil Procedure provides that

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allegations in a pleading to which a responsive pleading is required, other than allegations as to the

amount of damages, are admitted when they are not denied in a responsive pleading. Fed. R. Civ.

Pro. 8(d). See also TeleVideo Systems, Inc. v. Heidenthal, 826 F.2d 915, 917-918 (9th Cir. 1987). 

Because none of the defaulting Defendants has filed an answer to the complaint, there is nothing to

suggest that there is a possibility of dispute concerning material facts. The fact and magnitude of

damage to the Cargo does not appear to be in dispute. There is no evidence suggesting that the

failure to respond to the complaint was the result of excusable neglect. The defaulting Defendants

were properly served and had notice. The Court acknowledges that “[c]ases should be decided on

the merits whenever reasonably possible,” Eitel, 782 F.2d at 1472, and that damages sought are not

insubstantial. See Pepsico, 238 F. Supp. 2d at 1176 (stating “the court must consider the amount of

money at stake in relation to the seriousness of Defendant’s conduct”). However, the damages

incurred here are not disproportionate. Plaintiff seeks only direct damages, not consequential or

exemplary damages. On balance, the Court concludes that the Eitel factors weigh in favor of

awarding default judgment. 

D. No Limitation of Liability

Article 22(2) of the Warsaw Convention provides for a limitation of liability in the event that

air cargo is damaged in transportation covered by the convention. 49 U.S.C. § 40105, Art. 22(2). 

However, even as to Mr. Cargo, the only defaulting Defendant covered by the Warsaw Convention,

this limitation of liability does not apply. The Warsaw Convention dictates that all of the provisions

listed in Article 8 must be included on the face of the air waybill in order for a defendant to be able

to avail itself of the limitation of liability. 49 U.S.C. § 40105, Art. 9. See also Maritime Ins. Co. v.

Emery Air Freight Corp., 983 F.2d 437, 441 (2d. Cir. 1993) (holding that, under Article 9, the

carrier is not permitted to limit its liability if [the] particulars listed in Article 8 are absent). The face

of the air waybill in this case did not include Particular (q) of Article 8, “a statement that the

transportation is subject to the rules relating to liability established by [the Warsaw Convention].” 

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 The Court notes that Mr. Cargo’s air waybill contains the following language along the bottom

of the air waybill: “All business is transacted in accordance with the standard trading conditions (2000

Edition) of the British International Freight Association, copies of which are available on request.” See

id. at Ex. 16. The British International Freight Association’s (BIFA) conditions contain a section on

“Liability and Limitation.” See British International Freight Association, Standard Trading Conditions

2005 (Dec. 2004), available at http://www.bifa.org/DocFrame/DocView.asp?id=235&sec=-1) (last

visited Dec. 13, 2005). But these limitations are not expressly provided in the waybill. The provisions

of BIFA are not cited or quoted in the air waybill; those provisions are steps removed from the air

waybill. The Court has serious doubts about the effectiveness of any effort to incorporate the BIFA’s

standard trading conditions into the air waybill. See e.g. Pray v. Oughtred & Harrison 1999 U.S. Dist.

LEXIS 5287 (S.D.N.Y. 1999) (holding that the BIFA standard trading conditions were not incorporated

by reference into the contract, because the term “All business undertaken according to the standard

terms and trading conditions of the ICS BIFA” appeared at the bottom of a facsimile written in

minuscule print, and was blurred and wholly illegible). In any event, no party has raised the application

of BIFA.

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 While Article 30(3) provides that the consignor has a right of action against the first carrier and

the consignee has a right of action against the last carrier, Article 1(3) provides that “transportation to

be performed by several successive air carriers shall be deemed, for the purposes of this convention, to

be one undivided transportation, if it has been regarded by the parties as a single operation.” 49 U.S.C.

§ 40105, Art. 1(3) In the case of one undivided transportation, any possible restrictions on who may

sue do not apply. See Commercial Union Ins. Co. v. Alitalia Airlines, S.p.A., 347 F.3d 448, 459 (2d Cir.

2003).

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Thus, Mr. Cargo cannot avail itself of the damage limitation provisions of the convention. See

Daley Decl. in Supp. of Pls.’ Second Supplemental Briefing, Exs. 15, 16.6

E. Joint and Several Liability

Under both the Warsaw Convention and federal common law, joint and several liability

applies to the defaulting Defendants. The Warsaw Convention provides that successive carriers

shall be jointly and severally liable for the loss or damage to goods under their care.7 49 U.S.C. §

40105, Art. 30(3). Under federal common law, “where a fair allocation of liability cannot be made

among multiple tortfeasors, the federal common law permits imposition of joint and several

liability.” Project Hope v. M/V IBN Sina, 250 F.3d 67, 76 (2d Cir. 2001), (quoting Restatement

(Second) of Torts § 879 (1979)).

F. Damages

“The general rule of law is that upon default the factual allegations of the complaint except

those relating to the amount of damages, will be taken as true.” Geddes v. United Financial Group,

559 F.2d 557, 560 (9th Cir. 1977) (emphasis added). Samgamo carries the burden of proving

damages resulting from the damage to the Cargo. See Bd. of Trustees of the Boilermaker Vacation

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 The Court notes that Beckman originally sold the Cargo to Samgamo’s affiliate in 2000 for

140,000 Pounds Sterling, equivalent to $216,574 U.S. Dollars in October 2002 when Samgamo took

delivery of the Cargo. See Pls’ Supplemental Briefing, Exh. 8, Items 1, 2.

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Trust v. Skelly, Inc., No. 04-02841 CW, 2005 WL 43346, *2 (N.D. Cal. Feb. 24, 2005) (“Plaintiff

has the burden of proving damages through testimony or written affidavit”).

As discussed above, Plaintiffs have proven that the $216,574.00 paid by Federal Insurance

Company reflects the true extent of the damages suffered by the Plaintiffs in this case and thus that

$187,574 reflects the true value of their damages after a $29,000 offset for money received from the

settling defendants. See Pls.’ Supplemental Briefing, Ex. 8; Cammarano Decl. in Supp. of Pls.’

Third Supplemental Briefing ¶ 11.8

G. Prejudgment Interest

A decision to award prejudgment interest on successful federal claims is subject to the

court’s discretion. The court examines such issues as whether the prejudgment interest is

compensatory or duplicative and whether the equities in the particular case would preclude award of

prejudgment interest. See F.D.I.C. v. UMIC, Inc., 136 F.3d 1375, 1388 (10th Cir. 1998). This Court

finds that an award of prejudgment interest in this case would be compensatory rather than

duplicative and that there are no equities particular to this case that would preclude an award of

prejudgment interest.

Plaintiffs claim that prejudgment interest has accumulated at the rate of .095 or $48.82 per

day, from June 9, 2003, the date that FIC paid Samgamo for the damages. Pls.’ Req. to Enter

Default Judgments at p. 2. Plaintiffs cite no authority for its calculation. Because this Court’s

jurisdiction is based on federal question, federal law governing the calculation of prejudgment

interest rates applies. See The Guides, Ltd. v. The Yarmouth Group Property Management, Inc., 295

F.3d 1065, 1078 (10th Cir. 2002) (noting that “a federal rate of interest rather than the state rate

applies where jurisdiction is based on a federal question.”) Federal pre- and postjudgment interest

rates are calculated at a rate equal to the yield equivalent of the average accepted auction price for

the last auction of fifty-two week United States Treasury bills settled immediately prior to the date at

which the interest rates started accruing. See Western Pacific Fisheries, Inc. v. S.S. President Grant,

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730 F.2d 1280, 1289 (9th Cir. 1984) (citing 28 U.S.C. § 1961(a)). The date closest to June 9, 2003

for which this rate is available is June 6, 2003, when the one-year Treasury Bill rate was 1.13%

annually. See Overseas Markets: Money Rates Administered, The Globe and Mail, June 6, 2003 at

B13, available in 2003 WLNR 14080996. Calculated at this rate, prejudgment interest on the

judgment amount of $187,574.00 has accrued at a rate of $5.81 per day. As of the date of this

Report and Recommendation, December 21, 2005, the total judgment including interest comes to

$192,954.06.

III. CONCLUSION

For the foregoing reasons, the Court recommends granting Plaintiff’s motion for default

judgment against each of the three defaulting Defendants and that Samgamo be awarded damages in

the amount of $192,954.06 as of December 21, 2005 plus interest at a rate of $5.81 per day

thereafter. Defendants should be held jointly and severally liable.

Dated: December 21, 2005

 EDWARD M. CHEN

United States Magistrate Judge

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