Case Name: The Limited Stores, Inc., Appellant and Cross-Appellee, v. Pan American World Airways, Inc., Appellee and Cross-Appellant; Sea Insurance Co. et al., Appellees
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1992-09-23
Citations: 65 Ohio St. 3d 66
Docket Number: No. 91-582
Parties: The Limited Stores, Inc., Appellant and Cross-Appellee, v. Pan American World Airways, Inc., Appellee and Cross-Appellant; Sea Insurance Co. et al., Appellees.
Judges: Moyer, C.J., Sweeney and Wright, JJ., concur.
Reporter: Ohio State Reports, Third Service
Volume: 65
Pages: 66–82

Head Matter:
The Limited Stores, Inc., Appellant and Cross-Appellee, v. Pan American World Airways, Inc., Appellee and Cross-Appellant; Sea Insurance Co. et al., Appellees.
[Cite as The Limited Stores, Inc. v. Pan American World Airways, Inc. (1992), 65 Ohio St.3d 66.]
(No. 91-582 —
Submitted April 14, 1992 —
Decided September 23, 1992.)
Schwartz, Kelm, Warren & Rubenstein, Russell A. Kelm and John A. Gleason, for appellant and cross-appellee.
Vorys, Sater, Seymour & Pease, Michael G. Long and Patricia A. Davidson, for appellee and cross-appellant.
Hamilton, Kramer, Myers & Cheek, Austin P. Wildman and Thomas J. Conkle, for appellee Sea Insurance Company.
Roetzel & Andress and John P. Mazza, for appellees GAB Business Services, Inc. et al.

Opinion:
Per Curiam.
This case concerns the liability of an air carrier for damage to an international shipment of retail goods. By that description, the case seems deceptively simple. The issues this case raises, however, include the applicability of the law of two states and an international treaty under a complicated set of facts. We address each of the issues raised by appellant and cross-appellant in turn.
I
We first must determine what substantive law applies to the issues in this case. As both the trial court and the court of appeals correctly concluded, the "Convention for Unification of Certain Rules Relating to International Transportation by Air" commonly referred to as the "Warsaw Convention" ("Convention") provides the basic legal framework within which the dispute between Pan Am and The Limited is to be decided. The Convention was designed to provide uniform, world-wide rules of liability for losses sustained by air passengers and shippers of goods during international transportation by air. Reed v. Wiser (C.A.2, 1977), 555 F.2d 1079, 1090, certiorari denied (1977), 434 U.S. 922, 98 S.Ct. 399, 54 L.Ed.2d 279. As specified in Article 1 of the Warsaw Convention, the Convention applies to "all international transpor tation of persons, baggage, or goods performed by aircraft for hire." Article 18 of the Convention provides that a carrier shall be liable for damage to goods occurring during "transportation by air" of those goods.
The effect of the Warsaw Convention is to place liability for damage or personal injury on the air carrier unless the air carrier shows that it took "all necessary measures to avoid the damage." Article 20 of the Convention. In exchange for the carrier's bearing that heavy burden, the Convention limits the amount of damages an injured party can collect for its damage or injury. In the case of damaged goods, Article 22(2) of the Convention limits the airline's liability to two hundred fifty French francs per kilogram of cargo unless the consignor has made a special declaration of the value of the cargo and paid an additional sum based on that value. Additionally, if it can be proven that the carrier caused the damage by its willful misconduct, then under Article 25(1) of the Convention, the liability limits of the Convention do not apply.
It is undisputed that The Limited did not make a special declaration as to value and pay an additional sum for coverage. Whether Pan Am engaged in willful misconduct, however, was an issue for the jury, and whether the jury was properly instructed on that issue is discussed in detail in Part III below.
The Warsaw Convention, as an international treaty to which the United States is a party, preempts state common carrier law with respect to those issues within its purview. Conflict-of-law principles are not relevant to the interpretation of the Convention; rather, legal interpretation must be gleaned from the four corners of the treaty. Saiyed v. Transmediterranean Airways (D.C.Mich.1981), 509 F.Supp. 1167, 1169.
The Convention, however, does not specifically address all the issues involved in the dispute between Pan Am and The Limited. Indeed, in this context the Convention merely provides for a cause of action against Pan Am and specifies the method of calculating Pan Am's maximum potential liability if it fails to prove that it took all necessary steps to prevent the damage. The Convention does not address, for example, how damages are calculated, nor does it define a standard for willful misconduct. Thus, in order to provide a legal foundation for those areas not addressed within the four corners of the Convention we must look to other sources of law.
We first note that an action brought under the Warsaw Convention cannot be classified as either a tort action or a contract action. Indeed, an action brought pursuant to the Convention, like other common carrier actions under federal law, incorporates elements of both tort and contract actions. Compare Article 21 of the Convention (permitting the application of contributory or comparative negligence principles if forum law so allows) with Article 23 of the Convention (precluding a contract that incorporates a provision further limiting the carrier's liability). Thus, with respect to the dispute between Pan Am and The Limited, while we may properly rely upon cases from any jurisdiction, state or federal, that have interpreted the Warsaw Convention and its terms, we may also rely upon federal common law in analogous carriage-of-goods cases to fill in the gaps that may still remain in the application of the Convention. Accord In re Air Disaster at Lockerbie, Scotland on Dec. 21, 1988 (C.A.2, 1991), 928 F.2d 1267 (federal common law of torts applies in construing Warsaw Convention). Although we may find it instructive to look to the law of New York and Ohio to interpret certain terms that the the Convention does not define, we are not bound to do so.
With respect to the dispute between The Limited and the insurers and agents, the Convention is not applicable, because that portion of the case does not involve damage caused to the goods during air transportation. See Article 31 of the Convention. As to this portion of the case, we conclude that Ohio law applies. An action grounded in promissory estoppel is an action in contract, and choice-of-law analysis indicates that Ohio bears the most significant relationship to the dispute between the parties. See Gries Sports Enterprises, Inc. v. Modell (1984), 15 Ohio St.3d 284, 15 OBR 417, 473 N.E.2d 807, syllabus (applying Section 188, 1 Restatement of the Law 2d [1971], Conflict of Laws, to resolve conflict-of-law questions when parties to a contract do not specify the law to be applied).
Having resolved the question of the law to be applied in this action, we now turn to the propositions of law set forth by the parties.
II
The Limited urges as its first proposition of law that "[a] retail seller of clothing is entitled to recover the retail value of goods damaged in transit, when cover with comparable merchandise is not possible." Flowing from the proposition of law is The Limited's argument that the trial court erred in directing a verdict for Pan Am capping the damages at the wholesale value of the goods and precluding The Limited from arguing that the proper measure of its damages was the retail value of its goods. We agree that the trial court erred in directing the verdict and that the jury should have considered the retail value of the goods in its deliberations. We do not, however, agree that, as a matter of law, the proper measure of The Limited's damages is the retail value of the entire shipment.
The general rule for calculating damages in common carrier cases is that the shipper is entitled to the difference between fair market value of the goods as received and fair market value of the goods in the condition they would have been in had they not been damaged. Pacol (Canada) Ltd. v. M/V Minerva (S.D.N.Y.1981), 523 F.Supp. 579, 581-582; and C. Itoh & Co. (America), Inc. v. Hellenic Lines, Ltd. (S.D.N.Y.1979), 470 F.Supp. 594, 598. In this respect, the trial court properly instructed the jury.
By further defining, through directed verdict, the term "fair market value" to mean only the wholesale value of the shipment less salvage, the trial court erred to the prejudice of The Limited and improperly precluded the jury from determining, based upon all the evidence presented at trial, what it believed The Limited's damages to be. Under the facts of this case, where a retail establishment has arranged for a shipment of goods that have a short sale life and where cover is impossible, a jury should be permitted to consider whether a portion of the goods would have sold had they arrived in good condition in time to meet consumer demand and to determine the price at which those goods would have sold, provided the retail establishment has presented sufficient evidence to put those considerations in issue.
Upon review of the record, we conclude that The Limited presented adequate evidence to demonstrate that it would have sold at least a portion of the goods at a profit had they arrived undamaged. The Limited introduced documentary and testimonial evidence of the sales history as well as the successful test marketing of similar products. Sales records introduced by The Limited at trial indicated that products similar to those which had been damaged were selling on a two-to-three week rate of supply in early December 1985. Additionally, The Limited provided evidence of the retail price of comparable items and expert testimony concerning the retail value of the goods in question. The jury should have been permitted to assess The Limited's evidence to determine the fair market value of the goods in view of the price for which they would have been offered for sale and the testimony and documentary evidence of the sale of comparable items. Accordingly, we remand this portion of the case to the trial court for a new trial on the issue of The Limited's damages.
III
Next we are asked to reverse and remand this action for error claimed in the jury instruction given by the trial court concerning willful misconduct. Pursuant to Article 25(1) of the Warsaw Convention, the Convention's limitation of liability does not apply if the damage is caused by the carrier's willful misconduct. The Limited contends that the trial court should have instructed the jury that a finding of intent on the part of Pan Am was unnecessary to determine that Pan Am had acted willfully.
In order to find reversible error, we would have to conclude that the instruction as a whole did not clearly and fairly express the law, and that The Limited's substantial rights were prejudiced. Ohio Farmers Ins. Co. v. Cochran (1922), 104 Ohio St. 427, 135 N.E. 537. Reading the instruction that was given to the jury as a whole, we find that it was consistent with similar instructions and definitions approved in other Warsaw Convention cases. See Koninklijke Luchtvaart Maatschappij N.V. KLM Royal Dutch Airlines Holland v. Tuller (C.A.D.C.1961), 292 F.2d 775, 778, certiorari denied (1961), 368 U.S. 921, 82 S.Ct. 243, 7 L.Ed.2d 136; American Airlines, Inc. v. Ulen (C.A.D.C.1949), 186 F.2d 529, 533; Maschinenfabrik Kern, A.G. v. Northwest Airlines, Inc. (N.D.Ill.1983), 562 F.Supp. 232, 240; and Grey v. American Airlines, Inc. (C.A.2, 1955), 227 F.2d 282, 285. We thus cannot conclude that the instruction did not clearly and fairly express the law, and we find no error in the instruction given by the trial court.
Having concluded that the trial court did not err in its instruction, the jury's finding that Pan Am did not engage in willful misconduct must stand. Accordingly, upon retrial of the damages issue, The Limited's potential recovery is capped by the liability limitation provisions of the Warsaw Convention. The limit of two hundred fifty francs per kilogram has been interpreted to be the equivalent of $9.07 per pound. Trans World Airlines, Inc. v. Franklin Mint Corp. (1984), 466 U.S. 243, 104 S.Ct. 1776, 80 L.Ed.2d 273. Based upon a shipment weight of 27,117 pounds, The Limited's maximum potential recovery is thus $245,951.19. In the event that the jury's determination of The Limited's damages exceeds this amount, the trial court must reduce the award to the Convention limit.
IV
The Limited also asks this court to reverse the trial court's granting of a directed verdict in favor of defendants-appellees Robert Maldeis, Intermodal Technical Services, GAB Business Services and Sea Insurance Company. The Limited's action against these appellees is asserted on a theory of promissory estoppel based on a statement allegedly made by Maldeis when he inspected the garments after their arrival at The Limited's warehouse in Columbus, Ohio.
TKe Limited claims that Maldeis informed its representatives and employees on December 2, 1985, the time of his first inspection of the goods, that the shipment appeared to be a total loss and that the insurer would take care of the loss. The trial court directed a verdict in favor of these appellees, finding there was no evidence that Maldeis intended to induce reliance by his statement or that The Limited reasonably relied on any such statement.
In Talley v. Teamsters Local No. 377 (1976), 48 Ohio St.2d 142, 146, 2 O.O.3d 297, 299, 357 N.E.2d 44, 47, this court adopted the rule of Section 90 of the Restatement of the Law 2d, Contracts, concerning promissory estoppel. The Restatement provides in part:
"(1) A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. " 1 Restatement of the Law 2d, Contracts (1981) 242, Section 90. See, also, McCroskey v. State (1983), 8 Ohio St.3d 29, 30, 8 OBR 339, 340-341, 456 N.E.2d 1204, 1205.
Maldeis admitted that his preliminary survey of the ¡garments led him to believe that the shipment was a total loss, but he further testified that the statement he made to The Limited representatives was conditioned upon his further inspection which was to have been made after United States Customs cleared the shipment. As both courts below found, there is an abundance of testimony in the record of The Limited's employees that the decision to reject the goods was made independently of any statements made by Maldeis.
A motion for directed verdict is to be granted when, construing the evidence most strongly in favor of the party opposing the motion, the trial court finds that reasonable minds could come to only one conclusion and that conclusion is adverse to such party. Civ.R. 50(A)(4); Crawford v. Halkovics (1982), 1 Ohio St.3d 184, 185-186, 1 OBR 213, 214, 438 N.E.2d 890, 892. Based upon the evidence, the trial court found and the court of appeals confirmed that reasonable minds could come to only one conclusion and that conclusion was adverse to The Limited. We agree.
V
In the first issue it raises on cross-appeal, Pan Am contends that The Limited lacked standing to sue an international air carrier because it was neither consignor nor consignee of an international shipment of cargo.
Article 15(1) of the Warsaw Convention states:
"Articles 12, 13, and 14 shall not affect either the relations of the consignor and the consignee with each other or the relations of third parties whose rights are derived either from the consignor or from the consignee."
Article 30(3) of the Convention provides:
"As regards baggage or goods, the passenger or consignor shall have a right of action against the first carrier, and the passenger or consignee who is entitled to delivery shall have a right of action against the last carrier, and further, each may take action against the carrier who performed the transportation during which the destruction, loss, damage, or delay took place. These carriers shall be jointly and severally liable to the passenger or to the consignor or consignee."
Pan Am insists that these provisions permit only the consignor or consignee named on the air waybill to sue for damage to goods. We disagree.
In Leon Bernstein Commercial Corp. v. Pan American World Airways (1979), 72 A.D.2d 707, 421 N.Y.S.2d 587, the defendant therein sought to similarly limit standing under the Warsaw Convention to only the consignor or consignee. Finding that the plaintiff therein derived its rights from the consignor, and further holding that construing the Warsaw Convention in the manner proposed would defeat the rights of the true owner of the cargo, the court rejected the defendant's standing argument. We similarly reject Pan Am's reasoning and hold that The Limited had standing in this action. The Limited's rights are derived from its agent, the consignee A.W. Fenton & Co. ("Fenton"), named on the Pan Am waybill, and it is not disputed that Fenton received and forwarded goods purchased by The Limited.
VI
Pan Am also challenges the trial court's award of prejudgment interest, contending that the Warsaw Convention does not permit such an award.
Although there is a split of authority between the Second and Fifth United States Circuit Courts of Appeals concerning the award of prejudgment interest under the Warsaw Convention when the amount of damages exceeds the damages limitation, we find no case that stands for the proposition that prejudgment interest cannot be awarded as an element of compensation if properly presented to the jury and if the sum of the prejudgment interest and the damages awarded does not exceed the damages limitation. Indeed, the chief case relied upon by Pan Am, O'Rourke v. Eastern Air Lines, Inc. (C.A.2, 1984), 730 F.2d 842, suggests that it is proper to award prejudgment interest in a Warsaw Convention action if the damages cap is not exceeded.
Although we do not adopt the position espoused by the Fifth Circuit that prejudgment interest may be awarded in the discretion of the trial judge even if the damages limitation is exceeded, Domangue v. Eastern Air Lines, Inc. (C.A.5, 1984), 722 F.2d 256, we agree with that court's conclusion that the preeminent purpose of the Convention was to fix definite and uniform limits on the cost to airlines of damages sustained by their customers. As such, prejudgment interest, in this context, should be presented to the jury as an element of damages, with the understanding that the ultimate award available under the Convention will be limited to a fixed, uniform level.
Thus, we hold that in a case subject to the provisions of the Warsaw Convention, prejudgment interest may be awarded by the factfinder as an element of compensation if the sum of the damages awarded and the prejudgment interest on those damages is less than the damages limitation imposed under the provisions of the Convention.
For the reasons set forth above, the cause is remanded for a new trial on the issue of damages, with instructions to the trial court to limit The Limited's maximum recovery to the amount of damages specified by the Warsaw Convention. In all other respects the judgment of the court of appeals is affirmed.
Judgment affirmed in part, reversed in part and cause remanded with instruction.
Moyer, C.J., Sweeney and Wright, JJ., concur.
Holmes and Bryant, JJ., concur in part and dissent in part.
Douglas and Resnick, JJ., concur in part and dissent in part.
Thomas F. Bryant, J., of the Third Appellate District, sitting for H. Brown, J.
. 49 Stat. 3000, T.S. No. 876, 137 L.N.T.S. 11, opened for signature on October 12, 1929, in Warsaw, Poland, entered into force for the United States, October 29, 1934, and is reprinted in Section 1502 note, Title 49, U.S.Code (1976 and Supp.1992).
. The Warsaw Convention applies only by agreement of the parties, not by operation of law. B.R.I. Coverage Corp. v. Air Canada (E.D.N.Y.1989), 725 F.Supp. 133, 135. A shipment's air waybill usually provides evidence of the parties' agreement to be governed by the Warsaw Convention. In the case at bar, neither Pan Am nor The Limited now contests the Convention's applicability.
. We note that had the Warsaw Convention not applied, we likely would have applied the law of New York with respect to the dispute between Pan Am and The Limited because New York has the more significant relationship to the contract for the carriage of goods. Section 197, 1 Restatement of the Law 2d, Conflict of Laws (1971) 628.