Opinion ID: 464705
Heading Depth: 2
Heading Rank: 1

Heading: Liability Limitation Under the Lausanne Convention

Text: 7 The Lausanne Convention is one of an assortment of international agreements, federal statutes and agency regulations governing the transportation of domestic and international mail in the United States. Article 44 of the Convention, in pertinent part, provides that [p]ostal administrations shall be liable only for the loss of registered items, and that [i]n case of loss of a registered letter, the sender shall be entitled to an indemnity the amount of which shall be fixed at 40 francs [$15.76] per item. 8 Application of this liability provision to a carrier performing services for a postal administration has not yet been squarely addressed by the federal courts. At least one court, however, has considered a similar issue, albeit in dictum. Caribe Diamond Works, Inc. v. Eastern Airlines, Inc., No. 71-2875 (S.D.N.Y. June 24, 1974). In Caribe, the sender sought to recover from the postal carrier damages arising out of the nondelivery of certain diamonds sent via registered mail from Puerto Rico to New York. While dismissing the sender's claims on the ground that it had failed to prove the carrier's responsibility for the nondelivery, Judge Brieant noted the possible application to the carrier of certain liability limitations afforded the USPS under federal regulations relating to the level of insurance coverage for a specific package. Id. at 18; see 39 C.F.R. Secs. 161.2(a), 161.2(b)(2) (1985). He posited that if the USPS were to be considered a bailee, 5 the carrier then would be a sub-bailee. As such, the carrier would be a party to all of the express or implied rights and privileges of its transferor [USPS] arising under the original bailment, Caribe, slip op. at 18-19, and, if any limitation of liability were available to the USPS, there would be no reason why [it] should not inure to the benefit of all sub-bailees or successors in interest who acquired lawful possession from the original bailee to aid in accomplishing the purpose of the alleged bailment. Id. at 19. 9 We agree with the reasoning in Caribe and hold that Pan Am, as an agent of the USPS performing services that the USPS otherwise would perform pursuant to its bailment relationship with the sender, may assert Article 44 as a limitation upon its potential liability for the nondelivery. It is established common law doctrine that a sub-bailee may take advantage of a liability limitation contractually agreed upon between the original bailee and bailor. E.g., Berger v. 34th Street Garage, 3 N.Y.2d 701, 703, 171 N.Y.S.2d 824, 826, 148 N.E.2d 883, 884 (1958); Schoeffer v. United Parcel Service of New York, Inc., 277 App.Div. 569, 571, 101 N.Y.S.2d 451, 453 (1st Dep't 1950). Here, the Lausanne Convention, as part of the federal regulatory framework for the handling of international mail, prescribes some of the terms to which a sender of registered mail agrees when delivering a parcel to the USPS for transport. These terms form the equivalent of a contractual agreement between the sender and the USPS limiting the liability of the USPS, and, pursuant to agency principles, that limitation is passed on to any party performing services for the USPS. 10 The nature of air mail carriage under federal law compels this conclusion. While the USPS is empowered to contract with air carriers for the carriage of mail where present systems are inadequate, 39 U.S.C.A. Sec. 5402 (West Supp.1985), air carriers also may be conscripted to provide necessary and adequate facilities and service for the transportation of mail pursuant to the provisions of their certificates of public convenience and necessity, 49 U.S.C.A. Secs. 1371, 1375 (West Supp.1985). 6 It would be unjust indeed to require air carriers, as a condition of their operation, to perform services otherwise the responsibility of the USPS while at the same time denying them the benefit of the USPS's liability limitation. 11 In addition, application of Article 44 to Pan Am is appropriate in light of the reasoning of this and other courts in decisions holding that the liability limitations for air carriers under the Warsaw Convention should be extended to employees and agents of such carriers. E.g., Reed v. Wiser, 555 F.2d 1079, 1081 (2d Cir.) (employees of air carrier may assert liability limitations under Warsaw Convention even though only air carrier itself is covered expressly), cert. denied, 434 U.S. 922, 98 S.Ct. 399, 54 L.Ed.2d 279 (1977); Baker v. Lansdell Protective Agency, Inc., 590 F.Supp. 165, 170-71 (S.D.N.Y.1984) (agents of air carrier may assert liability limitation under Warsaw Convention); Julius Young Jewelry Manufacturing Company v. Delta Air Lines, 67 A.D.2d 148, 151, 414 N.Y.S.2d 528, 530 (1st Dep't 1979) (same). 12 The liability limitation provision of the Warsaw Convention could be circumvented by a suit against an employee of a carrier, rather than against a carrier itself, without the expansive interpretation we accorded that provision in Reed. This would require a carrier to provide indemnity for higher recoveries as the price for service by employees who are essential to the continued operation of its airline, Reed, 555 F.2d at 1082, and, in turn, would require this added expense to be passed on to airline passengers, id. 13 The implications of failing to extend the Lausanne Convention provision to agents of the USPS are no less severe. While the record reveals nothing to suggest that the USPS would be compelled to indemnify Pan Am for any recovery in this instance, it is beyond speculation that a limited interpretation of the Lausanne Convention would have a major influence on the USPS's ability to contract with airlines for the carriage of mail in the future. At the very least, air carriers would demand higher rates from the USPS for this service, with such added government costs then being passed on to the public in the form of higher postage prices. This, in turn, would be in conflict with the obvious intent of Article 44: to limit the financial repercussions of the nondelivery of registered mail on the government agency. Accordingly, Article 44 must be extended to cover the claims against Pan Am. 7