Court Opinion

ID: 9575458
Source: CourtListenerOpinion
Date Created: 2023-08-21 21:13:58.812494+00
Date Added: 2024-06-11T12:48:12.852692
License: Public Domain

MESKILL, Circuit Judge,
dissenting:
I agree that we should apply the federal common law’s choice of law rules to determine whether this contract is governed by Brazilian law or federal common law and that we may look to the Restatement (Second) of Conflict of Laws (1971) (the Restatement) for guidance. However, I disagree with the majority’s conclusion that *85under federal common law and the Restatement the United States has a greater interest in this litigation than does Brazil. I believe that Brazil’s strong interest in regulating commerce within its borders trumps any interest of the United States in enforcing this contract. Therefore, I respectfully dissent.
I. The Restatement (Second) of Conflict of Laws
The Restatement has four provisions that offer guidance as to how we should resolve this conflict between Brazilian law and federal common law. See Restatement §§ 6, 188, 197 and 207. My analysis begins with the Restatement provisions that specifically apply to conflicts in contract law because “a specific statute controls over a general one.” Bulova Watch Co. v. United States, 365 U.S. 753, 758, 81 S.Ct. 864, 6 L.Ed.2d 72 (1961); see also United States v. Torres-Echavarria, 129 F.3d 692, 699-700 n. 3 (2d Cir.1997) (“The operative principle of statutory construction is that a specific provision takes precedence over a more general provision.”).
A. Section 197 of the Restatement Sets Brazil as the Default Jurisdiction Because the Goods Were Dispatched From Brazil
The FedEx Air Waybill called for the transportation of Lilly’s goods from Brazil to Japan. The Waybill contained no choice of law provision. Under Restatement § 197 contracts for the transportation of goods are governed “by the local law of the state from which ... the goods are dis^ patched.” Section 197 sets Brazil as the default jurisdiction because the state of dispatch “will naturally loom large in the minds of the parties” and it “has a natural interest in the contract of transportation and in many instances has a greater interest in the contract than the state of destination, if for no other reason than that there can be no absolute certainty at the time of the departure that ... the goods will reach the latter state.” Restatement § 197 cmt. b.
However, while § 197 sets Brazil as the default jurisdiction, it also provides for the possibility that another state may have “a more significant relationship under the principles stated in § 6 to the contract and to the parties.” Furthermore, “[o]n occasion” the law of a state other than the state of dispatch might apply. Restatement § 197 cmt. c. This may occur if the contract is invalid under the law of the state of dispatch but valid under the law of a state with “a close relationship to the transaction and the parties.” Id. Thus, Brazil’s laws will govern this contract unless the United States has either a “more significant relationship” to the contract and to the parties than does Brazil, Restatement § 197 (emphasis added), or the contract is invalid under Brazilian law and the United States has a “close relationship” to the contract and to the parties, Restatement § 197 cmt. c (emphasis added). Leaving aside for the moment the issue of whether the FedEx Air Waybill is valid under Brazilian law, I turn to Restatement § 188 for guidance in determining whether the United States has a significant or close relationship to the contract or to the parties.
B. Under §188 of the Restatement Brazil Has the Most Substantial Contacts With the Contract and With the Parties
Section 188 of the Restatement is designed to help courts resolve a conflict of laws that involves “an issue in contract.” Restatement § 188(1). To determine which state has “the most significant relationship to the transaction and the par*86ties,” id'., the court evaluates the following five contacts:
(a) the place of contracting,
(b) the place of negotiation of the contract,
(c) the place of performance,
(d) the location of the subject matter of the contract, and
(e) the domicil, residence, nationality, place of incorporation and place of business of the parties.
Id. § 188(2)(a)-(e). Once these contacts are known, the court takes them “into account” by “applying the[m to] the principles of § 6.” Id. at § 188(2). The § 6 principles are those general considerations that “underlie all rules of choice of law,” id. at § 188(1) cmt. b.:
(a) the needs of the interstate and international systems,
(b) the relevant policies of the forum,
(c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue,
(d) the protection of justified expectations,
(e) the basic policies underlying the particular field of law,
(f) certainty, predictability and uniformity of result, and
(g) ease in the determination and application of the law to be applied.
Id. at § 6(1). Thus, to determine whether the United States has a “significant” or “close” relationship to the contract and to the parties, the Court must first evaluate each state’s § 188(2) contacts with the FedEx Air Waybill.

1.The Place of Negotiation Was Brazil

The FedEx Air Waybill was negotiated between FedEx and Lilly’s Brazilian freight forwarder Nippon Express do Bra-sil, Ltda (Nippon Express) in Brazil. The contract between FedEx and Jumbo Jet Transportes Internacionais, Ltda (Jumbo Jet), and the contract between Lilly and Nippon Express, also were negotiated in Brazil.

2.The Place of Contracting Was Brazil

The FedEx Air Waybill was issued to Nippon Express in Brazil by the FedEx office in Sao Paolo. In addition, the following contracts were executed in Brazil: (1) Lilly’s contract with Nippon Express, (2) Nippon Express’ subcontract with FedEx, and (3) FedEx’s subcontract with Jumbo Jet.

3.Performance Under the Contract Occurred Only In Brazil

Lilly contracted with Nippon Express to transport the fourteen drums of Cephalex-in from Lilly’s factory in Cosmopolis, Sao Paolo, Brazil to Lilly’s customer in Iwate, Japan. Nippon Express picked up the pharmaceuticals from Lilly’s factory in Sao Paolo and transported them to the Nippon Express freight forwarding facility at Cumbica Airport in Guarulhos, Brazil. Nippon Express then subcontracted with FedEx to deliver the shipment to Narita International Airport in Chiba, Japan.
FedEx picked up and accepted the pharmaceutical cargo at the Nippon Express freight forwarding facility in Guarulhos, Brazil and subcontracted with Jumbo Jet to transport the cargo locally from Guarul-hos to an airport FedEx uses for international shipments located in Viracopos, Brazil. While the goods were on a Jumbo Jet truck on route to Viracopos the truck was hijacked and the pharmaceuticals were stolen. Had the pharmaceuticals made it to Viracopos, FedEx would have transported them to Chiba, Japan via Sao Paolo and Memphis, Tennessee. However, because the Jumbo Jet truck was hijacked the only *87performance that ever took place under the contract occurred in Brazil.
Admittedly, performance under the contract also would have taken place in the United States had the shipment not been hijacked.1 However, the goods were only to enter the United States briefly so that FedEx could route them through its hub in Memphis before sending them on to Japan. The United States was neither the final destination state nor the state of dispatch. The cargo’s planned brief stopover in Memphis is an insignificant contact when compared with the performance that actually took place in Brazil, especially considering that the performance that is the subject of this contract dispute — the ground transportation between Guarulhos to the airport located in Viracopos — occurred only in Brazil. Therefore, while the contract called for performance in both the United States and Brazil, because the shipment originated in Brazil, the little performance that occurred under the contract occurred in Brazil. The goods never left Brazil. Thus the § 188(2)(c) contact weighs heavily in favor of Brazil.
4. The Subject Matter of the Contract Was Located in Brazil
The pharmaceutical cargo was in Brazil at the time of contracting and FedEx never transported the cargo out of Brazil.
5. The Parties Involved Are Either Brazilian Companies Or Companies That Regularly Conduct Business in Brazil
Lilly, Nippon Express and Jumbo Jet are all Brazilian companies domiciled in Brazil. FedEx is not a Brazilian company. Nevertheless, FedEx regularly conducts business in Brazil and the Air Waybill here was issued by the FedEx office in Sao Paolo.
C. When the § 188(2) Factors Are Taken Into Account and Applied to the § 6 Principles Brazil Emerges as the State With the Most Significant Relationship to the Transaction and to the Parties
“The states which are most likely to be interested [in the contract] are those which have one or more of the [§ 188(2) ] contacts.” Restatement § 188 cmt. e. Brazil has the most substantial § 188(2) contacts with the FedEx Air Waybill and with the parties. While the majority admits that Brazil’s § 188(2) contacts are “important ones,” they never proceed to the next step and take those contacts into account and apply them to the principles of § 6. Instead, the majority concludes that two of the § 6 principles — (1) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue, and (2) the justified expectations of the parties — “emerge as determinative” in favor of applying federal common law.
The majority concludes that federal common law applies over Brazilian law without pointing to a single § 188(2) contact that the United States has with either the FedEx Air Waybill or with the parties. In addition, the majority never acknowledges that under § 197 Brazil is the default jurisdiction whose laws govern this contract unless the United States has a *88“significant ” or “close ” relationship to the contract. In my view, §§ 188 and 197 are specific provisions addressing conflicts in contract law that should take precedence over the more general § 6 principles. See Bulova, 365 U.S. at 758, 81 S.Ct. 864. Therefore, I would follow the Restatement and take each states’ § 188(2) contacts into account and apply them to the § 6 principles. When this is done, Brazil emerges as the only state with a “significant” or “close” relationship to the contract and to the parties.
I agree with the majority that the most important § 6 principles implicated by this conflict of laws are (1) the relevant policies of the forum, (2) the relevant policies of other interested states and the relevant interests of those states in the determination of the particular issue, and (3) the protection of justified expectations. See Restatement § 6(b),(c) & (d). I also agree with the majority’s conclusion that under our federal common law choice of law rules there is “some presumption in favor of applying that law tending toward the validation of [an] alleged contract.” Kossick v. United Fruit Co., 365 U.S. 731, 741, 81 S.Ct. 886, 6 L.Ed.2d 56 (1961).
The presumption in favor of applying the law that tends to validate a contract is important where the alternative is no contract at all. This was the conflict of laws choice presented in Kossick, but it is not the conflict of laws choice presented 'here. In this ease application of Brazilian law may invalidate one provision in the FedEx Ah’ Waybill and then only under limited circumstances. However, in Kossick the Court was faced with a much more drastic choice: (1) apply the New York Statute of Frauds, which would render the alleged oral contract wholly invalid, or (2) apply federal maritime law, which generally upholds oral contracts. 365 U.S. at 733-34, 81 S.Ct. 886. Even though the application of New York law would have completely invalidated the contract, the Kossick Court did not treat that factor as dispositive, but instead analyzed whether the contract was “sufficiently related to peculiarly maritime concerns” and whether the contract “though maritime” was “maritime and local.” Id. at 738, 81 S.Ct. 886 (internal quotation marks omitted).
The Kossick Court never treated the presumption in favor of applying the law that would validate the contract as disposi-tive, and under circumstances that presented a much more compelling case for adherence to the presumption than those presently before the Court. Instead, the presumption was just one of “several considerations” the Kossick Court discussed in its choice of law analysis. Id. at 741, 81 S.Ct. 886.2 I find no support in Kossick for the majority’s conclusion that we must ignore all other traditional choice of law factors and instead apply federal common law because it validates this contract, particularly when it is Brazil that has the dominant interest in this litigation and applying Brazilian law could only affect the amount of damages in a limited situation. Even if the presumption in favor of applying the law that tends to validate contracts applies here, with all of the § 188(2) contacts, Brazil has easily rebutted the presumption.
Furthermore, while the federal common law’s presumption in favor of applying the law that tends to validate contracts might mean that the United States has a general interest in validating contracts, the United *89States still does not have a “significant” or “close” relationship with this contract. Therefore, under § 197 Brazil remains as the default jurisdiction whose laws govern this contract of transportation regardless of whether the liability limitation is valid under Brazilian law. The Restatement does not elevate the forum state’s interests above any other state’s, nor should we.3
I also disagree with the majority’s conclusion that the protection of the justified expectations of the parties mandates application of federal common law. First, because choice of law is not expressed in the Waybill the justified expectations of the parties, like the other § 6 principles, must be analyzed in accordance with each state’s § 188 contacts. The United States does not have any significant § 188 contacts with this contract. However, Brazil served as the place of negotiation and execution of the contract, the majority of the companies are domiciled in Brazil, and the contract called for the transportation of goods located in Brazil out of Brazil. Under these circumstances, I believe that the parties would be wholly justified in expecting that their contract was governed by Brazilian law.
Second, there has been no allegation by either party that the contract would be rendered completely invalid under Brazilian law. We are only concerned with the validity of the limitation of liability provision and then only under certain conditions. I agree with the Restatement commentary that while “the expectations of at least one of the parties would presumably be disappointed if the [damages] provision is found to be invalid[,][o]n the other hand, a rule declaring such a provision invalid is likely to represent a strongly-felt policy which the forum would be hesitant to override if the state with the invalidating rule was the state with the dominant interest in the issue to be decided.” Restatement § 207 cmt. c.4 Regardless of what the par*90ties expectations were, Brazil is the state with the dominant interest in this litigation and by applying federal common law we are overriding Brazil’s “strongly-felt policy” regarding the validity of the damages provision.
Third, while I agree with the majority that in many cases “the protection of the justified expectations of the parties is of considerable importance in contracts,” Restatement § 188 cmt. b, I do not agree that to protect the justified expectations of the parties we should enforce blindly the contract as written where no choice of law is expressed and that choice might determine the damages allowed. If the majority’s interpretation of the Restatement is correct, then §§ 188, 197 and 207 serve no purpose, and we need never consider whether the United States or any other interested state has any contacts with a contract. I do not believe that the presumption in favor of applying the law that tends toward the validation of the contract has supplanted the traditional choice of law analysis embodied in the Restatement.
Of course, where two states have significant interests in the contract the common law presumption in favor of applying the law of the state that tends to validate the contract might prove dispositive. However, this is not such a case. Brazil’s interest in regulating commerce within its own borders heavily outweighs any interest the United States has in enforcing this contract. The Supreme Court has instructed courts to “construe[ ] ambiguous statutes to avoid unreasonable interference with the sovereign authority of other nations.” F. Hoffmann-La Roche Ltd. v. Empagran S.A., 542 U.S. 155, 164, 124 S.Ct. 2359, 159 L.Ed.2d 226 (2004); see also Murray v. The Schooner Charming Betsy, 6 U.S. (2 Cranch) 64, 118, 2 L.Ed. 208 (1804) (“[A]n act of congress .ought never to be construed to violate the law of nations if any other possible construction remains.”). Here we are dealing only with a judicially created common law presumption and not an act of Congress, yet the majority somehow concludes that this presumption is an interest that trumps Brazil’s sovereign authority.
II. Lilly’s Evidence of Brazilian Law
Finally, the majority faults Lilly for failing to provide sufficient evidence that Brazilian law does not allow common carriers to limit their damages when they are grossly negligent. However, the issue before the Court is whether Brazilian law applies- — -not what Brazilian law is. I do not see why we need to consider the particulars of Brazilian law at this stage of the proceedings.
But even assuming arguendo that the content of Brazilian law should play a role in resolving this conflict of laws, Lilly has supplied sufficient evidence that Brazil treats limitation of liability provisions differently than does the United States. The majority dismisses the Ma-chado declaration as offering “no real support” for Lilly’s assertion that Brazilian law does not allow FedEx to limit its liability for acts of gross negligence. However, the Machado declaration plainly states that “a common carrier is not entitled to limit its liability if found to be grossly negligent in the care of the cargo while said cargo was in its custody, control and possession or in the custody, control and possession of its duly appointed agent or subcontractor.” Under the Federal Rules of Civil Procedure, district courts are allowed to make determinations regarding foreign law by eonsid-*91ering “any relevant material or source, including testimony, whether or not submitted by a party or admissible under the Federal Rules of Evidence.” Fed. R.Civ.P. 44.1. We have “urge[d] district courts to invoke the flexible provisions of Rule 44.1 to determine issues relating to the law of foreign nations” because “such issues can be expected to come to the federal courts with increasing frequency as the global economy expands and cross-border transactions increase.” Curley v. AMR Corp., 153 F.3d 5, 13 (2d Cir.1998). Nevertheless, the majority finds the Ma-chado declaration insufficient despite the Federal Rules of Civil Procedure and our case law that would allow the district court to rely on it. This is an odd conclusion because FedEx never challenged Lilly’s characterization of Brazilian law.
In the district court proceedings FedEx decided not to submit proof of Brazilian law because “such is premature at this point,” and in its brief to this Court FedEx mistakenly informs us that “the parties did not offer factual proof of the substance of Brazilian law.” However, only FedEx failed to provide proof of Brazilian law. Lilly’s characterization of Brazilian law and the Machado declaration are unchallenged.5
I also disagree with the majority’s conclusion that Lilly failed to address whether the parties could contract around Brazilian law. The Machado declaration states that “a common carrier is not entitled to limit its liability if found to be grossly negligent.” The plain meaning of this sentence is that common carriers in Brazil cannot limit their liability for grossly negligent acts even if they try.
For the foregoing reasons, I respectfully dissent from the majority opinion. I would vacate the district court’s judgment and remand this case to allow the district court to determine whether the limitation of liability provision in the FedEx Air Waybill is valid and enforceable under Brazilian law.

. Restatement § 188(3) provides that when "the place of negotiating the contract and the place of performance are in the same state, the local law of this state will usually be applied.” In this case, the place of negotiating was Brazil but the place of perform-anee was both Brazil and the United States. Nevertheless, because what little performance occurred was in Brazil, § 188(3) serves to highlight Brazil’s significant interest in the contract.

. The other considerations were whether the contract was “essentially maritime [in] character,” whether the contract could have been made "anywhere in the world” and whether its validity “should be judged by one law wherever it was made,” and whether New York had a significant interest in the contract. Id.

. The United States’ interest in enforcing contracts will arise in any choice of law contract case litigated in its courts, even when the only contact it has with the contract is that it is the state where the lawsuit was brought.

. Section 207 of the Restatement addresses conflict of laws involving damages provisions in breach of contract claims. While the text of § 207 provides that "[t]he measure of recovery for a breach of contract is determined by the local law of the state selected by application of the rules of §§ 187-188,” the commentary minimizes the importance the justified expectations of the parties have in cases such as this, where the only conflict involves the measure of recovery:
[Qluestions involving the measure of recovery for breach of contract will be determined in accordance with the law selected by application of the rule of § 188. This rule in turn calls for the application of the choice-of-law principles stated in § 6, of which one ... is the protection of the justified expectations of the parties. This principle, however, has little role to play with respect to the measure of damages. In the absence of a provision in the contract dealing explicitly with the question of damages, it is improbable that the parties gave thought before entering the contract to what the measure of damages would be in the event of breach. Hence, the expectations of the parties are unlikely to be disappointed by application of the rule of one state rather than of the rule of another state. In such circumstances, the forum, in determining which is the state of the applicable law with respect to the measure of damages, will usually give primary weight to the choice-of-law principle, also mentioned in § 6, which seeks the effectuation of the relevant policies of the state with the dominant interest in the issue to be determined.
The situation is essentially the same where the issue involves the validity of a provision in the contract dealing with the measure of damages. Here the expectations of at least one of the parties would presumably be disappointed if the provision is found to be invalid. On the other hand, a rule declaring such a provision invalid is likely to represent a strongly-felt policy which the forum would be hesitant to override if the state with the *90invalidating rule was the state with the dominant interest in the issue to be decided.
Id. at § 207 cmt. c.

. FedEx even appears to concede that Brazilian law would render the limitation provision invalid: "Eli Lilly seeks to apply Brazilian law, which would not enforce the limitation if Eli Lilly can prove that FedEx acted with gross negligence or willful misconduct.”