Court Opinion

ID: 194805
Source: CourtListenerOpinion
Date Created: 2011-02-07 02:25:29+00
Date Added: 2024-06-11T17:26:37.502807
License: Public Domain

UNITED STATES COURT OF APPEALS
                   FOR THE FIRST CIRCUIT
                                        

No. 92-1903

               HILL CONSTRUCTION CORPORATION,
           D/B/A HILL HELICOPTERS RENTAL SERVICE,
                    Plaintiff, Appellee,

                             v.

                  AMERICAN AIRLINES, INC.,
                   Defendant, Appellant.
                                   
No. 92-1992

               HILL CONSTRUCTION CORPORATION,
           D/B/A HILL HELICOPTERS RENTAL SERVICE,
                   Plaintiff, Appellant,

                             v.

                  AMERICAN AIRLINES, INC.,
                    Defendant, Appellee.
                                        

       APPEALS FROM THE UNITED STATES DISTRICT COURT
              FOR THE DISTRICT OF PUERTO RICO

       [Hon. Jose Antonio Fuste, U.S. District Judge]
                                                    
                                        

                           Before
                    Breyer, Chief Judge,
                                       
           Torruella* and Selya, Circuit Judges.
                                               
                                        

Ricardo F. Casellas with whom  Jacqueline D. Novas and Fiddler,
                                                              
Gonzalez & Rodriguez were on brief for American Airlines, Inc.
                 
Jose  E. Alfaro  Delgado with  whom Calvesbert  & Brown  was on
                                                      
brief for Hill Construction Corp.
                                        

                       June 29, 1993
                                        
                  
*Judge  Torruella  heard  oral   argument  in  this  matter,  and
participated in the  semble but,  after deciding  that he  should
recuse himself, he  did not  participate in the  drafting or  the
issuance of  the panel's  opinion.  The  remaining two  panelists
therefore issue this opinion pursuant to 28 U.S.C.   46(d).

          BREYER,  Chief Judge.  American Airlines appeals a
                              

judgment requiring  it to pay approximately  $22,000 to Hill

Construction Corporation  as a  result of  American's having

temporarily lost, and then  damaged, a helicopter blade that

Hill  had  asked  American  to  ship  from  Puerto  Rico  to

California.     American  does  not  contest   the  fact  of

liability.   Rather,  it argues  that the  court  lacked the

power to award damages  greater than the maximum permissible

under a contract provision limiting American's liability for

cargo "lost, damaged or delayed" to $9.07 per pound (a total

of $1,814  in this case).  The district court found that the

"liability limitation" did not apply.  In our view, however,

the  limitation  is  valid   and  applicable.    And,  well-

established  legal  principles  require  us  to  reverse the

district court's determination.

                             I

                         Background
                                   

          The  record,  read favorably  to  Hill,  shows the

following: 

          1)   On  August  10,  1990,  a  Hill  Construction
               employee  brought  a   helicopter  blade   to
               American  Airlines'  cargo  terminal  in  San
               Juan,  Puerto  Rico,  and signed  (on  Hill's
               behalf)  an  American  "air  waybill"   --  a

               contract that obliged American, in return for
               payment, to ship the blade to California.

          2)   The  air  waybill  said  on  its   face  that
               provisions  on  its   "reverse  side"   would
               "limit"   American's  "liability   for  loss,
               damage, or delay in  certain instances."  The
               reverse side  said, among other  things, that
               American's   liability   for   cargo   "lost,
               damaged, or delayed" was limited to $9.07 per
               pound  (plus  transportation charges)  unless
               the shipper declared a  higher value and paid
               an additional charge. Hill's employee did not
               fill in the "declared value" box on the front
               of  the bill,  nor did  the employee,  in any
               other way, declare  a higher  value, nor  did
               the employee pay any additional charge.

          3)   American  accepted the blade for carriage and
               promptly lost the blade.

          4)   About seven months later, in March 1991, in a
               San Juan air  cargo warehouse  near the  sea,
               American found  a  crate containing  what  it
               thought was the missing blade.   It contacted
               Hill's "administrator," Ms. Dorothy Hill, who
               came to the warehouse.  An American  employee
               (contrary to Ms. Hill's advice) began to open
               the crate with a  forklift.  Inside, Ms. Hill
               found  the  missing blade,  seriously damaged
               both  by the  forklift and  by the  salty sea
               air. 

          After these events, Hill Construction brought this

lawsuit against American.  After a trial, the district court

found  American "negligent  in the  handling  of plaintiff's

cargo."    It decided that  the liability limitation  either

was invalid or, alternatively, did not apply to so serious a

violation  of  the   transportation  contract.     And,   it

consequently  awarded  full compensatory  damages  of almost

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$22,000,  the value of the blade.  American now appeals this

damage award.

                             II

                          The Law
                                 

          Where air carriage contracts set forth limitations

on  carrier cargo liability  in a "reasonably communicative"

form and offer the shipper a choice of  paying a higher rate

for greater protection,  federal courts have  normally found

those  limitations lawful.   See  (1)  post-deregulation air
                                

carrier cases,  e.g., Deiro v. American  Airlines, Inc., 816
                                                       

F.2d  1360, 1364-65 (9th  Cir. 1987); Husman  Constr. Co. v.
                                                         

Purolator Courier Corp., 832 F.2d  459, 461 (8th Cir. 1987);
                       

Arkwright-Boston Mfrs.  Mutual  Ins. Co.  v.  Great  Western
                                                            

Airlines, Inc., 767 F.2d 425,  426-27 (8th Cir. 1985); First
                                                            

Pennsylvania Bank v. Eastern  Airlines, Inc., 731 F.2d 1113,
                                            

1115, 1122 (3d  Cir. 1984); Reece  v. Delta Airlines,  Inc.,
                                                           

731 F.  Supp.  1131, 1134  (D.Me.  1990); Neal  v.  Republic
                                                            

Airlines, Inc., 605 F.  Supp. 1145, 1148-49 (N.D.Ill. 1985);
              

see also Saul Sorkin, 2 Goods in Transit [hereinafter, Goods
                                                            

in Transit]   13.07[1] at 13-79-82 & n.11,   13.07 [3][b] at
          

13-90 & n.48  (1976 &  Supp. 1990) and  cases cited  therein
                                                            

(noting  continued  enforcement  of   liability  limitations

despite deregulation of air carriers); (2) regulated carrier

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                             4

cases,  e.g.,  American  Cyanamid  Co.  v.  New  Penn  Motor
                                                            

Express, Inc., 979 F.2d 310, 313, 316 (3d Cir. 1992); Hughes
                                                            

Aircraft Co.  v. North  American Van  Lines, Inc.,  970 F.2d
                                                 

609, 611-13 (9th Cir.  1992); Co-Operative Shippers, Inc. v.
                                                         

Atchison,  Topeka & Santa Fe  Ry. Co., 840  F.2d 447, 451-52
                                     

(7th Cir. 1988); Polyplastics, Inc. v. Transconex, Inc., 827
                                                       

F.2d  859 (1st Cir. 1987); Anton v. Greyhound Van Lines, 591
                                                       

F.2d  103 (1st  Cir. 1978);  National Motor  Freight Traffic
                                                            

Ass'n,  Inc. v.  Interstate Commerce  Comm'n, 590  F.2d 1180
                                            

(D.C. Cir. 1978), cert.  denied, 442 U.S. 909  (1979); North
                                                            

American Phillips Corp. v. Emery Air Freight Corp., 579 F.2d
                                                  

229, 232  (2d Cir.  1978); Dassin  v. Eastern  Airlines, 501
                                                       

F.2d 74 (9th Cir. 1974), cert. denied, 419 U.S. 1121 (1975);
                                     

Thomas  v. Trans  World  Airlines, 457  F.2d  1053 (3d  Cir.
                                 

1972);  Quasar Co. v. Atchison,  Topeka & Santa  Fe Ry. Co.,
                                                           

632  F.  Supp. 1106,  1111-13  (N.D.  Ill.  1986);  cf.  (3)
                                                       

statutes allowing limitations on  liability, e.g., 46 U.S.C.
                                                 

   1304(5) (carriage of goods at sea); 49 U.S.C.    10505(e)

(rail carriers), 10730(b)(1) (motor  transport), 11707(c)(4)

(common carriers).  

          In  a  commercial  context, liability  limitations

have  certain advantages.   They permit  a carrier  to avoid

unforeseeably high liability for especially  valuable cargo;

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                             5

they permit shippers of ordinary items to pay somewhat lower

freight bills; and they permit shippers of valuable items to

choose between  paying an  insurance premium to  the carrier

and obtaining,  perhaps less  expensive, insurance  on their

own.   See Husman  Constr. Co., 832  F.2d at  462; cf.  Alan
                                                      

Schwartz  & Robert E.  Scott, Commercial Transactions 122-23
                                                     

(1991).  On  the other hand,  such clauses risk  unfairness,

where,  for example, a shipper  is, in fact,  unaware of the

limitation  and  his  choices.   Yet,  the  requirements  of

reasonably communicative  notice and  an opportunity  to buy

increased  coverage for a premium payment lessen the risk of

unfairness.  And, as we  have said, balancing advantages and

disadvantages,  both Congress and  the courts  have approved

the use of such clauses. 

          The contract before  us contains typical, standard

form clauses  which reasonably communicate the limitation on

liability.  The reverse side of the "air waybill" contains a

series  of  clauses   setting  forth  transport  conditions,

written in  ordinary sized  print and separated  by spacing.

On the  copy submitted  at trial, these  clauses are  fairly

easy  to read (except for the blurring of a few non-critical

words that may reflect poor duplication).  The clauses  make

clear that the  carrier limits its liability  for cargo that

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                             6

is "lost, damaged or  delayed" to $9.07 per pound,  but that

the shipper may  avoid the limitation by declaring  a higher

value and paying  a greater charge.   The front side  of the

bill clearly refers the reader to the  back of the bill, for

it  says, in  ordinary  sized type,  set  forth clearly  and

separately from other words on the page:

          This nonnegotiable airbill is a contract
          governed by Law and by the provisions on
          the  reverse  side.    Such  provisions,
          among
          other  things,  exclude  or   limit  the
          Carrier's liability for loss,  damage or
          delay in certain circumstances.

The front side  of the  bill also contains  a box  captioned

"declared  value," which, in this case, was left blank.  Cf.
                                                            

Federal Express v. Paris  Business Forms, Inc., 46 Pa.  D. &
                                              

C.  3d 262  (1988) (standard  provisions clearly  printed on

front and reverse of airbill afforded sufficient opportunity

to declare higher value).    

          Ms. Hill  testified that American's agent  did not

tell  either  her  or   her  employee  about  the  liability

limitation clauses, and that, in fact,  neither she, nor her

employee, knew about such  clauses.  But, we do  not believe

that, in  these factual circumstances,  American was obliged

to call the liability limitation to its customers' attention

orally.  The  context is commercial.   Hill Construction had

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been in business  in Puerto  Rico for eighteen  years.   Its

employees  had  previously  shipped  helicopter  parts  from

Puerto  Rico to the mainland.  In this context, a reasonably

prominent  writing, not  in  particularly  small print,  set

forth  with reasonable  clarity on  the front  of a  printed

airbill, would seem sufficient to communicate  the liability

limitation,  or  at  least  to impose  upon  the  commercial

customer a further obligation to read (rather than to impose

upon the carrier a  further obligation to point to)  what is

written. See Husman  Constr. Co.,  832 F.2d  at 461  (citing
                                

First Pennsylvania Bank, 731 F.2d at 1115); cf. Hopper Furs,
                                                            

Inc.  v. Emery Air Freight  Corp., 749 F.2d  1261, 1264 (8th
                                 

Cir. 1984).  

          The carrier  also has fulfilled  its obligation to

offer  a further  "insurance"  option.   The contract  makes

clear  that the carrier can  declare a higher  value and buy

full  coverage for an additional  fee.  Hill  has offered no

evidence  to  suggest  that  the  amount  of  this  fee  for

additional  cargo  protection was  unreasonable  for  an air

carrier in American's market.

          This  valid liability  limitation  applies in  the

present  situation. The  provisions refer  to cargo  that is

"lost, damaged or delayed,"  and the circumstances here fall

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                             8

within this language.  The clause is enforceable despite the

fact  that American  may  never have  put  the blade  on  an

airplane.   A remedial contract clause, such as this one, is

designed  to  take  effect  precisely where,  as  here,  the

carrier has  broken the basic  carriage contract.   As Judge

Kaufman pointed out more than forty years ago, 

          Only in case of a misdelivery, negligent
          injury, loss or similar  misfortune does
          a valuation clause come into use.  Hence
          the  Federal  courts  have rightly  held
          that the limitation of  liability clause
          is  designed  for  and  does  survive  a
          breach of the contract of carriage.

Lichten  v.  Eastern Airlines,  Inc.,  87  F.Supp. 691,  697
                                    

(S.D.N.Y. 1949). Compare Restatement (Second) of Contracts  
                                                          

237 (breach discharges other party's duties  under contract)
                                           

with, e.g., American  Cyanamid Co., 979 F.2d  at 316 (citing
                                  

Quasar Co., 632 F.Supp. at 1108 (breach does  not invalidate
          

liability-limiting  remedial  provision  designed to  govern

consequences of breach)).  

          Hill argues that a Ninth Circuit case, Coughlin v.
                                                         

Trans World Airlines, Inc.,  847 F.2d 1432 (9th  Cir. 1988),
                          

is  to the  contrary, but  Coughlin involved  rather special
                                   

circumstances.     A  special  contract   provision  gave  a

passenger  the  right to  carry  valuables  in the  airplane

cabin; the airline  refused to  allow a widow  to carry  her

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husband's ashes in  the cabin; the  airline lost the  ashes;

and   the  court  (in  a  brief  per  curiam  opinion)  held
                                            

inapplicable  a provision  limiting the  airline's liability

for  loss  of valuables.    Unlike this  case,  the Coughlin
                                                            

contract  involved a  separate, liability-limitation-related

contractual promise,  namely  a promise  that the  passenger

might  personally monitor  the  safety of  the valuables  by

carrying  them in the cabin.   One might  read the liability

limitation as  conditioned on  fulfillment of that  promise.

See 2  Goods in Transit    13.07[4] at 13-90 &  n.49.  Then,
                       

since  the carrier did not permit the passenger to carry the
                          

ashes, it failed to satisfy the condition, and the liability

limitation did not take effect.  See id. at 1433.  We do not
                                        

see how otherwise, consistent  with prior authority, to read

this  case.   See, e.g.,  Pinion v.  Dow Chemical,  928 F.2d
                                                 

1522, 1536 (11th  Cir.) (case should  be read as  consistent

with prior precedent if possible), cert. denied,  112 S. Ct.
                                               

438 (1991).  And, as  so read, the case provides no  support

for Hill's claim here,  where there is no  relevant special,

liability-limitation-related  condition   that  the  carrier

failed  to  fulfill.   As  we  have  just  pointed out,  the

contract  here does  not condition the  liability limitation

upon the carrier's satisfying  its basic, general promise to

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transport  the  goods, for  the  parties  normally intend  a

liability limitation  to apply, not to  disappear, when this

type of general promise is breached.  See pp. 8-9, supra.
                                                        

          Hill makes  one further argument.  It  points to a

legal  doctrine,  called  the  "deviation  doctrine,"  which

originated in maritime law.   Applying that doctrine, courts

would  hold  liability limitations  inapplicable  when ships

departed significantly from prearranged routes that they had

promised to take.  See 2  Goods in Transit   13.13[1] at 13-
                                          

140-42  and cases cited therein.   Hill has  found two state
                               

cases, construing  federal law, which applied  this doctrine

outside the maritime context, where  the carrier acted so as

"fundamentally"  to  change  the  foreseeable  risks to  the

cargo.  See,  e.g.,  Information  Control  Corp.  v.  United
                                                            

Airlines  Corp., 73 Cal. App. 3d 630 (1977); Philco Corp. v.
                                                         

Flying  Tiger  Line, Inc.,  171  N.W.2d 16  (Mich.  Ct. App.
                         

1969).  But see Grant Gilmore  & Charles L.  Black, Jr., The
                                                            

Law of Admiralty    3-42  at 182 (2d  ed. 1975)  ("deviation
                

doctrine"   limited  to   geographic  departures).     Given
                                    

American's seriously  negligent  conduct, says  Hill,  those

state cases require us to invoke the "deviation doctrine" to

set aside the liability limitation here. 

                            -11-
                             11

          We do  not  believe,  however,  that  these  cases

require the result  for which Hill  argues.  In each  of the

state cases, the carrier made a special, separate promise to

the shipper about special conditions of carriage designed to

lessen the risk  of harm to the  shipper's particular cargo.

In the  first  case, United  Airlines  promised  Information

Control  Corporation (and  later  specially confirmed  in  a

telephone  conversation)  that  it  would  place Information

Control's  computers on  a specific  flight and  fly without

stopovers.  See Information Control, 73 Cal. App. 3d at 632-
                                   

33.   In the second case, Flying Tiger specifically promised

Philco that  it would store its  computer materials upright.

See Philco Corp., 171 N.W.2d at 17-18.  We suspect  that, as
                

in  Coughlin, the  state courts  saw failure  to live  up to
            

these  separate,  risk-related   promises  (special  to  the

particular shipment at issue)  as a "fundamental"  departure

from conditions  precedent  to the  "boilerplate"  liability

limitation's  taking effect.   See  Restatement (Second)  of
                                                            

Contracts   203(c)  & cmt. e  (specific provisions or  later
         

additions supersede more general contract language); Baloise
                                                            

Ins. Co. v. United Airlines, 723 F. Supp. 195, 199 (S.D.N.Y.
                           

1989)  (distinguishing Information Control where carrier was
                                          

under no obligation to follow specific route).

                            -12-
                             12

          In the case  before us  there was no  breach of  a

special transport  promise.   Nor was there  any "deviation"

from the  kind of  thing one  might expect  to  find when  a

carrier has  "lost, damaged, or delayed" cargo.   The record

does  not  provide  adequate  basis for  a  court's  finding

transportation-related circumstances that  fell outside  the

range  of those in which  the parties intended the liability

limitation to apply. See,  e.g., American Cyanamid, 979 F.2d
                                                  

at 315 (citing Deiro, 816 F.2d at 1366 (liability limitation
                    

valid   "regardless  of   the   degree   of  the   carrier's

negligence")); Coughlin, 847 F.2d at 1433; C.A. La Seguridad
                                                            

v. Delta Steamship Lines, 721 F.2d 322, 325 (11th Cir. 1983)
                        

(limitation  valid where cargo  never delivered); Hellyer v.
                                                         

Nippon  Yesen Kaisya,  130  F. Supp.  209, 210-11  (S.D.N.Y.
                    

1955) (same); Rockwell Int'l  Corp. v. M/V Incotrans Spirit,
                                                           

707 F.  Supp. 272,  273 (S.D.  Tex. 1989) (limitation  valid

where damage occurred in warehouse);  Neal, 605 F. Supp.  at
                                          

1149 &  n.3 (suggesting  limitation valid  even  in case  of

willful misconduct); Schiff v.  Emery Air Freight Corp., 332
                                                       

F. Supp.  1057, 1059 (D. Mass.  1971) (distinguishing Philco
                                                            

to uphold limitation where  no intentional wrong shown); cf.
                                                            

Rocky Ford  Moving Vans,  Inc.  v. United  States, 501  F.2d
                                                 

                            -13-
                             13

1369,  1372 (8th  Cir.  1974) (refusing  to apply  deviation

doctrine outside maritime law).

          These  federal  rulings   apply  even  though  the

negligence here was  serious, for (as  these cases show)  in

the  absence of  some  special indication,  courts will  not

impute  to  commercial  parties  (agreeing  to  a  liability

limitation) an intent  to litigate the degree to which loss-

causing negligence  was ordinary,  gross, or egregious.   We

add that we have found a  case that suggests, in dicta, that

the willful  nature of  misconduct might make  a difference.

Glickfield v. Howard Van Lines, Inc., 213 F.2d 723, 727 (9th
                                    

Cir. 1954); cf. Schiff, 332 F.  Supp. at 1059.  But, we need
                      

not decide  whether or not we agree  with that dicta for, in

this case, there is no showing of willfulness.

          For   these   reasons,   the    district   court's

determination that the liability limitation was inapplicable

in  this case is reversed.  The  judgment is vacated and the

case  is remanded  for further  proceedings consistent  with

this  opinion.    (Our  disposition  of the  case  makes  it

unnecessary to consider Hill's cross-appeal.)

          So ordered. 
                    

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