Bayer Corporation v. British Airways, Plc

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
BAYER CORPORATION,
Plaintiff-Appellant,
v. No. 99-1408
BRITISH AIRWAYS, PLC,
Defendant-Appellee.
Appeal from the United States District Court
for the Eastern District of Virginia, at Alexandria.
T. S. Ellis, III, District Judge.
(CA-98-541-A)
Argued: March 1, 2000
Decided: April 17, 2000
Before WILKINSON, Chief Judge, and WIDENER
and TRAXLER, Circuit Judges.
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Affirmed by published opinion. Chief Judge Wilkinson wrote the
opinion, in which Judge Widener and Judge Traxler joined.
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COUNSEL
ARGUED: Thomas Mark Eagan, MALOOF & BROWNE, L.L.P.,
New York, New York, for Appellant. Diane Westwood Wilson,
CONDON & FORSYTH, L.L.P., New York, New York, for Appel-
lee. ON BRIEF: James G. Hnat, II, CONDON & FORSYTH, L.L.P.,
New York, New York; Thomas J. Whalen, David F. Rifkind, CON-
DON & FORSYTH, L.L.P., Washington, D.C., for Appellee.
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OPINION
WILKINSON, Chief Judge:
Bayer Corporation brought this suit against British Airways under
the Warsaw Convention, alleging that British Airways was responsi-
ble for the spoilage of Bayer's goods. The district court granted par-
tial summary judgment to Bayer, but limited recovery to $6,110. The
court limited Bayer's recovery because it found that British Airways
had not engaged in "wilful misconduct" under article 25 of the Con-
vention. We now affirm the judgment.
I.
Bayer Corporation contracted with British Airways to transport
seventy cartons of medical products (PSA reagents used in diagnosing
cancer) from London Heathrow Airport in England to Dulles Interna-
tional Airport in Virginia. Before the flight, the reagents were packed
in wet ice. The air waybill noted, "PACKED IN WET ICE, STORE
BETWEEN 2-8 DEGREES C, DO NOT FREEZE." While the sev-
enty cartons of reagents bore labels stating "REFRIGERATE, DO
NOT FREEZE, URGENT, FRAGILE MEDICAL SUPPLIES," the
labels did not note how long the reagents would be safe without
refrigeration. Unbeknownst to British Airways, the reagents had an
unrefrigerated shelf life of only five days.
The shipment left Heathrow on May 28, 1996, and arrived at Dul-
les that same day after business hours. British Airways placed the
cargo in its unrefrigerated warehouse -- just as British Airways had
done with past Bayer shipments. With these past shipments, Bayer's
customs broker, Airschott, had timely picked up the temperature-
sensitive cargo. Because of these past dealings, both Bayer and Airs-
chott were aware that British Airways did not provide refrigerated
storage at Dulles. Airschott, in fact, reminded Bayer in writing three
weeks before the instant shipment that "British Airways has no
cooler."
British Airways notified Airschott of this most recent arrival on the
morning of May 29. Airschott applied for U.S. Customs clearance,
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and the shipment was approved for importation the next day. Contrary
to the course of conduct established among the parties, Airschott did
not immediately pick up the cargo. As a result, a British Airways
employee asked an Airschott employee why the shipment had not
been picked up. Finally, on June 6 -- nine days after the reagents
were transported to the United States -- Airschott removed the
reagents from the unrefrigerated British Airways warehouse. As a
result of the reagents' being unrefrigerated for nine days, the ship-
ment was determined to be a total loss.
On November 20, 1997, Bayer brought suit against British Airways
in the United States District Court for the Southern District of New
York. Bayer alleged that British Airways had breached its duties
under the Warsaw Convention -- the commonly used name for the
Convention for the Unification of Certain Rules Relating to Interna-
tional Transportation by Air. Oct. 12, 1929, 49 Stat. 3000, T.S. No.
876 (1934), reprinted in note following 49 U.S.C. § 40105 (1994).
The Warsaw Convention provides the rules of liability for "all inter-
national transportation of persons, baggage, or goods performed by
aircraft for hire." Id. art. I.
By consent order, Bayer's suit was transferred to the Eastern Dis-
trict of Virginia. Bayer then commenced a separate action against Air-
schott, and the two suits were consolidated. The case against
Airschott was dismissed when Bayer accepted Airschott's settlement
offer. Both Bayer and British Airways filed motions for summary
judgment.
On February 19, 1999, the district court granted partial summary
judgment to Bayer and denied British Airways' motion. The court
found British Airways liable under the Warsaw Convention. The
court noted that Bayer's reagents were damaged while under British
Airways' control and that British Airways had not taken all reason-
able steps to protect the cargo. The court also found that Airschott
was not the agent of Bayer, and its actions therefore could not be
imputed to Bayer, and that Bayer itself was not negligent.
The district court concluded, however, that article 22 of the War-
saw Convention limited British Airways' liability to $20 per kilogram
for the 355.5 kilogram shipment. Bayer argued for the application of
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article 25 of the Convention, which created an exception to article
22's liability limitation when a defendant has engaged in "wilful mis-
conduct." But the district court concluded that Bayer could not show
"wilful misconduct" on the part of British Airways. As a result, the
court granted Bayer a recovery of only $6,110 -- $20 per kilogram
minus the $1,000 Airschott had already paid Bayer. Bayer now
appeals the district court's holding that British Airways did not
engage in "wilful misconduct."
II.
At the time Bayer brought this suit, article 25 of the Warsaw Con-
vention provided: "The carrier shall not be entitled to avail himself of
the provisions of this convention which exclude or limit his liability,
if the damage is caused by his wilful misconduct or by such default
on his part as, in accordance with the law of the court to which the
case is submitted, is considered to be equivalent to wilful miscon-
duct." (emphasis added).
On September 28, 1998, the United States Senate ratified Montreal
Protocol No. 4 to the Warsaw Convention. See Montreal Protocol No.
4 to Amend the Convention for the Unification of Certain Rules
Relating to International Carriage by Air, signed at Warsaw on Octo-
ber 12, 1929, as amended by the Protocol Done at the Hague on Sep-
tember 8, 1955, reprinted in S. Exec. R. No. 105-120, at 21-32
(1998). This protocol clarifies what article 25 meant by "wilful mis-
conduct."* The Protocol states, "the limits of liability specified in
Article 22 shall not apply if it is proved that the damage resulted from
an act or omission of the carrier, his servants or agents, done with
intent to cause damage or recklessly and with knowledge that damage
would probably result." Id. at 29 (emphasis added).
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*As the Protocol "clarifies" the article 25"wilful misconduct" standard
rather than substantively changing it, the amendment can be considered
"an accurate restatement of prior law." Piamba Cortes v. American Air-
lines, Inc., 177 F.3d 1272, 1283 (11th Cir. 1999); see also El Al Israel
Airlines, Ltd. v. Tsui Yuan Tseng, 119 S. Ct. 662, 674 (1999). The Proto-
col also makes the article 25 exception inapplicable to goods, although
it still applies to passengers and baggage. British Airways does not argue
that this substantive change applies to Bayer's suit.
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On a mens rea spectrum from negligence to intent, article 25's
standard is very close to the intent end. See Piamba Cortes v. Ameri-
can Airlines, Inc., 177 F.3d 1272, 1290-92 & n.13 (11th Cir. 1999).
Negligence will not suffice, nor even recklessness judged objectively.
Rather, a plaintiff must show that a defendant either intended to cause
the damage or acted recklessly with subjective knowledge that the
damage would probably result. "[W]hile an objective test asks
whether an actor `should have known' of an obvious risk, the subjec-
tive test requires, at a minimum, a showing that the actor `must have
known' of the risk." Id. at 1291.
Pre-Protocol case law interpreting "wilful misconduct" also
stressed the "heavy burden" facing plaintiffs. Branyan v. KLM, 13
F.R.D. 425, 427 (S.D.N.Y. 1953). For example, the Ninth Circuit has
defined "wilful misconduct" as "the intentional performance of an act
with knowledge that the . . . act will probably result in injury or dam-
age or the intentional performance of an act in such a manner as to
imply reckless disregard of the probable consequences." Johnson v.
American Airlines, Inc., 834 F.2d 721, 724 (9th Cir. 1987) (internal
quotation marks omitted). Other courts have interpreted "wilful mis-
conduct" using similar language. See, e.g. , Saba v. Compagnie
Nationale Air France, 78 F.3d 664, 666 (D.C. Cir. 1996); Butler v.
Aeromexico, 774 F.2d 429, 430 (11th Cir. 1985); Berner v. British
Commonwealth Pac. Airlines, 346 F.2d 532, 536-37 (2d Cir. 1965).
The cases have repeatedly held that negligence, even gross negli-
gence, would not satisfy this standard. See, e.g., Saba, 78 F.3d at 667-
70; Perera Co. v. Varig Brazilian Airlines, Inc. , 775 F.2d 21, 23-24
(2d Cir. 1985). And many courts -- just as under the Montreal Proto-
col -- have held that a plaintiff needs to prove that a defendant was
subjectively aware that its actions probably would result in damage.
See, e.g., Saba, 78 F.3d at 667-70 (It"is essential to recovery under
the Warsaw Convention [that a defendant] acted with a conscious
awareness that its acts or omissions were wrongful."); Berner, 346
F.2d at 536-37; Tokio Marine & Fire Ins. Co. v. United Air Lines, 933
F. Supp. 1527, 1534 (C.D. Cal. 1996).
The rationale for such a high threshold was explained by the Dis-
trict of Columbia Circuit -- "It is not all that easy to avoid the Con-
vention's limitations by establishing willful misconduct . . . . But the
signatories obviously thought the economics of air travel . . . dictated
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those limitations. It simply will not do for courts to chip away at that
liability limit, out of a natural desire to remedy the negligence that
can be all too apparent in any individual case." Saba, 78 F.3d at 671.
Bayer and British Airways, however, were not locked into article
22's liability limitation. The limitation serves only as a default rule.
Article 22 limits British Airways' liability to $20 per kilogram unless
Bayer had made, "at the time when the package was handed over to
the carrier, a special declaration of the value at delivery and has paid
a supplementary sum if the case so requires." Thus Bayer and British
Airways could have bargained out of the liability limitation. It is
undisputed, however, that Bayer neither declared special value nor
paid any supplementary sum with regard to this shipment. As a result,
unless Bayer can satisfy its burden under article 25, its recovery is
limited to $6,110.
III.
Bayer argues that British Airways cannot avail itself of article 22's
liability limitation because British Airways engaged in "wilful mis-
conduct."
We disagree. In light of the following three undisputed facts, Bayer
cannot satisfy its "heavy burden" of showing"wilful misconduct" as
defined under either the Montreal Protocol or pre-Protocol case law.
First, both Bayer and Airschott were on notice that British Airways
could not provide and was not expected to provide refrigeration at its
Dulles warehouse. In fact, British Airways had not had refrigeration
capability at Dulles for more than twenty years. And Bayer and Airs-
chott were repeatedly informed of this fact -- the last such notice to
Bayer came three weeks before the shipment at issue here.
Second, the reagents were packed in wet ice, and British Airways
was never informed of their unrefrigerated shelf life. The packaging
also failed to identify the shelf life of the reagents.
Third, the morning after the shipment arrived at Dulles, British Air-
ways notified Airschott. In the past when British Airways had notified
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Airschott of the arrival of a Bayer shipment, Airschott had promptly
picked it up. Thus, according to the previous dealings among these
parties, once British Airways informed Airschott of the shipment's
arrival, the ball was in Airschott's and Bayer's court. Here, British
Airways even went beyond its obligations under the established
course of conduct by subsequently asking Airschott why it had not yet
picked up the shipment.
Bayer makes much of the fact that British Airways personnel
walked past the packaged reagents 10-50 times a day for nine days
and observed the temperature-sensitive nature of the shipment. But
this is not enough in itself to establish "wilful misconduct." As the
district court noted, British Airways could have taken further steps to
ensure the cargo's protection. For example, British Airways could
have contacted Bayer when the reagents were not picked up after a
few days or made further inquiries with Airschott. But saying that
British Airways could have taken further steps is a far cry from find-
ing "wilful misconduct." In light of the above undisputed facts, we
simply cannot conclude that British Airways has engaged in "wilful
misconduct."
Even when confronted with more egregious facts, the District of
Columbia Circuit found no "wilful misconduct." In Saba, Air France
disregarded its own cargo-handling regulations when packing plain-
tiff's carpets for shipment. 78 F.3d 664, 670 (D.C. Cir. 1996). When
the carpets arrived in the United States, Air France's cargo agent
decided to leave them outside its warehouse for five days, despite
forecasted rain. Even when it did rain, the agent did not bring the car-
pets inside. While the conduct by Air France and its agent may have
constituted gross negligence, the court found no"wilful misconduct."
Id. at 670. It is even clearer that there was no"wilful misconduct" in
this case.
IV.
For the foregoing reasons, the judgment of the district court is
AFFIRMED.
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