Victoria Sales Corp. v. Emery Air Freight, Inc.

MESKILL, Circuit Judge: Plaintiffs-appellants Victoria Sales Corporation (Victoria) and Fritz Air Freight, Inc. (Fritz) appeal from a judgment of the United States District Court for the Southern District of New York, Wood, J, limiting their recovery of money damages for cargo lost outside of the boundaries of an airport under the liability limitations of the Warsaw Convention, 49 Stat. 3000, T.S. No. 876, reprinted at 49 U.S.C. App. § 1502 note. Defendant-appellee Emery Air Freight, Inc. (Emery) cross-appeals the district court’s award of indemnification including attorney’s fees and costs to defendant-appellee Lassen GmbH (Lassen). BACKGROUND In February 1984, Lassen agreed to ship a cargo of a pharmaceutical product known as coumadin from Frankfurt, West Germany to New York. Lassen prepared a waybill designating Frankfurt as the place of departure, New York as the destination, and Victoria as the consignee. It then arranged for Halbart Air Consolidator System (Halbart) to transport the cargo to Amsterdam. Halbart consolidated the cargo of coumadin with other cargo and transported the consolidated cargo to Schiphol Airport in Amsterdam by truck. At Schiphol Airport, the cargo was turned over to Speed, B.V. Handling Services (Speed). Speed in turn contracted with Emery to ship the consolidated cargo to New York. An Emery waybill was prepared, designating Speed as the shipper and Fritz as the consignee. Emery booked the cargo on a February 25 flight from Amsterdam to New York. After the flight arrived at John F. Kennedy International Airport in New York on February 26, the consolidated cargo was unloaded and taken to Emery’s warehouse facility located less than one-quarter mile outside of the airport. The various consignees of the consolidated cargo were notified of its arrival. On March 1, Victoria attempted to pick up the coumadin shipment, but Emery could not locate it. The parties agree that the cargo was lost at Emery’s warehouse. Victoria, as consignee of the coumadin shipment, and Fritz, as consignee of the consolidated cargo, initiated this action in the district court. Fritz subsequently transferred its interest in any recovery to Victoria. On the parties’ motions for summary judgment, the district court ruled that the loss was governed by the Warsaw Convention. Although the full market value of the cargo was $281,571, the court held that the Convention limited Emery’s liability to $20 per kilogram or $16,220. In addition, the court held that Lassen was entitled to indemnification from Emery for any amount of Lassen’s liability to plaintiffs for the lost cargo and awarded Lassen $87,929.58 in attorney’s fees and costs. DISCUSSION A. The Coverage of the Warsaw Convention Section 1 of Article 18 of the Warsaw Convention provides that liability un [707] der the Convention extends to any damage to baggage or goods sustained during “transportation by air.” This phrase is defined in section 2 of Article 18 as “the period during which the baggage or goods are in charge of the carrier, whether in an airport or on board an aircraft.” However, section 3 of the same article provides, in pertinent part: The period of the transportation by air shall not extend to any transportation by land ... performed outside an airport. If, however, such transportation takes place in the performance of a contract for transportation by air, for the purpose of loading, delivery or transshipment, any damage is presumed, subject to proof to the contrary, to have been the result of an event which took place during the transportation by air. All the parties agree that the loss of the coumadin shipment occurred at Emery’s warehouse, located near but nonetheless outside the boundaries of Kennedy Airport. It would appear, therefore, that the plain language of Article 18 would exclude the loss from the scope of the Warsaw Convention. Emery and Lassen attempt to avoid the implications of the plain language, however, by offering what Lassen describes as a “more practical, sensible” interpretation of Article 18, extending the coverage of the Warsaw Convention to include the storage of cargo at a place outside of the airport until the goods are picked up by the consignee pursuant to the carriage contract. See, e.g., Royal Ins. v. Amerford Air Cargo, 654 F.Supp. 679, 681-83 (S.D.N.Y.1987); Magnus Electronics, Inc. v. Royal Bank of Canada, 611 F.Supp. 436, 439-40 (N.D.Ill.1985). They further suggest that the language of Article 18 must be viewed in the light of modem commercial realities so that Emery’s warehouse, despite its location outside of the airport’s official boundaries, may be deemed to be functionally part of the airport. Although cognizant of the commercial realities that may force the location of a warehouse outside of the actual confines of an airport, we must reject the proposed interpretation of Article 18 because it has no support in the language of the Convention. Our interpretation of Article 18 must begin “with the literal language of the provision. We would end there if that language [is] reasonably susceptible of only one interpretation.” Buonocore v. Trans World Airlines, Inc., 900 F.2d 8, 9-10 (2d Cir.1990). Furthermore, when the text of a treaty is clear, a court shall not, through interpretation, alter or amend the treaty. Chan v. Korean Air Lines, Ltd., 490 U.S. 122, 109 S.Ct. 1676, 1683-84, 104 L.Ed.2d 113 (1989). The plain language of Article 18 draws the line at the airport’s border. The Convention’s coverage excludes any transportation by land outside of the airport. Although Article 18 creates a presumption that any damage or loss occurring during the performance of a contract for air transportation was the result of an event during transportation by air, that is, on board an aircraft or within an airport, the presumption may be rebutted by evidence demonstrating that the loss occurred on land outside the airport. Our interpretation of Article 18, contrary to the suggestion of the dissenting opinion, does not limit the meaning of “transportation by air” to “actual” air transportation. Rather, as the plain language of Article 18 directs, “transportation by air” would include a loss occurring while the cargo was in the air or on the ground but within the confines of the airport’s boundaries. Under the dissenter’s view, even if there is undisputed evidence, as here, that the loss occurred outside of the airport during transportation by land, the Convention governs as long as the land transportation was part of the carriage contract. This interpretation would effectively render nugatory Article 18’s command that “[t]he period of the transportation by air shall not extend to any transportation by land ... performed outside an airport.” This cannot be the result intended by the Convention’s drafters. Because the shipment of coumadin was admittedly lost at Emery’s warehouse outside the airport, the presumption favoring Warsaw Convention coverage has been re [708] butted and the Convention does not govern. A different interpretation might be more “sensible,” as appellees suggest, but to en-graft such an interpretation onto the plain language of Article 18 would require an impermissible judicial amendment of the Convention. See Chan, 109 S.Ct. at 1684. The district court therefore erred in its conclusion that the Warsaw Convention governed appellants’ claims and limited their recovery.1 B. Indemnification of Lassen The district court ruled that Emery, as the primary wrongdoer, must indemnify Lassen. Proceeding from the premise that the Warsaw Convention governed, the district court determined that indemnification was available under the Convention and awarded Lassen $87,929.58 in attorney’s fees and costs as part of Emery’s indemnity obligation. Emery does not challenge the reasonableness of the amount of fees and costs awarded. As discussed supra, the Warsaw Convention does not govern this case. Lassen contends that the indemnification award may nonetheless be upheld under either federal or New York common law principles. It argues that because the loss of Victoria’s cargo was entirely the fault of Emery, Lassen could only be held vicariously liable for the loss. Under the circumstances, Lassen maintains that Emery should indemnify Lassen for any loss it sustains, including attorney’s fees and costs expended in this litigation. Emery counters by arguing that the district court erred, in the absence of coverage by the Warsaw Convention, by not enforcing the liability limits set forth in Emery's waybill and relevant tariffs. The waybill provided for a $20 per kilogram limitation on Emery’s liability for “destroyed, lost, damaged or delayed” cargo. Emery contends that it should not be liable for any amount to any party above this limitation and that therefore Lassen's indemnification award should be subject to the waybill’s liability limits. We find Emery’s position unconvincing. The waybill’s liability limitation refers only to Emery’s liability for damaged, lost or delayed cargo. It does not address the rights and liabilities between Emery and a party in Lassen’s status. Absent an explicit contractual provision to the contrary, we see no reason to extend the waybill’s liability limitations to Lassen’s indemnity claim and to abrogate the principle that a primary wrongdoer must indemnify a party whose liability is secondary or vicarious. See Ingersoll Milling Machine Co. v. M/V BODENA, 829 F.2d 293, 305 (2d Cir.1987) (“Indemnity rests upon the principle that the true wrongdoer should bear the ultimate burden of payment.”), cert. denied sub nom. J.E. Bernard and Co. v. Ingersoll Milling Machine Co., 484 U.S. 1042, 108 S.Ct. 774, 98 L.Ed.2d 860 (1988); McDermott v. City of New York, 50 N.Y.2d 211, 216-17, 406 N.E.2d 460, 462, 428 N.Y.S.2d 643, 646 (1980). Although the district court granted indemnification under the Warsaw Convention, we nevertheless view the award as sustainable on these common law principles of indemnification. There is no dispute that the cargo was lost at Emery’s warehouse, and Emery does not contend that the loss was the result of any fault on the part of Lassen. Lassen’s liability for the loss, therefore, could be based only on its contractual obligation to ship the cargo to New York. Between Emery and Lassen, the former, as the party primarily liable for the lost cargo, must bear the loss, and Lassen consequently is entitled to indemnification. Furthermore, the district court properly awarded Lassen attorney’s fees and costs incurred in defending this action as part of its successful indemnity claim. See Peter Fabrics, Inc. v. S.S. HERMES, 765 F.2d 306, 315 (2d Cir.1985); Owens v. Palm Tree Nursing Home, Inc., 89 A.D.2d [709] 619, 620-21, 452 N.Y.S.2d 670, 673 (2d Dep’t 1982). CONCLUSION That portion of the district court’s judgment awarding Lassen indemnification and attorney’s fees and costs from Emery is affirmed. That portion of the district court’s judgment limiting plaintiffs-appellees’ recovery to $16,620 under the Warsaw Convention is vacated. The case is remanded for further proceedings consistent with this opinion. Footnotes [1] Emery argues that even if the Warsaw Convention's liability limitations do not apply to Victoria’s claim, federal common law standards, rather than New York law, should govern this case. We leave it to the district court to resolve this issue in the first instance on remand. Similarly, we do not reach Victoria's contention that it is entitled to prejudgment interest. Victoria may present this claim to the district court on remand.