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Denby v. Seaboard World Airlines

June 7, 1984

M. E. DENBY, INDIVIDUALLY AND ON BEHALF OF CERTAIN OTHER CONCERNED UNDERWRITERS AT LLOYDS, PLAINTIFFS-APPELLANTS,
v.
SEABOARD WORLD AIRLINES, INCORPORATED AND FLYING TIGER LINE, INCORPORATED, DEFENDANTS-APPELLEES



Appeal by the insurers of a shipper from an order of the District Court for the Eastern District of New York, Jack B. Weinstein, Chief Judge, granting the carrier's motion for summary judgment in an action for damages for loss of air cargo, on the ground that the shipper had failed to comply with Article 26(2) of the Warsaw Convention requiring complaint to be made within seven days from the date of receipt of the cargo.

Friendly, Pierce and Winter, Circuit Judges.

Author: Friendly

FRIENDLY, Circuit Judge:

This appeal is from an order of Chief Judge Weinstein in the District Court for the Eastern District of New York granting summary judgment to the defendants in an action by the insurers of a shipper for loss of cargo. The basis for the order was the shipper's alleged failure to give notice of the loss within seven days after receipt of the cargo as required by Article 26(2) of the Warsaw Convention.*fn1 The appeal presents important questions concerning the meaning of Article 26(2), particularly in regard to air freight container shipments. Although we agree with much of Chief Judge Weinstein's scholarly opinion, we believe decision hinges on factual questions that were not appropriate for resolution on the papers before the court and therefore reverse the order granting summary judgment and remand for a trial.

The Facts

Plaintiff Denby, representing a group of insurance underwriters at Lloyds, brought this action to recover $673,190.16, the market value of thirty-six kegs of silver residue and flake shipped by the subrogor, Kodak Limited (Kodak), from England to John F. Kennedy International Airport in New York City by defendant Seaboard World Airlines, Inc. (Seaboard).*fn2

On July 11, 1980,*fn3 a driver employed by Seaboard delivered one of its standard ten-foot fiberglass containers to Kodak's plant outside of London. A Kodak employee loaded the container with forty cartons, consisting of thirty-six kegs of silver flake and residue and four skips of scrap sensitized paper. He then closed the container's doors and affixed a seal. The driver signed a receipt and delivered the container to Seaboard's warehouse at Heathrow Airport where it was stored. On July 14 a Kodak employee delivered an air waybill relating to the shipment, consisting of an original and thirteen copies, to Seaboard's Heathrow office. The air waybill described the number of packages as "1" and stated the weight and charges. Under the heading "Nature and quantity of goods (incl. dimension or volume)," the airway bill said:

SCRAP PAPER & SILVER RESIDUE FOR SILVER RECOVERY PURPOSES

8.32m3

SPECIAL INSTRUCTIONS

CONTAINER ARA5661 SB, SAID CONTAIN 40 PACKAGES No.s KRO1 1/26.KPO53/1-4,KLOO 4/1-10.

In another box, "Handling information", the air waybill stated:

C.A.N. 80172 2 Commercial Invoices

1 CONTAINER ARA 5661

A/F 1/10.

Later Seaboard certified on the air waybill that the container had been shipped on flight 305 on July 16.

Flight 305 arrived in New York at 12:25 a.m. on July 17. The container was stored in Seaboard's warehouse until July 18 when Edward Kochersberger, a driver for Rochester Air Freight, commissioned by the consignee, Eastman Kodak Co. (Eastman), arrived to pick up the shipment. Precisely what happened then is not completely clear, as will be explained below; it suffices here to say that Kochersberger received only four cartons instead of forty.

On August 26 Eastman gave written notice to Seaboard claiming the loss of thirty-six kegs of silver residue and flake. The notice said:

The consignment consisted of 40 pieces. However, when the container was opened at the Seaboard World Airlines warehouse, only four bails of silver flakes were in the container.

Nearly a month later Eastman corrected the notice to say that the four barrels were scrap paper, not silver flakes.

The Proceedings in the District Court

The complaint of Denby as Eastman's subrogee characterized the shipment as having been of thirty-six kegs of silver flake and residue and four skips of scrap sensitized paper; the answer characterized it as a shipment of "one (1) container said to contain 'Scrap Paper and Silver Residue for Silver Recovery Purposes'". Defendants later moved for summary judgment on the ground that Eastman had failed to give timely notice of the loss as required by Article 26(2) of the Warsaw Convention.

After appropriate further proceedings, Chief Judge Weinstein granted the motion. The bulk of his opinion was devoted to Eastman's claim that the case was not one of "damage", for which Article 26(2) provides a seven day notice requirement, but of loss, for which no time limitation is set. He rejected this largely on the basis of the decision of the House of Lloyds in Fothergill v. Monarch Airlines, Ltd., [1980] 2 Lord's L.R. 295 (hereafter cited by page number only) that the loss of part of the contents of a passenger's suitcase constituted damage to baggage, a claim for which was barred by failure to make a complaint within seven days from the date of receipt.*fn4 He then rejected plaintiff's argument that certain acts of Seaboard's employees with respect to Kochersberger, hereafter discussed, constituted "fraud" within the meaning of Article 27(4), 575 F. Supp. at 1144, as well as arguments, no longer pressed, that Seaboard was barred from relying on the notice provisions of Article 26 by its having accepted the shipment on July 11, three days before issuing an air waybill, see id. at 1145-48, or by its having engaged in willful misconduct under Article 25, see id. at 1148.

Discussion

(1) Application of Article 26(2) of the ...


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