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FEATURE ENTER'S. v. CONTINENTAL AIRLINES

September 19, 1990

FEATURE ENTERPRISES, INC., PLAINTIFF,
v.
CONTINENTAL AIRLINES AND INTERNATIONAL TOTAL SERVICES, INCORPORATED, A/K/A ITS, INC., DEFENDANTS.



The opinion of the court was delivered by: Robert P. Patterson, Jr., District Judge.

AMENDED OPINION AND ORDER

This is a motion by defendants and a cross-motion by plaintiff for summary judgment pursuant to Federal Rule of Civil Procedure 56.

BACKGROUND

Plaintiff is a national wholesale jewelry manufacturer based in New York City and sells gold jewelry to major retail chain stores in other cities in the United States. On July 18, 1988, Mr. John Paist ("Paist"), as a salesman for plaintiff, purchased a roundtrip ticket from a travel agent for a flight on defendant Continental Airline ("Continental") from Chicago to Newark, New Jersey and return. The purpose of the flights was to transport plaintiff's jewelry and for Paist to engage in activities in Newark on behalf of plaintiff. On July 27, 1988, Paist arrived at Newark airport to board the Continental flight and return to Chicago.

One of his bags was a jewelry case allegedly containing $175,000 in jewelry belonging to plaintiff. It is undisputed that plaintiff's policy is to transport all jewelry cases as regular passenger luggage without notice to the airline being utilized of the value of the contents. It is also plaintiff's standard operating procedure not to have its employees send jewelry by air freight and not to pay a fee so that any limitation on the airline's liability for the luggage is increased. On July 27, 1988, Paist followed the above company procedures when he checked his bags "at curbside" with a skycap employed by defendant International Total Services, Inc. ("ITS").

Paist has stated in deposition that after receiving the receipt for the jewelry case he turned away and then when he looked back he noticed that the jewelry case was missing. There is no evidence as to where the jewelry is now. There is no evidence that defendants possess the jewelry.

Defendants move for a summary judgment ruling that they have no liability for the lost luggage or, in the alternative, that their liability is limited to $1,250. Plaintiff cross-moves for summary judgment on its claim to full recovery of the value of the jewelry.

DISCUSSION

Summary judgment is appropriate only if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law.

Both parties agree that federal common law governs this dispute over an air carrier's liability. Defendants' first defense is that Continental's tariff and conditions of carriage, which are referenced in the ticket and ticket folder, provided for an exclusion of liability for jewelry applicable to Continental and its agents, servants and representatives. Specifically, defendant relies on Tariff Rule 230(B) and the notice in the ticket folder that Continental will not be liable for jewelry loss. Plaintiff argues that this contention must be dismissed summarily because it is a black letter rule that a common carrier cannot completely exculpate itself from liability. See, e.g., First Pennsylvania Bank v. Eastern Airlines, Inc., 731 F.2d 1113, 1116 (3d Cir. 1984); Klicker v. Northwest Airlines, Inc., 563 F.2d 1310, 1312 (9th Cir. 1977).

The Court agrees with plaintiff's contention based upon a reading of the current federal regulations governing interstate air transportation. The federal regulations set forth which conditions of carriage may be incorporated by an airline. See 14 C.F.R. § 253.5(b). The list includes "[l]imits on the air carrier's liability" but does not specify exclusions of the air carrier's liability. Moreover, 14 C.F.R. § 254, which governs "domestic baggage liability," states "'Federal rules require any limit on an airline's baggage liability to be at least $1,250 per passenger.'" It would be illogical for the regulations to outlaw a limitation of less than $1,250, but to permit an exclusion of liability — i.e., zero liability. Although Section 254 does not explicitly prohibit exclusions of liability, the implication is clear. Accordingly, defendants cannot rely on the provision in the tariff and contract of carriage which excludes liability.

There is no evidence that defendants did not provide notice of the $1,250 limitation in accordance with federal regulations. Indeed specific notice was contained in large print on the ticket folder. There also is no evidence that defendants have not complied with the governing common law rules embodied in the Released Valuation Doctrine. That doctrine provides that an air carrier may validly limit its liability to an agreed value of the goods when: (1) the carrier gives the passengers a fair opportunity to choose between higher and lower liability by paying a greater or lesser fee; (2) the passenger is on notice of the opportunity to pay a higher price for greater coverage and the passenger does not choose to pay for higher coverage; (3) the carrier does not appropriate the property of the passenger for its own use. See Deiro v. American Airlines, 816 F.2d 1360 (9th Cir. 1987); Shapiro v. United Airlines, 22 Avi. 17395 (S.D.N.Y. 1989).

The record shows that the first and second elements of the doctrine were satisfied. There was reasonable notice in the ticket of the incorporation of the tariff and conditions of carriage which set forth that liability is limited to $1,250 per passenger "unless a higher value is declared in advance and additional charges are paid." Section 230(C) of the tariff sets forth that the passenger can pay a fee to raise the liability limit "when checking in for a flight and presenting property for transportation." Moreover, under a bold-faced capitalized caption "NOTICE OF BAGGAGE LIABILITY LIMITATIONS," there was a statement on the ticket itself: "Liability for loss, delay, or damage to baggage is limited unless a higher value is declared in advance and additional charges are paid." It is reasonable to presume that a corporation like plaintiff regularly engaged in interstate transport of jewelry would have notice of the provisions for raising liability limitations on lost baggage. Indeed, the written security instructions of the plaintiff to its salespersons shows that it had knowledge of this standard option. Thus, it is not material that Paist may have failed to read the ticket's notice of the means for raising the liability limitation and of the incorporation of the terms of the tariff and conditions of carriage. See Deiro, 816 ...


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