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