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ZICHERMAN v. KOREAN AIR LINES CO.

January 26, 1993

MARJORIE ZICHERMAN, Executrix of the Estate of Muriel A.M.S. Kole, and Muriel Mahalek, Plaintiffs,
v.
KOREAN AIR LINES CO., LTD., Defendant.



The opinion of the court was delivered by: CONSTANCE BAKER MOTLEY

 I. BACKGROUND

 This case arises out of the tragic downing of Korean Air Lines ("KAL") Flight KE007. On September 1, 1983, while the plane was on route from New York to Seoul, South Korea, the plane strayed into Soviet airspace and was shot down by Soviet military aircraft over the Sea of Japan. All 269 persons aboard were killed. Muriel A.M.S. Kole was among those who perished. This action was commenced on November 18, 1983 by Muriel Kole's mother, Muriel Mahalek, and Muriel Kole's sister, Marjorie Zicherman in both her individual and representative capacities. There were numerous other actions filed around the country for wrongful death of the deceased passengers. These numerous death actions brought against KAL were consolidated and came on for common pre-trial proceedings and trial of the common issues of liability in the United States District Court for the District of Columbia. In re Korean Air Lines Disaster of Sep. 1, 1983, 575 F. Supp. 342 (Judicial Panel on Multidistrict Litigation 1983).

 On August 2, 1989, a jury found that KAL engaged in "wilful misconduct," proximately causing the deaths of the KAL Flight KE007 passengers. In addition, the jury awarded plaintiffs punitive damages. On appeal, the Court of Appeals for the District of Columbia Circuit upheld the jury's finding of "wilful misconduct" but set aside the punitive damage award as non-recoverable in a Warsaw Convention case. In re Korean Airlines Disaster of Sept. 1, 1983, 932 F.2d 1475, 1490 (D.C. Cir.), cert. denied, 112 S. Ct. 616 (1991). Plaintiffs and KAL individually filed petitions for writ of certiorari in the United States Supreme Court, both of which were denied on December 2, 1991. Dooley v. Korean Air Lines, Ltd., U.S. , 112 S. Ct. 616, 116 L. Ed. 2d 638 (1991). The common liability issues in this multidistrict case having been decided, the individual cases were returned to the various jurisdictions where they originally had been filed in order to determine compensatory damages as to each plaintiff.

 A jury trial on the issue of compensatory damages in this case commenced on December 7, 1992. *fn1" At the conclusion of the trial, the jury returned a verdict in favor of plaintiff Muriel Mahalek, individually, in the amount of $ 124,000 for mental injury, past and future and loss of love, affection and companionship, past and future. The jury also returned a verdict in favor of plaintiff Marjorie Zicherman, in her individual capacity, in the amount of $ 151,000 for past loss of support, past and future mental injury, past and future loss of love, affection and companionship, and lost inheritance. The jury also found in favor of plaintiff Marjorie Zicherman, in her capacity as executrix of decedent's estate, in the amount of $ 100,000 for decedent's conscious pain and suffering before her death.

 The parties previously agreed to reserve the question of prejudgment interest until after trial. For the reasons discussed below, plaintiffs are entitled to prejudgment interest.

 A. THE WARSAW CONVENTION

 This court has previously determined that the Warsaw Convention is the applicable law governing this case. *fn2" In re Korean Air Lines Disaster of September 1, 1983, 1992 U.S. Dist. LEXIS 17710, F. Supp. , No. 83 Civ. 8428, S.D.N.Y., Nov. 19, 1992. The Warsaw Convention, however, is silent as to the award of prejudgment interest. See O'Rourke v. Eastern Air Lines, Inc., 730 F.2d 842, 852 n. 18 (2d Cir. 1984). The Second Circuit considered the question of prejudgment interest under the Warsaw Convention in O'Rourke. O'Rourke involved the crash of Eastern Air Lines Flight 66 as it was on route from New Orleans to New York. The Public Administrator of one of the victims of the crash brought suit on behalf of the estate against Eastern and the United States. A jury found Eastern negligent and its verdict was affirmed on appeal. In re Air Crash Disaster at John F. Kennedy Int'l Airport, 635 F.2d 67 (2d Cir. 1980). Following this affirmance, the District Court granted a motion by Eastern to limit its liability to $ 75,000 pursuant to the Montreal Agreement. *fn3" O'Rourke v. Eastern Air Lines, 16 Avi.L.Rep. 18,367 (E.D.N.Y. Jan. 29, 1982). The Second Circuit affirmed the District Court's denial of prejudgment interest. The court determined that awarding prejudgment interest in O'Rourke would be inconsistent with the intent of the framers of the Warsaw Convention and the supplemental Montreal Agreement to limit recovery against airlines for negligence to $ 75,000 to prevent airlines from going out of business. The court held that "in the absence of any contrary intent on the part of the framers, we may not read into that document a provision that allows the payment of prejudgment interest above the $ 75,000 liability limitation." 730 F.2d at 853. Compare Boehringer-Mannheim Diagnostics, Inc. v. Pan American World Airways, Inc., 737 F.2d 456, 460 (5th Cir.), cert. denied, 469 U.S 1186, 105, 83 L. Ed. 2d 959, 105 S. Ct. 951 S. Ct. 951, 83 L. Ed. 2d 959 (1985) (where Warsaw Convention limit on recovery for lost cargo applies, prejudgment interest is recoverable).

 O'Rourke, however, is not this case. Defendant in this case was found by a jury to have engaged in "wilful misconduct." Under the Warsaw Convention, when a defendant has engaged in "wilful misconduct," the $ 75,000 cap on liability expressly does not apply. *fn4" While O'Rourke concludes that the intent of the framers was not to exceed the $ 75,000 with the addition of prejudgment interest in situations where the Warsaw Convention dictates damages, where the cap is expressly removed pursuant to Article 25 of the Warsaw Convention, the rationale for restricting prejudgment interest is also removed. O'Rourke is, therefore, inapplicable to situations such as the present, where there has been "wilful misconduct" and where there is no limit on liability.

 B. FEDERAL COMMON LAW

 The Second Circuit in Lockerbie held that the Warsaw Convention is a federally-created cause of action, preempting all state causes of action, and must be construed exclusively under federal common law where the Warsaw Convention, itself, is silent and where federal statutory law is helpful in reaching a determination. See also In re Inflight Explosion on Trans World Airlines, Inc. Aircraft Approaching Athens, Greece on April 2, 1986, 778 F. Supp. 625, 629 (E.D.N.Y.), rev'd on other grounds, 975 F.2d 35 (2nd Cir. 1992). It is, therefore, necessary to look to federal law to determine whether or not plaintiffs are entitled to prejudgment interest. Thus, in developing the federal common law regarding the award of prejudgment interest under the Warsaw Convention where there has been a finding of "wilful misconduct," this court refers to the general treatment under federal common law of questions of prejudgment interest and looks to the intent of the framers of the Warsaw Convention. There is no federal statute governing prejudgment interest in Warsaw Convention cases and which determines the rate to be used. *fn5"

 1. Prejudgment Interest Under Federal Law

 Generally, where entitlement to prejudgment interest is not statutorily determined, it is within the court's discretion to determine whether or not an award for prejudgment interest is appropriate. In West Virginia v. United States 479 U.S. 305, 107 S. Ct. 702, 93 L. Ed. 2d 639 (1987), which involved a dispute over a debt arising out of a contractual obligation, the Supreme Court determined that "in the absence of an applicable federal statute, it is for the federal courts to determine, according to their own criteria, the appropriate measure of damage, expressed in terms of interest, for nonpayment of the amount found to be due." 479 U.S. at 308-09 (citing Royal Indemnity Co. v. United States, 313 U.S. 289, 296, 61 S. Ct. 995, 85 L. Ed. 1361 (1941)). See Wickham Contracting v. Local Union No. 3, IBEW, 955 F.2d 831, 833, 835 (2d Cir.), cert. denied, U.S. , 113 S. Ct. 394, 121 L. Ed. 2d 302 (1992) ("Our prejudgment interest decisions have been in accord with the Supreme Court's approach. We have allowed discretionary awards of prejudgment interest, notwithstanding the statute's silence on the subject of interest, when the awards were fair, equitable and necessary to compensate the wronged party fully"); Waterside Ocean Navigation Co., Inc. v. International Navigation Ltd., 737 F.2d 150, 153 (2d Cir. 1984) ("'whether to award prejudgment interest in cases arising under federal law has in the absence of a statutory directive been placed in the sound discretion of the district courts'") (citing Lodges 743 & 1746, International Association of Machinists v. United Aircraft Corp., 534 F.2d 422, 446 (2d Cir. 1975), cert. denied, 429 U.S. 825, 97 S. Ct. 79, 50 L. Ed. 2d 87 (1976)).

 The purpose of prejudgment interest is compensatory. United States v. Seaboard Surety Co., 817 F.2d 956, 966 (2d Cir.), cert. denied, 484 U.S. 855, 108 S. Ct. 161, 98 L. Ed. 2d 115 (1987) (citing Rodgers v. United States, 332 U.S. 371, 373, 68 S. Ct. 5, 6, 92 L. Ed. 3 (1947)). See also Rolf v. Blyth, Eastman Dillon & Co., Inc., 637 F.2d 77, 87 (2d Cir. 1980) ("An award of prejudgment interest is in the first instance, compensatory . . .") KAL Flight KE007 was shot down more than nine years prior to the judgment in this case. ...


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