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March 14, 1996

AMR SERVICES CORP., Defendant. AMR SERVICES CORP., Third-Party Plaintiff, v. SCAC TRANSPORT (USA), INC., Third-Party Defendant.

The opinion of the court was delivered by: NEWMAN

 BERNARD NEWMAN, Senior Judge of the United States Court of International Trade, sitting as a United States District Court judge by designation:1


 This is a diversity action within the purview of 28 U.S.C. § 1332(a)(1) commenced by The Travelers Indemnity Co. ("Travelers"), an insurance carrier and subrogee of its insured, Horizon Associates, New York ("Horizon"), against AMR Services Corp. ("AMR"). Travelers sued AMR to recover damages in the sum of $ 160,833.23, representing the value of the insured goods stolen while stored in AMR's customs bonded warehouse. Travelers' action against AMR was settled for $ 113,000 and dismissed.

 Currently before the court for final disposition is AMR's third-party complaint against SCAC Transport (USA), Inc. ("SCAC"), which action seeks indemnification for AMR's $ 113,000 settlement payment to Travelers, or in the alternative, for all damages in excess of $ 9,923.72 (representing the contractual cap on AMR's "freight liability"), plus costs and attorneys fees.

 Upon consent of the parties, and with the permission of the court, the third-party action has in lieu of a bench trial in open court been submitted for decision and judgment on the following record: an Agreed Statement of Facts, deposition testimony, and documentary exhibits appended to the parties' memoranda of law. The parties, nonetheless, still have the requisite burdens of proof on specific issues.

 With regard to choice of law, there is no dispute that New York law applies.

 For the following reasons, the third-party complaint is dismissed.


 The record comprises: the parties' Agreed Statement of Facts; affidavits of Stanley G. Gerold ("Gerold"), AMR's Operations Supervisor for the customs bonded warehouse from which the goods were stolen, and Karin A. Schlosser, counsel for the third-party plaintiff, to which affidavits are appended various supporting documentary exhibits; the depositions of Gerold, Peter A. Bernacki ("Bernacki"), SCAC's Vice President, Joseph Castellano ("Castellano"), Senior Supervisor of Security Experts, Inc. ("SEI"), and Ugister Mulahoo ("Mulahoo"), an employee of SEI.

 The facts are:

 SCAC is a clearing agent for international shipments arriving at JFK International Airport, New York ("JFK") for SCAC's French affiliate, an air freight forwarder in Paris, France, SCAC Transport International Air Service ("SCAC Air Service"). At the pertinent period of time, SCAC leased cargo storage space, and hence was a tenant, in Cargo Building No. 75 at JFK, also known as the Helmar Building ("Building 75").

 Under the cargo handling contract, AMR performed the "hands-on" control and management functions related to cargo handling services at the Building 75 facility on behalf of SCAC. Appended to, and part of, the cargo handling contract is a special attachment denominated as "Exhibit JFK," dated September 1, 1988, covering the specific "ground handling" services AMR contractually agreed to perform as agent of SCAC at JFK.

 Of pivotal concern in this case is clause 2 of the cargo handling contract, an indemnifying agreement. Also of significance in the cargo handling contract for purposes of this litigation is clause 3 of the appended "Exhibit JFK" providing for a limitation or cap on AMR's "freight liability." The disputes between the parties arising out of the indemnification and freight liability limitation clauses are discussed infra.

 A shipment of 43 cartons of leather goods having a value of $ 160,833.23 was consigned by Ideal Cuir ("Cuir"), Paris, France, to Horizon. Cuir delivered the goods to its air freight forwarder SCAC Air Service for carriage by air via Trans World Airlines ("TWA") to New York and delivery to the consignee Horizon.

 SCAC Air Service issued its air waybill No. 591962, dated June 14, 1989, *fn3" naming as clearing agent at JFK third-party defendant, SCAC. That air waybill made no reference to limited liability pursuant to the Warsaw Convention, a Convention for the Unification of Certain Rules Relating to International Transportation by Air, 49 Stat. 3000-3026 (1934), TS No. 876, 137 L.N.T.S. 11, reprinted at 49 U.S.C. § 1502 (1976), adopted in 1929 ("Warsaw Convention"). However, in lieu the Warsaw limitation of liability, the air waybill contained SCAC Air Service's own contractual limitation of liability, discussed infra.

 The shipment of leather goods was consolidated by SCAC Air Service and transferred to TWA for transportation from France to JFK. Upon arrival at JFK on Friday, June 16, 1989, AMR's trucker picked up the shipment (subsequently found to be one piece short) and delivered the 42 cartons to Cargo Building No. 75, wherein the goods were stored in a locked cage located inside AMR's Container Station Annex, part of AMR's customs bonded warehouse operations at JFK.

 On Monday, June 20, 1989, when Sarcona Trucking came to the warehouse to pick up the goods for delivery to the consignee, they could not be found. As previously mentioned and discussed infra, the 42 cartons had been stolen from the warehouse.

 Travelers paid its insured, Horizon, the value of the goods, $ 160,833.23, and thereafter, in 1991, as Horizon's subrogee, commenced this action against only AMR to recover damages for the loss of the goods. *fn4" Travelers' action against AMR was settled and dismissed in March 1995 upon AMR's payment to Travelers of $ 113,000, after giving notice to SCAC. AMR impleaded SCAC by third-party complaint. SCAC has consistently disclaimed any liability to AMR for the theft of the goods.

 At the time warehouse space in Building No. 75 was leased by SCAC, apparently the storage facility provided no central alarm system. Although not required by the terms of the cargo handling contract, SCAC arranged for the installation of a central alarm system for the warehouse, for certain related security services, and for installation of a "high-value" security cage inside the warehouse, which cage was locked with a keyed padlock and monitored by a motion detection system. The cargo handling contract does not expressly impose, and is completely silent with respect to, any duties or obligations on either party regarding security at the warehouse.

 Further, although not required to do so by the cargo handling contract, AMR arranged for its already existing U.S. Customs Bond to extend to SCAC's storage facility in Building No. 75, and to operate such facility as AMR's bonded Container Station Annex. As previously disclosed, Gerold was AMR's Operations Supervisor at the warehouse at the time of the theft of the goods (and through April, 1992), and is a pivotal actor in this case.

 Regarding security, prior to the date of the cargo handling contract, November 11, 1988, but following the retroactive effective date of that contract, September 1, 1988, SCAC entered into a "CONTRACT FOR BURGLAR ALARM," dated October 12, 1988, with SEI, an independent security company. Under that contract, SEI agreed to install, maintain, monitor, and generally take charge of the security services at the warehouse, including a central alarm system, armed patrol and response. The contract scheduled the installation of a central alarm system to commence on October 10, 1988. It is stressed that during its contract with SEI, SCAC assumed no supervision or control over SEI in the installation, maintenance, or monitoring of the security system. Indeed, under the contract, SCAC was expressly prohibited from disturbing or interfering with the alarm and from permitting anyone else (other than SEI, of course) to do so.

 A critical feature of the security system at the warehouse was the central alarm system. So far as pertinent, the alarm system operated as follows:

 Upon entry into or exiting from the warehouse, the alarm was disarmed and rearmed by pressing numbers on a pressure-sensitive keypad located outside the building. For such purpose, authorized employees each had a numbered personal user code. SCAC's Vice President, Bernacki, informed SEI of the employees who had been designated to have personal user code numbers, including AMR employees.

 According to Bernacki's March 30, 1994 deposition, p. 50, Gerold's June 30, 1991 deposition, p. 22-23, and Castellano's March 26, 1992 deposition, p. 20, authorized employees selected a personal user code number and in the presence of an SEI employee who put the system in a "program mode," the number selected by the employee was electronically programmed into the alarm system. Gerold was authorized to have an access code. Bernacki and his manager at SCAC also had user codes, "purely as an emergency" and "backup." Bernacki dep., p. 51. ...

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