p. 466, defines "damaged goods" as "Goods, subject to duties, which have received some injury either in the voyage home or while bonded in a warehouse." Emphasis added. Black's, p. 466 also defines "damaged" as "Made less valuable, less useful, or less desirable," which definition excludes a total diminution of value due to the goods becoming nonexistent through loss. The Black's dictionary definition of "damage," id. at 466, cited by AMR nowhere mentions loss caused by theft or conversion, but rather: "The harm, detriment, or loss sustained by reason of an injury. " Emphasis added.
That the term "damage" or "damaged" was clearly intended by AMR to refer to physical damage and not to goods lost or stolen is also evident from the very use of the terms in the list of Cargo Handling duties set forth in Exhibit I of the Exh. JFK. For example:
AMR had a duty to "notify customer of damaged cargo upon receipt of cargo from shipper." (Emphasis added.) Obviously, if cargo is lost or stolen in transit, AMR could not give notice to the customer "upon receipt of cargo."
Exhibit I also provides, with reference to imported cargo, "it shall be the sole and exclusive obligation of AMRS [AMR] to check the condition of each arriving shipment. If the shipment is damaged it shall not be accepted, except upon the request of SCAC." (Emphasis added.) Plainly, if a shipment was lost or stolen in transit, it could not arrive to be accepted by AMR.
Further, under Exhibit I, AMR had a duty to "notify the Customer of complaints and claims made by the Customer's clients, and handle lost, found and damaged cargo matters, as mutually agreed. This is further evidence of an intent by AMR to distinguish between lost and damaged cargo.
Finally, absent an express unequivocal provision to the contrary in an indemnification agreement, such agreement generally will not be construed to indemnify against the indemnitee's own negligence. Morgan v. Good Humor Corp., 386 N.Y.S.2d 888, 54 A.D.2d 560 (2nd Dept. 1976). Contracts indemnifying a party against its own negligence are generally disfavored and are strictly construed against the drafter. Quintel Corp. N.V. v. Citibank, N.A., 596 F. Supp. 797 (S.D.N.Y. 1984). Thus, indemnification clauses, such as that involved here, expressly agreeing to indemnify against "any and all claims," etc., "including those attributable in whole or in part to the negligence [except gross negligence] of either party," are subject to strict construction rather than expansive application.
A contract of indemnification must be strictly construed to avoid reading into it a duty which the parties did not intend to be assumed. Hooper Associates, Ltd. v. AGS Computers, Inc., 74 N.Y.2d 487, 549 N.Y.S.2d 365, 548 N.E.2d 903 (Ct.App. 1989). If the parties to the cargo handling contract intended to be indemnified for theft of goods (even if attributable wholly to negligence), such scope of indemnification obviously was not unequivocally spelled out simply by the phrase "by reason of damage to property."
AMR also argues that because of the limitation of freight liability
and the particular relationship of the parties under the cargo handling contract, SCAC Air Service's omission of the customary Warsaw Convention limitation of liability in its air waybill constituted a breach by SCAC of its "fiduciary duty" owed to AMR. Citing Filner v. Shapiro, 633 F.2d 139, 143 (2d Cir. 1980), citing Kirke LaShelle Co. v. Paul Armstrong Co., 263 N.Y. 79, 87, 188 N.E. 163 (1933), for the rule that an implied covenant of good faith "precludes each party from engaging in conduct that will deprive the other party of the benefits of their agreement," AMR further posits that the omission of the limitation of liability in the air waybill also constitutes breach of an implied duty of good faith and fair dealing owed by SCAC to AMR. See also Zilg v. Prentice-Hall, Inc., 717 F.2d 671 (2d Cir. 1983), cert. denied, 466 U.S. 938, 80 L. Ed. 2d 460, 104 S. Ct. 1911 (1984).
Inasmuch as both AMR's claim of breach of fiduciary duty and claim of breach of an implied covenant of good faith dealing revolve around the omission from the air waybill of the Warsaw Convention's limitation of liability, those claims although based on distinct legal theories will be discussed together as essentially the same cause of action.
The Warsaw Convention for Unification of Certain Rules Relating to International Transportation by Air, 49 Stat. 3000-3026 (1934), T.S. No. 876, 137 L.N.T.S. 11, reprinted at 49 U.S.C. § 1502 (1976). was adopted in 1929. The United States became an adhering nation in 1934. 78 Cong. Rec. 11582, 49 Stat. 3013. See Trans World Airlines v. Franklin Mint Corp., 466 U.S. 243, 277, 80 L. Ed. 2d 273, 104 S. Ct. 1776 (1986); Denby, 575 F. Supp. at 1137. Clause 22(2) of the Warsaw Convention limits the carrier's liability to 250 francs or 17 SDR per kilo, which at the pertinent period of time corresponded to a $ 20.00 per kilo limitation of liability. Carriers' standard limitation of liability for international carriage reads: "Carriage hereunder is subject to the rules and limitations relating to liability established by the Warsaw Convention unless such carriage is not 'international carriage' as defined by that Convention."
Citing to Royal Ins. v. Amerford Air Cargo, 654 F. Supp. 679, 681-82 (S.D.N.Y. 1987), AMR insists that it was an agent of the freight forwarder (SCAC Air Service), and had the air waybill included the customary Warsaw Convention limitation of liability,
both SCAC and AMR as agents of the freight forwarder (treated as a "carrier") would likewise have been protected by such limitation of liability in the air waybill.
AMR further contends that because the limitation of freight liability included in the cargo handling contract corresponds to the Warsaw Convention limitation of liability, the omission of the Warsaw limitation from the air waybill "completely negated and nullified the benefit of limited liability that AMR had bargained for [with SCAC under the cargo handling agreement]." Third-party plaintiff's Mem., p. 8 and Reply Mem., p. 6. Stated differently, AMR reasons that notwithstanding its limited freight liability to SCAC under the cargo handling contract of $ 20.00 per kilo corresponds to and is based upon the Warsaw Convention's limitation of liability under Clause 22(2), the limitation of liability contained in the cargo handling contract, but omitted from the air waybill, was not binding on third persons - thus exposing AMR to unlimited liability to third persons.
AMR maintains that SCAC Air Service (which used the IATA logo on the face of its air waybill, giving the impression that it was an IATA air carrier), "acted in bad faith deliberately taking away a bargained for advantage of the Ground Handling Agreement" (third-party pltf.'s supp. mem., p. 11) by using the IATA logo while omitting the organization's standard IATA air carrier's Warsaw Convention limitation of liability from the air waybill.
In sum, AMR contends that at time it entered into the cargo handling contract limiting its freight liability to SCAC, it intended and had a good faith expectation that AMR's liability to third persons would be similarly limited in accordance with the Warsaw Convention by the customary terms imprinted on the carriers' air waybill. By omission of such terms in the air waybill, SCAC breached its fiduciary duty to AMR and its covenant of good faith dealing implied by the limitation of freight liability under the cargo handling contract.
Even assuming that AMR, acting as SCAC's cargo handling agent and warehouseman, would have been afforded limited liability to third persons by inclusion of the Warsaw Convention limitation of liability in the air waybill, no legal authority has been called to the court's attention establishing that the limitation of SCAC's freight liability under the cargo handling contract created a fiduciary relationship or implied obligation on SCAC with regard to the contents of the air waybill. There is no evidence that in issuing air waybills, the French corporation acted as SCAC's alter ego or agent or otherwise was under the control of SCAC.
Moreover, there is no evidence that prior to or contemporaneously with the execution of the cargo handling contract there was any discussion between the parties or conduct by SCAC that remotely implies SCAC intended to assume a fiduciary duty or obligation of good faith to complement AMR's limited freight liability under the cargo handling contract with limited liability to third persons under the air waybill. Rather, with regard to AMR's liability exposure to third persons arising out of performance of the cargo handling agreement, the parties bargained for an obviously detailed mutual indemnifying agreement under which AMR would be held harmless against third person claims arising out of personal injury or damage to property, including even claims attributable wholly to negligence.
While air waybill No. 591962 issued by SCAC Air Service concededly did not mention the Warsaw Convention limitation of liability, SCAC stresses that the air waybill did in fact contain a 4500 franc per carton or 50.000 franc ($ 10,000) per shipment limitation of liability, which AMR could have, but failed, to raise in defense of Travelers' suit against AMR. Therefore, argues SCAC, AMR having failed to interpose the limitation of liability provision under the air waybill to Travelers' claim, AMR should now be held estopped to claim over by way of indemnification against SCAC.
AMR contends that it could not have legitimately raised the limitation of liability contained in the air waybill because it would have fixed a lower limit of liability ($ 10,000) than that permitted by the Convention ($ 14,162.79) and therefore, was legally null and void under Article 23 of the Convention.
In view of the result reached herein, the court need not decide the validity of the limitation of liability in the air waybill, or whether or not the limitation of liability in the air waybill might have been successfully raised against Travelers by AMR, or the estoppel issue.
For the reasons expressed above, SCAC has no liability to AMR for indemnification, implied or contractual, or for breach of fiduciary duty or an implied covenant of good faith dealing under the cargo handling contract. The third-party complaint is dismissed, and the Clerk is directed to enter a judgment accordingly.
Dated: New York, New York
March 14, 1996.
Bernard Newman, U.S.D.J. by