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ROYAL INS. CO. v. FOUNTAIN TECHS.

September 29, 1997

ROYAL INSURANCE CO. (U.K.) a/s/o HIGHMEAD TECHNOLOGIES LTD., Plaintiff, against FOUNTAIN TECHNOLOGIES, INC., A corporation d/b/a GALAXCO, KAMINO INTERNATIONAL TRANSPORT INC. and CARGO MAX, INC., Defendants.


The opinion of the court was delivered by: PECK

 ANDREW J. PECK, United States Magistrate Judge:

 To the Honorable Allen G. Schwartz, United States District Judge:

 This case involves an international shipment of computers that was hijacked en route to its final destination. Presently before the Court is plaintiff's motion to dismiss defendant Kamino International Transport's defense of limited liability, and Kamino's cross-motion to limit its liability to $ 50 per package. Decision of the motions requires the Court's determination of several issues. The first issue is whether defendant Kamino is a common carrier (thereby responsible for loss while the cargo was in the trucker's possession) or merely a freight forwarder (thus liable only for its own negligence). A consideration of the relevant factors leads the Court to conclude that Kamino is a common carrier. The second and third issues are whether the Warsaw Convention and Carmack Amendment are applicable, and the Court determines that they are not. Finally, the Court finds that Kamino's liability limitation is enforceable because of the parties' lengthy prior course of dealings that included certain limitations.

 FACTS

 The Parties

 Highmead Technologies, Ltd. is a computer wholesaler located in England. (Plf. 3(g) P 1.) Plaintiff Royal Insurance Co. (U.K.) Ltd. issued an insurance policy to Highmead covering shipments of goods in transit. (Plf. 3(g) P 2.) By virtue of Royal's payment to Highmead for the loss at issue in the instant case, Royal is suing as subrogee of Highmead. (Plf. 3(g) PP 3, 4.)

 Fountain Technologies, Inc. manufactures personal computers. (Plf. 3(g) P 5.) Galaxco assembled Fountain's computer systems. (Plf. 3(g) P 6.)

 Kamino is in the business of transporting goods by means of a combination of its own efforts and arranging for other companies to carry out its jobs. (Galella Aff. PP 3, 10; Galella Dep. at 104.) Kamino offered "door to door" service, including pick up, airport transfers and customs clearances. (Plf. 3(g) PP 9, 13; Kamino 3(g) P 5; Galella Aff. PP 3, 5; Galella Dep. at 26.) Kamino charged an all inclusive, set fee; it did not merely pass through its costs and charge a fee on top of those costs. (See Galella Aff. P 3; Galella Dep. at 27-28, 51-53.) Kamino decided what direct air or trucking carriers to use, and any savings from Kamino using a less expensive direct carrier were not passed on to Kamino's customer. (Galella Dep. at 51-53, 102-03.)

 Kamino provided these services to Fountain since 1992, and to Highmead since February 1994. (Galella Aff. P 2.) Kamino had shipped computers from Fountain to Highmead on numerous occasions, sometimes at Fountain's behest and sometimes at Highmead's; Kamino's prior dealings with Fountain and Highmead consisted of at least 20 shipments for each. (Galella Aff. P 2; Al-Najjar Dep. at 140-41.)

 The Loss of Highmead's Computers While in Transit

 In late February 1995, Highmead contracted to buy 290 computers from Fountain, to be shipped from Galaxco's location in Brooklyn, New York to Highmead in England. (Plf. 3(g) P 10; Galella Dep. at 103.) Fountain instructed Kamino, by fax, to transport the computers from Galaxco's facility in Brooklyn to Highmead in England. (Plf. 3(g) P 12.) Fountain did not give Kamino any other instructions as to the manner of shipment. (Plf. 3(g) P 14.) Kamino hired Cargo Max, Inc. to transport the shipment from Galaxco in Brooklyn to Newark Airport, where it would then be loaded on an airplane for carriage to England. (Plf. 3(g) P 13; Galella Dep. at 51-53.)

 Ronald Artis, a Cargo Max employee, acknowledged receipt of the shipment at Galaxco's Brooklyn warehouse. (Plf. 3(g) P 15; Kamino Ex. A.) However, the shipment never arrived at Newark Airport; during the trip from Brooklyn to Newark, the shipment was hijacked, stolen or otherwise lost. (Plf. 3(g) P 16.) Because this shipment never arrived at the airport, no invoice, air waybill or any other document was ever issued with respect to this shipment, although Kamino had drafted an air waybill for this shipment and given it an air waybill number. (Plf. 3(g) PP 10, 17, 22; Kamino 3(g) PP 4, 10, 12; Galella Dep. at 12-15; see Corbett 3/13/97 Aff. Ex. 7.)

 Kamino's Prior Course of Dealings With Highmead and Fountain

 Typically, Kamino would issue two documents to the shipper after the goods were tendered for air carriage. (See Plf. 3(g) P 22; Galella Aff. P 6; Kamino 3(g) PP 4, 12; Galella Dep. at 36-37.) Kamino would issue an invoice containing a provision limiting Kamino's liability to $ 50 per package. (See Galella Aff. P 6; Kamino Ex. D: Standard Kamino Invoice; see also Plf. 3(g) P 20; Kamino 3(g) P 12; Galella Dep. at 35-37.) The $ 50 per package limitation reads as follows:

 
It is agreed that if the property covered by this bill is entrusted or delivered to any express company, truckman, steamship, railroad or other carrier whether named in this receipt or not (which Kamino Air Transport, Inc. is hereby authorized to do: subject to all the usual conditions of transportation of such carrier or others), such person or company so selected shall be regarded as the agent of the shipper, consignee or owner of said property, and as such alone liable, and Kamino Air Transport, Inc. shall not be, in any event, responsible for the negligence or non-performance of such company or person, nor for any error of judgement or misinterpretation of instructions and in no event shall the shipper, consignee or owner of said property demand or recover beyond the sum of $ 50.00 (or the invoice value thereof if less) at which each package is hereby valued.

 (Kamino Ex. D, emphasis added.)

 Kamino also would issue an air waybill, the front of which provides that: "THE SHIPPER'S ATTENTION IS DRAWN TO THE NOTICE CONCERNING CARRIER'S LIMITATION OF LIABILITY. Shipper may increase such limitation of liability by declaring a higher value for carriage and paying a supplemental charge if required." (Kamino Supp. Br. Ex. 2: Kamino Standard Air Waybill; accord, Corbett 3/13/97 Aff. Ex. 7.) A box labeled "Declared Value for Carriage" is also included on the front of the air waybill. (Id.) The back of the air waybill contains the specific provision to which the notice on the front refers:

 (Id., reverse side, P 4.)

 These invoices and air waybills were familiar to Fountain and Highmead from their numerous prior dealings with Kamino. (Plf. 3(g) PP 17, 20, 22; Kamino 3(g) P 12; Galella Dep. at 32; Al-Najjar Dep. at 50-51, 141.)

 The Parties' Current Relationship in this Litigation

 The "present caption does not reflect the true state of the parties' relationships. Fountain is now a plaintiff suing Kamino" along with Highmead. (Corbett 3/27/97 Aff. P 8.) Fountain and Highmead are identically situated with respect to the pending motions as to the enforceability of Kamino's liability limitation. Therefore, for purposes of simplification, the Court will refer to Fountain and Highmead together as "Fountain" for the remainder of this Report and Recommendation. Plaintiff also settled with Galaxco. (Memo Endorsed Order dated 1/23/97.) Finally, Cargo Max has not responded to ...


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