
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________          No. 92-1903                            HILL CONSTRUCTION CORPORATION,                        D/B/A HILL HELICOPTERS RENTAL SERVICE,                                 Plaintiff, Appellee,                                          v.                               AMERICAN AIRLINES, INC.,                                Defendant, Appellant.                                      __________          No. 92-1992                            HILL CONSTRUCTION CORPORATION,                        D/B/A HILL HELICOPTERS RENTAL SERVICE,                                Plaintiff, Appellant,                                          v.                               AMERICAN AIRLINES, INC.,                                 Defendant, Appellee.                                 ____________________                    APPEALS FROM THE UNITED STATES DISTRICT COURT                           FOR THE DISTRICT OF PUERTO RICO                    [Hon. Jose Antonio Fuste, U.S. District Judge]                                              ___________________                                 ____________________                                        Before                                 Breyer, Chief Judge,                                         ___________                        Torruella* and Selya, Circuit Judges.                                              ______________                                 ____________________            Ricardo F. Casellas with whom  Jacqueline D. Novas and Fiddler,            ___________________            ___________________     ________          Gonzalez & Rodriguez were on brief for American Airlines, Inc.          ____________________            Jose  E. Alfaro  Delgado with  whom Calvesbert  & Brown  was on            ________________________            ___________________          brief for Hill Construction Corp.                                 ____________________                                    June 29, 1993                                 ____________________          _____________________          *Judge  Torruella  heard  oral   argument  in  this  matter,  and          participated in the  semble but,  after deciding  that he  should          recuse himself, he  did not  participate in the  drafting or  the          issuance of  the panel's  opinion.  The  remaining two  panelists          therefore issue this opinion pursuant to 28 U.S.C.   46(d).                       BREYER,  Chief Judge.  American Airlines appeals a                                ___________             judgment requiring  it to pay approximately  $22,000 to Hill             Construction Corporation  as a  result of  American's having             temporarily lost, and then  damaged, a helicopter blade that             Hill  had  asked  American  to  ship  from  Puerto  Rico  to             California.     American  does  not  contest   the  fact  of             liability.   Rather,  it argues  that the  court  lacked the             power to award damages  greater than the maximum permissible             under a contract provision limiting American's liability for             cargo "lost, damaged or delayed" to $9.07 per pound (a total             of $1,814  in this case).  The district court found that the             "liability limitation" did not apply.  In our view, however,             the  limitation  is  valid   and  applicable.    And,  well-             established  legal  principles  require  us  to  reverse the             district court's determination.                                          I                                      Background                                      __________                       The  record,  read favorably  to  Hill,  shows the             following:                        1)   On  August  10,  1990,  a  Hill  Construction                            employee  brought  a   helicopter  blade   to                            American  Airlines'  cargo  terminal  in  San                            Juan,  Puerto  Rico,  and signed  (on  Hill's                            behalf)  an  American  "air  waybill"   --  a                            contract that obliged American, in return for                            payment, to ship the blade to California.                       2)   The  air  waybill  said  on  its   face  that                            provisions  on  its   "reverse  side"   would                            "limit"   American's  "liability   for  loss,                            damage, or delay in  certain instances."  The                            reverse side  said, among other  things, that                            American's   liability   for   cargo   "lost,                            damaged, or delayed" was limited to $9.07 per                            pound  (plus  transportation charges)  unless                            the shipper declared a  higher value and paid                            an additional charge. Hill's employee did not                            fill in the "declared value" box on the front                            of  the bill,  nor did  the employee,  in any                            other way, declare  a higher  value, nor  did                            the employee pay any additional charge.                                     3)   American  accepted the blade for carriage and                            promptly lost the blade.                       4)   About seven months later, in March 1991, in a                            San Juan air  cargo warehouse  near the  sea,                            American found  a  crate containing  what  it                            thought was the missing blade.   It contacted                            Hill's "administrator," Ms. Dorothy Hill, who                            came to the warehouse.  An American  employee                            (contrary to Ms. Hill's advice) began to open                            the crate with a  forklift.  Inside, Ms. Hill                            found  the  missing blade,  seriously damaged                            both  by the  forklift and  by the  salty sea                            air.                        After these events, Hill Construction brought this             lawsuit against American.  After a trial, the district court             found  American "negligent  in the  handling  of plaintiff's             cargo."    It decided that  the liability limitation  either             was invalid or, alternatively, did not apply to so serious a             violation  of  the   transportation  contract.     And,   it             consequently  awarded  full compensatory  damages  of almost                                         -3-                                          3             $22,000,  the value of the blade.  American now appeals this             damage award.                                          II                                       The Law                                       _______                       Where air carriage contracts set forth limitations             on  carrier cargo liability  in a "reasonably communicative"             form and offer the shipper a choice of  paying a higher rate             for greater protection,  federal courts have  normally found             those  limitations lawful.   See  (1)  post-deregulation air                                          ___             carrier cases,  e.g., Deiro v. American  Airlines, Inc., 816                             ____  _____    ________________________             F.2d  1360, 1364-65 (9th  Cir. 1987); Husman  Constr. Co. v.                                                   ___________________             Purolator Courier Corp., 832 F.2d  459, 461 (8th Cir. 1987);             _______________________             Arkwright-Boston Mfrs.  Mutual  Ins. Co.  v.  Great  Western             ________________________________________      ______________             Airlines, Inc., 767 F.2d 425,  426-27 (8th Cir. 1985); First             ______________                                         _____             Pennsylvania Bank v. Eastern  Airlines, Inc., 731 F.2d 1113,             _________________    _______________________             1115, 1122 (3d  Cir. 1984); Reece  v. Delta Airlines,  Inc.,                                         _____     _____________________             731 F.  Supp.  1131, 1134  (D.Me.  1990); Neal  v.  Republic                                                       ____      ________             Airlines, Inc., 605 F.  Supp. 1145, 1148-49 (N.D.Ill. 1985);             ______________             see also Saul Sorkin, 2 Goods in Transit [hereinafter, Goods             ________                ________________               _____             in Transit]   13.07[1] at 13-79-82 & n.11,   13.07 [3][b] at             __________             13-90 & n.48  (1976 &  Supp. 1990) and  cases cited  therein                                                _________________________             (noting  continued  enforcement  of   liability  limitations             despite deregulation of air carriers); (2) regulated carrier                                         -4-                                          4             cases,  e.g.,  American  Cyanamid  Co.  v.  New  Penn  Motor                     ____   _______________________      ________________             Express, Inc., 979 F.2d 310, 313, 316 (3d Cir. 1992); Hughes             _____________                                         ______             Aircraft Co.  v. North  American Van  Lines, Inc.,  970 F.2d             ____________     ________________________________             609, 611-13 (9th Cir.  1992); Co-Operative Shippers, Inc. v.                                           ___________________________             Atchison,  Topeka & Santa Fe  Ry. Co., 840  F.2d 447, 451-52             _____________________________________             (7th Cir. 1988); Polyplastics, Inc. v. Transconex, Inc., 827                              __________________    ________________             F.2d  859 (1st Cir. 1987); Anton v. Greyhound Van Lines, 591                                        _____    ___________________             F.2d  103 (1st  Cir. 1978);  National Motor  Freight Traffic                                          _______________________________             Ass'n,  Inc. v.  Interstate Commerce  Comm'n, 590  F.2d 1180             ____________     ___________________________             (D.C. Cir. 1978), cert.  denied, 442 U.S. 909  (1979); North                               _____________                        _____             American Phillips Corp. v. Emery Air Freight Corp., 579 F.2d             _______________________    _______________________             229, 232  (2d Cir.  1978); Dassin  v. Eastern  Airlines, 501                                        ______     _________________             F.2d 74 (9th Cir. 1974), cert. denied, 419 U.S. 1121 (1975);                                      ____________             Thomas  v. Trans  World  Airlines, 457  F.2d  1053 (3d  Cir.             ______     ______________________             1972);  Quasar Co. v. Atchison,  Topeka & Santa  Fe Ry. Co.,                     __________    _____________________________________             632  F.  Supp. 1106,  1111-13  (N.D.  Ill.  1986);  cf.  (3)                                                                 ___             statutes allowing limitations on  liability, e.g., 46 U.S.C.                                                          ____                1304(5) (carriage of goods at sea); 49 U.S.C.    10505(e)             (rail carriers), 10730(b)(1) (motor  transport), 11707(c)(4)             (common carriers).                         In  a  commercial  context, liability  limitations             have  certain advantages.   They permit  a carrier  to avoid             unforeseeably high liability for especially  valuable cargo;                                         -5-                                          5             they permit shippers of ordinary items to pay somewhat lower             freight bills; and they permit shippers of valuable items to             choose between  paying an  insurance premium to  the carrier             and obtaining,  perhaps less  expensive, insurance  on their             own.   See Husman  Constr. Co., 832  F.2d at  462; cf.  Alan                    ___ ___________________                     ___             Schwartz  & Robert E.  Scott, Commercial Transactions 122-23                                           _______________________             (1991).  On  the other hand,  such clauses risk  unfairness,             where,  for example, a shipper  is, in fact,  unaware of the             limitation  and  his  choices.   Yet,  the  requirements  of             reasonably communicative  notice and  an opportunity  to buy             increased  coverage for a premium payment lessen the risk of             unfairness.  And, as we  have said, balancing advantages and             disadvantages,  both Congress and  the courts  have approved             the use of such clauses.                        The contract before  us contains typical, standard             form clauses  which reasonably communicate the limitation on             liability.  The reverse side of the "air waybill" contains a             series  of  clauses   setting  forth  transport  conditions,             written in  ordinary sized  print and separated  by spacing.             On the  copy submitted  at trial, these  clauses are  fairly             easy  to read (except for the blurring of a few non-critical             words that may reflect poor duplication).  The clauses  make             clear that the  carrier limits its liability  for cargo that                                         -6-                                          6             is "lost, damaged or  delayed" to $9.07 per pound,  but that             the shipper may  avoid the limitation by declaring  a higher             value and paying  a greater charge.   The front side  of the             bill clearly refers the reader to the  back of the bill, for             it  says, in  ordinary  sized type,  set  forth clearly  and             separately from other words on the page:                       This nonnegotiable airbill is a contract                       governed by Law and by the provisions on                       the  reverse  side.    Such  provisions,                       among                       other  things,  exclude  or   limit  the                       Carrier's liability for loss,  damage or                       delay in certain circumstances.                           The front side  of the  bill also contains  a box  captioned             "declared  value," which, in this case, was left blank.  Cf.                                                                      ___             Federal Express v. Paris  Business Forms, Inc., 46 Pa.  D. &             _______________    ___________________________             C.  3d 262  (1988) (standard  provisions clearly  printed on             front and reverse of airbill afforded sufficient opportunity             to declare higher value).                           Ms. Hill  testified that American's agent  did not             tell  either  her  or   her  employee  about  the  liability             limitation clauses, and that, in fact,  neither she, nor her             employee, knew about such  clauses.  But, we do  not believe             that, in  these factual circumstances,  American was obliged             to call the liability limitation to its customers' attention             orally.  The  context is commercial.   Hill Construction had                                         -7-                                          7             been in business  in Puerto  Rico for eighteen  years.   Its             employees  had  previously  shipped  helicopter  parts  from             Puerto  Rico to the mainland.  In this context, a reasonably             prominent  writing, not  in  particularly  small print,  set             forth  with reasonable  clarity on  the front  of a  printed             airbill, would seem sufficient to communicate  the liability             limitation,  or  at  least  to impose  upon  the  commercial             customer a further obligation to read (rather than to impose             upon the carrier a  further obligation to point to)  what is             written. See Husman  Constr. Co.,  832 F.2d  at 461  (citing                      ___ ___________________             First Pennsylvania Bank, 731 F.2d at 1115); cf. Hopper Furs,             _______________________                     ___ ____________             Inc.  v. Emery Air Freight  Corp., 749 F.2d  1261, 1264 (8th             ____     ________________________             Cir. 1984).                         The carrier  also has fulfilled  its obligation to             offer  a further  "insurance"  option.   The contract  makes             clear  that the carrier can  declare a higher  value and buy             full  coverage for an additional  fee.  Hill  has offered no             evidence  to  suggest  that  the  amount  of  this  fee  for             additional  cargo  protection was  unreasonable  for  an air             carrier in American's market.                       This  valid liability  limitation  applies in  the             present  situation. The  provisions refer  to cargo  that is             "lost, damaged or delayed,"  and the circumstances here fall                                         -8-                                          8             within this language.  The clause is enforceable despite the             fact  that American  may  never have  put  the blade  on  an             airplane.   A remedial contract clause, such as this one, is             designed  to  take  effect  precisely where,  as  here,  the             carrier has  broken the basic  carriage contract.   As Judge             Kaufman pointed out more than forty years ago,                        Only in case of a misdelivery, negligent                       injury, loss or similar  misfortune does                       a valuation clause come into use.  Hence                       the  Federal  courts  have rightly  held                       that the limitation of  liability clause                       is  designed  for  and  does  survive  a                       breach of the contract of carriage.             Lichten  v.  Eastern Airlines,  Inc.,  87  F.Supp. 691,  697             _______      _______________________             (S.D.N.Y. 1949). Compare Restatement (Second) of Contracts                                _______ _________________________________             237 (breach discharges other party's duties  under contract)                                                  ______             with, e.g., American  Cyanamid Co., 979 F.2d  at 316 (citing             ____  ____  ______________________             Quasar Co., 632 F.Supp. at 1108 (breach does  not invalidate             __________             liability-limiting  remedial  provision  designed to  govern             consequences of breach)).                         Hill argues that a Ninth Circuit case, Coughlin v.                                                              ________             Trans World Airlines, Inc.,  847 F.2d 1432 (9th  Cir. 1988),             __________________________             is  to the  contrary, but  Coughlin involved  rather special                                        ________             circumstances.     A  special  contract   provision  gave  a             passenger  the  right to  carry  valuables  in the  airplane             cabin; the airline  refused to  allow a widow  to carry  her                                         -9-                                          9             husband's ashes in  the cabin; the  airline lost the  ashes;             and   the  court  (in  a  brief  per  curiam  opinion)  held                                              ___________             inapplicable  a provision  limiting the  airline's liability             for  loss  of valuables.    Unlike this  case,  the Coughlin                                                                 ________             contract  involved a  separate, liability-limitation-related             contractual promise,  namely  a promise  that the  passenger             might  personally monitor  the  safety of  the valuables  by             carrying  them in the cabin.   One might  read the liability             limitation as  conditioned on  fulfillment of that  promise.             See 2  Goods in Transit    13.07[4] at 13-90 &  n.49.  Then,             ___    ________________             since  the carrier did not permit the passenger to carry the                                    ___             ashes, it failed to satisfy the condition, and the liability             limitation did not take effect.  See id. at 1433.  We do not                                              ___ ___             see how otherwise, consistent  with prior authority, to read             this  case.   See, e.g.,  Pinion v.  Dow Chemical,  928 F.2d                           ___  ____   ______     ____________             1522, 1536 (11th  Cir.) (case should  be read as  consistent             with prior precedent if possible), cert. denied,  112 S. Ct.                                                ____________             438 (1991).  And, as  so read, the case provides no  support             for Hill's claim here,  where there is no  relevant special,             liability-limitation-related  condition   that  the  carrier             failed  to  fulfill.   As  we  have  just  pointed out,  the             contract  here does  not condition the  liability limitation             upon the carrier's satisfying  its basic, general promise to                                         -10-                                          10             transport  the  goods, for  the  parties  normally intend  a             liability limitation  to apply, not to  disappear, when this             type of general promise is breached.  See pp. 8-9, supra.                                                   ___          _____                       Hill makes  one further argument.  It  points to a             legal  doctrine,  called  the  "deviation  doctrine,"  which             originated in maritime law.   Applying that doctrine, courts             would  hold  liability limitations  inapplicable  when ships             departed significantly from prearranged routes that they had             promised to take.  See 2  Goods in Transit   13.13[1] at 13-                                ___    ________________             140-42  and cases cited therein.   Hill has  found two state                     _______________________             cases, construing  federal law, which applied  this doctrine             outside the maritime context, where  the carrier acted so as             "fundamentally"  to  change  the  foreseeable  risks to  the             cargo.  See,  e.g.,  Information  Control  Corp.  v.  United                     ___   ____   ___________________________      ______             Airlines  Corp., 73 Cal. App. 3d 630 (1977); Philco Corp. v.             _______________                              ____________             Flying  Tiger  Line, Inc.,  171  N.W.2d 16  (Mich.  Ct. App.             _________________________             1969).  But see Grant Gilmore  & Charles L.  Black, Jr., The                     _______                                          ___             Law of Admiralty    3-42  at 182 (2d  ed. 1975)  ("deviation             ________________             doctrine"   limited  to   geographic  departures).     Given                                       __________             American's seriously  negligent  conduct, says  Hill,  those             state cases require us to invoke the "deviation doctrine" to             set aside the liability limitation here.                                          -11-                                          11                       We do  not  believe,  however,  that  these  cases             require the result  for which Hill  argues.  In each  of the             state cases, the carrier made a special, separate promise to             the shipper about special conditions of carriage designed to             lessen the risk  of harm to the  shipper's particular cargo.             In the  first  case, United  Airlines  promised  Information             Control  Corporation (and  later  specially confirmed  in  a             telephone  conversation)  that  it  would  place Information             Control's  computers on  a specific  flight and  fly without             stopovers.  See Information Control, 73 Cal. App. 3d at 632-                         ___ ___________________             33.   In the second case, Flying Tiger specifically promised             Philco that  it would store its  computer materials upright.             See Philco Corp., 171 N.W.2d at 17-18.  We suspect  that, as             ___ ____________             in  Coughlin, the  state courts  saw failure  to live  up to                 ________             these  separate,  risk-related   promises  (special  to  the             particular shipment at issue)  as a "fundamental"  departure             from conditions  precedent  to the  "boilerplate"  liability             limitation's  taking effect.   See  Restatement (Second)  of                                            ___  ________________________             Contracts   203(c)  & cmt. e  (specific provisions or  later             _________             additions supersede more general contract language); Baloise                                                                  _______             Ins. Co. v. United Airlines, 723 F. Supp. 195, 199 (S.D.N.Y.             ________    _______________             1989)  (distinguishing Information Control where carrier was                                    ___________________             under no obligation to follow specific route).                                         -12-                                          12                       In the case  before us  there was no  breach of  a             special transport  promise.   Nor was there  any "deviation"             from the  kind of  thing one  might expect  to  find when  a             carrier has  "lost, damaged, or delayed" cargo.   The record             does  not  provide  adequate  basis for  a  court's  finding             transportation-related circumstances that  fell outside  the             range  of those in which  the parties intended the liability             limitation to apply. See,  e.g., American Cyanamid, 979 F.2d                                  ___   ____  _________________             at 315 (citing Deiro, 816 F.2d at 1366 (liability limitation                            _____             valid   "regardless  of   the   degree   of  the   carrier's             negligence")); Coughlin, 847 F.2d at 1433; C.A. La Seguridad                            ________                    _________________             v. Delta Steamship Lines, 721 F.2d 322, 325 (11th Cir. 1983)                _____________________             (limitation  valid where cargo  never delivered); Hellyer v.                                                               _______             Nippon  Yesen Kaisya,  130  F. Supp.  209, 210-11  (S.D.N.Y.             ____________________             1955) (same); Rockwell Int'l  Corp. v. M/V Incotrans Spirit,                           _____________________    ____________________             707 F.  Supp. 272,  273 (S.D.  Tex. 1989) (limitation  valid             where damage occurred in warehouse);  Neal, 605 F. Supp.  at                                                   ____             1149 &  n.3 (suggesting  limitation valid  even  in case  of             willful misconduct); Schiff v.  Emery Air Freight Corp., 332                                  ______     _______________________             F. Supp.  1057, 1059 (D. Mass.  1971) (distinguishing Philco                                                                   ______             to uphold limitation where  no intentional wrong shown); cf.                                                                      ___             Rocky Ford  Moving Vans,  Inc.  v. United  States, 501  F.2d             ______________________________     ______________                                         -13-                                          13             1369,  1372 (8th  Cir.  1974) (refusing  to apply  deviation             doctrine outside maritime law).                       These  federal  rulings   apply  even  though  the             negligence here was  serious, for (as  these cases show)  in             the  absence of  some  special indication,  courts will  not             impute  to  commercial  parties  (agreeing  to  a  liability             limitation) an intent  to litigate the degree to which loss-             causing negligence  was ordinary,  gross, or egregious.   We             add that we have found a  case that suggests, in dicta, that             the willful  nature of  misconduct might make  a difference.             Glickfield v. Howard Van Lines, Inc., 213 F.2d 723, 727 (9th             __________    ______________________             Cir. 1954); cf. Schiff, 332 F.  Supp. at 1059.  But, we need                         ___ ______             not decide  whether or not we agree  with that dicta for, in             this case, there is no showing of willfulness.                       For   these   reasons,   the    district   court's             determination that the liability limitation was inapplicable             in  this case is reversed.  The  judgment is vacated and the             case  is remanded  for further  proceedings consistent  with             this  opinion.    (Our  disposition  of the  case  makes  it             unnecessary to consider Hill's cross-appeal.)                       So ordered.                        __________                                                        -14-                                          14
