                                                                                                                           Opinions of the United
2008 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


2-27-2008

Warner Lambert v. LEP Profit Intl
Precedential or Non-Precedential: Precedential

Docket No. 06-3244




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                               PRECEDENTIAL

UNITED STATES COURT OF APPEALS
     FOR THE THIRD CIRCUIT

              ________

   Nos. 06-3244, 06-3340, 06-3341
             _________


  WARNER LAMBERT COMPANY

                  v.

LEP PROFIT INTERNATIONAL, INC.;
LEP INTERNATIONAL (JAPAN) LTD,;
FEDERAL EXPRESS CORPORATION;
       BOEING COMPANY;
     JOHN DOES 1 THROUGH 5

    LEP Profit International, Inc.,

                       Appellant No. 06-3244

         ________________


             (continued)
        ________________

 WARNER LAMBERT COMPANY,

                      Appellant No. 06-3340

                    vs.

LEP PROFIT INTERNATIONAL, INC.;
LEP INTERNATIONAL (JAPAN) LTD,;
FEDERAL EXPRESS CORPORATION;
       BOEING COMPANY;
     JOHN DOES 1 THROUGH 5

        ________________


  WARNER LAMBERT COMPANY

                v.

LEP PROFIT INTERNATIONAL, INC.;
LEP INTERNATIONAL (JAPAN) LTD,;
FEDERAL EXPRESS CORPORATION;
       BOEING COMPANY;
     JOHN DOES 1 THROUGH 5

     LEP International (Japan) Ltd.,
                    Appellant No. 06-3341
       ________________


                2
                         _________

     On Appeal from the United States District Court
                for the District of New Jersey
 (D.C. Civil Nos. 99-cv-03618; 99-cv-03619; 00-cv-00228)
      District Judge: Honorable Katharine S. Hayden
                         __________

                Argued September 12, 2007

    Before: RENDELL, FUENTES, and CHAGARES,
                  Circuit Judges

                  Filed: February 27, 2008
                         __________

James F. Campise
Cozen & O’Connor
45 Broadway, Atrium, Suite 1600
New York, NY 10006-0000

Andrew R. Spector [ARGUED]
Hyman Spector & Mars
150 West Flagler Street, Suite 2701
Miami, FL 33130-0000
Counsel for Appellant
LEP Profit International, Inc.

(continued)


                              3
Robert C. von Ohlen Jr.
Kaplan, von Ohlen & Massamillo
120 North LaSalle Street, 24th Floor
Chicago, IL 60602-0000
Counsel for Appellee
Federal Express Corporation

James A. Saville Jr.
Hill, Rivkins & Hayden
175 North Broadway
South Amboy, NJ 08879-1638

Keith B. Dalen    [ARGUED]
Hill, Rivkins & Hayden
45 Broadway, Suite 1500
New York, NY 10006-0000
Counsel for Appellant
LEP International (Japan) Ltd.

Robert G. Rose [ARGUED]
Day Pitney
P.O. Box 1945
Morristown, NJ 07962-0000

John P. Scordo    [ARGUED]
Day Pitney
200 Campus Drive
Florham Park, NJ 07932
Counsel for Appellee
Warner Lambert Company


                              4
                          __________

                 OPINION OF THE COURT
                       __________


RENDELL, Circuit Judge.

        Warner-Lambert Company (“Warner-Lambert”) appeals
from the District Court’s entry of final judgment limiting the
liability of Federal Express Corporation (“FedEx”), LEP Profit
International Inc. (“LEP Profit”), and LEP International (Japan),
Ltd. (“LEP Japan”) to $9.07 per pound, pursuant to Article 22(2)
of the Warsaw Convention, for pharmaceutical cargo destroyed
when a FedEx plane crashed on July 31, 1997, while attempting
to land at Newark International Airport. The shipment had left
Japan on July 30, 1997, destined, ultimately, for Puerto Rico.
LEP Profit and LEP Japan individually performed various
functions in connection with the transport of the troglitazone
shipment at issue, such as arranging and coordinating
transportation, engaging outside contractors (including FedEx),
and preparing necessary documentation and air waybills. The
District Court held that LEP Profit and LEP Japan acted as
“indirect carriers” with respect to the shipment at issue,
subjecting them to common carrier liability under the Warsaw
Convention, as opposed to liability as “freight forwarders.”
Warner-Lambert, LEP Profit, and LEP Japan filed appeals. For


                               5
the reasons stated below, we will affirm the District Court’s
classification of LEP Profit and LEP Japan as indirect carriers,
but reverse the District Court’s entry of final judgment limiting
the liability of FedEx, LEP Profit, and LEP Japan, and remand
for further proceedings consistent with this opinion.

                        DISCUSSION

       This Court exercises plenary review over a grant of
summary judgment, Onyeanusi v. Pan Am. World Airways, Inc.,
952 F.2d 788, 790 (3d Cir. 1992), and reviews de novo pure
questions of law and the application of law to uncontested facts,
Ilchuk v. Att’y Gen. of U.S., 434 F.3d 618, 621 (3d Cir. 2006).



       This case is fact-intensive and the relevant facts were
well catalogued by the District Court. We repeat them herein
below as necessary to our discussion. Our resolution of the
issues was aided not only by a review of the record, briefs, and
case law, but also by oral argument.

I.     Classification of LEP Profit and LEP Japan

       The characterization of LEP Profit and LEP Japan as
either “indirect carriers” or “freight forwarders” turns on the
specific involvement of each in the arrangement and oversight
of the troglitazone shipment at issue. It presents a close
question in the instant factual setting. There is no dispute as to

                                6
the parties’ respective roles in the shipment and the terms of the
documents that they drafted, filled in, or were governed by. The
challenge lies in fitting what they did neatly within the category
of “indirect carrier” or “freight forwarder” under the four-factor
analysis that is customarily used. See Zima Corp. v. M.V.
Roman Pazinski, 493 F. Supp. 268, 273 (S.D.N.Y. 1980).

         Both LEP Profit and LEP Japan urged that they were
freight forwarders in connection with this shipment.1 The
District Court examined the functions performed by each and,
after a thorough and well-reasoned analysis, concluded that they
had instead acted as indirect carriers. We have reviewed the
relevant case law distinguishing between freight forwarders and
indirect carriers, and agree with this conclusion. Accordingly
we will affirm this aspect of the District Court’s order.

II.    Limitation of Liability

        The extent of FedEx’s liability (and consequently of LEP
Profit and LEP Japan) depends entirely on how we read Article
8(c) of the Warsaw Convention, which—together with
Article 9—excepts from the limitation of liability carriers who


  1
   Usually, entities in the position of LEP Profit and LEP Japan
urge or concede that they are carriers so as to be covered by the
protections of the Warsaw Convention. It is rare that the
position is taken, as it is here, that they are, instead, freight
forwarders.

                                7
fail to list “agreed stopping places” on the air waybill. Here, the
relevant transportation of goods was from Japan to Puerto Rico,
with stops in Anchorage, Alaska, and Newark, New Jersey. The
FedEx flight from Anchorage crashed while landing on the
Newark runway, and the entire shipment of pharmaceuticals was
destroyed. None of the air waybills prepared in connection with
the shipment listed Anchorage, nor did they indicate that once
Flight 78 (the FedEx flight from Tokyo to Anchorage)
terminated in Anchorage, the cargo would be transferred onto
Flight 14, which in turn would terminate at Newark Airport,
where the cargo was to be transferred by truck to JFK. Warner-
Lambert seized upon this omission as its basis for imposing
liability on FedEx, LEP Profit, and LEP Japan for the full value
of the goods rather than the $9.07 per pound limitation under the
Warsaw Convention.

       Our ruling in this regard has limited significance because
the Hague Protocol, which became effective in 1999, changed
the relevant provision so as to require listing of only those
stopping places that give international character to an otherwise
domestic or single-country flight.2 Nevertheless, it is of obvious


   2
    Article 8(b) of the Convention, as amended by the Hague
Protocol, requires that the air waybill contain, “if the places of
departure and destination are within the territory of a single
High Contracting Party, one or more agreed stopping places
being within the territory of another State, an indication of at
                                                    (continued...)

                                8
significance to the parties involved in this mishap, which
occurred in 1997, and parties to any other cases currently in
litigation involving pre-1999 incidents subject to the Warsaw
Convention.3

       The District Court concluded that the “agreed stopping
places” requirement should be read as limited only to flights that
had both their place of origin and destination within the territory
of a single High Contracting Party, but had an interim stop
outside the territory of the Party (e.g., a flight from Los Angeles
to New York, with an interim stop in Toronto). The District
Court reasoned that “the driving force of 8(c) as a whole is to
ensure notice and acknowledgment, not as to every stop, but as
to stops [that] pertain to and indicate the international character
of the shipment of the flight.”             Dist. Ct. Op. at 22.
“Consequently,” the District Court continued, “8(c)’s
requirement to list ‘agreed stopping places’ is inextricably


  2
   (...continued)
least one such stopping place.” Protocol to Amend the
Convention for the Unification of Certain Rules Relating to
International Carriage by Air signed at Warsaw on 12 October
1929, Sept. 28, 1955, 478 U.N.T.S. 371 (“Hague Protocol”).
   3
    We agree with the District Court that the Hague Protocol
should not be given retroactive effect. See Arkwright Mut. Ins.
Co. v. LEP Profit Int’l, Inc., No. 99-3618, slip op. at 17
(E.D. Pa. Aug. 16, 2001) (“Dist. Ct. Op.”) (citing Fujitsu Ltd. v.
Federal Express Corp., 247 F.3d 423, 431-34 (2d Cir. 2001)).

                                9
related to making sure the parties are aware of the international
character of the flight, and not a very general (and overly
burdensome) notice requirement that requires every stop to be
listed.” Dist. Ct. Op. at 22-23. It reasoned that, here, because
the origin of the shipment and the destination were in different
countries, no stopping places needed to be listed, and the
exception to limited liability did not apply. Thus, the District
Court granted FedEx’s motion for partial summary judgment
and held that FedEx was entitled to limited liability under the
Convention.

        We respectfully disagree with the District Court’s
conclusion that the strictures of Article 8(c) are satisfied as long
as the air waybill gives the shipper notice of the international
nature of the shipment. Based on the Convention’s plain text,
the drafting history of Article 8, and its overall structure, we do
not find its application to be so limited. Rather, we find the
jurisprudence of the Court of Appeals for the Second Circuit,
which requires the listing of all stopping places contemplated by
the carrier and which represents the “prevailing view” in this
area, see Fireman’s Fund Ins. Co. v. Panalpina, Inc., No. 00 C
2595, 2001 WL 969032, at *2 (N.D. Ill. Aug. 24, 2001), to be
both persuasive and on point.4 The meaning the District Court


    4
     See, e.g., Tai Ping Ins. Co. v. Northwest Airlines, Inc.,
94 F.3d 29, 33 (2d Cir. 1996) (“Concededly, the air waybill . .
. reveals the international character of the flight and the
                                                (continued...)

                                10
  4
    (...continued)
applicability of the Warsaw Convention. Nevertheless, if the air
waybill does not incorporate the agreed stopping places
effectively, the air waybill does not contain the information
required.”); Intercargo Ins. Co. v. China Airlines, Ltd., 208 F.3d
64, 69-70 (2d Cir. 2000) (finding that Article 8(c) had not been
satisfied as carrier failed to properly incorporate Taipei as an
“agreed stopping place” even though point of departure (Los
Angeles) and destination (Hong Kong) clearly noticed
international nature of shipment); Fed. Ins. Co. v. Yusen Air &
Sea Servs. Pte. Ltd., 232 F.3d 312, 314-15 (2d Cir. 2000) (same,
with departure (Singapore), destination (Massachusetts), and
stopping place (Amsterdam)); see also Sotheby’s v. Fed.
Express Corp., 97 F. Supp. 2d 491, 498 (S.D.N.Y. 2000)
(rejecting argument that “agreed stopping places” refers to
literal agreement between shipper and carrier before waybill is
issued, and holding that Article 8(c) “requires the carrier to
include on the air waybill all stopping places contemplated by
the carrier”); Mitsui Marine & Fire Ins. Co. v. China Airlines,
Ltd., 101 F. Supp. 2d 216, 221 (S.D.N.Y. 2000) (same).
          We note FedEx’s contention that the terms and
conditions of its Service Guide— which include the statement:
“There are no stopping places which are agreed at the time of
tender of the shipment, and we reserve the right to route the
shipment in any way we deem appropriate”—specifically
disclaimed the need to list stopping places. FedEx cites the
Ninth Circuit’s decision in Insurance Co. of North America v.
Federal Express Corp., 189 F.3d 914 (9th Cir. 1999), in support
                                                    (continued...)

                               11
gave to the language of 8(c) requires an additional caveat that
simply does not appear in the text. Moreover, the later change
effectuated by the Hague Protocol could just as easily be viewed
as changing and restricting, rather than clarifying, the exceptions
for limited liability. In addition, the drafting history of the
Convention reveals another animating purpose for the need to
list “agreed stopping places,” namely the desire of shippers to
know precisely where their goods would be landing so as to
anticipate the applicability of other laws, potential risks, customs
regulations, and the like.5


  4
    (...continued)
of this contention. In Insurance Co. of North America, however,
the FedEx air waybill expressly incorporated the Service Guide
into the waybill's “Conditions of Contract.” There was no such
incorporation here, and thus, Insurance Co. of North America is
distinguishable on its facts. We therefore express no opinion as
to what effect, if any, a proper incorporation would have had on
this case.
      5
     The minutes of the 1929 Convention recount a dialogue
between the delegate from Switzerland and the Convention’s
official reporter in which the Swiss delegate urged that Article
8(c) require an indication of the “route to be followed,”
expressing concerns about possible seizure of goods, levying of
fines, and varying customs regulations. See Minutes, Second
International Conference on Private Aeronautical Law, Oct. 4-
12, 1929, Warsaw, 158-59 (R. Horner & D. Legrez trans. 1975).
                                                  (continued...)

                                12
        Finally, we find that the mere listing of Flight 78 (as
“FX078/30” and “FX78/30”) on the air waybills at issue was not
sufficient to satisfy the requirements of Article 8(c), as the
record indicates that the information relayed was not complete.6
Thus, having failed to satisfy the requirement that Anchorage be
listed as an “agreed stopping place,” we conclude, pursuant to
Article 9, that no carrier involved in this case—whether direct
or indirect—may avail itself of the limited liability provisions of

  5
   (...continued)
The official reporter objected to this suggestion, stating that
“[a]ll the guarantees which we need can be found in the words
‘the contemplated stopping places.’ Provided there is no stop in
any country overflown, there is nothing to be feared from the
authorities of this country.” Id. at 159. Accordingly, the
indication of the “route to be followed” was thereafter deleted
from Article 8(c), id. at 161, and the language was included in
Article 8(p) as an optional particular.
  6
    See Intercargo, 208 F.3d at 70 (rejecting same argument as
proffered by Appellees here and stating that “when a carrier
seeks to comply with Article 8(c) without listing stopping places
but instead incorporates by reference its scheduled timetables,
the flight information included on the waybill must be both
accurate and complete.”); id. at 69 (“[C]arrier must include on
the waybill accurate and complete information as to transfer
flight numbers and dates” in order to incorporate timetables by
reference); see also Yusen, 232 F.3d at 314-15 (relying on
Intercargo in rejecting same argument as proffered by Appellees
here).

                                13
the Warsaw Convention.7 Accordingly, we will reverse the
District Court’s grant of summary judgment in favor of FedEx.



                        CONCLUSION

       For the reasons set forth above, we will AFFIRM the
District Court’s classification of LEP Profit and LEP Japan as
indirect carriers; REVERSE the District Court’s June 13, 2006
Amended Order of Final Judgment, which limited the liability
of Fed Ex, LEP Profit, and LEP Japan pursuant to Article 22 of
the Warsaw Convention; and REMAND for further proceedings
consistent with this Opinion.




    7
      We reach this conclusion notwithstanding the parties’
arguments that various provisions of their contracts and waybills
limit their liability. Pursuant to Article 23 of the Convention,
“[a]ny provision tending to relieve the carrier of liability or to
fix a lower limit than that which is laid down in th[e]
Convention shall be null and void.” Warsaw Convention art. 23.

                               14
FUENTES, concurring in part and dissenting in part.

       I join the majority in its affirmance of the District Court’s

finding that, in connection with this transaction, LEP Profit and

LEP Japan acted as “indirect carriers” and not as “freight

forwarders.”     However, I respectfully dissent from the

majority’s conclusion that the District Court’s finding that

FedEx was entitled to benefit from the limited liability provision

of the Warsaw Convention was in error. The majority reversed

the District Court’s decision on that issue because FedEx failed

to specifically list Anchorage, Alaska and Newark, New Jersey

as “agreed stopping places” on the air way bill for the relevant

transaction.




       As noted above, to be eligible for limited liability

protection, Article 9 of the Warsaw Convention requires that a



                                15
carrier comply with the Convention’s requirements for

documenting a given shipment in an “air waybill.” A proper

“air waybill” must contain certain particulars listed in Article 8

of the Warsaw Convention, including the following, which is

the text of subpart (c) and the disputed provision in this case:




       The agreed stopping places, provided that the carrier may
       reserve the right to alter the stopping places in cases of
       necessity, and that if he exercises that right, the alteration
       shall not have the effect of depriving the transportation
       of its international character.




       The majority here adopts an interpretation of 8(c)

articulated in a line of cases from the Second Circuit. These

cases found that all interim stops are encompassed by the phrase

“agreed stopping places,” so that failure to specifically list any

such stop on the waybill of an international flight renders the


                                16
carrier ineligible for limited liability protection.       See, e.g.,

Intercargo Ins. Co. v. China Airlines, Ltd., 208 F.3d 64, 69-70

(2d Cir. 2000); Tai Ping Ins. Co. v. Northwest Airlines, Inc., 94

F.3d 29, 31 (2d Cir. 1996). The rationale for interpreting 8(c)

in such a stringent fashion is that limited liability affords carriers

a “significant benefit”; as such, “omission of any required item

from the air waybill will result in the loss of limited liability

regardless of the commercial significance of the omission.”

Fujitsu Ltd. v. Federal Exp. Corp., 247 F.3d 423, 429 (2d Cir.

2001).




         The “primary purpose of the contracting parties to the

Convention,” however, was to “limit[] the liability of air

carriers.” Eastern Airlines, Inc. v. Floyd, 499 U.S. 530, 546

(1991). Our own jurisprudence suggests that in “order to further

the goals of uniformity and liability limitation, the Convention's

                                 17
provisions must be construed broadly. Indeed, the purposes of

the Convention must be furthered to the greatest extent

possible.” Onyeanusi v. Pan Am, 952 F.2d 788 (3d Cir. 1992)

(internal quotations and citations omitted). To read Article 8(c)

as imposing the draconian requirement that a carrier anticipate

and list all stopping places in order to qualify for limited liability

protection is certainly not a “broad” interpretation that furthers

the goal of limited liability for carriers to the “greatest extent

possible.”




       Instead, the majority’s interpretation embraces the

narrowest possible understanding of Article 8(c) by failing to

consider the significance of the latter portion of the provision.

That portion states that “if [the carrier] exercises [the right to

alter the stopping places] the alterations shall not have the effect

of depriving the transportation of its international character.”

                                 18
This safety valve ensures that all parties to the contract

understand and agree that the transportation in question qualifies

for limited liability protection under the Warsaw Convention

regardless of any alternate route that the carrier may select out

of necessity. As the District Court explained, the inclusion of a

safety valve demonstrates that the “driving force of 8(c) as a

whole is to ensure notice and acknowledgment, not as to every

stop, but as to stops [that] pertain to and indicate the

international character of the flight.” Dist. Ct. Op. at 22.




       The majority contends that the “meaning the District

Court gave to the language of 8(c) requires an additional caveat

that simply does not appear in the text.” Part II, supra at [9]. To

the contrary, it is the majority’s reading of Article 8(c) that

imposes upon carriers a burden far heavier than the provision

requires. To further the purpose of the Warsaw Convention to

                                19
the “greatest extent possible,” as mandated by Onyeanusi, this

Court should read Article 8(c) as imposing a requirement that

carriers list only those “agreed stopping places” that might

impact the international character of the flight and thus the

availability of limited liability protection to the carrier.8




  8
    Although the District Court did not reach its conclusion on
the issue of limited liability via application of the Hague
Protocol to the facts of this case, to do so, I believe, would have
lent further support to the court’s analysis. I respectfully
disagree with the majority’s contention that the “later change
effectuated by the Hague Protocol could just as easily be viewed
as changing and restricting, rather than clarifying, the exceptions
for limited liability.” Part II, at [9]. The Hague Protocol did not
furnish a different definition for the phrase “agreed stopping
places,” but merely clarified that only an interim stop that
affected the international character of the shipment qualified as
such an “agreed stopping place.” Courts have recognized that
if an “amendment clarifies prior law rather than changing it, no
concerns about retroactive application arise and the amendment
is applied to the present proceeding as an accurate restatement
of prior law.” Piamba Cortes v. American Airlines, Inc., 177
F.3d 1272, 1283 (11th Cir. 1999).

                                 20
For these reasons, I respectfully dissent.




                        21
