Facts
Plaintiff Uikirifi made two trips on Hawaiian Airlines (hereinafter "Hawaiian") from Honolulu to Pago Pago. On an August 7, 1987 trip, Hawaiian: lost two bags containing clothing which plaintiff valued at $1,926.64. On September 17, 1987 nine pieces of luggage valued by plaintiff at $5,055.24 were lost. Four boxes were said to contain 227 fine mats which the plaintiff valued at $2,270.00. The other five bags contained clothing. The District Court awarded plaintiff $1,929.00 on the first claim and $4,999.00 on the second.
Plaintiff Neru traveled on Hawaiian on February 8, 1987. He carried with him four pieces of baggage, two of which were lost. They contained auto parts that plaintiff valued at $2,286.70. The District Court awarded plaintiff relief in that sum.
Hawaiian has appealed these decisions maintaining that certain contractual clauses either bar or substantially limit the claims of Uikirifi and Neru.
Discussion
During the past decade the airline industry has undergone substantial deregulation and the tariff structure which airlines once could rely on to limit their baggage liability no longer exists. See 49 U.S.C. § 1551. At the outset, therefore, we reject any suggestion that these • cases may be simply disposed of because the baggage liability limitations at issue are "tariffs" that have the force and effect of law in binding passengers. This is not to say, however, that this Court is left to its own devices and that the contract law of American Samoa is all that we need look to in interpreting the contract of carriage which lies at [36] the heart of this controversy. There are rather detailed federal regulations which regulate the area of baggage liability,1 and even in areas not covered explicitly by federal rules, applying territorial law does not seem appropriate because of the "continued federal interest in air transportation." See Arkwright-Boston Manufacturers Mutual Insurance Co. v. Great Western Airlines, Inc., 767 F.2d 425, 427 (8th Cir. 1985). Federal common law should provide the rule of decision in these cases.
There are three major issues for decision. First, Hawaiian argues that it is absolved of any liability for the loss of these passengers’ bags because of contractual provisions purporting to exclude the classes of items Uikirifi and Neru carried from liability. Second, Hawaiian maintains that even if it has some liability, it is limited to $1250.00 per passenger because of compliance with federal regulations that allow limitations of liability to be incorporated by reference into air carriage contracts. Finally, plaintiffs contend that, even if Hawaiian’s limitation of liability conformed to applicable federal regulations, the [37] common law "released value" doctrine supersedes the limitation of liability and allows them full recovery.
I. Exclusions from Liability
Hawaiian maintains that certain contractual provisions release it from any liability for the lost bags. Almost half of Uikirifi’s claim from the September 17, 1987 flight was for lost fine mats. The contract states that Hawaiian "assumes no liability for irreplaceable articles and/or valuable items including but not limited to . . . religious or ceremonial mats and artifacts." Rule 26 (B)(2), Terms of Contract of Carriage, at 49 (April 9, 1987). Accordingly, Hawaiian maintains it is not liable at all for loss of the fine mats. Hawaiian also states that it has no liability for the rest of Uikirifi’s luggage and all of Neru’s bags because they contained business goods, not the "personal effects" which Hawaiian had contracted to carry. Appellant’s Memorandum, Hawaiian Airlines v. American Samoa Government ex rel. Langford, CA No. 37-88, at 7 (Sept. 19, 1988). Finally, Hawaiian contends that the "restriction of certain items from any liability was specifically approved by the CAB [Civil Aeronautics Board]." Id., citing Civil Aeronautics Board, Final Rule on Part 254---Domestic Baggage Liability, ER-1374, at 6 (December 23, 1983), reprinted in Air Transport Association of America, Memorandum No. 84-10 re: Domestic Baggage Liability (February 10, 1984) [hereinafter ER-1374].
To deal with Hawaiian’s last point first, the Civil Aeronautics Board [C.A.B. or Board] did not "specifically" approve such limitations as are present here. Rather, the Board required that carriers seeking to incorporate by reference terms of contract include with their tickets a notice of any "’[l]imits on the air carrier’s liability . . . for loss, damage, or delay of goods and baggage, including fragile and perishable items.’" ER-1374, supra, at 6, citing 14 C.F.R. § 253.5 (b)(1). As is discussed in Part HI below, a "limit" on the amount of a carrier’s liability does not mean the same thing as the exclusion of all liability. We assume that the Board, which was conscious of this difference (see Part III, infra), did not intend to use "limit" in the sense suggested by Hawaiian.
[38] As to the argument that liability is contractually limited to "personal effects" to the exclusion of "business goods," we see the agreement quite differently.2 Firstly, we could not find an explicit exclusion for "personal effects" in the contract, although the contract does explicitly disclaim liability for certain items --- such as fine mats. It would appear reasonable to us, therefore, that if "business goods" were meant to be excluded from liability an explicit exclusion for "business goods" would have been provided as well.3
At the same time, another clause provides that Hawaiian will "accept for transportation as baggage, such personal property as is necessary or appropriate for the wear, use, comfort, or convenience of the passenger for the purpose of the trip." Rule 19 (A), Terms of Contract of Carriage, at 30 (November 23, 1987) (emphasis added). Two observations may be made about this clause. First, the positive does not always imply the negative. Second, even accepting Hawaiian’s reading, having once "broken" its own condition of carriage, Hawaiian should not now be heard to say that it takes no responsibility for that which it has carried. Cf. Klicker v. Northwest Airlines, Inc., 563 F.2d 1310, 1316 (9th Cir. 1977) ("If the airline erred in accepting the animal, the responsibility for the mistake falls on the airline, not on the innocent shipper.") This is especially so given the extent of the class of goods sought to be excluded by Hawaiian’s suggested [39] interpretation of this clause.4 In fact, the contractual baggage liability clause states simply that Hawaiian "shall be liable for the provable loss of, damage to, or delay in the delivery of a fare-paying passenger’s baggage, or other property." Rule 26 (A)(1), Terms of Contract of Carriage, at 49 (April 9, 1987). Nowhere here is it mentioned that Hawaiian is responsible only for "acceptable" baggage or for "personal" property or effects.
Furthermore, we find that the items questioned come within the definition of "acceptable" baggage. We find listed in another section of the contract several items that Hawaiian will only transport subject to a disclaimer of liability for any damage caused to such items due solely to their fragile nature. This class of fragile items includes "[advertising displays, models, sketches, blueprints and maps" and "[m]icroscopes, oscilloscopes, meters, counters and polygraphs." Rule 20 (L)(3)(e), (L)(3)(h), Terms of Contract of Carriage, at 33 (January 1, 1983). If indeed responsibility for "personal" items were all that was envisaged by the contract, then "personal" items would thus seem to include a polygraph machine or advertising model, if the contract is to be consistently interpreted. We find it hard to imagine a logical definition of "personal use" which could differentiate between a polygraph machine or advertising model and auto parts or clothing for resale. We accordingly conclude that recovery for clothing and auto parts even where they are for "business purposes" is not excluded.
Finally, even if we were to concede that the contract does reasonably attempt to exclude all liability for the clothing and auto parts, the exclusion is void for violating public policy. In Klicker v. Northwest Airlines, Inc., the Ninth Circuit held invalid an airline tariff which purported to exclude all liability for damage due [40] to the death of an animal transported as baggage. 563 F.2d 1310, 1312-14 (9th Cir. 1977). The Court first explained that under the common law, carriers were not allowed to exculpate themselves from liability for their own negligence. Id. at 1312. Otherwise ”v"[a] carrier who stipulates not to be bound to the exercise of care and diligence ’seeks to put off the essential duties of his employment.””” Id. at 1313, quoting New York, New Haven and Hartford Railroad Co. v. Nothnagle, 346 U.S. 128, 136 (1953) (emphasis in original) (other citations omitted). The Court reasoned that allowing the airline to exclude all liability for damage to animals which it accepted as baggage would violate this rule even where a tariff had been filed with and approved by the C.A.B. Id. at 1314.5
Prior to Klicker, the Second Circuit had issued decisions which arrived at the opposite conclusion. These decisions disallowed recovery for jewelry contained in lost baggage, reasoning that the airline tariffs excluding liability for jewelry had been approved by the C.A.B., and that such tariffs had the force and effect of law. Tishman & Lipp, Inc. v. Delta Air Lines, 413 F.2d 1401, 1403-04 (2d Cir. 1969); Lichten v. Eastern Airlines, 189 F.2d 939, 941 (2d Cir. 1951). The Klicker decision cast doubt on the reasoning of these Second Circuit decisions. The court went so far as to say that it declined to follow the rationale of Tishman & Lipp and Lichten because "it is flatly wrong,” Klicker, supra at 1314, and noted that Lichten had "been uniformly criticized by commentators." Id. at n.6.
A choice between these two lines of authority is unnecessary for our purposes. It is important to note that even the Lichten court acknowledged that it was "the common law rule that a common carrier may not by contract relieve itself from [41] liability for the consequences of its own negligence." Lichten, supra at 941. Thus, the Lichten decision did not question the principle of law that concerns us here. Instead, it was grounded on the court’s interpretation of the effect regulation of airlines by the C.A.B. had on that rule. Id. In an era of deregulation, where neither the C.A.B. nor the tariffs considered by the Lichten court exist, it seems clear that exculpatory contractual clauses such as those in question here are no longer valid.
Here, Hawaiian has attempted to exculpate itself from any liability in carrying the enumerated goods — including, presumably, liability for the intentional acts of its employees. The clause therefore, as it attempts to exclude responsibility for the loss of these "business goods," is void. Of course, this reasoning applies equally to the attempted exclusion of plaintiff Uikirifi’s ceremonial fine mats.
II. Limitation of Liability to $1250
Hawaiian seeks to limit its liability for lost baggage through incorporating by reference a contractual term setting a maximum recovery of $1250 per passenger for loss of baggage. A passenger may avoid the $1250 limit by declaring a higher value for his baggage and paying an excess valuation charge of $1.00 for each additional $100 worth of baggage. Rule 26 (A)(1), Terms of Contract of Carriage, at 49 (April 9, 1987).
To so limit its liability, Hawaiian is required to comply with two sets of federal regulations --- 4 C.F.R. Parts 253 and 254.6 The former establishes the method by which airlines may incorpórate by reference terms of a contract of carriage. The latter establishes specific rules relating to notice of limitation of baggage liability.
[42] A. Incorporation by Reference
Federal regulations specifically allow an airline in interstate transportation to incorporate by reference terms of its contract so long as proper notice of such incorporation is given the passenger. 14 C.F.R. § 253.4. When such notice is given, local law is preempted and the local authorities cannot require disclosures beyond those federally required. Id. § 253.1. As it here concerns us, the regulations first require each airline seeking to incorporate by reference terms of contract to provide a "conspicuous notice" that any terms incorporated by reference are part of the contract. Id. § 253.5 (a). The regulations further require notice that the contract of carriage incorporates by reference "[l]imits on the air carrier’s liability . . . for loss, damage, or delay of goods and baggage." Id. § 253.5(b)(1). If such notice is not given, the carrier may not claim the benefit of the incorporated baggage liability limitations. Id. § 253.4 (a).
Here, it is clear that language appears on the ticket which fulfills the substantive requirements of Part 253. The second page of the ticket following the flight coupons contains a notice that the air transportation "is subject to the individual terms of the transporting air carriers, which are herein incorporated by reference and made part of the contract of carriage." Exhibit 4, Hawaiian Airlines v. American Samoa Government ex rel. Neru, CA 36-88 (August 4, 1988). Thus the requirement of section 253.5 (a) is met. There is a further notice that the incorporated terms include "[l]imits on liability for baggage, including fragile or perishable goods." This then conforms to the requirements of section 253.5(b)(1).
The question, then, is whether these notices constitute "conspicuous notice" of the incorporated terms. We were not able to find any cases that have dealt directly with what constitutes "conspicuous notice” within the meaning of 14 C.F.R. § 253.5. However, cases decided under the Warsaw Convention have dealt with a similar issue in an analogous context and should be helpful in defining "conspicuous notice." There is also one helpful case involving the adequacy of notice at a time when a tariff required such notice.
[43] When its requirements are complied with, the Warsaw Convention7 limits liability of carriers in international transportation by air for loss, delay, or damage to a passenger’s baggage; for personal injury or death of passengers; and for air freight shipments. Warsaw Convention, arts. 17-19. As a prerequisite to obtaining the benefits of limited liability, the carrier must provide the passenger or shipper with a ticket, baggage check, or air waybill (as the case may be) which contains a "statement that the transportation is subject to the rules relating to liability established by this convention." Id., arts. 3(e), 4(h), 8(q). Courts interpreting these provisions have held that the "statement" contemplated by the Convention must be more than " [inconspicuous and hypertechnical ’notice.’" In re Aircrash in Bali, Indonesia on April 22, 1974, 684 F.2d 1301, 1313 n.13 (9th Cir. 1982). Rather, courts have held that as the quid pro quo for the Convention’s substantial limitations on recovery of damages, the documents involved must give the passengers "adequate notice" of the applicability of the Convention so that they might take self-protective measures such as purchasing additional coverage. Lisi v. Alitalia-Linee Aeree Italiane, S.p.A., 370 F.2d 508, 513 (2d Cir. 1966).
Not surprisingly, the factors which the courts have found important in deciding what is "adequate notice" under the Warsaw Convention bear a close relation to what one might intuitively expect to constitute "conspicuous notice." These include print size, type of print, legibility, and placement of the message.
In Lisi, the notice warning passengers about the applicability of the Warsaw Convention was:
"camouflaged in Lilliputian print in a thicket of ’Conditions of Contract’ . . . Indeed the exculpatory statements on [44] which defendant relies are virtually invisible. They are ineffectively positioned, diminutively sized, and unemphasized by bold face type, contrasting color, or anything else. The simple truth is that they are so artfully camouflaged that their presence is concealed."
Lisi at 514, quoting the decision of the lower court at 253 F.Supp. 237, 243 (S.D.N.Y. 1966).
In addition, on the front of the ticket and the baggage check a message drawing the passengers attention to the actual notice was printed in "exceedingly small print." Id. at 513. Accordingly, the appellate court affirmed the trial court’s decision granting plaintiff’s motion for summary judgment to strike defendant’s Warsaw Convention defense. (A reproduction of the ticket involved in Lisi can be found at 253 F.Supp. 237, 240-42.)
In another illustrative case where the warning given was found inadequate, the first notice that the ticket was subject to the Convention found in a footnote to the face of the ticket was "in exceedingly small, almost unreadable (4 1/2 point) print." Egan v. Kollsman Instrument Corp., 234 N.E.2d 199, 200 (N.Y. 1967), cert. denied 390 U.S. 1039 (1968). On the outside, back cover of the ticket "likewise printed in miniscule [sic] type" appeared some Conditions of Contract which included a statement that the transportation was subject to the Convention. Id. at 200 n.1. A final notice was "in such exceedingly small and fine, print as almost to defy reading." Id. at 203. The court concluded that even though the airline had literally complied with the Convention notice requirement, this was nevertheless insufficient and not in accord with the overall purposes of the notice regime becáuse "a statement which cannot reasonably be deciphered fails of its purpose and function of affording notice and may not be accepted as the sort of statement contemplated or required by the Convention." Id. at 203. The appellate court reversed the trial court’s denial of plaintiff’s motion to dismiss the defendant’s affirmative defense grounded on the Convention.
The courts have also upheld the applicability of the Convention against claims that the notice [45] provided was inadequate. One court did so because the "printing on the back of the ticket and baggage check in this case, though small, is certainly readable." Parker v. Pan American World Airways, Inc., 447 S.W.2d 731, 735 (Tex. Civ. App. 1969) (affirming limitation of passenger’s claim to the Convention amount). In another case:
each sheet of the five page ticket issued to appellees contained three warnings that the provisions of the Warsaw Convention applied to international flights. The reverse side of each sheet contained one warning in type about twice the size of the rest of the printing on the page. The other warning, on the reverse side, was in bold-face type in the body of the "Conditions of Contract."
Trans World Airlines, Inc. v. Christophel, 500 S.W.2d 409, 410-11 (Ky. 1973) (reversing lower court decision and ordering j.n.o.v. for appellant).
Finally, another court held that because an air waybill had notice of the applicability of the Convention "in bold face, easily legible type placed directly above the space wherein Mr. Tobin affixed his signature" the message was adequate notice of the applicability of the Convention as a matter of law. Bianchi v. United Air Lines 587 P.2d 632, 635 (Wash. App. 1978).
The last case of interest to us was not under the Warsaw Convention but under former C.A.B. tariffs. The ticket in question had the notice of domestic baggage liability limitations below a paragraph that had the bold-faced heading "Advice to International Passengers on Limitation of Liability." Greenberg v. United Airlines, Inc., 414 N.Y.S.2d 240, 240 (1979) (emphasis added). The court held that "[a]ny reasonable person, let alone a harried tourist, would conclude that the described page, under its top line, applies solely to international passengers." Id. at 241. The court continued that "[a] notice so elusive cannot fulfill the office provided for it in the tariff. In order to succeed defendant’s communication must be positioned and identified so as to penetrate the traveling public’s reasonably focused consciousness. Instead, defendant has set before the [46] traveler a morsel of nourishment hidden in a banquet of dust." Id.
In this scheme of things, it is clear that defendant’s Notice of Incorporated Terms is "conspicuous." The print is not small, and it is certainly legible. Cf. Egan, supra (4 1/2 point type). Also, there is a bold-faced heading which announces the content of the notice which follows. Cf. Bianchi, supra, and the suggestion of Lisi. Moreover, although the particular notice of baggage liability limitations is buried in the midst of five other specific notices, it is important to note that each of these other notices is also required by regulations. Given the fact that the C.A.B. has specifically referred to the advantages of short form ticketing (see Part III below), it would be hard to do this with a message much larger than that here. Also, if the message ran on to several pages because it were in larger type, the airline would potentially be accused of obscuring the notice by burying it in a morass of pages. Finally, the page is the first thing a passenger would see once she got past the flight coupons. In that sense then it is effectively positioned. Cf. Greenberg, supra.
B. Notice of Baggage Liability Limits
However, for Hawaiian to successfully limit its baggage liability merely providing notice of incorporation by reference would not be enough. According to 14 C.F.R. § 254.5 Hawaiian must also:
provide to passengers, by conspicuous written material included on or with its ticket, either:
(a) Notice of any monetary limitation on its baggage liability to passengers; or
(b) The following notice: "Federal rules require any limit on an airline’s baggage liability to be at least $1250 per passenger."
There are two places on the ticket and accompanying material dealing with baggage liability limitations. First, on the ticket itself. Second, on the ticket jacket. In analyzing each of these statements, the first question to ask is whether Hawaiian provided such a notice at all and then whether it was the [47] "conspicuous written material" required by the enactment.8
In our opinion, although the notice provided on the ticket itself is sufficiently "conspicuous,"9 its content renders it inadequate. The notice states that:
Liability for loss, delay, or damage to baggage is limited as follows unless a higher value is declared in advance and additional charges are paid: .... (2) For travel wholly between U.S. points, to $1250 per passenger on most carriers (a few have lower limits).
Exhibit 4, Neru, supra.
The notice does not comply with 14 C.F.R. § 254.5(b) since it deviates in several material respects from the federally prescribed language of that subsection. Additionally, we do not think it fulfills the requirement of section 254.5(a). Instead of stating the "monetary limitation on its baggage liability to passengers," (emphasis added), [48] the ticket clause states a hypothetical limitation on "most carriers" without indicating what this carrier’s liability limitations are. The difference is not merely semantic. A traveller deciding whether to buy additional baggage coverage must make his decision on the basis of what he might recover without that additional insurance. Where the airline does not provide notice of its actual limitation, the customer cannot choose properly. That the importance of this distinction was understood during the rulemaking process seems clear when we consider that when the C.A.B. promulgated 14 C.F.R. § 254.5 it stated that it found the inclusion of either "(1) the Board-mandated notice, or (2) a specific statement of its actual liability limitation" preferable to "a general notice that liability may be limited." ER-1374, supra, at 6 (emphasis added). Although the notice provided on the ticket is more than a "general notice," in our opinion it seems closer to being a "general notice" than a "specific" statement of "actual" liability limitations.
Hawaiian’s . ticket jackets also include a notice of baggage liability limitation. The language here unambiguously sets forth Hawaiian’s actual limitation. It states:
Liability for loss or damage: not over $1250 per passenger unless higher value declared in advance. Charge for higher value declared $1.00 per $100 (up to $2,500).