Limited Stores, Inc. v. Pan American World Airways, Inc.

600 N.E.2d 1027, 65 Ohio St. 3d 66
CourtOhio Supreme Court
DecidedSeptember 23, 1992
DocketNo. 91-582
StatusPublished
Cited by64 cases

This text of 600 N.E.2d 1027 (Limited Stores, Inc. v. Pan American World Airways, Inc.) is published on Counsel Stack Legal Research, covering Ohio Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Limited Stores, Inc. v. Pan American World Airways, Inc., 600 N.E.2d 1027, 65 Ohio St. 3d 66 (Ohio 1992).

Opinions

Per Curiam.

This case concerns the liability of an air carrier for damage to an international shipment of retail goods. By that description, the case seems deceptively simple. The issues this case raises, however, include the applicability of the law of two states and an international treaty under a complicated set of facts. We address each of the issues raised by appellant and cross-appellant in turn.

I

We first must determine what substantive law applies to the issues in this case. As both the trial court and the court of appeals correctly concluded, the “Convention for Unification of Certain Rules Relating to International Transportation by Air” commonly referred to as the “Warsaw Convention” (“Convention”)2 provides the basic legal framework within which the dispute between Pan Am and The Limited is to be decided. The Convention was designed to provide uniform, world-wide rules of liability for losses sustained by air passengers and shippers of goods during international transportation by air. Reed v. Wiser (C.A.2, 1977), 555 F.2d 1079, 1090, certiorari denied (1977), 434 U.S. 922, 98 S.Ct. 399, 54 L.Ed.2d 279. As specified in Article 1 of the Warsaw Convention, the Convention applies to “all international transpor[69]*69tation of persons, baggage, or goods performed by aircraft for hire.”3 Article 18 of the Convention provides that a carrier shall be liable for damage to goods occurring during “transportation by air” of those goods.

The effect of the Warsaw Convention is to place liability for damage or personal injury on the air carrier unless the air carrier shows that it took “all necessary measures to avoid the damage.” Article 20 of the Convention. In exchange for the carrier’s bearing that heavy burden, the Convention limits the amount of damages an injured party can collect for its damage or injury. In the case of damaged goods, Article 22(2) of the Convention limits the airline’s liability to two hundred fifty French francs per kilogram of cargo unless the consignor has made a special declaration of the value of the cargo and paid an additional sum based on that value. Additionally, if it can be proven that the carrier caused the damage by its willful misconduct, then under Article 25(1) of the Convention, the liability limits of the Convention do not apply.

It is undisputed that The Limited did not make a special declaration as to value and pay an additional sum for coverage. Whether Pan Am engaged in willful misconduct, however, was an issue for the jury, and whether the jury was properly instructed on that issue is discussed in detail in Part III below.

The Warsaw Convention, as an international treaty to which the United States is a party, preempts state common carrier law with respect to those issues within its purview. Conflict-of-law principles are not relevant to the interpretation of the Convention; rather, legal interpretation must be gleaned from the four corners of the treaty. Saiyed v. Transmediterranean Airways (D.C.Mich.1981), 509 F.Supp. 1167, 1169.

The Convention, however, does not specifically address all the issues involved in the dispute between Pan Am and The Limited. Indeed, in this context the Convention merely provides for a cause of action against Pan Am and specifies the method of calculating Pan Am’s maximum potential liability if it fails to prove that it took all necessary steps to prevent the damage. The Convention does not address, for example, how damages are calculated, nor does it define a standard for willful misconduct. Thus, in order to provide a legal foundation for those areas not addressed within the four corners of the Convention we must look to other sources of law.

[70]*70We first note that an action brought under the Warsaw Convention cannot be classified as either a tort action or a contract action. Indeed, an action brought pursuant to the Convention, like other common carrier actions under federal law, incorporates elements of both tort and contract actions. Compare Article 21 of the Convention (permitting the application of contributory or comparative negligence principles if forum law so allows) with Article 23 of the Convention (precluding a contract that incorporates a provision further limiting the carrier’s liability). Thus, with respect to the dispute between Pan Am and The Limited, while we may properly rely upon cases from any jurisdiction, state or federal, that have interpreted the Warsaw Convention and its terms, we may also rely upon federal common law in analogous carriage-of-goods cases to fill in the gaps that may still remain in the application of the Convention. Accord In re Air Disaster at Lockerbie, Scotland on Dec. 21, 1988 (C.A.2, 1991), 928 F.2d 1267 (federal common law of torts applies in construing Warsaw Convention). Although we may find it instructive to look to the law of New York and Ohio to interpret certain terms that the the Convention does not define, we are not bound to do so.4

With respect to the dispute between The Limited and the insurers and agents, the Convention is not applicable, because that portion of the case does not involve damage caused to the goods during air transportation. See Article 31 of the Convention. As to this portion of the case, we conclude that Ohio law applies. An action grounded in promissory estoppel is an action in contract, and choice-of-law analysis indicates that Ohio bears the most significant relationship to the dispute between the parties. See Gries Sports Enterprises, Inc. v. Modell (1984), 15 Ohio St.3d 284, 15 OBR 417, 473 N.E.2d 807, syllabus (applying Section 188, 1 Restatement of the Law 2d [1971], Conflict of Laws, to resolve conflict-of-law questions when parties to a contract do not specify the law to be applied).

Having resolved the question of the law to be applied in this action, we now turn to the propositions of law set forth by the parties.

II

The Limited urges as its first proposition of law that “[a] retail seller of clothing is entitled to recover the retail value of goods damaged in transit, when cover with comparable merchandise is not possible.” Flowing from the [71]*71proposition of law is The Limited’s argument that the trial court erred in directing a verdict for Pan Am capping the damages at the wholesale value of the goods and precluding The Limited from arguing that the proper measure of its damages was the retail value of its goods. We agree that the trial court erred in directing the verdict and that the jury should have considered the retail value of the goods in its deliberations. We do not, however, agree that, as a matter of law, the proper measure of The Limited’s damages is the retail value of the entire shipment.

The general rule for calculating damages in common carrier cases is that the shipper is entitled to the difference between fair market value of the goods as received and fair market value of the goods in the condition they would have been in had they not been damaged. Pacol (Canada) Ltd. v. M/V Minerva (S.D.N.Y.1981), 523 F.Supp. 579, 581-582; and C. Itoh & Co. (America), Inc. v. Hellenic Lines, Ltd. (S.D.N.Y.1979), 470 F.Supp. 594, 598. In this respect, the trial court properly instructed the jury.

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Bluebook (online)
600 N.E.2d 1027, 65 Ohio St. 3d 66, Counsel Stack Legal Research, https://law.counselstack.com/opinion/limited-stores-inc-v-pan-american-world-airways-inc-ohio-1992.