UNDERWRITERS AT LLOYDS SUBSCRIBING TO COVER NOTE B0753PC1308275000, Plaintiff - Appellee,
EXPEDITORS KOREA LTD., FORWARD AIR, INC., Defendants - Appellants.
from the United States District Court for the Southern
District of Florida D.C. Docket No. 1:14-cv-20708-DPG
JORDAN and JILL PRYOR, Circuit Judges, and PROCTOR, [*] District Judge.
PRYOR, Circuit Judge
Korea Ltd. and Forward Air, Inc. (together, the
"transporters") damaged cargo that they were
responsible for transporting internationally. In this case,
the Underwriters at Lloyds ("Lloyds"), having
compensated its insured-the cargo's owner-for the damage
to the cargo, seeks to recover from the transporters. The
transporters admit their liability; the only question is how
much they owe. Lloyds and the transporters disagree over the
rules that govern the amount the transporters must pay. There
are two possibilities: (1) the Montreal Convention,
multinational treaty that provides uniform rules for
liability in international air carriage, or (2) the waybill,
the contract between the transporters and the company that
shipped the cargo. The Convention and the waybill establish
nearly identical limitations of liability, in each case
capping damages based on the weight of the damaged shipment.
The only potential difference, for our purposes, is that when
damage to one part of a shipment renders the rest of the
shipment less valuable, the Montreal Convention calculates
liability based on the weight of the entire shipment, while
the waybill is ambiguous about whether the weight of the
damaged part alone should be used. Because the transporters
damaged one part of a machine that could not operate without
the damaged part, the extent of the transporters'
liability may depend on whether the Montreal Convention or
the waybill controls. We therefore must address whether the
Montreal Convention applies under the circumstances present
here: After the cargo had been flown from South Korea to
Miami, Florida, en route to Orlando, Florida, it was damaged
either at a trucking company's warehouse outside Miami
International Airport or while aboard a truck bound for
that the district court erred in ruling that the Montreal
Convention governs the transporters' liability. The
Convention does not apply based on the district court's
factual findings regarding where the cargo was damaged. By
default, then, the waybill governs the transporters'
liability. Because the waybill is ambiguous about the weight
that should be used to calculate liability, we remand the
case for the district court to address the issue in the first
The Montreal Convention
begin with a brief overview of the relevant provisions of the
Montreal Convention. The Convention, which was ratified by
both the United States and South Korea, caps a carrier's
liability for cargo damaged during international air
transport. See Eli Lilly & Co. v. Air Express
Int'l USA, Inc., 615 F.3d 1305, 1308 (11th Cir.
2010). The Convention's Article 22 limits a carrier's
potential liability to 19 Special Drawing Rights (SDRs) per
kilogram of cargo shipped. See Montreal Convention art.
22(3). "An SDR is an artificial currency, published
daily by the International Monetary Fund, which fluctuates
based on the global currency market." Eli
Lilly, 615 F.3d at 1308. Central to the dispute in this
case, Article 22 provides that if only part of the cargo is
damaged, then only the weight of the damaged package or
packages is used to calculate liability, but if damage to
some packages affects the value of other, undamaged packages,
then the weight of the undamaged packages will also be
included in the calculation. See Montreal Convention
Convention, and thus Article 22's limitation of
liability, applies only to cargo damaged during
"carriage by air." Id. art. 18(1). Article
18 defines carriage by air as "the period during which
the cargo is in the charge of the carrier." Id.
art. 18(3). The fourth paragraph of Article 18 expressly
excludes from that definition "any carriage by land, by
sea or by inland waterway performed outside an airport."
But there are two exceptions to this exclusion that extend
the reach of "carriage by air." First, the Montreal
Convention establishes a rebuttable presumption that cargo
damaged at an unknown point during a journey that includes at
least some carriage by air will be governed by the
Convention. See id. art. 18(4). Second, if a carrier
substitutes non-air carriage for air carriage without the
permission of the sender, the Convention deems the non-air
carriage to have been carriage by air. See id. It is
plain, then, that the Convention reaches further than literal
air transit, but how much further depends on the interplay
between paragraphs three and four of Article 18. We examine
Article 18 in greater detail below.
case, if the Montreal Convention does not apply, then the
waybill under which the cargo was shipped governs the
transporters' liability. A waybill is "[a] document
acknowledging the receipt of goods by a carrier . . . and the
contract for the transportation of those goods."
Waybill, Black's Law Dictionary (10th ed. 2014).
Here, the waybill Expeditors issued provided for
airport-to-airport transportation of the cargo from Incheon,
South Korea, to Orlando, Florida.
waybill capped the carrier's liability for damage to
cargo at the same amount as the Montreal Convention, 19 SDRs
per kilogram. Like the Convention, the waybill also provided
that the weight used to calculate damages was to be the same
weight that was used to calculate the shipping charges. The
waybill described what would happen if only part of the
shipment was damaged:
In any case of loss, damage, to, or delay to part of the
cargo, the weight to be taken into account in determining
Expeditors' limit of liability shall be only the weight
of the package or packages concerned.
Air Waybill ¶ 6 (Doc. 78-3). The parties disagree about
whether the waybill's reference to "package or
packages concerned" indicates that only the weight of
packages actually lost, damaged, or delayed may be considered
or whether the weight of packages that diminished in value
due to the loss, damage, or delay of related packages may
also be included in calculating the carrier's liability.
waybill contained one other term that is relevant here. The
waybill gave Expeditors the right to substitute non-air
carriage for air carriage, absent specific instructions to
Semiconductor, Inc., a manufacturer of components used in
electronics, purchased a machine for coating silicon wafers
from Cybortrack Solutions Inc., a South Korean company. The
machine consisted of various process stations where the
wafers were prepared and a robotic arm that moved the wafers
among these process stations. Cybortrack hired Expeditors to
transport the machine to TriQuint in ten separate shipping
crates from Incheon, South Korea to Orlando, Florida.
though the waybill provided for airport-to-airport
transportation between the two cities, Expeditors did not fly
the ten crates directly from Incheon to Orlando. Instead, it
flew them to Miami and then arranged for a multi-step journey
by land to Orlando. After the crates arrived in Miami, a
cargo handling company delivered them from Miami
International Airport to Expeditors' warehouse near the
airport. Expeditors then hired Forward Air to drive the
crates by truck to Forward Air's Orlando facility. Along
the way, Forward Air stored the crates for a short period of
time in its Miami warehouse. Finally, Expeditors hired Crazy
Joe's Airfreight to transport the crates by truck from
Forward Air's Orlando facility to TriQuint's delivery
the machine was damaged somewhere between Miami and Orlando.
Forward Air employees noted no damage to the crates when they
arrived at Forward Air's Miami warehouse. And the
company's policy was to decline shipments of damaged
items. When the crates arrived at Forward Air's Orlando
facility, a Forward Air employee reported that two of the
crates were damaged, one of them severely. The severely
damaged crate contained the silicon coating machine's
robotic arm. The Forward Air employee testified that the
crate containing the robotic arm had been crushed either
while it was being loaded onto the truck at Forward Air's
Miami facility or while traveling in the truck from Miami to
Orlando, as a result of improper loading. Upon picking the
crates up from Forward Air's Orlando facility, a driver
for Crazy Joe's observed that one crate had a hole in it
and two crates were missing legs. A Forward Air supervisor
also observed the damage when the crates were picked up by
the Crazy Joe's driver.
time it reached TriQuint, the robotic arm was damaged beyond
use.TriQuint received no replacement arm for
approximately five months, and the rest of the machine was
inoperable without the arm. The company filed a claim with
its insurer, Lloyds, which paid it $918, 000 in compensation
for the damage.
then filed this action against Expeditors and Forward Air in
federal district court, alleging that in damaging the cargo
Expeditors breached its duties under the Montreal Convention,
Forward Air was negligent, and both defendants breached the
waybill. Lloyds sought $920, 000 in damages. After discovery,
the transporters moved for partial summary judgment, arguing
that the Montreal Convention did not apply and that the
waybill capped their liability. The district court denied the
motion and then held a bench trial.
trial, the court entered findings of fact and conclusions of
law, determining that the Montreal Convention governed the
transporters' liability. The court found that
TriQuint's machine was damaged either while in the
custody of Forward Air at its warehouse facility in Miami or
in transit to its Orlando facility. The court also found that
Forward Air was acting as an agent of Expeditors while the
cargo was in its custody. After examining the text of the
Montreal Convention, the court concluded that the damage
occurred during carriage by air, and so the Convention
applied. Applying the Convention's limitation of
liability, the court entered judgment in favor of Lloyds
against the transporters in the amount of $195, 882 (plus
interest). The court calculated the transporters'
liability based on the weight of the entire shipment, not
merely the crate containing the damaged robotic arm.
transporters filed a motion to alter judgment and for
additional findings under Federal Rules of Civil Procedure 59
and 52, respectively, arguing that the district court had
misapplied the Montreal Convention. The district court denied
the motion. This appeal-from both the judgment and the denial
of the post-trial motion-followed. The transporters do not
contest their liability to Lloyds or the amount that Lloyds
paid to TriQuint; this appeal concerns only the limitation of
liability that governs the calculation of damages.
STANDARD OF REVIEW
a bench trial, we review a district court's conclusions
of law de novo and its findings of fact for clear
error. Wexler v. Anderson, 452 F.3d 1226, 1230 (11th
Cir. 2006). With regard to the Montreal Convention, the
interpretation of a treaty is a question of law we review
de novo. United States v. Duboc, 694 F.3d
1223, 1229 n.7 (11th Cir. 2012). "The goal of treaty
interpretation is to determine the actual intention of the
parties 'because it is our responsibility to give the
specific words of the treaty a meaning consistent with the
shared expectations of the contracting parties.'"
In re Comm'rs Subpoenas, 325 F.3d 1287, 1294
(11th Cir. 2003) (quoting Air France v. Saks, 470
U.S. 392, 399 (1985)), abrogated in part by In re
Clerici, 481 F.3d 1324, 1333 n.12 (11th Cir. 2007).
regard to the waybill, "[c]ontract interpretation is
generally a question of law." Lawyers Title Ins.
Corp. v. JDC (Am.) Corp., 52 F.3d 1575, 1580 (11th Cir.
1995). The question of whether a contract is ambiguous is a
question of law that we review de novo. Carneiro
Da Cunha v. Standard Fire Ins. Co./Aetna Flood Ins.
Program, 129 F.3d 581, 584-85 (11th Cir. 1997). But
"[q]uestions of fact arise . . . when an ambiguous
contract term forces the court to turn to extrinsic evidence
of the parties' intent . . . to interpret the disputed
term." Lawyers Title, 52 F.3d at 1580.
turn to the question that brings the parties before us: how
much of the money that Lloyds paid TriQuint for the damaged
machine can be recovered from the transporters? The amount of
the transporters' liability may depend on whether the
Montreal Convention or the waybill controls. Both the
Convention and the waybill cap the transporters'
liability at 19 SDRs multiplied by the weight of the damaged
cargo, but they may differ as to whether the weight of the
undamaged parts of the shipment rendered less valuable by the
damage to the robotic arm should be included as cargo.
district court applied the Montreal Convention, but we
conclude, based on the district court's own factual
findings, that it should have looked to the waybill instead.
Below, we interpret the provisions of the Montreal Convention
dealing with damage to cargo and apply them to the facts as
found by the district court. Because the Convention is
inapplicable under these facts, the waybill governs the
transporters' liability. We conclude that the waybill is
ambiguous about whether damages must be calculated using only
the weight of the one crate containing the robotic arm or
using the weight of all the cargo that diminished in value
due to the damage to the arm. We thus remand to the district
court for further findings of fact to resolve this ambiguity.
The Montreal Convention Does Not Govern the Damages at
issue is whether, under the facts of this case, the cargo was
damaged in such a way that the Montreal Convention applies.
This issue turns on our interpretation of Article 18, which
defines when the terms of the Montreal Convention govern. In
construing Article 18, our "analysis must begin . . .
with the text of the treaty and the context in which the
written words are used." Air France, 470 U.S.
at 397. If the treaty contains "difficult or ambiguous
passages, " we may go beyond the text of the treaty to
consider general rules of construction as well as "the
history of the treaty, the negotiations, and the practical
construction adopted by the parties." E. Airlines,
Inc. v. Floyd, 499 U.S. 530, 535 (1991) (internal
quotation marks omitted); see Zicherman v. Korean Air
Lines Co., Ltd., 516 U.S. 217, 226 (1996) (explaining
that "a treaty ratified by the United States is not only
the law of this land but also an agreement among sovereign
powers" and thus "we have traditionally considered
as aids to its interpretation the negotiating and drafting
history (travaux préparatoires) and
postratification understanding of the contracting
parties"). Applying this framework, we conclude that the
Montreal Convention does not apply in this case because the
district court's findings tell us that the cargo was
damaged during carriage by land rather than during carriage
18 establishes the conditions under which the Montreal
Convention will govern liability for damaged cargo. Three of
its four paragraphs are relevant here. The first paragraph
limits the Convention's reach to damage that takes place
during carriage by air:
1. The carrier is liable for damage sustained in the event of
the destruction or loss of, or damage to, cargo upon
condition only that the event which caused the damage so
sustained took place during carriage by air.
Convention art. 18(1).
third and fourth paragraphs then set forth when carriage by
air occurs. The third paragraph broadly defines
"carriage by air" by creating a default rule that
any time when the cargo is in the carrier's control
qualifies as carriage by air:
3. The carriage by air within the meaning of paragraph 1 of
this Article comprises the period during which the cargo is
in the charge of the carrier.
Id. art. 18(3). Importantly, this paragraph neither
restricts carriage by air to the time when the cargo is
actually aboard an airplane nor limits it geographically,
such as confining it to within an airport. We note that if
the Convention was intended to apply only when the damage
occurred aboard an aircraft, this paragraph would be wholly
fourth paragraph of Article 18 refines the definition of
carriage by air by excluding certain periods when the cargo
is control of the carrier. Initially, it carves out from the
definition of carriage by air most non-air transportation
performed outside an airport:
4. The period of the carriage by air does not extend to any
carriage by land, by sea or by inland waterway performed
outside an airport.
Id. art. 18(4). We will refer to this first sentence
as "the exclusion." Under the exclusion, no period
of a journey can qualify as both carriage by air and carriage
by land. Beyond drawing this distinction, Article 18 does not
define "carriage by land."
the exclusion, the fourth paragraph establishes two
exceptions to the exclusion. If the conditions of either
exception are satisfied, the carriage is deemed to have been
carriage by air notwithstanding the exclusion. The first
exception applies when damage occurs at an unknown point
during a journey consisting of both air carriage and non-air
carriage that falls within the exclusion. This exception
establishes a rebuttable presumption that the cargo was
damaged during carriage by air unless there is proof that the
damage occurred during carriage by land:
If, however, such carriage takes place in the performance of a
contract for carriage by air, for the purpose of loading,
delivery or transshipment, any damage is presumed, subject to
proof to the contrary, to have been the result of an event
which took place during the carriage by air.
Id. When it is proven that the damage did
not occur during carriage by air, the Convention
will not apply. Id.; see Danner v. Int'l
Freight Sys. of Wash., LLC, No. ELH-09-3139, 2013 WL
78101, at *21 (D. Md. Jan. 4, 2013) (reading paragraph four
as "establish[ing] a rebuttable presumption");
see also Read-Rite Corp. v. Burlington Air Express,
Ltd., 186 F.3d 1190, 1194 n.2 (9th Cir. 1999) (same in
the Warsaw Convention context); UPS Pty. Ltd. v
Gountounas and Another (2001) 80 SASR 288, 292 ( S.Ct.
S. Austl.) (same).
second exception to the exclusion applies when a carrier
substitutes carriage by another mode of transportation for
carriage by air without the consent of the customer (the
If a carrier, without the consent of the consignor,
substitutes carriage by another mode of transport for the
whole or part of a carriage intended by the agreement
between the parties to be carriage by air, such carriage by
another mode of transport is ...