UNITED STATES COURT OF APPEALS
For the Second Circuit
August Term, 1999
(Argued: May 30, 2000 Decided: December
06, 2000 )
Docket Nos. 99-7988(L),
Nippon Fire & Marine
Insurance Co., Ltd.,
Skyway Freight Systems, Inc., American
International Airways, Inc.; U.S. Airways, Inc.; and United Airlines,
B e f o r e :
Parker, Straub, and Katzmann, Circuit
Appeals from two final judgments
of the United States District Court for the Southern District
of New York (Denise Cote, Judge) granting the defendants'
motions for partial summary judgment. The District Court held
(1) that Defendant Skyway Freight Systems, Inc. ("Skyway")
was liable to Plaintiff Nippon Fire & Marine Insurance Co.,
Ltd., for losses incurred during five laptop computer shipments
made by the plaintiff's subrogor, but that its liability was
contractually limited under its shipping contracts; and (2) that
the secondary carriers with whom Skyway subcontracted to carry
four of these shipments were not directly liable to the plaintiff
in tort at all.
Because some of the claims on appeal
have been stayed by post-appeal bankruptcy proceedings and, as
a result, the parties have stipulated to the dismissal of most
of these claims, we are required to address but a portion of
the District Court's disposition. We hold that the District Court
correctly concluded that two of the three secondary carriers,
United Airlines, Inc. and U.S. Airways, Inc., are not directly
liable to the plaintiff in tort.
Appeal dismissed in part and judgment
affirmed in part.
David T. Maloof, Maloof & Browne
LLP (Lawrence C. Browne, on the brief), New York, NY, for
Fredric S. Newman, Hoguet Newman
& Regal, LLP, New York, NY, for Defendant- Appellee Skyway
Freight Systems, Inc.
Mark S. Susina, Adler Murphy &
McQuillen, Chicago, IL (Michael G. McQuillen and Paula LoMonaco,
Adler Murphy & McQuillen, Chicago, IL; and Paul A. Lange,
New York, NY, on the brief), for Defendant-Appellee American
International Airways, Inc.
Charles E. Schmidt, Kennedy Lillis
Schmidt & English (Matthew T. Loesberg, on the brief), New
York, NY, for Defendant-Appellee U.S. Airways, Inc.
David deAndrade, Law Offices of
Scott A. Felcher, P.C., New York, NY, for Defendant-Appellee
United Airlines, Inc.
Straub, Circuit Judge:
In these two consolidated appeals,
Plaintiff Nippon Fire & Marine Insurance Co., Ltd. ("Nippon"),
the subrogated insurer of Toshiba America Information Systems,
Inc. ("Toshiba"), challenges two final judgments of
the United States District Court for the Southern District of
New York (Denise Cote, Judge) granting the defendants'
motions for partial summary judgment. The District Court held
that Defendant Skyway Freight Systems, Inc. ("Skyway")
was liable to Nippon for losses incurred when Skyway carried
five shipments of laptop computers for Toshiba in 1997, but that
its liability was contractually limited under its contracts with
Toshiba, the shipper. The District Court also held that the three
secondary carriers with whom Skyway subcontracted to carry four
of these shipments-Defendants American International Airways,
Inc. ("AIA"), United Airlines, Inc. ("United"),
and U.S. Airways, Inc. ("USAir")-were not directly
liable in tort to the plaintiff at all.
Skyway and AIA have now filed in
bankruptcy for liquidation and reorganization, respectively,
and as a result, a number of the claims in this appeal automatically
have been stayed under the bankruptcy laws. The parties have
stipulated to dismissal of these claims, and with respect to
the non-stayed claims that properly remain before us, we affirm
the District Court's conclusion that the secondary carriers were
not directly liable to the plaintiff in tort.
These two actions arise from five
shipments of computer equipment pursuant to shipping contracts
between Toshiba and Skyway. Toshiba suffered losses as a result
of these shipments having been lost or not delivered complete
to Toshiba's consignees in New Jersey and Florida. Nippon was
Toshiba's insurer for cargo losses and, having compensated Toshiba
for these losses, brought these two actions as Toshiba's subrogee.
Under the first set of shipments
considered by the District Court, Skyway agreed to carry a shipment
of 50 laptop computers on Monday, September 8, 1997, and a second
shipment of 146 laptops on Tuesday, September 9, 1997. The shipments
were to be picked up from Toshiba in California and delivered
to Toshiba's consignee in New Jersey. Both shipments were designated
as being shipped by air on "3S," or standard three-day
air terms, which provide for delivery on the third business day
after pickup. The air waybills provided that the shipments would
be governed by a standard tariff provision limiting Skyway's
liability to the "declared value" of the shipment.
Skyway's tariff defines "declared value" to be the
higher of either 50 cents per pound or $50.00, unless the shipper
declares a higher value-which results in an extra charge of 75
cents for every $100.00 above the default declared value. Toshiba
declined to declare a higher value for either shipment, but it
declared the weight of the first shipment to be 600 pounds and
the second shipment to be 1,606 pounds.
Without consulting or notifying
Toshiba, Skyway elected to subcontract these shipments to Defendant
AIA. AIA issued air waybills to Skyway that incorporated a tariff
rule-similar to Skyway's-expressly limiting liability to 50 cents
per pound unless a higher value is declared. Skyway did not declare
a higher value for the shipment. AIA was to hold the shipments
for pickup by Skyway in Philadelphia. As agreed upon by Toshiba
and Skyway, the two shipments were picked up by Skyway on Monday,
September 8, and Tuesday, September 9, 1997. AIA carried both
shipments by air to Philadelphia, where they arrived on Thursday
morning, September 11th. Nippon and AIA contend that Skyway was
notified several times that these shipments had arrived in Philadelphia
but did not attempt to retrieve these shipments from AIA's airport
warehouse until the afternoon of Monday, September 15th. Skyway
disputes this assertion, claiming that it first attempted to
retrieve the shipments during the afternoon of Friday, September
12th, but that AIA refused to remain open long enough for the
Skyway driver to do so.
On Tuesday, September 16th, Skyway
informed Toshiba and the local police that part of the first
shipment (20 of the 50 laptops) and all of the second shipment
were missing. Nippon asserts that law enforcement officials "believe
that the computers were converted by AIA's employees," and
that a criminal investigation of these employees was underway.
The losses incurred by Toshiba totaled approximately $388,000.00.
Under the second set of shipping
contracts between Toshiba and Skyway, Skyway agreed to carry
three shipments of laptop computers from Irvine, California,
to Toshiba's consignees in New Jersey and Florida. The bills
of lading again provided that the shipments would be governed
by a standard tariff provision limiting Skyway's liability to
the "declared value" of the shipment. As in Nippon
I, Skyway's tariff defines "declared value" to
be the higher of either 50 cents per pound or $50.00, unless
the shipper declares a higher value and pays an additional 75
cents for every $100.00 above the default declared value of $50.00.
Toshiba shipped the first shipment, consisting of 54 cartons
of data processing machines, on January 28, 1997, on "SS,"
or "standard two day service" terms. Toshiba did not
declare a value for this shipment on the waybill, but declared
a weight of 864 pounds. Skyway subcontracted this shipment to
Defendant USAir. USAir issued to Skyway its own waybill, which
incorporated a tariff provision limiting liability to 50 cents
per pound unless a higher value is declared. Like Toshiba, Skyway
did not declare a higher value on the USAir waybill but declared
that the shipment weighed 939 pounds. While the shipment was
to have left Los Angeles on January 29, 1997, it apparently did
not leave Los Angeles until February 4, 1997, and was never delivered
to Skyway or Toshiba's New Jersey consignee.
The second shipment, consisting
of 25 cartons of data processing machines, was shipped on February
28, 1997, on the same "SS" terms to the same New Jersey
consignee. Toshiba again did not declare any value for the shipment,
but declared a weight of 375 pounds. Skyway again subcontracted
the shipment, this time using the "general freight"
service of Defendant United. The waybill issued by United also
limited liability to 50 cents per pound unless a higher value
is declared, and Skyway did not declare any value for the shipment.
Toshiba's shipment was combined into a larger shipment totaling
1095 pounds. The waybill also indicated that all claims must
be made within nine months and nine days of the date of acceptance.
Only 12 of Toshiba's 25 cartons were delivered on March 4, 1997;
Skyway did not present any claim to United for the lost cartons.
The third shipment of 33 cartons
of data processing machines was shipped by Toshiba to a California
consignee on July 31, 1997. The shipment was made on "3S,"
or standard three-day delivery terms. Toshiba again did not declare
any value, but declared a weight of 396 pounds. This time, Skyway
shipped the cartons by truck, rather than air, and delivered
only 23 of the 33 cartons on August 6, 1997. Skyway did not receive
any report of a shortage for the undelivered cartons until September
12, 1997. The losses incurred by Toshiba for the three shipments
totaled approximately $360,000.00.
For all five shipments, Skyway compensated
Toshiba for its losses based on the declared weight of each shipment,
pursuant to the limitations of liability in the Skyway's tariff,
since Toshiba had not declared a value for any of the five shipments.
After reimbursing Toshiba for these
losses, Nippon filed two actions seeking compensation from the
defendants in connection with the two sets of shipments. The
first action (Nippon I), filed June 24, 1998 against Skyway
and AIA, alleged (1) breach of contract and federal common law
duties; (2) negligent damage to property; (3) breach of bailment
and warehouseman's obligations; and (4) conversion in connection
with the two September 1997 shipments. While the complaint originally
sought recovery from AIA on all four theories, Nippon subsequently
dropped its contract claim against AIA. Skyway cross-claimed
against AIA seeking indemnification. In considering the parties'
motions and cross-motions for summary judgment, the District
Court held that Skyway was liable to Nippon for loss of shipments,
but that its liability was limited to $923.00 on account of the
contractual limitation of liability, and that AIA, as a secondary
common carrier, was not liable in tort to Nippon at all. The
Court also upheld the contractual limitation of liability in
the waybill issued by AIA to Skyway, and accordingly limited
AIA's obligation to pay damages to Skyway to $923.00. See
Nippon Fire & Marine Ins. Co. v. Skyway Freight Sys., Inc.,
45 F. Supp. 2d 288 (S.D.N.Y. 1999) ("Nippon I").
Following the District Court's decision, Skyway and AIA stipulated
to withdrawal of Skyway's cross-claim against AIA with prejudice,
subject to reinstatement if the District Court's decision were
subsequently vacated, modified, or reversed so as to hold Skyway
liable to Nippon for more than $923.00. The District Court approved
and endorsed that stipulation on July 26, 1999, and entered final
judgment in Nippon I on July 27, 1999.
The second action (Nippon II),
filed September 24, 1998 against Skyway, United, and USAir in
connection with the January, February, and July 1997 shipments,
alleged breach of contract against Skyway and negligence, breach
of bailment obligations, breach of warehouseman's obligations,
and conversion against Skyway, United, and USAir. Skyway cross-claimed
for indemnification against USAir and United, and United cross-claimed
for indemnification against Skyway and USAir. In considering
the parties' motions and cross-motions for summary judgment,
the District Court again held that Skyway was liable to Nippon
for the losses, but that its liability for the three shipments
was contractually limited to $432.00, $97.50, and $138.00, respectively;
and that the secondary common carriers, United and USAir, were
not liable in tort to Nippon at all. See Nippon Fire
& Marine Ins. Co. v. Skyway Freight Sys., Inc., 67 F.
Supp. 2d 293 (S.D.N.Y. 1999) ("Nippon II").
Following the District Court's decision, Skyway and USAir stipulated
to withdrawal of Skyway's cross-claim against USAir with prejudice,
subject to reinstatement if the District Court's decision were
subsequently vacated, modified, or reversed so as to hold Skyway
liable to Nippon for more than $432.00. The District Court approved
and endorsed that stipulation on November 1, 1999, and entered
final judgment in Nippon II on November 23, 1999.
These timely appeals followed. After
the notices of appeal had been filed, Skyway filed in bankruptcy
for liquidation (Chapter 7) and AIA filed in bankruptcy for reorganization
(Chapter 11). As a result, all claims and cross-claims against
Skyway and AIA were automatically stayed by operation of 11 U.S.C.
§ 362(a). In light of the automatic bankruptcy stay, the
parties stipulated to voluntary dismissal, with prejudice and
without costs to any party, of (1) Nippon's claims and United's
cross-claims against Skyway and (2) United's cross-claim against
USAir in Nippon II. The parties also stipulated to voluntary
dismissal, without prejudice to reinstatement and without costs
to any party, of Nippon's claims against Skyway and AIA in Nippon
I. We approved and endorsed the stipulation in Nippon
II on May 18, 2000, and the stipulation in Nippon I
on November 30, 2000, and thereby have dismissed these claims.1 Nippon's
claims against United and USAir, however, remain before us. These
remaining claims are not subject to the automatic stay and properly
may go forward. See Teachers Ins. v. Butler, 803
F.2d 61, 65 (2d Cir. 1986) ("It is well established that
stays pursuant to § 362(a) are limited to debtors and do
not encompass non- bankrupt co-defendants.").
We review a grant of summary judgment
de novo, viewing the facts in the light most favorable
to the non-moving party. See Bogan v. Hodgkins, 166 F.3d
509, 511 (2d Cir.), cert. denied, 120 S. Ct. 526 (1999).
Summary judgment is appropriate "[w]here the record taken
as a whole could not lead a rational trier of fact to find for
the non-moving party." Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 587 (1986). Very few of
the material facts in this case are disputed; rather, the parties'
disputes center primarily around conflicting interpretations
of the law.
On appeal, Nippon argues that the
secondary carriers, United and USAir, should be held directly
liable in tort to Nippon for its losses. United and USAir counter
that Nippon may not assert any tort claims against them, but
is limited to claims sounding in contract. If there is to be
recovery on these contractual claims, the secondary carriers
further assert, that recovery must be limited by the liability
limitation provisions in their shipping contracts with Skyway.
Nippon responds that while the secondary carriers might be able
to assert those liability limitation clauses against Skyway,
they may not do so against Nippon. We agree with the secondary
carriers that Nippon is limited to contractual relief, and since
Nippon does not assert any contract claims against the secondary
carriers, we affirm the District Court's conclusion that United
and USAir are not liable to Nippon at all.
Prior to enactment of the Airline
Deregulation Act of 1978 ("ADA"), 92 Stat. 1705, it
had been clearly established that actions against interstate
air carriers for lost or damaged shipments were governed by federal
common law. See generally Read-Rite Corp. v. Burlington Air
Express, Ltd., 186 F.3d 1190, 1195-99 (9th Cir. 1999); Sam
L. Majors Jewelers v. ABX, Inc., 117 F.3d 922, 926-29 (5th
Cir. 1997); see also Insurance Co. of North America
v. Federal Express Corp., 189 F.3d 914, 924-27 (9th Cir.
1999) (W. Fletcher, J., concurring). This Court has not explicitly
stated whether federal common law continues to govern such actions
following enactment of the ADA. See Victoria Sales
Corp. v. Emery Air Freight, Inc., 917 F.2d 705, 708 n.1 (2d
Cir. 1990) (declining to address whether federal common law or
state law governs action seeking damages for lost air shipment
in situation in which Warsaw Convention does not apply); Ruston
Gas Turbines, Inc. v. Pan American World Airways, 757 F.2d
29, 30 (2d Cir. 1985) (stating that "[d]eregulation of certain
common carriers returns us to the common law," but not stating
explicitly whether that common law is state or federal). Other
courts, however, have held that federal common law continues
to govern actions against air carriers for lost or damaged interstate
shipments. See Read-Rite Corp., 186 F.3d at 1195-99;
Sam L. Majors Jewelers, 117 F.3d at 928-29; Arkwright-Boston
Manufacturers Mutual Ins. Co. v. Great Western Airlines, Inc.,
767 F.2d 425, 427 (8th Cir. 1985); First Pennsylvania Bank,
N.A. v. Eastern Airlines, Inc., 731 F.2d 1113, 1119-22 (3d
Cir. 1984); Owens-Corning Fiberglas Corp. v. U.S. Air,
853 F. Supp. 656, 664-65 (E.D.N.Y. 1994); United States Gold
Corp. v. Federal Express Corp., 719 F. Supp. 1217, 1223-26
(S.D.N.Y. 1989). We agree with those courts and hold that federal
common law continues to control the issue of liability of air
carriers for lost or damaged shipments even after deregulation.2
B.Effect of the Secondary Carriers'
Contractual Limitations of Liability
Under the federal common law rules
governing common carriers, contractual provisions that purport
to relieve carriers from liability for loss or damage to cargo
altogether are invalid and unenforceable as against public policy.
See Adams Express Co. v. Croninger, 226 U.S. 491,
509 (1913); Shippers Nat'l Freight Claim Council, Inc. v.
ICC, 712 F.2d 740, 746 (2d Cir. 1983). However, under the
"released value" doctrine, contractual provisions that
merely limit carrier liability for lost or damaged cargo-such
as those incorporated into the air waybills in this case-ordinarily
are valid and enforceable so long as they (1) are set forth in
a "reasonably communicative" form, so as to result
in a "fair, open, just and reasonable agreement" between
carrier and shipper; and (2) offer the shipper a possibility
of higher recovery by paying the carrier a higher rate. Hill
Constr. Corp. v. American Airlines, Inc., 996 F.2d 1315,
1317 (1st Cir. 1993); Shippers Nat'l Freight Claim Council,
712 F.2d at 746.
The released value doctrine, which
dates back to the earliest cases at common law governing railroads,
see, e.g., Hart v. Pennsylvania R.R., 112 U.S.
331 (1884), subsequently has been extended by statute and common
law to common carriers of every stripe, including air carriers
both before and after deregulation. See, e.g., Hill
Constr. Corp., 996 F.2d at 1317 (citing cases and statutes);
Deiro v. American Airlines, Inc., 816 F.2d 1360, 1365
(9th Cir. 1987) (under federal common law, released value doctrine
applies to air carriers). A valid limitation of liability clause
governs "not only the nature and extent of [the carrier's]
liability, but also the nature and extent of the shipper's right
of recovery." North American Phillips Corp. v. Emery
Air Freight Corp., 579 F.2d 229, 233 (2d Cir. 1978). Such
clauses, therefore, limit recovery not only for breach of contract,
but also based on other legal theories, including negligence,
bailment, or conversion. See Owens-Corning Fiberglas Corp.,
853 F. Supp. at 665-66 (valid limitation of liability clause
also applies to claims sounding in tort); Neal v. Republic
Airlines, Inc., 605 F. Supp. 1145, 1148 (N.D.Ill. 1985) (holding
that "[w]here . . . it is clear plaintiffs seek damages
for breach of the carriage contract . . . [t]hey must proceed,
if at all, on a breach of contract theory," and the contractual
limitation of liability applies if otherwise valid); 3 Saul Sorkin,
Goods in Transit § 13.07, at 13-123 & n.27 (1976
& Supp. 1998) (contractual limitations of liability "may
not be avoided by framing the complaint in terms of bailment
or tort"). Moreover, the fact that an air carrier temporarily
may have stored the goods does not render the carrier a warehouseman,
subject to common law warehouseman's duties, so long as the storage
was only temporary and incidental to the primary goal of interstate
shipment. See Owens-Corning Fiberglas Corp., 853 F. Supp.
at 666; Baloise Ins. Co. v. United Airlines, Inc., 723
F. Supp. 195, 199 (S.D.N.Y. 1989) (carrier should not be treated
as a warehouseman "simply because it stores goods temporarily
in a warehouse facility prior to transport").
The original shipping contracts
between Toshiba and Skyway contained provisions limiting Skyway's
liability to the greater of either 50 cents per pound or $50.00.
While Toshiba had the option of declaring a higher value for
its shipments and paying Skyway a correspondingly higher rate,
it elected not to do so. Nippon argues that even if those liability
limitations in the Toshiba-Skyway shipping contracts were valid,
USAir and United may not avail themselves of those provisions,
since the original contract between Toshiba and Skyway lacked
a "Himalaya clause,"3 which would have explicitly extended
the protective clauses of the primary contract to third parties,
such as agents and subcontractors. Nippon argues that this question
is controlled by the Supreme Court's decision in Robert C.
Herd & Co. v. Krawill Machinery Corp., 359 U.S. 297,
302-303 (1959), a maritime case holding that under the Carriage
of Goods by Sea Act of 1936 ("COGSA"), 46 U.S.C. §§
1300-15, a secondary carrier may not claim the benefit of the
primary carrier's contractual limitation of liability unless
the contract contains language akin to a "Himalaya clause."
USAir and United, however, do not
seek to benefit from the liability limitation in the Toshiba-Skyway
contracts. Instead, they assert the independent validity of the
limitations of liability in their own respective contracts
with Skyway-which, they claim, preclude both Skyway and
Nippon from asserting non-contractual claims against the secondary
carriers. The District Court agreed with defendants, distinguishing
Herd and cases following its rule as inapplicable in light
of the valid limitations of liability in their own contracts
with Skyway. Nippon II, 67 F. Supp. 2d at 298-301.
We agree with the District Court's
well-reasoned analysis of this issue. Application of the Herd
principle does not help Nippon in this case, since the shipping
contracts between Skyway and the secondary carriers contain their
own valid limitations of liability. The District Court noted
in Nippon I that common carriers are entitled to assume
"that one presenting goods for shipment either owns them
or has authority to ship them." Nippon I, 45 F. Supp.
2d at 293 (quoting Puerto Rico Maritime Shipping Auth. v.
Crowley Towing & Transportation Co., 747 F.2d 803, 804
(1st Cir. 1984)); see also ICC v. Delaware, L. &
W. R.R. Co., 220 U.S. 235, 252 (1911); Nippon II,
67 F. Supp. 2d at 298-99; Atlantic Mutual Ins. Co. v. M/V
President Tyler, 765 F. Supp. 815, 818 n.3 (S.D.N.Y. 1990)
("Absent special circumstances, the risk that the individual
presenting the goods for shipment is unauthorized is better borne
by the actual owner of the goods than a common carrier.").
Indeed, as common carriers, USAir and United were not even permitted
to scrutinize ownership of the cargo before deciding to accept
the shipments from Skyway-unlike private carriers, common carriers
lack "the power to sit in judgment on the title of the prospective
shipper who has tendered the goods for transportation."
Nippon I, 45 F. Supp. 2d at 293 (quoting ICC v. Delaware,
L. & W. R.R. Co., 220 U.S. at 252); see also Chicago,
Milwaukee, St. Paul & Pac. R. Co. v. Acme Fast Freight, Inc.,
336 U.S. 465, 487(1949) (when shipping goods tendered by freight
forwarder, "the carrier is not concerned with questions
of ownership, but must treat the forwarder as shipper").
In this context, the District Court properly distinguished the
cases cited by Nippon that apply the Herd principle-either
because they involve private, rather than common carriers, see
Arkwright-Boston Manufacturers Mutual Ins. Co. v. Great Western
Airlines, Inc., 767 F.2d 425, 426 (8th Cir. 1985), or because
the secondary carriers in those cases did not have their own
waybills containing valid limitations of liability, see, e.g.,
id.; Hartford Fire Ins. Co. v. Empresa Ecuatoriana
de Aviacion, 945 F. Supp. 51, 55 (S.D.N.Y. 1996), aff'd,
122 F.3d 1056 (2d Cir. 1997) (table).
Nippon does not dispute the validity
of the liability limitations in the air waybills between Skyway
and the secondary carriers with which it subcontracted the Toshiba
shipments. Rather, Nippon argues that since Skyway was not authorized
to subcontract the shipments, the secondary carriers should not
be permitted to "lawfully bind [Toshiba] to some unknown
terms." In at least two respects, however, Nippon's argument
misunderstands its relationship to the secondary carriers under
federal common law. First, Nippon cannot avoid the liability
limitations in the secondary carriers' shipping contracts by
framing its claims in tort. It is well-established that a shipper
may sue a secondary carrier of its goods for any loss or damage
that may be caused by those carriers. However, such actions have
always had their basis in contract-the theory being that
the shipper is either a disclosed or undisclosed principal of
its agent, the primary carrier. See Acme Fast Freight, Inc.,
336 U.S. at 487 n.27; Great Northern R. Co., 232 U.S.
at 514-15; see also Gibson v. Greyhound Bus Lines, Inc.,
409 F. Supp. 321, 325 (M.D. Fla. 1976) (for a common carrier,"[t]he
duty of due care grows out of the contract of carriage and breach
of that duty gives rise to" a cause of action sounding in
contract). In this case, Toshiba was the undisclosed principal
of its agent, Skyway. As a result, Toshiba's subrogee, Nippon,
is subject to the ordinary federal common law rule that limitation
of liability provisions in shipping contracts "may not be
avoided by framing the complaint in terms of bailment or tort."4 3 Saul
Sorkin, Goods in Transit § 13.07, at 13-123 & n.27
(1976 & Supp. 1998).
Second, on the facts of this case,
the terms to which Toshiba is bound under Skyway's shipping contracts
with United and USAir were not "unknown." Toshiba's
expectations were in no way frustrated by Skyway's decision to
subcontract its shipments, since the scope of the liability limitations
agreed to between Skyway and its secondary carriers was exactly
the same as that agreed to between Toshiba and Skyway.5 See
Nippon I, 45 F. Supp. 2d at 294 & n.4; Nippon II,
67 F. Supp. 2d at 299. Any argument that Skyway exceeded its
authority by subcontracting the shipment must, necessarily, be
directed at Skyway alone-as common carriers, United and USAir
were obliged to treat Skyway as a shipper when it tendered Toshiba's
goods to them for shipment. See Great Northern R.R. Co. v.
O'Connor, 232 U.S. 508, 514-15 (1914) (stating that "[i]f
there was any undervaluation, wrongful classification or violation
of [the shipper's] instructions, resulting in damage, the [shipper]
has her remedy against" the primary carrier, not the secondary
carrier); Burnell v. Butler Moving & Storage, 826
F. Supp. 65, 68 (N.D.N.Y. 1993).
Therefore, since Nippon does not
assert any contract claims against the secondary carriers, it
has not alleged a valid basis of recovery against these defendants.
We hold that USAir and United are
not liable in tort for the losses resulting from the shipments
in this case, and we therefore AFFIRM the District Court's judgment
as to Nippon's claims against USAir and United in Nippon II.
All other claims in these appeals have been dismissed, following
the parties' stipulations, by our orders of May 18, 2000, and
November 30, 2000.
Since Nippon's claims against Skyway
have been dismissed, we do not address Nippon's arguments that
the District Court erred by (1) refusing to consider the testimony
of its expert witness in support of its claims against Skyway,
and (2) refusing to apply the "material deviation"
doctrine, see Nippon I, 45 F. Supp. 2d at 292-93; Nippon
II, 67 F. Supp. 2d at 299-300; see generally Hill Constr.
Corp. v. American Airlines, Inc., 996 F.2d 1315, 1317 (1st
Cir. 1993), to invalidate the limitation of liability in the
shipping contracts between Toshiba and Skyway.
Since we conclude that this case
arises under federal common law, federal jurisdiction over this
case is properly based on 28 U.S.C. § 1331, which "support[s]
claims founded upon federal common law as well as those of a
statutory origin." Sam L. Majors Jewelers v. ABX, Inc.,
117 F.3d 922, 926 (5th Cir. 1997) (quoting Illinois v. City
of Milwaukee, 406 U.S. 91, 100 (1972)). Even if federal common
law did not control the question of the defendants' liability,
however, federal jurisdiction would remain available under 28
U.S.C. § 1332(a)(2). The $75,000 amount-in-controversy requirement
has been met in each action, and Nippon, the only plaintiff in
either action, is incorporated under Japanese law and has its
principal place of business in Tokyo, making it a "citizen
or subject of a foreign state" for purposes of diversity/alienage
jurisdiction. 28 U.S.C. § 1332(a)(2); see Matimak Trading
Co. v. Khalily, 118 F.3d 76, 79 (2d Cir. 1997) (citing National
Steamship Co. v. Tugman, 106 U.S. 118, 121 (1882)), cert.
denied, 522 U.S. 1091 (1998). The defendants-Skyway, AIA,
USAir, and United-all are incorporated (respectively, in California,
Michigan, Delaware, and Delaware) and have their principal places
of business (respectively, in California, Michigan, Virginia,
and Illinois) in the United States.
The use of this label derives from
the case of Adler v. Dickson,  1 Q.B. 158, which
involved the steamship "Himalaya." See 3 Saul
Sorkin, Goods in Transit § 14.15, at 14-85 (1976 &
We need not definitively resolve
whether other circumstances might exist in which secondary carriers
may be held liable to shippers in tort, for the facts of this
case-in which United and USAir had no duty to Toshiba-do not
present any such circumstance. From the perspective of the secondary
carriers, Nippon is an unforeseeable plaintiff, since the carriers
accepted the goods for shipment from Skyway, not from Nippon's
subrogor Toshiba. As discussed above, the secondary carriers
were entitled-and indeed, obligated-as common carriers to assume
that Skyway either owned the goods to be shipped or had authority
to ship them. See Nippon I, 45 F. Supp. 2d at 293-94;
see also Hampton v. Federal Express Corp., 917 F.2d 1119,
1125-26 (8th Cir. 1990) (holding that carrier was not liable
in tort since it could not reasonably foresee any injury to the
plaintiff). Notwithstanding their contractual obligations to
Skyway, the secondary carriers therefore did not have any
duty to Toshiba, and Nippon has not advanced any argument
as to why we should recognize a duty by the secondary carriers
to a party of which it had no knowledge and to whom injury could
not reasonably have been foreseen.
Like the District Court, we express
no view as to whether the shipper has "any additional rights"
against secondary carriers when the secondary carriers' shipping
contracts contain higher damage limitations than the original
agreement between the shipper and the primary carrier. Nippon
I, 45 F. Supp. 2d at 294 n.4.