Air cargo carrier enforces contractual liability limitation against shipper’s claim

Golden Hawk Metallurgical, Inc. v. Federal Express Corporation (E.D. Mich. Oct. 4, 2016).  The plaintiff, a metal refinery, shipped two packages to its customers via FedEx.  According to the plaintiff, the packages contained gold and diamonds valued over $33,000, but the plaintiff did not declare any value for either shipment.  The plaintiff alleged that FedEx personnel replaced the packages’ contents with rocks before making the deliveries to the plaintiff’s customers.  The plaintiff claimed that the rocks matched those at a nearby FedEx terminal and that a FedEx driver had been “arrested for a similar theft.”

The plaintiff sued FedEx in state court, alleging causes of action for breach of contract, breach of bailment duties and conversion.  FedEx removed the case to federal court and, after discovery, moved for partial summary judgment.  FedEx contended that the bailment and conversion claims were preempted by 49 U.S.C. § 41713(b)(1), a provision of the Airline Deregulation Act, and that the terms and conditions of the shipping contracts expressly limited FedEx’s liability for breach of contract to $100 per shipment.  In opposition, the plaintiff argued that its bailment and conversion claims were not preempted by the Carmack Amendment and that the shipping contracts’ liability limitations did not apply because they “did not cover the theft of goods by employees of FedEx.”

The court ruled that the Carmack Amendment did not apply to air carriers, such as FedEx, and that the ADA preempted the bailment and conversion claims because both claims were based on alleged violations of “state-imposed obligations” rather than of terms and conditions that the parties had voluntarily undertaken.  As to the contract claim, the court ruled that the plaintiff’s “conversion exception” argument against contractual limited liability failed because that exception only applied where a shipper has proved that the carrier has itself appropriated the shipper’s property, which the plaintiff did not even allege.  The court also ruled that the shipping contracts’ limited liability provisions were unambiguous and that FedEx had provided the shipper with reasonable notice of such provisions, thus making them enforceable.  Accordingly, the court granted FedEx’s motion.

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