Amicus Brief for the United States — Trans World Airlines, Inc. v. Franklin Mint Corp.

-Supreme Court, US,

Pkg Oe TL ED

3

Nos. 82-1186 and 82-1465 APR 7 196

a pnperremite STEVAS,

—

In the Supreme Court of the Bni tates

OCTOBER TERM, 1982

TRANS WORLD AIRLINES, INC., PETITIONER

»

FRANKLIN MINT CORPORATION, ET AL.

FRANKLIN MINT CORPORATION, ET AL., PETITIONERS

7

TRANS WORLD AIRLINES, INC.

ON PETITIONS FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE SECOND CIRCUIT

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

Rex E. LEE

Solicitor General

J. PAUL MCGRATH

Assistant Attorney General

JOSHUA |, SCHWARTZ

Assistant to the Solicitor General

MICHAEL F,. HERTZ

EDWARD R. COHEN

Attorneys

Department of Justice

Washington, D.C. 20530

(202) 633-2217

Ce et

QUESTION PRESENTED

The United States will address the following question:

Whether recent international monetary developments

and the repeal in 1978 of the Par Value Modification Act,

former 31 U.S.C. 449, render unenforceable in United

States courts the limitations on carrier liability, stated in

terms of quantities of gold, prescribed by Article 22 of the

1929 Warsaw Convention on international air transporta-

tion.

(1)

TABLE OF CONTENTS

Interest of the United States ....................0005.

INGE ANUGLUS 0 bs di'viudaweWs ov évdd S6dcaeepeccens

SEEGER Cad GU Tce oUilee bUve bc iweckvcceblesudene

Th Mictalcd Co vcchcccncdiecsctcsecteeses

TABLE OF AUTHORITIES

Cases:

Aircrash at Kimpo International Airport

Korea on November 18, 1980, In re,

MDL-482 (Feb. 15, 1983) ..................

Bacardi Corp. v. Domenech, 311 U.S. 150....

Cook v. United States, 288 U.S. 102 .........

Garcia vy. Pan American Airways, Inc., 269

App. Div. 287, 55 N.Y. Supp. 317, aff’d, 295

N.Y. 852, 67 N.E.2d 256, cert. denied, 329

0 ES a a

Indemnity Insurance Co. of North America v.

Pan American Airways, Inc., 58 F. Supp.

Mississippi University for Women v. Hogan,

No. 81-406 (July 1, 1982) ..................

Pigeon River Improvement, Slide & Boom Co.

v. Charles W. Cor, Ltd., 291 U.S. 188 .....

Washington v. Washington State Commercial

Passenger Fishing Vessel Ass'n, 443 U.S.

Weinberger v. Rossi, 456 U.S. 25 ............

Wright v. Henkel, 190 U.S. 40...............

United States v. Bornstein, 423 U.S. 308 .....

Constitution, treaties and statutes:

RPMS TINGL EEE i. Swincs cpediene «oboe adode

Articles of Agreement of the International

Monetary Fund, Dec. 27, 1945, 60 Stat. 1401,

EE 2d. 5 Lids saranda cma ae ee

Fe

IV

Constitution, treaties and statutes—continued: Page

Convention for the Unification of Certain Rules

Relating to International Transportation by

Air (“the Warsaw Convention,”), Oct. 12,

1929, 49 Stat. 3000, T.S. No. 876, 137

L.N.T.S. 11, reprinted in 49 U.S.C. 1502

NOOR Gaccedsvctudnssesasehvcevesuseuears 1

SOU Sere esac Sa celta stots eee cate 2

SS ons vind oaccteteaves 3, 4, 9-10, 11, 12, 13

ORG es da daeWaee and vende buccees eens 2

OE NY divas ot'e's ba bn en cn cem cade ae san 2,15

Wile Mn sd sd bvedetbuctaradessutaretravin 2

First Amendment of Articles of Agreement of

the International Monetary Fund, July 28,

1969, 20 U.S.T. 2275, T.1.A.S. No. 6748 .... 5

Second Amendment of Articles of Agreement of

the International Monetary Fund, Apr. 1,

1976, 29 U.S.T. 2208, T.1.A.S. No. 8937 .... 5

Act of May 12, 1933, Section 43(b)(2), 48 Stat.

Gia lccdavebus se cbs ne ecububc<cuaaeneey 11

Bretton Woods Agreements Act, ch. 339, 59

RS DUE hae steed econ ckdas aches eieaers 4

Par Value Modification Act, Pub. L. No.

92-268, Section 2, 86 Stat. 116, (former 31

U.S.C. 449), as amended b Pub. L. No.

93-110, Section 1, 87 Stat. 352 ............. 4, 11

Pub. L. No. 94-564, 90 Stat. 2660 et seq.:

Section 6, 90 Stat. 2661 .......ccccccccccess 5

Section 9, 90 Stat. 2661 .......ccccccccccces 5, 11

ee ee ee ere eee ee ps oe

31 U.S.C. 5117 at Pub. L. No. 97-258, 96 Stat.

984 (formerly 31 U.S.C. 405b) ............. 13

Miscellaneous:

H.R. 13955, 94th Cong., 2d Sess. (1976) ...... 12

H.R. Rep. No. 94-1284, 94th Cong., 2d Sess.

CRE a cd'cddnc cae cddareucsendumanneeenaet 12

R. Lipsey & P. Steiner, Economics (1978) ... 12

Miscellaneous—continued:

Lowenfeld & Mendelsohn, The United States

and the Warsaw Convention, 80 Harv. L.

Te 0 SR a ee

1 Report of the Commission on the Role of Gold

in the Domestic and International Monetary

System (Mar. 1968) ...2ccccccsccccsevesces

U.S. Dep't of State, Treaties in Force (1982) .

3n the Supreme Court of the Gnited States

OCTOBER TERM, 1982

No. 82-1186

TRANS WORLD AIRLINES, INC., PETITIONER

”

FRANKLIN MINT CORPORATION, ET AL.

No. 82-1465

FRANKLIN MINT CORPORATION, ET AL., PETITIONER

Uv.

TRANS WORLD AIRLINES, INC.

ON PETITIONS FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE SECOND CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE

INTEREST OF THE UNITED STATES

This case presents a substantial question of recurring im-

portance respecting the enforceability in United States

courts of key provisions of the Warsaw Convention on in-

ternational air transportation. The Warsaw Convention

creates a uniform regime to govern the international car-

' This treaty, universally known simply as “the Warsaw Conven-

tion,” is more properly termed the Convention for the Unification of

Certain Rules Relating to International Transportation by Air, Oct.

12, 1929, 49 Stat. 3000, T.S. No. 876, 137 L.N.T.S. 11, reprinted in 49

U.S.C. 1502 note. The United States has been a party to the Warsaw

Convention since 1934.

2

riage of passengers, baggage and cargo by air, including

rules governing tickets, baggage checks and air waybills,

and regulates the liabilities of carriers. Generally speaking,

under Articles 18-21 of the Convention, carriers are pre-

sumptively liable for the loss of shipped goods. As quid pro

quo for this rule favoring shippers, the liabilities of carriers

are limited. Article 22(2) of the Convention provides in per-

tinent part:

In the transportation of checked baggage and of

goods, the liability of the carrier shall be limited to a

sum of 250 francs per kilogram, unless the consignor

has made, at the time when the package was handed

over to the carrier, a special declaration of the value at

delivery and has paid a supplementary sum if the case

so requires. * * *

Article 22(4) provides that the currency unit employed in

the Convention “shall be deemed to refer to the French

franc consisting of 65% miligrams of gold at the standard of

fineness of nine hundred thousandths.” This unit is general-

ly known as the Poincare franc.

The court of appeals has declared unenforceable the limi-

tation on liability for loss of, or damage to, goods shipped

by air in international commerce subject to the Warsaw

Convention. This decision, if allowed to stand, will have

significant adverse consequences for the United States both

in its immediate application to the Warsaw Convention and

in its broader implications for the treaty obligations of this

country generally. The United States continues to regard

the Warsaw Convention as a binding international agree-

ment, See U.S. Dep't of State, Treaties in Force 207-208

(1982). Indeed, if the United States wished to terminate. its

participation in the system established by the Convention,

it would be obligated to give its treaty partners six months’

notice. Art. 842). The United States remains committed to

the Convention as the basic instrument governing ques-

tions of liability in the international aviation industry.

The Department of State informs us that several foreign

governments have expressed their view that the court of

appeals’ decision will seriously affect United States rela-

3

tions in international aviation. Pursuant to the United

States’ obligations under the Convention itself, and under

the generally recognized principle of international law pacta

sunt servanda (“treaty obligations must be observed”), the

United States is required to uphold the Convention's

enforceability. Only if there is a clear decision by the politi-

cal branches of the federal government to abrogate a trea-

ty, by formal executive denunciation or legislative man-

date, should the courts take the extraordinary step of

placing the United States in violation of its international

commitments.

The United States also has a substantial interest in as-

suring that this Nation's treaty obligations are applied uni-

formly throughout the federal court system. Because the

decision of the court of appeals is at odds with those of

other federal courts that have considered the questions pre-

sented, and because the issues involved are recurring ones,

this interest is adversely affected by the court of appeals’

ruling.

STATEMENT

1. Franklin Mint Corp. brought this action in the United

States District Court for the Southern District of New

York to recover damages from Trans World Airlines, Inc.

for the loss of a shipment of 714 pounds of numismatic ma-

terial that was carried by TWA from New York to London.

The freight charge for the shipment was $544.96. Although

Franklin Mint subsequently claimed that the coins were

worth $250,000, it did not make a special declaration of

value, as permitted by the Warsaw Convention. The par-

ties stipulated that the action was governed by the Warsaw

Convention and that TWA was liable for the loss (Pet. App.

A-3 to A-4).?

TWA moved for partial summary judgment, asserting

that under Article 22 of the Warsaw Convention its liability

should be limited to the equivalent of 259 francs per kilo-

gram of cargo weight and that each frane should be evalu-

ated as “65% miligrams of gold at the standard of fineness

“Pet. App.” refers to the appendix to the petition for a writ of cer-

tiorari in No. 82-1186.

4

of nine hundred thousandths.” The parties agreed to the

applicability of this standard and the weight of the ship-

ment. The only dispute concerned the rate at which the lia-

bility limitation, stated in Article 22 of the Convention in

terms of gold francs, was to be translated into dollars.*

Franklin Mint argued that its recovery should be converted

into dollars through use of the free market value of gold.

TWA claimed, instead, that damages were to be computed

through use of one of three conversion measures: (1) the of-

ficial price of gold ($42.22 per troy ounce) that prevailed un-

der the Par Value Modification Act, former 31 U.S.C. 449,

prior to its repeal,* (2) a price adjusted by reference to the

* The parties apparently agreed that the actual value of the ship-

ment exceeded the limitation rate; accordingly, no question of actual

value was presented.

* In 1945, the United States and other countries, in accepting mem-

bership in the International Monetary Fund, undertook to maintain a

“par value” for their currencies, expressed in terms of gold, and to

convert foreign official holdings of their currencies into gold or the cur-

rency of the holder, at the request of the holder. See Bretton Woods

Agreements Act, ch. 339, 59 Stat. 512; Articles of Agreement of the

International Monetary Fund, Dec. 27, 1945, 60 Stat. 1401, T.1.A.S8.

No. 1501. In practice, most countries maintained par values for their

currencies by official intervention in the foreign exchange market (i.¢.,

values and the main reserve asset of the monetary system.

The Bretton Woods system ultimately proved insufficiently flexible

to accommodate major changes in the world economy and, in particu-

lar, shifts in the economic position of the United States relative to

soulldae dates anny vee ef he autre nb ty oun

changes in were

gress. Par Value Modification Act, Pub. L. He S00k Gestion 2, 98

Stat. 116, as amended by Pub. L. No. 98-110, Section 1, 87 Stat. 368.

In 1973, however, after the second major realignment of exchange

rates and in response to severe market pressures, many nations moved

l

*

i

;

i

or

value of the Special Drawings Rights (SDRs) established

under the auspices of the International Monetary Fund,° or

(3) the exchange value of the contemporary French franc.

Under either the last official price of gold or the SDR-based

methods for conversion, TWA’s liability in this case would

be limited to roughly $6500. The use of the contemporary

French franc would yield a somewhat larger recovery,

while conversion at the free market value would produce a

recovery many times greater, but still significantly less

than the actual value now claimed for the shipment (Pet.

App. A-4 to A-6).

States and other IMF members of the obligation of maintaining par

values of their currencies and to adopt the Special Drawing Right

(SDR) as the unit of account of the IMF. See note 5, infra. Second

Amendment of Articles of Agreement of the International Monetary

Fund, Apr. 1, 1976, 29 U.S.T. 2208, T.1.A.S. No. 8937. The Second

Amendment took effect on April 1, 1978. This amendment was accept-

ed by Congress. Pub. L. No. 94-564, 90 Stat. 2660. By the same legis-

lation, the Par Value Modification Act, which had fixed the par value

of the dollar, was repealed See pages 11-14, infra.

* SDRs are international reserve assets allocated by the IMF to

member countries to supplement existing reserve assets.

At the time the original Articles of Agreement of the International

Monetary Fund became effective in 1945, the dollar, which then had a

fixed par value in terms of gold, was the IMF unit of account. See note

4, supra. The SDR was created by the IMF nations in 1969. First

Amendment of Articles of Agreement of the International Monetary

Fund, July 28, 1969, 20 U.S.T. 2775, T.1.A.S. No. 6748. The SDR was

defined in terms of gold and was equa! in value to the dollar.

In July 1974, after the advent of floating exchange rates, the SDR

was revalued as the sum of specified amounts of a number of curren-

cies. Under the Second Amendment of the IMF Articles of Agreement,

the SDR’s value is no longer defined in terms of gold but is determined

daily on the basis of the market exchange rate for specified amounts (a

mixed “basket”) of a number of major national currencies. Although

the United States dollar is a component of the basket, the value

of the dollar in terms of the varies over time, depending upon

changes in rates for the various currencies in the “basket.”

= Ry Fay publishes a valuation for the dollar in terms of

SDRs. the 1978 Amendment to the IMF Articles of Agreement

the SDR became the IMF unit of account

TWA proposed that its liability in thus case be ectablished as the dol-

lar value, on the date uf

6

The district court stated: “{wjere we writing on a clean

slate we would find the arguments in favor of * * * [the

SDR] most persuasive” (Pet. App. A-27). It concluded,

however, that the calculation of the dollar amount should

be made by using the last official price of gold fixed by the

Par Value Modification Act. /bid. The court observed that

this measure remained the basis for the liability lymitations

stated in dollars in international air tariffs filed with the

Civil Aeronautics Board. In the court’s view, this measure

“c{a}me[] as close as anything to constituting a governmen-

tal interpretation of the Article 22 limitation” (ibid.), to

which deference was due. Accordingly, Franklin Mint was

awarded $6,475.98, plus interest and costs (id. at A-28).

2. The court of appeals affirmed “the result reached in

this case” (Pet. App. A-3), adopting the district court’s rea-

soning ana citing the reliance interests of the parties as the

rationale for that disposition (id. at A-19). The court of ap-

peals nonetheless purported to “hold the Convention’s limit

on liability prospectively unenforceable in United States

Courts” (id. at A-3). The court believed that “neither inter-

national nor domestic sources of law specify a unit of ac-

count for purposes of the Convention” (id. at A-17). In par-

ticular, the court understood the repeal of the Par Value

Modification Act to preclude reference, for purposes of

enforcing the Convention, to the price of gold set by that

Act (id. at A-14):

which has been s y rejected by the

States Congress. ’ action, moreover, as well

as that taken by the other parties to the Jamaica Ac-

cords, is relevant to the Convention. The repeal

of the Par Value Modification Act was based on a do-

mestic and international conclusion that the official

price of gold was w out of touch with eeonomic

cubes te Canveath rae Arete ne i me Be

as vention’s was specifically designed

to establish a limitation level at a certain value, this

7

repeal must be taken as a statement that the official

price no longer reflects that specified value.

The court of appeals found that each of the other conver-

sion mechanisms proposed by the parties was equally un-

tenable. The court regarded use of the current French

france or the free market value of gold as inconsistent with

the intent of the contracting nations to establish a non-

parochial, internationally recognized, uniform and stable

unit of measure for the liability limitation under the Con-

vention (Pet. App. A-15). Use of the SDR as the basis for

conversion was, in the court’s view, simply unauthorized by

the Convention. The court of appeals also assumed that use

of the SDR would have required it to determine the num-

ber of SDRs to be awarded per kilogram of freight loss—

and thus to legislate the level of limitation. Finally, the

court suggested that it was precluded from adopting a unit

of conversion “variable at the whim of an international body

distinct from the parties to the Convention” (id. at A-17).

Thus, the court of appeals determined that the essential

ingredient of the formula by which the Convention’s limit

on liability had previously been translated into United

States dollars had been eliminated “as a consequence of in-

ternational action followed by domestic legislation” (Pet.

App. A-17). As a result, the court concluded that the par-

ties were asking it “to select * * * as a matter of policy, a

new unit of conversion” (ibid.). This, the court explained,

was beyond its authority, because “selection of a unit of

conversion and the level of value of a limitation on liability

is plainly a matter to be negotiated by the parties (to the

Convention},” and “such a unit must be selected either

through treaty ratification by the Senate or by legislation

passing both the Houses of Congress” (id. at A-17, A-18).®

* The court of appeals announced (Pet. App. A-19) that its ruling

8

DISCUSSION

The court of appeals has decided important and recurring

questions of law in a manner that deviates from established

principles regarding the validity and enforceability of trea-

ties. The court’s decision threatens to undermine a signifi-

cant international law regime to which the United States is

committed and to subject this country to adverse repercus-

sions in the international community. We accordingly urge

that certiorari be granted to resolve the questions

presented.

1. The principles that govern this case are well settled.

“(A] treaty will not be deemed to have been abrogated or

modified by a later statute unless such purpose on the part

of Congress has been clearly expressed.” Cook v, United

States, 288 U.S. 102, 120 (1933). See also Washington vy.

Washington State Commercial Passenger Fishing Vessel

Ass'n, 443 U.S. 658, 690 (1979); Pigeon River Improve-

ment, Slide & Boom Co. vy. Charles W. Cox, Ltd., 291 U.S.

138, 160 (1934). When considering questions that arise un-

der a treaty, courts must

construe the treaty liberally to give effect to the pur-

pose which animates it. Even where a provision of a

treaty fairly admits of two constructions, one re-

stricting, the other enlarging, rights which may be

claimed under it, the more liberai interpretation is to

be preferred.

Bacardi Corp. v. Domenech, 311 U.S. 150, 168 (1940).

Finally, courts are to give treaties “a fair interpretation,

according to the intention of the contracting parties, and so

as to carry out their manifest purpose.” Wright v. Henkel,

190 U.S. 40, 57 (1908). These principles are not rendered

inapplicable by the occurrence of events that were unfore-

seen by the nations that are party to the instrument. See,

e.g., Pigeon River Improvement, Slide & Boom Co, v.

Charles W. Cox, Ltd., supra, 291 U.S. at 157-158.

In light of these principles, the court of appeals should

have engaged in a two-step analysis. First, it should have

determined whether Congress clearly intended to invali-

date the liability limits of the Warsaw Convention when it

repealed the Par Value Modification Act. We submit that

the requisite specific and unambiguous intent cannot be

o

» ¥.~

9

found here (see pages 10-14, infra). Second, upon conclud-

ing that the Convention remains in force, the court should

have attempted to construe its language in view of perti-

nent statutes, governmental policies, and economic facts to

accomplish its obvious purpose. The court of appeals’ ability

to determine a value for the limitation on liability for the

litigants in this suit strongly suggests that it could have es-

tablished a value in future suits as well. Other courts have

regularly done so. See page 10 note 7, infra.

The decision of the court of appeals is inconsistent with

these principles. The court below failed to give effect to the

intent of the nations that entered into the Warsaw Conven-

tion, principally because it failed to ascertain that intent. In

limiting liability, and in specifying that limit in terms of the

Poincare franc (consisting of a stated quantity of gold of a

prescribed level of purity), the contracting nations intended

to establish an internationally uniform and stable stand-

ard—and above all to impose a /imit on air carrier liability.

See Lowenfeld & Men. elsohn, The United States and the

Warsaw Convention, 80 Harv. L. Rev. 497, 499 (1967). The

treaty regime represented a compromise between the in-

terests of transport users and carriers and the interests of

the various nations party to the Convention. Transport

users obtained a fixed system of nearly-absolute liability,

and an opportunity to provide themselves with additional

protection by declaring excess value at the time of ship-

ment. In return, carriers received a fixed and certain

standard of liability and the limitation on recovery at issue

in this case. Moreover, the treaty eliminated conflicts of

laws problems, involving differing standards of fault in dif-

ferent countries, to the advantage of all.

The court of appeals proceeded as if Article 22 of the

Warsaw Convention were a prescription for liquidated

damages (see Pet. App. A-14). In the court’s view, if it

could not translate the gold-based liability limit fixed by the

Convention into dollars in a fashion that ensured that the

dollar value awarded was the precise one prescribed by the

Convention, it was powerless to give any effect to Article

A *

10

22 (id. at A-5, A-17). The court of appeals thus ignored en-

tirely the most critical facet of the intentions of the con-

tracting parties—the unambiguous intent to adopt a ceiling

on damages for loss of shipped goods. The court instead

substituted a regime of completely unbounded liability.

Abrogation of the limitation on liability is the one alter-

native that simply cannot be squared with the provisions of

Article 22. The court of appeals should have determined

which of the proposed measures for translating the limits

prescribed by the Convention into dollars best effectuated

the intent of the framers. The court was not free to abdi-

cate that responsibility simply because it concluded that no

perfect measure of conversion was available. The court’s

refusal to enforce any limitation on liability at all was in

clear violation of the mandate of the Convention.

2. The court of appeals substantially exaggerated the ob-

stacles to ascertainment of the appropriate measure of con-

version.’ Specifically, the court’s explanation of its rejec-

tion of TWA’s proposal to convert the Convention liability

limit into dollars at a rate of $42.22 per ounce of gold is se-

riously flawed.

a. Contrary to the decision of the court of appeals, the

repeal of the Par Value Modification Act in 1978 does not

preclude use of the last official price of gold established by

that Act, $42.22 per troy ounce, for translation of the gold-

based liability limits prescribed by the Convention into dol-

lars. Especially when the appropriate inquiry is made—

i.e., what measure of conversion best effectuates the iritent

of the parties to limit liability—the court of appeals’ objec-

tions to use of this measure appear insubstantial.

The Warsaw Convention is a self-executing treaty that

provides a source of rules of decision applicable in United

States courts without enactment of any supplementary im-

plementing legislation by Congress. See, e.g., /ndemnity

’ Although substantial changes in international currency arrange-

ments have taken place since 1971, courts both in the United States

and elsewhere have found it possible to interpret Article 22 of the Con-

vention so as to effectuate the original intent to limit the liability of

carriers thereunder. See Brief of the International Air Transport As-

sociation 17 nn. 51 & 52. See also Pet. App. A-12 to A-13 & nn. 14-19.

These decisions strongly suggest that the court of appeals could have

given effect to the Convention.

1]

Insurance Co. of North America vy. Pan American Air-

ways, Inc., 58 F. Supp. 338 (S.D.N.Y. 1944); Garcia v.

Pan American Airways, Inc., 269 App. Div. 287, 55 N.Y.

Supp. 317, aff'd, 295 N.Y. 852, 67 N.E.2d 256, cert.

denied, 329 U.S. 741 (1940). See generally Bacardi Corp.

v. Domenech, supra, 311 U.S. at 161. Neither the Par

Value Modification Act fixing the value of $42.22 per troy

ounce of gold for international exchange purposes, Pub. L.

No. 93-110, Section 1, 87 Stat. 352, nor any of its predeces-

sors that fixed othe: prices, or authorized the President to

do so (see, e.g., Par Value Modification Act, Pub. L. No.

92-268, Section 2, 86 Stat. 116 ($38 per troy ounce); Act of

May 12, 1933, ch. 25, Section 43(b)(2), 48 Stat. 52

(authorizing President to fix by proclamation the weight of

the gold dollar)), can properly be regarded as enabling leg-

islation necessary to the enforcement of the Convention in

United States courts. Accordingly, the repeal of those pro-

visions, designed to fulfill other purposes, does not have

the effect of rendering the liability limitation of the Con-

vention unenforceable.

On March 31, 1978, one day before the Second Amend-

ment of the Articles of Agreement of the International

Monetary Fund took effect (see page 4 note 4, supra), dol-

lar equivalents for the liability limits prescribed by the

Warsaw Convention were a determinate quantity. Pursu-

ant to Section 9 of Pub. L. No. 94-564, 90 Stat. 2661, the

Par Value Modification Act was repealed effective April 1,

1978. There is no indication in the language or the legisla-

tive history of Pub. L. No. 94-564 that repeal of the Par

Value Modification Act was intended to affect, much less

abrogate, the liability limitation established by Article 22 of

the Convention. Rather, the repeal of the Par Value Modi-

fication Act was part of legislation that amended the

Bretton Woods Agreements Act and accepted the new Ar-

ticles of Agreement of the IMF on behalf of the United

States. See page 4 note 4, supra. Amendment of these arti-

cles was prompted by the fact that IMF member nations no

longer wished to maintain par values as required under the

original IMF Agreement. Accordingly, central to the new

articles was the abolition of the requirement of par value

maintenance that had been placed upon the United States

and other countries by the original Bretton Woods Agree-

12

ments. The Par Value Modification Act was thus repealed

as part of a process of reordering of international monetary

affairs. As the House Report on H.R. 13955, 94th Cong., 2d

Sess. (1976), which became Pub. L. No. 94-564, explained,

under the new international regime “the U.S. has no legal

obligations to establish and maintain a par value for the dol-

lar.”” H.R. Rep. No. 94-1284, 94th Cong., 2d Sess. 13

(1976). Congress was not abandoning a unit of conversion;

it was simply recognizing in domestic legislation that the

United States had been relieved by international agree-

ment of its undertaking to guarantee the basis for inter-

changeability of gold and dollars.

Thus, the court of appeals was plainly wrong in conclud-

ing that, by repealing the Par Value Modification Act, Con-

gress “specifically rejected” (Pet. App. A-14) use of the

price of $42.22 per troy ounce of gold for purposes of imple-

menting Article 22 of the Warsaw Convention. There is no

suggestion anywhere that Congress intended to preclude

such use,® and legislative silence alone cannot satisfy the

requirement of clear expression necessary to abrogate a

treaty. See Weinberger v. Rossi, 456 U.S. 25, 32 (1982);

see page 8, supra.

Nor was the repeal “relevant to the Convention” in the

sense the court of appeals suggested, because repeal did

not reflect the view that “the official price of gold was

wholly out of touch with economic and monetary reality”

(Pet. App. A-14). On the contrary, the repeal of the Par

Value Modification Act was a domestic response to an in-

ternational consensus that gold was no longer a satisfactory

international unit of account. Among the factors underlying

this consensus were the insufficiency of the supply of gold

and the rise of a previously unknown speculative free mar-

ket in gold that interfered with its utility as a common mon-

etary unit. See R. Lipsey & P. Steiner, Economics 713-725

(1978). But abandonment of gold as a unit of account be-

tween nations for purposes of the International Monetary

13

Fund in no way suggested that the prevailing value of gold

was no longer to be employed under other treaty regimes,

that did continue to provide for such use. This is especially

so because continued use of the fixed rate of $42.22 per troy

ounce of gold provided by the last official value of gold rath-

er precisely meets the expectations of the framers of the

Warsaw Convention respecting the limitation of liability

adopted. See page 9, supra. The needs of the IMF nations

to ensure flexibility in exchange rates and to insulate inter-

national monetary transactions from the confounding effect

of the emerging free market in gold—factors that prompted

the international decision to abandon the fixed exchange

rates based on a fixed par value for the dollar defined in

terms of gold—simply have no application to the purposes

of Article 22 of the Warsaw Convention.

In sum, the repeal of the Par Value Modification Act did

not preclude resort to the price of $42.22 per troy ounce of

gold to implement the liability limitation prescribed by the

Warsaw Convention. That conversion rate, which served to

effectuate the intent of the parties on March 31, 1978, was

not rendered ineffective for that purpose one day later sim-

ply because express statutory authority prescribing an offi-

cial gold price for other purposes was repealed. Cf. United

States v. Bornstein, 423 U.S. 303, 307 n.1 (1976).

b. The price of $42.22 per troy ounce of gold was not

without official standing under United States law after

April 1, 1978. Pursuant to newly codified 31 U.S.C. 5117(b)

(see Pub. L. No. 97-258, 96 Stat. 984) formerly 31 U.S.C.

405b, that value is used to govern issuance of gold certifi-

cates by the United States Treasury. And it is used to ex-

press the value of the gold reserves of the United States

for general purposes. 1 Report of the Commission on the

Role of Gold in the Domestic and International Monetary

System 13 (Mar. 1982). Moreover, the rate of $42.22 per

troy ounce of gold has historically been used by the United

States to determine the dollar amount of its subscription

obligations to the capita stock of four major international

financial institutions, tne International Bank for Recon-

struction and Development (the World Bank), the

14

Inter-American Development Bank, the International De-

velopment Association, and the Asian Development Bank.®

The court of appeals dismissed as irrelevant to the issue

presented the continued use of the $42.22 conversion rate

to value gold held in the United States Treasury (Pet. App.

A-14 n.20). But what the court of appeals failed to recog-

nize is that it was the abandonment of the $42.22 conver-

sion rate for purposes likewise unrelated to the Warsaw

Convention—i.e., under the IMF Articles of Agree-

ment—that is not relevant here. The various examples

cited above of continued use of the $42.22 price merely

illustrate that Congress did not reject use of that price for

all purposes. In these circumstances, repeal of the Par

Value Modification Act falls far short of a clear legislative

decision to abrogate the Convention that would render the

$42.22 conversion rate unavailable for use in United States

courts.

c. We agree with the court of appeals’ conclusion (Pet.

App. A-15), although not with all of its supporting reason-

ing, that use of the exchange value of the modern French

franc or of the free market value of gold to translate the lia-

bility limitation specified by the Warsaw Convention into

dollars would be directly contrary to the intentions of the

contracting nations. Use of the former measure is pre-

cluded because the " arties carefully specified a unit distinct

from the value of che modern franc—the Poincare franc

consisting of a stated quantity of gold. Use of the free mar-

ket price of gold is inappropriate because the parties plainly

intended to adopt a relatively fixed value unaffected by the

extreme fluctuations that have recently beset the free mar-

ket in unmonetized gold—a market unknown at the time

the Convention entered into force. The fluctuations induced

by private speculation in gold have no place in the hability

lim, tation regime of the Convention.

On the other hand, the SDR constitutes a potential alter-

native choice for implementation of the Warsaw Conven-

tion’s limitation on liability. While we do not advocate the

* The articles of agreement of those institutions employ as a unit of

account dollars of a specified weight and fineness of gold.

15

use of the SDR as a conversion mechanism, it is highly in-

structive that the dollar value of the Convention liability

limitation arrived at through use of the SDR mechanism

proposed by TWA 's nearly identical to that provided by

the official price of gold. Indeed, if translated into round

figures, as is permitted by Article 22(4) of the Convention,

the liability limitation in dollars is the same under either

method of calculation.’° Because the value of the SDR is

computed by reference to a weighted basket of major cur-

rencies, it is relatively stable compared to any single cur-

rency over the long run. Indeed, the near identity of the li-

ability limitations computed by the alternate routes is a

telling indication that the court of appeals erred in sug-

gesti:» that “the official price of gold was wholly out of

touch with economic and monetary reality” (Pet. App.

A-14).

Conversion of the Warsaw Convention liability limits into

dollars at the rate of $42.22 per troy ounce of gold therefore

would effectuate the manifest purpose of the contracting

nations: to provide a stable and binding limitation upon the

liabilities incurred by international air carriers.

3. Because the question presented by TWA’s petition is a

substantial one that arises frequently in litigation and that

affects important interests of the United States, we believe

that it is appropriate for resolution by this Court. The Sen-

ate’s recent vote withholding consent to ratification of

Montreal Protocols 3 and 4,'! which would have amended

the Warsaw Convention to redefine the stated liability lim-

its in terms of SDRs, enhances rather than detracts from

the exigency of further review. The Senate’s action be-

speaks no controlling view as to the enforceability of the

existing Convention limits—which remain part of our

1° The court of appeals apparently did not consider the actual dollar

liability limits that result from application of the alternative conver-

sion mechanisms to be germane to its analysis. But because the cardi-

nal objective in a case such as this must be to give practical effect to

the intention of the contracting nations, it is highly relevant that alter-

native measures between which the court of appeals deemed itself

unable to decide would produce nearly identical judgments.

1! See Supplemental Memorandum of Potential Intervenors 1.

16

law—in United States courts. But the Senate’s action

means, a8 a practical matter, that the present Convention

regime will remain in force for the foreseeable future. Be-

cause the Second Circuit encompasses New York City, the

major gateway for international air traffic entering the

United States, and virtually every international air carrier

can be sued there, the decision of the court of appeals will

have a far-reaching and unsettling effect.**

We note, however, our uncertainty whether TWA’s peti-

tion, standing alone, brings before the Court a case or con-

troversy within the Article III jurisdiction of this Court.

This is a suit for money damages, not an action for declara-

tory relief. Because the court of appeals affirmed the judg-

ment of the district court limiting TWA’s liability in this

case to an amount calculated at the rate of $42.22 per ounce

of gold—a standard advocated by TWA— it is arguable that

TWA’'s petition does not attack the judgment of the court of

appeals and thus brings no actual controversy before the

Court in the setting of a concrete case. TWA is, in effect,

seeking review of the legal rule that the court of appeals

has announced it intends to apply to future cases.'*

We see no need for the Court to resolve this question, at

least at the present juncture. Franklin Mint also has filed a

certiorari petition, which seeks review of the court of ap-

peals’ judgrnent limiting its recovery in this case. Franklin

** We note that the United States District Court for the Central Dis-

trict of alifornia has recently followed and extended the declaration of

17

Mint’s petition, which was filed within 90 days of the order

denying rehearing (see 82-1465 Pet. 2), presents the ques-

tions (1) whether the liability limits of the Warsaw Conven-

tion remain enforceable, (2) if not, whether the Convention

limits nevertheless should be applied in this case, and (3) if

the Convention limits retain any effectiveness, what is the

proper standard for conversion. Franklin Mint’s petition

thus places before the Court a concrete controversy, reso-

lution of which entails consideration of the issues raised by

TWA.

CONCLUSION

The petitions for a writ of certiorari should be granted,

Respectfully submitted.

Rex E. Lee

Solicitor General

J. PAUL McGRATH

Assistant Attorney General

JOSHUA I. SCHWARTZ

Assistant to the Solicitor General

MICHAEL F.. Hertz

EDWARD R. CoHEN

Attorneys

APRIL 1983