Petition — Franklin Mint Corporation v. Trans World Airlines, Inc.

Supreme Court brief1983

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8 2 ae 1 465 Office-Supreme Court, US

No.

eS es

Win 1 1083

IN THE

| ALEXANDER L STEVAS,

Supreme Court of the United Stated“

OCTOBER TERM, 1982

FRANKLIN MINT CORPORATION,

FRANKLIN MINT LIMITED,

and McGREGOR, SWIRE AIR SERVICES LIMITED,

Petitioners,

against

TRANS WORLD AIRLINES, INC.,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

JOHN R. FOSTER

120 Broadway

New York, New York 10271

(212) 227-3550

Counsel for Petitioners,

Franklin Mint Corporation

Franklin Mint Limited

McGregor, Swire Air

Services Limited

WAESCHE, SHEINBAUM &

O'REGAN, P.C.

Of Counsel

March 1, 1983

Questions Presented

1. Whether a treaty provision should be enforced notwith-

standing a subsequent Act of Congress which abandoned the

premise upon which the treaty provision had been based?

2. What is the proper conversion factor, if any, for the gold

franc provision in the Warsaw Convention in view of the Con-

gressional decision to eliminate an official price for gold?

TABLE OF CONTENTS

PAGE

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sec enn cabs cccscectcceseicjeoge 2

Tah eae cucinden édan'bc0cce ceoeetceee 2

TREATY AND STATUTORY PROVISIONS INVOLVED ........ 2

EE EE OE. cca cee cc cccdceseveveecs 3

REASONS FOR GRANTING THE WRIT .........0000000: 5

Point I—This case concerns an important question of fed-

eral law which should be settled by this Court........ 5

Point II—The federal courts are in disarray over the inter-

CET MEE CED aw ples ccd cecccccsacccecens 7

Dn cua EaOu cabs se eneacocccosceccesec 10

TABLE OF AUTHORITIES

Cases:

In re Aircrash at Kimpo International Airport, Korea on

November 18, 1980, MDL-482 (C.D. Cal. Feb. 15,

i Cie han ab aol Swe ue. uis e/o0 ves ne bee ete 9

In re Air Crash Disaster at Warsaw, Poland, 535 F. Supp.

833 (E.D.N.Y. 1982), appeal docketed, No. 82-7616

Ce A, UG SEED olay ecccespcwecveccca® 7

Bank of Nova Scotia vy. Pan American World Airways, Inc.,

16 Av. Cas. 17,378 (S.D.N.Y. 1981) ..........46. 7

Boehringer Mannheim Diagnostics, Inc. v. Pan American

World Airways, Inc., 531 F. Supp. 344 (S.D. Tex.

1981), appeal docketed, No. 81-2519 (Sth Cir. Feb. 2,

A on hat vighti ns sap hrae es oneMee ea ekees ahs 8,9

Franklin Mint Corp. v. Trans World Airlines, Inc., 525 F.

Supp. 1288 (S.D.N.Y. 1981), aff'd, 690 F.2d 303 (2d

ee SUED ans nu 0 opvkiacde scene areas 2, 4, 5, 8,9

Husserl v. Swiss Air Transport Company, Ltd., 388 F.

Supe. 1258 (S.DIY. 1975): .0rccevegiensnedens 6

Kinney Shoe Corp. v. Alitalia Airlines, 15 Av. Cas. 18,509

CER Reen. ROOD lividus chon cnbcbacess acne 9

Maugnie v. Compagnie Nationale Air France, 549 F.2d

1256 (9th Cir.), cert. denied, 431 U.S. 974 (1977)... 6

Ricotta v. Iberia Lineas Aereas de Espana, 482 F. Supp.

497 (E.D.N.Y. 1979), aff'd per curiam, 633 F.2d 206

cee Rly SOP cde vccesccpaacdeseetan ese ead 6

Constitution, Statutes, Rules & Legislative Materials:

BP Mes OBOE nc. ce cddccls'vocvavectshienrenGwe 3

Be Res PRED pe vcececveccs copnns@uuetelenheeue 3

BO UMA BIGGS wc cccvccccevnveeyscacegcstseaen 2

Act of March 14, 1900, ch. 41, § 1, 31 Stat. 45 (1900)... 8

Gold Reserve Act of 1934, 48 Stat. 337 (1934) ........ 8

Par Value Modification Act, Pub. L. No. 92-268, 86 Stat.

116 (1972), amended by Pub. L. No. 93-110, 87 Stat.

352 (1973), repealed by Pub. L. No. 94-564, 90 Stat.

Be CASE) Sia cccccccctocvsdsnpheedecewuen 3,7,8

Presidential Proclamation No. 2072 of January 31, 1934,

SB Tet, BTFO CIDSS) ovo cvccvdcivscccvssepenuc 8

Sweden's Aviation Act of 1957, Amendinent to Article 22,

Chapter 9, effective April 27, 1978 ...........005. Gg

“

United Kingdom's Carriage by Air (Sterling Equivalents)

(No. 2) Order 1980, Statutory Instruments 1980 No.

Maks He we/bh bb 64.0 6 Whnd 46 Ved bebe Cam eh nb mss 9, 10

Treaties and International Agreements:

Convention for the Unification of Certain Rules Relating to

International Transportation by Air, opened for signa-

ture October 12, 1929, 49 Stat. 3000, T.S. No. 876

(1934), 137 L.N.T.S. 11, reprinted in 49 U.S.C.

te be oa da eihu ciate A OSE Bie passim

Guatamala City Protocol of 1971, reprinted in A. Lowen-

feld, Aviation Law, Documents Supplement 975-84

a ONL, ad so dba Hye 6 ma¥ cond ae hos 9

Guadalajara Convention of 1961, reprinted in A. Lowen-

feld, Aviation Law, Documents Supplement 1017-22

RIN oO Sd 2 o's phd S bs 004-0 e GeE WO as 9

Hague Protocol of 1955, reprinted in A. Lowenfeld, Avia-

tion Law, Documents Supplement 955-63 (2ded.1981) 9

Montreal Protocols Nos. 3 and 4, reprinted in A. Lowen-

feld, Aviation Law, Documents Supplement 985-1001

LL Ae ba og ma bets ke Sepa s Caan 9

Administrative Materials:

Civil Aeronautics Board Order 74-1-16, 39 Fed. Reg. 1526

ED Di aie ivan he cA che wh 0 sa belts Oh wees 6,8

Other Authorities:

A. Lowenfeld, Aviation Law (2d ed. 1981) ........... 6,9

Dep't of State Pub. No. 9285 Treaties In Force (1982) .. 5 “i

In The

SUPREME COURT OF THE UNITED STATES

OcTOBER TERM 1982

FRANKLIN MINT CORPORATION,

FRANKLIN MINT LIMITED,

and McGreGor, SwirRE AIR SERVICES LIMITED,

Petitioners,

against

TRANS WORLD AIRLINES, INC.,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Petitioners, Franklin Mint Corporation, Franklin Mint Lim-

ited, and McGregor, Swire Air Services Limited (collectively

“Franklin Mint”),’ request that a writ of certiorari issue to re-

view the judgment and opinion of the United States Court of

Appeals for the Second Circuit entered in this action on Sep-

tember 28, 1982, which affirmed a final judgment of the United

States District Court for the Southern District of New York.

Specifically, Franklin Mint seeks review of that portion of the

Petitioners’ designation of corporate relationships pursuant to Rule

28.1 is stated at page A 36. References in the form “A ” are to the

pages of the Appendix to this petition.

circuit court’s decision declaring presently enforceable (al-

though not prospectively so) a treaty provision, the premise of

which was abandoned by an Act of Congress subsequent to the

treaty. This petition is a cross-petition to the one filed by Trans

World Airlines, Inc. (“TWA”)? in Docket No. 82-1186.

Opinions Below

The opinion of the court of appeals, reported at 690 F.2d 303

(2d Cir. 1982), is reprinted in the Appendix at Al. The

opinion of the district court, reported at 525 F. Supp. 1288

(S.D.N.Y. 1981), is reprinted at Al9.

Jurisdiction

The judgment of the court of appeals was issued on Sep-

tember 28, 1982, and entered the same day (A23). TWA sub-

sequently made a timely motion for a rehearing; and this mo-

tion was denied by the court on December 1, 1982 (A25).

This petition is being filed within ninety days of the circuit

court’s denial of a rehearing. The Supreme Court has jurisdic-

tion to review the judgment of the court of appeals pursuant to

28 U.S.C. 1254(1).

Treaty and Statutory

Provisions Involved

The treaty provision involved is Article 22 of the Warsaw

Convention, which is formally known as the Convention for the

Unification of Certain Rules Relating To International Trans-

portation By Air, opened for signature October 12, 1929, 49

Stat. 3000, T.S. No. 876 (1934), 137 L.N.T.S. 11, reprinted

*All the parties to the proceeding in the court of appeals are stated

in the caption of this petition.

Agee te One

in 49 U.S.C. §1502 note (1970). Article 22 is set out at page

A27.

The statute involved is the Par Value Modification Act, Pub.

L. No. 92-268, 86 Stat. 116 (1972), amended by Pub. L. No.

93-110, 87 Stat. 352 (1973), repealed by Pub. L. No. 94-564,

90 Stat. 2660 (1976). The pertinent sections of the statute are

reprinted at A28.

Statement of the Case

In March 1979 Franklin Mint contracted with TWA for the

carriage by air of 714 pounds of numismatic articles from the

United States to England. The cargo was lost or stolen in transit,

and Franklin Mint brought suit for $250,000 to recover the

cargo’s value. The district court’s jurisdiction was founded on

both 28 U.S C. §1331 (federal question) and 28 U.S.C. §1332

(diversity of citizenship).

Following the joinder of issue, TWA moved for partial sum-

mary judgment. In a Stipulation and Pre-Motion Order, the par-

ties stipulated to the basic, undisputed facts. It was further

agreed, and the district court so ordered, that TWA was liable

under the Warsaw Convention for the loss of the cargo. It was

also stipulated and ordered that TWA was entitled to limit its

liability in accordance with Article 22 of the Convention. As a

result, the sole issue presented on TWA's motion was the proper

interpretation of the limit in Article 22.

Article 22 states the limitation in air cargo cases to be 250

gold francs per kilogram of cargo. Franklin Mint contended in

the district court that this gold franc provision must be con-

to dollars by using the only existing price of gold, the

free market price. With the elimination by Congress of an of-

gold, the only price for gold in the United States

the open market.

TWA, on the other hand, argued that Article 22 must be

interpreted by using one of three other possible units of con-

version: (a) Special Drawing Rights (“SDR’s”) of the Inter-

national Monetary Fund, (b) the last official price of gold, or

The district court determined that the limit of TWA’s lia-

bility for its loss of Franklin Mint’s property was $6,475.98.

This figure was based on a conversion of the gold franc using

the last official price of gold. As the cargo had a stipulated value

in excess of this limit, and as there were no remaining issues of

either fact or law, the district court ordered that judgment be

entered for Franklin Mint in the amount of $6,475.98, plus

interest and costs. Franklin Mint moved for reconsideration of

the decision, and the motion was denied.

Franklin Mint appealed from the final judgment of the dis-

trict court. Again, the sole issue before the court was the proper

interpretation of Article 22 of the Warsaw Convention. The par-

ties repeated their earlier contentions as to the correct method

of converting gold francs into dollars.

In an opinion dated 28 September 1982, the Second Cir-

cuit held that all four of the proposed conversion factors were

subject to strong criticism. The court agreed, however, with

Franklin Mint that the elimination by Congress of an official

gold price had destroyed the status quo. In the court’s view, the

“repeal of the Par Value Modification Act was an explicit aban-

donment of the previously established unit of conversion.” 690

F.2d at 311; Al7. Congress has failed to substitute a new

unit of conversion, and the choice of the proper unit involves

a political question. Consequently, substitution of a new unit

is not for the courts, with the result that the limit is unenforce-

able. /d.

Although Congress eliminated the official gold price as of

1 April 1978, the Second Circuit's ruling on the liability limit

is prospective only. According to the court of appeals, the limit

will be unenforceable “only to events creating liability occur-

ring 60 days from the issuance of the mandate in this case.” 690

F.2d at 311-12; A1l8. Because Franklin Mint had failed to

predict how the Second Circuit would treat Congress’s repeal of

the Par Value Modification Act, the shipper was bound by the

last official price of gold. The district court’s judgment for

$6,475.98 was affirmed.

TWA timely moved for a reconsideration of the decision, with

the suggestion of a rehearing en banc. This motion was denied

1 December 1982. The mandate of the court of appeals was

stayed upon the filing of TWA’s petition in Docket No. 82-1186.

Reasons for Granting the Writ

Certiorari should be granted because this case raises the sig-

nificant question of whether the courts of the United States

should enforce a treaty provision when Congress has eliminated

the premise on which the provision was based. While the court

of appeals correctly declared the limitation provision of the

Warsaw Convention to be unenforceable, the Second Circuit

held this ruling to be prospective only. In view of the significant

role of the Warsaw Convention in American aviation law, the

Court should review this decision of the court of appeals.

POINT I

This case concerns an important q12stion of federal

law which should be settled by this Court.

The Warsaw Convention is a multilateral treaty adhered to

by over 120 nations. See U.S. DEP’T OF STATE, PUB. NO.

9285, TREATIES IN FORCE 270 (1982). It has been called

“by far the most widely adopted treaty concerning private inter-

national law and after the United Nations Charter one of the

most widely adopted of all treaties... .” A. Lowenfeld, Aviation

Law §4.1, at 7-98 (2d ed. 1981). As a treaty of the United

States, it is in this nation the “supreme Law of the land.” U.S.

Const., art. VI.

The Convention is applicable to all normal international air

transportation between the United States and other member na-

tions. See Warsaw Convention, Art. 1. In addition, the Conven-

tion gives American courts jurisdiction over disputes arising from

flights between member countries involving a United States air

carrier. Warsaw Convention, Art. 28.

The scope of the Warsaw Convention is a matter of federal

law and federal treaty interpretation. Maugnie v. Compagnie

Nationale Air France, 549 F.2d 1256, 1258 (9th Cir.), cert.

denied, 431 U.S. 974 (1977); Ricotta v. Iberia Lineas Aereas

de Espana, 482 F. Supp. 497, 499 (E.D.N.Y. 1979), aff'd, 633

F.2d 206 (2d Cir. 1980); Husserl v. Swiss Air Transport Com-

pany, Ltd., 388 F. Supp. 1238, 1249 (S.D.N.Y. 1975).

The Warsaw Convention applies to both passengers and cargo. R

For example, Articles 3 and 4 state the provisions applicable

to passenger tickets and baggage checks, while Articles 5-16

pertain to the air waybill. Article 22 provides the carrier with

a limitation of liability for claims from both passengers (125,000

gold francs) and cargo (250 gold francs per kilogram of cargo).

Because of the low limitations set in 1929 by the Conven-

tion, the issue of the limit is involved in almost all Warsaw Con-

vention litigation. The Convention's limit for a passenger’s death

is $10,000 when calculated using the las: official price of gold.*

Civil Aeronautics Board Order No. 74-1-16, 39 Fed. Reg. 1526

(1974). In the present case TWA's limit as determined by the

‘In a private agreement called the Montreal Agreement of 1966, most

of the international carriers agreed to accept a limit of $75,000 per pas-

senger. The reason for this to peovent United States wtdeeet

from the Convention. See A. Lowenfeld, Aviation Law §5.3 at 7-128 to

7-144 (2d ed. 1981).

lower courts is about 2.5% of the cargo’s claimed value. As a

consequence of such low limits, in litigation the crucial issue is

often whether the limit can be defeated. See In re Aircrash Dis-

aster at Warsaw, Poland, 535 F. Supp. 833 (E.D.N.Y. 1982),

appeal docketed, No. 82-7616 (2d Cir. Aug. 19, 1982) (pas-

senger); Bank of Nova Scotia vy. Pan American World Airways,

Inc., 16 Av. Cas. 17,278 (S.D.N.Y. 1981) (not officially re-

ported) (cargo).

Prior to 1978 the Convention’s liability limits, which are ex-

pressed in terms of gold francs, were converted into dollars in

accordance with the official price of gold. The elimination by

Congress of an official gold price, effective as of 1 April 1978,

completely confused the interpretation of this gold franc provi-

sion in Article 22. As discussed below in Point II, the federal

courts that have faced the issue of how to deal now with Ar-

ticle 22 have resolved the matter in a variety of ways. Because

of the critical role of the Warsaw Convention in American avia-

tion law, and because of the crucial nature of Article 22 to the

Convention, this Court should determine this important issue

of federal law.

Petitioners contend that the limits of liability in Article 22

are unenforceable as of 1 April 1978. The court of appeals

erred when it ruled that the limits are only prospectively unen-

forceable. Alternatively, if these limits are to be enforced, then

the gold franc should be converted into dollars by using the only

existing price of gold available, the free market price.

POINT Il

The federal courts are in disarray over the interpreta-

tion

The Par Value Modification Act, Pub. L. No. 92-268, 86

Stat. 116 (1972), amended by Pub. L. No. 93-110, 87 Stat.

352 (1973), stated an official, legal relationship between gold

and the dollar. As a result, converting the gold franc of Article

22 into dollars was not difficult; and the Civil Aeronautics

Board published an order listing the limits for passengers and

cargo based on the official price. Civil Aeronautics Board Order

No. 74-1-16, 39 Red. Reg. 1526 (1974).

In its Act of October 19, 1976, Pub. L. No. 94-564, 90 Stat.

2660 (1976), the Congress eliminated the official price of gold,

effective 1 April 1978. This legislation was to put into domestic

effect the international commitment made by tiie United States

as part of the so-called Jamaica Accords of 1975. Under these

accords the decision was made to eliminate gold from its central

position as the foundation of the international monetary system.

See the Second Circuit’s description of the relevant economic

history at 690 F.2d at 307-8, A8-10.

The difficulty with the Congressional elimination of an official

price of gold was that it destroyed the assumption upon which

Article 22 had been founded. In both 1929 (when the Convention

was drafted) and in 1934 (when the United States adhered to

the Convention), there was a price of gold set by statute. Gold

Reserve +_-t of 1934, 48 Stat. 337 (1934); Presidential Proc-

lamation No. 2072 of January 31, 1934, 48 Stat. 1730 (1934);

Act of March 14, 1900, ch. 41 §1, 31 Stat. 45 (1900). For the

period between 1934 and 1978, therefore, the gold franc in Ar-

ticle 22 posed no problem because the limit was calculated on

the basis of the value of gold set by law.

With the elimination of an official gold price, the question

consequently arose as to the way by which to convert the Con-

vention’s gold franc into U.S. dollars. The federal district courts

considering this question have .cached a variety of results. The

district court in the present case decided to use the last official

price of gold. 525 F. Supp. at 1289; A20. Subsequently, in

Boehringer Mannheim Diagnostics, Inc., v. Pan American World

Airways, Inc., 531 F. Supp. 344 (S.D. Tex. 1981), appeal

docketed, No. 81-2519 (Sth Cir. Feb. 2, 1982), Judge Ely of

the Ninth Circuit, sitting by designwtion, held that to use the

old official price would be to resort to a fiction. Consequently he

converted the gold franc with reference to the free market price

of gold. In Kinney Shoe Corp. v. Alitalia Airlines, 15 Av. Cas.

18,509 (S.D.N.Y. 1980) (not officially reported), the district

judge made the conversion using the current French franc. Most

recently in In Re Aircrash at Kimpo International Airport, Korea

on November 18, 1980, MDL-482 (C.D. Cal. Feb. 15, 1983)

(reprinted at A29), the court ruled that the Article 22 limit is

completely unforceable.

The only federal court of appeals to consider the present prob-

lem is the Second Circuit's decision in Franklin Mint, in which

a still different conclusion was reached.

The Senate has had before it since 1977 a set of protocols,

called the Montreal Protocols of 1975, that would amend Ar-

ticle 22 to state the limit of liability in terms of SDR’s rather

than in gold francs. It is questionable whether this provision

will ever go into effect.* Although the Montreal Protocols were

reported out of committee in 1981, the Senate has never voted

on them. Likewise the United States has never ratified the two

other protocols amending the Convention.°

Congress could also presumably resolve the matter by do-

mestic legislation, as has been done in other countries. See, e.g.,

Sweden's Aviation Act of 1957, Amendment to Article 22, Chap-

ter 9, effective April 27, 1978; United Kingdom’s Carriage by

Air (Sterling Equivalents) (No. 2) Order 1980, Statutory In-

‘Before the Montreal Protocols go into effect internationally, thirty

nations must ratify them. To date only about four have done so.

"The Hague Protocol of 1955 and the Guatemala City Protocol of

1971. In addition, the Guadalajara Convention of 1961, which supple-

ments the “Varsaw Convention, has never been ratified by the United

States. All of these Protocols, including the Montreal Protocols of 1975,

are reprinted in A. Lowenfeld, Aviation Law, Documents Supplement

(2d ed. 1981).

struments 1980 No. 1873. There has been, however, no indica-

tion of any Congressional intent to do so.

Because of the complete disarray of the federal courts in re-

solving this fundamental issue concerning the Warsaw Conven-

tion, this Court should review the decision of the court of ap-

peals so that the limitation of liability in Article 22 can be held

unforceable from 1 April 1978.

CONCLUSION

Certiorari should be granted.