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

82-1465

In THE

Supreme Court of the United

OCTOBER TERM, 1982

,

J

FRANKLIN MINT CORPORATION,

FRANKLIN MINT LIMITED, and

McGREGOR, SWIRE AIR SERVICES LIMITED,

Petitioners,

against

TRANS WORLD AIRLINES, INC.,

Respondent.

Se

APPENDIX TO

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

INDEX TO APPENDIX

Opinion of the United States Court of Appeals for the

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Memorandum and Order of the United States District

Court for the Southern District of New York, and

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Judgment of the United States Court of Appeals for the

EE Vesctnevaccatpecticcanhbseumue

Order of the United States Court of Appeals for the Sec-

ond Circuit denying rehearing ..............++..

Article 22 of the Warsaw Convention ..............

Par Value Modification Act ............cceeeeeeee

In re Aircrash at Kimpo International Airport, Korea on

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

i git ged idle so 4 bu wks «ese eSekns

Desirnation of Corporate Relationships .............

PAGE

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Opinion of the United States Court of Appeals

for the Second Circuit

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

No. 999—August Term, 1981

(Argued April 22, 1982 Decided September 28, 1982)

Docket No. 82-7012

FRANKLIN MINT CORPORATION,

FRANKLIN MINT LIMITED, and

McGReEGor, SwIRE AIR SERVICES LIMITED,

Plaintiffs-A ppellants,

eo

TRANS WORLD AIRLINES, INC.,

Defendant-A ppellee.

Before:

OAKES, CARDAMONE, and WINTER,

Circuit Judges.

Appeal from a final judgment of the United States District

Court for the Southern District of New York, Whitman Knapp,

Judge, utilizing the last official price of gold to calculate the limit

on defendant’s liability under the Warsaw Convention.

The Court holds the limitation provision of the Convention

prospectively unenforceable and affirms.

JOHN R. Foster, New York, New York (Donald M.

Waesche, Waesche, Scheinbaum & O’Regan, P.C.,

New York, New York, of counsel), for Plaintiffs-

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Opinion of the Court of Appeals

Appellants Franklin Mint Corporation, Franklin

Mint Limite, and McGregor Swire Air Services,

Limited.

JOHN N. ROMANS, New York, New York (Robert S.

Lipton, Scott J. McKay, Wolas, Curtis, Mallet-

Prevost, Colt & Mosley, New York, New York,

of counsel) for Defendant-Appellee Trans World

Airlines, Inc.

(Robert B. Hemley, Norman Williams, Gravel, Shea

& Wright, Burlington, Vermont, of counsel) for

Amici-Curiae Jacques Roulin and Hugh Harley.

WINTER, Circuit Judge:

This is an appeal from a final judgment of the United States

District Court for the Southern District of New York, Whitman

Knapp, Judge, limiting the defendant’s liability under the Warsaw

Convention (“Convention”)* for loss of cargo. In determining

the limit in United States dollars, Judge Knapp utilized the last

official price of gold as a unit of conversion and awarded plain-

tiffs $6,475.98. 525 F.Supp. 1288 (S.D.N.Y. 1981). Plaintiffs

appeal, claiming the limit should have been calculated by other

methods. While we agree with the result reached in this case and

thus affirm, we hold the Convention’s limit on liability prospec-

tively unenforceable in United States Courts.

SUMMARY OF THE ISSUES AND DECISION

The facts in this case, if nothing else, are clear cut. In March,

1979, plaintiffs Franklin Mint Corporation, Franklin Mint

?The Warsaw Convention is formally known as the “Convention for

the Unification of Certain Rules Relating to International Transportation

by Air,” opened for signature October 12, 1929, 49 Stat. 3000, T.S.

No. 876, 137 L.N.T.S. 11 (adherence of the United States proclaimed

October 29, 1934).

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Opinion of the Court of Appeals

Limited, and McGregor, Swire Air Services Limited (collectively,

“Franklin Mint”) contracted with defendant Trans World Air-

lines, Inc. (“TWA”) for the carriage by air from the United

States to England of 714 pounds of numismatic materials.

Though the articles were worth more than $6,500, Franklin Mint

made no special declaration of value. The articles were either lost

or destroyed, thus rendering TWA liable under Article 18 of

the Convention.’ Because of the absence of a special declaration,

TWA sought to limit its liability under Article 22 of the Con-

vention.

Article 22 limits the carrier's liability for injuries to both

“checked baggage and. . . goods” and “objects of which the

passenger takes charge himself."* The various limits are stated

*Article 18 of the Convention reads:

(1) The carrier shall be liable for damage sustained in the event

of the destruction or loss of, or of damage to, any checked baggage

or any goods, if the occurrence which caused the damage so sus-

tained took place during the transportation by air.

(2) The transportation by air within the meaning of the preceding

paragraph shall comprise the period during which the baggage or

goods are in charge of the carrier, whether in an airport or on board

an aircraft, or, in the case of a landing outside an airport, in any

place whatsoever,

(3) The period of the transportation by air shall not extend to

any transportation by land, by sea, or by river performed outside

an airport. If, however, such transportation takes place in the per-

formance of a contract for transportation by air, for the purpose

of loading, delivery or transshipment, any damage is presumed,

subject to proof to the contrary, to have been the result of an event

which took place during the transportation by air.

*Article 22 of the Convention reads:

(1) In the transportation of passengers the liability of

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Opinion of the Court of Appeals

in terms of a specified number of French gold or “Poincare”

francs, a unit of account consisting of “65% milligrams of gold

at a standard fineness of nine hundred thousandths.” The limit

on baggage or other goods is 250 Poincare francs per kilogram.

The dollar value of that limit is calculated simply by converting

the gold value of the specified unit into United States dollars, e.g.,

the limit per kilogram is 250 multiplied by the dollar value of

65% milligrams of gold.

The difficulty arises from the fact that when Article 22 was

drafted, gold served official monetary functions and its price

was set by law. The Convention thus selected it as the unit of

conversion in order to ensure judgments of uniform value as well

as a stable and easily calculable limitation on liability. The

plain but highly troublesome fact is that by international agree-

ment and United States domestic legislation gold has now lost

its monetary functions and no longer has an official price. Un-

fortunately for parties to international airline transactions as well

as for us, the terms of Article 22 continue to utilize gold as the

(Footnote continued from previous page)

not exceed 125,000 francs. Nevertheless, by special contract, the

carrier and the passenger may agree to a higher limit of liability.

(2) 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. In that case the carrier will be liable to pay a sum not

exceeding the declared sum, unless he proves that that sum is

greater than the actual value to the consignor at delivery.

(3) As regards objects of which the passenger takes charge himself

the liability of the carrier shall be limited to

passenger.

(4) The sums mentioned above shall be deemed to refer to

French franc consisting of 65% milligrams of gold at the standard

of fineness of nine hundred thousandths. These sums may be con-

verted into any national currency in round figures.

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Opinion of the Court of Appeals

unit of conversion. Thus, the parties raise the issue of what unit

of account is now to be used to convert judgments under the

Convention into United States dollars.

In arguing the issue, the parties offer four alternatives:

(i) the last official price of gold in the United States; (ii) the

free market price of gold; (iii) the Special Drawing Right

(“SDR”), a unit of account established by the International

Monetary Fund (“IMF”) and recently proposed as a substitute

for gold in the as yet unratified Montreal Protocols to the Con-

vention; and (iv) the exchange value of the current French franc,

While acknowledging that “the arguments in favor of .. . the

SDR [were] most persuasive,” Judge Knapp nevertheless held

that the last official price of gold was the appropriate standard.

This choice was predicated on the view that this standard “has

been . . . espoused by the Civil Aeronautics Board (“CAB”), the

government agency most intimately concerned with the transac-

tion at hand,” and has been “used by all domestic carriers—in-

cluding TWA—in calculating the dollar value of the Article 22

limitation printed on their tariffs.” 525 F.Supp. at 1289.

We share Judge Knapp’s doubt about the result. Indeed, there

are powerful arguments against each of the proffered solutions.

The last official price of gold is a price which has been explicitly

repealed by the Congress. See note 11, infra, and accompanying

text. It thus lacks any status in jaw or relationship to contempor-

ary currency values. The free market price of gold is the highly

volatile price of a commodity determined in part by forces of

supply and demand unrelated to currency values. SDR’s are a

creature of the IMF, modified at will by that body and having

no basis in the Convention. The French franc is simply one

domestic currency, subject to change by the unilateral act of a

single government.

Every proffered solution thus appears to have a devastating

argument against it. While the Convention has not been formally

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Opinion of the Court of Appeals

abrogated, enforcement by national judicial tribunals is impos-

sible without their picking and choosing among alternative units

of conversion according to their view of which is best as an initial

policy matter. We have no power to select a new unit of account.

We thus hold the Convention's limitation of liability unenforce-

able by United States Courts.

BACKGROUND

Drafted in the late 1920's, the Convention was designed both

to protect the fledgling aviation industry from the alternatives of

ruinous damage suits or exorbitant insurance premiums and to

insure a certain degree of uniformity of legal obligation given the

expected international character of the industry. See A. Lowen-

feld and A. Mendelsohn, The United States and the Warsaw Con-

vention, 80 Harvard L. Rev, 497, 499-501 (1967) (hereafter

“Lowenfeld and Mendelsohn”); see also Reed v. Wiser, 555

F.2d 1079, 1089 (2d Cir.), cert. denied, 434 U.S. 922 (1977)

and CAB Staff Memorandum, Warsaw Convention Liability

Limits, March 18, 1980, at 5-6. (App. at 43-44). A series of

rules governing liability, affirmative defenses and limitations ac-

complished the former goal, while the Convention’s international

scope accomplished the latter. Articles 17, 18 and 19 enunciate

the carrier's liability for personal injuries, for damage or loss of

baggage, and for damage due to delay. Articles 20 and 21 estab-

lish as affirmative defenses lack of fault and contributory negli-

gence, Finally, Article 22 provides a limitation on the extent of

liability for both personal injury and loss of luggage or other

goods,

The personal injury limitations amounts have been subject to

upward revision from time to time through protocols to the orig-

inal agreement. These revisions have come in the wake of a

continuing debate, with the developed countries, notably the

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Opinion of the Court of Appeals

United States, Great Britain and France, arguing for higher

limits, and the less developed nations seeking reduction of the

existing limit.‘ Lowenfeld and Mendelsohn at 504, Throughout

this period, the level of the limitations on liability for loss or

destruction of checked baggage and other goods has remained

the same.

Defining recoveries in terms of a specified amount of gold

was intended to produce stability and uniformity. Such a common

standard allowed the conversion of liability limits into national

currencies and insulated recoveries from the vicissitudes of cur-

rency fluctuation and devaluation. In drafting the Convention,

a proposal! to fix recoveries purely in terms of the French franc

was rejected by Switzerland on the ground that use of a single

national currency rendered the liability limit subject to change

by the act of one government. See Second International Contfer-

ence on Private Aeronautical Law, Minutes, October 4-12, 1929,

*In 1955, at The Hague, the conferees would agree only to a doubling

of the limit to 250,000 Poincare francs of $16,000. Lowenfeld and Men-

delsohn at 504-09, The United States unenthusiastically signed the Hague

Protocol a year later, but did not present the treaty to the Senate until

July 1959, Lowenfeld and Mendelsohn at 515. The Senate never con-

sented to the Protocol because of its low limit, however, and ultimately

the Kennedy/Johnson Administrations actually threatened United States

denunciation of the Convention. This threat came in the wake of Con-

gress’ failure to enact a legislative package ratifying the Hague Protocol

while compelling the purchase by all American air carriers of $50,000

in insurance for each passenger. To avoid United States denunciation, a

conference met in Montreal in the spring of 1966, The result of this

meeting was the so-called Montreal Agreement “which provided for ab-

solute carrier liability up to $75,000 on all flights into or out of the

United States.” Reed v, Wiser, 555 F.2d at 1087. Appeased, the United

States withdrew its denunciation. However, it continued to press for an

amendment to the Convention raising personal injury liability limits. In

1971, the parties promulgated the Guatemala City Protocol under which

personal injury limits were to be raised to $100,000 at the then current

exchange rate of $35 per ounce of gold.” Jd. at 1089 n. 12. However, the

United States has not ratified that protocol.

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Opinion of the Court of Appeals

Warsaw, at 88-89 (Horner and Legrez trans. 1975), (App. at

247-248). As the Swiss delegate put it, “Naturally one can say

‘French franc’ but . . . its [France's] national law which deter-

mines it, and one need have only a modification of the national

law to overturn the essence of this provision.” /d, at 89-90, (App.

at 248-249). Accordingly, the Swiss pressed for a standard which

tied the limitation to a gold value regardless of the national cur-

rency actually named in the article. /d. at 90, (App. at 249).

The conferees accepted the Swiss position and stated the limita-

tion in terms of the Poincare franc defined as “65% milligrams

of gold at a standard fineness of nine hundred thousandths,” Con-

vention, art. 22 §(4).°

From October, 1934, when the United States first adhered to

the Convention, until 1978, use of gold as the unit of account

posed no problem for United States or the judicial tribunals of

other signatory nations. In 1934, the value of gold was set at $35

per troy ounce pursuant to statute, United States Gold Reserve

Act of 1934, Pub. L. No, 73-87, 48 Stat. 337 (1934). When

the United States became a party to the International Monetary

Fund (IMF) in 1945, see Bretton Woods Agreements Act, ch.

339, § 2, Pub. L. No. 79-171, 59 Stat. 512 (1945) (codified

at 22 U.S.C. § 286 (1976)), it promised to maintain (and, if

necessary, redeem) the value of United States dollars in terms

of gold. For purposes of the Convention's limits on liability,

"There was only one change made in this standard at the Hague in

1955, To avoid any confusion, the conferees deleted reference to the

Poincare franc and defined the specified sums as referring “to a currency

unit consisting of sixty-five and a half milligrams of gold of millesimal

fineness nine hundred.” Asser, Golden Limitations of Liability in Inter-

national Transport Conventions and the Currency Crisis, 5 J. Mar. L. &

Com. 645, 647-48 n. 7 (1974). Since the United States never ratified

the Hague Protocol, the old language still governs American courts. That

change, however, is entirely form.', since the elimination of any refer-

ence to the French franc merely clarified the Convention's desire to use

gold, a point never doubted in the United States.

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Opinion of the Court of Appeals

therefore, the relationship of gold and the dollar allowed judicial

tribunals to award judgments on a stable, uniform basis.

At the time of Bretton Woods, the United States dollar was

grossly undervalued and was actually an asset more valuable

than gold, The promise to redeem all dollars in gold could thus

be made without having to be fulfilled.’ From 1955, however,

the United States faced a persistent balance of payments deficit.

Where once there existed a dollar shortage, there now developed

a dollar glut.’ To compensate, central banks abroad began trad-

ing their dollars for gold, and hoarders and speculators began

accumulating the metal in increasing amounts. From 1955 to

1968, United States gold reserves plummeted from approximately

$24 billion to around $10 billion.”

These events led ultimately to the demise of the gold standard.

In early 1968, depletion of the United States gold reserve led

the central banks of Belgium, the Federal Republic of Germany,

Italy, the Netherlands, Switzerland, the United Kingdom and

the United States to agree to discontinue supplying gold to private

markets. A so-called “two-tier” system of gold pricing—a market

price set accordingly and the official price set under Bretton

Woods’—was thus created. This eased the pressure but could not

remedy the essential flaw. In addition to persistent United States

balance of payment deficits, international gold reserves grew more

slowly than the volume of world economic activity. As a conse-

quence, banks faced pressures to liquidate official holdings in

light of readily available market profits. The stage was thus set for

abandonment of the Bretton Woods arrangements.

"See P. Samuelson, Economics, 686-88 (8th ed. 1970).

Id. at 690-91.

"Id. at 691, Figure 36-1.

*See Asser, supra note 6, at 650; Gold, International Monetary Law:

Change, Uncertainty and Ambiguity, 15 J. Int'l L. & Econ. 323, 340-41;

Samuelson, supra note 7, at 698-99,

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Opinion of the Court of Appeals

In August, 1971, the United States suspended its commitment

to convert dollars for gold.*° In May, 1972, it devalued the dollar

by raising the official price of gold to $38 per ounce. See Par

Value Modification Act, Pub. L. No. 92-268, § 2, 86 Stat. 116

(1972) (formerly codified at 31 U.S.C. § 449 (1972)). In Oc-

tober, 1973, yet another devaluation raised the price to $42.22

per ounce. See Par Value Modification Act, amendments, Pub.

L. No. 9? 110, § 1, 87 Stat. 352 (1973) (formerly codified at

31 U.S.C. § 449 (1976)).

The dollar’s troubles led the IMF to put forth a plan to abolish

the official price of gold, to delete references to gold in its articles,

and to substitute SDR’s as the Fund’s reserve isset and unit of

account. The plan was proposed in the 1976 ‘amaica Accords,

was passed by the Fund’s members and becaine effective April

1, 1978. In the interim, the United States passed implementing

legislation including a repeal of the Par Value Modification Act

of 1973 and the abolition of the official price of gold.** Along

with the Jamaica Accords, the measure also became effective on

April 1, 1978.

This radical change in the international monetary system

created an obvious problem under the Warsaw Convention. With

gold abandoned as a currency base and the official price repealed,

gold became a commodity with a daily fluctuating free market

price. That the difficulty in continuing to use gold as a mone-

~ 20fd. at 641; supra note 6, at 651.

In repealing the official price generally, Congress retained its use for

the limiced purpose of determining the value of gold held in the form

of gold certificates. See 31 U.S.C. §405(b). The Senate noted that this

was the “only domestic purpose for which it is necessary to define a

fixed relationship between the dollar and gold. . . .” S. Rep. No. 1295,

94th Cong., 2d Sess. 18, reprinted in 1976 U.S. Code Cong. & Ad. News

5935, 5966-67.

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Opinion of the Court of Appeals

tary base undermined the Convention’s unit of conversion was

immediately recognized. Thus, the Warsaw conferees met in Mon-

treal in 1975, even before the Jamaica Accords, and drafted and

signed a Protocol] substituting SDR’s as the Convention’s unit

of conversion. At the time of the proposal, the SDR was calcu-

lated in terms of gold.*? With the Jamaica Accords, the referent

was changed to a baske: of 16 national currencies, and in Janu-

ary, 1981, the basket was reduced to five currencies.’ The Mon-

treal Protocol was presented to the United States Senate in Janu-

ary, 1977 but has not been approved.

Meanwhile, parties to the Convention have utilized a variety

of units of conversion. The record shows Sweden and Britain have

adopted SDR’s for purposes of Warsaw.** Both a Netherlands

court and the Civil Court of Rome reached the same result.**

Two French courts have recently decided that the Warsaw unit

is to be converted simply into the current French franc.** The

United States District Court in the Southern District of Texas

Gold, supra note 10, at 345.

*8Ward, The SDR in Transport Liability Conventions: Some Clarifica-

tions, 13 J. Mar. L. & Com. 1, 3 (1981).

**See Sweden's Carriage by Air Act 1957), amendment to Chapter 9,

§ 22, effective April 27, 1978, (translated and reprinted in App. at

57-61); see also the British Carriage by Air (Sterling Equivalents) Order

of 1980, Statutory Instrument 1980 No. 281, effective March 21, 1980,

(reprinted in App. at 62-63).

‘State of the Netherlands vy. Giant Shipping Corp., Rechtspraak van

de Week, 30, May, 1981, 321 (Supreme Court of the Netherlands, May

1, 1981) (translated and reprinted in App. at 64-93); Linee Aerea

Italiane vy. Ricciole (Rome Civil Court judgment 609/1979, Nov. 14,

1978), (translated and reprinted in App. at 95-108).

**See Chamie v. Egyptiar (Cours d’appel Paris, Jan. 31, 1980) (trans-

lated and reprinted in App. at 171-91); Pakistan Int'l Airlines v. Com-

pagnie Air Inter. S.A., (Cours d'appel Aix-en-Provence Oct. 31, 1981)

(translated and reprinted in App. at 156-70).

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Opinion of the Court of Appeals

recently opted for the free market price of gold,*’ the standard

utilized by an Indian court,’* and a Greek court.’** Finally, the

last official price of gold, chosen by the District Court in this

case, was relied upon by Judge Sifton in Jn re Air Crash Disaster

at Warsaw Poland or March 14, 1980, 535 F.Supp. 833 (E.D.

N.Y. 1982) and is still utilized by the CAB pursuant to a 1974

order.

DISCUSSION

The controlling facts in this case are: (i) enforcement of the

Convention’s limitation on liability requires a unit of conversion

to translate judgments into domestic currency; (ii) there is no

longer an internationally agreed upon unit of conversion; and

(iii) there is no United States legislation specifying a unit to be

used by United States Courts.

The need for a unit of conversion is self-cvident. Without it,

a rational limit on liability cannot exist, much less one which

produces judgments of equal value in different currencies.

The lack of an internationally agreed upon unit is also obvious.

The very convening of the Montreal meeting in 1975 was a

recognition by the Warsaw parties that the Convention’s unit had

been eliminated by events. In plain fact, different countries now

apply different units, Although the alternatives argued before us

yield limitations on TWA’s liability in this case ranging from

1'Boehrirger Mannheim Diagnotecs, Inc. {/k/a Hycel, Inc. v. Pan

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

“Kuwait Airways Corp. v. Sanghi, R: gular Appeal No. 54 of 1977

(Civil Station, Bangalore, India, August 11, 1978) (reprinted in App.

at 265-71).

Po mg di Olympic Airways Corp., No. 256 of 1974 Ct. of App.;

3d Dep't., Athens, Greece (February 15, 1974) (translated and reprinted

in App. at 251-54).

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Opinion of the Court of Appeals

less than $6,500 to over $400,000, each has been adopted as the

proper unit of account by at least one party, or domestic tribunal

of a party, to the Convention. This disarray merely confirms the

obvious fact that the Jamaica Accords destroyed the international

arrangements which had led to adoption of gold as a unit of

conversion.

International disarray is also reflected in the lack of legisla-

tion in the United States implementing the Convention by estab-

lishing a unit of conversion. While the “last” official price of gold

is offered as a possible unit, “last” is really a euphemism for “no

longer” or “repealed.” The repeal of the Par Value Modification

Act in 1978 was in every sense a legislative declaration that the

price of $42.22 per troy ounce was no longer recognized by the

United States.*” We fail to see the logic in adopting as a legal

staudard a specified value for gold which has been specifically

rejected by the United States Congress. Congress’ action, more-

over, as well as that taken by the other parties to the Jamaica

Accords, is highly relevant to the Convention. The repeal of the

Par Value Modification Act was based on a domestic and inter-

national conclusion that the official price of gold was wholly out

of touch with economic and monetary reality. Since use of a

fixed amount of gold as the Convention’s unit was specifically

designed to establish a limitation level at a certain value, this

repeal must be taken as a statement that the official price no

longer reflects that specified value. The case for continuing to use

the now repealed price of gold thus finds no support in law or

logic.

The CAB order on which Judge Knapp relied was expressly

premised on the existence of an official price under the Par Value

Modification Act of 1973. The more recent internal CAB memo-

"The sole remaining use of the last official price is in determining the

value of gold in the form of gold certificates. See note 12, supra. That is

not relevant to the issues here.

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Opinion of the Court of Appeals

randum supporting continuation of that order is based ultimately

on a policy determination that the last official price is the best

available standard.** The inconsistency of the CAB position,

however, is starkly evident. It rejects SDR’s because the Senate

has not approved the Montreal Protocol, while adopting the last

official price of gold which has been explicitly rejected by the

Congress. The sole criterion supporting the CAB’s position ap-

pears to be the law of inertia.

The other alternatives have an equally infirm base. Neither

the free market price of gold nor the current French franc was

ever agreed to by the treaty’s framers, both are gross departures

from its purposes, and, as to the latter, there is ample evidence

that it was specifically rejected. The fram-rs clearly contemplated

use of the governmentally fixed price of gold in adopting it as a

unit of account in the hope of providing stability.** The free

market price of gold, however. is simply the daily fluctuating

price of a commodity, affected by conditions relating to supply

and nonmonetary uses affecting demand. The current French

franc is similarly flawed. To enforce it would amount to a de-

liberate departure from the expressed wishes of the framers to

avoid the use of a single national currency subject to unilateral

action.

TWA argues that we should adopt the International Monetary

Fund’s SDR as the unit of conversion. It is true that the SDR

was “created by the IMF in 1969 to replace gold and foreign

exchange as an international reserve asset.”* “[MJember central

"CAB Internal Memorandum, Warsaw Convention Liability Limits,

May 20, 1981 (App. at 32-38).

*? Appellant's reliance on dicta in our decision Reed v. Wiser, 555 F.2d

at 1089 n.12, is misplaced. The Reed footnote implied a free market

standard under the Guatemala City Protocol which the U.S. has not

ratified.

"Ward, supra note 14, at 2

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Opinion of the Court of Appeals

banks may exchange SDR’s for other convertible currencies and,

therefore, SDR balances are actually lines of credit against which

reserves may be borrowed for use in central bank operations.”**

As noted above, methods of calculating SDR’s have been changed

from time to time. They are presently calculated with reference

to a so-called basket of five currencies—the U.S. dollar, the

Deutsche mark, the French franc, the Japanese yen, and the

pound sterling. The amount of each currency in one SDR is a

function of the percentage weights which are assigned to each

currency in the basket. The dollar value of one SDR is then de-

termined by adding the “dollar values of each currency com-

ponent based on daily market exchange rates.”*’

Though the value of any one currency in terms of SDR’s fluctu-

ates from day to day, SDR fluctuations are generally less ex-

treme than fluctuations in the free market price of gold. The

relative stability of the SDR has thus led the Warsaw signatories

to propose its substitution as the Convention’s unit of account.

The proposal was formally drafted in 1975 as part of the Mon-

treal Protocols to the Convention and has been presented to the

signatory states for ratification. Though the substitution was sup-

ported by the United States, there has been opposition by non-

IMF signatories and very few signatories (the United States in-

cluded) have actually ratified the Protocol.

The inappropriateness of our adopting SDR’s as the unit of

conversion is plain. The Convention itself contains not the slight-

est authority for its use and the Senate has thus far declined to

ratify the Montreal Protocols. Moreover, the decision in principle

to use SDR’s is only the first step. After that, a further step must

be taken to define the limitation of liability in terms of a partic-

ular number of SDR’s per kilogram of baggage. In effect, we

241d.

*8Jd. at 3.

Al6

Opinion of the Court of Appeals

would have to set the level of the limitation. Finally, the SDR

is a creature of an international body, the IMF, and is subject

to modification or outright elimination by that body. In fact, the

method of calculating SDR’s has been changed three times in the

last seven years. This Court has no power under the terms of

the Convention cr relevant domestic source of authority to adopt

a unit of conversion variable at the whim of an international body

distinct from the parties to the Convention.

It is thus clear that neither international nor domestic sources

of law specify a unit of account for purposes of the Convention.

We deal here not with ambiguities which may be clarified by

reference to underlying purpose or with language which inade-

quately mirrors the understood intentions of the drafters. For

almost two generations, the Convention’s limits on liability have

been translatable into domestic currency values by application

of a clear and easily applied formula. An essential ingredient of

that formula has, as a consequence of international action

followed by domestic legislation, ceased to exist. What the par-

ties ask us to do is to select, upon the basis of our judgment as

to what is best as a matter of policy, a new unit of conversion.

We are without authority to do so.

Treaty advice and consent and proposal is the province of the

executive and ratification is the exclusive province of the United

States Senate. U.S. Const. art. II, § 2, cl. 1; Doe ex dem. Clark

et al. v. Braden, 16 How. 635, 656-57 (1853). While federal

courts are necessarily called upon to interpret treaties, The

Federalist No. 3 (J. Jay) (Rossiter ed. 1961); see also id. No. 80

(A. Hamilton), they must observe the line between treaty inter-

pretation on the one hand and negotiation, proposal and advice

and consent and ratification on the other. See Baker v. Carr, 369

U.S. 186, 211-12 (1961). To be sure, great difficulty may arise

in ascertaining where that line is drawn and when it has been

Al7

Opinion of ti:e Court of Appeals

crossed.** See, e.g., Goldwater v. Carter, 444 U.S. 996 (1979).

However, selcc‘ion 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, as the history of the Convention demonstrates,

While international disarray as to the proper unit of conver-

sion under the Convention alone might not disable us from en-

forcing a new unit, such a unit must be selected either through

treaty approval by the Senate or by legislation passing both

Houses of the Congress. The repeal of the Par Value Modifica-

tion Act was an explicit abandonment of the previously estab-

lished unit of conversion. While Congress may not have focused

explicitly upon the Convention in repealing that Act, its purpose,

abandonment of a price which was out of touch with economic

reality, plainly encompasses use of that price to convert judg-

ments to United Sates currency values. Congress thus abandoned

the unit of conversion specified by the Convention and did not

substitute a new one. Substitution of a new term is a political

question, unfit for judicial resolution. We hold, therefore, that

the Convention's limits on liability for loss of cargo are unen-

forceable in United States Courts.”

**Given the lack of an internationally agreed pon standard of con-

version, it might be argued that the Convention has been abrogated,

However, treaties involve international obligations ertered into by co-

ordinate branches of the government and it is not the province of courts

to declare treaties abrogated or to afford relief to those (including the

parties) who wish to escape their terms. These are not matters for “judicial

cognizance.” Whitney v. Robertson, 124 U.S. 190, 194 (1887): see also

Terlinden v. Ames, 184 U.S. 270 (1901). They belong to the executive

and legislative departments because they are more properly the domain

of “diplomacy and legislation, . .. not . . . the administration of laws.”

Whitney V. Robertson, 124 US. at 195.

*"Tt - Convention establishes liability as well as limits it. Note 2,

supra. Our holding is limited solely to the unenforceability of the limits

and we express no view as to the severability of those limits from the

rest of the Convention.

Al8

Opinion of ‘the Court of Appeals

CONCLUSION

This ruling is prospective and will apply only to events creat-

ing liability occurring 60 days from the issuance of the mandate

in this case. Prospective effect is compelled by the fact that this

is the first case in which a court has declined to enforce the Con-

vention’s limits on liability. The parties assumed our power to

select a new unit and thus our “resolution was not clearly fore-

shadowed.” Chevron Oil Co. v. Huson, 404 U.S. 97, 106 (1971).

Parties to transactions covered by the Convention should have

time to adjust their affairs to this ruling. Cf. Northern Pipeline

Construction Co. Vv. Marathon Pipeline Co., 50 U.S.L.W. 4892

(U.S. June 28, 1982) (judgment holding Bankruptcy Act un-

constitutional stayed until] October 4, 1982). As to events oc-

curring before that date, we hold that the last official price of gold

shall be used to calculate the limits on liability. Because of both

the CAB ruling discussed above and the lack of alternatives, air

carriers, at least in this country, have relied on the last official

price of gold. All carriers have thus filed tariffs that comply with

that standard and substantial “injustice and hardship” would re-

sult were they not allowed time to reformulate those tariffs. Other

parties may continue to protect themselves through insurance.

Affirmed.

Al9

Memorandum and Order of the United States District

Court for the Southern District of New York and

amendment thereto

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

81 Civ, 1700 (WK)

FRANKLIN MINT CORPORATION,

FRANKLIN MINT, LIMITED, and

McGREGoR, SWIRE AIR SERVICES, LIMITED,

Plaintiffs,

—against—

TRANS WORLD AIRLINES, 'NC.,

Defendant.

MEMORANDUM AND ORDER

WHITMAN Knapp, D.J.

On March 23, 1979, plaintiff Franklin Mint Corporation

(“Franklin”) delivered to defendant Trans World Airlines, Inc.

(“TWA”) for carriage from Philadelphia, Pennsylvania to

London's Heathrow Airport, four packages weighing some 714

pounds, Although the packages are said to have contained a

large quantity of valuable coins, Franklin made no special declar-

ation of value at the time of delivery. TWA charged Franklin

$544.96 for the shipment. The four packages never arrived at

their destination, and Franklin brought this action to recover

their full value, which it fixes at $250,000. The parties agree

A20

Memorandum and Order of tha District Court

that this action is governed by the terms of the Warsaw Con-

vention, and that TWA is liable for the loss. Before us is a

motion by TWA for partial summary judgment as to the extent

of its liability. We grant that motion in part and deny it in part.

Article 22 of the Warsaw Convention provides that, unless a

special declaration of valuc is made at the time of delivery, a

shipper’s liability for checked baggage and goods is limited to

the equivalent of 250 francs per kilogram, Article 22 states,

moreover, that this limitation of 250 francs:

“shall be deemed to refer to the French franc consisting of

65% milligrams of gold at the standard of fineness of nine

hundred thousandths [the so-called Poincare franc]. These

sums may be converted into any national currency in round

figures.” (Emphasis added. ) |

Counsel for TWA, in on extraordinary lucid and comprehen-

sive brief, has suggested three possible bases for the calculation

converting the Article 22 limitation into United States dollars:

(1) the Special Drawing Right (“SDR”), used by members of

the International Monetary Fund (“IMF”) as a unit of account;

(2) the last official price of gold in the United States; and (3)

the exchange value of the current French franc. Counsel for

Franklin, in an equally able brief, suggests a fourth possibility:

the free market price of gold.

Were we writing on a clean slate, we would find the arguments

in favor of the first of TWA's suggestions (the SDR) most per-

suasive. However, TWA's second suggestion (the last official

price of gold in the United States) has—arguably, at least—been

espoused by the Civil Aeronautics Board (“CAB”), the govern-

ment agency most intimately concerned with the transaction at

hand. It therefore comes as close as anything to constituting a

governmental interpretation of the Article 22 limitation. Also, it

A2l

Memorandum and Order of the District Court

is used by all domestic carriers—including TWA—in calculating

the dollar value of the Article 22 limitation printed on their

tariffs. It would seem to follow that the parties intended to adopt

the last official price of gold as the basis for converting the Article

22 limitation into dollars in the instant case.

Beyond saying the foregoing we can, since there are no dis-

puted issues of fact upon which a finding by us is required, see

no purpose to be served by delaying a decision while we seek

to put in our own words the arguments so cogently expressed by

counsel for TWA. Accordingly, we simply adopt those arguments

to the extent that they support our conclusion that the conver-

sion should be premised on the last official price of gold in the

United States.

Let counsel for TWA submit a proposed order on ten days

notice. As we understand the stipulation of the parties, such an

order would in effect direct that judgment be entered for plaintiff

in the amount of $6,475.98 plus interest and costs, a result which

would permit immediate appeal from this order,

SO ORDERED.

Dated:

New York, New York

November 6, 1981

/s/ Whitman Knapp

WHITMAN KNAPP

U.S.D.J,

A22

Memorandum and Order of the District Court

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

81 Civ, 1700 (WK)

FRANKLIN MINT CORPORATION,

FRANKLIN MINT LIMITED, and

McGREGor, SWIRE AIR SERVICES, LIMITED,

Plaintiffs,

—against—

TRANS WORLD AIRLINES, INC.,

Defendant.

ORDER

WHITMAN Knapp, D.J.

The first sentence of the second paragraph of our November

6, 1981 Memorandum and Order is hereby amended to read:

“Article 22 of the Warsaw convention provides that, unless

a special declaration of value is made at the time of a de-

livery, a carrier's liability for checked baggage and goods is

limited to the equivalent of 250 francs per kilogram.”

SO ORDERED.

Dated: New York, New York

December 18, 1981

WHITMAN Knapp, U.S.D.J.

A23

Judgment of the United States Court of Appeals

for the Second Circuit

UNITED STATES COURT OF APPEALS

FoR THE SECOND CIRCUIT

At a stated Term of the United States Court of Appeals for

the Second Circuit, held at the United States Courthouse in the

City of New York, on the twenty-eighth day of September one

thousand nine hundred and eighty-two.

Present:

Hon. JAMES L. OAKES

Hon, RICHARD J, CARDAMONE

Hon. RALPH K. WINTER

Circuit Judges.

No, 82-7012

FRANKLIN MINT CORPORATION,

FRANKLIN MINT LIMITED, and

McGREGor, SWIRE AIR SERVICES, LIMITED,

Plaintiffs-A ppellants,

—

TRANS WORLD AIRLINES, INC.,

Defendant-A ppellee.

Appeal from the United States District Court

for the Southern District of New York

This cause came on to be heard on the transcript of record

A24

Judgment of the Court of Appeals

from the United States District Court for the Southern District

of New York, and was argued by counsel.

ON CONSIDERATION WHEREOF, it is now hereby

ordered, adjudged, and decreed that the judgment of said District

Court be and it hereby is affirmed in accordance with the opinion

of this court with costs to be taxed against the appellants.

A. DANIEL FUSARO

Clerk

by /s/ Arthur Heller

ARTHUR HELLER

Deputy Clerk

A25

Order of the United States Court of Appeals for the

Second Circuit denying rehearing

UNITED STATES COURT OF APPEALS

SECOND CIRCUIT

No, 82-7012

At a stated term of the United States Court of Appeals, in and

for the Second Circuit, held at the United States Courthouse, in

the City of New York, on the first day of December one thousand

nine hundred and eighty-two.

FRANKLIN MINT CORPORATION,

FRANKLIN MINT LIMITED, and

McGreEGor, SWIRE AIR SERVICES, LIMITED,

Plaintiffs-A ppellants,

a ant

TRANS WORLD AIRLINES, INC.,

Defendant-A ppellee.

A petition for rehearing containing a suggestion that the action

be reheard in banc having been filed herein by counsei for the

defendant-appellee, Trans World Airlines, Inc.,

Upon consideration by the panei that heard the appeal, it is

ORDERED that said petition for rehearing is DENIED.

It is further noted that the suggestion for rehearing in banc has

been transmitted to the judges of the court in regular active

A26

Order of the Court of Appeals denying rehearing

service and to any other judge on the panel that heard the appeal

and that no such judge has requested that a vote be taken thereon.

A. Daniel Fusaro, Clerk

by:

FRANCIS X. GINDHART

Francis X. Gindhart

Chief Deputy Clerk

A27

Article 22 of the Warsaw Convention

CONVENTION FOR UNIFICATION OF CERTAIN

RULES RELATING TO INTERNATIONAL

TRANSPORTATION BY AIR

Article 22

(1) In the transportation of passengers, the liability of the

carrier for each passenger shall be limited to the sum of 125,000

francs. Where, in accordance with the law of the court to which

the case is submitted, damages may be awarded in the form of

periodical payments, the equivalent capital value of the said pay-

ments shall not exceed 125,000 francs. Nevertheless, by special

contract, the carrier and the passenger may agree to a higher

limit of liability.

(2) 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. In that case the carrier will be liable to pay a sum not

exceeding the declared sum, unless he proves that that sum is

greater than the actual value to the consignor at delivery.

(3) As regards objects of which the passenger takes charge

himself, the liability of the carrier shall be limited to 5,000 francs

per passenger.

(4) The sums mentioned above shall be deemed to refer to the

French franc consisting of 652 miligrams of gold at the standard

of fineness of nine hundred thousandths. These sums may be

converted into any national currency in round figures.

Pub.

Pub.

Pub.

A28

Par Value Modification Act

L. No. 92-268, § 2, 86 Stat. 116, 117 (1972):

Sec, 2. The Secretary of the Treasury is hereby author-

ized and directed to take the steps necessary to establish a

new par value of the dollar of $1 equals one thirty-eighth

of a fine troy ounce of gold. When established such par

value shall be the legal standard for defining the relation-

ship of the dollar to gold for the purpose of issuing gold

certificates pursuant to section 14(c) of the Gold Reserve

Act of 1934 (31 U.S.C. 405b).

L. No. 93-110, § 1, 87 Stat. 352 (1973):

Be it enacted by the Senate and House of Representatives

of the United States of America in Congress assembled,

That the first sentence of section 2 of the Par Value Modifi-

cation Act is amended by striking out the words “one thirty-

eighth of a fine troy ounce of gold” and inserting in lieu

thereof the following: “0.828948 Special Drawing Right or,

the equivalent in terms of gold, of forty-two and two-ninths

dollars per fine troy ounce of gold”.

L. No. 94-564, § 6, 90 Stat. 2660, 2661 (1976):

Sec. 6. Section 2 of the Par Value Modification Act

(31 U.S.C, 449) is hereby repealed.

A29

In re Aircrash at Kimpo International Airport Korea

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

1983)

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

MDL-482

MEMORANDUM OPINION

In Re Aircrash at Kimpo International Airport,

Korea on November 18, 1980

BACKGROUND

On November 18, 1980, a Korean Air Lines (“Korean”)

jet crashed after a flight from the Urited States to Kimpo Inter-

national Airport near Seoul, Korea. Several passengers, includ-

ing plaintiffs’ decedents, were killed. Others, including some

plaintiffs, were injured. They now seek to recover damages.

The issues presented to this court are 1) whether the Warsaw

Convention (“Convention”) limits the damages recoverable for

death or personal injury that results from an accident involving

an international air carrier, and 2) the method of calculating

damages if the Convention is applied.

The plaintiffs urge this court to strike the defense of the Con-

vention’s limitation on liability, asserting that, inter alia, there

was insufficient notice of the applicability of the Convention to

that particular flight and California's Wrongful Death Statute,

Cal. Code Civ. Proc. §377, provides the plaintiffs an independ-

ent basis for suit. Alternatively, plaintiffs suggest that, if the Con-

vention is applicable, the method of converting the limitation

into dollars should be based upon the free market price of gold,

rather than any of the other possible conversion methods dis-

cussed below.

A30

In re Aircrash at Kimpo International Airport, Korea

The Warsaw Convention

The Convention is a multilateral treaty drafted in 1929 and

adhered to by most countries that have international airlines.

The United States adhered to the Convention in 1934. 49 Stat.

3000 (1934). A primary purpose of the Convention is to limit

the liability of international air carriers in the event of an acci-

dent or loss.

Article 22 sets a limit of 125,000 “Poincare” francs as dam-

ages for injury to passengers. Article 22(4) defines the franc

as a gold coin consisting of 65.5 milligrams of gold “which may

be converted into any national currency in round figures.” The

dollar value is calculated by converting the gold value into

United States dollars. In 1965, this represented a ceiling on

damages of $8,291.88. The United States expressed dissatisfac-

tion with this low amount and gave the necessary six month's

notice to formally denounce the Convention.

As a result, the international carriers met in Montreal and

drafted the Montreal Agreement (“Agreement”), which provides

that the airlines accept absolute liability for injury to passengers

up to a limit of $75,000 per passenger. The Agreement is a

special contract under Article 22 which allows the parties to

agree to a higher limit than that provided for by the Conven-

tion. However, Article 23 prohibits “[a]ny provision tending to

relieve the carrier of liability or to fix a lower limit than...

this convention. .. .” Therefore, Article 22, or special contracts

allowed by it, cannot be a vehicle to reduce the liability of a

carrier below the Convention limits. The Civil Aeronautics

Board (“CAB”), in Order No. E-23680, 31 Fed. Reg. 7302

(1966), ordered carriers to use this higher limit if the point of

departure or a planned stop was in the United States.

It should be noted that not all airlines or countries are par-

A3l

In re Aircrash at Kimpo International Airport, Korea

ties to the Agreement. If they are not, the Convention’s lower

limits are still applicable. Furthermore, some parties, including

Korea but not the United States, are parties to the Hague Pro-

tocol of 1955, which doubled the Convention limits to 250,000

Poincare francs.

Two other protocols, the Guatemala Protocol and the Mon-

treal Protocol, contain amendments to Article 22 changing the

unit of reference from the Poincare franc to the Special Draw-

ing Right (“SDR”) of the International Monetary Fund

(“IMF”). However, these protocols have been ratified by very

few countries. The United States Senate has not ratified either.

The Gold Standard

When the Convention was drafted, gold served official mone-

tary functions internationally, and its price was set by law in

most countries, including the United States. It was selected as

the unit of conversion to ensure judgments of uniform value as

well as a stable and easily calculable limitation on liability.

In 1976, Congress repealed Section 2 of the Par Value Modi-

fication Act, 31 U.S.C. §449, thus abolishing the official price

of gold. However, the CAB and the airlines in the Uniied States

continued to rely upon the last official price as the method to

determine liability under the Convention.

However, other parties to the Convention have chosen other

conversion methods. French courts have held that the current

French franc is comparable to the Poincare franc and is to be

used as the measure of liability under the Convention.’ The

1See, Chamie v. Egyptiar (Cours d'appel Paris, Jan. 31, 1980); Pakis-

tan Int'l Airlines v. Compagnie Air Inter. S.A., (Cours d'appel Aix-en-

Provence Oct. 31, 1981).

A32

In re Aircrash at Kimpo International Airport, Korea

SDR has been adopted legislatively by Britain? and Sweden* and

by court decisions in the Netherlands‘ and Italy.* Courts in India®

and Greece’* and a United States District Court for the Southern

District of Texas* have chosen the free market price of gold.

Because there are four units of conversion currently recog-

nized, this court is asked to select the correct one. The four

methods are: (1) the last official price of gold, (2) the free

market price of gold, (3) the Special Drawing Right (“SDR”)

of the International Monetary Fund (“IMF”), and (4) the cur-

rent French franc.

DISCUSSION

Which of the four available units of conversion is to be used

to measure liability under the Convention is an open question

in this circuit. Jn Re Aircrash in Bali, Indonesia on April 22,

1974, 684 F.2d 1301, 1305 n.2 (9th Cir. 1982). However, a

month after the Ninth Circuit decided Bali, the Second Circuit

addressed that issue. Franklin Mint Corp. v. Trans World Air-

“The British Carriage by Air (Sterling Equivalents) Order of 1980,

Statutory Instrument 1980 No. 281, effective March 21, 1980.

®Carriage by Air Act (1957), amendment to Chapter 9, §22, effective

April 27, 1978.

‘State of the Netherlands v. Giant Shipping Corp., Rechtspraak van

de Week, 30, May, 1981, 321 (Supreme Court of the Netherlands, May

1, 1981).

SLinee Aerea Italiane v. Ricciole, (Rome Civil Court Judgment 609/

1979, Nov. 14, 1978).

*Kuwait Airways Corp. v. Sanghi, Regular Appeal No. 54 of 1957

(Civil Station, Bangalore, India, August 11, 1978).

*Zakoapolos v. Olimpic Airways Corp., No. 256 of 1974 Ct. of App.;

3d Dep’t., Athens, Greece (February 15, 1974).

8Boehringer Mannheim Diagnotecs, Inc. f{/k/a Hycel, Inc. v. Pan Amer-

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

A33

In re Aircrash at Kimpo International Airport, Korea

lines, Inc., 525 F. Supp. 1288 (S.D.N.Y. 1981), affd 690 F.

2d 303 (2d Cir. 1982). The Franklin Mint trial court had de-

termined that the CAB’s reliance on the last official price of

gold was persuasive and ruled that that unit of measure was still

applicable. The Second Circuit held that selection of a unit of

conversion was a political question unfit for judicial resolution.

Therefore, the Convention’s limits on liability were rendered un-

enforceable. However, the court made its ruling prospective and

otherwise affirmed the trial court.

In discussing three of the four currently available units of con-

version, the Second Circuit noted:

Neither the free market price of gold nor the current French

franc was ever agreed to by the treaty’s framers, and as

to the latter, there is ample evidence that it was specifically

rejected. .. . The free market price of gold, however, is

simply the daily fluctuating price of a commodity, affected

by conditions relating to supply and nonmonetary uses af-

fecting demand. The French franc is similarly flawed.

The inappropriateness of .. . adopting SDR’s as the unit

of conversion is plain. The Convention itself contains not

the slightest authority for its use and the Senate has thus

far declined to ratify the Montreal Protocols. Moreover, the

decision . . . to use SDR’s is only the first step. After that,

a further step must be taken to define the limitation of lia-

bility in terms of a particular number of SDR’s .. . Finally,

the SDR is a creature of an international body, the IMF,

and is subject to modification or outright elimination by

that body.

690 F.2d at 310.

After consideration of the fourth unit of conversion, the last

A34

In re Aircrash at Kimpo International Airport, Korea

official price of gold used by the court below, the Second Circuit

held:

The repeal of the Par Value Modification Act was an ex-

plicit abandonment of the previously establishment unit of

conversion. While Congress may not have focused ex-

plicitly upon the Convention in repealing that Act, its pur-

pose, abandonment of a price which was out of touch with

economic reality, plainly encompasses use of that price to

convert judgments to United States currency values. Con-

gress thus abandoned the unit of conversion specified by

the Convention and did not substitute a new one. Substi-

tution of a new term is a political question, unfit for judicial

resolution. We hold, therefore, that the Convention’s limits

on liability . . . are unenforceable in United States Courts.

690 F.2d at 311.

The well-reasoned, comprehensive Franklin Mint opinion has

persuaded this court that, indeed, the limitation on damages that

is imposed by the Convention is unenforceable.

The Second Circuit made its decision prospective, expressly

limiting its effect to events occurring at least 60 days from the

decision. 690 F.2d at 312. However, in its discussion the court

noted:

The need for a unit of conversion is self-evident. With-

out it, a rational limit on liability cannot exist, much less

one which produces judgments of equal value in different

currencies.

The lack of an internationally agreed upon unit is also

obvious. The very convening of the Montreal meeting in

1975 was a recognition by the Warsaw parties that the

Convention’s unit had been eliminated by events.

690 F.2d at 309.

A35

In re Aircrash at Kimpo International Airport, Korea

It is clearly establisied that the airlines knew that “a rational

limit on liability cannot exist” without an internationally agreed

upon unit and “the Montreal meeting in 1975 was a recognition

by the Warsaw parties that the Convention’s unit had been elim-

inated.” Therefore, airlines, including Korean, presumptively

knew that this “international disarray” would prevent the Con-

vention from shielding them in any rational manner, and they

would be expected to protect themselves and obtain additional

insurance.

Furthermore, the knowledge of this “international disarray”

and the “recognition by the Warsaw parties that the Conven-

tion’s unit has been eliminated by events,” contrary to the hold-

ing in Franklin Mint, would allow the airlines to see—as early

as 1975—that, eventually, a court would refuse to enforce the

Convention. Therefore, this Court’s decision as to the enforce-

ability of the Convention is applicable to this action.

On the basis of the unenforceability of the damages limita-

tion imposed by the Convention, the plaintiffs’ motion to strike

the defense of the Warsaw Convention is granted.

Dated: February 15, 1983

/s/ Terry J. HATTER, Jr.

United States District Judge

A36

Designation of Corporate Relationships

Franklin Mint Corporation, Franklin Mint Limited, and

McGregor, Swire Air Services Limited, filing this petition for

a writ of certiorari as petitioners in this proceeding, state that:

1. This is their original Designation of Corporate Relation-

ships.

2. Franklin Mint Corporation is a subsidiary of Warner Com-

munications, Inc.

3. Franklin Mint, limited is a subsidiary of Warner Com-

munications, Inc. (U.K.), which is in turn a subsidiary of Warner

Communications, Inc.

4. McGregor, Swire Air Services Limited, presently known

as McGregor Sea & Air Services, Ltd., is a subsidiary of Ocean

Cory, Ltd., which is in turn a subsidiary of Ocean Transport &

Trading plc.

5. Affiliates and subsidiaries of Franklin Mint Corporation

and Franklin Mint, Limited are:

Atari, Inc.

Atlantic Records

WEA Corp.

WEA Manufacturing

Warner Bros,

Panavision

DC Comics

Warner Cosmetics

Warner Amex Cable Communications

Knickerbocker Toy

Elektra/Asylum/Nonesuch Records

Warner Special Prods.

Warner Bros. Television

Warner Home Video

Mad Magazine

A37

Designation of Corporate Relationships

Cosmos Soccer

Warner Amex Satellite Entertainment Co.

Malibu Grand Prix

Warner Bros. Records

WEA International

Warner Bros. Music Publishing

Licencing Corp. of America

Warner Books

Warner Publisher Services

Warner Theatre Prods.

6. Affiliates and subsidiaries of McGregor, Swire Air Services

Limited are:

McGregor Uyeno K.K.

Calayan Co., Ltd.

McGregor Swire Air Services (Malaysia) Sdn. Bhd.

G.E. Green & Co, Pty., Ltd.

MSAS SRL

Society Francaise Wm. Cory et Fils

MSAS Transport GmbH