Reply Brief — Kuehne & Nagel, Inc. v. Motorola, Inc.

No. 02-1066 az "

Suprerag C

ELLEDP |

| APR 29 2008

IN THE OLERK

Supreme Court of the Hnited States

> -<-

KUEHNE & NAGEL, INC.,

Petitioner,

— |

MOTOROLA, INC. and FIREMAN’S FUND INSURANCE COMPANY,

Respondents.

ON PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE NINTH CIRCUIT

REPLY TO BRIEF IN OPPOSITION

ANDREW J. HARAKAS

Counsel of Record

DESMOND T. BARRY, JR.

DIANE WESTWOOD WILSON

CONDON & FORSYTH LLP

685 Third Avenue

New York, New York 10017

(212) 490-9100

Counsel for Petitioner

Kuehne & Nagel, Inc.

TABLE OF CONTENTS

pet oe oe we tes 2 1) it en ee il

Pg PRT rer Ty Tree eee Tee ree Teer ]

I. THE UNDISPUTED CONFLICT AMONG

THE CIRCUITS WITH RESPECT TO THE

AWARD OF PREJUDGMENT INTEREST

BEYOND THE TREATY’S LIABILITY

LIMIT REQUIRES THE COURT’S

rr er er ee Tree ee l

II. THE COURT SHOULD CORRECT THE

IMPROPER APPLICATION OF THE

“AFFECTED VALUE” DOCTRINE ........ 3

A. The 1955 Hague Protocol’s “Affected

Value” Doctrine Cannot Properly Be

Read Into the Unamended Warsaw

ce rey rrr ant TTT eee 4

B. Even the “Affected Value” Doctrine

Requires Evidence that the Value of

the Undamaged Cargo Was “Affected”. 7

SPE bckneweGckedsadsecuiuencaksseracas 9

REPLY APPENDIX

ii

TABLE OF AUTHORITIES

Cases: PAGE

Boehringer-Manheim Diagnostics, Inc.

v. Pan American World Airways, Inc.,

737 F.26 456 (Sth Cir. 1964) 2... ccc ccccccces 2n

Chan v. Korean Air Lines, Ltd.,

QPS UF. BE Ce a hs od eh hos base eens ss x F

Deere & Co. v. Deutsche Lufthansa

Aktiengesel!schaft, 855 F.2d 385

(FU COMR.. FE hs bs inne dsc kccsncueceunbanienues 6-8

Deere & Co. v. Deutsche Lufthansa

Aktiengesellschaft, 621 F. Supp. 712

(N.D. Ill. 1985), aff’d, 855 F.2d 385

CFU COR FIRED bkadecscnassesacuateeseuases 8

Domangue v. Eastern Air Lines, Inc.,

Fe BBO ZIG (SG CH. GGG) s civcdcscevcdavs 2n

El Al Israel Airlines, Ltd. v. Tseng,

Dae Gicke Cae LASS bees i oh a daa \ a |

Erie R. Co. v. Tompkins, 304 U.S. 54 (1938) .... 2

Hanna v. Plummer, 360 U.S. 460 (1965) ........ 2

Trans World Airlines, Inc. v. Franklin Mint, '

Corp., 466 U.3. 28S CIPGS) cscesccuviccenss 4,5

Zicherman v. Korean Air Lines Co., Ltd.,

516 U.S. 217 CI ch nivcvekscaites see lees 3n

Treaties and Statutes:

Convention for the Unification of Certain Rules

Relating to International Transportation by

Air, October 12, 1929, 49 Stat. 3000, T.S.

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

in note following 49 U.S.C.A. § 40105 (1997)

(note) (“Warsaw Convention”).............- passim

Protocol to Amend the Convention for the

Unification of Certain Rules Relating to

International Transportation by Air, October

12, 1929, Sept. 28, 1955, 478 U.N.T.S. 371

(1955 Hague Protocol”) ...........sseeeeee: pe

Convention for the Unification of Certain Rules

Relating to International Transportation by

Air, October 12, 1929, as amended by the

Protocol Done at The Hague, 1955 and by

Protocol No. 4 of Montreal, 1975, reprinted

in S. Exec. Rep., No. 105-20 (1998)

(“Montreal Protocol No. 4”) .........+---+5 3-4

Other Authorities:

I International Conference on Private Air law,

The Hague, September 1955—Minutes, ICAO

Doc. 7686-LC/140 (Sept. 1956)............. 6

ICAO Legal Committee, Minutes of the Ninth

Session, Rio de Janeiro, 25 August—12

September 1953, ICAO Doc. 7450-LC/136-1

SOE sien kevacrentccassucssberssosnaseuncess 6

Petitioner KUEHNE & NAGEL, INC. (“KNI’”)

respectfully submits this reply to Respondents’ Brief in

Opposition (“Opp. Brief”) to the Petition for writ of

certiorari.

ARGUMENT

I

THE UNDISPUTED CONFLICT AMONG THE

CIRCUITS WITH RESPECT TO THE AWARD

OF PREJUDGMENT INTEREST BEYOND THE

TREATY’S LIABILITY LIMIT REQUIRES

THE COURT’S INTERVENTION

Respondents concede, as they must, that there is a

conflict among the Circuit Courts as to whether pre-

judgment interest may be awarded in addition to the

Article 22 limit of liability of the unamended Warsaw

Convention.' See Opp. Brief at 2; see also Petition at 8-

15 citing cases. In fact, even the Court of Appeals below

recognized the conflict. See Appendix to Petition for

Writ of Certiorari (“Petition App.”) at 15a-18a. Never-

theless, respondents claim that the issue of prejudgment

interest is not sufficiently important to warrant review

by this Court because (1) “any award of prejudgment

interest would still be quite small,” and (2) “very few

Warsaw cases complete the trial phase.” See Opp. Brief

at 3. Respondents’ unsupported arguments are incorrect

and, even if accepted as true, they cannot justify the con-

’ Convention for the Unification of Certain Rules Relating to

International Transportation by Air, October 12, 1929, 49 Stat. 3000,

T.S. No. 876, 137 L.N.T.S. 11 (1934), reprinted in note following 49

U.S.C.A. § 40105 (1997) (note). It is undisputed that this action is

governed by the unamended Warsaw Convention.

2

tinued misinterpretation and misapplication of a treaty of

the United States.

The issue of prejudgment interest arises in every War-

saw Convention case, regardless of its value or whether

the case settles,” proceeds to trial or is appealed. To

allow the acknowledged conflict to continue on such a

basic issue involving one of the most widely and often

applied treaties in the world is intolerable. Indeed,

allowing this conflict to continue will lead to forum

shopping, which consistently has been discouraged since

the Court’s decision in Erie R. Co. v. Tompkins, 304 U.S.

54 (1938). See Hanna v. Plummer, 360 U.S. 460, 468

(1965).

The language of Article 22(2) of the Warsaw Con-

vention is clear and unambiguous: “In the transportation

of checked baggage and goods, the liability of the carrier

shall be limited to the sum of 250 francs per kilogram.

. . .” The decision of the Court of Appeals below, as

well as the decisions of the Fifth Circuit,’ in effect

improperly amend Article 22(2) to read: “In the trans-

portation of checked baggage and goods, the liability of

the carrier shall be limited to the sum of 250 francs per

kilogram in addition to the prejudgment interest

thereon. . . .” “Postratification adjustments, however,

are appropriately made by the treaty signatories.” E/ Al

Israel Airlines, Ltd. v. Tseng, 525 U.S. 155, 171, n.12

(1999).* As the Court consistently has cautioned: “where

2 Common sense dictates that the specter of a recovery of pre-

judgment interest (or not) affects the settlement value of a case.

3 See Domangue v. Eastern Air Lines, Inc., 722 F.2d 256, 262-

64 (Sth Cir. !¥%4:, Boehringer-Manheim Diagnostics, Inc. v. Pan

American World Airways, Inc., 737 F.2d 456, 460 (Sth Cir. 1984).

+ Even the provisions of the 1955 Hague Protocol relied upon

by the Court below (Petition App. at 23a-24a) do not expressly allow

prejudgment interest. See Protocol to Amend the Convention for the

the tex\ is clear, as it is here, [a court] has no power to

insert an amendment.” Chan, 490 U.S. at 134.

The conflict is undisputed and intolerable. The Court

should reject respondents’ proffered rationale for ignor-

ing the conflict and grant the Petition for Writ of Cer-

tiorari to bring the lower courts back in line with the

express text of Article 22(2) of the Warsaw Convention.

II

THE COURT SHOULD CORRECT THE

IMPROPER APPLICATION OF THE

“AFFECTED VALUE” DOCTRINE

The issue before the Court is whether the “affected

value” doctrine was applied properly in this case, based

on the facts as determined by the district court and as

governed by the unamended Warsaw Convention.

Although there is no conflict among the Circuit Courts

on this issue (in fact, there are no controlling Circuit

Court decisions), the issue is of extreme importance, as

the lower courts have misinterpreted one of the central

provisions of the Warsaw Convention—Article 22. If

allowed to stand, this misinterpretation will be perpet-

uated by other courts in cases involving both the una-

mended Warsaw Convention and the Convention as

amended by Montreal Protocol No. 4.° Accordingly, this

Unification of Certain Rules Relating to International Transportation

by Air, October 12, 1929, Sept. 28, 1955, 478 U.N.T.S. 371. In any

event, while the drafting history and post-ratification conduct of the

parties may be relevant if the text is ambiguous or to confirm its

meaning, they cannot serve as a basis to amend the express text. See

Zicherman v. Korean Air Lines Co., Ltd., 516 U.S. 217, 225 (1996);

Chan v. Korean Air Lines, Ltd., 490 U.S. 122, 134 (1989).

5 Convention for the Unification of Certain Rules Relating to

International Transportation by Air, October 12, 1929, as amended by

4

issue of treaty interpretation is important, has wide-rang-

ing effect and is recurring. See, e.g., Trans World Air-

lines, Inc. v. Franklin Mint, Corp., 466 U.S. 243 (1983)

(addressing proper interpretation of Article 22).

The “affected value” doctrine is not part and parcel of

Article 22 “in all Warsaw cases” as argued by respon-

dents. See Opp. Brief at 6-7. Moreover, petitioner did

not “agree[ ] to the method of calculating damages at

trial.” Opp. Brief at 5-6. Rather, for purposes of trial,

petitioner agreed only that the method of calculation had

been resolved by summary judgment as follows:

[if] the damage to the shipment rendered the entire

system inoperable and caused the construction or

operation of the shipped system to be delayed for a

period of several weeks, then the proper weight to

be considered under Article 22(2) of the Warsaw

Convention is the total weight of the shipment.

See Summary Judgment Order (Reply App. at 10a).° This

portion of the district court’s summary judgment order

was then incorporated into the Joint Final Pretrial Order

under the heading entitled “Legal Issues Resolved By

Summary Adjudication Order.” See Joint Final Pretrial

Order (Reply App. at 24a).

A. The 1955 Hague Protocol’s “Affected Value”

Doctrine Cannot Properly Be Read Into the

Unamended Warsaw Convention

The first and foremost goal of the Warsaw Convention

was to limit the liability of the air carrier for lost cargo.

Franklin Mint. Corp., 466 U.S. at 256. “The Conven-

the Protocol Done at The Hague, 1955 and by Protocol No. 4 of Mon-

treal, 1975, reprinted in S. Exec. Rep., No. 105-20 (1998).

© All references preceded by “Reply App.” refer to pages in the

Appendix hereto.

5

tion’s second objective was to set a stable, predictable,

and internationally uniform limit that would encourage

the growth of a fledgling industry.” /d. Thus, the

“affected value” doctrine, absent from the express

language of Article 22(2) of the Warsaw Convention,

should be rejected as contrary to both of these goals.

Article 22(2) of the unamended Warsaw Convention

does not contain any language upon which the “affected

value” doctrine can be based. The text is clear and

direct:

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 supplemen-

tary sum if the case so requires. In that case the car-

rier will be liable to pay a sum not exceeding the

declared sum, unless he proves that the sum is

greater than, the actual value to the consignor at

delivery.

Warsaw Convention, Article 22(2) (emphasis added).

The language used in Article 22(2) evinces that the

liability limit is calculated based upon the weight of the

damaged “package” and not on the weight of the entire

“shipment” or other “packages.” Moreover, application

ef the “affected value” doctrine necessarily leads to

unpredictability and increased liability for items not

actually damaged.

Nevertheless, the Court below found that “the text and

drafting history of the Warsaw Convention are silent on

this question” and turned to the text of the 1955 Hague

Protocol as putative support for the application of the

“affected value” doctrine to this unamended Warsaw

6

Convention case. See Petition App. at 8a-10a. Article XI

of the 1955 Hague Protocol amends Article 22(2) of the

Warsaw Convention as follows:

In the case of loss, damage or delay of part of reg-

istered baggage or cargo, or of any object contained

therein, the weight to be taken into consideration in

determining the amount to which the carrier’s lia-

bility is limited shall be only the total weight of the

package or packages concerned. Nevertheless, when

the loss, damage or delay of a part of the registered

baggage or cargo, or of any object contained

therein, affects the value of other packages cov-

ered by the same baggage check or the same air

waybill, the total weight of such package or pack-

ages shall also be taken into consideration in deter-

mining the limit of liability.

1955 Hague Protocol, Article XI (emphasis added).

The characterization by the Court below of the 1955

Hague Protocol amendment as a mere clarification (Peti-

tion App. at 9a) is based upon an improper reading of

the 1955 Hague Protocol drafting history. See, e.g., I

International Conference on Private Air law, The Hague,

September 1955—Minutes, at 251-253, ICAO Doc. 7686-

LC/140 (Sept. 1956); ICAO Legal Committee, Minutes

of the Ninth Session, Rio de Janeiro, 25 August—12

September 1953, ICAO Doc. 7450-LC/136-1 at 153-55

(1954) (comments of Mr. Drion (Netherlands) and Mr.

Ambrosi (Italy)). Neither does the decision of the Court

of Appeals in Deere & Co. v. Deutsche Lufthansa

Aktiengesellschaft, 855 F.2d 385 (7th Cir. 1988), support

the decision of the courts below. Although the Seventh

Circuii in Deere acknowledged the importance of the

issue, as the parties agreed to its application, the Court

declined to address the applicability of the “affected

7

value” doctrine to unamended Warsaw Convention trans-

portation. /d. at 391, n. 13.

As with the prejudgment interest ruling, the Court

below improperly read language into Article 22(2) of the

Warsaw Convention to allow for recovery of damages

not allowed by the plain text of the Convention. See

Tseng, 525 U.S. at 171, n.12; Chan, 490 U.S. at 134.

B. Even the “Affected Value” Doctrine Requires

Evidence that the Value of the Undamaged Cargo

Was “Affected”

Assuming that the “affected value” doctrine was appli-

cable to the unamended Warsaw Convention, the Court

below misapplied the doctrine in this case. The proper

evidentiary standard of the “affected value” doctrine is

legal, not factual as argued by respondents. See Opp.

Brief at 5-6.

The express language of the 1955 Hague Protocol

requires that a cargo’s loss, damage or delay “affect[ ]

the value of other packages” to increase the carrier’s

limit of liability to more than just the weight of the

packages actually damaged, which inherently requires

evidence of the diminution in the “value” of the other

undamaged packages. Here, the courts below did not

look at whether the damage to the control frame actually

“affected the value of other packages” of the cellular

base station. Rather, the district court focused only on

whether the construction and operation of the base sta-

tion was delayed, and this error was compounded by

respondents’ failure to submit evidence that this delay

actually had any effect on the “value” of the undamaged

components. See Petition App. at 12a-15a; Reply App. at

10a.

As justification for the “affected value” doctrine, both

of the courts below relied on the decisions of the courts

8

in Deere & Co. v. Deutsche Lufthansa Aktienge-

sellschaft, 621 F. Supp. 712 (N.D. Ill. 1985), aff’d, 855

F.2d 385 (7th Cir. 1988). In Deere, plaintiff sued for

damage to a “director frame,” one of a number of com-

ponents comprising part of an IBM Model 3032 com-

puter. 621 F. Supp. at 721-22. Although the damage was

to only one component of the computer, it rendered the

computer inoperable and could not be replaced for a

period of several months. /d. at 722. Based on this, the

Deere district court calculated the Warsaw Convention

limit of liability based on the weight of the entire ship-

ment, ‘instead of just the damaged component. /d.

Significantly, in Deere, plaintiff claimed $195,500 in

damages, consisting of the cost of repair and associated

transportation costs, and the cost of leasing a replace-

ment computer for the several months in which the com-

puter was inoperable. Jd. On appeal, the Seventh Circuit

upheld the district court’s decision but did not actually

review whether the “affected value” doctrine was appli-

cable as a matter of treaty law. Deere, 855 F.2d at 391.

Here, respondents’ damages related solely to the 680

kilogram portion of the shipment actually damaged, but

they seek to calculate the liability limit based upon the

weight of the entire shipment (i.e., 12,204 kilograms).

The “affected value” doctrine, however, required respon-

dents to present some evidence of how the damaged

component affected the “value” of the other components

(i.e., diminution of value). None was presented and a

delay in obtaining a replacement part, standing alone, is

insufficient to establish that the damage to one package

affected the value of the other packages. Even in Deere,

there was evidence that the damaged shipment and delay,

in fact, affected the value of the undamaged components. :

The Court below misapplied the “affected value” doc-

trine to Article 22 of the unamended Warsaw Convention

Pe

9

to increase the limit of liability based upon the weight of

the entire shipment rather than the packages actually

damaged (and further disregarded the true Article 22

treaty limit of liability by the imposition of prejudgment

interest on this inflated value), contrary to clear treaty

law and the goals of the Convention’s drafters.

CONCLUSION

The Petition for Writ of Certiorari should be granted

in all respects.

Dated: April 29, 2003

Respectfully submitted, —

ANDREW J. HARAKAS

Counsel of Record

DESMOND T. BARRY, JR.

DIANE WESTWOOD WILSON

CONDON & FORSYTH LLP

685 Third Avenue, 14th Floor

New York, New York 10017

(212) 490-9100

Attorney for Petitioner

Kuehne & Nagel, Inc.

Of Counsel:

BARRY S. ALEXANDER

SCOTT D. CUNNINGHAM

REPLY APPENDIX

la

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

No. C 99-03659 WHA

Filed September 25, 2000

MOTOROLA, INC., a corporation, and FIREMAN’S

FUND INSURANCE COMPANY, a corporation,

Plaintiffs,

FEDERAL EXPRESS, a corporation; KUEHNE & NAGEL,

INC., a corporation, and DOES ONE through TEN,

inclusive,

Defendants.

ORDER GRANTING IN PART AND DENYING IN

PART SUMMARY JUDGMENT TO MOTOROLA,

DENYING SUMMARY JUDGMENT TO

FEDERAL EXPRESS AND GRANTING SUMMARY

JUDGMENT TO KUEHNE & NAGEL

2a

INTRODUCTION

In this action for breach of contract and negligence,

the general issue concerns allocation of the risk of loss

for damage done to Motorola’s shipment from Dallas to

Tokyo. The parties filed cross motions for summary

judgment. In each motion herein decided, the summary

judgment record was viewed in the light most favorable

to the nonmoving party.

The Warsaw Convention applies to this shipment. The —

convention's provisions on limits on liability apply. The

limit of liability, the Court holds, is assessed based upon

the weight of the overall cargo if it is shown at trial that

the overall Cellular Base Station system was affected by

the damage to part of the shipment. This and other issues

will be addressed below.

STATEMENT

Motorola hired Kuehne & Nagel to transport a Cellu-

lar Base Station system. On July 10, 1997, Relocation

Services Inc. (RSI), a company hired by Motorola, pack-

aged the cargo into a number crates. Kuehne & Nagel

then arranged for Federal Express to ship the cargo.

Between July 10 and July 15, Federal Express used sev-

eral planes to transport this equipment. Both Kuehne &

Nagel and Federal Express issued “clean” air waybills.

A clean air waybill means that there was no apparent

damage to the cargo before transport. Kuehne & Nagel

and Motorola claim that Kuehne & Nagel noted damage

to a’portion of the cargo when the shipments arrived in

the airport in Tokyo. Upon receiving them, Motorola

claims that part of the Cellular Base Station system had

sustained severe damage. Motorola replaced the equip-

ment allegedly damaged, and was reimbursed for this

ee Tee

’

;

q

3a

expense, less its $25,000.00 deductible, by its insurance

company, Fireman’s Fund. On June 21, 1999, Motorola

and Fireman’s Fund filed this action against Kuehne &

Nagel and Federal Express based upon breach of con-

tract and negligence. This order responds to various

cross-motions for summary judgment.

ANALYSIS

The Summary Judgment Standard

In order to withstand a motion for summary judgment,

the opposing party must set forth specific facts showing

that there is a genuine issue of material fact in dispute.

Fed. R. Civ. P. 56(e). A dispute about a material fact is

genuine “if the evidence is such that a reasonable jury

could return a verdict for the nonmoving party.” Ander-

son v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In

the absence of such facts, “the moving party is entitled

to a judgment as a matter of law.” Celotex Corp. v.

Catrett, 477 U.S. 317, 323 (1986).

“[A] party cannot manufacture a genuine issue of

material fact merely by making assertions in its legal

memoranda.” SA Empresa de Viacao Aerea Rio

Grandense (Varig Airlines) v. Walter Kidds & Co., 690

F.2d 1235, 1238 (9th Cir. 1982). Rule 56 provides that

“f{w]Jhen a motion for summary judgment is made and

supported as provided in this rule, an adverse party may

not rest upon the mere allegations or denials of the

adverse party’s pleading, but the adverse party’s

response, by affidavits or otherwise as provided in this

rule, must set forth specific facts [that would be admis-

sible as evidence] showing that there is a genuine issue

gg

4a

The Court does not make credibility determinations

with respect to the evidence offered and is required to

draw all inferences in a light most favorable to the non-

moving party. 7.W. Elec. Serv., Inc. v Pacific Elec. Con-

tractors Ass’n, 809 F.2d 626, 630-31 (9th Cir. 1987)

(citing Matsushita Elec. Indus. Co. v. Zenith Radio

Corp., 475 U.S. 574, 587 (1986)). Summary judgment is

not appropriate “where contradictory inferences may

reasonably be drawn from undisputed evidentiary facts

.. . .” Hollingsworth Solderless Terminal Co. v Turley,

622 F.2d 1324 (9th Cir. 1989).

The Warsaw Convention

The Warsaw Convention governs situations that arise

from the “international transportation of persons, bag-

gage or goods performed by an aircraft for hire.” War-

saw Convention (for the Unification of Certain Rules

Relating to International Transportation by Air) October

12, 1929, at 1(1), 49 Stat. 3000 (1934), T.S. No. 876,

137 L.N.T.S. 11, reprinted in 49 U.S.C. 40105 note

(1995). The convention applies where, as here, the place

of departure and the place of destination are located

within the territories of two High Contracting Parties.

Warsaw Convention Art.1(2). The movement of the

Cellular Base Station system is considered the “transport

of goods” as defined by the convention. Warsaw Con-

vention Art. 1(2). Both Federal Express and Kuehne &

Nagel are subject to carrier liability under the

convention.

As an “indirect air carrier” (a freight forwarder who issues

air waybills), Kuehne & Nagel is bound by the provisions of the con-

vention. See Hitachi Data Systems Corp. v. Nippon Cargo Airlines,

1995 WL 16923, at *5 (N.D.Cal. Jan. 6, 1995).

Sa

The Limit on Liability Is Based Upon the Total

Affected Weight of The Shipment

Article 22(2) of the convention provides a limit on a

carrier’s liability. Article 22(2) provides:

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 con-

signor 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.

Liability is established on the basis of the weight of the

cargo to $20 per kilogram (or $9.07 per pound). The

convention, however, is silent as to the weight that

should be considered in a case such as this, in which

damage done to a single package arguably affects the

value of the entire shipment.

If the Court were writing on a clean slate, some strong

practical arguments could be made for limiting the car-

riers’ liability to only those packages damaged. First, it

is left up to the shipper how to subdivide the shipment

and the shipper is in a position to subdivide (or not) so

as to fashion the limits preferred. (RSI, acting as

Motorola’s agent, packaged the shipment at issue.) Sec-

ond, the convention explicitly permits a “declared higher

value,” so that shippers would be in a position to protect

themselves. Third, this p-ovision of the Warsaw Con-

vention is vague and/or silent as to its intent on this

issue. There is no persuasive legislative history or con-

vention deliberations that illuminate the question. The

supplements filed after oral argument do not supply any

convincing evidence of intent at the time the Warsaw

Convention was adopted. In such circumstances, much

can be said for letting the parties resolve such silence by

6a

contract. Article 33 permits such contracting so long as

it does not conflict with the convention. If the contract

could be used for this purpose, then this issue would

probably be controlled by Read Rite Corp. v. Burlington

Air Express, Ltd., 186 F.3d 1190 (9th Cir. 1999). There,

the Ninth Circuit construed language similar to the way-

bill at issue to limit liability to the package damaged—

and not the entire shipment. That decision was based on

federal common law and not on the Warsaw Convention.

But there is not a clean slate. The issue of the proper

weight to consider when applying the limitation-on-lia-

bility provision was first addressed in Deere & Co. v.

Deutsche Lufthansa Aktiengesellschaft, 621 F. Supp. 721

(N.D.III. 1985), aff’d, 855 F.2d 385 (7th Cir. 1988). In

Deere, one portion of a shipment, containing the “direc-

tors frame” of a computer, was damaged during transport

to Germany. The court ruled that the weight of the entire

shipment, which consisted of the various components of

a single computer, was to be used in calculating the lim-

itation of liability of the carrier under Article 22(2). See

id.at 721. The court explained that damage done to the

“directors frame” affected the value of the entire ship-

ment, because the entire computer was rendered inop-

erable for several months until the damaged part could

be replaced. See id.at 721.

The “affected-weight” rule as stated in Deere was re-

stated in Williams Dental Co., Inc. v. Air Express Inter-

national, 824 F. Supp. 435, 443 (S.D.N.Y. 1993), B.R.J.

Coverage Corp. v. Air Canada, 725 F. Supp. 133, 139

(E.D.N.Y. 1989), Hartford Fire Ins. v. Trans World Air-

lines, Inc., 671 F. Supp. 693, 694 (C.D.Ca. 1987), and

Arkwright Mutual Ins. Co. v. KLM Royal Dutch Airlines,

1995 WL 491490 (S.D.N.Y. Aug. 17, 1995). “Recovery

based upon a shipment’s gross weight is permitted only

when damage to a portion of a shipment affects the value

7a

of the entire shipment.” Williams Dental, 824 F. Supp. at

443, citing B.R.J., 725 F. Supp. at 139. No decision has

clearly gone the other way in terms of stating the general

rule.

In its supplemental brief, Federal Express proposes

that Kalok Corp. v. Circle Freight Int'l, 24 Avi. Cas.

(CCH) 17,768 (N.D.Cal. 1993), can be seen as chal-

lenging the general rule above. In Kalok, the packaging

of a shipment containing 1,728 disk drives arrived in a

crushed condition. Kalok then tested all of the disk

drives, and found that 78 of them had sustained damage.

The plaintiffs advanced several theories for assessing

liability under Article 22(2) on the basis of the total

weight of the shipment. The court ultimately relied upon

the total weight of the shipment. The court explained:

“The damage sustained was faulty transportation suffi-

cient to call into doubt the effectiveness of the disk

drives, and hence to lower the drives value. Accordingly,

the weight of each disk drive must be considered in deter-

mining the Warsaw Convention limit. . .” See id. at

Ag B

The court used the entire weight of the shipment

because it decided that the entire shipment had actually

sustained damage. The court, therefore, did not use the

affected-weight standard, but rather the package-stan-

dard in assessing liability. In responding to plaintiff’s

affected-weight argument, the court stated that the plain-

tiff “mistat[ed] the significance of Deere because the

affected weight standard was not actually upheld by the

Seventh Circuit.” Having clarified that “the Circuit

expressed no opinion on the merit of whether the

affected-weight standard is inapplicable under United

States law,” the court went on to find that the facts of the

case before it were distinguishable from prior affected-

weight cases. “Here, the physically damaged drives were

= an

a,

hee.

fa 8) SS SRA A SAL

8a

not necessary components to the workings of the phys-

ically intact drives.” /d. at 17,771. Federal Express is

therefore correct in noting that the court expressed reser-

vations about the significance of Deere in the wake of

the Seventh Circuit’s affirmance. The court, however,

did not hold that the affected-weight standard is a faulty

standard to use in assessing liability. Furthermore, there

is no disagreement that when an entire shipment has

been damaged, the proper quantum of damages under the

Warsaw Convention would be based upon the total

weight of the shipment— in this context there is no rea-

son to question the package-weight standard.

Given that multiple district courts in the United States

have stated the general rule as the affected-weight stan-

dard, and given that the convention has nationwide,

indeed, world-wide applicability, this Court will follow

those precedents even if they are not strictly binding

authority; otherwise, the law would be in conflict over a

point that is ambiguous and arguable either way and the

main need is to simply have a clear rule that commerce

can rely on.

After oral argument, Federal Express submitted a sup-

plement. It pointed out what no party had yet done—that

the Seventh Circuit had reviewed the Deere decision.

(Plaintiff had neglected to point out that the Seventh

Circuit had arguably questioned the lower court’s basis

for holding.) According to Federal Express, the district

court in Deere mistakenly assumed that the Warsaw

Convention had already incorporated the later Hague

Protocol. The Hague Protocol did indeed adopt an

affected-weight standard, but was not effective in this

country at the time in issue. Federal Express asserts that

Deere “was decided incorrectly pursuant to the terms of

the Hague Protocol, which is not in effect in the United

States” citing to 855 F.2d at 388 and 621 F.Supp. at 722.

SA te

=o

9a

In fact, however, neither of those pages of the opinions

state that Deere was based on the Hague Protocol. True,

on appeal the airline argued that the district judge had

gotten confused over the difference between the Hague

Protocol and the subsequent Montreal Agreement but the

Seventh Circuit refused to reach the argument because

the airline had not raised the issue below. The Seventh

Circuit affirmed that aspect of the appeal. Accordingly,

this Court takes Deere at face value as a construction of

the Warsaw Convention itself.

To bring this to a point, the Court is going to follow

Deere and its affected-weight rule. If the damage sus-

tained in part rendered the entire system inoperable,

the proper weight to be considered under Article 22(2)

of the Warsaw Convention is the total weight of the

shipment.

In the future this problem will largely be solved by the

Montreal Protocol No. 4, which adopts the affected-

value standard of Deere. The judgment herein is thus

consistent with the future law in this area, at least as far

as concerns Warsaw Convention cases in which the

countries involved have signed the Protocol.”

Having held that the Warsaw Convention employs an

affected-value standard, it follows that Warsaw Con-

vention liability cannot be reduced by contract. Article

23 is very clear in its prohibitions of any diminution of

the level of compensation available under the convention

below that set by the limitation-on-liability provision.

Article 23 states:

2 The Montreal Protocol amends the Warsaw Convention,

as amended by the Hague Protocol (1955). It interprets limits upon

liability as based upon total weight. The Montreal Protocol is not

applicable to the present case, as it was only effective as of 1999

and Japan is not a signatory. See Montreal Protocol No. 4, Signed at

Montreal on September 25, 1975.

10a

[a]ny provision tending to relieve the carrier of lia-

bility or to fix a lower limit than that which is laid

down in this convention shall be null and void, but

the nullity of any such provision shall not involve

the nullity of the whole contract, which shall remain

subject to the provisions of this convention.

Warsaw Convention, Art. 23.

Turning to the next issue, the parties argue about what

is meant by “affects the whole shipment.” In Deere the

value of the shipment was affected by the loss of the use

of the computer for a period of time.

This case is like Deere. Motorola claims that the entire

shipment containing the Cellular Base Station system

was rendered inoperable by the damage to the Common

Control Frame (Koepke Decl. 4/6). During the six weeks

that it took to get the replacements, Motorola could not

begin to install the Cellular Base Station system (Koepke

Decl. 47). Motorola suggests, therefore, that damage

sustained to the part of the cargo affected the value of

the whole.

There remain factual questions with regard to exactly

what Motorola property was damaged and for how long.

If it is shown at trial that the damaged parts caused the

construction or operation of the shipped system to be

delayed for a period of several weeks, then the weight

that will be considered under Article 22(2) is the total

weight of the shipment.

There Are Triable Issues of Material Fact

Summary judgment cannot be granted to plaintiffs

because, viewing the evidence in a light most favorable

to the non-moving parties, there is a genuine issue of

material fact. Motorola claims that a Common Control

Frame and the control cards that were located within the

lla

frame were severely damaged (Sawada Decl. 4). The

Sawada declaration is competent evidence as it is based

upon personal knowledge. Kuehne & Nagel, however,

offer the deposition testimony of Koepke as proof that

Motorola’s claim of damage is inaccurate (Tede Decl.

Exh. “A”). The examiner refers Koepke to a shipping

“manifest” that was either prepared by Motorola, by RSI

(the packaging agency hired by Motorola), or by the

manufacturer of the Cellular Base Station system. The

“manifest” said that certain items had been excluded

from the shipment. These items, however, were included

among the cargo that Motorola had claimed was dam-

aged duri..g transport (Koepke Dep. 25: 1-25 and 26:1-

5). Keopke is an agent of Motorola and was sent in

response to Federal Express’s deposition request for the

“person most knowledgeable” within Motorola with

regard to this shipment (K&N Opp. para. 1, at 6). The

deposition is admissible as evidence under the Federal

Rules of Evidence as an admission of a party-opponent.

There is, therefore, an issue of fact regarding the mean-

ing of this “manifest,” who prepared it and what infor-

mation it contains, i.e., what exactly was damaged and

how did it relate to the overall system. This issue is

material to the outcome of this litigation, and is to be

resolved at trial.

Notice

Federal Express argues both as an affirmative defense

and as a basis on which to grant summary judgment in

its favor that it did not receive proper notice of the dam-

age to Motorola’s property. Federal Express claims that

it only became aware of this claim on March 31, 1998,

when it received a claim letter from plaintiff’s counsel

(Opp. 11-12).

12a

In brief, Kuehne & Nagel is shown at trial to have

been the agent of Federal Express, then the requirement

of notice under the convention is satisfied. Federal

Express cannot hold Kuehne & Nagel out as its agent

and then disclaim notice when notice was given to the

agent. Furthermore, even if Kuehne & Nagel is not

found to be Federal Express’s agent, if Federal Express

received the “Preliminary Notice of Claim,” then the

notice requirement is similarly satisfied. Finally, there

are triable issues of fact regarding the adequacy of the

damage notation on the delivery order (Kuehne &

Nagel’s house waybill). These fact issues will have to be

resolved at trial.

If Kuehne & Nagel Was the Agent of

Federal Express, Then Notice to Kuehne & Nagel

Is Notice To Federal Express

Motorola claims that Kuehne & Nagel was the agent

of Federal Express, Kuehne & Nagel does not dispute

that it acted as Federal Express’s agent in executing Fed-

eral Express’s waybill. Kuehne & Nagel also does not

dispute that it received timely notice of damage. Because

of this, Motorola contends that notice to Kuehne &

Nagel satisfies the notice requirement as to Federal

Express.

In response, Federal Express maintains that this claim

is both logically inconsistent and irrelevant. Federal

Express suggests that Motorola is attempting to assign

Kuehne & Nagel various and contradictory roles,

because Motorola has suggested that Kuehne & Nagel

acted as its agent for the purpose of standing, and acted

as the agent of Federal Express for the purpose of sat-

isfying the notice requirement.

13a

The Court views this as counterfeit logic. If Kuehne &

Nagel was installed by Federal Express as its agent,

there is no inconsistency with Kuehne & Nagel being the

party who was responsible for interacting with Motorola

on one end and Federal Express on the other. In that

case, the installation of Kuehne & Nagel as Federal

Express’s agent does not diminish Federal Express’s

responsibility to the shipper. If agency is shown, the

receipt of notice by Kuehne & Nagel would be effective

as to Federal Express irrespective of any other proofs of

notice proffered by the plaintiffs.

It seems plausible to the Court that an agency rela-

tionship may have existed, given that Federal Express’s

master waybill lists Kuehne & Nagel as the “issuing car-

rier’s agent.” At a minimum, there is a triable issue of

fact as to the nature of the relationship between Kuehne

& Nagel and Federal Express. At trial, the Court will be

interested to see any direct proof of Federal Express’s

designation of Kuehne & Nagel as an agent.

“Preliminary Notice of Claim”

Notice may be valid, moreover, even if Kuehne &

Nagel was not the agent of Federal Express. Article 26

of the Warsaw Convention outlines the proper form that

notice must take in order for the carrier to be held liable.

“In case of damage, the person entitled to delivery must

complain to the carrier forthwith after the discovery of

the damage, and, at the latest, within . . . 7 days of

receipt in the case of goods.” Warsaw Convention Art.

26(2). All complaints must be in writing. Warsaw Con-

vention Art. 26(3).

Federal Express makes two arguments with regard to

notice. First, the “Preliminary Notice of Claim” which

Kuehne & Nagel says was sent on July 18, 1997, was

never sent, and even if it was sent, it was ineffective.

l4a

Second, the notation of damage on the front of Kuehne

& Nagel’s house waybill (delivery order) was ineffec-

tive. The court finds on the legal questions posed, that

both the “Preliminary Notice of Claim” and the damage

notation would be satisfactory forms of notice under the

Warsaw Convention. The factual questions, with regard

to the actual delivery of these documents and the ade-

quacy of the translation of the damage notation, how-

ever, are questions to be resolved at trial.

Federal Express suggests that the “Preliminary Notice

of Claim” which Motorola claims to have sent to Federal

Express two days after the cargo was delivered is legally

insufficient because no evidence has been presented set-

ting forth who issued and received the notice, nor where

and when the notice was given. (FX’s Opp. 11). Federal

Express says that document also failed to list the air

waybill information (id. at 12).

The Court finds that the “Preliminary Notice of

Claim” is satisfactory notice even though it is not

detailed with precision. It is dated July 18, 1997, which

is within the seven-day notice period required by the

convention. It has the consignee’s name on it, and was

addressed to Federal Express. Finally, it said that there

had been damage, delay or loss to the cargo, and

reserved the right to file a claim when the details were

ascertained (Ginger Decl., Exh. “D”). This notice,

though brief, should have alerted Federal Express that

there was a problem with the shipment of this property,

and should have sparked an investigation.

Federal Express suggests that this was a blanket notice

that Kuehne & Nagel gives out to all carriers it deals

with, and as such, is tantamount to no notice at all. This

suggestion is based upon a letter written by Nobo Ogawa

to David McLeod, both of Kuehne & Nagel (Ginger

Decl. Exh. “D”). In reviewing the letter, there are a

15a

range of possible interpretations that can be given its

language, especially when read in conjunction with the

e-mail that the message above was responding to. Spec-

ulation as to the meaning of the e-mail does not create

an issue in regard to the notice requirement. Even if

sending out a preliminary claim was standard practice

for Kuehne & Nagel (which it denies), this would not

make the notice legally insufficient.

Although the summary judgment record seems to indi-

cate that Federal Express received the “Preliminary

Notice of Claim,” Federal Express has affirmatively

indicated that it did not receive notice and the items of

proof of notification are indirect and inconclusive. For

that reason a triable issue of fact exists.

Notation on Kuehne & Nagel’s Waybill (Delivery

Order)

Motorola claims that Federal Express was also made

aware of the damage to its cargo through a notation

made by Kuehne & Nagel on the front of its house air

waybill (delivery order), upon receipt of the cargo from

Federal Express (Reply Br. 3).

The notation of the front of the Kuehne & Nagel’s

house waybill is legally sufficient because Article 26(3)

provides that notice to be made “upon the document of

transportation or by separate notice in writing. . .” In

this case, the notice was made upon a document of trans-

portation. The document was produced by Federal

Express in this action, and as such is admissible as a

party admission.

There are however, several issues of fact regarding

this notation. First, Motorola suggests that this notice

was received by IACT, which it claims is a representa-

tive of Federal Express. The claim of agency between

IACT and Federal Express is unsubstantiated. Second,

16a

there is a question of fact .egarding what the notation

actually said. The notation has been translated from

Japanese to English, but is has not been certified as an

accurate translation, and it is unclear who provided the

translation. There are, therefore, triable issues of fact as

to the relationship between IACT and Federal Express

and as to the adequacy of the translation of the damage

notation.

Standing

As explained above, Motorola claims that Kuehne &

Nagel was the agent of Federal Express. The Court holds

that if Kuehne & Nagel acted as Federal Express’s agent,

then Motorola has standing to bring this action against

both defendants.

Under the Warsaw Convention, the “consignor” and

the “consignee” have aright of action. . . against the

carrier who performed the transportation during which

the destruction, loss, damage, or delay took place.” War-

saw Convention Art. 30(3). Federal Express’s air waybill

lists Kuehne & Nagel as the consignee, and Kuehne &

Nagel, Japan, Ltd. as the consignor of this cargo. Federal

Express argues that Article 30(3) dictates that only the

consignee or the consignor listed on the air waybill may

bring an action of this type (Opp. 14-15). In its view, the

plaintiffs lack standing because they were not listed in

either position.

Notwithstanding its absence on Federal Express’s air

waybill, Motorola may have standing to maintain this

action against Federal Express. This is because it may be

shown at trial that Federal Express installed Kuehne &

Nagel as its agent. If the defendants had an agency rela-

tionship, then Motorola’s contract with Kuehne & Nagel

was effectively an agreement with Federal Express and

Federal Express will not be able to immunize itself from

17a

suit through the placement of Kuehne & Nagel in the

position of “consignor.”

Lastly, if Motorola is found to have standing, then

standing will also be conferred upon Fireman’s Fund, as

its successor-in-interest, through its subrogation agree-

ment with Motorola (FX Opp., Exh. “D” at 11). See

B.R.I. Coverage Corp. v. Air Canada, 725 F. Supp. 133,

136 (E.D.N.Y. 1989).

At Least Some Damage to Plaintiff’s Property

Was Sustained During Air Transportation

and While the Cargo Was Under the Care,

Custody and Control of Federal Express

Kuehne & Nagel made a motion for partial summary

judgment stating that the damage that did occur in this

case happened during air transportation as defined by the

Warsaw Convention, while the cargo was under the care,

custody and control of Federal Express. It is undisputed

that cargo was being transported under a contract for air

transport. The “clean” air waybills are evidence of the

apparent good condition of the cargo until after the

transportation of the cargo began. Though Motorola and

Kuehne & Nagel claim that damage was noted upon

receipt of property by Kuehne & Nagel at the airport in

Japan, as explained above, there are questions of fact

regarding the reliability of this evidence. Damage was

confirmed upon receipt of the cargo by Motorola

(Sawada Decl. 4). Since no parties timely opposed this

motion, the Court holds that the damage in this case was

sustained during the course of air transportation as

defined by the Warsaw Convention, and while the cargo

was under the care, custody and control of Federal

Express. As explained above, the factual issue of the

scope of damage still requires resolution.

18a

CONCLUSION

The Warsaw Convention applies to this case. Under

the Article 22(2) of the convention, if the value of the

entire shipment was affected by the damage that was

done to a portion of the equipment, then the limit on lia-

bility is based upon the total weight of Motorola’s cargo.

Neither plaintiffs nor defendant Federal Express is

entitled to summary judgment as there are triable issues

of material fact which must still be resolved with regard

to whether the overall shipment was so affected, the

scope of the damage done to Motorola’s property, the

receipt of notice, and as to the existence of an agency

relationship between Federal Express and Kuehne &

Nagel.

Though there remains a factual issue as to exactly

what Motorola property was damaged, it is clear that at

least some damage was sustained to the Cellular Base

Station system, and this damage occurred “during air

transportation” as defined by the Convention, and while

the property was under the care, custody and control of

Federal Express. For this reason, Kuehne & Nagel’s

motion for partial summary judgment is granted. Lastly,

Kuehne & Nagel cross claim for equitable and compar-

ative indemnity and contribution from Federal Express

is postponed until the completion of trial.

IT Is SO ORDERED.

Dated: September 25, 2000

/S/ WILLIAM ALSUP

WILLIAM ALSUP

UNITED STATES DISTRICT -UIDGE

19a

Stanley Gibson (047882)

Michael J. Cummins (184181)

GIBSON & ROBB

275 Battery Street, Suite 920

San Francisco, California 94111

Tel: (415) 283-2300

Fax: (415) 291-1705

Attorneys for Plaintiffs

MOTOROLA, INC. and FIREMAN’S

FUND INSURANCE COMPANY

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

Case No. C99-03659 WHA

Filed October 11, 2000

MOTOROLA, INC., a corporation, and FIREMAN’S

FUND INSURANCE COMPANY, a corporation,

Plaintiffs,

=—_V5."=

FEDERAL EXPRESS, a corporation; KUEHNE & NAGEL,

INC., a corporation, and DOES ONE through TEN,

inclusive,

Defendants.

20a

Trial Date: October 18, 2000

Time: 2:00 p.m.

Place: Courtroom 9, 19th Floor

Judge: Hon. William Alsup

JOINT (PROPOSED) FINAL PRETRIAL ORDER

Pursuant to the Court’s order at the pre-trial confer-

ence held on September 26, 2000, the parties hereby sub-

mit the following revised joint final pretrial order to

conform with the Court’s September 25, 2000 Order

Granting in part and Denying in part the parties’ motions

and cross-motions for summary judgment/adjudication

(hereinafter “Order’’).

A. Brief Description of the Claims & Defenses To B

Tried

This case involves damage to Motorola’s Cellular

Base Station system during transportation as more fully

set forth in the Court’s Statement at page 2:15 of its

Order. The issues remaining for resolution in this case

are:

1. Exactly what parts of the shipment were

damaged.

2. Whether the damage affected the value of the

entire system.

3. Whether Federal Express (“Fed Ex”) received

timely notice of claim pursuant to Article 26.

4. The nature of the relationship between Kuehne

& Nagel (“K&N”) and Fed Ex with respect to

21a

the shipment, Motorola’s standing to sue Fed

Ex and notice of damage.

5. The meaning of the Japanese hand-written

notation on the front of K & N’s house waybill

(delivery order).

6. Whether K&N sent the “Preliminary Notice of

Claim” to Fed Ex on July 18, 1997.

7. Whether plaintiffs possess standing to pursue

their action against Fed Ex pursuant to Article |

30.

The amount of damages sustained by plaintiffs.

9. Whether either defendant can limit its liability

to plaintiffs and, if so, to what amount.

10. Whether the shipment was properly packaged. |

11. Whether Fed Ex is liable to K&N for indemnity

for any damages awarded to plaintiffs and for |

attorney fees and costs incurred by K&N in |

defense of this action. |

B. STATEMENT OF ALL RELIEF SOUGHT

Plaintiffs seek damages against both defendants,

excluding costs and interest, of $452,065.60. If the Court

finds defendants can avail themselves of Article 22’s

limitation provision, plaintiffs then seek damages in the

amount of $244,040.00.

Defendant Fed Ex seeks a determination that it has no

liability to either plaintiff or K&N based on Article 26's

notice requirement. Fed Ex also seeks a determination

that plaintiffs do not possess standing. Both defendants

seek a determination that they are not liable for the dam-

ages, however, if found liable, both defendants then seek

SIE LPI LES

|

22a

a determination that their liability is limited to $13,680.

Defendant K&N also seeks a determination that Fed Ex

owes K&N equitable indemnity for any damages

awarded to plaintiffs and for attorney fees and costs

incurred by K&N in defense of this action.

C. STIPULATED FACTS

The parties hereby stipulate and agree to the following

facts:

-

Motorola, Inc. is now and at all times material

herein was a corporation duly organized and

existing according to law.

Fireman’s Fund Insurance Company is now and

at all times material herein was a corporation

duly organized and existing according to law

and the insurer of the Cellular Base Station

System (hereinafter “the shipment’).

Motorola hired defendant Kuehne and Nagel

(“K&N”) to transport the shipment via air from

Dallas, Texas to Tokyo, Japan.

K&N arranged for Fed Ex to transport the ship-

ment by air from Dallas, Texas to Tokyo, Japan.

Motorola hired RSI to package the shipment.

RSI packaged the shipment and arranged for

the shipment to be transported to Fed Ex.

Fed Ex received the shipment on July 8, 1997

at the airport in Dallas, Texas.

Fed Ex issued air waybill no. 023 9052 3926

and K&N issued air waybill no. 67701336 for

the shipment on July 8, 1997.

10.

11.

es

ER

14.

15.

16.

17.

18.

19.

23a

K&N executed Fed Ex’s waybill on behalf of

Fed Ex.

When Fed Ex and K&N issued the air waybills

on July 8, 1997 in Dallas, Texas, the air way-

bills were issued “clean”, i.e. there was no

notation of any damage to the shipment.

Fed Ex transported the shipment by air from

Dallas, Texas to Tokyo, Japan.

On July 16, 1997, K&N Japan accepted deliv-

ery of the shipment at the airport in Tokyo from

Fed Ex.

K&N delivered the shipment to Nippon

Motorola Ltd.

On August 15, 1997, K. Inoue, on behalf of

Nippon Motorola, conducted a survey of the

shipment in Japan.

The Cellular Base Station System cannot oper-

ate without the common control frame and the

cards within it.

Motorola submitted a claim to plaintiff Fire-

man’s Fund Insurance Company in the amount

of $459,330.70 for the alleged damage to the

shipment (the “claim’”’).

Fireman’s Fund paid Motorola $434,330.70 for

the claim.

Fireman’s Fund paid the surveyor $2,734.90 for

his fees related to the claim.

The shipment weighed 12,204 kilograms and

the individual components which plaintiffs

alleged were damaged weighed 680 kilograms.

24a

FACTUAL ISSUES RESOLVED BY SUMMARY

ADJUDICATION ORDER

1.

Damage to the shipment occurred during the

course of air transportation while under the

care, custody and control of Fed Ex (Order

13:27-14:3).

K & N received timely notice of damage from

Motorola (Order 9:26-27).

LEGAL ISSUES RESOLVED BY SUMMARY ADJU-

DICATION ORDER

1.

The movement of the system was “transport of

goods” as defined by the Warsaw Convention

Art. 1(2). Both Federal Express and Kuehne &

Nagel are subject to carrier liability under the

convention (Order 3:19-22).

If it is shown at trial that the damage to the

shipment rendered the entire system inoperable

and caused the construction or operation of the

shipped system to be delayed for a period of

several weeks, then the proper weight to be

considered under Article 22(2) of the Warsaw

Convention is the total weight of the shipment

(Order 7:12-14; 8:13-16).

FACTUAL ISSUES TO BE TRIED

7

Whether K&N made note of damage on the

delivery order.

25a

Whether K&N sent preliminary notice of claim

to Fed Ex within 7 days of receipt of the ship-

ment on July 16, 1997.

Exactly what parts of the shipment were dam-

aged when received by Motorola and whether

the claimed damage affected the value of the

entire shipment by rendering the entire system

inoperable and causing the construction or

operation of the system to be delayed for a

period of several weeks.

Whether Motorola replaced the damage

components.

Whether the replacement costs for the damaged

components, including freight and insurance,

was $459,330.70.

Whether plaintiffs incurred damages of

$462,065.60 resulting from the damage to the

system’s common control frame and the cards

within it.

Whether the shipment was properly packaged.

Who owned the shipment that is the subject of

this action.

The amount of attorneys’ fees and costs

incurred by K&N in defense against the claims

asserted by the plaintiffs (which, pursuant to

L.R. 54-5 is raised by post-judgment motion, if

pertinent).

26a

10. Contentions: K&N contends that exactly what

was shipped by Motorola is a factual issue to be

tried. Plaintiffs contend that proof of exactly

what parts were damaged-renders proof of what

was shipped unnecessary.

G. LEGAL ISSUES TO BE TRIED

1. Whether Fed Ex is liable to K&N and, if so, the

extent of that liability.

2. Whether Fed Ex has waived the “real party in

interest” defense to Motorola’s claim.

3. Contentions: K&N contends that a legal issue

to be tried is whether Fed Ex is liable to plain-

tiffs, and if so, the extent of that liability. Plain-

tiffs contend that the Court’s ruling on motions

for summary adjudication resolved the issue of

K&N’s legal liability to plaintiffs for damage to

the shipment subject only to resolution at trial

of the factual issue set forth in factual issue # 3

above.

4

H. JOINT EXHIBIT LIST

The parties will file separately a joint exhibit list as

follows:

1. Exhibits which the parties have stipulated are

admissible are listed in the attached Joint

Exhibit list as Exhibits 1—.

2. Plaintiffs’ exhibits are listed beginning at

Exhibit # 50.

27a

3. K&N’s exhibits are listed beginning at Exhibit

# 100.

4. Fed Ex’s exhibits are listed beginning at

Exhibit # 200.

I. WITNESS STATEMENTS

The parties’ witness statements have been previously

filed separately from this document. However, the par-

ties incorporate said witness lists by reference into this

proposed order.

I. PROPOSED FINDINGS OF FACT AND CONCLU-

SIONS OF LAW

The parties previously filed proposed findings of fact

and conclusions of law prior to the Court’s rulings on the

motions for summary adjudication and will file amended

versions no later than October 18, 2000.

K. TRIAL BRIEFS

The parties previously filed trial briefs in this matter.

Dated: October 11,2000 GIBSON & ROBB

By STANLEY L. GIBSON

Stanley L. Gibson

Attorneys for Plaintiffs

MOTOROLA and

FIREMAN’S FUND

INSURANCE COMPANY

28a

Dated: October 11,2000 FLYNN, DELICH & WISE

By JAMES B. NEBEL

James B. Nebel

Attorneys for Defendant

Kuehne & Nagel, Inc.

Dated: October 11, 2000 FEDERAL EXPRESS

CORPORATION

By J. RUSSELL PHILLIPS

J. Russell Phillips

Attorneys for Defendant

FEDERAL EXPRESS

CORPORATION

IT Is ORDERED.

Dated: October __, 2000

Hon. William H. Aslup