United States District Court, Northern District of California
August 13, 2001
SEAGATE TECHNOLOGY LLC,[FN1] PLAINTIFF,
DALIAN CHINA EXPRESS INTERNATIONAL CORP. LTD., D.B.A. CHINA EXPRESS; U-FREIGHT AMERICA INC.; GATEWAY CARGO SERVICE CENTER; AND DOES ONE THROUGH TEN, DEFENDANTS.
The opinion of the court was delivered by: Patel, Chief Judge.
MEMORANDUM AND ORDER
Plaintiff Seagate Technology LLC commenced this action following the
loss of its international cargo in South San Francisco in November 1998.
Now before the court are China Express and U-Freight's motion for summary
judgment or partial summary judgment and Seagate's countermotions for
summary judgment. Having considered the parties' arguments and
submissions, and for the reasons set forth below, the court enters the
following memorandum and order.
Seagate is a manufacturer of computer disc drives with offices in
Scotta Valley, California and the People's Republic of China. Defendants
U-Freight America, Inc. ("U-Freight") and Dalian China Express
International Corporation, Ltd.*fn2 ("China Express") are freight
forwarding companies hired by Seagate to ship a cargo of disc drives from
Shanghai, China to San Francisco in November 1998. Defendant Gateway
Cargo Services America ("Gateway") is a ground cargo handling agent in
South San Francisco, California. China Eastern Airlines ("China Eastern")
is an airline that flies between Shanghai, China and San Francisco, but
has its principal place of business in the People's Republic of China.
Per Seagate's instructions, U-Freight arranged for the shipment of
4,480 disc drives from Shanghai, China to San Francisco in November
1998. Seagate alleges that on November 11, 1998, China Express received
the cargo, weighing 3027 kilograms, in Shanghai and issued air waybill
number USH 00450778 for shipment to San Francisco. Declaration of John
Fitch filed January 29, 2001 ("1 Fitch Dec."), Exh. A; Declaration of
Conte Cicala, Exh. A ("China Express agreed to carry the subject shipment
from Wuxi to San Francisco, California. China Express issued an airway
bill to that effect.") (emphasis added). The waybill was issued to the
shipper, Seagate Technology International (Wuxi) Co., Ltd. See 1 Fitch
Dec. ¶ 2. The consignee copy was issued to Seagate Technology Scotts
Valley on or about the same day. Id. Defendants claim the "Standard
Trading Conditions" were on the back of copies issued to both the shipper
and the consignee. Id. ¶ 3. Seagate alleges that the copy of the
waybill it received was blank on the back.
The terms of the waybill declare a shipping rate of $2.50 per
kilogram. See 1 Fitch Dec., Exh. A. The shipment weighed 3027 kilograms
for a total cost of $7567.50. Id. In the top right corner of the waybill
is the phrase:
It is agreed that the goods herein are accepted in
apparent good order and condition (except as noted)
for carriage SUBJECT TO THE CONDITIONS OF CONTRACT ON
THE REVERSE HEREOF. THE SHIPPER'S ATTENTION IS DRAWN
TO THE NOTICE CONCERNING CARRIERS' LIMITATION OF
LIABILITY. Shipper may increase such limitation of
liability by declaring a higher value for carriage and
paying a supplemental charge if required.
Id. (emphasis in original).
Among the conditions of contract found on the reverse of the waybill is
the following language, located at paragraph 1(a):
All and any business undertaken, except all and any
advice, information or services provided gratuitously
by the Company is transacted subject to the conditions
hereinafter set out and each of the Conditions shall
be deemed to be incorporated in and to be a condition
of any agreement between the Company and the
Customer. All other terms and conditions are hereby
excluded. Should the customers wish to contract with
the Company otherwise than subject to these
Conditions, special arrangements can be made and
revised prices quoted, provided that such arrangements
shall only apply if reduced to writing and signed by
an authorized officer of the Customer and by an
authorized officer of the Company.
Id. (emphasis added).
The waybill also limits China Express's liability in paragraph 21: "In
no case whatsoever shall any liability of the Company howsoever arising
and notwithstanding any lack of explanation exceed the value of the
relevant goods or a sum of US$30 per package or US$2 per kilogram
whichever is the least." Id. Finally, the waybill contains a notice
provision under paragraph 23(a), which relieves China Express from
liability unless "notice of any claim is received in writing by the
Company or its agent within 14 days after the date [the goods should have
been delivered and] suit is brought in the proper forum and written
notice thereof received by the Company within 9 months after the date
[the goods should have been delivered]." Id.
In the two-year period leading up to the shipment, Seagate. and
defendants U-Freight and China Express communicated at least two times
concerning the conditions under which the cargo would be shipped from
Seagate's Wind facility to San Francisco. In a letter dated August 5,
1997, U-Freight representative Fitch wrote to C.S. Ng of Seagate to
confirm a quoted rate proposal for transportation of cargo from Shanghai
to San Francisco. Declaration of C.S. Ng, Exh. 1. The proposed rate was
$2.90 per kilogram for door-to-airport transportation from Shanghai to
San Francisco and $2.35 per kilogram for airport-to-door transportation
from San Francisco to Shanghai. Id. The letter also states that the
quoted rate "includes providing Seagate with full replacement cost of the
finished goods for lost or stolen shipments handled by China
Express/U-Freight," and promises to provide a liability limitation
The second communication was a letter dated March 27, 1998 —
after the August 5, 1997 letter but before the issuance of the air
waybill — in which China Express quotes Seagate a rate of $2.50 per
kilogram for cargo transport from Wind to San Francisco. 1 Fitch Dec.,
Exh. C. This was the rate eventually charged under waybill USH-00450778.
At the bottom of the letter is pre-printed language stating "[a]ll
transactions are subject to our Company Trading Terms and Conditions
which are available upon request." Id. According to Fitch, these are the
same standard conditions that appear on the back of the China Express air
waybill. See 1 Fitch Dec. ¶ 6. The letter does not otherwise mention
China Express or U-Freight's liability for loss or damage. See 1 Fitch
Dec., Exh. C.
The cargo was flown on China Eastern Airlines on November 11, 1998. 1
Fitch. Dec., Exh. B. When it arrived at San Francisco International
Airport ("SFO"), China Eastern deposited it with Gateway, its ground
handler, to await customs clearance. Gateway is located in South San
Francisco, near, but not on the grounds of, SFO. On November 12, 1998,
the day the
shipment was due to be collected, Gateway could not locate it. The
suspected cause of loss is theft.*fn4
Seagate submitted a claim to U-Freight on November 17, 1998, informing
it of its intent to file a claim. 1 Fitch Dec., Exh. B. This letter
referred not to the air waybill, but to the August 5, 1997 letter in
which U-Freight had agreed to be liable for up to $1 million for loss or
damage. Id. Enclosed with the letter was a copy of air waybill number
USH-00450778. Id. Seagate sent a follow-up email to U-Freight on December
30, 1998. See Declaration of Stanley L. Gibson, Exh. 3. On May 24,
1999,*fn5 U-Freight informed Seagate that its liability was
limited to $60,540 ($20 per kilogram) "according to the tariff regulations
and our contract of carriage" and offered to settle, for that
amount.*fn6 Fitch Dec., Exh. D. This letter did not mention any
time limit for filing suit. On July 31, 1999, Seagate rejected this offer.
See 1 Fitch Dec., Exh. E. This lawsuit ensued.
Seagate originally filed this action in San Mateo County Superior Court
on September 27, 1999, against U-Freight, China Express, Gateway and Does
One through Ten. Seagate demands a judgment of $515,200 plus prejudgment
interest and costs, and any other relief as the law requires. The
requested judgment represents the total value of the lost disc drives.*fn7
On November 12, 1999, Defendants U-Freight and China Express removed the
action to this court pursuant to 28 U.S.C. § 1441 (b), claiming
federal question jurisdiction under the Warsaw Convention or, in the
alternative, federal common law. See 28 U.S.C. § 1331.
Defendants U-Freight and China Express cross-claimed against Gateway
for equitable indemnity or comparative indemnity and contribution. They
also filed a third-party claim against China Eastern for equitable
indemnity and contribution and for comparative indemnity and
contribution. Gateway answered the original complaint on March 2, 2000.
On November 6, 2000, Gateway in turn filed a cross-claim against China
Eastern Airlines for contractual indemnity and declaratory relief. In its
cross-claim, Gateway alleges that it entered into a ground-handling
agreement with China Eastern Airlines in which China Eastern agreed to
defend and indemnify Gateway for losses such as those claimed by
China Eastern disputes the terms of the ground-handling agreement and,
on November 27, 2000, filed its own counter-claim against Gateway,
requesting, among other things, declaratory judgment that it is not
required to indemnify Gateway for intentional or recklessly-caused
On January 29, 2001, defendants U-Freight and China Express moved for
summary judgment or partial summary
judgment claiming that Seagate's action is time-barred by the waybill
or, in the alternative, that their liability is limited to $2 per
kilogram by the waybill's terms. On March 12, 2001, Seagate filed a
counter-motion for summary judgment or partial summary judgment against
China Express and U-Freight.*fn8
Under Federal Rule of Civil Procedure 56, summary judgment shall be
granted "against a party who fails to make a showing sufficient to
establish the existence of an element essential to that party's case, and
on which that party will bear the burden of proof at trial . . . since a
complete failure of proof concerning an essential element of the
nonmoving party's case necessarily renders all other facts immaterial."
Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91
L.Ed.2d 265 (1986); see also T.W. Elec. Serv. v. Pacific Elec.
Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987).
The moving party bears the initial burden of identifying those portions
of the record which demonstrate the absence of a genuine issue of
material fact. The burden then shifts to the nonmoving party to "go
beyond the pleadings, and by [its] own affidavits, or by the
`depositions, answers to interrogatories, or admissions on file,'
designate "specific facts showing that there is a genuine issue for
trial.'" Celotex, 477 U.S. at 324, 106 S.Ct. 2548 (citations omitted);
see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct.
2505, 91 L.Ed.2d 202 (1986) (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"). The moving party discharges its burden by
showing that the nonmoving party has not disclosed the existence of any
"significant probative evidence tending to support the complaint." First
Nat'l. Bank v. Cities Serv. Co., 391 U.S. 253, 290, 88 S.Ct. 1575, 20
L.Ed.2d 569 (1968).
The court's function on a motion for summary judgment is not to make
credibility determinations. See Anderson, 477 U.S. at 249, 106 S.Ct.
2505. The inferences to be drawn from the facts must be viewed in a light
most favorable to the party opposing the motion. See T.W. Elec. Serv.,
809 F.2d at 631.
The court is troubled by the fact that it appears that Gateway never
formally consented to removal to federal court. Under
28 U.S.C. § 1446(a), all defendants in a state action must join a
petition for removal to federal court, except for nominal, unknown or
fraudulently joined parties. See 28 U.S.C. § 1446 (a); see also
Emrich v. Touche Ross & Co., 846 F.2d 1190, 1193 n. 1 (9th Cir. 1988).
Typically, a proper removal notice must be served within 30 days of
service of Seagate's complaint. See 28 U.S.C. § 1446 (b). The rule
that all defendants must unanimously join a removal petition applies to
all defendants properly joined and served. See Emrich, 846 at 1193 n. 1.
The failure to join all proper defendants may render a removal petition
procedurally defective. See id. But this defect is not necessarily fatal,
as a court may allow amendment of a removal petition to join all proper
defendants. See id.; Porrino v. FHP, Inc., 146 F.3d 699, 703 (9th Cir.
1998), cert. denied, 525 U.S. 1001, 119 S.Ct. 510, 142 L.Ed.2d 423 (1998)
(allowing remand to the district court, instead of reversing and
remanding to state
court, to cure procedural defect prior to entry of judgment).
The docket contains a record of Gateway's answer to Seagate's complaint
filed in this court on March 2, 2001. There is no record of whether and
when Gateway was served. Nor is there a separate removal petition from
Gateway or any indication that it consented to the removal petition filed
by China Express and U-Freight. At the April 2, 2001 hearing on these
motions, counsel for Gateway informed the court that his client consents
to joinder. The court is willing to overlook this procedural defect in
order to save time and resources in what has turned out to be an already
difficult case procedurally.
II. Applicable Law
A. Warsaw Convention
The Warsaw Convention is an international treaty governing the
international shipment of goods by air. See 49 U.S.C. § 40105, note.
The parties disagree as to whether the Warsaw Convention applies to this
action. Seagate alleges that the Convention applies, without providing
much support for this contention. Defendants allege that it does not
apply because the cargo was lost off of airport premises.
Under Article 18 of the Convention, a carrier is liable for damage or
loss of any goods "if the occurrence which caused the damage so sustained
took place during the transportation by air." Id. at art. 18(1). Air
transportation is defined under the Convention as "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." Id. at art. 18(2). This definition is
limited, however, by Article 18(3), which states:
The period of 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 performance 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 too place during the
transportation by air.
Id. at art. 18(3).
In the Ninth Circuit, the presumption that the damage occurred during
air transportation can be rebutted with proof that the damage occurred
off of airport premises. See Read-Rite Corp. v. Burlington Air Express,
Ltd., 186 F.3d 1190, 1194 (9th Cir. 1999). In Read-Rite, the damage
occurred at a ground handling facility near, but not on the grounds of,
London's Heathrow Airport. In deciding that the damage was not covered by
the Warsaw Convention because it occurred off of airport grounds, the
Read-Rite court cited the Second Circuit's decision in Victoria Sales
Corp. v. Emery Air Freight, Inc., 917 F.2d 705 (2d Cir. 1990). See
Read-Rite, 186 F.3d at 1194. The Second Circuit, in Victoria Sales, found
the presumption that loss occurs during air transportation rebutted when
the subject loss occurred at the defendant's warehouse located near, but
outside the boundaries of, New York's John F. Kennedy Airport. See
Victoria Sales, 917 F.2d at 707 ("The plain language of Article 18 draws
the line at the airport's border.").
Seagate claims that when it went to collect its cargo from Gateway's
warehouse, the cargo could not be found. This amounts to a claim that the
shipment was lost while it was in Gateway's control. Because Gateway's
warehouse is located outside the boundaries of SFO, and Seagate has not
alleged that the loss occurred while the cargo was in transit or being
handled on airport premises, the Warsaw Convention does not apply.
A. Federal Common Law
The weight of authority, both in this circuit and in others, supports
the application of federal common law to determine a carrier's liability
for loss or damage to goods transported by air. See Read-Rite, 186 F.3d
at 1195; Deiro v. American Airlines, Inc., 816 F.2d 1360, 1365 (9th Cir.
1987); Klicker v. Northwest Airlines, Inc., 563 F.2d 1310, 1316 n. 10
(9th Cir. 1977) ("Federal law, rather than state law[,] may be applicable
by reason of an overriding federal interest in the uniformity of
obligations of domestic air carriers."); see also Sam L. Majors Jewelers
v. ABX, Inc., 117 F.3d.922, 928 (5th Cir. 1997).
Determining the content of federal common law is yet another matter.
See 19 Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal
Practice and Procedure, § 4518 (discussing the inquiry federal courts
must make in determining the content of federal common law). When
determining federal common law, a court may look to many different
sources, including "pre-Erie Railroad v. Tompkins principles of `federal
general common law,' generally recognized common-law principles of the
subject-matter area involved in the case, considerations of what rule is
best designed to implement the underlying federal policy or statute
involved in the litigation, general considerations of equity
jurisprudence or notions of systemic or party convenience, analogous
federal statutes, and the content of the forum state's law." Id.
1. State Law/Restatement
The Supreme Court has held that there is a general presumption in favor
of applying state law principles in federal court actions, which holds
particularly true "in areas in which private parties have entered legal
relationships with the expectation that their rights and obligations
would be governed by state-law standards." Kamen v. Kemper Fin. Servs.,
Inc., 500 U.S. 90, 98, 111 S.Ct. 1711, 114 L.Ed.2d 152 (1991) (noting
that corporations law is an example of an area of law that parties expect
to be governed by state-law standards). In this case, the parties have
chosen to bring suit in a federal court in the Northern District of
Cafifornia. Seagate appears to have significant contacts with this area,
as does Gateway. Neither China Express nor U-Freight has raised any
choice-of-law issues, arguing, for example, that Chinese law applies to
this action. Therefore; the court assumes that the parties expected, when
they entered into the agreements at issue, that California law would
govern any disputes arising therefrom. Accordingly, with deference to the
parties' expectations and in the interests of federalism, this court will
apply California contract' principles to this action.
California courts rely heavily on the Restatement. See
Brinderson-Newberg Joint Venture v. Pacific Erectors, Inc., 971 F.2d 272,
277 (9th Cir. 1992), cert. denied, 507 U.S. 914, 113 S.Ct. 1267, 122
L.Ed.2d 663 (1993). Thus, the court will supplement its application of
state law with reference to relevant state and federal court
interpretations of the Restatement in deciding this action. The
Restatement (Second) of Contracts is equally helpful in that it
represents "generally-recognized common-law principles of the
subject-matter area involved in the case," another basis for discerning
the substance of federal common law. See 19 Wright, Miller & Cooper
2. Common Law Principles of Contract Interpretation
The court may also consider federal contract law, which has its own set
of principles. Like California law, federal contract law also places
great weight on the
Restatement. See, e.g., First Interstate Bank of Idaho v. Small Bus.
Admin., 868 F.2d 340, 343 n. 3 (9th Cir. 1989). It also boasts unique
rules of interpretation for specific kinds of contracts.
For example, under federal common law, a common carrier may limit its
liability for harm due to loss or damage of cargo in exchange for a lower
carriage rate. See Royal Ins. Co. v. Sea-Land Serv., Inc., 50 F.3d 723;
725 (9th Cir. 1995); Deiro, 816 F.2d at 1365. For the provision limiting
liability to be enforceable, the carrier's "contract must offer the
shipper (1) reasonable notice of limited liability, and (2) a fair
opportunity to purchase higher liability." Read-Rite, 186 F.3d at 1198. A
provision limiting liability is "prima facie valid if the face of the
contract (or, in this case, air waybill) recites the liability limitation
and "the means to avoid it.'" Id. (quoting Royal Ins. Co., 50 F.3d at
727). The shipper then has the burden of showing it was not able to
purchase greater coverage. Id.
III. Governing Contract
There are three writings at issue in this case. The first is the August
5, 1997 letter Fitch wrote to Ng. See Ng Dec., Exh. 1. The second is the
March 27, 1998 letter from David Dai, a China Express employee, to Ng.
See Ng Dec., Exh. 2. The final writing is the air waybill issued on
November 11, 1998. The determination of which agreement applies, or of
whether and how the agreements apply collectively, will determine the
amount of damages, if any, to be awarded. Under the August 5, 1997
letter, for example, defendants may be liable for the full value of the
disc drives or $512,000. Under the air waybill, defendants may be liable
for as little as $6,054.
In its motion, Seagate contends that the air waybill does not govern
the transaction, but is rather a receipt for shipment. According to
U-Freight and China Express, the air waybill is the basic contract
governing the transaction, and it supersedes any other prior
A. Amount of liability
According to the August 5, 1997 letter, U-Freight agreed to be liable
for "full replacement cost of the finished goods for lost or stolen
shipments handled by China Express/U-Freight." Ng. Dec., Exh. 1. Under
the waybill issued November 11, 1998, U-Freight and China Express's
liability is limited to $30 per package or $2 per kilogram, whichever is
least. See 1 Fitch Dec., Exh. A ¶ 21. To support its contention that
the waybill does not govern the transaction, Seagate proffers Fitch's
deposition testimony that "the agreement in response to Seagate
Singapore's REQ for Asia outbound cargo" governed the terms and
conditions of shipment. See Gibson Dec., Exh. 4, 60:13-15. Seagate
further argues that defendants cannot point to any evidence, such as any
statements by U-Freight or China Express employees claiming that the air
waybill covers the shipment, to prove that the air waybill definitively
In response, defendants have submitted a third declaration from Fitch
in which he explains that when he testified at his deposition that the
cargo was shipped pursuant to "the agreement in response to Seagate
Singapore's RFQ for Asia outbound cargo, " he was not referring to the
August 5, 1997 letter but to the March 27, 1998 letter setting forth the
$2.50 rate at which the shipment was actually sent. See 3 Fitch
Dec. ¶ 7. In this declaration, Fitch also states that he never
intended to say that any contract replaced the terms of the standard
trading conditions found in the air waybill. Id. ¶ 8.
It does not appear that Fitch's third deposition contradicts his prior
testimony regarding his understanding of which agreement governed the
cargo shipment in question. At his deposition, the following exchange
Q: Do you agree with me or do you agree — you
don't have to agree with me at all. Do you agree that
this shipment evidenced by 00207 moved pursuant to the
agreement set forth in 0024?
Q: What agreement did it move pursuant to?
Fitch: It moved pursuant to the agreement in our
response to Seagate Singapore's RFQ for Asia outbound
Gibson Dec., Exh. 4, 60:7-15. Importantly, Fitch denies in his deposition
that the cargo was shipped according to "0024," the exhibit number
assigned to the August 5, 1997 letter. If anything, Fitch implied that
the August 5, 1997 letter in which U-Freight agreed to assume full
responsibility for lost or damaged cargo' had been superseded. And while
he does not claim that the air waybill governed specifically, the March
1998 letter to which he refers does incorporate the defendants' standard
trading conditions at the bottom of the page. See Ng Dec., Exh. 2. These
standard trading conditions are the same as those found on the back of
the U-Freight/China Express air waybill. 1 Fitch Dec. ¶ 6.
But Seagate argues that a contract is a meeting of the minds, and that
it never agreed to a lower liability amount. This, Seagate contends,
supports its argument that the air waybill is a receipt, not a contract.
In Northern Pac. R.R. Co. v. American Trading Co., 195 U.S. 439, 25
S.Ct. 84, 49 L.Ed. 269 (1904) the Supreme Court agreed with the Second
Circuit's finding that a prior negotiated contract between a shipper and
a carrier did not merge into a bill of lading with different terms and
conditions issued when the shipment is delivered for transport. See
Northern Pac. R.R., 195 U.S. at 463-64, 25 S.Ct. 84; aff'g Farmers' Loan
& Trust Co. v. Northern Pac. R.R. Co., 120 F. 873, 878 (2d Cir. 1903)
("That the mere receipt of a bill of lading does not affect or alter a
prior contract under which goods have been actually shipped and are in
course of transit without actual consent to such change is
well-settled."). The Supreme Court noted that where there is a valid
contract, and a bill of lading is received by a clerk or other officer of
the company and not read, it cannot change the initial contract. See
Northern Pac. R.R. Co. v. American Trading Co., 195 U.S. 439, 25 S.Ct.
84, 49 L.Ed. 269 (1904). In other words, mere receipt of a bill of lading
cannot show acquiescence to the changed terms contained therein.
While Northern Pac. has never been explicitly overruled, it was decided
well before the advent of airline cargo shipment, computerized billing
and communication, and the facsimile machine. It was also decided before
the codification of the Restatement (Second) of Contracts and modern
notions of course of dealing and course of performance. Furthermore, the
facts of this case are distinguishable from Northern Pac. This action
involves an intervening letter dated March 27, 1998; even if the waybill
was a receipt, the issue remains whether it was a receipt under this
letter or under the August 5, 1997 letter.
In their reply, defendants argue the plain language of the waybill
controls because it is effectively a new contract governed by the terms
on the reverse. They
argue that Seagate does not dispute, nor has it ever disputed, these
terms. Defendants' rely upon the language on the front of the waybill
which directs the shipper's attention to the reverse side of the
waybill, which, they argue, would have put Seagate on sufficient notice
that the terms of the contract were different than those to which they
had previously agreed.
Defendants fault Seagate for producing no evidence indicating that
Seagate objected in any way to the provisions of the air waybill. Nor
does Seagate dispute that it has enjoyed a long-standing business
relationship with defendant China Express. Indeed, China Express contends
that it has made more than 500 shipments with Seagate under the same air
waybill, 137 of them pursuant to the $2.50 per kilogram rate. quoted in
the March 27, 1998 letter. See 3 Fitch Dec. ¶ 8. Furthermore, Seagate
paid the freight charges on this particular air waybill without
objection, as it had on the 500 previous shipments made under similar
terms. Given the past relationship between the parties, and Seagate's
apparent sophistication in dealing with international air shipments, the
court will not impute complete naivete to Seagate; Seagate had a duty to
review the terms of the waybill and object to them if it saw fit. See
Sony Corp. v. BDP Int'l, Inc., 1999 WL 681497 at *8 (S.D.N Y Sept.1,
1999) ("A sophisticated party like Sony is responsible for informing
itself, either by reading each air waybill in its entirety or otherwise,
of the terms of each deal that it enters into. It cannot avoid the
unfavorable aspects of this particular deal by citing its own failings in
keeping track of the many similar contracts into which it enters either
directly or through the arrangement of buyers'"). Seagate has failed to
convince the court that it was not on notice as to the terms of the air
waybill, including the liability limitations contained therein. See
Hitachi Data Sys. Corp. v. Nippon Cargo Airlines Co., Ltd., 1995 WL 16923
*4 (N.D.Cal. Jan.6, 1995) (recognizing that a long-standing business
relationship and a failure to dispute familiarity with shipping practices
is sufficient evidence to put Seagate on notice of liability limitation
On the other hand, defendants have failed to establish that the air
waybill's liability amount provision controls. It is clear that on at
least one prior occasion, in a letter of defendants' own drafting, a
higher liability amount was specifically offered. Furthermore, defendants
have not shown why this court should simply ignore a prior agreement, the
terms of which were specifically negotiated by the parties. It is
axiomatic that all writings that are part of the same transaction are
interpreted together. See Restatement (Second) of Contracts §
202(2). Moreover, "an interpretation which gives a reasonable, lawful, and
effective meaning to all the terms is preferred to an interpretation
which leaves a part unreasonable, unlawful, or of no effect." Restatement
(Second) of Contracts § 203(a). Finally, separately negotiated or
added terms are given greater weight than standardized terms or other
terms not separately negotiated." Restatement (Second) of Contracts
§ 203(d); see also Brinderson-Newberg, 971 F.2d at 279 (favoring
typewritten additions to a form over the form's boilerplate provisions).
From all of the writings together, giving the greatest weight to those
terms that were separately negotiated, it appears that the parties had a
meeting of the minds with respect to U-Freight's offer to be liable for
full replacement value of lost or damaged shipments.
The evidence to support the determination of the amount of liability is
factual in nature, and can only bolster a legal argument if it is
sufficient and undisputed.*fn10
To decide the question of liability the court requires more evidence of
prior dealings and of the parties' intent, issues which have to do with
whether a contract is integrated, and whether extrinsic evidence is
admissible. The court also requires more evidence as to whether Seagate
had notice that it could ask for a higher liability limit in exchange for
more consideration, and as to whether Seagate was led to believe that its
original agreement would govern the transaction. See Royal Insurance Co.
v. Fountain Technologies, Inc., 984 F. Supp. 724, 726 (S.D.N Y 1997)
(finding a genuine issue of fact as to whether parties' prior dealings
gave notice that a higher amount of liability could be declared for
certain portions' of the journey).
IV. Statute of Limitations
The court must determine the governing limitation on the period in
which to file an action for loss of cargo. If, as defendants argue, the
air waybill controls, Seagate's entire action is barred, since Seagate
failed to file suit within the nine-month window prescribed by the air
waybill's standard conditions, which would have been by August 12, 1999.
1 Fitch Dec., Exh. A. Seagate filed this action in state court on
September 27, 1999 — 46 days too late.
Unlike the liability amount controversy, where multiple figures were
broached between the parties, it appears from the record submitted that
there was only one mention of the time limit in which to bring suit. That
was the nine-month window prescribed by the air waybill in paragraph 23
(a)(ii). Even reading the three separate agreements together, a statute
of limitations is mentioned only in the waybill. Since it is not
contradicted, nor was it objected to, under long-standing principles of
contract interpretation, it should govern.
Seagate further claims that the nine-month provision is unenforceable
as a matter of law because the provision arguably would have been
unenforceable during the air carriage portion, when the Warsaw Convention
was in effect, because the Convention offers a statute of limitations
provision of up to two years. See 49 U.S.C. § 40105, note, art. 29
(1). Analogizing to cases decided under the Carriage of Goods by Sea
Act, 46 App. U.S.C. § 1300, et seq. ("COGSA"), Seagate argues that
unenforceable clauses do not spring back to life because transportation
enters a stage where a treaty no longer applies as a matter of law; once
such clauses are void they remain void. For this proposition, Seagate
cites David Crystal, Inc. v. Cunard Steamship Co., 339 F.2d 295, 299 (2d
Cir. 1964), which held that a contract of carriage continues to govern
the relationship between a shipper and a carrier after discharge but
Contrary to Seagate's assertions, David Crystal is inapposite. David
Crystal does not address the situation where the contract explicitly
acknowledges that it is superseded by treaty or other legislation where
applicable, but reverts to its own terms when that legislation no longer
applies. Paragraph 1(b) of the China Express waybill provides:
If any legislation is compulsorily applicable to any
business undertaken, these Conditions shall, as
regards such business, be read as subject to such
legislation and nothing in these conditions shall be
construed as a surrender by the
Company of any of its rights or immunities or as an
increase of any of its responsibilities or liabilities
under such legislation and if any part of these
Conditions be repugnant to such legislation to any
extent such part shall as regards such business be
overridden to that extent and no further.
1 Fitch Dec., Exh. A ¶ 1(b). As discussed supra, the Warsaw
Convention specifically states that it only applies during the air
carriage portion of a journey. All other transportation — by land,
sea or river — is excluded from its sphere of influence.
Therefore, the Warsaw Convention necessarily implies that some other
contractual obligations must adhere when the air carriage portion of a
cargo shipment is finished. It would be unreasonable to assume that the
Warsaw Convention implies that no law governs a shipment after the
termination of the air carriage. It logically follows that any gaps will
be supplemented by contract.
Furthermore, there is no evidence to support Seagate's contention that
a nine-month limitations period is void as unconscionable. "It is a
well-settled proposition of law that the parties to a contract may
stipulate therein for a period of limitation, shorter than that fixed by
the statute of limitations, and that such stipulation violates no
principle of public policy, provided the period fixed be not so
unreasonable as to show imposition or undue advantage in some way."
Beeson v. Schloss, 183 Cal. 618, 622-23, 192 P. 292 (1920) (upholding
six-month statute of limitations); see also Missouri, Kansas & Texas
Railway Co. v. Harriman Bros., 227 U.S. 657, 672, 33 S.Ct. 397, 57 L.Ed.
690 (1913) (upholding 90-day limit in which to bring suit agreed to by
contract even though the provision gave less time than state statute
because the limit was "just and reasonable"); Hambrecht & Quist Venture
Partners v. American Medical Int'l, Inc., 38 Cal.App.4th 1532, 1547,
46 Cal.Rptr.2d 33 (1995) (holding that where parties agree by contract to
a statute of limitations more or less than the four-year statutory
provision for breach of contract in the state of California, the
agreed-upon provision is enforceable as long as it is not unreasonable).
A nine-month provision is not unreasonable, able, particularly where,
as here, the amount and value of the lost goods were immediately known.
There was no further investigation required; Seagate's claim would have
been the same on November 12, 1998 as it was on September 27, 1999
Without evidence that Seagate was somehow prejudiced by the nine-month
provision, in that it was unable to gather facts or present its case, the
court will not find the clause to be unreasonable. See Rosenberg Bros. &
Co. v. Atlantic Transp. Co. of West Virginia, 25 F.2d 739, 742 (N.D.Cal.
1928) ("In the absence of such a showing [of hardship], the court cannot
say as a matter of law that five months from the date of shipment is an
unreasonable limitation period."). The Supreme Court has noted that the
policy behind statutes of limitations is "to encourage promptness in the
bringing of actions, that the parties shall not suffer by loss of
evidence from death or disappearance of witnesses, destruction of
documents or failure of memory." Harriman Bros., 227 U.S. at 672, 33
S.Ct. 397. Therefore, the nine-month statute of limitations applies and
Seagate's claims are barred for failure to file within the limitations
For the foregoing reasons, the court hereby DENIES Seagate's motion for
summary judgment and GRANTS defendants China Express and U-Freight's
motion for summary judgment.
IT IS SO ORDERED.
*fn2 The parties do not dispute that U-Freight and China Express are
agents for each other.
*fn3 The cap was later quoted to be $1 million. See Ng Dec. ¶ 4.
*fn4 Seagate has offered a police report describing the incident.
According to the report, on the evening before Seagate went to collect
its shipment, two suspects used a forged warehouse bill to claim the
cargo. These suspects approached a Gateway employee, handed him a
warehouse bill, which he said appeared authentic, and helped him load the
disc drives into their truck. They then drove away. According to an
exhibit filed in support of China Eastern's motion for summary judgment,
to date 679 units of cargo have been recovered by police. Declaration of
Mark T. McClenning, Exh. C.
*fn5 Seagate claims Mr. Fitch waited to inform it of the lower liability
amount because he did not want to jeopardize further business relations
*fn6 The air waybill actually limits liability to $2 per kilogram. It
appears that Mr. Lam, the author of the letter, overstated and/or
misquoted U-Freight's liability.
*fn7 Seagate claims 4,480 disc drives were lost and that each was
valued at $115.
*fn8 On January 22, 2001, China Eastern moved for summary judgment
against U-Freight, China Express and Gateway, alleging that the liability
limitations contained in its own air waybill number 781 1178 0941 are
enforceable against the other three defendants. This motion is addressed
in a separate memorandum and order.
*fn9 U-Freight and China Express argue that by virtue of the fact that
Seagate referenced the air waybill in its complaint, Seagate essentially
admits this is the controlling agreement. Seagate replies that it only
referred to the waybill to identify the lost shipment; it is suing not
for breach of the waybill, but for breach of the August 5, 1997
*fn10 At various points in the briefs, there is mention of the figure of
$25,000 as a possible modification of the liability amount in the August
5, 1997 letter. It is unclear to the court who offered this figure, what
form the offer took, and whether it was accepted by either or both
parties. Suffice it to say that the mere mention of this third amount
casts even more doubt on the ability of the court to determine a
liability amount at this juncture.