United States District Court, Northern District of Illinois, E.D
April 8, 1985
MAGNUS ELECTRONICS, INC., PLAINTIFF,
ROYAL BANK OF CANADA AND AEROLINEAS ARGENTINAS, DEFENDANTS.
The opinion of the court was delivered by: Shadur, District Judge.
MEMORANDUM OPINION AND ORDER
Magnus Electronics, Inc. ("Magnus") has filed a multi-count
First Amended Complaint (the "Complaint") against Aerolineas
Argentinas ("Aerolineas") and the Royal Bank of Canada
("Bank") to recover the unpaid portion of the purchase price
of two shipments of electronics equipment that, Magnus says,
were delivered to the buyer in Argentina in breach of
Aerolineas' and Bank's obligations to Magnus. Bank has in turn
filed a First Amended Cross-claim (the "Cross-claim") against
Aerolineas for indemnity or contribution, asserting the loss
was attributable to Aerolineas' wrongful conduct.
Aerolineas now has moved under Fed.R. Civ.P. ("Rule")
12(b)(6) to dismiss both the Complaint and the Cross-claim
because (1) Aerolineas' liability is governed by the terms of
the Warsaw Convention (the "Convention," 49 Stat. 3000 TS 876,
reprinted following 49 U.S.C.A. § 1502) and (2) the claims
against Aerolineas are barred by the Convention's two-year
limitations period. For the reasons stated in this memorandum
opinion and order, Aerolineas' motion is granted.
In October 1981 Magnus contracted to sell three of its
"Magnasync" generators to buyer Alfredo Di Lullo ("Di
Lullo")*fn2 in Buenos Aires. Magnus engaged a freight
forwarder to arrange for shipment to Di Lullo, and the freight
forwarder then engaged Aerolineas to transport the generators
from Miami to Buenos Aires. According to the Aerolineas air
waybill the generators were to be delivered to Bank (as
consignee) in Buenos Aires, with notice to Di Lullo of their
arrival. Under the terms of its arrangement with Magnus, Bank
was to hold the generators pending Di Lullo's payment of the
full purchase price to Bank (for Magnus' account). Only upon
payment in full was Di Lullo to take delivery of the goods.
Despite those arrangements, either Aerolineas or Bank (or
perhaps the two together in some fashion) permitted delivery
of the generators to Di Lullo without Bank's (and hence
Magnus') receiving payment. Magnus has yet to collect any
portion of the $68,946 purchase price.
In early March 1982 Magnus entered into a second transaction
with Di Lullo, this time involving a shipment of transceivers.
Again Aerolineas was engaged to carry the goods from Miami to
Buenos Aires, where Bank was to take delivery as consignee
pending payment in full of the $30,831 purchase price. On
March 18 Di Lullo telephoned Magnus and said it had received
the transceivers in good condition and would shortly tender
payment — this despite the fact Di Lullo was not to get
delivery before having paid the purchase price. To date Di
Lullo has paid $30,000 on the 1982 shipment, leaving an
outstanding balance of $831. Again Magnus claims the loss is
attributable to either Aerolineas or Bank or both.
"[A]ll international transportation of persons, baggage, or
goods performed by aircraft for hire" (Convention Art. 1(1))
is governed by the Convention, a uniform set of rules drafted
at international meetings held in Paris in 1925 and Warsaw in
1929. "International transportation" is defined in relevant
part to include (Art. 1(2)):
any transportation in which, according to the
contract made by the parties, the place of
departure and the place of destination, whether
or not there be a break in the transportation or
transshipment, are situated . . . within the
territories of two High Contracting
Parties. . . .
Both the United States and Argentina are High Contracting
Parties to the Convention.
Probably the most frequently invoked provisions of the
Convention, in litigation terms, are those limiting the
liability of air carriers for loss or damage to passengers or
property in the course of air transportation. However, the
focus of the present dispute is the limitations period under
Convention Art. 29:
(1) The right to damages shall be extinguished if
an action is not brought within 2 years, reckoned
from the date of arrival at the destination, or
from the date on which the aircraft ought to have
arrived, or from the date on which the
(2) The method of calculating the period shall be
determined by the law of the court to which the
case is submitted.
Aerolineas claims that provision bars the claims of both
Magnus and Bank. They respond with several arguments in an
effort to avoid dismissal:
1. Based upon the facts as set out in Magnus'
Complaint, it is not clear the
loss occurred "during transportation by air," in
which event the Convention and its two-year
limitations period would be inapplicable to
2. Bank's cross-claim is not subject to the
Convention in any event.
3. Even if the Convention does apply to the
claims, the Complaint's allegations leave open
the possibility the limitations period has not
run, at least as to the 1981 shipment.
4. Magnus' allegations of fraud on Aerolineas'
part either render the two-year limitations
period inapplicable or toll it on a fraudulent
5. Because Aerolineas is alleged to have
engaged in "wilful misconduct," Convention Art.
25 says Aerolineas cannot avail itself of the
two-year limitations period.
This opinion will deal successively with those contentions.
1. Applicability of the Convention to Both Claims
Article 18 defines the scope of a carrier's liability under
(1) The carrier shall be liable for damages
sustained in the event of the destruction or loss
of, or damage to, any checked baggage or any
goods, if the occurrence which caused the damage
so sustained took place during the transportation
(2) The transportation by air within the meaning
of the preceding paragraph shall comprise the
period during which the baggage or goods are in
charge of the carrier, whether in an airport or
on board an aircraft, or, in the case of a
landing outside an airport, in any place
(3) The period of the transportation by air shall
not extend to any transportation by land, by sea,
or by river performed outside an airport. If,
however, such transportation takes place in the
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 took place during the
transportation by air.
Article 24(1) then provides that in cases covered by Article
any action for damages, however founded, can only
be brought subject to the limits and conditions
set out in this convention.
Magnus and Bank argue that, on the basis of the facts alleged
in the Complaint, it is not clear the improper delivery of the
goods to Di Lullo occurred "during the transportation by air."
That notion is simply untenable. Magnus' contract with
Aerolineas specifically required delivery of the goods shipped
to Bank as Magnus' consignee. As Complaint ¶ 5 puts it:
AA undertook . . . to deliver the goods to and
only to the named consignee, RBC, upon the
latter's proper identification or instructions at
For presumptive liability purposes, Article 18(3)'s terms
expressly embrace an air carrier's contractual undertaking for
land delivery within "transportation by air" — a term of art.
Here Aerolineas' contract necessarily called for such
"transportation by air" (though non-air transportation in
common parlance) by Magnus once the goods arrived at their city
True enough, if the claimed damages take place during any
such non-air leg of the carriage, Article 18(3) leaves open to
the carrier the possibility of escaping absolute liability
under Article 18(1) by proof that someone else was
responsible. But that does not limit the defined scope of
"transportation by air." So long as the goods remain in the
air carrier's actual or constructive possession pursuant to
the terms of the carriage contract, the period of
"transportation by air" does not end. If Aerolineas had put
the Magnus shipments on (say) a truck and transported them
from the airport in Buenos Aires to another location where Di
Lullo took possession, neither Magnus nor Aerolineas would
have any basis for claiming "transportation by air" had
ceased. Accordingly Article 24(1) makes Magnus' action for
damages subject to the terms of the Convention, including the
Article 29(1) limitations period.
Even if the Convention is thus plainly applicable to Magnus'
claim, Bank urges it should not be construed to apply to the
Cross-claim. Pointing to language dealing with rights to
damages under the Convention, Bank Mem. 8 argues:
This phrasing, like the language in other
pertinent Convention provisions, plainly provides
rights to, and imposes corresponding burdens
upon, only the plaintiff shipper.
Aerolineas correctly responds that argument reflects only a
partial reading of the Convention. As consignee for both the
1981 and 1982 shipments, Bank is a direct beneficiary of the
Convention. Article 13 provides in relevant part:
(1) [T]he consignee shall be entitled, on arrival
of the goods at the place of destination, to
require the carrier to hand over to him the air
waybill and to deliver the goods to him. . . .
(3) If the carrier admits the loss of the goods,
or if the goods have not arrived at the
expiration of seven days after the date on which
they ought to have arrived, the consignee shall
be entitled to put into force against the carrier
the rights which flow from the contract of
And Article 14 says the consignee may enforce his rights under
Article 13 in his own name:
whether he is acting in his own interest or in
the interest of another, provided that he carries
out the obligations imposed by the contract.
Those provisions squarely gave Bank, in its own right, an
action against Aerolineas under Article 18 for nondelivery or
loss of the goods. Just as with Magnus' claim, Article 24(1)
rendered Bank's claim subject to the two-year limitations
period, whether filed as a direct action or as a cross-claim.
See Husserl v. Swiss Air Transport Co., 388 F. Supp. 1238,
1244-45 (S.D.N.Y. 1975); Reiser v. Meloi World Travel Service,
18 Av.Cas. (CCH) 17,208, 17,209-10 (S.D.N.Y. 1983), both
construing the "however founded" language of Article 24(1) and
concluding the Convention establishes "the exclusive relief
available for damages resulting from an injury sustained in
international transportation" (Husserl, 388 F. Supp. at 1244).
2. Measurement of the Limitations Period under Article
Article 29(1) specifies any of three dates as the starting
point for the running of the limitations period: the date of
arrival at the destination, the date on which the aircraft
ought to have arrived or the date on which transportation
stopped. Magnus does not challenge the running of the
limitations period on the 1982 shipment in those terms (Magnus
As to the 1981 shipment,
however, Magnus claims there is as yet no factual basis for
concluding the limitations period has run.
Complaint ¶ 6 alleges Aerolineas transported the generators
to Buenos Aires "[a]t a time unknown to plaintiff." And
Complaint ¶ 20 alleges the wrongful release of the generators
to Di Lullo occurred "[a]t some point during November, 1981, or
as late as some time in 1983." Those allegations, Magnus
contends, leave open the possibility that the Article 29(1)
limitations period did not begin to run until sometime after
September 5, 1982, even though Aerolineas unquestionably took
control of the generators October 19, 1981.
That argument, in all candor, is a phony. Even putting aside
the fact Magnus' original complaint alleged the generators were
shipped on October 20 and delivered to Di Lullo soon
thereafter,*fn5 it is simply unreasonable to infer goods
delivered to an air carrier on October 19, 1981 remained in
transit until at least September 5, 1982. Indeed, despite its
claims to uncertainty about when the goods were shipped, Magnus
acknowledges the generators arrived in Buenos Aires in November
1981. Complaint ¶¶ 29-30. Moreover Magnus alleges it "has made
numerous inquiries . . . since 1981 as to the whereabouts of
its goods." Complaint ¶ 33. Plainly Magnus knew in late 1981
something had gone wrong with the shipment. At that point,
surely, the limitations period began to run.
In an effort to avoid that result Magnus claims to look to
the language of Article 29(1), contending the generators never
"arrived at the[ir] destination" and the "transportation
[never] stopped" because the goods were never delivered to the
proper consignee. If that were an accurate construction of
Article 29(1), limitations would never run in cases where goods
are somehow lost after they arrive at the airport where the
plane touches down but before delivery to the party identified
in the carriage contract. Surely the dates set out in Article
29(1) are not intended as alternatives that leave plaintiffs to
choose the one that most extends the limitations period. Rather
they are obviously designed to provide for the different
circumstances under which a claim against an air carrier might
arise. Their clear import is that at the latest the limitations
period begins to run once a party with enforceable rights under
a carriage contract knows or has reason to know something has
gone wrong with the shipment, be it misdelivery, loss or delay.
See Strygler & Co. v. Pan American Airlines, Inc., 84 Civ. 2652
(JMC), slip op. at 5-6 (S.D.N.Y. Feb. 15, 1985).*fn6 On that
(proper) reading of Article 29(1) and in the circumstances of
this case, the only fair conclusion is that Magnus' and Bank's
causes of action against Aerolineas accrued well before
September 5, 1982.
3. Allegations of Aerolineas' Fraud and Wilful
According to Complaint Count VI, as to both the 1981 and
1982 shipments Aerolineas acted wilfully and fraudulently to
release the shipped goods to Di Lullo before payment had been
received. In addition, Complaint ¶ 33 alleges Aerolineas has
fraudulently concealed its handling of
the goods "and thus unreasonably delayed plaintiff in learning
of their conversion." Those allegations of fraud, Magnus
asserts, are sufficient to prevent application of the Article
29(1) limitations period to either shipment, or at least to
toll the limitations period until such time as Magnus learned
what had happened to its goods. Bank launches a related though
not identical attack based on Aerolineas' alleged misconduct.
In support of those contentions, Magnus and Bank point to
two different provisions of the Convention. Neither leads to
the claimed destination.
Magnus notes Article 26, which requires a party entitled to
delivery to give written notice of any claim it may have
against the carrier:
(1) Receipt by the person entitled to delivery of
baggage or goods without complaint shall be
prima facie evidence that the same have been
delivered in good condition and in accordance with
the document of transportation.
(2) In case of damage, the person entitled to
delivery must complain forthwith after discovery
of the damage, and at the latest, within 3 days
from the date of receipt in the case of baggage
and 7 days from the date of receipt in the case
of goods. In case of delay the complaint must be
made at the latest within 14 days from the date
on which the baggage or goods have been placed at
(4) Failing complaint within the times aforesaid,
no action shall lie against the carrier, save in
the case of fraud on his part.
Focusing on the phrase "save in the case of fraud on his
part," Magnus Mem. 6 says:
The Convention's exception to the time limitation
by which notice may be given a carrier lies in
the fundamental contractual principle that good
faith in the carriage of goods should obtain in
the premises, that is, that deliberate fraud and
illegal conduct on the part of the carrier will
not allow the carrier to avail itself of the
two-year time limitation period.
But of course the fraud exception in Article 26(4) is
applicable by its express terms only to the notice rules set
out in the preceding Article 26 subsections — notice rules
that come into play only after the person entitled to delivery
has taken possession of the goods. Suspension of that narrow
rule in case of fraud surely raises no inference that fraud
will also suspend the overall limitations rule of Article
29(1). If anything the inference is precisely the opposite:
Inclusion of an express fraud exception in Article 26 negates
an implied-in-law fraud exception to Article 29(1).
Bank cites Article 25(1) of the Convention:
(1) The carrier shall not be entitled to avail
himself of the provisions of this convention
which exclude or limit his liability, if the
damage is caused by his wilful misconduct or by
such default on his part as, in accordance with
the law of the court to which the case is
submitted, is considered to be equivalent to
Bank contends Article 29(1)'s limitations rule "excludes" or
"limits" a carrier's liability and is thus negated in cases
involving wilful or fraudulent misconduct. But Aerolineas
correctly points out an unbroken line of cases says otherwise.
As Stone v. Mexicana Airlines, Inc., 610 F.2d 699
, 700 (10th
Cir. 1979) (per curiam) put it, citing earlier cases that had
reached the same conclusion:
We do not believe the language of Article 25 was
intended to result in periods of limitation
differing in accordance with the type of conduct
giving rise to the cause of action. Airplanes
travel through many jurisdictions and it is
evident that a uniform period of limitations was
determined to be desirable.
See also the extended discussion in Bergman v. Pan American
World Airways, Inc., 32 A.D.2d 95, 299 N.Y.S.2d 982, 984-85
(1969), cited with approval in Stone and quoted at length (with
total agreement) in Kordich v. Butler Aviation Detroit, Inc.,
103 Mich. App. 566, 303 N.W.2d 238, 239-40 (1981) (per curiam).
All the cases teach the "exclude or limit his liability"
language was aimed at the familiar provisions of Article 22,
not at Article 29(1) and its limitations provision. In light of
the universal body of authority rejecting Bank's position, it
must fail here as well.
Magnus' fallback argument is that Aerolineas' fraudulent
concealment of its disposition of the goods tolled the
limitations period until Magnus learned what had happened.
That tolling has assertedly kept the claim alive. Magnus'
contention is founded on Article 29(2):
The method of calculating the period of
limitation shall be determined by the law of the
court to which the case is submitted.
On the strength of that provision Magnus invokes the Illinois
discovery rule codified at Ill.Rev.Stat. ch. 110, ¶ 13-215:
If a person liable to an action fraudulently
conceals the cause of such action from the
knowledge of the person entitled thereto, the
action may be commenced at any time within 5
years after the person entitled to bring the same
discovers that he or she has such a cause of
action, and not afterwards.
At least two independent reasons defeat Magnus' contention.
For one thing, the "legislative history" of the Convention
demonstrates Article 29(2)'s reference to local law was never
intended to bring into consideration the local
limitation-tolling principles. On the contrary, the minutes of
the Warsaw conference reflect its specific rejection of a
provision that would have incorporated the tolling provisions
of the forum's statute of limitations, substituting instead the
complete bar of actions after two years had run. R.C. Horner
and D. Legrez, Minutes of the Second International Conference
on Private Aeronautical Law 110-13. Article 29(2) was designed
to look to the law of the forum court only on the question
"whether the plaintiff had taken the necessary measures within
the two-year period to invoke that particular court's
jurisdiction over the action." Kahn v. Trans World Airlines,
82 A.D.2d 696, 705, 443 N.Y.S.2d 79, 87 (1981). In this case that
issue refers not to Illinois law but to the federal rules, in
this instance Rule 3:
A civil action is commenced by filing a complaint
with the court.
See also Darghouth v. Swiss Air Transport Co., 18 Av.Cas.
Second, even were that not the case, the Illinois statute on
which Magnus seeks to rely speaks of fraudulent concealment of
the "cause of action." And the Illinois cases teach the
provision does not apply where the party affected by that
fraud may, with ordinary diligence, discover the claim.
Zagar v. Health and Hospital Governing Commission of Cook
County, 83 Ill. App.3d 894, 898, 39 Ill.Dec. 112, 115-116,
404 N.E.2d 496, 499-500 (1st Dist. 1980).
Here there is no need to speculate as to whether the alleged
fraud sought to conceal the cause of action or, if so, whether
Magnus could have discovered the alleged fraud. As early as
1981 Magnus knew something had gone wrong with the shipment of
generators (Complaint ¶ 33). By March 18, 1982 Magnus knew the
transceivers had been improperly delivered (Complaint ¶ 23).
That takes the discovery rule out of the case entirely. Magnus
concededly knew facts on which it could base a claim of
nondelivery. It cannot be heard to claim it was unaware it had
a cause of action against Aerolineas, regardless of any alleged
fraud on Aerolineas' part.
Magnus and Bank have gone to considerable — and less than
forthright — efforts to frame their allegations so as to avoid
the consequences of having sat on their rights. Nevertheless,
even accepting their allegations and reasonable inferences
therefrom as true, it is plain they cannot prove any set of
facts sufficient to establish the timeliness of their claims.
Even under the liberal pleading standard of Conley v. Gibson,
355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957),
recently reaffirmed in Hishon v. King & Spalding,
___ U.S. ___, 104 S.Ct. 2229, 2233, 81 L.Ed.2d 59 (1984),
Aerolineas' motion must be granted as to Magnus' entire
Complaint and Bank's Cross-claim.
Indeed this is not a case in which pleading over is called
for. Magnus has already tried that (in a less-than-candid
way). Accordingly not only the present pleadings but Magnus'
and Bank's actions against Aerolineas are dismissed with
prejudice. By a kind of poetic justice, that leaves Magnus and
Bank to do battle only with each other.*fn7