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Deere & Co. v. Aktiengesellschaft

decided: August 16, 1988.

DEERE & COMPANY, PLAINTIFF-APPELLEE,
v.
DEUTSCHE LUFTHANSA AKTIENGESELLSCHAFT, DEFENDANT-APPELLANT



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 81 C 4726--Ilana D. Rovner, Judge.

Cummings, Flaum, and Ripple, Circuit Judges.

Author: Flaum

FLAUM, Circuit Judge.

Defendant-appellant airline ("Lufthansa") damaged part of a computer owned by Deere & Company during an international shipment. Lufthansa argued that under the Warsaw Convention and Lufthansa's tariff and waybill, any liability must be determined with reference only to the weight of the damaged package ("package weight"). Deere sought and was awarded a greater amount based on the weight of the portion of the shipment whose value was affected by the damage ("affected weight"). The district court also awarded Deere prejudgment interest and imposed sanctions against Lufthansa under Federal Rule of Civil Procedure 11. We affirm the district court's ruling with the exception of its prejudgment interest award.

I.

On August 24, 1979, an IBM Model 3032 mainframe computer, contained in 14 separate packages*fn1 weighing a total of 15,530 lbs., was delivered to Lufthansa's Chicago facility for shipment to Frankfurt, Federal Republic of Germany. Deere had bought the computer for a total cost of $1,854,858. A Lufthansa forklift operator dropped one of the packages during preparation for loading it onto an airplane, damaging its contents. The dropped package, weighing 2,739 lbs., contained the "director frame"--the central component of the Model 3032. Despite this mishap, Lufthansa completed loading the shipment and delivered it to Frankfurt, from where it was shipped to its final destination in Mannheim. Because the director frame was the central unit of the computer and could not be repaired or replaced except by the manufacturer, damage to this component rendered the entire computer inoperable. Deere consequently incurred aggregate costs of $195,500 for shipping the director frame back to IBM, having it repaired, and leasing another computer in the interim.

Deere claimed damages from Lufthansa under the Warsaw Convention ("Convention").*fn2 The parties disputed two issues: the rate payable per pound of damage under the Convention, and the question of whether the value of the entire computer was impaired by the damage to the director frame. The district court found that the Convention sets a limit of $9.07 per pound*fn3 for lost or damaged goods. The package containing the director frame weighed 2,739 lbs.; accordingly, Deere accepted $24,900 from Lufthansa without prejudice to its argument that it was owed more. Deere sought to recover $9.07 per pound for the 12,791 lbs. constituting the weight of the remainder of the shipment. Lufthansa contended that $24,900 was the limit of its liability, first arguing that the value of the whole computer was not affected, within the meaning of the Convention, by the damage to the central component. Later in the litigation, the airline stressed that its liability was limited by its tariff and waybill to the weight of the damaged package itself. Both parties thus accepted the general applicability of an "affected weight" standard;*fn4 Lufthansa argued, however, that in this case it was liable only for the "package weight."

In an August 9, 1984 memorandum opinion, Judge Grady ruled that Deere was entitled to the additional damages under the Warsaw Convention if it could prove that the value of the remainder of the shipment was affected by the damage to the director frame. The judge thus confirmed what both parties had explicitly assumed: that the Convention allowed Deere to recover damages for the affected weight of the shipment. The case was reassigned to Judge Rovner, who ruled on April 26, 1985 that the damage to the package containing the director frame had indeed affected the value of the rest of the shipment. The only issue remaining in the case was the resulting cost to Deere of shipping, repairing, and leasing.*fn5

Lufthansa never sought reconsideration of the August 9 opinion, but after the case was reassigned to Judge Rovner the airline argued that, for reasons not now advanced on appeal, Judge Grady had erred. The airline moved for rehearing of Judge Rovner's April 26 partial summary judgment order, insisting that it had already paid Deere the limit of its possible liability. Lufthansa asserted that the director frame was a "separate part, capable of separate repair and replacement," and that damages therefore could not be calculated with reference to the weight of the entire shipment. Judge Rovner ruled that Lufthansa had "offered no argument or authority for its assertion that Judge Grady erred."*fn6 The court noted Lufthansa's sloppy use of authority and warned that defendant's conduct "could justify the sua sponte award of sanctions under Rule 11." Judge Rovner then ordered Lufthansa to respond to Deere's motion for summary judgment on the issue of the extent of Deere's damages.

Lufthansa instead filed a summary judgment motion and a "motion to strike" Deere's motion for summary judgment, on the ground that its waybill and tariff filed with the Civil Aeronautics Board precluded any recovery by Deere in excess of the package weight figure. Deere moved for sanctions. The district judge ruled that the Convention controls whenever it conflicts with any narrower liability limitation*fn7 and that Judge Grady had already determined that the Convention provided for an affected weight standard. The judge noted that the "multitude" of cases cited by the defendant in support of its tariff argument did not address how a tariff or waybill could prevail over the treaty. The court felt "compelled" to order Lufthansa to pay $5,756.25 of Deere's attorney's fees for persisting in making unsupported arguments that had already been rejected. Finally, the court found Deere's proof of damages unrebutted. Because these damages exceeded the maximum allowable under the affected weight standard, the court found Deere entitled to the upper limit under that standard--$140,857.10--plus prejudgment interest of $44,991.39.

Lufthansa appeals the rulings on liability, sanctions and prejudgment interest. We conclude that Lufthansa has waived the argument it now advances that the unamended Convention dictates a "package weight" standard. We also find that the district court did not abuse its discretion in awarding sanctions. We hold, however, that the court erred in awarding prejudgment interest under the Convention.

II.

Lufthansa argues on appeal that Article 22(2) of the Warsaw Convention,*fn8 as originally adhered to by the United States in 1934, limits a carrier's liability to $9.07 for every pound of the actual package damaged. In 1955, most of the signatories of the Warsaw Convention signed the Hague Protocol*fn9 which amended the Convention in several respects. As part of these changes, a new Article 22(2)(b) was incorporated into the Convention. This paragraph provides that:

In the case of loss, damage or delay of part of registered 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 liability 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 an object contained therein, affects the value of other packages covered by the same baggage check or the same air ...


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