Continental Insurance v. Federal Express , 454 F.3d 951 ( 2006 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CONTINENTAL INSURANCE COMPANY, 
a corporation,
Plaintiff-Appellee, No. 03-57162
v.  D.C. No.
FEDERAL EXPRESS CORPORATION, a CV-00-00696-NMM
corporation,
Defendant-Appellant.

CONTINENTAL INSURANCE COMPANY, 
a corporation,
No. 03-57214
Plaintiff-Appellant,
v.  D.C. No.
CV-00-00696-NMM
FEDERAL EXPRESS CORPORATION, a
OPINION
corporation,
Defendant-Appellee.

Appeal from the United States District Court
for the Central District of California
Nora M. Manella, District Judge, Presiding
Argued and Submitted
October 17, 2005—Pasadena, California
Filed June 29, 2006
Before: Procter Hug, Jr., Harry Pregerson, and
Richard R. Clifton, Circuit Judges.
Opinion by Judge Hug
7153
7156 CONTINENTAL INSURANCE v. FEDERAL EXPRESS
COUNSEL
Robert J. Taitz and David R. Shane, Shane & Taitz, Green-
brae, California, for the defendant-appellant/appellee.
Timothy R. Lord and Bernadette M. Chala, Lewis Brisbois
Bisgaard & Smith, LLP, Costa Mesa, California, for the
plaintiff-appellee/appellant.
OPINION
HUG, Circuit Judge:
This appeal is from a stipulated judgment for $109,023.24
in favor of Continental Insurance Company (“Continental”)
for goods lost in shipment by Federal Express Corporation
(“FedEx”). We have jurisdiction because the parties reserved
the right to appeal the district court’s rulings on the applica-
bility of the Original Warsaw Convention and its subsequent
amending agreements, the Hague Protocol and the Montreal
Protocol No. 4.
I. BACKGROUND
On March 31 and April 15, 1999, FedEx and Comet Elec-
tronics Co., Ltd., entered into a contract of carriage, whereby
FedEx agreed to ship by air packages containing integrated
circuits and memory modules from Hong Kong to Pasadena,
CONTINENTAL INSURANCE v. FEDERAL EXPRESS 7157
California, with delivery to Viken Electronics. Four packages
never arrived. The insurer of these cargoes, Continental, was
subrogated to the rights of Viken Electronics, the consignee
and owner of the goods. Continental filed an action against
FedEx in the California Superior Court, alleging causes of
action for loss of cargoes under the Warsaw Convention, neg-
ligence, breach of contract, breach of the duty to care for
property and bailment, and conversion. Continental alleged
the losses of shipments “including, but not necessarily limited
to, air waybill number[s] 8101 8095 3045 . . . [and] 8101
8095 3137” (“3045” and “3137”). FedEx removed the case to
the United States District Court for the Central District of Cal-
ifornia. It is undisputed that the Warsaw Convention preempts
the state law causes of action.
A. First Motion for Partial Summary Judgment.
FedEx sought partial summary judgment that its liability
was limited as to waybills 3045 and 3137 under the amended
version of the Warsaw Convention presently in force between
Hong Kong and the United States, which it alleged either to
be The Hague Protocol of 1955 (“The Hague Protocol”)1 or
the Montreal Protocol No. 4 (1975).2 Compared to the Origi-
nal Warsaw Convention, both versions substantially relax pre-
conditions to limited liability.
The Original Warsaw Convention presumes liability of the
carrier for goods lost or destroyed while entrusted to the car-
rier, but limits permissible recovery unless a special declara-
1
Protocol to Amend the Convention for the Unification of Certain Rules
Relating to International Carriage by Air, signed at Warsaw on 12 October
1929, opened for signature Sept. 28, 1955, art. XI, 478 U.N.T.S. 371, 381.
2
Montreal Protocol No. 4 to Amend the Convention for the Unification
of Certain Rules Relating to International Carriage by Air, signed at War-
saw on 12 October 1929, amended by Protocol Done at the Hague on 28
September 1955, Sept. 25, 1975, ICAO Doc. 9148, reprinted in Lawrence
B. Goldhirsch, The Warsaw Convention Annotated: A Legal Handbook
401 (2000).
7158 CONTINENTAL INSURANCE v. FEDERAL EXPRESS
tion of value is made when the goods are delivered to the
carrier, and the shipper has paid a supplementary sum accord-
ing to the value. See Original Warsaw Convention art. 22(2).
However, Article 9 provides that “the carrier shall not be enti-
tled to avail himself of the provision of this convention which
excludes or limits his liability . . . if the air waybill does not
contain all of the particulars set out in Article 8 (a) to (i),
inclusive and (q).”3 Article 8(i) requires the air bill to contain
the weight of the goods. By contrast, The Hague Protocol
only requires notice of stop-over destinations on the waybill.
The Montreal Protocol No. 4 abandons the cargo documenta-
tion provisions of the Original Warsaw Convention entirely,
permitting limitation of liability even in the absence of an air
waybill.
Before the district court ruled on FedEx’s first motion,
Continental broadened the scope of its suit to include two
3
Specifically, the air waybill must contain the following particulars:
(a) the place and date of its execution;
(b) the place of departure and of destination;
(c) the agreed stopping places, provided that the carrier may
reserve the right to alter the stopping places in case of necessity
...;
(d) the name and address of the consignor;
(e) the name and address of the first carrier;
(f) the name and address of the consignee . . . ;
(g) the nature of the goods;
(h) the number of packages, the method of packing, and the par-
ticular marks or numbers upon them;
(i) the weight, the quantity, the volume, or dimensions of the
goods;
...
(q) a statement that the transportation is subject to the rules relat-
ing to liability established by this convention.
Warsaw Convention art. 8(a)-8(q) (emphasis added).
CONTINENTAL INSURANCE v. FEDERAL EXPRESS 7159
additional waybills — 8101 8095 3067 and 8101 8095 3056
(“3067” and “3056”). FedEx maintained that Continental was
barred from pursuing claims for additional waybills. How-
ever, the district court also permitted Continental to proceed
on waybills 3067 and 3056.
Because weight notations appeared on the waybills in evi-
dence for 3045 and 3137, FedEx stated “for the purposes of
this motion only, Federal Express will concede that this mat-
ter is governed solely by the Original Warsaw Convention.”
Obviously, this concession was made because the waybills
complied with all the requirements of the Original Warsaw
Convention, including the weight requirement. Thus, partial
summary judgment was granted for FedEx on those two way-
bills.
The district court permitted Continental to proceed on way-
bills 3067 and 3056 because Continental’s complaint stated
that the action involved the loss of shipments “including but
not necessarily limited to, air waybill numbers 3045 and
3137.” The copies of waybills number 3067 and 3056 did not
contain the weight of the goods shipped on the copies of the
waybills before the court; therefore, the district court denied
partial summary judgment limiting liability as to those ship-
ments.
B. Second Motion For Partial Summary Judgment.
FedEx’s second motion for partial summary judgment ref-
erenced waybills 3067 and 3056 specifically. Because the
billing copies of waybills 3067 and 3056, on which the cargo
weights were clearly marked, were then in evidence, FedEx
conceded again only for purposes of summary judgment that
the Original Warsaw Convention applied. However, this time
the district court ruled that waybills 3067 and 3056 were tech-
nically deficient under Article 8 of the Original Warsaw Con-
vention because the sender’s copies, which omit the cargoes’
weight, had also been entered into evidence.
7160 CONTINENTAL INSURANCE v. FEDERAL EXPRESS
C. Law Of The Case Doctrine.
In telephonic conferences on July 7 and July 30, 2003, the
district court relied on FedEx’s limited concessions and held
that the Original Warsaw Convention was the law of the case,
thereby barring further consideration at trial of what treaty
governs, and, in the district court’s view, resolving all out-
standing legal issues. Only the factual question of damages
remained. To posture the case for appeal, the parties stipu-
lated to damages and entered a consent judgment, which
explicitly reserved their rights of appeal. We have jurisdiction
over this appeal of the stipulated judgment due to this reserva-
tion of the right to appeal. See U.A. Local 342 Apprenticeship
& Training Trust v. Babcock & Wilcox Construction Co., 396
F.3d 1056, 1058 (9th Cir. 2005).
FedEx appeals the district court’s use of the law of the case
doctrine and challenges the district court’s holding that the
Original Warsaw Convention controls the case and precludes
consideration of The Hague Protocol or the Montreal Protocol
No. 4.
II. DISCUSSION OF FEDEX’S APPEAL
We review de novo a district court’s interpretation of trea-
ties to which the United States is a party. Motorola, Inc. v.
Federal Express Corp., 308 F.3d 995, 999 n.6 (9th Cir. 2002).
We review applications of law of the case doctrine for abuse
of discretion. Milgard Tempering, Inc. v. Selas Corp. of
America, 902 F.2d 703, 715 (9th Cir. 1990). Here, the district
court abused its discretion in applying the law of the case doc-
trine for two reasons.
First, the court misunderstood the effect of its summary
judgment rulings. FedEx sought summary judgment on
whether liability is limited even if the Original Warsaw Con-
vention applies. It did not concede that this applied for the
purposes of trial if the motion was denied. Denying summary
CONTINENTAL INSURANCE v. FEDERAL EXPRESS 7161
judgment rendered no decision on what law governed; no
actual ruling on the issue of applicable law was made. The
record bears this out: nowhere is it evident that the court actu-
ally analyzed the treaties in force. By invoking the law of the
case doctrine to prevent judicial consideration of a dispositive
legal issue not yet ruled upon for the purposes of trial, the dis-
trict court abused its discretion.
Second, the district court erred by applying the Original
Warsaw Convention to this case. Given that various nations
have ratified either the Original Warsaw Convention or its
various amending agreements, the question as to what law
applies has ordinarily been determined on a “lowest common
denominator” basis. See, e.g., G.D. Searle & Co. v. Federal
Express Corp., 248 F. Supp. 2d 905, 907-09 (N.D. Cal. 2003);
see also Paul S. Dempsey, International Air Cargo & Bag-
gage Liability And The Tower Of Babel, 36 GEO. WASH. INT’L
L. REV. 239, 240 (2004). The latest treaty ratified by both ori-
gin and destination countries supplies the governing law. The
most recent common treaty in force between Hong Kong and
the United States is not the Original Warsaw Convention, but
The Hague Protocol.
A. Hong Kong.
[1] From July 1, 1997, the People’s Republic of China
resumed the exercise of sovereignty over Hong Kong from
the United Kingdom, becoming a Special Administrative
Region (“SAR”) of China. Prior to that date, the U.K. had rat-
ified treaties and other international agreements on Hong
Kong’s behalf. Upon changing status to a SAR, Hong Kong
neither automatically ceased to honor its past obligations nor
automatically became subject to China’s agreements. Rather,
China issued a joint statement with the U.K. to the effect that
certain enumerated treaties to which China was a party would
be applied to Hong Kong from July 1, 1997, while certain
treaties to which China was not yet a party, but which applied
to Hong Kong prior to July 1, 1997, would continue to apply.
7162 CONTINENTAL INSURANCE v. FEDERAL EXPRESS
See The Position Of The People’s Republic Of China And The
United Kingdom On Multilateral Treaties Applying To The
Hong Kong Special Administration Region, 36 I.LM. 1671,
1676-1678 (1997). This document gave renewed effect in
Hong Kong to both The Hague Protocol and the Original
Warsaw Convention. See id. at 1678, 1684; see also DEPT. OF
STATE, TREATIES IN FORCE: A LIST OF TREATIES AND OTHER
INTERNATIONAL AGREEMENTS OF THE UNITED STATES IN FORCE ON
JANUARY 1, 2004, 349 n.3 (2004).
[2] By contrast, the Montreal Protocol No. 4 did not
become effective in the U.K. until June 14, 1998, long after
Hong Kong’s change of status. See RESTATEMENT (THIRD) OF
THE FOREIGN RELATIONS OF THE UNITED STATES § 322(1) (1986)
(observing that “the provisions of an international agreement
do not bind a party in relation to any act or fact that took place
. . . before the date of the entry into force of the agreement
with respect to that party”). Because the Montreal Protocol
No. 4 never came into force in Hong Kong, was never subject
to the Chinese/British note on multilateral treaties applying to
Hong Kong, and, indeed, was ratified by China itself only
within the last year—without application to Hong Kong—the
Montreal Protocol No. 4 cannot apply.
B. The United States.
[3] The United States expressly ratified The Hague Proto-
col on December 14, 2003. However, the question before the
court is whether, by adopting the Montreal Protocol No. 4, the
United States acceded to The Hague Protocol, such that the
terms of the Original Warsaw Convention as amended by The
Hague Protocol should govern this matter. This is a question
of first impression in this circuit.
[4] In dictum, the Ninth Circuit has noted that “The Hague
Protocol did not enter into force for the United States until the
Montreal Protocol No. 4 was ratified by the Senate” on March
4, 1999, Motorola Inc., 308 F.3d at 999 n.6, implying that
CONTINENTAL INSURANCE v. FEDERAL EXPRESS 7163
upon ratification of the Montreal Protocol No. 4, the United
States became bound by the terms of The Hague Protocol.
District courts in the Southern, Central, and Northern Districts
of California have adhered to Motorola and the March 4,
1999 date. See, e.g., Polanski v. KLM Royal Dutch Airlines,
378 F. Supp. 2d 1222, 1226 (S.D. Cal. 2005) (“[O]n Septem-
ber 28, 1998, the United States ratified a later amending
treaty, Montreal Protocol No. 4, which became effective as to
the United States on March 4, 1999. By doing so, the United
States acceded to the Warsaw Convention as amended by the
Hague Protocol.”) (citations omitted); In re Air Crash at Tai-
pei, Taiwan, 2002 WL 32513726, *4 (C.D. Cal. Dec. 19,
2002) (Not Reported in F. Supp. 2d) (“[R]atification [of Mon-
treal Protocol No. 4] made the Hague Protocol effective in the
U.S. as of March 4, 1999.”); G.D. Searle, 248 F. Supp. 2d at
907-909 (concluding that by ratifying the Montreal Protocol
No. 4 the U.S. “did in fact express its consent to accede to the
Warsaw Convention as amended by the Hague Protocol”).
[5] The Second Circuit agreed in Fujitsu Ltd. v. Federal
Express Corp., 247 F.3d 423, 431 (2d Cir. 2001). The Second
Circuit stated that the United States was not governed by The
Hague Protocol “until another international agreement, Mon-
treal Protocol No. 4, was ratified by the Senate on September
28, 1998 and became effective on March 4, 1999.” Even
Chubb & Son, Inc. v. Asiana Airlines, 214 F.3d 301, 307 n.4
(2d Cir. 2000), relied on heavily by Continental, accepts that
the United States “acceded to the Warsaw Convention as
amended by the Hague Protocol” upon ratification of the
Montreal Protocol No. 4. See also Schopenhauer v. Compag-
nie Nat’l Air Fr., 255 F. Supp. 2d 81, 86 (E.D.N.Y. 2003)
(“When referring specifically to the 1955 Hague revisions of
the original Warsaw Convention, the Court occasionally
refers to the ‘Hague Protocol,’ even though those revisions
did not take effect in this country until the ratification of
Montreal Protocol No. 4 in 1999.”); Royal & Son Alliance
Ins. v. Am. Airlines, et al., 277 F. Supp 2d 265, 268 (S.D.N.Y.
2003) (“The Second Circuit has twice recognized that the
7164 CONTINENTAL INSURANCE v. FEDERAL EXPRESS
United States has acceded to the Hague Protocol, as has the
Ninth Circuit.”).4
[6] This treatment is consistent with the language of the
Montreal Protocol No. 4, the Vienna Convention on the Law
of Treaties, and positions taken by the Executive Branch. A
review of the express language of the Montreal Protocol No.
4 indicates that by ratifying the Montreal Protocol No. 4, the
United States expressed its consent to accede to The Hague
Protocol. Article XVII(2) of the Montreal Protocol No. 4 pro-
vides:
This provision incorporates by reference the revi-
sions to the Warsaw Convention made at The Hague
in 1955 and defines the resulting single instrument as
the Warsaw Convention as amended at The Hague,
1955, and by Protocol No. 4 of Montreal, 1975.
(emphasis added)
Likewise, Article XVII provides that
Ratification by any state which is not a party to the
Warsaw Convention and to The Hague Protocol has
the effect of accession to the new single instrument
defined in Article XV. Paragraph 2 of this article has
the important function of making clear that it is not
necessary to ratify the Warsaw Convention or The
Hague Protocol in order to become a party to the
new single instrument created by Protocol 4.
(emphasis added)
Read in conjunction, this language supports our position, as
does Article 40 of the Vienna Convention on the Law of Trea-
4
In a recent case, however, the Second Circuit retreated from this posi-
tion, treated Fujitsu’s statements adopting the March 4, 1999 date as dicta,
and arrived at a different construction. See Avero Belgium Ins. v. American
Airlines, Inc., 423 F.3d 73, 82-90 (2nd Cir. 2005).
CONTINENTAL INSURANCE v. FEDERAL EXPRESS 7165
ties, reprinted in 63 AM. J. INTL. L. 875 (1969). Article 40
addresses the amendment of multilateral treaties and provides
that:
5. Any state which becomes a party to the treaty
after the entry into force of the amending agreement
shall, failing an expression of a different intention by
that state:
(a) be considered as a party to the treaty as
amended; and
(b) be considered as a party to the unamended treaty
in relation to any party to the treaty not bound by the
amending agreement.5
See also Saul Sorkin, Goods In Transit § 9.19 (2003) (“[I]f a
State failed to become a party to the original Warsaw Conven-
tion but thereafter adhered to the Hague Protocol to the War-
saw Convention it thereby became a party to the Warsaw
Convention.”); Dana L. Christensen, Comment, The Elusive
Exercise of Jurisdiction Over Air Transportation Between The
United States and South Korea, 10 PAC. RIM L. & POL’Y J.
653, 688-89 (2001) (“[M]ost scholars agree that . . . adherence
to an amending agreement binds a new party to the terms of
the original treaty with respect to parties that adhere solely to
that treaty.”)
[7] The authorities cited above are persuasive. We hold that
the ratification of the Montreal Protocol No. 4 brought The
Hague Protocol into full force and effect in the United States
on March 4, 1999.
5
The Second Circuit in Avero Belgium did not apply section 5(b)
because the court held that the United States, in ratifying Protocol No. 4
of Montreal, expressed an intention that this provision did not apply. We
reach a contrary conclusion, holding that no such intention was expressed
by Congress.
7166 CONTINENTAL INSURANCE v. FEDERAL EXPRESS
We observe that President Bush’s transmittal to the Senate
on July 31, 2002 of The Hague Protocol for advice and con-
sent, S. Treaty Doc. No. 107-14, 1955 WL 45606 (2002),
does not undermine this holding. The transmittal took no posi-
tion on The Hague Protocol’s then-current status. It was
offered to dispel future uncertainty as to whether the United
States is bound by The Hague Protocol. In a June 2003 State
Department white paper, offered as testimony before the Sen-
ate Foreign Relations Committee, the Administration clarified
that it sought to eliminate any ambiguity for the future,
observing only that:
If the courts were to conclude that Montreal Protocol
No. 4 does not create treaty relations under The
Hague Protocol, the United States’ treaty relations
with the 79 countries that are parties to both the
Warsaw Convention and The Hague Protocol, but
not to Montreal Protocol No. 4, would be based on
the Warsaw Convention, unamended by any later
protocol . . . . This is an unsatisfactory result . . . .
Ratification of The Hague Protocol will eliminate
any ambiguity and secure for the U.S. industry The
Hague Protocol’s more modern cargo documentation
rules, which are critical to the efficient movement of
air cargo.
John R. Byerly, U.S. Aviation Policy: the Montreal Conven-
tion and The Hague Protocol, at http://www.state.gov/e/eb/
rls/rm/2003/21869.htm.
III. CONTINENTAL’S CROSS-APPEAL
Because Continental later discovered the sender’s copies of
waybills 3045 and 3137, which omitted the cargoes’ weight,
Continental requested that the district court revisit its grant of
summary judgment as to waybills 3045 and 3137 and “apply
the same rule . . . that it later applied to waybills Nos. 3056
and 3067.” The district court declined, noting this evidence
CONTINENTAL INSURANCE v. FEDERAL EXPRESS 7167
was available earlier, and the failure to present it was an over-
sight. On cross-appeal, Continental challenges the district
court’s refusal to harmonize its two rulings.
This type of oversight does not ordinarily meet the criteria
for granting a motion for reconsideration. See C.D. Cal. L.R.
7.16. Furthermore, because we have held that The Hague Pro-
tocol governs all four waybills, the issue becomes moot. We
deny Continental’s cross-appeal.
IV. CONCLUSION
[8] The Montreal Protocol No. 4 brought The Hague Proto-
col into force in the United States on March 4, 1999. The
Hague Protocol was in force in both Hong Kong and the
United States at the time Continental’s claims arose, which
was March 31 and April 15, 1999, for the first and second
shipments, respectively, and the district court erred by apply-
ing the Original Warsaw Convention. Because a district court
abuses its discretion when it applies incorrect law, see Casey
v. Albertson’s Inc., 362 F.3d 1254, 1257 (9th Cir. 2004), we
VACATE the stipulated judgment, and REMAND for further
proceedings consistent with the liability provisions of The
Hague Protocol.
VACATED and REMANDED.