UPS Supply Chain v. Qantas Airways

Filing

FILED AND ENTERED JUDGMENT. [7643137]--[Edited 02/10/2011 by RP to indicate correct authoring Judge] FILED OPINION (DIARMUID F. O'SCANNLAIN, RONALD M. GOULD and SANDRA S. IKUTA) REVERSED AND REMANDED. Judge: DFO Authoring, FILED AND ENTERED JUDGMENT. [7643137]

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CHUBB INSURANCE COMPANY OF
EUROPE S.A., a foreign
corporation, on behalf of itself and
all other underwriters subscribing
to policy number CJ7317,
Plaintiff,
v.
MENLO WORLDWIDE FORWARDING,
INC., a corporation,
Defendant,
v.
UPS SUPPLY CHAIN SOLUTIONS,
INC., a corporation f/k/a MENLO
WORLDWIDE FORWARDING, INC.,
Defendant-third-party-plaintiffAppellant,
v.
QANTAS AIRWAYS LIMITED,
Third-party-defendant-Appellee.





No. 08-55281
D.C. No.
CV-06-07267-DSF
OPINION



Appeal from the United States District Court
for the Central District of California
Dale S. Fischer, District Judge, Presiding
Argued and Submitted
September 2, 2010—Pasadena, California
Filed February 10, 2011

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UPS SUPPLY CHAIN v. QANTAS AIRWAYS

Before: Diarmuid F. O’Scannlain, Ronald M. Gould, and
Sandra S. Ikuta, Circuit Judges.
Opinion by Judge O’Scannlain

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COUNSEL
Michael S. McDaniel, Countyman & McDaniel, Los Angeles,
California, argued the cause for the defendant-third-partyplaintiff-appellant, and filed the briefs. Byron E. Countyman,

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Geoffrey W. Gill, and Christoph M. Wahner, Countyman &
McDaniel, Los Angeles, California, were also on the briefs.
Scott D. Cunningham, Condon & Forsyth LLP, Los Angeles,
California, argued the cause for the third-party-defendantappellee, and filed the brief. Roderick D. Margo and Julia K.
Doyle, Condon & Forsyth LLP, Los Angeles, California, were
also on the brief.
Brandon Fried and Richard Fisher, Airforwarders Association, Washington DC, filed a brief on behalf of Amicus
Curiae Airforwarders Association, in support of the
defendant-third-party-plaintiff-appellant.
Dr. Eduardo T. Cosentino, Langbehn & Cosentino, Buenos
Aires, Argentina, filed a brief on his own behalf, in support
of the defendant-third-party-plaintiff-appellant.
John D. Dillow, Kathleen M. O’Sullivan, and Mack H.
Shultz, Perkins Coie, LLP, Seattle, Washington, filed a brief
on behalf of Amicus Curiae Aerospace Industries Association
of America, Inc.
Robert A. Rees, Rees Law Firm, PC, Los Angeles, California,
filed a brief on behalf of Amicus Curiae Paul Stephen Dempsey, in support of the third-party-defendant-appellee.

OPINION
O’SCANNLAIN, Circuit Judge:
We must decide whether the Montreal Convention’s twoyear statute of limitations on “the right to damages” in connection with international air cargo shipments applies to suits
seeking indemnification and contribution.

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I
On November 14, 2004, Air New Zealand Engineering,
Ltd. contracted with Menlo Worldwide Forwarding, Inc.
(“Menlo”) to ship a turbine aircraft engine from New Zealand
to the United States. Menlo, in turn, contracted with Qantas
Airways, Ltd. (“Qantas”) to perform the actual carriage of the
engine to its destination. When the engine arrived in Los
Angeles on or about November 19, however, it was not in the
same condition as when it had left New Zealand; it had been
damaged sometime during transportation. The engine’s owner
subsequently filed a claim with its insurer, Chubb Insurance
Co. of Europe, S.A. (“Chubb”), for the resulting loss. Chubb
paid the owner $119,666.62.
On November 14, 2006, Chubb brought this suit in federal
district court against Menlo’s successor-in-interest, UPS Supply Chain Solutions, Inc. (“UPS”), seeking to recover the
money that it had paid to the engine’s owner. Chubb argued
that UPS was liable for the damage to the engine under the
Montreal Convention, which governs international air carriage of passengers, baggage, and cargo.1 The parties eventually reached a settlement under which UPS agreed to pay
Chubb $80,000.
On September 18, 2007, UPS filed a third-party complaint
against Qantas, seeking indemnification and contribution for
sums UPS had paid Chubb. UPS claimed that it was “in no
way responsible” for the damages alleged in Chubb’s action;
rather, UPS maintained, the engine was damaged as a “direct
and proximate result” of “negligent or other actionable conduct” by Qantas.
The district court dismissed UPS’s third-party complaint,
1

See Convention for the Unification of Certain Rules for International
Carriage by Air, May 28, 1999, S. Treaty Doc. No. 106-45 (2000)
(“Montreal Convention”).

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reasoning that under Article 35 of the Montreal Convention,2
UPS’s claims against Qantas were timely only if brought
within two years of the damaged engine’s arrival in Los
Angeles. Because the claims were not brought within that
period, the court held that they were barred and dismissed
UPS’s third-party complaint with prejudice. UPS timely
appealed.
II
A
“The interpretation of a treaty, like the interpretation of a
statute, begins with its text.” Medellin v. Texas, 552 U.S. 491,
506 (2008). And, where the text of a treaty is clear, a court
has “no power to insert an amendment” based on consideration of other sources. Chan v. Korean Air Lines, Ltd., 490
U.S. 122, 134 (1989).
[1] The Montreal Convention governs the liability of air
carriers in the “international carriage of persons, baggage or
cargo.” Montreal Convention, supra, art. 1. Article 35 of the
Montreal Convention states: “The right to damages shall be
extinguished if an action is not brought within a period of two
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 carriage stopped.” By its terms,
Article 35 extinguishes only a single right: the “right to damages.” Thus, unless UPS’s claims against Qantas assert such
a right, they are not affected by Article 35.
The “right to damages” is not defined in Article 35, but its
contours become clear when the Convention is read as a
whole. Articles 17 to 19 of the Convention set forth the circumstances in which a carrier is “liable for damage.” A car2

Both parties agree that this case is governed by the Montreal Convention.

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rier is liable, under Article 17(1), for “damage sustained in
case of death or bodily injury of a passenger”; under Article
17(2), for “damage sustained in case of destruction or loss of,
or of damage to, checked baggage”; under Article 18(1), for
“damage sustained in the event of the destruction or loss of,
or damage to, cargo”; and under Article 19, for “damage
occasioned by delay in the carriage by air of passengers, baggage or cargo.”
Other Articles establish limits on a carrier’s liability for
damage, providing, for example, that compensation for loss of
cargo cannot exceed a specified amount per kilogram. See id.
art. 22(3). Still other Articles impose conditions on the filing
of an action for damages against a carrier. Article 31, for
instance, requires that in the case of damage to baggage or
cargo, “the person entitled to delivery must complain to the
carrier” within a specified time period “after the discovery of
the damage.”
[2] Construed against this backdrop, the “right to damages” referenced in Article 35 is the cause of action under the
Montreal Convention by which a passenger or consignor may
hold a carrier liable for damage sustained to passengers, baggage, or cargo. It is plain that Chubb’s action against UPS
asserted such a right. But it is equally plain that UPS’s thirdparty action against Qantas does not. UPS does not seek compensation for damage sustained to the engine; rather, UPS, as
a contracting carrier, seeks indemnification (and contribution)
from Qantas, as an actual carrier, for such compensation it has
already paid Chubb.
[3] While the Montreal Convention does not create a cause
of action for indemnification or contribution among carriers,
it does not preclude such actions as may be available under
local law. See In re Air Crash at Lexington, KY, No. 5:07-CV316, 2007 WL 2915187 (E.D. Ky. Oct. 5, 2007) (holding that
the Montreal Convention does not preempt a local law cause
of action for apportionment among joint tortfeasors); cf.

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Sompo Japan Ins., Inc. v. Nippon Cargo Airlines Co., Ltd.,
522 F.3d 776, 785-87 (7th Cir. 2008) (holding the same for
the Warsaw Convention). The Montreal Convention refers to
these local law causes of action for indemnification, contribution, apportionment, or set-off, not as a “right to damages,”
but as a “right of recourse.” This is the right UPS seeks to vindicate in its action against Qantas.
[4] Article 37, entitled “Right of recourse against third parties,” provides: “Nothing in this Convention shall prejudice
the question whether a person liable for damage in accordance
with its provisions has a right of recourse against any other
person.” If Article 35 were construed to extinguish a carrier’s
“right of recourse” at the expiration of the specified two-year
period, then the Convention would do precisely what Article
37 says it does not: “prejudice the question whether a person
liable for damage . . . has a right of recourse against any other
person.” To avoid an explicit conflict between Articles 35 and
37, the “right to damages” extinguished by Article 35 must be
understood not to include a carrier’s “right of recourse”
against another carrier. This reading is consistent with other
portions of the Montreal Convention which use “right of
recourse” to refer to suits between carriers. See Montreal Convention, supra, art. 48 (referring to “the rights and obligations
of the carriers between themselves, including any right of
recourse or indemnification”). In other words, because an
action between carriers for indemnification or contribution is
premised on the “right of recourse,” rather than the “right to
damages,” Article 35’s time bar does not apply. Instead, the
timing of such an action is governed by local law.
Article 45 supports this conclusion. It provides that “an
action for damages may be brought . . . against [the actual]
carrier or the contracting carrier, or against both together or
separately. If the action is brought against only one of those
carriers, that carrier shall have the right to require the other
carrier to be joined in the proceedings, the procedure and
effects being governed by the law of the court seized of the

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case.” Id. art. 45 (emphasis added). Thus, where an action is
brought against one carrier within Article 35’s two-year
period, “that carrier shall have the right to require” other carriers “to be joined in the proceedings,” and that third-party
action will be subject to “the procedures and effects” of local
law, not the strictures of Article 35.3
Finally, it is worth noting that Article 35 only mandates
that “the right to damages shall be extinguished if an action
is not brought within a period of two years.” Id. art. 35
(emphasis added). It does not require that “all actions” relating to a particular event must be brought within two years.
Thus, if a party has timely brought an action for damages
against an actual carrier or a contracting carrier, nothing in
Article 35 prevents the defendant carrier from exercising its
Article 45 right to “require the other carrier to be joined in the
proceedings,” subject to the “procedure and effects” of local
law. See id. art. 45.
[5] Accordingly, the plain language of the Montreal Convention makes clear that actions for indemnification and contribution are not subject to Article 35’s two-year statute of
limitations.
3

Where, as here, the “court seized of the case” is a federal district court,
the Federal Rules of Civil Procedure furnish the applicable law. And
where, as here, the contracting carrier seeks to bring in the actual carrier
as a third party, the applicable rule is Federal Rule of Civil Procedure 14,
which provides:
A defending party may, as third-party plaintiff, serve a summons
and complaint on a nonparty who is or may be liable to it for all
or part of the claim against it. But the third-party plaintiff must,
by motion, obtain the court’s leave if it files the third-party complaint more than 14 days after serving its original answer.
Fed. R. Civ. P. 14(a)(1). Qantas does not dispute that UPS’s filing of its
third-party complaint complied with Rule 14.

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B
Qantas argues that, because Article 35 of the Montreal
Convention is substantially identical to Article 29 of the Warsaw Convention, which it superseded,4 we must follow preMontreal Convention precedent interpreting Article 29. And,
to be sure, some of those cases did hold that Article 29 of the
Warsaw Convention applied to third party actions for indemnity and contribution. See Motorola, Inc. v. MSAS Cargo Int’l,
Inc., 42 F. Supp. 2d 952, 956 (N.D. Cal. 1998); Data Gen.
Corp. v. Air Express Int’l Co., 676 F. Supp. 538, 540-41
(S.D.N.Y. 1988); Split End Ltd. v. Dimerco Express (Phils)
Inc., No. 85 Civ. 1506, 1986 WL 2199, at *6 (S.D.N.Y. Feb.
11, 1986); L.B. Smith, Inc. v. Circle Air Freight Corp., 488
N.Y.S.2d 547, 549-50 (Sup. Ct. 1985).
We have considered these cases, but find their textual analysis unpersuasive. Instead, we are guided by the Ontario
Supreme Court of Canada’s ruling that Article 29 of the Warsaw Convention does not apply to suits brought by one carrier
against another. See Connaught Laboratories Ltd. v. Air Canada (1978), 23 O.R. 2d 176 (Can. Ont. Sup. Ct. J.).5 “Such
claims,” the court held, were not “intended to be included,
within the purview of The Warsaw Convention,” which,
“deals with the claims of passengers, consignors and consignees, and the liability of carriers therefor,” not “with the claims
of carriers inter se.” Id. ¶ 26.
Still, Qantas insists that the decisions it cites, despite having been issued by trial courts, are binding on this Court. This
4

See Convention for the Unification of Certain Rules Relating to International Transportation by Air, Oct. 12, 1929, 49 Stat. 3000, 137 L.N.T.S.
11, art. 29 (“Warsaw Convention”).
5
Warsaw Convention precedent includes the judicial opinions of our sister signatories. Cf. Air France v. Saks, 470 U.S. 392, 404 (1985) (deeming
“the opinions of our sister signatories to be entitled to considerable
weight” on matters of treaty interpretation (internal quotations marks
omitted)).

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is so, Qantas maintains, because the Montreal Convention’s
drafting history supposedly makes clear that then-existing
Warsaw precedent was not to be overruled. We are not
allowed to consider the treaty’s drafting history, however,
because its text is unambiguous. See Chan, 490 U.S. at 134
(asserting that, when interpreting unambiguous treaties, courts
must “be governed by the text—solemnly adopted by the governments of many separate nations—whatever conclusions
might be drawn from the [treaty’s] intricate drafting history”).6
III
For the foregoing reasons, we REVERSE the judgment of
the district court and REMAND the case for further proceedings not inconsistent with this opinion.
REVERSED and REMANDED.

6

After oral argument, we invited amicus briefs addressing, inter alia,
how precedent interpreting Article 29 of the Warsaw Convention should
affect our interpretation of Article 35 of the Montreal Convention. We
would like to thank all the amici who responded to our request.