THE ROGAK REPORT: 2 December 2003
- AIRLINE PASSENGER'S CLAIM FOR LOST LUGGAGE IS LIMITED BY TERMS OF
Finestone v. Continental Airlines, Inc., 759 N.Y.S.2d 623 (App. Term
Plaintiff commenced suit seeking to recover damages in the sum of
$21,820 for luggage allegedly lost by Continental Airlines upon
plaintiff's return flight from Chicago to Newark. Plaintiff's theory
of recovery was breach of bailment based on defendant's alleged gross
negligence, which plaintiff argued consisted of Continental's failure
to inspect the claims checks at the baggage area exit, and the lack
of security to prevent outsiders from entering into the baggage
pickup area. Continental moved for summary judgment dismissing the
complaint on the ground that its liability, if any, is limited to
$1,250, pursuant to the Terms and Conditions of Contract of Carriage,
which were made part of, and incorporated into, the air waybill by
the Notice of Incorporated Terms of Contract of Carriage appearing on
the back of plaintiff's passenger tickets and boarding pass, as well
as on a Notice of Baggage Liability Limitations included on the
ticket jacket issued by Continental. In the alternative, Continental
argued that there were adequate security measures in place in its
baggage claim area. Plaintiff cross-moved for summary judgment on the
issue of liability, and argued that the limitation of liability
contractual provision did not apply to grossly negligent conduct.
Plaintiff further asserted that Continental was precluded from
introducing the Notice of Baggage Liability Limitations into evidence
because it was in 6 point type size in violation of CPLR 4544. Civil
Court denied Continental's motion and plaintiff's cross motion,
finding that there were issues of fact requiring a trial. The
Appellate Term reversed.
Prior to the enactment of the Airline Deregulation Act of 1978
("ADA") (49 USC § 41713), which largely deregulated domestic air
transport, it was well settled that actions against interstate
carriers for lost or damaged shipments were governed by federal
common law. Following the enactment of the 1978 ADA, most federal
courts, including the Second Circuit, have held that "federal common
law continues to control the issue of liability of air carriers for
lost or damaged shipments even after deregulation." The ADA contains
a preemption clause providing in pertinent part as follows: "[A]
state ... may not enact or enforce a law, regulation, or other
provision having the force and effect of law related to price, route,
or service of an air carrier" (49 USC § 41713[b]). The purpose of
the clause was "[t]o ensure that the States would not undo federal
deregulation with regulations of their own" (Morales v. Trans World
Airlines, Inc., 504 US 374). Consistent with this purpose, the
Supreme Court has accorded a broad construction to the "related to"
language of the preemption clause, as "having a connection with, or
reference to, airline 'rates, routes, or services.'"
In American Airlines, Inc. v. Wolens (513 US 219), the Supreme Court
held that "[t]he ADA's preemption clause ... stops states from
imposing their own substantive standards with respect to rates,
routes, or services" but that the ADA does not preempt routine
breach of contract claims since these "suits alleg[e] no violation of
state-imposed obligations, but seek recovery solely for the airlines'
alleged breach of its own, self-imposed undertakings." The "terms and
conditions airlines offer and passengers accept are privately ordered
obligations" which do not amount to a State's enforcement of any rule
or standard. The Supreme Court stated that "[t]his distinction
between what the state dictates and what the airline itself
undertakes confines courts, in breach-of-contract actions, to the
parties' bargain, with no enlargement or enhancement based on state
laws or policies external to the agreement."
In the instant case, plaintiff's claim pertains to the standards of
limited liability of an air carrier for loss or damage to baggage and
is thus directly related to the rates and services of an air
carrier. "Allowing states to decide individually when and how a
common air carrier may limit its liability would 'significantly
impact federal deregulation' ... and would 'adversely affect the
economic deregulation of the airlines and the forces of competition
within the airline industry'". Plaintiff's claim does not arise
merely out of an alleged routine contractual breach by defendant.
Rather, plaintiff seeks to invalidate the contractual limitation of
liability clause based upon the state common law of bailment and
tort. Thus, the determination of plaintiff's claim requires
consideration of, and giving effect to, "state laws or policies
external to the agreement" which are preempted by the ADA.
The sufficiency of Continental's compliance with the notice
requirements of the federal regulations governing limitation of
liability provisions for baggage (14 CFR 253.1 et seq., 254.1 et
seq.) is governed by federal statutory and common law.
"Inasmuch as Continental concedes that plaintiff is entitled, under
the circumstances presented, to recover the sum of $1,250, summary
judgment was awarded plaintiff for said amount," ruled the Court.