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THE ROGAK REPORT: 2 December 2003

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    AIRLINE PASSENGER S CLAIM FOR LOST LUGGAGE IS LIMITED BY TERMS OF CONTRACT Finestone v. Continental Airlines, Inc., 759 N.Y.S.2d 623 (App. Term 2003) Plaintiff
    Message 1 of 1 , Dec 1, 2003
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      AIRLINE PASSENGER'S CLAIM FOR LOST LUGGAGE IS LIMITED BY TERMS OF
      CONTRACT

      Finestone v. Continental Airlines, Inc., 759 N.Y.S.2d 623 (App. Term
      2003)

      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][1]). 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.
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