FINESTONE v. CONTINENTAL AIRLINES INC (2003)

Order unanimously reversed without costs, plaintiff's cross motion granted and summary judgment awarded to plaintiff in the sum of $1,250.

Plaintiff commenced the instant action seeking to recover damages in the sum of $21,820 for luggage allegedly lost by defendant Continental Airlines, Inc. (hereinafter “Continental”) on April 16, 1998, upon plaintiff's return flight from Chicago to Newark Airport.   Plaintiff's theory of recovery is breach of bailment based on defendant's alleged gross negligence, which plaintiff argues consists 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, inter alia, 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.   In separate orders, the court denied Continental's motion and plaintiff's cross motion, finding that there were issues of fact requiring a trial.   For the reasons set forth below, summary judgment should be awarded plaintiff in the sum of $1,250.

Prior to the enactment of the Airline Deregulation Act of 1978 (hereinafter “ADA”) (49 USC § 41713), which largely deregulated domestic air transport (see American Airlines, Inc. v. Wolens, 513 U.S. 219, 222, 115 S.Ct. 817, 130 L.Ed.2d 715), it was well settled that actions against interstate carriers for lost or damaged shipments were governed by federal common law (see generally Nippon Fire & Marine Ins. Co. v. Skyway Freight Systems, Inc., 235 F.3d 53, 59 [2d Cir.2000];  Read-Rite Corp. v. Burlington Air Express, Ltd., 186 F.3d 1190, 1195-1199 [9th Cir.1999];  Sam L. Majors Jewelers v. ABX, Inc., 117 F.3d 922, 926-929 [5th Cir.1997];  Insurance Co. of North America v. Federal Express Corp., 189 F.3d 914, 924-927 [9th Cir.1999] [W. Fletcher, J., concurring] ).

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” (Nippon Fire & Marine Ins. Co., supra at 59);  Read-Rite Corp., supra at 1195-1199;  Sam L. Majors Jewelers, supra at 928-929;  Arkwright-Boston Manufacturers Mutual Ins. Co. v. Great Western Airlines, Inc., 767 F.2d 425, 427 [8th Cir.1985];  First Pennsylvania Bank, N.A. v. Eastern Airlines, Inc., 731 F.2d 1113, 1119-1122 [3rd Cir.1984];  Owens-Corning Fiberglas Corp. v. U.S. Air, 853 F.Supp. 656, 664-665 [E.D.N.Y.1994].   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 U.S. 374, 378, 112 S.Ct. 2031, 119 L.Ed.2d 157) 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' ” (Morales, supra at 384, 112 S.Ct. 2031).   The ADA also contains a “saving clause” which provides that “[a] remedy under this part is in addition to any other remedies provided by law” (49 USC § 40120 [c] ).

In American Airlines, Inc. v. Wolens (513 U.S. 219, 115 S.Ct. 817, 130 L.Ed.2d 715, supra), the Supreme Court held that “[t]the ADA's preemption clause ․ read together with the ․ saving clause, stops states from imposing their own substantive standards with respect to rates, routes, or services” (id. at 232, 115 S.Ct. 817), 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” (id. at 228, 115 S.Ct. 817).   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 (id. at 228-229, 115 S.Ct. 817).   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” (id. at 233, 115 S.Ct. 817).

 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 (see Read-Rite Corp. v. Burlington Air Express, Ltd., supra at 1198).  “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’ ” (id., quoting Charas v. Trans World Airlines, Inc., 160 F.3d 1259, 1265, 1261;  see also Insurance Co. of North America v. Federal Express Corp., 189 F.3d 914, 926 [9th Cir.1999] [W. Fletcher, J., concurring] supra ).   Plaintiff's claim does not arise merely out of an alleged routine contractual breach by defendant (cf.   AIT International v. Federal Express Corp., 278 A.D.2d 439, 719 N.Y.S.2d 255).   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” (American Airlines, Inc. v. Wolens, supra at 232, 115 S.Ct. 817) which are preempted by the ADA (accord Boon Ins. Agency, Inc. v. American Airlines, Inc., 17 S.W.3d 52 [Texas Ct.App.2000];  Howell v. Alaska Airlines, Inc., 99 Wash.App. 646, 994 P.2d 901 [2000];  Leonard v. Northwest Airlines, Inc., 605 N.W.2d 425 [Minn.Ct.App.2000], cert. denied 531 U.S. 876, 121 S.Ct. 183, 148 L.Ed.2d 127;  Blackner v. Continental Airlines, Inc., 311 N.J.Super. 10, 709 A.2d 258, [App.Div.1998], cert. denied 525 U.S. 1142, 119 S.Ct. 1034, 143 L.Ed.2d 42 [1999] )

 To the extent that Kim v. U.S. Air, Inc., 171 Misc.2d 532, 655 N.Y.S.2d 253, relied upon by plaintiff, is inconsistent with our determination herein, it is not controlling upon this court.   The sufficiency of Continental's compliance with the notice requirements of the federal regulations governing limitation of liability provisions for baggage (see 14 CFR 253.1 et seq., 254.1 et seq.) is governed by federal statutory and common law (see Gluckman v. American Airlines, Inc., 844 F.Supp. 151 [S.D.N.Y.1994];  Wells v. American Airlines, Inc., 1991 WL 79396 [S.D.N.Y.1991] ).

Inasmuch as Continental concedes that plaintiff is entitled, under the circumstances presented, to recover the sum of $1,250, summary judgment is awarded plaintiff for said amount.

MEMORANDUM.