Eastern Air Lines, Inc. v. Mahfoud – Oral Argument – January 15, 1985

Media for Eastern Air Lines, Inc. v. Mahfoud

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Warren E. Burger:

Mr. Sharp, you may proceed whenever you’re ready.

Richard M. Sharp:

Mr. Chief Justice and may it please the Court:

This case, like the preceding case, also is governed by the Warsaw Convention as that convention is supplemented by the Montreal Agreement.

Now, the question here is whether pre-judgment interest may be awarded in excess of the limitation of liability that is set forth in those agreements.

In this case, we unfortunately do have an accident.

In June of 1975, Eastern Flight 66 crashed short of the runway at Kennedy International Airport in New York City.

As a result of that crash, approximately 91 cases were brought in the federal courts.

These cases were consolidated in the Eastern District of New York.

They were consolidated for the purposes of pre-trial discovery and then a liability trial was held.

Now, among these 91 cases were a number of cases involving passengers who were engaged in international carriage when the plane crashed.

Now, as to these passengers… that is, those passengers who were engaged in international carriage… both the witness and the Montreal Agreement apply.

Under those agreements, a carrier’s liability is limited to $75,000 per passenger.

In these international cases, Eastern moved for partial summary judgment.

The basis of its motion was that partial summary judgment should be given in the form of an order that would limit Eastern’s liability to $75,000 in the international passenger cases.

In this particular case, the case involving Bernard and Odile Mahfoud, Eastern’s motion was ultimately granted by the judge sitting in the Western District of Louisiana.

The judge sustained Eastern’s position, but he also sustained Respondent Mahfoud’s position, which was that, even though the limitation of liability amounts to $75,000 pre-judgment interest may be awarded on top of that amount.

Warren E. Burger:

What would you say about post-judgment interest?

Richard M. Sharp:

Your Honor, we think that post-judgment interest is not presented to the Court.

It is a different type of award.

Post-judgment interest reflects interest that is to be earned on a debt that has been liquidated.

Warren E. Burger:

Post-judgment interest is simply interest on a debt, is it not?

Richard M. Sharp:

That’s right.

Pre-judgment interest is an element of the Plaintiff’s compensatory damages.

It’s an effort to bring the Plaintiff’s damages up to the date of judgment.

Pre-judgment interest, for example, is often awarded by juries, if not by judges sitting as the trier of fact.

In this case, we contend that the courts below failed to give the full intended purpose and effect to the limitation of liability found in the Warsaw Convention and the Montreal Agreement.

Now, at the outset I want to make clear that the limit of liability that must be applied by the Court to this case is the limitation of liability that is contained in the Montreal Agreement, but the Montreal Agreement must be interpreted in light of its historical context as a highly specific amendment to the Warsaw Convention.

John Paul Stevens:

Mr. Sharp, would you help me by telling me where in the papers the language you rely on is found?

Richard M. Sharp:

Yes, Your Honor.

On page 3 of our brief are the provisions of the Warsaw Convention.

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Richard M. Sharp:

At page 4 is… sorry, 3 and 4 are the provisions of the Montreal Agreement.

We have attached as an appendix to this brief a more fuller statement of the Montreal Agreement.

It’s sometimes more difficult to locate in the library than the Warsaw Convention.

The Warsaw Convention here is the basic document.

It governs international air carriage among 120 signatory nations.

The Montreal Agreement, when it’s applicable, is applicable because it simply makes two changes in the Warsaw Convention system.

The changes are that the Montreal Agreement raises the level or the limit of liability; and the second change is that the Montreal Agreement waives one of the carriers’ primary defenses.

It’s the Article 20 defense.

Now, because the Montreal Agreement and the limit of liability in that agreement is an extension of the limit of liability found in the Warsaw Convention, it’s appropriate to look first at the language of the Warsaw Convention, and the special language of limitation in that convention is found at page… or at Article 22.1, and that is at page 3 of our opening brief.

Now, Article 22.1 contains three sentences, and the first sentence limits the carrier’s liability to a fixed sum.

The second sentence then goes on to create a narrow exception to that limit.

The exception is for those nations that require defendants to make periodic payments to the plaintiff rather than making a lump sum payment to the plaintiff.

And then the third sentence provides a means for raising the level of the limit, and that means is by special contract between the carrier and the passenger.

Thurgood Marshall:

But suppose, Mr. Sharp, the Defendant used excessive delaying tactics before and during the trial and the judge decided to penalize him $5,000?

Richard M. Sharp:

Your Honor, if the penalty were in the form of a sanction for a violation of court orders or court rules, we believe that that would not come within the–

Thurgood Marshall:

Well, weren’t there some delays charged in this?

Richard M. Sharp:

–Well, Your Honor, I don’t believe there were delays charged.

The courts in Louisiana, particularly the Fifth Circuit… I’m sorry, the district court in Louisiana… noted that there had been considerable passage of time.

The point that the court said that we had been dilatory about was that we had raised an objection to a motion for summary judgment, but our objection was sustained in the Court of Appeals, the Second Circuit sitting, to determine that our position was in fact the correct one.

I think the fundamental point to grasp here in terms of the delay is that Eastern answered this complaint approximately six weeks after it was filed.

At that time we said that the Warsaw Convention and the Montreal Agreement limit our liability.

At any time from that point on, had the Plaintiff chosen, he could have moved for a complete summary judgment asking the carrier to pay the sum of $75,000, and that would have extinguished the liability that Eastern had to that Plaintiff.

That motion for complete summary judgment was never made in this case.

The Warsaw Convention, its limitations on liability, were pressed by the carrier, not by the Plaintiffs.

I wanted to return now to the first sentence in Article 21.

Now, that sentence states that in the transportation of passengers the liability of the carrier for each passenger shall be limited to the sum of 125,000 francs.

Now, it’s important to consider here what the drafters of this sentence did.

First of all, they did not place the limit on a certain part of the Plaintiff’s recovery.

Rather, they wrapped the limit around the concept of the carrier’s liability.

Now, I want to reach now beyond this first sentence a bit to discuss this idea of liability in terms of the convention as a whole.

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Richard M. Sharp:

The concept of liability that is referred to in the first sentence is a liability that is to be determined by a court.

It’s the liability of the carrier at the time the Plaintiff’s claim is reduced to a liquidated sum.

That is normally when the Plaintiff’s claim is reduced to judgment.

The Warsaw Convention in its many parts, first of all it creates forums for the Plaintiff, jurisdiction in certain national courts.

Second, it creates liability for the carrier.

Third, it creates defenses for the carrier.

Fourth, it incorporates national law to determine the amount of damages that may be due to the Plaintiff.

The upshot is that this convention, the basic purpose of the convention, the basic effect of the convention, is to create liability and to bring that liability to judgment.

And it’s that liability that is covered by the limit found in Article 22.1, the first sentence.

Now, we get confirmation of that position from the second sentence in Article 22.1.

The second sentence we believe again confirms that the liability that must be limited is the carrier’s liability at the time of the judgment.

I would like to read the second sentence.

Its text is that:

“Where, in accordance with the law of the court to which the case is submitted, damages may be awarded in the form of periodical payments, in that event, the equivalent capital value of said payments shall not exceed 125,000 francs. “

–125,000 francs, of course, being the limit fixed in sentence one.

Now, this second sentence is the only sentence in the convention that speaks to the time value of money and also of the limitation on liability.

Now, what the second sentence does is it expressly authorizes national courts to order carriers to pay out more than 125,000 francs if they do it over a period of years.

But the sentence makes plain that the limit… that is, the limit contained in the first sentence… requires that these payments not exceed the capital value of 125,000 at the date of the award.

Thurgood Marshall:

At what rates?

Richard M. Sharp:

There is no specification of the rate.

I take it at the date of judgment one would use an annuity table or the like to determine the appropriate rate for the period.

Warren E. Burger:

Is that what has been done?

Richard M. Sharp:

Your Honor, this is principally a procedure followed in Germany, and the minutes of the Warsaw Convention, the German delegates submit a paper that they would purchase an annuity or require the payment of an annuity under the German system.

I gather that the civil code today of Germany also provides that.

Warren E. Burger:

I thought you meant on the date of closing they would buy an annuity, whatever annuity could be provided for $75,000.

Richard M. Sharp:

Yes, yes.

I think in modern court terminology this would resemble what we call a structured settlement today.

It would be an annuity purchased at the date of judgment or provided for by the Defendant at the date of judgment.

Now, I want to direct the Court’s attention then to another article of the convention, and that is Article 24.2.

This article appears at page 4 of the reply brief, and in this article the drafters of the convention have undertaken to remind national courts that they may not apply their local laws regarding damages in a way that places some of the recovery outside of the limit.

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Richard M. Sharp:

Article 24.2 states… and I’m going to interpolate here because the cross-referencing is very cumbersome.

But Article 24.2 states that in the cases covered by Article 17… that is, cases involving death or bodily injury… any action for damages, however founded, can only be brought subject to the conditions and limits set out in this convention.

In other words, this is the gentle reminder back to the national courts.

Don’t rework your damage concepts, your damage laws, in a way that attempts to circumvent the limit of liability.

John Paul Stevens:

Mr. Sharp, may I just ask on the periodic payments sentence.

You refer to the fact that the amount shall not exceed the 125,000 francs as of the date of judgment.

Richard M. Sharp:

Yes.

John Paul Stevens:

It doesn’t say date of judgment here.

Are there cases that refer to that date?

Richard M. Sharp:

Your Honor, I take it from the language of the text, and this is how I do it.

First, you have to determine the law that is to be applied, and it’s the law of the court to which the case is submitted.

You can have as many as four different international form in the Montreal system.

So you have to have the suit on file before you know which national law is going to apply.

But then, more particularly in response to your question, it refers to damages being awarded in the forum of periodic payments.

And it’s the fact of the award, the awarding of damages.

John Paul Stevens:

But if the law in this certain place were settled the damage issue should always be computed as of the date of injury… I’m not suggesting that’s the law in any state… then one could read it differently.

I kind of thing that’s the issue in the case, whether or not it’s correct to insert the words “from the date of judgment”.

Richard M. Sharp:

We have no indication, in either the history drawn from the minutes of the Warsaw Convention or our own research, that there is any computing done prior to the date of judgment.

John Paul Stevens:

But is there any indication that that is the date from which computing should be done?

Richard M. Sharp:

Well, yes?

I looked into the rest of the convention.

It conceives of a claim that is being brought to judgment.

The idea of liability itself must be liquidated, it must be reduced to a sum certain.

When you have a limit such as they designed here, a limit of 125,000 francs, the limit is not applicable… that is, it’s not able to be applied… until you know the amount of the Plaintiff’s claim or the amount of the carrier’s liability, that is, since it’s the limit on liability.

And this convention then provides the means for determining the liability in a judicial proceeding.

So it’s reading a number of provisions together, plus the specific language in the second sentence that speaks of awards or awarding damages, that leads me to believe that the critical point for determining the value of the limit is the time of judgment.

Now, what we conclude from the text of the Warsaw Convention is that it… first of all, it covers all elements.

That is, the limitation on liability covers all elephants of the Plaintiff’s recovery against the carrier.

And second, as I mentioned to Justice Stevens, the limit fixes the carrier’s maximum liability as of the date of the judgment.

Now, the lower court in its ruling that pre-judgment interest can be awarded over and above the limitation of liability is inconsistent with this reading of the Warsaw Convention that I have tried to give to the Court.