Commentary: All that glitters

Chris Dupin, maritime and intermodal editor of American Shipper, examined the importance of protecting high-value parcel deliveries, using the outcome of Golden Hawk Metallurgical’s case against FedEx for the loss of two shipments as an example.

   The need to protect high-value parcel deliveries was underscored in a recent decision by a federal court in Michigan.
   Golden Hawk Metallurgical, a Livonia, Mich.-based firm, sought recovery from FedEx for the loss of two shipments in August 2015 (Golden Hawk Metallurgical Inc. v. Federal Express Corp. U.S. District Court, E.D. Michigan. No. 15-14005. Oct. 4, 2016).
   One shipment to a customer in Ohio had the equivalent of four gold bars inside with a value of $23,700 or more; the other, sent to a customer in Massachusetts, contained diamonds and buffing sweeps with a value of $9,860 or more. (Polishing sweeps contain sandy grit, grease used as a binder, lint from buffs, and small amounts of gold that can be refined).
   Golden Hawk said in its court filings it handed both packages to a FedEx employee at a FedEx Office retail location, and that both were in the sole possession of the FedEx the entire time.
   When the packages arrived at their respective destinations in Ohio and Massachusetts, however, the original contents from both were missing and had been replaced with rocks.
   A memo from a FedEx security specialist to the Ohio firm said, “It was determined that both packages would have had the rocks placed in them at one of the origin points based on the size of the rocks used, and the weight change in the system. The origin points consist of: the FedEx Office where the packages were dropped off by the shipper, the local FedEx station that picked up the packages, and the airport location the packages went to. There is no evidence that these are the locations where the switch took place, but it is the most likely scenario.” He suggested Golden Hawk contact the police in the town where the packages were dropped off.
   The firm filed a lawsuit in state court in Michigan in October 2014 where it asserted three theories of liability: Count I, breach of contract; Count II, breach of duty as a bailee; and Count III, conversion. Golden Hawk argued that under the conversion count, it was entitled to multiply the damages by a factor of three, for a total of $167,800 or more, plus reasonable attorney fees and costs.
   FedEx in November 2015 moved to send the case to federal court and moved for summary judgment, arguing federal law preempts counts II and III and limits dam- ages under Count I to $100 per shipment.
   The court found the terms and conditions of the contract appeared on the airbills and expressly limited FedEx’s liability to $100, “unless a higher value is declared and paid for.”
   Golden Hawk, however, “did not declare a value on either shipment, nor did plaintiff pay a value higher than $100 in relation to either shipping contract,” according to its decision.
   On counts II and III, the company asked the court to enforce Michigan statutory and common law, but FedEx argued the Airline Deregulation Act (ADA) of 1978 preempted both claims, entitling it to judgment as a matter of law.
   The court ultimately agreed with FedEx, explaining that the U.S. Supreme Court in a 1992 decision (Morales v. Trans World Airlines, Inc., 504 U.S. 374, 384) determined that Congress included a broad preemption provision to promote competition and “en- sure that the states would not undo federal deregulation with regulation of their own.”
   More recently, the Sixth Circuit in Solo v. United Parcel Service Co., 819 F.3d 788, 797-98, considered whether the ADA preempted a plaintiff’s claim of unjust enrichment.
   The court did not rule on the issue, but it suggested the claim would not be preempted. “[U]njust enrichment serves to ‘effectuate the intentions of parties or to protect their reasonable expectations, and thus looks to the particular parties to a transaction rather than a universal, state imposed obligation,’” it said.
   The First Circuit has taken a different view, holding that the ADA preempts state law claims for unjust enrichment.
   In this case, the court held since counts II and III allege violations of “state-imposed obligations”apply universally that they were preempted by the ADA, and therefore granted FedEx’s motion for dismissal.
   As to Count I, while Golden Hawk alleged FedEx was liable in breach of contract for the full value of the missing metals and gems, FedEx argued the terms and conditions of the shipping contracts unambiguously limited its liability to $100.
   The court agreed “that the terms limiting liability are unambiguous and enforceable,” entitling FedEx to summary judgment, noting the terms at issue appeared on FedEx airbills and in the FedEx Service Guide.
   “The airbills’ bottom sections are not cluttered, nor are their essential conditions buried among a litany of immaterial terms,” the court added. “The airbills thus provide ‘conspicuous warnings’ of defendant’s limited liability, and plaintiff has not offered evidence showing that defendant behaved in any way to render the contracts’ terms less clear.”
   The court found the limited liability provisions at issue satisfied a “reasonable notice” test, and granted FedEx’s motion for partial summary judgment.
   As a result, Golden Hawk’s claims for conversion and breach of duty as bailee were dismissed, and the claims for breach of contract were limited to $100 per shipment. The case was referred to a magistrate judge for a settlement conference, and a month after the decision, Golden Hawk and FedEx mutually agreed to dismiss the suit.