The Limited Stores, Inc. v. Pan American World Airways, Inc. - Ohio Supreme Court Opinion - Ohio Supreme Court Decision

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OPINIONS OF THE SUPREME COURT OF OHIO
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The Limited Stores, Inc., Appellant and Cross-Appellee, v.
Pan American World Airways, Inc., Appellee and Cross-Appellant;
Sea Insurance Co. et al., Appellees.
Civil procedure -- In a case subject to provisions of Warsaw
Convention, prejudgment interest may be awarded by the
fact-finder as an element of compensation, when.
[Cite as The Limited Stores, Inc. v. Pan American World
Airways, Inc. (1992), Ohio St.3d .]
(No. 91-582 -- Submitted April 14, 1992 -- Decided
September 23, 1992.)
Appeal from the Court of Appeals for Franklin County, No.
89AP-502.
On November 24, 1985, Pan American World Airways, Inc.
("Pan Am"), appellee and cross-appellant, accepted delivery in
Paris, France of approximately twenty thousand articles of
women's apparel for air shipment to New York. The apparel
consisted of floral denim jeans, skirts and overalls that had
been manufactured under the Americanino brand in Italy and
purchased by The Limited Stores, Inc. ("The Limited"),
appellant and cross-appellee.
The shipments arrived at John F. Kennedy Airport in New
York on November 24 and 25, 1985. The Pan Am inside storage
facilities were apparently full, so the boxes containing the
clothing were left stacked on pallets in an outside storage
area during a rainfall. When The Limited's agent, A.W. Fenton
& Co., Inc., picked up the garments on November 26, 1985, a
notation was made on the delivery receipt that the goods were
"very wet."
On November 26, 1985, Pan Am notified Chubb Group of
Insurance Companies ("Chubb Group"), the manager for
defendant-appellee Sea Insurance Company Ltd. ("Sea
Insurance"), its insurance carrier, of the damaged shipment.
A.W. Fenton & Co., Inc. then delivered the garments by truck to
The Limited's corporate headquarters in Columbus, Ohio. Chubb
Group subsequently retained defendant-appellee Intermodal
Technical Services, Inc. ("ITS"), a wholly owned subsidiary of
defendant-appellee GAB Business Services Inc. ("GAB"), to
survey the damaged goods.

An ITS employee, defendant-appellee Robert Maldeis,
inspected the goods on December 2, 1985 and told The Limited's
personnel that the shipment appeared to be a total loss. After
Sea Insurance refused to pay The Limited's claimed loss, The
Limited aired out the garments and in January distributed those
that were salvageable to its retail stores. By that time,
however, the Christmas selling season was virtually over, and
the transitory fashion trend these garments were designed to
meet had already peaked. Although The Limited immediately
marked down the price of the garments upon placement in their
stores, consumer interest in, and sales of, these garments were
minimal. In preparation for the spring selling season, The
Limited then recalled the garments as part of a general recall
of inventory. Some of the recalled garments were sold to a
distributor in a secondary market; others were donated to
charity.
The Limited brought this action claiming it was entitled
to recover damages from Pan Am for its negligence and from Sea
Insurance, ITS, GAB, and Maldeis (collectively the "insurers
and agents") on the basis of promissory estoppel. On November
28, 1988, the cause came on for a jury trial. After the close
of the Limited's case, GAB, ITS, Sea Insurance and Maldeis
moved for a directed verdict on The Limited's promissory
estoppel claim. The trial court subsequently granted the
motion.
The trial court also granted Pan Am's motion for a partial
directed verdict restricting The Limited's potential recovery
to the wholesale rather than retail value of the garments.
Although the court eventually instructed the jury to consider
the fair market value of the goods in its deliberations and did
not, in those instructions, restrict The Limited's potential
recovery to the wholesale value of the garments1, the court
precluded The Limited's counsel from arguing to the jury that
the retail value of the garment was the proper measure of the
fair market value of the garments, effectively limiting The
Limited's potential recovery.
The jury found Pan Am liable, and in response to a special
interrogatory found that thirty percent of the garments had
been damaged by rainfall. The jury awarded The Limited
$141,974.20 on its claim against Pan Am, to which sum the trial
court added prejudgment interest. Pan Am's subsequent motion
for judgment notwithstanding the verdict was denied. Upon an
appeal by The Limited challenging both the jury's verdict and
the directed verdict, and a cross-appeal by Pan Am concerning
the trial court's assessment of prejudgment interest, the court
of appeals affirmed in full the judgment of the trial court.
In so ruling, the court held that although it was error for the
trial court to direct a verdict restricting the fair market
value of the garments to their wholesale value, the error was
nonprejudicial.
The cause is now before this court upon the allowance of a
motion and cross-motion to certify the record.

Schwartz, Kelm, Warren & Rubenstein, Russell A. Kelm and
John A. Gleason, for appellant and cross-appellee.
Vorys, Sater, Seymour and Pease, Michael G. Long and
Patricia A. Davidson, for appellee and cross-appellant.

Hamilton, Kramer, Myers & Cheek, Austin P. Wildman and
Thomas J. Conkle, for appellee Sea Insurance Company.
Roetzel & Andress and John P. Mazza, for appellees GAB
Business Services, Inc. et al.

Per Curiam. This case concerns the liability of an air
carrier for damage to an international shipment of retail
goods. By that description, the case seems deceptively
simple. The issues this case raises, however, include the
applicability of the law of two states and an international
treaty under a complicated set of facts. We address each of
the issues raised by appellant and cross-appellant in turn.
I
We first must determine what substantive law applies to
the issues in this case. As both the trial court and the court
of appeals correctly concluded, the "Convention for Unification
of Certain Rules Relating to International Transportation by
Air" commonly referred to as the "Warsaw Convention
("Convention")2 provides the basic legal framework within which
the dispute between Pan Am and The Limited is to be decided.
The Convention was designed to provide uniform, world-wide
rules of liability for losses sustained by air passengers and
shippers of goods during international transportation by air.
Reed v. Wiser (C.A.2 1977), 555 F.2d 1079, 1090, certiorari
denied (1977), 434 U.S. 922, 98 S.Ct.399, 54 L.Ed.2d 279. As
specified in Article 1 of the Warsaw Convention, the Convention
applies to "all international transportation of persons,
baggage, or goods performed by aircraft for hire."3 Article 18
of the Convention provides that a carrier shall be liable for
damage to goods occurring during "transportation by air" of
those goods.
The effect of the Warsaw Convention is place liability for
damage or personal injury on the air carrier unless the air
carrier shows that it took "all necessary measures to avoid the
damage." Article 20 of the Convention. In exchange for the
carrier bearing that heavy burden, the Convention limits the
amount of damages an injured party can collect for its damage
or injury. In the case of damaged goods, Article 22(2) of the
Convention limits the airline's liability to two hundred fifty
French francs per kilogram of cargo unless the consignor has
made a special declaration of the value of the cargo and paid
an additional sum based on that value. Additionally, if it can
be proven that the carrier caused the damage by its willful
misconduct, then under Article 25(1) of the Convention, the
liability limits of the Convention do not apply.
It is undisputed that The Limited did not make a special
declaration as to value and pay an additional sum for
coverage. Whether Pan Am engaged in willful misconduct,
however, was an issue for the jury, and whether the jury was
properly instructed on that issue is discussed in detail in
part III below.
The Warsaw Convention, as an international treaty to which
the United States is a party, preempts state common carrier law
with respect to those issues within its purview. Conflict of
law principles are not relevant to the interpretation of the
Convention; rather, legal interpretation must be gleaned from
the four corners of the treaty. Saiyed v. Transmediterranean

Airways (D.C.Mich.1981), 509 F.Supp. 1167, 1169.
The Convention, however, does not specifically address all
the issues involved in the dispute between Pan Am and The
Limited. Indeed, in this context the Convention merely
provides for a cause of action against Pan Am and specifies the
method of calculating Pan Am's maximum potential liability if
it fails to prove that it took all necessary steps to prevent
the damage. The Convention does not address, for example, how
damages are calculated, nor does it define a standard for
willful misconduct. Thus, in order to provide a legal
foundation for those areas not addressed within the four
corners of the Convention we must look to other sources of law.
We first note that an action brought under the Warsaw
Convention cannot be classified as either a tort action or a
contract action. Indeed, an action brought pursuant to the
Convention, like other common carrier actions under federal
law, incorporates elements of both tort and contract actions.
Compare Article 21 of the Convention (permitting the application
of contributory or comparative negligence principles if forum
law so allows) with Article 23 of the Convention (precluding a
contract that incorporates a provision further limiting the
carrier's liability). Thus, with respect to the dispute
between Pan Am and The Limited, while we may properly rely upon
cases from any jurisdiction, state or federal, that have
interpreted the Warsaw Convention and its terms, we may also
rely upon federal common law in analogous carriage of goods
cases to fill in the gaps that may still remain in the
application of the Convention. Accord In re Air Disaster at
Lockerbie, Scotland on Dec. 21 1988 (C.A.2, 1991), 928 F.2d
1267 (federal common law of torts applies in construing Warsaw
Convention). Although we may find it instructive to look the
law of New York and Ohio to interpret certain terms that the
the Convention does not define, we are not bound to do so.4
With respect to the dispute between The Limited and the
insurers and agents, the Convention in not applicable, because
that portion of the case does not involve damage caused to the
goods during air transportation. See Article 31 of the
Convention. As to this portion of the case, we conclude that
Ohio law applies. An action grounded in promissory estoppel is
an action in contract, and choice-of-law analysis indicates
that Ohio has bears the most significant relationship to the
dispute between the parties. See Gries Sports Enterprises,
Inc. v. Modell (1984), 15 Ohio St.3d 284, 15 OBR 417, 473
N.E.2d 807, syllabus (applying Section 188, 1 Restatement of
the Law 2d [1971], Conflict of Laws, to resolve conflict-of-law
questions when parties to a contract do not specify the law to
be applied).
Having resolved the question of the law to be applied in
this action, we now turn to the propositions of law set forth
by the parties.
II
The Limited urges as its first proposition of law that
"[a] retail seller of clothing is entitled to recover the
retail value of goods damaged in transit, when cover with
comparable merchandise is not possible." Flowing from the
proposition of law is The Limited's argument that the trial
court erred in directing a verdict for Pan Am capping the

damages at the wholesale value of the goods and precluding The
Limited from arguing that the proper measure of its damages was
the retail value of its goods. We agree that the trial court
erred in directing the verdict and that the jury should have
considered the retail value of the goods in its deliberations.
We do not, however, agree that, as a matter of law, the proper
measure of The Limited's damages is the retail value of the
entire shipment.
The general rule for calculating damages in common carrier
cases is that the shipper is entitled to the difference
between fair market value of the goods as received and fair
market value of the goods in the condition they would have been
in had they not been damaged. Pacol (Canada) Ltd. v. M/V
Minerva (S.D.N.Y.1981), 523 F.Supp. 579, 581-582; and C. Itoh &
Co. (America), Inc. v. Hellenic Lines, Ltd. (S.D.N.Y.1979), 470
F.Supp. 594, 598. In this respect, the trial court properly
instructed the jury.
By further defining, through directed verdict, the term
"fair market value" to mean only the wholesale value of the
shipment less salvage, the trial court erred to the prejudice
of The Limited and improperly precluded the jury from
determining, based upon all the evidence presented at trial,
what it believed The Limited's damages to be. Under the facts
of this case, where a retail establishment has arranged for a
shipment of goods that have a short sale life and where cover
is impossible, a jury should be permitted to consider whether a
portion of the goods would have sold had they arrived in good
condition in time to meet consumer demand and to determine the
price at which those goods would have sold, provided the retail
establishment has presented sufficient evidence to put those
considerations in issue.
Upon review of the record, we conclude that The Limited
presented adequate evidence to demonstrate that it would have
sold at least a portion of the goods at a profit had they
arrived undamaged. The Limited introduced documentary and
testimonial evidence of the sales history as well as the
successful test marketing of similar products. Sales records
introduced by The Limited at trial indicated that products
similar to those which had been damaged were selling on a two
to three week rate of supply in early December 1985.
Additionally, The Limited provided evidence of the retail price
of comparable items and expert testimony concerning the retail
value of the goods in question. The jury should have been
permitted to assess The Limited's evidence to determine the
fair market value of the goods in view of the price for which
they would have been offered for sale and the testimony and
documentary evidence of the sale of comparable items.
Accordingly, we remand this portion of the case to the trial
court for a new trial on the issue of The Limited's damages.
III
Next we are asked to reverse and remand this action for
error claimed in the jury instruction given by the trial court
concerning willful misconduct. Pursuant to Article 25(1) of
the Warsaw Convention, the Convention's limitation of liability
does not apply if the damage is caused by the carrier's willful
misconduct. The Limited contends that the trial court should
have instructed the jury that a finding of intent on the part

of Pan Am was unnecessary to determine that Pan Am had acted
willfully.
In order to find reversible error, we would have to
conclude that the instruction as a whole did not clearly and
fairly express the law, and that The Limited's substantial
rights were prejudiced. Ohio Farmers Ins. Co. v. Cochran
(1922), 104 Ohio St. 427, 135 N.E. 537. Reading the
instruction that was given to the jury as a whole, we find that
it was consistent with similar instructions and definitions
approved in other Warsaw Convention cases. See Koninklijke
Luchtvaart Maatschappij N.V. KLM Royal Dutch Airlines Holland
v. Tuller (C.A.D.C.1961), 292 F.2d 775, 778, certiorari denied
(1961), 368 U.S. 921, 82 S.Ct. 243, 7 L.Ed.2d 136; American
Airlines, Inc. v. Ulen (C.A.D.C.1949), 186 F.2d 529, 533;
Maschinenfabrik Kern, A.G. v. Northwest Airlines, Inc.
(N.D.Ill.1983), 562 F.Supp. 232, 240; and Grey v. American
Airlines, Inc. (C.A.2, 1955), 227 F.2d 282, 285. We thus
cannot conclude that the instruction did not clearly and fairly
express the law, and we find no error in the instruction given
by the trial court.
Having concluded that the trial court did not err in its
instruction, the jury's finding that Pan Am did not engage in
willful misconduct must stand. Accordingly, upon retrial of
the damages issue, The Limited's potential recovery is capped
by the liability limitation provisions of the Warsaw
Convention. The limit of two hundred fifty francs per kilogram
has been interpreted to be the equivalent of $9.07 per pound.
Trans World Airlines, Inc. v. Franklin Mint Corp. (1984), 466
U.S. 243, 104 S.Ct. 1776, 80 L.Ed.2d 273. Based upon a
shipment weight of 27,117 pounds, the Limited's maximum
potential recovery is thus $245,951.19. In the event that the
jury's determination of The Limited's damages exceeds this
amount, the trial court must reduce the award to the Convention
limit.
IV
The Limited also asks this court to reverse the trial
court's granting of a directed verdict in favor of
defendants-appellees Robert Maldeis, Intermodal Technical
Services, GAB Business Services and Sea Insurance Company. The
Limited's action against these appellees is asserted on a
theory of promissory estoppel based on a statement allegedly
made by Maldeis when he inspected the garments after their
arrival at The Limited's warehouse in Columbus, Ohio.
The Limited claims that Maldeis informed its
representatives and employees on December 2, 1985, the time of
his first inspection of the goods, that the shipment appeared
to be a total loss and that the insurer would take care of the
loss. The trial court directed a verdict in favor of these
appellees, finding there was no evidence that Maldeis intended
to induce reliance by his statement or that The Limited
reasonably relied on any such statement.
In Talley v. Teamsters Local No. 377 (1976), 48 Ohio St.2d
142, 146, 2 O.O.3d 297, 299, 357 N.E.2d 44, 47, this court
adopted the rule of Section 90 of the Restatement of Contracts
2d concerning promissory estoppel. The Restatement provides in
part:
"(1) A promise which the promisor should reasonably

expect to induce action or forbearance on the part of the
promisee or a third person and which does induce such action or
forbearance is binding if injustice can be avoided only by
enforcement of the promise. * * *" 1 Restatement of the Law
2d, Contracts (1981) 242, Section 90. See, also, McCroskey v.
State (1983), 8 Ohio St.3d 29, 30, 8 OBR 339, 340-341, 456
N.E.2d 1204, 1205.
Maldeis admitted that his preliminary survey of the
garments led him to believe that the shipment was a total loss,
but he further testified that the statement he made to The
Limited representatives was conditioned upon his further
inspection which was to have been made after United States
Customs cleared the shipment. As both courts below found,
there is an abundance of testimony in the record of The
Limited's employees that the decision to reject the goods was
made independently of any statements made by Maldeis.
A motion for directed verdict is to be granted when,
construing the evidence most strongly in favor of the party
opposing the motion, the trial court finds that reasonable
minds could come to only one conclusion and that conclusion is
adverse to such party. Civ.R. 50(A)(4); Crawford v. Halkovics
(1982), 1 Ohio St.3d 184, 185-186, 1 OBR 213, 214, 438 N.E.2d
890, 892. Based upon the evidence, the trial court found and
the court of appeals confirmed that reasonable minds could come
to only one conclusion and that conclusion was adverse to The
Limited. We agree.
V
In the first issue it raises on cross-appeal, Pan Am
contends that The Limited lacked standing to sue an
international air carrier because it was neither consignor nor
consignee of an international shipment of cargo.
Article 15(1) of the Warsaw Convention states:
"Articles 12, 13, and 14 shall not affect either the
relations of the consignor and the consignee with each other or
the relations of third parties whose rights are derived either
from the consignor or from the consignee."
Article 30(3) of the Convention provides:
"As regards baggage or goods, the passenger or consignor
shall have a right of action against the first carrier, and the
passenger or consignee who is entitled to delivery shall have a
right of action against the last carrier, and further, each may
take action against the carrier who performed the
transportation during which the destruction, loss, damage, or
delay took place. These carriers shall be jointly and
severally liable to the passenger or to the consignor or
consignee."
Pan Am insists that these provisions permit only the
consignor or consignee named on the air waybill to sue for
damage to goods. We disagree.
In Leon Bernstein Commercial Corp. v. Pan American World
Airways (1979), 72 App.Div.2d 707, 421 N.Y.S.2d 587, the
defendant therein sought to similarly limit standing under the
Warsaw Convention to only the consignor or consignee. Finding
that the plaintiff therein derived its rights from the
consignor, and further holding that construing the Warsaw
Convention in the manner proposed would defeat the rights of
the true owner of the cargo, the court rejected the defendant's

standing argument. We similarly reject Pan Am's reasoning and
hold that The Limited had standing in this action. The
Limited's rights are derived from its agent, the consignee A.W.
Fenton & Co. ("Fenton"), named on the Pan Am waybill, and it is
not disputed that Fenton received and forwarded goods purchased
by The Limited.
VI
Pan Am also challenges the trial court's award of
prejudgment interest, contending that the Warsaw Convention
does not permit such an award.
Although there is a split of authority between the Second
and Fifth United States Circuit Courts of Appeals concerning
the award of prejudgment interest under the Warsaw Convention
when the amount of damages exceeds the damages limitation, we
find no case that stands for the proposition that prejudgment
interest cannot be awarded as an element of compensation if
properly presented to the jury and if the sum of the
prejudgment interest and the damages awarded does not exceed
the damages limitation. Indeed the chief case relied upon by
Pan Am, O'Rourke v. Eastern Air Lines, Inc. (C.A.2, 1984), 730
F.2d 842, suggests that it is proper to award prejudgment
interest in a Warsaw Convention action if the damages cap is
not exceeded.
Although we do not adopt the position espoused by the
Fifth Circuit that prejudgment interest may be awarded in the
discretion of the trial judge even if the damages limitation is
exceeded, Domangue v. Eastern Air Lines, Inc. (C.A.5, 1984),
722 F.2d 256, we agree with that court's conclusion that the
preeminent purpose of the Convention was to fix definite and
uniform limits on the cost to airlines of damages sustained by
their customers. As such, prejudgment interest should in this
context should be presented to the jury as an element of
damages, with the understanding that the ultimate award
available under the Convention will be limited to a fixed,
uniform level.
Thus, we hold that in a case subject to the provisions of
the Warsaw Convention, prejudgment interest may be awarded by a
fact-finder as an element of compensation if the sum of the
damages awarded and the prejudgment interest on those damages
is less than the damages limitation imposed under the
provisions of the Convention.
For the reasons set forth above, the cause is remanded for
a new trial on the issue of damages, with instructions to the
trial court to limit The Limited's maximum recovery to the
amount of damages specified by the Warsaw Convention. In all
other respects the judgment of the court of appeals is affirmed.
Judgment affirmed in part
and reversed in part.
Moyer, C.J., Sweeney and Wright, JJ., concur.
Holmes and Bryant, JJ., concur in part and dissent in part.
Douglas and Resnick, JJ., concur in part and dissent in
part.
Thomas F. Bryant, J., of the Third Appellate District,
sitting for H. Brown, J.

FOOTNOTES
1 The trial court instructed the jury on the issue of

damages as follows:
"If you find from the evidence that as a direct result of
the wrongful act of the Defendant the property of The Limited
Stores was damaged when delivered on November 27th, 1985, you
should award as damages the difference between the fair market
value of the goods if they had arrived undamaged and their fair
market value in their damaged condition at that time.
"Fair market value is the price the goods would bring if
offered for sale in the open market by an owner who desired to
sell them, but was under no necessity or compulsion to do so,
and when purchased by a buyer who desired to but was not -- was
under no necessity or compulsion to do so, each having
knowledge of the pertinent facts concerning the goods."
2 49 Stat. 3000, T.S. No. 876, 137 L.N.T.S.11, opened for
signature on October 12, 1929, in Warsaw, Poland, entered into
force for the United States, October 29, 1934, and is reprinted
in Section 1502 note, Title 49, U.S. Code (1976 and Supp. 1992).
3 The Warsaw Convention applies only by agreement of the
parties, not by operation of law. B.R.I. Coverage Corp. v. Air
Canada (E.D.N.Y.1989), 725 F.Supp. 133, 135. A shipment's air
waybill usually provides evidence of the parties' agreement to
be governed by the Warsaw Convention. In the case at bar,
neither Pan Am nor The Limited now contest the Convention's
applicability.
4 We note that had the Warsaw Convention not applied, we
likely would have applied the law of New York with respect to
the dispute between Pan Am and The Limited because New York has
the more significant relationship to the contract for the
carriage of goods. Section 197, 1 Restatement of the Law 2d,
Conflict of Laws (1971) 628.

Bryant, J., concurring in part and dissenting in part. I
concur in Part IV of the majority opinion which affirms the
judgment of the trial court granting a directed verdict in
favor of defendants-appellees Robert Maldeis, Intermodal
Technical Services, GAB Business Services and Sea Insurance
Company on The Limited's claim against them based on the theory
of promissory estoppel.
I dissent from Parts I and II of the majority opinion and
concur with the conclusion reached in Part III, but disagree
with the majority's reasoning in reaching that conclusion.
I
I agree with so much of Part I of the majority opinion as
holds that the Warsaw Convention applies to the dispute between
The Limited and Pan Am. I further agree that the Convention
limits the amount which may be recovered by The Limited in this
case. I also agree that the Convention preempts state common
law with respect to the issues within its purview, but the
Convention does not address all issues involved in the dispute
between The Limited and Pan Am. I agree with the majority's
conclusion that Ohio law applies to the dispute between The
Limited and the insurers and agents.
I disagree with so much of Part I of the majority opinion
as holds that federal common law is the substantive law to the
applied to the dispute between Pan Am and The Limited in this
case. I do not agree that a state court can apply federal
common law to a case brought pursuant to the Warsaw Convention

while ignoring its own law. The majority recognizes that this
court is free to consider the law of New York and Ohio
concerning interpretation of certain terms not defined in the
Convention, but then holds that it is not bound to do so. I
believe that this court is so bound.
In the case of Erie Railroad Co. v. Tompkins (1938), 304
U.S. 64, 78, 58 S.Ct. 817, 822, 82 L.Ed. 1188, 1194, the
Supreme Court held:
"Except in matters governed by the Federal Constitution or
by Acts of Congress, the law to be applied in any case is the
law of the State. * * * There is no federal general common
law."
A careful reading of the Convention reveals several issues
to which state law is applicable. Article 25(1) provides that
the Convention's limitation of liability does not apply "if the
damage is caused by his [the carrier's] wilful misconduct or by
such default on his part as, in accordance with the law of the
court to which the case is submitted, is considered to be
equivalent to wilful misconduct." Article 28(2) states that
procedural matters are to be governed by the law of the court
in which the action is pending. Article 29(2) states that
"[t]he method of calculating the period of limitation [two
years pursuant to Article 29(1)] shall be determined by the law
of the court to which the case is submitted." As noted by the
majority, Article 21 provides that contributory or comparative
negligence principles may be applied in accordance with the
court's own law.
In addition to the language contained in the Convention,
the "Order of the Civil Aeronautics Board Approving Increases
in Liability Limitations of Warsaw Convention and Hague
Protocal [sic]," adopted May 13, 1966, as part of the Montreal
Agreement, provides that the damage limitation for wrongful
death and personal injury is "$75,000 inclusive of legal fees,
and, in case of a claim brought in a State where provision is
made for separate award of legal fees and costs, a limit of
$58,000 exclusive of legal fees and costs." Order reprinted in
Section 1502 note, Title 49, U.S. Code (1976 and Supp.1992).
This language together with the above-cited language contained
in the Convention indicates that the law of the forum state is
to be applied to certain issues.
The court of appeals correctly held that the substantive
law of New York applies to the facts of this case, but it erred
in relying on Section 146 of 1 Restatement of the Law 2d,
Conflict of Laws (1971) 430. Section 146 applies to actions
for personal injury and this is clearly not such an action.
For purposes of the choice of law issue in this case, we
should rely on Section 145 of the Restatement of Conflicts,
which states that "the local law of the state which * * * has
the most significant relationship to the occurrence and the
parties * * *" should be applied. Section 145(1) of the
Restatement of the Law of Conflicts 2d 414. Section 145(2)
provides several factors to be considered in determining which
state has the most significant relationship:
"(a) the place where the injury occurred;
"(b) the place where the conduct causing the injury
occurred;
"(c) the domicile, residence, nationality, place of

incorporation and place of business of the parties; and
"(d) the place where the relationship, if any, between
the parties is centered."
In this case, both the injury and the conduct causing the
injury occurred in New York. Pan Am is a New York corporation
with its principal place of business in New York. The Limited
is a Delaware corporation with its principal place of business
in Ohio. A review of the record fails to disclose any evidence
as to where the relationship between The Limited and Pan Am was
centered. It appears that the only connection Ohio has with
Pan Am's portion of this transaction is the fact that The
Limited's principal place of business is located here and the
garments were ultimately transported to this state, although by
an entity other than Pan Am.
Following the guidelines set forth in Section 145 of the
Restatement of Conflicts 2d, it is apparent that New York has
the most significant relationship to the occurrence and
parties. Accordingly, New York law should apply to this case.
II
I dissent from Part II of the majority decision reversing
and remanding this cause to the trial court for new trial on
the issue of The Limited's damages. As stated previously, I
would hold that the law of New York applies to the issues as
between The Limited and Pan Am. The parties cite both New York
and Ohio law in their briefs, and the law of both states is
essentially the same with respect to the damages issues
presented for review.
Under New York law, the general rule for awarding damages
for cargo is the difference between fair market value of the
goods as received and fair market value of the goods in the
condition they would have been in had they not been damaged.
Pacol (Canada) Ltd. v. M/V Minerva (S.D.N.Y.1981), 523 F.Supp.
579, 581-582; and C. Itoh & Co. (America), Inc. v. Hellenic
Lines, Ltd. (S.D.N.Y.1979), 470 F.Supp. 594, 598.
In this respect, New York and Ohio law are identical. I
believe the damages instruction given to the jury by the trial
court correctly set forth this measure of damages.
The Limited's argument that it should be entitled to
receive the retail value of the damaged garments simply because
it is a retailer is, in my opinion, without merit. In the
Pacol case, supra, the plaintiff sought to recover lost profits
because it had already contracted for the sale of the entire
shipment of cocoa beans that were damaged by the carrier. The
court disallowed recovery for lost profits because the
plaintiff was able to fulfill its contractual obligations
through the sale of cocoa beans from other sources. Pacol, 523
F.Supp. at 582. The court further noted that the plaintiff was
unable to accurately forecast its lost profits. Id. There is
evidence in the record of the trial of the case sub judice
which indicates that The Limited might have made sales of
substitute merchandise to customers who otherwise were
prospective buyers of the garments at issue here.
I would hold that the evidence presented by The Limited is
insufficient to find, as it urges this court to do, that it
would have sold all of the garments at full retail price.
Damages for lost profits may be recovered only if proven with
"reasonable certainty." Kenford Co., Inc. v. County of Erie

(1986), 67 N.Y.2d 257, 502 N.Y.S.2d 131, 493 N.E.2d 234. The
Limited not having proven its lost profits with reasonable
certainty, I would affirm the judgment of the trial court.
III
I concur in that portion of Part III of the majority
opinion which affirms the jury's finding that Pan Am did not
engage in willful misconduct. I would have made this finding
upon different grounds, however. As discussed in Parts I and
II, above, I would hold that New York applies to the damages
issue and the question of whether Pan Am engaged in willful
misconduct.
The Limited contends that the trial court should have
instructed the jury that a finding of intent on the part of Pan
Am was unnecessary to determine that Pan Am had acted
willfully. Neither the parties nor the court of appeals
mentioned New York law concerning the elements of willful
misconduct. Instead, they relied on Ohio law, which does not
require a finding of intent.
New York law differs from Ohio law concerning the elements
of willful misconduct. The law of New York as it relates to
willful misconduct within the terms of the Warsaw Convention
clearly requires "a conscious intent to do or to omit doing the
act from which harm results to another * * *." Goepp v.
American Overseas Airlines, Inc. (1952), 281 A.D. 105, 111, 117
N.Y.S.2d 276, 281. See, also, Rymanowski v. Pan American World
Airways, Inc. (App.Div.1979), 70 A.D.2d 738, 739, 416 N.Y.S.2d
1018, 1020; and Grey v. American Airlines, Inc. (C.A.2, 1955),
227 F.2d 282, 285, certiorari denied (1956), 350 U.S. 989, 76
S.Ct. 476, 100 L.Ed. 855.
Because the jury instruction concerning willful misconduct
should have been based upon New York law, I would hold that the
trial court's failure to instruct the jury that it need not
find intent on the part of Pan Am was not error.
IV
As to the cross-appeal, I concur that The Limited had
proper standing to sue Pan Am, but find no basis to justify an
award of prejudgment interest.
The trial court cited R.C. 1343.03(C) and Essex House v.
St. Paul Fire & Marine Ins. Co. (S.D.Ohio 1975), 404 F.Supp.
978, as its authority under the circumstances for granting
prejudgment interest.
If this be deemed an Ohio tort action to which R.C.
1343.03(C) might apply, the motion for prejudgment interest
alleged neither the movant's good faith efforts nor the
judgment debtor's failure to make a good faith effort to settle
the claims in suit. The trial court held no hearing on motion
and made no finding of Pan Am's willful misconduct. Thus, the
requirements of R.C. 1343.03(C) were not met. Kalain v. Smith
(1986), 25 Ohio St.3d 157, 25 OBR 201, 495 N.E.2d 572; Villella
v. Waikem Motors, Inc. (1989), 45 Ohio St.3d 36, 543 N.E.2d 464.
In Essex House, the district court found an award of
prejudgment interest justified by the need for adequate
compensation to make the injured party whole. Essex House
concerned an insurance contract claim calling for resort to
equitable considerations, not as here a claim subject to
limitation of damages by treaty.
Although Ohio common-law principles permit compensation

for the value of the lost use of money by an award for
prejudgment interest, such considerations are properly included
only in the jury's assessment and award of compensatory
damages. See Hogg v. Zanesville Canal & Mfg. Co. (1832), 5
Ohio 410; and Lawrence R.R. Co. v. Cobb (1878), 35 Ohio St. 94.
Assuming arguendo that New York law applies, the
procedural requirements of the applicable statute were not
followed.
New York's CPLR, Section 5001, states in pertinent part:
"(a) Actions in which recoverable. Interest shall be
recovered upon a sum awarded because of a breach of performance
of a contract, or because of an act or omission depriving or
otherwise interfering with title to, or possession or enjoyment
of, property, except that in an action of an equitable nature,
interest and the rate and date from which it shall be computed
shall be in the court's discretion.
"(b) Date from which computed. Interest shall be
computed from the earliest ascertainable date the cause of
action existed, except that interest upon damages incurred
thereafter shall be computed from the date incurred. Where
such damages were incurred at various times, interest shall be
computed upon each item from the date it was incurred or upon
all of the damages from a single reasonable intermediate date.
"(c) Specifying date; computing interest. The date from
which interest is to be computed shall be specified in the
verdict, report or decision. If a jury is discharged without
specifying the date, the court upon motion shall fix the date,
except that where the date is certain and not in dispute, the
date may be fixed by the clerk of the court upon affidavit.
The amount of interest shall be computed by the clerk of the
court, to the date the verdict was rendered or the report or
decision was made, and included in the total sum awarded."
The court of appeals, in considering the federal law
issue, recognized the split of authority between the Second and
Fifth United States Circuit Courts of Appeals concerning the
award of prejudgment interest under the Warsaw Convention, and
believing the better view and result to be found in Domangue v.
Eastern Air Lines, Inc. (C.A.5, 1984), 722 F.2d 256, rather
than that in O'Rourke v. Eastern Air Lines, Inc. (C.A.2, 1984),
730 F.2d 842, affirmed the award by the trial court. I would
hold the appellate court's reliance on Domangue as authority
for the award of prejudgment interest under the Warsaw
Convention to be misplaced.
Domangue, was a wrongful death case subject to the
provisions of the Montreal Agreement modifying the Warsaw
Convention and expressly providing for prejudgment interest in
cases to which the modification applies. The cargo case before
us, on the other hand, is not subject to the modifications of
the Montreal Agreement.
In Deere & Co. v. Deutsche Lufthansa Aktiengesellschaft
(C.A.7, 1988), 855 F.2d 385, 391-392, a cargo case, the court
observed that the Warsaw Convention's primary goal is to fix
the air carriers' limit of liability on a per pound basis of
the damaged cargo, not to fully compensate an aggrieved party
absent an express contract provision for prejudgment interest.
A reasonable construction of the Warsaw Convention prohibits an
award of prejudgment interest unless willful misconduct by the

carrier can be found.
I would hold that prejudgment interest may be awarded only
as expressly provided by the treaty or by contract of the
parties and accordingly would reverse the award entered by the
trial court.
Holmes, J., concurs in the foregoing opinion.

Alice Robie Resnick, J., concurring in part and dissenting
in part. I concur in that part of the majority opinion
remanding this cause for a new trial on the issue of damages,
and I agree that Pan Am's liability upon remand is limited by
Article 22(2) of the Warsaw Convention. However, there are
several other issues in this case on which I do not concur with
the majority; therefore, I dissent in part.
A
I dissent from Part IV of the majority opinion. I would
reverse the trial court's granting of a directed verdict in
favor of defendants-appellees Robert Maldeis, Intermodal
Technical Services, GAB Business Services and Sea Insurance
Company. After reviewing the record as it concerns The
Limited's cause of action asserting promissory estoppel against
those parties, I conclude that the trial court erred when it
granted the motion for a directed verdict. When the evidence
is construed most strongly in The Limited's favor, as the
reviewing standard for a directed verdict requires, Civ.R.
50(A)(4), it becomes evident that reasonable minds could have
reached a conclusion contrary to the one reached by the trial
court. See White v. Ohio Dept. of Transp. (1990), 56 Ohio
St.3d 39, 45, 564 N.E.2d 462, 468. Numerous questions of fact
exist surrounding the extent and reasonableness of The
Limited's reliance on the initial statements of Maldeis
indicating that the shipment appeared to be a total loss.
These questions of fact should have been resolved by the
fact-finder and not by the trial court. I would reverse the
judgment of the court of appeals on the promissory estoppel
issue, and would remand that question to the trial court for
further proceedings.
B
I also do not agree with the majority's discussion of the
prejudgment interest question, contained in Part VI of the
opinion, and so do not join in the syllabus law decided in this
case. It is true, as the majority opinion states, that there
is a split among the federal circuit courts of appeals
regarding prejudgment interest and the Warsaw Convention. The
problem with the majority's analysis of the issue is that as a
precondition for the issue to arise, the damage-amount cap of
the Warsaw Convention must first be met. The federal cases on
prejudgment interest cited in the majority opinion involve
situations in which a plaintiff wished to receive an award of
prejudgment interest above the amount of the Warsaw Convention
cap. But, in the case before us, the limit was never
exceeded. Hence, there is no reason for us to reach or resolve
this issue.
The Warsaw Convention caps Pan Am's potential liability at
$245,951.19. The jury awarded The Limited $141,974.20, and the
prejudgment interest awarded by the trial judge amounted to
$49,424.72. Since the total amount awarded ($191,398.92) is

less than the limit mandated by the Warsaw Convention, that
Convention is irrelevant to the resolution of the prejudgment
interest issue. The question is best resolved without resort
to cases involving the Warsaw Convention, and should not result
in syllabus law based on the Convention.
Nevertheless, I do agree with the majority that, upon
remand, the question of whether prejudgment interest is
appropriate should be presented to the jury to be considered in
calculating a proper amount of compensatory damages. Only in
the event that the jury awards a total amount of damages in
excess of the Warsaw Convention limitation must the trial judge
then consider the application of that limitation to an award of
prejudgment interest. At that time, a resolution of the
prejudgment interest question which has been decided
differently in several federal courts of appeals would be
necessary. Compare O'Rourke v. Eastern Air Lines, Inc. (C.A.2,
1984), 730 F.2d 842 (Warsaw Convention does not permit the
award of prejudgment interest above damages limitation), with
Domangue v. Eastern Air Lines, Inc. (C.A.5, 1984), 722 F.2d 256
(prejudgment interest may sometimes be awarded above amount of
Convention limitation).
On the other hand, if on remand the jury awards a total
amount of damages, including some prejudgment interest, against
Pan Am that is less than $245,951.19, no Warsaw Convention
issue on prejudgment interest arises. It is premature to now
decide, as the majority does, that prejudgment interest in
excess of the Convention's damage limitation is precluded in
all cases, when that question is not really even before us.
Douglas, J., concurs in the foregoing opinion.