EASTERN AIR LINES v. MAHFOUD

Transcript: 

ORAL ARGUMENT OF RICHARD M. SHARP, ESQ., ON BEHALF OF PETITIONER

Chief Justice Burger: Mr. Sharp, you may proceed whenever you're ready.

Mr. 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.

Unidentified Justice: What would you say about post-judgment interest?

Mr. 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.

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

Mr. 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.

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

Mr. Sharp: Yes, Your Honor.

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

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.

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

Mr. 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--

Unidentified Justice: Well, weren't there some delays charged in this?

Mr. 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.

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.

Unidentified Justice: At what rates?

Mr. 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.

Unidentified Justice: Is that what has been done?

Mr. 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.

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

Mr. 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.

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.

Unidentified Justice: 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.

Mr. Sharp: Yes.

Unidentified Justice: It doesn't say date of judgment here.

Are there cases that refer to that date?

Mr. 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.

Unidentified Justice: 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".

Mr. 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.

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

Mr. 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.

I want to turn now to the text of the Montreal Agreement.

We think the text the Montreal Agreement confirms the fact that pre-judgment interest cannot be awarded over and above the limit of liability.

The relevant provision in the Montreal Agreement appears at page 4 of our brief, and that provision states in part that the limit of liability for each carrier for death, wounding, or other bodily injury shall be the sum of $75,000 inclusive of legal fees and costs.

Now, once again, the limit is wrapped around the concept of liability, the concept of the carrier's liability.

And again, it's liability as determined after litigation.

There is this reference to fees and legal costs.

The limit is not by its terms restricted to certain items in a Plaintiff's recovery.

The second point I want to make with respect to the text of the Montreal Agreement is by way of rebuttal to my opponent, and that is that Montreal's... Warsaw's limit... the limit contained in the Montreal Agreement, rather, is, like the limit contained in the Warsaw Convention, simply a limit.

It's a ceiling.

It is not a guarantee of recovery in the amount of $75,000.

Now, the way to prove this point textually, I think, is by looking at the model notice that is contained in the Montreal Agreement, and that is at page A-3.

It's the appendix to our brief.

There the drafters of the Montreal agreement set down the notice that carriers will give to passengers, that is, the notice of limitation of liability.

And that notice is to provide that the liability of the carrier

"is limited in most cases to proven damages, not to exceed $75,000."

The notice makes clear that the Plaintiff must prove their damages.

The fact that the Plaintiffs must prove their damages shows that the Montreal limit is a ceiling on liability as of the date of judgment.

Unidentified Justice: Well, is there any question about that?

Mr. Sharp: My opponent argues that what the Montreal Agreement has done is effectively created a liquidation of damages provision, and it's liquidated damages in the amount of $75,000 that are due at the time of the accident.

I think there's a practical answer to that.

I've tried now to give you the textual reading as to why that is not so.

The practical answer to that is that nobody would have agreed to that provision because this limit, the $75,000 limit, not only reaches liability for wrongful death, but it reaches liability for personal injury and other bodily damage.

The examples that the Court was working with in the preceding argument of minor, important injuries but minor injuries to a human being, would be recompensed at $75,000 per injury if one were to conclude that the limit in effect develops a liquidated damage for injuries at the time of the accident.

Unidentified Justice: Suppose we went to trial and came up with a verdict of $60,000.

Would you be making the same argument about pre-judgment interest?

Mr. Sharp: No, Your Honor.

You could recover pre-judgment interest.

You could recover $15,000 worth of pre-judgment interest.

Unidentified Justice: You would go along with that?

Mr. Sharp: That's right.

Unidentified Justice: It isn't pre-judgment interest per se that you're concerned about?

Mr. Sharp: No, no, it's not.

It's anything.

This could be... this could be pain and suffering.

it could be any item of the Plaintiff's injury.

It could be lost future earnings.

Unidentified Justice: Is that because pre-judgment interest is really part of compensatory damages?

Mr. Sharp: That's right, that's right, Your Honor.

In this case it's awarded by Louisiana statute.

Unidentified Justice: And the only issue in this case does relate to pre-judgment interest?

Mr. Sharp: Yes, Your Honor.

The fact is--

Unidentified Justice: Your deposit took care of post-judgment.

Mr. Sharp: --Right.

We deposited the full amount four months prior to the rendering of the judgment in this case.

Unidentified Justice: How long has this case been in litigation?

Something like ten years?

Mr. Sharp: I believe the complaint was filed in December of 1975.

Unidentified Justice: The rule you want us to adopt certainly wouldn't encourage early settlement of airline accident claims, would it?

Mr. Sharp: Well, Your Honor, my own position is that pre-judgment interest is not really likely to be much of an inducement to settlement on behalf of the Plaintiff or the Defendant.

There is a case cited, the Bond case from West Virginia that is cited in our brief, where the court faces up to, how useful is pre-judgment interest as a real means for inducing settlement, and concludes that where the Defendant has a substantial defense and the Plaintiff has a substantial claim, it's likely they would take account of pre-judgment interest in settling the case, in valuing the case, but it's not likely that one or the other would take down the flag because pre-judgment interest was available.

I think that is probably in my judgment the most realistic analysis of pre-judgment interest.

Unidentified Justice: In this case it's a very significant percentage of the recovery, isn't it?

Mr. Sharp: Yes, it is a very significant percentage of the recovery against Eastern.

It's only a pittance of the recovery against the United States.

Unidentified Justice: Well, I understand, but we're talking about the $75,000 recovery.

Mr. Sharp: That's right.

Unidentified Justice: And it was several years after the complaint was filed that you made the deposit?

Mr. Sharp: It was just several days after the district court granted our motion limiting our liability to $75,000.

I would say to you that our motion was opposed, and that one of the grounds that the motion was opposed on was that the limit was unenforceable in light of the Second Circuit's decision in TWA.

Unidentified Justice: But it is true that the deposit was made several years after the claim was filed?

Mr. Sharp: That's right, that's right.

I want to rebut that point, Your Honor, with the fact that at any time, if the Plaintiff had chosen to move for complete summary judgment, I think it's likely that he would have prevailed on this record, and he never did.

Mr. Chief Justice, if there are no further questions by the Court, I think I would like to reserve the balance of my time.

Chief Justice Burger: Very well.

Mr. Farrell.

ORAL ARGUMENT OF GEORGE E. FARRELL, ESQ., ON BEHALF OF RESPONDENT

Mr. Farrell: Mr. Chief Justice and may it please the Court:

The provisions of the Warsaw Convention, as well as the intent of the signatories to it and to the Montreal Agreement, clearly show that there never was a prohibition to exceeding the limits of liability, for the payment of interest or otherwise.

As pointed out a moment ago--

Unidentified Justice: Just what do you incorporate in the "or otherwise"?

Mr. Farrell: --The "otherwise" would be the payment of attorneys' fees and expenses in addition to the Warsaw limit, the initial Warsaw limit, Your Honor.

As pointed out, the first paragraph of Article 22 does establish a liability limit of $8300.

That second sentence of that same paragraph, however, which refers to periodical payments, does provide for interest.

As Petitioner admits in his brief at page 14 and his reply brief at page 6, these words mean that the award for proven damages cannot exceed the Warsaw limit, but if the damages are paid over a period after they accrue an additional sum may be paid to the claimant, which the Petitioner says is time value of money, the basis for interest.

Unidentified Justice: That's the annuity arrangement that you're speaking of, that we were speaking of before.

Mr. Farrell: Right.

Unidentified Justice: But on the ordinary rules of construction, since they expressly talk about interest there but omit it in the previous discussion, what's the consequence of that rule of construction?

Mr. Farrell: The consequence is, Your Honor, that no matter what you call it, interest is interest.

And that rule provided for pre-judgment interest, or that provision.

Unidentified Justice: If they're paid over a period of installments.

Mr. Farrell: It would be, Your Honor--

Unidentified Justice: As under the German arrangement.

Mr. Farrell: --I'm not sure that was the German arrangement.

But as we allege, Your Honor, and as we urge the Court to rule, the damages accrue at the time of death in a death case, and if you don't pay them for seven years, as was this instance, in this case, you pay interest.

Interest is for the use of money.

Unidentified Justice: Well, that's the issue in this case, isn't it?

Mr. Farrell: It is, Your Honor.

Now, the signatories of Warsaw and Montreal never considered that the liability limitation was absolute.

The Warsaw limitation was never strictly applied by the signatories other than the United States.

Both Drion in his treatise on

"Limitation on Liabilities in International Air Law."

at page 114 and Lowenfeld in 80 Harvard Law Review at 508 point out that the constant practice of the courts when applying the limitation provision of Warsaw was to exceed the limitation by awarding attorneys' fees and legal expenses against the airline.

In addition, at least Belgium and France awarded interest on top of the Warsaw limit.

No one outside the United States had previously thought that the Warsaw Convention limitation could not be exceeded by the application of domestic law.

Now, this procedure had been going on for 25 years before the United States became aware of it at The Hague Conference in 1955.

When the delegates did become aware of it, by their own volition they changed or had it changed so that The Hague Protocol permitted the payment of attorneys' fees and expenses on top of the limit.

Now, this was done by the insistence of the United States that maximum recoveries were desired and that the expenses of litigation oftentimes ate up the amount of the award.

There could be little doubt that if the issue of interest because of delay had been considered, that it would have been approved also.

In other words, the delegates neglected to deal with the problem; they would wish to have it relieved... resolved, rather... if they had been aware of it.

Unidentified Justice: Are you suggesting we should go ahead and finish their task for them?

Mr. Farrell: No, I think that we don't have to do that, Your Honor.

We are permitted by the articles of the Warsaw Convention to use domestic law, and our domestic law provides for interest on a damages award.

We're not trying to change the Warsaw Convention in any way.

Unidentified Justice: Well, I understood your opponent as agreeing that pre-judgment interest is awardable up to the overall limit on damages provided for under the Montreal Agreement.

Mr. Farrell: Well, that is his position.

It's not very consistent, however.

Unidentified Justice: Well, I suppose that depends in part on whether you think pre-judgment interest is part of damages for compensation.

Mr. Farrell: Under the law of the United States, Justice O'Connor, and particularly under the law of the court where this case was tried, in Louisiana, pre-judgment interest is not a part of damages.

Unidentified Justice: What law do you think we look to for determining pre-judgment interest, the state law, or is that a matter of federal law, or what is it?

Mr. Farrell: We look to the law of the court.

Under the articles--

Unidentified Justice: The law of the court?

Mr. Farrell: --The law of the court which has the case, Your Honor.

Unidentified Justice: What do you mean, state law if it's a state case?

Mr. Farrell: If it is a case, in this case in Louisiana in a federal court, you would look to the federal court to apply Louisiana law.

And Louisiana law in this instance provided for pre-judgment interest.

Unidentified Justice: How would that result in uniformity of liability, which was a primary goal of the Warsaw Convention and the Montreal Agreement?

Mr. Farrell: Liability would accrue at the time of the death in this case, and that's pursuant to the law of the United States and all jurisdictions that I know of.

At that time damages would be established.

If the case were worth X number of dollars, then no matter whether it took ten years to resolve it, it was still worth X number of dollars at the time of death.

The delay in between is the period that we're actually talking about in this case, whether or not you can delay a case for seven years and still not pay anything in addition to the actual damages which accrued at the time of death.

Does that answer your question?

Unidentified Justice: Your opponent says that you could have had a summary judgment much earlier if you just asked for it.

Mr. Farrell: Well, I think maybe he forgot that we did move for summary judgment, and Eastern opposed it.

Now, the motion for summary judgment was made when the cases were in New York.

This was a multi-district litigation case and it was in the Eastern District of New York.

Both the Government and the United States... the Government here, the United States, and Eastern Air Lines were Defendants.

Just before trial was to commence on liability the United States, pursuant to an agreement which it had made with Eastern Air Liner, decided not to contest liability.

Now, the agreement was that Eastern would pay 60 percent of all the losses and the Government would pay 40 percent.

But for that agreement, Eastern would get entire control over all aspects of the litigation, including settlements, trials, damages trials, whatever.

When the Government decided not to contest liability, there obviously now was a solvent party.

There was no reason to continue with Eastern, and the Plaintiff in the case, Respondent here, moved for summary judgment.

Eastern opposed it, saying that, on a technical ground, saying that the Plaintiff did not have capacity to sue.

There were several... two more appeals on this, and two years later... two years, in fact, after a judgment was rendered by the jury finding Eastern both negligent and liable... the Second Circuit agreed that there was a technical deficiency and sent the case back, said that you must give then notice so that they can decide whether or not they want to put in written papers and so forth.

Unidentified Justice: Put you didn't file in New Orleans... I mean, in Louisiana?

Mr. Farrell: Later on, Justice Marshall, the case was remanded to Louisiana for trial on damages.

Unidentified Justice: Did you make any summary motions there?

Mr. Farrell: No, Your Honor, because the damages trial then was imminent.

After Eastern had been found negligent by jury trial and the United States was in the case, there was no reason.

We still did not have the decision on whether or not the Plaintiff had capacity.

Unidentified Justice: Well, we realize that Louisiana law is civil law, don't we?

Mr. Farrell: Yes, Your Honor.

Unidentified Justice: So it's impossible to get any... the 49 states to adopt civil law, so this is going to be different from the other states.

Mr. Farrell: No, I don't think so, Your Honor.

The law of Louisiana in regard to, in this case, damages is very similar to every other jurisdiction.

Unidentified Justice: That it's not damages?

Mr. Farrell: I beg your pardon?

Unidentified Justice: That pre-trial interest is not damages?

Mr. Farrell: Pre-trial interest in Louisiana is not damages, that's correct.

Unidentified Justice: Mr. Farrell, let me ask a foolish question, because I've missed something here.

In effect, the Government has conceded liability?

Mr. Farrell: Correct.

Unidentified Justice: Why don't you collect against the Government?

Mr. Farrell: The problem was that we could not do it because the district court in New York had, in one of its decisions, had stated that it was not going to decide capacity to sue and was going to remand the Louisiana cases back to Louisiana and let the Louisiana court make that decision.

When Eastern appealed the case... knowing very well, incidentally, that the Plaintiff did have capacity to sue either in Louisiana or in New York... the case then was in the hands of the Second Circuit and didn't come back for two years.

Unidentified Justice: May I ask another bad question--

--Don't you still have a claim against the Government?

Mr. Farrell: We had the claim, Your Honor, but we had no... we could not go to trial because the capacity to sue issue was never decided, and the case was in the hands of the Second Circuit, which didn't decide it for two years.

Unidentified Justice: Then the Government has not conceded liability?

Mr. Farrell: If the Government had not conceded?

Unidentified Justice: No, I'm asking has it?

Mr. Farrell: The Government did concede... well, it didn't concede liability.

It agreed not to contest liability; for all practical purposes, the same thing.

Eventually damages were tried against the United States.

Unidentified Justice: I guess when you say "for all practical purposes" I fall off and don't follow.

Mr. Farrell: I meant that a concession of liability and an agreement not to contest it as far as the Plaintiff is concerned is not a lot different, although it has some different aspects, we agree.

Unidentified Justice: I was going to ask you, I notice you said that Eastern knew that there was no issue about capacity, and I'm puzzled that Eastern would know it when the judge didn't know it.

But that's not really the question I had, and that is, you talked about Eastern's negligence.

Is that because a large number of the passengers were just domestic passengers and they were relevant to that?

Because negligence I wouldn't understand would be relevant to your case.

Mr. Farrell: The majority of the passengers here were domestic passengers, although there were quite a few Warsaw passengers involved.

Unidentified Justice: And their negligence really didn't have anything to do with your client's claim, who was an international passenger?

Mr. Farrell: Well, at that time, since the motion for summary judgment... the district court found that our motion was proper, so we had... we were not in the trial on damages against Eastern... or on liability against Eastern.

Our case was out of it because we had... under Warsaw, Montreal, the district court gave us judgment.

You were asking how Eastern knew about the capacity and the Government did not.

Unidentified Justice: Not the Government, the court--

Mr. Farrell: Or the court, I'm sorry, the court.

Eastern had in its hands for two years prior to this motion certified copies of tutorship, which is the procedure in Louisiana, and letters of administration, which are the procedure in New York.

And in addition, just two or three days before the Plaintiff's motion in the case, before Respondent's motion, Eastern had served upon him an offer of settlement, and it was served three days before.

And in the offer of settlement, Eastern had to know that he had... or it's an admission, an admission that he was... or did have capacity to sue.

So Eastern knew it very well.

It had never come before the court because the court had never wanted to decide that issue.

It was going to send it back to Louisiana.

Now, the Petitioner states that he agrees that you can have pre-judgment interest, just so it doesn't exceed the limitation.

I'd like to just give you an example of what the result would be if this were correct.

If you had, for instance, a $25,000 judgment or if the damages were worth $25,000, and the airline didn't pay at for say a year and the interest rate was ten percent, he would permit the $2500 of pre-judgment interest to be added onto the amount that the airline owed the claimant.

Now, if it were say $74,000 and the judgment was not paid until the year after and the interest was the same ten percent, the Petitioner would permit payment of interest in the amount of $1,000, but no more.

The remaining $6,400 earned on a $74,000 damages award would remain in the pocket of the insurance company.

Now, in the subject case, where the judgment was for $75,000 for decedent and the airline kept the money made on the investment of that amount for its own use for over seven years, the Petitioner's position would not permit any interest, even though the damages award, because of the delay, was only worth about $31,000, permitting the airline's insurers to pocket approximately $44,000 per decedent for its own account or, under its own figures, a total of $87,000.

Unidentified Justice: --Well, that analysis would support an argument that this was not a very good treaty.

Mr. Farrell: No, Your Honor, we're not trying to change the treaty.

We're merely saying that the provisions of the treaty permit domestic law to be applied, but the treaty could not operate without domestic law.

It really provides guidelines and, as this Court held in the Franklin Mint case, it's a flexible treaty.

It wasn't meant to be narrowly construed.

Unidentified Justice: Well, I suppose your opponents would argue that you're the one that's trying to narrowly construe it.

I suppose the treaty, like any other treaty, is supposed to be construed in accordance with its terms, not either "narrowly" nor "broadly".

Mr. Farrell: Your Honor, pre-judgment interest was never mentioned in the treaty, so we have to look to the background to see if we can interpret it properly.

As I tried to point out in the beginning, the signatories never thought that exceeding the limitation of Warsaw was any problem.

They all did it.

Unidentified Justice: For attorneys' fees and costs.

Mr. Farrell: Yes, Your Honor.

Well, expenses is what they said.

I'm not sure what "expenses" were.

But the principle is the same.

Unidentified Justice: When did the courts of the United States first begin awarding pre-judgment interest in tort cases?

Mr. Farrell: I don't know, Your Honor, but it's been for a long time, and even today some courts do not.

Unidentified Justice: When it's a jury verdict you can't really find it out, can you, if the jury takes it into account?

Mr. Farrell: Well, Your Honor, in a case like this, in a death case, as I'm pointing out, the damages accrue at the time of death.

So if you don't pay it, it's not in the jury's hands.

It's a ministerial procedure that the clerk of the court says you have to pay so much interest on it until you pay it.

It doesn't change the treaty, it doesn't change the law of damages.

It just is a fairness, a way of proceeding.

Now, the signatory United States never considered pre-judgment interest as an integral part of proven a damages, as Petitioner would have the Court believe.

The United States chairman--

Unidentified Justice: Mr. Farrell, suppose the State of Louisiana passed a law and said that in all wrongful death statutes, if they involve the Warsaw Pact they shall include judgment on interest, pre-judgment interest.

Would that be good?

Mr. Farrell: --I would think so.

Under the local law, it shouldn't be any problem.

That wouldn't affect the treaty any.

Unidentified Justice: Well, if they say that in all cases under the Warsaw Pact the state may, at its will, add $15,000 to the $75,000?

Mr. Farrell: Well, I think now you're getting into a different problem.

You're changing now the limitation.

Unidentified Justice: Well, put down the same amount of money; would that be a different problem?

Mr. Farrell: If you change... you cannot change the limitation, Justice Marshall, because only the Congress can do that, or perhaps this Court.

But awarding interest on a judgment does not change anything in Warsaw or does not change anything in Montreal.

Unidentified Justice: But it adds money.

Mr. Farrell: No, it doesn't add money.

It merely makes the award--

Unidentified Justice: More money.

Mr. Farrell: --Yes, it... it makes it adequate.

Unidentified Justice: But this isn't the wording, interest on a judgment.

We're talking about pre-judgment interest.

So doesn't it really turn on how we characterize it, whether it's a part of compensation to the victim or not?

Mr. Farrell: Well, as I was going to point out, Your Honor, the United States' position at Montreal, as stated by Chairman Lowenfeld, was that recovery for death or injury would presumably be based on some combination of earning power, life expectancy, and, in the case of death, degree of dependence of the survivors.

He didn't say anything about interest, interest being a part of damages.

There's no express language in Warsaw or Montreal either permitting pre-judgment interest or excluding it.

Miller in her treatise on 19, gives some insight.

She states that:

"Where the convention is silent, the lex for a will determine the conditions under which the damages allegedly due may be compensated."

Unidentified Justice: But there's no silence, here.

There's a very fixed $75,000 statement.

Mr. Farrell: I meant, Your Honor, that it's silent as to interest.

We're not saying that you exceed the limitation.

The limitation was the damages which were awarded for the death, the damages which accrued at the time of death.

The interest merely is for reimbursement for the use of that money by the insurance company when it didn't pay for seven years.

Unidentified Justice: If you had an ordinary domestic negligence case where the Defendant was insured by public liability insurance in the usual way, but the limit of the policy was $75,000... now, it is often suggested, whether true or not, that insurance companies who take over the defense of these cases delay as long as possible so they can keep getting the interest on their own money in their own bank or portfolio.

Do you think any pre-judgment interest would be added to the $75,000 limit on liability of the insurer?

Mr. Farrell: I would say, Your Honor, that if it was in a jurisdiction that permitted pre-judgment interest, it always would be added.

Unidentified Justice: In other words, the limit of the policy would go up?

Mr. Farrell: No, the limit of the policy would stay the same.

But the fact that they didn't pay it on time would... the interest would be awarded on top of it.

Unidentified Justice: Now you're talking about post-judgment interest.

Mr. Farrell: Well, it would--

Unidentified Justice: Could the insurer, the insurer, be liable for any more than $75,000 on any theory at all?

Mr. Farrell: --The insurer would only be liable for damages up to the extent of the policy.

Again, but if he didn't pay it, if it's a death case, he was liable at the time of death for $75,000.

Unidentified Justice: Well, your opponent has conceded, understand it, that if they didn't pay the judgment as I they would be liable for interest on the judgment.

I'm sure he--

Mr. Farrell: Well, he didn't get the judgment until seven years after the accident, Your Honor.

We're saying that the amount accrues at the time of the death, and if you pay it seven years later you pay interest on it.

If it were only an injury amounting to $5,000 and you didn't pay it for seven years, you would pay interest on the seven years, over that period of time.

I might say that the Respondent here never did oppose the Warsaw limit, as intimated by Petitioner.

Franklin Mint was mentioned to the district court after it was handed down in a slip opinion, to show that this was an other case.

Franklin Mint could never have been used in this case by the court.

It was prospective.

It had no bearing whatsoever here.

And I might say that, on the other side of the coin, Eastern Air Line depended upon the Domangue case, which is the basis for this decision in the Mahfoud case.

I might conclude by saying that denying pre-judgment interest in this case would fail to effect any purpose of the convention's framers or signatories.

The decision of the district court, as affirmed by the Court of Appeals, ensures that a Warsaw-Montreal recovery is not diminished by the simple strategy of delaying payment until the award diminishes in value.

The judgment should be affirmed.

Chief Justice Burger: Do you have anything further, Mr. Sharp?

REBUTTAL ARGUMENT OF RICHARD M. SHARP, ESQ., ON BEHALF OF PETITIONER

Mr. Sharp: I wanted to try briefly to clarify some of the facts relating to how this litigation was handled.

There were 92 cases at the high water mark in the litigation.

When the case was fixed for liability trial on September the 18th, that number had been reduced to 54.

On September the 18th, 1978, 18 of the 54 cases were international cases of the Warsaw-Montreal variety.

36 were domestic cases that were going to be tried on the ordinary issues of damages and negligence outside the Warsaw Convention.

The trial counsel for Eastern was prepared for a six weeks liability trial on issues of whether the air traffic controllers and the like had caused the crash, when the Plaintiffs on the day of trial... that is, the Warsaw Plaintiffs... and in some cases on the preceding day to trial orally moved for summary judgment, for partial summary judgment in the sum... I'm sorry.

They did not ask for $75,000.

They just asked orally that Eastern be declared liable to them.

Eastern did not say it was not liable for the accident under Warsaw, but it said that it was not liable to them, to the Plaintiffs; that there was an individual... there was a dispute of fact over who should be the Plaintiff.

The reason for that was that in almost half of the international cases there were more than two human beings that were contesting for the position of representing the estate or of bringing the wrongful death claim against the estate.

Eastern was reserving its position so that it would be liable to the proper Plaintiff and not also be liable to the improper Plaintiff.

In the Mahfoud case there was not a contest, but the papers did not show that.

Counsel is faced with 15 different oral motions for summary judgment.

He takes the position, I would like to have that in writing, as Rule 56 entitles me to have it in writing.

I would like to have ten days notice.

In ten days he can pull together the facts and determine whether there is in fact a dispute with Mahfoud.

That was never done.

Now, the issue of summary judgment was revisited.

It was revisited approximately a year later in proceedings to amend the summary judgment, and at that point... at that point the Plaintiffs moved to amend the summary judgment.

Eastern urged the trial judge to decide the issue of capacity now.

The trial judge did not do that.

The Plaintiff's counsel for Mahfoud at page 41 proffered an affidavit... this is 41 of the joint appendix... proffered an affidavit, and in the affidavit they suggested that any summary judgment against Eastern make clear that Eastern is not precluded by the judgment from raising its defense of lack of capacity.

In other words, we're trying to get the legal issues solved and they are making clear that the legal issues are reserved for another day.

Now, I disagree with Mr. Farrell on the point concerning whether Mahfoud ever contested the application of the limit.

There is a four-page brief in the record at pages 902 to 906... it's in the unprinted portion of the record before the Court... in which Mahfoud urges the district court to declared that the limit is unenforceable.

I want to make two other points, and that is that counsel for the Plaintiff quite properly mentioned, after the Warsaw Convention it became evident, at least to some of the drafters at Hague and Montreal, it became evident that some courts were applying legal fees and costs above the limit, and in that event--

Chief Justice Burger: Your time has expired, counsel.

Mr. Sharp: --Thank you, Mr. Chief Justice.

Chief Justice Burger: Thank you, gentlemen.

The case is submitted.

Transcript: 

IN THE SUPREME COURT OF THE UNITED STATES

EASTERN AIR LINES, INC., Petitioner, v. ROBERT F. MAHFOUD

No. 83-1807

October 9, 1985

The above-entitled matter came on for oral argument before the Supreme Court of the United States at 10:02 o'clock a.m.

APPEARANCES:

RICHARD M. SHARP, ESQ., Washington, D.C.; on behalf of Petitioner.

GEORGE EDWIN FARRELL, ESQ., Washington, D.C.; on behalf of Respondents.

PROCEEDINGS

CHIEF JUSTICE BURGER: We will hear arguments first this morning in Eastern Air Lines against Mahfoud. Mr. Sharp, you may proceed whenever you're ready.

ORAL ARGUMENT OF RICHARD M. SHARP, ESQ. OF BEHALF OF THE PETITIONER

MR. SHARP: Mr. Chief Justice, and may it please the Court:

The Warsaw Convention and the Montreal Agreement place limits on the liability of air carriers. The question presented by this case is whether courts may award prejudgment interest in excess of those limits.

In this case, Mr. and Mrs. Bernard Mahfoud purchased an airline ticket in Paris, France, that was to take them to their home in New Orleans and to return them to Paris, France. On the return leg of that trip, they were aboard Eastern Flight 66 which crashed near Kennedy Airport in New York. As a result, Mr. and Mrs. Mahfoud were killed, as were 111 other persons.

Mr. Mahfoud's brother initiated this action against Eastern Air Lines and the United States and several other Defendants. Prior to the trial of Mr. Mahfoud's damage claims, Eastern moved for partial summary judgment. It requested the district court to declare that, in accordance with the Warsaw Convention and the Montreal Agreement, Eastern's liability for Mr. and Mrs. Mahfoud's deaths was limited to the sum of $150,000 or $75,000 per person.

The district court granted that motion, but the district court also ruled that the Plaintiffs could recover prejudgment interest in excess of the limits contained in the Warsaw Convention and the Montreal Agreement.

Eastern appealed, the Court of Appeals confirmed, and we now contend before this Court that both of the courts below erred in their prejudgment interest ruling. The basis of our position rests on four points. They are:

First, the text of Article 22.1 of the Warsaw Convention;

Second, the text of Article 24 of the Warsaw Convention;

Third, the text of the Montreal Agreement;

And fourth, the negotiating history of both of those documents.

I'd like to turn now to the text of Article 22.1, which appears at page 3 of the blue brief. Before I read that text, I'd like to point out that this is the particular sentence in the Warsaw Convention that establishes the limit on liability. It also gives us some indication of the scope of that limit. In the second sentence of Article 22.1, we have the indication as to when the liability is to be valued so that the limit can be placed on it.

Turning now to the first sentence of Article 22.1, it provides 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, the liability is obviously specific. It's for 125,000 francs. And it's fixed or mandatory, that is the liability "shall be limited." I think the most important concept in this sentence is what the limit applies to, and that is the limit applies to the "liability of the carrier for each passenger."

It's our position that prejudgment interest is necessarily a part of this concept of liability of the carrier for each passenger. Prejudgment interest is an item of the Plaintiff's recovery. The function of prejudgment interest is simply to calculate the Plaintiff's damages so that the Plaintiff will receive full compensation at the date of judgment, and the Warsaw Convention itself sets up a system providing that a Plaintiff may bring a claim and reduce that claim to judgment in a court of law.

The Warsaw Convention system, then, necessarily contemplates that there will be a delay of some sort between the accident and the date of judgment when the Plaintiff is to be paid. It leaves to the law of the nation states whether or not they will take account of this delay.

And the standard way, the way this delay was taken account of here, was to provide prejudgment interest by method of a formula, that is, a fixed rate, percentage rate, over a period of time. But the same thing may be accomplished where a court or a legal system instructs its courts, its jurors, to simply value the Plaintiff's claim as of the date of the judgment.

Under either of those systems, some prejudgment interest passes to the Plaintiff, and under either of those systems that prejudgment interest in our view is part of the carrier's "liability for each passenger."

Now, I'd like to turn next to the second sentence of Article 22. This sentence indicates the time at which the limit is to be applied. It states: "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, the equivalent capital value of said damages shall not exceed the sum of 125,000 francs."

Now, the first thing to point out about this sentence is that, as with the rest of the convention, this sentence presupposes that the liability of the carrier will be established in a judicial proceeding. The sentence speaks of there being a court of law to which the case is submitted.

But the sentence also indicates -- it deals now with a situation where the judgment will not be for a lump sum, but the judgment will be in the form of an order to pay out various payments over a period of time. And it indicates that the future periodic payments contemplated by this section are to be capitalized to the date of the award, and that capital amount of the award cannot exceed the limit. In effect, this sentence says that the equivalent capital value of the award shall not exceed 125,000 francs.

Now, we have some further help in this regard from the original version of the Warsaw Convention. The text that you have before you, the English text, uses the word "damages." The corresponding word that appears in the official French version of the convention is "indemnite."

If one consults the French legal dictionary that this Court relied upon in Sack's, a dictionary published in 1931, "indemnite" is defined as a reparation or compensation. That dictionary says that "indemnite" is "indemnity conferred by judgment," and that "it ordinarily takes the form of damages and interest."

If you fit this together, what we draw from this sentence is that, when damages and interest are awarded, not in the form of a single lump sump, but in the form of periodic payments, the capital value of that award shall not exceed 125,000 francs. So what we draw from that is that Article 22.1 indicates that the limit imposed by this convention is to be applied to the carrier's liability as of the date of the judgment.

I'd like to turn next to Article 24 of the convention. Article 24 --

QUESTION: Before you do that, Mr. Sharp, what has your research disclosed in the way of cases from other countries who are parties to the treaty with regard to their interpretation of Article 22 and its meaning?

MR. SHARP: Your Honor, I can report three cases, none of which have a reasoned opinion, but provide results. One case is reported by Professor Drion in his treatise, and I believe we have cited that case in our main brief. It is a case from Brussels, in which interest is awarded in a commercial case in excess of the limit.

There are two cases cited in our reply brief, one from France and one from Great Britain, in which interest is not awarded in excess of the limit. In none of those cases can we find any explanation for the court's reasoning or the result.

QUESTION: Have you found any cases since your briefs were filed?

MR. SHARP: We have not, Your Honor. We have consulted with various experts and we have looked at LEXIS.

At the same time, I must say to the Court that this is an area of research where one cannot be confident that nothing exists after one has looked. We simply do not have the tools to deal with these 120 signatory nations that may or may not be deciding this issue.

But we have nothing to offer the Court, either on behalf of the Plaintiff's position or on behalf of our position, that would be instructive to the Court.

I want to return to Article 24, then, of the convention, and that article is found at page 4 of our reply brief. This article in our view shows that the intended reach of the limit is all-inclusive. Now, in this article there is very elaborate cross-referencing, and I intend to omit that.

The core language of the article begins in the third line in the middle, an the core language is that: "Any action for damages, however founded, can only be brought subject to the conditions and limits set out in this convention."

Now, the key phrase in this sentence is the phrase "however founded." The sentence as we read it is saying that, whatever the local law may award to the Plaintiff in the way of a remedy, whatever Plaintiff's theory of the case may be of whatever the legal basis may be for Plaintiff's case, his suit is subject to the limits of liability set out in this convention.

Now, the provision also confirms that the liability that is regulated by the convention is a liability that is determined in a court of law. Here again, the official version in French is possibly more helpful than the English version.

The version you have before you speaks of "any action for damages." The French text refers to an action "en responsabilite," which translates, we think, one for one to "liability." In other words, the French text contemplates that there will be an action to establish liability or an action for liability.

And when we turn from the terms of the convention, which in our view show that the limit is to cover judicially determined liability, turn from the convention to the Montreal Agreement --

QUESTION: Before you do that, Mr. Sharp, did you find any discussion of this issue in the minutes of the convention or in earlier drafts of the convention?

MR. SHARP: Your Honor, there has never been to my knowledge in reading through these minutes a detailed discussion of the points that I am making at this time. The recorder for the convention that was held in 1929 -- that was Mr. Henri Deveaux -- prepared a memorandum, if you will, of explanation as to what the meaning of the draft proposal was that was before the conferees that were meeting in 1929.

In the course of Mr. Deveaux's explanation as to the limit on liability, Mr. Deveaux says that this limit is intended to apply to the carrier's "maximum liability." We think that is a strong indication that it was to be the liability judgment that was imposed upon the carrier.

There is in Mr. Drion's book a discussion of whether or not prejudgment interest, interest awards generally, are included within the limit or whether or not they can escape the limit. And Mr. Drion concludes that they are within the limit.

Those are the two sources that I would mention to you.

QUESTION: Well, I suppose there are other writers who disagree with that view and say it's an open question, isn't that so?

MR. SHARP: I think that there is a suggestion to that effect in the Shawcross and Beaumont text. I am trying to collect now all of the discussions. I think we have covered the principal discussions of the point.

I'd like to turn now to the text of the Montreal Agreement. The relevant provisions of that text are printed at page 4 of the blue brief, and it's the first three lines that begin at subparagraph (1), and those lines state:

"The limit of liability for each passenger for death, wounding, or other bodily injury shall be the sum of $75,000 inclusive of legal fees and costs."

Now, what happened here was that when the delegates met in Montreal they knew that some nations were awarding attorney's fees and costs to the passengers and that in some instances the awarding of attorney's fees and costs meant that the carrier was paying out a total that was greater than 125,000 francs.

It was based on that knowledge that the delegates provided that the limit that you see here should be increased to $75,000, but that limit should be inclusive of legal fees and costs. This action by the delegates, we submit, indicates that the limit contained in the Montreal Agreement is really intended to cover the waterfront.

Now, the Montreal Agreement also makes --

QUESTION: May I just ask this question? You don't deny that it might cover postjudgment interest, that postjudgment might be recoverable?

MR. SHARP: We do not deny that.

QUESTION: And I'm just wondering, would you think that a signatory state could decide for itself whether postjudgment interest should be set to run from the date the trial court judgment was rendered in one country and another one might decide it should be after all the appellate process has run its course, which might be a difference of a couple of years in some countries?

Could a country decide for itself the date from which postjudgment interest will run?

MR. SHARP: I think so, Your Honor. Our view is that once the convention has placed a judgment in the hands of the passenger, it has spent its course and whatever the --

QUESTION: Would a country be free to decide that postjudgment interest should run from the date that the lawsuit started?

MR. SHARP: I think not, because then I think you're in the period -- the liability of the carrier to each passenger in the period that the convention speaks to.

QUESTION: You'd say that the line would be drawn at -- they could fix the date when the judgment was rendered, but not some earlier date, such as the date the complaint --

MR. SHARP: That's right.

QUESTION: -- was filed or the date the Plaintiff's evidence went in or something like that?

MR. SHARP: That's right.

Now, the Montreal Agreement we submit also makes it clear that for purposes of applying the limit one should look at the carrier's liability as finally determined in a judicial proceeding. We say that because the fees and the costs do not exist at the time of the accident, and thus the limit cannot be read as applying simply to those items of liability that may be deemed to have arisen at the time of the accident.

There is in the negotiating history, then, further confirmation of our position. We think that negotiating history suggests that the limits in the Montreal Agreement and the Warsaw Convention were intended to cover the full extent of the carrier's liability.

As I responded to Justice O'Connor's question, one of the principal indications of the scope of this limit is contained in the explanation that Henri Deveaux gave to the conferees in 1929, when he described the limit as applying to the "maximum liability of the carrier."

Now, the courts below looked to the Montreal Agreement of 1966 and concluded that a new or different purpose sprang from that agreement. They found in the agreement of 1966 a purpose of expediting litigation and facilitating settlement, and they concluded that, in light of that new purpose, it was permissible to award prejudgment interest in excess of the limit.

QUESTION: Certainly the Montreal Agreement was motivated in part by a desire to speed settlement and provide for an earlier resolution of claims falling under the convention. If your position is correct, what is there left to encourage speedier resolution of claims?

This case is a rather good example of what some might call dilatory tactics on the part of the carrier, and I just wonder what you think is left for the encouragement of speedy settlements if your position on the treaty is correct?

MR. SHARP: Your Honor, if the limit on liability is recognized by the Plaintiffs and the Defendants as being a guillotine that cannot be escaped, you have created the ideal environment for settlement. It's when one or both of the parties do not know whether they can break the limit.

I would give you as an example this case, in which Eastern made an offer of judgment to the Plaintiff in 1978 in the sum of $150,000, which would be the equivalent of $75,000 for both Mr. and Mrs. Mahfoud. That offer of judgment was in the Defendant's view an offer to pay its maximum liability.

It was not accepted because in the Plaintiff's view, no doubt, it did not constitute what the Plaintiff thought was the maximum liability. It is -- if we have an absolute limit, that is the best hope for expediting settlement in these cases.

I might say that the minutes of the Guatemala convention point out there the delegates to that convention are discussing whether or not they should lift the willful misconduct exception to the limit so that they can then put before the parties an absolute limit that tells them really what they should settle against.

QUESTION: But if the carrier knows that it's likely to be hit with the maximum liability under the treaty and it can stall around with its defense of the lawsuit for years and not incur any interest as a result of it, I don' t understand why it's motivated to go ahead and pay it out right away.

MR. SHARP: Your Honor, if the carrier can walk away from one of these cases for $75,000 today, it's well advised to do so. The costs for litigation will greatly exceed that amount.

QUESTION: Well, Mr. Sharp, refresh my recollection. Did Eastern deposit $150,000 with the court?

MR. SHARP: They did. As soon as the district court said our liability was limited, we paid $150,000 into the registry of the court.

QUESTION: And it still sits in the court's hands?

MR. SHARP: It may have been paid out. We simply walked away from the case as soon as we discharged our liability.

QUESTION: Mr. Sharp, December of '82?

MR. SHARP: December of '28, Your Honor.

QUESTION: And no postjudgment interest was imposed?

MR. SHARP: That's correct.

QUESTION: Mr. Sharp, in connection with those questions, the Court of Appeals for the Second Circuit in its opinion that it handed down, as I recall in 1980, stated that Eastern did not deny liability for the $75,000 to the proper parties, is that correct?

MR. SHARP: That is correct.

QUESTION: Did Eastern consider then depositing $150,000 in the court, subject to the determination of who the proper parties were?

MR. SHARP: There is no indication of that. What I would say to you, Your Honor, is that Eastern offered every Warsaw Plaintiff an offer of judgment in an amount of $75,000.

QUESTION: That was an offer of settlement.

MR. SHARP: Pardon me?

QUESTION: That was an offer of settlement.

MR. SHARP: Yes.

QUESTION: Right. But my point is, what did Eastern have to lose by depositing the money earlier than it did if it took seven years before it finally deposited the money? Meanwhile, it had the use of that money. If it had been deposited and Eastern won the case eventually, it would have received its money back plus interest.

MR. SHARP: Your Honor, I don't know that it ever considered whether to deposit or not to deposit. I think that most defendants hold onto the money until they can get a discharge from the plaintiff. That's the one thing they have to win, is when they pay they want to leave the case, and that's what Eastern wanted.

QUESTION: The plaintiff doesn't get the money when it's with the registry of the court.

MR. SHARP: That's right.

QUESTION: But the interest on $150,000 over seven years is quite substantial.

MR. SHARP: That's right. Your Honor, the only thing I would point out there is that the Plaintiff has never moved for a complete summary judgment against Eastern, and if they had Eastern would have certainly, as its offer of judgment suggests, been prepared to pay the limit; and if the court had ruled that prejudgment interest also had to be paid in a summary judgment proceeding, that would have concluded the litigation.

QUESTION: Was that motion made in --

MR. SHARP: It was never made.

QUESTION: -- 1982, when the money was paid into the registry of the court?

MR. SHARP: No. The Plaintiff opposed our motion to fix the liability. The Plaintiff's position was in 1982 that the limits of liability were void in light of the Second Circuit's opinion in Franklin Mint.

If there are no further questions, I would like to reserve the balance of my time.

CHIEF JUSTICE BURGER: Mr. Farrell.

ORAL ARGUMENT OF GEORGE EDWIN FARRELL, ESQ., ON BEHALF OF PLAINTIFFS

MR. FARRELL: Mr. Chief Justice and may it please the Court:

The basis of Petitioner's argument seems to me to be that the limits of liability stated in Warsaw and Montreal can't be exceeded, no matter what. Now, this was never intended by the delegates at Warsaw or Montreal, nor by any of the high contracting parties who ratified the treaty.

The delegates at the Warsaw conference were not making a wrongful death statute. They were trying to establish air law. They full understood that the articles they promulgated were dependent upon national law for implementation.

Almost none of the operating articles in the Warsaw convention are self-executing, and of those making up the liability section, six directly require the use of national law. The European delegates and the high contracting European parties never considered that the liability limitations set forth in Article 22 could not be exceeded.

It was standard procedure for them to award legal fees and costs in addition to the damages limitation. No one outside the United States even knew this was going on until the Hague conference in 1955.

Mr. Sharp points out that Mr. Deveaux thought that the damages should be limited or that there should not be any way to exceed the damages limit. Yet, it was his country, as reported by Mr. Drion, who also awarded interest in addition to the costs and attorney's fees. Mr. Drion further said that the attorney's fees and costs are not damages arising from the conduct or the fact for which liability is imposed by the convention. Obviously, the same reasoning could apply to interest in excess of the Warsaw convention limitation, as interest is not an element of damages.

Thus, from the very beginning the Warsaw limitations were routinely exceeded. The very provision of Article 22 that was related to you provides that interest in excess of the Warsaw limit was permissible. That provision pertained to the periodical payments which were just discussed.

The Petitioner's brief says that these periodical payments which permitted an excess payment over and above the Warsaw limitation took into account the time value of money. Now, that can only be interest.

Article 22 further provides that the limitation could be exceeded by a special contract. Article 3 provides that if you don't give notice you can exceed the Warsaw limitation. Article 25 permits the limitation to be exceeded if the conduct of the carrier so requires.

The Hague -- yes?

QUESTION: For example, what? "If the conduct"; what kind of conduct?

MR. FARRELL: The words are the "willful misconduct pursuant to the law of the court that is hearing the case."

QUESTION: What about ordinary negligence?

MR. FARRELL: Ordinary negligence would not do it, Justice White.

QUESTION: Could I ask, Eastern filed an answer, I take it, to the complaint? And based on that answer, was there any issue at all that Eastern at least owed $150,000?

MR. FARRELL: Eastern alleged the defense of Warsaw-Montreal, saying that its liability was limited to $75,000.

QUESTION: Right, but its answer at least conceded its liability for 150?

MR. FARRELL: No, it did not concede its liability up to that amount. It said that it was defending, using that as a defense, that Warsaw-Montreal did apply.

QUESTION: How could they escape liability?

MR. FARRELL: Well, I don't think they could, because there were two deaths.

QUESTION: Well, I know. But could you read the answer? The Second Circuit said, as Justice Powell points out, that Eastern had never denied its liability up to the convention limits. Did its answer deny or not?

MR. FARRELL: Its answer did not deny, but it was not -- it was an affirmative defense, Your Honor. It didn't say that, we owe you $75,000. It says that the Warsaw-Montreal provisions are applicable.

QUESTION: Well, which would mean that their liability is limited.

MR. FARRELL: Yes, indeed. They were alleging their liability was limited, correct.

QUESTION: But they never denied liability?

MR. FARRELL: They never denied liability, no, that is correct.

They also -- as admitted by the Plaintiff, the defense of the improper party was not valid against this Plaintiff. There were others perhaps it may have been, but not this one. So that defense, which was carried on for many years, was a spurious defense.

QUESTION: Well, of course you were hoping to get a recovery in excess of the liability limits, I assume?

MR. FARRELL: Well, when you have two Defendants in it, Justice O'Connor, that is correct. We had a right to determine if we could get adequate damages for our Plaintiff.

QUESTION: But you wanted to recover amounts in excess of the limits of the $75,000 a person.

MR. FARRELL: I didn't particularly care whether I got it from Eastern or from the United States, Your Honor. But in fact, we did get $1,650,000, but principally from the United States, after Eastern made its motion almost seven years after the case began.

QUESTION: And you never filed for summary judgment against Eastern for the amount of $75,000 each, partial summary judgment?

MR. FARRELL: Specifically stating that, we did not. We filed for summary judgment on the issue of liability, and we were willing to permit Eastern to maintain whatever defenses it thought it had. And that was approved by the trial court.

QUESTION: When?

MR. FARRELL: That was in 1978, Your Honor.

QUESTION: So that as of 1978 liability had been established?

MR. FARRELL: No, Your Honor, it hadn't. There was a trial--

QUESTION: I thought you said your motion was granted.

MR. FARRELL: Well, the motion was granted, but it was later overturned by the Second Circuit on a procedural ground.

QUESTION: Well, I know, but there was a judgment in 1978.

MR. FARRELL: But only on liability.

QUESTION: Right, just liability.

MR. FARRELL: Yes. Later there was an all-out trial on liability against Eastern. Eastern was found negligent. But this case was not in it because of the ruling by the trial court that Eastern was liable, for liability only. So this case was not in the liability trial before the jury.

QUESTION: That's the judgment on page 37 of the appendix. It was entered September 26th, 1978.

MR. FARRELL: Yes, Your Honor. The first judgment entered was prepared by the defense firm that was defending in New York Eastern Air lines, and they for some reason included some Article 54 words, and it had to come back, although after they made up the order themselves they then appealed it.

QUESTION: And what was the later trial against Eastern on liability?

MR. FARRELL: The trial commenced --

QUESTION: Well, what was the issue there, liability?

MR. FARRELL: The issue was whether or not Eastern was negligent in causing this accident.

QUESTION: What if it had been?

MR. FARRELL: It was found negligent, Your Honor.

QUESTION: And does that escape the Warsaw limits?

MR. FARRELL: No, it did not, Your Honor, not for a Warsaw case like this one. We always agree that this is a warsaw case. The Warsaw Convention and Montreal Agreement apply to this case and we've never denied that, Your Honor.

QUESTION: And so why were you trying out negligence against Eastern?

MR. FARRELL: There were other cases in it, Justice White, many in which Warsaw did not apply.

QUESTION: I see.

QUESTION: Those were the domestic passengers?

MR. FARRELL: Yes, Your Honor.

In addition to the articles which I mentioned which permitted excess payments over and above the Warsaw limitation, there was also a dual payment, a system which came into being during the Hague conferences in 1955. This was after the United States discovered that the Europeans were exceeding the Warsaw limitation anyway.

So a dual system was brought into those discussions and, although the United States never ratified Hague, the dual system again was brought up during the Montreal conference and that is the provision that, in the countries that do not award fees and costs such as the United States, a limitation of $75,000 was reached, and otherwise it would be $58,000 plus attorney's fees and costs.

Of course, this permits the ceiling on damages to be exceeded, depending upon the length of time, again, that the litigation takes place, because the longer the time involved the more the attorney's fees and the more the costs.

Thus, there never has been any prohibition on exceeding the Warsaw-Montreal limits from the provisions of the documents and the conduct of the parties that drew up the convention. The framers, the Europeans who framed Warsaw, never considered that exceeding the limitation was any problem.

Now, we had some discussions of Articles 24 and 28, but before getting to those I would like to respond to Petitioner's comments from reading Article 22.1 and his finding of apparently a 1932 French dictionary which changes the words.

The Congressional Record, which reports the Senate's action on the Warsaw Convention, dated June 15 1934, has the word "damages" in it. It says 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," and so forth.

We've had this treaty in effect for over 50 years, and I for one would assume that if we weren't using the right words that the French people would have told us by now. I don't think that this is the time to, on a reargument, to change the wording.

As previously in its brief, the Petitioner has agreed that this means that under 22.1 if you have periodical payments that the excess that's paid is for the use of money.

Now, probably the real key to this case is in Article 24, which provides that the law of the court that hears the case shall determine the elements of damages. Now, this is a wrongful death case. The Petitioner concedes that the proper wrongful death law to be applied is the law of Louisiana, where this case was brought, including its conflict laws as well as its law pertaining to judgment interest. His problem with it is that he doesn't think that prejudgment interest could be awarded.

Now, Louisiana, the recovery for wrongful death may be had for a loss of love and affection and that type of recovery, loss of support, loss of services, and funeral and medical expenses. The trial court determined the loss under each of these categories and awarded damages against the United States and Eastern Air Lines in the amount of $1,650,000, as I previously mentioned. Of that amount, $150,000 was assessed against Eastern for the two deaths.

In making its determination for the lost support portion of the damages award, the court first determined the loss from the time of death until the time of trial, using decedent's income at the time of death projected forward, and then determined future loss of support by using projected income from date of trial until date of majority of the three infants, reduced to present value.

Thus, the damages judgment was based upon the value of the human life at the time of death. The court then ordered the application of prejudgment interest from date of what they called judicial demand, or the time when the case was filed, and postjudgment interest as allowed by the specific Louisiana statute pursuant to the Louisiana procedure.

Thus the district court, pursuant to its law as the court before which the action was brought, determined that damages accrued at the time of death and Eastern was liable for $75,000 per decedent, the maximum damages pursuant to the Montreal Agreement.

The court then determined, pursuant to Article 28, that Eastern was further liable to pay interest from the date that the action was filed as compensation for the use of money rightfully belonging to the Plaintiffs over the nearly seven-year period between the time that the case was filed and the time that Eastern paid its $150,000 into the registry of the court.

QUESTION: Mr. Farrell, isn't that item normally considered part of the damages or compensation that would be contemplated under the terms of the treaty?

MR. FARRELL: I would say if you're using the --

QUESTION: Prejudgment interest?

MR. FARRELL: I would say no, Your Honor. The prejudgment interest to my knowledge, at least in the United States, is never a part of damages. It's something that is added. It's a ministerial function. It's pursuant to statute. It's never a part of damages that I know of in any of the jurisdictions in the United States.

Now, the proceeding in Louisiana is really no different from the provisions of Article 22.1 of Warsaw. That provision states: "Where, in accordance with the law of the court in which the case is submitted, damages may be awarded in the form of periodic payments, the equivalent capital value of the said payments shall not exceed 125,000 francs."

This provision specifically permits a court to add interest to a damages award when payment is delayed and, as admitted by Eastern, provides compensation for the use of money, or interest.

Petitioner admits by delaying payment rightfully due to three orphaned children it put $87,000 into the pockets of Eastern's insurance company. Instead of paying $75,000 per death, it actually paid approximately $31,000.

The action of the Louisiana district court was absolutely proper under its law, and it is not in violation of any articles, neither Warsaw nor Montreal. And if anything, the result is no different than the periodic payment provision of Article 22.

Now, the Petitioner in its briefs has gone to great length in an attempt to establish that interest is an integral part of compensatory damages. In some jurisdictions throughout the world, this may be correct, but as I -- in response to Justice O'Connor's question, the jurisdiction in which the action was brought, Louisiana, and whose laws were properly used, as admitted by Eastern, the practical application of the Louisiana procedure is to establish a starting point for compensation to be paid for the use of money at the time the Plaintiff files his lawsuit and a termination point when the judgment is paid.

The amount of interest to be paid is determined by the amount of the damages award and the length of time involved. The theory is simple: The Defendant owed the money at the time of death and must pay the Plaintiff for its use.

QUESTION: Well, in Louisiana, then, what would the judgment say? It would just give a total amount, wouldn't it? What would it say?

MR. FARRELL: This one broke the judgment down, Justice White, into loss of support, loss of services, and so forth.

QUESTION: And then did it have a separate item on interest?

MR. FARRELL: It says "interest pursuant to law," which later-- that was in its decision. Later in the judgment, it set out the Louisiana interest provisions.

Now, this action was a wrongful death action which, as you were told, arose from the crash of Eastern's Flight 66 at the John F. Kennedy International Airport on June 24, 1975. And it was not until December 2, 1982, that Eastern deposited $150,000, or $75,000 per decedent, into the registry of the court pursuant to its contract of carriage as established by the Montreal Agreement.

The reason for the delay stems from an agreement between Petitioner's insurance company and the United States under which the insurance company agreed to pay 60 percent and the United States 40 percent of any passenger recovery, with the specific provision that Eastern's insurance company was to have complete control over damages discovery, damages trial, appeals, and any decisions relating to the settlement or non-settlement of a particular case.

This is the Petitioner's fifth appeal, four of which relate to Montreal damages. The district court, as affirmed by the Court of Appeals, found that Eastern contributed to delaying the litigation to an extent that a smaller amount of money was invested in order to pay the $75,000 claims.

Petitioner admits that if this honorable Court rules in its favor it will pay only 62 or $63,000 for the two deaths, or about $31,000 each, instead of the $75,000 each, as ordered by the district court. Therefore, at least $87,000 rightfully belonging to the three Mahfoud children will go into the pockets of the insurance company.

This result was never intended by the framers or signatories of Warsaw or Montreal. Denying prejudgment interest in this case would fail to effect any purpose of the convention's framers or signatories. The decision of the district court, as affirmed by the Court of Appeals, ensures that Warsaw-Montreal recoveries will not be diminished by the simple strategy of delaying payment until the award diminishes in value.

The judgment should be affirmed.

CHIEF JUSTICE BURGER: Anything further, Mr. Sharp?

REBUTTAL ARGUMENT OF RICHARD M. SHARP, ESQ. ON BEHALF OF PETITIONER

MR. SHARP: Yes, Your Honors. I would like to address this problem of delay. Eastern in 1978 offered judgment in the full amount of the limits of liability. In 1982 Eastern twice moved to have the court declare what the amount of its liability was, and in the second motion the court did so and Eastern paid that liability into the court.

The Plaintiff opposed our motion to have our liability fixed. There are sound reasons why Warsaw Plaintiffs would not want to settle, to take the full maximum liability of the carrier and let the carrier leave the litigation. That would mean that only the United States is standing ready for the damage trial. The damage trial against the United States standing alone can only be before a judge. No jury would be involved. If the Co-Defendant Eastern is present, there is a right of a jury trial.

The second point is that if the United States is standing liable alone, prejudgment interest on that $1.7 million cannot be recovered. Federal law disallows the recovery of prejudgment interest against the United States. On the other hand, it does not disallow the recovery of prejudgment interest against a private defendant.

Accordingly, if a Plaintiff in the position of Mahfoud can, one, break the limit by alleging willful misconduct, which another Plaintiff, Mrs. Domangue, was doing in this case, or if a Plain tiff can break the limit, as Mr. Mahfoud tried to do, by relying on the Franklin Mint case when it had just come down from the Second Circuit Court of Appeals, that would allow the Plaintiff to recover prejudgment interest on $1.7 million.

Alternatively, the Plaintiff might be able to raise the limit, at least at this time during the litigation, by suggesting to the court that the market value of gold should be the conversion rate for purposes of fixing the limit. That notion was abroad since 1981 in a case called Boeringer-Mannheim, in which the district court in Texas decided that it would be the market price of gold that would set the limit.

What I'm suggesting to Your Honors is that there's a very, very sound reason why a Warsaw Plaintiff would not move for summary judgment and would not discharge the carrier of its liability. And in this case there was no motion by the Plaintiff for a complete summary judgment.

QUESTION: No, but there was a motion for summary judgment on liability.

MR. SHARP: Yes, Your Honor.

QUESTION: Which was granted, and then that judgment was reversed on purely procedural grounds.

MR. SHARP: That is true, Your Honor.

QUESTION: But the Court of Appeals for the Second Circuit didn't for a minute suggest that there was any question about liability.

MR. SHARP: That's right, and the Court of Appeals in that decision --

QUESTION: I just wonder -- the question Justice Powell asked you some time ago: Why didn't, at least in 1978, why didn't you deposit the $150,000 so that it would accrue interest in favor of the Plaintiff?

MR. SHARP: Well, I think the answer is because it was accruing interest in favor of the Defendant.

QUESTION: Well, that's right.

MR. SHARP: I mean, I can't state that as a fact --

QUESTION: So you just say that as long as we can keep the money, it's in our interest to keep the money as long as possible?

MR. SHARP: Yes. It's in our interest to keep the money unless we can be discharged from the litigation. That's the key to our exit from the litigation.

QUESTION: Well, that's an argument, all right.

MR. SHARP: Your Honors, our position boiled down is that the purpose and the text of the Warsaw Convention and the Montreal Agreement is to place a limit on the maximum liability of an air carrier, and prejudgment interest is part of that maximum liability.

CHIEF JUSTICE BURGER: Thank you, gentlemen. The case is submitted.

(Whereupon, at 11:59 a.m., argument in the above-entitled case was submitted.)