Trans World Airlines, Inc. v. Alitalia-Linee Aeree Airlines

Citations: 85 Cal. App. 3d 185; 149 Cal. Rptr. 411; 1978 Cal. App. LEXIS 1960Docket: Civ. 42519

Court: California Court of Appeal; September 28, 1978; California; State Appellate Court

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Trans World Airlines, Inc. (TWA) successfully sought indemnification from Alitalia and Lufthansa for damages incurred due to a shipment of two speedboat engines damaged during transit. The engines were transported from Los Angeles to Pisa, Italy, with TWA initially handling the shipment to Frankfurt before transferring it to Alitalia, which then passed the cargo to Lufthansa for delivery to Milan. Upon arrival in Pisa, the engines were found to be damaged, with evidence suggesting mishandling during transportation.

Alitalia and Lufthansa appealed the trial court's judgment, arguing that the court failed to apply the indemnity provisions of the International Air Transport Association Interline Cargo Claims Agreement 1852, specifically Part C(14)(b), which addresses the allocation of losses among responsible carriers when an action has been defended. This provision allows for the apportionment of costs based on the transportation revenue received by each carrier involved in the shipment. The trial court had found that the engines were in good condition when transferred to Alitalia, which further supported TWA's claim for indemnification.

The trial court awarded full indemnity to TWA based on the federal common law presumption that damage to goods delivered in apparent good order occurred under the last carrier's control. However, the controversy is governed by the IATA Interline Cargo Claims Agreement 1852, which defines the loss as a 'concealed loss' since the damage was not discovered until after delivery to the consignee at customs in Milan. According to Part C(14)(b) of the IATA agreement, when a carrier unsuccessfully defends a claim related to a concealed loss, the judgment amount and associated legal fees are charged proportionally among responsible carriers based on their air transport revenue.

In this case, TWA, Alitalia, and Lufthansa are all classified as 'interested carriers,' but only Alitalia and Lufthansa were deemed 'responsible carriers' for the loss. The evidence showed that the engines were transferred to Alitalia and Lufthansa in Frankfurt without any noted damage, and the significant damage was discovered only when the crates were opened in Milan. Therefore, TWA is entitled to recover from both Alitalia and Lufthansa based on their respective shares of the air transport revenue.

Lufthansa argued that the trial court erred in admitting the transfer manifest as evidence, claiming it lacked a proper foundation under the business records exception to the hearsay rule, as the document's custodian did not testify. Nonetheless, the court's conclusion that TWA was entitled to recover was upheld, despite the inapplicability of federal common law.

Evidence Code section 1271 allows the admission of writings as business records, provided certain criteria are met: the writing must be created in the regular course of business, at or near the time of the event, authenticated by a custodian or qualified witness, and must demonstrate trustworthiness. Carl Hilts, TWA's cargo claims head, testified he was the custodian of a transfer manifest documenting a shipment transfer from TWA to Alitalia at Frankfurt airport on June 24, 1973. Hilts confirmed that the document was maintained in accordance with TWA's business practices and was required by IATA procedures. Alitalia acknowledged receiving the cargo and admitted the transfer manifest matched a similar document they possessed. The court found Hilts qualified to testify about the manifest as a business record, affirming the trial judge's discretion in its admissibility.

Lufthansa challenged the admission of Hilts' and Gunter Mosler's testimony regarding F.A.G. as Alitalia's cargo handling agent, arguing it lacked personal knowledge. Hilts based his testimony on the presence of F.A.G.'s stamp on the manifest and his airline industry experience, although he did not have direct knowledge of any contract between F.A.G. and Alitalia. Mosler, who supervised TWA's cargo operations in Germany, asserted he had personal knowledge of TWA's procedures for documenting such transfers. The court determined that both Hilts' and Mosler's testimonies were admissible based on their respective knowledge and experience.

The trial court affirmed that Mosler's testimony was based on his personal knowledge gained from his duties. Lufthansa argued that TWA should not receive fees and costs from them or Alitalia due to TWA's alleged inadequate performance of its obligations under the IATA agreement to defend the action. However, the record showed that TWA properly notified both Lufthansa and Alitalia of Gentry-Nevada's action and sought their cooperation in the defense, as stipulated in the IATA claims agreement. Specifically, paragraphs (17) and (18) of the agreement require parties to provide all pertinent information and assistance when requested and state that failure to respond in a timely manner constitutes acquiescence to the requesting carrier's decisions. There was no evidence that Alitalia or Lufthansa responded to TWA's request, rendering Lufthansa's argument invalid. The judgment was upheld, with judges Caldecott and Rattigan concurring.