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Axa Art Ins. Corp. v. Art Courier

United States District Court,

S.D. New York.

AXA ART INSURANCE CORPORATION as subrogee of Gagosian Gallery International, Plaintiff,

v.

ART COURIER, Boxart, Inc., Int’l, Lufthansa Cargo, AG, Defendants.

 

No. 09 Civ. 7362(JSR).

July 6, 2011.

 

MEMORANDUM

JED S. RAKOFF, District Judge.

Plaintiff Axa Art Insurance Corporation (“Axa Art”), as subrogee of Gagosian Gallery International (“Gagosian”), brought this lawsuit against defendants Art Courier, Art Crating, Inc. (“Art Crating”), Boxart, Inc. (“Boxart”), Fritzstock, Inc., Tiffany Transport International, and Lufthansa Cargo, AG (“Lufthansa”), seeking recovery for a Brice Marden painting entitled Au Centre (1969) (the “Painting”) that was damaged in Frankfurt, Germany while in transit from Moscow to New York via Lufthansa Airlines. During in-court conference held on April 27, 2011, the Court dismissed, on consent, all claims and cross-claims against defendants Art Crating, Inc., Fritzstock, Inc., and Tiffany Transport, Int’l. See Tr., 4/27/2011. On May 6, 2011, the Court issued a “bottom-line” Order granting plaintiff’s motion for summary judgment against de Lufthansa in the sum of $2,800,000 and, correspondingly, denying Lufthansa’s motion for partial summary judgment; denying plaintiff’s motion for summary judgment against Boxart and Boxart’s motion for summary judgment against plaintiff; and granting Art Courier’s motion for summary judgment against plaintiff and, correspondingly, denying plaintiff’s motion for summary judgment against Art Courier. This Memorandum explains the reasons for those rulings.

 

The pertinent facts on summary judgment, undisputed except where indicated, are as follows. In exchange for $86,805.52, Art Courier agreed to transport the Painting (as well as all paintings exhibited at the Red October Exhibition) from Moscow to New York City in October 2008. Plaintiff Axa Art’s Rule 56.1 Statement (“Pl.56.1”)  5; Art Courier’s Counterstatement to Plaintiff’s Rule 56 .1 Statement (“Art Courier Resp. 56.1”)  5. Gasosian and Art Courier agreed that “in the case of necessity, [Art Courier] is entitled to make contracts with reputable third parties to provide shipping or packaging services related to this Agreement, [Art Courier] shall be solely responsible for any third party services related to this agreement.” Pl. 56.1  7; Art Courier Resp. 56.1  7.

 

Unless otherwise noted, all citations to a moving party’s statement of undisputed facts made pursuant to Local Rule 56.1 incorporate the corresponding paragraphs of the opposing parties’ responses.

 

When Art Courier received the Painting it was undamaged. Pl. 56.1  6. Art Courier arranged for its agent TBSS to enter into an agreement with Lufthansa for the transport of the Painting from Moscow to New York. Art Courier Resp. 56.1  8. The contract entered into between Gagosian and Art Courier was written in both English and Russian. According to the English version of the contract between Gagosian and Art Courier, Art Courier agreed to provide “supervision at the airports and provid[e] monitoring or loading to the board of the plane.” Pl. 56.1  9. According to the Russian version of the contract, Art Courier agreed to “monitor[ ] cargo at the airport of the City of Moscow during unloading at the warehouse and loading the board the aircraft.” Art Courier Resp. 56.1  4, 9.

 

Defendant Boxart manufactured the travel frame used to transport the Painting from Moscow to New York in April 2006. Pl. 56.1  13. Boxart custom-built the travel frame for the Painting and designed it to protect the Painting from movement and to stabilize the Painting while inside an exterior crate. Id.   15, 17–18. Boxart fastened eight so-called “oz clips” to the rear of the stretcher of the Painting to secure the Painting into the travel frame. Id.  20. Each oz clip was designed to be fastened to the rear of the stretcher of a painting using two screws. Id.  30.

 

Four of the eight oz clips were fastened to the rear of the stretcher of the Painting with eight screws that were 6 gauge in girth and 1/2 inch in length. The fifth oz clip was fastened to the rear of the stretcher with two screws that were 8 gauge in girth and 1/2 inch in length. The sixth oz clip was fastened with two screws that were 8 gauge in girth and 5/8 inch in length. The seventh oz clip was fastened with one screw that was 8 gauge in girth and 5/8 inch in length and one screw that was 10 gauge in girth and 3/4 inch in length. The eighth oz clip was fastened with one screw that was 8 gauge in girth and 1/2 inch in length and one screw that was 8 gauge in girth and 5/8 inch in length. Id.  38–42.

 

Plaintiff—primarily relying on the expert testimony of James Martin, principal of consulting firm Orion Analytical LLC—contends that the appropriately sized screws necessary to fasten the eight oz clips to the rear of the stretcher of the Painting are 8 gauge in girth and between 3/4 inch and 1 inch in length, Pl. 56.1  32. Thus, according to plaintiff, none of the screws were appropriately sized. Boxart, however, contends that there is not necessarily only one appropriate type of screw, as there are many variables concerning the appropriate screw length. Boxart Resp. 56.1  14 (citing Engel Dep. at 78–80).

 

Plaintiff further contends that eleven of the sixteen holes used to fasten the oz clips to the rear of the stretcher of the Painting could not accommodate screws greater than 1/2 inch. Pl. 56.1  53. Defendant Boxart again disputes this point and argues that the original hardware installed with the travel frame was altered or changed between the time of manufacture and time of inspection after the Painting was damaged. Counter Rule 56.1 Statement of the Defendant Boxart, Inc. (“Boxart Resp. 5 6.1”)  1. Robert Lowe, the President of Art Crating, testified that the Painting was not affixed to the travel frame in the same manner it was packed when Art Crating received the painting in August of 2008. Lowe Dep. at 54–55.

 

The Painting was damaged while in transit from Moscow to New York in October 2008 when the Painting dislodged from its travel frame. Prior to the damage, the Painting was valued at $2,800,000. Pl. 56 .1  22–24. Lufthansa accepted the crated Painting with no noted damage at Moscow Airport. Rule 56.1 Statement by Art Courier (“Art Courier 56.1”)  7. Axa Art’s early investigation revealed that the crate holding the Painting had a 6 inch hole, “which appears to be a result of a forklift prong of possibly another piece of cargo that may have fallen into the crate damaging same.” Art Courier 56 .1  5. Axa Art reported that “[t]he impact caused the painting to be knocked off the [clips] that held it to the travel frame. The resulting damage was that the work was damaged in all four corners with losses in the top center and the lower left and upper and lower right areas of the painting.” Id.  6. As a result of the damage, the Painting could not be restored and suffered a total loss. Pl. 56.1  25. Pursuant to an assignment and subrogation receipt dated November 20, 2008, Gagosian’s claims against the defendants from damage to the Painting were assigned to plaintiff Axa Art Insurance Corp. Pl. 56.1  2.

 

Summary judgment is appropriate when, viewing the evidence most favorably to the non-moving party, there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c)(2); Sarus v. Rotundo, 831 F.2d 397, 400 (2d Cir.1987). However, a mere “scintilla” of evidence is insufficient for the non-movant to survive summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). A dispute as to a material fact is “genuine” only “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. at 248.

 

Turning first to Lufthansa’s liability, the Court concludes that plaintiff is entitled to summary judgment against Lufthansa. As an initial matter, the Court notes that Lufthansa failed to submit a memorandum in opposition to plaintiff’s summary judgment motion and also failed to submit a statement of undisputed facts pursuant to Local Rule 56.1. This alone warranted granting plaintiff summary judgment against Lufthansa.

 

Over a week after summary judgment answering papers were due, Lufthansa submitted, without more, a blank air waybill purporting to limit Lufthansa’s liability. The Court, while determining that summary judgment should be granted to plaintiff for the foregoing failure to respond, independently undertook to consider the document provided by Lufthansa in opposition to plaintiff’s motion, but still found that plaintiff was entitled to summary judgment against Lufthansa. It is undisputed that Lufthansa accepted the Painting in good condition and delivered it in damaged condition. When an item is damaged in transit, the carrier is presumed liable pursuant to the Warsaw Convention, and the only dispute concerns whether the Warsaw Convention limits Lufthansa’s liability. Lufthansa contends that its liability is limited by the terms of Warsaw Convention of 1929 as amended by the Hague Protocol of 1955 to $9.07 per pound. However, in order to benefit from limited liability, Articles VI and VII of the Hague Protocol of 1955 require the air carrier to provide in its air waybill notice that the Warsaw Convention may be applicable and that liability is limited. Specifically, the air waybill must contain “a notice to the consignor to the effect that, if the carriage involves an ultimate destination of stop in a country other than the country of departure, the Warsaw Convention may be applicable and that the Convention governs and in most cases limits the liability of carriers in respect of loss of or damage to cargo.” Warsaw Convention art. 8(c). If the air waybill does not include the required notice, “the carrier shall not be entitled to avail himself” of the limited liability provisions of the convention. Id. art. 9.

 

Here, while Lufthansa did belatedly submit an air waybill that purportedly provides notice of limited liability, the submitted air waybill is blank and does not indicate a date or a customer name. Thus, there is no evidence that any notice of limited liability was provided in this case. Because of Lufthansa’s failure to respond to plaintiff’s summary judgment motion and, independently, because the blank air waybill that was belatedly submitted by Lufthansa fails to provide admissible evidence creating a genuine dispute of material fact, the Court grants plaintiff’s motion for summary judgment against Lufthansa in the amount of $2,800,000 (and correspondingly denies Lufthansa’s cross-motion for partial summary judgment).

 

Turning to Art Courier, the Court finds that Art Courier cannot be held liable for the damage to the Painting and thus grants Art Courier’s summary judgment motion against plaintiff and denies plaintiff’s summary judgment motion against Art Courier. As an initial matter, the parties are at odds over whether New York law or Russian law governs the dispute between Axa Art and Art Courier. Since, however, the contract entered between Gagosian and Art Courier expressly provides that “[a]ll legal disputes occurred in connection with this present Contract that cannot be settled are resolved according to the laws of the Russian Federation,” the Court concludes that Russian law plainly applies.

 

Plaintiff, in its summary judgment moving papers, argues that the contract between Gagosian and Art Courier is invalid because Russian law requires agreements to be signed to be enforceable and, in this case, the agreement was not signed. Since the contract is allegedly invalid, plaintiff then asserts (without conducting an interest analysis, as required by New York choice of law principles) that New York law governs the dispute since it was foreseeable that Art Courier’s conduct could result in damage to the Painting in New York. Perhaps realizing that at least one of its arguments for Art Courier’s liability is premised on the validity of another provision in the supposedly invalid contract, plaintiff, in its memorandum in opposition to Art Courier’s summary judgment motion, backs away from the position that the contract is invalid and argues that the contract would still be enforceable even if not reduced to a signed writing. Plaintiff cannot assert that the contract is invalid to avoid its choice of law provision and simultaneously assert that the contract is valid to take advantage of its purported indemnity provision. In any case, regardless of the contract’s choice of law provision, the Court would still find that Russian law applies pursuant to New York choice of law rules, because Russia is the jurisdiction with “the greatest concern with the specific issue raised in the litigation.” Babcock v. Jackson, 191 N.E.2d 279, 283 (1963). Indeed, most of Art Courier’s allegedly negligent conduct took place in Russia and none of the allegedly negligent conduct took place in New York.

 

Having established that Russian law governs the dispute, the Court now considers whether Art Courier agreed to indemnify Gagosian in the event that the Painting was damaged while in Lufthansa’s care. As an initial matter, the Court notes that Axa Art has not pled contractual indemnity in its complaint; rather, it has only filed a negligence claim and a claim (unknown to law) of “breach of contract due to negligence.” Thus, Axa Art cannot prevail on a claim for contractual indemnification.

 

Independently, the Court finds that Axa Art’s interpretation of the purported indemnification provision is wrong as a matter of law. The relevant provision of the contract between Art Courier and Gagosian provides that “in the case of necessity [Art Courier] is entitled to make contracts for providing services with reputable third parties to provide shipping or packaging services related to this Agreement” and that “[Art Courier] shall be solely responsible for any third party services related to this Agreement.” See Contract 01/20, art. 2.1.1. The contract goes on to define “services” to include “[p]acking and loading,” “[t]ransportation by special fine art trucks,” “[a]rmed escort of the trucks within Moscow,” “[o]utward customs clearance at the ‘Exhibition’ customs post,” “[h]andling and storage charges at the airport,” and “[s]upervision at airports and providing monitoring of loading [of the Painting] to … the plane.” Id. art. 1 .2. Since air carriage is not among the “services” listed in the agreement, Art Courier cannot be held liable for Lufthansa’s negligence.

 

While not raised as an argument in its summary judgment moving papers or in its memorandum in opposition to Art Courier’s summary judgment motion, plaintiff argues in its reply papers that Art Courier is liable under the Warsaw Convention as an indirect “carrier.” Although the argument was waived by not being raised earlier, the Court also concludes that, on the merits, the argument is defective because Art Courier is not an air carrier or an agent of an air carrier and thus the Warsaw Convention is inapplicable. Here, among other things, no bill of lading was issued by Art Courier, Art Courier did not directly engage the services of Lufthansa, and Art Courier did not own the carrying vessel. The Court further notes that its conclusion that Art Courier is not a “carrier” within the meaning of the Warsaw Convention is consistent with Axa Art’s own position that Boxart is not a “carrier” within the meaning of the Warsaw Convention. As Axa Art argues in its own opposition to Boxart’s summary judgment motion, “the Warsaw Convention was intended only to apply to those involved in the airline industry,” see Memorandum in Opposition to Boxart Motion for Summary Judgment at 12, and Art Courier is not involved in the airline industry.

 

The Court now turns to Axa Art’s negligence claims against Art Courier. The plaintiff first claims that had Axa Art provided supervision at the airport in Frankfurt, the Painting would not have been damaged. As an initial matter, it is not clear that Art Courier was contractually obligated to supervise the loading of the Painting at the airport in Frankfurt. Indeed, the contract between the parties is written in both Russian and English and the Russian version very clearly provides that Art Courier would provide supervision “at the airport in the City of Moscow” rather than all airports. In any case, even assuming that Art Courier had such a duty, Art Courier cannot be held liable because its failure to supervise did not cause the harm. While plaintiff points to some testimony suggesting that “[s]tatistically … supervising the loading, unloading, changeover, handling or artworks at all and any airports substantially reduces the chance of harm,” it cannot be seriously argued that Art Courier, by failing to supervise the monitoring of the Painting, somehow “caused” Lufthansa’s employee to drive a forklift into the crate containing the Painting, especially since, under Russian law, plaintiff must show direct causation (as opposed to indirect causation) in order to establish liability.

 

In opposing Art Courier’s summary judgment motion, Axa Art argues that because Art Courier did not provide timely responses to Axa Art’s requests to admit, certain matters should be deemed admitted, including, inter alia, that Art Courier was responsible for providing supervision of Painting at the airport in Frankfurt and that Art Courier was responsible for monitoring the loading of the Painting onto aircraft in Frankfurt. Since Art Courier had already effectively denied these matters through deposition testimony and since it did provide its responses on March 18, 2011–prior to the deadline for summary judgment papers-the Court excuses Art Courier’s late responses on the ground that Axa Art was not prejudiced in any way. See Moosman v. Joseph P. Blitz, Inc., 358 F.2d 686, 688 (2d Cir.1966) (permitting untimely responses when there is no delay and no prejudice to the requesting party).

 

With respect to plaintiff’s claim that Art Courier was negligent in the packaging of the Painting, there is simply no evidence suggesting that Art Courier’s packaging was deficient. Plaintiff has submitted some evidence that the travel frame built for the Painting was deficient as a result of the use of inappropriately sized screws; but there is no evidence that the actual packaging of the Painting was deficient in any respect, let alone that it caused Lufthansa’s employee to drive a forklift into the crate containing the Painting. Thus, taking the facts most favorably to plaintiff, the Court concludes that Art Courier is entitled to summary judgment in its favor, and that plaintiff’s motion for summary judgment against Art Courier must be denied. In addition, since all cross-claims against Art Courier are premised on plaintiff prevailing against Art Courier, the Court dismisses all cross-claims against Art Courier.

 

Turning to Boxart, the Court concludes that there are disputed issues of material fact that preclude granting Boxart’s summary judgment motion against plaintiff or plaintiff’s summary judgment motion against Boxart. As an initial matter, while Boxart is correct that the Warsaw Convention preempts all state law claims and limits liability of “air carriers and their agents,” see Reed v. Wiser, 555 F.2d 1079 (2d Cir.1977), Boxart is clearly not an air carrier or an agent of an air carrier and thus the Warsaw Convention does not apply. In this case, while Boxart manufactured the travel frame for the Painting, there is no evidence that it had any relationship to defendant Lufthansa. Since the Warsaw Convention only “preempts local law causes of action to the extent that they are inconsistent with the Convention,” see Sompo Japan Insurance, Inc. v. Nippon Cargo Airlines Co. Ltd., 522 F.3d 776 (7th Cir.2008), therefore, if the Warsaw Convention’s provisions do not cover Boxart, plaintiff must be permitted to bring state law causes of action against Boxart.

 

Having established that plaintiff is not barred from bringing claims against Boxart, the Court now considers how the evidence presented at summary judgment bears on Boxart’s liability. While conceding that Lufthansa’s forklift punctured the crate containing the Painting, plaintiff contends that Boxart’s failure to appropriately fasten oz clips caused (or at least contributed to) the damage to the Painting. To establish a claim for manufacturing defect, a plaintiff must demonstrate that the product was defective when it left the control of the manufacturer. Sabessar v. Presto Sales and Service, Inc., 45 A.D.3d 829, 831 (N.Y.App.Div. 2nd Dept.2007). Taking the facts most favorably to Boxart, plaintiff is not entitled to summary judgment because there is some evidence suggesting that the product was not defective when it left Boxart’s control.

 

As the parties themselves assume, New York law governs plaintiff’s claims against Boxart. Pursuant to Babcock v. Jackson, 191 N.E.2d 279, 283 (1963), New York is the jurisdiction with the greatest interest in the dispute, since both Gagosian and Boxart are New York corporations and since Boxart’s allegedly negligent conduct occurred in New York.

 

To be sure, Christopher Engel, the assistant director of Boxart, attested that the Painting was installed into the travel frame with proper oz clips and screws which were uniform in size. Engel Aff.  4–7. In addition, Lucy Dew, the Gallery Manager of Mitchell–Innes and Nash Gallery, attested that no one at the Mitchell–Innes and Nash Gallery reported any defects with the travel frame when the gallery received the frame in 2006, Dew Aff.  5. And Taylor Linehan, the Senior Manager of Operations of Sotheby’s Inc., attested that there was no problem with the frame when the Painting arrived at Sotheby’s in 2006 and that, if there were a problem, it would have been noted in the condition report upon arrival, Linehan Aff.  1–2. But, nonetheless, taking the facts most favorably to plaintiff, Boxart’s summary judgment motion must be denied because there is some evidence suggesting that the defect was present at the time it left Boxart’s control. Specifically, plaintiff has presented evidence that the rear of the stretcher of the Painting contained only sixteen holes that could have been used by Boxart for the installation of oz clips and eight of these holes could not accommodate screws larger than 6 gauge and 1/2 inch in length, three of the holes could not accommodate screws larger than 8 gauge and 1/2 inch in length, and four of the holes could not accommodate screws larger than 8 gauge and 5/8 inch in length. Thus, a reasonable jury could infer that the holes themselves suggest that Boxart did not use the appropriate screws.

 

Interestingly, Boxart’s own president testified that the screws that were ultimately affixed to the stretcher of the Painting were “too thin, too short” and were “utterly improper.” Fisher Dep. at 46–47. Of course, it is Boxart’s position that when the travel frame left Boxart’s control, the screws were uniform in dimension and gauge. Engel Aff.  8; Engel Dep. at 81–82.

 

While Boxart argues that plaintiff’s expert is unqualified because he allegedly is not familiar with art packaging and shipping, this is not a determination that the Court can make at this stage. Taking the facts most favorably to plaintiff, the Court observes that James Martin is a Cambridge Fellow with a degree in historic conservation and art history and a forensic investigator who specializes in fine arts and is regularly utilized by the FBI. While Boxart asserts that the Martin’s opinions are “speculative,” the Court notes that at least portions of his expert report are based on objective measurements of the holes in the rear of the stretcher of the Painting. After hearing live testimony from James Martin, the Court may decide, pursuant to Daubert v. Merrell Dow Pharmaceuticals Inc., 509 U.S. 579 (1993), that Martin is not qualified to proffer expert testimony at trial; but the Court is not prepared to make that determination at this stage.

 

Boxart further argues that it is entitled to summary judgment on the alternative ground that the alleged defect did not cause damage to the Painting. However, the Court concludes that a reasonable jury could conclude that the failure to install proper screws caused or contributed to the damage to the Painting by causing it to be dislodged from the from the rear of the stretcher of the Painting. While it is true that when a defendant submits evidence that an accident was not necessarily attributable to a defect, the plaintiff must produce direct evidence of a defect, see Sideris v. Simon A. Rented Services, Inc., 254 A.D.2d 408, 409 (N.Y.App.Div. 2nd Dept.1998), here, the plaintiff has presented direct evidence of a defect. Specifically, Axa Art has produced expert testimony suggesting that the screws used to fasten the oz clips were too small in length and has presented some evidence disputing Boxart’s contention that the travel frame was altered by some other party. Indeed, according to Martin’s measurements, the holes in the rear of the stretcher could not accommodate the appropriate screws. Of course, it would also be improper to grant plaintiff’s summary judgment motion since plaintiff has not definitively established causation. Since a forklift did crash into the crate holding the Painting, it is far from clear that the alleged manufacturing defect caused or even contributed to the damage to the Painting. Thus, the Court concludes that whether there was a manufacturing defect and whether the alleged defect caused any harm are both issues that must be resolved by a jury.

 

Accordingly, the Court affirms its Order of May 6, 2011 granting plaintiff’s motion for summary judgment against defendant Lufthansa in the sum of $2,800,000, denying Lufthansa’s motion for partial summary judgment, denying plaintiff’s motion for summary judgment against Boxart, denying Boxart’s motion for summary judgment, granting Art Courier’s motion for summary judgment, and denying plaintiff’s motion for summary judgment against Art Courier Counsel are reminded that trial of the remaining claims shall commence on Wednesday, August 17, 2011 at 9:00 A.M.

 

SO ORDERED.

 

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