In this air tragedy case, Article 28 of the Warsaw Convention prevented many of the plaintiffs from being able to sue Korean Air Lines Co., Ltd. ("KAL") in the United States. As this audience undoubtedly knows, Article 28(1) provides that "An action for damages must be brought, at the option of the plaintiff, in the territory of one of the High Contracting parties, either before the court of the domicile of the carrier or of his principal place of business, or where he has a place of business through which the contract has been made, or before the court at the place of destination." The domicile and principal place of business of KAL is Korea. And the majority of the injured or decedent passengers in this case were Korean nationals who had purchased their tickets in Korea, with a final destination of Korea on round trip tickets. Therefore, those plaintiffs could not bring suit against KAL in the U.S., but only in Korea.

 

In spite of the fact that the business activities of KAL did not qualify it to be sued in the U.S. by most of the foreign plaintiffs in this case, those plaintiffs were able to bring the question of KAL’s liability into the U.S. federal district court by a less direct means. First, the plaintiffs filed suit in federal district court against the U.S. for the FAA air traffic controllers’ negligence, and against Serco Management Services, Inc. ("Serco"), for negligently operating the control tower on behalf of the FAA.

 

In turn, those defendants filed cross-complaints for indemnification against KAL. When the district court allowed the original defendants to seek indemnity from KAL in the U.S. court, the question of KAL’s liability suddenly became a question to be addressed by the U.S. courts. This ruling, along with other crucial rulings, helped induce the three defendants, the U.S., KAL, and Serco, to enter into agreements that both admitted and apportioned liability.

 

Once liability was admitted and apportionment agreed among defendants, the court appointed a mediator, Justice Robert Feinerman. The parties then settled the majority of the cases in California, under U.S. damage standards, despite the fact that most of the injured and decedent passengers were foreign nationals from Korea with no jurisdiction under the Warsaw Convention to sue KAL in the U.S.

 

On August 6, 1997, at approximately 1:42 a.m., a Boeing 747-300 aircraft crashed into a hillside on approach to the Guam International Airport. The flight was operated by Korean Air Lines as KAL Flight 801 from Seoul, Korea, to Agaña Guam. The crew consisted of two pilots, one flight engineer, one purser, 13 flight attendants and 231 passengers. Of the 254 people aboard, 228 died as a result of the crash.

On the night of the crash, the glide slope for the instrument landing system to the target runway, runway 6L, was out of service, and thunderstorms were in the area.

Causation and Defendants’ Liability

 

1. Korean Air Lines

 

KAL’s flight crew did not follow the published and prescribed flight procedure for the approach into the airport. As stated, the glide slope was not working, and consequently the pilots used a Localizer/DME approach. The flight crew did not follow the step-down procedure on the Localizer approach, but rather descended in a straight line, and crashed into Nogomo Hill, about three miles short of the runway.

Darkness and rain showers severely inhibited visibility of the runway environment for the KAL flight crew. These conditions increased the flight crew’s reliance on the air traffic control system to help land the airplane safely.

 

 

The agents of the air traffic control system failed to fulfill many of their duties. Every failure is not included here. Of particular significance, the CERAP (combined center and radar approach control) controller failed to monitor the progress of the flight on the radar scope that would have allowed him to see that six miles from the runway, the airplane had descended below a safe altitude. Because of that inattention, he failed to see its dangerous descent and failed to call the flight crew and issue the required "low altitude alert" to KAL 801. That controller also failed to request a read back that the glide scope was unusable.

 

Another significant failure of the FAA’s agents was that the Minimum Safe Altitude Warning System (M-SAW) was not operating. The FAA personnel responsible for maintaining safety critical equipment had failed to correctly install the M-SAW. What’s more, there was evidence that FAA personnel had deliberately turned off M-SAW.

M-SAW is critical safety equipment that would have provided aural and visual alarms to the controller when KAL 801 descended below the minimum safe altitude. Because of the lack of M-SAW alarms, the air traffic controller was not alerted, and did not communicate a low altitude alert warning to KAL 801. Such a warning would certainly have caused the flight crew to abandon their Localizer/DME approach to the airport and execute a missed approach.

 

 

The air traffic control tower was operated by Serco Corporation for the FAA. The local traffic controller in the tower at the Agaña airport failed to communicate vital information to the flight crew. He did not timely update the ATIS (Airport Terminal Information Service) to reflect that the weather had changed and that KAL 801 might encounter a thunderstorm on its approach. Nor did he radio the crew that thunderstorms were in the area, although that information was available to him for nine minutes before he first spoke to KAL 801's crew. Controllers are required to issue "special weather observations" to pilots as soon as possible. This incorrect information about the weather gave the pilot of KAL 801 a false expectation that he would have good visibility on approach.

 

Most strikingly, although the controller could not see the Boeing 747, he cleared KAL 801 to land. Using binoculars, the tower controller would normally expect to see a large jet at night with all its lights on, about six miles from touchdown. When he did not see the aircraft at that point, he was required to inform the crew that it was: "not in sight." The controller failed to do this, which in turn failed to alert the pilot to check his altitude.

Jurisdiction in the Federal District Courts in the Actions Against the U.S. and Serco

All the plaintiffs, whether they had Article 28 jurisdiction or not, were able to file suit in the federal district courts against the U.S. for the alleged negligence of the FAA air traffic controllers and the alleged negligence of Serco. The Federal Tort Claims Act ("FTCA") waives sovereign immunity and grants exclusive jurisdiction to the federal district courts over covered tort actions. The FTCA imposes liability on the U.S. for the wrongful act or omission "of any employee of the government while acting within the scope of his office or employment, under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred. . . ." Specifically, the U.S. can be held liable for the failure of air traffic controllers to provide their services with due care.

 

Plaintiffs filed their cases in various locations in the U.S. district courts, including Guam (a U.S. Territory), California, New York and New Jersey.

 

The Multidistrict Litigation panel ordered more than 80 different lawsuits consolidated. All of the cases were eventually sent by the Multidistrict Litigation Panel to the U.S. District Court, Central District of California, for coordinated pretrial proceedings.

The U.S. Code provides that civil actions pending in different districts and involving one or more common questions of fact, may be transferred to any district for coordinated or consolidated pretrial proceedings. Such transfers are made by the Judicial Panel on Multidistrict Litigations. The purpose is to effect judicial economy and to eliminate the potential for conflicting contemporaneous pretrial rulings by different district courts.

It is important to note that the Central District of California had no power to retain the cases for trial. All of the cases not originally filed in the federal district court in California were subject to the Multidistrict Litigation statute: 28 U.S.C §1407(a). That statute provides that cases sent to a particular courtroom for pretrial proceedings must be remanded to their original location at or before the conclusion of the pretrial proceedings. It is up to the transferor court to make any further transfers of venue for trial.

But in these consolidated cases, many parties signed settlement agreements before the conclusion of the pretrial proceedings. This result flowed directly from the court’s rulings on key issues.

 

The Court Ordered that the IATA Agreements Applied, Thus KAL Was Presumptively Liable for Full Compensatory Damages Without Limit Unless it Could Prove Freedom

 

 

The plaintiffs brought a motion for partial summary judgment, asking the district court to determine certain issues. Plaintiffs argued that KAL had signed the International Air Transport Association (IATA) Agreements of 1996, and that they applied to the subject crash. (The IATA Agreements consist of the Intercarrier Agreement on Passenger Liability (IIA) and the Agreement on Measures to Implement the IATA Intercarrier Agreement (MIA).)

 

The passenger liability limits for signatories to the Warsaw Convention have increased over the years. In 1929, the Warsaw Convention set forth uniform rules for passenger liability:

These provisions have undergone changes over the years, some by intergovernmental agreements and some by airlines contracting with each other to waive rights under the Warsaw Convention, with governmental approval. Changes include the Hague Protocol (1955), the Montreal Agreement (1966), and the IATA Agreements of 1996.

KAL was a signatory to the Montreal Agreement. That Agreement raised the limit of liability to $75,000 and waived the non-negligence defense for amounts up to $75,000. Plaintiffs could recover full compensation above $75,000 only if they could prove "willful misconduct."

 

But according to the IATA Agreements of 1996, an international carrier is strictly liable to each passenger for up to 100,000 SDRs. Carriers also are presumptively liable for full compensatory damages above that amount unless they prove freedom from negligence. In other words, the IATA Agreements reinstated the "all necessary measures" (or non-negligence) defense for carriers that had been done away with in the Montreal Agreement.

 

Most favorable of all, under the IATA Agreements, it is no longer necessary for the plaintiff to prove "wilful misconduct" to escape the damages limitation of the Convention.

 

Thus, Plaintiffs urgently desired that the IATA Agreements would be considered applicable to KAL.

 

Although KAL admitted signing the IATA Agreements in October 1995, the question for the district court to determine was when the agreements became effective. The MIA stated that the IATA Agreements would become effective when "[t]he Director General of IATA shall declare the Agreement effective on November 1st 1996, or such later date as all requisite Government approvals have been obtained. . . ." The U.S. Department of Transportation (DOT) approved the Agreements in January 1997, and the European Commission approved them in February 1997. The Director General of IATA declared the Agreements to be in effect on February 14, 1997.

 

KAL contended that the Agreements were not applicable to it until the Korean government approved the Agreements (which it did after the KAL crash). Indeed, the Agreements do not specifically define the "requisite Government approvals." Contrary to KAL’s argument that the term "requisite Government approvals" meant the approval of the tariff by the Korean government, the district court found that the Korean government’s approval was not required. The court stated that the conduct of the parties to IATA revealed an intention that their waivers of prior limits would take effect after approval by the DOT and the European Commission, and when the Agreements were declared effective. There was no indication that any signatory had taken the position that each country’s tariff authority had to give approval before the IATA Agreements became effective.

 

Another argument raised by KAL was that the Agreements were not "special contracts" with the passengers as provided by the Warsaw Convention, Article 22(1). KAL stated that the Agreements were between carriers, and did not bestow new legal rights on the passengers until Korean government approvals were obtained and the new terms were incorporated into contracts of carriage and tariffs. The district court rejected KAL’s argument, finding that the practical interpretation of the airlines and the governments of the phrase "special contracst" includes agreements among carriers. The court reiterated that KAL had waived its Warsaw Convention defenses and limits, and that its failure to seek approval of its changed tariffs before the crash was irrelevant to the issue of waiver.

The court granted the plaintiffs’ motion in part and determined that the IATA agreements of 1996 came into effect on February 14, 1997 -- the date of promulgation of effectiveness of the agreements following approval by the U.S. and the European Commission.

 

A federal district court in Georgia has disagreed with California District Court’s ruling in this case regarding the effective date of the IATA Agreements. In Price v. KLM-Royal Dutch Airlines, the court ruled that the signing of the IATA Agreements, by itself, was insufficient to waive the liability limitations. The court reasoned that the limits of the Warsaw Convention may only be altered by "special contract" between carrier and passenger. That contract is set forth in the conditions of carriage on the ticket and by any applicable tariffs. The court found that new terms of IATA would not become effective until the airline filed amended tariffs with the DOT. The court found that the carriers had not expressly waived liability in the Agreements, but had only agreed "to take action to waive the limitations of liability." [The Price court apparently did not consider that when the DOT issued its conditional approval of the IATA Agreements in January 1997, it stated that they were self-executing and that tariff filings were unnecessary to implement the waiver of liability limitations.]

 

Order Allowing the United States and Serco to Bring Cross-complaints for Indemnity

 

Against KAL in U.S. District Court

 

The defendants, U.S. and Serco, filed cross-claims against KAL seeking indemnity for any liability of the U.S. and Serco to the Korean plaintiffs.

KAL brought a motion to dismiss the indemnity cross-claims and third party claims of U.S. and Serco, in cases where suit in U.S. courts would not be allowed against KAL under Article 28 of the Warsaw Convention. KAL argued that U.S. jurisdiction should not be indirectly forced upon it for passenger claims that could not directly gain U.S. jurisdiction.

 

The court disagreed with KAL on the basis that the Warsaw Convention only applies to the death or injury claims of passengers, or the claims of freight shippers. In support of that premise, the court relied on language from the Convention itself. For instance, Article 1 states that the Convention applies to "all international transportation of persons, baggage, or goods performed by aircraft for hire." Article 17, introducing the liability rules, states that, "The carrier shall be liable for damage sustained in the event of the death or wounding of a passenger or other bodily injury suffered by a passenger. . . ." Article 18 limits the actions which can be brought "however founded" to those provided in the Convention. It was the court’s opinion that domestic law is only preempted as to the "certain" rules contained in the Convention. The court found that an indemnity suit is not a passenger or shipper action governed by the Convention.

 

The court also based its ruling on the fact that in different factual circumstances, traditional law classifies an equitable indemnity action as distinct from that of the plaintiff’s tort action. Nor do procedural barriers to the injured person’s action affect the indemnity claim. In other areas the exclusivity provisions of various statutes have been held not to affect the rights of indemnity.

 

However, the court was careful to limit the indemnity claim to the same amount provided in the treaty agreements. The court relied on Polec v. Northwest Airlines, in which McDonnell Douglas cross-claimed against Northwest Airlines for indemnity in a case arising out of the Northwest Airlines crash in 1987. "If Northwest committed ‘only’ ordinary negligence [as opposed to willful misconduct], the international traveler’s recovery may not exceed the liability limit of the Warsaw Convention, and this liability limit restricts McDonnell Douglas’s potential recovery." (Id. at 544.) Following Polec, the federal district court held that KAL’s indemnity liability was similarly limited in this case, according to the IATA Agreements.

 

 

The district court made another crucial ruling. It decided that the substantive law of the territory of Guam would apply to all liability issues for the passengers’ cases.

The district court began its choice of law analysis by listing the various jurisdictions which were the initial forums for the cases. 92 cases were before the district court in California. Plaintiffs originally filed their cases as follows: 76 in the Central District of California, 13 in the District of Guam, one in the Southern District of New York, and one in the District of New Jersey. (The number of cases did not reflect the number of decedents, since some cases cover the claims of heirs of multiple decedents.)

In general, the choice of law rules of the jurisdiction in which the court sits will govern which domestic law applies. All the Korean plaintiffs filed actions against Serco, and for those cases filed in California, the Court was required to apply California’s choice of law rule.

 

However, when a case is transferred by the Multidistrict panel from another jurisdiction, the choice of law rules from the jurisdiction of original filing are applied. Thus, for the cases filed against Serco in Guam, the court needed to follow Guam’s choice of law methodology.

 

An exception to the general rule applies when the U.S. is the defendant. The Federal Tort Claims Act (FTCA), which governs the liability of the U.S., has its own choice of law rules which govern cases against the U.S. Accordingly, the choice of law rules of the ‘site of the crash’ apply to the cases against the U.S. Since Guam was the site of the crash, Guam’s choice of law rules applied.

 

In determining the choice of law, the district court only considered the laws of the jurisdictions that parties argued applied. No party argued that the law of Korea applied. No party argued that the law of New York applied to the one New York case. Thus the court was left to consider only the application of the conflict of law rules of California, Guam and New Jersey.

 

1. California Law

 

The court began by considering California’s conflict rules. California abandoned the traditional lex loci delecti (law of the place of wrong) choice for tort cases in 1967 with Reich v.Purcell, 67 Cal.2d 551 (1967). California substituted a more sophisticated system of analyzing the interests of various competing jurisdictions involved in a case. In California, a court must first compare the substantive laws of the competing jurisdictions. If there is no conflict between them, the law of the forum applies. If there is a conflict, the court considers the interests of each state in the application of its own rule. The court chooses as applicable the law of the state whose interests are least impaired by the selection of the others’ law. If the interests are equal, the law of the forum is applied.

The laws of California and Guam are similar in many respects. Both make a tortfeasor liable for negligently causing injury to others. Both have abandoned the common law defense of contributory negligence as a complete defense in a negligence action and have substituted comparative negligence. Here, there is a difference between Guam and California law. In California, by case decision, Li v. Yellow Cab, 13 Cal.3d 804 (1975), a "pure" comparative negligence system is followed in which each party is charged with a percentage of causation, including the plaintiff.

 

In Guam, liability is determined by a statutory provision based on former Wisconsin law (18 Guam Code Ann. §90108). Under that provision, a plaintiff whose percentage of negligence exceeds that of other defendants is barred from recovery. The district court regarded this as a "false conflict" to be disregarded, since no party had contended that the passenger plaintiffs were guilty of contributory negligence.

 

In both California and Guam, defendants’ liability to plaintiff is "joint and several," but is apportioned among defendants in proportion to their share of liability. The court found that there was no conflict about this process of sharing liability, even though the California Supreme Court termed it "equitable implied indemnity" and the Guam statute termed it "contribution among joint tortfeasors."

 

There was a significant difference between California law and Guam law regarding damages. In California, pursuant to Proposition 51 enacted in 1986 (Cal. Civil Code §1431.1), economic damages are considered joint and several, but non-economic damages are charged to a defendant only in proportion to the defendant’s percentage of causative fault. In Guam, all damages are joint and several.

 

The district court determined this difference in damages law was a "false conflict" for the reason that "California has no interest in having its rule applied in this fact situation, while Guam has a significant interest in having its rules applied." Accordingly, the court decided to apply Guam law in the California filed cases.

 

2. New Jersey Law

 

Serco, whose principle place of business is in New Jersey, argued for the application of New Jersey’s choice of law rules in the one case from New Jersey. But the court found that the analysis and result were the same, since New Jersey appeared to follow the same conflicts rules as does California. And on balance, the court found that Guam’s interests would be the most impaired by the application of New Jersey law. As a result, the court held that Guam law applied to the New Jersey case.

 

 

The FTCA, 28 U.S.C §1346(b)(1,) provides its own choice of law rules, directing application of the whole law (including choice of law rules) of the place where the alleged act or omission occurred. The court found that all the alleged negligent acts occurred in Guam. So the court considered the applicability of Guam law.

The court explained that common law governs choice of law, but it had no Guam Supreme Court, Appellate Division, or Ninth Circuit decisions declarative of Guam law on conflicts. Instead, it found two district court trial court decisions persuasive: Pedersen v. U.S., 191 F.Supp. 95 (D. Guam 1961) and Heikkila v. Sphere Drake Ins. Underwriting Mngmt., Ltd., 1997 WL 995625 (D. Guam 1997).

 

The court stated that the judge’s careful and thorough opinion in Heikkila implied that the Restatement (2nd) of Conflicts should be used as a guide to the law of Guam on choice of law. In accord with §175 of Restatement (2nd) of Conflicts, the district court ruled that Guam law applies to the Guam filed cases, unless another state has a "more significant relationship" with the event. The court concluded, based on the facts of the case, that no state has a more significant relationship than Guam with respect to the liability rules and rights among defendants.

 

Since Guam law applied to all aspects of the case, if the U.S. were to be found merely 1% at fault for the crash, it was exposed to paying for all the damages caused by all defendants. At this point, however, the U.S. and Serco still retained their rights to seek indemnity from KAL.

 

The Court Determined That a Plaintiff’s Sliding Scale Settlement With KAL Had Been Entered Into In Good Faith, Which Forced the U.S. and Serco Into Settlement

KAL and one plaintiff, in a single test case, formed a sliding scale or "Mary Carter" agreement. This sort of agreement was reached in large part because the U.S. and Serco --believing their percentage of liability to be low (i.e., between 1% and 10%)-- had refused to meaningfully participate in settlement talks.

 

KAL and this plaintiff sought the district court’s approval that their settlement was in good faith. In spite of the opposition of the U.S. and Serco, the court approved the settlement. This order meant that the indemnity claims of the U.S. and Serco against KAL were dismissed. After this ruling approving the sliding scale agreement with KAL, the U.S. had to accept that its actual percentage of fault was closer to 50% and that it was left without any right of indemnification against KAL. As a consequence, the U.S. and Serco did not contest liability with the remaining plaintiffs.

 

 

KAL and plaintiffs used the settlement agreement with one particular plaintiff to seek the court’s approval, and then the court applied its ruling to the other cases. In the lead case, the plaintiff had lost his wife and three children in the crash. KAL agreed that the value of the quadruple death case was $14,000,000.

 

KAL agreed to pay $8,000,000 (57%) at once and the plaintiff would continue with his claims against the U.S. and Serco. KAL also promised to pay the balance of the $14,000,000 to the plaintiff to the extent that it was not obtained from the other defendants.

 

The U.S. and Serco challenged the agreement, arguing that 57% was too small a share for KAL to pay up front.

 

 

It was vital in this case that the court determined that the doctrine of joint and several liability of tortfeasors set forth in Guam Civil Code §24602 meant that KAL’s liability did not exonerate the U.S. and Serco.

 

Under the Warsaw Convention and the IATA Agreements, KAL’s liability was limited to a particular amount (100,000 SDRs). Additionally, KAL was liable over that amount up to the amount of actual damages, if it could not prove that it took all steps necessary to avoid the accident. KAL waived that defense, and conceded liability to the passengers for all damages caused by the crash.

 

In spite of that, the court ruled that the doctrine of joint and several liability meant that if the factfinder found either the U.S. or Serco liable at all, it would be joint and severally liable for the whole damages, to be apportioned according to percentage of fault.

 

 

The court held that Guam’s law was identical to California’s law in regards to determining whether a settlement was made in good faith. Guam Civil Code §24605 was virtually identical to California C.C.P. §877.6 because it provided the same procedure and basic test of "good faith" to determine whether an agreement cuts off the contribution rights of the non-settling defendants. The court also noted that the rights of contribution in Guam Civil Code §24602 were the same as the rights in California C.C.P. §875.

Guam has a long tradition of following California law. The Guam Codes are based on the California Codes, and Guam will follow California precedents regarding similar code sections.

 

In Abbott Ford, Inc. v. Superior Court, 4 Cal.3d 858 (1987), the California Supreme applied the doctrine for determining "good faith" to sliding scale agreements. The district court in this case applied Abbott Ford to the question of the whether KAL’s sliding scale agreement was in good faith. First, the court found it relevant that the U.S. and Serco would only be liable if the ultimate damages for the plaintiff were determined to be more than $8,000,000, because they got a credit for the amount paid by KAL. Second, the court believed fixing the value of the case by agreement was generous and not designed to prejudice the remaining defendants. Third, while it seemed likely that the trier of fact would find that KAL had greater liability, 57% of the estimated share for KAL was "within the ballpark" of realistic value. Another consideration was that the Supreme Court in Abbott Ford had recognized a defendant is entitled to a discount for being the first to settle.

 

And so the court approved the KAL sliding scale settlement as being in good faith, which wiped out the indemnity claims of the U.S. and Serco for any future plaintiffs’ recovery against them. The district court explained that the statutes of California and Guam that cut out the indemnity claims clearly reflect the pro-settlement policies of those jurisdictions, as does Abbott Ford (supra).

 

As a result of this order, all defendants entered into settlement agreements with most plaintiffs. Some damages trials are still pending.

 

 

Although the Warsaw Convention and the Federal Tort Claims Act are two completely separate schemes for determining liability. In actual practice, they can both be applied to a case where the named defendants include both a foreign airline that is a signatory to the Warsaw treaties and the United States. In this case, plaintiffs effectively employed both the international treaty and the FTCA to attack the most responsible defendants in this air tragedy.

 

Most of the plaintiffs had no present jurisdiction under Article 28 to bring suit in the U.S. against KAL. In the face of this barrier, these plaintiffs’ cases were still settled in the U.S., according to U.S. damage standards.