Kristin Maddox v. American Airlines ( 2002 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 00-3715
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Kristin Maddox, *
*
Appellant, *
* Appeal from the United States
v. * District Court for the
* Eastern District of Arkansas.
American Airlines, Inc., a Delaware *
Corporation, * [PUBLISHED]
*
Appellee. *
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Submitted: October 16, 2001
Filed: August 1, 2002
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Before McMILLIAN, BEAM, and HANSEN,1 Circuit Judges.
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HANSEN, Circuit Judge.
A federal jury awarded Kristin Maddox over $11,000,000 in damages for
personal injuries she suffered while she was a passenger on an American Airlines
international flight that crashed in Little Rock, Arkansas. She now appeals,
challenging the district court’s rulings regarding prejudgment and postjudgment
1
Judge David R. Hansen became Chief Judge of the United States Court of
Appeals for the Eighth Circuit on February 1, 2002.
interest rates. We affirm with the exception of one minor issue on which the parties
agree.
I.
Kristin Maddox, a resident of Oklahoma, was a passenger on American
Airlines Flight 1420 when it crashed after running out of runway while landing at
Little Rock, Arkansas, on June 1, 1999. Eleven people died as a result of the crash
and many, like Ms. Maddox, were severely injured. Prior to the crash, Ms. Maddox
had been a music major with an emphasis in vocal operatic performance and a minor
in piano performance at Ouachita Baptist University. On the night of the crash, she
was returning from Europe where she had been touring and performing with her
college choir. Ms. Maddox suffered severe smoke and toxic fume inhalation that
damaged her lungs and vocal chords, destroying her ability to sing. She also suffered
severe burns to her hands and arms, impairing her ability to play a keyboard
instrument of any kind.
Ms. Maddox filed suit in federal court in Arkansas seeking damages for her
injuries. Prior to trial, American Airlines made payments to Maddox for medical
expenses totaling $134,453. American Airlines conceded liability, leaving the
amount of damages due as the only issue for trial, and it does not cross appeal the
jury’s damage award.
Because Maddox had been a passenger on an international flight, her claims
are governed by the Warsaw Convention. See Convention for the Unification of
Certain Rules Relating to International Transportation by Air, concluded at Warsaw,
Poland, Oct. 12, 1929 (Warsaw Convention), 49 Stat. 3000, 3014 (1934), reprinted
in note following 49 U.S.C. § 40105 (1994). Article 17 of the Warsaw Convention
governs the liability of international air carriers for accidents in which a passenger is
wounded on an international flight. El Al Israel Airlines, Ltd. v. Tsui Yuan Tseng,
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525 U.S. 155, 162 (1999). Article 22 creates monetary liability limits on damage
awards against an international airline. Id. at 163 n.7. Recognizing that the liability
limits of the Warsaw Convention, signed in 1929 and amended in 1955, are now
inadequate in most countries, a group of international airlines, including American
Airlines, has taken action to waive the Convention’s liability limits through a series
of agreements. See Lloyd v. Am. Airlines, Inc., 291 F.3d 503, 506 n.2 (8th Cir.
2002). Among the agreements supplementing the Warsaw Convention is the
International Air Transport Association Intercarrier Agreement on Passenger Liability
(the IATA Intercarrier Agreement). (Appellee’s Add. at 3.) With listed exceptions
for certain routes which do not apply to this case, the measures implementing the
IATA Intercarrier Agreement impose absolute liability on an international carrier to
the extent of 100,000 Special Drawing Rights (SDRs).2 (Id. at 5.) For claims
exceeding this amount, limited defenses are available to the airlines under the
Warsaw Convention, but in all cases in which a passenger has been wounded in an
accident, the IATA Intercarrier Agreement waives the Warsaw Convention’s
limitation of liability “on recoverable compensatory damages . . . so that recoverable
compensatory damages may be determined and awarded by reference to the law of the
domicile of the passenger.” (Id. at 3.) The provisions are implemented in the
carrier’s tariffs and the contract of carriage between the carrier and its passenger. The
passenger’s domicile in this case is Oklahoma, and prior to trial, American Airlines
stipulated that “Oklahoma law applies to damages issues in this lawsuit.” (J.A. at Tab
6.)
2
SDRs are a type of international monetary reserve currency or accounting
system created in 1968 by the International Monetary Fund, see
http://www.encyclopedia.com/articles/12191.html, which is a specialized agency of
the United Nations that determines the value of SDRs relative to the currencies of the
five largest exporting nations, see http://www.encyclopedia.com/articles/23338.html.
The parties agree that American Airlines’ advance payment of $134,453 was the
equivalent of 100,000 SDRs.
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Following trial, the jury returned a general verdict form fixing damages at
$11,015,000. The district court entered judgment in favor of the plaintiff in this
amount and ordered that the judgment bear postjudgment interest at the rate of
6.375% pursuant to federal statute. Maddox moved to amend the judgment,
requesting prejudgment interest in accordance with Oklahoma law and requesting that
the judgment bear postjudgment interest at Oklahoma’s rate of 8.73% as opposed to
the federal rate of 6.375%. Also, both parties agreed that the judgment should be
amended to deduct from the total damage award the pretrial SDR payments made by
American Airlines to Maddox in the amount of $134,453.
The district court granted in part and denied in part the motions to amend the
judgment. Maddox v. Am. Airlines, Inc., 115 F. Supp. 2d 993, 996 (E.D. Ark. 2000).
Specifically, the district court denied Maddox’s request for any prejudgment interest
on the damage award, denied Maddox’s request for postjudgment interest at the
Oklahoma rate, and granted the joint request to credit the judgment with American
Airlines’ pretrial SDR payment of $134,453. The district court also credited interest
on that payment in the amount of $4,051.93, although neither party had requested this
further reduction. Ms. Maddox appeals.
II.
Ms. Maddox first contends that the district court erred by applying Arkansas’s
choice of law rules to determine whether to award prejudgment interest because the
parties had agreed by stipulation and the IATA Intercarrier Agreement that Oklahoma
law would govern the damages issue. “We review the district court’s choice of law
determinations de novo.” Inacom Corp. v. Sears, Roebuck & Co., 254 F.3d 683, 687
(8th Cir. 2001). Similarly, we apply de novo review to the district court’s
determinations of state law. Salve Regina Coll. v. Russell, 499 U.S. 225, 231-32
(1991).
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Because actions under the Warsaw Convention, an international treaty, present
federal law questions, a federal forum is available, but the Convention itself does not
include a choice of law provision. The Supreme Court has indicated that Article 17
of “the Warsaw Convention permit[s] compensation only for legally cognizable harm,
but leave[s] the specification of what harm is legally cognizable to the domestic law
applicable under the forum’s choice of law rules.” Zicherman v. Korean Air Lines
Co., 516 U.S. 217, 231 (1996). Thus, Article 17 is a “pass-through” provision which,
absent special federal legislation applicable to Warsaw Convention cases, provides
nothing more than an authorization to apply whatever law would govern in the
absence of the Warsaw Convention. Id. at 229; see also Ins. Co. of N. Am. v. Fed.
Express Corp., 189 F.3d 914, 920 (9th Cir. 1999); Brink’s Ltd. v. S. African Airways,
93 F.3d 1022, 1029 (2d Cir. 1996), cert. denied, 519 U.S. 1116 (1997).
While ordinarily the choice of law rules of the forum would apply to determine
the applicable law that governs what harm is legally cognizable, the IATA Intercarrier
Agreement and its implementing provisions make an express choice of law applicable
to this case, stating that “recoverable compensatory damages” will be determined by
reference to the law of the passenger’s domicile or permanent residence, which is
Oklahoma in this case. (Appellee’s Add. at 3, 5.) Also, American Airlines agreed in
a pretrial stipulation that the “damages issues” in this lawsuit should be governed by
Oklahoma law. (J.A. at Tab 6.) Accordingly, the district court properly chose to
apply Oklahoma’s law on damages generally. Ms. Maddox argues that prejudgment
interest is within the meaning of “recoverable compensatory damages” under the
IATA Intercarrier Agreement and its implementing provisions or within the term
“damages issues” as used in the stipulation, and therefore prejudgment interest should
have been awarded according to Oklahoma law, and not denied under Arkansas law.
The applicable agreements do not define the terms “recoverable compensatory
damages” or “damages issues.” Thus, we look to Oklahoma law to determine
whether prejudgment interest may be characterized as within their meanings. By
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statute, Oklahoma law requires prejudgment interest to be added to a personal injury
judgment from the date when the lawsuit was filed, Okla. Stat. tit. 12, § 727E, but
prejudgment interest is not itself a measure of compensatory damages. The courts of
Oklahoma have expressly stated that “prejudgment interest under § 727 is not of the
substance of the right of action.” Shoemaker v. First Nat’l Bank & Trust, 11 P.3d
1265, 1267 (Okla. Civ. App. 2000). Oklahoma courts consider prejudgment interest
to be procedural only, and not a substantive right. Fields v. Volkswagon of Am., Inc.,
555 P.2d 48, 63 (Okla. 1976) (holding that prejudgment interest is procedural only
so the statute applies to a case even where the suit was filed before the legislation
became effective). Because prejudgment interest is recoverable by statute as a cost
of litigation, it is not an element of damages under Oklahoma law. Benson v. Blair,
515 P.2d 1363, 1365 (Okla. 1973) (addressing the retrospective application of the
statute). Even though the Oklahoma courts indicate that prejudgment interest is
mandated as a monetary recovery that is intended to compensate for the lost use of
the money awarded as damages, prejudgment interest does not itself rise to the level
of an element of damages in the personal injury claim. Carney v. State Farm Mut.
Auto. Ins. Co., 877 P.2d 1113, 1118 (Okla. 1994); Fleming v. Baptist Gen.
Convention, 742 P.2d 1087, 1096 (Okla. 1987); see also Burwell v. Okla. Farm
Bureau Mut. Ins. Co., 896 P.2d 1195, 1199 n.4 (Okla. Ct. App. 1995) (noting that an
award of interest “is a sum added to a judgment–not part of the judgment”).
Ms. Maddox argues that a recently decided case from the Supreme Court of
Oklahoma indicates that the Oklahoma courts now consider prejudgment interest as
“recoverable compensatory damages” or as a “damages issue” because the court
expressly states that prejudgment interest is “an item of damages owed for the delayed
satisfaction of an obligation.” McDonald v. Schreiner, 28 P.3d 574, 577 (Okla.
2001). We disagree with her assertion that this statement renders prejudgment
interest an element of damages in a personal injury case. The court noted that
prejudgment interest may be characterized as “damages” owed for the delay in use of
the money judgment, but the court also goes on to clearly state that this delay
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“constitutes an expense incident to the chosen course of litigation.” Id. (emphasis
omitted). In other words, prejudgment interest remains a cost of litigation. See id.
Because prejudgment interest is not characterized as an element of damages or
as “recoverable compensatory damages” under Oklahoma law, the issue of
prejudgment interest is not governed by the choice of law provision of the IATA
Intercarrier Agreement or the pretrial stipulation in this case. But see Johnson v.
Cont’l Airlines Corp., 964 F.2d 1059, 1064 (10th Cir. 1992) (holding under Idaho law
that prejudgment interest is not subject to an independent choice of law analysis apart
from the issue of compensatory damages). Absent an express choice of law, the
Warsaw Convention leaves “the specification of what harm is legally cognizable to
the domestic law applicable under the forum’s choice-of-law rules.” Zicherman, 516
U.S. at 231. Ms. Maddox argues that the district court erred by not applying the
federal choice-of-law rules, asserting a split in the circuits regarding whether to
interpret “forum” as referring to the federal court or the state in which the court sits.
In Pescatore v. Pan Am. World Airways, 97 F.3d 1, 9 (2d Cir. 1996), and Ins. Co. of
N. Am. v. Fed. Express Corp., 189 F.3d 914, 920 (9th Cir. 1999), each court
concludes that the forum state’s choice of law rules should apply. The courts reason
that the state law governs because Zicherman declared Article 17 to be a pass-through
provision, which merely authorizes courts to apply the law that would govern in its
absence. Pescatore, 97 F.3d at 9; Fed. Express Corp., 189 F.3d at 920. The
“contrary” Sixth Circuit case simply presented a different factual scenario. In Bickel
v. Korean Air Lines Co., 83 F.3d 127, 130-31 (6th Cir. 1996), vacated in part on
separate issue, 96 F.3d 151 (6th Cir. 1996), the case did not involve citizens of
different states but of different countries. Similarly, in Zicherman, the accident
occurred on the high seas, and the choice of law was first a choice between foreign
law or the laws of the United States, making federal forum choice-of-law rules
applicable.
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The present case is more akin to the Second and Ninth Circuit cases in which
no federal statute furnished a rule of law with respect to damages. The accident
clearly occurred in Arkansas, and state-law personal injury damages were at issue, not
federal substantive law. Thus, federal choice-of-law rules were not implicated.
We conclude that the district court correctly considered and applied Arkansas’s
choice-of-law rules to the issue of prejudgment interest. The district court determined
that Arkansas’s choice-of-law rules dictated that it should apply the substantive law
of Oklahoma. However, because Oklahoma considers prejudgment interest as
procedural only and not substantive, Arkansas law, the law of the forum, would apply
to the prejudgment interest issue, and prejudgment interest would not be allowed
under Arkansas law. We find no error in the district court’s application of Arkansas’s
choice of law principles, and Ms. Maddox challenges only the choice of the law
applied by the district court; she does not assert that the district court incorrectly
concluded that she is not entitled to prejudgment interest under Arkansas law as it
presently exists.
III.
Ms. Maddox next argues that she is entitled to postjudgment interest on the
verdict at the rate prescribed by Oklahoma law, rather than the rate prescribed by
federal law as applied by the district court because the parties’ choice of law to
govern damages issues also extends to the issue of postjudgment interest. We
disagree. A federal statute prescribes the relevant postjudgment interest rate and
dictates that “[i]nterest shall be allowed on any money judgment in a civil case
recovered in a district court.” 28 U.S.C.A. § 1961(a) (1994). We have specifically
held that, unless a case is expressly exempt from the scope of this statute, the federal
postjudgment interest rate applies to cases adjudicated in federal court, regardless of
whether the basis for jurisdiction was federal question or diversity. See, e.g., Happy
Chef Sys., Inc. v. John Hancock Mut. Life Ins. Co., 933 F.2d 1433, 1435 (8th Cir.
8
1991) (“In a diversity action, state law governs prejudgment interest; federal law
governs postjudgment interest.”); Merrill Lynch, Pierce, Fenner & Smith, Inc. v.
Knudsen, 749 F.2d 496, 497 (8th Cir. 1984) (holding that because § 1961(a) does not
exempt diversity actions from its scope, “federal, not state law, determines the interest
rate in such actions”); Wietz Co. v. Mo-Kan Carpet, Inc., 723 F.2d 1382, 1385-86
(8th Cir. 1983). Accordingly, the district court properly applied the federal rate of
postjudgment interest.
Finally, both parties agree that the district court should not have deducted from
the verdict an amount representing interest on the pretrial SDR payments in light of
the court’s refusal to add prejudgment interest on the judgment. We agree, and
accordingly, we reverse the portion of the district court’s judgment that reduces the
verdict by an amount representing interest on the SDR payments ($4,051.93). The
verdict should have been reduced only by the actual amount of payments made as
SDRs.
IV.
Accordingly, we reverse the district court’s decision to deduct from the verdict
interest on the SDR payments, and we remand for entry of an amended judgment that
reduces the verdict only by the actual amount of the SDR payments–$134,453. In all
other respects, we affirm the judgment of the district court. Finally, we overrule
American Airlines’ motion to strike both the appellant’s Rule 28(j) letter and her
response to American’s Rule 28(j) citation.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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