Federal law governs claims against air carrier, rules 7th Circuit.

Byline: David Ziemer

Federal common law governs disputes over packages shipped by air carriers, the Seventh Circuit held on Jan. 9. Treiber & Straub, Inc., a jewelry store in Wisconsin, needed to return a diamond ring to a California jewelry wholesaler. It sent the package via United Parcel Service, and using the UPS Web site, it arranged to send the package via "Next Day Air." As part of the transaction, it purchased $50,000 in insurance, the maximum permitted, paying a $174.65 premium for the insurance. However, the ring was actually worth $105,000, although Treiber listed the value as $50,000 on the online airbill. The terms and conditions of the contract stated that UPS would not ship packages worth more than $50,000, and that it would not be liable for loss of articles that exceed that value. Twice, Treiber had to click an icon, stating that he read and understood the terms and conditions. UPS lost the package, and Treiber had to reimburse the wholesaler. Treiber then brought suit in federal court, but Magistrate Judge Patricia J. Gorence granted summary judgment in favor of UPS. The court also relinquished jurisdiction over Treiber's state law breach of contract claim. Both parties appealed, and in a decision by Judge Diane P. Wood, the Seventh Circuit affirmed the grant of summary judgment for UPS. However, it also concluded that the state law claims are preempted, and that the lower court should have dismissed the claim with prejudice, rather than merely relinquishing jurisdiction to state court. The court began by addressing jurisdiction. Because only $50,000 was sought by Treiber, there is no diversity jurisdiction, even if the parties are diverse. Neither is there jurisdiction pursuant to the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. 14706, because the Carmack Amendment applies only to ground carriers and not to air carriers, and Treiber shipped the package via "Next Day Air." Accordingly, the court found that there can only be jurisdiction under federal common law. The court found that jurisdiction was present, concluding, "In this case, the federal interest is the same as the one that underlies the Carmack Amendment for ground carriers: a need for uniformity in interstate shipping and commerce." The court observed that several of its sister circuits have already held that a suit against a common carrier that uses air rather than ground to transport goods arises under federal common law (the court listed...