Claims Against International Cargo Broker Preempted by Montreal Convention

In A.S.A.P Logistics, Ltd. v. UPS Supply Chain Solutions, Inc., 20-CV-4553 (E.D.N.Y. Sep. 19, 2022), the court dismissed breach of contract and tort claims as preempted by the Montreal Convention.

Plaintiff ASAP Logistics (“ASAP”) contracted with defendant UPS Supply Chain Solutions (“UPS”) to charter one or more aircraft on four specific dates to transport ASAP’s goods from China to the United States. ASAP alleged that UPS failed and refused to timely ship the goods on the required dates. ASAP sued for breach of contract, breach of the duty of good faith and fair dealing, and prima facie tort. UPS moved to dismiss for failure to state a claim, arguing that all of ASAP’s claims were preempted by the Montreal Convention’s protections for “contract carriers.” The court agreed.

The Montreal Convention, and its predecessor the Warsaw Convention, created a unified set of rules for claims related to international air transportation. Those rules preempt private inter-carrier agreements covered by the Convention. The Warsaw Convention protected only “actual carriers”—i.e., entities that actually transport cargo. The Montreal Convention, however, extended those protections to “contracting carriers” that arrange for carriage by third parties.

In opposing UPS’s motion to dismiss, ASAP argued that the Montreal Convention did not govern its contracts with UPS because UPS is neither an “actual carrier” nor a “contracting carrier.” Unlike its parent company, United Parcel Service, Inc., defendant UPS Supply Chain Solutions, Inc. does not carry freight on its own transports. Rather, it provides brokerage services between shippers and third-party carriers.

Referencing the Warsaw Convention’s protections for “actual carriers” only, ASAP argued that the Montreal Convention’s protections for “contracting carriers” were meant to expand modestly the scope of the Warsaw Convention by protecting “actual carriers” in those occasional transactions when they retained third parties to carry certain cargo. The Montreal Convention was not, ASAP argued, intended to expand the convention’s protections to “charter brokers” that, like UPS, acted exclusively as intermediaries.

The court rejected this attempt to narrow the Convention’s definition of “contracting carriers,” which the court found to “plainly cover UPS.” Id. at *3. Rather than categorizing certain types of companies, the court found that the Convention’s definitions instead described the parties’ role in the transaction at issue. Here, because UPS had contracted with ASAP to arrange transportation with a third party for ASAP’s goods, UPS acted as a “contracting carrier” and was protected under the Convention’s preemption provisions. Id. of *4-5.

When engaging in litigation concerning cross-border transactions, accurately understanding the international legal landscape is vital to defining and controlling risk.  If you have questions about the application of a treaty to a claim or defense in a U.S. action, please contact Michael Rakower or Travis Mock.

ASAP Logistics Decision

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