ContractsProf Blog

Editor: Jeremy Telman
Oklahoma City University
School of Law

Friday, January 24, 2025

Reefer Brief: When the Montreal Convention Preempts State Law Claims

Marijuana budWe CBD, LLC (We CBD) acquires and distributes legal hemp. Legal hemp, in case you were wondering, has a delta-9 tetrahydrocannabinol (THC) concentration of not more than 0.3 percent on a dry weight basis. If it has more than that, it is legally classified as marijuana, not hemp.  Through defendant Ed Clark and his firm, defendant Jet Northwest, LLC, We CBD chartered a flight through another company, Planet Nine, to send a shipment of hemp from Oregon to Switzerland. The price for the transport was $147,000.

Planet Nine either did not submit the proper paperwork to the federal authorities or that paperwork was incomplete, and there were other elements of the shipment that caught the attention of the federal authorities.  When the chartered flight landed in North Carolina for refueling, U.S. Customs detained the shipment. It tested positive for THC, and so U.S. Customs  sent the cargo back to San Francisco for further testing. There, most of the cargo, which was packed into duffel bags and garbage bags, was determined to be not hemp but marijuana, and so the authorities burned it in March, 2o21. We CBD challenged that action, but its suit against the United States was dismissed for lack of jurisdiction. When We CBD failed to respond to a forfeiture action, the authorities burned the rest.

HempseedIn July, 2021, We CBD also sued Planet Nine and other defendants in North Carolina, claiming that the defendants’ conduct caused the authorities to burn the cargo. Planet Nine moved for summary judgment, and the district court agreed, finding that the Montreal Convention preempted We CBD’s claims. After some procedural confusion, because no Reefer Brief is complete without some idiosyncrasies, We CBD appealed to the Fourth Circuit.

In We CBD, LLC v. Planet Nine Private Air, LLC, the Fourth Circuit affirmed the district court’s judgment.  As relevant here, Article 18 of the Montreal Convention provides that carriers are strictly liable for “damage sustained in the event of the destruction or loss of, or damage to, cargo upon condition only that the event which caused the damage so sustained took place during the carriage by air,” and “carriage by air” is defined to include any time during which the cargo is “in the charge of the carrier.” However, carriers have a defense to liability if harm to the cargo is caused by "an act of public authority carried out in connection with the entry, exit or transit of the cargo.”  Liability under the Montreal Convention is exclusive and thus preempts causes of action arising under state law.

There is no real argument that the cargo in question was in international transit. We CBD did not provide any evidence suggesting that customs officials were incorrect in concluding that the cargo was marijuana, rather than hemp. However, We CBD raised interesting issues regarding whether the harm occurred while the cargo was “in transit.” It occurred either before transit, when Planet Nine neglected to fill out the proper paperwork, or afterwards, when customs officials destroyed the cargo.

The Fourth Circuit dispensed with these arguments fairly quickly. As to the latter argument, there is always a chain of events leading to harm. However, “Plaintiffs’ claims necessarily and inextricably arise from events that occurred during the carriage by air — namely the plane’s detention in Charlotte, followed by field testing of the Cargo and its seizure at the Charlotte-Douglas Airport.” As to the former argument, Planet Nine’s failure to fill out the proper paperwork would not have mattered were the goods not actually placed aboard an international flight. The Convention itself contemplates that events that precede international transit can cause harms covered by the Convention, which then preempt any competing state-law claims.

Finally, the Fourth Circuit supplies an interesting gloss on Article 18’s provision that airlines will only be liable if  "the event which caused the damage so sustained took place during the carriage by air.” The event which causes damage is different from the damage itself. Here, the event that caused the destruction of the cargo seven months after its interdiction was the detention of the cargo in North Carolina.

Ultimately, the Court was persuaded that the destruction of the cargo was inextricably linked to events that occurred during carriage by air. The Court thus affirmed the district court’s award of summary judgment to the defendant.

https://lawprofessors.typepad.com/contractsprof_blog/2025/01/reefer-brief-when-the-montreal-convention-preempts-state-law-claims.html

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