MAX GIN and JOHNNIE FONG, as former partners of FONG AND GIN ENTERPRISES, a
dissolved Hawaii General Partnership, Plaintiffs, v. THE WACKENHUT CORPORATION,
Defendant
Civil No. 89-0097-SPK
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF HAWAII
741 F. Supp. 1454; 1990 U.S. Dist. LEXIS 8718
May 30, 1990, Decided
May 30, 1990, Filed
CASE SUMMARY
PROCEDURAL POSTURE: Plaintiffs, former partners in a general partnership specializing in
wholesale jewelry, brought a negligence action against defendant security checkpoint operator to recover
the value of jewelry lost during the process of proceeding through a security checkpoint at an
international airport. The court issued its findings of fact and conclusions of law after hearing the case.
OVERVIEW: The partners alleged that a piece of luggage was lost at an airport security checkpoint
after a woman ahead of one of the partners needed four attempts before being cleared, causing the
partner to become separated from a bag containing $ 200,000 in jewelry. The jewelry was not recovered.
The partners asserted causes of action based on, inter alia, negligent bailment, and sought punitive
damages. The court, applying the law of the State of Florida, where the incident occurred, concluded that
a bailment was created. Testimony was adduced indicating that due to the placement of the
magnetometer, a passenger could not see his bag for some length of time and thus surrendered control of
it. The court concluded that the security checkpoint operator failed to exercise the requisite degree of
care. In fact, on average bags were lost twice a week. As an independent contractor, the operator was
ordered to pay damages in the amount of $ 140,000, plus prejudgment interest at the statutory rate.
OUTCOME: The court found the security checkpoint operator liable for damages in the amount of $
140,000 to the partners for negligent bailment of the bag containing the partners' jewelry.
CORE TERMS: bag, passenger, bailment, magnetometer, checkpoint, machine, baggage,
airline, tariff, jewelry, contractor, alarm, hand baggage, airport, degree of care, bailee,
ticket, theft, metal, woman, choice of law, claimant, flight, gate, departure, safeguard,
security services, present case, period of time, luggage
LexisNexis® Headnotes Hide Headnotes
Civil Procedure > Federal & State Interrelationships > Erie Doctrine
HN1
Under the Erie case, a federal district court is to apply the substantive law of the state in which it
sits. This ruling was extended to apply to the state's choice of law rules.
Civil Procedure > Federal & State Interrelationships > Choice of Law > General Overview
HN2
According to the Hawaii Supreme Court, a fact specific approach to choice of law should be
utilized, one which assesses the interests and policy factors involved with a purpose of arriving at
a desirable result in each situation.
Contracts Law > Types of Contracts > Bailments
HN3
Under Florida law, it has come to be recognized that a bailee who has the sole, actual, and
exclusive physical possession of the goods is presumed to be negligent if he cannot explain the
loss or disappearance of the goods, and the law imposes on him the burden of showing that he
exercised the degree of care required by the nature of the bailment.
Contracts Law > Types of Contracts > Bailments
Evidence > Inferences & Presumptions > General Overview
Torts > Negligence > Proof > General Overview
HN4
Under Florida law, once a plaintiff has proven the existence of a bailment, and demonstrated the
failure of the bailee to return the bailed goods, a presumption of negligence on the part of the
bailee arises.
COUNSEL: [**1] JOHN RAPP, ESQ., Honolulu, Hawaii.
KEVIN S. W. CHEE, ESQ., GREGORY K. MARKHAM, ESQ., Honolulu, Hawaii.
JUDGES: Samuel P. King, United States District Judge.
OPINION BY: KING
OPINION
[*1455] FINDINGS OF FACT AND CONCLUSIONS OF LAW
SAMUEL P. KING, UNITED STATES DISTRICT JUDGE
This matter came on for trial on April 18, 1990. Having considered all the evidence,
memoranda and arguments of the parties, the court hereby makes the following findings of
fact and conclusions of law.
I. Findings of Fact
Plaintiff, Max Gin ("Gin"), commenced this action seeking to recover the value of certain
items of jewelry lost during the process of proceeding through a security checkpoint at
Miami International Airport. 1 Gin asserts that the negligence of the defendant, Wackenhut
Corporation ("Wackenhut"), which operated the security checkpoint, precipitated the loss of
the jewelry.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - 1 Leave was given at trial to amend the complaint to include Gin's former business partner, plaintiff Johnnie Fong
("Fong"), so that all parties in interest would be bound by the outcome of this trial.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - At the time of the [**2] loss, Max Gin was a partner with Johnnie Fong in the firm of Fong
& Gin Enterprises, a partnership specializing in wholesale jewelry sales. It was the practice
of plaintiffs Gin and Fong to travel, sometimes together and at other times separately, to
wholesale jewelry shows throughout the mainland United States where they would ply their
wares to jewelry retailers. On the day of the loss, Gin had just completed a show in Miami
and was enroute to New Orleans, where he was to meet his partner and to participate in
another show.
After the Miami show, Gin was dropped at the airport by several friends. Gin left his checked
bags with a skycap at the curbside, and proceeded directly to the departure gate with only a
carry-on bag containing his jewelry. Defendant Wackenhut operated a security checkpoint
at the entrance to the terminal area containing Gin's departure gate. This checkpoint was
typical of those found at airports around the [*1456] country, consisting of an X-ray
machine for examining baggage, with an adjacent magnetometer to detect the presence of
metal upon persons passing into the departure area.
Gin testified that once he approached the checkpoint, he waited to one side until the [**3]
line of people waiting for the magnetometer had dwindled. He then placed his bag on the
conveyor belt leading into the X-ray machine and stepped up to the magnetometer. Just at
that moment a woman wearing a heavy coat abruptly cut in front of Gin and passed through
the magnetometer ahead of him. In passing through the magnetometer the woman
activated the metal detection alarm. The Wackenhut employee who operated the
magnetometer motioned for Gin to wait on the terminal side of the magnetometer while the
woman emptied the contents of her pockets onto a tray, stepped back to Gin's side of the
machine, and passed through once more. The alarm sounded a second time. Gin continued
to wait while the woman produced more objects from her clothing, and attempted to pass
through the magnetometer for the third time. The alarm sounded once more. Again more
items were disgorged and another pass through the detector was made. The fourth attempt
was successful and the woman proceeded onward. Immediately afterward Gin, who
throughout this process had been separated from his bag, passed through the
magnetometer without incident and moved to pick up his bag at the other end of the X-ray
machine. Unfortunately, [**4] the bag containing close to $ 200,000 worth of jewelry was
no where to be found. 2 Gin anxiously questioned one of the Wackenhut employees
operating the X-ray machine, made a quick run through the departure area looking for the
bag, and enlisted the assistance of the police, all to no avail.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - 2 Wackenhut does not dispute that Gin's bag disappeared. Wackenhut strenuously objects, however, to any
characterization of its actions as negligent.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - II. Conclusions of Law
This suit was originally filed in state court and later removed to federal district court by the
defendant. This court has jurisdiction under 28 U.S.C. § 1332, and removal was proper
under 28 U.S.C. § 1441 and § 1446.
Plaintiff pursued four causes of action: negligent bailment, federal and state RICO claims,
and punitive damages. At the conclusion of trial, the federal and state RICO claims and the
punitive damages count were dismissed for lack of proof. Only the cause of action for
negligent bailment remains.
A. Choice of Law
As an initial matter, [**5] this court must decide which state's laws govern this case. HN1
Under Erie R. Co. v. Tompkins, 304 U.S. 64, 82 L. Ed. 1188, 58 S. Ct. 817 (1938), a federal
district court is to apply the substantive law of the state in which it sits. This ruling was
extended to apply to the state's choice of law rules in Klaxon Company v. Stentor Company,
313 U.S. 487, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941). The Hawaii courts have not often had
occasion to consider the choice of law issue. In the most significant case, Peters v. Peters,
634 P.2d 586, 63 Haw. 653 (1981), HN2 the Hawaii Supreme Court settled upon a fact
specific approach to choice of law which assessed "the interests and policy factors involved
with a purpose of arriving at a desirable result in each situation." Id. 634 P.2d at 593.
This court is persuaded that the most desirable and logical approach in the present case is
to apply the law of the state where the incident occurred. To hold otherwise is to rule that
the level of care security services such as Wackenhut must provide when examining
passengers and their packages varies depending upon the traveler's home state. This is an
outcome which choice of law will not tolerate. Such an approach would clearly place an
impossible burden upon security [**6] companies in large airports, such as Miami, which
may serve tens of thousands of passengers annually. Since the loss here occurred in
Florida, Florida law shall govern.
[*1457] B. Negligent Bailment
Plaintiff's only remaining count alleges Wackenhut was a negligent bailee of plaintiff's bag.
Plaintiff argues that in surrendering his bag for examination by defendant's X-ray machine,
a bailment was created. Plaintiff further argues that defendant's failure to return the bag
gives rise to a presumption of negligence which defendant must rebut in order to avoid
liability.
Under Florida law, "[i]t has come to be recognized that a bailee who has the sole,
actual, and exclusive physical possession of the goods is presumed to be negligent if he
cannot explain the loss or disappearance of the goods, and the law imposes on him the
burden of showing that he exercised the degree of care required by the nature of the
bailment." Marine Office-Appleton & C. Corp. v. Aqua Dynam., Inc., 295 So. 2d 370, 371
(Fla.App. 1974); Clermont Marine Sales, Inc. v. Harmon, 347 So. 2d 839, 841 (Fla.App.
1977); Aetna Cas. & Sur. v. Pappagallo Rest., 547 So. 2d 243, 244 (Fla.App. 1989). In
order for plaintiff [**7] to prevail on the merits, a bailment must have been created and
defendant must have failed to exercise the requisite degree of care.
1. Bailment
HN3
Although the law of bailments is well settled, the brevity of of the alleged bailment makes
this case somewhat novel. The defendant argues that a bailment was not created in this
case because defendant did not take possession of plaintiff's bag in the short time that
plaintiff and bag were separated. The question of whether the relinquishment of an article of
luggage for purposes of a security check constitutes a bailment evidently has not been
addressed by a Florida court. There are several Florida cases finding bailments where
plaintiff suffered a loss after leaving property in the hands of another for a period of days.
In Puritan Insurance Company v. Butler Aviation-Palm Beach, Inc., 715 F.2d 502, 504 (11th
Cir. 1983), a bailment was found where the plaintiff left his airplane parked for several days
at the defendant's facility. Among other things, the court pointed to the length of time the
plane was parked, the fact that the defendant's facility was fenced, that defendant had
control of the access gate and that a dispatcher was [**8] on duty, as indicative of
plaintiff's surrender of control over the bailed good. Id., at 504. See also City of Clearwater
v. Thomas, 446 So. 2d 1160 (Fla.App. 1984); Empire Tool Company v. Wells, 227 So. 2d 76
(Fla.App. 1969).
In at least two published cases the Florida courts have found bailments were created in
instances where the bailee had possession of the bailed goods for a relatively short period of
time. In Favors v. Firestone Tire & Rubber Company, 309 So. 2d 69, 72 (Fla.App. 1975),
cert. den. sub nom Sansing v. Firestone Tire & Rubber Company, 360 So. 2d 1250 (Fla.
1978), the Florida Appellate Court ruled that delivery of a truck to an automobile repair
station in order to have the tires changed created a bailment. Similarly, in Aetna Cas. & Sur.
v. Pappagallo Rest., 547 So. 2d 243, 244 (Fla.App. 1989), a bailment was created where a
restaurant customer left his automobile with the restaurant's valet parking service. In both
these cases the period of time of the bailment was not a matter of days, but at most a very
few hours.
At least one court outside the state of Florida has found a bailment created under factual
circumstances similar to the present [**9] case. In Tremaroli v. Delta Airlines, 17 Av. Cas.
(CCH) P18,293, 294 (Civ. Ct. N.Y. 1983), the claimant's bag was lost, either as a result of
theft or mistaken identity, after passing through the security checkpoint operated by the
defendant. Without any discussion, the court held that "[d]efendants had dominion and
control of claimant's hand baggage while said baggage went through the security check
required by Delta Airlines and operated by its agent Ogden Security, Inc., thereby creating
a bailment." Id. at 18,295.
This court is convinced that in the instant case a bailment was created. In proceeding
through the security checkpoint, plaintiff placed his bag upon the X-ray conveyor belt. From
the moment the bag entered the machine the plaintiff surrendered [*1458] control to the
defendant. The defendant could stop the bag in the machine for prolonged examination,
could run it through the machine a second time, or could order it opened for an examination
of its contents. Further, passengers such as the plaintiff have virtually no control over the
length of time they will be separated from their bag. This time could vary from a few
seconds to several minutes, dependent upon the number [**10] of persons ahead of the
passenger in the line for the magnetometer, whether any of those persons triggers the
metal detection alarm, and upon the procedure used to search those who do trigger the
alarm. 3 It is also noteworthy that plaintiff could not retrieve his bag until the Wackenhut
employee operating the magnetometer permitted plaintiff to pass into the concourse area.
Testimony was also heard at trial that due to the orientation of the X-ray machine and the
magnetometer, it was impossible for a passenger waiting in line for the magnetometer to
see his bag after it emerged from the X-ray machine. 4 In short, once the plaintiff's bag
entered the X-ray machine, the plaintiff could no longer reach or see it, and had little or no
control over the period of time he would be separated from it. Although the period of
separation might be brief, the plaintiff had surrendered possession and control of his
belongings and a bailment was created.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - 3 Considerable testimony was heard at trial concerning the proper procedure for screening passengers who set off
the metal detection alarm. Wackenhut's training tape and manual state that a passenger who triggers the alarm
should be asked to empty his pockets onto a tray, and then to pass through the magnetometer a second time. If
the alarm sounds again, then the passenger is to be asked to step to one side where he can be scanned with a
hand held metal detector. Screening with a hand held detector frees up the magnetometer for processing other
passengers, thereby minimizing the time passengers are separated from their hand baggage. It is obvious from the
present case, however, that this procedure is not always followed. [**11] 4 Defendant also cites Chafin v. Atlantic
Coast Line Railrod Company, 58 So. 2d 185 (Fla. 1952) in support of its argument that a bailment was not created.
In Chafin, a porter placed the plaintiff's bags on an open baggage shelf in front of plaintiff's seat. The court held
that since the plaintiff was both present and able to observe the bag at all times while the bag was handled, no
bailment was created. The present case is distinguishable in that plaintiff could neither observe nor reach his bag
after it emerged from the X-ray machine until given permission to pass through the magnetometer by a Wackenhut
employee.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - 2. Negligence
Under Florida law, once a plaintiff has proven the existence of a bailment, and
demonstrated the failure of the bailee to return the bailed goods, a presumption of
negligence on the part of the bailee arises. The defendant here does not dispute that the
HN4
plaintiff brought a bag to the airport or that the bag was lost. Since the court has found that
a bailment existed, and since the bag was not returned, the claimant here has established a
prima facie case [**12] of negligence. In order to avoid liability for the lost goods, the
defendant has the "burden of showing that he exercised the degree of care required by the
nature of the bailment." Marine Office-Appleton & Cox Corp. v. Aqua Dynamics, Inc., 295
So. 2d 370, 371 (Fla.App. 1974); Aetna Cas. & Sur. v. Pappagallo Rest., 547 So. 2d 243
(Fla.App. 1989).
The Tremaroli court, after finding a bailment was created, also went on the consider the
degree of care owed by the security agency to the public. The court found that the security
agency did have a duty to safeguard the passenger's hand baggage during their security
procedures. The court reasoned:
The traveling public is warned not to pack valuables in checked luggage which is stored within the aircraft's freight
and luggage compartments during the flight's duration. Accordingly, valuables are encouraged to be packed in
hand baggage intended to be carried aboard the plane to be kept within the passengers control. Yet, the passenger
and his hand baggage are separated as both go through the required security measures. The passenger, indeed, is
placed in a catch-22 situation in need of a safe place to carry his travelers cheques, [**13] credit cards, travel
and business documents, [*1459] identification, airline tickets, eyeglasses and jewelry.
The court went on to hold:
. . .where, as here, the airline either knows or has reason to know from past experience that there is a likelihood of
a passenger and his hand baggage becoming separated under its security operations the airline is obliged to take
all necessary measures to safeguard such baggage. . . .
This court also believes that security companies such as Wackenhut have a duty to
safeguard the belongings of persons passing through the security checkpoint.
The court finds that Wackenhut failed to exercise the requisite degree of care in the instant
case. Indeed, the defendant security agency appears to have made it a conscious policy to
take no steps to ensure that passenger and baggage are reunited. One of the defendant's
witnesses testified that Wackenhut considered its only priority to be that of carrying out the
Federal Aviation Administration regulations promulgated in the Code of Federal Regulations.
5
This viewpoint was maintained despite the fact that Wackenhut knew passengers could not
keep a visual watch over their bags throughout the inspection process. [**14] In addition,
the defendant's own witness testified that carry-on bags had been lost, either through theft
or inadvertence, an average of twice each week over the past several years. Despite this
knowledge the defendant evidently made no effort either to more closely coordinate the
screening of passengers with their baggage, to reorient the X-ray machine and
magnetometer so that passengers could watch their bags during the security check, or to
simply post a sign alerting passengers that thefts frequently occurred. This court expresses
no opinion as to whether these precautions would satisfy the level of care owed to
passengers by the defendant. However, when, as here, the security agency is aware both
that thefts are a regular, foreseeable event and that passengers cannot safeguard their
bags during the mandatory security process, 6 then a finding of negligence is appropriate if
the security agency shows absolutely no concern for passengers' belongings. 7
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - 5 This court recognizes that security services such as Wackenhut are charged with the important duty of ensuring
safe flights by intercepting passengers transporting "explosive, incendiary or . . . deadly or dangerous weapon[s]."
14 C.F.R. § 108.9[a] (1989). However, the fact that a federal agency has imposed certain duties upon a company
does not mean that company then rises above any need to consider that it may have other responsibilities to the
public. Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 78 L. Ed. 2d 443, 104 S. Ct. 615 (1984). [**15] 6 Passengers
must consent to a security check before boarding a commercial flight. Under 14 C.F.R. § 108.9(b) (1989), airlines
are forbidden to transport passengers who refuse to permit a search of their person and property.7 Defendant also
argues that it can not be found liable where the theft of the bag was caused by the criminal act of a third party.
However it is settled law that where the criminal acts of a third party are foreseeable a defendant may be found
liable for failing to take appropriate measures to protect against a succeeding loss. Carlisle v. Ulysses Line Ltd.,
475 So. 2d 248 (Fla.App. 1985); Vining v. Avis Rent-A-Car Systems, Inc., 354 So. 2d 54 (Fla. 1977); Nicholas v.
Miami Burglar Alarm Co., Inc., 339 So. 2d 175 (Fla. 1976).
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - III. Damages
A. Applicability of Tariff
In its brief, defendant argues that if the court should find for plaintiff, the court should also
find that the defendant's liability is limited by the "Conditions of Contract" tariff printed on
the back of the plaintiff's ticket for carriage on Eastern Airlines. However, inasmuch as
the [**16] defendant failed to plead this affirmative defense in its answer, this defense
may not properly be considered a part of this case. 8 Even were the defense before the
court, the outcome of the trial would be unchanged. The court simply was not persuaded of
the merit of the defense, and believes the tariff Wackenhut seeks to use to limit its liability
is inapplicable to this case.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - 8 Defendant's untimely request to amend its answer to add this affirmative defense was denied by Magistrate
Conklin.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - The [*1460] tariff printed on the back of Gin's ticket specifically refers to "Eastern's
liability" for baggage "accepted by Eastern". 9 The tariff makes no mention of Wackenhut,
either by name or by function. In order for the plaintiff's lost bag to have been "accepted by
Eastern" within the scope of the tariff, Wackenhut would have to be considered an agent of
Eastern Airlines. At trial, and in their briefs, both parties submitted evidence on this point.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - 9 The "Condition of Contract" clause reads in full:
Eastern's liability for the loss of, damage to, or the delay in the delivery of any personal property, baggage or
goods (whether checked or otherwise delivered into the custody of Eastern) shall be limited to an amount equal to
the value of the property (subject to verification) but, in no event, shall exceed $ 1,250.00 for each ticketed
passenger. This limitation shall also apply to baggage, personal property or goods accepted by Eastern at a city or
airport ticket office or elsewhere before, after or during a passenger's trip.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - [**17] Although Wackenhut was hired by Eastern Airlines, the court is convinced
Wackenhut was not an agent of Eastern, but an independent contractor. The evidence to
this effect is undeniable. Eastern exercised little, if any, control over the everyday activities
of Wackenhut and its employees. The contract for provision of security services executed
between Eastern and Wackenhut refers to Wackenhut as a "Contractor" and specifically
states:
1. It is agreed that Contractor exercises exclusive control over its employees and Eastern disclaims any control or
right to control said employees. The employees of Contractor in performing the services hereunder shall be
considered as employees of Contractor for any and all purposes and shall under no circumstances be deemed to be
employees of Eastern.
2. Eastern shall have no supervision or control over any such Contractor's employees and any complaint or
requested change in procedure shall be transmitted by Eastern to Contractor which shall in turn promptly give any
necessary instructions to its own personnel.
Further, testimony given at trial supported the view that Wackenhut is an independent
contractor and not an employee. Wackenhut's supervisor [**18] James Sparkman could
not recall any instance when Eastern came to the security checkpoint and told "the people
what to do."
On a purely pragmatic level, finding the tariff limitation applicable would result in the
anomalous situation of limiting the damages recoverable by ticketed passengers passing
through the security gate, while permitting unticketed well-wishers unlimited recovery for
negligently lost hand bags. Thus the customers whose very patronage supports agencies
such as Wackenhut would be limited to the amount of damages recoverable under the tariff,
while all others would be under no such restriction. 10
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - 10 Further complicating the matter is the fact that several airlines may be served by a single security checkpoint.
Under Wackenhut's argument, its liability for lost baggage then would vary depending upon the liability limitations
of the particular airline being used by the plaintiff passenger.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - The defendant calls attention to Baker v. Lansdell Protective Agency, Inc., 590 F. Supp.
165, 167 ( [**19] S.D.N.Y. 1984), in which a court ruled that a tariff applicable to
international travel under the Warsaw Convention limited the liability of a security agency
for losses at a security checkpoint. This case is inapposite. The applicable limiting provision
of the Convention specifically encompasses losses sustained not only while "on board the
aircraft" but also while "in the course of embarking or disembarking." Warsaw Convention,
49 Stat. 3000 (codified at note to 49 U.S.C.A. § 1502), ch. III, art. 17. The Baker court held
the act of embarking to include passing through the security checkpoint, thereby extending
the liability limitation to the checkpoint operators. The plaintiff in the pending case was
holding a ticket for a wholly domestic flight to which the Warsaw Convention does not apply.
Further, the Eastern tariff in question here contains no such language, and could not
reasonably be construed to extend to checkpoint operators.
[*1461] B. Amount of Loss
Claimant is awarded damages in the amount of $ 140,000 plus prejudgment interest at the
statutory rate from the date of the loss. This figure includes $ 100,000 for the cost of
merchandise plus a 40% markup for lost partnership profits [**20] due to the loss of the
jewelry. There was some dispute over the documentation provided by plaintiff to support his
proof of damages. Plaintiff's original claim was for $ 190,969. The court feels the $ 100,000
figure is more appropriate considering the documentation. There was substantial testimony
at trial that 40% was a reasonable, if not conservative, markup on wholesale jewelry.
The foregoing constitute the findings of fact and conclusions of law required by Rule 52 of
the Federal Rules of Civil Procedure.
Let judgments enter accordingly.