KEVIN BRANCHPartner ● Dennis, Corry, Porter & Smith LLP

Recoverable Damages for Cargo Claims

Shipper/ClaimantShipper/Claimant’’s Burden of Proof s Burden of Proof Under the Under the CarmackCarmack AmendmentAmendment

Prove that the cargo was tendered to the Prove that the cargo was tendered to the carrier in good ordercarrier in good order

Prove that the cargo was not delivered in Prove that the cargo was not delivered in the same good orderthe same good order

Prove the amount of damagesProve the amount of damages

Theoretical Underpinning for Cargo Theoretical Underpinning for Cargo Claim DamagesClaim Damages

When cargo is lost, stolen or damaged in When cargo is lost, stolen or damaged in transit, the claim against the carrier transit, the claim against the carrier sounds in contract. sounds in contract. Hector Martinez & Co. Hector Martinez & Co. v. Southern Pac. Transportation Co.v. Southern Pac. Transportation Co., 606 , 606 F.2d 106 (5F.2d 106 (5thth Cir. 1979).Cir. 1979).

Theoretical Underpinning for Cargo Theoretical Underpinning for Cargo Claim DamagesClaim Damages

One who commits a breach of contract One who commits a breach of contract must make compensation to the injured must make compensation to the injured party. In determining the amount of this party. In determining the amount of this compensation as the ''damages'' to be compensation as the ''damages'' to be awarded, the aim in view is to put the awarded, the aim in view is to put the injured party in as good a position as that injured party in as good a position as that party would have been in if performance party would have been in if performance had been rendered as promised. 11had been rendered as promised. 11--5555Corbin on ContractsCorbin on Contracts §§ 55.3 55.3

CarmackCarmack Amendment on DamagesAmendment on Damages

““The liability imposed under this paragraph The liability imposed under this paragraph is for the actual loss or injury to the is for the actual loss or injury to the property caused by (A) the receiving property caused by (A) the receiving carrier, (B) the delivering carrier, or (C) carrier, (B) the delivering carrier, or (C) another carrier over whose line or route another carrier over whose line or route the property is transported.the property is transported.”” 49 U.S.C. 49 U.S.C. §§14706 (a)(1).14706 (a)(1).

Common Law Rule Regarding Common Law Rule Regarding Recovery for Damaged PropertyRecovery for Damaged Property““Where goods are damaged, the general Where goods are damaged, the general rule for determining the amount of rule for determining the amount of damages is the difference between the damages is the difference between the market value of the property in the market value of the property in the condition in which it should have arrived at condition in which it should have arrived at destination and its market value at destination and its market value at destination in the damaged condition less destination in the damaged condition less salvage collected.salvage collected.”” Saul Saul SorkinSorkin, , Goods In Goods In TransitTransit citingciting, , Gulf C. & S. F. Gulf C. & S. F. RyRy. Co. v. . Co. v. Texas Packing Co.Texas Packing Co., 244 U.S. 31 (1917). , 244 U.S. 31 (1917).

Common Law Rule Regarding Common Law Rule Regarding Recovery for Lost or Stolen Recovery for Lost or Stolen

PropertyProperty““The general measure of damages for loss The general measure of damages for loss of property is the value of the property at of property is the value of the property at the time and place at which it should have the time and place at which it should have been delivered or the market value at been delivered or the market value at destination.destination.”” Saul Saul SorkinSorkin, , Goods in Goods in TransitTransit, , §§ 11.03 11.03 citingciting, , Chicago, M. St. P. Chicago, M. St. P. RyRy. Co. v. . Co. v. McCaullMcCaull--DinsmoreDinsmore Co.Co., 253 , 253 U.S. 97 (1920). U.S. 97 (1920).

NeverthelessNevertheless““The general rule of market value less salvage The general rule of market value less salvage …… is not is not always the best measure of actual loss. That measure of always the best measure of actual loss. That measure of damages may be discarded and other more accurate damages may be discarded and other more accurate means resorted to if, for special reasons, it is not exact means resorted to if, for special reasons, it is not exact or otherwise not applicable.or otherwise not applicable.”” BrockwayBrockway--Smith Co. v. Smith Co. v. Boston and Marine Corp.Boston and Marine Corp., 497 F. Supp. 814 (D. Mass. , 497 F. Supp. 814 (D. Mass. 1980). 1980).

It is incumbent on the carrier to show that the market It is incumbent on the carrier to show that the market value rule will not result in a just measure of actual value rule will not result in a just measure of actual damages. damages. Custom Cartage, Inc. v. Motorola, Inc.Custom Cartage, Inc. v. Motorola, Inc., 1999 , 1999 U.S. Dist. 16462 (1999).U.S. Dist. 16462 (1999).

What Issue Most Often Creates What Issue Most Often Creates Disputes Regarding Application of Disputes Regarding Application of

the Market Value Rule?the Market Value Rule?

Manufacturing Price v. Wholesale Price Manufacturing Price v. Wholesale Price

Wholesale Price v. Retail PriceWholesale Price v. Retail Price

–– The dispute raises the question of whether lost profits The dispute raises the question of whether lost profits are recoverable for the shipper.are recoverable for the shipper.

Lost ProfitsLost Profits

In deciding whether a shipper is entitled to lost In deciding whether a shipper is entitled to lost profits, the central issues to be considered are:profits, the central issues to be considered are:

–– Was the shipper able to replace the shipment?Was the shipper able to replace the shipment?

–– Is the shipper a lost volume seller? (i.e. can the Is the shipper a lost volume seller? (i.e. can the shipper sell every bit of product that it manufactures shipper sell every bit of product that it manufactures or purchases on a wholesale basis.)or purchases on a wholesale basis.)

Case Where Lost Profits Were Case Where Lost Profits Were Not RecoverableNot Recoverable

Levi Strauss v. SeaLevi Strauss v. Sea--LandLand, 2003 U.S. Dist. LEXIS , 2003 U.S. Dist. LEXIS 8171 (S.D.N.Y. 2003)8171 (S.D.N.Y. 2003)

–– A Shipment of Levi Strauss jeans was stolen in A Shipment of Levi Strauss jeans was stolen in transit.transit.

–– Levi Strauss claimed that the stolen jeans were Levi Strauss claimed that the stolen jeans were manufactured for the 1999 holiday season and that it manufactured for the 1999 holiday season and that it could not remanufacture a replacement shipment could not remanufacture a replacement shipment before the holiday shopping season ended.before the holiday shopping season ended.

Case Where Lost Profits Were Case Where Lost Profits Were Not RecoverableNot Recoverable

Levi Strauss v. SeaLevi Strauss v. Sea--LandLand, 2003 U.S. Dist. LEXIS , 2003 U.S. Dist. LEXIS 8171 (S.D.N.Y. 2003)8171 (S.D.N.Y. 2003)

–– However, Levi Strauss could not produce any However, Levi Strauss could not produce any evidence showing that it lost any sales during the evidence showing that it lost any sales during the 1999 holiday season.1999 holiday season.

This likely means that Levi Strauss had excess inventory of This likely means that Levi Strauss had excess inventory of that particular product at the end of the holiday shopping that particular product at the end of the holiday shopping season.season.

–– Therefore, damages were limited to Levi StraussTherefore, damages were limited to Levi Strauss’’manufacturing costs.manufacturing costs.

Case Where Lost Profits Were Case Where Lost Profits Were RecoveredRecovered

Eastman Kodak Company v. Eastman Kodak Company v. WestwayWestway Motor Motor Freight, Inc.Freight, Inc., 949 F.2d 317 (10, 949 F.2d 317 (10thth Cir. 1991). Cir. 1991).

–– Shipment of sensitized film was transported at the Shipment of sensitized film was transported at the wrong temperature thus destroying the product.wrong temperature thus destroying the product.

–– Kodak was able to replace the shipment in short Kodak was able to replace the shipment in short order.order.

–– However, Kodak showed that it sells all of the However, Kodak showed that it sells all of the sensitized film that it manufactures shortly after the sensitized film that it manufactures shortly after the production is completed.production is completed.

Case Where Lost Profits Were Case Where Lost Profits Were RecoveredRecovered

Eastman Kodak Company v. Eastman Kodak Company v. WestwayWestwayMotor Freight, Inc.Motor Freight, Inc., 949 F.2d 317 (10, 949 F.2d 317 (10thth Cir. Cir. 1991). 1991).

–– Kodak was therefore able to show that it is a Kodak was therefore able to show that it is a lost volume seller. lost volume seller.

–– Lost Profits were awarded.Lost Profits were awarded.

Other Examples of Lost Other Examples of Lost Profit CasesProfit Cases

Fiber Optic Cable Shipment in the 1990Fiber Optic Cable Shipment in the 1990’’ss

–– Spool of cable was damaged while in transit from Spool of cable was damaged while in transit from Atlanta, Georgia to Texas.Atlanta, Georgia to Texas.

–– Manufacturer was unable to replace the shipment Manufacturer was unable to replace the shipment because it had six months of backorders for that type because it had six months of backorders for that type of fiber optic cable.of fiber optic cable.

–– Lost profits for the shipment were recoverable.Lost profits for the shipment were recoverable.

Other Examples of Lost Other Examples of Lost Profit CasesProfit Cases

Fiber Optic Cable Shipment in the 2004 (Same Fiber Optic Cable Shipment in the 2004 (Same Manufacturer)Manufacturer)

–– Spool of cable was damaged while in transit from Atlanta, Spool of cable was damaged while in transit from Atlanta, Georgia to Louisiana.Georgia to Louisiana.

–– Manufacturer was able to replace the damaged shipment from Manufacturer was able to replace the damaged shipment from existing inventory.existing inventory.

–– Inventory records produced by the manufacturer showed a large Inventory records produced by the manufacturer showed a large and dated inventory of that fiber optic cable with no orders and dated inventory of that fiber optic cable with no orders pending. pending.

–– Lost Profits were not recoverable.Lost Profits were not recoverable.

Another Example of a Lost Another Example of a Lost Profit CaseProfit Case

Container shipment of 1950s style poodle sweaters was Container shipment of 1950s style poodle sweaters was stolen in transit.stolen in transit.

–– Claimant was the retailer who had purchased the shipment.Claimant was the retailer who had purchased the shipment.

–– Claimant was able to show that it could not replace the shipmentClaimant was able to show that it could not replace the shipmentbecause wholesaler did not have any more inventory of the because wholesaler did not have any more inventory of the poodle sweaters.poodle sweaters.

–– Retailer was a low end seller whose sales records showed that itRetailer was a low end seller whose sales records showed that itgenerally sold a small percentage of product at full price and generally sold a small percentage of product at full price and then sold the remaining product at escalating discounts.then sold the remaining product at escalating discounts.

–– Should this retailer recover lost profits and if so, how much?Should this retailer recover lost profits and if so, how much?

Repair of Damaged CargoRepair of Damaged Cargo

If the shipper decides to repair cargo that If the shipper decides to repair cargo that has been damaged in transit, the cost of has been damaged in transit, the cost of repair is recoverable as long as it does not repair is recoverable as long as it does not exceed the market value of the product. exceed the market value of the product.

Consequential DamagesConsequential Damages““It is basic that, in contract law, the defendant's It is basic that, in contract law, the defendant's liability to a plaintiff arises from the contractual liability to a plaintiff arises from the contractual agreement between the parties. Tort liability, agreement between the parties. Tort liability, however, arises from "general obligations that however, arises from "general obligations that are imposed by law are imposed by law -- apart from and apart from and independent of promises made and therefore independent of promises made and therefore apart from the manifested intention of the parties apart from the manifested intention of the parties -- to avoid injury to others." to avoid injury to others." ProsserProsser at at §§ 92. 92. Hampton v. Federal Express Corp.Hampton v. Federal Express Corp., 917 F.2d , 917 F.2d 1119 (81119 (8thth Cir. 1990).Cir. 1990).

Consequential DamagesConsequential DamagesIt is a fundamental principle of the law of It is a fundamental principle of the law of damages that, in contract cases, a plaintiff can damages that, in contract cases, a plaintiff can only recover for a loss which, in the ordinary only recover for a loss which, in the ordinary course of events, would result from the course of events, would result from the defendant's breach or for a loss which was in the defendant's breach or for a loss which was in the contemplation of the parties. In the words of the contemplation of the parties. In the words of the Restatement, "damages are not recoverable for Restatement, "damages are not recoverable for loss that the party in breach did not have reason loss that the party in breach did not have reason to foresee as a probable result of the breach to foresee as a probable result of the breach when the contract was made." when the contract was made." Hampton v. Hampton v. Federal Express Corp.Federal Express Corp., 917 F.2d 1119 (8, 917 F.2d 1119 (8thth Cir. Cir. 1990).1990).

Consequential DamagesConsequential DamagesThere are two tests for consequential damages.There are two tests for consequential damages.

–– The less accepted, restrictive test requires a plaintiff to showThe less accepted, restrictive test requires a plaintiff to show that that the carrier was made aware of the special damages that would the carrier was made aware of the special damages that would arise from a breach of the contract of carriage and that the arise from a breach of the contract of carriage and that the carrier impliedly or expressly agreed to bear that risk of carrier impliedly or expressly agreed to bear that risk of damages. damages. Globe Ref. Globe Ref. LandaLanda Cotton Oil Co.Cotton Oil Co., 190 U.S. 540 , 190 U.S. 540 (1903).(1903).

–– The more commonly used test does not require a showing that The more commonly used test does not require a showing that the carrier agreed to accept the risk as long as it can be shownthe carrier agreed to accept the risk as long as it can be shownthat the carrier was, or should have been aware that special that the carrier was, or should have been aware that special damages would occur if the cargo was lost or damaged. damages would occur if the cargo was lost or damaged.

Consequential DamagesConsequential DamagesBurlington Air Express v. Truck Air of the CarolinasBurlington Air Express v. Truck Air of the Carolinas, 8 F. , 8 F. Supp. 2d 508, 512 (D.S.C. 1998).Supp. 2d 508, 512 (D.S.C. 1998).

–– Under the Under the CarmackCarmack Amendment, the common law rule that Amendment, the common law rule that special or consequential damages are not usually recoverable special or consequential damages are not usually recoverable from a motor carrier has not been altered. from a motor carrier has not been altered. Special damages are Special damages are those that the carrier did not have reason to foresee as ordinarthose that the carrier did not have reason to foresee as ordinary, y, natural consequences of a breach of the contract of carriage natural consequences of a breach of the contract of carriage when such contract was formed. Damage is foreseeable by the when such contract was formed. Damage is foreseeable by the carrier if it is the proximate and usual consequence of the carrier if it is the proximate and usual consequence of the carrier's action. In other words, special damages are those carrier's action. In other words, special damages are those damages other than physical damage to the cargo which can be damages other than physical damage to the cargo which can be measured by the value of the cargo in the market place or measured by the value of the cargo in the market place or otherwise. otherwise. CitingCiting, Saul , Saul SorkinSorkin, , Goods in TransitGoods in Transit §§ 11.09[1].11.09[1].

Consequential DamagesConsequential DamagesIf the carrier is told that special damages will If the carrier is told that special damages will occur if the cargo is lost of damaged in transit, occur if the cargo is lost of damaged in transit, the claimant will have a good argument that the claimant will have a good argument that those damages can be recovered. However, the those damages can be recovered. However, the carrier must be told about the special damages carrier must be told about the special damages at the time that the contract for carriage is at the time that the contract for carriage is entered. Advising the carrier of the special entered. Advising the carrier of the special circumstances while the cargo is in transit is circumstances while the cargo is in transit is insufficient. insufficient. Mrs. SullivanMrs. Sullivan’’s Pies, Inc. v. T.I.M.E. s Pies, Inc. v. T.I.M.E. –– D.C., Inc.D.C., Inc., 1971 U.S. Dist. LEXIS 11893 (W.D. , 1971 U.S. Dist. LEXIS 11893 (W.D. Tenn. 1971).Tenn. 1971).

Consequential DamagesConsequential Damages

If the carrier was not specifically told about If the carrier was not specifically told about the special damages, then the shipper the special damages, then the shipper must prove that they were foreseeable. must prove that they were foreseeable. That generally raises the question of That generally raises the question of whether the carrier should have known whether the carrier should have known that the damages would arise from a that the damages would arise from a breach of the contract for carriage.breach of the contract for carriage.

Consequential DamagesConsequential Damages

Examples of Consequential Damages Examples of Consequential Damages Include:Include:–– Loss of market due to delayLoss of market due to delay–– Loss of good will or business reputationLoss of good will or business reputation–– Loss of future businessLoss of future business–– Loss of rental incomeLoss of rental income–– Lease payments for rented propertyLease payments for rented property–– Loss of useLoss of use–– Alternate transportationAlternate transportation

Consequential Damages Cases Consequential Damages Cases The Paper Magic Group, Inc. v. J.B. Hunt Transport, Inc.The Paper Magic Group, Inc. v. J.B. Hunt Transport, Inc., , 2001 U.S. Dist. LEXIS 13494 (E.D. Pa. 2001)2001 U.S. Dist. LEXIS 13494 (E.D. Pa. 2001)

–– Shipper, which was the manufacturer of greeting cards, Shipper, which was the manufacturer of greeting cards, delivered 2432 cartons of Christmas cards to carrier.delivered 2432 cartons of Christmas cards to carrier.

–– Carrier had been hauling shipperCarrier had been hauling shipper’’s cargo for ten years.s cargo for ten years.

–– The bill of lading did not indicate that the shipment was time The bill of lading did not indicate that the shipment was time sensitive or that the goods were seasonal.sensitive or that the goods were seasonal.

–– The normal transit time for the shipment was two to three days.The normal transit time for the shipment was two to three days.

–– Carrier misplaced the goods for four months and attempted to Carrier misplaced the goods for four months and attempted to deliver them approximately two months after the holiday season.deliver them approximately two months after the holiday season.

Consequential Damages CasesConsequential Damages CasesThe Paper Magic Group, Inc. v. J.B. Hunt Transport, Inc.The Paper Magic Group, Inc. v. J.B. Hunt Transport, Inc., , 2001 U.S. Dist. LEXIS 13494 (E.D. Pa. 2001)2001 U.S. Dist. LEXIS 13494 (E.D. Pa. 2001)

–– Consignee, which was a large retailer, rejected the shipment. Consignee, which was a large retailer, rejected the shipment.

–– The cards had been packaged and printed with the retailerThe cards had been packaged and printed with the retailer’’s s label on them.label on them.

–– Invoice Value of the cards was $130,080.48.Invoice Value of the cards was $130,080.48.

–– Carrier sold the cards for salvage value of $49,645.96.Carrier sold the cards for salvage value of $49,645.96.

Consequential Damages CasesConsequential Damages CasesThe Paper Magic Group, Inc. v. J.B. Hunt The Paper Magic Group, Inc. v. J.B. Hunt Transport, Inc.Transport, Inc., 2001 U.S. Dist. LEXIS 13494 , 2001 U.S. Dist. LEXIS 13494 (E.D. Pa. 2001).(E.D. Pa. 2001).

–– When shipper sought the full value of the goods, When shipper sought the full value of the goods, carrier argued that shipper was seeking special carrier argued that shipper was seeking special damages.damages.

–– Court held that it was foreseeable to carrier that a four Court held that it was foreseeable to carrier that a four month delay in transit would render the product month delay in transit would render the product worthless and shipper was awarded $130,080,48.worthless and shipper was awarded $130,080,48.

Consequential Damages CasesConsequential Damages CasesStarmakersStarmakers Publishing Corp. v. ACME Fast Publishing Corp. v. ACME Fast Freight, Inc.Freight, Inc., 646 F. Supp. 780 (S.D.N.Y. 1986)., 646 F. Supp. 780 (S.D.N.Y. 1986).

–– Shipper manufactured posters depicting characters Shipper manufactured posters depicting characters for a newly released movie.for a newly released movie.

–– The posters were delayed in transit for approximately The posters were delayed in transit for approximately three weeks.three weeks.

–– Once the cargo was located, the consignee rejected Once the cargo was located, the consignee rejected the shipment because the movie had already been the shipment because the movie had already been released.released.

Consequential Damages CasesConsequential Damages CasesStarmakersStarmakers Publishing Corp. v. ACME Fast Freight, Inc.Publishing Corp. v. ACME Fast Freight, Inc., , 646 F. Supp. 780 (S.D.N.Y. 1986).646 F. Supp. 780 (S.D.N.Y. 1986).

–– The bill of lading only identified The bill of lading only identified ““Printed MatterPrinted Matter”” and did not and did not make any reference to a time sensitive nature for the cargo.make any reference to a time sensitive nature for the cargo.

–– The shipper claimed that the cargo lost all value because it wasThe shipper claimed that the cargo lost all value because it wasnot timely delivered.not timely delivered.

–– The court held that the shipperThe court held that the shipper’’s claim constituted s claim constituted ““special special damagesdamages”” and that there was no evidence that the carrier was and that there was no evidence that the carrier was aware that such damages would arise if the items were delayed aware that such damages would arise if the items were delayed for three weeks.for three weeks.

Consequential Damages CasesConsequential Damages CasesMain Road Bakery, Inc. v. Consolidated Main Road Bakery, Inc. v. Consolidated FreigthwaysFreigthways, , Inc.Inc., 799 F. Supp. 26 (D.N.J. 1992), 799 F. Supp. 26 (D.N.J. 1992)

–– Manufacturer in Illinois delivered oven to carrier for Manufacturer in Illinois delivered oven to carrier for transportation to a bakery in New Jersey.transportation to a bakery in New Jersey.

–– Bill of lading stated Bill of lading stated ““Express DeliveryExpress Delivery”” and and ““Do Not Delay.Do Not Delay.””

–– While the oven was in transit, the consignee bakery advised the While the oven was in transit, the consignee bakery advised the carrier that it planned to disassemble its existing oven the daycarrier that it planned to disassemble its existing oven the daybefore the shipment was scheduled to arrive.before the shipment was scheduled to arrive.

–– The oven was damaged and rendered a total loss in transit.The oven was damaged and rendered a total loss in transit.

Consequential Damages CasesConsequential Damages Cases

Main Road Bakery, Inc. v. Consolidated Main Road Bakery, Inc. v. Consolidated FreigthwaysFreigthways, Inc., Inc., 799 F. Supp. 26 (D.N.J. , 799 F. Supp. 26 (D.N.J. 1992)1992)–– Carrier paid shipper the value of the damaged oven.Carrier paid shipper the value of the damaged oven.

–– Consignee bakery sued carrier for: Consignee bakery sued carrier for:

Cost of experts hired to install the new oven; and Cost of experts hired to install the new oven; and

Lost profits for seven days because bakery was closed while Lost profits for seven days because bakery was closed while it waited for a new oven to arrive.it waited for a new oven to arrive.

Consequential Damages CasesConsequential Damages Cases

Main Road Bakery, Inc. v. Consolidated Main Road Bakery, Inc. v. Consolidated Freightways, Inc.Freightways, Inc., 799 F. Supp. 26 (D.N.J. , 799 F. Supp. 26 (D.N.J. 1992)1992)–– Court dismissed the bakeryCourt dismissed the bakery’’s claim finding that:s claim finding that:

Carrier was not notified that existing oven would be Carrier was not notified that existing oven would be disassembled until the new oven was in transit.disassembled until the new oven was in transit.

““Express DeliveryExpress Delivery”” and and ““Do Not DelayDo Not Delay”” on bill of lading was on bill of lading was insufficient to notify the carrier that existing oven would be insufficient to notify the carrier that existing oven would be disassembled and oven installment experts hired.disassembled and oven installment experts hired.

Consequential Damages CasesConsequential Damages CasesHypothetical Number 1:Hypothetical Number 1:

–– Carrier specializes in hauling oversized loads.Carrier specializes in hauling oversized loads.

–– Generally, all of the carrierGenerally, all of the carrier’’s loads have to be unloaded by a crane.s loads have to be unloaded by a crane.

–– From experience, carrier knows that the load at issue will be unFrom experience, carrier knows that the load at issue will be unloaded by a loaded by a crane. However, carrier is not given any details about the crancrane. However, carrier is not given any details about the crane that will be e that will be used. used.

–– The cargo is damaged and rendered a total loss on the morning thThe cargo is damaged and rendered a total loss on the morning that it is at it is scheduled to be delivered.scheduled to be delivered.

–– Consignee files a claim for the cost of leasing a crane on the sConsignee files a claim for the cost of leasing a crane on the scheduled delivery cheduled delivery date. date.

–– Is this amount recoverable against the carrier?Is this amount recoverable against the carrier?

Consequential Damages CasesConsequential Damages CasesHypothetical Number 2:Hypothetical Number 2:

–– Carrier is hired to transport the compulsion system for a rocketCarrier is hired to transport the compulsion system for a rocket that will deploy a that will deploy a satellite.satellite.

–– CarrierCarrier’’s truck is involved in an accident while transporting the compuls truck is involved in an accident while transporting the compulsion sion system.system.

–– Industry experts agree that because the truck was involved in anIndustry experts agree that because the truck was involved in an accident, the accident, the compulsion system cannot be used until it is subjected to an xcompulsion system cannot be used until it is subjected to an x--ray scan and the ray scan and the only place to do that is in France.only place to do that is in France.

–– The costs associated with transporting the compulsion system to The costs associated with transporting the compulsion system to France, and France, and performing the test are approximately $100,000.00. The test revperforming the test are approximately $100,000.00. The test reveals that the eals that the compulsion system is not damaged.compulsion system is not damaged.

–– Can the consignee recover the transportation and testing expenseCan the consignee recover the transportation and testing expenses from the s from the carrier? carrier?

Other Elements of Recoverable Other Elements of Recoverable DamagesDamages

Freight ChargesFreight Charges

–– Can be recovered if the freight charges comprise an Can be recovered if the freight charges comprise an element of the market value of the cargo at element of the market value of the cargo at destination. destination.

Inspection and Salvaging ExpensesInspection and Salvaging Expenses–– These expenses can be recovered if they are These expenses can be recovered if they are

necessary for mitigation issues such as separating necessary for mitigation issues such as separating damaged from undamaged cargo. damaged from undamaged cargo.

Costs that May Subtract From Costs that May Subtract From Recoverable DamagesRecoverable Damages

Broker commissions and other expenses Broker commissions and other expenses that the claimant may incur at destination that the claimant may incur at destination to sell or dispose of the goods. to sell or dispose of the goods. Missouri Missouri Pacific Railroad Co. v. H. Pacific Railroad Co. v. H. RouwRouw Co.Co., 258 , 258 F.2d 445 (5F.2d 445 (5thth Cir. 1958).Cir. 1958).

Damage to Part of a ShipmentDamage to Part of a ShipmentConsignee special orders 276 colored glass panels to install on Consignee special orders 276 colored glass panels to install on a building.a building.

10 of the panels are damaged in transit.10 of the panels are damaged in transit.

The consignee is unable to complete the building with the undamaThe consignee is unable to complete the building with the undamaged panels.ged panels.

Because the colored glass panels are specially made in lots, theBecause the colored glass panels are specially made in lots, the manufacturer cannot make manufacturer cannot make replacement panels of the exact same color and appearance.replacement panels of the exact same color and appearance.

Consignee claims the 266 undamaged panels are unusable and have Consignee claims the 266 undamaged panels are unusable and have no value. Consignee no value. Consignee therefore pursues a claim against the carrier for the full valuetherefore pursues a claim against the carrier for the full value of the 276 panels. Efforts to salvage of the 276 panels. Efforts to salvage the specialty glass panels does not reveal a secondary market.the specialty glass panels does not reveal a secondary market.

What are the recoverable damages in this situation?What are the recoverable damages in this situation?

Issue may turn on whether the panels are determined to be worthlIssue may turn on whether the panels are determined to be worthless for their intended purpose. ess for their intended purpose. Courts have held that worthless for an intended purpose is not dCourts have held that worthless for an intended purpose is not distinguishable from totally istinguishable from totally worthless as a matter of law. worthless as a matter of law. SeeSee, , Oak Hall Cap and Gown Co. Inc. v. Old Dominion Freight Line, Oak Hall Cap and Gown Co. Inc. v. Old Dominion Freight Line, Inc.Inc., 899 F.2d 291 (4, 899 F.2d 291 (4thth Cir. 1990). Cir. 1990).

Mitigation of DamagesMitigation of Damages

Oak Hall Cap and Gown Co. Inc. v. Old Oak Hall Cap and Gown Co. Inc. v. Old Dominion Freight Line, Inc.Dominion Freight Line, Inc., 899 F.2d 291 , 899 F.2d 291 (4(4thth Cir. 1990). Cir. 1990).

–– When damaged goods arrive at destination, When damaged goods arrive at destination, the consignee has a duty to accept them and the consignee has a duty to accept them and mitigate damages unless the goods are mitigate damages unless the goods are deemed deemed ““totally worthless.totally worthless.””

Mitigation of DamagesMitigation of Damages

TokioTokio Marine and Fire Ins. Co. v. Norfolk Marine and Fire Ins. Co. v. Norfolk and Western Railway Co.and Western Railway Co., 1996 U.S. Dist. , 1996 U.S. Dist. LEXIS 22389 (M.D.N.C. 1996).LEXIS 22389 (M.D.N.C. 1996).

–– The The CarmackCarmack Amendment generally imposes Amendment generally imposes upon a shipper of goods a duty of upon a shipper of goods a duty of reasonablereasonablemitigation of damages. mitigation of damages.

Mitigation of DamagesMitigation of DamagesTokioTokio Marine and Fire Ins. Co. v. Norfolk and Western Marine and Fire Ins. Co. v. Norfolk and Western Railway Co.Railway Co., 1996 U.S. Dist. LEXIS 22389 (M.D.N.C. , 1996 U.S. Dist. LEXIS 22389 (M.D.N.C. 1996).1996).

–– The reasonableness standard in the mitigation context is much The reasonableness standard in the mitigation context is much like the reasonable man standard in negligence. like the reasonable man standard in negligence. Reasonableness is an objective standard. It is generally judged Reasonableness is an objective standard. It is generally judged by taking all of the relevant circumstances into account. The faby taking all of the relevant circumstances into account. The factct--finder should consider the loss that might be averted by acting,finder should consider the loss that might be averted by acting,the loss that might be caused by acting (both to the parties andthe loss that might be caused by acting (both to the parties andto third parties), and the probabilities that those losses mightto third parties), and the probabilities that those losses mightoccur. This factoccur. This fact--intensive decision is to be left to the jury except intensive decision is to be left to the jury except in the clearest of cases. in the clearest of cases.

Mitigation of DamagesMitigation of DamagesLand OLand O’’Lakes, Inc. v. Superior Service Transportation of Wisconsin, IncLakes, Inc. v. Superior Service Transportation of Wisconsin, Inc.., , 500 F. Supp. 2d 1150 (E.D. Wis. 2007). 500 F. Supp. 2d 1150 (E.D. Wis. 2007).

–– A truck carrying a load of butter wrecked in transit.A truck carrying a load of butter wrecked in transit.

–– The shipper refused to take redelivery of the butter and attemptThe shipper refused to take redelivery of the butter and attempt to salvage it.to salvage it.

–– Shipper argued that its policy prohibited it from accepting prodShipper argued that its policy prohibited it from accepting product that had been uct that had been involved in an accident because of the risk of contamination, aninvolved in an accident because of the risk of contamination, and market d market reputation damage that it could suffer for doing so.reputation damage that it could suffer for doing so.

–– Carrier introduced evidence that only 20% of the load had been dCarrier introduced evidence that only 20% of the load had been deformed, that eformed, that the butter was in its original packaging, that none of the buttethe butter was in its original packaging, that none of the butter had been r had been exposed, and that the trailer remained in tact with the refrigerexposed, and that the trailer remained in tact with the refrigerator unit working. ator unit working.

–– The court held that a fact question existed regarding whether thThe court held that a fact question existed regarding whether the shipper had e shipper had acted reasonably to mitigate damages. acted reasonably to mitigate damages.

Kevin P. BranchKevin P. BranchDennis, Corry, Porter & Smith, LLPDennis, Corry, Porter & Smith, LLP

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