These were some of the issues discussed in a recent decision by a federal court in Michigan (Zurich North America (Canada) and Woodbridge Foam Inc. v. Triple Crown Services Co., 2009 WL 127754, E.D. Mich., Jan. 20). Woodbridge Foam and the insurer Zurich North America sought monetary damages for the value of two shipments of automobile gears involved in rollover accidents during transport by Triple Crown
. In addition to making parts for automobiles out of polyurethane foam and other plastics, Woodbridge offers a variety of engineering and design, supply chain management, assembly, sequencing and just-in-time delivery services for the automobile industry.
A prima facie claim under the Carmack Amendment requires a plaintiff to demonstrate that a shipment was in good condition at the point of origin, arrived in damaged condition at the point of destination and detail the damage.
Triple Crown moved for summary judgment, asserting that the plaintiffs were unable to demonstrate that either shipment arrived in damaged condition. The carrier seized on the fact that the plaintiffs did not closely inspect the shipments and did not establish which parts, if any, were damaged.
The plaintiffs offered photographs of the interior of the trailers taken by insurance adjusters, which documented the shipments were in disarray. Adjusters also observed that some of the gears were removed from their protective casing.
So the court denied Triple Crown's motion for summary judgment, concluding that a jury could infer damage from the shipments' involvement in rollover accidents in conjunction with evidence demonstrating that some of the gears had ejected from the packaging.
The plaintiffs also alleged that the accidents dissolved the manufacturer's quality or engineering certification, rendering the gears valueless to Woodbridge.
It explained that Delphi Saginaw Steering Systems manufactured the gears. Throughout the manufacturing, Delphi employed quality control processes for each gear and certified that each met applicable standards.
Woodbridge took control of the gears at Delphi's Saginaw, Mich., plant and contracted with Triple Crown to transport the gears to its plant in Kansas City, Mo. There it was to incorporate the gears into engine cradles that it was contracted to deliver to Yorozu Automotive of North America, which would in turn furnish its final product to General Motors.
Woodbridge contends that it ' like each entity in the GM supply chain ' was contractually obligated to only use gears with the quality or engineering certificate.
As a result of the accidents, Woodbridge said the integrity of the gears' certification was compromised, and offered a deposition from a Yorozu Automotive representative who said the company would not accept gears involved in the accidents because their 'status' was 'unknown.' He also said re-certification through visible inspection was likely not feasible.
Woodbridge sought monetary damages for both shipments contending that decertification of the entire load because of the risk of actual physical damage constituted foreseeable consequential damage.
In what is called an in limine motion before the actual jury trial would begin, Triple Crown sought to preclude the plaintiffs from presenting any expert evidence at the trial on this matter. But the plaintiffs said they did not intend to rely on expert testimony, but would call lay witnesses 'familiar with the value of the goods that were damaged in the rollover accidents.' The court granted Triple Crown's motion with respect to the exclusion of undisclosed expert testimony.
The court said the two sides had an equally significant difference of opinion concerning the measure of damages. Triple Crown contended the plaintiffs' damage remedy was limited to the repair or replacement of the particular parts they could identify as actually physically damaged in the rollover. The plaintiffs, on the other hand, believed their ability to establish that even the most modest actual physical damage to the parts and their packaging destroyed the required quality-control certificate and, thus, establishes their entitlement to the replacement value of the entire load of parts.
At oral argument, Triple Crown urged the court to exclude testimony to this effect because the Carmack Amendment requires a plaintiff to demonstrate physical damage and decertification does not qualify as damage to the shipment. However, the court said that 'reasonably foreseeable consequential damages' are available under the Carmack Amendment, and it does not restrict recovery only to 'physical damage.'
This conclusion notwithstanding, the court said the plaintiffs had a burden 'to establish it was reasonably foreseeable to the defendant at the time it agreed to transport the merchandise that it would be responsible for the full market value of the shipments in the event its conduct during delivery led to the decertification of the gears.'
To recover for the drop in the market value due to decertification, the plaintiffs would need to demonstrate that the defendant accepted a contractual responsibility for 'damage' to the parts' certification as well as the physical integrity of the gears.
Criminally liable for action of non-managers
A federal appeals court has rejected the argument that a corporation should not be held criminally liable for the actions of non-management level employees acting in violation of company policy (U.S. v. Ionia Management, 2nd Cir. Nos. 07-5801, 08-1387, Jan. 20)
A note on the case written by Christopher Myers, John P. Rowley III and John S. Irving IV of Holland and Knight, said the court refused to accept the position that corporate criminal liability can stem only from the actions of managerial employees, and 'rejected the argument that in order to establish vicarious corporate criminal liability, the government had to affirmatively prove that the company did not have effective compliance policies and procedures.'
It upheld a criminal vessel pollution conviction and a $4.9 million criminal fine against a vessel management company.
An ethics program is still part of good corporate governance, they said, potentially useful in defeating a criminal charge at trial, and reducing fines as well as convincing prosecutors not to bring charges in the first place.
