The fish (oil) that got away
UPS Supply Chain Solutions Inc. sued American Inc., and motions by both firms for summary judgment on UPS's breach of contract claim were denied by a U.S. District Court judge. (No. 08 C 2130, N.D. Illinois, Eastern Division. Aug. 14)
Abbott Laboratories contracted with UPS to have 80 drums of fish oil transported from Tokyo to South Bend, Ind. UPS, in turn, hired American to have the fish oil transported from Japan to Chicago.
UPS issued an air waybill to American that stated, 'Keep cool/must be in cooler upon arrival at AA/ORD.'
The shipment was tendered to American on April 7, 2006 at Tokyo's Narita Airport. A representative of American at Narita stamped the air waybill with the following language: 'Customer agrees that refrigeration is not guaranteed.'
The shipment arrived at O'Hare Airport in Chicago later the same day, but was not refrigerated on arrival. Rather, it was mistakenly placed on American' bypass system, which is meant mainly for customer loaded containers (CLC).
Loose freight cargo that is not packaged as a CLC is handled and stored in other areas, including the cooler. The shipment at issue was loose freight, not a CLC, but American contended the shipment was loose freight that had been wrapped and packaged to look like a CLC.
On April 18, UPS's nominated trucker attempted to pick up the shipment from American's facilities at O'Hare, but failed to do so. American contended this was because of the trucker's inability to load the shipment onto its truck; UPS said it was because Abbott rejected it once it learned the fish oil had not been refrigerated and was therefore spoiled.
On May 1, a UPS employee sent a letter to American stating that its customer refused the shipment because it was not cooled. It said the product was worth more than $80,000. Another UPS employee said in a deposition that she faxed a notice of intent to file a claim, but no fax was produced in discovery.
American sent a letter on May 29 saying that after an investigation it was declining responsibility for the loss.
Both parties agreed the Montreal Convention, a treaty concerning international air shipments, governed this case. It provides the 'carrier is 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.'
Under this convention, a prima facie case of liability 'is established upon a showing that the goods were delivered to the carrier in good condition, were delivered to the consignee at destination in damaged condition, and resulted in a specified amount of damage.'
American did not challenge the first or third elements of UPS's prima facie case, and the only issue is whether there was damage to the shipment upon delivery to the consignee.
UPS said American guaranteed that the shipment would be kept cool upon arrival at O'Hare, while American pointed to the stamp made at Narita.
UPS contended the stamp made at Narita Airport was not an effective disclaimer of the refrigeration guarantee for O'Hare and said American failed to produce any evidence concerning when it stamped the air waybill or when, if ever, UPS received notice of the stamp.
The court said the language of the stamp supports a reasonable inference that UPS had notice of the disclaimer's existence and that a reasonable jury could conclude that an American agent stamped the air waybill upon receipt of the package from UPS in Narita and that UPS acknowledged the disclaimer's existence. If so, a reasonable fact-finder could also infer that a refrigeration guarantee was not part of the shipment contract. As a result, summary judgment is inappropriate, the court said.
Article 31 of the Montreal Convention bars claims against a carrier if there has been no timely notice of damage, within 14 days from the date of receipt in the case of cargo.
The court said UPS's May 1 letter was timely, and rejected American's contention that UPS failed to give adequate notice because it did not state an intention to hold American liable for the loss. The court said the shipper needs only to 'complain' to the carrier when there has been damage to shipment.
With the denial of summary judgment, the court scheduled a hearing to set a trial date and discuss the possibility of settlement.
Shipper has duty to mitigate damages
A load of advertising brochures for a post-Christmas sale at Macy's was delivered to Donnelley's distribution center on Dec. 27, 2005, 11 days after they were promised. By then it was too late to mail the brochures to Macy's customers. Donnelley had to credit the $81,650 cost of the brochures to its customer.
It sued Vanguard, seeking that amount in damages, plus its attorney's fees, which it contended were due under the indemnification clause in the parties' contract. (R.R. Donnelley & Sons Co. v. Vanguard Transportation Systems, No. 06 C 5837, N.D. Illinois, Eastern Division, Aug. 10.)
Vanguard said Donnelley caused the problem by refusing to let its driver deliver the brochures on Dec. 16, even though he arrived at the distribution center before 2 p.m. as required. Donnelley said he was at least two hours late when outbound trucks were being loaded.
In a case in which the court said 'the parties disagree over virtually every factual and legal issue,' the judge focused on the so-called 'duty to mitigate damages.'
'While acknowledging that the victim of a breach of contract must mitigate damages, Donnelley argues that it did not do so ' although it concedes that it would have been easy and cheap for it to have done so ' because it justifiably relied on Vanguard's repeated assurances that it would make delivery.'
The court found 'all that stood between Donnelley and the fulfillment of its obligations to Continental Web Press and the complete mitigation of its certain damages of $81,000 was about an hour of either its time or that of a local cartage company and a few hundred dollars. Donnelley chose to do nothing, as it had the right to do. But in law as in life, choices have consequences. The consequence here is that the avoidable loss of more than $80,000 cannot be taxed to Vanguard.'
It found Donnelley was not entitled to damages or to attorney's fees. Vanguard did breach the contract, and consequently Donnelley would be entitled to nominal damages, had they been sought, but they were not in this case.