COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term 2000
(Argued: December 5, 2000 Decided:
May 04, 2001 )
Docket Nos. 00-7498(L);
M/V IBN SINA, her engines, boilers,
NEPTUNE ORIENT LINES, LTD.,
UNITED ARAB AGENCIES, INC., and
UNITED ARAB SHIPPING COMPANY,
BLUE OCEAN LINES,
MILL TRANSPORTATION COMPANY,
B e f o r e : WALKER, Chief Judge,
CABRANES and STRAUB, Circuit Judges.
Mill Transportation Company appeals following a bench trial in
the United States District Court for the Southern District of
New York (William H. Pauley III, Judge) in which it and
defendant-appellee/third-party plaintiff Blue Ocean Lines were
held jointly and severally liable to plaintiff-appellee/cross-appellant
Project Hope for spoiled cargo. Project Hope cross-appeals contending
that the district court erred both in its calculation of damages
and in its dismissal of the claims against defendants-appellees
United Arab Agencies, Inc. and United Arab Shipping Company.
Affirmed in part, vacated in part
and remanded for recalculation of damages.
PATRICK J. CORBETT, Esq., Bigham,
Englar, Jones &Houston, New York, NY,
DAVID Y. LOH, Esq., Nicoletti Hornig
Campise & Sweeney, New York, NY, for Plaintiff-Appellee/Cross-Appellant
ROBERT A. MILANA, Esq., LondonFischer
LLP, New York, NY, forDefendants-Appellees UnitedArab Agencies,
Inc. and UnitedArab Shipping Company.
JOHN M. WALKER, JR., Chief Judge:
Mill Transportation Company ("Mill") appeals from a
verdict, following a bench trial, of the United States District
Court for the Southern District of New York (William H. Pauley
III, Judge) finding Mill and defendant-appellee/third-party
plaintiff Blue Ocean Lines ("Blue Ocean") jointly and
severally liable to plaintiff-appellee/cross- appellant Project
Hope for 95,474 vials of spoiled humulin, a type of insulin.
See Project Hope v. M/V IBN SINA, 96 F. Supp. 2d
285, 298 (S.D.N.Y. 2000).
Project Hope initially contracted
with Blue Ocean for transport of the humulin from Winchester,
Virginia to Cairo, Egypt via the port of Norfolk, Virginia. Blue
Ocean, in turn, subcontracted with Mill for the overland portion
of the transport in Virginia and with United Arab for the oceangoing
leg of the transport. When Mill transported the humulin at the
wrong temperature, it spoiled.
On appeal, Mill challenges on two
grounds that part of the district court's judgment making the
damage award joint and several. First, Mill argues that in imposing
joint and several liability the district court improperly resorted
to federal admiralty law, which permits joint and several awards
in the normal course in cases involving multiple tortfeasors.
Second, Mill argues that, in any event, Project Hope failed to
assert direct claims against Mill and cannot look to it for recovery.
Project Hope cross-appeals, contending
that the district court erred (1) in relying on the replacement
cost for the spoiled humulin to measure damages, (2) in calculating
the actual damage award, and (3) in dismissing its claims against
defendant-appellee United Arab Shipping Co. and its United States
agent, defendant-appellee United Arab Shipping Agencies, Inc.
(collectively, "United Arab").
We hold that the district court
did not err in allowing joint and several recovery against Mill
or in holding Mill liable to Project Hope despite Project Hope's
failure to assert claims against Mill directly. With respect
to Project Hope's cross-appeal, we hold both that the district
court did not err in relying on the humulin's replacement cost
to measure Project Hope's damages and that the district court
properly dismissed Project Hope's claims against United Arab.
However, because we find that the district court improperly calculated
Project Hope's actual loss, we vacate the damage award and remand
the case to the district court for recalculation.
The judgment of the district court
is thus affirmed in part, vacated in part and remanded for recalculation
Familiarity with the detailed factual
account in the district court's opinion is assumed. See
Project Hope, 96 F. Supp. 2d at 287-91. We recite only
those facts relevant to the disposition of this appeal. No challenge
has been made to the district court's factual findings, which
we take to be true.
On October 11, 1996, Eli Lilly and
Company ("Eli Lilly") donated to Project Hope 95,474
vials of humulin--a chemically synthesized form of insulin manufactured
exclusively by Eli Lilly and taken "by more than 4 million
people with diabetes around the world every day," see
visited April 6, 2001). Humulin must be stored within five degrees
of 42OF at all times; otherwise, it will spoil.
Project Hope is a private, non-profit
organization that makes charitable donations of medicine and
pharmacy supplies both in the United States and abroad. In early
October 1996, Project Hope contracted with Blue Ocean--a non-
vessel owning common carrier--for it to arrange the transport
of the donated humulin from Project Hope's warehouse in Winchester,
Virginia to Cairo, Egypt. Blue Ocean, in turn, contracted separately
with United Arab for the ocean carriage and Mill for the overland
motor carriage. The arrangements called for United Arab to provide
a refrigerated container ("reefer") to be used throughout
the transport from Winchester to Cairo; United Arab was also
to transport the humulin on board its vessel from the Virginia
International Terminal in Norfolk, Virginia ("the Norfolk
Terminal") to Cairo. Mill's responsibilities included picking
up the empty reefer from United Arab at Norfolk Terminal, transporting
the reefer to Project Hope's Winchester warehouse, waiting there
while Project Hope's staff loaded the humulin into the reefer,
and transporting the humulin- filled reefer back to the Norfolk
Terminal for loading aboard United Arab's vessel.
On October 13, 1996, Blue Ocean
prepared and faxed to Mill a dock receipt that stated in relevant
part: "Temperature must be 42OF plus or minus 5OF **** Do
not freeze **** Vents must be closed." According to the
facts stipulated by the parties and accepted by the district
court, neither Blue Ocean nor Mill provided a copy of the dock
receipt to United Arab. On October 15, 1996, a Blue Ocean employee
negligently misinformed a member of United Arab's staff that
the reefer's temperature should be set at 24OF--eight degrees
below freezing--rather than the proper 42OF temperature. As a
result, United Arab set the reefer's temperature at 24OF.
Later that same day a truck driver
for Mill picked up United Arab's reefer at the Norfolk Terminal
and, the next morning, transported it to Project Hope's Winchester
warehouse. Project Hope's personnel loaded the humulin into the
reefer, but neither Mill's driver nor anyone on Project Hope's
staff verified that the reefer's temperature was set properly.
After the humulin was loaded, Mill issued a straight bill of
lading to Project Hope for the inland transportation between
Winchester and Norfolk.
Mill's driver returned to the Norfolk
Terminal with the humulin on October 17, 1996, whereupon terminal
personnel inspected the reefer and then issued Mill's driver
a receipt that documented the container's temperature at -2OC
(between 26OF and 28OF). At some point during the weekend of
October 20, 1996, as United Arab was preparing to load the reefer
onto its vessel, an United Arab employee discovered the error.
As a consequence, the reefer was not loaded onto United Arab's
vessel, and United Arab informed Blue Ocean, which in turn informed
Project Hope, of the situation. No one disputes that "placing
the [humulin] in a sub-freezing environment" rendered it
"unfit for use and thus a total loss." Project Hope,
96 F. Supp. 2d at 291.
On December 20, 1996, Project Hope's
insurance underwriter, Kemper Insurance Co. ("Kemper"),
paid Project Hope for the spoiled humulin and for other incidental
damages. On or about January 17, 1997, Project Hope used the
insurance proceeds to purchase a replacement shipment from Eli
Lilly. However, due to a January 1, 1997 increase in the price
of humulin from $3.60 to $4.00 per vial, Project Hope was only
able to secure with the insurance proceeds a replacement shipment
of 85,927 vials of humulin, as compared to the 95,474 donated
vials that had spoiled.1
On May 27, 1997, Project Hope sued,
inter alia, defendants Neptune Orient Lines, Ltd.,2 United
Arab, and Blue Ocean, alleging that they had breached their duties
and obligations as common carriers. Thereafter, defendant Blue
Ocean filed a third-party complaint against Mill. Mill answered
both Blue Ocean's complaint and Project Hope's original complaint.
On March 21, 2000, following a bench
trial, the district court found Mill and Blue Ocean jointly and
severally liable in the amount of $358,928.26, of which $343,708
was Project Hope's recovery for the humulin. See id.
at 297-98. The district court also found that United Arab was
not responsible for the incorrect temperature setting and therefore
dismissed the claims against United Arab. See id.
Mill's appeal and Project Hope's
The thrust of Mill's appeal is directed
toward avoiding liability, joint and several or otherwise, for
the loss Project Hope suffered. It asserts two arguments in this
effort. Despite its less-than-pellucid briefing on the issue,
we understand Mill's first argument to be that the district court
erroneously resorted to federal admiralty law principles in deciding
to impose joint and several liability on Mill. See Project
Hope, 96 F. Supp. 2d at 292 n.6. Mill's second argument is
that after it was impleaded by Blue Ocean under Federal Rule
of Civil Procedure 14(a), Project Hope failed to amend its original
complaint to assert direct claims against Mill, and, thus cannot
look to Mill for recovery.
As noted, Mill's argument seems
to be that the district court, in imposing joint and several
liability, erroneously resorted to the federal common law of
admiralty, under which such awards are a standard remedy in cases
involving multiple tortfeasors. See McDermott, Inc.
v. AmClyde, 511 U.S. 202, 220-21 (1994) (noting that in admiralty
"[j]oint and several liability applies when there has been
a judgment against multiple defendants"); The Atlas,
93 U.S. 302, 317-19 (1876) (adopting joint and several liability
rule in admiralty); Coats v. Penrod Drilling Corp., 61
F.3d 1113, 1124-30 (5th Cir. 1995) (en banc) (stating
that "joint and several liability is the maritime rule"
and noting that "[b]y 1876, the common-law rule of joint
and several liability" was being adopted in admiralty);
Pennsylvania R.R. v. The Beatrice, 275 F.2d 209, 212-13
(2d Cir. 1960); see also 1 Thomas J. Schoenbaum, Admiralty
and Maritime Law § 5-5, at 167 (2d ed. 1994); Celeste
Coco-Ewing, Coats v. Penrod Drilling Corporation:
The Fifth Circuit Adheres to the Doctrine of Joint and Several
Liability in the General Maritime Law, 70 Tul. L. Rev. 785,
788 (1995); Marie R. Yeates et al., Contribution and Indemnity
in Maritime Litigation, 30 S. Tex. L. Rev. 215, 217 (1989);
cf. Drake Towing Co. v. Meisner Marine Constr. Co.,
765 F.2d 1060, 1068 (11th Cir. 1985).
Mill's premise is infirm, however.
Our review of the district court's judgment against Mill--both
the finding of liability and the imposition of joint and several
recovery--reveals that it was not grounded in admiralty.3 See
Project Hope, 96 F. Supp. 2d at 291-98. Rather, Mill's
liability and the joint and several award were determined exclusively
under two federal statutory schemes: the Carriage of Goods by
Sea Act ("COGSA"), 46 U.S.C. §§ 1300 et
seq., and the Carmack Amendment to the Interstate Commerce
Act, 49 U.S.C. § 14706.4
We therefore turn to consider whether the joint and several award
against Mill was proper under these statutes. The prima facie
cases for both COGSA and the Carmack Amendment are identical
for all relevant purposes here.
B. COGSA and the Carmack Amendment
COGSA is not a proper basis for
Mill's joint and several liablity. By its express terms, COGSA
only "covers the period from the time when the goods are
loaded on to [the ship] to the time when they are discharged
from the ship." 46 U.S.C. § 1301(e) (defining "carriage
of goods"); see also id. § 1300 (COGSA
covers "contract[s] for the carriage of goods by sea to
or from ports of the United States, in foreign trade . . . .").
Mill's negligence in failing to ensure that the reefer was set
at the proper temperature occurred exclusively on land, while
the humulin was being transported from Project Hope's Winchester
warehouse to the Norfolk Terminal. Therefore, Mill's negligence
was plainly outside COGSA's reach.5
The Carmack Amendment, however,
does govern Mill's negligence.6 In pertinent part, the Carmack
[A] carrier and any other carrier
that deliver the property and [are] providing transportation
or service subject to jurisdiction under [49 U.S.C. § 13501
are] liable to the person entitled to recover under the . . .
bill of lading. The liability imposed . . . is for the actual
loss or injury to the property caused by (A) the receiving carrier,
(B) the delivering carrier, or (C) another carrier over whose
line or route the property is transported in the United States
. . . .
49 U.S.C. § 14706(a)(1).
The Carmack Amendment's reach is
determined by reference to 49 U.S.C. § 13501, the provision
of the Interstate Commerce Act that now establishes the regulatory
jurisdiction of the U.S. Surface Transportation Board (formerly
the Interstate Commerce Commission) with respect to the "transportation
by motor carrier" of passengers and property. In relevant
part, § 13501 extends the reach of the Carmack Amendment
to motor carrier transportation of property:
(1) between a place in
(A) a State and a place in another
. . .
(E) the United States and a place
foreign country to the extent the
transportation is in the United States; . . . .
Where multiple carriers are responsible
for different legs of a generally continuous shipment, whether
either § 13501(1)(A) or (E) is satisfied to trigger application
of the Carmack Amendment is determined by reference to the intended
final destination of the shipment as that intent existed when
the shipment commenced. See Swift Textiles, Inc. v.
Watkins Motor Lines, Inc., 799 F.2d 697, 699 (11th Cir. 1986)
("The nature of a shipment is not determined by a mechanical
inspection of the bill of lading nor by when and to whom title
passes but rather by the essential character of the commerce,
reflected by the intention formed prior to shipment, pursuant
to which property is carried to a selected destination by a continuous
or unified movement." (internal citations and quotation
marks omitted)); cf. Southern Pac. Transp. Co. v. ICC,
565 F.2d 615, 617 (9th Cir. 1977) (discussing the reach of Interstate
Commerce Commission's jurisdiction). This intent fixes the character
of the shipment for all the legs of the transport within the
United States. See New York, New Haven & Hartford
R.R. v. Nothnagle, 346 U.S. 128, 131 (1953) (citing Sprout
v. South Bend, 277 U.S. 163, 168 (1928)); Greenwald v.
Pan Am. World Airways, Inc., 547 F. Supp. 159, 161-62 (S.D.N.Y.
Thus, if the final intended destination
at the time the shipment begins is another state, the Carmack
Amendment applies throughout the shipment, even as to a carrier
that is only responsible for an intrastate leg of the shipment.
See, e.g., Merchants Fast Motor Lines, Inc. v. ICC,
528 F.2d 1042, 1044 (5th Cir. 1976) (discussing challenge to
ICC ruling and stating "[i]t is elemental that a carrier
is engaged in interstate commerce when transporting goods either
originating in transit from beyond Texas or ultimately bound
for destinations beyond Texas, even though the route of the particular
carrier is wholly within one state"); Martinez v. Phillips
Petroleum Co., 283 F. Supp. 514, 530-31 (D. Idaho 1968);
cf. Texas v. United States, 866 F.2d 1546, 1559-60
(5th Cir. 1989) ("Determining the existence of the requisite
`fixed and persisting' intent to move goods in interstate commerce
turns in significant part on the factual context of each case.");
Burlington N. Inc. v. Weyerhaeuser Co., 719 F.2d 304,
310 (9th Cir. 1983) (noting "intent manifested . . . at
the time of shipment" fixes interstate or intrastate character
of shipment and finding intent was for intrastate shipment).
Similarly, if the final intended destination at the time the
shipment begins is a foreign nation, the Carmack Amendment applies
throughout the entire portion of the shipment taking place within
the United States, including intrastate legs of the shipment.
See Swift Textiles, 799 F.2d at 698-700; cf.
United States v. Erie R.R., 280 U.S. 98, 102 (1929) ("[The
character of a shipment] is not affected by the fact that the
transaction is initiated or completed under a local bill of lading
which is wholly intrastate . . . ."); Texas & New
Orleans R.R. v. Sabine Tram Co., 227 U.S. 111, 126 (1913);
Long Beach Banana Dist., Inc. v. Atchison, Topeka & Santa
Fe Ry., 407 F.2d 1173, 1180-81 (9th Cir. 1969).
Here, Project Hope's intention that
the humulin travel in foreign commerce was fixed before Mill
transported the humulin from Project Hope's Winchester warehouse
to the Norfolk Terminal. As a result § 13501(1)(E) is satisfied,
and the Carmack Amendment governs Mill's liability even though
Mill's role in the humulin's shipment was restricted exclusively
Having concluded that the Carmack
Amendment controls Mill's liability, we must consider whether
the district court's imposition of the joint and several award
was permissible under the Carmack Amendment. To answer this question,
we look to the federal common law of damages, which informs the
propriety of damage remedies under the Carmack Amendment.7 See,
e.g., Hector Martinez & Co. v. Southern Pac. Transp.
Co., 606 F.2d 106, 108 (5th Cir. 1979) ("[The Carmack
Amendment] incorporates common law principles for damages.");
J & H Flyer Inc. v. Pennsylvania R.R., 316 F.2d 203,
205 (2d Cir. 1963); see also Camar Corp. v. Preston
Trucking Co., 221 F.3d 271, 277 (1st Cir. 2000); F.J.
McCarty Co. v. Southern Pac. Co., 428 F.2d 690, 693 (9th
Doing so, we find that the district
court's imposition of joint and several liability in this case
was consistent with the federal common law of damages and, therefore,
permissible under the Carmack Amendment. The district court imposed
joint and several liability only after concluding that--as between
Blue Ocean and Mill--"the record d[id] not permit a fair
allocation of comparative fault." Project Hope, 96
F. Supp. 2d at 298. Where a fair allocation of liability cannot
be made among multiple tortfeasors, the federal common law permits
imposition of joint and several liability. See, e.g.,
Restatement (Second) of Torts § 879 (1979) ("If
the tortious conduct of each of two or more persons is a legal
cause of harm that cannot be apportioned, each is subject to
liability for the entire harm, irrespective of whether their
conduct is concurring or consecutive."); W. Page Keeton,
Prosser and Keeton on Torts § 52, at 347-48 (5th
ed. 1984) ("Single Indivisible Result: Certain results,
by their very nature, are obviously incapable of any reasonable
or practical division and . . . [n]o ingenuity can suggest anything
more than a purely arbitrary apportionment of such harm. Where
two or more causes combine to produce [a single loss], each may
be a substantial factor in bringing about the loss, and if so,
each is charged with all of it."); cf. Gordon
H. Mooney, Ltd. v. Farrell Lines, Inc., 616 F.2d 619, 625-26
(2d Cir. 1980) (holding that, under the Carmack Amendment, comparative
fault is the appropriate method for assigning liability among
joint tortfeasors where fault is assignable).
Because the district court found
that liability could not be fairly apportioned- -a factual conclusion
that is not challenged by Mill in this appeal--and because the
common law of damages allows resort to joint and several liability
in such instances, we hold that the district court's joint and
several award against Mill was proper under the Carmack Amendment.
C. Rule 14(a)
Mill's second line of attack on
the joint and several award centers on the fact that after Blue
Ocean served its third-party complaint against Mill pursuant
to Federal Rule of Civil Procedure 14(a), Project Hope did not
amend its original complaint to directly assert a claim against
Mill. Mill argues that, as a result, it cannot be held liable
to Project Hope. We disagree.
Mill has waived this challenge because
it failed--either out of error or strategy--to raise it properly
before the district court. If Mill had voiced an objection to
the district court before the bench trial, Project Hope easily
could have amended its complaint to assert claims directly against
Mill. See Fed. R. Civ. P. 15(a). Even if Mill had raised
the objection in a post-trial motion--when it was absolutely
clear that Mill was to be held directly accountable to Project
Hope--the district court could have taken steps to ameliorate
any injury to Mill by, among other options, permitting Mill to
amend its complaint to conform to the evidence at trial. See
Fed. R. Civ. P. 15(b).
In any event, we hold that a formal
amendment of a plaintiff's complaint asserting causes of action
against a party impleaded under Rule 14(a) is unnecessary if
the third-party is effectively on notice that it will be held
liable on the plaintiff's claims and the two proceed against
one another in an adverse manner. See, e.g., Wasik
v. Borg, 423 F.2d 44, 46 (2d Cir. 1970); Falls Indus.,
Inc. v. Consolidated Chem. Indus., Inc., 258 F.2d 277, 287
(5th Cir. 1958); cf. generally Fed. R. Civ. P. 1 ("[The
rules] shall be construed and administered to secure the just,
speedy, and inexpensive determination of every action.").
The record is clear that throughout the district court proceedings
Mill and Project Hope conducted themselves as though Project
Hope was proceeding directly against Mill. For example, on its
own initiative, Mill answered Project Hope's complaint and, in
doing so, expressly denied that it breached any duty of care
or contractual obligation owed to Project Hope. Likewise, Mill
filed a pre- trial motion seeking dismissal of Project Hope's
claims, which Project Hope contested.
For all of the foregoing reasons,
the award of joint and several liability against Mill stands.
II. Project Hope's Cross-Appeal
In its cross-appeal, Project Hope
makes three arguments. First, it challenges the district court's
use of the replacement cost, rather than the fair market value,
to measure the value of the destroyed humulin. Second, Project
Hope argues that even if the replacement value is the correct
measure of damages, the district court erred in calculating the
humulin's actual replacement cost. Third, Project Hope argues
that the district court erred in dismissing the claims against
United Arab because, it contends, United Arab had a "non-
delegable duty to provide a vehicle suitable for the intended
We consider each of these contentions
A. Method of Measuring Damages
We review the district court's choice
of a measure of damages for an abuse of discretion. Cf.
Thyssen, Inc. v. S/S EUROUNITY, 21 F.3d 533, 540 (2d Cir.
1994) (analyzing damages under COGSA). Having done so, we conclude
that the district court did not exceed its discretion in relying
on the replacement cost to calculate Project Hope's damages for
the spoiled humulin.
Contrary to Project Hope's argument
on appeal, the fair market value is not the exclusive measure
of damages under the Carmack Amendment. See id.;
Oak Hill Cap & Gown Co. v. Old Dominion Freight Line,
Inc., 899 F.2d 291, 296 (4th Cir. 1990). While it is true
that damages under the Carmack Amendment should generally be
based on the fair market value, see Contempo Metal
Furniture Co. v. East Tex. Motor Freight Lines Inc., 661
F.2d 761, 764 (9th Cir. 1981), we have held that it need not
be applied if "circumstances suggest a more appropriate
alternative." Thyssen, 21 F.3d at 540 (internal citation
Here, no open market existed to
provide a fair market value of humulin, thus warranting reliance
on the replacement cost. While Project Hope attempted to "construct"
various market values from, among other considerations, the value
Eli Lilly established in its "`gift in kind' inventory report"
when it donated the original shipment of humulin, see
Project Hope, 96 F. Supp. 2d at 291, the district court
acted within its discretion in rejecting these constructed values
because it reasonably believed they provided less reliable measures
of Project Hope's loss. See id. at 297 (reasoning
that a "greater award of damages [above the actual replacement
cost] based on an artificial estimation of market value would
only result in a windfall to Project Hope").
B. Calculation of Damages
Project Hope next argues that even
if the replacement cost for the humulin is appropriate for measuring
damages, the district court's actual calculation was too low.
Project Hope bases this argument on the fact that the portion
of the district court's damage award going to the replacement
of the humulin-- $343,7088--covers the replacement of only
85,297 vials of humulin, which is 9,547 vials fewer than was
actually lost due to the negligence of Mill and Blue Ocean. Compare
Project Hope, 96 F. Supp. 2d at 297 ("Thus, Project
Hope is entitled to recover $343,708 against Blue Ocean and Mill
for the cost of securing the replacement shipment of humulin."),
with id. at 291 ("With the insurance proceeds
from Kemper, Project Hope secured a replacement shipment of 85,927
vials of humulin--somewhat less than the 95,474 vials contained
in the original shipment--at a price of $343,708.").
A plaintiff suing under the Carmack
Amendment is entitled to the "actual loss or injury to the
property caused by . . . the carrier." 49 U.S.C. §
14706; see, e.g., Cleveland v. Beltman N. Am. Co.,
30 F.3d 373, 377 (2d Cir. 1994); Oak Hall Cap & Gown Co.,
899 F.2d at 296; see also Fredette v. Allied Van Lines,
Inc., 66 F.3d 369, 372 (1st Cir. 1995). The $343,708 that
was intended to cover the replacement cost of the humulin plainly
did not compensate Project Hope fully for its "actual loss"
since Project Hope was unable to replace all of the spoiled vials.
Mill nonetheless argues that the
deficiency Project Hope suffered was one of its own making and
that, as a result, Mill should not be made to cover the deficiency.
Specifically, Mill argues that if Project Hope had purchased
replacement humulin on December 20, 1996, the day it received
the insurance proceeds from its insurer, Kemper, the $343,708
would have fully replaced the humulin that spoiled. Mill contends
that, instead, Project Hope delayed ordering the replacement
humulin until January 17, 1997, by which time Eli Lilly had increased
the price per vial from $3.60 to $4.00, which precluded the $343,708
from fully replacing the original shipment of humulin.
Under the Carmack Amendment, Mill
has the burden to prove that the plaintiff did not exercise reasonable
diligence in mitigating its damages. See Frosty Land
Foods Int'l v. Refrigerated Transport, 613 F.2d 1344, 1349
(5th Cir. 1980). We believe that Mill has failed to carry that
burden. Eli Lilly's price increase occurred on January 1, 1997.
Therefore, to accept Mill's argument, we would have to conclude
that Project Hope acted unreasonably in delaying its replacement
of the humulin for eleven days--that is, from its receipt of
the insurance proceeds on December 20, 1996 until Eli Lilly's
January 1, 1997 price increase. This we cannot do; under the
circumstances, Project Hope did not act unreasonably.
C. Claims Against United Arab
Finally, Project Hope contends that
the district court erred in dismissing the claims against United
Arab because, according to Project Hope, United Arab owed it
a "non-delegable duty to provide a [reefer] suitable for
the intended transportation." We are unpersuaded by this
Even if United Arab owed a non-delegable
duty to Project Hope to provide a suitable reefer, the dismissal
of the claims against United Arab would remain appropriate. The
fact remains that neither United Arab nor anyone to whom it delegated
its duty of care to ensure the reefer's suitability acted negligently
to proximately cause the humulin's spoilation.9 See Project Hope,
96 F. Supp. 2d at 293 ("[T]he Court finds that . . . the
loss of the humulin was caused by something other than [United
Arab's] own negligence."); id. at 294 ("In sum,
United Arab was not negligent. Among the defendants, fault for
the incorrect temperature setting lies with Mill and Blue Ocean.").
For the foregoing reasons, we affirm
the district court's imposition of joint and several liability
against Mill, but in response to the cross-appeal we vacate the
damage award and remand the case for recalculation of damages
based on the January 17, 1997 replacement cost for the 95,474
vials of humulin that were lost.
We also affirm the district court's
dismissal of the claims against United Arab.
Mill shall bear the costs of this
If Project Hope had purchased
the replacement shipment of humulin before the January 1, 1997
price increase from $3.60 per vial, the total replacement cost
for the 95,474 vials of spoiled humulin would have been $343,706.40,
and thus the district court's $343,708 award would have completely
covered the cost of replacement. However, after the price increase
to $4.00 per vial on January 1, 1997, the total replacement cost
for the 95,474 vials of spoiled humulin increased to $381,896.
See Project Hope, 96 F. Supp. 2d at 291, 297.
The claims against Neptune
Orient Ocean Lines were not pursued in the district court and
are not at issue on this appeal. See Project Hope,
96 F. Supp. 2d at 287 n.3.
We note that to the extent
the district court's opinion can be read to imply that Mill's
liability to Blue Ocean arises from admiralty common law, see
Project Hope, 96 F. Supp. 2d at 292 n.6, it is mistaken.
Admiralty jurisdiction reaches contracts that are exclusively
maritime, as well as certain "mixed" contracts, which
are contracts that involve both maritime and non- maritime obligations.
See Hartford Fire Ins. Co. v. Orient Overseas Containers
Lines (UK) Ltd., 230 F.3d 549, 555 (2d Cir. 2000). Because
Blue Ocean's contract with Mill for motor carriage of the humulin
from Westminster, VA to Norfolk, VA was exclusively nonmaritime,
admiralty jurisdiction would not reach disputes arising under
Effective January 1, 1996,
the Carmack Amendment was recodified at 49 U.S.C. § 14706
from 49 U.S.C. § 11707 (1995), by the ICC Termination Act
of 1995, Pub. L. No. 104-88, 109 Stat. 803 (1995), which reorganized
the Interstate Commerce Act by eliminating some provisions and
relocating the remaining provisions to other places in Title
49. This recodification worked no substantive change on the Carmack
The parties could have "extend[ed]
COGSA so that it applie[d] prior to loading . . . , see
46 U.S.C. § 1307, but the extent of any application beyond
the scope of the statute is a matter of contract," Hartford
Fire Ins. Co., 230 F.3d at 557 (footnote omitted). There
is no indication that such a contractual extension was undertaken
with respect to Mill's liability to Project Hope. Cf.
Project Hope, 96 F. Supp. 2d at 292 n.4 (noting that defendants
Blue Ocean and United Arab contend that COGSA had been contractually
extended to govern their liability to Project Hope before loading).
Surprisingly, none of the
parties referenced the Carmack Amendment in their briefs, and
its applicability was only first addressed in response to an
inquiry by the court during oral argument--despite the fact that
the district court plainly relied on either COGSA or the Carmack
Amendment to assess liability, see Project Hope,
96 F. Supp. 2d at 291-94. Thus, we think a brief excursion into
the background of the Amendment is in order.
The Carmack Amendment was enacted
in 1906 as an amendment to the Interstate Commerce Act of 1887.
See Ward v. Allied Van Lines, Inc., 231 F.3d 135,
138 (4th Cir. 2000) (citing Act of June 29, 1906, ch. 3591, 34
Stat. 584). In enacting it, Congress intended to provide interstate
carriers with reasonable certainty and uniformity in assessing
their risks and predicting their potential liability. See
Morris v. Covan World Wide Moving, Inc., 144 F.3d 377,
381 (5th Cir. 1998); Shao v. Link Cargo (Taiwan) Ltd.,
986 F.2d 700, 704 (4th Cir. 1993). The Carmack Amendment did
this both by establishing a single uniform regime for recovery
by shippers "directly from [the] interstate common carrier
in whose care their [items] are damaged," Windows, Inc.
v. Jordan Panel Sys. Corp., 177 F.3d 114, 117-18 (2d Cir.
1999), and by "preempt[ing] [the] shipper's state and common
law claims against a carrier for loss or damage to goods during
shipment," Ward, 231 F.3d at 138; see, e.g.,
Adams Express Co. v. Croninger, 226 U.S. 491, 505 (1913).
See generally Jeanne Kaiser, Moving Violations: An
Examination of the Broad Preemptive Effect of the Carmack Amendment,
20 W. New Eng. L. Rev. 289, 294-301 (1998).
"To make a prima facie case
under the Carmack Amendment, a plaintiff must show 1) delivery
to the carrier in good condition; 2) arrival in damaged condition;
and 3) the amount of damages caused by the loss." See,
e.g., Camar Corp. v. Preston Trucking Co., 221 F.3d
271, 274 (1st Cir. 2000) (citing Missouri Pac. R.R. Co. v.
Elmore & Stahl, 377 U.S. 134, 137-38 (1964)). Once the
prima facie case is established, "[l]iability attaches unless
the carrier can establish one of several affirmative defenses;
for example, by showing that the damage was the fault of the
shipper or caused by an Act of God." Windows, 177
F.3d at 118; see, e.g., Allied Tube & Conduit Corp.
v. Southern Pac. Transp. Co., 211 F.3d 367, 369 n.2 (7th
Cir. 2000) ("The excepted causes are: acts of God, the public
enemy, the act of the shipper himself, public authority, or the
inherent vice or nature of the goods." (citing Missouri
Pac. R.R., 377 U.S. at 137)).
While the Carmack Amendment
governs the liability of carriers to the original shipper of
the goods (here, the liability of Blue Ocean and Mill to Project
Hope), the situation is different regarding the liability of
the two carriers inter sese (here, the liability
of Mill and Blue Ocean to one another). "[O]rdinary rules
of [the applicable state's] negligence [law] govern . . . action[s]
to determine which of two carriers is liable [to the other]."
American Foreign Ins. Ass'n v. Seatrain Lines of P.R., Inc.,
689 F.2d 295, 299 (1st Cir. 1982).
Project Hope's total damage
award was $358,928.26. The difference between this figure and
the district court's $343,708 estimated replacement cost for
the humulin represented Project Hope's recovery for various "incidental
damages." Project Hope, 96 F. Supp. 2d at 297 ("Project
Hope's award of incidental damages totals $15,220.26.").
The record indicates that
Gibson Engineering, Inc., the "reefer mechanics used by
United Arab at the Norfolk [T]erminal," actually set the
reefer's temperature at the incorrect 24OF. Project Hope,
96 F. Supp. 2d at 288. However, no contention is made that Gibson
acted negligently. As noted above, United Arab (or, more precisely,
Gibson) acted upon the instructions negligently conveyed to United
Arab by Blue Ocean.