UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

NEPTUNE ORIENT LINES, LTD.,
Plaintiff-Appellee,                                   No. 98-17387

v.                                                    D.C. No.
                                                     CV 97-04204-FMS
BURLINGTON NORTHERN AND SANTA
FE RAILWAY COMPANY,                                   OPINION
Defendant-Appellant.

Appeal from the United States District Court
for the Northern District of California
Fern M. Smith, District Judge, Presiding

Argued and Submitted
April 12, 2000--San Francisco, California

Filed May 24, 2000

Before: Alfred T. Goodwin, Melvin Brunetti, and
Sidney R. Thomas, Circuit Judges.

Opinion by Judge Goodwin

_________________________________________________________________
 

COUNSEL

Gordon D. McAuley, Hanson, Bridgett, Marcus, Vlahos &
Rudy, San Francisco, California, for the defendant-appellant.

Eric Danoff, Kaye, Rose & Partners, San Francisco, Califor-
nia, for the plaintiff-appellee.

_________________________________________________________________

OPINION

GOODWIN, Circuit Judge:

Neptune Orient Lines, Ltd. ("Neptune") brought a claim
against The Burlington Northern and Santa Fe Railway Com-

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pany ("Burlington") seeking indemnity and damages. Nep-
tune sought to recover $182,892.08 which it paid to its
subrogor, Nike, Inc. ("Nike") for the loss of a container load
of shoes. Neptune moved for summary judgment claiming an
amount equal to the market value of the shoes at the destina-
tion. Burlington opposed the motion arguing that Nike, and
therefore Neptune, was entitled only to replacement cost. The
district court granted the motion for summary judgment in
favor of Neptune. This appeal followed. We have jurisdiction
pursuant to 28 U.S.C. S1291.

Pursuant to a single through bill of lading, Neptune was to
deliver shoes from a manufacturing facility in Jakarta, Indo-
nesia, to Nike's distribution center in Memphis, Tennessee.
Neptune subcontracted for Burlington to carry the shipment
from Los Angeles, California, to Memphis by rail. While in
transit, the shipment was lost or stolen and has not been
recovered.

Nike did not declare the value of the cargo on the bill of
lading. Nor did Nike notify Burlington that it would lose sales
or profits if the shoes were not delivered. Neither Nike nor
Neptune declared a value to Burlington nor paid higher
freight rates as a result of the value of the cargo.

In 1996, at the time of the loss, Nike routinely pre-sold
90% of the shoes ordered from the manufacturer by receiving
orders from retailers. The remaining 10% of the shoes were
usually sold soon after being imported. Because Nike changes
the models of its shoes so frequently, no replacement shoes
could be manufactured to replace lost shipments.

Nike claimed $182,892.08 -- the wholesale price of the
shoes (based on the pre-sales) less costs saved. Neptune paid
Nike for its loss in this amount and then sought reimburse-
ment from Burlington. Burlington refused to pay that amount
arguing Nike is entitled only to the amount Nike paid the
manufacturer, or $94,567.13. Despite the fact that Nike could

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not actually replace the shoes, Burlington refers to this
amount as the replacement cost.

This court reviews a grant of summary judgment de novo
applying the same standards utilized by the district court. Fac-
tual determinations are reviewed for clear error. We also
review de novo the district court's selection of a legal stan-
dard in computing damages. See Evanow v. M/V Neptune, 163
F.3d 1108, 1113-14 (9th Cir. 1998).

[1] The district court explained the well-settled governing
principles applicable to this case. We publish to clarify these
deeply-rooted principles in the context of the contemporary
law governing interstate and international commerce. The so-
called Carmack Amendment, 49 U.S.C. S 11706, determines
carrier liability for "transportation in the United States
between a place in . . . the United States and a place in a for-
eign country." 49 U.S.C. S 10501(2)(F). In the past we have
held that an earlier incarnation of this provision applies to
separate inland bills of lading for shipments to or from over-
seas ports. See F.J. McCarty Co. v. Southern Pac. Co., 428
F.2d 690, 692 (9th Cir. 1970). The language of the statute also
encompasses the inland leg of an overseas shipment con-
ducted under a single "through" bill of lading, such as the bill
we have before us, to the extent that the shipment runs beyond
the dominion of the Carriage of Goods by Sea Act. Cf. 46
U.S.C. SS 1300 & 1301(e), 1303(2) (covering carrier liability
from the time when the goods are loaded onto the ship until
the time when they are discharged).

[2] Under the Carmack Amendment, damages are to be
measured by "the actual loss or injury to the property." 49
U.S.C. S 11706(a). We have held this to mean "the difference
between the market value of the property in the condition in
which it should have arrived at its destination and its market
value in the [damaged] condition in which it did arrive." Con-
tempo Metal Furniture Co. of Calif. v. East Texas Motor
Freight Lines, 661 F.2d 761, 764 (9th Cir. 1981). Therefore,

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when the property does not arrive at all, we are left to deter-
mine its market value at the destination had it arrived safely.

Burlington claims that Nike's actual loss is only the price
it paid to the manufacturer. Burlington argues that any amount
in excess of the price paid to the manufacturer violates the
rule established by Hadley v. Baxendale, 9 Exch. 341, 156
Eng. Rep. 145, 5 Eng. Rul. Cas. 502 (1854), which states that
special or consequential damages are not recoverable unless
the party was on notice of those special damages at the time
of contracting. Burlington cites a long line of cases holding
that "lost profits" are not recoverable as special damages.
However, as the district court correctly pointed out, each of
those cases essentially involves "lost productivity." November
18, 1998, Order Granting Plaintiff's Motion For Summary
Judgement; And Vacating Hearing, at 5 (emphasis in origi-
nal). Hadley v. Baxendale and the lost productivity cases cited
by Burlington do not address the question before this court.

[3] The question presented to us is whether the amount
characterized as "lost markup" by Burlington is correctly
viewed as part of the "actual loss." We hold that it is. "Market
value at destination" is the proper measure of the actual loss
in a situation where, as here, the shipment is lost or destroyed.
See The Ansaldo San Giorgio I v. Rheinstrom Bros. Co., 294
U.S. 494, 495-96 (1935) (affirming "damages [computed] on
the basis of the market value of the goods at destination on the
date of arrival."); Otis McAllister & Co. v. Skibs, 260 F.2d
181, 183 (9th Cir. 1958) (under COGSA and common law
"basis of recovery for the usual carriage of goods [is] the
value at the point of destination."); Polaroid Corp. v.
Schuster's Express, Inc., 484 F.2d 349, 351 (1st Cir. 1973);
see also Seguros Banvenez, S.A. v. S/S Oliver Drescher, 761
F.2d 855, 861 (2d Cir.1985) (measure of damages under
COGSA is typically the "market value of the goods at the
time and place they were to have been delivered"); Armada
Supply, Inc. v. S/T Agios Nikolas, 613 F. Supp. 1459, 1469
(S.D.N.Y. 1985); cf. New York Marine & Gen. Ins. Co. v. S/S

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"Ming Prosperity," 920 F. Supp. 416, 423 n.10 (S.D.N.Y.
1996) (finding injured party not entitled to "lost profits"
where the bill of lading required carrier liability to be "ad-
justed and settled on the basis of the net invoice value").

[4] Replacement cost is an appropriate measure of damages
where the injured party could mitigate the loss by replacing
the goods. Where the cargo owner is unable to replace the
goods, "mere replacement costs deprive a manufacturer of
expected profit . . . and do not compensate him for what he
`would have had if the contract [of delivery ] had been per-
formed . . . .' " Polaroid, 484 F.2d at 351 (alteration in origi-
nal). Here, Nike was unable to replace the damaged property
and therefore is entitled to the entirety of its actual loss which
the district court correctly determined to be the market price
at the destination.

[5] Burlington finally argues that the replacement cost is
the market value at the destination because the destination
was a Nike distribution center. However, the wholesale price
of pre-sold goods can serve as the proper measure of damages
even when the shipment is destined for a warehouse or distri-
bution center. See Eastman Kodak Co. v. Westway Motor
Freight, Inc., 949 F.2d 317, 318-320 (10th Cir. 1991); Polar-
oid Corp. v. Schuster's Express, Inc., 484 F.2d 349, 350 (1st
Cir. 1973); Goldenberg v. World Wide Shippers & Movers of
Chicago, 236 F.2d 198, 200, 202 (7th Cir. 1956).

AFFIRMED.

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