Damaged cargo dispute remanded to lower court

A lower court is going to have to decide after further investigation how much of the $918,000 claim Lloyd’s of London paid in connection with damaged cargo it may be able to recover, says an appeals court, in overturning a lower court ruling and remanding a case back to the lower court.

The 11th U.S. Circuit Court of Appeals in Atlanta said the Montreal Convention, a multinational treaty that provides uniform rules for liability in international air carriage, does not apply in the case, according to Friday’s ruling in Underwriters at Lloyd's subscribing to cover note B0753PC1308275000 vs. Expeditors Korea Ltd., Forward Air Inc. But how to calculate damages based on the alternative is unclear at this point, according to the ruling.

At issue in the case is a machine purchased by Hillsboro, Oregon-based TriQuint Semiconductor Inc., a manufacturer of components used in electronics, for coating silicon wafers from Mesa, Arizona-based Cybortrack Solutions Inc., which has a facility in South Korea.

The machine consisted of various process stations where the wafers were prepared and a robotic arm that moved the wafers among these process stations. Cybortrack hired Seoul, South Korea-based Expeditors to transport the machine to TriQuint in 10 shipping crates from Incheon, South Korea, to Orlando, Florida.

Instead of flying the crates directly from Incheon to Orlando, it flew them to Miami and arranged for a multi-step journey by land to Orlando, according to the ruling.

The machine was damaged between Miami and Orlando. TriQuint filed a claim with Lloyd’s, which paid $918,000 in compensation for the damage.

Lloyd’s then filed suit in U.S. District Court in Miami seeking $920,000 in damages, which was the full cost of replacing the damaged unit along with other costs, less credit for the sale of the damaged unit.

The U.S. District Court ruled the Montreal Convention applied and entered judgment in Lloyd’s favor for $195,882 plus interest.

A three-judge appeals court panel held the Montreal Convention does not apply in this case because the cargo was damaged during transport by land rather than by air.

This means the waybill, which is the contract between the transporters and the company that shipped the cargo, applies, said the ruling.  However, “the waybill is ambiguous about the weight that should be used to calculate liability,” said the ruling.

“Given the ambiguity in the waybill, under federal common law, extrinsic evidence such as industry custom or usage, may be examined to help shed light on its meaning,” said the ruling.

“We conclude that it would be inappropriate for us to exercise such discretion here because of the need for the taking of evidence and fact finding,” said the ruling. The ruling was unanimous, with a concurring opinion.

Last year, a U.S. District Court refused to dismiss litigation filed by Lloyd’s of London underwriters against a trucking firm seeking compensation for a $275,000 claim Lloyd’s paid for damaged cargo.