Can Lost Profits be Included in Carmack Amendment Claim?

Kevin Anderson Cargo Liability, Transportation

In nearly every Carmack Amendment claim, one of the chief issues of disputes is the amount of damages for lost or damaged cargo. Seldom do parties argue over whether cargo is actually damaged or lost, because those issues are essentially self evident. But how much a company should pay for lost or damaged cargo continues to be the basis for most legal fights in a Carmack Amendment claim.

At the outset, an important thing to remember is that shippers and carriers can control this problem at the beginning of a business relationship. A motor carrier can limit liability by offering and executing a legally sufficient contract that puts a cap on how much and what a shipper can recover should their goods be lost or damaged. But all too often that does not happen, either because the companies do not think about it, or because whatever agreement they made did not meet the very specific requirements to limit liability in the contract regulated by the Carmack Amendment.

Of course, at Anderson and Yamada, P.C., we can set your company up with such contracts. To help you in this endeavour, simply contact us. But in case your situation requires post-contract litigation work, we can help there too. One question for litigation of a Carmack Amendment claim is: what is a shipper entitled to when goods are lost or damaged by a motor carrier? Can the shipper recover lost profits?

9th Circuit Decides Lost Profits Case

This question was presented to the 9th Circuit Court of Appeals in 2000. In that case, Neptune Orient Lines, LTD., v. Burlington N. & Santa Fe, 213 F.3d 1118 (9th Cir. 2000), the court was tasked with establishing how much a popular shoe company should recover for a lost shipment of shoes. At the time of the loss, the motor carrier reimbursed the shoe company for the full value of what the shoes would have sold for had they reached market. But when the motor carrier sought reimbursement from the carrier they subcontracted part of shipping to, the carrier balked.

The subcontractor refused to pay the market value for what the shoes would have sold for, and instead paid the manufacturing cost, which constituted a difference of nearly $100,000. Because of the impasse, the companies took their case to court, and it ended up in the 9th Circuit’s hands.

Perhaps this should not have been a difficult issue for the court to decide. At least since 1917 the Supreme Court has held that the amount due for lost or damaged goods in a Carmack Amendment claim is the market value had the goods arrived in good condition. And the circuit court of appeals have followed that rule of law. But in this case the subcontractor argued that full market value was too speculative, and therefore should not be paid.

In this case, the 9th Circuit held that the subcontractor would be held liable for the lost profits the company would have made had the goods been delivered as agreed. Now it is more than clear that when a motor carrier loses or damages cargo, lost profits are very much available to claim under the Carmack Amendment.