UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 04-2383
ALSTOM POWER, INCORPORATED, a Delaware
corporation,
Plaintiff - Appellee,
versus
NORFOLK SOUTHERN RAILWAY COMPANY, an entity
operating in Maryland,
Defendant - Appellant.
Appeal from the United States District Court for the District of
Maryland, at Baltimore. Benson Everett Legg, Chief District Judge.
(CA-01-622-1-BEL)
Argued: September 20, 2005 Decided: November 17, 2005
Before WIDENER and TRAXLER, Circuit Judges, and R. Bryan HARWELL,
United States District Judge for the District of South Carolina,
sitting by designation.
Affirmed by unpublished per curiam opinion.
ARGUED: Paul D. Keenan, Jonathan F. Ball, JANSSEN, KEENAN & CIARDI,
P.C., Philadelphia, Pennsylvania, for Appellant. Karyn Alicia
Booth, THOMPSON HINE, L.L.P., Washington, D.C., for Appellee. ON
BRIEF: Scott A. Harvey, THOMPSON HINE, L.L.P., Washington, D.C.,
for Appellee.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
2
PER CURIAM:
Norfolk Southern Railway Company (“Norfolk Southern”) appeals
various findings of fact and conclusions of law entered by the
district court following a bench trial in an action brought by
Alstom Power, Inc. (“Alstom”) under the Carmack Amendment to the
Interstate Commerce Act. See 49 U.S.C.A. § 11706 (West 1997). For
the reasons that follow, we affirm.
I.
Alstom designs, fabricates and supplies components for heat
recovery steam generators (“HRS generators”) used in electric power
plants. In July 1998, Alstom entered into a five-year contract to
supply HRS generators to Duke/Fluor Daniel, Inc. (“DFD”), the
general contractor for the construction of power plants in Hidalgo,
Texas, and Veazie, Maine. The contract imposed various delivery
deadlines for the HRS generator components to arrive at the DFD
construction sites. The contract included a liquidated damages
provision that was triggered by a missed delivery date. The amount
of liquidated damages due under this provision increased
proportionally with the length of the delay.
Alstom fabricates the components for its HRS generators--steel
modules and steam drums—-at plants in Kings Mountain, North
Carolina, and Chattanooga, Tennessee. The tremendous weight of the
3
components generally requires Alstom to ship them by rail. In the
fall of 1998, Alstom’s Manager of Transportation, Gregory Gowans,
arranged for the shipment of the HRS generator components to DFD’s
construction site at Veazie with Norfolk Southern, the only rail
carrier that serviced Alstom’s North Carolina and Tennessee plants.
In explaining Alstom’s shipping requirements for the DFD contract,
Gowans informed Norfolk Southern that Alstom’s planning was
predicated upon an expected transit time of seven to fourteen days,
and that the final deadline for the delivery of the modules to
Veazie was June 30, 1999, pursuant to Alstom’s contract with DFD.
Gowans also informed upper-level managers from Norfolk Southern
that late delivery would give DFD the right to seek liquidated
damages from Alstom.
In May 1999, Alstom began delivering modules to Norfolk
Southern for shipment. Each module was shipped under a separate
Uniform Bill of Lading requiring Norfolk Southern to transport the
shipments with “reasonable dispatch.” The “reasonable dispatch”
period was not defined. Ultimately, twenty-six out of thirty steel
modules being shipped to Veazie arrived after the June 30 deadline.
Both parties contributed to the delays: Norfolk Southern’s actual
transit time ranged from 29-62 days, and Alstom experienced
manufacturing problems that contributed to the delay of certain
shipments. At some point during the summer of 1999, when it was
4
apparent that Alstom would have difficulty meeting the delivery
deadlines, Gowans secured premium transportation services for some
of the shipments, including special trains to transport only
Alstom’s modules and weekend inspections at transfer points.
In September 1999, Alstom and DFD began negotiating DFD’s
claim for damages as a result of the untimely deliveries.
Initially, DFD sought liquidated damages under the contract of more
than ten million dollars--$5.08 million attributable to the late
deliveries to Veazie and the remainder attributable to late
deliveries to DFD’s Hidalgo, Texas, construction site. Eventually,
however, DFD relented on its demand for liquidated damages and
indicated that it would settle for actual damages caused by the
delayed deliveries, provided that a settlement could be reached
quickly and without haggling.
The parties ultimately reached a settlement based on DFD’s
unilateral calculation of actual damages. Mike Stark, a former DFD
employee who negotiated the settlement terms with Alstom, testified
that on November 15, 1999, DFD presented its calculation of actual
damages to Alstom and explained the general basis for the claim.
However, in light of DFD’s right to pursue liquidated damages under
the contract, DFD “made it quite clear . . . that [DFD] had no
contractual obligation to give [Alstom] . . . information” about
5
how DFD arrived at an actual damages figure or to “prove that this
was right or wrong.” J.A. 1638.
Concluding that DFD’s calculations were accurate and
reasonable under the circumstances—-indeed, they were much less
than the liquidated damages originally sought by DFD--Alstom’s
negotiators accepted DFD’s settlement offer without requiring an
accounting or itemization of the alleged actual damages. The final
settlement figure was $3.6 million, covering damages incurred by
DFD at both the Veazie and Hidalgo sites. The $3.6 million amount
consisted of $1.8 million in cash and $1.8 million in extended
warranties.
On December 22, 1999, the parties confirmed the essential
terms of the settlement agreement in a two-page document (the “Term
Sheet”). The Term Sheet purported to “serve as the basis for a
negotiated settlement agreement between [DFD] and [Alstom] for
Liquidated Damages arising from delayed deliveries for the Maine
Independence Project . . . and for Hidalgo Energy Project.” J.A.
2906. The Term Sheet set forth the amount of the cash payment,
explained Alstom’s extended warranty obligations, and indicated
that the settlement covered all past and present claims relating to
delays at the Veazie and Hidalgo construction sites. The Term
Sheet, however, did not apportion settlement between the Veazie and
Hidalgo sites, and it did not distinguish between damages resulting
6
from Alstom’s own manufacturing delays and those caused by Norfolk
Southern’s transit issues. The Term Sheet also reflected the
parties’ agreement “to reduce these terms to a settlement agreement
for signature as soon as possible after the holidays.” J.A. 2907.
There is no evidence, however, that the parties subsequently
executed a formal settlement agreement. According to John
Stratton, an Alstom employee who participated in the negotiation
process, the parties honored the Term Sheet even though no formal
agreement was prepared or signed after the holidays.
On March 6, 2000, Alstom’s attorney submitted an eleven-page
letter to Norfolk Southern asserting a claim under the Carmack
Amendment for damages caused by the late deliveries to the Veazie
site. Neither this letter nor the subsequent lawsuit sought
indemnification for damages paid by Alstom in connection with the
Hidalgo site. Although the letter incorrectly indicated that,
pursuant to its contract with DFD, Alstom had already paid
$1,695,000 in liquidated damages, it acknowledged that Alstom’s
production problems contributed to the delays and thus demanded
reimbursement from Norfolk Southern in the amount of $930,000—-less
than the full amount. Alstom’s claim also included $203,276 in
premium freight charges that Alstom paid for substitute rail
service incurred “[a]s a direct result of [Norfolk Southern’s]
failure to provide timely service to Veazie.” J.A. 2916. In the
7
claim letter, Alstom offered to disclose to Norfolk Southern
“confidential contract provisions” and other relevant documents
upon the execution of a confidentiality agreement. J.A. 2908.
Norfolk Southern, which was undergoing a merger with another rail
carrier, indicated it would respond to the claim as soon as
possible. Although Alstom sent additional letters in April and
September 2000, Norfolk Southern failed to respond.
On March 2, 2001, Alstom filed this action, seeking to recover
damages for the late deliveries to Veazie under the Carmack
Amendment.1 Following the completion of discovery, Alstom moved
for partial summary judgment, seeking a ruling that Norfolk
Southern, as a matter of law, “violated its statutory obligation
under the Carmack Amendment to transport Alstom’s modules with
reasonable dispatch.” J.A. 848. The parties agreed that, in order
to rule on this issue, the district court would first need to
determine the reasonable dispatch period for these shipments, the
point at which the reasonable dispatch period begins to run, and
the actual delivery time. Even accepting Norfolk Southern’s
evidence as true, the court determined that thirty-one of thirty-
two modules were not delivered with reasonable dispatch. The
1
Alstom also included claims for (1) breach of the bills of
lading, (2) breach of the duty of good faith and fair dealing, and
(3) breach of contract. The district court dismissed the first two
claims and Norfolk Southern was awarded summary judgment on the
third.
8
district court concluded that it would be for the finder of fact at
trial to decide whether the remaining module was delivered with
reasonable dispatch.
Norfolk Southern filed a cross-motion for summary judgment,
contending that Alstom offered insufficient evidence that Norfolk
Southern, regardless of whether it delivered with reasonable
dispatch, caused any of the damages claimed by Alstom.
Specifically, Norfolk Southern argued that because the modules at
the time of delivery were missing parts due to manufacturing
problems, Norfolk Southern’s failure to deliver with reasonable
dispatch did not cause Alstom to violate its delivery deadlines.
Norfolk Southern also argued that it was not liable for any portion
of the unallocated settlement because the apportionment of damages
rested on speculation. Finally, Norfolk Southern contended that it
was not liable for the premium rail services procured by Alstom.
The district court concluded that a triable issue of fact existed
as to all three issues and denied the motion.
In November 2003, the district court conducted a four-day
bench trial and reached the following conclusions. First, the
court rejected Norfolk Southern’s argument that Alstom failed to
file a valid notice of claim under the Carmack Amendment—-a
prerequisite for imposing liability upon a rail carrier-—because
Alstom’s March 6, 2000, letter did not claim a “specified or
9
determinable amount of money.” 49 C.F.R. 1005.2(b). The district
court concluded that the letter satisfied the claim requirement.
The court reasoned that “[a] Carmack Amendment claim is not
intended to serve as an itemized statement of account that the
carrier is expected to pay by return mail. Instead, the claim
triggers the carrier’s obligation to investigate it promptly upon
receipt.” J.A. 3214.
Next, the district court considered whether Norfolk Southern
delivered with reasonable dispatch the remaining module, an issue
left for trial following the court’s summary judgment ruling. The
court found that the reasonable dispatch period for regular train
service in this case was fourteen days, a factual determination
that fell comfortably between the range of reasonableness suggested
by the parties’ witnesses-—Alstom took the position that the
reasonable transit time was between seven and fourteen days, and
Norfolk Southern estimated between sixteen and twenty days. With
respect to special trains that charge a premium rate, the court
found that a reasonable dispatch period of seven days was
appropriate. The district court also determined, contrary to the
position taken by Norfolk Southern, that the reasonable dispatch
period should be measured from the time that a rail carrier issues
a waybill signifying the shipment has been inspected and is
approved for transit, not the time that the carrier actually begins
10
“pulling” the shipment. Finally, applying these findings, the
court concluded that the last of the thirty-two modules was
delivered beyond the reasonable dispatch period in violation of the
Carmack Amendment.
As for causation, the district court concluded that Norfolk
Southern’s late deliveries caused actual harm even though many of
the modules arrived at Veazie without pressure nozzles because of
production problems at the Alstom plants. The court found that the
missing nozzles did not impede the construction schedule because
the nozzles were not needed until shortly before the power plant
began operating.
The district court rejected Norfolk Southern’s argument that
it was not liable for the premium freight charges paid by Alstom
because Alstom’s manufacturing problems would have required the
hiring of these special trains in any event. The court reasoned
that Gowan’s decision to secure an alternate carrier—-before there
was any indication of a manufacturing problem--was a reasonable
response to the fact that there were transit delays for even the
earliest shipments. The district court found, therefore, that
“Gowans would have engaged these services regardless of Alstom’s
manufacturing problems.” J.A. 3226.
Finally, the district court concluded that, before it could
determine the damages owed by Norfolk Southern for its untimely
11
deliveries, it was required to identify the portion of the
settlement between Alstom and DFD that was attributable to delays
at Veazie, not Hidalgo; to identify the portion of the settlement
paid for the late delivery of modules, as opposed to other parts
arriving late; to determine a dollar value for the extended
warranties portion of the settlement; and to “determine the share
attributable to Norfolk [Southern]’s transit delays (rather than
Alstom’s manufacturing delays).” J.A. 3226.
Based on the testimony of Mike Stark, a former DFD employee
who participated in negotiating the settlement, the district court
concluded that sixty-three percent of the settlement amount was
attributable to delays at Veazie. The court further found that the
entire settlement amount was based on the late delivery of modules
as opposed to other parts and equipment. Furthermore, the district
court credited the testimony of John Stratton, Alstom’s project
director for generators, that it would cost Alstom $700,000 to
honor the extended warranty portion of the settlement. Finally,
the district court recognized that Norfolk Southern was not solely
at fault for the late deliveries, given that Alstom failed to have
some of the modules ready for shipping until after the June 30
deadline. Accordingly, the court arrived at the following formula
for calculating damages: “$1.575 million multiplied by the
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percentage of total delay attributable to Norfolk [Southern], plus
the cost of premium transportation services.” J.A. 3255.
The district court invited Alstom to submit a proposed final
damages figure using this formula and to brief the court on the
propriety of pre-judgment interest. The district court likewise
invited a response from Norfolk Southern. Alstom submitted a final
figure of $1,459,485, including interest. The court reduced the
interest claimed by Alstom but otherwise adopted Alstom’s
calculation and entered judgment in the amount of $1,230,871.2
II.
A.
Norfolk Southern argues that Alstom failed to file a proper
written notice of claim and was therefore precluded from bringing
suit on its delay claim under the Carmack Amendment. Like the
district court, we reject this claim.
The Carmack Amendment to the Interstate Commerce Act imposes
liability upon a rail carrier “for the actual loss or injury to the
property” it transports under a bill of lading. 49 U.S.C.A. §
11706(a); see Siemens Power Transmission & Distrib., Inc. v.
Norfolk Southern Ry. Co., 420 F.3d 1243, 1248 (11th Cir. 2005). A
bill of lading is essentially “a transportation contract between a
2
On appeal, Norfolk Southern does not specifically challenge
the award of prejudgment interest.
13
shipper/consignor (i.e., a seller of goods) and a carrier.” Paper
Magic Group, Inc. v. J.B. Hunt Transport, Inc., 318 F.3d 458, 461
(3d Cir. 2003). Although the statute refers to “loss or injury” to
the property being shipped, the Carmack Amendment allows a shipper
to recover damages caused by the carrier’s unreasonable delay in
transporting the shipment. See New York, Philadelphia & Norfolk
R.R. Co. v. Peninsula Produce Exch. of Md., 240 U.S. 34, 38-39
(1916); Hector Martinez & Co. v. Southern Pac. Transp. Co., 606
F.2d 106, 108 (5th Cir. 1979).
The uniform bill of lading issued by all rail carriers
obligates carriers to transport shipments with “reasonable
dispatch.” 49 C.F.R. 1035, App. B, § 2(a) (2004). The terms of
the uniform bill of lading also require that, “[a]s a condition
precedent to recovery, claims must be filed in writing with the
receiving or delivering carrier, or carrier issuing this bill of
lading, or carrier on whose line the loss, damage, injury or delay
occurred, within nine months after delivery of the property.” 49
C.F.R. 1035, App. B, § 2(b). This language comports with the
statutory directive that shippers be afforded no less than nine
months to file a claim with the carrier and no less than two years
to file a civil action. See 49 U.S.C.A. § 11706(e).
The Department of Transportation has prescribed various
baseline requirements for a shipper’s claim. See 49 C.F.R.
14
1005.2(b). The claim must be in writing, it must be submitted
within the time limits set by the bill of lading, and it must: “(1)
[c]ontain[] facts sufficient to identify the . . . shipment . . .
, (2) assert[] liability for alleged loss, damage, injury, or
delay, and (3) mak[e] claim for the payment of a specified or
determinable amount of money.” Id.
The primary purpose of the pre-suit claim requirement is to
“secur[e] reasonable notice for the carrier so that it can conduct
an independent investigation.” Siemens Power, 420 F.3d at 1251.
The purpose of the regulation is “not to permit the carrier to
escape liability but to insure that the carrier has enough
information to begin processing the claim.” Id. at 1252 (internal
quotation marks omitted). Thus, a specific amount is not required;
the claim must communicate the intent to hold the carrier liable
and provide sufficient information for the carrier to investigate
the claim. See id.
Based on these general principles, Norfolk Southern argues
that “where a carrier denies a proper timely filed freight claim,
any subsequent suit against the carrier essentially asks the courts
to review the propriety of the carrier’s denial.” Brief of
Appellant at 19. Thus, Norfolk Southern argues that the court
should decide only whether the carrier should have paid the precise
claim presented to it. Norfolk Southern contends that Alstom’s
15
letter of March 6, 2000, sets forth a different claim than the one
that actually went to trial and, therefore, failed to satisfy the
“specific or determinable amount of money” requirement prescribed
by regulation. Alstom’s claim incorrectly asserted that it had
already paid liquidated damages of $1,695,000. Acknowledging that
production problems contributed to the delays, Alstom made a demand
for $930,000, in addition to $203,276 for the premium rail services
that it secured to mitigate the delays. The total amount of the
delay claim was just over $1.1 million. Norfolk Southern points
out, however, that Alstom increased the amount of its claim after
suit was filed and changed the basis for its claim from liquidated
to actual damages.
We agree with the district court that the March 6, 2000,
letter gave plenty of information to permit Norfolk Southern to
begin its investigation. The fact that the letter misstated the
basis for determining the amount of its claim-–the liquidated
damages clause as opposed to the negotiated settlement of DFD’s
actual damages—-did not prevent it from satisfying the claim
requirement. As the district court observed, the regulations do
not require “an itemized statement of account that the carrier is
expected to pay by return mail.” J.A. 3214.
Norfolk Southern’s complaint boils down to its belief that
Alstom’s claim for damages presented in the March 6 letter morphed
16
into something different at trial. Norfolk Southern cannot win
this argument, however, by hyper-technical reliance on regulations
designed to afford it an opportunity to investigate the claim when
Norfolk Southern in fact conducted absolutely no investigation of
the claim and made no decision on the claim before this action was
filed. See 49 C.F.R. § 1005.4 (2004) (requiring carriers to
investigate claims promptly); 49 C.F.R. § 1005.5 (2004) (directing
carriers to “pay, decline, or make a firm compromise settlement
offer” within 120 days after receiving the claim). Accordingly, we
reject this argument.3
B.
Norfolk Southern next argues that the district court’s
allocation of the settlement between Veazie and Hidalgo cannot be
affirmed because it was based on speculative and inadmissible
evidence. First, Norfolk Southern contends that the district court
should not have permitted any testimony regarding how the
settlement was allocated in light of Alstom’s failure to produce a
3
We likewise reject Norfolk Southern’s argument that the
judgment should be vacated because the district court quashed the
trial subpoena issued to the attorney who drafted the November 6
claim letter that wrongly indicated Alstom paid liquidated damages.
Even assuming such testimony would not have divulged privileged
information, we fail to see the relevance of testimony regarding
how the statement about liquidated damages “came to be made.”
Brief of Appellant at 48. It is undisputed that this assertion was
false, and that Alstom and DFD did not reach a settlement using
liquidated damages.
17
formal settlement agreement between Alstom and DFD. According to
Norfolk Southern, any testimony about how the settlement was
allocated was barred by the best evidence rule. Norfolk Southern
also argues that Alstom’s failure to produce a formal settlement
document suggests spoliation of the evidence.
The district court found that “[o]n December 22, 1999, Alstom
and DFD memorialized the main points of the settlement in . . .
(the ‘Term Sheet’)” and that “[t]he parties intended to prepare a
formal settlement agreement after the winter holidays, but never
did so.” J.A. 3210 (emphasis added). The court concluded that the
“Term Sheet . . . is the sole contemporaneous writing that
describes the settlement.” Id. Norfolk Southern’s arguments
assume the opposite–-that the parties created a formal, integrated
settlement document. However, Norfolk Southern has not highlighted
any record evidence that would convince us that the factual
findings of the district court in this regard were clearly
erroneous. Accordingly, we reject Norfolk Southern’s argument that
the district court erred in considering testimony regarding the
terms of the settlement.4
4
Norfolk Southern also contends that the parol evidence rule
bars testimony regarding the allocation of settlement funds because
“[i]t is also possible that the Settlement Agreement was silent as
to allocation, but contained a merger clause.” Brief of Appellant
at 29. This argument injects speculation into an argument already
based on the unsupported assumption that a formal settlement
document existed. We reject this theory as well.
18
Next, Norfolk Southern argues that the testimony relied upon
by the district court to support its allocation determination was
too speculative to have been considered. The primary negotiators
for Alstom and DFD testified at trial about the delay damages
linked to the Veazie site as opposed to the damages attributed to
the Hidalgo site. Norfolk Southern characterizes this testimony as
post hoc allocation of damages, supplying the settlement with terms
the parties never agreed upon or considered. The witnesses,
however, testified that the allocation of damages between Veazie
and Hidalgo was, in fact, considered at the time of settlement even
though the Term Sheet did not itemize the components of the
settlement. We conclude that there is sufficient evidence to
support the district court’s finding that the parties allocated
delay damages between the two sites in reaching a settlement.
Finally, Norfolk Southern contends that the deposition
testimony of witnesses from Alstom and DFD was inconsistent as to
what percentage of the lump sum settlement had been allocated to
the Veazie site, thus demonstrating the unreliable and speculative
nature of the allocation evidence. Specifically, Thomas DeHart, a
DFD employee involved in the settlement negotiations, indicated
that approximately forty-four percent was apportioned to Veazie,
while Alstom’s Stratton indicated that the settlement was split
evenly between the two sites. Both of these witnesses, however,
19
were explaining how the settlement was apportioned for accounting
purposes, not for purposes of determining actual damages.
Ultimately, the district court accepted the trial testimony of Mike
Stark, a former employee with DFD with no ties to Alstom, who
indicated, based on his contemporaneous notes, that sixty-three
percent of the settlement was apportioned for actual damages at
Veazie. We conclude that this evidence was sufficiently certain
and non-speculative to permit the court to make its findings.5
C.
Finally, Norfolk Southern argues that the district court
abdicated its role as a fact-finder when it directed Alstom to
submit a proposed final judgment using the liquidated damages
formula that Alstom disavowed earlier in the litigation. We cannot
agree. Although Norfolk Southern is correct that we have
“consistently disapproved of the practice of a district court
adopting proposed findings of fact and conclusions of law submitted
by the prevailing party,” District 17, United Mine Workers of
America v. Apogee Coal Co., 13 F.3d 134, 137 n.4 (4th Cir. 1993),
this is not such a case. The district court made its own detailed
5
Norfolk Southern also challenges the district court’s finding
that Alstom is entitled to recover the premium transportation costs
it incurred. This argument simply takes issue with the district
court’s view of the evidence. Finding no clear error, we reject
this argument as well.
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findings of fact, including the formula for determining damages,
and arrived at its own conclusions of law. The district court’s
order merely directed Alstom to perform a calculation based on the
court’s factual determination. Part of the calculation called for
a determination of the number of “delay days” attributable to
Norfolk Southern, but the court invited both sides to submit briefs
on this narrow issue. Moreover, the district court did not use the
“contractual liquidated damages” provision, as Norfolk Southern
contends. Indeed, the district court specifically found that DFD
waived the liquidated damages clause and settled its losses with
Alstom based on actual damages. The formula devised by the court
did not change this finding.
III.
For the foregoing reasons, we affirm the district court.
AFFIRMED
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