PRESENT: Hassell, C.J., Lacy, Koontz, Kinser, Lemons, and Agee,
JJ., and Stephenson, S.J.
MCI WORLDCOM NETWORK SERVICES, INCORPORATED
OPINION BY
v. Record No. 030312 SENIOR JUSTICE ROSCOE B. STEPHENSON, JR.
OSP CONSULTANTS, INCORPORATED September 12, 2003
UPON A CERTIFIED QUESTION FROM THE UNITED STATES
COURT OF APPEALS FOR THE FOURTH CIRCUIT
Pursuant to Article VI, Section 1 of the Constitution of
Virginia and Rule 5:42, the United States Court of Appeals for
the Fourth Circuit (the Fourth Circuit), by an order entered
February 10, 2003, certified to this Court the following
question:
Is a telecommunications services carrier entitled
to damages for the loss of use of a fiber-optic cable
damaged by a defendant when the carrier intended to
have the full capacity of the damaged cable available
for its use should the need have arisen, but the
carrier was able to accommodate within its own network
the telecommunications traffic carried by the damaged
cable and the carrier presented no evidence that it
suffered loss of revenue or other damages during the
time that the cable was unavailable?
I
MCI WorldCom Network Service, Incorporated (MWNS) provides
telecommunications services through underground fiber-optic
cables. On March 27, 2000, OSP Consultants, Incorporated (OSP)
severed one of MWNS's underground fiber-optic cables while
excavating near Centreville, Virginia. Consequently, MWNS sued
OSP in tort, based upon theories of negligence and trespass,
seeking repair costs of $32,509.33 and $454,484.10 for loss of
use of the severed cable.
OSP conceded liability, and, in a subsequent bench trial in
the United States District Court for the Eastern District of
Virginia, the district court awarded MWNS the repair costs of
$32,509.33. The district court, however, refused to award
damages for loss of use, and MWNS appealed that ruling to the
Fourth Circuit.
On February 10, 2003, the Fourth Circuit certified the
above-quoted question. By an order entered March 6, 2003, we
accepted the question.
II
The relevant facts, as set forth in the certification
order, are not in dispute. The severed underground fiber-optic
cable was one of MWNS's primary transmission routes for
telecommunications traffic along the East Coast. The cable
carried voice and data traffic as well as high-speed data
transmission for banks and credit card companies. Like other
telecommunications providers, MWNS has built into its network
excess capacity to allow for varying levels of traffic and to
permit traffic to be re-routed, and service maintained, in the
event of an outage in one part of its network.
In the telecommunications industry, a "DS-3" is a standard
unit of capacity, and one DS-3 represents 672 voice circuits or
2
individual telephone calls. The cable severed by OSP had a
total capacity of 960 DS-3s. The number of active DS-3s varies
from moment to moment, depending on the volume of traffic. When
the cable was severed, 222 DS-3s were active, and more than 3000
voice calls were lost or blocked, as was some amount of private-
line and Internet traffic. MWNS, however, was able to quickly
re-route the traffic carried by the severed cable because of the
excess capacity built into its network. A computer effected
this rerouting automatically.
On the day that OSP severed MWNS's cable near Centreville,
MWNS suffered another cable break in Pennsylvania. MWNS
ordinarily could have used the excess capacity in the
Centreville cable to handle the traffic re-routed from the
Pennsylvania cable. Nothing in the record, however, suggests
that MWNS had any difficulty re-routing within its network the
traffic from both broken cables.
Although traffic was not fully restored to the Centreville
cable for more than thirteen hours after it was severed, MWNS
sought recovery for only seven-and-one-half hours of lost use of
the cables; i.e., four-and-one-half hours to make the physical
repairs to the cable and three hours to "normalize" the traffic
that had been re-routed. MWNS arrived at its loss-of-use
damages by consulting the tariff rates filed by competitors
Sprint and AT&T to determine the per-hour cost of procuring
3
substitute DS-3s. Sprint's tariff rate, the lower of the two,
for one DS-3 was $45,448.41 for one month. Thus, MWNS
calculated that replacing 960 DS-3s, or the entire capacity of
the severed cable, for one month would cost $43,630,473.60 and
that replacing 960 DS-3s for one hour would cost $60,597.88.
MWNS then multiplied the hourly rate by the seven-and-one-half
hours the cable was unavailable and arrived at $454,484.10 in
loss-of-use damages. MWNS did not attempt to assign any
economic value to the traffic that was lost at the moment the
cable was severed, and it presented no evidence that it lost
customers or revenue as a result.
III
MWNS contends that it is entitled to loss-of-use damages
measured by the cost of replacing 960 DS-3s for seven-and-one-
half hours even though it was able to accommodate within its own
network all the telecommunications traffic carried by the
damaged cable. In other words, MWNS seeks to recover the
reasonable cost of obtaining replacement property even though it
did not, in fact, obtain a replacement.
OSP concedes that loss-of-use damages may be recovered in
appropriate cases. OSP contends, however, that MWNS suffered no
damages from the loss of the use of its cable because it had
within its own network the capacity to handle all the traffic
carried by the damaged cable. OSP asserts that to award MWNS
4
loss-of-use damages under the circumstances would "bestow a
massive and unfair windfall."
We have recognized that loss of use is a compensable
element of damages for the detention of personal property. See
e.g., Vines v. Branch, 244 Va. 185, 190, 418 S.E.2d 890, 894
(1992); Shearer v. Taylor, 106 Va. 26, 28, 55 S.E. 7, 8 (1906).
In Shearer, the plaintiff had her furniture in storage under a
12-month storage contract. While the furniture was in storage,
a creditor of the plaintiff had a distress warrant levied on the
furniture. The furniture remained in storage for approximately
six months after being released from the levy. The plaintiff
sued the creditor, claiming damages for the wrongful levy,
including damages for the loss of use of the furniture during
the time it was held under the warrant. The jury returned a
verdict in favor of the plaintiff. 106 Va. at 27-29, 55 S.E. at
7-8.
At trial, the jury was instructed "to allow a fair rental
value for the property during the time it was held under levy,
considering the character of the property levied on." Id. at
28, 55 S.E. at 8. The jury was further instructed that "the
measure of damage in this case is: (1) A fair rental value of
the property levied on for the period that same was held under
the distress warrant, not exceeding twelve months; (2) the
5
damage to the same occasioned by the storage during the same
period." Id.
We reversed the judgment and remanded the case for a new
trial, holding that the jury was improperly instructed about the
measure of damages that plaintiff could recover. We
acknowledged the general principle that the value of the use of
property during an unlawful detention is an appropriate element
of damages. Id. We concluded, however, that, because the
furniture at issue had been in storage when it was detained and
remained in storage for six months after it was released from
levy, the
evidence tended to show that the plaintiff had not
been deprived of the use of the property at all
. . . . If no use of the property was contemplated by
the plaintiff, she suffered no loss of use in
consequence of the levy, and therefore was not
damaged. The effect of the instruction given was to
exclude from the jury all consideration of the
evidence tending to show that the plaintiff had
suffered no loss of use of the property, and to
require them to ascertain its rental value without
regard to whether or not injury had been suffered as a
result of the levy.
Id. at 29, 55 S.E. at 8.
Shearer tends to support OSP's contention that a plaintiff
must actually be deprived of the use of property in order to
obtain loss-of-use damages. Shearer also suggests, however,
that the mere intention to use the property may be sufficient to
6
support a damage award. Therefore, Shearer does not provide a
clear answer to the certified question.
Two leading cases relating to the question were decided by
the United States Supreme Court. Both are maritime cases, and
they reach opposite results. One of these cases, relied upon by
MWNS, is The Cayuga, 5 F.Cas. 326 (E.D.N.Y. 1868) (No. 2,535),
aff'd, 5 F.Cas. 329 (C.C.E.D.N.Y. 1870) (No. 2,537), aff'd, 81
U.S. 270 (1871). The other case, relied upon by OSP, is
Brooklyn Eastern District Terminal v. United States, 287 U.S.
170 (1932).
In The Cayuga, a ferry was damaged in a collision with a
steamer. The owners of the ferry had a spare boat that was used
while the ferry was being repaired. Consequently, the owners
suffered no pecuniary damages during the time that the ferry was
out of commission. 5 F.Cas. at 327. The circuit court
concluded, however, that the ferry owners were entitled to
compensation for the loss of use to be measured by the
reasonable cost of hiring a substitute boat, even though no such
substitute was needed. The court reasoned as follows:
It is quite obvious, that there is neither
justice nor equity in allowing to a tort-feasor the
benefit of this large outlay made by the libellants to
enable them to serve the public and run their ferry
without interruption; and yet that is the effect of
yielding to the argument that, because such spare boat
was already in the libellants' possession, and was
used, therefore the libellants sustained no pecuniary
loss by the delay. If it be conceded that a just
7
allowance for the necessary cost of another boat,
hired at its fair value to perform the service, would
be necessary to the indemnity of the libellants, there
is no sound reason . . . for withholding such
allowance when the libellants furnish the substituted
boat themselves. . . . The principle of indemnity is
uniformly recognized as just, and its measure must be
the same, whether a substitute is furnished by the
libellant or procured from another.
5 F.Cas. at 331. The Supreme Court affirmed the circuit court's
decision. 81 U.S. at 279.
In Brooklyn Terminal, decided approximately 60 years after
The Cayuga, the Supreme Court reached a different result on
somewhat similar facts. In Brooklyn Terminal, a dredge
belonging to the United States collided with a tugboat that
towed car floats for railroads. The tugboat was damaged, and,
while it was being repaired, the owner did not obtain a
substitute tug. Instead, the tug owner worked its other two
tugs overtime. No evidence was presented to show that the
overtime use of the other tugs caused the owner to incur
additional expenses. 287 U.S. at 172-73. The Supreme Court
unanimously concluded that it would be "[e]rroneous and
extravagant" to award the tug owner loss-of-use damages measured
by the amount it would have cost to hire a substitute tug "when
there was no need of such a boat to keep the business going, and
none in fact was used or paid for." Id. at 174.
In reaching this conclusion, the Court wrote the following:
8
The disability of a vessel will not sustain demurrage
at the rate of the value of her hire unless an award
at such a rate can be seen to be reasonable when the
disability is viewed in the setting of the
circumstances. Only when thus enlightened can we
choose the yardstick most nicely adjusted to be a
measure of reparation, in some instances, no doubt,
the hire of another vessel, in other instances, it may
be, a return upon the idle capital, in others
something else. Only then indeed can we know whether
the interference with profit or enjoyment is to be
ranked as substance or as shadow. The vessel may have
been employed in a business of such a nature that for
the avoidance of loss there is need of the employment
of a substitute. In such circumstances the fair value
of the hire may be an element of damage, and this
whether the substitute is actually procured or not.
. . . We are to have regard in every case to the
reasonable probabilities of time and place and
circumstance. Demurrage on the basis of the cost of a
substitute, actual or supposititious, may be no more
than fair indemnity when gains have been lost or
enjoyment seriously disturbed. Demurrage on a like
basis may be so extravagant as to outrun the bounds of
reason when loss of profit has been avoided without
the hire of a substitute and the disturbance of
enjoyment has been slight or perhaps fanciful.
Id. at 174-76 (citations omitted). The Court specifically
distinguished "spare boat" cases like The Cayuga as follows:
The doctrine of the "spare boat" cases is invoked
by the petitioner as decisive in its favor, but we
think without avail. Shipowners at times maintain an
extra or spare boat which is kept in reserve for the
purpose of being utilized as a substitute in the
contingency of damage to other vessels of the fleet.
There are decisions to the effect that in such
conditions the value of the use of a boat thus
specially reserved may be part of the demurrage. If
no such boat had been maintained, another might have
been hired, and the hire charged as an expense. The
result is all one whether the substitute is acquired
before the event or after. . . . [H]owever, . . .
there has been a refusal to extend the doctrine to
9
boats acquired and maintained for the general uses of
the business. . . .
So here. The petitioner was engaged in an
established business using tugs for a single purpose.
It had no thought to turn that business into one of a
different kind while this tug was out of service.
Mindful of the need to minimize the damages, it used
to the full its available resources, and was able by
special effort to make them do the work. We are
unable to accept the argument that the expenses which
it saved are to be charged to the respondent as if
they had not been saved at all.
Id. at 176-77 (emphasis added) (citations omitted).
MWNS contends that the extra capacity that it built into
its fiber-optic network and that allowed it to accommodate the
traffic carried by the damaged cable is the functional
equivalent of the spare boat used in The Cayuga. OSP contends,
on the other hand, that the present case is much closer to
Brooklyn Terminal because MWNS simply made additional use of the
available capacity on its own network, extra capacity that was
"acquired and maintained for the general uses of the business."
IV
We do not agree with MWNS's contention. In the present
case, the evidence shows that MWNS maintains excess network
capacity primarily for the general use of its business so that
it can accommodate varying levels of telecommunications traffic.
While it is true that the excess capacity enables MWNS to
reroute traffic in the event of emergencies, MWNS does not
reserve particular cables for use exclusively in emergencies, as
10
in the "spare boat" cases. Accordingly, consistent with the
holding in Brooklyn Terminal, we hold that, in the circumstances
of this case, MWNS is not entitled to loss-of-use damages, and
we answer the certified question in the negative.
Certified question answered in the negative.
11