Stroh Brewery Co. v. Grand Trunk Western Railroad
513 F. Supp. 827, 1981 U.S. Dist. LEXIS 17873 (1981)
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Rule of Law:
A common carrier is liable for special or consequential damages arising from a breach of contract of carriage, such as misdelivery, if the carrier had sufficient notice of the facts and circumstances at the time of contracting to make such damages a reasonably foreseeable result of the breach.
Facts:
- The Stroh Brewery Company (Stroh) ordered a carload of 'Stroh Bulk Type Malt' to be delivered by rail.
- Around the same time, Rickel Malting Company, Inc. (Rickel) ordered a carload of barley, which was also shipped by rail.
- Both shipments were placed in hopper cars with very similar numbers (CNW 172379 for Stroh's malt, and CNW 173379 for Rickel's barley).
- Both cars were transported by Grand Trunk Western Railroad Company (Grand Trunk) to its Farnsworth Siding in Detroit.
- On September 21, 1976, Stroh requested delivery of its specific malt car to its agent, Great Northern Feed, Inc. (Great Northern).
- A Grand Trunk switch crew mistakenly delivered the Rickel barley car to Great Northern instead of the Stroh malt car.
- Stroh's employees, despite having procedures to check car numbers and inspect materials, did not notice the error and proceeded to unload the barley.
- The barley was introduced into Stroh's brewing process, where it contaminated a large quantity of existing malt and damaged grinding engines.
Procedural Posture:
- The Stroh Brewery Company (Plaintiff) filed an action for damages against Grand Trunk Western Railroad Company (Defendant) in the United States District Court.
- The action was brought under the Carmack Amendments, 49 U.S.C. § 20(11), for breach of two contracts of carriage.
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Issue:
Does a common carrier's liability for misdelivery extend to special or consequential damages that result from the recipient's subsequent use of the incorrect goods, when the carrier possessed specific knowledge of the recipient's business operations and the intended use of the correct shipment?
Opinions:
Majority - Cook, Jr.
Yes. A common carrier's liability for misdelivery extends to such special or consequential damages. The court found that the damages Stroh suffered were reasonably foreseeable to Grand Trunk at the time the contract of carriage was made. Applying the principles of Hadley v. Baxendale, the court determined that Grand Trunk's extensive knowledge of Stroh's operations made the resulting harm a foreseeable consequence of the misdelivery. Grand Trunk knew that the only hopper cars at the siding were for Stroh and Rickel, that Stroh used malt and grits for brewing beer, and that the order of delivery was critical. This specific knowledge distinguished the case from Marquette Cement, where the carrier's knowledge was limited to the bill of lading. The court also rejected Grand Trunk's argument that Stroh's own negligence in failing to inspect the car barred recovery, reasoning that it was also foreseeable that Stroh might not catch the mistake, especially given the similarities in car numbers and contents. Finally, the court permitted Stroh to recover on an assigned claim from Rickel, finding that the payment to Rickel did not extinguish the underlying contract claim against Grand Trunk.
Analysis:
This decision reinforces the application of the Hadley v. Baxendale foreseeability rule for consequential damages in common carrier contracts. It underscores that a carrier's liability is not limited to the value of the goods but can extend to significant operational losses if the carrier has specific knowledge of the shipper's business and the intended use of the cargo. The case establishes that the more a carrier knows about its customer's specific needs and processes, the wider the scope of foreseeable—and thus recoverable—damages becomes. Furthermore, the ruling suggests that a plaintiff's contributory negligence may not serve as a complete defense for a carrier if the plaintiff's failure to discover the carrier's initial breach was itself a foreseeable event.
