railroad property damage â who pays
Keenan Cohen & Howard P.C. RAILROAD PROPERTY DAMAGE – WHO PAYS ASLRRA ANNUAL CONFERENCE April 29, 2013 Jeffrey D. Cohen, Esq. Keenan Cohen & Howard PC [email protected] 215-609-1104
THIRD PARTIES THAT CAUSE PROPERTY DAMAGE TO RAIL CARRIERS 1. 2. 3. 4. 5. 6. 7.
Vendors Contractors Shippers/Consignees Adjacent Property Owners Vandals Motorists Barges
TYPES OF CLAIMS ASSERTED AGAINST THIRD PARTIES 1. 2. 3. 4. 5.
Negligence Breach of Contract Indemnification Products Liability Breach of Warranty
Improper Securement
Improper Securement
Improper Securement
SO YOU DON’T WANT TO SUE YOUR BIGGEST CUSTOMER Assignment/Negotiation • In certain circumstances the negligent actor may be a subcontractor or vendor of a customer. • To avoid suing a key customer, many times approaching the customer and requesting an assignment to sue the subcontractor/ vendor is possible. • Alternatively, if an assignment is not viable, a lawsuit naming the key customer can be filed following consultation with the customer. This consultation will identify the ultimate culpable party and develop a strategy to seek recovery from this responsible party.
Lots of Vendors – Each Should Have Contract Which Explicitly Addresses Liability or Incorporates a Standing Terms and Conditions Document Auto Inspection Auto Ramp Operations Intermodal Equipment & Parts Purchases Drayage Dust Control Pest Control Fencing Intermodal Facilities Janitorial Services Trailer Maintenance Real Estate Projects Mixing Centers Auto Claims Processing Intermodal Crane Maintenance Landscaping Security Systems Installations Elevators
Snow Removal, Rail Analysis, Grinding/Flaw Detect Environmental Assessment Microwave Tower Construction/Maintenance CWR Plant Welding/Maintenance Crane (w/operator) Services C&S Software Maintenance Field Electric/Thermit Welding Crosstie Unloading/Disposal Ballast Cleaning/Ditching C&S Grade Crossing Projects Waste/Trash Removal MW&S/Mechanical Vegetation Control Environmental Remediation Environmental Response Chemical Lab Services Security Services
BATTLE OF THE FORMS
KRAFT FOODS NORTH AMERICA, INC., Plaintiff, v. BANNER
ENGINEERING & SALES, INC, 446 F. Supp. 2d 551 (2006)
THE PRICE QUOTE A vendor, Banner, attached a "Terms and Conditions of Sale" document to its price quote: All orders are subject to acceptance by the SELLER at its home office in Saginaw, Michigan USA. The liability of the SELLER is limited to the proposal and terms and conditions herein. **** All goods sold are warranted or guaranteed only to the extent of the express warranty of the MANUFACTURER. In no event shall the SELLER be liable for consequential damages.
THE PURCHASE ORDER Kraft sent a purchase order to Banner by facsimile. At the beginning of the purchase order, Kraft stated: "Kraft's terms and conditions shall supersede all other terms and conditions whether expressed or implied." WARRANTY: Seller warrants the goods to be free from defects in materials and workmanship, and guarantees to repair and/or replace, at Seller's expense, any part thereof which is found by Buyer to be defective within a period of one year from date of Installation. PERFORMANCE GUARANTEE: Equipment not manufactured by Seller shall be covered by the guarantee of its manufacturer. Seller guarantees the goods to perform in accordance with performance specifications in this Purchase Order and to make the goods covered by this Purchase Order fulfill said guarantee or to remove same at its expense and refund all payments made therefor by Buyer.
TERMS AND CONDITIONS Attached to Kraft's purchase order was a separate set of "terms and conditions," which stated in pertinent part: ACCEPTANCE The first to occur of Seller's acceptance of this Order or shipment of goods pursuant to this Order, shall constitute Seller's agreement to the terms and conditions set forth on the face and back of this Purchase Order. No other terms, whether or not contained in any bid, estimate, acknowledgment, confirmation or invoice given by Seller, shall in any way modify or supersede any of the terms of this Order or otherwise be binding on Buyer, and Buyer hereby explicitly rejects all such other terms unless it has accepted such other terms by a written instrument signed by its authorized representative.
INDEMNIFICATION • INDEMNIFICATION; INSURANCE Seller shall defend, indemnify and hold Buyer harmless against all damages, claims, liabilities and/or expenses (including attorney's fees) arising out of or resulting in any way from any defect in the goods purchased hereunder, from any act or omission of Seller, its employees, agents or subcontractors, or from Seller's breach of any warranty as provided herein or otherwise provided by law. . . .
WHO WINS THE BATTLE OF THE FORMS Banner supplied the materials and equipment pursuant to the purchase order and was paid in full by Kraft. Assume that equipment supplied by Banner was defective and caused direct and consequential damages. 1. Is Kraft entitled to consequential damages? 2. Is Kraft entitled to attorney’s fees?
ISSUE • The disagreement centers around whether Kraft's purchase order operated as an acceptance or rather as a rejection and counteroffer.
Uniform Commercial Code • Given that this transaction involved the sale of goods, issues of contract formation are governed by the Uniform Commercial Code (UCC)
THE LAW – (VA) • "[A]s a general rule, the submission of a purchase order by a prospective buyer is viewed as an offer which may then be accepted or rejected by a seller." • "However, the determination whether an offer inviting acceptance has been made is controlled by the expressed intention of the offeror." • The Supreme Court of Virginia found that a purchase order prepared and submitted by a seller, and intended to be an offer, ripened into a contract upon acceptance by the buyer. The court held that buyer's purchase order constituted acceptance where it incorporated terms and conditions "as per your quotation."
FACT SPECIFIC • In this case, Banner included "Terms and Conditions of Sale" with its quotation, but the terms and conditions failed to express clearly whether Banner intended its quotation to be an offer. • On the one hand, Banner stated: "Quotations are subject to acceptance within thirty (30) days from date of quotation." This would seem to suggest that the quotation was an offer, which would be held open for 30 days. Moreover, the very fact that Banner included terms and conditions with its price quotation would seem to indicate that it intended the quotation to be an offer. • On the other hand, however, Banner stated: "All orders are subject to acceptance by the SELLER at the home office in Saginaw, Michigan USA." This statement would appear to contemplate offers by buyers in the form of purchase orders, which would be subject to Banner's acceptance at its home office.
HOLDING • The Court concludes that Banner's quotation was not an offer. If Banner's quotation were an offer, which empowered Kraft to form a contract through acceptance, then Kraft's purchase order would not be subject to Banner's acceptance at its home office. Rather, a contract would already have been formed.
HOLDING • Even if Banner had intended its quotation to be an offer, which Kraft was empowered to accept, Kraft's purchase order expressly conditioned any acceptance on Banner's assent to the terms and conditions contained in the purchase order.
UCC • The UCC states that: • A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed up-on, unless acceptance is expressly made conditional on assent to the additional or different terms.
PURCHASE ORDER PREVAILS BASED ON THESE FACTS • Kraft's purchase order states: "A PURCHASE ORDER WILL BE SUBJECT TO SELLER'S ACCEPTANCE OF THE FOLLOWING TERMS AND CONDITIONS," and expressly rejects the terms and conditions in any bid unless accepted in a signed, written instrument. • Kraft's purchase order made clear that it was unwilling to proceed in the absence of Banner's assent to the terms and conditions in the purchase order. Thus, even if Banner's quotation could be construed as an offer, the conditional nature of Kraft's purchase order made it a counter-offer, which thereby rejected the terms of Banner's offer.
HOLDING • Consequently, the limitation on consequential damages contained in the terms and conditions submitted with Banner's proposal is not part of the contract, but the express warranties contained within the terms and conditions of Kraft's purchase order are part of the contract.
SUMMARY RAILROAD PROPERTY DAMAGE RESULTING FROM BREACH OF CONTRACT - WHO PAYS • Is there a signed contract (vendor, contactor, shipper)? • What constitutes the contract? • Were favorable and enforceable terms and conditions properly incorporated? • Is there a quote and a purchase order? • Are the carriers rules and conditions implicated? • Are the carriers rule and conditions incorporated sufficiently into any transactional document with the shipper? • Who won the battle of the forms?
NEGLIGENCE – NO CONTRACTUAL RELATIONSHIP
EXPERTS 1. 2. 3. 4. 5. 6. 7.
Train Handling Track Construction and Maintenance Mechanical aspects of rail cars Mechanical aspects of locomotives Metallurgy Load Engineering Other – Barge Operation, Communication Tower Construction, etc.
Cause Code – M506 – Track Damage Caused By Non-Railroad Interference with Track Structure
Cause Code – M506 – Track Damage Caused By Non-Railroad Interference with Track Structure
Cause Code – M506 – Track Damage Caused By Non-Railroad Interference with Track Structure
DERAILMENT CAUSATION • A problem solving committee consisting of a representative from Engineering (track and signal), Transportation, Mechanical – Car, Mechanical - Locomotive, and other departments as necessary such as Load Engineering
FINDINGS FROM DERAILMENT INVESTIGATION 1. 2. 3. 4. 5.
Point of derailment Which wheel derailed first How the derailment occurred Why the derailment occurred Cause codes
EXPERTS 1. 2. 3. 4. 5. 6. 7.
Train Handling Track Construction and Maintenance Mechanical aspects of rail cars Mechanical aspects of locomotives Metallurgy Load Engineering Other – Barge Operation, Communication Tower Construction, etc.
Grade Crossing
Negligent Repair
Negligent Repair
Deficient Sealcoating
Deficient Sealcoating
Barge Allision With Bridge Protection
FAILURE OF SHIPPER TO FULLY CLOSE HOPPER DOOR
DAMAGES
TYPES OF DAMAGES RECOVERABLE FROM THIRD PARTIES 1. Damage to locomotives 2. Damage to railcars – if destroyed use depreciated value less salvage 3. Damage to track structure 4. Material (from outside vendors) 5. Material from railroad inventory 6. Damage to communications or other equipment 7. Damage to Bridge Fenders or Structure 8. Freight loss and damage 9. Train delay 10. Rerouting Costs
TYPES OF DAMAGES RECOVERABLE FROM THIRD PARTIES 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.
Inside labor cost Labor overburden Contracted services (re-railing, clearing etc.) Equipment Rental Environmental damage Environmental testing Security Services Injury to personnel Payments to adjacent property owners for damage to property Payment for use of adjacent or other property to stage recovery and repair 21. Payments to impacted local businesses
SOURCES OF FUNDS 1. The Third Party Causing the Damage 2. The Third Party’s Insurance Carrier 3. The Subcontractor of the Third Party Causing the Damage 4. The Subcontractor’s Insurance Carrier 5. Bond
DISCOVERY • • • • •
Document requests to party Non-Party Subpoena to Insurance Carrier Non-Party Subpoena to Insurance Broker Depositions Interrogatories
Keenan Cohen & Howard P.C.
Jeffrey D. Cohen, Esq. Keenan Cohen & Howard PC [email protected] 215-609-1104
THIRD PARTIES THAT CAUSE PROPERTY DAMAGE TO RAIL CARRIERS 1. 2. 3. 4. 5. 6. 7.
Vendors Contractors Shippers/Consignees Adjacent Property Owners Vandals Motorists Barges
TYPES OF CLAIMS ASSERTED AGAINST THIRD PARTIES 1. 2. 3. 4. 5.
Negligence Breach of Contract Indemnification Products Liability Breach of Warranty
Improper Securement
Improper Securement
Improper Securement
SO YOU DON’T WANT TO SUE YOUR BIGGEST CUSTOMER Assignment/Negotiation • In certain circumstances the negligent actor may be a subcontractor or vendor of a customer. • To avoid suing a key customer, many times approaching the customer and requesting an assignment to sue the subcontractor/ vendor is possible. • Alternatively, if an assignment is not viable, a lawsuit naming the key customer can be filed following consultation with the customer. This consultation will identify the ultimate culpable party and develop a strategy to seek recovery from this responsible party.
Lots of Vendors – Each Should Have Contract Which Explicitly Addresses Liability or Incorporates a Standing Terms and Conditions Document Auto Inspection Auto Ramp Operations Intermodal Equipment & Parts Purchases Drayage Dust Control Pest Control Fencing Intermodal Facilities Janitorial Services Trailer Maintenance Real Estate Projects Mixing Centers Auto Claims Processing Intermodal Crane Maintenance Landscaping Security Systems Installations Elevators
Snow Removal, Rail Analysis, Grinding/Flaw Detect Environmental Assessment Microwave Tower Construction/Maintenance CWR Plant Welding/Maintenance Crane (w/operator) Services C&S Software Maintenance Field Electric/Thermit Welding Crosstie Unloading/Disposal Ballast Cleaning/Ditching C&S Grade Crossing Projects Waste/Trash Removal MW&S/Mechanical Vegetation Control Environmental Remediation Environmental Response Chemical Lab Services Security Services
BATTLE OF THE FORMS
KRAFT FOODS NORTH AMERICA, INC., Plaintiff, v. BANNER
ENGINEERING & SALES, INC, 446 F. Supp. 2d 551 (2006)
THE PRICE QUOTE A vendor, Banner, attached a "Terms and Conditions of Sale" document to its price quote: All orders are subject to acceptance by the SELLER at its home office in Saginaw, Michigan USA. The liability of the SELLER is limited to the proposal and terms and conditions herein. **** All goods sold are warranted or guaranteed only to the extent of the express warranty of the MANUFACTURER. In no event shall the SELLER be liable for consequential damages.
THE PURCHASE ORDER Kraft sent a purchase order to Banner by facsimile. At the beginning of the purchase order, Kraft stated: "Kraft's terms and conditions shall supersede all other terms and conditions whether expressed or implied." WARRANTY: Seller warrants the goods to be free from defects in materials and workmanship, and guarantees to repair and/or replace, at Seller's expense, any part thereof which is found by Buyer to be defective within a period of one year from date of Installation. PERFORMANCE GUARANTEE: Equipment not manufactured by Seller shall be covered by the guarantee of its manufacturer. Seller guarantees the goods to perform in accordance with performance specifications in this Purchase Order and to make the goods covered by this Purchase Order fulfill said guarantee or to remove same at its expense and refund all payments made therefor by Buyer.
TERMS AND CONDITIONS Attached to Kraft's purchase order was a separate set of "terms and conditions," which stated in pertinent part: ACCEPTANCE The first to occur of Seller's acceptance of this Order or shipment of goods pursuant to this Order, shall constitute Seller's agreement to the terms and conditions set forth on the face and back of this Purchase Order. No other terms, whether or not contained in any bid, estimate, acknowledgment, confirmation or invoice given by Seller, shall in any way modify or supersede any of the terms of this Order or otherwise be binding on Buyer, and Buyer hereby explicitly rejects all such other terms unless it has accepted such other terms by a written instrument signed by its authorized representative.
INDEMNIFICATION • INDEMNIFICATION; INSURANCE Seller shall defend, indemnify and hold Buyer harmless against all damages, claims, liabilities and/or expenses (including attorney's fees) arising out of or resulting in any way from any defect in the goods purchased hereunder, from any act or omission of Seller, its employees, agents or subcontractors, or from Seller's breach of any warranty as provided herein or otherwise provided by law. . . .
WHO WINS THE BATTLE OF THE FORMS Banner supplied the materials and equipment pursuant to the purchase order and was paid in full by Kraft. Assume that equipment supplied by Banner was defective and caused direct and consequential damages. 1. Is Kraft entitled to consequential damages? 2. Is Kraft entitled to attorney’s fees?
ISSUE • The disagreement centers around whether Kraft's purchase order operated as an acceptance or rather as a rejection and counteroffer.
Uniform Commercial Code • Given that this transaction involved the sale of goods, issues of contract formation are governed by the Uniform Commercial Code (UCC)
THE LAW – (VA) • "[A]s a general rule, the submission of a purchase order by a prospective buyer is viewed as an offer which may then be accepted or rejected by a seller." • "However, the determination whether an offer inviting acceptance has been made is controlled by the expressed intention of the offeror." • The Supreme Court of Virginia found that a purchase order prepared and submitted by a seller, and intended to be an offer, ripened into a contract upon acceptance by the buyer. The court held that buyer's purchase order constituted acceptance where it incorporated terms and conditions "as per your quotation."
FACT SPECIFIC • In this case, Banner included "Terms and Conditions of Sale" with its quotation, but the terms and conditions failed to express clearly whether Banner intended its quotation to be an offer. • On the one hand, Banner stated: "Quotations are subject to acceptance within thirty (30) days from date of quotation." This would seem to suggest that the quotation was an offer, which would be held open for 30 days. Moreover, the very fact that Banner included terms and conditions with its price quotation would seem to indicate that it intended the quotation to be an offer. • On the other hand, however, Banner stated: "All orders are subject to acceptance by the SELLER at the home office in Saginaw, Michigan USA." This statement would appear to contemplate offers by buyers in the form of purchase orders, which would be subject to Banner's acceptance at its home office.
HOLDING • The Court concludes that Banner's quotation was not an offer. If Banner's quotation were an offer, which empowered Kraft to form a contract through acceptance, then Kraft's purchase order would not be subject to Banner's acceptance at its home office. Rather, a contract would already have been formed.
HOLDING • Even if Banner had intended its quotation to be an offer, which Kraft was empowered to accept, Kraft's purchase order expressly conditioned any acceptance on Banner's assent to the terms and conditions contained in the purchase order.
UCC • The UCC states that: • A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed up-on, unless acceptance is expressly made conditional on assent to the additional or different terms.
PURCHASE ORDER PREVAILS BASED ON THESE FACTS • Kraft's purchase order states: "A PURCHASE ORDER WILL BE SUBJECT TO SELLER'S ACCEPTANCE OF THE FOLLOWING TERMS AND CONDITIONS," and expressly rejects the terms and conditions in any bid unless accepted in a signed, written instrument. • Kraft's purchase order made clear that it was unwilling to proceed in the absence of Banner's assent to the terms and conditions in the purchase order. Thus, even if Banner's quotation could be construed as an offer, the conditional nature of Kraft's purchase order made it a counter-offer, which thereby rejected the terms of Banner's offer.
HOLDING • Consequently, the limitation on consequential damages contained in the terms and conditions submitted with Banner's proposal is not part of the contract, but the express warranties contained within the terms and conditions of Kraft's purchase order are part of the contract.
SUMMARY RAILROAD PROPERTY DAMAGE RESULTING FROM BREACH OF CONTRACT - WHO PAYS • Is there a signed contract (vendor, contactor, shipper)? • What constitutes the contract? • Were favorable and enforceable terms and conditions properly incorporated? • Is there a quote and a purchase order? • Are the carriers rules and conditions implicated? • Are the carriers rule and conditions incorporated sufficiently into any transactional document with the shipper? • Who won the battle of the forms?
NEGLIGENCE – NO CONTRACTUAL RELATIONSHIP
EXPERTS 1. 2. 3. 4. 5. 6. 7.
Train Handling Track Construction and Maintenance Mechanical aspects of rail cars Mechanical aspects of locomotives Metallurgy Load Engineering Other – Barge Operation, Communication Tower Construction, etc.
Cause Code – M506 – Track Damage Caused By Non-Railroad Interference with Track Structure
Cause Code – M506 – Track Damage Caused By Non-Railroad Interference with Track Structure
Cause Code – M506 – Track Damage Caused By Non-Railroad Interference with Track Structure
DERAILMENT CAUSATION • A problem solving committee consisting of a representative from Engineering (track and signal), Transportation, Mechanical – Car, Mechanical - Locomotive, and other departments as necessary such as Load Engineering
FINDINGS FROM DERAILMENT INVESTIGATION 1. 2. 3. 4. 5.
Point of derailment Which wheel derailed first How the derailment occurred Why the derailment occurred Cause codes
EXPERTS 1. 2. 3. 4. 5. 6. 7.
Train Handling Track Construction and Maintenance Mechanical aspects of rail cars Mechanical aspects of locomotives Metallurgy Load Engineering Other – Barge Operation, Communication Tower Construction, etc.
Grade Crossing
Negligent Repair
Negligent Repair
Deficient Sealcoating
Deficient Sealcoating
Barge Allision With Bridge Protection
FAILURE OF SHIPPER TO FULLY CLOSE HOPPER DOOR
DAMAGES
TYPES OF DAMAGES RECOVERABLE FROM THIRD PARTIES 1. Damage to locomotives 2. Damage to railcars – if destroyed use depreciated value less salvage 3. Damage to track structure 4. Material (from outside vendors) 5. Material from railroad inventory 6. Damage to communications or other equipment 7. Damage to Bridge Fenders or Structure 8. Freight loss and damage 9. Train delay 10. Rerouting Costs
TYPES OF DAMAGES RECOVERABLE FROM THIRD PARTIES 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.
Inside labor cost Labor overburden Contracted services (re-railing, clearing etc.) Equipment Rental Environmental damage Environmental testing Security Services Injury to personnel Payments to adjacent property owners for damage to property Payment for use of adjacent or other property to stage recovery and repair 21. Payments to impacted local businesses
SOURCES OF FUNDS 1. The Third Party Causing the Damage 2. The Third Party’s Insurance Carrier 3. The Subcontractor of the Third Party Causing the Damage 4. The Subcontractor’s Insurance Carrier 5. Bond
DISCOVERY • • • • •
Document requests to party Non-Party Subpoena to Insurance Carrier Non-Party Subpoena to Insurance Broker Depositions Interrogatories
Keenan Cohen & Howard P.C.
Jeffrey D. Cohen, Esq. Keenan Cohen & Howard PC [email protected] 215-609-1104
