Opinion ID: 197477
Heading Depth: 3
Heading Rank: 1

Heading: Navieros

Text: 70 The breach of the Navieros time charter occurred when the vessel was diverted to the use of Comet, after performance of the Navieros contract commenced but before Navieros's cargo was loaded. Without noting the distinction, defendants assert that the measure of damages should be that which is used in cases where the owner breached the charter party by repudiating it before performance began. The general rule for recovery in that situation was stated long ago by Judge Learned Hand: the withdrawal of the ship entitled [the charterer] prima facie to damages measured by the difference between the hire reserved in the charter and the hire necessary to secure such another bottom. The Ada, 239 F. 363, 364 (S.D.N.Y.1916), rev'd on other grounds, 250 F. 194 (2d Cir.1918); see also Sanders v. Munson, 74 F. 649, 651 (2d Cir.1896); 2 Schoenbaum, supra, § 11-17, at 204-05 (The charterer's damages for cancellation are equal to the difference between the contract hire in the broken charter and the hire necessary to secure another vessel.). It seems reasonable to apply this general rule here, provided the victim of the breach is also allowed to recover out-of-pocket expenses incidental to preparing for the arrival of the ship for loading. 71 Inherent in that rule, of course, is a duty of mitigation; the victim of the breach must make reasonable efforts to locate a substitute vessel. See Glidden Co. v. Hellenic Lines, Ltd., 315 F.2d 162, 164 (2d Cir.1963); The Ada, 239 F. at 364; Sanders, 74 F. at 651, 2 Schoenbaum, supra, § 11-17, at 204-05. If the charterer is unable to locate a suitable substitute vessel, then the proper measure of damages for the breach is its lost profits. See Polar Steamship Corp. v. Inland Overseas Steamship Corp., 136 F.2d 835, 842 (4th Cir.1943); The Ada, 239 F. at 364. Here, the trial court found that Navieros was unable to locate an adequate substitute. Defendants argue that Navieros in fact found a suitable substitute, but did not use it. We review findings of fact for clear error. Roche v. Royal Bank of Canada, 109 F.3d 820, 827 (1st Cir.1997). 72 William Coleman's deposition testimony at trial and Kenneth Coleman's trial testimony were the only evidence offered by any of the parties on the question of mitigation. According to William Coleman's uncontroverted testimony, Navieros conducted an intensive but fruitless search for a replacement vessel. Cf. Polar Steamship Corp., 136 F.2d at 842 (The evidence is that efforts were made to obtain [another vessel] but without success.). It is true that Navieros learned about an available vessel and did consider using it in place of the M/V VASILIA EXPRESS, but decided in the end that this vessel was too slow. 20 Such a decision was within Navieros's rights. See Sanders, 74 F. at 652 (charterer under no obligation to accept a slower and smaller vessel than the [originally chartered vessel] had been represented to be). The district court was not obliged to credit William Coleman's testimony, but it is certainly not clear error for it to have done so. 73 Even using the rule advocated by defendants, therefore, the proper measure of damages for the breach here was Navieros's lost profits. 21 The court purported to apply such a measure, but defendants argue that it awarded Navieros lost revenues 22 instead, a far more generous dollar amount. Indeed, the court's choice of words was at times confusing; for instance, it titled the table of damages calculations Gross Loss of Revenue. We must look past the question of word choice and determine if the correct measure was applied. 74 These are the components of damages awarded Navieros: 75
76 (2) canceled bills of lading issued in Guatemala, representing $118,000 of freight charges for three voyages; 77 (3) freight charges [of $71,175] on southbound cargo received in Port Everglades, eventually returned to shippers; 78 (4) net loss of $3,377 over $26,000 worth of freight rerouted through another steamship line providing service to Guatemala. 79 From this Gross Loss of $259,552, the court subtracted charter hire expense of $57,600 and fuel expense of $19,000. The Net Loss was $182,952, and the court awarded damages in this amount. 80 That the court subtracted charter hire and fuel expense from the sub-total seems to indicate that, despite its choice of words, the court did not see the award as one of lost revenues per se. 81 However, a radically different conception of Navieros's lost profits is found in William Coleman's deposition. Coleman stated that Navieros expected to make $28,500 in profits from the shipping of cargo under the M/V VASILIA EXPRESS charter (this estimate included the exercise by Navieros of its option on a third round-trip). 82 Kenneth Coleman also testified at trial that Navieros charters approximately 50 voyages per year and that Navieros's 1995 net profits were roughly $495,000. The average profit per voyage is thus just under $10,000. Given this, it is hard to understand how the loss of the three M/V VASILIA EXPRESS voyages caused $182,952 in lost profits. 83 Because it is unclear on what basis the district court calculated lost profits, we vacate the damages award and remand the question of Navieros's damages to the district court for clarification.