Opinion ID: 678497
Heading Depth: 4
Heading Rank: 2

Heading: Admissibility of Mitigation Evidence

Text: 70 Amoco argues that BNY should have mitigated damages by selling platinum futures contracts and that the district court erroneously refused to admit mitigation evidence. Amoco cites no case law directly on point, but essentially argues that under the law of New York, a plaintiff in a conversion action has a duty to mitigate. BNY, like Amoco, has found no cases directly on point. BNY does, however, cite one case in which a court held that a bailor under Article 7 had no duty to mitigate. Industrial Welding Supplies, Inc. v. Atlas Vending Co., Inc., 276 S.C. 196, 277 S.E.2d 885, 887 (1981). 71 Generally, the duty to mitigate is a limitation on consequential damages. See N.Y.U.C.C. Sec. 2-715(2)(a). BNY is not seeking consequential damages. Rather, it is seeking the value of the platinum on the date its demand was refused. See 2 White & Summers, Uniform Commercial Code Sec. 21-3, at 142. Moreover, it would appear that consequential damages are not available under Article 7. The U.C.C. provides that neither consequential or special nor penal damages may be had except as specifically provided in this Act or by other rule of law. N.Y.U.C.C. Sec. 1-106(1). Nothing in Article 7 specifically provides for consequential damages. Further, New York courts have held that in New York [t]he usual measure of damage, in event of nondelivery of goods by a bailee, is the market value on the date of the conversion. Procter & Gamble, 16 N.Y.2d at 352, 266 N.Y.S.2d at 790, 213 N.E.2d at 876-77 (citing McIntyre v. Whitney, 139 A.D. 557, 124 N.Y.S. 234 (1st Dept.1910), aff'd, 201 N.Y. 526, 94 N.E. 1096 (1911)). Thus, neither the U.C.C. nor the law of New York expressly provides for consequential damages in actions against warehousemen for failure to deliver. But see 2 White & Summers, Uniform Commercial Code Sec. 21-3, at 142 (upon proper proof the plaintiff should recover such consequential damages and ... would cite 1-103 as the source of another 'rule of law' (the common law) permitting recovery under 1-106). Because, under the U.C.C., the duty to mitigate is generally a limitation on consequential damages and because BNY does not seek consequential damages, we decline to impose a duty to mitigate upon the holder of a duly negotiated document of title whose demand for the goods covered by the document was improperly refused. 72 Amoco essentially urges this court to hold that the holder of a negotiated document of title has a duty to insure the goods against risks associated with non-delivery by the bailee. 7 This proposal, however, raises a number of potential problems: Is the holder to purchase the hedging contracts before or after demand has been made? If after, how soon after? How long a term should the hedging contracts have? How often must they be renewed? Is the cost of entering the hedging transaction recoverable as part of incidental damages? It is difficult for the holder to resolve some of these problems on its own because it cannot control whether the bailee will refuse to deliver or, if the bailee refuses, the holder cannot control how long the bailee will continue to refuse. Because the bailee controls whether and when the goods are delivered in response to the holder's demand, the costs of insuring against price declines following the failure to deliver should be placed on the bailee, not the bailor. Forcing the bailor to bear these costs would introduce an inefficiency into commercial practices--something that runs directly contrary to the purposes and policies of the U.C.C. Therefore, in the absence of a claim for consequential damages, we believe that the courts of New York would not impose a duty to mitigate upon the holder of a duly negotiated document of title whose demand for delivery is improperly refused. Because BNY had no duty to purchase financial contracts hedging against the risk of a decline in the value of the platinum following Amoco's improper refusal of BNY's demand for delivery, the district court properly excluded evidence pertaining to such contracts.