Jos. Schlitz Brewing Co. v. Transcon Lines, 83-2196

• Decision Date: 20 March 1985
• Docket Number: No. 83-2196,83-2196
• Parties: JOS. SCHLITZ BREWING CO., a Wisconsin corporation, Plaintiff-Appellant, v. TRANSCON LINES, a California corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 171

757 F.2d 171

JOS. SCHLITZ BREWING CO., a Wisconsin corporation, Plaintiff-Appellant, v. TRANSCON LINES, a California corporation, Defendant-Appellee.

No. 83-2196.

United States Court of Appeals,

Seventh Circuit.

Argued May 29, 1984.

Decided March 20, 1985.

Robert H. Friebert, Friebert, Finerty & St. John, Milwaukee, Wis., for plaintiff-appellant.

Christopher Ashworth, Garfield, Tepper & Ashworth, Los Angeles, Cal., for defendant-appellee.

Before POSNER and Circuit Judge, FLAUM, Circuit Judges, and CAMPBELL, Senior District Judge. ^*

WILLIAM J. CAMPBELL, Senior District Judge.

Plaintiff, Jos. Schlitz Brewing Company, filed a complaint in district court under 49 U.S.C. Sec. 11707, the Carmack Amendment, seeking compensation for cargo damage caused to a shipment of empty beer cans. The cans had been shipped by the defendant motor carrier, Transcon Lines, from Memphis, Tennessee to Van Nuys, California. Some of the cans were dented or crushed in transit and the defendant's liability for that portion of the cargo damage is not at issue on this appeal. ¹ The remainder of the shipment was rendered unusable due to fiber contamination and the resulting loss was valued at approximately $235,000. After a non-jury trial, the district court determined that the defendant was not liable for that damage. 571 F.Supp. 52. Schlitz challenges that conclusion, claiming that the district court erred in its allocation of the burden of proof.

The material facts as found by the district court are not in dispute. The appellant operated breweries at various locations in the country and had its own Container Division to manufacture cans and bottles. However, Schlitz did not rely solely on its own Container Division. For example, in Memphis the American Can Company operated a manufacturing plant adjacent to the Schlitz facility that supplied cans directly to the brewery. In May 1977, the employees in appellant's Container Division went on strike. The breweries were still operating, however, and Schlitz had to make arrangements to provide cans for the beer that was still being produced. The appellant contracted with the American Can Company to increase its production of cans at the Memphis facility and then made plans to transport those cans to its other breweries. Schlitz arranged with the Southern Pacific Railroad to ship 10 million steel cans, labeled "Schlitz", to Van Nuys, California. Appellant also contracted with the defendant for the shipment of 3.1 million cans, labeled "Old Milwaukee", by motor carrier to the same destination.

When shipping empty cans the industry practice is to stack them vertically with the opening at the top and to separate the layers of cans with chipboard separators. The cans are stacked on pallets, braced with bands, and wrapped in cardboard shrouds and placed in the trailer or railroad car by the use of forklifts. This method is used throughout the industry even though it is inevitable that fiber dust will be generated as a result of the friction between the open tops of the cans and the chipboard separators. While the resulting dust is not desirable, it can be rinsed out prior to the filling of the cans and, therefore, this means of transporting cans is not impractical.

Schlitz utilized the method of packing cans described above in preparing the cargo for shipment to Van Nuys. The pallets to be sent were chosen at random from the cans produced by the American Can Company in Memphis (the other pallets were either shipped to other breweries or put into production at Memphis).

When Schlitz originally provided Transcon with the shipping instructions for its cans, it directed that 45-foot trailers with swing-out doors be utilized. Thereafter, James McNeer, manager of defendant's Memphis terminal, telephoned Ted Thurmon, inventory control coordinator at Schlitz's Memphis brewery, regarding the shipment. He asked whether 27-foot "pup" trailers could be used to ship the cans. This arrangement would be favorable to Transcon because it could transport the "pup" trailers in tandem from Arkansas to California thereby lowering its expenses. Mr. Thurmon stated, however, that the smaller trailers would be unsatisfactory. Thereafter, Mr. McNeer did in fact send twenty-four 45-foot trailers to the Memphis brewery to pick up the shipment of cans.

During the period between May 17 through May 21, 1977, approximately 3.1 million cans were loaded by Schlitz's personnel onto the trailers. The appellant had instructed its employees to take extra precautions to prevent losses on these shipments. Each trailer was loaded with eighteen pallets, the first two pallets being placed directly against the front wall of each trailer and the other pallets placed snuggly behind them. After loading each trailer, a small space at the rear was left empty and so two-by-four's were nailed to the floor directly behind the last pallets to brace them. Corrugated cardboard shrouds were placed along the sides of the palletized loads to guard against cans falling out during shipment.

After the loading, however, Transcon did not transport the cans directly to Van Nuys. Instead, the trailers were driven ten miles to defendant's West Memphis, Arkansas terminal. There Transcon employees were directed to unload the cargo and to transfer it to "pup" trailers. The reloading of the cargo was not performed with the same care as the original loading. The cardboard shrouds became detached and many of the pallets loosened. As a result, cans fell off the pallets. In only a few of the "pup" trailers were the pallets braced in any manner at all. In the space at the rear of the trailers, Transcon also added miscellaneous cargo from other shippers. The cans were then transported 1,800 miles to Van Nuys.

Upon arrival at the Schlitz brewery, plaintiff's employees found a great number of loose cans in the trailers. Furthermore, it was, of course, obvious that Transcon had not complied with Schlitz's instructions regarding the use of trailers. All of the cans were eventually transferred to a nearby warehouse and Transcon was notified that Schlitz intended to file a claim for cargo damage. It was subsequently determined that 60,000 cans were dented or crushed. More importantly, the entire load was contaminated with fibers from the chipboard separators. Schlitz's personnel testified that they had never observed a shipment of cans which contained such a large amount of fiber dust. The normal rinsing techniques were ineffective to remove the dust from the cans. For some reason, many of the fibers adhered to the enamel lining in the interior of the cans, thus rendering them unusable. ² Schlitz eventually had to sell the cans for scrap and suffered a loss valued at $234,408.42.

At trial the plaintiff presented the prima facie case required by the Carmack Amendment. It submitted evidence that the cans were delivered to the carrier in good condition, they arrived at the destination in a damaged condition, and that a specific monetary loss resulted, see Missouri Pacific Railroad v. Elmore and Stahl, 377 U.S. 134, 84 S.Ct. 1142, 12 L.Ed.2d 194 (1964). The trial judge specifically ruled that the plaintiff successfully carried its burden as to the elements of the prima facie case and that conclusion is not challenged on appeal. Under the Carmack Amendment, the burden then shifted to the defendant to demonstrate that it was free from negligence and that the damage was caused by (a) an act of God; (b) a public enemy; (c) an act of the shipper; (d) a public authority; or (e) an inherent vice or nature of the goods, see Martin Imports v. Courier-Newson Express, Inc., 580 F.2d 240, 242 (7th Cir.1978), cert. den. 439 U.S. 983, 99 S.Ct. 574, 58 L.Ed.2d 655 (1978), citing Missouri Pacific Railroad, supra, 377 U.S. at 137, 84 S.Ct. at 1144. Transcon's defense was that the cans were delivered to it in a defective condition. This was based on the expert testimony of Dr. Vandermeerssche. He stated that in fifty percent of the cans he examined from the Memphis to Van Nuys shipment the enamel coating contained imperfections and bubbles. His theory was that the chipboard fibers could not be rinsed out because of the surface tension resulting from the imperfections in the enamel. The plaintiff rebutted this testimony with its experts who testified that the bubbles and unevenness were not related to the adhesion of the chipboard fibers. Furthermore, the fact that the cans were chosen randomly from the ones produced in Memphis and that none of the other cans suffered from fiber contamination weighed against Dr. Vandermeerssche's explanation.

In its Findings of Fact the Court rejected Dr. Vandermeerssche's theory because his...