MCI Commc'ns Servs., Inc. v. CMES, Inc.

• Decision Date: 18 June 2012
• Docket Number: No. S12Q0941.,S12Q0941.
• Citation: 291 Ga. 461,12 FCDR 1872,728 S.E.2d 649
• Parties: MCI COMMUNICATIONS SERVICES, INC., d/b/a Verizon Wireless v. CMES, INC.
• Court: Georgia Supreme Court

291 Ga. 461

728 S.E.2d 649

12 FCDR 1872

MCI COMMUNICATIONS SERVICES, INC., d/b/a Verizon Wireless

v.CMES, INC.

No. S12Q0941.

Supreme Court of Georgia.

June 18, 2012.

William Drummond Deveney, Brent L. Wilson, Elarbee, Thompson, Sapp & Wilson LLP, Atlanta, Anthony J. Jorgensen, Oklahoma City, OK, James J. Proszek, Tulsa, OK, Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C., for appellant.

Jason Peter King, Hall, Booth, Smith & Slover, Atlanta, for appellee.

CARLEY, Chief Justice.

On March 30, 2007, CMES, Inc. was performing excavation work in Stone Mountain, Georgia, when, at around 9:41 a.m., it accidentally severed an underground fiber-optic cable owned by MCI Communications Services, Inc. The severance rendered the cable incapable of transmitting telecommunications traffic. According to MCI, the severance caused 568,000 switched calls to be blocked and provoked 242 complaints from customers whose service was interrupted. Further communications disruption would have resulted except that MCI had spare restorative capacity that it had previously installed for $6.4 million. MCI Field Operations identified the location of the severance by 10:00 a.m., the first optical system was restored by 1:16 p.m., 95% of the transmission systems on the severed cable were back up by 3:45 p.m., and all traffic impacting systems on the cable were restored by 5:42 p.m. Thus, the severed cable was back to full capacity usage in about eight hours.

Due to MCI's spare restorative capacity, it did not need to rent substitute capacity from any other carrier during the cable's downtime, and, in fact, there is no such market for renting optical carriers on an hourly basis. Although the severance impacted service, causing blocked calls and customer complaints, MCI has produced no evidence that it issued any customer refunds or credits, lost any customers, or lost any profits due to the severance. However, MCI sued CMES in the United States District Court for the Northern District of Georgia on theories of negligence and trespass, and sought damages consisting of the costs to repair the severed cable in the amount of $27,926.86, compensation in the amount of $362,468.10 for the loss of use of the cable during the time it took to repair it, and punitive damages. MCI based its amount of loss of use damages on the theoretical rental value of the full capacity of the severed fiber-optic cable for the approximately eight hours that it was being repaired. CMES moved for partial summary judgment on, among other things, the claim for the loss of use damages, contending that MCI cannot show any monetary loss because its service was only momentarily interrupted due to the spare restorative capacity and that estimating loss of use damages on a theoretical rental value would be improper. MCI responded that it should not be punished for having the foresight to install a backup system at considerable cost. The district court granted partial summary judgment in favor of CMES, holding that MCI could not recover loss of use damages. On appeal, the United States Court of Appeals for the Eleventh Circuit certified the following question to this Court:

Under Georgia law, may a telecommunications service provider whose cable is severed recover loss-of-use damages measured by the rental value of substitute cable when it has not rented such cable or otherwise incurred any monetary loss apart from the cost of repair?

MCI Communications Services v. CMES, 669 F.3d 1313, 1314 (11th Cir.2012).

Loss of use damages are a type of compensatory damage, and the award thereof has long been approved by Georgia courts. See F.H. Ross & Co. v. White, 224 Ga. 324, 325(1), 161 S.E.2d 857 (1968); Doughty v. Simpson, 190 Ga.App. 718, 721(3), 380 S.E.2d 57 (1989). Therefore, an examination of Georgia law regarding the purpose of loss of use and other compensatory damages will inform our analysis of whether MCI is entitled to loss of use damages under the circumstances presented here.

“Damages are given as compensation for injury....” OCGA § 51–12–4. Under Georgia law, an injury to a person or damage to property is required before tortious conduct is actionable. Synalloy Corp. v. Newton, 254 Ga. 174, 177(2), 326 S.E.2d 470 (1985). Moreover, excluding the situations where the law presumes injury, a negligent act does not result in tortious conduct unless and until an injury to a person or damage to property has been caused. See Tante v. Herring, 264 Ga. 694–695(1), 453 S.E.2d 686 (1994); Parris v. Atlanta, Knoxville & Northern R. Co., 128 Ga. 434, 437–438(1), 57 S.E. 692 (1907); Conner v. Hart, 252 Ga.App. 92, 94(1)(a), 555 S.E.2d 783 (2001); Pinholster v. McGinnis, 155 Ga.App. 589(1), 271 S.E.2d 722 (1980). “[S]ome injury [or damage]—even if small or nominal—is necessary. [Cit.]” Conner v. Hart, supra. For example, in Hortman v. Cantrell, 173 Ga.App. 429, 326 S.E.2d 779 (1985), the Court of Appeals, applying the fair market value rule of computing damages, held that plaintiffs could not recover damages against a contractor who built their house contrary to their specifications because the actual completed home was worth substantially more than the promised home.

“[T]he purpose of damages is to place an injured party in the same position as it would have been in had there been no injury or breach of duty, that is, to compensate for the injury actually sustained.” Home Ins. Co. v. North River Ins. Co., 192 Ga.App. 551, 558(6), 385 S.E.2d 736 (1989). See also John Thurmond & Assoc. v. Kennedy, 284 Ga. 469(1), 668 S.E.2d 666 (2008). In a negligence action, “an out-of-pocket measure of damages is commensurate with the culpability of the tortfeasor, who acted negligently, rather than intentionally or maliciously. [Cit.]” BDO Seidman v. Mindis Acquisition Corp., 276 Ga. 311, 312(1), 578 S.E.2d 400 (2003). “ ‘The rationale of damages, as in this case, is to compensate the plaintiff and not to unreasonably burden the defendant beyond the point of compensating the plaintiff.’ ” Atlanta Recycled Fiber Co. v. Tri–Cities Steel Co., 152 Ga.App. 259, 265(3), 262 S.E.2d 554 (1979). The basic tenet under Georgia law is “that compensation, not enrichment, is the basis for the award of damages. [Cits.]” Home Ins. Co. v. North River Ins. Co., supra. Generally, compensatory damages are given “where an injury is of a character capable of being estimated in money.” OCGA § 51–12–4.

“Where a party sues for damages, he has the burden of proof of showing the amount of loss in a manner in which the jury or the trial judge in nonjury cases can calculate the amount of the loss with a reasonable degree of certainty.”

Lester v. S. J. Alexander, 127 Ga.App. 470, 471(1), 193 S.E.2d 860 (1972). See also Universal Credit Co. v. Starrett, 61 Ga.App. 132, 135(2), 6 S.E.2d 80 (1939).

The loss of use of damaged but repairable personal property measured by the reasonable rental rate has its roots in cases involving injury to domestic animals such as horses or mules and in automobile cases. See Atlanta & West Point R. Co. v. Hudson, 62 Ga. 679(2) (1879); Georgia R. & Elec. Co. v. Wallace & Co., 122 Ga. 547, 50 S.E. 478 (1905). However,

the maximum recovery for a repairable [property] including loss of use may not exceed value before the injury. [Cits.] This ceiling removes temptation for a party to seek to make a profit out of the unfortunate occurrence and at the same time makes him financially whole.

Firestone Tire & Rubber Co. v. Jackson Transp. Co., 126 Ga.App. 471, 478(2), 191 S.E.2d 110 (1972). Moreover, loss of use damages are only recoverable if the personal property was impaired but not destroyed. If the property is destroyed, then the damages would be the full market value of the property at the time of the impairment or loss, and thus “further recovery would be barred as exceeding the maximum that is otherwise allowable.” (Emphasis omitted.) Boral Bricks v. Old South Transp. Mgmt., 198 Ga.App. 678, 679(1), 402 S.E.2d 777 (1991). In fact, the principle that a plaintiff cannot recover an amount of damages against a tortfeasor greater than the fair market value of the property prior to the impairment is of such great import that a plaintiff seeking damages only for the amount of repairs on the property must still provide evidence of the fair market value of the property before the impairment in order to prevail. See Canal Ins. Co. v. Tullis, 237 Ga.App. 515, 516(1), 515 S.E.2d 649 (1999); Goss v. Total Chipping, 220 Ga.App. 643, 647(5)(a), 469 S.E.2d 855 (1996), abrogated on other grounds, Webster v. Boyett, 269 Ga. 191, 196(2), 496 S.E.2d 459 (1998).

Applying the legal principles cited above, it is clear that MCI cannot recover loss of use damages absent some showing of monetary loss apart from the cost of repair. An injury to a person or damage to property is required for a tort to be actionable, and MCI did not expend any money to keep its system running, nor did it suffer any lost profits, and thus it has failed to show damage qualifying as loss of use that would require compensation. Moreover, another underlying principle of compensatory damages law is not triggered here, that is, that the purpose of damages is to put the aggrieved party in the position, as near as possible, as he or she would have been without the injury or damage. In the present case, MCI cannot argue that it would not have invested in the spare restorative capacity if the severance had not occurred. The spare restorative capacity was built prior to the severance, and its purpose was to ensure the ability to reroute telecommunications traffic in the event of any outage or when such a reroute is needed in the ordinary course of business. To require CMES to reimburse the costs of a system that MCI uses for several purposes and for all kinds of outages, including those caused by MCI or other third parties, would be inequitable and would result in placing MCI in a position significantly better than it would have been without...