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July 18, 1990


The opinion of the court was delivered by: Newman, Senior Judge of the United States Court of International Trade, sitting by designation:



Plaintiff Novelty Textile Mills, Inc. ("Novelty") is a Connecticut Corporation with an office and place of business located at 1440 Broadway, New York, New York. Novelty is engaged in the business of manufacturing and selling specialty textiles. Defendant Central Transport ("Central") is a Michigan Corporation doing business in New York. Central is engaged in business as a common carrier transporting merchandise in interstate commerce by motor vehicle. Although jurisdiction is predicated on diversity of citizenship pursuant to 28 U.S.C. § 1332, the Court's rule of decision is drawn from 49 U.S.C. § 10730 and 11707 (1982 & Supp. V. 1987).

Central agreed to transport certain goods — rolls of Nomex Raschel Cloth ("Nomex") — under bill of lading No. 00957 for the account of Novelty from Westmont Industries, Inc. ("Westmont") of East Stroudsburg, Pennsylvania to Point Blank Body Armor, Inc. ("Point Blank") in Freeport, New York. Novelty Invoice No. 11184 indicates 1,195 yards of the material were to be delivered to Point Blank at a price of $29.50 per yard for a total of $35,252.50. Plaintiff's Exhibit 4 ("PX n").*fn1

The bill of lading, made out by Westmont, described the cargo merely as "woven synthetic piece goods." PX 5. Significantly, Central's rate scheme under the tariff schedule provided no classification for the Nomex other than woven synthetic piece goods. Tr. 106, 112.*fn2 Westmont did not declare any value for the goods on the bill of lading, see PX 5, and neither Novelty nor Westmont ever apprised Central of the extraordinary nature of the material. Tr. 61.

Defendant admits that while the fabric was in its possession a liquid contaminant spilled on the Nomex, thereby damaging the material. However, defendant contends it is not liable for the loss because: (1) plaintiff misclassified the goods on the bill of lading, i.e., did not declare any value on the bill of lading, and at no time apprised defendant that the material was an expensive fabric; and (2) the goods were properly cleaned and the contaminant removed by using hot water, which eventually resulted in no damage to the material. Moreover, defendant maintains that assuming arguendo the material was damaged, plaintiff failed to prove that it properly mitigated damages and hence defendant should not be held liable for speculative damages.

As noted, Novelty is a manufacturer and processor of textiles. The cloth in this case, Nomex, is a flame retardant mesh material which was especially prepared by Novelty for sale to Point Blank and ultimately to the United States Army to be used as vests for tank drivers. Nomex by design is extremely difficult to cut and is, in fact, used in ballistic fabrics, "to stop a knife or bullet. . . ." Trial Transcript at 42. ("Tr. x")

Since the material was intended for use by army personnel, Novelty was required, as part of the sale to Point Blank, to supply test reports from a government approved laboratory certifying that the fabric met all military specifications. Tr. 43. It was essential that the material be flame retardant for wear by tank drivers. Indeed, the military had changed its specifications from nylon — military specification MIL-C-8061 (which sells from $4 to $5 per yard) to Nomex — military specification MIL-C43989 (which sells for $29.50 per yard, see PX 1) precisely because the Nomex was flame retardant. "[P]revious vests were made of nylon and under the heat of . . . fire in the tank nylon melts and it becomes like lava, and if it gets on the skin it [causes] a terrible burn and can't be taken off. . . ." Tr. 40.

Upon receiving the material from Dupont, Novelty warped and knitted it.*fn3 After examining the knitted material, Novelty packaged it and sent it to the finisher where the material was scoured to remove any impurities and also heat set. The finisher, Westmont, was also a government-approved laboratory which certified that the material met all the required military specifications. Westmont processed the material and shipped it to Point Blank. Tr. 45.

During the transport from Pennsylvania to Freeport, New York, and while under the control of defendant, the goods were damaged by contact with a contaminant foreign substance, requiring the return of the goods to Westmont. Stipulated Fact 7. ("SF n").

The chief dispute between the parties at this point was whether the contaminant could be safely removed. However, Central never informed Westmont, nor is it clear, that Central was aware of the exact nature of the contaminant. Arthur Feinberg, president of Novelty Textiles, testified that Central sent a letter (he was uncertain) either to Novelty or Westmont stating merely that the contaminant could easily be removed with hot water. Tr. 64.

Concerning the contaminant and proper method of cleaning the Nomex, defendant introduced the deposition testimony of John Dougherty, president of ASW Environmental Consultants, a general testing laboratory. Dougherty testified:

  We tried rinsing the material with various
  solvents, organic solvents, which was not
  successful. It did not — it was not affected at
  all. We then took a portion of the contaminant off
  the material, submitted it and ran an infrared
  analysis on that to determine what it was. . . .
  [T]he infrared analysis indicated it was some type
  of polymer. . . . [G]iven that we tried probably
  one of the [best] polymer solvents which is simply
  water, and hot

  water took the [contaminant] off the base
  material with no apparent damage to the base
  material itself.

Tr. 93 (Deposition of John Dougherty at 7.)

Although Dougherty blandly testified that the contaminant could be removed with hot water, he could not, however, guarantee 100% removal because he had not been able to pinpoint the exact nature of the contaminant. Id. at 96. Furthermore, Dougherty had no idea that the base material was Nomex, although he had heard of Nomex; and neither was he aware that the base material was intended for use by the United States military nor that Nomex is supposed to be flame retardant. Without knowledge of both the base material and the contaminant, it is impossible to determine whether there has been complete removal of the contaminant from the base material. Id. Indeed, Dougherty further conceded that he did not test the contaminant to determine whether it was a flammable or non-flammable material. Id. at 96-97.

Plaintiff insists that unless 100% of the contaminant is removed, the base material would not be suitable for its intended purpose, i.e., as a fire retardant tank vest, especially when the contaminant may have been itself flammable. Because Nomex is used to manufacture products that protect the lives of army soldiers, the enormous potential liability in the form of products liability and personal injury actions, plaintiff argues, would be too great to consider selling contaminated material to the Army. Tr. 4, 59-60.

Consequently, plaintiff's underwriter attempted to liquidate the goods and employed M.F. Bank & Company ("Bank"), whose business is salvage and appraisal work for insurance companies, to determine the salvage value of the contaminated fabric. Glenn H. Davis, a field representative for Bank, inspected the goods at the Westmont facility in Pennsylvania. Davis, whose experience has been eight and one half years in the appraisal business, examined the rolls and estimated that the salvage value would be very low: five to ten percent of the initial reported value of $29.50 per yard. In a letter dated January 23, 1987 Davis explained his reasoning:

  The limited uses of this type of material along
  with the chemical involvement and the high-price
  structure makes the salvage potential of this
  stock very low.
  The involved material is deemed for military use,
  and in this writer's [Davis'] judgment, would not
  pass the ...

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