## Facts

- Hector Martinez & Company shipped a 2400 Lima Dragline (used strip-mining machinery) from Ohio to Eagle Pass, Texas via rail under a single uniform bill of lading describing “used strip mining machinery and parts.”
- The dragline was transported on five separate railcars that arrived at different times; the last car arrived April 2, 1974, though Martinez alleged delivery should have been completed by March 1, 1974.
- The equipment was damaged in transit and required repairs costing $14,467, completed June 20, 1974.
- Martinez sought loss-of-use damages for the period it claimed the dragline was unavailable (March 1 to June 20), measured by alleged fair rental value totaling $117,600.
- Claims for repair costs and demurrage/storage charges were resolved; only the loss-of-use/delay-damages claim remained.
- The district court dismissed the loss-of-use claim under Rule 12(b)(6) on the ground that such damages were “special” and required pleading carrier notice of special circumstances; Martinez declined leave to amend and appealed.

## Issues

1. Whether loss-of-use damages measured by reasonable rental value for detention of income-producing equipment are “general” damages recoverable under the Carmack Amendment without specific notice to the carrier at contracting.
2. What portion of the claimed loss-of-use period is recoverable as the natural and proximate result of the carrier’s delay and damage.

## Decision

- The Fifth Circuit reversed the Rule 12(b)(6) dismissal and remanded.
- The court held that, for this type of shipment, rental-value loss-of-use damages can constitute general damages and therefore do not require specific notice.
- The court limited the scope of potential recovery, requiring proof that the claimed detention time and amount were reasonably attributable to the carrier’s breach, and remanded for trial on “some but not all” of the claimed damages.

## Legal Principles

- The Carmack Amendment permits recovery of damages for loss, damage, and delay in interstate rail shipments, and the delivering carrier may be liable for all recoverable damages.
- Whether damages are recoverable as general or special turns on common-law contract principles associated with Hadley v. Baxendale.
- When the nature of the shipped property makes loss of use the ordinary, foreseeable consequence of delay or damage (e.g., a large item of productive machinery), rental-value loss-of-use damages may be treated as general damages.
- Loss-of-use may be measured by the reasonable rental value of the detained property, without requiring proof of specific lost profits.
- Even where loss-of-use damages are generally recoverable, the shipper must prove proximate causation and reasonableness, including that the claimed period was not extended by unrelated causes and that repairs were pursued with reasonable diligence.

## Conclusion

The Fifth Circuit held that loss-of-use damages measured by reasonable rental value for detention of income-producing machinery may be general damages recoverable under the Carmack Amendment without special notice, but recovery is limited to the period and amount proven to be the natural, proximate, and reasonable result of the carrier’s delay and damage.


Hector Martinez & Co. v. S. Pac. Transp. Co., 606 F.2d 106 (5th Cir. 1979)