United States District Court, D. Maryland
THE HELLENIC MINISTRY OF NATIONAL DEFENSE, et al.
EAGLE VAN LINES, INC
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
For The Hellenic Ministry of National Defense, The Hellenic Armed Forces, The Hellenic Air Force Procurement Service, Plaintiffs, Counter Defendants: Max Francis Maccoby, LEAD ATTORNEY, Butzel Long Tighe Patton PLLC, Washington, DC; Richard Henry Gordin, Butzel Long PC, Washington, DC.
For Eagle Van Lines, Inc., Defendant, Counter Claimant: George Z Petros, George Z Petros Attorney At Law, Annapolis, MD.
DEBORAH K. CHASANOW, United States District Judge.
In order to resolve this five year dispute between units of the Greek government and a Maryland-based freight forwarding company concerning the shipment of military equipment, a bench trial was held from April 16 to April 24, 2015. Upon consideration of the evidence adduced at trial, and the parties' arguments with respect thereto, the court now issues findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52(a).
Plaintiffs and Counter-Defendants the Hellenic Ministry of National Defense, the Hellenic Armed Forces, and the Hellenic Air Force Procurement Service (collectively, " HAF" or " Plaintiffs" ) are military units within the Greek government. Plaintiffs brought this action against freight forwarder Eagle Van Lines (" EVL" or " Defendant" ) on March 18, 2013, seeking the release of items belonging to HAF held in EVL facilities and damages for their alleged unlawful retention. On June 14, 2013, Plaintiffs filed a first amended complaint asserting the following causes of action: (1) conversion (count I); and (2) breach of contract (count II). Plaintiffs sought declaratory judgment and injunctive relief, which they designated as counts III and IV of the amended complaint. (ECF No. 3). The court granted Plaintiffs leave to file a second amended complaint, which contained an additional count for replevin and/or detinue, but otherwise remained identical to the prior complaints. (ECF No. 57, second amended complaint).
Defendant counterclaimed against Plaintiffs for breach of contract (ECF No. 8). Defendant requested declaratory judgment and punitive damages, which relief it included as separate causes of action. (ECF No. 8, at 5-6).
The parties' contractual relationship began in 2005 when EVL first became the freight forwarder for Plaintiffs. As relevant to the current dispute, the parties entered into Contract No. 100/09, which covered EVL's provision of freight-forwarding services from March 1, 2009 through November 30, 2009. Plaintiffs were not able to enter into another contract with a freight forwarder for the period beginning December 1, 2009 because of a bidding dispute, so, in early January 2010, the parties discussed the terms of an interim contract - draft No. 47/10 - designed to cover the time between the expiration of the earlier contract and the resolution of the bid dispute.
On February 12, 2010, the Minister of National Defense issued a decision discontinuing EVL's services as a freight-forwarder.
HAF's materials continued to be shipped to EVL after the termination of its freight-forwarding services.
II. Findings of Fact and Conclusions of Law
Following the court's ruling on post-discovery cross-motions for partial summary judgment (ECF Nos. 40 & 41), the materials received by EVL up to February 24, 2010 were released to HAF on April 6, 2015. (DTX 4). The following issues remained for trial: (1) as to Plaintiffs' complaint, whether Defendant is liable for conversion for accepting and retaining goods received after February 24, 2010 and, if so, the appropriate award of damages; and (2) as to Defendant's counterclaim for breach of contract, whether Plaintiffs are liable and if so, the appropriate damage award. Plaintiffs seek the return of all materials belonging to HAF remaining in EVL's warehouse and compensatory damages for their unlawful retention in the form of damages for lost materials, lost technical documentation, expired materials, cost of human working hours to move spare parts, depreciation, and punitive damages. Defendant seeks payment of seventy-eight (78) outstanding invoices and pre-judgment interest.
A. Plaintiffs' Complaint
As explained in the prior opinion, in Maryland the common law tort of conversion contains two elements.
First, the plaintiff must prove the defendant exerted " any distinct ownership or dominion . . . over the personal property of another in denial of his right or inconsistent with it." Darcars Motors of Silver Spring, Inc. v. Borzym, 379 Md. 249, 260, 841 A.2d 828 (2004) (quotation omitted). " This act of ownership for conversion can occur either by initially acquiring the property or by retaining it longer than the rightful possessor permits." Id. Second, the defendant must have " an intent to exercise dominion or control over the goods which is in fact inconsistent with the plaintiff's rights." Id. at 836.
Sprint Nextel Corp. v. Simple Cell, Inc., Civ. No. CCB-13-617, 2013 WL 3776933, at *8 (D.Md. July 17, 2013). " The defendant may have the requisite intent even though he or she acted in good faith and lacked any consciousness of wrongdoing, as long as there was an intent to exert control over the property." Darcars, 379 Md. at 262. Conversion may occur in a variety of circumstances. A consignee who fails to return or pay for consigned goods may be held liable for conversion. See, e.g., Bacon & Assocs., Inc. v. Rolly Tasker Sails (Thailand) Co., 154 Md.App. 617, 632, 841 A.2d 53 (2004).
All of the materials that EVL received before February 24, 2010 have been released, thus the only remaining question is whether EVL converted the items received after February 24, 2010. EVL previously relied on the existence of a warehouseman's statutory lien as a justification
for conditioning the release of materials received after February 24, 2010 on payment of outstanding invoices by HAF. As explained in the memorandum opinion adjudicating the cross-motions for partial summary judgment, in Maryland, a warehouseman's statutory lien is conferred by Md. Code Ann., Com. Law § 7-209. Section 7-209(a) states, in relevant part:
A warehouse has a lien against the bailor on the goods covered by a warehouse receipt or storage agreement or on the proceeds thereof in its possession for charges for storage or transportation, including demurrage and terminal charges, insurance, labor, or other charges, present or future, in relation to the goods, and for expenses necessary for preservation of the goods or reasonably incurred in their sale pursuant to law.
(emphasis added). Thus, the existence of a warehouseman's lien hinges on whether EVL issued warehouse receipts for the items it retained after February 24, 2010 because no storage agreement existed between the parties at any time. At trial, Defendant did not produce any warehouseman's receipts and essentially abandoned its warehouseman's lien defense. EVL also stipulated that it did not submit any invoices for items received after February 24, 2010. (ECF No. 52, at 12, amended joint pretrial order).
EVL also stated that it continued to receive goods because it was listed as a freight-forwarder for HAF on the Military Assistance Program Address Directory (" MAPAD" ). EVL was removed from MAPAD as a freight forwarder by March 15, 2010, however. ( See PTX 82). Goods continued to be misdirected to EVL for some time after that period, (T. Georgakopoulos, 04/22/15), but even if EVL believed it had to accept shipments, it did not have any legal justification for retaining the goods for nearly five years. George Georgakopoulos testified that EVL housed three classified items in its warehouse that it was not authorized to ship to Stellar Maritime, the freight-forwarding company to which HAF requested that EVL forward materials. (T. 04/20/15). HAF requested that all unclassified materials be forwarded to Stellar Maritime, however. (PTX 24, HAF 000524). Mr. Georgakopoulos acknowledged that only three out of the approximately 2,000 items were classified.
Based on the foregoing, EVL has committed the tort of conversion.
Pursuant to Md. Rule 12-601(h), " [a]fter the issue of the right to possession before judgment is determined, the action shall proceed as an action for recovery of property after judgment under Rule 12-602." See Wallander v. Barnes, 341 Md. 553, 572, 671 A.2d 962 (1996) (" Modern replevin in Maryland is a pre-judgment, but post-probable cause determination, seizure." ). Rule 12-602, entitled " Recovery of Property or Value after Judgment - Detinue," provides, in turn, that " [a] judgment for the plaintiff shall award possession of the property or, in the alternative, payment of its value." Md. Rule 12-602(d)(1). Such judgment must " separately set forth the value of the property and any amount awarded for damage to or detention of the property." Id. Pursuant to Md. Code Ann., Cts. & Jud. Proc. § 11-104(a), " [i]n an action of detinue a plaintiff may recover the personal property and damages for the wrongful detention of the property."
It is uncontested that HAF has a right to possession of the withheld materials that were received by EVL after February 24, 2010 and for the reasons explained, EVL has offered no legal justification for conditioning their release. Accordingly, EVL will be ordered to release to HAF the items received by EVL after February 24, 2010.
A court sitting in diversity must apply state law governing the threshold of proof necessary for a damages award and the amount of that award. See Defender Indus., Inc. v. Nw. Mut. Life Ins. Co., 938 F.2d 502, 504-05 (4th Cir. 1991) (en banc). " The measure of damages for the conversion of a chattel is the market value of the chattel at the time and place of conversion plus interest to the date of judgment." Staub v. Staub, 37 Md.App. 141, 145, 376 A.2d 1129 (1977). Here, the actual items have been or will be returned to Plaintiffs. There is no evidence that, for most of the items, their market value was diminished due to the detention. Nor have Plaintiffs provided any evidence of the monetary value of any particular item or sought interest. The exception is the expired items which lost their entire value due to the detention. EVL has not contested that assessment and $67,768.59 will be awarded as damages to Plaintiffs for the expired items.
Plaintiffs do seek additional damages, however. " As in other tort actions, additional damages adequate to compensate an owner for other injurious consequences which result in a loss greater than the diminished or market value of the chattel at the time of the trespass or conversion may be allowed unless such claimed damages are so speculative as to create a danger of injustice to the opposite party." Id. at 145-46 (emphasis added); United States v. Arora, 860 F.Supp. 1091, 1100 (D.Md. 1994) (acknowledging the caveat from Staub that compensatory damages may not be so speculative as to create a danger of injustice). Pursuant to Md. Code Ann., Cts. & Jud. Proc. § 11-104(a), " [i]n an action of detinue a plaintiff may recover the personal property and damages for the wrongful detention of the property." To be recoverable, damages must be " reasonably certain" and not " based on speculative, remote, or uncertain" figures. Dierker v. Eagle Nat. Bank, 888 F.Supp.2d 645, 658 (D.Md. 2012); Hoang v. Hewitt Ave Assocs., LLC, 177 Md.App. 562, 936 A.2d 915 (2007). Under Maryland law, " [i]f the fact of damage is proven with certainty, the extent or the amount thereof may be left to reasonable inference." David Sloane, Inc. v. Stanley G. House & Assocs. Inc., 311 Md. 36, 41, 532 A.2d 694 (Md. 1987) (internal quotation marks omitted).
a. July 2014 Damage Report
Captain Konstantinos Katirtzidis provided testimony regarding Plaintiffs' damages and prepared a damage report. Captain Katirtzidis joined the military in 2000 as a military student, obtaining a bachelor's degree in 2004. (T. 04/16/15). He studied economic theory and policy during his undergraduate studies. He then obtained a master's degree in Philosophy of Economics. (T. 04/16/15 & 04/17/15). He began a PhD program in May 2007 and finished his dissertation on macroeconomics and economic policy in December 2012. (T. 04/17/15). From 2006 until 2009, he served in the procurement agency with the Hellenic Air Force where he was involved with procurement bids, appropriation, and negotiations. In November 2009, he was promoted to be a member of the Directorate of Finance for Economics within the General Staff, where he issued directives to units of the Hellenic Air Force concerning procurement issues. He remained
there for five years, after which point he was transferred to serve as a supervisor in an accounting department. (T. 04/16/15).
As will be explained in more detail below, in preparing his damage report, Captain Katirtzidis obtained data from the appropriate units within the Hellenic Armed Forces. He prepared a damage report in January 2014 with appendices quantifying each damage category sought by Plaintiffs. After the January 2014 damage report, Captain Katirtzidis ordered another review by the logistics department to verify damages for lost items, which resulted in the amended July 2014 damage report. The July 2014 damage report removes from the damage calculation some of the compensation originally sought in the January report. (PTX 104). Captain Katirtzidis did not personally review all of the primary information supporting the damages calculations; rather, he compiled the data provided to him by other offices and in some instances, reviewed representative samples of the primary documentation. At least some primary documents were included in two envelopes (one envelope with supporting documentation regarding depreciation that accompanied the January 2014 damage report, and another envelope supporting damages for lost items that accompanied the June 2014 damage report), but these envelopes were not provided to defense counsel during discovery. Captain Katirtzidis stated that his final damage report was submitted to the appropriate branches of the Hellenic Armed Forces for approval, and was approved by his command. (T. 04/20/15).
Plaintiffs' counsel attempted to qualify Mr. Katirtzidis as a " damages" expert. However, as the court explained to counsel throughout trial, Captain Katirtzidis is a fact and summary witness, much like Stephanie Bo and Ngai Siu who testified on behalf of the defense. Captain Katirtzidis's " expertise" is only in compiling economic information or data and presenting it in a way that quantifies damages. He certainly is not an independent witness, given his position within HAF and the fact that his " expert report" had to be approved by his command.
This limited view of his purported expertise is exemplified by a recent opinion issued by the United States Court of Appeals for the Fourth Circuit:
Rule 702 of the Federal Rules of Evidence permits expert witnesses to testify if their " scientific, technical, or other special knowledge will help the trier of fact to understand the evidence or to determine a fact in issue," such as the amount of damages due. Fed.R.Evid. 702. The question of whether a witness is qualified to testify is context-driven and " can only be determined by the nature of the opinion he offers." Gladhill v. Gen. Motors Corp., 743 F.2d 1049, 1052 (4th Cir. 1984). Because our general preference is to admit evidence that will aid the trier of fact, the expert need only have " sufficient specialized knowledge to assist jurors in deciding the particular issues in the case." Belk, Inc. v. Meyer Corp., __ U.S. __, 679 F.3d 146, 162 (4th Cir. 2012) (internal quotation marks omitted); see Westberry v. Gislaved Gummi AB, 178 F.3d 257, 261 (4th Cir. 1999) ( " Rule 702 was intended to liberalize the introduction of relevant expert evidence." ); Thomas J. Kline, Inc. v. Lorillard, Inc., 878 F.2d 791, 799 (4th Cir. 1989) (" Generally, the test for exclusion is a strict one, and the purported expert must have neither satisfactory knowledge, skill, experience, training nor education on the issue for which the opinion is offered." ). In order to offer an opinion, " one . . . need not be precisely informed about all details of the issues raised" or even have prior experience with the particular subject the testimony concerns. Lorillard, 878 F.3d at
799; see Fed.R.Evid. 703 (providing that " [a]n expert may base an opinion on facts or data in the case that the expert has been made aware of [at trial] or personally observed." ).
In this case, Appellant " reads this [qualification] requirement far too narrowly." Belk, 679 F.3d at 162. Although Cohen had no prior experience with maritime contracts, his opinion did not call for such expertise. Rather, his function was to calculate Appellee's damages. Cohen has an MBA in economics. He created mathematical formulas for this case after reviewing information that he obtained before trial by personally interviewing Appellee's employees and reading their deposition testimony. Cohen then formed his opinion on the extent of Appellee's losses by applying his formulas.
. . . Although Cohen relied on information provided by other witnesses at trial to devise his formula, the Federal Rules of Evidence specifically authorized him to do so. See Fed.R.Evid. 703. . . . Thus, we conclude that the district court did not abuse its discretion by permitting Cohen to offer expert testimony as to his calculation of Appellee's damages for demurrage and changes in commercial terms.
RG Steel Sparrows Point, LLC, f/k/a Severstal Sparrows Point, LLC v. Kinder Morgan Bulk Terminals, Inc., d/b/a Kinder Morgan Chesapeake Bulk Stevedores, 609 Fed.Appx. 731, 2015 WL 1905884, at *6 (4th Cir. 2015) (unpublished opinion) (emphases added).
To the extent that calculation of damages is useful, the July 2014 damage report will be considered. The basis for any calculation is another matter. The witness accumulated financial and logistic information provided to him by other departments and synthesized it for the court in the appendices to the July 2014 damage report. To that extent, his efforts were anything but independent and, to be credited, would have to be supported by other evidence.
b. Lost Items
Plaintiffs seek $2,370,653.39 as compensation for items that they believe EVL lost and an additional $4,447 in damages for " lost technical documentation." (PTX 104, Tables 3 & 7 to Appendix A to the July 2014 damage report).
Colonel Konstantinos Vlassis provided testimony regarding how the underlying information that formed the basis of Colonel Katirtzidis's damage report - including
damages for lost items - was obtained and verified. Colonel Vlassis testified that on March 20, 2010, Nikolaos Klothakis, an Air Force officer resident at EVL's warehouse who served as a liaison between the Hellenic Armed Forces and EVL, sent via email to the Hellenic Air Force a list of items purportedly held by EVL. (T. 04/20/15; PTX 43). The cover letter of this email is written in Greek and Plaintiffs have not translated the email. Colonel Vlassis testified that the email from Mr. Klothakis with an attached list showing 1,642 items purportedly housed in EVL's facilities, (PTX 43, HAF 000271-000301), responded to an order from the Hellenic General Staff that he send this report. (T. 04/20/15). Colonel Vlassis stated that supply depot maintains its own database comprised of information obtained from: Foreign Military Sales (" FMS" ) information systems; Security Assistance Management Manual (" SAMM" ); Air Force Security Assistance Center (" AFSAC" ); and information from invoices or packing lists from vendors. ( Id. ). He stated that the list provided in the email from Mr. Klothakis was cross checked with supply depot's database in 2010 and that the supply depot database subsequently was updated after the cross check to include information from the list provided by Mr. Klothakis.
Three additional exhibits purport to show materials that Plaintiffs at some point believed were retained by EVL: Plaintiffs' Exhibits 90 and 105 and Defendant's Exhibit 2. Defendant's Exhibit 2 and Plaintiffs' Exhibit 105 appear to be identical. Colonel Vlassis testified that Defendant's Exhibit 2 is a better-formatted version of Plaintiffs' Exhibit 90. (T. 04/20/15). All three exhibits appear to reflect the same information. Colonel Vlassis stated that Plaintiffs' Exhibit 90 is an earlier version of supply depot's database reflecting what supply depot understood EVL was holding in 2012 and 2013. Colonel Vlassis testified that Plaintiffs' Exhibit 90 (which mirrors the information in Plaintiffs' Exhibit 105 and Defendant's Exhibit 2) reflects information that supply depot received from FMS, invoices of vendors, and information provided by Mr. Klothakis in May 2010. ( Id. ).
Then, from October 15 through October 18, 2013, Colonel Vlassis led a Committee comprised of two other individuals (Wing Commander Konstantinos Papathanasiou and Flight Lieutenant Leonidas Kantzidis), in conducting an inventory or inspection of HAF materials in EVL's warehouse in Temple Hills, Maryland. (T. 04/20/15). Following the inventory, he prepared a report. (PTX 96). Importantly, the report states, inter alia :
(3) The inventory process was agreed upon by the attorneys Mr. Max Maccoby (of the law firm " Butzel Long, PC" who represents the Hellenic Republic) and Mr. George Petros, and was conducted as follows:
(a) EVL company forwarded initially - through e-mail - the Committee and the law firm " Butzel Long, PC" the total list
of the retained materials which - according to the opposing party - were stored in ...