Brooklyn Eastern District Terminal v. United States

Background

A tug owned by a private towing company (the Integrity) collided with a U.S. government dredge (the Raritan) in New York Harbor on September 30, 1920. The tug company sued the United States for damages, and the government counterclaimed. The trial court found both vessels at fault, split fault equally, and awarded the tug owner repair costs plus demurrage—payment meant to cover the cost of hiring a substitute—at $150 a day for 78 days.

Reasoning

The tug company actually continued its business by using its two other tugs on overtime and never hired or paid for an extra vessel. The Court examined whether it was reasonable to let the company recover the full-time hire of a substitute that was neither needed nor actually employed. The opinion explained that demurrage may sometimes be measured by substitute hire or by the return on idle capital, but only when facts make that measure reasonable. Here the record showed no real extra expense, no proved extra wages, and no reliable figures for other measures, so the trial award was legally and factually excessive.

Real world impact

The Supreme Court affirmed the Court of Appeals’ decision excluding the demurrage award. That means a vessel owner who avoids expense by using existing resources cannot recover hypothetical hiring costs as damages. The ruling leaves room for recovery in other situations where a substitute was reasonably necessary or where loss of use can be shown with reliable figures, but it rejects awards based on imaginary or unproven expenses.