The Problem: No accounting provided in support of salvage returns.
The Key Point: A duty to mitigate losses exists even after a wrongful rejection.
The Solution: Truck brokers must be prepared to properly manage rejected loads.
QUESTION: We are a truck broker based in the Midwest. Blue Book recently wrote an assessment which agreed with us that the receiver wrongfully rejected a shipment consisting of 20 different lots of fresh produce to the carrier. The carrier did absolutely nothing wrong here and yet the receiver turned the truck away, leaving it to us to salvage all these different lots, including Brussels sprouts, spring mix, and baby spinach.
We are a truck broker, not a produce vendor! We were therefore surprised when Blue Book’s assessment concluded that the receiver had a valid claim against us because the salvaging firm that worked this shipment on consignment failed to properly support its salvage returns. Can you please explain more fully?
ANSWER: We agree with you that, under these circumstances, a receiver should not expect market-level salvage returns following its wrongful rejection of the product. However, even following a wrongful rejection, you have a fundamental obligation to take reasonable steps to mitigate losses, and an accompanying duty to provide a full accounting of the salvage returns.
The fact that you salvaged the product through a third-party wholesaler does not relieve you of these obligations. You are entitled to a full accounting from the salvaging firm, just as the receiver is entitled to a full accounting from you.
In essence, your firm found itself in possession of a commercially valuable asset (i.e., a shipment of fresh produce) that needed to be responsibly liquidated. Unfortunately, however, you have been unable to support your significantly below-market salvage returns with a detailed accounting and government inspection. In our view, this is inconsistent with your duty to responsibly liquidate this asset.
If, on the other hand, your salvage returns were properly accounted for (with a detailed accounting and inspection certificate), then—especially in light of the receiver’s wrongful rejection—we would be inclined to give you the benefit of the doubt with respect to the reasonableness of the salvage proceeds. This is consistent with industry precedent and protects those firms that make reasonable efforts to resell distressed and/or rejected product, provided they fully account for their sales.
But in the absence of a proper accounting to establish what this product was sold for, what deductions were taken, when the product was sold, and the condition of the product, we must conclude that you have failed to properly account for the resale of this shipment.
Lastly, although we acknowledge that your business is truck brokerage and not produce sales, rejections are a daily occurrence in the fresh produce industry. Truck brokers doing business in this industry need to be prepared to competently manage the salvage of rejected loads, which includes securing proper accountings in support of proffered salvage returns.
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