Vitol Trading S.A., Inc., Cross-Appellant v. Sgs Control Services, Inc., Cross-Appellee

GEORGE C. PRATT, Circuit Judge,

concurring:

I concur in the result and readily join in Judge Cardamone’s fine discussion in part II-A of the opinion. Special damages are inappropriate here because Vitol’s loss “flowed not from anything defendant did or did not do”, but instead from plaintiff’s “tender of nonconforming cargo”.

However, I am unable to join in part II-B of the discussion insofar as it opines that, even if SGS’s conduct had caused Vitol’s injury, Vitol would still not be entitled to special damages. In my view, that section is dictum, not only unnecessary to the decision, but also too narrow in its interpretation of New York law.

In New York’s leading case, Glanzer v. Shepard, 233 N.Y. 236, 135 N.E. 275 (1922) (Cardozo, J.), independent weighers were held liable for special damages when they negligently mismeasured a quantity of beans in transit from seller to buyer. Noting that the weighers had been aware of the contract between buyer and seller, had sent their measurement results to both parties, and had recognized that these results could affect the contract price, the court held that reliance by the buyer and seller on the weight results “was not an indirect or collateral consequence of the action of the weighers”; but rather, “was a consequence which, to the weighers’ knowledge, was the end and aim of the transaction.” Id. at 238-39, 135 N.E. at 275. In such circumstances, the court held, special damages are appropriate. Id.; Credit Alliance v. Arthur Andersen & Co., 65 N.Y.2d 536, 483 N.E.2d 110, 493 N.Y.S.2d 435 (1985) (awarding special damages to plaintiff, who relied on the results of a faulty audit report, because the defendant-auditor transmitted the results of its audit directly to plaintiff, because it knew that plaintiff “would be relying on the audit reports”, because defendant was in “direct communication” with plaintiff about the results, and because defendant knew the “end and aim” of the audit was to aid plaintiff in making a financial determination).

Here, as in Glanzer and Credit Alliance, SGS was aware of the contract between Vitol and Sun, it transmitted the results of its tests to both parties, and it recognized that these results would determine whether the naphtha was conforming. Under such circumstances, Vitol’s reliance on the test results was a consequence which, to SGS’s knowledge, “was the end and aim of the transaction”; therefore, if SGS’s conduct had caused Vitol’s injury, Vitol could collect special damages under New York law. Glanzer, 233 N.Y. at 239-42, 135 N.E. at 276-77; Credit Alliance, 65 N.Y.2d at 554, 483 N.E.2d at 121, 493 N.Y.S.2d at 445.