B-170070, December 29, 1971

B-170070, December 29, 1971

The Honorable L. Patrick Gray, III Assistant Attorney General Civil Division Department of Justice

Dear Mr. Gray:

Subject: Offer in compromise from Consolidated Freightways

Reference is made to your letter of December 10, 1971, file LPG:EIS:jps 77-1140, advising us of the increase to $125,000 in the amount offered to settle the Government's claim for $301,833.51. Such offer was made by telephone on December 9, 1971, by the attorney for Consolidated Freightways, Richard W. Galiher, Esq. You request our reasoned recommendation not later than December 30, 1971, as to the acceptability of this offer.

As you know, Consolidated has been attempting to settle the Government's claim for less than the full amount by a series of offers which have been rejected. The carrier initially offered to settle the claim for $24,871.08 then $65,000, the $100,000 culminating in the present offer of $125,000. In the previous correspondence relative to the prior settlement offers we have furnished a resume of and the complete file forwarded to our Office as to the facts relating to the claim and discussed certain legal principles on which we felt a favorable decision of a court might be predicated in the event the claim was litigated.

At a conference on December 2, 1971, attended by Edward I. Swichar of your Department, L. Mitchell Dick of our Office, Robert E. Phillips, Claims Manager of Consolidated, and Richard W. Galiher, attorney for Consolidated, the Government's claim and supporting evidence were reviewed. As a result of the meeting and upon reconsideration of certain aspects of the Government's claim and supporting evidence were reviewed. As a result of that meeting and upon reconsideration of certain aspects of the Government's claim we are now of the view that acceptance of the carrier's offer of $125,000 to settle the claim would be in the best interests of the Government.

The record shows by affidavit dated April 26, 1968, and undated letter addressed to OOSTTB, responding to its letter of August 16, 1968, which documents are marked with a yellow marker in the file, Russell E. Grow, Equipment Specialist, reported that the left rear leaf spring of the tractor pulling the missile semi-trailer had a break and the upper, outer portion of the break showed indications of oxidation which indicated to Mr. Grow that there was a possibility of a partial crack prior to the accident. Mr. Grow states that, since it was storming at the time of his examination of the wreck, the lack of oxidation on the remainder of the break indicated to him that it was a fresh break. Mr. Grow states that if the spring had been broken prior to the accident it would have been obvious to the driver during his normal walk around inspection of the unit; however, the crack in the spring would not have been obvious during this type of check. Mr. Grow explains that to discover the crack prior to the breaking would have required a more sophisticated inspection of the spring.

At the conference it was brought out that the unit had come to a complete standstill and then tipped over to one side, and it was indicated that the broken leaf spring caused or contributed to the tipping over. Although it is the opinion of Mr. Grow that the broken leaf spring did not contribute to the tractor and trailer overturning, Dr. Thomas Manos, a highly qualified expert, who could be expected to testify in Consolidated's behalf if the matter is litigated and who likely would make an impressive witness for the carrier, concludes that a principal contributing factor in causing the overturning of the unit was the broken left rear tractor suspension spring and that an ordinary examination with the naked eye would not have revealed the crack in the spring at the start of the trip in which the accident occurred. It was also brought out that the broken spring is no longer available, at least in its condition at the time of the accident, from which it might be implied that the Government destroyed material evidence which might have been used to show the Government was not without fault in the accident.

Another factor militating against the government's prospects if the matter is litigated would be the fact that the Government furnished this Government-owned unit which may have had a cracked rear leaf suspension spring and a defective windshield wiper knob, both of which contributed to the accident.

Although the amount of damages ($301,833.51) has not as yet been disputed, in the event of litigation it is not unlikely that Consolidated will bring the question of the amount of damages into issue. In this connection, the carrier's present limitations of liability to $100,000 which the Government apparently has accepted without changing the freight to be paid would be some evidence that the carrier would have to pay and the government would be willing to accept if a similar accident occurred currently.

Another factor to be considered in passing upon the acceptability of the offer would be the question of the forum in which the matter would be litigated. Likely, the setoff would be made from amounts due on numerous bills of lading, the amount of each bill of lading being less that $10,000. While in the course of the meetings the carrier's representatives have indicated suit would be brought in the Court of Claims, it is likely that the amount set off on a single bill of lading would be less that $10,000 and under 28 U.S.C. 1345(a)(2) and United States v. Louisville & N.R. Co., 221 F.2d 562, the carrier could sue either in the Court of Claims or a United States District Court, and in the latter could request trial by jury. The forum chosen by the carrier could have a considerable bearing upon the success of the carrier in its suit to recover any amount set off.

In view of the foregoing, and considering generally the risks of litigation, it is our opinion that acceptance of the offer would be in the best interest of the Government and we recommend its acceptance. k Further Action on the carrier's offer will be held in abeyance pending notice from your Department of acceptance or rejection of the offer.

We are enclosing our file in this case and an analysis of the accident by Dr. Manos, as to which he would be expected to testify if the matter were litigated. Please return the files with your advice.

Sincerely yours,

Paul G. Dembling General Counsel