220 F. Supp. 3d 812
W.D. Ky.2016Background
- Level 3 Communications operates a fiber‑optic cable (the Cable) between Louisville, KY and Portland, TN; TNT severed the Cable during excavation on Oct. 3, 2012.
- Level 3 alleges 6.3 hours of lost use affecting 18,816 DS‑3s (≈841 Gbps) and seeks $3,369,894.42 in damages (repair costs + $3,308,605.44 loss‑of‑use).
- Level 3’s network has redundant capacity and can reroute traffic; Level 3 contends some service was interrupted and that redundancy is reserved for emergencies.
- Level 3 calculated loss‑of‑use by prorating monthly/installation DS‑3 rates from third‑party carriers for 6.3 hours, but never actually rented substitute capacity and admitted it has no record of pecuniary loss (lost profits, refunds, lost customers).
- TNT moved for partial summary judgment challenging only Level 3’s loss‑of‑use measure; the court considered (1) whether loss‑of‑use damages are available and (2) whether Level 3’s rental‑cost methodology is an appropriate measure.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Availability of loss‑of‑use damages for damaged fiber‑optic cable | Level 3: Kentucky law permits loss‑of‑use where owner is deprived of use (6.3 hours); redundancy reserved for emergencies supports recovery | TNT: Redundant capacity allowed immediate rerouting so no compensable loss of use | Court: Loss‑of‑use damages available; evidence that redundancy was emergency‑only and some service interruption occurred means recovery may be proper |
| Proper measure of loss‑of‑use damages | Level 3: Theoretical cost of renting 18,816 DS‑3s for 6.3 hours (prorated monthly/installation charges) reflects rental value of lost use | TNT: No hourly rental market for DS‑3s; prorated rental is speculative and would produce a windfall | Court: Rejected Level 3’s DS‑3 rental‑cost methodology as unreasonable and speculative; rental value measure inappropriate here |
| Effect of not actually renting substitute capacity or having pecuniary loss | Level 3: Recovery does not require actual rental or demonstrable pecuniary loss; owner’s right to use is compensable | TNT: Because Level 3 neither rented replacement nor suffered pecuniary loss, rental‑based damages should be barred | Court: Failure to rent and lack of pecuniary loss do not automatically bar loss‑of‑use recovery; however measurement must be reasonable and supported by a market |
| Unit of measure (DS‑3s vs. transport systems) | Level 3: DS‑3 is the industry common denominator and appropriate basis for calculation | TNT: DS‑3 lines are typically multiplexed into higher‑bandwidth OC systems; using individual DS‑3 rental rates ignores actual practice and inflates damages | Court: Criticized use of 18,816 DS‑3 lines without considering OC transport practice; methodology unsupported and unreasonable |
Key Cases Cited
- Schulte v. Louisville & N.R. Co., 128 Ky. 627, 108 S.W. 941 (recognizing loss‑of‑use damages for injury to property)
- Louisville & I.R. Co. v. Schuester, 183 Ky. 504, 209 S.W. 542 (rental value is relevant measure of loss of use)
- Southern Ry. in Ky. v. Kentucky Grocery Co., 166 Ky. 94, 178 S.W. 1162 (owner may recover reasonable value of use while property is repaired)
- Brooklyn Eastern Dist. Terminal v. United States, 287 U.S. 170 (distinguishes spare‑boat cases; use of existing business resources can preclude recovery for substituted costs)
- Mastec, Inc. v. MCI WorldCom Network Servs., 995 So.2d 221 (Fla. 2008) (no loss‑of‑use when traffic instantly reroutes to redundant capacity)
- OSP Consultants, Inc. v. MCI WorldCom Network Servs., 266 Va. 389, 585 S.E.2d 540 (refusing recovery where redundant capacity used in ordinary course)
- MCI Comm’n Servs. v. CMES, Inc., 291 Ga. 461, 728 S.E.2d 649 (rental‑value method inappropriate where no short‑term market for capacity)