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Smoke Screen
by Ron Davis

Payment for smoke damage to merchandise of a Massachusetts shopping center tenant will be less than half the amount the tenant had hoped for.

The shopping center, located in the Boston area, was the site of a fire that caused the smoke damage to the merchandise of the tenant--a Radio Shack electronics retailer. That fire started next to the Radio Shack operation in a pet supply store whose tenant was later found to be negligent in maintaining his electrical wiring.

But a dispute soon arose over payment for the smoke-damaged Radio Shack merchandise. Since the pet supply store operator was responsible for the fire, he would have to reimburse Radio Shack for its losses. But how much would that payment be?

The Radio Shack tenant argued that the payment should equal the retail value of the damaged inventory at the time of the fire. That value was estimated at $262,000. The pet supply store tenant countered that the inventory's wholesale cost of approximately $120,000 should be the amount he owed. Any amount greater, he added, would result in a "windfall" for the Radio Shack tenant.

To support his argument, the pet supply store tenant pointed out that a week after the fire, an advertisement appeared for a "Smoke Sale" at the Radio Shack store, with savings to customers of "up to 50% off."

The Radio Shack tenant eventually sued, seeking the full retail value of the damaged merchandise. But a Massachusetts jury awarded only the wholesale value. The Radio Shack tenant appealed.

A Massachusetts appellate court agreed with the jury, explaining, "Since the Radio Shack tenant is entitled only to be made whole, the wholesale price is the appropriate one in this case. There was no suggestion that the goods were not freely obtainable in the market, that they had peculiar value to the owner, or that they had a special value for a particular purpose such as real estate may, in some circumstances, have." (Tandy Corp. v. Boston Pet Supply, Inc., 729 N.E.2d 677 [Mass.App.Ct. 2000])

Decision: June 2000
Published: July 2000



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