Texas A&M Research Foundation v. Magna Transportation, Inc. , 338 F.3d 394 ( 2003 )

United States Court of Appeals
Fifth Circuit
F I L E D
July 9, 2003
In the Charles R. Fulbruge III
Clerk
United States Court of Appeals
for the Fifth Circuit
_______________
m 02-40264
_______________
TEXAS A&M RESEARCH FOUNDATION,
Plaintiff-Appellant-
Cross-Appellee,
VERSUS
MAGNA TRANSPORTATION, INC.,
Defendant-
Third Party Plaintiff-Appellee-
Cross-Appellant,
VERSUS
ITALIA LINE,
Third Party Defendant-Appellee-
Cross-Appellant,
NAVAHO SHIPPING AGENCY, INC.,
Third Party Defendant-Appellee.
_________________________
Appeals from the United States District Court
for the Southern District of Texas
_________________________
Before SMITH and BARKSDALE, Circuit given leg are approved and the scientists
Judges, and DUPLANTIER,* District Judge. selected to conduct the experiments, special
equipment must be assembled and shipped to
JERRY E. SMITH, Circuit Judge: a port where it can be loaded on the Joides
Resolution. Each shipment is time sensitive,
Plaintiff Texas A&M Research Foundation because port time is expensive and steals time
(“TAMRF”) sued defendant Magna from research.
Transportation, Inc. (“Magna”), for damages
suffered from the late delivery of specialized A new hammer device specifically designed
ocean research equipment. Magna, in turn, to penetrate the earth’s crust was to be tested
sought indemnification from third-party on Leg 179. The crew and equipment were to
defendants Italia di Navigazione, S.p.A meet the vessel in Capetown, South Africa, in
(“Italia”), and Navajo Shipping Agency, Inc. early April 1998. TAMRF selected Magna to
(“Navajo”). The district court held Magna, arrange for the transport of the necessary
Italia, and Navajo jointly and severally liable to equipment. Magna contacted Navajo, which
TAMRF but denied certain items of damages had a direct contract to arrange booking for
as unreasonable and unforeseeable. All but Italia, and obtained a rate for shipment on the
Navajo appeal. M/V Morelos, Voyage 17. On February 3,
1998, Magna entered into a contract with
I. TAMRF to arrange shipment of the cargo for
TAMRF is a private, non-profit corporation arrival in Capetown by March 23, 1998. Mag-
that, under contract with the Joint Ocean- na had worked with TAMRF and was aware
ographic Institute, Inc., conducts a research of the time-sensitive nature of the delivery.
program known as the Ocean Drilling
Program. TAMRF maintains a research Magna, in turn, contracted with Navajo for
vessel, the Joides Resolution, which conducts the carriage of TAMRF’s cargo, which
deep water drilling into the ocean floor in six consisted of a flatrack and two containers.
annual, two-month-long cruises, or legs, that Navajo engaged Italia to carry TAMRF’s
are planned at least eighteen months in cargo. The result of this string of contracts
advance by lengthy consultation and was an arrangement for TAMRF’s equipment
preparation. Once the research projects for a to be shipped on the Morelos, Voyage 17,
which was scheduled to sail from Houston in
late February 1998, and was estimated to
*
District Judge of the Eastern District of Loui- arrive in Capetown on March 23.
siana, sitting by designation.
2
On February 20, 1998, Navajo issued a bill party defendants pursuant to FED. R. CIV. P.
of lading to Magna certifying that TAMRF’s 14(c). After a short bench trial, 1 the district
cargo had been loaded on the Morelos, court found the defendants jointly and
Voyage 17; the Morelos, Voyage 17, departed severally liable, decided that TAMRF had
Houston on the same day. On two separate failed to offer any evidence of damages, and
occasions, Navajo confirmed that the cargo invited a motion to reopen the record.
had sailed on the Morelos. When TAMRF’s
personnel flew to meet their cargo in After TAMRF made, and the district court
Capetown, however, they were able to locate granted, the motion to reopen, TAMRF
only the flatrack and not the two containers. submitted affidavit and documentary evidence
of certain expenses it had incurred, allegedly as
TAMRF’s agent in Capetown informed a result of defendants’ conduct. The court
Magna that the containers were missing, and considered the additional evidence and altered
Magna eventually contacted Italia, which re- its judgment, awarding TAMRF damages of
plied that the containers were at sea aboard the $49,057.972 but disallowing various conse-
Morelos, Voyage 18. The containers had not quential damages because they were
even been loaded until April 1998, after their unforeseeable and thus unrecoverable.
scheduled arrival in Capetown. Before
TAMRF’s discovery that its cargo was All parties except Navajo appeal.3 TAMRF
missing, Italia had made no effort to inform appeals the denial of its consequential damages
any party that the cargo had not been shipped and the refusal to award attorneys’ fees. Mag-
aboard Voyage 17. na and Italia appeal the calculation of damag-
es. Italia challenges the assessment of liability.
After learning its containers were aboard
Voyage 18, TAMRF requested that the III.
containers be discharged in Miami, Florida, Italia contends that it is immune from lia-
and then Valencia, Spain, but Italia refused to bility and, in the alternative, that the district
offload the containers. The Morelos continued court erred as a matter of law in imposing joint
on to La Speiza, Italy, where TAMRF’s per- and several liability. As an initial matter, how-
sonnel met the cargo and placed the most es-
sential equipment into a single container for air
shipment to the island of Reunion. From 1
The court heard testimony from a single wit-
there, TAMRF’s personnel chartered a small ness, after which it informed the parties that it
freighter to carry the container and attempted would conduct the trial on written submissions. No
a midsea rendezvous with the Joides party objected to this procedure, and we make no
Resolution. Because of rough seas, the at- comment on its propriety.
tempt failed, and none of the equipment was 2
The damages awarded included amounts spent
transferred to the research vessel.
to return various portions of the cargo to Houston
and travel expenses for Pat Thompson, a TAMRF
II. employee attempting to ensure proper delivery of
TAMRF sued Magna, alleging breach of the cargo.
contract and fraudulent misrepresentation.
Magna brought in Navajo and Italia as third- 3
Navajo filed an answer but, without explan-
ation, did not appear at trial.
3
ever, we conclude the court improperly “demanded judgment” in favor of the plaintiff
applied rule 14(c) in holding Italia and Navajo such that the plaintiff may then pursue its ac-
directly liable to TAMRF. Because the court tion directly against the third-party
abused its discretion in imposing such liability, defendants.4 This case, however, does not
we need not address Italia’s other arguments involve inapt phrasing in a complaint that was
with respect to this issue. nonetheless intended to invoke the direct suit
provision of rule 14(c).
After being sued by TAMRF, Magna joined
Italia and Navajo as third-party defendants. To the contrary, Magna’s third-party
TAMRF took no steps to assert claims against complaint entirely fails to meet the substantive
the third-party defendants. Yet, in its final or- requirements of that provision. Nowhere does
der, the district court purported to realign the it request that Italia and Navajo be held liable
parties, allowing TAMRF to proceed directly directly to TAMRF; in the absence of such a
against Navajo and Italia. request, there was no basis for TAMRF to re-
cover directly from them under rule 14(c).
Rule 14(c) governs third-party practice in Consequently, the district court erred in
admiralty proceedings and, in some finding Italia and Navajo directly liable to
circumstances, allows a plaintiff to proceed TAMRF, although they are potentially liable to
directly against third-party defendants. The Magna for any amounts expended in
rule provides that “the defendant . . . may satisfaction of a judgment in favor of TAMRF.
bring in a third-party defendant who may be
wholly or partly liable, either to the plaintiff or IV.
to the [defendant as third-party plaintiff].” In its initial findings of fact and conclusions
Magna exercised that option, filing a third- of law, the district court concluded that,
party complaint seeking indemnification from although TAMRF had established defendants’
Italia and Navajo. liability, it “inexplicably ha[d] provided no evi-
dence to support a finding of damages . . . .”5
The rule additionally states that “the third-
party plaintiff may also demand judgment
against the third-part y defendant in favor of 4
See, e.g., Royal Ins. Co. v. Southwest Marine,
the plaintiff, in which event . . . the action shall 194 F.3d 1009, 1018 (9th Cir. 1999) (holding that
proceed as if the plaintiff had commenced it third-party complaint permitted original plaintiff to
against the third-party defendant as well as the recover from third-party defendants where com-
third-party plaintiff.” This clause is plaint explained the third-party defendants’ direct
inapplicable here, however, because Magna’s liability to plaintiffs and repeatedly referred to rule
third-party complaint did not demand 14(c)); Riverway Co. v. Trumbull River Servs.,
judgment against Navajo and Italia in favor of Inc., 674 F.2d 1146, 1154 (7th Cir. 1982) (where
third-party complaint cited rule 14(c) and demand-
TAMRF. Instead, Magna sought
ed that third-party appear and answer the com-
indemnification from Italia and Navajo for any plaint).
sums it was required to pay TAMRF.
5
TAMRF disputes the accuracy of this finding,
Courts have taken a lenient approach in de- contending that evidence of damages was provided
termining whether a third-party plaintiff has by Richard McPherson, the only live witness heard
(continued...)
4
Accordingly, the court invited TAMRF to “Because Rule 59(e) is not subject to the
move to reopen the record for submission of limitations of Rule 60(b), the district court has
evidence on damages. TAMRF made, and the considerable discretion in deciding whether to
district court granted, such a motion seven reopen a case in response to a motion for re-
days later. All damages awarded were based consideration arising under the former rule.”
on the additional evidence submitted by Id. at 174. In exercising this broad discretion,
TAMRF pursuant to that order. the court should consider four primary factors:
“(1) the reasons for the plaintiffs’ default,
We review for abuse of discretion the de- (2) the importance of the evidence to the
cision to reopen the record.6 “[T]he extent of plaintiffs’ case, (3) whether the evidence was
the court’s discretion to reopen the case and to available to plaintiffs [prior to the entry of
consider [additional] materials depends, in the judgment], and (4) the likelihood that the de-
first instance, on the particular Federal Rule of fendants will suffer unfair prejudice if the case
Civil Procedure under which the motion aris- is reopened.” Ford, 32 F.3d at 937-38 (citing
es.” Lavespere, 910 F.2d at 173. A motion Lavespere, 910 F.2d at 174).
filed after judgment requesting that the court
reconsider its decision in light of additional ev- The first and third factors cut against
idence constitutes either a motion to “alter or granting the motion to reopen. TAMRF offers
amend” under FED. R. CIV. P. 59(e) or a no substantial explanation for its failure to
motion for “relief from judgment” under FED. submit, before judgment, the documentary and
R. CIV. P. 60(b). See id. affidavit evidence proffered after the record
was reopened. Further, there is no allegation
“Under which Rule the motion falls turns that this evidence was not freely available
on the time at which the motion is [filed]. If before entry of the initial judgment. Unlike a
the motion is [filed no later than] ten days of rule 60(b) motion, however, a rule 59(e)
the rendition of judgment, the motion falls un- motion need not “make any particular showing
der Rule 59(e); if it is [filed] after that time, it of inadvertence or excusable neglect.”7
falls under Rule 60(b).” Id. Here, the motion Therefore, even if these factors weigh against
was filed seven days after the entry of the ini- TAMRF’s request to reopen, they are not
tial order, so we we treat it as a motion to alter determinative. See Ford, 32 F.3d at 938.
or amend under rule 59(e).
The second and fourth factors, by contrast,
weigh heavily in favor of TAMRF. Although
the district court already had established
5
(...continued) defendants’ liability, its judgment left TAMRF
from in the case. McPherson did testify as to dam- without any recovery. Evidence of damages
ages, most or all of which were denied even after
the record was supplemented.
6 7
See Ford v. Elsbury, 32 F.3d 931, 937-38 Ford, 32 F.3d. at 938; see also Lavespere,
(5th Cir. 1994); Lavespere v. Niagara Mach. & 910 F.2d at 174 (“[T]o reopen a case under Rule
Tool Works, Inc., 910 F.2d 167, 173 (5th Cir. 59(e) on the basis of evidentiary materials that
1990), abrogated on other grounds by Little v. were not timely submitted, the mover need not first
Liquid Air. Corp., 37 F.3d 1069 (5th Cir. 1994) show that her default was the result of mistake,
(en banc)). inadvertence, surprise, or excusable neglect . . . .”).
5
was obviously of critical importance. In addi- F.3d 642, 660 (5th Cir. 2002).
tion, the defendants did not suffer any unfair
prejudice from the reo pening. The affidavit A.
and invoice testimony overlapped substantially Italia and Magna contend that the invoices
with McPherson’s testimony, to which the de- submitted with McPherson’s affidavit are inad-
fendants did not object at trial; they were missible under FED. R. CIV. P. 37(c)(1), which
therefore already aware of most of the provides that a party cannot offer, at trial,
damages claimed. Further, the additional documents that have not been disclosed in
damages identified in the supplemental filings accordance with FED R. CIV. P. 26.8 Rule
took the form of expenses actually incurred by 37(c)(1) provides that a party who fails to
TAMRF. disclose such information “shall not, unless
such failure is harmless, be permitted to use as
Defendants’ position is that TAMRF’s ex- evidence at a trial, at a hearing, or on a motion
penses are not recoverable as damages, but de- any witness or information not so disclosed.”
fendants never have argued that these expens- FED. R. CIV. P. 37(c)(1). We review for abuse
es were not incurred. Essentially, defendants of discretion a decision not to exclude
were not unfairly surprised by the evidence, documents under rule 37. United States v.
which did not directly relate to their principal $9,041,598.68, 163 F.3d 238, 252 (5th Cir.
arguments against recovery. Consequently, 1998).
defendants were not unfairly prejudiced by evi-
dence of the expenses. Taken together, these In evaluating whether a violation of rule 26
factors establish that the district court did not is harmless, and thus whether the district court
abuse its discretion in inviting and granting the was within its discretion in allowing the
motion to reopen. evidence to be used at trial, we look to four
factors: (1) the importance of the evidence;
V. (2) t he prejudice to the opposing party of in-
As part of its submission on damages for cluding the evidence; (3) the possibility of cur-
the reopened trial record, TAMRF introduced ing such prejudice by granting a continuance;
McPherson’s affidavit, which described in de- and (4) the explanation for the party’s failure
tail various expenses TAMRF had incurred to disclose. See id.purportedly in connection with the defendants’
failure timely to deliver the cargo to Although TAMRF failed to explain its fail-
Capetown. The six-page affidavit was ure to disclose, the prejudice to the adverse
accompanied by 329 pages of documents parties was negligible, because the witness in
detailing TAMRF’s expenses. The district support of whose testimony the invoices were
court admitted it as a business record affidavit offered had been designated properly as a wit-
with respect to most of the documented charg-
es; the court excluded, as speculative, that
portion of the affidavit discussing damages for 8
Presumably, Magna contends that TAMRF
“lost ship time.” Both parties challenge the should have disclosed the documents pursuant to
treatment of the affidavit. We review rule 26(a)(1)(B) or (C), which requires a party to
evidentiary rulings for abuse of discretion. disclose, respectively, documents relevant to dis-
Green v. Adm’rs of Tulane Educ. Fund, 284 puted facts in the proceedings or documents on
which damages computations are based.
6
ness before trial. Further, any prejudice was OF EVIDENCE MANUAL § 803.02[7][d] (Lexis-
cured by the approximately one month during Nexis 8th. ed. 2002). Consequently, the
which Italia was allowed to examine and re- district court did not abuse its discretion in ad-
spond to the contested evidence. The district mitting the affidavit as a business record.
court did not abuse its discretion in admitting
the documentary evidence supporting the C.
affidavit. The McPherson affidavit included, in its list
of expenses, $132,239 related to lost ship
B. time. This entry reflects the cost of chartering
Magna contends the McPherson affidavit is the Joides Resolution for the three days during
hearsay not admissible under any exception. which the hammer experiment was to have
The district court, however, concluded that the been performed, but during which no research
affidavit was admissible as a business record was done because of defendants’ failure to de-
affidavit, which requires only that the affiant liver the necessary equipment. The district
have “personal knowledge to testify as court excluded that portion of the affidavit,
custodian of documents” and “personal concluding that it was inadmissible as
knowledge as to some of the statements in the improper or speculative lay opinion testimony.
affidavit.” FSLIC v. Griffin, 935 F.2d 691,
702 (5th Cir. 1991). “Under [FED.R. EVID.] 701, ‘a lay opinion
must be based on personal perception, must be
The affidavit states that part of McPher- one that a normal person would form from
son’s duties as vice-president of TAMRF in- those perceptions, and must be helpful to the
cluded the management of all records and doc- [fact finder].’”10 “In particular, the witness
uments pertaining to the Ocean Drilling must have personalized knowledge of the facts
Program and that such records are kept under underlying the opinion and the opinion must
his custody and control. The district court have a rational connection to those facts.” Id.also reasonably concluded that, as vice-presi- Accordingly, rule 701 does not preclude tes-
dent of the foundation, McPherson had timony by business owners or officers on mat-
personal knowledge as to some of the ters that relate to their business affairs.11 In-
statements in the affidavit.9 Italia’s principal deed, an officer or employee of a corporation
argument is that McPherson lacked personal
knowledge of certain of the facts in the
10
affidavit. This argument is meritless, because Miss. Chem. Corp. v. Dresser-Rand Co., 287
personal knowledge of all the contents of a F.3d 359, 373 (5th Cir. 2002) (quoting United
business record affidavit is not required. See States v. Riddle, 103 F.3d 423, 428 (5th Cir.
id; 4 STEPHEN A. SALTZBURG, MICHAEL M. 1997)).
MARTIN & DANIEL J. CAPRA, FEDERAL RULES 11
Id.. at 373-74 (allowing corporation’s direc-
tor of risk management to testify to lost profits, and
collecting cases from other circuits holding
9
This conclusion is particularly appropriate in likewise); 3 STEPHEN A. SALTZBURG, MICHAEL M.
light of the fact that most of the statements in the MARTIN & DANIEL J. CAPRA, FEDERAL RULES OF
affidavit relate to the payment of various expenses EVIDENCE MANUAL § 701.03[7], at 701-20
related to the program over which payment Mc- through 701-21 & Supp. 2002 (Lexis-Nexis 8th ed.
Pherson had final approval authority. 2002).
7
may testify to indust ry practices and pricing of Orthodontists, 314 F.3d 758, 767 (5th Cir.
without qualifying as an expert. Tampa Bay 2002), cert. denied, 123 S. Ct. 2078 (2003).
Shipbuilding & Repair Co. v. Cedar Shipping As we explain, TAMRF is not entitled to
Co., 320 F.3d 1213, 1223 (11th Cir. 2003). recover expenses related to the cessation of
McPherson’s testimony, similarly, is based on research activity aboard the Joides Resolution
particularized knowledge based on his position and thus was not prejudiced by the exclusion
as vice-president of the research foundation.12 of this evidence.
In any event, the lost ship time charges set VI.
forth in the affidavit do not constitute opinion In its supplemental order on damages, the
testimony of any kind. As with the other doc- district court denied recovery for two broad
umented expenses, the amount established for categories of expenses incurred by TAMRF:
lost ship time is an amount actually paid by expenditures related to TAMRF's own
TAMRF. The figure was not derived from attempts to deliver part of the delayed
McPherson’s opinion as to the value of lost shipment to the Joides Resolution;14 and costs
ship time, as the district court phrased it, but incurred in reliance on defendants’
rather was established according to precise commitment to deliver the cargo by the
contractual terms. appointed date.15 In its findings of fact, the
district court acknowledged that TAMRF had
Because the ruling rested on a incurred these expenses but held them to be
misinterpretation of rule 701, the exclusion of unforeseeable and thus unrecoverable as
the lost-ship-time portion of the affidavit was consequential damages. TAMRF argues that
an abuse of discretion.13 But, “[this court] will the expenses were reasonable and necessary to
not reverse erroneous evidentiary rulings salvage critical research.
unless the aggrieved party can demonstrate
‘substantial prejudice.’” Viazis v. Am. Ass’n We review de novo legal conclusions un-
derlying an award of damages. Harken
Exploration Co. v. Sphere Drake Ins. PLC,
12
Although rule 701 was amended in 2000 to
prohibit lay witnesses from offering opinions based
14
on “scientific, technical or other specialized knowl- These expenditures include the $98,000 spent
edge within the scope of Rule 702 [expert evi- to airlift part of the cargo to Reunion Island and
dence],” the court in Tampa Bay Shipbuilding, 320 $38,962.90 to charter a vessel for the attempted
F.3d at 1222-23, thoroughly reviewed the advisory mid-sea rendezvous with the Joides Resolution.
committee notes accompanying the 2000
15
amendment and concluded that the amendment did TAMRF’s reliance costs include items such
not place any restrictions on the preamendment as the $7,465.60 spent to outfit the Joides Res-
practice of allowing business owners or officers to olution for the scientific experiments that could not
testify based on particularized knowledge derived be performed. TAMRF also spent $2,325 to feed
from their position. and $24,796.16 to pay the crew intended to
perform those experiments. The most significant
13
See United States v. Buck, 324 F.3d 786, 791 reliance expenditure, however, was the roughly
(5th Cir. 2003) (noting that district court abuses $140,000 spent to secure use of the Joides Reso-
discretion where decision to admit evidence is lution for the three days during which the hammer
based on error of law). experiment was to have been performed.
8
261 F.3d 466, 477 (5th Cir. 2001). In the for special damages caused by an unreasonable
absence of legal error, the award of damages and unnecessary delay in the transportation of
is a finding of fact reviewed for clear error. goods only if it has notice of the special
Tyler v. Union Oil Co., 304 F.3d 379, 401 circumstances leading to those damages.19
(5th Cir. 2002). So, “[i]f the district court’s
factual findings are plausible in light of the The question is therefore whether Magna
evidence presented, this court will not reverse had reason to know that untimely delivery of
its decision even if this court would have the cargo would cause the special damages
reached a different conclusion.”16 suffered by TAMRF. The district court
implicitly held that Magna lacked knowledge
That TAMRF actually incurred the disputed of the special circumstances surrounding the
expenses is uncontroverted; the only issue is shipment, concluding that neither the
whether it is entitled to recover them as con- significant costs TAMRF incurred in its
sequential, or “special,” damages, which are attempts to secure an alternative means of
those unusual or indirect costs that, although delivery nor those incurred in reliance on the
caused by the defendant’s conduct in a literal agreed-on delivery date were “foreseeable.”
sense, are beyond what one would reasonably The foreseeability of damages is a fact
expect to be the ordinary consequences of a question we review for clear error.20
breach.17 As a general rule, special damages
are not recoverable in an action for breach of Judging from the findings of facts, Magna
contract. See id. Instead, to recover special had sufficient notice of the special
damages, a plaintiff must establish that the circumstances surrounding the cargo that it
defendant “had notice of the special can be held liable for special damages resulting
circumstances from which such damages from TAMRF’s attempts to secure an alternate
would flow.”18 Accordingly, a carrier is liable
18
(...continued)
16
Id. (citing Patterson v. P.H.P. Healthcare the contract of carriage was made” (citation and in-
Corp., 90 F.3d 927, 936 (5th Cir. 1996)). ternal quotation marks omitted)).
17 19
See Contempo Metal Furniture Co. v. E. See Alpine Ocean Seismic Survey, Inc. v.
Tex. Motor Freight Lines, Inc., 661 F.2d 761, 765 F.W. Myers & Co., 23 F.3d 946, 948 (5th Cir.
(9th Cir. 1981) (“Special damages are those that 1994) (holding carrier not liable for cost of re-
the carrier did not have reason to foresee as ordi- placing microorganisms killed as a result of late
nary, natural consequences of a breach when the delivery, in part because it had no knowledge of the
contract was made.”). contents of containers and therefore could not have
reasonably foreseen the need to collect replace-
18
Id. (citing Ill. Cent. Gulf R.R. v. S. Rock, ments from the ocean floor); see also Contempo,
Inc., 644 F.2d 1138, 1141 (5th Cir. May 1981)); 661 F.2d at 765; Hector Martinez & Co. v. S. Pac.
see also Gardner v. Mid-Continent Grain Co., Transp. Co., 606 F.2d 106, 109 (5th Cir. 1979);
168 F.2d 819, 822 (8th Cir. 1948) (“It is the Ill. Cent. R.R. v. Horace Turner Corp., 9 F.2d 6,
general rule that damages recoverable for delay in 7 (5th Cir. 1925).
transportation must be such a[s] might reasonably
20
have been contemplated by the parties at the time Cf. Hector Martinez, 606 F.2d at 110; King
(continued...) v. Otasco, Inc., 861 F.2d 438, 444 (5th Cir. 1988).
9
means of delivering the cargo. The court methods of the research project, Magna could
found that “Magna was aware of the not reasonably have expected that a failure to
time-sensitive nature of the delivery of [the] deliver TAMRF’s cargo would render the
equipment.” In addition, Dana Holcomb, Joides Resolution and its scientists incapable
Magna’s president, admitted knowing the pur- of performing any research for an extended
pose of the Ocean Drilling Project. period of time. Thus, all the preparation costs
associated specifically with the task at hand are
Further, Magna had worked with TAMRF recoverable, but costs generally applicable to
on several time- and place-sensitive deliveries other, unspecified research are not. Cf.
and was aware that, in this case, TAMRF had Alpine, 23 F.3d at 948.
arranged alternate shipping dates to ensure
timely delivery. Although a general awareness VII.
that harm could result from any untimely Maritime disputes generally are governed
delivery does not justify an award of by the “American Rule,” pursuant to which
consequential damages,21 Magna had actual each party bears its own costs. Galveston
notice of the importance to TAMRF of timely County Nav. Dist. v. Hopson Towing Co., 92
delivery. Therefore, the district court clearly F.3d 353, 356 (5th Cir. 1996). Therefore,
erred in holding these expenses to be “absent statute or enforceable contract,
unforeseeable. litigants must pay their own attorneys’ fees.”
Id. TAMRF contends, however, that it has
The special damages resulting from identified a st atute entitling it to feesSSTEX.
TAMRF’s reliance on its contract with Magna CIV. PRAC. & REM. CODE § 38.001, which
raise more difficult questions of foreseeability. provides that a party seeking to recover for
The $7,465.60 TAMRF spent outfitting the breach of an oral or written contract “may
Joides Resolution for the hammer experiment recover reasonable attorney’s fees.”
was foreseeable, even given Magna’s limited
knowledge of the particulars of the Ocean In MTO Maritime Transp. Overseas, Inc. v.
Drilling Project. Magna should reasonably McLendon Forwarding Co., 837 F.2d 215,
have known that certain costs would be 219-220 (5th Cir. 1988), we rejected a similar
incurred in preparing for research dependent challenge to the refusal to award fees under
upon the cargo and that those expenditures the precursor to § 38.001. Concluding that
would be wasted in the event Magna failed to the statute was discretionary and that there
deliver the shipment in time. had been no abuse of discretion, the MTO
Maritime panel affirmed the denial of fees
With respect to the remainder of the without deciding whether the state statute
expenses sought to be recovered, however, the controlled. Since MTO Maritime was decided,
district court did not clearly err. Based on its however, Texas courts have concluded that
superficial knowledge of the purposes and “attorneys’ fees under section 38.001 are
mandatory.”22 Therefore, we must address the
21
See Evra, 673 F.2d at 959 (holding that ab-
22
stract knowledge that any untimely bank transfer Kona Tech. Corp. v. S. Pac. Transp. Co.,
could theoretically cause great harm was not suf- 225 F.3d 595, 603 (5th Cir. 2000) (citing Green
ficient to justify consequential damages). (continued...)
10
question reserved in MTO Maritime, 837 F.2d uniformity in federal maritime law, precludes
at 219, namely, “the applicability of state laws the application of state attorneys’ fee statutes,
providing for attorney’s fees in an admiralty such as § 38.001, to maritime contract
contract dispute.” The applicability of state disputes.
law to a maritime contract dispute is a legal
determination subject to de novo review. The judgment is REVERSED in part and
AFFIRMED in part, and this matter is
Although the question is a matter of first REMANDED for further proceedings con-
impression in this circuit, two other circuits sistent with this opinion. In addition to the
have directly addressed it. Citing the “strong initial award of $49,057.97, TAMRF is entit-
interest in maintaining uniformity in maritime led to recover for amounts expended in con-
law,” the Third Circuit has held that the nection with its attempt to deliver the cargo,
various state statutes providing for attorney specifically, $98,000.00 to airlift the cargo to
fees should not be applied in federal maritime Reunion Island and $38,962.90 to charter a
disputes.23 vessel for the attempted rendezvous with the
Joides Resolution. TAMRF is also entitled to
Similarly, the First Circuit has held that the $7,465.60 incurred in outfitting its vessel
state law is inapplicable to the question of at- for research dependent on the cargo. On re-
torneys’ fees in maritime contract disputes, mand, therefore, the district court shall enter
noting that state law cannot apply where it judgment of $193,486.47 for TAMRF against
conflicts with maritime law and concluding Magna and then shall determine the extent to
that the fee statute at issue contradicted the which Magna is entitled to indemnification
general rule of maritime law that “parties pay from Italia and Navajo.
their own fees absent bad faith or oppressive
litigation tactics.”24 We likewise conclude that
the general rule of maritime law that parties
bear their own costs, coupled with the need for
22
(...continued)
Int'l, Inc. v. Solis, 951 S.W.2d 384, 390 (Tex.
1997)).
23
Sosebee v. Rath, 893 F.2d 54, 56-57 (3d Cir.
1990); id. at 57 (“[W]here a case arises under the
federal maritime law, as this case does, a local stat-
ute awarding attorneys’ fees should not be ap-
plied.”).
24
See Southworth Mach. Co. v. F/V Corey
Pride, 994 F.2d 37, 41 (1st Cir. 1993); id. at 42(holding that state law governing awards of attor-
ney’s fees will not be applied in a case involving a
“standard contractual breach to which maritime
law has always applied”).
11