Opinion ID: 31946
Heading Depth: 1
Heading Rank: 3

Heading: (2) t he prejudice to the opposing party of in-

Text: As part of its submission on damages for cluding the evidence; (3) the possibility of curthe 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 failCapetown. 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 witwith 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 disGreen 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] (Lexiscured 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 adspond 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 deaffidavit, 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 tesdent of the foundation, McPherson had timony by business owners or officers on matpersonal knowledge as to some of the ters that relate to their business affairs.11 Instatements 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 underlying 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 Respractice 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 Resodiscretion 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 inCorp., 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 rethe 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 conimpression 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 entitinterest in maintaining uniformity in maritime led to recover for amounts expended in conlaw,” 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 retorneys’ 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 statute 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 attorney’s fees will not be applied in a case involving a “standard contractual breach to which maritime law has always applied”). 11