Court Opinion

ID: 2964837
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:31:53.679303+00
Date Added: 2024-06-11T11:43:02.236900
License: Public Domain

USCA1 Opinion

	

                                For the First Circuit
                                ____________________
       No. 96-1904
                             LA ESPERANZA DE P.R., INC.,
                                Plaintiff, Appellant,
                                         v.
                         PEREZ Y CIA. DE PUERTO RICO, INC.,
                                Defendant, Appellee.
       No. 96-1905
                             LA ESPERANZA DE P.R., INC.,
                                Plaintiff, Appellee,
                                         v.
                         PEREZ Y CIA. DE PUERTO RICO, INC.,
                                Defendant, Appellant.
                                ____________________
                    APPEALS FROM THE UNITED STATES DISTRICT COURT
                           FOR THE DISTRICT OF PUERTO RICO
            [Hon. Gilberto Gierbolini-Ortiz, Senior U.S. District Judge]
                                ____________________
                                       Before
                                Stahl, Circuit Judge,
                           Aldrich, Senior Circuit Judge,
                           and Cyr, Senior Circuit Judge.
                                 ___________________
            Harry A. Ezratty for La Esperanza de P.R., Inc.
            Juan A. Lopez-Conway
                               , with whom 
                                           Paul E. Calvesbert
                                                              and 
                                                                  Calvesbert,
       Alfaro 
              & 
                Lopez-Conway, were on brief for Perez y Cia. de Puerto Rico,
       Inc.
                                ____________________
                                   August 13, 1997
                                ____________________

                      STAHL, Circuit 
                                     Judge. This consolidated admiralty
            case involves a dispute between a shipowner and a shipyard over
            repairs to a vessel, S/V LA ESPERANZA, that were begun but
            never completed. It comes to us on cross-appeals following a
            bench trial in which the district court entered judgment,
            first, in favor of Perez y Cia de Puerto Rico, Inc. ("the
            shipyard" or "Perez") in the amount of $10,999 in its
            collection action for unpaid work performed pursuant to
            contract, and, second, in favor of La Esperanza de Puerto Rico,
            Inc. ("the shipowner") in the amount of $220,000 in its
            separately brought action for damages resulting from Perez's
            negligence and breach of contract.  See Perez Y Cia. de P.R.,
            Inc. v. S/V La Esperanza, 899 F. Supp. 861 (D.P.R. 1995). 
                      On appeal, Perez argues that the district court's
            findings of fact and conclusions of law are erroneous. It
            contends that the district court erred in finding that it was
            negligent and in breach of its contractual obligations and
            argues both that the shipowner's contributory negligence caused
            the damages that are in issue here and that the ship was
            worthless when it first arrived at the shipyard, thereby
            obviating the district court's award of damages in favor of the
            shipowner. For its part, the shipowner accepts the district
                                
            1.  We note that LA ESPERANZA was sold at public auction by the
            U.S. Marshals Service in July 1996 pursuant to its status as
            the in rem defendant in the Perez shipyard's cause of action.
            The district court granted the shipyard's motion for
            confirmation of sale and ordered the Marshals Service to issue
                                         -2-
                                          2

            court's findings of fact, but seeks to ascribe error to the
            district court's conclusions of law. Its argument on appeal is
            that the court erred in enforcing a "red letter clause" in the
            ship repair contract that limited the shipyard's liability by
            precluding recovery for loss of use and loss of profits in the
            event of a breach. The shipowner argues that the liability
            limitation clause was vitiated on the facts found by the
            district court because the shipyard's actions, on such facts,
            constituted gross negligence, not ordinary negligence as the
            district court concluded. Finally, both parties take issue
            with the district court's measure of damages. The shipyard
            argues that the district court erred by ordering it to pay too
            much; the shipowner, on the contrary, argues that the district
            court erred by not ordering the shipyard to pay more.
                      As we do not believe that the district court's
            determinations were clearly erroneous, we affirm.
                          Background and Prior Proceedings
                      We state the facts consistent with the district
            court's findings.  See id. at 862-65.
                      The S/V LA ESPERANZA ("the vessel" or "the ship") is
            an eighty-eight foot, steel-hulled, diesel-powered, auxiliary
                                
            a bill of sale conveying title to LA ESPERANZA to one Jose L.
            Novas Debien. Our use of the word "shipowner" in this opinion
            refers exclusively to La Esperanza de Puerto Rico, Inc. 
                                         -3-
                                          3

            sail schooner built in 1896 in Antwerp, Belgium.   Her hull
            consists of an older type of steel, akin to wrought iron, that
            is no longer used in the construction of ships. The seams of
            the ship's hull and frames are rivetted and welded.
                      Julio R. Matos and Enrique Cardona (the principals of
            La Esperanza de Puerto Rico, Inc.) bought LA ESPERANZA in 1990
            for $40,000 with the apparent purpose of refitting her as a
            passenger vessel for use as a tourist attraction and for
            sightseeing harbor tours of San Juan, Puerto Rico. To this
            end, the ship underwent extensive reconstruction and repairs at
            Vaello Shipyard in Puerto Rico from 1990 to 1992. This work
            was overseen and approved by the U.S. Coast Guard, which is
            charged by law to inspect passenger vessels and to certify them
            for operation. Among the many other things done while the ship
            was at Vaello, the thickness of the ship's hull was tested in
            accordance with applicable Coast Guard guidelines by drilling
            holes at various points to determine those areas that were
            "wasted" (i.e., excessively deteriorated or corroded) and in
            need of either immediate or eventual replacement.
                                                             This drill-
                                
            2.  The district court's opinion lists the ship's length as 122
            feet. However, the Coast Guard certificate of inspection and
            the relevant marine surveys of the vessel contained in the
            record indicate a length of eighty-eight feet. While our
            review fails to account for the discrepancy between these
            figures, we note that it is of no consequence to the legal
            result in this case. 
            3.  The Coast Guard considers deficiencies in the thickness of
            hull plating to be a safety concern for steel-hulled vessels
            because such deterioration, much like buckling, cracks, or
                                         -4-
                                          4

            hole gauging indicated that various parts of the hull were in
            fact wasted. On the basis of these findings, eight hull plates
            were replaced in accordance with welding procedures developed
                                
            fractures, "may affect the strength or integrity of the hull to
            an extent which would make it unseaworthy." See United States
            Coast Guard, Navigation and Vessel Inspection Circular No. 7-
            68; 
                Enclosure 
                          (1)--Notes 
                                      on 
                                         Inspection 
                                                    and 
                                                         Repair 
                                                                of 
                                                                    Steel
            Hulls at 1 (1968) [hereinafter 
                                          NAVIC]. Coast Guard inspection
            guidelines provide that the present thickness of hull plates is
            to be compared to their original thickness as a means of
            gauging their present condition. Id. at 3-4. "Wastage" refers
            to the percentage of the original thickness that has
            deteriorated. Thus, a plate with twenty-five percent wastage
            has lost twenty-five percent of its original thickness. 
                                                                   Id. at
            4. 
                      Under Coast Guard guidelines, "a local thickness
            deterioration of up to about 25 percent may be accepted before
            replacement is necessary," id. at 7, but this is not a hard-
            and-fast rule. "[I]n the application of this percentage,
            considerable judgment is called for depending upon the location
            and extent of wasted material. Localized wastage of some
            portions of plates . . . in excess of 25 percent may be
            accepted in many cases, if the condition of the adjacent
            material is sufficiently good to maintain an adequate margin of
            strength." Id. Indeed, Coast Guard inspectors are afforded a
            wide latitude of discretion in dealing with the various hull
            deficiencies they may encounter upon inspection of a vessel.
            They must "first evaluate if seaworthiness is compromised or
            not" by these deficiencies, a decision that calls for
            "considerable discretion because the line of demarcation
            between what is seaworthy and what is not, is necessarily
            approximate and subject to some range of interpretation." Id.
            at 2. Among the factors that Coast Guard inspectors "must"
            weigh in evaluating a particular vessel's hull is "[w]hether
            the repair work contemplated is necessary to restore
            seaworthiness or is a maintenance measure to insure prolonged
            utilization of the vessel."  Id. "In the first case, repair
            must be required. In the second case, the details of the
            condition should be reconsidered at a future inspection and,
            possibly, called to the attention of the owner so that he may
            exercise his own good judgement."  Id.
                                         -5-
                                          5

            by Vaello, which had the responsibility for designing the
            procedures for Coast Guard approval.
                      LA ESPERANZA's overhaul was completed during the
            summer of 1992. The total cost of the refitting was financed
            by loans totalling almost $2,175,000. The refurbished ship had
            a replacement value of $4.8 million, a physical value of $3.5
            million, and an estimated value of $2.8 million. For
            accounting purposes, the vessel's book value was listed as
            $1,704,000.
                      The Coast Guard issued a certificate of inspection
            for the vessel, which indicated the route that LA ESPERANZA was
            permitted to run and conditions on the manner of her operation.
            Specifically, the Coast Guard limited LA ESPERANZA, 
                                                              inter 
                                                                    alia,
            to carrying no more than seventy-five passengers and restricted
            her passage to "the protected waters of Bahia de San Juan . .
            . within one mile of shore . . . . [and] to the waters
            shoreward of buoys 5 and 6 of the Anegado Channel." The
            certificate of inspection further provided that the ship, when
            operating its sails, could only set her inner and outer jibs
            while passengers were on board, but also indicated that up to
                                
            4.  Coast Guard guidelines require that hull replacements, and
            in particular, the welding and rivetting procedures used in
            marrying new steel plates to existing older plates, conform
            with applicable standards and gain Coast Guard approval. See,
            e.g., NAVIC at 24-35 (discussing proper welding and rivetting
            procedures). 
                                         -6-
                                          6

            150 passengers were allowed on deck when the ship "operate[d]
            as a moored attraction vessel."
                      Under these conditions, the vessel thereafter began
            its passenger service around San Juan Bay. On average, LA
            ESPERANZA made two trips per day on weekdays and made three or
            four daily runs on weekends. She was also available for rent
            for private events.
                      On March 4, 1994 the shipowner took LA ESPERANZA to
            the Perez shipyard in San Juan for repairs to her rudder deemed
            necessary by the Coast Guard. Seeing as the vessel would be
            dry-docked for the rudder repair, the shipowner decided to
            accelerate an overall hull inspection that was scheduled for
            the following month. The Coast Guard inspected the hull and,
            on March 10, indicated that all hull plates with wastage in
            excess of fifty percent had to be replaced. The shipyard
            subcontracted with another firm to perform ultrasonic gauging
            of the hull in order to identify the candidate plates for
            replacement. This audio gauging revealed that eighty percent
            of the ship's hull was wasted twenty-five percent or more from
            its original thickness. In view of the test results, the Coast
            Guard required that eighty percent of the hull be replaced, but
            agreed to allow the shipowner to do the replacement work in
            stages. As an immediate matter, the shipowner was required to
            replace the twelve hull plates that were wasted fifty percent
            or more.
                                         -7-
                                          7

                      On March 17, the shipowner and the shipyard signed a
            contract for repairs, with the shipowner paying a deposit of
            $40,000. The shipyard's quoted estimate of $71,947.20
            included, among other things to be done, the replacement of
            twelve hull plates. The contract encompassed an attached list
            of conditions. Under section 3(a) of that list, "[t]he Yard
            commits itself to use materials and execute work to standard
            ship repair practice." Section 3(b) provided the shipyard the
            right to "make good at its own workshops and expense any
            defective work or material [that it] supplied," although the
            shipowner retained an option to demand, in lieu of such
            performance, "a sum equal to the cost of such repair."
            Finally, section 5 provided that "[t]he yard shall in no case
            be held responsible for the damages resulting from any loss of
            use or profit of the vessel."
                      The shipyard hired welders to do the hull replacement
            work. Despite the fact that the welders did not know the type
            of steel used in LA ESPERANZA's hull, or the fact that it was
            an older type of steel no longer used in ship construction, on
            March 18 they began cutting into the ship's hull with torches
            in order to remove five of the twelve plates slated for
            replacement. This work caused a fire with resulting damage to
            the ship's electrical system. While the method used to remove
            the hull plates did not require Coast Guard approval, the
            method for their replacement did. After initial plans were
                                         -8-
                                          8

            rejected by the Coast Guard, the shipyard's contract manager,
            Miguel Nin, together with the yard's welding subcontractor,
            drafted another set of welding procedures that they gave to the
            shipowner to present to the Coast Guard for approval, but the
            Coast Guard did not approve the newly submitted procedures. As
            a consequence, all hull replacement work on the vessel stopped
            pending development of new welding procedures. 
                      It rapidly became apparent, however, that the Perez
            shipyard did not possess the ability to perform the hull
            replacement work on LA ESPERANZA. Nevertheless, on April 6,
            the shipyard welded five temporary doubler plates onto the hull
            areas where plates had already been removed. This welding was
            done too quickly and with excessive heat, causing the older
            steel of the hull to crack and rivets to loosen.
                      During this period, the shipowner and shipyard met to
            discuss the welding procedure problem. The parties met one
            last time on May 20, 1994 to discuss what arrangements would be
            made for the vessel in light of the welding difficulties.
            Although no solution to LA ESPERANZA's predicament was
            forthcoming, the shipyard produced a bill for $73,999 for the
            unfinished hull work and other repairs that it had already done
            on the ship. Subtracting the $40,000 deposit that the
            shipowner had previously paid, the shipyard demanded payment
            for the remaining balance of $33,999.
                                         -9-
                                          9

                      The shipowner refused to pay. On May 22, 1994,
            anxious to get other ships into its only dry dock facility,
            which LA ESPERANZA had now occupied for some two months, the
            shipyard moved the ship from the dry dock and refloated it.
            Perez then moved the vessel, operating under its own power, to
            its tender dock area, an area akin to a floating junk yard.
            The shipyard recommended two welding experts that the shipowner
            could hire to develop a welding plan for Coast Guard approval.
            The shipyard hired one of the two recommended experts, but the
            expert failed to produce a plan. 
                      Meanwhile, the refloated vessel was taking on water
            through the cracks in her hull caused by the faulty plate
            removal and the welding of the temporary plates. The ship was
            once again removed from the water, water was pumped out, and
            soft patches using rubber and metal were used to plug leaks,
            though these too soon began to develop cracks. Surveys
            conducted at about this time, May and June 1994, revealed that
            the vessel was tilting to one side because the ballast
            initially removed in order to gain access to the hull plates
            for the removal operation had never been replaced. Indeed,
            when the shipyard refloated LA ESPERANZA, it had placed
            concrete blocks on the upper deck in lieu of the ship's
            ballast. During this period, the damaged upper deck itself
            collected about an inch of water. The surveys revealed that
            the cost of repairing the vessel to correct the problems with
                                        -10-
                                         10

            the hull, to repair the damaged upper deck, and to replace
            damaged wiring, electrical equipment, and carpeting would be
            between $180,000 and $220,000, not including any possible
            hidden damages that could not be readily detected while the
            ship was still in the water.
                      The shipyard subsequently filed a collection action
            in federal district court, in personam against the shipowner
            and 
               in 
                  rem against the vessel itself, for the money it alleged
            it was owed for the repair work it had performed on LA
            ESPERANZA. The shipowner filed a separate action against the
            shipyard for the damages it alleged it suffered as a result of
            the shipyard's negligence in performing the repair contract.
            A consolidated trial before the district court sitting in
            admiralty without a jury was held in September 1995. The court
            awarded the shipyard $10,999 on its contract collection claim,
            an amount corresponding to the work that the shipyard actually
            did on the vessel, minus the amount billed for the defective
            hull replacement work. The court similarly awarded the
            shipowner $220,000 for the damages it sustained as a result of
            the shipyard's negligence in performing the repair work, an
            amount corresponding to the cost needed to repair the damages
            to the vessel and to return LA ESPERANZA to the condition it
            was in before it entered the Perez shipyard. The parties filed
            motions for additional findings of fact and conclusions of law
            that were denied by the court. These cross-appeals followed.
                                        -11-
                                         11

                                 Standard of Review
                       We review a district court's bench trial findings of
            fact for clear error. See Fed. R. Civ. P. 52(a); 
                                                            McAllister v.
            United States
                        , 348 U.S. 19, 20 (1954); 
                                                  Puerto Rico Ports Auth.
            v. M/V 
                   Manhattan 
                             Prince, 897 F.2d 1, 3 (1st Cir. 1990). We
            deem a finding to be clearly erroneous "only when, after
            reviewing the entire record, we are 'left with the definite and
            firm conviction that a mistake has been committed.'"  Clement
            v. United 
                      States, 980 F.2d 48, 53 (1st Cir. 1992) (quoting
            Deguio v. United 
                             States, 920 F.2d 103, 105 (1st Cir. 1990)
            (quoting United 
                            States v. United 
                                             States 
                                                    Gypsum 
                                                           Co., 333 U.S.
            364, 395 (1948))).
                      Likewise, "[w]e review questions of negligence"
            decided in a bench trial "under the clearly erroneous
            standard." Id. (citing 
                                   Goudy & Stevens, Inc.
                                                         v. 
                                                            Cable Marine,
            Inc., 924 F.2d 16, 19 (1st Cir. 1991)),  Deguio, 920 U.S. at
            105, and Obolensky v. Saldana 
                                           Schmier, 409 F.2d 52, 54 (1st
            Cir. 1969)). In using this standard, our practice accords with
            the Supreme Court's characterization of negligence and
            causation as issues of fact, 
                                        see 
                                           McAllister, 348 U.S. at 20-23,
            and is consonant with the rule applied in virtually all our
            sister circuits, which similarly treat a bench trial finding
            that a party was negligent as a question of fact, or mixed
            question of fact and law, and thus do not reverse such a
            finding unless clearly erroneous.  See generally Charles Alan
                                        -12-
                                         12

            Wright & Arthur Miller, 9A  Federal 
                                                Practice 
                                                         and 
                                                             Procedure S
            2590 at 620-28 (2d. ed. 1995) (discussing cases); Steven Alan
            Childress & Martha S. Davis, 1 Federal 
                                                   Standards 
                                                             of 
                                                                Review S
            2.28 at 2-220 to 2-227 (2d. ed. 1992) (same).  But see Mamiye
            Bros. v. 
                    Barber S.S. Lines, Inc.
                                           , 360 F.2d 774, 776-78 (2d Cir.
            1966) (per Friendly, J.) (distinguishing    McAllister as a
            causation case and holding that clear error standard does not
            apply to trial court's determination of negligence). 
                            Negligence, or No Negligence?
                      On appeal, the shipyard contends that the district
            court erred in finding that it was negligent and in breach of
            contract. It argues that the shipowner is really to blame for
            the damages to LA ESPERANZA and for the fact that the hull
            repairs were never completed. It thus contends that the
            shipowner was not entitled to the $220,000 awarded by the
            district court. Even if it was negligent, the shipyard
            insists, the ship was worthless, thus making the district
            court's measure of damages erroneous.
                      The shipowner counters that the district court's
            error consists in not realizing that the facts it found
            constituted gross negligence, not ordinary negligence. Because
            the district court incorrectly decided the gross negligence
            issue, the shipowner argues, it also incorrectly concluded that
            the shipyard's liability did not extend to loss of the vessel's
            use and loss of profit because of the red letter clause
                                        -13-
                                         13

            contained in the repair contract. That clause, the shipowner
            argues, precludes recovery for loss of the vessel's use and
            loss of profits in instances involving ordinary negligence, but
            not in circumstances involving gross negligence.
                      We address the parties' various claims under federal
            maritime law because "[a]dmiralty jurisdiction brings with it
            a body of federal jurisprudence, largely uncodified, known as
            maritime law." In re Ballard Shipping Co.
                                                      v. 
                                                         Beach Shellfish
                                                                        ,
            32 F.3d 623, 625 (1st Cir. 1994) (citing 
                                                    East River S.S. Corp.
            v. Transamerica 
                            Delaval, 476 U.S. 858, 864 (1986)); see  also
            Yamaha 
                   Motor 
                         Corp., 
                                U.S.A. v.  Calhoun, 116 S. Ct. 619, 623
            (1996). While a contract to construct a ship falls outside
            federal admiralty jurisdiction because it is "a contract made
            on land, to be performed on land," 
                                             People's Ferry Co.
                                                                v. 
                                                                   Beers,
            61 U.S. (20 How.) 393, 402 (1858), contracts for repairs to a
            vessel or for its substantial reconstruction come under the
            scope of admiralty jurisdiction.  See Kossick v. United Fruit
            Co., 365 U.S. 731, 735 (1961) (contrasting ship repair and
            construction); New Bedford Dry Dock Co. v. Purdy, 258 U.S. 96
            (1922); see also 28 U.S.C. S 1333 (granting exclusive federal
            jurisdiction in "[a]ny civil case of admiralty"); 
                                                            cf. Thomas J.
            Schoenbaum, 1 Admiralty 
                                     and 
                                         Maritime 
                                                  Law at 111-12 (2d ed.
            1994). In the absence of a relevant statute, the judicially-
            developed norms of the general maritime law, "an amalgam of
            traditional common-law rules, modifications of those rules, and
                                        -14-
                                         14

            newly created rules," govern actions in admiralty. East River
            S.S., 476 U.S. at 865.
                      We thus must evaluate the merits of the parties'
            claims against "substantive rules and precepts peculiar to the
            law of the sea." Schoenbaum, 
                                        supra, at 156 (discussing cases).
            Under this body of law, a shipowner may sue in either tort or
            contract for negligent repairs to his vessel.       See  Todd
            Shipyards Corp.
                           v. 
                              Turbine Serv., Inc.
                                                 , 674 F.2d 401, 412 (5th
            Cir. 1982); Alcoa 
                              S.S. 
                                   Co. v. Charles 
                                                  Ferran 
                                                         & 
                                                           Co., 383 F.2d
            46, 50 (5th Cir. 1967). A ship repairer potentially faces
            three sources of liability for repairs he performs improperly
            on a vessel. He may be liable in contract for a breach of his
            expressly assumed obligations or for a breach of an implied
            warranty of workmanlike performance that attaches to admiralty
            contracts under the rule of    Ryan  
                                                 Stevedoring  
                                                             Co. v.   Pan
            Atlantic S.S. Corp., 350 U.S. 124 (1956).  See Alcoa S.S. Co.
            at 50; see also Employers Ins. of Wausau v. Suwanee River Spa
            Lines, 
                   Inc., 866 F.2d 752, 763 n.17 (5th Cir. 1989). A ship
            repairer may also be liable for the maritime tort of
            negligence.  See Alcoa 
                                   S.S., 383 F.2d at 50.   See  generally
            Schoenbaum, 
                       supra, at 183-84 (collecting cases). Importantly,
            negligence causes of action in admiralty invoke the principles
            of maritime negligence, not those of the common law. See 
                                                                     Pope
            & Talbot, Inc.
                          v. 
                             Hawn, 346 U.S. 406, 408-09 (1953). Moreover,
            while the implied warranty of workmanlike performance
                                        -15-
                                         15

            "parallel[s] a negligence standard rather than imposing [the]
            strict liability" that attaches to implied warranties in land-
            based contracts under the Uniform Commercial Code,        see
            Employers Ins.
                         , 866 F.2d at 763 n.17, "a shipowner may receive
            indemnity from a marine contractor for breach of implied
            warranty of workmanlike service, albeit that such performance
            was done without negligence." SS Amazonia
                                                     v. 
                                                        New Jersey Export
            Marine Carpenters, Inc., 564 F.2d 5, 8 (2d Cir. 1977) (citing
            Italia 
                   Societa v. Oregon 
                                     Stevedoring 
                                                  Co., 376 U.S. 315, 324
            (1964) and  Ryan, 350 U.S. at 133). Finally, federally
            developed maritime law applies both when a court construes the
            terms of a repair contract and when it construes the standard
            of performance due thereunder. See 
                                               Alcoa S.S.
                                                         , 383 F.2d at 50
            (citing 
                   Booth S.S. Co.
                                  v. 
                                     Meier & Oelhof Co.
                                                       , 262 F.2d 310 (2d
            Cir. 1958) and Southport Transit Co. v. Avondale Marine Ways,
            Inc., 234 F.2d 947 (5th Cir. 1956)).
                      In this case, the shipyard argues that it was not
            negligent or in breach of contract because the shipowner, not
            it, was really at fault for the fact that the hull repairs were
            never completed. The crux of the shipyard's theory is that the
            Coast Guard did not disapprove the welding plans for the twelve
            plates it was supposed to replace because of the method by
            which the shipyard proposed to do the job, but rather because,
            at the insistence of the shipowner, an insufficient number of
            plates were to be removed. The shipyard argues that it cannot
                                        -16-
                                         16

            be faulted for the fact that the Coast Guard found the scope of
            the hull replacements inadequate or for the fact that the
            shipowner failed to provide the Coast Guard with a
            comprehensive plan detailing how and when a full eighty percent
            of the hull with wastage of twenty-five percent or more would
            be replaced -- as the Coast Guard was requiring. The
            shipyard's theory, in short, is that it could not act to repair
            the vessel until the Coast Guard approved the repairs, and the
            Coast Guard would not approve the repairs until the shipyard
            acted by submitting a comprehensive plan for replacing eighty
            percent of the hull, not just the twelve plates scheduled for
            removal and replacement under the contract.
                      The record simply does not support this argument. In
            the first place, contrary to the shipyard's contentions, the
            record does not substantiate the view that the Coast Guard
            disapproved the welding procedures notwithstanding the
            shipyard's submission of proper welding procedures. Neither
            does the record support the shipyard's alternative argument
            that the Coast Guard "neither approved or disapproved" welding
            procedures that it submitted because the Coast Guard was not
            about to deliberate in the absence of a comprehensive plan for
            additional repairs to LA ESPERANZA. In his deposition, Lt.
            Comdr. Randal B. Sharpe, the Coast Guard officer in charge of
            marine safety in San Juan during the relevant period of this
            dispute, was asked to describe the purpose of the welding
                                        -17-
                                         17

            procedures submitted to the Coast Guard.  He answered that
            "the purpose of that document was to show us, the Coast Guard,
            how the shipyard intended to weld the new plate to the old iron
            hull." When asked whether that proposal met Coast Guard
            requirements, Lt. Comdr. Sharpe responded, "Parts of the
            proposal do, yes; parts of the proposal do not." The parts of
            the proposal that were acceptable, he continued, were those
            above the load water line, thereby indicating that those below
            the water line (which presumably were of greater significance
            to the vessel's seaworthiness) were not acceptable. Thus, even
            if Lt. Comdr. Sharpe's deposition substantiates the
            uncontroverted fact that no comprehensive plan was submitted
            (which it does in parts not reproduced here), it also
            substantiates other record evidence that the shipyard's method
            of work, in any event, did not pass muster. 
                      Furthermore, Lt. Comdr. Sharpe's deposition supports
            the view of other witnesses at trial that the shipyard bore the
            responsibility of furnishing the Coast Guard with appropriate
            welding procedures because it was a matter of "technical
            nature," meaning that it was something that "would normally
            have been submitted either by the shipyard or by the welding
            contractor who was going to perform the work." Finally, his
            deposition supports a finding that the shipyard's inability to
                                
            5.  We note that both parties took Lt. Comdr. Sharpe's
            deposition knowing that he would be unavailable to testify at
            trial. 
                                        -18-
                                         18

            devise appropriate welding procedures precluded the shipowner
            from submitting a comprehensive repair plan for the ship's hull
            with the Coast Guard, not the other way around. "Basically
            what we were looking for," Sharpe explained in discussing the
            requirements for approval of the repairs to LA ESPERANZA, "was
            a proposal on how to repair all of the wasted steel. . . .
            [T]hat repair proposal . . . was supposed to include 
                                                               what areas
            of plate would be replaced; a time-line for replacement, and
            how the plate would be replaced." (emphasis added). Because
            neither the shipyard nor its welding contractor ever devised a
            welding plan that was acceptable to the Coast Guard on the
            issue of how the first set of hull plates would be replaced, it
            is difficult to see how the shipowner, the shipyard, or anyone
            else could have compiled a comprehensive plan detailing a
            schedule for the more protracted process of taking out and
            replacing yet other hull sections. It would thus appear that
            the shipyard's successful development of a welding procedure
            acceptable to the Coast Guard was a constructive condition
            precedent to formulation of a comprehensive plan, and overall
            Coast Guard approval, rather than vice versa. In any event, we
            detect no clear error in the district court's implicit
            allocation of blame on this issue.
                      Accordingly, the shipyard's contention that it was
            not liable for negligent performance of the contract cannot
            withstand close scrutiny. Here, one witnesses a ship that came
                                        -19-
                                         19

            in for repairs under her own power. Pursuant to a valid,
            written contract, the shipyard began to make the repairs, but
            somewhere, somehow, something went wrong. Although the
            shipyard manager, Miguel Nin, knew that LA ESPERANZA's hull was
            of an older type steel, and despite the fact that the
            undisputed evidence revealed that the special quality of LA
            ESPERANZA's steel should have been readily apparent to any
            reasonably competent ship repair professional, the welders that
            Perez hired to cut into LA ESPERANZA did not know what type of
            steel they were dealing with when they cut into the ship's hull
            with torches. The method of cutting they employed caused
            damage to the ship and, to condense a long story, the
            contracted-for repairs were never completed. Instead of
            remedying the error and giving the vessel back to the
            shipowner, the shipyard patched the holes it had already made
            by welding on temporary plates, causing even more damage to the
            hull. The shipyard then refloated the ship, which by now was
            in worse condition than it was prior to arriving for repairs,
            and placed the ship in its tender dock area. Finally, seeking
            to extricate itself from a predicament of its own making, the
            shipyard told the shipowner, essentially, that it (the
            shipowner) had a problem on its hands, and maybe it should
            consider hiring a special welding consultant.
                      This attempt to evade responsibility and escape
            liability is unavailing. Where the shipyard, like Perez here,
                                        -20-
                                         20

            "held itself out as a competent shipyard skilled in" doing the
            type of work requested by the shipowner, the latter "had a
            right to rely on the expertise of [the shipyard] and had reason
            to expect a stable seaworthy vessel upon completion of the
            repairs, regardless of the condition of the boat[] prior to
            repairs."  Empacadora 
                                  del 
                                       Norte, 
                                              S.A., v. Steiner 
                                                                Shipyard,
            Inc., 469 F. Supp. 954, 962 (S.D. Ala. 1979). The contract
            between the parties does not evince any manifestation of an
            intent to deviate from this principle. On the contrary, under
            section 3(a) of the appended list of conditions, "[t]he Yard
            commit[ted] itself to use materials and execute work to
            standard ship repair practice." This contractual clause
            manifests an intent to bind the shipyard expressly to the
            otherwise implied warranty of workmanlike performance in marine
            contracts. In any event, "[t]his warranty need not be express
            to bind the ship repairer to use the degree of diligence,
            attention and skill adequate to  complete 
                                                      the 
                                                          task."   Little
            Beaver 
                   Enters. v. Humphreys 
                                        Rys., 
                                              Inc., 719 F.2d 75, 78 (4th
            Cir. 1983) (emphasis added) (citing    Coffman v.  Hawkins  
                                                                        &
            Hawkins Drilling Co.
                               , 594 F.2d 152 (5th Cir. 1979) and 
                                                                 Tebbs v.
            Baker-Whiteley Towing Co.
                                    , 407 F.2d 1055 (4th Cir. 1969)). The
            shipyard's failure to complete the hull replacement repairs
            thus constituted a breach of an express and implied contractual
            obligation, particularly in view of the fact that evidence in
            the record substantiates that similarly situated ship repairers
                                        -21-
                                         21

            could have devised appropriate welding procedures and replaced
            the hull plates in question. On this record, we cannot ascribe
            any clear error to the district court's determination that the
            shipyard was negligent in its manner of performing the
            contracted-for repairs.
                           Negligence or Gross Negligence?
                      We turn next to the shipowner's argument that the
            shipyard's actions amounted to gross negligence, not ordinary
            negligence, and thereby vitiated the red letter clause in the
            contract limiting the shipyard's liability by precluding
            recovery for loss of the vessel's use and loss of profit.
            Whatever else may be said here, we are not convinced that the
            district court committed clear error when it determined that
            the shipyard, though negligent, was not grossly negligent in
            how it undertook to repair the vessel or in how it dealt with
            it while in its custody.
                      While exculpatory clauses -- commonly referred to as
            red letter clauses -- were traditionally disfavored by courts
            sitting in admiralty,  see, e.g., Bisso v.  Inland 
                                                                Waterways
            Corp., 349 U.S. 85 (1955) (refusing to enforce a clause
            absolving a towing company from all liability for its negligent
            acts), such clauses are today routinely enforceable. See 
                                                                     East
            River  
                  S.S., 476 U.S. at 873 (indicating that a marine
            contractor "can restrict its liability     within  
                                                               limits by
            disclaiming warranties or limiting remedies" (emphasis added)).
                                        -22-
                                         22

            Accordingly, courts today will enforce red letter clauses that
            are expressed clearly in contracts entered into freely by
            parties of equal bargaining power, provided that the clause not
            provide for a total absolution of liability.      See  Edward
            Leasing Corp.
                         v. 
                            Uhlig & Assocs., Inc.
                                                , 785 F.2d 877, 888 (11th
            Cir. 1986); Todd 
                             Shipyards, 674 F.2d at 410; Alcoa 
                                                               S.S., 383
            F.2d at 46. The rationale for upholding such clauses, "so long
            as no overreaching is found," 
                                         Edward Leasing
                                                       , 785 F.2d at 888,
            "is predicated upon the consideration that businessmen can
            bargain over which party is to bear the risk of damage and set
            the price accordingly, thus achieving a more rational
            distribution of the risk [and allocation of price] than the law
            would otherwise allow." Jig The Third Corp.
                                                        v. 
                                                           Puritan Marine
            Ins. 
                 Underwriters 
                              Corp., 519 F.2d 171, 176 (5th Cir. 1975).
            However, parties may not totally absolve themselves of all
            liability and, more substantively, the prospective wrongdoer's
            "'potential liability'" should be enough to "'deter
            negligence.'"  Edward Leasing, 785 F.2d at 888 (quoting Alcoa
            S.S., 383 F.2d at 55). A red letter clause, finally, may not
            limit liability on a marine contract for gross negligence
            because "'harm wilfully inflicted or caused by gross or wanton
            negligence,'" operates to "invalidate an exemption from
            liability." Todd Shipyards
                                      , 674 F.2d at 411 (quoting 6A Corbin
            On Contracts S 1472 (1964 ed.)).
                                        -23-
                                         23

                      The shipowner submits that the shipyard knew that LA
            ESPERANZA was made of older steel, but nevertheless hired
            welding subcontractors who proceeded to cut into the vessel's
            hull without knowing the nature of the steel they were working
            on, causing damage to the ship. Moreover, after the shipyard
            failed to provide welding plans acceptable to the Coast Guard
            and after it became apparent that the shipyard did not have the
            expertise to devise such plans (as the district court found),
            the shipyard nonetheless proceeded to weld temporary plates
            onto LA ESPERANZA's hull to cover the holes that had been
            already made, thereby rendering even more damage to the ship by
            causing the steel in the hull to crack and rivets to loosen.
            The shipyard then refloated the vessel to get it out of dry
            dock, repairs still uncompleted, and moored it with cracks that
            allowed water to seep into the hull. The shipowner also argues
            that the shipyard, among other things, improperly moored the
            vessel without shock-absorbing fenders, improperly secured it
            against vandals who made off with several radios and liquor
            from the ship's liquor cabinet, and improperly protected the
            ship's decks from damaging debris from a sandblasting operation
            performed near LA ESPERANZA.
                      As our previous discussion indicates, there was no
            clear error on the district court's part in determining that
            such actions breached the shipyard's duty of care to the
            shipowner. A more difficult question to be resolved is the
                                        -24-
                                         24

            finding necessary to the district court's determination that
            the liability limitation clause in question was enforceable,
            viz., that the shipyard's actions did not amount to gross
            negligence. While the district court concluded that the Perez
            shipyard "did not have the expertise to perform the hull
            replacement work adequately," we cannot say that it was clearly
            erroneous for the court to conclude that Perez did not act in
            such a way as to wilfully inflict harm on LA ESPERANZA or to
            cause her damage in wanton and gross disregard of the vessel or
            the shipowner's interests in it. See 
                                                 Todd Shipyards
                                                               , 674 F.2d
            at 411.
                      The shipyard's subcontracted welders admittedly did
            not know the quality of the steel on which they were working
            when they cut into LA ESPERANZA, and because of that failed to
            adopt the proper heat mixture, causing damage to the ship.
            But, the record substantiates that the circumstances of this
            misstep more closely approximate a failure to exercise due
            care, rather than some modicum of reckless abandon. Nor did
            the shipyard completely ignore its contractual duties. All
            indications in the record are that it strove in good faith to
            devise acceptable welding procedures, even if it was
            unsuccessful and ultimately unable to do so. Moreover, it is
            not clear that it was unreasonable for the shipyard to believe
            that it could repair the ship's hull. The shipyard manager,
            Miguel Nin, had considerable training and experience in marine
                                        -25-
                                         25

            repair, including advanced degrees in relevant fields of naval
            architecture. Moreover, as indicated above, at least some
            portions of the plans that the shipyard submitted met Coast
            Guard requirements. In addition, while the shipyard damaged
            the ship's hull somewhat when it welded on temporary plates, it
            attempted to rectify the short-term damage to the vessel's
            seaworthiness by applying soft patches to plug leaks and
            coordinated efforts with the ship's captain to remove water
            that succeeded in entering the vessel. This feature of the
            record, too, militates against a finding of gross negligence.
            Finally, while it became apparent that the shipyard eventually
            abandoned any effort to make good on its contractual
            undertaking to repair the vessel, we cannot agree that a
            material breach of contract is tantamount in this case to gross
            negligence.
                      Because nothing in our full review convinces us that
            a finding of gross negligence was necessitated on these facts,
            we cannot ascribe clear error to the district court's
            determination that the liability limitation clause in the
            contract between the parties was enforceable on its terms.
            Thus, no recovery was available to the shipowner for loss of
            the vessel's use or loss of profits because the contract
            unambiguously provides that "[t]he yard shall in no case be
                                        -26-
                                         26

            held responsible for the damages resulting from any loss of use
            or profit of the vessel."
                                       Damages
                      Having determined the liability issues as to the
            parties, we turn finally to the question of remedies, where all
            of the parties "unite in attacking the district court's basis
            for assessing damages."  Todd Shipyards, 674 F.2d at 412. On
            our full review of the record we find no merit in either
            party's challenge to the damages awarded by the district court.
                      We note that "[t]he trial court, as a fact-finder,
            possesses considerable discretion in fixing damages, and its
            decision will be upheld absent clear error."   Little 
                                                                   Beaver
            Enters., 719 F.2d at 79 (citing   Thompson v.  National  
                                                                     R.R.
            Passenger 
                      Corp., 621 F.2d 814, 823 (6th Cir. 1980)). As a
            threshold requirement, however, the trial court "must expose
                                
            6.  We need not consider at any great length the shipowner's
            argument that the district court erred in refusing rebuttal
            testimony to that of the shipyard's manager, Miguel Nin. The
            shipowner sought to have a former Perez employee, Carlos
            Claudio, testify that he had informed Nin of the special
            qualities of LA ESPERANZA's steel and had given Nin a welding
            plan, which Nin rejected and ignored. The purpose of rebuttal
            testimony is to meet and reply to any new evidence offered by
            an opponent. See 
                             United States
                                           v. 
                                             Tejada, 956 F.2d 1256, 1266-
            67 (2d Cir. 1992). Determinations regarding what constitutes
            proper rebuttal evidence are committed to the "sound
            discretion" of the trial court. 
                                           See 
                                               Lubanski v. 
                                                           Coleco Indus.,
            Inc., 929 F.2d 42, 47 (1st Cir. 1991). Here, we can discern no
            apparent error because Nin, who testified that he was in fact
            aware that the vessel's hull was made of a special older-type
            steel, never testified that Claudio had not informed him of the
            steel's quality nor did he testify that Claudio had not
            presented him with a welding plan. 
                                        -27-
                                         27

            'the measure of damages and method of computation,' both to
            inform the litigants of the basis for its findings and to
            afford the appellate court 'a possibility of intelligent
            review.'" Id. at 79-80 (quoting 
                                            Safer v. 
                                                     Perper, 569 F.2d 87,
            100 (D.C. Cir. 1977)).
                      We turn first to consider the $10,999 awarded the
            shipyard. While the shipowner on appeal asks whether the
            district court erred in granting the shipyard this relief, the
            shipowner does not succeed in demonstrating that the court's
            action in doing so was clearly erroneous. On the contrary, the
            shipowner concedes that the district court differentiated
            between negligent work performed and work properly done to the
            vessel and awarded the shipyard $10,999 for satisfactorily
            completed non-hull repair work. In fact, the district court's
            opinion stated that it would disallow any recovery by the
            shipyard for the hull replacement work that it either failed to
            do or negligently performed and would allow recovery only for
            the other work that it had adequately performed pursuant to the
            contract. It thus deducted $23,000 from the shipyard's $33,999
            invoice, an amount equal to what the shipyard was seeking for
            hull replacement work, and determined that the shipyard was
            entitled to recovery on its collection action in the amount of
            $10,999. See 
                         Perez Y Cia. de P.R.
                                             , 899 F. Supp. at 866. This
            determination was not clearly erroneous and, therefore, the
            shipowner's argument is unavailing.
                                        -28-
                                         28

                      Similarly, we see no clear error in the court's
            decision to award the shipowner $220,000. For its part, the
            shipyard argues that the district court erred in accepting
            valuations of the ship's worth from the shipowner's expert
            witness, rather than its own expert witness, who testified that
            LA ESPERANZA was only worth her "scrap value," i.e., was
            basically worthless. The gist of the shipyard's contention
            here is that its expert was more qualified to render an
            appraisal value than the shipowner's expert, who was not an
            appraiser per se, but rather a marine surveyor. The record
            substantiates, however, that marine surveyors like the
            shipowner's expert routinely inspect and value ships for
            insurance coverage purposes, prospective sales, and so forth,
            and are fully competent to offer their professional opinion as
            to what a vessel is worth. This is a classic case of dueling
            experts and it is not reversible error that the district court
            was more persuaded by the range of valuations offered by the
            shipowner's expert rather than the other way around.
                      The shipowner, meanwhile, argues that the district
            court should have awarded more than $220,000 because it was
            entitled to loss of use and interest paid on loans taken out to
            refit and repair LA ESPERANZA. The shipowner's expert opined
            that the cost of repairs to the vessel would have been in the
            range of $180,000 to $220,000 plus possible "hidden damages"
            that were not easily ascertained while the ship was still in
                                        -29-
                                         29

            the water. The district court did not commit reversible error
            in accepting the range of figures offered to it by the
            shipowner's expert, in selecting the upper-most figure in that
            range, and then declining to exceed that figure based on
            speculation about costs to repair damage that might or might
            not exist. To the extent that the shipowner is heard to
            complain that it should not bear the burden of interest, loans,
            and loss of use, we believe that the red letter clause and the
            district court's generous award as to actual damages precludes
            a determination of clear error on appeal.
                                     Conclusion
                      Having carefully reviewed the record in this case, we
            believe that the district court's determinations as to
            liability and the proper measure of damages recoverable by the
            respective parties in this dispute were not clearly erroneous.
            We thus discern no cause to disturb the judgments rendered
            below.
                      Affirmed. No costs.
                                        -30-
                                         30