TX A & M Rsrch Fdn v. Magna Trans Inc, et al

United States Court of Appeals
Fifth Circuit
F I L E D
July 9, 2003
Charles R. Fulbruge III
ClerkIn the
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.

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_________________________
Appeals from the United States District Court
for the Southern District of Texas
_________________________
Before SMITH and BARKSDALE, Circuit
Judges, and DUPLANTIER,* District Judge.
JERRY E. SMITH, Circuit Judge:
Plaintiff Texas A&M Research Foundation
(“TAMRF”) sued defendant Magna
Transportation, Inc. (“Magna”), for damages
suffered from the late delivery of specialized
ocean research equipment. Magna, in turn,
sought indemnification from third-party
defendants Italia di Navigazione, S.p.A
(“Italia”), and Navajo Shipping Agency, Inc.
(“Navajo”). The district court held Magna,
Italia, and Navajo jointly and severally liable to
TAMRF but denied certain items of damages
as unreasonable and unforeseeable. All but
Navajo appeal.
I.
TAMRF is a private, non-profit corporation
that, under contract with the Joint Ocean-
ographic Institute, Inc., conducts a research
program known as the Ocean Drilling
Program. TAMRF maintains a research
vessel, the Joides Resolution, which conducts
deep water drilling into the ocean floor in six
annual, two-month-long cruises, or legs, that
are planned at least eighteen months in
advance by lengthy consultation and
preparation. Once the research projects for a
given leg are approved and the scientists
selected to conduct the experiments, special
equipment must be assembled and shipped to
a port where it can be loaded on the Joides
Resolution. Each shipment is time sensitive,
because port time is expensive and steals time
from research.
A new hammer device specifically designed
to penetrate the earth’s crust was to be tested
on Leg 179. The crew and equipment were to
meet the vessel in Capetown, South Africa, in
early April 1998. TAMRF selected Magna to
arrange for the transport of the necessary
equipment. Magna contacted Navajo, which
had a direct contract to arrange booking for
Italia, and obtained a rate for shipment on the
M/V Morelos, Voyage 17. On February 3,
1998, Magna entered into a contract with
TAMRF to arrange shipment of the cargo for
arrival in Capetown by March 23, 1998. Mag-
na had worked with TAMRF and was aware
of the time-sensitive nature of the delivery.
Magna, in turn, contracted with Navajo for
the carriage of TAMRF’s cargo, which
consisted of a flatrack and two containers.
Navajo engaged Italia to carry TAMRF’s
cargo. The result of this string of contracts
was an arrangement for TAMRF’s equipment
to be shipped on the Morelos, Voyage 17,
which was scheduled to sail from Houston in
late February 1998, and was estimated to
arrive in Capetown on March 23. * District Judge of the Eastern District of Loui-
siana, sitting by designation.

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On February 20, 1998, Navajo issued a bill
of lading to Magna certifying that TAMRF’s
cargo had been loaded on the Morelos,
Voyage 17; the Morelos, Voyage 17, departed
Houston on the same day. On two separate
occasions, Navajo confirmed that the cargo
had sailed on the Morelos. When TAMRF’s
personnel flew to meet their cargo in
Capetown, however, they were able to locate
only the flatrack and not the two containers.
TAMRF’s agent in Capetown informed
Magna that the containers were missing, and
Magna eventually contacted Italia, which re-
plied that the containers were at sea aboard the
Morelos, Voyage 18. The containers had not
even been loaded until April 1998, after their
scheduled arrival in Capetown. Before
TAMRF’s discovery that its cargo was
missing, Italia had made no effort to inform
any party that the cargo had not been shipped
aboard Voyage 17.
After learning its containers were aboard
Voyage 18, TAMRF requested that the
containers be discharged in Miami, Florida,
and then Valencia, Spain, but Italia refused to
offload the containers. The Morelos continued
on to La Speiza, Italy, where TAMRF’s per-
sonnel met the cargo and placed the most es-
sential equipment into a single container for air
shipment to the island of Reunion. From
there, TAMRF’s personnel chartered a small
freighter to carry the container and attempted
a midsea rendezvous with the Joides
Resolution. Because of rough seas, the at-
tempt failed, and none of the equipment was
transferred to the research vessel.
II.
TAMRF sued Magna, alleging breach of
contract and fraudulent misrepresentation.
Magna brought in Navajo and Italia as third-
party defendants pursuant to FED. R. CIV. P.
14(c). After a short bench trial,1 the district
court found the defendants jointly and
severally liable, decided that TAMRF had
failed to offer any evidence of damages, and
invited a motion to reopen the record.
After TAMRF made, and the district court
granted, the motion to reopen, TAMRF
submitted affidavit and documentary evidence
of certain expenses it had incurred, allegedly as
a result of defendants’ conduct. The court
considered the additional evidence and altered
its judgment, awarding TAMRF damages of
$49,057.972 but disallowing various conse-
quential damages because they were
unforeseeable and thus unrecoverable.
All parties except Navajo appeal.3 TAMRF
appeals the denial of its consequential damages
and the refusal to award attorneys’ fees. Mag-
na and Italia appeal the calculation of damag-
es. Italia challenges the assessment of liability.
III.
Italia contends that it is immune from lia-
bility and, in the alternative, that the district
court erred as a matter of law in imposing joint
and several liability. As an initial matter, how-
1 The court heard testimony from a single wit-
ness, after which it informed the parties that it
would conduct the trial on written submissions. No
party objected to this procedure, and we make no
comment on its propriety.
2 The damages awarded included amounts spent
to return various portions of the cargo to Houston
and travel expenses for Pat Thompson, a TAMRF
employee attempting to ensure proper delivery of
the cargo.
3 Navajo filed an answer but, without explan-
ation, did not appear at trial.

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ever, we conclude the court improperly
applied rule 14(c) in holding Italia and Navajo
directly liable to TAMRF. Because the court
abused its discretion in imposing such liability,
we need not address Italia’s other arguments
with respect to this issue.
After being sued by TAMRF, Magna joined
Italia and Navajo as third-party defendants.
TAMRF took no steps to assert claims against
the third-party defendants. Yet, in its final or-
der, the district court purported to realign the
parties, allowing TAMRF to proceed directly
against Navajo and Italia.
Rule 14(c) governs third-party practice in
admiralty proceedings and, in some
circumstances, allows a plaintiff to proceed
directly against third-party defendants. The
rule provides that “the defendant . . . may
bring in a third-party defendant who may be
wholly or partly liable, either to the plaintiff or
to the [defendant as third-party plaintiff].”
Magna exercised that option, filing a third-
party complaint seeking indemnification from
Italia and Navajo.
The rule additionally states that “the third-
party plaintiff may also demand judgment
against the third-part y defendant in favor of
the plaintiff, in which event . . . the action shall
proceed as if the plaintiff had commenced it
against the third-party defendant as well as the
third-party plaintiff.” This clause is
inapplicable here, however, because Magna’s
third-party complaint did not demand
judgment against Navajo and Italia in favor of
TAMRF. Instead, Magna sought
indemnification from Italia and Navajo for any
sums it was required to pay TAMRF.
Courts have taken a lenient approach in de-
termining whether a third-party plaintiff has
“demanded judgment” in favor of the plaintiff
such that the plaintiff may then pursue its ac-
tion directly against the third-party
defendants.4 This case, however, does not
involve inapt phrasing in a complaint that was
nonetheless intended to invoke the direct suit
provision of rule 14(c).
To the contrary, Magna’s third-party
complaint entirely fails to meet the substantive
requirements of that provision. Nowhere does
it request that Italia and Navajo be held liable
directly to TAMRF; in the absence of such a
request, there was no basis for TAMRF to re-
cover directly from them under rule 14(c).
Consequently, the district court erred in
finding Italia and Navajo directly liable to
TAMRF, although they are potentially liable to
Magna for any amounts expended in
satisfaction of a judgment in favor of TAMRF.
IV.
In its initial findings of fact and conclusions
of law, the district court concluded that,
although TAMRF had established defendants’
liability, it “inexplicably ha[d] provided no evi-
dence to support a finding of damages . . . .”5
4 See, e.g., Royal Ins. Co. v. Southwest Marine,
194 F.3d 1009, 1018 (9th Cir. 1999) (holding that
third-party complaint permitted original plaintiff to
recover from third-party defendants where com-
plaint explained the third-party defendants’ direct
liability to plaintiffs and repeatedly referred to rule
14(c)); Riverway Co. v. Trumbull River Servs.,
Inc., 674 F.2d 1146, 1154 (7th Cir. 1982) (where
third-party complaint cited rule 14(c) and demand-
ed that third-party appear and answer the com-
plaint).
5 TAMRF disputes the accuracy of this finding,
contending that evidence of damages was provided
by Richard McPherson, the only live witness heard
(continued...)

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Accordingly, the court invited TAMRF to
move to reopen the record for submission of
evidence on damages. TAMRF made, and the
district court granted, such a motion seven
days later. All damages awarded were based
on the additional evidence submitted by
TAMRF pursuant to that order.
We review for abuse of discretion the de-
cision to reopen the record.6 “[T]he extent of
the court’s discretion to reopen the case and to
consider [additional] materials depends, in the
first instance, on the particular Federal Rule of
Civil Procedure under which the motion aris-
es.” Lavespere, 910 F.2d at 173. A motion
filed after judgment requesting that the court
reconsider its decision in light of additional ev-
idence constitutes either a motion to “alter or
amend” under FED. R. CIV. P. 59(e) or a
motion for “relief from judgment” under FED.
R. CIV. P. 60(b). See id.
“Under which Rule the motion falls turns
on the time at which the motion is [filed]. If
the motion is [filed no later than] ten days of
the rendition of judgment, the motion falls un-
der Rule 59(e); if it is [filed] after that time, it
falls under Rule 60(b).” Id. Here, the motion
was filed seven days after the entry of the ini-
tial order, so we we treat it as a motion to alter
or amend under rule 59(e).
“Because Rule 59(e) is not subject to the
limitations of Rule 60(b), the district court has
considerable discretion in deciding whether to
reopen a case in response to a motion for re-
consideration arising under the former rule.”
Id. at 174. In exercising this broad discretion,
the court should consider four primary factors:
“(1) the reasons for the plaintiffs’ default,
(2) the importance of the evidence to the
plaintiffs’ case, (3) whether the evidence was
available to plaintiffs [prior to the entry of
judgment], and (4) the likelihood that the de-
fendants will suffer unfair prejudice if the case
is reopened.” Ford, 32 F.3d at 937-38 (citing
Lavespere, 910 F.2d at 174).
The first and third factors cut against
granting the motion to reopen. TAMRF offers
no substantial explanation for its failure to
submit, before judgment, the documentary and
affidavit evidence proffered after the record
was reopened. Further, there is no allegation
that this evidence was not freely available
before entry of the initial judgment. Unlike a
rule 60(b) motion, however, a rule 59(e)
motion need not “make any particular showing
of inadvertence or excusable neglect.”7
Therefore, even if these factors weigh against
TAMRF’s request to reopen, they are not
determinative. See Ford, 32 F.3d at 938.
The second and fourth factors, by contrast,
weigh heavily in favor of TAMRF. Although
the district court already had established
defendants’ liability, its judgment left TAMRF
without any recovery. Evidence of damages
5(...continued)
from in the case. McPherson did testify as to dam-
ages, most or all of which were denied even after
the record was supplemented.
6 See Ford v. Elsbury, 32 F.3d 931, 937-38
(5th Cir. 1994); Lavespere v. Niagara Mach. &
Tool Works, Inc., 910 F.2d 167, 173 (5th Cir.
1990), abrogated on other grounds by Little v.
Liquid Air. Corp., 37 F.3d 1069 (5th Cir. 1994)
(en banc)).
7 Ford, 32 F.3d. at 938; see also Lavespere,
910 F.2d at 174 (“[T]o reopen a case under Rule
59(e) on the basis of evidentiary materials that
were not timely submitted, the mover need not first
show that her default was the result of mistake,
inadvertence, surprise, or excusable neglect . . . .”).

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was obviously of critical importance. In addi-
tion, the defendants did not suffer any unfair
prejudice from the reo pening. The affidavit
and invoice testimony overlapped substantially
with McPherson’s testimony, to which the de-
fendants did not object at trial; they were
therefore already aware of most of the
damages claimed. Further, the additional
damages identified in the supplemental filings
took the form of expenses actually incurred by
TAMRF.
Defendants’ position is that TAMRF’s ex-
penses are not recoverable as damages, but de-
fendants never have argued that these expens-
es were not incurred. Essentially, defendants
were not unfairly surprised by the evidence,
which did not directly relate to their principal
arguments against recovery. Consequently,
defendants were not unfairly prejudiced by evi-
dence of the expenses. Taken together, these
factors establish that the district court did not
abuse its discretion in inviting and granting the
motion to reopen.
V.
As part of its submission on damages for
the reopened trial record, TAMRF introduced
McPherson’s affidavit, which described in de-
tail various expenses TAMRF had incurred
purportedly in connection with the defendants’
failure timely to deliver the cargo to
Capetown. The six-page affidavit was
accompanied by 329 pages of documents
detailing TAMRF’s expenses. The district
court admitted it as a business record affidavit
with respect to most of the documented charg-
es; the court excluded, as speculative, that
portion of the affidavit discussing damages for
“lost ship time.” Both parties challenge the
treatment of the affidavit. We review
evidentiary rulings for abuse of discretion.
Green v. Adm’rs of Tulane Educ. Fund, 284
F.3d 642, 660 (5th Cir. 2002).
A.
Italia and Magna contend that the invoices
submitted with McPherson’s affidavit are inad-
missible under FED. R. CIV. P. 37(c)(1), which
provides that a party cannot offer, at trial,
documents that have not been disclosed in
accordance with FED R. CIV. P. 26.8 Rule
37(c)(1) provides that a party who fails to
disclose such information “shall not, unless
such failure is harmless, be permitted to use as
evidence at a trial, at a hearing, or on a motion
any witness or information not so disclosed.”
FED. R. CIV. P. 37(c)(1). We review for abuse
of discretion a decision not to exclude
documents under rule 37. United States v.
$9,041,598.68, 163 F.3d 238, 252 (5th Cir.
1998).
In evaluating whether a violation of rule 26
is harmless, and thus whether the district court
was within its discretion in allowing the
evidence to be used at trial, we look to four
factors: (1) the importance of the evidence;
(2) t he prejudice to the opposing party of in-
cluding the evidence; (3) the possibility of cur-
ing such prejudice by granting a continuance;
and (4) the explanation for the party’s failure
to disclose. See id.
Although TAMRF failed to explain its fail-
ure to disclose, the prejudice to the adverse
parties was negligible, because the witness in
support of whose testimony the invoices were
offered had been designated properly as a wit-
8 Presumably, Magna contends that TAMRF
should have disclosed the documents pursuant to
rule 26(a)(1)(B) or (C), which requires a party to
disclose, respectively, documents relevant to dis-
puted facts in the proceedings or documents on
which damages computations are based.

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ness before trial. Further, any prejudice was
cured by the approximately one month during
which Italia was allowed to examine and re-
spond to the contested evidence. The district
court did not abuse its discretion in admitting
the documentary evidence supporting the
affidavit.
B.
Magna contends the McPherson affidavit is
hearsay not admissible under any exception.
The district court, however, concluded that the
affidavit was admissible as a business record
affidavit, which requires only that the affiant
have “personal knowledge to testify as
custodian of documents” and “personal
knowledge as to some of the statements in the
affidavit.” FSLIC v. Griffin, 935 F.2d 691,
702 (5th Cir. 1991).
The affidavit states that part of McPher-
son’s duties as vice-president of TAMRF in-
cluded the management of all records and doc-
uments pertaining to the Ocean Drilling
Program and that such records are kept under
his custody and control. The district court
also reasonably concluded that, as vice-presi-
dent of the foundation, McPherson had
personal knowledge as to some of the
statements in the affidavit.9 Italia’s principal
argument is that McPherson lacked personal
knowledge of certain of the facts in the
affidavit. This argument is meritless, because
personal knowledge of all the contents of a
business record affidavit is not required. See
id; 4 STEPHEN A. SALTZBURG, MICHAEL M.
MARTIN & DANIEL J. CAPRA, FEDERAL RULES
OF EVIDENCE MANUAL § 803.02[7][d] (Lexis-
Nexis 8th. ed. 2002). Consequently, the
district court did not abuse its discretion in ad-
mitting the affidavit as a business record.
C.
The McPherson affidavit included, in its list
of expenses, $132,239 related to lost ship
time. This entry reflects the cost of chartering
the Joides Resolution for the three days during
which the hammer experiment was to have
been performed, but during which no research
was done because of defendants’ failure to de-
liver the necessary equipment. The district
court excluded that portion of the affidavit,
concluding that it was inadmissible as
improper or speculative lay opinion testimony.
“Under [FED.R. EVID.] 701, ‘a lay opinion
must be based on personal perception, must be
one that a normal person would form from
those perceptions, and must be helpful to the
[fact finder].’”10 “In particular, the witness
must have personalized knowledge of the facts
underlying the opinion and the opinion must
have a rational connection to those facts.” Id.
Accordingly, rule 701 does not preclude tes-
timony by business owners or officers on mat-
ters that relate to their business affairs.11 In-
deed, an officer or employee of a corporation
9 This conclusion is particularly appropriate in
light of the fact that most of the statements in the
affidavit relate to the payment of various expenses
related to the program over which payment Mc-
Pherson had final approval authority.
10 Miss. Chem. Corp. v. Dresser-Rand Co., 287
F.3d 359, 373 (5th Cir. 2002) (quoting United
States v. Riddle, 103 F.3d 423, 428 (5th Cir.
1997)).
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
likewise); 3 STEPHEN A. SALTZBURG, MICHAEL M.
MARTIN & DANIEL J. CAPRA, FEDERAL RULES OF
EVIDENCE MANUAL § 701.03[7], at 701-20
through 701-21 & Supp. 2002 (Lexis-Nexis 8th ed.
2002).

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may testify to indust ry practices and pricing
without qualifying as an expert. Tampa Bay
Shipbuilding & Repair Co. v. Cedar Shipping
Co., 320 F.3d 1213, 1223 (11th Cir. 2003).
McPherson’s testimony, similarly, is based on
particularized knowledge based on his position
as vice-president of the research foundation.12
In any event, the lost ship time charges set
forth in the affidavit do not constitute opinion
testimony of any kind. As with the other doc-
umented expenses, the amount established for
lost ship time is an amount actually paid by
TAMRF. The figure was not derived from
McPherson’s opinion as to the value of lost
ship time, as the district court phrased it, but
rather was established according to precise
contractual terms.
Because the ruling rested on a
misinterpretation of rule 701, the exclusion of
the lost-ship-time portion of the affidavit was
an abuse of discretion.13 But, “[this court] will
not reverse erroneous evidentiary rulings
unless the aggrieved party can demonstrate
‘substantial prejudice.’” Viazis v. Am. Ass’n
of Orthodontists, 314 F.3d 758, 767 (5th Cir.
2002), cert. denied, 123 S. Ct. 2078 (2003).
As we explain, TAMRF is not entitled to
recover expenses related to the cessation of
research activity aboard the Joides Resolution
and thus was not prejudiced by the exclusion
of this evidence.
VI.
In its supplemental order on damages, the
district court denied recovery for two broad
categories of expenses incurred by TAMRF:
expenditures related to TAMRF's own
attempts to deliver part of the delayed
shipment to the Joides Resolution;14 and costs
incurred in reliance on defendants’
commitment to deliver the cargo by the
appointed date.15 In its findings of fact, the
district court acknowledged that TAMRF had
incurred these expenses but held them to be
unforeseeable and thus unrecoverable as
consequential damages. TAMRF argues that
the expenses were reasonable and necessary to
salvage critical research.
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
on “scientific, technical or other specialized knowl-
edge within the scope of Rule 702 [expert evi-
dence],” the court in Tampa Bay Shipbuilding, 320
F.3d at 1222-23, thoroughly reviewed the advisory
committee notes accompanying the 2000
amendment and concluded that the amendment did
not place any restrictions on the preamendment
practice of allowing business owners or officers to
testify based on particularized knowledge derived
from their position.
13 See United States v. Buck, 324 F.3d 786, 791
(5th Cir. 2003) (noting that district court abuses
discretion where decision to admit evidence is
based on error of law).
14 These expenditures include the $98,000 spent
to airlift part of the cargo to Reunion Island and
$38,962.90 to charter a vessel for the attempted
mid-sea rendezvous with the Joides Resolution.
15 TAMRF’s reliance costs include items such
as the $7,465.60 spent to outfit the Joides Res-
olution for the scientific experiments that could not
be performed. TAMRF also spent $2,325 to feed
and $24,796.16 to pay the crew intended to
perform those experiments. The most significant
reliance expenditure, however, was the roughly
$140,000 spent to secure use of the Joides Reso-
lution for the three days during which the hammer
experiment was to have been performed.

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261 F.3d 466, 477 (5th Cir. 2001). In the
absence of legal error, the award of damages
is a finding of fact reviewed for clear error.
Tyler v. Union Oil Co., 304 F.3d 379, 401
(5th Cir. 2002). So, “[i]f the district court’s
factual findings are plausible in light of the
evidence presented, this court will not reverse
its decision even if this court would have
reached a different conclusion.”16
That TAMRF actually incurred the disputed
expenses is uncontroverted; the only issue is
whether it is entitled to recover them as con-
sequential, or “special,” damages, which are
those unusual or indirect costs that, although
caused by the defendant’s conduct in a literal
sense, are beyond what one would reasonably
expect to be the ordinary consequences of a
breach.17 As a general rule, special damages
are not recoverable in an action for breach of
contract. See id. Instead, to recover special
damages, a plaintiff must establish that the
defendant “had notice of the special
circumstances from which such damages
would flow.”18 Accordingly, a carrier is liable
for special damages caused by an unreasonable
and unnecessary delay in the transportation of
goods only if it has notice of the special
circumstances leading to those damages.19
The question is therefore whether Magna
had reason to know that untimely delivery of
the cargo would cause the special damages
suffered by TAMRF. The district court
implicitly held that Magna lacked knowledge
of the special circumstances surrounding the
shipment, concluding that neither the
significant costs TAMRF incurred in its
attempts to secure an alternative means of
delivery nor those incurred in reliance on the
agreed-on delivery date were “foreseeable.”
The foreseeability of damages is a fact
question we review for clear error.20
Judging from the findings of facts, Magna
had sufficient notice of the special
circumstances surrounding the cargo that it
can be held liable for special damages resulting
from TAMRF’s attempts to secure an alternate
16 Id. (citing Patterson v. P.H.P. Healthcare
Corp., 90 F.3d 927, 936 (5th Cir. 1996)).
17 See Contempo Metal Furniture Co. v. E.
Tex. Motor Freight Lines, Inc., 661 F.2d 761, 765
(9th Cir. 1981) (“Special damages are those that
the carrier did not have reason to foresee as ordi-
nary, natural consequences of a breach when the
contract was made.”).
18 Id. (citing Ill. Cent. Gulf R.R. v. S. Rock,
Inc., 644 F.2d 1138, 1141 (5th Cir. May 1981));
see also Gardner v. Mid-Continent Grain Co.,
168 F.2d 819, 822 (8th Cir. 1948) (“It is the
general rule that damages recoverable for delay in
transportation must be such a[s] might reasonably
have been contemplated by the parties at the time
(continued...)
18(...continued)
the contract of carriage was made” (citation and in-
ternal quotation marks omitted)).
19 See Alpine Ocean Seismic Survey, Inc. v.
F.W. Myers & Co., 23 F.3d 946, 948 (5th Cir.
1994) (holding carrier not liable for cost of re-
placing microorganisms killed as a result of late
delivery, in part because it had no knowledge of the
contents of containers and therefore could not have
reasonably foreseen the need to collect replace-
ments from the ocean floor); see also Contempo,
661 F.2d at 765; Hector Martinez & Co. v. S. Pac.
Transp. Co., 606 F.2d 106, 109 (5th Cir. 1979);
Ill. Cent. R.R. v. Horace Turner Corp., 9 F.2d 6,
7 (5th Cir. 1925).
20 Cf. Hector Martinez, 606 F.2d at 110; King
v. Otasco, Inc., 861 F.2d 438, 444 (5th Cir. 1988).

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means of delivering the cargo. The court
found that “Magna was aware of the
time-sensitive nature of the delivery of [the]
equipment.” In addition, Dana Holcomb,
Magna’s president, admitted knowing the pur-
pose of the Ocean Drilling Project.
Further, Magna had worked with TAMRF
on several time- and place-sensitive deliveries
and was aware that, in this case, TAMRF had
arranged alternate shipping dates to ensure
timely delivery. Although a general awareness
that harm could result from any untimely
delivery does not justify an award of
consequential damages,21 Magna had actual
notice of the importance to TAMRF of timely
delivery. Therefore, the district court clearly
erred in holding these expenses to be
unforeseeable.
The special damages resulting from
TAMRF’s reliance on its contract with Magna
raise more difficult questions of foreseeability.
The $7,465.60 TAMRF spent outfitting the
Joides Resolution for the hammer experiment
was foreseeable, even given Magna’s limited
knowledge of the particulars of the Ocean
Drilling Project. Magna should reasonably
have known that certain costs would be
incurred in preparing for research dependent
upon the cargo and that those expenditures
would be wasted in the event Magna failed to
deliver the shipment in time.
With respect to the remainder of the
expenses sought to be recovered, however, the
district court did not clearly err. Based on its
superficial knowledge of the purposes and
methods of the research project, Magna could
not reasonably have expected that a failure to
deliver TAMRF’s cargo would render the
Joides Resolution and its scientists incapable
of performing any research for an extended
period of time. Thus, all the preparation costs
associated specifically with the task at hand are
recoverable, but costs generally applicable to
other, unspecified research are not. Cf.
Alpine, 23 F.3d at 948.
VII.
Maritime disputes generally are governed
by the “American Rule,” pursuant to which
each party bears its own costs. Galveston
County Nav. Dist. v. Hopson Towing Co., 92
F.3d 353, 356 (5th Cir. 1996). Therefore,
“absent statute or enforceable contract,
litigants must pay their own attorneys’ fees.”
Id. TAMRF contends, however, that it has
identified a st atute entitling it to feesSSTEX.
CIV. PRAC. & REM. CODE § 38.001, which
provides that a party seeking to recover for
breach of an oral or written contract “may
recover reasonable attorney’s fees.”
In MTO Maritime Transp. Overseas, Inc. v.
McLendon Forwarding Co., 837 F.2d 215,
219-220 (5th Cir. 1988), we rejected a similar
challenge to the refusal to award fees under
the precursor to § 38.001. Concluding that
the statute was discretionary and that there
had been no abuse of discretion, the MTO
Maritime panel affirmed the denial of fees
without deciding whether the state statute
controlled. Since MTO Maritime was decided,
however, Texas courts have concluded that
“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-
stract knowledge that any untimely bank transfer
could theoretically cause great harm was not suf-
ficient to justify consequential damages).
22 Kona Tech. Corp. v. S. Pac. Transp. Co.,
225 F.3d 595, 603 (5th Cir. 2000) (citing Green
(continued...)

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question reserved in MTO Maritime, 837 F.2d
at 219, namely, “the applicability of state laws
providing for attorney’s fees in an admiralty
contract dispute.” The applicability of state
law to a maritime contract dispute is a legal
determination subject to de novo review.
Although the question is a matter of first
impression in this circuit, two other circuits
have directly addressed it. Citing the “strong
interest in maintaining uniformity in maritime
law,” the Third Circuit has held that the
various state statutes providing for attorney
fees should not be applied in federal maritime
disputes.23
Similarly, the First Circuit has held that
state law is inapplicable to the question of at-
torneys’ fees in maritime contract disputes,
noting that state law cannot apply where it
conflicts with maritime law and concluding
that the fee statute at issue contradicted the
general rule of maritime law that “parties pay
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
uniformity in federal maritime law, precludes
the application of state attorneys’ fee statutes,
such as § 38.001, to maritime contract
disputes.
The judgment is REVERSED in part and
AFFIRMED in part, and this matter is
REMANDED for further proceedings con-
sistent with this opinion. In addition to the
initial award of $49,057.97, TAMRF is entit-
led to recover for amounts expended in con-
nection with its attempt to deliver the cargo,
specifically, $98,000.00 to airlift the cargo to
Reunion Island and $38,962.90 to charter a
vessel for the attempted rendezvous with the
Joides Resolution. TAMRF is also entitled to
the $7,465.60 incurred in outfitting its vessel
for research dependent on the cargo. On re-
mand, therefore, the district court shall enter
judgment of $193,486.47 for TAMRF against
Magna and then shall determine the extent to
which Magna is entitled to indemnification
from Italia and Navajo.
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”).

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