     Case: 15-30504      Document: 00513398470         Page: 1    Date Filed: 02/26/2016




           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT
                                                                          United States Court of Appeals

                                      No. 15-30504
                                                                                   Fifth Circuit

                                                                                 FILED
                                                                          February 26, 2016
                                                                            Lyle W. Cayce
JAB ENERGY SOLUTIONS II, L.L.C.,                                                 Clerk


              Plaintiff – Appellee

v.

SERVICIO MARINA SUPERIOR, L.L.C.; CASHMAN EQUIPMENT
CORPORATION,

              Defendants – Appellants


                  Appeals from the United States District Court
                      for the Eastern District of Louisiana
                             USDC No. 2:13-CV-556


Before PRADO, OWEN, and HAYNES, Circuit Judges.
PER CURIAM:*
       Cashman Equipment Corp. (“Cashman”) and its subsidiary Servicio
Marina Superior, LLC (“SMS”) appeal the district court’s judgment awarding
damages to JAB Energy Solutions II, LLC (“JAB”) for breach of contract.
Cashman and SMS argue that the district court erred when it: (1) found that
Cashman and SMS breached the contract’s warranty of seaworthiness and the
warranty to perform transportation services with “due dispatch”; (2) concluded


       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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that neither the contract’s terms nor a subsequent agreement between JAB
and Cashman barred JAB’s claim; and (3) determined that Cashman was the
alter ego of SMS. For the reasons that follow, we AFFIRM the district court’s
judgment in all respects as to SMS, AFFIRM the dismissal of Cashman’s
counterclaim for failure to brief the issue properly, and REVERSE the
judgment of liability as to Cashman, which was predicated on an erroneous
alter ego finding; we RENDER judgment in favor of Cashman on JAB’s claims
against it.
                                I. Background
      After being awarded a job to transport and install an oil drilling platform
in Malaysia, JAB contacted an employee of SMS and Cashman for the
estimated cost to tow the drilling platform by ocean tug and barge from
Louisiana to Malaysia. On March 1, 2012, the employee sent an email to JAB
providing details of a potential voyage. It designated a vessel owned by SMS,
the Atlas, as the tug to perform the job. The email made predictions regarding
the voyage’s length, the vessel’s speed and fuel consumption, and noted that
only two fuel stops would be required. This email was expressly incorporated
into the Contract of Affreightment (the “Contract”), which was signed by JAB
and SMS on June 1, 2012. While another email and a voyage plan submitted
by SMS to JAB further outlined the details of the voyage, they were not
expressly incorporated into the Contract.       The cost of the project in the
Contract was $5,048,000.
      On June 16, 2012, the Atlas—which had received work on its engines a
few months prior—left Louisiana to perform the Contract, tugging the JMC-
3330 barge, owned by Cashman, with the drilling platform attached. During
the journey, the Atlas experienced significant difficulties.        The Atlas’s
starboard main engine reported constant issues that required numerous


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repairs, the chief engineer was fired, and at one point, the tug’s tow bridle
broke and had to be fixed.
       On the afternoon of July 12, JAB emailed representatives at SMS and
Cashman to suggest that they find a replacement tug as soon as possible, a
suggestion that SMS and Cashman rejected. Two days later, JAB then notified
SMS and Cashman that it had located a tug to replace the Atlas on its own in
order to complete the voyage to Malaysia. On July 23, JAB replaced the Atlas
and also executed the Barge Bareboat Charter (the “Bareboat Charter”) with
Cashman, which arranged for JAB’s continued use of the JMC-3330 barge to
transport the drilling platform to Malaysia.
       JAB filed suit against SMS and Cashman on March 26, 2013, claiming
breach of contract and seeking all costs associated with the replacement of the
Atlas. Cashman asserted a counterclaim seeking the amount still due under
the Bareboat Charter for the continued use of the barge. After a bench trial,
the district court ruled for JAB and dismissed Cashman’s counterclaim. The
district court, describing a long list of problems with the Atlas, noted that the
Atlas made unexpected stops to refuel and undergo repairs, vastly exceeded
fuel consumption estimates, and had failed to even approach the speed
described in the emails and the voyage plan provided to JAB. 1 As a result, the
district court determined that it was reasonable for JAB to find a replacement
tug, and that JAB had no choice but to sign the Bareboat Charter for continued
use of the JMC-3330 barge because the drilling platform was already secured
to the JMC-3330’s deck.          It also concluded that neither the terms of the
Contract nor the Bareboat Charter barred JAB’s contractual claim.                       The
district court found that SMS breached the terms in the Contract requiring



       1  The district court found that it took the Atlas twenty-one days to reach Panama, at
which point it had consumed 68,894 gallons of fuel. The voyage plan projected that this leg
of the trip would take around eight days and consume 32,000 gallons of fuel.
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SMS to tender the Atlas “in a seaworthy condition, fully equipped and fully
capable to performing the intended services,” and also breached its express
obligation to “perform the transportation services with due dispatch.” The
district court also determined that Cashman was the alter ego of SMS, and was
thus also liable despite not being a signatory to the Contract. It entered
judgment against Cashman and SMS for $4,864,214.89, plus $439,576.02 in
attorneys’ fees. Cashman and SMS timely appealed.
                     II. Jurisdiction and Standard of Review
      The district court had jurisdiction over this admiralty action under 28
U.S.C. § 1333. As with any bench trial, we review findings of fact for clear
error and issues of law de novo. Mid-South Towing Co. v. Exmar Lux (In re
Mid-South Towing), 418 F.3d 526, 531 (5th Cir. 2005). The interpretation of
contracts is a question of law reviewed de novo.          Dell Comput. Corp. v.
Rodriguez, 390 F.3d 377, 384 (5th Cir. 2004). “A basic principle of contract
interpretation in admiralty law is to interpret, to the extent possible, all the
terms in a contract without rendering any of them meaningless or
superfluous.” Chembulk Trading LLC v. Chemex Ltd., 393 F.3d 550, 555 (5th
Cir. 2004).
      “[A] district court’s findings on unseaworthiness are findings of fact and
therefore are reviewed for clear error.” Boudreaux v. United States, 280 F.3d
461, 468 (5th Cir. 2002). We review alter ego determinations for clear error.
Zahra Spiritual Tr. v. United States, 910 F.2d 240, 242 (5th Cir. 1990). A
finding of fact is clearly erroneous when, after viewing the evidence in its
entirety, we are left with a definite and firm conviction that a mistake has been
made. See Bertucci Contracting Corp. v. M/V ANTWERPEN, 465 F.3d 254,
258–59 (5th Cir. 2006).




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                                III. Discussion
A. SMS’s breach of the Contract’s express warranties
      Cashman and SMS argue that the district court clearly erred when it
found that the Atlas was unseaworthy. To be seaworthy, a vessel must be
“reasonably suited for the purpose or use for which [it was] intended.” In re
Signal Int’l, LLC, 579 F.3d 478, 498 (5th Cir. 2009) (citation omitted). This
requires that “a ship, whether the hull, the decks, the machinery, the tools
furnished, the stowage, or the cargo containers . . . be reasonably fit for the
purpose for which they are to be used[.]” Id. (citation omitted).
      Article 3(A) of the Contract expressly warranted that the Atlas would be
seaworthy when tendered:
            Warranties. Carrier [SMS] shall tender the Vessels to
            Shipper [JAB] in a seaworthy condition, fully equipped
            and fully capable to performing the intended services
            as advised in advance by [JAB] to [SMS] with all
            documentation, licensing and permits required for
            routine operation of the Vessels.
In finding that SMS failed to tender a seaworthy vessel, the district court
credited the testimony of an SMS employee who revealed that the Atlas had
previously experienced fuel-consumption problems and that it emitted thick
black smoke as it was sailing away from Louisiana.          It also referenced the
daily email reports provided by the Atlas during the voyage that indicated
recurring engine problems, excessive fuel consumption, and issues with the
Atlas’s engineer.    Accordingly, we are not left with a definite and firm
conviction that the district court made a mistake and therefore conclude that




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it did not clearly err in finding that the Atlas was tendered in an unseaworthy
condition. See Boudreaux, 280 F.3d at 468.
       In the alternative, SMS claims that the district court erroneously
ignored Article 4B 2 of the Contract, which, according to SMS, was a waiver of
the express warranty of seaworthiness at tender. However, we have held that
to adequately waive the warranty of seaworthiness, a contract must do so
“clear[ly] and unequivocal[ly].” Thomas Jordan, Inc. v. Mayronne Drilling
Mud, Chem. & Eng’g Serv., 214 F.2d 410, 412 (5th Cir. 1954). In Thomas
Jordan, we held that an inspection provision stating that a customer “has had
the barge inspected and found same to be in first-class condition” was not
sufficiently clear and unequivocal to constitute a waiver. Id. We specifically
noted that the customer only inspected the exterior of the vessel and that the
inspection provision was on the vessel owner’s pre-printed form. Id. Similarly,
SMS’s inspection provision was part of SMS’s pre-printed form and JAB only
inspected the exterior of the Atlas. The inspection provision here failed to
unequivocally waive any warranty of seaworthiness. See id. Accordingly, the
district court correctly determined that Article 4(B) did not bar JAB’s
unseaworthiness claim. 3
       SMS further maintains that the district court erred in determining that
SMS breached the warranty to conduct the voyage with “due dispatch.” Article
3A on warranties states: “Carrier [SMS] shall perform transportation services


       2 Article 4(B) of the Contract states: “Inspection. Shipper [JAB] shall be responsible
for inspecting the Vessels, including their fittings, gear and equipment, prior to acceptance
at tender to determine their suitability and fitness for the intended services, with Shipper to
note any deficiencies in writing to Carrier prior to the commencement of loading cargoes.
Upon Shipper’s acceptance of the Vessels or commencement of loading, whichever shall first
occur, Shipper shall be deemed to have acknowledged and agreed that the Vessels, including
their fittings, gear and equipment, are in all respects suitable and fit for the intended
services.”
       3Nor did the district court err in holding that the Contract’s indemnity provisions
presented no obstacle to JAB’s contractual claims.
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with ‘due dispatch,’ but makes no warranty as to speed or arrival/departure
times.” SMS’s obligation to perform with “due dispatch” is informed by the
email sent to JAB—expressly incorporated into the Contract—that outlined
the Atlas’s planned fuel consumption, speed, and the number of fuel stops for
the voyage. While the Contract made no firm guarantees as to speed or arrival
times, these initial estimates provide an outline as to the obligations of SMS.
The district court found that, due to SMS’s negligence, the Atlas failed to even
come close to reaching any of these estimated figures.                  The Atlas vastly
exceeded the estimated fuel consumption, made multiple unexpected stops for
repair and refueling, and fell woefully short of the estimated speed as outlined
in the email. 4 The district court did not err in finding that SMS breached the
“due dispatch” warranty. 5
B. Neither the terms of the Contract nor the terms of the Bareboat Charter
barred JAB’s claim
       SMS also claims that the district court improperly failed to apply Article
8, 6 the provision of the Contract that bars JAB from recovering consequential
damages. General or direct damages are “damages that are recoverable . . . for
injuries that are the natural result of the breach” or “[l]osses that an ordinary


       4The email incorporated into the Contract estimated that the Atlas would average a
speed of seven knots, consume around 4,000 gallons of fuel per day, and make two stops to
refuel. The district court found that the Atlas averaged around three or four knots, more
than doubled the estimated fuel consumption, and made two additional unplanned stops in
Manzanillo and San Diego for repairs.
       5As we hold that the district court did not err in concluding that SMS violated the
warranty of “due dispatch” based upon terms expressly incorporated into the Contract, we
need not address whether the district court properly assessed other extrinsic evidence to
determine whether SMS breached its “due dispatch” obligation.
       6 Article 8 states: “Neither Carrier [SMS], Shipper [JAB] nor any Vessel shall be
responsible for any special or consequential damages whatsoever and howsoever caused,
including the unseaworthiness of either of the Vessels or the sole or concurrent negligence of
either Carrier or Shipper, including without limitation, extra expense, loss of earnings, loss
of profits, loss of use and business interruption, whether resulting from negligence,
unseaworthiness, breach of this Contract or otherwise, even if the possibility of such damages
may have been foreseeable.”
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person would expect to follow the breach.” 11 JOSEPH M. PERILLO, CORBIN ON
CONTRACTS § 56.6, at 102, 103 (2005). By contrast, consequential or special
damages are losses “suffered as a ‘consequence’ of the breach of duty, but not
as a direct and immediate and foreseeable consequence.” Id. at 105. SMS’s
argument fails because the damages awarded are not consequential damages.
The damages awarded represent the costs of hiring a tug to replace the
unseaworthy and inadequate Atlas. 7 They stem from the direct, immediate
and foreseeable consequence of the Atlas being unable to perform the voyage.
The district court did not err in deeming the ban on consequential damages
inapplicable. 8
       Also unpersuasive is SMS’s argument that the Bareboat Charter—the
agreement between Cashman and JAB for the continued use of the JMC-3330
barge—constituted a release of JAB’s claims or, in the alternative, a novation
of the original Contract. Upon examination of the terms of the Bareboat
Charter, we conclude that it does not indicate any intent by JAB to release any
contractual claims or to novate the prior Contract. The district court correctly
concluded that the Bareboat Charter presented no bar to JAB’s claims.
C. Cashman was not the alter ego of SMS
       Cashman and SMS further argue that the district court erred when it
found that Cashman was the “alter ego” of SMS. Under the alter ego doctrine,
a court may bind a corporation to an agreement entered into by its subsidiary



       7Given the lack of availability of other substitute tugs in the area to replace the Atlas,
these damages also cannot be characterized as an “extra expense,” an item barred under the
consequential damages provision of the Contract in Article 8.
       8  SMS also attempts to argue that under the language of Article 8, the Contract
defined consequential damages to include any claims based on the unseaworthiness of the
vessels, thus barring JAB’s claim. However, interpreting Article 8 to bar all claims based on
the unseaworthiness of the Atlas would then ignore a basic principle of admiralty contract
interpretation by rendering meaningless the express warranty of seaworthiness in Article
3(A). See Chembulk Trading LLC, 393 F.3d at 555. We reject SMS’s argument.
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when their conduct demonstrates a virtual abandonment of separateness. See
Bridas S.A.P.I.C. v. Gov’t of Turkmenistan (Bridas I), 345 F.3d 347, 358–59
(5th Cir. 2003). However, we have stated that “‘fraud’ may be required to
pierce the corporate veil in contract cases, because the party seeking to utilize
the doctrine has had the opportunity, during negotiations with a subsidiary, to
obtain assurances . . . from its parent.”                Bridas S.A.P.I.C. v. Gov’t of
Turkmenistan (Bridas II), 447 F.3d 411, 417 (5th Cir. 2006); see also United
States v. Jon-T Chems., Inc., 768 F.2d 686, 692 (5th Cir. 1985) (“[I]n contract
cases, fraud is an essential element of an alter ego finding.”). Here, JAB never
alleged that SMS or Cashman committed fraud. Further, JAB could have
negotiated with Cashman to agree to the same warranties assented to by SMS,
but failed to do so in the Contract.             Accordingly, the determination that
Cashman was the alter ego of SMS was clearly erroneous. See Zahra Spiritual
Tr., 910 F.2d at 242. As such, Cashman should not have been held liable for
SMS’s breaches. 9
                                      IV. Conclusion
       For the reasons set forth above, we AFFIRM the decision of the district
court as to SMS and the dismissal of Cashman’s counterclaim, REVERSE the
judgment against Cashman, and RENDER judgment in its favor on JAB’s
claims against it.




       9 Cashman’s counterclaim was mentioned in its brief on appeal, but it failed to brief
the issue of the effect of a ruling against SMS on the merits but in Cashman’s favor on alter
ego. Its sole argument regarding the counterclaim was as follows: “A plain reading of the
contract and settled law negates all of these findings [holding SMS liable]. This Court should
set aside the District Court’s finding of breach. [sic ,] The natural consequence of which would
be to revive Cashman’s counterclaim.” This argument fails because we affirm SMS’s liability.
We conclude that any separate arguments about Cashman’s counterclaim fail for want of
adequate briefing. See In re Repine, 536 F.3d 512, 518 n.5 (5th Cir. 2008).
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