                                             United States Court of Appeals
                                                      Fifth Circuit
                                                   F I L E D
                                                     July 9, 2003

              In the                           Charles R. Fulbruge III
                                                       Clerk
United States Court of Appeals
       for the Fifth Circuit
          _______________

            m 02-40264
          _______________




  TEXAS A&M RESEARCH FOUNDATION,

                            Plaintiff-Appellant-
                            Cross-Appellee,

              VERSUS

    MAGNA TRANSPORTATION, INC.,

                            Defendant-
                            Third Party Plaintiff-Appellee-
                            Cross-Appellant,

              VERSUS

            ITALIA LINE,

                            Third Party Defendant-Appellee-
                            Cross-Appellant,

   NAVAHO SHIPPING AGENCY, INC.,

                            Third Party Defendant-Appellee.
                                      _________________________

                             Appeals from the United States District Court
                                  for the Southern District of Texas
                                    _________________________




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

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

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

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

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

                                                    6
ness before trial. Further, any prejudice was              OF EVIDENCE MANUAL § 803.02[7][d] (Lexis-
cured by the approximately one month during                Nexis 8th. ed. 2002). Consequently, the
which Italia was allowed to examine and re-                district court did not abuse its discretion in ad-
spond to the contested evidence. The district              mitting the affidavit as a business record.
court did not abuse its discretion in admitting
the documentary evidence supporting the                                          C.
affidavit.                                                    The McPherson affidavit included, in its list
                                                           of expenses, $132,239 related to lost ship
                       B.                                  time. This entry reflects the cost of chartering
    Magna contends the McPherson affidavit is              the Joides Resolution for the three days during
hearsay not admissible under any exception.                which the hammer experiment was to have
The district court, however, concluded that the            been performed, but during which no research
affidavit was admissible as a business record              was done because of defendants’ failure to de-
affidavit, which requires only that the affiant            liver the necessary equipment. The district
have “personal knowledge to testify as                     court excluded that portion of the affidavit,
custodian of documents” and “personal                      concluding that it was inadmissible as
knowledge as to some of the statements in the              improper or speculative lay opinion testimony.
affidavit.” FSLIC v. Griffin, 935 F.2d 691,
702 (5th Cir. 1991).                                          “Under [FED.R. EVID.] 701, ‘a lay opinion
                                                           must be based on personal perception, must be
   The affidavit states that part of McPher-               one that a normal person would form from
son’s duties as vice-president of TAMRF in-                those perceptions, and must be helpful to the
cluded the management of all records and doc-              [fact finder].’”10 “In particular, the witness
uments pertaining to the Ocean Drilling                    must have personalized knowledge of the facts
Program and that such records are kept under               underlying the opinion and the opinion must
his custody and control. The district court                have a rational connection to those facts.” Id.
also reasonably concluded that, as vice-presi-             Accordingly, rule 701 does not preclude tes-
dent of the foundation, McPherson had                      timony by business owners or officers on mat-
personal knowledge as to some of the                       ters that relate to their business affairs.11 In-
statements in the affidavit.9 Italia’s principal           deed, an officer or employee of a corporation
argument is that McPherson lacked personal
knowledge of certain of the facts in the
                                                              10
affidavit. This argument is meritless, because                  Miss. Chem. Corp. v. Dresser-Rand Co., 287
personal knowledge of all the contents of a                F.3d 359, 373 (5th Cir. 2002) (quoting United
business record affidavit is not required. See             States v. Riddle, 103 F.3d 423, 428 (5th Cir.
id; 4 STEPHEN A. SALTZBURG, MICHAEL M.                     1997)).
MARTIN & DANIEL J. CAPRA, FEDERAL RULES                       11
                                                                 Id.. at 373-74 (allowing corporation’s direc-
                                                           tor of risk management to testify to lost profits, and
                                                           collecting cases from other circuits holding
   9
     This conclusion is particularly appropriate in        likewise); 3 STEPHEN A. SALTZBURG, MICHAEL M.
light of the fact that most of the statements in the       MARTIN & DANIEL J. CAPRA, FEDERAL RULES OF
affidavit relate to the payment of various expenses        EVIDENCE MANUAL § 701.03[7], at 701-20
related to the program over which payment Mc-              through 701-21 & Supp. 2002 (Lexis-Nexis 8th ed.
Pherson had final approval authority.                      2002).

                                                       7
may testify to indust ry practices and pricing              of Orthodontists, 314 F.3d 758, 767 (5th Cir.
without qualifying as an expert. Tampa Bay                  2002), cert. denied, 123 S. Ct. 2078 (2003).
Shipbuilding & Repair Co. v. Cedar Shipping                 As we explain, TAMRF is not entitled to
Co., 320 F.3d 1213, 1223 (11th Cir. 2003).                  recover expenses related to the cessation of
McPherson’s testimony, similarly, is based on               research activity aboard the Joides Resolution
particularized knowledge based on his position              and thus was not prejudiced by the exclusion
as vice-president of the research foundation.12             of this evidence.

   In any event, the lost ship time charges set                                   VI.
forth in the affidavit do not constitute opinion               In its supplemental order on damages, the
testimony of any kind. As with the other doc-               district court denied recovery for two broad
umented expenses, the amount established for                categories of expenses incurred by TAMRF:
lost ship time is an amount actually paid by                expenditures related to TAMRF's own
TAMRF. The figure was not derived from                      attempts to deliver part of the delayed
McPherson’s opinion as to the value of lost                 shipment to the Joides Resolution;14 and costs
ship time, as the district court phrased it, but            incurred in reliance on defendants’
rather was established according to precise                 commitment to deliver the cargo by the
contractual terms.                                          appointed date.15 In its findings of fact, the
                                                            district court acknowledged that TAMRF had
   Because the ruling rested on a                           incurred these expenses but held them to be
misinterpretation of rule 701, the exclusion of             unforeseeable and thus unrecoverable as
the lost-ship-time portion of the affidavit was             consequential damages. TAMRF argues that
an abuse of discretion.13 But, “[this court] will           the expenses were reasonable and necessary to
not reverse erroneous evidentiary rulings                   salvage critical research.
unless the aggrieved party can demonstrate
‘substantial prejudice.’” Viazis v. Am. Ass’n                  We review de novo legal conclusions un-
                                                            derlying an award of damages. Harken
                                                            Exploration Co. v. Sphere Drake Ins. PLC,
   12
       Although rule 701 was amended in 2000 to
prohibit lay witnesses from offering opinions based
                                                               14
on “scientific, technical or other specialized knowl-             These expenditures include the $98,000 spent
edge within the scope of Rule 702 [expert evi-              to airlift part of the cargo to Reunion Island and
dence],” the court in Tampa Bay Shipbuilding, 320           $38,962.90 to charter a vessel for the attempted
F.3d at 1222-23, thoroughly reviewed the advisory           mid-sea rendezvous with the Joides Resolution.
committee notes accompanying the 2000
                                                               15
amendment and concluded that the amendment did                    TAMRF’s reliance costs include items such
not place any restrictions on the preamendment              as the $7,465.60 spent to outfit the Joides Res-
practice of allowing business owners or officers to         olution for the scientific experiments that could not
testify based on particularized knowledge derived           be performed. TAMRF also spent $2,325 to feed
from their position.                                        and $24,796.16 to pay the crew intended to
                                                            perform those experiments. The most significant
   13
      See United States v. Buck, 324 F.3d 786, 791          reliance expenditure, however, was the roughly
(5th Cir. 2003) (noting that district court abuses          $140,000 spent to secure use of the Joides Reso-
discretion where decision to admit evidence is              lution for the three days during which the hammer
based on error of law).                                     experiment was to have been performed.

                                                        8
261 F.3d 466, 477 (5th Cir. 2001). In the                 for special damages caused by an unreasonable
absence of legal error, the award of damages              and unnecessary delay in the transportation of
is a finding of fact reviewed for clear error.            goods only if it has notice of the special
Tyler v. Union Oil Co., 304 F.3d 379, 401                 circumstances leading to those damages.19
(5th Cir. 2002). So, “[i]f the district court’s
factual findings are plausible in light of the               The question is therefore whether Magna
evidence presented, this court will not reverse           had reason to know that untimely delivery of
its decision even if this court would have                the cargo would cause the special damages
reached a different conclusion.”16                        suffered by TAMRF. The district court
                                                          implicitly held that Magna lacked knowledge
   That TAMRF actually incurred the disputed              of the special circumstances surrounding the
expenses is uncontroverted; the only issue is             shipment, concluding that neither the
whether it is entitled to recover them as con-            significant costs TAMRF incurred in its
sequential, or “special,” damages, which are              attempts to secure an alternative means of
those unusual or indirect costs that, although            delivery nor those incurred in reliance on the
caused by the defendant’s conduct in a literal            agreed-on delivery date were “foreseeable.”
sense, are beyond what one would reasonably               The foreseeability of damages is a fact
expect to be the ordinary consequences of a               question we review for clear error.20
breach.17 As a general rule, special damages
are not recoverable in an action for breach of               Judging from the findings of facts, Magna
contract. See id. Instead, to recover special             had sufficient notice of the special
damages, a plaintiff must establish that the              circumstances surrounding the cargo that it
defendant “had notice of the special                      can be held liable for special damages resulting
circumstances from which such damages                     from TAMRF’s attempts to secure an alternate
would flow.”18 Accordingly, a carrier is liable

                                                             18
                                                               (...continued)
   16
     Id. (citing Patterson v. P.H.P. Healthcare           the contract of carriage was made” (citation and in-
Corp., 90 F.3d 927, 936 (5th Cir. 1996)).                 ternal quotation marks omitted)).
   17                                                        19
      See Contempo Metal Furniture Co. v. E.                     See Alpine Ocean Seismic Survey, Inc. v.
Tex. Motor Freight Lines, Inc., 661 F.2d 761, 765         F.W. Myers & Co., 23 F.3d 946, 948 (5th Cir.
(9th Cir. 1981) (“Special damages are those that          1994) (holding carrier not liable for cost of re-
the carrier did not have reason to foresee as ordi-       placing microorganisms killed as a result of late
nary, natural consequences of a breach when the           delivery, in part because it had no knowledge of the
contract was made.”).                                     contents of containers and therefore could not have
                                                          reasonably foreseen the need to collect replace-
   18
      Id. (citing Ill. Cent. Gulf R.R. v. S. Rock,        ments from the ocean floor); see also Contempo,
Inc., 644 F.2d 1138, 1141 (5th Cir. May 1981));           661 F.2d at 765; Hector Martinez & Co. v. S. Pac.
see also Gardner v. Mid-Continent Grain Co.,              Transp. Co., 606 F.2d 106, 109 (5th Cir. 1979);
168 F.2d 819, 822 (8th Cir. 1948) (“It is the             Ill. Cent. R.R. v. Horace Turner Corp., 9 F.2d 6,
general rule that damages recoverable for delay in        7 (5th Cir. 1925).
transportation must be such a[s] might reasonably
                                                             20
have been contemplated by the parties at the time               Cf. Hector Martinez, 606 F.2d at 110; King
                                     (continued...)       v. Otasco, Inc., 861 F.2d 438, 444 (5th Cir. 1988).

                                                      9
means of delivering the cargo. The court                 methods of the research project, Magna could
found that “Magna was aware of the                       not reasonably have expected that a failure to
time-sensitive nature of the delivery of [the]           deliver TAMRF’s cargo would render the
equipment.” In addition, Dana Holcomb,                   Joides Resolution and its scientists incapable
Magna’s president, admitted knowing the pur-             of performing any research for an extended
pose of the Ocean Drilling Project.                      period of time. Thus, all the preparation costs
                                                         associated specifically with the task at hand are
   Further, Magna had worked with TAMRF                  recoverable, but costs generally applicable to
on several time- and place-sensitive deliveries          other, unspecified research are not. Cf.
and was aware that, in this case, TAMRF had              Alpine, 23 F.3d at 948.
arranged alternate shipping dates to ensure
timely delivery. Although a general awareness                                   VII.
that harm could result from any untimely                     Maritime disputes generally are governed
delivery does not justify an award of                    by the “American Rule,” pursuant to which
consequential damages,21 Magna had actual                each party bears its own costs. Galveston
notice of the importance to TAMRF of timely              County Nav. Dist. v. Hopson Towing Co., 92
delivery. Therefore, the district court clearly          F.3d 353, 356 (5th Cir. 1996). Therefore,
erred in holding these expenses to be                    “absent statute or enforceable contract,
unforeseeable.                                           litigants must pay their own attorneys’ fees.”
                                                         Id. TAMRF contends, however, that it has
   The special damages resulting from                    identified a st atute entitling it to feesSSTEX.
TAMRF’s reliance on its contract with Magna              CIV. PRAC. & REM. CODE § 38.001, which
raise more difficult questions of foreseeability.        provides that a party seeking to recover for
The $7,465.60 TAMRF spent outfitting the                 breach of an oral or written contract “may
Joides Resolution for the hammer experiment              recover reasonable attorney’s fees.”
was foreseeable, even given Magna’s limited
knowledge of the particulars of the Ocean                   In MTO Maritime Transp. Overseas, Inc. v.
Drilling Project. Magna should reasonably                McLendon Forwarding Co., 837 F.2d 215,
have known that certain costs would be                   219-220 (5th Cir. 1988), we rejected a similar
incurred in preparing for research dependent             challenge to the refusal to award fees under
upon the cargo and that those expenditures               the precursor to § 38.001. Concluding that
would be wasted in the event Magna failed to             the statute was discretionary and that there
deliver the shipment in time.                            had been no abuse of discretion, the MTO
                                                         Maritime panel affirmed the denial of fees
   With respect to the remainder of the                  without deciding whether the state statute
expenses sought to be recovered, however, the            controlled. Since MTO Maritime was decided,
district court did not clearly err. Based on its         however, Texas courts have concluded that
superficial knowledge of the purposes and                “attorneys’ fees under section 38.001 are
                                                         mandatory.”22 Therefore, we must address the

   21
      See Evra, 673 F.2d at 959 (holding that ab-
                                                            22
stract knowledge that any untimely bank transfer              Kona Tech. Corp. v. S. Pac. Transp. Co.,
could theoretically cause great harm was not suf-        225 F.3d 595, 603 (5th Cir. 2000) (citing Green
ficient to justify consequential damages).                                                  (continued...)

                                                    10
question reserved in MTO Maritime, 837 F.2d                   uniformity in federal maritime law, precludes
at 219, namely, “the applicability of state laws              the application of state attorneys’ fee statutes,
providing for attorney’s fees in an admiralty                 such as § 38.001, to maritime contract
contract dispute.” The applicability of state                 disputes.
law to a maritime contract dispute is a legal
determination subject to de novo review.                          The judgment is REVERSED in part and
                                                              AFFIRMED in part, and this matter is
   Although the question is a matter of first                 REMANDED for further proceedings con-
impression in this circuit, two other circuits                sistent with this opinion. In addition to the
have directly addressed it. Citing the “strong                initial award of $49,057.97, TAMRF is entit-
interest in maintaining uniformity in maritime                led to recover for amounts expended in con-
law,” the Third Circuit has held that the                     nection with its attempt to deliver the cargo,
various state statutes providing for attorney                 specifically, $98,000.00 to airlift the cargo to
fees should not be applied in federal maritime                Reunion Island and $38,962.90 to charter a
disputes.23                                                   vessel for the attempted rendezvous with the
                                                              Joides Resolution. TAMRF is also entitled to
    Similarly, the First Circuit has held that                the $7,465.60 incurred in outfitting its vessel
state law is inapplicable to the question of at-              for research dependent on the cargo. On re-
torneys’ fees in maritime contract disputes,                  mand, therefore, the district court shall enter
noting that state law cannot apply where it                   judgment of $193,486.47 for TAMRF against
conflicts with maritime law and concluding                    Magna and then shall determine the extent to
that the fee statute at issue contradicted the                which Magna is entitled to indemnification
general rule of maritime law that “parties pay                from Italia and Navajo.
their own fees absent bad faith or oppressive
litigation tactics.”24 We likewise conclude that
the general rule of maritime law that parties
bear their own costs, coupled with the need for


   22
      (...continued)
Int'l, Inc. v. Solis, 951 S.W.2d 384, 390 (Tex.
1997)).
   23
      Sosebee v. Rath, 893 F.2d 54, 56-57 (3d Cir.
1990); id. at 57 (“[W]here a case arises under the
federal maritime law, as this case does, a local stat-
ute awarding attorneys’ fees should not be ap-
plied.”).
   24
      See Southworth Mach. Co. v. F/V Corey
Pride, 994 F.2d 37, 41 (1st Cir. 1993); id. at 42
(holding that state law governing awards of attor-
ney’s fees will not be applied in a case involving a
“standard contractual breach to which maritime
law has always applied”).

                                                         11
