Ham Marine, Inc. v. Dresser Industries, Inc.

• Decision Date: 22 December 1995
• Docket Number: No. 94-60753,94-60753
• Citation: 72 F.3d 454
• Parties: HAM MARINE, INC., Plaintiff-Appellee, v. DRESSER INDUSTRIES, INC. and Ingersoll-Rand Company, d/b/a Dresser-Rand Company, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 454

72 F.3d 454

HAM MARINE, INC., Plaintiff-Appellee, v. DRESSER INDUSTRIES, INC. and Ingersoll-Rand Company, d/b/a Dresser-Rand Company, Defendants-Appellants.

No. 94-60753.

United States Court of Appeals Fifth Circuit.

Dec. 22, 1995.

Thomas J. Wagner, Wagner, Bagot & Gleason, New Orleans, LA, Russell McMains, Corpus Christi, TX, for appellants.

David Watkins Mockbee, Phelps Dunbar, Jackson, MS, for appellee.

Appeal from the United States District Court for the Southern District of Mississippi.

Before KING, HIGGINBOTHAM and PARKER, Circuit Judges.

PER CURIAM:

Dresser-Rand Company ("Dresser") appeals from a jury verdict awarding Ham Marine, Inc. ("Ham") in excess of $3.7 million for breach of contract and tortious interference with existing or anticipated contracts between Ham and Cliffs Drilling Company ("Cliffs"). We affirm in part, reverse in part, and remand.

I. BACKGROUND

A. Facts

Dresser, a New York partnership, entered into a contract with Maraven S.A. to compress and reinject natural gas into Maraven's oil wells at Lake Maricaibo, Venezuela in order to increase oil production. In April 1991, Cliffs signed on to the project as a subcontractor of Dresser. Cliffs entered into a series of agreements to charter to Dresser three jackup rigs--Rig 53, Rig 60, and Rig 59--and to initiate the work necessary to convert the rigs to mobile gas pumping units. Each rig needed to be stripped of drilling equipment, refurbished, and fitted with compressor machinery. Rig 53 was to be fitted with ten reciprocating compressors; it had to be on-site in Venezuela and pumping by May 8, 1992. Rigs 60 and 59 were to be fitted with turbine compressors--a new and complex undertaking; they were to be complete and operating by September 26, 1992--six to eight months sooner than usual for a job of this magnitude. Cliffs was responsible for removal of the drilling equipment, refurbishment of the rigs, and installation of the ten reciprocating compressors. Dresser was responsible for the manufacture, installation, and hookup of the turbine compressors, and the testing of all three units.

To expedite delivery, Dresser was contemplating dry towing the two turbine rigs together to Lake Maricaibo because it faced substantial monetary penalties if the project was not delivered on time. Ham's shipyard, located in Pascagoula, Mississippi, is near the only sheltered deep hole in the Gulf of Mexico that can accommodate a ship capable of loading two rigs at one time. Consequently, in August 1991, Cliffs began negotiations with Ham for partial modification of Rigs 53 and 60. On September 5, 1991, Dresser's Project Director, David Palfreyman, visited Ham's facilities. Ham submitted to Cliffs written lump sum proposals for specific refurbishment work on all three rigs. In a series of phone conversations over the course of the next two months, Palfreyman discussed the work to be performed on all three rigs with various representatives of Ham. On November 11, 1991, Cliffs and Ham executed a contract covering work on Rig 53, and on December 20, 1991, they executed a contract covering Rig 60. Both contracts included clauses allowing for termination by either party at their convenience and specific limitations on consequential damages and prospective profits. ¹ Ham submitted contracts containing these terms to Dresser as well, but Dresser never responded. On December 13, 1991, Dresser and Cliffs executed formal bareboat charter agreements in which Ham was named as Cliffs's designated shipyard for all three rigs. No written contract was executed by Ham and Dresser.

Palfreyman visited the Ham marine yard again on November 25, 1991. Shortly thereafter, by letter, Palfreyman directed Ham to lease warehouse space for storage of materials for all three rigs and he confirmed that Dresser would reimburse Ham for putting in a gas line to test the compressor equipment on all of the rigs. Additionally, Dresser notified Ham that Dresser's suppliers had been directed to ship materials and equipment for all three rigs directly to Ham.

For reasons unrelated to Ham's work on the project, Dresser decided in December 1991, that towing the two turbine rigs together to Lake Maricaibo would no longer be advantageous. Once it was no longer important to work with a shipyard close to the deep hole, Dresser informed Ham that it was seeking competitive bids for the remaining work on Rigs 60 and 59. Ham submitted bids. Dresser paid Ham for the work Ham had done on Rig 53 and Rig 60, and, in January 1992, Dresser awarded the remaining work to Aker-Gulf Marine ("Aker").

B. Procedural History

On August 5, 1992, contending that Dresser had contracted with Ham for all of the shipyard work on all three rigs, Ham filed suit against Dresser for breach of contract in state court in Jackson County, Mississippi. ² Additionally, in case it was determined that no legally enforceable contract existed, Ham alternatively claimed tortious interference with existing and prospective contractual relations between Ham and Cliffs. Dresser counterclaimed for allegedly defective work on Rig 53. The action was removed to the United States District Court for the Southern District of Mississippi based on diversity of citizenship. During the eight-day jury trial, numerous writings were introduced that established a nexus between Ham and Dresser and all three rigs. Representatives of Ham testified that Dresser led them to believe that Ham and Dresser had entered into a contract for all the shipyard work needed on all three rigs. At the close of Ham's case in chief, Dresser moved for judgment as a matter of law. With the caveat that it had reservations concerning the tortious interference allegation, the district court denied the motion as to all claims. During the presentation of Dresser's evidence, representatives of Dresser testified that no such agreement was ever made.

The jury found that Dresser had formed a contract with Ham to perform all the repairs to the main decks of Rig 60 and Rig 59, that Dresser breached this contract, and that this breach was the proximate cause of Ham's monetary damages. The jury awarded Ham $3,517,283.94 in damages, based on the net profit that Aker realized for the work that Ham had been authorized to perform under the contract. In addition, the jury found Dresser liable for tortious interference with Ham's existing or reasonably anticipated contracts with Cliffs, for which Ham was awarded $200,400.45. The jury denied Dresser's counterclaim for unsatisfactory work.

Dresser filed posttrial motions, seeking judgment as a matter of law, a new trial, and/or remittitur. The district court denied the motions, concluding that the jury finding of a contract between Dresser and Ham was not against the great weight of the evidence, that there was sufficient evidence to support a finding of tortious interference, and that the jury award of compensatory damages was not arbitrary.

II. ANALYSIS

A. The Contract

The first issue Dresser raises on appeal is whether the evidence adduced at trial was sufficient to support a finding that Dresser had contracted with Ham to perform all the shipyard work on all three rigs. Dresser contends that there was no contract between Dresser and Ham dealing with Rigs 60 and 59, and that even if such a contract had existed it was too indefinite to be enforceable.

Whether a contract exists involves both questions of fact and questions of law. The district court's interpretation of a contract is a conclusion of law reviewable de novo on appeal. American Totalisator Co., Inc. v. Fair Grounds Corp., 3 F.3d 810, 813 (5th Cir.1993). The initial determination of whether the contract is ambiguous is also reviewed de novo. Thrift v. Hubbard, 44 F.3d 348, 357 (5th Cir.1995). However, "once the contract is found to be ambiguous the determination of the parties' intent through the extrinsic evidence is a question of fact." Watkins v. Petro-Search, Inc., 689 F.2d 537, 538 (5th Cir.1982). A jury's findings of fact are examined on appeal for sufficiency of the evidence. Granberry v. O'Barr, 866 F.2d 112, 113 (5th Cir.1988). ³ The standard of review for a challenge to the sufficiency of the evidence is well-settled. Unless the evidence is of such quality and weight that reasonable and impartial jurors could not arrive at such a verdict, the findings of the jury must be upheld. Chemical Distribs., Inc. v. Exxon Corp., 1 F.3d 1478, 1483 (5th Cir.1993).

We conduct our review of the jury findings according to Mississippi contract law. Concededly, admiralty principles govern contracts for vessel repair and conversion. Todd Shipyards Corp. v. Turbine Serv. Inc., 674 F.2d 401, 412 (5th Cir.), cert. denied, 459 U.S. 1036, 103 S.Ct. 447, 448, 74 L.Ed.2d 602, 603 (1982). To the extent that it is not inconsistent with admiralty principles, however, state contract law may be applicable to maritime contracts. Koninklyke Nederlandsche Stoomboot Maalschappy, N.V. v. Strachan Shipping Co., 301 F.2d 741, 743 (5th Cir.), cert. denied, 371 U.S. 921, 83 S.Ct. 288, 9 L.Ed.2d 230 (1962). ⁴

In order to find that a contract existed between Ham and Dresser, the jury must determine that both parties agreed to all of the essential terms. See, Knight v. Sharif, 875 F.2d 516, 525 (5th Cir.1989) (noting that, under Mississippi law, agreement to contract "must be expressed on all essential terms"); Andrew Jackson Life Ins. Co. v. Williams, 566 So.2d 1172, 1178 (Miss.1990) (finding that mutual assent on essential terms was manifested by insured's payment of premiums and completion of insurance application); 1 FARNSWORTH ON CONTRACTS Sec. 3.1 (1990); 1 WILLISTON ON CONTRACTS Sec. 1.3 (1990). The essential terms on which agreement was required in this case were (1) the scope of the service to be performed, (2) the price, and (3) the date by which the work was to be completed. See, Leach v. Tingle, 586 So.2d 799, 803 (Miss.1991) (noting that "price is an essential term");...