Texas a&M Research Foundation v. Magna Transportation, Inc.

• Decision Date: 09 July 2003
• Docket Number: No. 02-40264.,02-40264.
• Citation: 338 F.3d 394
• Parties: TEXAS A&M RESEARCH FOUNDATION, Plaintiff-Appellant-Cross-Appellee, v. MAGNA TRANSPORTATION, INC., Defendant-Third Party Plaintiff-Appellee-Cross-Appellant, v. Italia Line, Third Party Defendant-Appellee-Cross-Appellant, Navaho Shipping Agency, Inc., Third Party Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

338 F.3d 394

TEXAS A&M RESEARCH FOUNDATION, Plaintiff-Appellant-Cross-Appellee, v. MAGNA TRANSPORTATION, INC., Defendant-Third Party Plaintiff-Appellee-Cross-Appellant, v. Italia Line, Third Party Defendant-Appellee-Cross-Appellant, Navaho Shipping Agency, Inc., Third Party Defendant-Appellee.

No. 02-40264.

United States Court of Appeals, Fifth Circuit.

July 9, 2003.

COPYRIGHT MATERIAL OMITTED

Thomas C. Fitzhugh, III (argued), Fitzhugh & Elliott, James Corbin Van Arsdale, Houston, TX, for Texas A&M Research Foundation.

Victor Raul Rodriguez (argued), Houston, TX, for Magna Transp., Inc.

William Andrew Durham (argued), Justin William Renshaw, Eastham, Watson, Dale & Forney, Houston, TX, for Italia Line.

Frank E. Billings, Billings & Solomon, Houston, TX, for Navaho Shipping Agency, Inc.

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 Navaho Shipping Agency, Inc. ("Navaho"). The district court held Magna, Italia, and Navaho jointly and severally liable to TAMRF but denied certain items of damages as unreasonable and unforeseeable. All but Navaho appeal.

I.

TAMRF is a private, non-profit corporation that, under contract with the Joint Oceanographic 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 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. Magna had worked with TAMRF and was aware of the time-sensitive nature of the delivery.

Magna, in turn, contracted with Navaho for the carriage of TAMRF's cargo, which consisted of a flatrack and two containers. Navaho 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.

On February 20, 1998, Navaho 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, Navaho 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 replied 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 personnel met the cargo and placed the most essential 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 attempt 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 Navaho 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 consequential damages because they were unforeseeable and thus unrecoverable.

All parties except Navaho appeal.³ TAMRF appeals the denial of its consequential damages and the refusal to award attorneys' fees. Magna and Italia appeal the calculation of damages. Italia challenges the assessment of liability.

III.

Italia contends that it is immune from liability and, in the alternative, that the district court erred as a matter of law in imposing joint and several liability. As an initial matter, however, we conclude the court improperly applied rule 14(c) in holding Italia and Navaho 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 Navaho as third-party defendants. TAMRF took no steps to assert claims against the third-party defendants. Yet, in its final order, the district court purported to realign the parties, allowing TAMRF to proceed directly against Navaho 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 Navaho.

The rule additionally states that "the third-party plaintiff may also demand judgment against the third-party 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 Navaho and Italia in favor of TAMRF. Instead, Magna sought indemnification from Italia and Navaho for any sums it was required to pay TAMRF.

Courts have taken a lenient approach in determining whether a third-party plaintiff has "demanded judgment" in favor of the plaintiff such that the plaintiff may then pursue its action 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 Navaho be held liable directly to TAMRF; in the absence of such a request, there was no basis for TAMRF to recover directly from them under rule 14(c). Consequently, the district court erred in finding Italia and Navaho 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 evidence to support a finding of damages...."⁵ 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 decision 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 arises." Lavespere, 910 F.2d at 173. A motion filed after judgment requesting that the court reconsider its decision in light of additional evidence 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 under 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 initial order, so we we treat it as a motion to alter...