United States Court of Appeals,
Fifth Circuit.
No. 94-60537.
CORPUS CHRISTI OIL & GAS COMPANY and Corpus Christi Hydrocarbons
Company, Plaintiffs-Appellees,
v.
ZAPATA GULF MARINE CORPORATION, et al., Defendants.
GULF FLEET SUPPLY VESSELS INC., et al., Defendants-Third Party
Plaintiffs-Counter Defendants-Appellants,
v.
HOUSTON PIPE LINE CO., Defendant-Counter-Claimant-Third Party
Defendant-Appellee.
Dec. 27, 1995.
Appeal from the United States District Court for the Southern
District of Texas.
Before JOLLY and BENAVIDES, Circuit Judges, and FITZWATER*,
District Judge.
E. GRADY JOLLY, Circuit Judge:
In early November of 1989, the offshore towboat GULF STAR,
operated by Zapata Gulf Marine Operators and crewed by Zapata Gulf
Marine Services Corp., was tied to a docking platform in the Gulf
of Mexico, waiting for a storm from the north to pass. As the GULF
STAR prepared to maneuver, its mooring lines parted, and it and the
construction barge to which it was connected began drifting south
with the wind and waves toward a gas and condensate producing
*
District Judge of the Northern District of Texas, sitting
by designation.
1
platform, owned by Corpus Christi1. The tug and barge bore down on
the platform, while the GULF STAR's captain tried in vain to halt
the barge's drift with the tug's ailing engines, or to reel in the
barge with the tug's winch. Although the captain slowed the barge,
in the end he could not avert an allision between the barge and the
Corpus Christi platform. The allision damaged a gas riser
connected to the platform, owned by Houston Pipeline Company
("Houston"). Corpus Christi sued the Zapata defendants ("Zapata"),
and the district court found Zapata liable to Corpus Christi and
Houston for damages they incurred as a result of Zapata's
negligence. We affirm in part and reverse in part the award of
damages to Corpus Christi, affirm the award of damages to HPLC, and
affirm the award of prejudgment interest to Corpus Christi and
Houston, and the taxation of costs to Zapata.
I
The Corpus Christi platform is located in the Gulf of Mexico,
about eight miles from Port O'Connor, Texas. Attached to a leg of
the platform is a riser, a vertical pipe through which flows gas
and gas condensate. The riser is owned by Houston. The riser
connects to a pipeline, also owned by Houston, that runs eight
miles from the platform to the beach. Although other risers
attached to the platform were fitted with riser guards to prevent
damage from allisions, the riser damaged in the allision lacked any
1
"Corpus Christi" refers collectively to the plaintiffs
associated with the platform, including Corpus Christi
Hydrocarbons Co. and PG & E Resources Offshore Co., which was
formerly known as Corpus Christi Oil & Gas Co.
2
sort of protection.
Workers on the Corpus Christi platform foresaw the allision
and promptly shutdown operations to prevent a fire or explosion.
The force of the allision crushed the concrete riser coating and
damaged the riser. Houston ordered Corpus Christi to shut in its
wells so that it could inspect the riser and replace the damaged
section. The repair took two weeks, during which time Corpus
Christi could not use the riser to convey its gas. During the
repairs, Corpus Christi flared gas to prevent the loss of the
wells.
The district court conducted a bench trial. At its close, the
district court allocated fault for damage to the riser two-thirds
to Zapata, and the remaining one-third, collectively, to Corpus
Christi and Houston.2 Zapata argued at trial—and now argues on
appeal—that Corpus Christi did not sustain physical damage to any
proprietary interest; thus, under the "bright line" rule of this
circuit announced in Louisiana ex rel. Guste v. M/V TESTBANK, 752
F.2d 1019 (5th Cir.1985) (en banc), cert. denied, 477 U.S. 903, 106
S.Ct. 3271, 91 L.Ed.2d 562 (1986), may not recover its losses
incurred due to Zapata's negligence. In support of its argument,
Zapata notes that Corpus Christi did not own the damaged riser, and
that it voluntarily flared the gas, the cost of which it now seeks
2
The district court found Houston negligent for failing to
protect the riser from accidental vessel damage, and Corpus
Christi negligent either for failing to review plans for the
riser before allowing Houston to attach the riser, or failing to
require Houston adequately to protect its riser before allowing
Houston to attach the riser.
3
to recover. Zapata does not dispute, however, that Corpus Christi
would have incurred great harm to its wells if it had not flared
the gas during Houston's repair of its riser.
The district court held that the flaring of the gas
constituted physical damage to a proprietary interest of Corpus
Christi, thus permitting Corpus Christi to avoid the TESTBANK bar.
The court reasoned as follows:
8. [T]he gas flared by [Corpus Christi] when [Houston]
shut in the platform constitutes the physical damage necessary
for [Corpus Christi] to trump TESTBANK 's restrictive approach
to recovery in maritime tort. Because plaintiffs had to shut
in their wells and flare gas to keep from losing those wells
while [Houston] repaired its riser, the proprietary interest
of plaintiffs in their wells and gas is sufficient to enable
them to recover for their loss.
9. While the gas was flared voluntarily by plaintiffs
after the allision with [Houston's] riser, it was flared in
order to prevent the wells themselves from being lost. Had
plaintiffs done nothing, their wells would have sustained
perhaps permanent physical damage as a direct result of the
allision—such physical damages clearly would have enabled
plaintiffs to recover from the Zapata defendants. However,
had plaintiffs not flared gas and had they instead allowed
their wells to be lost, their damages would have been reduced
by the amount of damages which could have been mitigated by
flaring. Thus, the "voluntary" flaring does not bar recovery,
as defendants urge, but rather demonstrates that plaintiffs
mitigated their damages. * * *
10. * * * In the case at bar, ... the plaintiffs suffered
physical harm: plaintiffs were forced to burn, or flare, gas
in order to avert structural damage to their wells.
Second Amended Findings of Fact and Conclusions of Law at 4-5.
The district court thus awarded to Corpus Christi the value of
the gas and condensate that was flared. In addition, the district
court awarded Corpus Christi the revenue lost while its wells were
shut in for the repair of the riser. The proportionate share of
these items amounted to $232,628.64. With respect to Houston, the
4
district court awarded its actual costs of repair and the value of
gas that was lost. The proportionate share of these items amounted
to $203,999.97. Finally, the district court determined that Corpus
Christi and Houston both were entitled to prejudgment interest, and
it taxed litigation costs against Zapata.
II
A
In Pennzoil Producing Co. v. Offshore Express, Inc., 943 F.2d
1465, 1473 (5th Cir.1991), we reviewed a district court's
application of the rule of law announced in Robins Dry Dock &
Repair Co. v. Flint, 275 U.S. 303, 309, 48 S.Ct. 134, 135, 72 L.Ed.
290 (1927), and reaffirmed by this court in TESTBANK. Noting the
applicable standard of review, we wrote:
It is well settled law that, as in most federal actions,
in maritime actions the "clearly erroneous" rule applies to
the review of the factual findings of the trial court. Thus
we must accept the district court's findings of fact unless,
upon reading the record and examining the exhibits, we are
convinced that they are demonstrably incorrect. Fed.R.Civ.P.
52(a); Candies Towing Co., Inc. v. M/V B & C ESERMAN, 673
F.2d 91, 93 (5th Cir.1982).
Pennzoil, 943 F.2d at 1469.
B
The damages award in this case had three components—the cost
of gas flared by Corpus Christi to preserve the wells, the revenue
lost by Corpus Christi during the period of the riser's repair, and
the cost incurred by Houston of repairing the damage to the riser.
We address each award in turn.
(1)
Zapata argues that Corpus Christi suffered no physical damage
5
from the allision, and is therefore entitled to no damages award.
In the alternative, it argues that, if the flaring of the gas (in
order to save the wells) suffices as physical damage, then Corpus
Christi is entitled only to the costs incurred by the voluntary
flaring of gas, and not the purely economic loss in gas production
for the two weeks while Houston repaired its riser.
In this circuit, an admiralty plaintiff cannot recover
negligently inflicted economic losses where there is no physical
damage to the plaintiff's property. TESTBANK, 752 F.2d at 1020.
In TESTBANK, we reviewed a summary judgment entered against
numerous plaintiffs, each claiming purely economic losses arising
from a spill of a toxic chemical in the Mississippi River Gulf
outlet. Later, in Consolidated Aluminum Corp. v. C.F. Bean Corp.,
772 F.2d 1217 (5th Cir.1985), cert. denied, 486 U.S. 1055, 108
S.Ct. 2821, 100 L.Ed.2d 922 (1988) a panel of this court reviewed
TESTBANK, noting:
The "character of the interest harmed" for which the
plaintiffs sought relief in TESTBANK was solely economic.
Given this character of the interest harmed, the Court
reaffirmed the holding of this Court that physical damage to
a proprietary interest [is] a prerequisite to recovery for
economic loss in cases of unintentional tort. The Court
emphasized that to abandon the physical injury requirement
would impose a "limitless type of liability," and the result
would be wave upon wave of successive consequences. The Court
also noted the corresponding difficulty to courts in managing
such economic claims on a discrete basis under traditional
tort principles. Thus, where the character of the interest
harmed was solely economic, the Court held that no recovery
could be allowed under Robins as a "pragmatic limitation upon
the tort doctrine of foreseeability."
Consolidated, 772 F.2d at 1222 (internal citations and some
quotation marks omitted).
6
Corpus Christi points out that in Consolidated, we held that
physical damage that was a consequence of an accident was
sufficient to satisfy TESTBANK 's requirement. In that case,
Consolidated Aluminum Corporation's plant machinery was damaged by
the slowing of the flow of gas that was caused by Bean's negligent
puncture to a pipeline some six miles from Consolidated's facility.
We held that Consolidated had stated a claim for physical damages
to its machinery as a result of Bean's negligence and that,
therefore, TESTBANK did not preclude Consolidated's recovery of
associated economic losses. Consolidated, 772 F.2d at 1222.
Corpus Christi also points to Pennzoil, a case factually
similar to the one at bar. There we held that damage to a well
resulting from the failure to flare gas after a well was shut in
following an allision constituted the kind of physical damage that
made the TESTBANK bar inapplicable. See Pennzoil, 943 F.2d at
1473. Corpus Christi argues that here, it did "what this Circuit
told Pennzoil it should have done"—flared the gas and prevented the
loss of its wells.
We think that it does no violence to TESTBANK or its
underlying principles to find recovery appropriate in the case
before us. Except for its acts in mitigation, Corpus Christi would
have suffered great physical damages to its wells as a result of
Zapata's negligence. TESTBANK must not be construed as mandating
the narrow and impractical result urged by Zapata: finding a
defendant free of liability when the plaintiff incurs losses,
although "voluntarily" so, that nevertheless are directly
7
attributable to its efforts to avoid the physical damages that
would have rendered that defendant liable for much larger sums. We
therefore agree with the district court that Corpus Christi's costs
incurred in flaring the gas to save its wells constitutes the
physical damage to a proprietary interest, i.e., its gas,
sufficient to satisfy the TESTBANK requirements. Corpus Christi is
thus entitled to $58,613, representing the economic loss it
suffered because of the flaring of the gas, to be reduced by
one-third (reflecting the amount of Corpus Christi's own
negligence), for a total award of $39,075.33.
(2)
We disagree, however, that Corpus Christi is further entitled
to damages resulting from its inability to produce and sell its gas
in the two weeks during which Houston repaired its riser. TESTBANK
denies recovery for pure economic losses not associated with
physical injuries. Although we hold that the recovery Corpus
Christi seeks for its flared gas is based upon injury to its
property—that is, its gas—no such argument can be made with respect
to the purely economic losses resulting from failure to sell its
gas during the two-week repair. That gas remains in the ground,
unaffected by the property damage suffered by Corpus Christi, that
is, the gas that was flared. The additional economic losses that
Corpus Christi seeks to recover occurred solely and only because of
the physical damage that was done to Houston's property, i.e., the
riser, which shut down Houston's pipeline. Corpus Christi lost its
gas sale profits because it could not use the pipeline, not because
8
it was flaring its own gas.
We recognize that, although TESTBANK suggests an association
between recovery sought and damage to the plaintiff's property, it
left undecided the degree of association required. Neither did
Consolidated clearly resolve this question. It simply made clear
that economic losses that flowed directly from the physical damage
to Consolidated's property were recoverable. In the present case,
however, we are squarely presented with the question of whether the
principle of TESTBANK —that is, a limitation on the doctrine of
foreseeability3—requires that recoverable economic damages have
some direct tie to the plaintiff's specific physical loss or
damage, or whether the TESTBANK principle simply requires a showing
of damage to some proprietary interest of the plaintiff, in order
to open the door to recovery for all purely economic damages that
were foreseeable from the initial tort. For help in answering this
question, we turn first to the principles underlying TESTBANK.
In TESTBANK, when considering the basis of the subject rule,
we explained as follows:
Robins broke no new ground but instead applied a principle ...
which refused recovery for negligent interference with
"contractual rights." Stated more broadly, the prevailing
rule denied a plaintiff recovery for economic loss if that
loss resulted from physical damage to property in which he had
no proprietary interest.
TESTBANK, 752 F.2d at 1022 (emphasis added). We concluded that
"Robins Dry Dock is both a widely used and necessary limitation on
3
In TESTBANK we wrote, "Denying recovery for pure economic
losses is a pragmatic limitation on the doctrine of
foreseeability, a limitation we find to be both workable and
useful." TESTBANK, 752 F.2d at 1032.
9
recovery for economic losses." Id. at 1027. Thus, TESTBANK
strongly suggests that recoverable losses somehow be tied to the
damage to the plaintiff's property, here the flared gas. Clearly,
TESTBANK sought to preclude wave upon wave of damages. For
example, assuming Corpus Christi were a vertically integrated
operation, TESTBANK's bright line rule serves to preclude not only
recovery for lost gas sales from the well, but also any damages
related to refineries that could not process the gas, or damages
related to trucking operations that could not transport the gas or
to retail outlets that could not sell the final product.
Although one might try to extrapolate an argument from
Consolidated that, once physical damage to any proprietary interest
is proven, all pure economic losses are recoverable, such a
reading, we think, is inconsistent with Consolidated 's holding.
In Consolidated, all the awarded damages flowed directly from the
destruction of Consolidated's production facilities. Consolidated
sued
not solely for any lost income or other economic loss from the
interruption of its supply of natural gas (e.g., due to being
forced to pay higher prices for an alternative supply) but
instead for physical losses, as well as attendant economic
damages, to its own property which occurred as a result of the
interruption of Consolidated's supply of gas "within minutes"
of the pipeline's rupture.
Consolidated Aluminum, 772 F.2d at 1221-22 (third emphasis added).
As we have emphasized, Corpus Christi's claimed economic loss
was not "attendant" to the physical damage to Corpus Christi's
proprietary interest; the loss was instead occasioned only by the
physical injury to Houston's riser, property in which Corpus
10
Christi had no proprietary interest. To allow recovery for those
losses plainly would abrogate the bright line rule of TESTBANK. To
insure that the principles underlying TESTBANK are preserved, we
hold that simply meeting the requirement of showing physical damage
to a proprietary interest does not automatically open the door to
all foreseeable economic consequences. We therefore reverse the
district court on this point, and deny Corpus Christi's recovery of
revenue lost while its wells were shut in for the repair of
Houston's riser.
(3)
As to Houston's recovery, Zapata takes the position that the
district court erred in finding Houston's damages to be $306,000,
because it "arbitrarily rejected the uncontradicted and
unchallenged testimony and evidence presented by Zapata's expert,
Richard Zimmerman," who testified that Houston's damages were
approximately $45,000 to $50,000. Although Zapata acknowledges
that we must review the district court's finding of damages only
for clear error, it cites Strachan Shipping Co. v. Dresser Indus.,
Inc., 701 F.2d 483, 487 (5th Cir.1983) for its contention that, in
cases where "no credibility choice has been made by the district
court, "the burden of proving the district court's findings clearly
erroneous is to some extent ameliorated.' " It argues that this is
just such a case, and that the district court violated precedent of
this Circuit by "arbitrarily reject[ing] the testimony of a witness
whose testimony appears credible." Gee Chee On v. Brownell, 253
F.2d 814, 817 (5th Cir.1958). Zapata admits that Houston is
11
entitled to an award for damage to its riser, but argues that the
award should be no more than the cost to which Zimmerman testified
at trial—the $45,000 to $50,000 cost of a metal sleeve fitted
around the damaged section of the riser. In a similar vein, Zapata
also argues that neither Corpus Christi nor Houston offered any
testimony or evidence to contradict Zimmerman's testimony that, had
a riser guard been placed around the pipe, there would have been no
damage to the riser. Zapata concludes that it should not have been
liable to either party, except for the cost of replacing the riser
guard.
Citing Freeport Sulphur Co. v. S/S HERMOSA, 526 F.2d 300, 304
(5th Cir.1976), Houston responds that actual cost of repairs is the
proper measure of damages. Houston contends that the court was not
bound to accept uncontroverted expert opinion testimony, and that
its refusal to do so was a permissible exercise of the district
court's discretion that should not be second-guessed on appeal.
Houston further points out that, although Zimmerman testified that
the platform was not damaged in the allision, the district court
found specifically that the platform's boat platform was in fact
damaged. Houston further notes the district court's finding that
the possibility remained that, even with a guard, the riser might
have sustained some damage. In the light of that fact, it argues,
the district court declined to speculate on the effect that less
severe damage to the riser would have had on Houston's damages.4
4
Corpus Christi also points out other weaknesses in
Zimmerman's testimony, including his admission that his opinion
depended upon an assumption that the barge would have struck the
12
We are not persuaded that the district court's damages
findings are clearly erroneous. The district court simply chose
not to believe all of Zimmerman's testimony. Indeed, the Supreme
Court has observed that it is not error for the factfinder to
reject expert opinion evidence, even if uncontroverted. Sartor v.
Arkansas Natural Gas Corp., 321 U.S. 620, 627-28, 64 S.Ct. 724,
729, 88 L.Ed. 967, 973 (1944). Here, the factfinder acted within
his discretion. To be sure, it is clear from the district court's
finding of comparative fault on the part of Houston that it
considered—and accepted part of—the testimony of Zapata's expert;
it simply chose, within its discretion, not to adopt fully that
expert's view as the view of the court with respect to the
recoverable damages.
C
Zapata also challenges the district court's award of
prejudgment interest to Houston and Corpus Christi. The district
court found that the facts of this case were not sufficiently
"peculiar" to mandate denial of what is the norm in admiralty
cases—award of prejudgment interest to the prevailing party.
Zapata urges us to review de novo whether peculiar circumstances
existed in this case so as to abrogate the normal rule. Corpus
Christi and Houston argue that the award of prejudgment interest is
a matter committed to the district court's discretion, and that no
abuse of that discretion occurred in this case.
riser guard in a certain way, and that his diagram reflected that
he was unsure what part of the barge had struck the riser.
13
As the district court correctly noted, in maritime cases the
award of prejudgment interest is the rule, rather than the
exception, and the trial court has discretion to deny prejudgment
interest only where peculiar circumstances would make such an award
inequitable. See Reeled Tubing, Inc. v. M/V CHAD G, 794 F.2d 1026,
1028 (5th Cir.1986) (holding that award of prejudgment interest is,
in practice, "well-nigh automatic."). We have further explained as
follows:
Whether such circumstances exist is a question of fact, and
the standard to be applied on review is the "clearly
erroneous" standard. But even if an appellant can demonstrate
that it would be clearly erroneous to say that there are no
peculiar circumstances, the appellant must further show that
when the trial court declined the request to deny prejudgment
interest, the trial court abused the discretion that was
created by the peculiar circumstances.
Noritake Co., Inc. v. M/V HELLENIC CHAMPION, 627 F.2d 724, 729 (5th
Cir.1980). Thus, we conclude that the factual findings leading to
the district court's decision concerning whether "peculiar
circumstances" exist so as to allow the court properly to consider
prejudgment interest should be reviewed for clear error. If
peculiar circumstances are found to exist, the decision whether
prejudgment interest should be awarded, should be reviewed for
abuse of discretion.
With this standard in mind, we think that the district court
did not clearly err in concluding that this case did not present
"peculiar circumstances" sufficient to justify denial of the award
of prejudgment interest to Corpus Christi and Houston. The
district court found no delay on the part of either of the
prevailing parties; it found no more evidence of a "good faith"
14
dispute than in any other admiralty case; and it found that
apportionment of liability in an offshore allision case was not a
"peculiarity" that would justify denial of the award of prejudgment
interest to Corpus Christi and Houston. We find no clear error in
these conclusions.5
CONCLUSION
We AFFIRM the award of damages to Houston, and AFFIRM the
award of damages to Corpus Christi in the amount attributable to
the flaring of gas to save its wells, of $58,613. We further
AFFIRM the award of prejudgment interest to Houston and Corpus
Christi, and the taxation of costs to Zapata. We REVERSE that
portion of the district court's decision granting to Corpus Christi
damages for its economic losses suffered during the period in which
Houston repaired its riser.
AFFIRMED in part and REVERSED in part.
BENAVIDES, Circuit Judge, concurring in part and dissenting in
part:
I join the majority in affirming the award of damages to
Corpus Christi for the flared gas and to Houston for the riser, as
5
Zapata also complains that costs of the action should not
have been taxed against it, for essentially the same reasons it
urges in its prejudgment interest argument. Federal Rule of
Civil Procedure 54(d)(1) states that, with exceptions not
relevant here, "costs other than attorneys' fees shall be allowed
as of course to the prevailing party unless the court otherwise
directs." A party that obtains a favorable judgment on at least
a fraction of its claims may be regarded as a prevailing party,
even though that party has not sustained all its claims. United
States v. Mitchell, 580 F.2d 789, 793 (5th Cir.1978). The
district court, finding Zapata two-thirds at fault—a finding we
do not disturb on appeal—acted well within its discretion when it
awarded Corpus Christi and Houston their costs of court.
15
well as the award of prejudgment interest and taxation of costs.
However, the majority's denial of Corpus Christi's delay damages
resulting from the shut-in under the guise of TESTBANK ignores
controlling authority in this Circuit and forges a new rule of law
unintended by TESTBANK and its progeny.1 I must dissent.
TESTBANK stands for a single proposition: physical damage to
a proprietary interest is a prerequisite to recovery for economic
loss. 752 F.2d 1019, 1020 (5th Cir.1985) (en banc), cert. denied,
477 U.S. 903, 106 S.Ct. 3271, 91 L.Ed.2d 562 (1986). We adopted
the "bright-line" TESTBANK rule to exclude entire categories of
potential plaintiffs who had suffered only economic harm. These
would-be plaintiffs, whose claims were potentially indeterminate
and indefinite, created the specter of wave upon wave of successive
economic consequences. We drew our bright line with full
recognition that some plaintiffs with foreseeable economic injury
would be denied recovery. Nonetheless, our rule of law is not only
consistent with established precedent, but also with the
appropriate adjudicative role of our courts.
Thus TESTBANK operates as a threshold to recovery. Those
plaintiffs with physical injury to a proprietary interest may
enter; those without may not. This gateway to recovery makes
sense. Having satisfied the prerequisite, the rationale for
foreclosing relief for economic harm does not apply because the
1
The delay damages were based upon the loss in present value
of the deferred production. No attack against these damages or
the amount thereof is made by the appellant except for the attack
based on TESTBANK.
16
plaintiff no longer belongs to the putative class of indeterminate
and indefinite claimants; the plaintiff now belongs to the finite
fold of those suffering some physical damage. Simply put, once a
plaintiff demonstrates physical damage to a proprietary interest,
TESTBANK is simply inapplicable.
Clearing the TESTBANK threshold, however, is not the end of
the matter. A plaintiff's right to recovery still hinges on
application of traditional tort principles including legal duty and
foreseeable injury. These principles, of course, include recovery
for foreseeable economic loss caused by a defendant's negligence.
These well-settled principles of negligence, not TESTBANK, control
the ultimate outcome.
In this case, we correctly hold that Corpus Christi's sensible
action in flaring gas to save its wells "constitutes the physical
damage to a proprietary interest, i.e., its gas, sufficient to
satisfy the TESTBANK requirements." Maj. op. at ----. At this
point, Corpus Christi meets the prerequisite; our TESTBANK inquiry
is over. General principles of negligence now govern whether
Corpus Christi can recover damages. The majority, however,
resurrects TESTBANK and fashions a new requirement that each
element of recoverable loss must satisfy TESTBANK. I cannot
condone this new rule because it ignores the lessons of our
previous authority in this area of law.
In crafting this new rule, the majority relies on Consolidated
Aluminum. However, the approach this Court took throughout the
Consolidated Aluminum litigation is inconsistent with the course
17
the majority chooses today. Consolidated Aluminum sought damages
for physical losses as well as attendant economic damages stemming
from interruption of gas supply after the defendant negligently
severed a pipeline. 772 F.2d 1217, 1222 (5th Cir.1985). The
district court granted summary judgment for the defendant based
upon TESTBANK. We reversed stating: "Consolidated plainly
suffered physical harm to property in which it has a proprietary
interest—i.e., its own equipment for deriving aluminum. Thus,
TESTBANK does not apply." Id. We further explained that the
TESTBANK rationale for foreclosing relief for economic harm was
simply inapplicable because the number of potential plaintiffs was
neither indeterminate nor infinite. Id. at 1223.
Having cleared the TESTBANK hurdle, we instructed the district
court to resolve the issue of Consolidated's right to recovery
under traditional tort principles. In reaching this conclusion, we
relied on the RESTATEMENT (SECOND) OF TORTS. We quoted in toto comment
b to section 766C that makes clear that if there is physical harm,
the general rule prohibiting recovery for negligent interference
with contractual relations does not apply and there may be recovery
subject to the general rules governing liability for negligence.2
2
This comment is as follows:
b. Physical harm to the other. The rule stated in this
Section applies when the plaintiff suffers only
pecuniary loss, such as the loss of the financial
benefits of a contract or of prospective trade or
financial loss through being put to additional expense.
If there is physical harm to the person or land or
chattels of the plaintiff, the rule stated in this
Section does not apply and there may be recovery for
negligence that results in physical harm because of the
18
See id. Furthermore, we erased any doubt about our approach in our
per curiam opinion denying rehearing. After reiterating that
TESTBANK was inapplicable because Consolidated suffered physical
harm, we "left the application of traditional tort principles,
including foreseeability and the related concept of legal duty, for
the trial court to determine on remand." Id. at 1224.
On remand, the district court found that the defendant was not
liable for the damage to Consolidated because it was an
unforeseeable consequence of the rupture of the pipeline. 639
F.Supp. 1173, 1183 (W.D.La.1986), aff'd, 833 F.2d 65 (5th
Cir.1987), cert. denied, 486 U.S. 1055, 108 S.Ct. 2821, 100 L.Ed.2d
922 (1988). The court relied on the peculiar facts of that case.
For example, Consolidated's plant was located six miles away from
the point of rupture, on a different body of water, and upstream in
the gas distribution system. Additionally, the defendant had no
knowledge of Consolidated's connexity to the pipeline. Finally,
Consolidated was so far outside the zone of obvious danger that no
reasonable person would have anticipated that a rupture of the
pipeline would cause damage to "such a remotely located plant."
Id.
On appeal after remand, a different panel of this Court, per
nonperformance of a contract with the plaintiff. (Cf.
§§ 435B, 499). This recovery is of course subject to
the usual rules governing liability for negligence.
When recovery is allowed, the loss of expected profits
or other pecuniary loss may, in an appropriate case, be
recovered as "parasitic" compensatory damages.
RESTATEMENT (SECOND) OF TORTS § 766C cmt. b (1979).
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then Judge Politz, now Chief Judge, affirmed. 833 F.2d 65 (5th
Cir.1987), cert. denied, 486 U.S. 1055, 108 S.Ct. 2821, 100 L.Ed.2d
922 (1988). We agreed with the district court that the defendant
could not have anticipated that its failure to follow safe dredging
practices would result in physical damage to a plant several miles
away. Id. at 68. Significantly, we did not resurrect TESTBANK and
use it to foreclose Consolidated's recovery. Rather, we reaffirmed
our commitment to a two-step approach. Initially, TESTBANK must be
applied. Once satisfied, application of traditional tort
principles then determines recovery.
We used a similar approach in Domar Ocean Transp. v. M/V
ANDREW MARTIN, 754 F.2d 616 (5th Cir.1985). Domar owned a tank
barge and leased a tug to tow it. While in tow, the Domar barge
was struck by another towed by the Andrew Martin. Domar recovered
delay damages for lost profits from the use of both the barge and
the leased tug. Andrew Martin appealed contending that TESTBANK
barred recovery for the loss of use of the tug because it suffered
no physical damage. This Court rejected this argument and affirmed
the damage award. We held that Domar had a proprietary interest in
the barge-tug unit noting that it was indisputable "that they
functioned as an integrated unit." Domar, 754 F.2d at 619.
Consequently, "TESTBANK is no bar to Domar's recovery for the loss
of use of the unit." Id. Finding no solace in TESTBANK, Andrew
Martin argued, as a matter of law, Domar's damages for loss of use
of the undamaged tug were too tenuous and remote to be reasonably
foreseeable. Again, we rejected the argument. Judge Higginbotham,
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author of TESTBANK, wrote for the panel: "On these facts, that
Domar's damages were foreseeable is implicit in the conclusion that
the test of TESTBANK is met." Id.
In the case before us today, Corpus Christi suffered two types
of economic damages: flared gas and delay damages from the
shut-in. Having satisfied the TESTBANK prerequisite, Consolidated
Aluminum and Domar instruct that fundamental negligence principles
determine Corpus Christi's recovery. Applying traditional tort
principles, these economic damages are recoverable unless they are
unforeseeable or casually unrelated to the allision. When Zapata's
barge collided with the Corpus Christi platform it damaged the gas
riser. This necessitated Corpus Christi's prudent action in
flaring gas to avoid permanent damage to the well. Is it
unforeseeable that Corpus Christi would also suffer economic
damages from a shut-in caused by a need to repair the gas riser?
Certainly not. The damages from both the flared gas and the
subsequent shut-in directly flow from the allision. This is not a
situation, as presented in Consolidated Aluminum, where the damages
occur in some remote location unknown and unseen by the tortfeasor.
The Zapata barge ran into the Corpus Christi platform and the
attached riser directly leading to both the flared gas and
necessary shut-in.
In stripping Corpus Christi of its recovery for delay damages
caused by the shut-in, the majority stresses that these losses were
not "tied" to damage to Corpus Christi's property. The majority
maintains that the only property of Corpus Christi that was damaged
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was the flared gas. Corpus Christi's ownership interest in the gas
riser, however, is not dispositive as Domar makes clear. The gas
riser, while owned by Houston, was permanently connected to the
northeast leg of Corpus Christi's platform. Thus the riser
operates as an integrated unit with the platform. Under Domar,
Corpus Christi, while not the owner of the riser, can recover its
foreseeable economic damages.
The new rule of recovery that the majority creates is not
dictated by either the holding or rationale of TESTBANK. It is
inconsistent with the approach this Court has used in both
Consolidated Aluminum and Domar. Having satisfied the TESTBANK
inquiry, Corpus Christi should be allowed to recover all
foreseeable economic damages that flow from the allision under
traditional tort principles. Contrary to the majority's claim,
allowing this recovery does not abrogate the bright line rule of
TESTBANK. Rather, it is the majority's new layer of TESTBANK
analysis that clouds the water TESTBANK and its progeny have made
clear. I would affirm the award of the foreseeable delay damages
to Corpus Christi.
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