Correa v. Cruisers, a Division of KCS International, Inc.

United States Court of Appeals
For the First Circuit

No. 01-1240

ARTURO CORREA, MELISA MOSCA-DE-CORREA,
CONJUGAL PARTNERSHIP CORREA-MOSCA,

Plaintiffs, Appellees,
v.

CRUISERS, A DIVISION OF KCS INTERNATIONAL, INC.,

Defendant, Appellant.

No. 01-1241
ARTURO CORREA, MELISA MOSCA-DE-CORREA,
CONJUGAL PARTNERSHIP CORREA-MOSCA,
Plaintiffs, Appellees,

v.
CRUSADER ENGINES, THERMO POWER CORPORATION,
Defendants, Appellants.

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

[Hon. Salvador E. Casellas, U.S. District Judge]

Before

Torruella, Circuit Judge,
Coffin, Senior Circuit Judge,
and Selya, Circuit Judge.

Luis N. Blanco-Matos, for appellant Thermo Power Corporation.
Jorge C. Cruz-Jové, with whom Juan B. Soto-Balbas, Mercado &
Soto, Michael G. Derrick, Roane Waring, III and Shuttleworth,
Williams, Harper, Waring & Derrick were on brief for appellant
Cruisers.
Francisco M. Troncoso, with whom Richard Schell-Asad was on
brief, for appellees.

July 23, 2002

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 TORRUELLA, Circuit Judge. Defendants-appellants,

Cruisers, a Division of KCS International, Inc., and Thermo Power

Corporation, appeal from a jury verdict finding that they breached

a warranty against hidden defects in the sale of a motorboat to

plaintiffs. In accordance with the jury's verdict, the United

States District Court for the District of Puerto Rico ordered

rescission of the sales contract and return of the purchase price

of the boat, plus interest. In addition, the jury awarded to the

plaintiffs their costs for dockage, repair and maintenance,

insurance premiums, and license fees. The district court further
awarded attorney's fees based on its determination that defendants

acted obstinately in the course of the litigation. On appeal,
defendants-appellants contend that the plaintiffs' claim for breach
of warranty against hidden defects is barred by the statute of

limitations. Alternatively, even if the claim was properly before
the district court, defendants-appellants contend that the district
court erred in allowing the testimony of plaintiffs' expert, in

permitting the jury to award non-defect-related expenses, and in
granting attorney's fees. We affirm in part and reverse in part,
remanding the case for action consistent with this opinion.

I. Background and Procedural History

Despite having weathered an eight-day jury trial, the

facts in this case are far from settled. However, since this is an

appeal from a denial of judgment as a matter of law, which we

review de novo, we will present the relevant facts in the light

most favorable to the plaintiffs. See Down E. Energy Corp. v.

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Niagara Fire Ins. Co., 176 F.3d 7, 13-14 (1st Cir. 1999) (reviewing

denial of judgment as a matter of law on limitations grounds de

novo and in light most favorable to non-moving party).
On March 22, 1995, plaintiffs-appellees ("plaintiffs"),

Arturo Correa ("Correa") and his wife Melissa Correa, purchased a

1995 Cruisers 3570-Esprit motor yacht ("yacht" or "boat") in San
Juan, Puerto Rico from People's Marine. The yacht, manufactured by

Cruisers, a Division of KCS International, Inc. ("Cruisers"), was

equipped with two Crusader, model 454Xli, marine gasoline engines,

manufactured by Thermo Power Corporation ("Crusader"). The

plaintiffs paid $132,350 for the boat, which was delivered to them

at the San Juan Bay Marina on June 11, 1995.

Pursuant to the sale of the yacht, both Cruisers and
Crusader issued limited warranties, guaranteeing to repair or

replace, free of charge, any defects in their respective products.

Cruisers' warranty provided five years of coverage for the hull of
the boat and one year for all other items manufactured by Cruisers.

Crusader's warranty covered the engines for two years.

In the two months after the plaintiffs received their

boat, they took several excursions to Fajardo, Puerto Rico and to

the U.S. Virgin Islands. On these outings, plaintiffs experienced

problems with the engines, including backfiring, stalling, and an

inability to start. On July 26, 1995, Correa wrote a letter of

complaint to Cruisers, with a copy to People's Marine, describing

the problems that plaintiffs had encountered with the boat,

including engine troubles.

-4-
 Correa, in August of 1995, made further complaints to

People's Marine about "hard starting" of the engines, meaning that

the engines would not restart immediately after they had been
running for awhile and were then shut off. Crusader was familiar

with "hard starting" as a common symptom of "vapor lock," which

other manufacturers had been experiencing in the summer of 1995 due
to a new fuel pump in Crusader engines. Crusader had found that

the installation of additional fuel booster pumps had solved the

hard starting problem. Accordingly, it ordered two booster pumps,

which were installed on plaintiffs' yacht by People's Marine

sometime during September of 1995.

After the booster pumps were installed, the Correas

continued to experience engine problems. On September 25, 1995,
Correa wrote another letter to Cruisers, explaining that the

engines were stalling and backfiring. In this letter, Correa

informed Cruisers that he had already alerted People's Marine of
the continuing problem.

On October 21, 1995, Crusader sent Paul Doppke, a

certified Crusader marine engine specialist, to Puerto Rico to

examine Correa's engines. Doppke found that the booster pumps had

been misinstalled by People's Marine, which explained the

continuing engine problems. Doppke removed the booster pumps and

instead installed a new fuel delivery system that Crusader had

found to eliminate the vapor lock problem. Doppke, with Correa

aboard the yacht, then conducted a sea trial and performed

diagnostic tests to determine how the engines were running. During

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the sea trial, which lasted over four hours, the engines ran

without any difficulties.

During the trial, there was evidence that after the
installation of the new fuel delivery system Correa took his boat

out to watch an offshore race in San Juan Bay and experienced

engine problems.1 On November 10, 1995, Correa again contacted
Cruisers to alert the company. That same day, following the

telephone conversation, Correa sent a letter indicating that he

expected Cruisers and Crusader to fix his engines and Cruisers to

repair the other problems with the boat, including, inter alia,

leaks, a rusting ice-maker door, defective wipers, and a broken gas

alarm, that had plagued him since the time of delivery or shortly

thereafter.
In response to Correa's complaints, Cruisers and Crusader

sent a team of their top management and technical personnel to

Puerto Rico to inspect Correa's yacht. This team included Gerald
Scott, Vice President and General Manager of Crusader; Jim

Viestenz, President of Cruisers; Jim Hayes, Customer Service and

Quality Control Manager for Cruisers; Andrew Prietz, Customer

Service Manager for Crusader; Guillermo Cidre, owner of People's

Marine; and Osmani del Pino, a mechanic employed by People's

Marine. The Crusader and Cruisers representatives, along with

1
Although at trial there was corroborating evidence of Correa's
engine problems during the regatta, there was conflicting testimony
as to when the regatta occurred: before or after the installation
of the new fuel delivery system. Viewing the facts in the light
most favorable to the plaintiffs, however, we will assume that the
regatta and the concomitant engine problems arose after the new
fuel delivery system was installed on October 21, 1995.

-6-
Correa, took the boat out for a sea trial. The group experienced

no noticeable engine problems. In addition, computer monitoring of

the engines indicated that the engines were functioning properly.
Prior to leaving, Gerald Scott asked Correa to call him directly if

Correa experienced further engine problems so that he could ensure

that Crusader would fix or replace the engines.
Immediately after this inspection visit, on December 6,

1995, Cruisers wrote to Correa to summarize the repairs and

replacements that, pursuant to the inspection, would be made under

warranty by People's Marine. On December 11, 1995, Crusader wrote

to Correa, reassuring him that the engines were running properly

according to the inspection, but suggesting that the propellers be

repitched. After People's Marine had performed at least some of
the prescribed replacements and repairs, Correa wrote another

letter to Cruisers on December 26, 1995, detailing repairs that had

not been completed by People's Marine and further repairs or
replacements that were required. In this letter, Correa also

advised Cruisers that People's Marine, in conducting the repairs,

had noted that the engine water hoses were blistered and filled

with water. In response, on January 12, 1996, Cruisers notified

Correa that new water hoses were being sent to People's Marine for

installation. There was testimony at trial that the boat would

have been unusable until the water hoses were replaced because

there was a danger of the boat sinking. Sometime after January 12,

1996, People's Marine did replace the engine water hoses, although

-7-
it is unclear exactly when. Correa testified that the hoses were

replaced in March or April of 1996.

At trial, there was testimony that Correa used his boat
again in either January or February of 1996 to travel to Palomino

Island, off the coast of Fajardo. There is a factual dispute as to

whether Correa suffered engine problems during this venture. If
Correa did experience problems during this trip, there was no

evidence presented at trial that Correa made any further complaints

to Cruisers, Crusader, or People's Marine. The evidence was also

unclear as to whether this trip to Palomino Island occurred before

or after the engine hoses were replaced.

The plaintiffs did not use their boat again until June of

1996. At this time they encountered engine problems while
traveling to the U.S. Virgin Islands. On June 18, 1996, Correa

again wrote to Cruisers detailing necessary repairs and service

that had previously been communicated to Cruisers and/or People's
Marine, but had not yet been completed. This letter, however, did

not mention any problems with the engines. People's Marine

responded on June 19, indicating that they had been trying to

contact Correa to arrange a time to perform the necessary warranty

service.

In August of 1996, Correa made further complaints to

Guillermo Cidre of People's Marine about the engines and discussed

the possibility of trading in his boat for a Cruisers 4270 (a

higher-end model of motor yacht). On August 20, 1996, Correa wrote

a letter to People's Marine memorializing his dissatisfaction with

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his yacht due to its engine problems. Correa also indicated in

this letter that he would accept a Cruisers 4270 in exchange for

his boat as compensation and settlement for his difficulties, as
long as such settlement was confirmed by August 30, 1996. Correa

sent a copy of this letter to Crusader and Cruisers on August 22,

1996.
Cruisers answered Correa's letter on September 9, 1996.

Cruisers responded that it wanted another opportunity to inspect

and repair Correa's boat, but that if a defect were found,

Cruisers, Crusader, and People's Marine would allow Correa to

trade-in his boat, valued at the full purchase price, in partial

satisfaction towards a new Cruisers 4270, which would be sold to

Correa at a discount of $63,831 from the normal retail price.
Under this offer, the cost to Correa for the Cruisers 4270 would be

$195,150 after the inclusion of the trade-in value and discount.

Plaintiffs rejected this offer on September 26, 1996. Crusader, on
October 9, 1996, also responded to Correa's September 9 letter and

indicated that it was willing to perform warranty service on the

engines, if needed, but that this required an inspection of the

engines. Plaintiffs refused Crusader access to the boat.

On January 27, 1997, plaintiffs filed their complaint

against Cruisers and Crusader in the District Court for the

District of Puerto Rico, seeking rescission of the sales contract

and damages for breach of warranty against hidden defects. At the

end of plaintiffs' evidence, Cruisers and Crusader moved for

judgment as a matter of law, claiming that the breach of warranty

-9-
claim was barred by the statute of limitations. The district court

denied the motion. The defendants, to no avail, renewed this

argument at the close of all evidence. After an eight-day trial in
March of 2000, the jury returned a verdict for the plaintiffs,

finding both defendants liable for breach of warranty. Plaintiffs

were granted rescission of the contract and were ordered to return
the Cruisers 3570 Esprit boat to the defendants. The jury ordered

the defendants to return the $132,350 purchase price of the boat,

plus interest, and to reimburse plaintiffs for dockage fees of

$14,980.38, maintenance and repair expenses of $3,350.28, insurance

premiums of $13,326.00, and license fees of $1,164.95. Judgment

was entered on March 23, 2000.

On March 29, 2000, plaintiffs filed two post-judgment
motions pursuant to Federal Rule of Civil Procedure 59(e). The

first requested an amendment of the judgment to find defendants

liable for the payment of future dockage, license, and insurance
fees until defendants accept possession and title of the boat.

Plaintiffs supplemented this motion on June 16, 2000 by submitting

invoices for dockage and insurance fees for the months of April,

May, and June of 2000, since, as of this time, the plaintiffs still

retained custody of the boat.2 The second motion requested a

finding that the defendants were obstinate, thereby entitling

plaintiffs to attorney's fees.

2
It appears that at this time the plaintiffs and defendants were
involved in settlement negotiations prior to filing an appeal. As
a result, defendants had not yet paid the judgment to plaintiffs,
so the plaintiffs had not yet returned the boat to defendants.

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 On December 18, 2000, the district court issued two

orders amending its judgment. The court found defendants liable

for further dockage and insurance fees in the amounts of $1,108 and
$2,916, respectively, and stated that plaintiffs could apply for

further expenses incurred until defendants accept possession and

title of the boat. The court also determined defendants to have
been obstinate and awarded attorney's fees to plaintiffs in the

amount of $30,000. On January 17, 2001, defendants filed their

notices of appeal, challenging both the judgment and the two orders

issued on December 18, 2000.3

3
Plaintiffs argue that Crusader appeals only from the original
judgment and not from the orders amending the judgment, since these
orders were not explicitly cited in Crusader's notice of appeal.
Federal Rule of Appellate Procedure 3(c) provides that the notice
of appeal must "designate the judgment, order, or part thereof
being appealed." Failure to do so prevents the party from
appealing the unspecified ruling. See Lehman v. Revolution
Portfolio LLC, 166 F.3d 389, 395 (1st Cir. 1999) (disallowing
appeal of substitution order, which post-dated notice of appeal,
where order not specifically appealed). Normally, an appeal from
a Rule 59(e) motion is considered separate from an appeal from the
judgment, see LeBlanc v. Great Am. Ins. Co., 6 F.3d 836, 839 (1st
Cir. 1993) (stating that appeal from denial of Rule 59(e) motion is
not an appeal of underlying judgment), so that each must be
referenced in the notice of appeal to be properly appealable.
However, we have held that in determining what is being
appealed, the court may look to the appellant's intent. See id.;
see also In re San Juan Dupont Plaza Hotel Fire Litig., 45 F.3d
564, 567 (1st Cir. 1995); Mariani-Giron v. Acevedo-Ruiz, 945 F.2d
1, 2 (1st Cir. 1991). In this case, Crusader's intent to appeal
both the judgment and the orders amending the judgment is clear.
Crusader's brief explicitly adopts Cruisers' arguments regarding
reimbursable expenses and attorney's fees, which were the subject
matters of the orders. If Crusader only intended to appeal the
judgment, there would have been no need to discuss attorney's fees,
which were not included in the original judgment. See Foman v.
Davis, 371 U.S. 178, 181 (1962) (finding that appellant intended to
appeal both judgment and denial of motion to vacate based in part
on parties' briefs addressing issues relevant to the original
judgment and to the motion).

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 On appeal, defendants-appellants argue that the district

court committed four errors because: (1) the plaintiffs' claim for

breach of warranty is barred by the statute of limitations; (2) the
testimony of plaintiffs' expert should have been excluded; (3) the

jury should not have been permitted to award non-defect-related

expenses; and (4) the award of attorney's fees was not warranted.
We address each of these alleged errors in turn.

II. Statute of Limitations

Appellants contend that the district court erred in

refusing to grant them judgment as a matter of law because
plaintiffs' breach of warranty claim is barred by the statute of

limitations. Viewing the record in the light most favorable to the
non-moving party, we review de novo whether the statute of
limitations has run so that judgment as a matter of law is proper.

See Down E. Energy, 176 F.3d at 13-14 (reviewing de novo whether

claim was barred by statute of limitations so as to warrant
judgment as a matter of law); Fed. R. Civ. P. 50(a) (providing that

judgment as a matter of law is warranted when there is no legally
sufficient evidentiary basis for a reasonable jury to find for the
plaintiffs). Because this Court's jurisdiction is based on

diversity of citizenship, we apply Puerto Rico law to this issue.
See Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938) (holding that

federal court exercising diversity jurisdiction must apply

substantive state law); Fitzgerald v. Expressway Sewerage Constr.,

Inc., 177 F.3d 71, 74 (1st Cir. 1999) (same).

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 Section 3841 of the Puerto Rico Civil Code ("Code")

obligates a vendor to provide a vendee with a warranty against

hidden defects that render a product sold "unfit for the use to
which it was destined." P.R. Laws Ann. tit. 31, § 3841 (1990).

Such warranty covers only serious defects that are pre-existent and

unknown to the vendee at the time of sale, regardless of whether
the defects are known to the vendor. See id. (stating that vendor

is not liable for patent or visible defects); id. § 3842 (providing

for liability of vendor even if defects are unknown to him); Ferrer

v. Gen. Motors Corp., 100 P.R.R. 244, 254, 100 P.R. Dec. 246, 255-

56 (1971) (summarizing requirements for breach of warranty claim).

If there is a breach of warranty, the Code gives the vendee the

option of rescission of the contract or a proportional reduction in
price. See P.R. Laws Ann. tit. 31, § 3843 (1990).

The Code further provides that any action brought for

breach of warranty must be filed within six months of delivery of
the product sold. See id. § 3847. The Supreme Court of Puerto

Rico, however, has interpreted the limitations period more

leniently: the statute of limitations begins to run not on the

actual date of delivery, but rather on the date that "steps to come

to an understanding following the contract were interrupted."

Ferrer, 100 P.R.R. at 254, 100 P.R. Dec. at 256; accord Betancourt

v. W.D. Schock Corp., 907 F.2d 1251, 1253-54 (1st Cir. 1990); Kali

Seafood, Inc. v. Howe Corp., 709 F. Supp. 285, 287 (D.P.R.)

[hereinafter Kali Seafood I], aff'd, 887 F.2d 7 (1st Cir. 1989)

-13-
[hereinafter Kali Seafood II]; Casa Jaime Corp. v. Castro, 89

P.R.R. 686, 688, 89 P.R. Dec. 702, 704 (1963).

The district court, in denying the defendants' motion for
judgment as a matter of law, determined that the statute of

limitations had never begun to run because of ongoing negotiations

between the parties. The district judge ruled that since "the main
failure here is of the engines, which according to the plaintiffs

were never repaired, we hold that the claims continually made to

Cruisers on any and all items were continually tolling the statute

in this case."4 Because there were still problems in January

and/or February of 1996 involving the repair of the engine water

hoses, followed by a letter of complaint (although not referencing

the engine problems) from Correa on June 18, 1996, and more
communication in August and September of 1996, the district court

determined there were ongoing efforts "to come to an understanding"

so that the January 27, 1997 filing of the complaint was "within
the necessary six months as prescribed by the Civil Code."

It is undisputed that the Correas were in continual

communication with defendants about their engine problems from June

of 1995 through December 5, 1995, when the representatives from

Cruisers and Crusader came to Puerto Rico to inspect the boat.

Thus, until at least December 5, 1995, the parties were engaged in

4
Although the district court uses the term "tolling," and the
defendants dispute the applicability of the Code's tolling
provision, see P.R. Laws Ann. tit. 31, § 5303 (1990), it is clear
from this context that the district court is not applying the
tolling provision, but rather discussing what triggers the running
of the limitations period.

-14-
efforts to reach an understanding about any defects involving the

boat's engines.5 See Kali Seafood II, 887 F.2d at 8-9 (affirming

that the "steady communication" between November 1980 and August
1983 regarding the functioning and repair of ice maker prevented

limitations period from running); cf. Betancourt, 907 F.2d at 1253-

54 (deciding that gap in communication between April 1982 and
November 1984 precluded a finding of a "continuous series of

'claims and answers'" and therefore did not prevent the statute of

limitations from running).

The parties primarily disagree as to whether there were

continuing efforts to resolve the engine problems between December

5, 1995 and August of 1996. Appellants argue that plaintiffs made

no complaints about the engines during this period of more than six
months so that the statute of limitations had expired when

plaintiffs renewed their complaints in August of 1996. Even if we

were to accept their argument that the statute of limitations would
expire during a six-month lull in communication -- a matter on

which we take no view -- we find no such break. Evidence at trial

indicates that on December 26, 1995, Correa was still in

communication with the defendants about unresolved problems,

5
Because the district court determined that Cruisers and Crusader
were jointly and severally liable, and People's Marine was an
authorized dealer of Crusader from December of 1995 to August of
1996, the district court ruled that communication between Correa
and Cruisers, Crusader, and/or People's Marine was effective as
between them all for purposes of the statute of limitations: "But
once this statute was tolled against Cruisers which is solidarily
liable with Crusader then any and all claims against Cruisers
throughout all this period is attributable as a tolling to
Crusader." This finding was not challenged on appeal.

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including the blistered engine hoses, which allegedly prevented any

use of the boat. In addition, there was testimony to indicate that

the engine hoses were not replaced until January or February of
1996, at the earliest, so that plaintiffs were unable, during this

time, to test whether their engines were functioning properly.

Thus, this period of time should constitute continuing
communication between the parties about warranty service so as to

prevent the statute of limitations from commencing to run. See

Kali Seafood I, 709 F. Supp. at 287 (finding that statute of

limitations did not begin to run while ice maker was undergoing "a

series of modifications in an effort to make it function

properly"). As a result, when viewing the evidence in the light

most favorable to the plaintiffs, the earliest time the statute
could have begun to run was March of 1996, after replacement of the

engine hoses, which would mean that the limitations period would be

exhausted six months later, at the beginning of September of 1996.
However, Correa made further complaints about the boat,

in general, on June 18, 1996, and about the engines, in particular,

in August of 1996. Letters continued to be exchanged between the

parties until October of 1996. These further communications

indicate that there was no six-month gap, as appellants allege, in

which the statute could run, but rather that the parties were still

trying to reach an understanding about the warranty until October

of 1996. Although there is no evidence of complaints specific to

the engines between March and August of 1996, the parties could

still have been attempting to reach an agreement during this time,

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in which the boat was used only the one time (in June 1996).6
Thus, the earliest "trigger date" to start the limitations period

would be October of 1996, when Correa refused all further efforts
from the defendants to inspect the boat and remedy the problem.

See Kali Seafood II, 887 F.2d at 8, 9 (noting that trigger date

starting the limitations period was the day that "appellant called
a halt to all remedial efforts"). The complaint, filed on January

27, 1997, was well within six months of this trigger date.

Therefore, we find that the plaintiffs' claim is not barred by the

statute of limitations.

III. Expert Testimony

Appellants assert that even if plaintiffs' breach of
warranty claim was properly before the court, the district court
erred in allowing the testimony of plaintiffs' expert witness,

Ramón Echeandía. In essence, plaintiffs' expert opined that the
engines' fuel management system was defective, as evidenced by
excessive smoke during their operation and sooty spark plugs,

thereby causing engine stalling and backfiring. Appellants contend
that the expert's testimony should have been excluded because he

6
Appellants argue that, contrary to the district court's finding,
only communication regarding the alleged engine defect, as opposed
to other repairs covered by the boat's warranty, can prevent the
limitations period from starting to run for a breach of warranty
claim. We need not address that claim. Even if we limit our
review of continuous communications to those involving the engines,
the gap between the end of February or April of 1996, when the
engine hoses had been fixed, and August of 1996, when Correa
specifically mentioned the engine problems again, was less than six
months.

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was not qualified, relied on a defective methodology, and gave

irrelevant testimony.

We review the district court's decision to admit expert
testimony for abuse of discretion. See Gen. Elec. Co. v. Joiner,

522 U.S. 136, 138-39, 143, 146 (1997) (holding that abuse of

discretion standard applies on review regardless of whether the
trial court admitted or excluded the contested expert testimony);

Diefenbach v. Sheridan Transp., 229 F.3d 27, 29 (1st Cir. 2000).

Federal Rule of Evidence 702 imposes an important

gatekeeper function on judges by requiring them to ensure that

three requirements are met before admitting expert testimony:

(1) the expert is qualified to testify by knowledge, skill,

experience, training, or education; (2) the testimony concerns
scientific, technical, or other specialized knowledge; and (3) the

testimony is such that it will assist the trier of fact in

understanding or determining a fact in issue. See Fed. R. Evid.

702; Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 589, 592

(1993) (discussing trial judge's role in screening scientific

expert testimony for reliability and relevancy); see also Kumho

Tire Co. v. Carmichael, 526 U.S. 137, 141 (1999) (extending

Daubert's gatekeeping obligation to technical and other specialized

expert testimony); Diefenbach, 229 F.3d at 30 (setting forth three

requirements of Rule 702).

At trial, defendants objected to the proffered testimony

of Echeandía on three grounds. Defendants contended that Echeandía

could not properly be qualified as an expert because he lacked

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education, training, and experience with fuel management systems,

including marine systems. Second, defendants asserted that the

expert's methodology was unreliable because he did not use any
instruments to inspect the engines. Further, defendants argued

that his proffered testimony was irrelevant because it related to

fuel mismanagement rather than to engine stalling or backfiring.
In response to these objections, the district court conducted an

extensive voir dire as to Echeandía's qualifications and opinion.

Upon conclusion of the voir dire, the district court found that

Echeandía was qualified as an expert "in light of his experience."

Echeandía testified that he holds a bachelor's degree in

mechanical engineering from the Mayagüez Agricultural College of

the University of Puerto Rico. He obtained an engineering license
after passing a qualifying exam given by the government of Puerto

Rico and the College of Engineers.

In addition to his education, Echeandía testified as to
his mechanical engineering experience, particularly as it

corresponds to engine repair. He worked for the Puerto Rican

Cement Company for five years, where he performed maintenance on

heavy equipment, including work on Caterpillar, GM, Diesel,

Wisconsin, Pearce, and Perkins engines. Echeandía then moved to

Sea Train Line Container Division, where he worked for six years as

maintenance engineer for all of the company's equipment, which

included tractors, trailers, vans, diesel generators for

refrigeration units, Johnson outboard motors, and Chevrolet and

-19-
Ford engines. He also assisted the chief engineer with repair of

auxiliary engines on vessels.

Echeandía then worked for approximately three years at
Orbital de Puerto Rico, performing mechanical maintenance on

gasoline and diesel engines. After his stint at Orbital, he bought

Miami Rebuilders of Models, Inc., where he overhauled automobile
engines, diesel engines, and marine engines for about three years.

His work on specific marine engines included, inter alia, the

rebuilding of approximately fifteen 454 Chevrolet ("Chevy")

carburetor engines and twenty marine diesel engines.7 He then

opened an automobile repair shop, in which he has been repairing

fuel injection engines for more than twenty years. Echeandía was

also able to explain to the court how a marine fuel injection
engine differs from an automobile fuel injection engine.

Based upon these qualifications, we find no abuse of

discretion in the district court's decision to qualify Echeandía as
an expert in mechanical engineering of engines based on his

experience. Rule 702 permits qualification of an expert based on

knowledge, skill, experience, training, or education. See Tokio

Marine & Fire Ins. Co. v. Grove Mfg. Co., 958 F.2d 1169, 1175 (1st

Cir. 1992) (citing United States v. Paiva, 892 F.2d 148, 160 (1st

Cir. 1989)). Although plaintiffs' expert might not have qualified

as an expert based solely on his educational background in marine

engines, his experience repairing various marine and fuel-injection

7
Correa's boat also has 454 Chevy engines, although they are fuel
injection engines, whereas the 454 Chevy engines that Echeandía
rebuilt were carburetor engines.

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engines for over twenty years provided a basis for the district

court to find him qualified to opine on the function of plaintiffs'

marine engines. Thus, we will not disturb the district court's
qualification determination. See Diefenbach, 229 F.3d at 30

(noting that trial court has "broad discretionary powers" in

qualification of experts and that court's decision will be affirmed
unless there is clear error); United States v. Hoffman, 832 F.2d

1299, 1310 (1st Cir. 1987) (same).

As for the expert's methodology, the district court had

plaintiffs' expert describe how he arrived at his opinion regarding

Correa's engines. Echeandía testified during voir dire that when

he arrived to inspect the boat, Correa opened the engine hatches,

and Echeandía made a visual inspection. Echeandía then stood next
to the engines while Correa started the engines. Plaintiffs'

expert attested to an excessive amount of smoke coming from the

engines, indicating to him a bad fuel system. Echeandía testified
that it is important for an engine to have the right proportions of

gasoline and air flowing into it, otherwise the engine will not

burn properly and the spark plugs will "foul up." A "fouled up"

spark plug, according to Echeandía, can cause engine backfiring or

problems starting the engine. After warming up the engines, Correa

and Echeandía took the boat out for a test. After their return,

Echeandía removed a spark plug from the engines and noted it was

blackened from soot, rather than clean, as it should be in a

properly functioning engine.

-21-
 Defendants objected to Echeandía's methodology,

complaining that a visual inspection, accompanied by removal of a

spark plug, was insufficient to be reliable. Specifically,
defendants noted that Echeandía did not use any instruments or

gauges to determine whether Correa's engines were functioning

properly. Nor did plaintiffs offer any evidence to show that this
type of cursory examination is an accepted or recognized

methodology for diagnosing marine engine problems.

The district court, however, accepted Echeandía's

methodology as reliable. In reviewing the reliability of proffered

expert testimony, the trial court conducts a "flexible inquiry,"

which includes consideration of "the verifiability of the expert's

theory or technique, the error rate inherent therein, whether the
theory or technique has been published and/or subjected to peer

review, and its level of acceptance within the scientific

community." Ruiz-Troche v. Pepsi Cola of P.R. Bottling Co., 161

F.3d 77, 81 (1st Cir. 1998). Acceptance of the methodology by the

other party's expert may give additional credence to the
reliability of the proffered testimony. See id. at 84 (opining

that plaintiff's expert, who used the same scientific technique as

defendant's expert, added validation to methodology of defendant's

expert).

Although plaintiffs did not offer any evidence that

Echeandía's visual inspection of the engines was a well-accepted

method of diagnosing the existence of engine or fuel management

problems, here, we find it to be a matter of common sense that a

-22-
visual inspection, including observation of excessive smoke and

"fouled up" spark plugs, would be one acceptable way for a mechanic

or engineer to detect an engine problem. Moreover, one of
Crusader's experts, Andrew Prietz, offered support for Echeandía's

methodology by acknowledging that a sooty spark plug is a sign of

fuel mismanagement, which can cause stalling and shutting off of
the engine. Taking into account the "flexible inquiry" that a

district court conducts, we cannot say that the court committed

"meaningful error" in admitting Echeandía's testimony. See Ruiz-

Troche, 161 F.3d at 83 (stating that district court's reliability

determination will only be reversed when there is a "'meaningful

error in judgment'") (quoting Anderson v. Cryovac, Inc., 862 F.2d

910, 923 (1st Cir. 1988)).
Appellants further claim that Echeandía's testimony

should have been excluded because it was irrelevant. The relevancy

inquiry under Rule 702 focuses on whether the expert testimony
"likely would assist the trier of fact to understand or determine

a fact in issue." Id. at 81 (discussing "special relevancy"

requirement of Rule 702). Appellants claim that Echeandía's

testimony is irrelevant because it relates only to smoke and sooty

spark plugs (i.e., the fuel management system), rather than to an

engine stalling or starting problem, which is the alleged defect.

The district court disagreed, however, and ruled that the expert

testimony was relevant. Because Echeandía explained that the

excess smoke and "fouled up" spark plugs could cause engine

backfiring or stalling, we agree with the district court that his

-23-
testimony was relevant as to whether or not the engines were

defective. Thus, there was no abuse of discretion in admitting the

expert testimony.

IV. Expenses

Appellants also appeal the district court's ruling

permitting the jury to award plaintiffs the expenses they incurred

for dockage, insurance, and licenses, as well as the amendment to

the judgment for additional dockage, license, and insurance fees.

In their motion for judgment as a matter of law, based on

limitations grounds, defendants argued that if the court did not
grant their motion, the court should nevertheless, under Puerto

Rico law, disallow plaintiffs' claims for dockage, insurance, and
license fees because these expenses would have been incurred
regardless of any alleged defect. The issue of what constitutes

reimbursable "expenses" under Puerto Rico law in an action for
rescission of contract is a question of law. Therefore, we review
the district court's decision de novo. See Disola Dev., LLC v.

Mancuso, 291 F.3d 83, 86 (1st Cir. 2002).
The Puerto Rico Civil Code provides that when there is a
breach of warranty against hidden defects, "the vendee may choose

between withdrawing from the contract, the expenses which he may
have incurred being returned to him, or demanding a proportional
reduction of the price." P.R. Laws Ann. tit. 31, § 3843 (1990).

However, if the vendor had knowledge of the hidden defects and did
not inform the vendee, then the vendee has the additional remedy of

being "indemnified for the losses and damages should he choose the

-24-
rescission." Id. In the case before us, there was no allegation

that the defendants were aware of any hidden defect at the time of

sale, so only "expenses," as opposed to "losses and damages," are
recoverable.

Plaintiffs, in addition to the purchase price of the boat

($132,350.00) plus interest, sought reimbursement of the following
"expenses," incurred between the date of delivery and trial:

insurance for the boat ($13,326.00); dockage fees ($14,980.38);

license fees ($1,164.95); and miscellaneous costs for missing

equipment, repairs, and maintenance (totaling $3,350.28). At

trial, defendants objected to these "expenses," except for the

miscellaneous costs, claiming that these were not recoverable

"expenses" because they were not related to the alleged defect.
Rather, these were ordinary expenses associated with owning a boat

that would have been incurred whether or not the boat was

defective. The district court found otherwise, considering the
costs as "reasonable expenses for the upkeep" of the boat that

should go to the jury. We disagree. Although the case law

interpreting the expanse of the remedy for breach of warranty under

§ 3843 is hardly crystal clear, our review indicates that

recoverable "expenses," as opposed to "losses and damages," are to

be interpreted narrowly and are limited to costs that are directly

related to the defect.

In Berríos v. Courtesy Motors of Puerto Rico, Inc.,

91 P.R. Dec. 441 (1964), the plaintiff, who purchased an automobile

with a defective transmission, sued the vendor for breach of

-25-
warranty against hidden defects. In addition to rescission of the

sales contract and return of the vehicle down payment and

installment payments already made, the plaintiff also sought
reimbursement for transportation expenses that he incurred over the

eleven months while his vehicle was inoperable. See id. at 444.

The Supreme Court of Puerto Rico held that these transportation
costs were not recoverable. See id. at 449. Rather, the court

indicated that the transportation costs were more properly

considered as "losses" or "damages," which would be appropriate

only where the vendor knew of the defect at the time of sale. See

id. at 448-49. Since the trial court made no finding that the

vendor knew of the defective transmission, the court excluded the

transportation costs from the plaintiff's award. See id.

Similarly, the District Court for the District of Puerto

Rico has held that the remedy for breach of warranty is limited to

the price paid for the contract and "expenses directly related to
a product's hidden defects." Ramos Santiago v. Wellcraft Marine

Corp., 93 F. Supp. 2d 112, 118 (D.P.R. 2000). In Ramos Santiago,

the plaintiff sued for breach of warranty against hidden defects

arising out of a contract for the sale of a motor boat. The

plaintiff sought recovery of the price of the boat, the cost of

removing and transporting it, the cost of maintaining it in storage

while inoperable, and damages for "mental anguish suffered from

being out at sea in a broken-down boat with a severely injured

passenger on board." Id. at 118 & n.5. The district court

differentiated between these sums, implying that the price of the

-26-
boat, the removal and transportation cost, and the storage cost

would be recoverable because they qualify as "directly related

economic loss" due to the defect, whereas the mental anguish
damages would not be because they are "beyond the damage to the

boat itself." Id. at 118. In sum, the court limited recoverable

expenses to those that stemmed from "the objective fact of the
[alleged] defect" rather than "from the damages caused by such

defect." Id. (internal quotation marks omitted); see also Ferrer,

100 P.R.R. at 254-55, 100 P.R. Dec. at 256 (finding that, as a

result of defective automobile, appellant should be reimbursed the

contract price and "the expenses which he necessarily incurred as

a result of the faults or defects" of the vehicle, but was not

entitled to any damages).
Plaintiffs, defending the district court's determination

that the dockage, insurance, and license fees are recoverable

expenses under § 3843, cite to a case where the Supreme Court of
Puerto Rico, in addition to rescission of the contract, explicitly

awarded insurance expenses to the plaintiff for a breach of

warranty. See Departamento de Asuntos del Consumidor v. Marcelino

Mercury, Inc., 105 P.R. Dec. 80, 85 (1976) (awarding plaintiff the

sale price of the defective car plus payments made to appellees for

monthly installments, registration, insurance, and financing).

Although this case facially seems to indicate that insurance

payments related to the defective product qualify as expenses under

§ 3843 rather than as damages or losses, we do not read the case to

decide this issue. First, Marcelino Mercury does not even discuss

-27-
the difference between expenses and losses or damages. Second,

although not explained in the opinion, it appears that the

insurance payments were recoverable because they were part of the
amount the plaintiff paid to appellees as part of the contract.

Cf. Rios Ruiz v. Auto Outlet Sales, Nos. KLRA0100707, KLRA0100715,

2002 WL 537660, at *7 (P.R. Cir. Ct. App. Jan. 23, 2002)
(nullifying the financing contract because of the rescission of the

underlying sales contract). Thus, the court did not award expenses

incurred by the plaintiff after perfection of the contract, but

rather, in granting rescission of the sales contract, ordered

return of all the payments made by the plaintiff to the appellees

under the contract. Therefore, the facts of Marcelino Mercury do

not undermine our conclusion under Berríos and Ramos Santiago that
recoverable expenses are limited to those directly related to the

defect.

In the case before us, we find that the plaintiffs'
expenses for dockage, insurance, and licensing are not related in

any way to the defect in the boat's engines, but are expenses that

would have been incurred by the plaintiffs whether or not their

boat suffered from any problems. As a result of this finding and

our understanding of § 3843, we vacate the district court's

judgment of March 23, 2000, insofar as it awards reimbursement of

dockage fees, insurance premiums, and license fees.8

8
Appellants do not appeal the judgment's award of maintenance and
repair fees in the amount of $3,350.28.

-28-
 Appellants further appeal the district court's order of

December 18, 2000 amending the judgment to award payment to

plaintiffs of additional dockage, license, and insurance fees
incurred after the entry of judgment on March 23, 2000, and to

allow motions for future additional expenses. The district court,

in amending the judgment, adopted the plaintiffs' rationale that
the court's March 23 judgment rendered the plaintiffs legal

custodians, or bailees, of the boat until the judgment becomes

final and defendants accept possession of the boat. As legal

custodians, the court determined that the plaintiffs were under a

legal duty to maintain the boat with due diligence, thereby

necessarily incurring further dockage and insurance expenses.

Because we find that the district court erred in adopting
plaintiffs' bailment theory, we reverse the amendment of the

judgment awarding dockage and insurance fees.

The March 23, 2000 judgment ordered the plaintiffs to
return the boat to defendants and awarded a monetary amount to

plaintiffs against defendants. Although plaintiffs could not move

to enforce the judgment until ten days after its entry, see Fed. R.

Civ. P. 62(a), there was nothing to prevent plaintiffs from seeking

court enforcement of the judgment after the expiration of this ten-

day automatic stay period, had they so desired. See Fed. R. Civ.

P. 69 (providing process for execution of money judgments); Fed. R.

Civ. P. 70 (providing process for enforcement of judgments to

perform specific acts). Contrary to plaintiffs' assertion, there

is no requirement that the judgment become final before it can be

-29-
enforced. Cf. Fed. R. Civ. P. 62(d) (providing that when an appeal

is taken, the appellant may seek a stay of execution of the

judgment by filing a bond). Thus, plaintiffs did not become
bailees of the boat by operation of the judgment. Rather, the

plaintiffs had a duty to return the boat to the defendants. If the

defendants refused to accept the boat and/or pay the judgment, then
the proper remedy would have been for plaintiffs to move for

enforcement of the judgment rather than to continue incurring

additional expenses for the maintenance of the boat. Because

plaintiffs failed to turn over the boat to defendants and/or

request an enforcement of the judgment, they cannot now recover for

unnecessarily incurred expenses. Cf. Knapp Shoes, Inc. v. Sylvania

Shoe Mfg. Corp., 72 F.3d 190, 204-05 (1st Cir. 1995) ("The general
principle is well settled that a party cannot recover for harms

that its own reasonable precautions would have avoided.") We

hereby vacate the December 18, 2000 order insofar as it awards the
plaintiff dockage and insurance fees incurred after the entry of

judgment and permits application to the district court for further

such awards.

V. Attorney's Fees

In addition to the award of dockage, insurance, and
license fees, appellants challenge the district court's December
18, 2000 order awarding attorney's fees to plaintiffs in the amount

of $30,000. We review the trial court's determination of whether
attorney's fees are appropriate, based on obstinate conduct, for

abuse of discretion. See Dopp v. Pritzker, 38 F.3d 1239, 1253 (1st

-30-
Cir. 1994) (vacating award of attorney's fees because party's

conduct, viewed in context of "the overall nature of the

litigation," did not support finding of obstinacy). An error of
law constitutes an abuse of discretion. See Goya Foods, Inc. v.

Wallack Mgmt. Co., 290 F.3d 63, 75 (1st Cir. 2002). Since

jurisdiction is based on the diversity of the parties, we apply the
substantive law of Puerto Rico to this issue. See Grajales-Romero

v. Am. Airlines, Inc., 194 F.3d 288, 301 (1st Cir. 1999).

The Puerto Rico Rules of Civil Procedure provide that

"[i]n the event any party or its lawyer has acted obstinately or

frivolously, the court shall, in its judgment, impose on such

person the payment of a sum for attorney's fees which the court

decides corresponds to such conduct." P.R. Laws Ann. tit. 32, App.
III, R. 44.1(d) (Supp. 1998). Although the Rules do not themselves

define obstinacy, there is ample case law within this Circuit to

elucidate the concept.
"A finding of obstinacy requires that the court determine

a litigant to have been unreasonably adamant or stubbornly

litigious, beyond the acceptable demands of the litigation, thereby

wasting time and causing the court and the other litigants

unnecessary expense and delay." De León López v. Corporación

Insular de Seguros, 931 F.2d 116, 126 (1st Cir. 1991). Once the

court has determined that a party has engaged in obstinate conduct,

imposition of attorney's fees is mandatory. See R. 44.1(d)

(stating that the court "shall" impose attorney's fees in cases of

obstinacy); see also Dopp, 38 F.3d at 1252; Fernández Mariño v. San

-31-
Juan Cement Co., 18 P.R. Offic. Trans. 823, 829 (1987). The amount

of the fees awarded, however, is left to the discretion of the

court. See Dopp, 38 F.3d at 1252; Fajardo Shopping Ctr., S.E. v.
Sun Alliance Ins. Co., 81 F. Supp. 2d 331, 334 (D.P.R. 2000)

(noting that award of fees need not match actual attorney's fees

incurred, but should be determined based on extent of obstinate
conduct).

The Supreme Court of Puerto Rico has stated:

The main purpose of awarding attorney's fees
in cases of obstinacy is to impose a penalty
upon a losing party that because of his
stubbornness, obstinacy, rashness, and
insistent frivolous attitude has forced the
other party to needlessly assume the pains,
costs, efforts, and inconveniences of a
litigation.

Fernández Mariño, 18 P.R. Offic. Trans. at 830. Under this theory,

attorney's fees are appropriate when a party unnecessarily prolongs
or complicates litigation. See id. Examples of obstinate conduct

include: denying all liability in answering a complaint, where the

defendant later admits liability; raising inapplicable defenses;

denying all liability when only the amount of damages sought is

contested; and denying a fact, knowing it is true. See id. at 830-

31 (collecting cases). Obstinacy is to be judged in light of the

overall circumstances of the particular case. See Dopp, 38 F.3d at

1253 (opining that court should look at case's "personality" in

evaluating obstinacy); Fajardo Shopping Ctr., 81 F. Supp. 2d at 334

(recognizing that certain conduct may or may not be obstinate

depending upon the particular stage of litigation or the particular

case). Though the degree of obstinacy is the critical factor in

-32-
determining whether attorney's fees are warranted, other factors to

be weighed include, inter alia, the nature of the litigation, the

legal issues involved, the time spent, and the efforts and
abilities of the attorneys. See Velázquez Ortiz v. Universidád de

Puerto Rico, 128 P.R. Dec. 234, 238 (1991).

In this case, the district court based its obstinacy
determination on the following findings: (1) Cruisers and Crusader

denied a fact that was known to them, namely, that after the fuel

system was replaced on October 21, 1995, the plaintiffs suffered

further engine problems; (2) the defendants stubbornly denied all

liability, even when it was "highly probable" that the plaintiffs

would prevail; (3) the defendants limited their proposed settlement

to $150,000, although the original price of the boat was $132,350
and the judgment was for more than $200,000.

The district court found that defendants denied the

existence of any engine problems after Paul Doppke's repairs on
October 21, 1995. The court relied on defendants' answers, which,

in response to the complaint's allegations of continuing engine

problems after October 21, 1995, averred that defendants lacked

sufficient knowledge to answer. Yet, the court determined that

defendants were aware of further engine problems because Guillermo

Cidre and Osmani del Pino, employees of People's Marine, witnessed

one of the engine failures and because defendants' representatives

came to Puerto Rico in December of 1995 to investigate plaintiffs'

engine complaints. The court found that this "denial" of a known

fact constituted obstinacy. See Fernández Mariño, 118 P.R. Offic.

-33-
Trans. at 830, 832 ("[A]ttorneys must take special care when

drawing their pleadings so as not to deny facts which they know or

which may be easily verified and that to deny allegations in an
indiscriminate manner, even with the pet phrase 'for lack of

information,' is an undesirable practice which attorneys should

take special care to avoid.") (citing P.R.-Am. Ins. Co. v. Tribunal

Superior de P.R., 100 P.R. Dec. 747 (1972)).

We find the district court's reliance on this factor to

be flawed. As a matter of law, denying a fact is different than

asserting an inability to answer for lack of sufficient

information. Fernández Mariño, on which the district court relied,

discusses the danger of indiscriminately denying facts that are

known or are easily verifiable. See 18 P.R. Offic. Trans. at 832-
34 (finding defendants obstinate in a wrongful death suit arising

out of an accident where a truck hit a child on a bicycle where

defendants denied every allegation in the complaint, including the
occurrence of the accident and that the child was riding the

bicycle). Although Fernández Mariño also warns against

indiscriminately claiming a lack of sufficient information to

answer, Fernández Mariño, and the cases upon which it relies, did

not involve circumstances where the lawyers stated that they lacked

knowledge. See 18 P.R. Offic. Trans. at 832-34 (finding attorney's

fees appropriate where defendants denied every allegation in

complaint); Abreu Roman v. Rivera Santos, 92 P.R. Dec. 325, 331

(1965) (affirming award for attorney's fees where defendants denied

a fact that they had accepted in an earlier proceeding before the

-34-
same court); cf. P.R.-Am. Ins. Co., 100 P.R. Dec. at 749 (reversing

award of attorney's fees where defendant admitted facts in

interrogatory that had originally been denied in the answer because
there was no evidence that the inclusion of these additional

interrogatory questions imposed additional costs on plaintiff). As

a result, Fernández Mariño does not provide support for imposing

attorney's fees where the defendants have asserted a lack of

sufficient knowledge to answer, as opposed to flatly denying

allegations which they know to be true.

In addition, as a factual matter, this case is quite

different than Fernández Mariño. Defendants recognized, and

implicitly admitted, that plaintiffs were complaining of engine

problems after October 21, 1995, which is why they sent
representatives to Puerto Rico to inspect the boat in December of

1995. However, having not witnessed or been able to diagnose the

engine problems themselves after October 21 because no problems
were experienced during the defendants' sea trials, defendants

could not, in good faith, either admit or deny liability as to

whether the engines were defective. Rather, their only option was

to answer that they lacked sufficient knowledge to answer

plaintiffs' allegations about post-October engine problems. Even

if Guillermo Cidre and Osmani del Pino, both from People's Marine,

witnessed an engine failure after October 21, 1995 and we attribute

knowledge of such failure to the defendants, as the district court

suggests, it would be strange indeed, in the context of a lawsuit,

for defendants in their answers to admit that the engines were

-35-
defective without discovery as to what caused the engine failure.

See Grajales-Romero, 194 F.3d at 300-01 (rejecting claim that a

party "engages in obstinacy when it merely answers a complaint and
denies responsibility for a plaintiff's damages, even if it accepts

that responsibility later"). Moreover, since defendants were never

able to recreate the engine failures during discovery, it does not
strike us as either unusual or obstinate to refuse to admit that

the engines were defective. Just because the jury, at the close of

the trial, determined that the engines were defective, does not

indicate that the defendants were obstinate in asserting the

contrary, much less in asserting a lack of knowledge. See Dopp, 38

F.3d at 1254 ("Indeed, even if a party's claim ultimately fails, it

cannot be deemed frivolous or obstinate for that reason alone.").
Defendant Cruisers did not deny basic facts such as the purchase of

the boat by the plaintiffs or that the defendants were the

manufacturers of the engines and the boat, and defendant Crusader
claimed insufficient knowledge to answer many, but not all, of the

allegations in the complaint. Cf. Fernández Mariño, 18 P.R. Offic.

Trans. at 832 (finding that defendant obstinately denied every

allegation in the complaint, including basic underlying facts).

The second finding that the district court relied upon in

finding defendants obstinate was their denial of all liability,

even when it appeared "highly probable" that plaintiffs would

prevail. The district court seems to suggest that defendants

should have admitted liability as to the engine defects, see

Fernández Mariño, 118 P.R. Offic. Trans. at 831 (stating that a

-36-
party should assume liability when it appears prima facie),

limiting the trial issues to the remedy as well as to whether moral

and mental anguish damages were available as a matter of law.
However, the district court fails to consider the statute of

limitations defense, which, if decided in favor of the defendants,

would have absolved them of any liability under the breach of
warranty claim. See Dopp, 38 F.3d at 1253 (overlooking "relevant

factor deserving of significant weight" is an abuse of discretion).

Further, as discussed above, defendants did not deny all knowledge

of the engine defects, but rather averred their lack of sufficient

information regarding the alleged engine defects. Thus, the

district court's reliance on this second finding also seems

insufficient for an obstinacy determination. See Mejias-Quiros v.
Maxxam Prop. Corp., 108 F.3d 425, 429 (1st Cir. 1997) (stating that

appellant's claim that defendant was obstinate, based on refusals

to concede certain facts, denial of negligence, and litigation of
the issue, could not "have been seriously intended").

The third finding relied upon by the district court was
the defendants' failure to propose a reasonable settlement during

trial, thereby unnecessarily prolonging the litigation. Defendants

limited their proposed settlement to $150,000. The district court

found that this was unreasonable under the circumstances, given the

likelihood that plaintiffs would prevail on their claims, the

original price of the boat in 1995 of $132,350, and the final

judgment exceeding $200,000. We disagree.

-37-
 First, defendants might have thought that they had a

reasonable chance of succeeding on their statute of limitations

defense so that they would not be liable for any amount of money.
Second, the proposed settlement of $150,000, made when the boat was

over five years old, exceeded the price of the boat when new.

Third, as discussed above, the part of the judgment allowing
expenses for dockage, insurance, and licensing fees is not

permitted as a matter of law. As a result, the final judgment does

not exceed $200,000, but is limited to the original price of the

boat, plus legal interest, and the expenses awarded for repairs and

maintenance. Thus, a settlement offer of $150,000 can hardly be

considered so unreasonable as to rise to the level of obstinacy.

In Dopp, we overturned an obstinacy determination based,

in part, on a finding that the defendant was unreasonable in

assessing the plaintiff's damages. The defendant, Pritzker,

claimed that the plaintiff's damages were limited to $35,000. The
jury awarded a verdict to the plaintiff, Dopp, in the amount of

$17,000,000. We stated:

Though we readily acknowledge that Pritzker's
stated valuation verges on the ludicrous,
there is nothing to show that Dopp -- who even
now challenges a $17,000,000 verdict as too
paltry . . . -- ever placed a more reasonable
value on the case, or that a realistic
settlement offer by Pritzker would have
satisfied Dopp and shortened the proceedings.

38 F.3d at 1254-55. The key issue is not whether or not the

defendant's proposed settlement amount approaches plaintiff's

claimed damages, but whether the parties engaged in good faith

-38-
negotiations. See Reyes v. Banco Santander, 583 F. Supp. 1444,

1445-56 (D.P.R. 1984).

The plaintiffs, in their motion to amend the judgment to
include attorney's fees, did not allege any facts to show that

defendants did not engage in good faith negotiations. Instead,

plaintiffs only pointed to the allegedly inadequate settlement
offers of $20,000, prior to trial, and $150,000, during trial, as

evidence of lack of good faith. Under our case law, this alleged

insufficiency is not tantamount to bad faith in conducting

settlement negotiations. As a result, we also find this ground

inadequate to support the district court's obstinacy determination.

Because we conclude that the district court's findings

on which it based its obstinacy determination were infected with
legal errors that skewed the court's judgment on the matter, we

reverse the award granting attorney's fees to plaintiffs. See

Dopp, 38 F.3d at 1253 (stating that "'a district court abuses its
discretion when a relevant factor deserving of significant weight

is overlooked, or when an improper factor is accorded significant
weight, or when the court considers the appropriate mix of factors,

but commits a palpable error of judgment in calibrating the

decision scales.'"); see also Goya Foods, 290 F.3d at 75

(committing legal error is abuse of discretion). Moreover, when

looking at the overall "personality" of the case, the district

court opined that "the degree and intensity of Defendants'

obstinate conduct was significant, although not extreme. . . . it

did not border on fraud, and the litigation itself did not extend

-39-
beyond that to be expected of similar cases which go to trial." In

light of the district court's findings, influenced by errors of

law, and the defendants' overall conduct, which was not determined
to be extreme, we find that the district court abused its

discretion. See Dopp, 38 F.3d at 1255 (vacating award of

attorney's fees where the court's "subsidiary findings do not
support is ultimate finding of obstinacy" and "the record does not

otherwise show that [the defendant] was 'unreasonably adamant or

stubbornly litigious, beyond the acceptable demands of the

litigation'"); Velázquez Ortiz, 128 P.R. Dec. at 238 (asserting

that the degree or intensity of the obstinate conduct is the

critical or determining factor). Thus, we vacate the award of

attorney's fees.

VI. Conclusion

Because we find that the district court properly held
that the plaintiffs' claim was not time-barred and that plaintiffs'

expert's testimony was admissible, we affirm the judgment as to

defendants' liability. However, because we conclude that the
district court erred in awarding dockage, insurance, license, and

attorney's fees to plaintiffs, we vacate the judgment insofar as it

includes these sums and remand the case to the district court for

action consistent with this opinion.

-40-