RG Steel Sparrows Point, LLC v. Kinder Morgan Bulk Terminals, Inc. , 609 F. App'x 731 ( 2015 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-1245
RG STEEL SPARROWS POINT, LLC, f/k/a Severstal Sparrows
Point, LLC,
Plaintiff – Appellee,
and
SEVERSTAL SPARROWS POINT, LLC,
Plaintiff,
v.
KINDER MORGAN BULK TERMINALS, INC., d/b/a Kinder Morgan
Chesapeake Bulk Stevedores,
Defendant – Appellant.
Appeal from the United States District Court for the District of
Maryland, at Baltimore. William M. Nickerson, Senior District
Judge. (1:09-cv-01668-WMN)
Argued: January 28, 2015 Decided: April 28, 2015
Before TRAXLER, Chief Judge, and DIAZ and THACKER, Circuit
Judges.
Affirmed by unpublished per curiam opinion. Judge Diaz wrote a
separate concurring opinion.
ARGUED: Thomas M. Wolf, LECLAIRRYAN, PC, Richmond, Virginia, for
Appellant. Denise A. Lazar, BARNES & THORNBURG, LLP, Chicago,
Illinois, for Appellee. ON BRIEF: Joseph M. Rainsbury,
LECLAIRRYAN, PC, Roanoke, Virginia, for Appellant. L. Rachel
Lerman, BARNES & THORNBURG, LLP, Los Angeles, California; Linda
S. Woolf, GOODELL DEVRIES LEECH & DANN, LLP, Baltimore,
Maryland, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
2
PER CURIAM:
This case arose in the aftermath of the catastrophic
collapse of a bridge crane used by Kinder Morgan Bulk Terminals
Inc. (“Appellant”) to unload coke used to fuel a steel mill
located near Baltimore, Maryland. Ownership of the steel mill
and the bridge crane changed hands several times in recent
history. The appellee in this case, RG Steel Sparrows Point LLC
(“RG Steel”), 1 acquired the company that owned the steel mill and
the bridge crane through a stock purchase on March 31, 2011.
Following the bridge crane collapse, Appellee sued Appellant for
negligence. Appellee also claimed its right to indemnification
for losses pursuant to a lease and service contract governing
Appellant’s use of the bridge crane (“Lease”).
Appellant maintained that it was not negligent and
that it had no duty to indemnify Appellee. It argued that the
limitation-of-liability provision of a purchase order that was
in force at the time of the crane accident applied instead of
the Lease’s indemnity clause. After a bench trial, the district
court entered judgment in Appellee’s favor. The district court
found that the parties renewed the Lease by an implied-in-fact
contract and concluded that the purchase order did not supersede
1
For ease of reference, we refer to RG Steel and the
companies that previously owned the steel mill and the bridge
crane collectively as “Appellee.”
3
the Lease’s indemnity clause under Maryland law because the
Lease defined the parties’ relationship with respect to the
crane and the purchase order governed a different subject
matter. The district court held Appellant liable for over $15.5
million, awarding compensatory damages for destruction of
Appellee’s property and consequential damages for Appellee’s
resulting business losses.
In the instant action, Appellant does not challenge
the district court’s award of compensatory damages, nor does it
dispute the court’s finding that the parties were generally
operating under an implied-in-fact renewal of the Lease.
Instead, it argues the district court erred in concluding
Appellant was liable for consequential damages pursuant to the
Lease’s indemnity clause. Appellant claims the district court
should have applied the limitation-of-liability provision of a
purchase order agreement that was in force at the time the crane
collapsed -- a provision that Appellant contends superseded the
Lease’s indemnity clause and foreclosed any consequential
damages award. In the alternative, Appellant avers that, even
if the district court was correct to hold Appellant to the
Lease’s indemnity clause, the district court erred when it
qualified Appellee’s damages expert to testify and relied on the
expert’s calculation in ordering its award for consequential
damages.
4
We affirm the district court’s rulings in their
entirety, albeit on different grounds. See Hutto v. S.C. Ret.
Sys., 773 F.3d 536, 549-50 (4th Cir. 2014) (affirming “for a
reason supported by the record but not relied on by the district
court”). Appellant is liable for consequential damages even
under the express terms of the purchase order it wishes us to
apply. Furthermore, the district court did not abuse its
discretion by permitting Appellee’s damages expert to testify,
and it did not clearly err in determining the amount of
Appellee’s damages award.
I.
A.
The Lease at issue originated in 1992, although both
parties acquired their interests in this contractual
relationship at a much later date. Under the Lease, Appellee
leased the bridge crane to companies providing stevedoring 2
services for the steel mill’s “A Yard.” The stevedores
undertook to keep the bridge crane in good repair and to
maintain an insurance policy on it.
The Lease contained an indemnity provision, which read
as follows:
2
Stevedores load and unload cargo from ships. See Black’s
Law Dictionary 1549 (9th ed. 2009).
5
[The stevedores] shall . . . indemnify and
save harmless [Appellee] from and against
all loss or liability for or on account of
any injury (including death) or damages
received or sustained by any person or
persons (including [Appellee] and any
employee, agent, or invitee thereof) by
reason of any act or omission, whether
negligent or otherwise, on the part of [the
stevedores] or any employee, agent,
subcontractor, representative, invitee, or
business visitor of [the stevedores],
including any breach or alleged breach of
any statutory duty which is to be performed
by [the stevedores] hereunder but which is
or may be the duty of [Appellee] under
applicable provisions of law.
J.A. 692-93 (emphasis supplied). 3 The stevedores also “assume[d]
the entire risk of loss, theft, or destruction of the [bridge
crane] resulting from any cause whatsoever.” Id. at 690.
During the life of the Lease, Appellee entered into purchase
order contracts with the stevedores to unload coke-carrying
vessels in the port.
In December 2002, Appellant, a company that provides
stevedoring services, purchased its predecessor’s rights and
liabilities under the Lease. Although the Lease was set to
terminate at the end of July 2003, Appellant and Appellee
entered into a separate short-term interim agreement to extend
the Lease. Initially, this interim agreement was set to expire
3
Citations to the “J.A.” refer to the Joint Appendix filed
by the parties in this appeal.
6
when Appellee and Appellant executed a long-term agreement
governing the use of the bridge crane or on December 31, 2003,
whichever occurred sooner. However, Appellant and Appellee
extended the interim period several times. When they ultimately
were unable to reach a long-term agreement, the Lease finally
expired at the end of 2005.
Although Appellant never expressly renewed the Lease
after 2005, it continued to conduct business with Appellee
“largely in the same manner as [it] had under the Lease.” J.A.
600. For example, Appellant “repeatedly referenced the Lease”
in its communications with Appellee and it “maintain[ed] the
[b]ridge [c]rane at its own expense,” in accord with the terms
of the Lease. Id. at 600–01. Appellant also continued to use
the bridge crane to unload ships pursuant to various purchase
order contracts.
B.
1.
On June 4, 2008, the National Weather Service issued a
tornado watch for the central Maryland area. By 3:35 p.m. that
day, wind speeds measured over 90 miles per hour. Despite its
own procedures and federal regulations which require
preventative measures during high winds, Appellant did not
deploy hurricane tie downs, and the bridge crane’s automatic
7
rail clamps had been removed at some point in the mid-1990s. 4
Without the benefit of these safety measures, the wind toppled
one the bridge crane’s A-frame legs, and the crane fell.
2.
As an immediate result of the crane collapse, Appellee
closed the A Yard and paid for emergency repairs to its
facilities. Appellee also suffered other consequential losses
arising from delays and increased handling charges attributable
to the loss of the crane. Without a crane to unload coke for
the steel mill’s blast furnace, cargo ships carrying coke were
required to unload their cargo at another terminal farther away
from the blast furnace: the New Ore Pier. Because the New Ore
Pier already serviced a number of ships on a regular basis, it
struggled to accommodate the additional traffic. To make
matters worse, in order to keep the blast furnace lit, Appellee
was required to schedule the coke-carrying ships before other
non-coke-carrying vessels also waiting to unload at the New Ore
Pier. This rescheduling, coupled with port congestion caused by
4
Appellant does not dispute the fact that its own standard
operating procedures “instructed [Appellant] to employ hurricane
tie downs [on the crane to secure it] in the event of strong
winds.” J.A. 603. Additionally, Occupational Safety and Health
Administration regulations require bridge cranes to be equipped
with automatic rail clamps “that prevent cranes from moving
during high wind events.” Id. at 614-15; see also 29 C.F.R.
§ 1910.179(b)(4).
8
re-routing the coke-carrying ship traffic to the New Ore Pier,
resulted in transit delays. As a result, Appellee paid
demurrage 5 fees pursuant to its contracts with these ships.
When the A Yard reopened in the latter half of 2008,
Appellant used floating cranes to unload coke ships and it
placed the coke in piles near the mill. Because the floating
cranes unloaded cargo at a rate significantly slower than the
bridge crane, Appellee faced the possibility of future demurrage
fees. To mitigate its losses, Appellee renegotiated its
contracts with cargo ships and agreed to pay increased fees to
offset the delays. Appellee also needed to restore and modify a
conveyor in order to move the coke from piles in the A Yard to
the blast furnace. Mill operations did not normalize until
approximately three years later, in August 2011, when Appellant
purchased and installed its own crane at the A Yard.
3.
At the time of the bridge crane’s collapse on June 4,
2008, Appellee and Appellant were bound by a February 21, 2008
purchase order (“Purchase Order”) that required Appellee to
“unload[] up to 500,000 [tons] of coke from ships with bridge
5
In maritime law, the term “demurrage” applies to
“[l]iquidated damages owned by a charterer to a shipowner for
the charterer’s failure to load or unload cargo by the agreed
time.” Black’s Law Dictionary 498 (9th ed. 2009).
9
crane [sic].” J.A. 992. The Purchase Order also incorporated
the terms of another document entitled “AMUSA-100.” See id.The AMUSA-100 defined the parties’ rights and
liabilities with respect to the Purchase Order. Section 7.6 of
the AMUSA-100 contained the following limitation-of-liability
provision:
In no event shall either party be liable to
the other under this order for
consequential, indirect or special damages,
including without limitation lost profits,
revenues, production or business . . . .
J.A. at 1000. However, per section 1.4 of the AMUSA-100, other
“specific terms agreed in writing” that “contradict[]”
“corresponding” terms in the AMUSA-100 “shall prevail.” Id. at
997.
C.
Appellee filed suit against Appellant in the District
Court for the District of Maryland on June 24, 2009. In its
amended complaint, Appellee claimed that Appellant was negligent
for failing to secure the bridge crane from the impending storm,
and that it was liable in contract for breaching the Lease by
refusing to indemnify Appellee for losses arising from the crane
collapse.
The parties fought this dispute at a seven-day bench
trial in November and December 2013. At trial, Appellee offered
the testimony of its Corporate Controller, Jeffrey Gennuso, who
10
testified about the general effect of the crane collapse on
steel mill operations and Appellee’s contractual relationships.
Jeffrey Cohen, an economist, provided expert testimony about the
calculation of consequential damages Appellee suffered.
The district court reached a verdict in favor of
Appellee on both its negligence and breach of contract claims.
The district court awarded a total of $15,555,884 6 to Appellee,
which covered the following categories of damages:
• compensatory damages for loss of the
bridge crane;
• compensatory damages for emergency
repairs to Appellee’s facilities and
for restoration and modification of the
conveyor, all of which Appellant
conceded at trial; and
• consequential damages for demurrage
fees, changes in commercial terms, and
increased handling costs. 7
Appellant does not appeal any part of the district
court’s award of compensatory damages. Instead, it argues only
6
The court’s original damages award was approximately $13
million, but it increased this amount after correcting a
clerical error. This adjustment only affected the district
court’s calculation of Appellee’s compensatory damages for loss
of the bridge crane. See Order Granting Motion to Amend/Correct
Clerical Error, Severstal Sparrows Point, LLC v. Kinder Morgan
Bulk Terminals, Inc., No. 1:09-cv-01668 (D. Md. Jun. 24, 2009;
filed May 6, 2014), ECF No. 183.
7
At trial, Appellant conceded it was liable for damages due
to Appellee’s increased handling costs.
11
that the district court erred in ordering consequential damages
for demurrage fees and changes in commercial terms.
II.
A.
Contract Interpretation
1.
The threshold question is whether the district court
correctly concluded that Appellant should be required to
indemnify Appellee, or whether an agreement between the parties
prohibits such an award.
Interpretation of a contract renders a legal
conclusion, and we review the district court’s legal conclusions
de novo. See FTC v. Ross, 743 F.3d 886, 894 (4th Cir. 2014);
Perini/Tompkins Joint Venture v. Ace Am. Ins. Co., 738 F.3d 95,
101 (4th Cir. 2013). We apply substantive state law to resolve
appeals of district court rulings that rest on state law,
including those involving interpretation of private contracts.
See James v. Circuit City Stores, Inc., 370 F.3d 417, 421-22
(4th Cir. 2004).
The district court found that the parties renewed the
Lease by an implied-in-fact agreement and therefore “the
Lease . . . [and] its terms and conditions were in effect” at
the time of the crane collapse. J.A. 612. In essence, the
district court found that this implied-in-fact contract was
12
nothing more than an agreement to renew the Lease and to amend
its duration term. But Appellant argued that, even if the Lease
was renewed by an implied-in-fact contract, Maryland law
required that the later-in-time written Purchase Order took
precedence over the Lease. Cf. Cnty. Comm’rs of Caroline Cnty.
v. J. Roland Dashiell & Sons Inc., 747 A.2d 600, 607 (Md. 2000)
(holding that a contract implied in law cannot supplant an
express contract governing the same subject). It argued that
under the AMUSA-100, which was incorporated into the Purchase
Order, Appellant was not required to indemnify Appellee. The
district court rejected Appellant’s argument, concluding that
the Purchase did not govern the same subject and that the
Lease’s indemnity clause therefore applied.
Appellant does not appeal the district court’s finding
that it renewed the Lease through an implied-in-fact contract.
Nor does it dispute the district court’s conclusion that it
would be liable for consequential damages if the Lease’s
indemnity provision applied. Instead, Appellant renews its
argument that the Lease did not apply and that Appellant should
prevail by virtue of the AMUSA-100. We disagree, and conclude
that Appellant would be liable pursuant to the AMUSA-100’s plain
terms in any event.
13
2.
Appellant argues that the district court erred because
it permitted an implied-in-fact agreement to renew the Lease to
supersede an express contract on the same subject matter -- the
Purchase Order -- in contravention of Maryland law. Although
the Lease and the Purchase Order address the same subject
matter, Appellant’s argument is nonetheless flawed. For one,
the Maryland courts have not adopted the rule Appellant pushes;
they have only held that a contract implied in law cannot
supplant an express contract governing the same subject. See
Cnty. Comm’rs of Caroline Cnty., 747 A.2d at 607. And even
assuming Appellant’s interpretation of Maryland law is correct,
the AMUSA-100’s plain text and Appellant’s implied-in-fact
agreement to renew the Lease compel us to reach the same result
as the district court: Appellant is liable to indemnify Appellee
for consequential damages.
3.
When a contract is unambiguous, Maryland courts give
full effect to the plain meaning of its terms. See Wells v.
Chevy Chase Bank, F.S.B., 768 A.2d 620, 630 (Md. 2001). Per
section 1.4 of the AMUSA-100, “specific terms agreed in writing”
by the parties that contradict “corresponding . . . provisions”
of the AMUSA-100 “shall prevail.” J.A. 997. The effect of this
safety valve provision is unambiguous: the AMUSA-100 bows to
14
similar, yet contradicting, terms of a written agreement between
the parties.
There is no question that the Lease’s indemnity clause
is a “specific term[] in writing” that “correspond[s]” to the
AMUSA-100’s limitation-of-liability provision. J.A. 997.
Appellant instead argues that the implied-in-fact renewal of the
Lease is not a term agreed to in writing and section 1.4 “does
not prevent the Purchase Order from trumping any prior implied-
in-fact agreement.” Appellant’s Reply Br. 13. Although an
implied-in-fact agreement is necessarily not in writing, the
implied-in-fact agreement in this case only amended the Lease
term and does not “contradict[]” the limitation-of-liability
provision of the AMUSA-100. J.A. 997. The AMUSA-100 has no
“corresponding” temporal limitation. The Lease’s indemnity
clause, on the other hand, is an agreement in writing that
conflicts with the AMUSA-100’s limitation-of-liability
provision. Therefore, the AMUSA-100 unambiguously requires that
Appellant be held to the Lease. The Lease states that the crane
operator “assumes the entire risk of loss of the . . . [b]ridge
[c]rane resulting from any cause whatsoever.” Id. at 690.
Therefore, we affirm the district court’s conclusion
that Appellant was required to indemnify Appellee for
consequential damages it incurred as a result of the crane’s
collapse.
15
B.
Damages
We now turn to whether the district court’s awards for
demurrage and changes in commercial terms have evidentiary
support. The evidence upon which the district court principally
relied when ordering these awards was the calculation provided
by Cohen; Appellant asserts Cohen was unqualified to testify as
an expert on such matters. Accordingly, Appellant claims the
district court lacked sufficient evidence to order damages for
demurrage and changes in commercial terms.
1.
Admissibility of Expert Testimony
A district court’s decision to qualify and admit the
testimony of an expert witness is one that we review for abuse
of discretion. “A court abuses its discretion if its decision
is guided by erroneous legal principles or rests upon a clearly
erroneous factual finding.” United States v. Garcia, 752 F.3d
382, 390 (4th Cir. 2014) (internal quotation marks omitted).
Appellant claims that the district court abused its
discretion by qualifying Cohen as an expert to testify about
Appellee’s damages for demurrage and changes in commercial
terms. Appellant concentrates on Cohen’s admitted lack of
experience with maritime contracts.
16
Rule 702 of the Federal Rules of Evidence permits
expert witnesses to testify if their “scientific, technical, or
other special knowledge will help the trier of fact to
understand the evidence or to determine a fact in issue,” such
as the amount of damages due. Fed. R. Evid. 702. The question
of whether a witness is qualified to testify is context-driven
and “can only be determined by the nature of the opinion he
offers.” Gladhill v. Gen. Motors Corp., 743 F.2d 1049, 1052
(4th Cir. 1984). Because our general preference is to admit
evidence that will aid the trier of fact, the expert need only
have “sufficient specialized knowledge to assist jurors in
deciding the particular issues in the case.” Belk, Inc. v.
Meyer Corp., U.S., 679 F.3d 146, 162 (4th Cir. 2012) (internal
quotation marks omitted); see Westberry v. Gislaved Gummi AB,
178 F.3d 257, 261 (4th Cir. 1999) (“Rule 702 was intended to
liberalize the introduction of relevant expert evidence.”);
Thomas J. Kline, Inc. v. Lorillard, Inc., 878 F.2d 791, 799 (4th
Cir. 1989) (“Generally, the test for exclusion is a strict one,
and the purported expert must have neither satisfactory
knowledge, skill, experience, training nor education on the
issue for which the opinion is offered.”). In order to offer an
opinion, “one . . . need not be precisely informed about all
details of the issues raised” or even have prior experience with
the particular subject the testimony concerns. Lorillard, 878
17
F.3d at 799; see Fed. R. Evid. 703 (providing that “[a]n expert
may base an opinion on facts or data in the case that the expert
has been made aware of [at trial] or personally observed”).
In this case, Appellant “reads this [qualification]
requirement far too narrowly.” Belk, 679 F.3d at 162. Although
Cohen had no prior experience with maritime contracts, his
opinion did not call for such expertise. Rather, his function
was to calculate Appellee’s damages. 8 Cohen has an MBA in
economics. He created mathematical formulas for this case after
reviewing information that he obtained before trial by
personally interviewing Appellee’s employees and reading their
deposition testimony. Cohen then formed his opinion on the
extent of Appellee’s losses by applying his formulas.
The fact that Cohen had not previously analyzed issues
that are specific to maritime contracts does not mean the
district court abused its discretion in admitting Cohen’s expert
testimony. Here, similar to the appellant in Belk, Inc. v.
Meyer Corp., U.S., Appellant “provide[d] no support for its
argument” that the economics of maritime contracts and steel
mill operations “is so sui generis such that an expert’s lack of
8
Cohen testified at trial as to his limited role: “I mean,
as an economist, looking at the data, the best I can do is make
a comparison between two conditions and the result of that
analysis attributes only the incremental effect to that
condition.” J.A. 325.
18
expertise in . . . these specific [areas] necessarily
disqualifies him from giving an expert opinion.” Belk, 679 F.3d
at 162. Background issues that required special knowledge of
steel mills and maritime commerce were addressed by other
witnesses at trial, including Gennuso. 9 Although Cohen relied on
information provided by other witnesses at trial to devise his
formula, the Federal Rules of Evidence specifically authorized
him to do so. See Fed. R. Evid. 703.
Thus, we conclude that the district court did not
abuse its discretion by permitting Cohen to offer expert
testimony as to his calculation of Appellee’s damages for
demurrage and changes in commercial terms.
9
Gennuso’s testimony drew a relationship between lower
discharge rates and the higher prices Appellee paid on coke
contracts after the accident:
So when we entered into new coke
contracts, that portion that determined the
delivery cost of the material required a
discharge rate in order for them to properly
calculate the freight.
The discharge rate of 5,000 tons a day
[using the floating cranes, which is
approximately 3,000 tons per day slower than
rates achieved using the bridge crane] was
provided to us from Kinder Morgan. . . .
. . . So we used the 5,000 tons per day
[discharge rate in the renegotiated
contracts], which again was provided by
Kinder Morgan . . . .
J.A. 485.
19
2.
Sufficiency of Evidence for Damages Award
a.
When considering an appeal after a bench trial, we
review the district court’s factual findings for clear error and
its legal conclusions de novo. See Universal Furniture Int’l,
Inc. v. Collezione Europa USA, Inc., 618 F.3d 417, 427 (4th Cir.
2010). “A court’s calculation of damages is a finding of fact
and is therefore reviewable only for clear error . . . .” Id.(internal quotation marks omitted). Furthermore, when “a
district court’s factual findings turn on . . . the weighing of
conflicting evidence during a bench trial, such findings are
entitled to even greater deference.” Ross, 743 F.3d at 894
(internal quotation marks omitted); see also F.C. Wheat Mar.
Corp. v. United States, 663 F.3d 714, 723 (4th Cir. 2011).
A court sitting in diversity must apply state law
governing the threshold of proof necessary for a damages award
and the amount of that award. See Defender Indus., Inc. v. Nw.
Mut. Life Ins. Co., 938 F.2d 502, 504-05 (4th Cir. 1991) (en
banc). According to Maryland law, “if the fact of damage is
proven with certainty, the extent of amount thereof may be left
to reasonable inference.” David Sloane, Inc. v. Stanley G.
House & Assocs. Inc., 532 A.2d 694, 696 (Md. 1987) (internal
quotation marks omitted).
20
b.
Our task is to determine whether the district court
had sufficient evidence to conclude that Appellee proved, to a
reasonable certainty, that it suffered damages for demurrage and
change in commercial conditions. We must also decide if the
amount the district court awarded was supported by a reasonable
inference from the record.
During trial, Cohen presented his calculation of
damages and concluded that Appellant was liable for
approximately $2.7 million in demurrage fees and about $1.5
million in damages for changes in commercial terms. The
district court agreed with Cohen on his demurrage calculations
and awarded damages to Appellee accordingly. However, the
district court disagreed, in part, with Cohen’s calculation of
Appellee’s damages for changes in commercial terms. Therefore,
the court awarded $1.06 million for these damages according to
its own calculation.
Appellant claims the district court clearly erred in
ordering damages awards for demurrage and changes in commercial
terms. Regarding demurrage, Appellant concedes that Appellee
suffered demurrage damages, but it disagrees with Cohen’s
21
conclusions regarding the amount of such damages. 10 Relating to
changes in commercial terms, Appellant argues that the evidence
failed to establish the extent of Appellee’s losses to a
reasonable certainty, and thus no damages should have been
awarded in this category.
i.
Demurrage
Because Appellant only challenges the amount of the
district court’s award for demurrage, our inquiry focuses on
whether the district court had substantial evidence to find that
Cohen’s demurrage calculation -- which the district court
accepted -- was a reasonable inference from the record. See
Universal Furniture Int’l, Inc., 618 F.3d at 427; David Sloane,
Inc., 532 A.2d at 696. Appellant has failed to demonstrate that
the district court’s award for demurrage was not supported by
reasonable inferences from the record.
Cohen’s $2.7 million figure represented the amount in
demurrage fees that Appellee paid to ships bringing materials to
the steel mill as a result of the crane collapse, regardless of
whether their cargo was coke. To arrive at this number, Cohen
found a “baseline” demurrage figure by averaging the amounts of
10
Appellant concedes it is liable for only approximately
$400,000 in demurrage damages, as opposed to the $2.7 million
the district court awarded.
22
demurrage Appellee paid, per ton of cargo, for several months
before the crane collapse. To determine the incremental amount
Appellee paid in demurrage due to the accident, Cohen then
considered the difference between the baseline figure and the
average demurrage amount that Appellee paid over the two months
following the accident.
Cohen asked Appellee’s accounting personnel if any
factors other than the crane collapse (e.g., changes in labor
relations, commercial terms, prices, interest rates or
inflationary components) could have caused the pronounced
increase in its payment of demurrage fees. After reviewing the
evidence and discussing the subject with Appellee’s accountants,
Cohen concluded that these other factors were not responsible
for the increase in demurrage. He “was satisfied that one could
safely attribute the [incremental demurrage] to the bridge
collapse.” J.A. 327. As the district court noted,
“no . . . [other] data quantifying the [demurrage] loss directly
attributable to the [b]ridge [c]rane [loss] was available.” Id.
at 627-28. The district court also had access to Gennuso’s
testimony that one of Appellee’s employees worked with a member
of Appellant’s staff to “determine[] that [the increased]
demurrage charges were directly a result of not being able to
unload those ships at the A Pier.” Id. at 217.
23
Nonetheless, Appellant assails Cohen’s methodology for
failing “to account for factors that could have affected his
demurrage computation” and faults him for not investigating
other causes of the incremental demurrage unrelated to the
bridge crane accident, such as “problems with shore-side
equipment, delays in tugs, problems with the ships, labor
shortages, scheduling issues, etc.” Appellant’s Br. 55-56, 58.
Yet Appellant offered no evidence to support its speculative
claim that other potential factors that “could have
significantly affected the amount of demurrage charges” actually
had such an effect. Id. at 56.
In light of the considerable deference we afford to
district court findings during bench trials, the record’s
surplus of support for the court’s factual findings, and the
wholly speculative nature of Appellant’s argument, we conclude
the district court’s damages award for demurrage was a
reasonable inference from the record.
ii.
Changes in Commercial Terms
After losing the bridge crane, Appellee renegotiated
several of its contracts with coke-carrying vessels to account
for the increased unload time and to avoid further demurrage.
Gennuso testified that unloading delays increased transportation
costs and, in turn, drove up the price Appellee paid for coke.
24
Cohen relied on this assumption to calculate an approximate
damages amount for changes in commercial terms.
The district court did not take issue with Cohen’s
method, but it found that his calculation of the discharge rate
in the post-collapse period was not entirely reliable. It
concluded that Cohen’s analysis failed to recognize that
Appellant built a new crane in the A Yard in the second half of
2011, which dramatically increased discharge rates above those
measured soon after the bridge crane collapsed. Accordingly,
the district court awarded Appellee approximately $1.06 million
for changes in commercial terms, which was substantially less
than the approximately $1.5 million Appellee sought.
But Appellant argues that the district court should
not have awarded damages for changes in commercial terms at all.
In this regard, Appellant argues that the district court
committed three errors in relying on Cohen’s calculation of
damages for changes in commercial terms: (1) Cohen only reviewed
two shipping contracts in assessing the incremental discharge
rate, which was an unreliably small sample size; (2) Cohen did
not examine certain other potential causes for the change in
contract terms, such as market fluctuations in the price of coke
and Appellee’s credit history; and (3) Cohen lacked a basis to
assume a positive correlation between a decreased discharge rate
and the price of coke. Appellant claims that these alleged
25
deficiencies rendered Cohen’s calculation of damages
unreasonably uncertain; therefore, the district court lacked
sufficient evidence to conclude Appellee proved damages for
changes in commercial terms. Each of these arguments lacks
merit.
First, Appellant’s attack on Cohen’s methodology --
that it was fatally uncertain because it relied on an
impermissibly small sample size for calculating the incremental
discharge rate -- is plainly inconsistent with the evidence.
Cohen viewed the two charter contracts merely to confirm that
the pre- and post-accident discharge rates were accurate. As
the district court noted, “Mr. Cohen testified that he did not
rely on the contracts to glean the prices charged for coke, but
instead sought verification of the discharge rates.” J.A. 633.
In any event, as we discussed with respect to the demurrage
award, Cohen bolstered his conclusion by ruling out other causes
for the delays that precipitated Appellee’s renegotiation of the
coke shipping contracts.
We likewise reject Appellant’s two remaining arguments
because Appellant failed to support these challenges with
evidence. The district court’s decision to credit Cohen’s
testimony was not clearly erroneous. No evidence suggests the
district court’s conclusion was not a “legally justifiable
inference” from Cohen’s testimony and the entirety of the
26
record. Miller v. Mercy Hosp., Inc., 720 F.2d 356, 365 (4th
Cir. 1983).
Appellant offered no evidence indicating that the
possible alternative causes actually impacted Cohen’s
calculations. In fact, Appellant argued to the district court
“that coke prices did not appreciably change from prices before
the [b]ridge [c]rane collapse.” J.A. 632. Furthermore, a
district court’s decision on how much weight to give testimony
at a bench trial is one that we afford great deference. See
Ross, 743 F.3d at 894. This principle applies to the district
court’s determination of whether Cohen sufficiently ruled out
possible alternative causes for the increase in the contract
prices Appellee paid for coke after the accident. See
Westberry, 178 F.3d at 265 (providing that, unless a plaintiff’s
expert provides “no explanation” for why a defendant’s suggested
alternative causes are not plausible, these alternative causes
“affect the weight that the jury should give the expert’s
testimony and not the admissibility of that testimony”).
Without question, Gennuso logically linked the crane accident to
actual changes in the contract price for coke. Here, whether
Cohen sufficiently ruled out other causes is only a question of
how much weight to give Cohen’s opinion, and so we defer to the
district court’s conclusion.
27
Further, although Appellant argues Cohen improperly
assumed a positive correlation between decreased discharge rates
and the price of coke, Appellant again failed to point to any
evidence in the record showing that the district court’s
decision to credit this assumption was clear error. Cohen’s
reasoning that discharge rates affect transportation costs,
which then impact the cost of coke, was built on Gennuso’s
testimony that Appellee renegotiated coke shipping contracts at
a higher rate to account for slower discharge rates caused by
the crane collapse.
Mindful that district court findings in a bench trial
should be given the “highest degree of appellate deference,” we
find no reason to upset the district court’s determination.
F.C. Wheat Mar. Corp., 663 F.3d at 723 (internal quotation marks
omitted). The district court had a sufficient basis to conclude
that Cohen proved Appellee’s damages for changes in commercial
terms to a reasonable certainty.
III.
For the foregoing reasons, the judgment of the
district court is
AFFIRMED.
28
DIAZ, Circuit Judge, concurring:
Although I share the majority’s view of the outcome of this
case, I diverge slightly in my understanding of the nature of
the relationship between the parties after the expiration of the
Interim Agreement in 2005. I would find that Kinder Morgan was
bound by the Lease terms as a holdover tenant, and that the
later purchase orders do not supersede the Lease terms in this
case because they cover a different subject matter.
The record before the court does not support the conclusion
that Kinder Morgan objectively intended to be bound by the terms
of the 1992 Lease after the expiration of the final Interim
Agreement in 2005. To the contrary, the undisputed evidence
suggests that Kinder Morgan specifically did not wish to be
bound by the original lease terms because it wanted to negotiate
a new long-term agreement in order to invest in capital
improvements to the “A” Pier. In fact, when RG Steel’s
predecessor proposed a new contract that would have extended the
interim period through March 2006, Kinder Morgan refused to sign
it. Kinder Morgan’s occasional post-2005 references to the
expired Lease do not alter this conclusion, and indeed, some of
the references support Kinder Morgan’s assertion that it no
longer considered itself bound by the Lease. See, e.g., J.A.
888 (in which Kinder Morgan references “the previous contractual
relationship” under the Lease) (emphasis added).
29
Nonetheless, Kinder Morgan’s actions are entirely
consistent with a holdover tenancy. Importantly, a holdover
tenancy under Maryland law is not based on objective assent or
intent to be bound by a lease. Rather, it exists automatically
when a lessee overstays the term of a leasehold. See Md. Code
Ann., Real Prop. § 8-402(c) (West 2015) (“Unless stated
otherwise in the written lease . . . when a landlord consents to
a holdover tenant remaining on the premises, the holdover tenant
becomes . . . a periodic month-to-month tenant . . . .”). When
a tenant holds over, the tenancy remains “on all the terms and
conditions of the original lease.” Straley v. Osborne, 278 A.2d
64, 68 (Md. 1971).
Despite demonstrating an intent not to be bound by the
terms of the Lease in its negotiations with RG Steel’s
predecessors, Kinder Morgan undoubtedly remained at Sparrows
Point after the final Interim Agreement expired. As the
district court observed, it also continued to pay rent,
utilities, and wharfage fees to the owners of the property, and
it continued to operate and maintain the Bridge Crane. Kinder
Morgan also failed to take any of the actions that would have
been required upon the expiration of the Lease, including
surrendering the property and conducting a final inspection of
the Bridge Crane. Based on Kinder Morgan’s behavior, I agree
with the district court’s conclusion that the purchase orders
30
alone could not possibly be construed to govern the parties’
relationship. And although Kinder Morgan did not consider
itself bound by any agreement with RG Steel’s predecessors, its
continued presence at the site and “good faith” adherence to the
terms of the Lease is consistent with a holdover tenancy.
Due to the holdover tenancy, the Lease terms remained in
force beginning on January 1, 2006, to the extent the parties
did not replace those terms with express, written agreements.
Among the Lease terms was an entire section dedicated to the
Bridge Crane wherein Kinder Morgan and its predecessors agreed
to assume “the entire risk of loss, theft, or destruction of the
No. 4 Bridge Crane resulting from any cause whatsoever.” J.A.
690. The Lease’s indemnity provision further clarified Kinder
Morgan’s liability, stating that it would “indemnify and save
harmless” the crane’s owner from any loss or liability resulting
from any damages sustained by the owner as a result of any act
or omission of Kinder Morgan, “whether negligent or otherwise.”
J.A. 692. Undoubtedly, the terms of the Lease directly covered
the subject matter of Kinder Morgan’s liability in the event of
damage to the Bridge Crane, and did not provide for any
limitation on consequential damages.
In February 2008, the parties entered into a purchase order
under which Kinder Morgan agreed to unload “up to 500,000 nton
of coke from ships with Bridge Crane.” J.A. 992. Delivery of
31
the coke was promised approximately four months later, and the
purchase order provided for a delivery location, a unit price,
and a total price. The purchase order also made reference to
the buyer’s terms and conditions, contained in a document called
the AMUSA-100 “General Purchasing Conditions for Purchase of
Goods or Services.” The first sentence of the AMUSA-100 clearly
states its scope: “These General Purchasing Conditions (“GPC”)
shall apply to the purchase of any materials, items,
products . . . and any related services (“Goods”) offered or
provided by suppliers (‘Seller’).” J.A. 997 (emphasis added).
The terms of the AMUSA-100 thus explicitly apply to the
procurement of specific goods and services, addressing such
topics as price adjustments, delivery, inspection of the
product, and warranties on the goods exchanged.
Although the “Warranty – Liability” portion of the terms
states that neither party will be liable for consequential
damages “under this order,” that language is preceded by five
sections referring to the nature of the goods delivered under
the purchase order, including their quality, performance, and
timely delivery. The limitation on liability under the purchase
order is narrow in scope: it only covers liability resulting
directly from Kinder Morgan’s delivery of goods and services to
RG Steel and its predecessors. The purchase order and its
accompanying terms do not address Kinder Morgan’s liability in
32
the event that it fails to maintain and protect the Bridge Crane
itself, despite the fact that Kinder Morgan was unloading coke
at the time of the accident. I would therefore find that
because the terms of the Lease were the only manifestation of
the parties’ intent with respect to the damages caused by the
accident, those terms apply and there is no limitation on Kinder
Morgan’s liability. *
Ultimately, I agree with the majority’s view that the terms
of the Lease remained in force and continued to govern the
parties’ relationship at the time of the accident. Although the
parties subsequently entered into written purchase orders, those
orders (and their accompanying terms and conditions) addressed a
subject matter distinct from the events of this case and thus do
not supersede the Lease terms. I therefore join in the
majority’s conclusion that Kinder Morgan is liable for
consequential damages, and that the district court did not err
in relying on Appellee’s expert in calculating those damages.
*
The majority applies the Lease terms indirectly through
the AMUSA-100’s “safety valve provision.” But because I do not
agree that the limitation on liability in the purchase order and
the indemnity clause in the Lease are
“corresponding . . . provisions” “in contradiction with” each
other, J.A. 997, I conclude that Kinder Morgan’s liability for
the accident is governed only by the Lease.
33