Crompton Greaves, Ltd. v. Shippers Stevedoring Co. (921 F. Supp. 2d 697, 2013)

MEMORANDUM AND OPINION ENTERING FINDINGS OF FACT AND CONCLUSIONS OF LAW

LEE H. ROSENTHAL, District Judge.

This is a dispute over responsibility for damage to a large power transformer. The plaintiff, Crompton Greaves, Ltd. designs and manufactures power transformers in India. Tucson Electric Power (TEP), an electric utility, contracted with Crompton Greaves, through its subsidiary Pauwels Americas, to build and ship to the United States several power transformers. In March 2007, one of these transformers — referred to here as the “South Loop Transformer” or “the Transformer” — arrived by ocean vessel at the Port of Houston and was discharged. Shippers Stevedoring, a Texas corporation, provided stevedoring and terminal services. When the South Loop Transformer arrived at its final destination in Arizona, Crompton Greaves discovered that it was damaged and inoperable.

Crompton Greaves alleges that the South Loop Transformer was damaged due to Shippers Stevedoring’s negligence and that Shippers Stevedoring acted as Crompton Greaves’s bailee. Shippers Stevedoring contends that at least some of Crompton Greaves’s claims are barred by limitations under the Carriage of Goods by Sea Act (COGSA). Shippers Stevedoring denies that it acted as Crompton Greaves’s bailee and, alternatively, argues that Crompton Greaves failed to make a prima facie case of bailment liability. Shippers Stevedoring also argues that Crompton Greaves has not proven that Shippers Stevedoring’s negligence caused the Transformer’s damage.

This court held a seven-day bench trial. The parties presented fact and expert testimony and exhibits on the purchase, design, construction, transportation, delivery, inspection, and repair of the South Loop Transformer. Based on the testimony and exhibits, the parties’ oral and written legal arguments, and the relevant law, this court finds and concludes as follows:

• Crompton Greaves’s claims against Shippers Stevedoring are barred, in part, by COGSA’s one-year limitations period;

• Crompton Greaves failed to make a prima facie showing of Shippers Stevedoring’s liability as a bailee; and

• Shippers Stevedoring has no liability to Crompton Greaves for the damage to the Transformer.

The detailed reasons for these rulings are set out below.

I. Findings of Fact

A. The Evidence Presented 1. The Witnesses

In the bench trial, the court heard trial testimony from numerous expert and fact witnesses. The subject of their testimony is summarized below.

• Sandeep Chakravarty. Chakravarty has a B.S. in electrical engineering and an M.B.A. In 2007, Chakravarty was the general manager of the Crompton Greaves Bhopal, India plant. At the time of trial, he was responsible for Crompton Greaves’s transformer sales to Europe and the Americas. (Nov. 29, 2011 Trial Excerpt at 36). Chakravarty testified about the South Loop Transformer’s design, manufacturing, and transportation, and about the use of shock recorders.

• Viswanathan Shivakumar. Shivakumar is the operations head for the Crompton Greaves Bhopal, India plant. In 2006 and 2007, he was the production manager. (Docket Entry No. 204 at 441). Shivakumar has a bachelor’s degree in electrical engineering. (Id.). He began working at Crompton Greaves in 1979 and has worked at the Bhopal plant since 2002. (Id. at 22-23). Shivakumar testified primarily about the manufacture of the South Loop Transformer, the attachment of a shock recorder to the Transformer, and the Transformer’s transportation within India before shipment to the Port of Houston.

• Gautam Mazumder. Mazumder is the senior manager of customer services at the Bhopal plant. (Docket Entry No. 204 at 631). He testified about inspecting the South Loop Transformer around March 13, 2013 and when it arrived at TEP in Arizona.

• Karl E. Wolff. Wolff was called by Crompton Greaves as an expert witness. Wolff has worked as a carman apprentice, loading specialist, assistant car foreman, and lead car inspector for the Southern Pacific Railroad, where he worked with shippers on large and unusual loads. (Docket Entry No. 208 at 718-20, 726). Part of his responsibility as a railroad inspector was to ensure that cargo was properly placed on railcars. (Id. at 720). Wolff is also a qualified crane operator. (Id. at 719-20). Wolff testified about potential causes of damage to the Transformer on March 7, 13, and 31, 2007 and about custom and practice in the transportation industry.

• David Alan Hullender. Hullender was called by Crompton Greaves to testify as an expert witness on interpreting the shock recorder data. Hullender is a professor of mechanical engineering at University of Texas at Arlington. (Docket Entry 189 at 4). He has bachelor and master of science degrees in mechanical engineering and a Ph.D. in mechanical engineering. (Id.). Hullender has expertise in testing machinery for vibration issues, stress levels, and force levels and in developing computer models to test equipment design and reliability. (Id. at 4-5).

• Pravin Ghadi. Ghadi is an engineering head of the Crompton Greaves power group. (Docket Entry No. 211 at 773). He analyzes financial and commercial aspects of Crompton Greaves plants globally. Ghadi has a postgraduate degree in finance. (Id.). He was hired by Crompton Greaves to work in corporate taxation, was promoted to the factory finance-manager position, and then became Pauwels Indonesia’s CFO, (Id. at 774-75). Ghadi testified primarily about Crompton Greaves’s damages.

• Scott Anthony Butler. Butler is Shippers Stevedoring’s terminal manager at the Barbours Cut Terminal. (Docket Entry No. 211 at 840). In March 2007, Butler was the assistant terminal manager at Barbours Cut, responsible for cargo movement, supervision of other employees, and yard duties. (Id.). Butler testified about the Transformer’s movement within the Terminal.

• Clarence Rego. In 2007, Rego was employed by VeriClaim as a marine surveyor. (Docket Entry No. 211 at 870). He oversaw the loading and unloading of ships and investigated claims for damaged vessels, tankers, and cargo. (Id.). Rego was hired by Pauwels Americas to survey the South Loop Transformer’s unloading from the vessel and its loading onto a railcar at the Barbours Cut Terminal. (Id. at 871-72). He testified about his observations of the Transformer while it was located at the Barbours Cut Terminal.

• Darrel Harrelson. In March 2007, Harrelson was Shippers Stevedoring’s equipment director. (Docket Entry No. 213 at 897). He was responsible for maintenance and logistics for all of Shippers Stevedoring’s equipment, including its cranes. (Id. at 898). At the time of trial, Harrelson had worked for Shippers Stevedoring for 37 years, beginning as a crane operator. (Id. at 898). He testified about Shippers Stevedoring’s crane-usage practices and about loading the Transformer onto the railcar.

• Derlin Marsh. March is the terminal manager at Shippers Stevedoring’s Barbours Cut Terminal, a position he also held in 2007. He is responsible for supervising all of Shippers Stevedoring’s operations at the Terminal. Marsh testified about the Transformer’s movement within the Terminal and the relevant customs and practices at the Port of Houston.

• Edmund Francis Feloni. Feloni was called by Crompton Greaves to testify as an expert on transformer design and manufacturing and about the likely causes of the damage to the South Loop Transformer. He has a bachelor of science degree in electrical engineering. He specializes in power systems, including large transformers. (Docket Entry 190 at 154-55). He has worked for electrical utilities and currently consults on engineering, testing, and failure analysis primarily for government agencies, large utilities, industrial military facilities, and insurance companies. (Id. at 155, 157). He has reviewed over a hundred transformers on damage and loss issues. (Id. at 157).

• Robert G. Ganser. Ganser is a registered professional engineer working as a consultant on transformers. (Docket Entry No. 204 at 530-32). He received a bachelor of science degree in electrical engineering and an M.B.A. He has worked for several transformer manufacturing and repair companies on inspections and testing. (Id. at 532-3). As a consultant, Ganser provides design and environmental impact review and root-cause failure analysis. (Id. at 534-35). He was hired by TEP to inspect the South Loop Transformer after the damage was discovered. (Id. at 531). Ganser testified for Shippers Stevedoring about his observations and about the likely causes of the Transformer damage.

• Bayles Brett Holliday. Holliday was called by Shippers Stevedoring as an expert on the shipping industry. Holiday has a bachelor of science degree. (Docket Entry No. 215 at 989). He has worked in various capacities in ports around the world, in both military and civilian terminal and stevedoring operations. (Id. at 989-91). Holliday testified primarily about port customs and practices.

• Richard Mayne Bonyata. Bonyata testified as an expert for Shippers Stevedoring about interpreting shock recorder data and about the likely causes of the Transformer damage. He has a bachelor of science in electrical engineering and is a registered professional engineer. Bonyata works for McDowell Owens Engineering, specializing in failure analysis and forensic engineering. (Docket Entry No. 215 at 1074-75). He has an extensive background performing troubleshooting services for several companies. (Id. at 1075-76).

The parties also submitted deposition testimony under Federal Rule of Civil Procedure 32(a), including from the following individuals:

• Thomas Adgate. Adgate is a welder who was hired by T & M Welding to assist in securing the South Loop Transformer to the railcar. (Adgate Dep. at 9). He testified about the process of tying down cargo but could recall little about the Transformer.

• Michael Flores. Flores is TEP’s transmission and distribution engineering manager responsible for medium and high-voltage transformers. He has a bachelor’s and a master’s degree in electrical engineering. (Flores Dep. at 7). Flores managed engineering, construction, and commissioning activities for the South Loop Transformer. (Id. at' 8). He testified primarily about the problems with the Transformer.

• William Stuart. Stuart works for Time Marine, a company that was hired by Shippers Stevedoring to secure the Transformer to the railcar. (Stuart Dep. at 6). He is a professional naval architect. (Id. at 10). Stuart testified about the process of securing the South Loop Transformer and other heavy cargo to railcars.

• Colt Mangum. Mangum owns T & M welding services, a subcontractor for Time Marine. (Mangum Dep. at 7, 30). He testified about the pro-, cess of tying down the South Loop Transformer to the railcar.

• David McNew. McNew is TEP’s principal buyer. (McNew Dep. at 6). He testified as TEP’s corporate representative about the process of purchasing the South Loop Transformer, the problems with the South Loop Transformer and the other transformers that TEP purchased from Crompton Greaves, and the process of repairing the South Loop Transformer.

• Marc Schillebeeckx. Schillebeeckx is the president of CG Power Systems Americas, a company wholly owned by Crompton Greaves. (Schillebeeckx Dep. at 13). He is trained as a mechanical engineer. (Id. at 15). At the time of the events at issue, Schillebeeckx was Vice President of Marketing and Sales for Pauwels Americas. (Id. at 17). He testified about bidding and contracting for the transformers that Crompton Greaves produced for TEP and the process and cost to repair the South Loop Transformer.

2. The Evidence of the Transformer’s Design and Manufacture

Crompton Greaves is an Indian corporation that manufactures and sells power transformers. In 2005, Crompton Greaves acquired the Pauwels Group, a multinational transformer-manufacturing company with headquarters in Belgium and manufacturing facilities in Washington, Missouri and Winnipeg, Canada. After the acquisition, Pauwels Americas, Inc. became Crompton Greaves’s subsidiary in the United States. Crompton Greaves used Pauwels Americas to market and sell transformers manufactured in India to customers in the United States. (Nov. 29, 2011 Trial Excerpt at 38). In 2009, Crompton Greaves and its affiliated entities began operating under the global name CG. At that time, Pauwels Americas became CG Sales Networks Americas, Inc. (Id. at 46).

In April 2006, Pauwels Americas received a request for quotation (RFQ) from TEP. The RFQ invited Pauwels Americas to bid on contracts for building a series of transformers for various TEP facilities in the United States. Detailed specifications for each transformer accompanied the RFQ. Pauwels Americas submitted a bid and was awarded a contract to manufacture eight transformers for TEP. The transformer designed for the TEP South Loop Substation in Sahuarita, Arizona was known as the South Loop Transformer.

The purchase order for Pauwels Americas to build and deliver the South Loop Transformer to TEP’s substation in Arizona was for $1,250,662. This contract price was later revised to $1,264,135 based on TEP’s modifications to the specifications. (Id. at 40-44; Docket Entry No. 203 at 211; Pl.’s Exs. 2-5, 9). When it contracted with TEP to build the South Loop Transformer, Pauwels Americas was “acting on behalf of Crompton Greaves” as its sales agent. (Nov. 29, 2011 Trial Excerpt at 45).

Each Crompton Greaves transformer, including the South Loop Transformer, is “custom-built as per the requirements of the customer.” (Docket Entry No. 203 at 185). Crompton Greaves generated design drawings for TEP to review. It made changes based on TEP’s input and submitted the new drawings to TEP. (Id.).

At a design-review meeting, Crompton Greaves and TEP agreed that the transformers, including the South Loop Transformer, would each be shipped with two shock recorders. (Defs Ex. 14; Docket Entry No. 204 at 380). Pauwels Americas provided TEP with a quotation for $2,119 for an “extra shock recorder to fulfill opposite side requirement for the South Loop transformer.” (Def.’s Ex. 15; Docket Entry 204 at 385). The South Loop Transformer was designed and built with two small ledges on opposite sides of the external tank so that a shock recorder could be placed on each end.

Shock recorders are triaxial devices that use piezoelectric crystals to provide an acceleration reading. (Docket Entry No. 189 at 8). The Z-axis is the vertical axis; the Y-axis is the longitudinal-axis, which measures front-to-back acceleration; and the X-axis is the lateral axis, which measures side-to-side acceleration. (Id. at 30). Acceleration is typically measured in units of gravity, which are abbreviated as “g.” A shock recorder can identify when a “shock event” occurs and its magnitude. The recorder does not identify the cause of a shock event.

The Transformer was shipped with one shock recorder, a ShockLog model RD317. It was set to records accelerations or shocks above 1 g. (Docket Entry Nos. 204 at 647; 207 at 704). Based on the Shock-Log’s settings when it was attached to the Transformer during shipping, any force over 3 g would have triggered an “alarm event.” When an alarm event has been triggered, the ShockLog provides more detailed measurements — 1,024 readings per second over a 4-second period. (Docket Entry No. 189 at 104-05; PL’s Ex. 16 at 25).

At some point before the South Loop Transformer was built, Crompton Graves prepared a document titled “Packaging, Transport and Storage of Transformers and Its Importance.” (PL’s Ex. 6). The document provides “general guidance” to “designers and customers for the precautions to be taken” during the transportation of power transformers “from the factory to the job site.” (Docket Entry No. 203 at 302). The document also “defines the type of transport hazards” a transformer can undergo during transit; describes how a transformer should be packaged; and defines the “transport shocks” a transformer “might withstand” during transit. (Id).

At the trial, Chakravarty testified that Crompton Greaves transformers are usually designed to withstand shocks of up to 4 g along the X-axis, 4 g along the Y-axis, and 2 g along the Z-axis. (Id at 303). This is consistent with the limits stated in the “Transporting Transformers” document. The shock-design limits are based on industry experience and available information that described the forces, or shock limits, that “an equipment like a transformer” should be able to withstand during rail, truck, or ship transport. (Id at 304).

Chakravarty, Feloni, and Ganser agreed that there was no official or industry-wide standard defining the shock limits that a transformer should be built to withstand. (Id at 303-04; Docket Entry Nos. 190 at 170-71; 204 at 539). Chakravarty testified that manufacturers generally aim for design limits of approximately 2.5 g. (Docket Entry No. 203 at 305). He believed that, given the transportation infrastructure in the United States, transporting the South Loop Transformer was not especially risky. The biggest expected risk was during rail transport because of “bumping” and other rail-related events. (Id at 306-07).

Chakravarty testified at trial that the South Loop Transformer was designed to withstand 3g forces in every direction. (Id at 310). Chakravarty stated in his deposition that the Transformer was designed to withstand vertical shocks of up to 2.5 g. Chakravarty explained the apparent inconsistency in his statements by noting that there is a safety factor of .5 g added to the 2.5 g design limits. (Docket Entry No. 203 at 396).

In contrast to Chakravarty, Ganser recommended a slightly higher design limit of around 3 to 3.5 g in the vertical direction.

Shivakumar testified that Crompton Greaves was given instructions by TEP to design a transformer capable of withstanding 4 g forces along the X-axis and Y-axis and a 2 g force along the Z-axis. Shivakumar explained that the Transformer was designed to be less resistant to Z-axis forces than to X- and Y-axis forces because it is more difficult to design large transformers that can withstand vertical shocks and because vertical drops are less common during transportation. (Docket Entry No. 204 at 473).

In August or September 2006, after TEP approved the revised drawings, Crompton Greaves began building the transformers that TEP had ordered. (Docket Entry 204 at 466). In October 2006, TEP visited the Bhopal plant to inspect the South Loop Transformer while it was in the “vapor phase.” This allowed the TEP to observe the Transformer’s core and coil assembly, also referred to as a transformer’s “active part.” (Docket Entry 203 at 335-36).

When construction was completed but before the Transformer left the Bhopal plant, Crompton Greaves conducted tests, including a “sweep frequency response analysis test,” to ensure that the Transformer functioned properly, met TEP’s specifications, and met the standards set by the Institute of Electrical and Electronic Engineers (IEEE) and the American National Standards Institute (ANSI). (Docket Entry Nos. 203 at 329; PL’s Ex. 10). Before the test and before the shock recorder was attached, the Transformer was loaded onto a pallet to go into the test lab. After testing, the unit was moved again by a crane and then dismantled. (Docket Entry No. 204 at 498). No shock recorder was attached at that time.

The test results of the November 21, 2006 tests were submitted to TEP before the Transformer was shipped to the United States. (Docket Entry No. 203 at 330). TEP approved the test results. The Transformer was partially disassembled and packaged for shipping. (Docket Entry No. 204 at 472).

3. The Evidence About the Transformer’s Shipment to the Port of Houston

On December 31, 2006, the South Loop Transformer left the Bhopal plant on a truck owned by Premier Transport. (Docket Entry No. 203 at 330). A crane lifted the Transformer onto the truck trailer. (Docket Entry No. 204 at 496). Shivakumar testified that he witnessed the crane loading the Transformer onto the Premier trailer. He did not observe any event that would have caused a shock to the Transformer. He stated that it is unlikely that the Transformer was dropped during the loading process because the 250-ton crane that lifted it was capable of lowering it slowly. (Id. at 525).

Shivakumar’s testimony about the Transformer’s loading could not be verified by shock-recorder data because the Shock-Log recorder was not attached to the Transformer until after it was lifted onto the truck-trailer. (Id. at 497). Shivakumar conceded that the Transformer had also been lifted several times at the factory before the shock recorder was attached.

The shock recorder was attached and turned on after the Transformer was loaded and secured onto the truck trailer. Shivakumar testified at trial that he selected the ShockLog RD317 model recorder, mounted it on the Transformer, put in a new battery, and set the recorder to India Standard Time. (Docket Entry No. 204 at 475-76, 480, 485). The recorder’s alarm setting was set to activate when the Transformer sustained a 3 g force in any direction. On cross-examination, Shivakumar was asked to explain this shock recorder setting given what he believed were the Transformer’s 4-4-2 design parameters. Shivakumar responded: “I don’t know. During our training I think we had a discussion and we said it’s better to keep 3 g in all three directions ... in case somebody gets confused and he puts the 2 the other way around.” (Id. at 481).

Shivakumar also testified that he did not attach a second shock recorder to the Transformer. Shivakumar stated that, although it was not normal procedure to put a cover over an empty transformer shelf, there was a cover over the shelf where the second shock recorder that TEP had requested was supposed to be put. Shivakumar stated that the second shelf was covered because the Transformer’s bill of materials included a shelf cover. (Docket Entry No. 204 at 513-14).

Chakravarty also testified that the South Loop Transformer should have left the factory with two shock recorders. (Docket Entry No. 204 at 425). Chakravarty noted that Crompton Greaves typically places only one shock recorder on each unit. (Docket Entry No. 203 at 321). He acknowledged that, during the design-review meeting, TEP had specifically asked Crompton Greaves to use the LoGee 10 as a second shock recorder on the TEP transformers. (Docket Entry No. 204 at 433). Crompton Greaves did not typically use the LoGee 10 shock recorder at its plants. It had to specially order them for the TEP transformers. Chakravarty stated that the LoGee 10 did not arrive at the Bhopal factory until after the South Loop Transformer had shipped to the United States. (Id.). Once it did arrive, the Lo-Gee 10 was sent by courier to Crompton Greaves’s Washington facility. A LoGee 10 recorder was affixed as a second shock recorder to each transformer that Crompton Greaves shipped to TEP after the South Loop Transformer. (Id. at 433-34).

Crompton Greaves hired the National Shipping Company of Saudi Arabia (NSCSA) to ship the Transformer from the Port of Mumbai, India to the Port of Houston, Texas. To prepare for the shipment, the Transformer was placed on a NSCSA-owned Mafi-style trailer. A Mafi trailer is a flatbed trailer with hard wheels that is designed to allow cargo to roll on and off of specialized ships equipped with ramps. Once on the Mafi trailer, the Transformer was chained down and covered with a tarp. (Docket Entry No. 203 at 368). The Mafi trailer and the Transformer were then loaded onto the NSCSA vessel, the M/V Saudi Diriyah, for shipment to the Port of Houston. (Id.). Included in the shipment were 39 wooden crates containing Transformer parts and accessories that had been removed for shipping and would be reattached to the Transformer once it arrived in Sahuarita, Arizona.

The NSCSA issued a bill of lading for the shipment. The front of the bill of lading described the shipper, consignee, cargo, and intended voyage. The bill of lading listed Crompton Greaves as the “shipper/exporter” and Pauwels America as the “consignee.” TEP was listed under the heading “notify party.” The cargo was described as “South Loop Substation Tucson Electric Power” comprising “1 uncrated main unit + 39 wooden cases = total 40 Pkgs.” “Carrier’s responsibility ceases at Houston” and “Freight paid up to Houston” are both typed underneath the description of the goods. “Houston, Texas” was listed as the port of discharge and “Biehl & Company Lines Services in Houston, Texas” was the “place of delivery.” Box 14, titled “For Transshipment to,” was left blank. (Def.’s Ex. 20).

The back side of the bill of lading detailed the rights, liabilities, and responsibilities of the parties involved in the Transformer’s shipment. Section 3 set out the “Carrier’s Liability.” Subsection 3(b) stated that “TRADES TO OR FROM THE UNITED STATES shall be subject to the United States Carriage of Goods Act [“COGSA”] of 1936.” (Id., § 23(b) (capitalization in original)).

Section 4 of the bill lading contained a “Himalaya Clause,” extending the bill of lading’s liability limitations to certain other parties. Subsection 4(c) stated:

If an action for loss or damage to the Goods is brought against the ship managers, operator, insurer, servant, independent contractor, or subcontractor of the carrier or underlying carrier, including terminal operators, stevedores, carpenters, and watchmen, such persons shall be entitled to avail themselves of the defenses and limits of liability for which the Carrier is entitled to invoke under the contract.

(Id., § 4).

Section 5 described the carrier’s responsibilities. Subsection 5(a), titled “Port to Port Shipment,” stated:

The Carrier shall be liable for goods from the time the Goods have passed over the Vessel’s ramp/rail at time of loading at the Port of Loading (Box 12) until the time the Goods have passed over the Vessel’s ramp/rail at the time of discharging at the Port of Discharge (Box 13). For goods to or from U.S. Ports, the Carrier shall be liable from the time of [sic] the good are received at the loading port until the time the goods have been delivered to the Merchant at the Port of Discharge.

(Id., § 5(a) (emphasis in original)). Section 2 defined “Merchant” as the “Shipper, Receiver, the Consignees, the Holder of the Bill of Lading and the Owner of the Goods and servants and agents of any of these.” (Id., § 2).

Subsection 5(b), entitled “Combined Transport,” applied when the bill of lading was used as a combined-transport bill of lading. It provided that:

Whenever the Goods are transported by water, air or overland, and are to be ... carried to an in-land destination (Box 15) and freight is paid for Combined Transport, the carrier undertakes to produce the entire transport from the place where the Goods are taken in charge to the place designated for delivery and to be directly responsible to the Merchant for such through carriage. All claims must be filed with this Carrier, who shall be solely responsible for processing them to conclusion. When any payment is made to the Merchant, the Carrier shall be automatically subrogated to all rights of the Merchant against all others, including underlying carriers, on account of such loss or damage. When loss or damage occurs during Combined Transport but it cannot be determined which Carrier or underlying carrier has custody or control of the Goods at the time of the loss or damage, the Merchant and Carrier agree that it shall be deemed that the loss or damage occurred aboard the Vessel named therein on the reverse side and Clause 3 shall apply.

(Id., § 5(b)).

Section 13 gave the NSCSA a lien on the shipped goods until all shipping-related charges had been paid:

All persons within the definition of Merchant shall be jointly and severally liable for and the Carrier shall have a lien on the Goods for unpaid freight, ocean as well as inland, and charges due under the Bill of Lading for any expenses incurred by the Carrier or underlying Carriers .... for fines, dues, tolls, surveys, lighterage and all customs duties and port charges. The Carrier’s lien shall survive delivery and may be enforced at public or private sale upon ten days notice to the Consignees or Notify Party on the reverse side.

(Id., § 13).

Crompton Greaves hired Alomex, a freight forwarder, to take the Transformer on delivery at the Port of Houston and transport it by railcar to Tucson, Arizona. In Tucson, Alomex was responsible for offloading the Transformer from the rail-car and transporting it by truck to the job site, where it would be placed on a pad designed by TEP. (Docket Entry No. 203 at 317). Alomex hired several subcontractors to transport the Transformer, including Shippers Stevedoring, the NSCSA’s exclusive stevedore at the Port of Houston, (Docket Entry No. 213 at 933), and Vision Logistics.

According to Chakravarty, Shippers Stevedoring was responsible for taking the Transformer after the carrier delivered it to the Port of Houston, storing it in the Port, transferring it to the railcar at the rail siding, loading it onto the railcar, and tying it down to the railcar. Vision Logistics was responsible for arranging and bringing the railcar that would carry the Transformer to the Port of Houston. Once the Transformer was loaded and tied to the railcar, Vision Logistics was responsible for transporting it to Tucson, Arizona, then arranging for the Transformer to be picked up, transported to the TEP job site, and offloaded. (Id. at 318). Shippers Stevedoring hired its own subcontractor, Time Marine, to secure and tie down the Transformer to the railcar. (Id.).

Marsh testified that based on the manifest he believed — but did not know — that the Transformer belonged to Crompton Greaves when it was shipped. (Docket Entry No. 213 at 940; Def.’s Ex. 27). Marsh was not provided sales documents. Neither Alomex nor Vision Logistics told him who owned the Transformer or who had hired Alomex. He did not have any direct contact with Crompton Greaves. (Docket Entry No. 213 at 941-42). Chakravarty acknowledged that Crompton Greaves and Shippers Stevedoring did not have a contractual relationship and did not directly communicate before or during the transportation process. (Docket Entry No. 203 at 366).

4. The Evidence on the Transformer’s Discharge at the Port of Houston

The M/V Saudi Diriyah arrived at the Port of Houston’s Barbours Cut Terminal on March 1, 2007. On that same day, Clarence W. Rego, a surveyor, inspected the Transformer and crates in the Saudi Diriyah’s hold. Rego did not notice any damage to the Transformer tank. He did observe damage to some of the crates and that the cargo had shifted during the voyage. (Def.’s Ex. 33).

Shippers Stevedoring began unloading the cargo early the next day. Rego was present when the main Transformer unit and the crates containing its attachments were discharged. At trial, Rego testified that he did not see the Transformer sustain any damage during the unloading process. (Docket Entry No. 211 at 874). A report that Rego provided to Vericlaim on April 2, 2007 — while the Transformer was en route to Arizona — stated that, “during our presence, the tank was handled carefully and there were no shocks or damage to it.” (Id. at 875; Def.’s Ex. 33). Rego’s report noted that one of the crates fell off a forklift. (Docket Entry No. 211 at 881; Def.’s Ex. 33).

The witnesses disputed when the NSCSA “delivered” the Transformer. Wolff testified that, based on his experience in the shipping industry, once the cargo is unloaded from the ship, the carrier is no longer responsible. The stevedoring company becomes responsible from the time the goods are unloaded from the vessel until they are released to the entity that will transport the cargo to the next destination. (Docket Entry No. 208 at 725). Wolff did not address how the bill of lading’s contractual provisions and the intermodal shipping arrangements might affect the point of delivery.

Chakravarty also stated that he believed that the Transformer had been “delivered” once it was discharged at the Port of Houston. Chakravarty pointed to a February 8, 2007, invoice that Alomex emailed to Crompton Greaves. The invoice stated, “From delivered free on mafi, unlashed at the port of Houston, till offloaded at Sahuarita, AZ we can give you a lump sum price of USD 145,800.00.” (Pl.’s Exs. 25, 93). Alomex instructed Shippers Stevedoring to arrange to load the Transformer onto a railcar. Chakravarty testified that the phrase “discharge free on mafi” in Alomex’s email and invoice meant that the Transformer would be transported from the Port of Mumbai on a Mafi and that “they” would unload the Transformer on the Mafi to the pier at a safe resting place. According to Chakravarty, the Transformer was discharged on March 2, 2007, when the M/V Saudi Diriyah arrived and the Transformer and Mafi were removed from the ship by Shippers Stevedoring. (Docket Entry Number 203 at 313). There was no evidence that Shippers Stevedoring ever received the “from delivered free on mafi” instruction from Alomex.

Several Shippers Stevedoring witnesses testified that a carrier will not release cargo from its custody until the cargo has cleared customs and port charges and customs duties have been paid. Customs completed its inspection of the Transformer on March 6, 2007. (Def.’s Ex. 24). On March 8, 2007, a delivery order from Vandegrift Forwarding Co., Crompton Greaves’s freight forwarder, was stamped by Biehl & Co., the NSCSA’s shipping agent. The stamp, addressed to Shippers Stevedoring, instructed: “Please Release Cargo.” (Def.’s Ex. 26). The delivery order stated: “‘All loading charges + exam charges have [sic] be satisfied with Shippers.’ ” (Id. (internal quotation marks in original)). Marsh testified that this stamp is a “steamship release.” (Docket Entry No. 213 at 935-37). It indicated that all of the money owed to the ocean carrier had been paid and that the cargo had cleared customs. (Id. at 937). A similar stamp dated March 8, 2007 appeared on the NSCSA import manifest for the Transformer. (Def.’s Ex. 27). A March 9, 2007 email from Bart De Vos at Alomex to Anish Khosla at Crompton Greaves stated that, “Vandegrift confirmed us yesterday that clearance of this shipment is completed.” (Defi’s Ex. 30).

Marsh and Holliday both gave uncontroverted testimony that Shippers Stevedoring would not load the Transformer until a steamship release had issued. (Docket Entry Nos. 213 at 937-38; 214 at 1001). As Holliday explained, a stevedore is “not going to do anything with the on-carriage or the on-loading of any cargo until it’s released by the carrier.” (Docket Entry No. 214 at 1001).

Shippers Stevedoring’s invoice to the NSCSA stated “COMMENCED: 03/01/07” and “COMPLETED 03/03/07” and included a “terminal charge.” (Def.’s Ex. 22). Shippers Stevedoring’s invoices to Alomex included “delivering/loading charges” and “heavy lift charges.” (Def.’s Exs. 21A, 21B). The invoice did not define these terms or state the dates when these services were provided.

After unloading the Transformer from the vessel on March 2, 2007, Shippers Stevedoring towed it to an open yard, near the rail line. Shippers Stevedoring shared this yard with several other terminal operators.

5. The Shock-Recorder Data Evidence

The ShockLog recorder did not record any shock events between December 31, 2006, when the Transformer was carried by truck to the Port of Mumbai, and March 7, 2007. From January 1 to January 24, the recorder measured accelerations below 1 g that are consistent with the Transformer moving down a road on a truck. (Docket Entry No. 189 at 14-15).

The ocean voyage was from January 25 to March 1. (Id. at 15). The recorder does not show that the Transformer was subject to strong forces during the voyage. (Id.). On March 2, when the Transformer was offloaded from the ship on the Mafi, a .8 g acceleration was recorded along the Y-axis, but the Z-axis did not register any values greater than .4 g. (Id. at 16). Between March 3 and 6, the ShoekLog did not measure significant forces. This data is consistent with the Transformer sitting at rest in the Barbours Cut Terminal during this period. (Id.).

The ShoekLog registered four alarm events. The first alarm event occurred on March 7, 2007, when the shock recorder measured maximum accelerations of 1.8 g along the X-axis, 1.12 g along the Y-axis, and 3.92 g along the Z-axis. The second and third alarm events occurred about 14 seconds apart on March 13, 2007. The shock recorder measured maximum accelerations of .38 g along the X-axis, 1.3 g along the Y-axis, and 3.84 g along the Z-axis, during the second alarm event, and .48 g along the X-axis, 1.32 g along the Y-axis, and 3.1 g along the Z-axis, during the third alarm event. The fourth alarm event occurred on March 31, 3007, when maximum accelerations were recorded of .5 g along the X-axis, .96 g along the Y-axis, and 3.2 g along the Z-axis. The ShoekLog did not measure any readings in excess of 2 g along any axis except for those recorded during the four alarm events. (PL’s Ex. 80).

a. The March 7 Shock Event

On March 7, 2007, just after noon, the ShoekLog recorded its first alarm event. That same day, Rego visited the Barbours Cut Terminal with Dale Scheible, a Pauwels America employee, to inspect the Transformer and the crates containing the accessories. Rego arrived at the Terminal at 12:41 p.m. (Docket Entry No. 211 at 882). He spent the first hour inspecting the crates and was not able to see the Transformer from that location. (Id. at 884). At 1:33 p.m., Rego began taking pictures of the main unit. (Id.). Rego testified that the Transformer appeared to be in the same location where he saw Shippers Stevedoring place it on March 2. Rego saw no external sign of damage. (Id. at 875).

During his inspection, Rego removed the metal cover from the shelf holding the ShoekLog recorder. He took a picture showing the uncovered shelf with both the ShoekLog recorder and a LoGee 10 recorder sitting on top. (Def.’s Ex. 19A; Docket Entry No. 211 at 887). Rego testified the ShoekLog was attached to the Transformer, while the LoGee 10 was not attached but loosely resting on top of the second shelf. (Id. at 887-89). Rego explained that David Scheible, an engineer employed by Pauwels Americas, had brought the LoGee 10 recorder with him to the inspection because he thought one was already attached to the Transformer. Scheible planned to use the recorder he brought with him to download information from the LoGee 10 recorder that was supposed to be attached to the Transformer. Rego stated that he and Scheible were not able to download the data from the Shock-Log because the LoGee 10 that Scheible brought with him was incompatible with the ShoekLog recorder that was attached to the Transformer. (Id.).

When the ShoekLog records an alarm event, a flashing red light displays on the front of the recorder. In Rego’s picture showing the shock recorders, which the evidence supports was taken after the recorded March 7, 2007 shock event, the ShockLog’s alarm light is not lit up. (Def.’s Ex. 19A). Rego’s report for Vericlaim does not note that the alarm light was on. (Def.’s Ex. 33).

Crompton Greaves argues that the March 7 recorded shock could be explained by Shippers Stevedoring having dropped the Transformer while trying to move it. There were Shippers Stevedoring employees present at the yard on March 7. (Docket Entry No. 213 at 854). Wolff, Crompton Greaves’s expert witness, hypothesized that Shippers Stevedoring may have damaged the Transformer by trying to move it in preparation for an inspection scheduled that day by Regó and Scheible. Based on the pictures Rego took, Wolff noted that, on March 7, the Transformer was placed between two other large containers, making it difficult to inspect. (Docket Entry No. 208 at 731, 744^45). Wolff speculated that a lift truck may have been used to move the Transformer, and that truck may not have been properly coupled to the Mafi trailer. (Id. at 735). Wolff explained that if the truck’s lift does not have the metal probe fully inserted into the Mafi trailer, when the truck moves forward, the probe could slide out, dropping the Mafi 12 to 15 inches to the ground. (Id. at 735-36). Wolff admitted that his theory was based entirely on the ShockLog record of an apparent shock event on March 7. (Id. at 755). Neither Wolff nor anyone else saw Shippers Stevedoring trying to move the Transformer on March 7, 2007. Wolff presented no evidence, direct or circumstantial, supporting his speculation, other than the shock recorded on that date.

Feloni, another Crompton Greaves expert, also suggested in his report and testimony that Shippers Stevedoring may have tried to move the Transformer on March 7. Feloni speculated that Shippers Stevedoring may have expected that the railcar that was supposed to transport the Transformer to Arizona would arrive at the Terminal on March 8. (Pl.’s Ex. 96; Docket Entry No. 190 at 270-71). Feloni suggested that, on March 7, Shippers Stevedoring may have tried to move the Transformer closer to the rail line so that it could be lifted onto the railcar when it arrived. (Id.). Feloni based this view entirely on the timing of the recorded shock event and date the railcar could have arrived at the Terminal. A timeline produced by Shippers Stevedoring suggests that a railcar had arrived in LaPorte, Texas on March 7. (Pl.’s Ex. 24). The evidence shows that the railcar for the Transformer did not arrive at the Terminal until March 12.

Shippers Stevedoring denies that it moved the Transformer on March 7, 2007. Every Shippers Stevedoring employee who was deposed and who testified at trial consistently and credibly denied moving the Transformer at any time between March 2 and 12 or being aware of anyone who did move the Transformer during that period. (Docket Entry Nos. 211 at 852; 213 at 952). Butler and Marsh also testified that the Barbours Cut Terminal stevedores are union employees who do not normally work during their scheduled lunch hour, which runs from 12:00 p.m. to 1:00 p.m. That is when the ShockLog recorded the alarm event. Union rules require that Shippers Stevedoring’s employees be paid time-and-a-half if they work during lunch, and any such overtime pay is documented. (Docket Entry No. 211 at 84). Shippers Stevedoring’s time sheets do not show that anyone was paid time- and-a-half on March 7, 2007. (Def.’s Ex. 25).

The credible evidence does not show any attempt by Shippers Stevedoring to lift and move the Transformer on March 7, 2007. The credible evidence shows that lifting, loading, and moving the Transformer would require so much equipment and manpower as to generate records and recollection. Neither exists for March 7, 2007.

b. The March 13 ShockLog Recorder Event

On March 12, 2007, the railcar meant to carry the South Loop Transformer to Arizona arrived at Barbours Cut Terminal. Butler testified that, on the same day, Shippers Stevedoring used a truck with a Mafi attachment to move the Transformer near the rail line. (Docket Entry No. 211 at 846-47). Due to the Transformer’s weight, the truck’s hydraulics were not able to lift it. Butler arranged for a forklift to make it easier for the truck to raise the Mafi. (Id. at 848). Butler did not see the Transformer drop during the operation. He did not see the Mafi probe slip out of or disengage from the truck. (Id. at 849).

When the Transformer arrived at the rail line, two cranes were in place with the crew, which included among others Darrel Harrelson, the Shippers Stevedoring employee responsible for the crane equipment, and a marine surveyor. (Id. at 850). In total, about one dozen people were involved in loading the Transformer onto the railcar. (Id. at 851). Butler testified that it was “just a normal lift.” (Id.). Butler watched as the cranes picked up the Transformer without issue and loaded it onto the railcar smoothly. (Id.). Butler did not observe the Transformer drop and he heard no report of any problems. (Id. at 852). Marsh also testified that he watched the Transformer being moved from the Mafi to the railcar. He did not notice any problems with the lift. None of the people present reported any difficulties. (Docket Entry No. 213 at 948-51).

Rego also observed the transfer of the Transformer from the Mafi trailer onto the railcar on March 12. (Docket Entry No. 211 at 876). He testified that Shippers Stevedoring took care to align the Transformer on the railcar and to place plywood sheets on the railcar before the lift. (Id. at 877). Rego noted in his report for Vericlaim that the Transformer “was carefully loaded into position with no shocks.” (Def.’s Ex. 35 at 6). After Crompton Greaves received reports that some of the accompanying crates had been damaged during the ocean voyage, Gautam Mazumder, an engineer who worked for Crompton Greaves, was sent to the Port of Houston to inspect the Transformer. (Docket Entry No. 204 at 632). Mazumder arrived on March 12, 2012. He met with Rego, who told him that the Transformer had been loaded onto the railcar earlier that day. (Id. at 633).

On March 13, 2007, Time Marine, which Shippers Stevedoring hired to secure the Transformer to the railcar, began the securement process. On that date, the ShockLog recorded two shock events 14 seconds apart. (Pl.’s Ex. 80).

Hullender testified that the timing and magnitude of the March 13, 2007 shock events were consistent with Shippers Stevedoring loading or repositioning the Transformer on the railcar. (Docket Entry No. 189 at 27). He speculated that a crane operator could have set the Transformer down and then decided to lift it again to reposition it. (Id.). That scenario could result in the accelerations that were measured on the ShockLog recorder. (Id. at 28). Hullender stated that the recorded 1.3 g acceleration on the Y-axis and the 3.1 to 3.84 g acceleration on the Z-axis could mean that when the Transformer was lowered to the railcar, “it was not perfectly level and you [could] actually have one end coming down before the other.” (Id. at 29; PL’s Ex. 80).

Wolff proposed a similar theory at trial. He testified that the first thing welders securing the railcar usually do is ensure that the cargo’s center of gravity is properly aligned with the railcar’s center. If the cargo is not aligned properly, it would have to be lifted again and realigned. (Docket Entry No. 208 at 730). Wolf testified that the Transformer may not have been properly aligned on March 12 and that Shippers Stevedoring tried to lift and move it to a proper position on March 13, using only one crane. Alternatively, the Transformer might have been properly aligned but the plywood underneath might have been improperly placed. (Id. at 758). Wolff stated that the Transformer may have been lifted 1 to 1.5 inches and dropped, followed by a second similar attempt. Wolff testified that this would explain two shocks recorded 14 seconds apart. He thought a crane operator may not have realized that lifting the Transformer and dropping it such a slight distance had the potential to create a damaging force. (I'd at 731-32).

Shippers Stevedoring disputes the theories Wolff and Hullender suggested. Harrelson testified that he made sure the Transformer was properly aligned on the railcar on March 12 before he released the crane rigging. (Docket Entry No. 213 at 909). Harrelson supervises all of Shippers Stevedoring’s crane activities and is required to be present whenever cargo weighing more than 100,000 pounds is lifted. {Id. at 900). Harrelson did not see any cranes being used on March 13. He testified that, if any cranes had been used, he would have been notified so that he could observe. {Id. at 909-10).

Harrelson’s testimony is credible. It is corroborated by Shippers Stevedoring’s crane-usage records and the billing invoices that it sent to Alomex. Shippers Stevedoring keeps daily crane-usage records. According to Harrelson, Shippers Stevedoring’s consistent practice is to make an entry noting any use of its cranes. {Id.). The crane-usage records show that the two 140-ton P & H cranes at the Barbours Cut Terminal were used on March 12 from 1:00 p.m. to 3:00 p.m. (Def.’s Ex. 28; Docket Entry 213 No. at 901). According to the records, the cranes were not in use on March 13. Shippers Stevedoring charged Alomex for six hours of crane usage. Harrelson testified that there is a three-hour minimum per day for use of each crane. (Docket Entry No. 213 at 902). This is consistent with Shippers Stevedoring using the two cranes for two hours on March 12 and not using them on March 13.

Harrelson also credibly testified that it would not even have been possible for one crane to lift the Transformer. {Id. at 910). Photographs taken of Shippers Stevedoring loading the Transformer onto the rail-car show that two cranes were used. (Def.’s Ex. 1M). Rego’s Vericlaim report also indicates that two cranes were used to load the Transformer. (Def.’s Ex. 33 at 6). Harrleson admitted that a single crane might be able to lift one end of the Transformer but credibly testified that two cranes were used on March 12. (Docket Entry No. 213 at 919).

Rego returned to the Terminal on March 13 to observe the securement of the Transformer to the railcar. He did not see the Transformer being lifted in that process. (Docket Entry No. 211 at 877, 885). He did not notice any other activity that might have damaged the Transformer. {Id. at 878). Rego’s report for Vericlaim states that a plywood sheet had already been placed under the Transformer on March 12. (Def.’s Ex. 33 at 6). This makes it unlikely that, as Wolff speculated, the Transformer had been repositioned on March 13 so that Shippers Stevedoring could place or reposition a plywood sheet underneath it.

Mazumder also observed the securement of the Transformer to the railcar on the morning of March 13. (Docket Entry No. 204 at 634). Mazumder stated that the cranes that had been used to lift the Transformer onto the railcar were still in place on March 13 but were not used while he was there. {Id. at 635). Mazumder did not see anything occur that might have damaged the Transformer on March 13. {Id. at 681). This, with the crane-usage records, makes it implausible that, as Wolff and Hullender suggested, the Transformer was lifted not once — but twice— during the securement process.

Thomas Adgate, one of the welders working for Time Marine’s subcontractor to secure the Transformer on March 13, testified that, although it was unusual, there were “a couple of times” that cargo had already been transferred onto a railcar before his team arrived to secure it. (Ad-gate Dep. at 34). Adgate could not specifically recall securing the South Loop Transformer to the railcar on March 13. (Id. at 22-23, 44-45, 49-50, 60-61).

Coyt Mangum, who was part of the securement team, testified that it would have been unusual for Shippers Stevedoring to have placed the Transformer on the railcar the day before the securement process was scheduled. (Mangum Dep. at 45-46). Mangum also stated that he observed Shippers Stevedoring load the Transformer onto the railcar from the Mafi on the morning of March 13- — not on March 12, as all the other direct record evidence suggests. (Id. at 33, 43-45). Mangum’s testimony that the Transformer was loaded onto the railcar on March 13 is likely mistaken. It contradicts testimony and evidence provided not only by Shippers Stevedoring and its employees but also by Mazumder, a Crompton Greaves employee, and Rego, whose report was filed before the damage to the Transformer was discovered.

The Transformer was lifted onto the railcar on March 12, and no credible evidence shows that one end was abruptly dropped — much less dropped twice — during that process.

c. The March 31 ShockLog Recorder Event

On March 19, 2007, Union Pacific began towing the railcar carrying the South Loop Transformer to Tucson, Arizona. (Docket Entry Nos. 213 at 981; 208 at 725). On March 31, 2007, while the Transformer was still on Union Pacific’s railcar, the ShockLog recorded a fourth shock event. (Pl.’s Ex. 80). Shippers Stevedoring has suggested that the March 31, 2007 recorded event may have been caused by “rail humping.” This term refers to rail cars bumping against one another at relatively low speeds as a result of the way they are coupled. (Docket Entry No. 208 at 747). “Humping” is capable of damaging cargo. The railcar carrying the Transformer had a “Do Not Hump” sign attached to it. (PL’s Ex. 96; Docket Entry No. 215 at 1110-11,1123,1176-77,1180-81).

6. The Evidence as to the Discovery of the Damages

On April 3, 2007, the railcar arrived in Tucson, Arizona. On April 6, 2007, cranes were used to lift the Transformer onto a flatbed truck. The following day, the Transformer arrived in Sahuarita, where it was unloaded onto a specially designed pad at the South Loop Substation. (Docket Entry No. 203 at 372; PL’s Ex. 67; Defi’s Ex. 30).

Mazumder was present at Sahuarita when the South Loop Transformer arrived. (Docket Entry No. 204 at 640). He performed a Megger test, which measures a transformer’s core-to-ground resistance. The South Loop Transformer failed the test. (Id. at 641). When Mazumder removed the metal cover over the shelf holding the ShockLog recorder, he noticed that the warning light was flashing, indicating that the ShockLog had measured at least one alarm event. (Id. at 643). Mazumder then removed the ShockLog from the Transformer and downloaded the shock data onto his computer. (Id. at 644). Mazumder saw only one shock recorder on the Transformer. (Id. at 668). Mazumder performed an internal inspection of the Transformer. (Id. at 649). The inspection revealed that the Transformer’s core was displaced. (Id. at 653). He also noticed nuts, bolts, and loose insulation lying at the bottom of the Transformer, and indentations in the metal where the washers and bolts had previously been tightened. (Id. at 655, 657). Mazumder then performed a “sweep frequency response analysis,” to compares the electronic signature of the Transformer as measured on the job site with the electronic signature that was measured in the factory before shipping. This comparison showed that the core had shifted from its original location, evidence that the unit had been damaged. (Docket Entry No. 203, at 327).

Based on these tests, Crompton Greaves initially concluded that the Transformer could be repaired, but not “on the job site.” The repair work required “untanking” to identify the problem. (Id.). “Untanking” involves cutting open a transformer’s top cover and extracting the core and core assembly from the transformer tank. At TEP’s recommendation, Crompton Greaves shipped the Transformer to Edison ESI, a repair facility in Westminister, California, for untanking and then repair. (Docket Entry Nos. 203 at 328, 338; 190 at 222). Crompton Greaves estimated that the cost to repair the Transformer at Edison was approximately $570,000, which would be less than the remanufacturing cost. (Docket Entry No. 203 at 338).

At the Edison facility, the Transformer was untanked and tests were done to identify the location of the core-to-ground fault. The active parts were also inspected. Several people, including inspectors from TEP and Crompton Greaves, and the underwriter’s representative, saw the Transformer at the Edison facility. (Id. at 340). Their conclusion was that the Transformer’s core had shifted downward and the insulation had been damaged in multiple places. (Id. at 341). According to Chakravarty, further repairs at ESI were “ruled out” because the facility did not have “the right equipment in-house to repair th[e] unit.” (Id. at 342). ESI also refused to give a warranty for the repairs because the damage was so extensive. (Docket Entry No. 190 at 208-09; Def.’s Ex. 54). Crompton Greaves considered whether to repair the unit in its facilities in India, Canada, or Belgium. It chose Canada because it was the least expensive and the fastest option, and would also allow TEP to participate in the repair process. (Docket Entry No. 203 at 343; Pl.’s Ex. 58).

Ganser testified that TEP hired him as a consultant to inspect the South Loop Transformer at the Edison facility. Ganser sent a report to Mike Flores, TEP’s manager of engineering. (Docket Entry No. 204 at 548; Def.’s Ex. 62). In his report and at trial, Ganser noted numerous deficiencies in the Transformer that he ascribed to poor design and defective manufacturing. Among other things, Ganser observed that the Transformer was missing bolts and a washer and nut assembly, (Docket Entry No. 204 at 550), had misplaced paint inside the tank (which can cause a transformer to fail), (id. at 551); had misplaced HV end blocks (which are necessary to support the winding), (id. at 557); had an incorrectly measured lead (which could result in a fire), (id. at 559); had stuffing filling the gap between the core step and the block (which could cause the core to move due to improper support), (id. at 561); had loose insulation; and had rust on the laminations (suggesting that harmful moisture had entered the tank), (id. at 562-64).

Ganser admitted that he had not been informed of the shock recorder data before he drafted his report. He conceded that some of the damage he found in the South Loop Transformer could have been caused by a downward force. (Id. at 571). Nevertheless, Ganser testified that he would have recommended that TEP not accept delivery of the South Loop Transformer for reasons unrelated to any damage that could be ascribed to shock events. (Id. at 572). Ganser noted that TEP had experienced problems of various kinds with almost all of the transformers it ordered from Crompton Greaves. These problems included parts damaged during shipping, clearance problems, deviations from TEP’s specifications, a core-to-ground fault, and moisture infiltration. (Id. at 573). He believed these deficiencies reflected a lack of quality control at Crompton Greaves’s Bhopal, India plant.

Ganser also testified that the South Loop Transformer design lacked the structural support necessary to prevent damage during shipping. (Id. at 574). That lack meant that the South Loop Transformer could have been damaged by forces below 2.5g. (Id. at 618).

Crompton Greaves called Feloni to rebut the conclusions that Ganser expressed in his report for TEP. Feloni reviewed Ganser’s report and other relevant evidence but did not inspect the Transformer. Nor did he review photographs of the manufacturing process. (Docket Entry No. 190 at 263-65). Based on the evidence he did review, Feloni concluded that the “structural deformation ... and other deficiencies picked up in this transformer are due to rough handling.” (Docket Entry No. 190 at 179). He testified that many of the quality-control issues Ganser identified were unrelated to the damage found in the Transformer’s core and coil assembly, (id. at 227), and that the design of the Transformer’s support structure was consistent with industry standards, (id. at 178). Feloni noted that, although the many of the other transformers that Crompton Greaves manufactured for TEP required repair before they were placed into operation, unlike the South Loop Transformer, none arrived with damage to their core and coil assembly. (Id. at 217-18). Feloni also testified that a transformer can be shipped from India to the United States without exposure to shocks in excess of 2 g. (Id. at 288).

Based on the reports and testimony provided by Ganser and Feloni, and the other relevant evidence in the record, the court finds that poor manufacturing quality controls and design flaws increased the South Loop Transformer’s susceptibility to damage during transportation. But based on the reports and testimony about other Crompton Greav