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Falcon Steel, Inc v. J. Russell Flowers

March 29, 2011

FALCON STEEL, INC., PLAINTIFF - APPELLEE,
v.
J. RUSSELL FLOWERS, INC., A MISSISSIPPI CORPORATION, DEFENDANT, US TECHNOLOGY MARINE SERVICES, LLC, DEFENDANT - APPELLANT.



Appeal from the United States District Court for the Western District of Arkansas.

The opinion of the court was delivered by: Smith, Circuit Judge.

Submitted: September 21, 2010

Before BYE, BEAM, and SMITH, Circuit Judges.

In this case, Falcon Steel, Inc. ("Falcon") sued US Technology Marine Services, LLC (UST) in state court to enforce a materialman's lien on certain fully and partially constructed barges, alleging that the barges incorporate $376,659.82 worth of steel, for which payment remains due. Following removal to federal court and a bench trial, the district court*fn1 found Falcon's lien to be valid under Arkansas state law, and further, that it attaches jointly and severally to all barges at issue. We affirm.

I. Background

UST is a Nevada corporation maintaining its principal place of business in Sebastian County, Arkansas, and specializing in the construction of barges and tugboats. Falcon, a Missouri corporation headquartered in Springfield, Missouri, fabricates and supplies industrial steel. On December 21, 2007, UST agreed to build J. Russell Flowers, Inc.*fn2 ("Flowers") 20 barges in four-barge increments. Construction was to occur at UST's shipyard in Fort Smith, Arkansas. In turn, UST engaged Falcon to furnish the steel needed to build Flowers's barges. At trial, Falcon's general manager, Jackie Swain, and Falcon's owner and president, Terry Heinz, each testified that Mike Dismer of UST informed them of UST's contract with Flowers and represented that UST sought steel to fulfill its obligations under the Flowers contract. Swain further testified that, to that end, Dismer furnished her with a material list, or "spec sheet," detailing the barges' designs and dimensions as stipulated by Flowers. Swain noted that Falcon understood the steel to be for the Flowers barge projects and that no UST representative ever mentioned that the steel might be utilized for any projects other than Flowers's.

In its defense, UST elicited testimony from both Swain and Heinz that, from the time Falcon agreed to supply UST with steel until the filing of this suit, neither Swain nor Heinz had actually reviewed or was familiar with the details of UST's contract with Flowers. Moreover, Swain and Heinz each admitted that, after shipping commenced, they eventually learned that UST also was building a barge for Canal Barge Company ("Canal") at the same Fort Smith site where it was completing Flowers's project, and that Canal's barge was being built pursuant to an agreement unrelated to the Flowers contract. Nevertheless, Heinz maintained that, even at the time of Falcon's final shipment to UST, he understood UST to be using Falcon steel only in the construction of Flowers's barges.

UST also offered the testimony of Jeffrey Don Cluck, its former industrial engineer. According to Cluck, UST ordered steel from at least ten to twelve suppliers, depending on price and availability. Cluck testified that, because UST's agreement with Flowers included an "escalation clause" passing on the cost of price spikes in the steel market to Flowers, Cluck kept a logbook tracking which steel was incorporated into the various barges. Based on his logbook, a summary of which UST presented in chart-form at trial, Cluck acknowledged that certain amounts of Falcon steel-roughly $65,000 worth-went into Barges F1 through F5 but maintained that it is impossible for those barges to contain more Falcon steel than his chart reflects.*fn3 Upon further probing by the district court, Cluck conceded that the chart is not a business record that he regularly maintains but instead is a document he compiled from several different logbooks. Indeed, by Cluck's own admission, the data contained in the chart is largely an extrapolation:

Q: Can you describe for the Court all of the documentation that you would have reviewed in order to create this chart?

A [Cluck]: Well, the main thing I went over was the steel logbook as to when the steel was received at the yard so I know when it would have been used, and then at that particular time, all I had was the Purchase Order number, so I- those were on the chart. And then I used that to add the cost of weight, and then once I got the invoice numbers that were in question, I went back and married those into this.

Q: Okay. And you have designated [referring to Cluck's chart] that that [particular Falcon] steel was used in Flowers Barge Number 2. Is that right?

A [Cluck]: Yes.

Q: How do you know that that was used in only Barge Number 2?

A: Because that's what we needed at that time for that barge.

Moreover, Cluck admitted that his logbooks are kept solely to account for price escalations in the steel market, not to serve as a means for ascertaining a particular piece of steel's origin, or "whether Falcon steel went into one barge as opposed to another." UST did contend that the purchase orders that it sent to Falcon bore purchase-order numbers followed by the capital letter "F" or "C," purportedly indicating whether the steel was purchased for Flowers's or Canal's project. However, UST's own evidence on this point conflicts. Cluck initially conceded that this was "a recognized internal system" being used "at [UST] in order to designate which project it [sic] was being worked on." (emphasis added). But, upon further probing, Cluck ...


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