How to review for clear error after a bench trial

One issue in Hess Corp. v. Schlumberger Tech. Corp., a UCC case about the oil-and-gas industry, was whether the district court made clearly erroneous fact findings about a party’s compliance with a contract provision; specifically, whether “the difference between the Greene Tweed drawings and the 2004 validated valve was ‘insubstantial.'” The Fifth Circuit approached the issue in three steps:

1. Relevant Supreme Court precedent: “The Supreme Court has explained how to apply a clear-error standard to a district court’s credibility findings at a bench trial. The Anderson Court cautioned that a trial court could not ‘insulate [its] findings from review by denominating them credibility determinations’ and outlined certain ‘factors’ for consideration that could show error. Namely, ‘[d]ocuments or objective evidence may contradict the witness’ story; or the story itself may be so internally inconsistent or implausible on its face that a reasonable factfinder would not credit it.’ If ‘such factors are present, the court of appeals may well find clear error even in a finding purportedly based on a credibility determination.’” (citations omitted).
2. Relevant Circuit precedent: “We applied Anderson in an appeal involving a fatal maritime collision between a tug and a shrimper; the district court had considered physical evidence, expert testimony analyzing the physical evidence, and independent witness testimony. The district court determined that the tug was at fault. We considered the ‘plausibility and internal consistency” of the shrimper’s account, in addition to the actual evidence. Id. We found that ‘physical evidence strongly support[ed]’ the tug’s case; the tug’s expert witness was far more qualified than the shrimper’s expert and considered more information in making his assessment; the independent witness testimony was ‘inconsistent with the [shrimper’s] account of the collision’; and the shrimper’s account smacked of ‘sheer implausibility.’ Accordingly, we were left with the ‘definite and firm conviction” that the evidence showed clear error by the district court.'” (citation omitted, applying In re Luhr Bros., 157 F.3d 333 (5th Cir. 1998)).
3. Conclusion. “The drawings for the seal did not change from 2003 to 2014, and Schlumberger presented some evidence showing a series of springs from 2005 to 2015 that were manufactured within the tolerances specified in the drawings. Although it is clear that Greene Tweed produced springs that were outside the tolerances dictated by the drawings and thus did not conform, it is certainly not “implausible” that Greene Tweed manufactured its valves “to the qualified drawings” under the design-requirement-only interpretation of Section 6.3.2.2 adopted by the district court.”

No. 20-20663 (Feb. 7, 2022).