In this action Coastal (Bermuda) Ltd. ("Coastal"), a dissatisfied purchaser of 60,000 metric tons of "No. 6" fuel oil, filed suit against the independent surveyor of the oil cargo, E. W. Saybolt & Co., Inc. ("Saybolt"), seeking damages based on tort and contract theories. Following a one day bench trial, the district court rejected Coastal's contract theory, but held that under Section 552 of the Restatement (Second) of Torts, Saybolt was liable for supplying false information upon which others relied in a business transaction. More specifically, the district court held that Saybolt negligently failed to disclose on a laboratory analysis report of the oil cargo that the single set of test results represented a composite sample of the various tanks of oil sold to Coastal. Finding no negligence on the part of Saybolt in the performance of its analyses, nor in the preparation or communication of its test reports, and, further, finding no reliance by Coastal on the specific wording of the report at issue, we reverse.

* This saga began in December 1981 when the M/T HALKI, a vessel owned by Equity Shipping Corporation ("Equity"), arrived at the Mississippi River oil processing refinery of GHR Energy Corporation ("GHR"). GHR, who had chartered the HALKI from Equity, loaded the vessel with residual fuel oil from five separate storage tanks at the GHR terminal. The oil had been processed in different units at the GHR refinery. The fuel oil, designated as "No. 6 oil"1 by GHR, had been purchased by Armada Transport and Refining Company, Ltd. ("Armada") and was destined for Amsterdam, Holland. GHR hired Saybolt, a cargo inspection company that regularly worked for GHR, to determine the amount of oil loaded onto the vessel and to perform quality analyses on oil samples before, during and after the loading. Saybolt drew and analyzed four separate preloading samples, in accord with GHR's instructions. Two samples were taken from shoretanks numbered 150-17 and 150-20; and two were taken from barges Nos. TT7006 and TT7007. Of the four samples taken, three produced results which fell outside the acceptable range for No. 6 fuel oil specifications.2 Also in accord with GHR's orders, Saybolt performed a "final ship" or composite sample of the total oil cargo loaded on the HALKI. This final sample, performed according to industry practice, was taken by hand blending samples from each tank of oil on the HALKI and weighting them according to the amount of oil in each tank. The results yielded an oil viscosity of 252 seconds on the Saybolt Furol Scale at 122? Fahrenheit.3 This result was within the acceptable American Society for Testing Materials ("A.S.T.M.") standard range for No. 6 oil.4

While the tanker plied toward Amsterdam, Armada sold the cargo of No. 6 fuel oil to Coastal. A Coastal oil trader in London, David Robinson, negotiated the purchase with a Paris broker. Robinson asked the broker about the nature of the cargo, the specifications, the HALKI's estimated time of arrival, and the cargo's size. Because Coastal required an independent analysis of all oil cargoes prior to purchase, Robinson inquired which inspection company had performed the oil analyses. The broker informed him that Saybolt had performed the tests. Robinson's superior, Mr. Bowman, concluded the deal by telephone with the Paris broker later that afternoon. The broker sent Coastal a confirmation Telex, which stated that Saybolt's analysis was final and binding to the buyer and the seller. Neither Robinson nor Bowman saw copies of any Saybolt test report during the negotiations. Neither asked nor was told whether the report stated that the test was "composite."

Upon arrival in Amsterdam, the fuel oil was too cold to discharge or even to test.5 It required twelve days of heating the vessel's holds before the oil could be discharged into four shoretanks (Nos. 201, 202, 811 and 813). Saybolt-van Duyn, a related corporation of the defendant, tested the oil after discharge, and its results were comparable to those obtained by Saybolt upon loading. Approximately 340 cubic meters of oil could not be discharged and remained on board the HALKI. Coastal originally refused the shipment, complaining of the oil's high viscosity and excess water. The dispute was submitted to arbitration, and by a court order of the Southern District of New York, GHR, Equity, Armada and Coastal were compelled to participate in the arbitration proceedings. In January 1983, GHR filed a Chapter 11 petition in bankruptcy, which stayed all arbitration.

On June 10, 1983, Coastal filed suit against Saybolt in the United States District Court for the Eastern District of Louisiana, alleging in its original complaint that Saybolt had breached a contract with Armada to survey and analyze the fuel oil. Coastal claimed that Saybolt had issued materially erroneous reports of its test results knowing that subsequent purchasers of the oil cargo would rely on these reports. Coastal sought damages from Saybolt on the theory that it was a third-party beneficiary of the alleged Armada-Saybolt contract. Saybolt then filed a third-party claim in rem against the HALKI and its owner, Equity, and tendered those parties to Coastal as additional defendants, pursuant to Fed.R.Civ.P. 14(c).

The district court, sua sponte, stayed Coastal's suit pending the outcome of the New York arbitration proceedings, to which Saybolt was not a party. Coastal appealed the stay, and this court dismissed the appeal for lack of jurisdiction on the ground that stays in admiralty are nonappealable interlocutory orders. Coastal (Bermuda) Ltd. v. E.W. Saybolt & Co., 761 F.2d 198, 200 (5th Cir.1985).

The district court then modified its stay order and permitted Coastal's claim against Saybolt, but not Equity, to proceed. A bench trial was held on May 29, 1986, and the court awarded judgment for Coastal in the amount of $521,847.27 plus costs and interest from the date of judgment.

Saybolt noticed an appeal before any posttrial motions were filed. On June 11, 1986, Coastal moved to amend the judgment to add prejudgment interest and also moved for entry of final judgment. The district court denied Coastal's motion to amend, but entered final judgment in favor of Coastal on July 17, 1986. The district court then denied Saybolt's motion for a new trial, and Saybolt filed its second notice of appeal. Coastal appealed the district court's denial of its motion for prejudgment interest.

Coastal presented two theories of liability before the district court: one in contract and a second in tort. With respect to Coastal's third-party beneficiary contract theory, the district court held that the "plaintiff has not carried its burden of proof."6

However, the district court found that Coastal had stated a valid cause of action in tort, based on section 552 of the Restatement (Second) of Torts.7 Citing Vicon, Inc. v. CMI Corp., 657 F.2d 768 (5th Cir.1981), and Royal Embassy v. Ioannis Martinos, 1986 A.M.C. 769 (E.D.N.C.1984), the district court held that

a firm which in the course of its business provides information for the guidance of others in business transactions is responsible for damage caused by reliance upon that information, if the firm fails to exercise the care and competence in obtaining and communicating the information which the recipient is justified in expecting, and if the harm is suffered by a person for whose guidance or upon whose reliance the information was supplied or could be expected. That is clearly the situation which confronts the defendant in this case.

Record, Vol. VII at 15-16.

The district court concluded that Saybolt was negligent because the words "composite sample" did not appear on Saybolt's final ship test report. See supra note 3. Coastal had argued to the district court that without the word "composite," the test report indicated that each tank on the HALKI contained uniformly blended No. 6 oil with the exact specifications described in Saybolt's final ship report. The district court accepted Coastal's argument and held that absent the word "composite" or, at least, a range of minimum and maximum values for the properties analyzed, Saybolt's report failed to accurately describe the cargo, which was unblended, nonuniform lots of oil, some of which did not meet the minimum specifications for No. 6 fuel oil.8

While there is no argument that the test report in question (Plaintiff's Exhibit No. 16) did not contain the word "composite," Saybolt contends that the report was nonetheless marked "final ship," which indicated to GHR and to other persons in the industry that the sample had been taken after the ship was loaded and was a composite sample of the oil in all the ship's tanks.

In order to state a cause of action for negligent misrepresentation under section 552 of the Restatement (Second), the plaintiff must allege that: (1) the defendant, in the course of its profession, supplied false information for the plaintiff's guidance in a business transaction; (2) the defendant failed to exercise reasonable care in gathering the information; (3) the plaintiff relied on the false information in a transaction that the defendant intended the information to influence; and (4) the plaintiff thereby suffered pecuniary loss. Grass v. Credito Mexicano, S.A., 797 F.2d 220 (5th Cir.1986). Because we find no evidence in the record that Saybolt supplied false information for Coastal's guidance in this business transaction, no evidence that Saybolt failed to exercise reasonable care in obtaining or communicating the test results, and no evidence that Coastal justifiably relied on Saybolt's final ship report when it interpreted the report to indicate a preblended, uniform cargo of No. 6 oil, we reverse the district court's holding.

Our review of the record reveals that Coastal has failed to show the elements required in a prima facie case of negligent misrepresentation. We discuss below the record evidence in connection with each element.

Coastal must first show that the information in Saybolt's test report was false. The disputed test report, Plaintiff's Exhibit No. 16, is headed:

Sampled from: M/T HALKI at AMA ANCHORAGE FINAL SHIP

The report goes on to list the tests performed on the oil and the results, which include a viscosity of 252 seconds on the Saybolt Furol scale at 122? Fahrenheit. See supra note 3. The record shows that this result falls within the A.S.T.M. standard viscosity range for No. 6 oil.

The district court found the testimony of Mr. Ralph Babin, a Saybolt chemist, particularly credible. In its ruling from the bench, the district court stated:

Mr. Babin testified that the test was a certification to the world. He testified that the report failed to indicate that the test results were composite only. Mr. Brossette, another witness brought on by the defendant, confirmed Mr. Babin's and confirmed the implication of Mr. Babin's testimony when he admitted that the description in the test report was an exact description rather than a composite or a minimum/maximum description of the commodity in question. Mr. Babin said that the failure to indicate that the test results were a composite only [,] constituted an omission in direct response to a request from the court.9

Record, Vol. VII at 8.

Although the district court found the information in Saybolt's report falsely represented the cargo because it did not include the word "composite" or, at least, indicate the maximum/minimum ranges for the tests performed, we must disagree. The record shows that GHR instructed Saybolt to "make up a composite sample of that ship and determine what the composite sample's parameters were." Id., Vol. VI at 57. According to Babin, the witness whom the district court found most credible, Saybolt's final ship report was an accurate description of the average parameter of the oil as it came from the ship. Id. at 56. Babin further testified that the reports issued by Saybolt made it clear that the oil cargo contained in the four separate tanks on the HALKI was not uniform, but came from a wide variety of sources. Id. at 55. Babin explained that lack of uniformity is not an unusual problem with No. 6 oil, and he commented "that's why we were so careful with our composite because we knew that the substance in each tank would probably vary." Id.

In its bench opinion, the district court emphasized Babin's statement that the failure to indicate "composite" on the test results constituted an omission. From our review of the record, however, Babin testified that "final ship" at the top of Saybolt's report indicated a composite sample. Id. at 59-60. While it is true that in response to recurrent questioning by the district court Babin stated that the absence of the word "composite" was an "omission," the substance of his testimony is nonetheless clear: Saybolt's report accurately described the final ship's cargo in accord with GHR's instructions.

Saybolt called Robert Bartell as a witness, the former manager of quantity control at GHR's refinery in Goodhope. Although the district court found the "general thrust of Mr. Bartell's testimony ... not credible," Bartell, like Babin, testified that the words "final ship" on Saybolt's report indicated to him that the sample was a composite.10

Saybolt's final witness, Victor Brossette, was an expert in the field of petroleum products trading. Brossette testified, as did Babin and Bartell, that notwithstanding the lack of the word "composite," he would interpret Saybolt's test report to be a composite sample. Although the trial transcript shows that Brossette's testimony was not the essence of clarity, which appears at least partially attributable to the district court's interruptive questioning of the witness, Brossette nonetheless plainly stated: "Because it says 'final ship' and the way I know that ships are sampled, I would make the determination that this is the quality of the composite." Id. at 213.11 Brossette testified that the better business practice would be to state a range of minimums and maximums with respect to the specifications. He nonetheless unequivocally concluded that the Saybolt test report was a composite sample of the final, fully loaded ship. Id. at 213-14. We therefore interpret his testimony, as well as the testimony of other witnesses who examined the report, to demonstrate that because the words "final ship" clearly appeared on the report, the omission of the word "composite" did not render the report false as to the quality of the shipment. Coastal offered no witnesses who testified that the final ship report could be interpreted as false.12 To be sure, it is most difficult for us to imagine how a person in the industry who knows that cargo vessels contain numerous tanks, would possibly read a final ship's report to mean anything but a composite sample drawn from all the vessel's tanks.

It is our conclusion after carefully reviewing all the evidence presented that Saybolt reported the test results and performed its responsibilities in accord with industry practice. There is no evidence to show that Saybolt supplied false information for GHR's guidance in this particular business transaction, nor did Saybolt supply false information to subsequent purchasers. All the evidence indicates is that even without the word "composite" printed on the test report, a reasonable business person in the industry would assume that Saybolt's single data specifications, which were clearly marked "final ship," were the results of a composite sample representing the entire cargo. Thus Coastal failed to prove the first element of its prima facie case. Implicit in this finding is a conclusion that Saybolt cannot be charged with culpable negligence in the way it reported or communicated the quality of the cargo, the second element required to make a prima facie case under Sec. 552 of the Restatement (Second) of Torts. We turn, therefore, to examine Coastal's reliance on the report when it purchased the cargo.

Citing Babin's testimony, the district court found:Saybolt knew that GHR's oil moved all over the world. [Babin] testified that GHR wanted the test in question so that figures could not be doubted by the ultimate purchaser of the commodity, an implicit recognition that Saybolt knew others other than GHR might, in the chain of transaction, be relying on the test report.

Id., Vol. VII at 7.

Although we agree with the district court that an independent tester such as Saybolt must reasonably expect subsequent purchasers of fuel oil to rely on its test reports, we find nothing in the record to show that Coastal's reliance on Saybolt's report is the source or cause of Coastal's misunderstanding about the composition of the cargo.

We now examine the testimony of David Robinson, Coastal's oil trader who negotiated the sale of oil from Armada through a Parisian broker. In his telephone conversation with the broker, Robinson asked about "the nature of the cargo, the specifications, its ETA, [and] size of the cargo." Id., Vol. VI at 115. Robinson also asked which inspection company had performed the analyses, and he was informed that Saybolt had tested the oil cargo. Robinson further testified that he was interested in the cargo because it met the specifications and size that he was seeking for Coastal's inventory in Amsterdam. Robinson, who was completing a training period with Coastal, then informed his superior, Mr. Bowman, about the possible deal with Armada. Bowman, who did not testify at trial, made the final decision to purchase the HALKI oil. Both Bowman and Robinson spoke with the broker later that afternoon and confirmed the sale. The broker sent a confirmation Telex to Coastal in which only the test results of Saybolt's final ship report were reproduced and described as "final and binding" to the buyer and the seller. Id. at 119. The record does not reflect that Robinson ever asked the broker whether Saybolt's test results represented a composite sample or a uniformly blended cargo. Apart from Robinson's testimony regarding the negotiations, there is no evidence in the record that establishes what Bowman and the broker said, or what representations the broker might have made. Notwithstanding his lack of inquiry, Robinson assumed that the cargo was "uniform," that is, uniformly composed throughout each tank on the vessel of the exact No. 6 specifications indicated on Saybolt's final ship sample. Id. at 121. We must therefore conclude that whatever the source of Robinson's independent assumption that the cargo was uniform or preblended, it did not result from false representations made by Saybolt.

Finally, the evidence on damages also appears uncertain.13 The district court awarded total damages of $521,847.27 plus interest and all costs in favor of Coastal. This figure was comprised of: (1) $49,174.84 attributable to the 338.3 cubic meters of unpumpable oil left on board the HALKI, calculated at the contract price of $145.25 per metric ton; and (2) $472,671.43 for Coastal's costs in blending two shoretanks (Nos. 201 and 813) that contained seventy-five percent of the HALKI cargo. Coastal purchased 2,821.919 metric tons of middle distillate oil ("MDO"), a high quality oil priced at $312.75 per metric ton, and blended it with the two shoretanks. The district court reasoned that this reduced the value of the MDO to that of No. 6 oil and awarded damages on that basis. Using the contract price of $145.25 per metric ton as the value of No. 6 oil, the district court calculated the net loss of the MDO as $472,671.43 (2,821.919 metric tons X [$312.75 - 145.25].

Contrary to the district court, we find that Coastal has not established its damages on this record. First, it appears that the district court erred in assessing liability against Saybolt for the 338.3 cubic meters of unpumpable oil remaining on the HALKI. The district court rejected as mere speculation Saybolt's argument that the oil solidified because the HALKI's heating system failed en route, or alternatively, because of high winds or heavy seas. Coastal, on the other hand, argued that the only reasonable inference from the evidence presented was that the oil cargo, composed of incompatible aromatic and paraffinic stocks, stratified in the ship's tank leaving a heavy "unpumpable sludge." Coastal maintained that the lost 338.3 cubic meters of cargo was attributable to the incompatible characteristics of the oil, which Saybolt negligently failed to describe on its test report. The district court made no specific finding of fact on why the oil was unpumpable. The court commented, however, in its bench opinion that "for whatever reason, [the oil] couldn't be pumped off." Id., Vol. VII at 11.

We find Coastal's theory regarding the unpumpable sludge at least as speculative, and arguably more speculative, than that presented by Saybolt. We first note that there is no evidence in this record to prove that incompatible paraffinic oil stock was loaded on the HALKI. In fact, Babin testified that he considered the HALKI cargo to be compatible.14 Furthermore, GHR never asked Saybolt to test the oil for compatibility or potential stratification. Id., Vol. VI at 85-86. We therefore hold that Saybolt had no duty to perform additional tests for which GHR made no request and did not pay, and that liability for the unpumpable 338.3 cubic meters of oil remaining on the HALKI cannot be attributed to Saybolt.

Second, Robinson testified that Coastal purchased the oil on the HALKI fully intending to blend it upon discharge. According to Robinson, even if the oil had been uniform with the same viscosity of 252 seconds Saybolt Furol throughout the cargo, this viscosity was too high for the European market, which demanded a viscosity of 3,500 to 4,500 on the Redwood 1 standard. We note, however, a silence in the record with regard to the blending costs that Coastal had originally anticipated. In addition, approximately twenty-five percent of the oil purchased (Tanks Nos. 202 and 811) was of much higher quality than the oil for which Coastal had bargained, and was within the European market viscosity range for No. 6 oil. Nothing in the record, however, indicates the value of this higher quality oil on the European market.

Furthermore, there is no evidence of either the quality or the value of the remaining two shoretanks of oil (Tanks Nos. 201 and 813) after the MDO was blended into them. This leaves the question whether the blended oil was of a higher quality than the usual No. 6 oil. If the blended oil were of superior quality, the full cost of the MDO was an incorrect damage award. What Coastal ultimately did with the blended oil, whether it was sold or added to Coastal's own inventory, is yet another fact that is absent from this record. We find nothing in the record to indicate that Coastal suffered an actual pecuniary loss in a subsequent sale of the oil.

In any event, the proper damages recoverable for negligent misrepresentation under section 552 are "the difference between the value of what [one] has received in the transaction and its purchase price...." Restatement (Second) of Torts Sec. 552B(1)(a) (1977). See also In re Letterman Bros. Energy Securities Litigation, 799 F.2d 967, 974 (5th Cir.1986). The purchase price of $145.25 per metric ton is undisputed. However, Coastal presented no evidence of the oil cargo's value upon discharge. Without this crucial evidence, Coastal's claim of damages falls short of adequately establishing, the pecuniary loss necessary to prove its prima facie case.

In conclusion, we hold that Saybolt did not communicate false information upon which Coastal relied in its purchase of the No. 6 oil. Coastal has failed to establish the elements of a prima facie case of negligent misrepresentation under section 552 of the Restatement (Second) of Torts, and accordingly, the district court is

REVERSED.