On the morning of March 16, 1978, the supertanker AMOCO CADIZ broke apart in a severe storm, spewing most of its load of 220,000 tons of Iranian crude into the seas off Brittany. The wreck resulted in one of the largest oil spills in history, damaging approximately 180 miles of coastline in one of the most important tourist and fishing regions in France. The clean up took more than six months and involved equipment and resources from all over the country. The disaster has had lasting effects on the environment, the economy, and the people of Brittany, and has resulted in numerous lawsuits. Thirteen years later, the matter is before us. In this consolidated appeal, we are asked to resolve a myriad of issues involving jurisdiction, liability, and damages. Before we begin, a brief history of the litigation and its cast of characters is in order.

The origins of the AMOCO CADIZ are not difficult to trace. The vessel was born of discussions that began in Madrid, Spain in May 1970 between Astilleros Espanoles, S.A., the shipbuilder who constructed the fleet in which Columbus voyaged to the New World, and Standard Oil Company of Indiana ("Standard") (now called Amoco), an Indiana corporation having its principal office and place of business in Chicago, Illinois. The latter was represented by Robert S. Haddow, vice president in charge of marine operations at Amoco International Oil Company ("AIOC") and chairman of Amoco Tankers and Amoco Transport. (For simplicity's sake, we generally will refer to Amoco and its various subsidiaries--Amoco Tankers, Amoco Transport, and AIOC--as "the Amoco parties" or "Amoco.") Astilleros previously had contracted to build two megatankers for Amoco; Haddow wanted two more. The Madrid meeting covered all the essentials: technical specifications, delivery date, and price. Further negotiations took place in New York and Chicago. On May 30, Astilleros confirmed the content of the negotiations and submitted a bid to build two ships, the AMOCO CADIZ and the AMOCO EUROPA. Amoco accepted the bid by letter on June 18, and the parties signed off on the final contract and ship specifications in Chicago on July 31, 1970.

The contract required that the ship be built according to the American Bureau of Shipping's ("ABS") Rules for Building and Classing Steel Vessels. The ABS is a not-for-profit maritime classification society headquartered in New York that promulgates rules and sets standards for shipbuilding, design, and seaworthiness. The ABS's technical staff in London reviewed Astilleros's proposed plan for the AMOCO CADIZ to ensure that it complied with the ABS's Rules. The ABS examined the "general arrangement" plans--plans featuring the layout and list of components used in the various parts of the ship--as well as drawings related to the detailed design of the ship. (By "detailed design," we mean items as small as nuts and bolts.) The ABS stamped the plans and drawings with its Maltese cross emblem to signify its approval. The Amoco-Astilleros contract incorporated the general arrangement plans and required Astilleros to submit them to Amoco for acceptance prior to construction. Astilleros did so, but did not pass along to Amoco its detailed design drawings, calculations, or fabrication drawings showing the mechanical details of the steering mechanism's component parts. Amoco reviewed the design of the steering gear system and approved it on October 19, 1971. Amoco later made two modifications to the system: it designed a low fluid level alarm for the replenishment gravity tank and increased the size of the rudder. It chose not to include an optional hand charging pump. Astilleros's representatives came to Chicago for a two-day meeting in June 1972 to firm up technical details.

Pursuant to the contract, Astilleros built the behemoth at its shipyards in Cadiz, Spain. It took four years to complete the job. Throughout the construction process, both Amoco and the ABS had representatives on the scene at the shipyard. The Amoco representatives were concerned with deadlines and whether construction conformed to the contract specifications and general arrangement drawings. They also were present to witness tests of equipment and gear and to catch any problems that might have been missed in the plan approval process. The ABS representatives monitored the progress of the ship to ensure that construction was in conformity with the ABS's Rules. The Amoco representatives deferred to the ABS representatives' technical and engineering expertise in evaluating whether construction was proceeding as it should.

At long last, the vessel was finished. It measured 1095 feet long and 167 feet wide--the size of three football fields--and weighed 230,000 deadweight tons. It was powered by a 30,000 horsepower diesel engine driving a single screw and was equipped with a single rudder driven by a hydraulic steering engine. It had a hydraulic steering gear with movement of the rudder controlled by two pairs of rams contained in four cylinders that were filled with hydraulic fluid. The four rams were made of rolled steel and their heads were cast steel. Ram isolation valves controlled the flow of oil through the passages in the distribution block. These valves were a critical safety component. They could capture the remaining hydraulic fluid in the rams in the event of a rupture in the piping. The valves also could be closed to isolate the various lines from the rest of the system or to block the passage of oil to or from the cylinder.

The AMOCO CADIZ's steering system was supposed to work in the following manner. When the helmsman turned the steering wheel or when the ship operated on autopilot, an electronic signal was generated. In response to the signal, hydraulic fluid was moved by a series of pumps, which in turn moved the rams and, eventually, the rudder. The hydraulic fluid in the cylinders kept the rudder restrained and in the desired position by exerting pressure against the rams. There was no device aboard that could be used to steer the ship if the primary system failed. The ship was not equipped with twin screws, twin rudders, or bow thrusters that could be used to steer in an emergency. The anchor was underdesigned and could not be used as a stopping device in a crisis situation.

The ABS certified the ship--and its steering gear--as being in compliance with the ABS's Rules. Even after delivery, the ABS periodically conducted inspections of the AMOCO CADIZ to determine if it still was in seaworthy condition. Three times--June 1975, April 1976, and May 1977--the ABS inspected the steering gear and pronounced it in working order.

Amoco Tankers ("Tankers"), a Liberian corporation all of whose stock was owned by Standard through a chain of wholly owned subsidiaries, took delivery of the AMOCO CADIZ on May 11, 1974. Two weeks later, Tankers sold the vessel to Amoco Transport ("Transport"), a Liberian corporation with its principal place of business in Bermuda. Transport was a subsidiary of AIOC. In June 1974, Transport entered into a consulting agreement with AIOC. The agreement provided that AIOC was responsible for the operation of the AMOCO CADIZ, including maintenance, repair, and training of its crew. Transport remained the owner of the vessel. Long after delivery, in August 1975, representatives from Astilleros met with Amoco in Chicago to discuss contract guarantee terms. Similar discussions were held in New York in 1976. Just like a home appliance, the AMOCO CADIZ came with a one-year guarantee. Astilleros agreed to repair or replace any defects in the ship or its equipment during its first year of operation, 1974-75. Consequently, during that first year, the ship always had on board an engineer from Astilleros who was attuned to any problem that arose. After the one-year guarantee period had expired, AIOC took care of maintenance problems.

In June 1974, the AMOCO CADIZ was chartered to Shell International Petroleum. "Charter hire" is the expense charterers pay owners of vessels per long ton per day. During off-hire periods, such as when the vessel is in for repairs, charter hire payments stop. It thus is in the pecuniary interest of a chartered ship's owner to keep the vessel running. The Amoco-Shell time charter required annual drydocking of the tanker for maintenance, but for reasons of economy, Amoco unilaterally lengthened the interval between drydockings to eighteen months and made plans to extend the interval to two years. (A two-year interval would save the company $1,250,000 in shipyard costs and $200,000 per year in off-hire losses.) The ABS rules required two-year intervals between drydockings unless the owner received special permission from the ABS. By January 1976, Amoco decided that time-chartered vessels would be drydocked every two and one-half years.

In February 1978, the fully-staffed AMOCO CADIZ took on a load of crude oil at Kharg Island, Iran, and Ras Tanura, Saudi Arabia, destined for Rotterdam around the Cape of Good Hope. The Italian crew was experienced and the officers all were properly licensed. With regard to training, Captain Pasquale Bardari and his officers and crew participated in on-shore classes and on-board safety exercises. The latter were conducted by representatives of Marine Safety Services, a British organization. In addition, the ship's library contained a collection of films, videos, and technical information pertaining to ship operations.

As the tanker approached western Europe, it sailed into a storm. Retired Royal Navy officer Leslie Maynard, an on-board representative of Marine Safety Services, later testified that he had seen worse weather only once, during a typhoon. The AMOCO CADIZ had the capacity to weather severe storm conditions and heavy seas if she was in seaworthy condition. Buffeted by the rough seas and high winds, the ship rolled heavily on March 15 and through the night of March 16. Despite the bad weather, the helmsman reported no difficulty with the steering mechanism. During their normal inspection rounds, the crew members reported no abnormalities in the steering room.

In the morning, while the AMOCO CADIZ was approximately nine miles off the French island of Ushant, its steering gear completely failed. The helmsman informed Captain Bardari, who broadcast a message to nearby ships giving the AMOCO CADIZ's position and a caution to stay clear. The crew raised "not-under-command" flags as an additional warning. Almost immediately, the ship's engineers examined the steering gear only to find that the "De" flange, which had held a pipe that carried oil from the port steering gear pump to the hydraulic oil distribution block, had come off. Oil was spurting everywhere.

The crew members discovered that five of the six steel studs holding the De flange and pipe to the distribution block had broken; no other studs had failed in the system. The failure of the studs allowed the rapid escape of hydraulic fluid out of the steering system and the immediate entry of air. One of the engineers futilely tried to stop the flow of oil by closing the port steering gear pump and the isolation valves on the distribution block. The chief engineer tried to replenish the system by adding hydraulic fluid to the steering gear gravity replacement tank, but the fluid level in the gravity tank did not drop as it should have if the steering mechanism had been functioning normally.

Because of the lack of hydraulic pressure, the rudder was unrestrained. Some of the crew unsuccessfully tried to control the swinging rudder with a block and tackle, while others tried to repair the flange connection and purge the air from the system. As the crew worked, a relief valve pipe blew off, and oil hit the ceiling of the steering compartment. With the relief valve blown, the rudder's unchecked movement became more violent until it crashed into its stops, breaking apart the steering gear and hurling metal parts in every direction. The chief engineer ordered an evacuation of the compartment after one of the crewmen was struck in the head with a piece of metal. The chief engineer then reported to Captain Bardari that the steering gear could not be repaired.

About two hours after the steering failure, Captain Bardari called for salvage tugboats. In response, the PACIFIC, a salvage tug in the fleet of Bugsier Reederei und Bergungs, A.G., a corporation organized under the laws of the then Federal Republic of Germany, arrived on the scene. Bugsier undertook salvage jobs only under a "Lloyd's Open Form" ("LOF") "No-Cure-No Pay" salvage contract. The tug did not begin operations immediately because Bardari had to call Chicago to find out if he could enter into such a deal. While the AMOCO CADIZ foundered, Amoco and the tug's captain, Hartmut Weinert, haggled over the LOF. Finally, Amoco and Captain Weinert came to terms. By then, the island of Ushant was less than six miles dead ahead, the shallow Chenal du Four on the port bow, and the rocky Finistere coast on the port beam. The wind was fierce, the seas high, and the AMOCO CADIZ pitched so wildly that her bow repeatedly plunged beneath the surface.

The PACIFIC approached and secured a fairlead on the bow of the AMOCO CADIZ intending to turn the ship to her starboard, head her out to sea, and then tow her in to shore. In hindsight, this strategy proved unfortunate. The PACIFIC was incapable of turning a ship the size of the AMOCO CADIZ into the wind and the towing chain broke. The PACIFIC made a second tow attempt by connecting to the stern of the tanker. By then, tidal currents and heavy winds had carried the AMOCO CADIZ dangerously close to the rocky and irregular Finistere coastline. The tanker continued to roll on the rocks and sink into the shoals. As the PACIFIC continued its futile maneuvers, its captain received the following message from Marine Safety Services representative Leslie Maynard, "Sir, we are grounded." The AMOCO CADIZ began tearing in two and the PACIFIC lost contact altogether. Soon, the telltale odor of oil filled the air. Fifteen million gallons spilled into the sea during the first night alone.

The resulting oil slick was eighteen miles wide and eighty miles long, one-fourth of the Breton coast. Over the weeks following the grounding of the AMOCO CADIZ 4,400 men and 50 vessels (which included ships and personnel from the British Royal Navy) were dispatched to aid in the clean up operations at sea. France sought more than 30 million francs for the cost of the clean up at sea (see infra section V.). The clean up on land took over six months and involved the participation of the French army. Heavy machinery and volunteers were recruited from all over France. Approximately 220,000 tons of oily waste the color and consistency of chocolate mousse were recovered from the beaches along the Cotes du Nord. The infusion of oil upset the delicate ecosystem along the coastline, destroying algae and ruining oyster and lobster beds. Especially hard hit was the Breton economy. Brittany is France's second most important tourist region after the Riviera. The claimed overall cost to France was an estimated $1XX-XXX-XXX at the 1978 rate of exchange.

In the aftermath of the environmental disaster, various parties brought lawsuits. The Republic of France ("France") sued Amoco to recover for pollution damages and clean up costs. Similar actions were brought by the French administrative departments of Cotes du Nord and Finistere ("the Cotes du Nord parties"), numerous municipalities called "communes," and various French individuals, businesses, and associations, including hoteliers and fisherman who lost business as a result of the oil spill ("the French claimants"). The Cotes du Nord parties and the French claimants charged Astilleros with negligence in designing and constructing the tanker. The lawsuits were filed in Illinois and New York. Astilleros appeared and moved to dismiss the claims against it for lack of personal and subject matter jurisdiction and for forum non conveniens. Both the Cotes du Nord parties and Amoco sued Bugsier, the owner of the tug PACIFIC, claiming that it was negligent in attempting to tow the AMOCO CADIZ. The Bugsier suits were stayed pending arbitration in London. Bugsier filed a limitation action in the lawsuits which the Cotes du Nord parties were claimants.

Amoco brought several actions in federal district court in Chicago. It filed a complaint for exoneration from or limitation of liability pursuant to the United States Limitation of Liability Act of 1851, 46 U.S.C.App. §§ 181-196 ("Act"). In addition, the Amoco parties filed a third-party claim and cross-claims against Astilleros. Amoco filed for contribution from the ABS to the extent that the grounding was caused by ABS's negligence and breach of contract in approving the vessel design, inspecting it, and certifying its seaworthiness. The Cotes du Nord parties and French claimants also sued the ABS. The ABS settled these claims and sued the Amoco parties in New York, seeking reimbursement for expenses in connection with the settlement. Amoco removed the matter to federal court and counterclaimed. Petroleum Insurance Limited ("PIL"), Royal Dutch Shell's subrogee, sought to recover from Amoco for loss of the oil cargo, claiming loss occurred through Amoco's lack of due diligence in making the vessel seaworthy and through Amoco's breach of the charter contract.

The various federal actions were bifurcated and brought before Judge Frank J. McGarr of the Northern District of Illinois. After consolidating the liability issues, Judge McGarr opened the bench trial on May 4, 1982. The liability phase would not end until late November of the same year. In an April 18, 1984 opinion, the court held Amoco Corporation, Astilleros (who neither participated in discovery nor in the trial), and Amoco Production Company jointly and severally liable to France, the Cotes du Nord parties, the French claimants, and to PIL. The court denied Amoco's petition for limitation of liability. Bugsier was exonerated on the claims brought against it by the Cotes du Nord parties. (Amoco's claims against Bugsier eventually were resolved in the London arbitration.) Because of its settlement with France and the Cotes du Nord parties, the ABS did not participate in the liability trial. It still is part of a pending "tag-along" action in federal district court in Chicago in which Amoco is seeking contribution from the ABS.

The court subsequently held a second bench trial on the consolidated damages issues. That trial lasted from April 1986 to June 1987. On October 5, 1987, the court awarded PIL XX-XXX-XXX.50 pounds sterling for the loss of Shell's oil cargo. The court also awarded PIL prejudgment interest, but denied its request for compounded interest. Subsequently, the court amended its opinion by awarding PIL statutory costs and by setting the annual prejudgment interest rate at 7.22 percent. The final award to PIL was XX-XXX-XXX.68 pounds sterling. With regard to the other plaintiffs' damages, on January 11, 1988, the district court applied French law and ordered an award to cover costs of clean up and restoration incurred by France, the Cotes du Nord parties, and the French claimants. The court awarded statutory costs as well as compound prejudgment interest at an annual rate of 7.22 percent for a total of nearly 600 million French francs.

When Judge McGarr retired in late January 1988, the case was reassigned to Judge Charles R. Norgle, Sr., who appointed Judge McGarr as a Special Master to resolve any remaining issues. Special Master McGarr issued his Final Report and Recommendations on October 31, 1989. Pursuant to Rule 53 of the Federal Rules of Civil Procedure, the Amoco Parties, France, the Cotes du Nord parties, Astilleros, and PIL filed objections. In March 1990, a hearing was held on those objections. Following the hearing, the district court adopted all of the Special Master's Recommendations relating to liability and damages and, on July 24, 1990, issued four separate final judgments awarding claimants damages in French francs and pounds sterling against the Amoco parties and Astilleros, jointly and severally. These consolidated appeals followed.

Astilleros was named as a defendant or third-party defendant by Amoco, the Republic of France, the Cotes du Nord parties, and the French claimants in cases filed in both Illinois and New York. The Illinois and New York cases were consolidated in the Northern District of Illinois by the Judicial Panel on Multidistrict litigation.1 Three of the judgments now on appeal were entered in Illinois cases (Nos. 78 C 3693, 79 C 3548, and 79 C 3761) and one in a New York case (No. 79 C 2774). Astilleros contends that neither Illinois nor New York courts had personal jurisdiction over it.

Astilleros moved to dismiss each case against it for lack of personal jurisdiction. The court initially denied the motion in No. 78 C 3693, 491 F.Supp. 170 (N.D.Ill.1979) (Order 4), and later denied the motions in the other cases (Orders 5, 6, 10, 26). After the motions were denied, Astilleros did not significantly participate in any further proceedings in the district court. Default judgments finding Astilleros liable but leaving the calculation of damages for later determination were entered in the three Illinois cases in 1982. (Orders 16, 20) Astilleros appealed from these judgments under 28 U.S.C. § 1292(a)(3), which allows appeals from certain interlocutory orders in admiralty cases. This court affirmed the judgment of the district court. In re Oil Spill by the AMOCO CADIZ off the Coast of France on March 16, 1978, 699 F.2d 909 (7th Cir.1983) (Astilleros I ), cert. denied, 464 U.S. 864, 104 S.Ct. 196, 78 L.Ed.2d 172 (1983). Although Astilleros sought dismissal in No. 79 C 2774, the New York case, in 1980, and its motion was denied in 1982, no default judgment was then entered, and the present appeal is the first to arise from that case.

After the district court resolved the liability of other parties and made damages calculations, Astilleros objected to the damages again claiming that it was not subject to the jurisdiction of the court. The court rejected the attempt to relitigate this issue. After final judgments, Astilleros appealed claiming that neither the New York nor the Illinois district court had personal jurisdiction over it.2

Because a panel of this court has already determined that Astilleros was subject to the jurisdiction of the district court in Illinois, the doctrine of law of the case applies to this issue. "Ordinarily, matters decided on a prior appeal become the law of the case to be followed on a later appeal." Parts and Electric Motors, Inc. v. Sterling Electric, Inc., 866 F.2d 228, 231 (7th Cir.1988), cert. denied, 493 U.S. 847, 110 S.Ct. 141, 107 L.Ed.2d 100 (1989). Astilleros's arguments that the prior panel's decision is not law of the case because it was an affirmance of an interlocutory decision of the district court and because the prior panel must have found only that there was a prima facie case of jurisdiction are not correct.

It is well established that a decision of an interlocutory appeal may be the law of the case. See, e.g., Illinois ex rel. Burris v. Panhandle Eastern Pipe Line Co., 935 F.2d 1469, 1478-79 (7th Cir.1991); Citronelle-Mobile Gathering, Inc. v. Herrington, 826 F.2d 16, 23 (Em.App.1987), cert. denied, 484 U.S. 943, 108 S.Ct. 327, 98 L.Ed.2d 355 (1987); Erkins v. Bryan, 785 F.2d 1538, 1542 (11th Cir.1986), cert. denied, 479 U.S. 960 & 961, 107 S.Ct. 455, 93 L.Ed.2d 402 (1986); Appleton Electric Co. v. Graves Truck Line, Inc., 635 F.2d 603, 607 (7th Cir.1980), cert. denied, 451 U.S. 976, 101 S.Ct. 2058, 68 L.Ed.2d 357 (1981); United States v. Turtle Mountain Band of Chippewa Indians, 612 F.2d 517, 520-21, 222 Ct.Cl. 1 (1979). Also, the Fifth Circuit has held that decision of an interlocutory appeal in an admiralty case is law of the case. Todd Shipyards Corp. v. Auto Transportation, S.A., 763 F.2d 745, 750-51 (5th Cir.1985). There is no reason to refrain from treating a decision of an interlocutory appeal as law of the case when, as is very clear in this case, the issue necessarily addressed in the earlier decision is the same as the one we are asked to consider anew, and there was no clear error in the decision. The Supreme Court recently said, " 'when a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages in the same case.' " Christianson v. Colt Industries Operating Corp., 486 U.S. 800, 816, 108 S.Ct. 2166, 2177, 100 L.Ed.2d 811 (1988) (quoting Arizona v. California, 460 U.S. 605, 618, 103 S.Ct. 1382, 1391, 75 L.Ed.2d 318 (1983) (dictum )).

Astilleros cites three cases which say that law of the case applies only to final judgments, but we do not find those cases controlling. United States v. United States Smelting Refining & Mining Co., 339 U.S. 186, 198-99, 70 S.Ct. 537, 544, 94 L.Ed. 750 (1950), involved a proceeding before the Interstate Commerce Commission to determine the beginning and end of line-haul service at appellee smelters' plants. On review a three-judge district court decided that a finding was not supported by evidence, and remanded the matter. There was no appeal from this judgment. The Commission took no more evidence and simply restated the ground for its action. The district court again held the orders unlawful. The Supreme Court reversed. In rejecting the argument that the first district court decision became law of the case which bound the Supreme Court, the Court reasoned that "when the case was first remanded, nothing was finally decided." Id. at 198, 70 S.Ct. at 544. This language is not relevant to this case where the issue is whether law of the case applies in a court that has already decided the issue and not whether an unappealed decision which might have been law of the case in the lower court binds the appellate court. Similarly, we think the Supreme Court's further statement that law of the case, like res judicata, requires "a final judgment," id. at 199, 70 S.Ct. at 544, was meant to apply only when a party is arguing that law of the case precludes a court that has not yet considered the issue from reaching the merits of the issue on appeal. Furthermore, this court's decision on the earlier appeal in this case was an unequivocal appellate decision on the record before it, and was "final" in that context. See Turtle Mountain, 612 F.2d at 520 n. 2 (interpreting Smelting ). Cases generally have not relied on Smelting to limit law of the case to a decision on appeal from a final judgment, as the cases previously cited demonstrate.

In Hunter v. Atchison, Topeka and Santa Fe Railway Co., 188 F.2d 294, 299 (7th Cir.), cert. denied, 342 U.S. 819, 72 S.Ct. 36, 96 L.Ed. 619 (1951), this court declined to treat its earlier decision on appeal from a preliminary injunction as law of the case. The court relied on the fact that a preliminary injunction is not a decision on the merits and its object usually is to preserve the status quo. Id. at 298. The same considerations do not apply to appeals from other interlocutory orders where the issue addressed on the earlier appeal is identical to the issue which a party wishes to have reexamined on the later one.

In Gage v. General Motors Corp., 796 F.2d 345 (10th Cir.1986), the plaintiff had first filed in state court, and the state court dismissed his complaint for failure to state a claim. He then filed in federal district court, and that court dismissed his complaint saying in part that the state court decision was law of the case. The Court of Appeals held the law of the case rule was properly applied. It cited, but does not appear to have relied on, the statement in Smelting requiring a final decision. Id. at 349.

Astilleros's claim that Astilleros I established only that there was a prima facie case for jurisdiction is similarly unavailing. Astilleros argues that the procedural posture of the case has changed since the first appeal because the first appeal concerned a motion to dismiss and this appeal concerns a final judgment against Astilleros. Astilleros relies on several cases which say that a motion to dismiss is based on a prima facie case supporting personal jurisdiction and before judgment can be entered a court must hold an evidentiary hearing and find the facts upon which jurisdiction is based by a preponderance of the evidence. Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir.1985); CutCo Industries, Inc. v. Naughton, 806 F.2d 361, 363 (2d Cir.1986); Travelers Indemnity Co. v. Calvert Fire Ins. Co., 798 F.2d 826, 831 (5th Cir.1986), as modified, 836 F.2d 850 (5th Cir.1988). The first appeal, however, was not from the denial of the motion to dismiss. The appeal was from a default judgment as to liability against Astilleros. In granting the default judgment, the district court specifically found that it had jurisdiction over Astilleros. If Astilleros believed the default judgment rested upon improper procedure, it should have so argued on appeal. On appeal, this court affirmed the district court's finding of personal jurisdiction and in doing so implicitly held that the proper procedure and standard were used to find jurisdiction. Because implicit holdings constitute law of the case, Christianson v. Colt Industries Operating Corp., 486 U.S. 800, 817, 108 S.Ct. 2166, 2178, 100 L.Ed.2d 811 (1988); Parts and Electric Motors, Inc. v. Sterling Electric, Inc., 866 F.2d 228, 231-32 (7th Cir.1988); Conway v. Chemical Leaman Tank Lines, Inc., 644 F.2d 1059, 1062 (5th Cir. Unit A 1981), this issue is governed by Astilleros I.

Astilleros next argues that even if Astilleros I is the law of the case, this panel is not bound by that decision because (1) substantial new evidence was introduced after the first appeal, (2) subsequent decisions of the Supreme Court are contrary to the prior decision, and (3) the decision of the first court was clearly erroneous. Parts and Electric Motors, 866 F.2d at 231.

In its brief, Astilleros presents only one fact which it claims to be substantial new evidence: the oil spill was found to have been partially caused by Amoco's negligence. Astilleros argues that this fact is significant because in Astilleros I this court said, "If, as the cross-claim alleges, the oil spill was due not to any fault on Amoco's part but to Astilleros' negligence in designing or constructing the ship, this implies that Astilleros could have avoided a disastrous accident, for which both parties may be liable, more easily than Amoco could have." Astilleros I, 699 F.2d at 915 (emphasis added by Astilleros). Astilleros claims that this sentence shows that the prior panel's holding was not intended to apply were it found that the oil spill was partially caused by Amoco's negligence. The rest of the opinion, however, shows that the court held that Astilleros was subject to the jurisdiction of the court regardless of whether Amoco was partially negligent. The quoted sentence was part of the court's discussion of Amoco's claim for indemnity, which "can be said to 'arise from' the negotiation and signing of the shipbuilding contract." Id. The court went on to discuss Amoco's claim for contribution, which necessarily presupposes that Amoco would be found at fault, and to hold it sufficiently related to the contract claim to be within reach of the Illinois long-arm statute. Id. The court also held that there was jurisdiction in the cases brought by the French plaintiffs against Astilleros because "the negotiation and signing of the contract were critical steps in the chain of events that led to the oil spill," and this reason does not depend on whether Amoco was liable. Id. at 917. The court's conclusion contains no suggestion that the holding is conditional: "Since the district court has jurisdiction over both the complaint and cross-claim against Astilleros, the default judgments are AFFIRMED." Id. at 917. The facts which the court considered in finding personal jurisdiction are that Astilleros's representatives spent two weeks in Chicago intensively negotiating with Amoco, signed the contract for the construction of the AMOCO CADIZ in Chicago, and later returned to Chicago for other meetings related to the contract and to the contracts for other ships; no new evidence contradicts these facts.

Astilleros argues that subsequent decisions also require that we reconsider this court's prior judgment because these decisions "reflect an increasingly firm and specific admonition, particularly by the U.S. Supreme Court and the Illinois Supreme Court that, for domestic U.S. purposes, and particularly in the international context, courts should exercise care and restraint in using long-arm statutes to assert in personam jurisdiction over defendants, and especially over defendants residing outside the U.S." Astilleros brief at 60. Astilleros emphasizes that in Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102, 115, 107 S.Ct. 1026, 1033, 94 L.Ed.2d 92 (1987), the Court said,

the Federal Government's interest in its foreign relations policies, will be best served by a careful inquiry into the reasonableness of the assertion of jurisdiction in the particular case, and an unwillingness to find the serious burdens on an alien defendant outweighed by minimal interests on the part of the plaintiff or the forum State.

See also Wiles v. Morita Iron Works Co., 125 Ill.2d 144, 125 Ill.Dec. 812, 816, 530 N.E.2d 1382, 1386 (1988) (burden of defending in foreign jurisdiction should be primary concern when international defendant is involved). The subsequent decisions cited by Astilleros, including the Illinois Supreme Court decision, address the constitutional due process prong of the jurisdictional question. Astilleros has cited no subsequent decision interpreting the Illinois long arm statute, thus calling this court's earlier analysis of that statute into question.

With respect to the due process prong of the jurisdictional question, we do not view the language from Asahi quoted above as a new rule in the light of which this court's earlier due process analysis has become clearly erroneous. In Asahi, this language referred to one of several factors which the Court relied upon, and the weight which this factor deserves is not apparent. Also, even if foreign relations were a crucial factor in Asahi, it is not clear that it would deserve the same weight in this case because of the difference in facts. In Asahi, the foreign defendant's only knowledge that its product would be in the forum state came from its knowledge that the product was travelling in the stream of commerce, but Astilleros purposefully and voluntarily entered the forum state in order to conduct business.

It is not clear that the only relevant contacts are Astilleros' contacts with Illinois. This is a suit under the federal admiralty laws. The requirement of minimum contacts is intended to ensure that the sovereign possesses a legitimate claim to assert power over the defendant. Lisak v. Mercantile Bancorp, Inc., 834 F.2d 668, 671 (7th Cir.1987). When the national sovereign is applying national law, the relevant contacts are the contacts between the defendant and the sovereign's nation. "[T]he due process clause requires only that the defendant possess sufficient contacts with the United States." United Rope Distributors v. Seatriumph Marine, 930 F.2d 532, 534 (7th Cir.1991). Thus, in constitutional terms, the district court could assert jurisdiction over Astilleros based upon the combination of the New York and Illinois contacts. Not only do subsequent due process decisions not make this court's earlier decision clearly erroneous, but they may lend additional support to the decision that the district court could assert jurisdiction.3

Finally, Astilleros argues that Astilleros I is clearly erroneous because the court "sua sponte, without briefing and without a factual record, pierced the corporate veils of the various Amoco parties (and of six other Amoco subsidiaries who are not parties) in order to find that Astilleros entered into a contract with Standard Oil, an Illinois entity." Astilleros brief at 58 n. 31. This argument is not persuasive because in its opinion finding Amoco partially liable for the oil spill, the district court pierced the corporate veils of the Amoco parties, and there was substantial evidence to support this decision. In re Oil Spill by the AMOCO CADIZ Off the Coast of France on March 16, 1978, 1984 American Maritime Cases [hereinafter A.M.C.] 2123, 2173-88, 2194 (N.D.Ill.1984). Furthermore, Astilleros does not argue that the final result of this court's decision was clearly erroneous, and it is not possible to make such a showing. There is no clear precedent applicable to this case which the prior panel ignored or clearly misapplied, and no courts have subsequently criticized or called into doubt the holding. In fact, in Heil v. Morrison Knudsen Corp., 863 F.2d 546, 549 (7th Cir.1988), a case on which Astilleros relies heavily in its discussion of jurisdiction, this court cited the prior panel's decision with approval. The instant case rests on whether the actions against Astilleros can be said to be "arising from" its negotiation of the contract to build the AMOCO CADIZ, and we are not persuaded that it was clearly wrong to hold that the causes of action arose from the discussions between Amoco and Astilleros in Chicago about building the ship.

Although the doctrine of law of the case protects the default judgments in the Illinois cases from review, the New York case has not previously been reviewed by an appellate court. The district court denied Astilleros's motion to dismiss the New York case for lack of personal jurisdiction because Astilleros's representatives engaged in negotiations in New York concerning designs, plans, and specifications which were used for the AMOCO CADIZ. In re Oil Spill by the AMOCO CADIZ, 1983 A.M.C. 925, 932-35 (N.D.Ill.1982). Although this panel's prior opinion is not law of the case in the New York action, it has strong precedential value. New York's and Illinois's long-arm statutes are very similar, compare Ill.Rev.Stat. ch. 110, para. 2-209 with N.Y.Civ.Prac.L. & R. § 302(a)(1), and the factual differences between the New York and Illinois cases as to contacts with the forum are relatively small. Although Astilleros disagrees with the district court's finding that there were significant negotiations in New York, there were at least negotiations between Amoco and Astilleros concerning the sisterships of the AMOCO CADIZ, and the plans and designs for those ships which were developed in New York were used for the AMOCO CADIZ. Moreover, vacation of the judgment in the New York case (Order 49) would not benefit Astilleros. Judgment in one of the Illinois cases (Order 50) awarded all the recoveries included in Order 49.

Amoco moved for sanctions against Astilleros for pursuing this appeal after the jurisdictional issue has already been resolved by this court. Sanctions, however, are not appropriate in this case because although Astilleros's claims are "long shots, we do not believe they are the kind of 'objectively groundless legal arguments' we found sanctionable under Rule 38 in Hill v. Norfolk and Western Ry. Co., 814 F.2d 1192, 1200-03 (7th Cir.1987); nor are they 'entirely groundless' claims that 'the plaintiff knew or should have known [were frivolous] long before trial,' as in Bugg v. International Union of Allied Indus. Workers of America, 674 F.2d 595, 600-01 (7th Cir.1982). Further, [Astilleros's] brief does not contain 'blatant misrepresentations' of the facts or the law, as in Thomas v. Digital Equipment Corp., 880 F.2d 1486, 1490-91 (1st Cir.1989); and Thornton v. Wahl, 787 F.2d 1151, 1154 (7th Cir.1986)." Meredith v. Navistar International Transportation Corp., 935 F.2d 124, 129 (7th Cir.1991).

Having found that Astilleros is subject to the jurisdiction of American courts, we turn to the question of liability. What caused the steering system to fail and whose fault was it? As one can well imagine, in answering these questions, Judge McGarr braved a task akin to the seven labors of Hercules. Faced with a mountain of evidence, much of it highly technical, the district court did a remarkable job of factfinding. To summarize, it found that the failure of the steering gear system of the AMOCO CADIZ was proximately caused by a number of factors, including Amoco's (specifically, AIOC's) negligence in failing reasonably to perform its obligations to repair and maintain the steering gear, properly train its crew, provide the vessel with a redundant steering system or other means to steer the vessel in the event of a complete failure of the hydraulic system, and fulfill its duty as the party who supervised and approved the design to ensure that the design and construction properly were carried out. Amoco Cadiz, 1984 A.M.C. at 2154-61. Contesting jurisdiction, Astilleros chose not to defend itself against the various lawsuits filed by the Amoco parties, the Cotes du Nord parties, and the French claimants. The district court entered default judgments against the shipbuilder. The district court found that Astilleros improperly designed and built the steering gear and pressure relief valves and that the stud and flange assembly did not conform to specification or code requirements. Id. at 2162. In particular, the court found that the flange assemblies installed by Astilleros did not meet code requirements for high pressure systems.

Our standard of review is highly deferential. We are bound by the district court's findings of fact unless they are clearly erroneous. See Anderson v. City of Bessemer City, 470 U.S. 564, 573-76, 105 S.Ct. 1504, 1511-12, 84 L.Ed.2d 518 (1985); Insurance Corp. of Ireland, Ltd. v. Board of Trustees of Southern Illinois University and Richard Moy, M.D., 937 F.2d 331 (7th Cir.1991); Riviera v. Benefit Trust Life Ins. Co., 921 F.2d 692, 696 (7th Cir.1991); Fed.R.Civ.P. 52(a). A finding is "clearly erroneous" when, "although there is evidence to support it, the reviewing court on the entire evidence is left with a definite and firm conviction that a mistake has been made." United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948); see also E.E.O.C. v. Sears Roebuck & Co., 839 F.2d 302, 309 (7th Cir.1988). The clearly erroneous rule applies "even when the district court's findings do not rest on credibility determinations, but are based instead on physical or documentary evidence or inferences from other facts." Anderson, 470 U.S. at 574, 105 S.Ct. at 1511-12; see also Mucha v. King, 792 F.2d 602, 605 (7th Cir.1986). In order for us to determine whether the district court's findings of fact are clearly erroneous, we must spend some time examining the arcane workings of the steering systems of "VLCCs"--very large crude carriers.

From the beginning, there were mechanical problems with the hydraulic steering system rams and bushings on the AMOCO CADIZ and her sister ships. The rams are pistons; the bushings are the metal linings that protect the rams. The bushings on the four Amoco supertankers were constructed of cast iron, which was much harder than the rams themselves. When dirt particles are present, metal rams become scored, meaning they are marred or scratched because of close contact with something having a "plowing" effect. Ram scoring and defective bushings are especially serious because they contribute to the loss of pump efficiency and impair the reliability of the steering system. Scoring forms projections on the ram's surface, tearing the packing around the "gland," the ram casing. When the packing is torn, its sealing effect is destroyed and oil seeps through. It is good practice to change the packing every two years during drydocking or when a problem arises.

Amoco accepted the AMOCO CADIZ with the cast iron bushings and acknowledged the defect upon delivery. During the AMOCO CADIZ's sea trials in May 1974, an Amoco representative reported to AIOC vice-president Robert Haddow that there were problems with the hydraulic steering gear rams and bushings. Three of the ship's four rams were scored. Subsequent inspections of the tanker revealed that the scoring problem had worsened. Astilleros prepared a list of "Exceptions and Extras Not Completed for the AMOCO CADIZ." One of the items on the list stated, "Present rams are scored and cause rapid packing wear and leak oil excessively, resulting in excessive cleaning and expenditure for replacement oil. Repair satisfactorily or replace." Id. at 2168-69. Astilleros offered to repair or replace the scored rams and even supplied bronze replacement bushings. At the time of the wreck, a spare set of uninstalled bronze bushings was on board. Amoco had taken a cash credit from Astilleros in lieu of repair.

After visiting the ship in Genoa in March 1975, Transport marine engineer Giuseppe Ciaramaglia reported, "The rams were carefully inspected and found worse conditions since last inspection. Namely the four rams are heavily scored in the bottom side and near the bush. Particularly the ram in the position port-fore is in really bad condition and some dressing should be carried out next drydocking." Claimants' Exhibit 424. Although Amoco immediately changed the bushings on two of the AMOCO CADIZ's similarly constructed sister ships, the AMOCO MILFORD HAVEN and the AMOCO EUROPA, it took no action with regard to the AMOCO CADIZ's bushings. Unlike the AMOCO CADIZ, the repaired vessels were not on a time charter.

Robert J. Zimmerman, an AIOC ship superintendent, visited the ship in late January 1976 and inspected the steering gear rams. Zimmerman acknowledged the scoring problem, but recommended a polishing measure in lieu of more permanent repair, which would have required two weeks in drydock. Zimmerman wrote to company officials, "Rams are deeply scored and will continue to cut packing but oil loss cost minimal against extended time required to carry out the replacement of bushings...." Id. at 2169.

The specifications for the 1976 drydocking of the ship in Lisnave, Portugal included changing the ram packing material. Amoco later canceled this item to save time during the overhaul period. No work was performed during the 1976 drydock to polish out the scoring on the existing rams, change the bushings, or repack the glands. Over the next few months up until the grounding, the AMOCO CADIZ suffered leakage from the steering gear rams, the main hydraulic system of the steering gear, the small packing gland at the lower part of the level gauge indicator, and the mechanical seal of the main shaft of both main steering gear pumps at a rate far in excess of that which normally would occur with a properly maintained system. The AMOCO CADIZ was losing seven to twelve liters of hydraulic fluid per day in leakage. The acceptable quantity of leakage should have been no more than a few drops per day.

There were problems with the rudder, too. During trials in Lisbon on May 14, 1974, the rudder stuck in hard starboard position. On June 15, 1974, during maneuvering at Mina al Ahmadi, the rudder again stuck in the hard starboard position. In both cases, it was necessary to stop one of the two running pumps in order to return the rudder to normal position. There were other difficulties with the rudder as well. In port, the AMOCO CADIZ and her sister ships experienced as much as 15 degrees rudder movement when the system was shut down. To prevent the unwanted movement, Amoco ordered that one steering gear pump always be kept running. Amoco hired an independent marine hydraulics expert to investigate the problem, and he recommended that, as a first step in the investigation of the source of the problem, the company should check all valves in the distribution block, including relief valves and their springs. Amoco wrote a specification for the disassembly of the distribution block relief valves and associated repairs for the AMOCO CADIZ and her sister ships. Although the work called for in the specification was performed on the AMOCO MILFORD HAVEN and the AMOCO EUROPA in 1977, the work was not performed on either the AMOCO CADIZ or the AMOCO SINGAPORE, both of which were on time charter to Shell.

Another problem was that the ship's steering gear gravity tank, which held hydraulic fluid used to replenish fluid losses in the system, often would overflow when the starboard gear pump was activated. The overflow prevented the hydraulic steering gear pumps from being changed over every twenty-four hours, as required by the hydraulic system manufacturer in its steering gear manual (the "Manises Steering Gear Manual") and Amoco's own instructions. The system would have had to be shut down in order to locate the problem. In fall 1977, an Amoco inspector recommended that repairs concerning the overflow be deferred until the next drydocking. The repairs never were done. Also, Amoco failed to renew the leather belts used to drive the evacuation and replenishing pumps of the steering gear after they slipped on two occasions. Such slippage contributes to an imbalance in the system and has been associated with gravity tank overflow.

In addition to--and perhaps contributing to--these mechanical shortcomings, Amoco failed to adhere to manufacturer recommendations regarding proper maintenance of the ship's components. The instructions required that the isolation valves--the operation of which could have stabilized or immobilized the AMOCO CADIZ's rudder on the night of March 16, 1978--be opened, closed, and lubricated periodically to prevent their sticking as a result of being stationary for a long time or from being covered with foreign material. When the cylinder isolation valves were recovered after the wreck, they were found to have paint on the stem threads: they had been painted over with the valves in the open position. Tests performed on the valves showed that they could not be closed completely because of the paint. Had the isolation valves been totally closed when the steering gear failed, the hydraulic fluid in the cylinders could have acted as a "brake" on the rudder.

The manufacturer also recommended that the hydraulic fluid be kept free of contamination for proper operation of the hydraulic system. The Manises Steering Gear Manual stated: "The slightest impurity can bring about great damage on account of the narrowness of the channels in the Nanauer Pittler pumps.... The exact fulfillment of this operating instruction is the condition for a good performance of the pumps." Contamination creates an imbalance between the rate oil is removed from the main system and the rate of replenishment. Further, impurities in the oil cause wear on the internal parts of the main pumps, clogging of the filters, failure of seals, and scoring of the rams. Particulate matter in hydraulic systems acts like a grinding compound between points with close running tolerances. The manufacturer recommended that the shipowner avoid contamination of the hydraulic fluid by using clean oil filters and by filtering the oil through muslin as it is put into the system. The function of the oil filters is to strain the oil entering the system via the replenishing pump. The oil filters must be checked periodically and changed often to make sure they are clean. Checking the filters requires shutting down the system. The Manises Steering Gear Manual suggested a complete oil change after each 1,000 hours of operation for the first three oil changes and after every 3,000 hours thereafter, and periodic cleaning of filters. On each oil change, the tank must be drained in order to be kept free of sludge.

Amoco failed to follow these recommendations. It neither periodically replaced the oil in the hydraulic system of the steering gear with new oil, nor removed, strained, purified, or treated the oil prior to the wreck. The hydraulic fluid in the steering system was not filtered or changed between September 1977 and March 1978, and no steps ever were taken to check for contaminants. The drums containing hydraulic fluid were stored on the open deck. They were not covered over with tarpaulins. When the drums expanded and contracted because of temperature changes, the rainwater, dirt, soot, and sea spray that collected in the recessed drum heads was sucked in around the head of the drum.

In addition, Amoco utilized improper procedures in refilling the gravity replenishment tank, which it had to do more frequently than normal because of the leakage problem. On the AMOCO CADIZ, the gravity tank was not filled with a hand pump-storage tank. Instead, refilling was done in a rudimentary way. Crewmen would climb a ladder and pour a plastic bucket of hydraulic fluid into the tank without filtering. The bucket used to replenish the hydraulic fluid was kept uncovered in the steering gear room, which was dirty and moist. The various steam pipes that ran through the room all leaked. Transport marine engineer Ciaramaglia wrote several memoranda decrying conditions in the steering gear room. In a report describing his visit to the ship in October 1974, he stated that inspection of the rudder carrier bearing was impossible because the steering gear room was full of sea water.

The bucket method of pouring fluid into the gravity tank produced agitation that would cause air bubbles to enter the system. The steering system never was purged to remove entrapped air, a standard "good housekeeping" measure. Also, the fluid's exposure to air, which naturally contains moisture and contaminants, allowed foreign matter to enter the system. Water contamination decreases the lubricity of hydraulic fluid, which exacerbates the wear on closely moving parts and accelerates the growth of harmful bacteria. What's worse, the gravity tank on board the AMOCO CADIZ never was cleaned.

When the one of the valves of the AMOCO CADIZ--the # 9 valve located in the P loop--was recovered from the wreck and tested by the French National Testing Laboratory, it was found to be partially blocked. A properly functioning # 9 valve would have allowed the fluid level in the gravity tank to drop after rupture of the flange. The hydrocarbons removed from the valve were the sort that might be expected if significant quantities of oil or rubber oxidation residue had existed, clear physical evidence of contamination in the hydraulic fluid.

The ram scoring, leakage, unwanted rudder movement, and contaminated hydraulic fluid were clear signs of trouble that foreshadowed the breakdown of the steering gear. Apart from these mechanical and maintenance problems, a significant cause of the grounding of the AMOCO CADIZ was that its crew was trained improperly with respect to the maintenance, operation, inspection, and repair of the steering gear system. This lapse in training contributed to the failure of the steering gear system and the inability of the crew to reestablish steering control after the rupture of the De flange studs. The crew was not instructed as to the acceptable level of hydraulic fluid consumption of the steering gear. Amoco never directed the crew to clean the filters or change the hydraulic fluid in the steering gear, as required by the manufacturer's manual. Although it was critical to keep the hydraulic fluid uncontaminated, Amoco never told the crew to take samples of steering gear hydraulic fluid to test for purity. The crew was not instructed to clean out the bottom casing of the steering gear pumps or the sediment in the bottom of the gravity tank. Amoco never advised the AMOCO CADIZ crew of emergency procedures to be followed in the event of a steering gear breakdown, a critical lapse given that such drills could have familiarized the crew with emergency procedures so that they would have acted more decisively in the face of a crisis. Emergency drills also would have provided the perfect opportunity to "dry-run" emergency equipment. The crew did not practice blocking the rudder using the cylinder isolation valve as described in the steering gear manual, or using a two-ram mode of operation.

Why did these deficiencies occur? The record is replete with references to the fact that it was Amoco's deliberate policy to defer drydocking and repairs in order to minimize the loss of charter hire that would be incurred by taking the ship out of service during the charter period. Item 3 on a January 2, 1976 list of specifications for repairs of outstanding guarantee items contained an order for replacement of existing bushings for steering gear rams. Someone had written on the list the following note: "Take credit and do after charter expires." Following his January 1976 visit to the AMOCO CADIZ, AIOC ship superintendent Robert J. Zimmerman wrote his superiors that Amoco should turn down Astilleros's offer of replacement parts, take a cash credit, and defer repair until after the time charter expired.

In a March 10, 1976, memorandum from Chester J. Bysarovich, head of marine engineering for AIOC and a director of Tankers, to Tankers director Claude D. Phillips, Bysarovich emphasized the importance of keeping the AMOCO CADIZ out of drydock for "obvious reasons":

Realizing the importance of minimizing off-hire time, ... we have arranged to meet with Lisnave personnel at this vessel's discharge port at Genoa to go over the entire specification item by item, for the purpose of properly scheduling and organizing each item of work; and to cancel or accomplish by riding crews these items that are not absolutely necessary so that we can keep the ship's off-hire time down to 8 calendar running days.

Amoco later decided that eight running days would be the limit. Bysarovich telexed the drydocking site: "Amoco is extremely concerned over the possibility that this vessel will be delayed from sailing as scheduled and agreed. This vessel is committed to a charter and any delays could result in a severe penalty to Amoco." During the 1976 drydocking, Amoco canceled the renewal of bushings and packings because the job would have taken more than fourteen working days of two shifts per day.

In May 1977, Bysarovich wrote Phillips: "The AMOCO SINGAPORE and AMOCO CADIZ are planned for maximum allowable time without drydocking because these two vessels are on time charter." In an August 23, 1977, memorandum, Bysarovich informed Phillips of their 1978 goal:

The primary goal for 1978 is to keep the AMOCO CADIZ and the AMOCO SINGAPORE operating without any downtime that would put these two chartered-out vessels offhire. These two vessels will not be scheduled for their drydockings and biennial repair period until the expiration of the charters. This will mean doing various surveys during cargo operations. The charter hire of $28,000 per day vessel multiplied by the estimated time in the shipyard of 30 days per vessel is equal to $1,680,000 of incoming money that otherwise would not be realized.

Phillips responded in a handwritten note: "Very good! Hope we can reach this goal."

Amoco tries to confuse matters by arguing that, in finding that AIOC's negligence rendered the AMOCO CADIZ unseaworthy and caused its grounding, the district court improperly applied the admiralty doctrine of unseaworthiness, which imposes strict liability in favor of crew and cargo owners. Amoco points out that the category of individuals protected by this doctrine does not include the plaintiffs in this case. Amoco mischaracterizes the court's holding. Specifically, the court held that "AIOC negligently performed its duty to ensure that the AMOCO CADIZ in general and its steering gear in particular were seaworthy, adequately maintained and in proper repair." Amoco Cadiz, 1984 A.M.C. at 2191. Although the district court did indeed use the word "seaworthy," it was not applying the admiralty doctrine of unseaworthiness. "[L]iability based upon unseaworthiness is wholly distinct from liability based on negligence." Usner v. Luckenbach Overseas Corp., 400 U.S. 494, 498, 91 S.Ct. 514, 517, 27 L.Ed.2d 562 (1971). The unmistakable basis for the district court's decision that AIOC was liable was that its negligence caused the unseaworthy condition of the AMOCO CADIZ. The court stated, "The negligence of AIOC in failing reasonably to perform its obligations of maintenance and repair of the steering gear system was a proximate cause of the breakdown of the system on March 16, 1978, the grounding of the vessel and the resulting pollution damage." Id. 1984 A.M.C. at 2192 (emphasis added). The ship's "unseaworthy" condition, then, was the direct result of the failure to exercise reasonable care in the maintenance and operation of the vessel.

Amoco next assails the district court's concept of negligence; specifically, the court's use of the word "ensure." The court stated, "AIOC negligently performed its duty to ensure that the AMOCO CADIZ in general and its steering gear in particular were seaworthy, adequately maintained and in proper repair." Id. at 2191. Contrary to Amoco's contention, the district court's use of the word "ensure" did not create a new legal standard beyond the due diligence required of shipowners to take normal and reasonable precautions to make the ship seaworthy, something that Amoco failed to do before the AMOCO CADIZ's last voyage. Cf. Hercules Carriers, Inc. v. Claimant State of Fla., 768 F.2d 1558, 1577 (11th Cir.1985) ("Taken in context, it is obvious that the court was not using the word insure in the sense of requiring [the shipowner] to be an absolute insurer of all acts by its crew, but in the context of 'to make sure' that [its] responsibilities as owner were fulfilled, that is; exercising due diligence to furnish a competent, trained crew, provided with necessary information.").

Amoco also protests that the district court improperly expanded the due diligence requirement to include safeguarding against unknown, latent defects. Amoco contends that, in so doing, the district court overlooked a number of critical factors, such as the fact that Amoco chose a highly reputable shipbuilder and enlisted the expert services of the ABS. According to Amoco, the court also ignored the supertanker's past track record for safe trips and the unforeseeable nature of the steering gear failure. It is apparent to us (though not to Amoco) that the district court both considered and rejected these factors. Astilleros may have been a reputable shipbuilder, but the fact remains that it built the AMOCO CADIZ with certain defects. Fully aware of these deficiencies, Amoco failed to correct them purely for economic advantage. The fact that the ABS repeatedly vouched for the AMOCO CADIZ's seaworthiness does not relieve Amoco of liability either. When a shipowner has prior knowledge of its vessel's defects, certification by a classification society does not establish the seaworthiness of a ship or the lack of negligence on the part of a shipowner. See Complaint of Ta Chi Navigation (Panama) Corp. S.A., 574 F.Supp. 418, 428 (S.D.N.Y.1983); Navegacion Castro Riva v. The M.S. Nordholm, 178 F.Supp. 736, 741 (E.D.La.1959) ("It has been this Court's experience that classification societies often continue vessels in class long after their highest and best use would be as scrap."), aff'd, 287 F.2d 398 (5th Cir.1961). Amoco's argument that the AMOCO CADIZ performed well during its four-year history with no suggestion of any malfunction that could have led to the steering gear failure on March 16, 1978, completely ignores the scored rams, excessive oil leaks, and unexplained rudder movements--of which Amoco was well aware--that hinted of future trouble.

Faced with the overwhelming amount of evidence establishing its negligence, Amoco tries to get off the hook by spending a great deal of time and energy in this appeal challenging the district court's use of the "Free-Stroke/Torque Reversal" causation theory as an explanation for the failure of the steering mechanism. Amoco contends that the theory is but a highly imaginative by-product of inference piled upon inference as to what might have happened. Parenthetically, the district court rejected as "speculative" and not supported by the evidence Amoco's theory that the disaster was caused by improperly designed relief valves oscillating under pressure, thus producing repeated loads of pressure on the system and subjecting the studs to low cycle fatigue. Amoco Cadiz, 1984 A.M.C. at 2164-65. Cf. The West Arrow, 80 F.2d 853, 856 (2d Cir.1936) ("Neglecting precautions, which might have been taken if the instructions of the manufacturer had been carried out, makes the ship responsible for the resulting damage without clearer proof than was presented here that the accident was caused by a failure of performance which sprang from a latent defect.").

The basic idea of the "Free-Stroke/Torque Reversal" causation theory is that, as a result of Amoco's shoddy maintenance practices, void spaces were present in the steering gear hydraulic system. The presence of these voids effectively impaired the two-sided restraint of the movable parts of the steering gear. A high pressure surge originated with unintended rudder movement induced by wave action and sea forces acting upon the unrestrained rudder. Sea forces caused the movable parts to develop momentum, thereby creating an intense surge of high pressure transmitted through the hydraulic system that generated a force sufficient to break the studs of the De flange. Adopting this theory, the district court concluded that "a wave generated a pressure peak of whatever magnitude sufficient to rupture an underdesigned, below-specification, badly maintained hydraulic steering system." Id. 1984 A.M.C. at 2165.

A significant weakness in the "Free-Stroke/Torque Reversal" theory is that the expert who proposed it believed that it could account for about 330 to 450 bars of pressure on the studs, while metallurgists testified that 800 bars (Munse) and 1,200 bars (Silkiss) would have been required to rupture them.

Assuming, however, that the evidence does not support the conclusion that Amoco negligence caused the rupture, there was adequate evidence that Amoco negligence caused the grounding and ultimate spill by making the crew unable to get the rudder back under control after the rupture occurred. Consider: the studs failed because Astilleros built them improperly--as the district court found. Amoco's part lay in its failure to correct the ensuing leak. Two principal problems led to the inability to get the rudder back under control, to the point where the AMOCO CADIZ could use its engine to assist the PACIFIC. First, there was an inability to close the pressure isolation valve because its threads were painted. Second, there was the crud in the hydraulic oil, which a court could properly determine contributed to the failure of the # 9 valve to supply essential oil to replenish the system so that after isolation the rudder would have been stable. Even this is an iffy sequence. Stabilizing the rudder would have let the tanker assist the tug, but maybe this would not have been enough. Nonetheless, given deferential review, this sequence is adequate to support the district court's judgment. Thus, even without a "Free-Stroke/Torque Reversal" theory to explain the cause of the wreck, the district court's ultimate conclusion that the grounding of the AMOCO CADIZ was caused by the negligence of the Amoco parties and Astilleros was not clearly erroneous.

The evidence establishes that the grounding of the AMOCO CADIZ was a disaster waiting to happen. Amoco was aware of the ship's various problems--any one of which could have led to the failure of the steering system--yet chose to do nothing. The ship's high pressure hydraulic system needed to be kept fully-charged, free of contamination, and properly maintained. Amoco ignored manufacturers' instructions and failed to maintain the system in a reasonable manner, thus creating a foreseeable risk that the disaster would occur. If that were not enough, the oil giant allowed the AMOCO CADIZ to sail without a backup means of controlling the rudder in the event of a complete failure of the steering system. Apart from the initial failure of the steering gear system, the failure to train and instruct the crew in emergency procedures and to keep the isolation valves in working order are sufficient to hold Amoco liable for the damages caused by the oil spill. Cf. Cerro Sales Corp. v. Atlantic Marine Enterprises Inc., 403 F.Supp. 562, 567 (S.D.N.Y.1975) (Although equipment functioned properly, ship unseaworthy because crew inadequately trained to handle an emergency.)

Moving beyond causation issues, we next address the district court's denial of the Amoco parties' petition asserting a right to limited liability in the event that they were found to be legally responsible for the grounding of the AMOCO CADIZ. The Limitation of Liability Act of 1851 ("the Act") was enacted to protect the American maritime industry by severely limiting shipowners' personal liability. It provides:

The liability of the owner of any vessel, whether American or foreign, for any ... loss ... done, occasioned, or incurred, without the privity or knowledge of such owner or owners, shall not ... exceed the amount of value of the interest of such owner in such vessel, and her freight then pending.

46 U.S.C.App. § 183(a). The district court dismissed the petition to limit liability as to AIOC and Standard on the ground that they were not "owners" of the AMOCO CADIZ pursuant to the Act. See In re Oil Spill by the Amoco Cadiz off the Coast of France on March 16, 1978, 1979 A.M.C. 1018, 1024 (N.D.Ill.1979). (If the petition had been granted, Amoco's liability would have been limited to $700,000, the value of the AMOCO CADIZ after sinking.) Amoco argues that the district court incorrectly assumed that only the registered owner of the AMOCO CADIZ, Amoco Transport, could claim ownership status under the Act. Amoco claims that the term "owner" should be interpreted more liberally. Amoco has misstated the basis of the district court's dismissal. The court interpreted the term "owner" under the Limitation of Liability Act to mean "persons whose degree of possessory, managerial, and operational control, and relationship to the titleholder of the vessel justifies the inference of their being 'owners.' " Amoco Cadiz, 1979 A.M.C. 1017, 1021 (N.D.Ill.1979). The court found that AIOC and Standard failed to plead sufficient facts to show that they had "the requisite possessory, managerial, and operational control of the AMOCO CADIZ to justify even a preliminary finding that they were 'owners.' " Id. at 1024. Instead, they sought to establish ownership status based upon the allegations of the complaints filed in the civil action in which they are defendants. The court rejected this strategy for the reason that, although the complaints "contain language which avers some degree of their ownership of and control over the vessel ... [s]uch allegations are not incontrovertible admissions of indisputable fact." Id. at 1023.

What the actual facts reveal is that, pursuant to the Consulting and Chartering Agreements between Amoco Transport and AIOC, the latter was brought in to assist and advise Transport with regard to the maintenance and operation of the ship. Ultimate authority for maintenance and operation of the AMOCO CADIZ, however, remained with Transport alone. In addition, the Consulting Agreement expressly designated AIOC to be an agent of Transport, and not the owner itself. Only Transport had the requisite degree of "possessory, managerial, and operational control" of the AMOCO CADIZ. Thus, dismissal of the petition to limit liability with regard to Standard and AIOC was appropriate.

Despite Amoco's protests to the contrary, it was not contradictory for the district court to deny Standard and AIOC the right to rely upon the Limitation Act on the theory that they were corporate entities legally separate from Amoco Transport and later, in the damages phase of the proceedings, refuse to recognize separateness between Standard and its subsidiaries. In dismissing the limitation petition, the district court held only that there existed "no set of facts which, if proved, would establish the right of [AIOC and Standard] to limit their liability." Amoco Cadiz, 1979 A.M.C. at 1021. Liability for damages is another matter completely. The district court determined liability from facts showing that AIOC--the party in charge of the operation, maintenance, and repair of the AMOCO CADIZ and the selection of its crew--shared liability for the negligently designed, maintained, and operated steering gear. Standard--the entity that exercised control over AIOC and Transport and that initially was responsible for the design, construction, operation and management of the AMOCO CADIZ--was liable for its own negligence as well as that of AIOC with respect to the design, operation, maintenance, repair, and crew training of the AMOCO CADIZ. These two liability determinations do not conflict with the court's decision to deny these parties the benefits of the Act on the ground that they were not "owners." Even if AIOC and Standard were "owners," they cannot prove their freedom from privity or knowledge of the negligence that caused the grounding. The structure of Standard was so highly integrated, each of its subdivisions was a mere instrumentality of the parent corporation.

Unlike Standard or AIOC, Amoco Transport, the registered owner of the AMOCO CADIZ, was found to be an "owner" within the meaning of the Limitation Act. Nevertheless, the district court held that Transport was not entitled to limit its liability because it had "privity" and "knowledge", 46 U.S.C.App. § 183(a), of the negligence that caused the casualty. In limitations proceedings, the ultimate burden of proving lack of privity or knowledge is on the shipowner. See Coryell v. Phipps, 317 U.S. 406, 409, 63 S.Ct. 291, 292, 87 L.Ed. 363 (1942) (burden of establishing lack of privity and knowledge is on those who seek the benefit of the Act). Amoco attempts to shift focus away from Transport by arguing that a shipowner has privity or knowledge "only when it actually knows of or participates in creating causal negligence or unseaworthiness or where, in the use of ordinary care, it should have known of such conditions." Consolidated Opening Brief of Amoco Parties at 91 (citations omitted).

Not so. Privity or knowledge is not tantamount to actual knowledge or direct causation. All that is needed to deny limitation is that the shipowner, "by prior action or inaction set[s] into motion a chain of circumstances which may be a contributing cause even though not the immediate or proximate cause of a casualty...." Tug Ocean Prince, Inc. v. United States, 584 F.2d 1151, 1158 (2d Cir.1978), cert. denied, 440 U.S. 959, 99 S.Ct. 1499, 59 L.Ed.2d 772 (1979). The recent judicial trend has been to enlarge the scope of activities within the "privity or knowledge" of the shipowner, including imputing to corporations knowledge or privity of lower-level employees, see Silver Line, Ltd. v. United States (The Silver Palm), 94 F.2d 776, 780 (9th Cir.1937); Complaint of Delphinius Maritima, S.A. Etc., 523 F.Supp. 583, 594 (S.D.N.Y.1981); requiring shipowners to exercise an ever-increasing degree of supervision and inspection, see Spencer Kellogg & Sons v. Hicks, 285 U.S. 502, 511, 52 S.Ct. 450, 452, 76 L.Ed. 903 (1932); imposing a heavy burden on shipowners to prove their lack of privity or knowledge, see Coryell, 317 U.S. 406, 63 S.Ct. 291; rendering the shipowner's duty to ensure the seaworthiness of the ship nondelegable, see Federazione Italiana die Corsorzi Agrari v. Mandask Compania de Vapores, S.A. (The Perama), 388 F.2d 434, 439 ("The corporate owner's duty to make the vessel seaworthy, at least to the point of providing it with sufficient integrity to meet the ordinary perils of the sea, is not delegable to anyone."), cert. denied, 393 U.S. 828, 89 S.Ct. 92, 21 L.Ed.2d 99 (1968); and narrowing the group of potential defendants eligible for exoneration under the Act, see Waterman S.S. Corp. v. Gay Cottons, 414 F.2d 724, 733-35 (9th Cir.1969). See generally, Van Hanswyk, The 1984 Protocols to the International Convention on Civil Liability for Oil Pollution Damages and the International Fund for Compensation for Oil Pollution Damages: An Option for Needed Reform in United States Law, 22 Int'l Lawyer 319, 332 (1988).

Transport was not entitled to limit its liability pursuant to the Act because it did not meet its burden of proving its lack of privity or knowledge of the negligence that led to the ship's grounding. Although AIOC's employees might have been directly responsible for the negligent maintenance of the AMOCO CADIZ and the failure to train the crew properly, their knowledge of the defects in maintenance and training was attributable to Transport, which had a non-delegable duty to ensure a seaworthy vessel and a duty to control and supervise AIOC, its agent. See Federazione Italiana dei Cors, 388 F.2d at 439; Cerro Sales Corp., 403 F.Supp. 562 at 567 (owner cannot escape liability by delegating managerial duties).

Two of the AMOCO CADIZ's inspectors were Transport employees, thus Transport was well aware of the problems with ram scoring, leakage, hydraulic fuel contamination, unwanted rudder movement, and negligent maintenance. Transport's own ship inspectors included descriptions of the AMOCO CADIZ's problems in written reports sent to company offices in Bermuda. Instead of seeing to it that essential repairs were made, Transport employees charged with that responsibility kept the vessel out of drydock in order to squeeze more profit out of the time charter. "Neglect to take adequate precautions after a faulty condition has been revealed by a misadventure, or made known by a warning, has been held to amount to privity, if indeed it does not amount to knowledge." Benedict on Admiralty § 5.19 (1990).

The trial on damages lasted longer than the trial on the merits. More than a year of trial time was spread over about three years--some before Judge McGarr left the bench, some after. Two principal damages opinions span 575 pages, and there were many supplemental opinions and orders. About a dozen issues remain in dispute. Here are the principal rulings still in contention:

. Amoco and Astilleros are jointly and severally liable for all compensable losses, without reduction for the fault attributed to other parties such as Bugsier and the ABS.

. Damages compensate for all proven physical loss but not for diversion of business to other resorts.

. Governmental bodies recover not only for the marginal costs of cleaning up the oil but also for salaries of persons who would have been employed in any event, but they do not recover the costs of operating ships and planes to the extent these costs would have been incurred in the absence of the spill.

. Private businesses recover through trade associations.

. Prejudgment interest is awarded at the postjudgment rate.

. The shippers recover the value of the oil in pounds sterling, after allowance for shrinkage, and without compound prejudgment interest.

We begin with Amoco's principal argument: that extensive use of hearsay entitles it to a new trial.

During the damages trial the district court admitted a great deal of evidence it characterized as hearsay. It did so because it thought that if the rule were to be applied the trial would be too cumbersome. Yet the hearsay rule applies in all trialsjury and bench, big and small. Fed.R.Evid. 101, 1101; Walton v. United Consumers Club, Inc., 786 F.2d 303, 313 (7th Cir.1986). A defendant faced with a single $200 million claim is no less entitled to the protection of the rule than is a person defending against 200 claims for $1 million each, or 2,000 claims for $100,000. See, e.g., UNR Industries, Inc. v. Continental Casualty Co., 942 F.2d 1101, 1107 (7th Cir.1991) (enforcing the rules of evidence in a multi-million dollar case with approximately 100,000 claimants).

The district court recognized that some of the hearsay was unreliable. It compensated by reducing many claims substantially, an average of 35% for the French State and more for the communes. Rough and ready adjustments may be too little to protect the defendants or too great, undercompensating the plaintiffs. (None of the plaintiffs has challenged the reductions on appeal, however.) The Federal Rules of Evidence are statutes, and district judges may not disregard statutes no matter how inconvenient or cumbersome they believe the rules to be. Unless the Rules of Evidence are unconstitutional (which no one suggests), they are to be followed.

Judge McGarr stated that he admitted hearsay because "plaintiffs had no other feasible way to present a case for damages". Extensive hearsay may be the only way to prove damages if the court must tote up claims, one meter of beach and one commune at a time. Amoco resisted every bill to the last sou, as was its right. An alternative way to proceed would have been to sample the claims of loss, to prove them with admissible evidence and extrapolate from the sample to the Brittany coast as a whole. Apparently the parties never suggested sampling, even though the Manual for Complex Litigation § 21.484 (2d ed. 1985), recommends it, and many opinions, including our own UNR Industries, 942 F.2d at 1107, and Evans v. Evanston, 941 F.2d 473, 476-77 (7th Cir.1991), approve the procedure. In a case bristling with expert witnesses, it could not have been too difficult to add a few statisticians. Indeed, as experts may rely on hearsay, Fed.R.Evid. 703, the use of sampling techniques could have compressed the trial and eliminated much of the evidentiary problem at the same time. Alternatively the court could have inquired how much it would have cost to clean up and restore the coastline using prudent methods and awarded that sum as damages, without regard to the actual cost. If the plaintiffs used inefficient methods, they would have borne the loss; if they were thrifty, they could have kept the surplus. This, too, would have shortened the trial and avoided the hearsay problem. Alas, the parties suggested none of these approaches. This condemned the judge to a morass of detail, including the documents that Amoco contends are hearsay.

Amoco's briefs identify 1,236 exhibits to which timely hearsay objections were raised and overruled. There may be more, but we address only these. Our review of the record supports Amoco's position that many of these documents were hearsay. Amoco contends, without contradiction from the plaintiffs, that the hearsay exhibits underlie approximately 300 million francs of the damages award. Here is the number of documents by the party offering the exhibit:

 Party offering exhibit    Number  Percent of total
        ---------------------------------------------------
          Cotes du Nord Parties     998         80.744
            Communes' records       843         68.204
          Docs. used by experts      87          7.039
           Departments' records      34          2.751
         Maps, postcards, photos     32          2.589
           Doc. used in cross-x       1          0.081
                 Unknown              1          0.081
                 France             192         15.534
           Private Businesses        36          2.913
                  Amoco              10          0.809
        ----------

As this table shows, the communes' records are the lion's share of those objected to. France does not maintain the distinction among national, state, and local governments that a federal republic such as Germany or the United States recognizes. The Cotes du Nord, a departement of France and part of the national government, administers governmental functions in a territory equivalent to a state; communes are local subdivisions of the departement. We follow the practice of the parties in treating the communes, the Cotes du Nord, and the Republic of France as if they were distinct entities after the American fashion.

Each commune presented a patterned set of documents: an introduction to the commune (to which Amoco did not object), followed by expense forms dealing with the costs of communal employees, requisitioned staff, food, and other costs entailed in the cleanup. Most of the expense records appear on official forms (Bordereau de Mandat, or memorandum of authority to spend) bearing the communal seal and are accompanied by time sheets, bills, receipts, or similar documentation.

We picked the commune of Plougrescant for close examination because its award, approximately 2 million francs before interest, is substantial--more than most but less than seven others (Perros-Guirec, at 3.94 million francs, received the largest award among the communes). A sampling of documents from other communes shows that Plougrescant is representative. The following table reports the Cotes du Nord exhibit numbers, the nature of the claim, the amount requested, and the amount awarded. Plougrescant is an agricultural area with 14 kilometers of coastline (20 km including adjacent islands). After the coast was cleared of oil, it had to be reconstructed to prevent erosion; moreover, the narrow roads in the area were unsuited to the huge equipment that used t