Mozingo v. Correct Mfg. Corp.

• Decision Date: 07 February 1985
• Docket Number: No. 84-4059,84-4059
• Citation: 752 F.2d 168
• Parties: Elbie MOZINGO, Plaintiff-Appellant, Cross-Appellee, v. CORRECT MANUFACTURING CORPORATION and G.W. Way, Defendants-Appellees, Correct Manufacturing Corporation, Defendant-Appellee, Cross-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 168

752 F.2d 168

Elbie MOZINGO, Plaintiff-Appellant, Cross-Appellee, v. CORRECT MANUFACTURING CORPORATION and G.W. Way, Defendants-Appellees Correct Manufacturing Corporation, Defendant-Appellee Cross-Appellant.

No. 84-4059.

United States Court of Appeals Fifth Circuit.

Feb. 7, 1985.

Smith, Smith, Tate, Stuart & Cruthird, David R. Smith, Richard C. Fitzpatrick, Poplarville, Miss., for plaintiff-appellant, cross-appellee.

Easterling & Varnado, Carey R. Varnado, Hattiesburg, Miss., for defendants-appellees.

Appeals from the United States District Court for the Southern District of Mississippi.

Before GOLDBERG, JOHNSON and DAVIS, Circuit Judges.

W. EUGENE DAVIS, Circuit Judge:

On July 19, 1977, Elbie Mozingo was testing the operation of a Skyworker brand "cherrypicker" (a device similar to a crane with a bucket on the end of the boom), after completing repairs on it at a shop in Laurel, Mississippi. When Mozingo, who was in the bucket, moved the bucket on the Skyworker rapidly about, the boom on the unit suddenly collapsed, precipitating the bucket and Mozingo to the ground and seriously injuring Mozingo. Two opposed systems of cables operated by a hydraulic unit raise and lower the boom. The apparent cause of the collapse was that a cable in this system slipped off a yoke forming part of the system, allowing the boom to fall.

Mozingo filed this products liability action against Correct Manufacturing, Inc., a Delaware corporation which owned the Skyworker manufacturing enterprise, and G.W. Way, the president of Correct. ¹ Mozingo contended that the Skyworker was defective because as it was designed and constructed it did not have a clip or retaining clamp to prevent the cable slipping from the yoke.

The district court granted a directed verdict in favor of Way on the issue of Way's personal liability. The court refused a directed verdict on the issue of Correct's liability as a "successor" corporation to Transairco. The case was submitted to the jury on three alternative theories: (1) negligence, (2) strict liability in tort, and (3) breach of an independent duty to warn. The jury returned a verdict for Mozingo. Correct promptly filed a motion for judgment NOV or a new trial, which the district court took under advisement. Several weeks later, the district court granted JNOV on the basis of the collateral estoppel effect of this circuit's decision in Gaither v. Hughes-Keenan Corp., 721 F.2d 817 (5th Cir.1983) (unpublished), although Correct had not urged collateral estoppel at any point during the trial.

In this appeal, Mozingo contends that the district court erred in granting JNOV on We reverse the grant of JNOV and reinstate the jury verdict against Correct, but affirm the directed verdict in favor of G.W. Way.

the basis of collateral estoppel, and in granting a directed verdict on the issue of Way's personal liability. Correct defends the grant of JNOV, and alternatively cross appeals contending that there is insufficient evidence to support submission to the jury of any of the theories of Correct's liability. In addition, Correct contends that the district court erroneously instructed the jury using the "product line" theory of successor corporation liability, which has been expressly rejected by this court.

I. APPLICATION OF COLLATERAL ESTOPPEL FOLLOWING JURY VERDICT

Collateral estoppel, or issue preclusion, is generally considered to be a variant of the doctrine of res judicata. ² Under F.R.C.P. 8(c), ³ res judicata, and hence collateral estoppel, is an affirmative defense which if not pled is considered waived. The district court is granted a measure of discretion to allow late amendment to press a defense when no prejudice would result to the other party, and the ends of justice so require. E.g. Allied Chemical Corp. v. Mackay, 695 F.2d 854, 855-56 (5th Cir.1983). In this case, equity and the purposes underlying the doctrine of collateral estoppel militate strongly against allowing this defense to be asserted after trial.

Collateral estoppel has two purposes, to protect litigants "from the burden of relitigating an identical issue with the same party or his privy, and of promoting judicial economy by preventing needless litigation." Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326, 99 S.Ct. 645, 58 L.Ed.2d 552, 559 (1979). Neither of these purposes is served by the application of collateral estoppel after a factual issue has been fully developed through a well-contested trial and submitted to the jury for decision.

In addition, the terms of F.R.C.P. 50(b) allow a party to move "to have the verdict and any judgment entered thereon set aside and to have judgment entered in accordance with his motion for a directed verdict ..." We have held on several occasions that since the motion for JNOV is "technically only a renewal of the motion for a directed verdict ... it cannot assert a ground that was not included in the motion for a directed verdict." E.g., Sulmeyer v. Coca Cola Co., 515 F.2d 835, 846 (5th Cir.1975), cert. denied, 424 U.S. 934, 96 S.Ct. 1148, 47 L.Ed.2d 341 (1976); accord Johnson v. Rogers, 621 F.2d 300, 305 (8th Cir.1980). Correct has not cited us to authority or produced any argument indicating that a different result should obtain in this case.

Since we conclude that the district court abused its discretion in granting JNOV on the basis of collateral estoppel, we now address the other issues raised by the parties.

II. SUCCESSOR CORPORATION AND CORPORATE OFFICER LIABILITY

Mozingo's appeal of the directed verdict on the issue of Way's personal liability and Correct's cross appeal on the issue of successor corporation liability are intimately related factually. We preface our discussion with a brief summary of the relevant facts concerning the history of Correct Manufacturing, the Skyworker enterprise and G.W. Way's connection with these entities.

In 1957, the Hughes-Keenan Corporation, a manufacturing concern organized by G.W. Way in the late 1940's, became a In mid-August of 1972, Transairco agreed with Way and certain Transairco stockholders to incorporate a wholly-owned subsidiary, Correct Manufacturing Corporation. At Correct's first board meeting, on August 31, 1972, Correct accepted an offer from Transairco to acquire a majority of Transairco's manufacturing assets, including those of the Skyworker enterprise. Way and his family then swapped all of their shares in Transairco for all of the shares of Correct Manufacturing, at which point Correct ceased to be associated with Transairco. Andreoli was elected the first president of Correct on August 31, 1972, but Way became Correct's president and general manager on September 1, 1972.

division of the United States Air Conditioning Corporation. In 1960, United States Air Conditioning acquired the Skyworker enterprise, which became a part of the Hughes-Keenan division. In 1966, United States Air Conditioning changed its corporate name to Transairco. In 1971, Transairco merged with a group of companies owned by a Mr. Andreoli. From 1957 until 1971, Way was president and general manager of Transairco and its predecessor, and until the 1971 merger, held a controlling interest in Transairco. After his resignation as president and general manager in 1971, Way continued as a director of Transairco.

After the splitoff from Transairco, Correct continued to manufacture Skyworker products, maintain Skyworker service contracts, sell parts for Skyworkers, and do business with the same dealers. Correct continued to use a number of components bearing the Hughes-Keenan name for some time after the splitoff. In its promotional literature, the Skyworker enterprise emphasized its long history of production. The same management and employees continued with the Skyworker Corporation, and its production facilities remained in the same physical location.

The design for the particular model of Skyworker in which Mozingo was injured was first suggested by a Georgia Skyworker dealer. This model, the 6950A, utilized a fifty-foot boom mounted on an "A knuckle." The booms used in other models were four or five feet shorter, and Way had some reservations concerning the unit's safety, since the longer boom would put more stress on the cable system. Way authorized the production of a single prototype unit in 1969. Approximately twenty-three of these units were manufactured prior to Way's resignation in 1972, although on whose order is unclear. Apparently Way did not realize until after the Correct-Transairco split that these units had been manufactured.

A. PERSONAL LIABILITY OF WAY

In this diversity case, we are Erie-bound to follow the substantive law of Mississippi. Although the Mississippi courts have not spoken in depth on the subject, Mississippi follows the general rule that when a corporate officer directly participates in or authorizes the commission of a tort, even on the behalf of the corporation, he may be held personally liable. ⁴ Based on this principle, Mozingo contends that Way's failure to pursue his questions concerning the safety of the Skyworker constituted sufficient evidence of Way's personal participation in a tort to send the question of his liability to the jury. We disagree.

Way testified that his concern was that the use of a fifty-foot boom could cause the wire cables used in the hydraulic system to become overstressed, and that a fastener attached to the ends of the cables could possibly fail. Mozingo's counsel also elicited from Way the admission that overstressing could also cause some unspecified stretching of the cables. Way did not direct the manufacture of the 6950A units which were produced, and indeed appears to have had little or nothing at all to do

                with their production.  This sketchy evidence is simply inadequate to support a jury finding that Way personally participated in the tort.  Mozingo has cited us to no products liability case in which a corporate officer having this kind of peripheral

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