P H I, Inc. v. Apical Indus., Inc.

• Decision Date: 09 January 2020
• Docket Number: No. 18-31019,18-31019
• Citation: 946 F.3d 772
• Parties: P H I, INCORPORATED, formerly known as Petroleum Helicopters, Incorporated, Plaintiff - Appellee v. APICAL INDUSTRIES, INCORPORATED, Defendant - Appellant
• Court: U.S. Court of Appeals — Fifth Circuit

946 F.3d 772

P H I, INCORPORATED, formerly known as Petroleum Helicopters, Incorporated, Plaintiff - Appellee

v.APICAL INDUSTRIES, INCORPORATED, Defendant - Appellant

No. 18-31019

United States Court of Appeals, Fifth Circuit.

FILED January 9, 2020

Steven Dominic Sanfelippo, Michael Ross Cunningham, Esq., Alex Joseph Whitman, Cunningham Swaim, L.L.P., Dallas, TX, Paul Maury Sterbcow, Esq., General Attorney, Lewis, Kullman, Sterbcow & Abramson, for Plaintiff-Appellee.

Kenneth Hugh Laborde, Esq., Trial Attorney, Bradley J. Schwab, Gieger, Laborde & Laperouse, L.L.C., New Orleans, LA, for Defendant-Appellant.

Before OWEN, Chief Judge, and SMITH and DENNIS, Circuit Judges.

JAMES L. DENNIS, Circuit Judge:

PHI, Inc. sued Rolls-Royce, Apical Industries, and Offshore Helicopter Support Services (OHS), after a helicopter PHI owned was required to make an emergency landing in the Gulf of Mexico when its Rolls-Royce-manufactured engine failed. After the landing, the emergency flotation system manufactured by Apical and serviced by OHS partially deflated, causing the helicopter to turn over in the water and resulting in a total loss due to salt water incursion. Relatively early in the case, PHI’s action against Rolls-Royce was severed and transferred to federal court in Indiana. That action later settled.

Ahead of a jury trial in the Western District of Louisiana on PHI’s claims of redhibition (a Louisiana warranty claim sounding in contract law) against Apical and breach of contract against OHS, the magistrate judge presiding over the case by the parties’ consent excluded all evidence regarding the cause of the engine failure and determined that he would not submit the issue of Rolls-Royce’s liability to the jury as a basis for reduction in the damages award against Apical. The magistrate judge premised these rulings on the mistaken belief that Rolls-Royce could not, as a matter of law, be held solidarily liable along with Apical and OHS for the loss of the helicopter. The jury ultimately found Apical liable for the loss of the helicopter. Because, under Louisiana law, Rolls-Royce is a potential solidary obligor along with Apical, and because a finding of solidary liability would result in a reduction of damages award against Apical due to Rolls-Royce’s earlier settlement with PHI, the magistrate judge’s pretrial exclusion and verdict form rulings were in error. Accordingly, we VACATE and REMAND for trial on the issue of solidary liability.

I

On December 1, 2011, a helicopter owned by PHI, Inc., formerly known as Petroleum Helicopters Inc., "sustained an engine failure and made an emergency water landing." In doing so, the helicopter pilot activated an emergency flotation system and executed a water landing. The pilot and the sole passenger escaped the helicopter unharmed on life rafts. A rescue boat picked up the pilot and passenger, dropped them off at a nearby oil platform, and returned to the helicopter. As the rescue boat then towed the helicopter to the platform, the right section of the flotation system deflated, causing the helicopter to flip over in the Gulf of Mexico. Although PHI recovered the helicopter from the Gulf, the incursion of salt water into the helicopter caused it to be a total loss. A post-accident inspection revealed that the right rear float was punctured, and, unlike the left rear float, it did not have a "doubler," a patch used to protect from chafing damage where the float connected to the helicopter’s railing.

PHI sued Apical Industries, Inc. (Apical), the manufacturer of the flotation system that failed while the helicopter was being towed, as well as Rolls-Royce and Offshore Helicopter Support Services, Inc. (OHS), in Louisiana state court. Rolls-Royce was the engine manufacturer, and OHS serviced the float system before the accident. After removal to federal court,¹ PHI’s claims against Rolls-Royce were severed and transferred to Indiana based on a forum-selection clause.² The forum-selection clause was contained in a warranty agreement provided in connection with Rolls-Royce’s 2011 sale of a replacement part to PHI called a No. 2 bearing.³ PHI’s case against Rolls-Royce in Indiana settled after that court denied summary judgment for Rolls-Royce on PHI’s claim.

Ahead of trial against Apical and OHS, the magistrate judge excluded evidence regarding the cause of the Rolls-Royce engine failure, determining that this evidence was not relevant to PHI’s claims against Apical or OHS, or to any of Apical or OHS’s defenses.⁴ The magistrate judge also refused to submit to the jury a question about Rolls-Royce’s liability. After a two-day trial, the jury found Apical’s floats contained a redhibitory defect and OHS did not breach its contract with PHI. The jury awarded PHI $2,180,000 in damages, from which the magistrate judge later deducted $450,230 to account for the value of the engine, the loss of which Apical was not responsible for. Apical appealed.

II

Apical asserts on appeal that the magistrate judge was incorrect to exclude evidence of the cause of the Rolls-Royce engine failure and to refuse to submit the issue of Rolls-Royce’s liability to the jury. These contentions turn on two points: First, whether a limited warranty agreement between PHI and Rolls-Royce forecloses all potential liability on the part of Rolls-Royce for the salt-water damage caused to the helicopter; and second, if damages for salt-water incursion are in fact allowed, whether their availability makes Rolls-Royce a potential solidary obligor, entitling Apical to submit this question and evidence supporting it to a jury. We address each issue in turn.

A

The magistrate judge concluded that Rolls-Royce could not be solidarily liable with Apical and OHS, based on a limited warranty agreement executed between PHI and Rolls-Royce in connection with the sale of the No. 2 bearing in 2011 that waived consequential damages.⁵ The magistrate judge reasoned that under the limited warranty, "Rolls[-]Royce would not be liable for the same performance as Apical and OHS, and therefore, Rolls-Royce would not be solidarily liable with them." The warranty the magistrate judge relied on provided:

THIS WARRANTY IS GIVEN EXPRESSLY AND IN PLACE OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR PARTICULAR PURPOSE. THERE ARE NOT UNDERSTANDINGS, AGREEMENTS, REPRESENTATIONS, OR WARRANTIES NOT SPECIFIED HEREIN.

***

The obligations of Rolls-Royce under this Limited Warranty are limited to the repair of the spare module/part as provided herein. In no event, whether as a result of breach of contract or warranty, alleged negligence, or otherwise, shall Rolls-Royce be subject to liability for incidental, consequential, indirect, special or punitive damages of any kind, including without limitation to damage to the engine, airframe or other property, commercial losses, lost profits, loss of use, grounding of engines or aircrafts, inconvenience, loss of time, cost of capital, cost of substitute equipment, downtime, claims of customers, or changes in retirement lives and overhaul periods.

Apical argues that this warranty, which the magistrate judge found valid and enforceable under Indiana law, only applies to a bearing added to the engine ten years after installation of the engine itself, and therefore Rolls-Royce could still potentially be liable for damages to the extent the engine failed for reasons unrelated to the No. 2 bearing. We agree.⁶ The Southern District of Indiana’s order on Rolls-Royce’s motion for summary judgment in the severed action is informative on this point. There, the Indiana federal court determined that PHI had not only brought an action regarding a defect in the No. 2 bearing, which would be covered by the warranty provision, but also a broader design defect claim asserting a defect in a "piccolo tube," which allegedly reduced the amount of oil that could reach the No. 2 bearing and potentially caused the engine failure. See Petroleum Helicopters, Inc. v. Rolls-Royce Corp. , 1:15-CV-00840-TWP-DML, 2016 WL 7179362, at *3–*4 (S.D. Ind. Dec. 9, 2016). Moreover, according to the Indiana federal court, "the [l]imited [w]arranty applies only to the No. 2 bearing," such that a claim asserting design defect beyond the No. 2 bearing could go forward. Id. at *4. This analysis is persuasive, and we adopt it. The warranty’s plain terms apply only to the Rolls-Royce engine’s "spare modules and parts." Moreover, PHI’s response brief does not meaningfully challenge this point.⁷

Because the warranty’s waiver of consequential damages does not apply to the claim that the engine failed due at least in part to a defect outside the No. 2 bearing, a dispute of fact exists as to whether damages for any non-waived defects are recoverable. See Rolls-Royce Corp. , 2016 WL 7179362, at *4 ("Accordingly, because the Limited Warranty applies only to the No. 2 bearing, a genuine issue of material fact remains regarding whether the engine contained a design defect, and summary judgment is denied on this issue." (emphasis omitted)). As discussed in the following section, this dispute of fact is material, and thus should have been put to the jury, because Rolls-Royce may be a solidary obligor under Louisiana law along with Apical. Should a jury so find, Apical would be entitled to a reduction in the damages award against it.

B

Under Louisiana law, solidary liability arises when multiple obligors are liable for the same debt, and when performance by one would relieve the others’ liability to the obligee.⁸ LA. CIV. CODE art. 1794 (2019). Such a solidary obligation is not to be presumed but can arise from either "a clear expression of the parties’ intent or from the law."⁹ Id. art. 1796. "An obligation may be solidary though it derives from a different source for each obligor." Id. art. 1797. Solidary liability is designed to protect the obligee by placing responsibility for the debt fully on the obligors, who can...