Airborne Express, Inc. v. Sys. Research Laboratories, Inc.

• Decision Date: 25 September 1995
• Docket Number: No. CA94-10-026,CA94-10-026
• Citation: 106 Ohio App.3d 498,666 N.E.2d 584
• Parties: AIRBORNE EXPRESS, INC., Appellee, v. SYSTEMS RESEARCH LABORATORIES, INC., Appellant. *
• Court: Ohio Court of Appeals

Page 498

106 Ohio App.3d 498

666 N.E.2d 584

AIRBORNE EXPRESS, INC., Appellee, v. SYSTEMS RESEARCH LABORATORIES, INC., Appellant. ^*

No. CA94-10-026.

Court of Appeals of Ohio, Twelfth District, Clinton County.

Decided Sept. 25, 1995.

Vorys, Sater, Seymour & Pease, Daniel J. Buckley and Andrew Kaplan, Cincinnati, for appellee.

Martindale, Brzytwa & Quick, John E. Martindale and Margaret Mary Meko, Cleveland, for appellant.

WALSH, Presiding Judge.

Defendant-appellant, Systems Research Laboratories, Inc., appeals a Clinton County Court of Common Pleas jury verdict in favor of plaintiff-appellee, Airborne Express, Inc., in a breach of contract action.

Appellee is an overnight package air freight company that utilizes a fleet of aircraft to operate its air freight service. Appellee, as an aircraft operator, is controlled by Federal Aviation Administration ("FAA") regulations.

In the early 1980s, the FAA enacted regulations designed to control the noise output from aircraft. The FAA developed a program involving three stages of noise suppression levels. When the noise suppression regulations were enacted, all aircraft were in the stage one phase. All aircraft had to comply with stage two noise levels by January 1986. However, aircraft operators could apply for a two-year exemption and keep flying aircraft in the stage one phase until January 1988. Appellee obtained a two-year extension; consequently, its deadline for stage two compliance was January 1988.

In order to comply with the stage two noise level required by the FAA, appellee purchased portions of Pratt & Whitney and McDonnell Douglas "hushkits" for installation on its aircraft. ¹ However, as the stage two compliance deadline approached, the Pratt & Whitney and McDonnell Douglas hushkits became enormously expensive. Thus, appellee began investigating the possibility of designing and developing its own noise control device.

After designing and developing its own hushkit ("Airborne hushkit"), appellee entered into a contract with appellant, an applied research organization, to conduct the analysis and noise certification testing necessary for appellee to obtain a Supplemental Type Certificate ("STC") from the FAA for its hushkit. ² The contract provided that appellant would perform a number of services, including comparing the noise level of the Airborne hushkit with the Pratt & Whitney hushkit, preparing a test plan, conducting noise measurement and evaluation tests, analyzing the data obtained as a result of the testing and preparing a test report to be submitted to the FAA.

The purpose of the testing was to obtain FAA approval of the Airborne hushkit pursuant to the requirements of Federal Aviation Regulations ("FAR") Part 36. ³ Appellee hoped to demonstrate that an airplane equipped with the Airborne hushkit was no louder than an airplane equipped with the Pratt & Whitney hushkit to aid in obtaining an STC from the FAA for its hushkit.

Appellant's test results indicated that the Airborne hushkit was equivalent to the previously FAA-approved Pratt & Whitney hushkit. Appellant included its test results and supporting data in a report dated December 1984 and submitted the report to the FAA. The FAA approved the test results based upon the data contained in appellant's report. On January 21, 1985, the FAA issued an STC which authorized use of the Airborne hushkit on aircraft.

After the issuance of the Airborne hushkit STC, appellee formed a wholly owned subsidiary known as Sound Suppression, Inc. ("SSI"). SSI entered into an agreement with appellant pursuant to which appellant was paid $1,000,000 to manufacture one hundred Airborne hushkits at a price of $10,000 each. Appellee installed nine hushkits on its own airplanes and sold eleven hushkits to third parties.

In December 1986, appellee received a letter which stated that the FAA had completed a post-approval review of the Airborne hushkit STC and that it had mistakenly approved the Airborne hushkit. The letter stated that a review of the test report and supporting data prepared by appellant did not establish that aircraft modified with the Airborne hushkit complied with FAA noise level limits.

Several meetings were held in which appellant, appellee and the FAA attempted to rectify the problems with the data submitted in support of the Airborne hushkit STC. The FAA informed appellant and appellee that deficiencies in the data submitted in support of the STC rendered the measured aircraft data unusable. In addition, the data contained in the 1984 report submitted in support of the STC did not comply with FAR Part 36 requirements, and corrections which should have been made to the data were not completed. The position of the FAA was that if appellee could not correct the problems found in the data supporting the STC, procedures would be initiated to revoke the Airborne hushkit STC.

Appellee began exploring alternatives to the Airborne hushkit and developed a reduced flap setting which would enable aircraft to comply with stage two FAA-required noise levels. ⁴ Appellee applied for an STC for the reduced flap setting and in November 1987, appellee received a "flap STC" from the FAA. ⁵ Appellee removed the Airborne hushkits from its aircraft and replaced them with the flap STC. Appellee also began marketing and selling its flap STC to third parties for profit.

Appellee subsequently brought suit against appellant, asserting several causes of action arising out of the 1984 noise evaluation contract. The matter proceeded to a jury trial on appellee's breach of contract claim. Appellee sought damages in the amount of $1,798,223. ⁶ The jury rendered a verdict in favor of appellee in the amount of $731,934 and judgment was entered by the trial court in that amount. It is from this judgment that appellant now appeals, setting forth the following assignments of error:

Assignment of Error No. 1:

"The trial court erred and abused its discretion in denying appellant's motion for directed verdict and judgment notwithstanding the verdict when there was no evidence causally linking appellant's alleged breach of contract with appellee's purported damages."

Assignment of Error No. 2:

"The trial court erred and abused its discretion in denying appellant's motion for new trial when the judgment is not sustained by the weight of the evidence."

Assignment of Error No. 3:

"The trial court committed prejudicial error when it granted appellee's motion in limine to exclude evidence of appellee's profits and benefits received from the sale of the flap STC and denied SRL's motion for new trial based upon this prejudicial exclusion of evidence."

Assignment of Error No. 4:

"The trial court committed prejudicial error in denying appellant's motion for new trial when the judgment is contrary to law because the jury did not properly follow the jury instruction regarding causation and improperly rendered a compromise verdict."

Assignment of Error No. 5:

"The trial court committed prejudicial error in denying appellant's motion for new trial when the trial court gave an erroneous jury instruction on real party in interest."

In its first assignment of error, appellant contends that the trial court erred in denying its motion for a directed verdict and judgment notwithstanding the verdict because there was insufficient evidence to establish that appellant's breach of the noise evaluation contract caused appellee's damages which resulted from the loss of its Airborne hushkit STC.

A motion for a directed verdict should be granted when, construing the evidence most strongly in favor of the party opposing the motion, the trial court finds that reasonable minds could come to only one conclusion and that conclusion is adverse to such party. Civ.R. 50(A)(4); The Limited Stores, Inc. v. Pan Am World Airways, Inc. (1992), 65 Ohio St.3d 66, 73, 600 N.E.2d 1027, 1033-1034. Conversely, the trial court must submit an essential issue to the jury when there is sufficient evidence relating to the issue, which, if believed, would permit reasonable minds to reach different conclusions. O'Day v. Webb (1972), 29 Ohio St.2d 215, 220, 58 O.O.2d 424, 427, 280 N.E.2d 896, 899.

The record indicates that appellee hired appellant to accumulate data and prepare a test report to be submitted to the FAA. The contract provided that appellant would supply appropriate personnel and electronic equipment in order to obtain the required noise data that would be analyzed according to the requirements set out in FAR Part 36. The 1984 test report prepared by appellant concluded that based upon the test results contained in the report, the Airborne hushkit "should, therefore, be recognized as satisfying the [Federal Aviation Regulation] Part 36 noise regulations for DC9-30 series aircraft * * *."

At trial, appellee presented evidence that appellant breached certain provisions of the parties' contract and that the 1984 report prepared by appellant and submitted to the FAA contained deficient data and failed to comply with FAR Part 36. Appellant presented the testimony of James Densmore, retired FAA director of the office of environment and energy, and Dr. William Galloway, a retired consultant in the field of aircraft noise. Both Densmore and Galloway testified that the data submitted by appellant in support of its test report was deficient and did not comply with FAA regulations, and that the Airborne hushkit STC was incorrectly issued based upon such report. Edward Rickley, manager of the Department of Transportation's acoustics laboratory, processed the tape recordings and reanalyzed the data submitted by appellant in its test report. Rickley's report indicates that FAR Part 36 requirements were not followed and the tapes were contaminated by extraneous noise, rendering the collected data unusable.

Finally, Richard White, retired head of appellant's experimental research and simulation department, testified that although appellant agreed to...