Consumers Power Co. v. Curtiss-Wright Corp.
| Decision Date | 13 January 1986 |
| Docket Number | Nos. 84-5728 and 85-5027,CURTISS-WRIGHT,85-5027 and 85-5047,84-5764,Nos. 84-5764 and 85-5047,Nos. 84-5728,s. 84-5728 and 85-5027,s. 84-5764 and 85-5047,s. 84-5728 |
| Citation | 780 F.2d 1093 |
| Parties | , 1 UCC Rep.Serv.2d 415 CONSUMERS POWER COMPANY v.CORPORATION. Appeal ofCORPORATION, Appellant inAppeal of CONSUMERS POWER COMPANY, Appellant in |
| Court | U.S. Court of Appeals — Third Circuit |
Samuel A. DeGonge (argued), DeGonge, Garrity & Fitzpatrick, P.A., Bloomfield, N.J. for appellant.
R. Peter Connell (argued), Guy F. Clerici, Campbell, Foley, Lee, Murphy & Cerniglia, Asbury Park, N.J., for appellee.
Before SEITZ, WEIS, and ROSENN, Circuit Judges.
In this appeal from a jury verdict in a diversity action, 1 we are presented with the important question whether a commercial party, such as the plaintiff utility, may recover under the law of New Jersey in strict liability for accidental damages to a defectively repaired engine. Consumers Power Company (Consumers Power), a Michigan public utility, sued in the United States District Court for the District of New Jersey and recovered a verdict against the Curtiss-Wright Corporation (Curtiss-Wright) for damages resulting from its defective repair of a gas turbine owned by the utility. Curtiss-Wright appeals from the judgment entered on the verdict after a reduction in the form of a remittitur, contending, inter alia, that such damages constitute economic loss which may not be recovered under tort principles under New Jersey law. Consumers Power cross-appeals, asserting that because both parties had accepted the remittitur, Curtiss-Wright's appeal from the judgment entered on the reduced verdict frustrates the purpose of the district court's remittitur and that the original jury verdict should therefore be reinstated. We see no merit in either appeal 2 and affirm.
Consumers Power, a Michigan public utility, uses converted aircraft engines to generate power. In 1975, the high compressor in one of Consumers Power's engines failed. Consumers Power sent the engine to Curtiss-Wright's New Jersey facility with instructions for it to repair the high compressor and to disassemble and overhaul the low compressor. In the course of the repairs, Curtiss-Wright inadvertently switched the low compressor with the same part from another engine. The parts were interchangeable and the parties have stipulated that rotating interchangeable parts was a common industry practice recognized by both parties. The repairs were completed and the engine returned to Consumers Power in late 1975.
Before reassembling the engine, Anthony Spadaro, an inspector for Curtiss-Wright, examined the compressor disc of the low compressor with the aid of a magnifying glass, and found it to be in good condition. He found no evidence of wear or corrosion and therefore assumed that it was sufficiently coated with cadmium, a malleable metallic element used to prevent stress and cracking. Irving Glater, who had performed failure analyses of this model engine for its manufacturer, Pratt & Whitney, before becoming an independent consultant, testified as an expert witness for Consumers Power. According to Glater, the manufacturer had in 1974 instructed its authorized repair shops--including the Curtiss-Wright facility--that compressor discs were to be coated with between .5 and .7 mils of cadmium to prevent the discs from cracking. Previously, the standard instruction provided for .3 to .5 mils of cadmium coating. Glater also testified that the required cadmium coating on the surface of the disc would leave some coating in the pinhole at the center of the disc. Nicholas Brennan, a senior marketing specialist for Curtiss-Wright, testified on its behalf; he agreed that a used disc should be placed in an engine only if it has the required cadmium coating. Pratt & Whitney did not require that discs be replated with cadmium or be inspected in any particular way each time an engine was overhauled.
In 1978 Consumers Power noted that the repaired engine was vibrating and sent it to a facility in Texas for repair. The engine exploded while being tested in Texas, reducing its market value from at most $525,000 to at least $170,000. A crack in the lower compressor disc that had been inspected by Curtiss-Wright but not recoated with cadmium before its reassembly and return in 1975 caused the explosion. In Glater's opinion, the crack might have been prevented if the disc had been recoated with the proper amount of cadmium at the time of the repair. Glater had found when he inspected the disc's coating in 1983 that there was insufficient cadmium--between .3 and .4 mils--although he could not say how thick the coating was at the spot where the disc cracked, or how much coating might have evaporated in the time between the 1975 Curtiss-Wright repair and the 1978 accident, or in the time between the accident and his inspection in 1983.
A witness for Curtiss-Wright testified that Consumers Power probably received a brochure which stated under its guarantee provisions that Curtiss-Wright limited its liability to accidents occurring within fifteen months of repairs. The engine exploded more than two years after Curtiss-Wright's repairs.
The jury found that Curtiss-Wright was liable on a strict product liability count, and seventy percent liable on a comparative negligence count. The trial court addressed several post-verdict motions of the parties. The court found there was sufficient evidence to support the jury's verdict, and denied Curtiss-Wright's motion for a new trial. It also rejected Curtiss-Wright's motion for a directed verdict based on the contention that its sales brochure contained a contractual provision limiting its liability.
The court concluded, however, that the jury misunderstood the court's instructions on damages. The jury had been instructed to limit damages to the cost of repairs, if the cost of repairs was less than the difference in market value of the engine before and after the explosion. The jury found damages of $469,098.17, the highest estimate of the cost of repairing the engine after the explosion. The court granted a remittitur to adjust damages to $355,000, the difference between the market value of the engine before and after the accident, which it held to be the maximum damages awardable. Both parties accepted the remittitur. When Curtiss-Wright filed this appeal, Consumers Power moved to have the district court reinstate the original damages, but the court denied the motion, finding that the jury award was larger than permitted by the facts or law.
On appeal, Curtiss-Wright asserts that the district court erred in not finding that a contractual term in its sales brochure limited Curtiss-Wright's liability and mandated a directed verdict, and in denying its motion for a new trial on the ground that the evidence was insufficient to show that the accident resulted from Curtiss-Wright's failure to recoat the compressor disc with cadmium. Curtiss-Wright also asserts that under Spring Motors Distributors, Inc. v. Ford Motor Co., 98 N.J. 555, 489 A.2d 660 (1985), announced after the district court's judgment in this case, Consumers Power cannot recover in strict product liability.
Curtiss-Wright argues that its motion for a directed verdict should have been granted because a provision in a sales brochure it routinely sent to customers effectively created a contractual term that limits its liability. At trial, Curtiss-Wright could not produce a copy of the sales brochure in use in 1975 when Consumers Power sent the engine to Curtiss-Wright for repairs. It submitted a 1976 version of the brochure, the substance of which it claimed was in effect in 1975 and had been sent to Consumers Power. The brochure provided under the heading "GUARANTEES" that its repairs would be "free from defective workmanship." The guarantee is limited to fifteen months after Curtiss-Wright completes the repairs, and is to be the sole basis for Curtiss-Wright's liability "in tort, contract, or otherwise."
The guarantee appears in three paragraphs as the sixth of ten numbered items of "General Terms and Conditions," at the end of a fifty-five page brochure on gas turbine repair services. The first numbered item states the hourly repair rate, and Brennan testified for Curtiss-Wright that Consumers Power would not deal with Curtiss-Wright without being told the hourly rate. The terms and conditions were not discussed, Brennan said. "The only agreement was that we would do specifically what the customer requested and nothing else." No one from Consumers Power was asked about the brochure at trial, and in a pre-trial deposition Rolf Sorenson, a senior engineer for Consumers Power, stated that he did not know when, if at all, he would have received the brochure.
The district court, in denying Curtiss-Wright's motion for a directed verdict, found that there was insufficient evidence to show that Consumers Power "was ever aware of, let alone negotiated and consented to, the limitation of liability." This court in reviewing a denial of a directed verdict views the evidence in a light most favorable to the non-moving party. Dawson v. Chrysler Corp., 630 F.2d 950, 959 (3d Cir.1980), cert. denied, 450 U.S. 959, 101 S.Ct. 1418, 67 L.Ed.2d 383 (1981). If conflicting or contradictory evidence is presented that could lead to inconsistent conclusions, a directed verdict is not justified. Fireman's Fund Ins. Co. v. Videfreeze Co., 540 F.2d 1171, 1178 (3d Cir.1976), cert. denied, 429 U.S. 1053, 97 S.Ct. 767, 50 L.Ed.2d 770 (1977).
Contractual limitations on liability for negligence are frowned upon and will not be enforced unless they are bargained for. Henningsen v. Bloomfield Motors, Inc., 32 N.J. 358, 396-97, 161 A.2d 69 (1960). Such limitations in contracts are read strictly, "with every doubt resolved against the party seeking their protection." Neville Chem. Co....
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