Dorsey v. Continental Cas. Co.

Citation730 F.2d 675
Decision Date23 April 1984
Docket NumberNo. 83-3067,83-3067
PartiesGlen K. DORSEY, Jr., et al., Plaintiffs, Honda Motor Company, Ltd., Defendant-Appellant, v. CONTINENTAL CASUALTY COMPANY, Defendant-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (11th Circuit)

John L. O'Donnell, Jr., Thomas B. DeWolf, Orlando, Fla., Anthony M. Lanzone, New York City, for defendant-appellant.

John E. Fisher, Orlando, Fla., for defendant-appellee.

Appeal from the United States District Court for the Middle District of Florida.

Before FAY and HENDERSON, Circuit Judges, and TUTTLE, Senior Circuit Judge.

ALBERT J. HENDERSON, Circuit Judge:

Honda Motor Company, Ltd. ("Honda") appeals an adverse decision of the United States District Court for the Middle District of Florida refusing to assess punitive damages against Continental Casualty Company ("Continental"). This determination was made in response to a remand from the former Fifth Circuit Court of Appeals in Dorsey v. Honda Motor Company, Ltd., 655 F.2d 650 (5th Cir.1981), mod. and reh. den., 670 F.2d 21 (5th Cir.1982), reh. en banc den., 673 F.2d 911, cert. den., --- U.S. ----, 103 S.Ct. 177, 74 L.Ed.2d 145 (1982). In the district court, Honda maintained that a $5,000,000.00 jury verdict for punitive damages had been levied against it for the misconduct of a separate entity, Honda Research & Development Co., Ltd. ("Honda R & D"), and not because of its own acts. Honda contended that under Florida law its insurer, Continental, was responsible for the payment of these punitive damages under a theory of vicarious liability and thereby sought to invoke an exception to Florida's general rule precluding insurance coverage for punitive damages. The district court found instead that the award of punitive damages was the result of Honda's own misconduct, as opposed to that of Honda R & D, negating the issue of vicarious liability. Accordingly, the district court found that Continental was not obligated to pay for the punitive damages awarded against Honda. We affirm.

The facts pertinent to this appeal are set out generally at 655 F.2d 650. Because of the protracted nature of this litigation, we refer here only to the evidence and events which essentially bear on the issue now before us.

This controversy arises out of a diversity action for damages resulting from an automobile intersection collision on March 9, 1972. As amended, the complaint claimed damages for personal injury to Glen K. Dorsey, Jr. and for loss of consortium by his wife Barbara Dorsey. The amended complaint alleged theories of negligence, breach of express and implied warranty, and strict liability in tort. The suit was directed against Honda and American Honda Motor Company, Inc. ("American Honda"), the manufacturer and the American distributor, respectively, of the vehicle owned and operated by Glen K. Dorsey, Jr. Continental Insurance Company was also named as a defendant.

A pre-trial stipulation entered into among the Dorseys, Honda, American Honda and Continental, and approved by the district court on December 4, 1978, recited:

Honda Motor Company, Ltd., as the manufacturer is liable for any negligence (sic) breach of warranty with respect to any component part which is defectively designed and manufactured even though such part may have been obtained by a third-party supplier.

With leave of the district court, the plaintiffs, on March 28, 1979, filed an "Amendment to the Third Amended Complaint" containing a count for punitive damages against Honda and American Honda. 1 The claim for punitive damages alleged that the defendants had received actual notice two years before the manufacture of Dorsey's vehicle that the passenger compartment was defectively designed, subjecting occupants to the danger of severe personal injury in the event of minimum speed collisions. It was further alleged that despite actual knowledge of the design defect Honda failed to take any steps to correct the defect or to warn the plaintiffs of the dangerous propensities of the vehicle.

The trial of the action was commenced on June 15, 1979. On June 29, 1979, the jury returned a verdict against Honda and American Honda for $825,000.00 compensatory damages. In addition, the jury awarded punitive damages of $5,000,000.00 solely against Honda.

By special verdict, the jury found (1) that the automobile was defective; (2) that Honda failed to use reasonable care in the design or manufacture of the automobile; (3) that both Honda and American Honda failed to warn of a latent defect; and (4) that Honda acted with wantonness, willfulness or reckless indifference to the rights of others in the manufacture and distribution of the vehicle.

On November 2, 1979, following a hearing on various post-trial motions, the district court set aside the punitive damages award. To avoid piecemeal appellate review, the district court also ruled, in response to a motion filed by Continental, that Continental was not liable for the punitive damages under the circumstances of this case.

The Dorseys appealed from that portion of the order setting aside the punitive damages. Honda cross-appealed the ruling that Continental was not indebted for the punitive damages. The appeal and cross-appeal proceeded concurrently.

In Dorsey v. Honda Motor Company, Ltd., 655 F.2d 650 (5th Cir.1981), the former Fifth Circuit Court of Appeals reversed and reinstated the punitive damages originally assessed against Honda. The court also reversed the finding of no insurance coverage for the punitive damages, and remanded the case to the district court for a new determination of Continental's liability to Honda for punitive damages.

Both Honda and Continental petitioned for rehearing citing a new opinion of the Supreme Court of Florida which they claimed reflected a change in Florida law relating to punitive damages. Thereafter, the appeals court modified its prior opinion, 670 F.2d 21. It deleted a substantial portion including that part dealing with the sufficiency of evidence of Honda's liability for punitive damages vis-a-vis that of Honda R & D, and remanded the case to the district court to "determine afresh" whether, under Florida law, Continental was liable to Honda.

Following remand, it was stipulated between Honda and Continental that there was no necessity for an additional evidentiary hearing. The district court examined the entire record, including the transcript of evidence, and entered an order granting Continental's motion to limit its liability solely to compensatory damages. The memorandum decision stated that the case was not one of vicarious liability because "this court can reach no conclusion except that the fault which gave rise to the punitive damages was that of Honda and not that of Honda R & D.".

Honda assigns as error (1) that the district court departed from the law of the case in determining that Honda's liability for punitive damages was not vicarious; (2) that the district court erred in finding that the fault which gave rise to the punitive damages was that of Honda; and (3) that the district court erred in limiting the liability of Continental to compensatory damages.

I.

The "law of the case" doctrine invokes the rule that findings of fact and conclusions of law by an appellate court are generally binding in all subsequent proceedings in the same case in the trial court or on a later appeal. United States v. Robinson, 690 F.2d 869, 872 (11th Cir.1982). 2 Honda claims that the court of appeals made a determination in its initial opinion that the jury's award of punitive damages was predicated on the conduct of employees of Honda R & D and that the district court was bound by that finding.

The law of the case does not apply to a finding that is later vacated. Johnson v. Board of Education of the City of Chicago, 457 U.S. 52, 102 S.Ct. 2223, 72 L.Ed.2d 668 (1982). Where a judgment is vacated for a new determination, findings previously made that are integral to that judgment are likewise vacated and are thus not subject to the law of the case doctrine. Id.

In its first opinion, the prior panel held that the liability of Honda was not the product of its own conduct, but arose out of the acts of Honda R & D. 655 F.2d 650, 660. It also suggested that there was no substantial evidence that any responsible person employed by Honda acted in a reckless manner or that any such person had knowledge of the test results or recommendations of Honda R & D. Id. However, in its opinion on rehearing, 670 F.2d 21, the court specifically deleted that portion of the first decision containing those statements. The court in effect directed the district court to redetermine the vicarious liability issue and its impact on insurance coverage relating to punitive damages.

In urging that the "law of the case" principle is viable here, Honda emphasizes two sentences from the original opinion that were not vacated by the second opinion. The original appellate decision stated:

In considering the sufficiency of the evidence to support the jury finding of willful, wanton or reckless conduct, it is of no moment that the substantial evidence of such conduct relates to employees of Honda R & D.

655 F.2d 650, 653. It also noted:

By the pre-trial order, Honda, knowing that design and testing of the car had been done by Honda R & D, accepted responsibility for the acts of Honda R & D in design and testing. Thus, in assaying the evidence of wrongful conduct the acts of Honda R & D are treated as the acts of Honda.

Id. at 654.

Honda argues that these excerpts constitute a determination by the court of appeals that the jury's award of punitive damages was based on the conduct of employees of Honda R & D and, therefore, settle the issue of vicarious liability.

We do not believe that these statements stand for the proposition advanced by Honda. The two opinions must be read in their entirety. Viewed in context, the statements do not support Honda's interpretation.

First, the...

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