Gates Learjet Corp. v. Duncan Aviation

• Decision Date: 30 June 1988
• Docket Number: No. 85-1269,85-1269
• Citation: 851 F.2d 303
• Parties: GATES LEARJET CORPORATION, Plaintiff-Appellant, v. DUNCAN AVIATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 303

851 F.2d 303

GATES LEARJET CORPORATION, Plaintiff-Appellant, v. DUNCAN AVIATION, Defendant-Appellee.

No. 85-1269.

United States Court of Appeals Tenth Circuit.

June 30, 1988.

Stephen P. Kenney, Lord, Bissell & Brook, Chicago, Ill. (Hugh C. Griffin, Lord, Bissell & Brook, Chicago, Ill., and Richard C. Hite and Scott J. Gunderson, Kahrs, Nelson, Fanning, Hite & Kellogg, Wichita, Kan., were also on the brief), for plaintiff-appellant.

Windell G. Snow, Curfman, Harris, Stallings & Snow, Wichita, Kan. (Craig A. Kreiser, Curfman, Harris, Stallings & Snow, Wichita, Kan., was also on the brief), for defendant-appellee.

Before HOLLOWAY, Chief Judge, and SEYMOUR and BALDOCK, Circuit Judges.

HOLLOWAY, Chief Judge.

This suit for contribution and indemnification was filed in a Kansas state court by Gates Learjet Corporation (Gates) against Duncan Aviation (Duncan) arising from a crash of a jet aircraft in North Carolina, in which all five occupants perished. The suit was removed by Duncan to the federal district court. The aircraft was designed, manufactured and sold by Gates. Duncan serviced and maintained the aircraft prior to the crash on September 8, 1977. Before this case was filed, two other liability lawsuits arising from the same aircraft crash had been tried and concluded: one in Georgia and the other in Michigan. Additionally, the hull insurer of the aircraft, Federal Insurance Company, filed a subrogation action against Gates after paying the insured value of the aircraft to the deceased owner's estate. ¹

On behalf of one of the decedents, a wrongful death action was filed in the United States District Court for the Northern District of Georgia. Both Gates and Duncan were named as defendants; however, Duncan was dismissed for lack of jurisdiction. The case proceeded to trial on the theory of design defect and breach of implied warranty. The trial resulted in a judgment against Gates, which was appealed. Subsequently, Gates dismissed its appeal pursuant to a settlement agreement with the plaintiff.

Wrongful death actions on behalf of all five decedents were filed in the Circuit Court of the County of Wayne, Michigan, against several defendants, including Gates and Duncan. The plaintiffs' theory against Gates was similar to that in Georgia; one, there was a design defect in that the tailcone area of the aircraft was without a fire detection and extinguisher system, and two, breach of warranty. The Michigan plaintiffs' theory against Duncan was that it negligently maintained and inspected the aircraft. The five actions were consolidated for a jury trial on the issue of liability.

Prior to the beginning of the trial, Duncan filed a crossclaim against Gates, denying any negligence and any causation between its conduct and the in-flight fire. In addition, Duncan asserted in its cross-claim that if Duncan was held liable for negligent maintenance, it was due to Gates' faulty service manuals; thus, it was entitled to indemnification from Gates. Gates failed to respond to or answer Duncan's cross-claim.

At the close of plaintiffs' evidence, Duncan moved for a directed verdict against the plaintiffs. The trial court reserved its ruling on the motion until the close of all evidence. After all the evidence was submitted, and before the case was submitted to the jury, the trial court granted Duncan's motion for a directed verdict.

The Michigan jury returned a liability verdict against Gates, finding that negligence and breaches of express and implied warranties were a proximate cause of the decedents' deaths. Ultimately, all the wrongful death claims were settled by Gates, three prior to the damage trials, and the other two while appeals were pending in the Michigan Court of Appeals.

In the present action, Gates claims a right of contribution and indemnification from Duncan, due to its negligence in maintenance, for amounts paid by Gates pursuant to the prior Michigan State Court judgments and settlements arising from the 1977 plane crash. Duncan thereafter moved for summary judgment on the basis that Gates is collaterally and equitably estopped from litigating the issue of Duncan's negligence. The district court, applying Michigan law, sustained Duncan's motion for summary judgment, holding that Gates is barred from relitigating the issue of Duncan's negligence on the basis of equitable estoppel and Michigan procedural law. Gates appeals that ruling. We affirm.

I.

A. Michigan law of estoppel governs the estoppel effect of the prior Michigan court judgment

The district court, in granting Duncan's motion for summary judgment, correctly relied on Michigan law in deciding whether Gates was estopped from asserting its present contribution and indemnification claims. The Full Faith and Credit Statute, 28 U.S.C. Sec. 1738, requires that a federal court apply the law of the state which rendered the judgment for purposes of determining its preclusive effect. Marrese v. American Academy of Orthopedic Surgeons, 470 U.S. 373, 380-381, 105 S.Ct. 1327, 1332, 84 L.Ed.2d 274 (1985); Migra v. Warren City School District Board of Education, 465 U.S. 75, 81, 104 S.Ct. 892, 896, 79 L.Ed.2d 56 (1984); Kremer v. Chemical Construction Corp., 456 U.S. 461, 466 n. 6, 481-482, 102 S.Ct. 1883, 1889 n. 6, 1897-98, 72 L.Ed.2d 262 (1982); Jarrett v. Gramling, 841 F.2d 354, 356 (10th Cir.1988); Federal Ins. Co. v. Gates, 823 F.2d 383, 385 (10th Cir.1987). Duncan's argument that the district court could have given the Michigan judgments greater preclusive effect than would the court of Michigan without offending the Full Faith and Credit Statute is unpersuasive. See, Haring v. Prosise, 462 U.S. 306, 313 & n. 6, 103 S.Ct. 2368, 2373 & n. 6, 76 L.Ed.2d 595 (1983); and Union & Planters' Bank v. Memphis, 189 U.S. 71, 75, 23 S.Ct. 604, 606, 47 L.Ed. 712 (1903). The district court properly applied Michigan law in determining whether principles of estoppel could be used to preclude the present litigation by Gates concerning Duncan's liability.

B. Traditional Collateral Estoppel is not available to Duncan under Michigan law

Gates argues vigorously that the district court's ruling is in conflict with settled Michigan law and general principles on collateral estoppel, privity and mutuality.

We agree that under Michigan law, Duncan can not use the traditional doctrine of collateral estoppel to prevent Gates from litigating the issue of liability, as Michigan adheres to recognized limitations on collateral estoppel. These include actual litigation and determination of an issue leading to judgment. Howell v. Vito's Trucking and Excavating Company, 386 Mich. 37, 191 N.W.2d 313, 315 (1971); Rinaldi v. Rinaldi, 122 Mich.App. 391, 333 N.W.2d 61, 64-65 (1983). Also, the same issue underlying the original action must be involved in the subsequent action. Stolaruk Corp. v. Dept. of State Highways and Transportation, 114 Mich.App. 357, 319 N.W.2d 581 (1982). Moreover, Michigan requires that mutuality of estoppel exist. Rinaldi, supra, 333 N.W.2d at 65. Mutuality of estoppel is present if both parties in the second suit are bound by the judgment rendered in the first suit. Stolaruk Corp., supra, 319 N.W.2d at 583; Howell, supra, 191 N.W.2d at 315. Finally, one defendant is not bound by issues litigated between a plaintiff and another defendant, as long as no adversity exists between the defendants and no claim between them was brought in issue, litigated and determined. Gomber v. Dutch Maid Dairy Farms, Inc., 42 Mich.App. 505, 202 N.W.2d 566, 570 (1972), lv. denied, 389 Mich. 752 (1972); Cook v. Kendrick, 16 Mich.App. 48, 167 N.W.2d 483, 485 (1969).

Although Duncan is able to establish that in the first action the directed verdict entered in its favor constituted a final determination of nonliabilty between it and the plaintiffs, see Latimer v. William Mueller & Son, Inc., 149 Mich.App. 620, 386 N.W.2d 618, 627 (1986), it is unable to show that Gates was an adverse party as to Duncan in the proceedings between Duncan and the plaintiffs, nor that the judgment Duncan obtained from the directed verdict is binding on any party other than it and the plaintiffs.

Duncan contends that an adversary relationship existed between it and Gates which arose solely from the action between Duncan and the plaintiffs. Duncan argues first that Gates was adverse because the plaintiffs' claims against Duncan were put in issue by plaintiffs' pleadings and Duncan's answer denying negligence; thus, the directed verdict determination is final as to all parties for purposes of Duncan's nonliability. Secondly, Duncan asserts that its cross-claim itself against Gates satisfies the requirement that the parties be adverse. Both of Duncan's contentions are flawed; the former in that Duncan cannot establish that Gates was an adverse party due to the plaintiffs' allegation of negligence on the part of Duncan, and the latter because there was no final determination between Gates and Duncan on Duncan's cross-claim.

For adversity to exist between Duncan and Gates, they must by the pleadings be arrayed on opposite sides. Gomber, supra, 202 N.W.2d at 570. Duncan argues that this requirement is met because Gates, as well as the plaintiffs, had a full opportunity to litigate the issue of Duncan's negligence. However, the mere assertion by Duncan that some other party was responsible for the crash is not sufficient to align that party as an adversary for collateral estoppel purposes. See Cook v. Kendrick, supra, 167 N.W.2d at 486 (mere assertions by one defendant that another defendant is at fault does not make the co-defendants adversaries). Thus, Duncan cannot assert the defense of collateral estoppel on the basis of the judgment on the directed verdict because no adversity existed between it and Gates merely from the plaintiffs' pleadings and Duncan's denial of negligence.

Next, Duncan argues that its cross-claim against Gates was sufficient to create adversity between the...