Kuwait Airways v. Ogden Allied Aviation Services

• Decision Date: 30 November 1989
• Docket Number: No. CV 87-1365.,CV 87-1365.
• Citation: 726 F. Supp. 1389
• Parties: KUWAIT AIRWAYS CORPORATION, Plaintiff, v. OGDEN ALLIED AVIATION SERVICES, formerly Ogden Food Service Corp., Defendant.
• Court: U.S. District Court — Eastern District of New York

726 F. Supp. 1389

KUWAIT AIRWAYS CORPORATION, Plaintiff, v. OGDEN ALLIED AVIATION SERVICES, formerly Ogden Food Service Corp., Defendant.

No. CV 87-1365.

United States District Court, E.D. New York.

November 30, 1989.

Michael J. Holland, Condon & Forsyth, New York City, for plaintiff.

Michael Caulfield, White, Fleischner & Fino, New York City, for defendant.

MEMORANDUM AND ORDER

DEARIE, District Judge.

This case arises out of a fender bender between two rather extraordinary fenders: one attached to a truck of the type used to hoist meals onto aircraft, the other on a Boeing 747. Because the parties who owned the vehicles involved in the collision are of diverse citizenship, and the amount in controversy exceeds the statutory minimum, this Court has jurisdiction.

I.

On May 29, 1984, a Boeing 747 aircraft owned and operated by plaintiff was, while parked at John F. Kennedy International Airport, struck by a truck owned and operated by defendant. Defendant has admitted liability for the accident and stipulated to the amount of damages for actual costs of repairing plaintiff's aircraft and accommodating plaintiff's passengers who were inconvenienced by the accident. The only dispute remaining between the parties is whether plaintiff is entitled to any damages for temporary loss of use of the aircraft and, if so, what the measure of those damages should be.

There is no question that the damaged aircraft was out of service for several days while repairs were being made.¹ Plaintiff argues that this fact, coupled with defendant's admission of liability, entitles plaintiff to an award of damages for loss of use of the aircraft. Plaintiff moves for partial summary judgment establishing that the measure of its loss of use damages is the reasonable rental value of a replacement 747 for the time during which plaintiff's 747 was out of service.

Plaintiff concedes, however, that it did not actually rent a replacement 747. In fact, it appears that plaintiff was able to service all of the grounded plane's flights by using an A300 Airbus that was in plaintiff's fleet and was not otherwise engaged.² Defendant submits evidence that, because no flights were cancelled and the Airbus had sufficient capacity to seat all passengers who would have flown on the grounded 747, plaintiff suffered no lost profits— and may indeed have benefitted financially— as a result of the 747's grounding. Absent an actual pecuniary loss resulting from the accident, defendant contends, there can be no recovery of damages for loss of use of the jumbo jet.

The present motion thus requires the Court to decide whether proof of actual pecuniary loss is required in order to recover for loss of use of a damaged chattel, and whether the reasonable cost of securing a replacement for the damaged chattel may be recovered even if no substitute is actually rented.³ There are undoubtedly disputed, material issues of fact regarding the amount of loss of use damages suffered by plaintiff in this case—for example, the number of days the plane was out of service, the appropriate rental fee, and the relative net operating profit of the Airbus as compared to that of the 747. However, the appropriate measure of those damages —in effect, the decision whether the rental fee and operating profit are even relevant to determining damages in the factual context of this case—is purely a question of law that is appropriately addressed on a motion for summary judgment.

II.

In searching for law to apply to the instant motion, this Court must, of course, look to the law of New York State. Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1937). Unfortunately, the available precedents do not speak with a single voice.

Mountain View Coach Lines, Inc. v. Hartnett, 99 Misc.2d 271, 415 N.Y.S.2d 918 (Greene County Ct.1978), aff'd without opinion, 69 A.D.2d 1020, 414 N.Y.S.2d 947 and aff'd mem., 70 A.D.2d 977 (3d Dept. 1979), leave to app. denied, 47 N.Y.2d 710, 393 N.E.2d 1050, 419 N.Y.S.2d 1026 (1979), appears to be the first reported case in which a New York appellate court considered whether a common carrier could recover damages, based on the rental cost of a replacement, for loss of use of a vehicle when in fact no substitute had been rented. In Hartnett, the defendant paid the cost of repairing plaintiff's bus before trial. Mountain View Coach conceded that it had extra buses even after using a reserve to replace the damaged bus, and that it had not rented a replacement. The court found that to award loss of use damages would have "paid for the use of a bus that would otherwise have stood idle." Id. at 272, 415 N.Y.S.2d 918. Reasoning that such a payment would represent a windfall to the plaintiff rather than compensation for a loss actually incurred, the court refused to award any damages for loss of use.

The trial court's opinion in Hartnett was published only after the Appellate Division, Third Department, affirmed on the opinion below. Thus, Hartnett was unavailable to the Second Circuit when Koninklijke Luchtvaart Maatschaapij, N.V. (K.L.M. Royal Dutch Airlines) v. United Technologies Corp., 610 F.2d 1052 (2d Cir.1979) was decided. In K.L.M., an aircraft leased by plaintiff was damaged when an engine exploded while the plane was on the ground. The airline sued the manufacturers and designers of the engine. The claim for repair costs was settled before trial, and the parties agreed to postpone trying the issue of liability until after determination, in a preliminary trial, of the quantum of damages recoverable for loss of use of the plane during the time required for repairs.

The preliminary trial was held before a magistrate whose report and recommendation was adopted without change by the district court. The report concluded, first, that K.L.M. could recover loss of use damages only for its "actual pecuniary loss," and second, that no such loss had been adequately proven. Id. at 1054.

The Second Circuit reversed. The Court of Appeals agreed that the airline had failed to prove pecuniary damages, but held that even without a showing of actual out-of-pocket loss, the airline could recover damages equal to the fair rental cost of a replacement plane.⁴ Reasoning from a line of New York cases originally applied to negligently injured horses, the court noted that ownership of a chattel comprises a number of valuable rights, among them the right to use the chattel and the right to dispose of it for fair value. Both these rights are impaired when a tortfeasor damages a chattel, and each impairment is separately compensable. However, since neither of these rights can be valued directly, the law uses proxies to measure the value of the lost rights. The loss in value of the damaged thing itself is estimated by the expense of restoring the chattel to its pre-accident condition, i.e., the cost of repairs. The value of the lost use of a thing for a period of time is similarly estimated by the expense of acquiring the use of that item for that time, i.e., the rental cost of a replacement. Thus, repair costs and replacement rental fees are included as items of damages, not to pay back actual out-of-pocket expenses, but to provide approximate compensation for lost rights. Id. at 1055-56.

From that viewpoint, the Second Circuit's conclusion that "rental value may provide a measure of loss of use damages even though a substitute vehicle has not actually been hired," id., followed immediately. As the Court pointed out, it would be ridiculous to demand proof of actual financial loss resulting from loss of use of a pleasure vehicle, yet the use of that vehicle nonetheless has value, which may be approximated by the rental cost of a replacement.⁵

The K.L.M. court considered and rejected the possibility that it was bound to affirm the district court because of Brooklyn Eastern District Terminal v. United States, 287 U.S. 170, 53 S.Ct. 103, 77 L.Ed. 240 (1932). Brooklyn Terminal was not controlling because it was decided under federal admiralty law rather than New York state tort law. However, the K.L.M. court also attempted to distinguish Brooklyn Terminal on its facts.

In Brooklyn Terminal, a tugboat was damaged in a collision. The trial court found both parties at fault and directed that damages, including repair costs and the rental cost of a replacement tug, be apportioned equally. The Second Circuit reversed the award of loss-of-use damages, and the Supreme Court affirmed the reversal.

The damaged tug in Brooklyn Terminal was owned by a company that towed barges carrying railroad cars from point to point in New York harbor. While the tug was being repaired, the company neither hired a rental boat nor pressed a reserve boat of its own into emergency service. Instead, the company was able to meet the demand for car-float towing by extending the hours of operation of its remaining, undamaged tugs.

Justice Cardozo, writing for a unanimous court, held that under those facts, it was error for the trial court to award damages based on the rental cost of a replacement boat. The opinion took pains to avoid foreclosing loss of use damages in all cases where no substitute was hired. Had the record contained proof of overtime wages paid to the crews of the undamaged tugs, or of extra wear and tear on the boats used overtime, then those costs would have been recoverable as loss of use damages, Justice Cardozo observed. Nor did Brooklyn Terminal rule out a measure of damages that had been used "in situations not dissimilar": The fair return on the investment represented by the tug, prorated to reflect the period of time the tug was out of service. The Court simply observed that nothing in the record below could establish the amount of damages so measured.

Moreover, Brooklyn Terminal's facts were specifically distinguished from cases in which fleet owners, who maintained and used standby boats to insure against disruptions of service, had been allowed to recover...