Pegasus Helicopters, Inc. v. United Technologies Corp., 93-1199

Decision Date13 September 1994
Docket NumberNo. 93-1199,93-1199
Citation35 F.3d 507
CourtU.S. Court of Appeals — Tenth Circuit
Parties24 UCC Rep.Serv.2d 835 PEGASUS HELICOPTERS, INC., a Colorado corporation, Plaintiff-Appellee, v. UNITED TECHNOLOGIES CORPORATION, a Delaware corporation; Hamilton Standard, Defendants-Appellants.

Jonathan I. Blackman of Cleary, Gottlieb, Steen & Hamilton, New York City (Chaya F. Weinberg-Brodt of Cleary, Gottlieb, Steen & Hamilton, New York City, and Michael L. Poindexter of Byrne, Kiely & White, Denver, CO, with him on the briefs), for defendants-appellants.

W. Dan Mahoney of Quiat, Schlueter, Mahoney, Ross & Barber, P.C., Denver, CO, for plaintiff-appellee.

Before KELLY and McKAY, Circuit Judges, and ROSZKOWSKI, * Senior District Judge.

McKAY, Circuit Judge.

In this diversity case in which the parties agree the law of Colorado is applicable, Defendant-Appellant United Technologies Corporation and its subsidiary, Hamilton Standard (collectively, "Hamilton"), appeal from the district court's Amended Judgment of February 4, 1993, and from the Order of that court dated April 2, 1993, denying Hamilton's motion for judgment as a matter of law.

This case arises out of Hamilton's manufacture and refurbishment of helicopter fuel controls for a helicopter engine manufactured by the Textron Lycoming Division of Avco Corporation ("Lycoming"). Plaintiff-Appellee Pegasus Helicopters, Inc., provides helicopter services for heavy lifting in contracts involving, inter alia, building ski lifts, logging, and installing air conditioning units in commercial buildings. These operations often require helicopters to perform at high altitude and in hot weather. To perform its contracts, Pegasus operated a Bell 214B helicopter that utilized the Lycoming engine incorporating the Hamilton fuel control. The helicopter was manufactured in 1978 and purchased third-hand by Pegasus in 1985.

Until 1989, Pegasus was apparently satisfied with the performance of the Bell helicopter. In February of that year, the fuel control unit in Pegasus' helicopter was scheduled for overhaul in accordance with manufacturer's specifications. The fuel control unit was removed and sent to Pratt and Whitney in the Netherlands for overhaul. 1 To enable Pegasus to continue operations while the fuel control unit was overhauled, Pegasus leased from Lycoming a replacement fuel control unit that had been repaired and overhauled by Hamilton under its contract with Lycoming. 2 Pegasus was unable to obtain the reliability and performance it needed in its high-altitude heavy-lifting operations from the helicopter after installing the leased fuel control unit. Pegasus repeatedly obtained replacement refurbished fuel control units from Lycoming, but was unable to obtain the needed performance. When Pegasus received the refurbished fuel control unit it had sent for overhaul to Pratt and Whitney in the Netherlands, the helicopter still failed to provide the required performance.

In 1990, Pegasus sold the helicopter in question to North American Helicopters. Pegasus then sued Lycoming, United Technologies Corporation, and its subsidiary Hamilton Standard, seeking to recover for economic losses allegedly suffered as a result of the failure of its helicopter to perform as needed, which Pegasus blamed on the allegedly faulty fuel controls. Pursuant to the recommendation of the magistrate judge, the district court granted Lycoming's motion for summary judgment on all counts, and dismissed Pegasus' complaints against Lycoming on the ground that a sale is an essential element to impose liability for breach of warranty whereas Lycoming was merely a lessor of the fuel control units. The district court also granted summary judgment in favor of Hamilton on Pegasus' claims for negligence, negligent misrepresentation, and exemplary damages. The district court denied Hamilton's motion for summary judgment on Pegasus' warranty claims. Hamilton does not appeal the district court's denial of its motion for summary judgment on the warranty claims.

Pegasus' warranty claims were tried to a jury, and at the close of Plaintiff's case, Hamilton moved for judgment as a matter of law pursuant to Fed.R.Civ.P. 50(a)(1), arguing that there was no evidence that the fuel controls were in breach of an express warranty or that there was any implied warranty of fitness for a particular purpose. Hamilton did not move for judgment as a matter of law on the issue of whether the fuel controls were in breach of the implied warranty of merchantability. (Appellant's App. Vol. I at A548-49). The district court denied Hamilton's motion and Hamilton proceeded with its case, at the close of which Hamilton renewed its motion for judgment as a matter of law on all of Pegasus' claims. 3 The district court again denied Hamilton's motion, and the matter was submitted to the jury. On February 4, 1993, the jury returned its verdict in favor of Pegasus on the claims of breach of express warranty and implied warranty of merchantability. The district court entered judgment on the verdict and ordered Hamilton to pay the amount of $412,000. The district court also ordered that prejudgment interest should accrue from February 21, 1989, through the date of entry of judgment at the rate of 8 percent compounded annually, and that post-judgment interest should accrue at the rate of 3.67 percent from the date of entry of judgment.

After the jury returned its verdict, Hamilton timely moved for judgment as a matter of law pursuant to Federal Rule of Civil Procedure 50(b), or in the alternative, for a new trial pursuant to Rule 59(e). On April 2, 1993, the district court denied both of these motions. The district court found that Pegasus had presented sufficient evidence to support the jury verdicts. (Appellant's App. Vol. I at A121-A124.) From the district court's April 2, 1993 Order, Hamilton appeals. Hamilton argues that Pegasus failed to sustain its burden of proof on its claim for breach of an express warranty, that Pegasus failed to establish a breach of the implied warranty of merchantability, and that the district court improperly calculated prejudgment interest.

I. Sufficiency of the Evidence

Although this diversity case is governed by the substantive law of Colorado, the sufficiency of the evidence for purposes of granting judgment as a matter of law is governed by federal law. Orth v. Emerson Elec. Co., 980 F.2d 632, 635 (10th Cir.1992); Hurd v. American Hoist & Derrick Co., 734 F.2d 495, 498 (10th Cir.1984). We therefore review de novo the district court's order denying Hamilton's motion for judgment as a matter of law. Board of County Comm'rs v. Liberty Group, 965 F.2d 879, 884 (10th Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 329, 121 L.Ed.2d 247 (1992). The same standard is applied whether the motion is made before or after the verdict is returned. Hurd, 734 F.2d at 498. " '[W]e may find error [in the denial of such a motion] only if the evidence points but one way and is susceptible to no reasonable inferences supporting the party [opposing the motion]; we must construe the evidence and inferences most favorably to the nonmoving party.' " Ralston Dev. Corp. v. United States, 937 F.2d 510, 512 (10th Cir.1991) (quoting Zimmerman v. First Fed Sav. & Loan Ass'n, 848 F.2d 1047, 1051 (10th Cir.1988)).

Hamilton argues that there was insufficient evidence supporting the district court's decision to allow Pegasus' claim for breach of express warranty to go to the jury. Pegasus' claim for breach of express warranty turned on express promises allegedly made by Hamilton to Lycoming. 4 An express warranty can be created by the seller through, inter alia, "[a]ny affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain." Colo.Rev.Stat. Sec. 4-2-313(1)(a) (1992). Such an affirmation or promise creates an express warranty "that the goods shall conform to the affirmation or promise." Id. Similarly, "[a]ny description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description." Id. Sec. 4-2-313(1)(b). No particular words are necessary to the existence of an express warranty. Id. Sec. 4-2-313(2).

Pegasus' evidence concerning the existence and scope of the express warranty was based primarily on an affirmation made by Hamilton in a "Certificate of Conformance" that accompanied fuel controls refurbished by Hamilton. The Certificate contained the following language (underlining represents completed blanks):

THE ABOVE ITEM(S) HAVE BEEN AS IS TESTED/REPAIRED TO THE ORIGINAL EQUIPMENT MANUFACTURER'S SPECIFICATION REQUIREMENTS IN ACCORDANCE WITH THE HAMILTON STANDARD QUALITY PROGRAM AND THE FEDERAL AVIATION ADMINISTRATION AND ARE CERTIFIED TO BE SERVICEABLE.

(Appellant's App. Vol. II at A771). In denying Hamilton's motion at the close of Plaintiff's case for judgment as a matter of law, the district court relied on the statement in the Certificate of Conformance that the fuel controls were serviceable, and on testimony by Plaintiff's witness, Mr. McClatchey, as to the meaning of the word "serviceable" and that the fuel controls were in fact not serviceable. (Appellant's App. Vol. I at A552.) Hamilton argues on appeal that the term "serviceable," read in context, meant only that the fuel controls were in conformance with the specifications in the contract between Lycoming and Hamilton. The meaning of the word "serviceable" was a question of fact contested by the parties at trial. We agree with the district court that, viewing the evidence in the light most favorable to the party opposing the motion for judgment as a matter of law (here, Pegasus), there was sufficient evidence such that a reasonable jury could properly find for Pegasus.

Even were we to disagree with the trial court as to the sufficiency of the evidence with respect to the use of the term "serviceable" in the...

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