Southern Pine Helicopters v. Phoenix Aviation

• Decision Date: 26 February 2003
• Docket Number: No. 01-3932.,No. 01-3931.,01-3931.,01-3932.
• Citation: 320 F.3d 838
• Parties: SOUTHERN PINE HELICOPTERS, INC., Cross-Appellant/Appellee, v. PHOENIX AVIATION MANAGERS, INC.; Old Republic Insurance Company, Appellants/Cross-Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

320 F.3d 838

SOUTHERN PINE HELICOPTERS, INC., Cross-Appellant/Appellee, v. PHOENIX AVIATION MANAGERS, INC.; Old Republic Insurance Company, Appellants/Cross-Appellees.

No. 01-3931.

No. 01-3932.

United States Court of Appeals, Eighth Circuit.

Submitted: December 11, 2002.

Filed: February 26, 2003.

James M. Llewellyn, Jr., argued, Fort Smith, AR, for appellant/cross-appellee.

Charles S. Gibson, argued, Dermott, AR, for appellee/cross-appellant.

Before BOWMAN, MORRIS SHEPPARD ARNOLD, and RILEY, Circuit Judges.

MORRIS SHEPPARD ARNOLD, Circuit Judge.

This is an action by Southern Pine Helicopters, Inc., to recover on an insurance policy issued by Old Republic Insurance Company through Phoenix Aviation Managers, Inc., and for damages occasioned by Phoenix's bad faith. (We shall occasionally refer to appellants collectively as Phoenix.) After the district court¹ granted summary judgment against Southern Pine on its bad-faith claim, the case proceeded to trial on the contract claim, and a jury returned a verdict for Southern Pine. Phoenix appeals from the judgment entered on the verdict against it, and Southern Pine cross-appeals from the summary judgment entered on its bad-faith claim. We affirm.

I.

One of Southern Pine's helicopters was damaged by a fire that broke out in its engine compartment, but Phoenix asserts that the loss was not covered because two exclusions in the relevant policy applied. By their terms, those exclusions (the applicability of which it was Phoenix's burden to prove) operate if the helicopter was being "operated in violation of any Federal Aviation Administration regulation which applies to repairs, alterations or inspections [or] in violation of the terms of its Federal Aviation Administration Airworthiness Certificate." As relevant here, the terms of the airworthiness certificate require nothing beyond compliance with applicable FAA regulations; hence we treat both exclusions as the same. Phoenix asserts that the evidence was insufficient to support the verdict against it.

Our review of the sufficiency of the evidence to support a jury verdict is ordinarily quite limited. Here, it is even more limited because Phoenix evidently did not preserve the issue below: We see nothing in the record to indicate that Phoenix moved for judgment as a matter of law before the case was submitted to the jury or after the jury returned its verdict. See Fed.R.Civ.P. 50(a), (b). Thus, instead of reviewing the evidence supporting the jury verdict for substantial evidence, as we would normally do in a diversity case arising from a district court located in Arkansas, see National Am. Ins. Co. v. Hogan, 173 F.3d 1097, 1103 (8th Cir.1999), we review the evidence for "plain error" and will set the verdict aside only to prevent a "manifest miscarriage of justice," see Cross v. Cleaver, 142 F.3d 1059, 1069-70 (8th Cir.1998).

Phoenix argues first that the evidence indisputably established that the helicopter was being operated in violation of FAA regulations, and thus the exclusion applied, because an annual inspection had not been performed in the twelve months preceding the accident, as required by 14 C.F.R. § 91.409(a)(1). That regulation provides that, except in certain enumerated circumstances, "no person may operate an aircraft unless, within the preceding 12 calendar months, it has had ... [a]n annual inspection in accordance with part 43 of this chapter and has been approved for return to service by a person authorized by § 43.7 of this chapter." In response, Southern Pine contends that an annual inspection was not required because the helicopter had been a military aircraft and was maintained, with FAA approval, under a so-called TM-20 program, a military maintenance regime that requires only 25-, 50-, and 100-hour inspections, not annual ones.

FAA regulations specifically except aircrafts that undergo "progressive inspections" from the annual inspection requirement when the local branch of the FAA has approved a "progressive inspection" plan. 14 C.F.R. § 91.409(a), (c)(3), (d). Southern Pine's mechanic testified at trial that the FAA had approved maintenance of the helicopter pursuant to the TM-20 regime. Although we have significant reservations about whether the TM-20 maintenance regime qualifies as a progressive inspection, we are far from certain that it does not. For instance, while we recognize that the TM-20 requires 100-hour inspections and that many FAA regulations explicitly differentiate between progressive inspections and 100-hour inspections, e.g., 14 C.F.R. §§ 43.15, 65.95, we note that the FAA administrator may alter any proposed progressive inspection program to include 100-hour inspections. See 14 C.F.R. § 135.419(a); see also L. Ronald Jorgensen, The Defense of Aviation Mechanics and Repair Facilities from Enforcement Actions of the Federal Aviation Administration, 54 J. Air L. & Com. 349, 405 (1988). We also note that Phoenix did not explain at trial (or in its briefs) why the "progressive inspections" exception does not apply here. We thus do not believe that any error, if there is one, is obvious enough to be plain. Cf. United States v. Caldwell, 97 F.3d 1063, 1069 (8th Cir.1996).

Phoenix argues second that the policy exclusion is applicable because Southern Pine had made a modification to the helicopter's elevator that was not in accordance with FAA regulations. Southern Pine responds that the FAA had recently approved the elevator modification pursuant to something called a "337 application" pertaining to a different alteration to the helicopter.

With respect to this issue, we detect no manifest injustice in the verdict against Phoenix because Phoenix has failed to identify a regulation that the elevator modification violated. At trial, a mechanic testified that the modification was one that should not have been performed on the helicopter in question "according to Garlick Helicopter," but Phoenix has not explained what this meant or why "Garlick Helicopter" is an authoritative source that is entitled to legal force. The testimony of Southern Pine's owner that the FAA was well aware of the modification in question, moreover, provides some evidence that the modification was not contrary to applicable regulations. In any event, given the state of the record, it is clear that the jury verdict does not represent a manifest miscarriage of justice, particularly since it was Phoenix's burden of proof to establish the applicability of the exclusion.

Our review of this case has been hampered not a little by the way that the parties chose to try it. The evidence took the form, essentially, of a battle of experts opining as to whether Southern Pine had violated FAA regulations. As we have had occasion to remark before, however, expert testimony on legal matters is not admissible. See United States v. Klaphake, 64 F.3d 435, 438-39 (8th Cir.1995). Matters of law are for the trial judge, and it is the judge's job to instruct the jury on them. See id. Here, the parties did not request instructions on the relevant federal legal principles and so the district court gave none.

Of course, industry practice or standards may often be relevant in cases like the present one, and expert or fact testimony on what these are is often admissible. See Wood v. Minnesota Mining & Mfg., 112 F.3d 306, 310 (8th Cir.1997). But that is not what this case was about. This case was about whether federal law was contravened, and expert opinion as to that was simply inadmissible.

II.

Phoenix next contends that the district court erred in allowing Southern Pine to ask questions that intimated, and to argue to the jury, that under the relevant policy a holder of a lien on the helicopter (here a bank) would automatically receive ninety percent of the helicopter's insured value if the exclusion applied. Phoenix maintains that this representation unfairly prejudiced the jury's calculation of damages.

The lienholder endorsement in the policy provides that, in the event of physical damage to the helicopter, Old Republic would still pay the bank for an otherwise covered loss if Southern Pine's act or neglect triggered an exclusion. The amount of such a payment, according to the endorsement, "will not exceed the least of" the unpaid balance of the lien less certain items, the amount of the lien as reflected in a schedule, or ninety percent of the insured value of the aircraft. The lienholder endorsement also provides that, if the lienholder is paid under this provision, Old Republic would succeed to all the rights that the lienholder had against Southern Pine under the lien and that Southern Pine would have to reimburse Old Republic for any payment made to the...