Woodling v. Garrett Corp., s. 208

Decision Date03 March 1987
Docket Number370,239 and 236,86-7534 and 86-7541,Nos. 86-7496,Nos. 208,86-7526,D,s. 208,s. 86-7496
PartiesSusan Winter WOODLING, as Executrix of the Estate of Albert D. Woodling, deceased, Plaintiff-Appellee, Cross-Appellant, v. The GARRETT CORPORATION, Colt Electronics Company, Phoenix Aerospace, Inc., Lockheed Corporation and Texasgulf Aviation, Inc., Defendants. The GARRETT CORPORATION, Colt Electronics Company, Phoenix Aerospace, Inc., and Lockheed Corporation, Third Party Plaintiffs-Appellees, The Garrett Corporation, Phoenix Aerospace, Inc., Third Party Plaintiffs- Appellees, Cross-Appellants. v. TEXASGULF, INC. and Texasgulf Aviation, Inc., Third Party Defendants- Appellants, Cross-Appellees. ocket
CourtU.S. Court of Appeals — Second Circuit

Steven R. Pounian, New York City (Milton G. Sincoff, Kreindler & Kreindler, New York City, on the brief), for plaintiff-appellee, cross-appellant.

Richard C. Coyle, Seattle, Wash. (Sherilyn Peterson, Perkins Coie, Seattle, Wash., on the brief), for third party plaintiff-appellee, cross-appellant The Garrett Corp.

Randal R. Craft, Jr., New York City (John P. Marinan, Haight, Gardner, Poor & Havens, New York City, Steven B. Prystowsky, Lester Schwab Katz & Dwyer, New York City, Timothy W. Triplett, Blackwell Sanders Matheny Weary & Lombardi, Kansas City, Mo., on the brief), for third party plaintiff-appellee, cross-appellee Colt Electronics Co., Inc.

Steven G. Emerson, Morris, Larson, King, and Stamper, Kansas City, Mo. (James L. Stengel, Donovan Leisure Newton & Irvine, New York City, on the brief), for third party plaintiff-appellee, cross-appellant Phoenix Aerospace Inc.

Philip D. Pakula, New York City (Frederick D. Berkon, Mary D. Faucher, Townley & Updike, New York City, on the brief) for defendant-third party defendant-appellant, cross-appellee Texasgulf Aviation, Inc., and third party defendant-appellant, cross-appellee Texasgulf, Inc.

Before FEINBERG, Chief Judge, OAKES and KEARSE, Circuit Judges.

KEARSE, Circuit Judge:

Third-party-defendant Texasgulf, Inc. ("TG" or "TGI"), and defendant-third-party-defendant Texasgulf Aviation, Inc. ("TGA"), appeal from a judgment of the United States District Court for the Southern District of New York, entered in these consolidated actions after a series of jury trials before Gerard L. Goettel, Judge, in favor of plaintiff Susan Winter Woodling ("Woodling") for $1,142,888, including prejudgment interest, against TG, TGA, and defendants-third-party-plaintiffs The Garrett Corporation ("Garrett"), Phoenix Aerospace, Inc. ("Phoenix"), and Colt Electronics Company ("Colt"), for the wrongful death of her husband Albert D. Woodling ("Albert Woodling"). TG and TGA contend Garrett and Phoenix cross-appeal from the judgment against them, contending principally that the court erred (1) in failing to grant them a directed verdict or judgment n.o.v. on the ground that TGA's conduct was a superseding cause that exonerated them from liability, and (2) in calculating the prejudgment interest to be awarded to Woodling. Garrett contends, in the alternative, that if TG and TGA are granted judgment as a matter of law, Garrett is entitled to a new trial because of a variety of alleged trial errors. Woodling cross-appeals from so much of the judgment as limited her recovery to $1,142,888, contending principally that she is entitled to a new trial as to certain elements of damage because of errors in the district court's rulings and instructions.

principally that the court erred (1) in failing to direct a verdict in their favor or to grant them judgment notwithstanding the verdict ("n.o.v.") either because they were protected from liability in the present suit by principles of workers' compensation immunity or because Woodling had validly released them from liability, and (2) in failing to grant them a new trial on the ground that there were errors in the evidentiary rulings and instructions to the jury.

For the reasons below, we affirm so much of the judgment as holds TG, TGA, Garrett, and Phoenix liable to Woodling; we affirm in part and vacate in part the award of damages and remand for further proceedings.

I. BACKGROUND

On February 11, 1981, a Lockheed Jetstar airplane (the "Jetstar"), owned by TG's wholly-owned subsidiary TGA, crashed near Westchester Airport in Westchester County, New York, killing its two-man crew and all six passengers. Albert Woodling, a 34-year-old Accounting Supervisor employed by TG in Raleigh, North Carolina, was one of the passengers.

In 1982 and 1983, Woodling brought the present actions in the district court under the New York wrongful death statute, N.Y.Est.Powers & Trusts Law ("EPTL") Secs. 5-4.1 to 5-4.6 (McKinney 1981 & Supp.1987); jurisdiction was based on diversity of citizenship. Woodling named as defendants, inter alios, TGA as owner and operator of the Jetstar; Phoenix as the designer and manufacturer of generator control units aboard the Jetstar, which were alleged to have malfunctioned and caused the crash; Garrett as the installer of those generator control units; and Colt, which had prepared the installation drawings for those units. Each of the defendants was alleged to have been negligent with respect to events leading to the crash.

TGA, which in 1982 had been dissolved and its assets distributed to TG, denied liability and asserted two affirmative defenses pertinent to its present appeal. First, it contended that TG and TGA were alter egos and that since TG was Albert Woodling's employer, TGA was protected from liability in the present action by North Carolina principles of workers' compensation immunity. Second, TGA contended that Woodling had entered into a valid agreement (the "Release") releasing TG and TGA from liability resulting from the crash in exchange for a payment of $250,000. Woodling, in response to the latter defense, sought rescission of the Release on the ground that TG had procured it by means of material misrepresentations.

The district court tried the action before juries in three stages.

A. The Trial of the Affirmative Defenses

The first trial, held in the spring of 1984, dealt with TGA's affirmative defenses. As set forth in greater detail in Part II.A. below, Woodling presented evidence to show that, although TG paid the salaries of all TGA personnel, TGA was governed and operated as an entity separate from TG. The evidence included proof that TGA's pilots and maintenance employees were supervised by TGA officials; that both TG and TGA repeatedly certified to various state and federal agencies that TGA both owned and operated the aircraft; and that TGA entered into contracts in its own name for the lease, modification, and storage of aircraft and for the training and temporary employment of pilots. There was documentary As discussed in Part II.B. below, Woodling testified that she had signed the Release in reliance on TG officials' representations, inter alia, that TGA was essentially a shell that had "no employees," no "power to hire and fire the pilots and ground personnel," and "no business operations beyond holding title to the former TGI aircraft." Woodling testified that she had understood these representations to mean that TGA would have a workers' compensation defense to any wrongful death action she might bring. She also testified that she signed the Release because she was informed by TG and its insurer, United States Aircraft Insurance Group ("USAIG"), that a $250,000 insurance benefit payable to Albert Woodling's estate could not be received unless she signed such a release. Woodling testified that she was unaware that TG had another insurance policy with American Home Assurance Company ("American Home") which did not require such a release and which on its face covered aircraft accidents if the aircraft was not "owned or operated by the Policyholder," defined therein as "Texasgulf, Inc." She stated that had the existence and terms of the American Home policy been revealed to her, she would not have signed the Release.

and testimonial evidence that the technical aviation decisions with respect to TGA operations were made by TGA alone, not by TG.

TGA introduced the Release, which stated in part as follows:

This Release reflects the entire agreement between Releasor and Releasee concerning the subject matter hereof. Releasor has carefully read and fully understands the provisions of this Release and knows the contents thereof, and signs the same as Releasor's own free act, and avers that Releasor has not been influenced to any extent whatsoever in making and signing same by any representations or inducements whatsoever by Releasee, other than as set forth herein.

In addition, TGA introduced proof that the American Home policy did not in fact cover the death of Albert Woodling because the language that appeared to cover that event was the inadvertent result of a mutual mistake between TG and the carrier. TGA moved for a directed verdict in its favor on the basis of either or both of its affirmative defenses.

The district court denied the motion and submitted special interrogatories to the jury with respect to each defense. The court instructed the jury that in fact Albert Woodling's death was not covered by the American Home policy and that the jury should decide whether the nondisclosure of the policy with its mistaken facial coverage was a fraudulent or material misrepresentation.

The jury found in favor of Woodling on both of TGA's defenses. Rejecting the workers' compensation immunity defense, the jury found that TG and TGA were separate entities and that TGA was the employer of the flight crew and maintenance personnel involved in the events leading to the crash. Rejecting the release defense, the jury found that TGA was the operator of the airplane involved in the crash, that TG or USAIG had made fraudulent or material misrepresentations both with regard to the status and operations of TGA and...

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