Zantop Intern. Airlines, Inc. v. Eastern Airlines

• Decision Date: 22 June 1993
• Docket Number: 116839,123940,123537,Docket Nos. 116838,116840,129496 and 129497
• Parties: ZANTOP INTERNATIONAL AIRLINES, INC. v. EASTERN AIRLINES. ZANTOP INTERNATIONAL AIRLINES, INC. v. LOCKHEED AIRCRAFT CORP.
• Court: Court of Appeal of Michigan — District of US

Page 915

503 N.W.2d 915

200 Mich.App. 344

ZANTOP INTERNATIONAL AIRLINES, INC. v. EASTERN AIRLINES.

ZANTOP INTERNATIONAL AIRLINES, INC. v. LOCKHEED AIRCRAFT CORP.

Docket Nos. 116838, 116839, 116840, 123537, 123940, 129496

and 129497.

Court of Appeals of Michigan.

Submitted March 10, 1993, at Detroit.

Decided June 22, 1993, at 9:45 a.m.

Released for Publication Aug. 24, 1993.

Barris, Sott, Denn & Driker by Eugene Driker, Andrew M. Zack, and Daniel J. LaCombe, Detroit, for Zantop Intern. Airlines, Inc., on appeal.

Kohl, Secrest, Wardle, Lynch, Clark & Hampton, P.C. by Michael L. Updike, Farmington Hills, for Eastern Airlines, Inc.

Vandeveer Garzia by Robert D. Brignall, Detroit, for Bendix/Allied Corp.

Kohl, Secrest, Wardle, Lynch, Clark & Hampton, P.C. by Janet G. Callahan, Farmington Hills, for Lockheed Aircraft Corp.

Before GRIBBS, P.J., and HOLBROOK and NEFF, JJ.

PER CURIAM.

These appeals involve a fatal airplane crash. In 1977, Zantop International Airlines, Inc., purchased four used airplanes from Eastern Airlines. On May 30, 1984, one of the planes, a Lockheed Electra cargo plane, broke up in midair over Pennsylvania. Three Zantop employees (Charles R. Embry, John J. Bolton, and John B. Figarra) and one passenger (Bruce G. Whitesell) were killed.

Zantop argued that the removal of a "verticality monitor" was the likely cause of the accident. The monitor was removed by Eastern (when it owned the plane) pursuant to a service bulletin from Bendix/Allied Corporation, the manufacturer of the monitor. Zantop presented the following assessment of the accident: The plane probably experienced a failure of an instrument gyro. The monitor, had it still been installed in the plane, would have identified the gyro malfunction and would have disengaged the automatic pilot or warned the copilot of the failure in a timely manner. However, because of the absence of the monitor, the aircraft went into a rolling motion or tight turns, preventing the pilot from regaining control. Increased G-forces then caused the plane to break apart.

Bendix argued that pilot or crew error caused the accident. The plane's manufacturer, Lockheed Aircraft Corporation, also alleged that Zantop failed to keep the craft "airworthy" under Federal Aviation Administration regulations.

Lawsuits Filed

Five lawsuits were filed in the Wayne Circuit Court. Whitesell's estate sued Zantop, Lockheed, Bendix, and Eastern. Zantop filed a separate suit against Lockheed and Bendix to recover the cost of the lost aircraft and for contribution and indemnity. The estates of Embry, Bolton, and Figarra each sued Lockheed, Bendix, and Eastern. The suits were consolidated in the trial court.

Eastern, Lockheed, and Bendix settled jointly with the four estates for $2 million. A single insurer paid on behalf of the three parties, and the settlement was not allocated among them.

The Whitesell suit continued against Zantop (but was settled during this appeal). In addition, Eastern continued its claims for contractual indemnification against Zantop and Zantop proceeded with its claims against Eastern, Bendix, and Lockheed.

Summary Disposition for Eastern on Indemnification

After discovery was conducted, Eastern moved for summary disposition pursuant to MCR 2.116(C)(10) on the ground that it was entitled to indemnification from Zantop pursuant to the terms of the sales contract for the planes. To support the assertion that the settlement was reasonable and that Eastern had faced potential liability, Eastern's attorney argued that the verticality monitor had been removed after Eastern and two other airlines paid Bendix to prepare the service bulletin that had allowed them to remove the monitor. The court agreed that Eastern faced liability and ordered that Zantop indemnify Eastern in the amount of $666,666.66 (one-third of the $2 million settlement). Costs and attorney fees in the amount of $91,108.69 were awarded to Eastern for its defense of the principal action and its prosecution of the indemnification action.

Default and Dismissal of Zantop's Claims During Trial

Trial of the unresolved Whitesell claim against Zantop and of Zantop's unresolved claims against Lockheed and Bendix for manufacturing and design defects commenced on October 3, 1989.

During trial, Zantop's attorney asked a witness, "You were involved in OIL 24, weren't you, sir?" "OIL 24" is "Operating Information Letter # 24," a document issued by Lockheed three months after the crash that gave information concerning the relationship and use of the Electra's gyros and automatic pilot system. The trial court ruled that counsel's question was a violation of an order in limine restricting questioning about OIL 24 and ordered a default against Zantop in the Whitesell case and dismissal of Zantop's claims against Lockheed and Bendix. The trial court's written opinion supporting its decision also summarized earlier proceedings in which Zantop had violated previous orders and sanctions. The court prohibited Zantop from presenting additional proofs, but allowed Zantop to present closing arguments that afternoon concerning the issue of Whitesell's damages. The following day the jury returned a verdict of $2 million for Whitesell against Zantop. ¹

Mediation Sanctions

In light of the dismissal of Zantop's case, Lockheed and Bendix moved for attorney fees and costs as mediation sanctions. The case had been mediated, resulting in an award of $115,000 in favor of Zantop against Lockheed and an award of $115,000 in favor of Zantop against Bendix. Zantop rejected the mediation awards; Lockheed and Bendix accepted them. After mediation, but before trial commenced, Zantop served an offer of judgment upon Lockheed and Bendix, offering to allow a judgment of $825,000 to be entered in favor of Zantop. Lockheed and Bendix did not respond to the offer of judgment. During the hearings on mediation sanctions, Zantop argued that the procedures in the rule relating to offers of judgment should control the determination of fees and costs, because the last-rejected offer had been made under that rule. Zantop argued that because Lockheed and Bendix had failed to present counteroffers under that rule, they were precluded from obtaining fees and costs.

Although Lockheed and Bendix paid their attorneys $95 and $85 an hour respectively, Lockheed in a reply brief for the first time asked that it be awarded attorneys fees of $125 an hour rather than the $95 an hour its attorneys charged. The court ruled that $125 an hour was a reasonable attorney fee and entered three awards of attorney fees and costs against Zantop totaling $769,631.37, Lockheed's and Bendix's awards coming to a total of $289,436.11. Inherent in the court's ruling was a rejection of Zantop's position that the offer of judgment rule controlled.

I

Zantop argues that the trial court erred in failing to apply Florida law to the sales agreement and that Eastern is not entitled to indemnification under Florida law for its own negligence.

The Uniform Commercial Code, M.C.L. § 440.1105(1); M.S.A. § 19.1105(1), permits parties to a contract to agree on a choice of laws:

[W]hen a transaction bears a reasonable relationship to this state and also to another state or nation the parties may agree that the law either of this state or of such other state or nation shall govern their rights and duties.

The written sales agreement between Eastern and Zantop provided that the contract was to be interpreted under Florida law. The transaction had a reasonable relation to Florida, because Florida was the home state for Eastern Airlines. The parties' contractual choice of laws therefore was entitled to recognition.

MCR 2.112(J) imposes a notice requirement on parties relying on foreign law:

A party who intends to rely on or raise an issue concerning the law of

(1) a state other than Michigan,

(2) a United States territory, or

(3) a foreign nation or unit thereof

must give notice of that intention in his or her pleadings or in a written notice served by the close of discovery.

Although Eastern concedes on appeal that Florida law applies, it argues that notice of Florida law was not given as required by the court rule. The rules "are to be construed to secure the just, speedy, and economical determination of every action and to avoid the consequences of error that does not affect the substantial rights of the parties." MCR 1.105. Obviously, the purpose of MCR 2.112 is to give notice; a party that already has notice should not be heard to complain of a technical violation of the rule. Eastern was aware of the language in the contract it prepared and even argued Florida law in its motion for summary disposition. Thus, Eastern was aware that Florida law controlled the transaction.

Under Florida law, the construction of an indemnity contract is controlled by the general construction rules of contracts. Benevolent Order of Elks v. Delano, 308 So.2d 615, 617 (Fla.App., 1975). Construction generally is a question of law for the court and is dependent on the intent of the parties from the language of the contract and the circumstances under which it was made. Id., at 617. The indemnity provision should be read in harmony with other contractual provisions, American Employers Ins. Co. v. Taylor, 476 So.2d 281, 283 (Fla.App., 1985), cause dis. 485 So.2d 426 (Fla., 1985), and the contract's terms should be given their natural and commonly understood meanings, Baker & Co. v. Goding, 317 So.2d 118, 119 (Fla.App., 1975), cert. den. 328 So.2d 840 (Fla., 1976).

Florida law disfavors indemnification for one's own negligence, and, thus, such contracts will be enforced "only if they express an intent to indemnify against the indemnitee's own wrongful acts in clear and unequivocal terms." Charles Poe Masonry, Inc. v. Spring Lock Scaffolding Rental Equip. Co., 374 So.2d 487, 489 (Fla., 1979). ²

The principal Florida case cited by Zantop, University Plaza Shopping Center, Inc. v....