Opinion
No. CV-00-0171563-S (X06)
August 15, 2003
MEMORANDUM OF DECISION ON POST-TRIAL MOTIONS (## 175.50, 180, 181)
This case was tried before a jury, which on June 12, 2003, returned a verdict finding that the plaintiff Hamilton Sundstrand Corporation (H-S) had failed to prove any of its claims against Sino Swearingen Aircraft Company (SSAC), which claims included contract violations, promissory estoppel, negligent misrepresentation, unjust enrichment/quantum meruit, and implied covenant of good faith and fair dealing. The jury also found that SSAC proved its counterclaim alleging unfair or deceptive trade practices by H-S, in violation of the Connecticut Unfair Trade Practices Act, General Statutes § 42-110a et seq. (CUTPA). The jury awarded nothing to H-S and $130,588.96 to SSAC on its counterclaim.
H-S filed post-trial motions to set aside the verdict, for entry of judgment notwithstanding the verdict, for new trial, and for remittitur. SSAC has filed motions for attorneys fees, costs, litigation expenses, and punitive damages. The parties have filed opposition papers to each other's respective motions. All motions were heard in oral argument on July 21, 2003.
H-S is a wholly-owned subsidiary of United Technology Corporation, which possesses electro-expulsive deicing system (EEDS) technology. In the mid-1990s, H-S identified a $269 million market for EEDS products. SSAC, having its principal p1ace of business in San Antonio, Texas, was at the time in the process of manufacturing the SJ30-2, the first new business jet developed in the United States in approximately 40 years.
H-S was interested in applying its EEDS technology to an aircraft horizontal tail. In the summer and fall of 1996, H-S sales personnel and engineers made several trips to SSAC Texas headquarters for the purpose of marketing its EEDS technology for use on Sino's SJ30-2 airplane. During these meetings, H-S made representations about the development and performance of the EEDS technology.
In 1995, SSAC issued a request for proposal (RFP) for a deicing system for its SJ30-2 aircraft. The EEDS technology was marketed by H-S as state of the art technology that would represent a substantial improvement from the industry standard pneumatic deicing boots which had been used for years. In response to Sino's RFP, H-S agreed to develop and adapt EEDS for use on the horizontal tail of the SJ30-2, and bear the development costs in return for SSAC's agreement to award the contract to H-S if it decided to include a deicing system on the horizontal tail of the SJ30-2.
The jury reasonably could have found the following facts from the evidence presented at trial: that H-S represented to SSAC that the EEDS system had been developed during the period from 1991 through 1995; that the EEDS system shed ice from the protected area of the SJ30-2 horizontal tail at a minimum ice thickness of .060 inches (this number was subsequently adjusted by H-S to a claim of minimum ice thickness of 0.020 inches); that there was no maximum thickness of ice that EEDS could not shed; that the weight of EEDS applied to the SJ30-2 would be less than 20 pounds; that the color of the EEDS blanket for the SJ30-2 would be silver, as specified by the RFP; that the EEDS system could readily be certified to meet the requirements of the SSAC RFP and the Federal Aviation Administration certification for deicing systems on aircraft horizontal tails; that the price of each EEDS unit would be $13,900 for the first 20 units and the nonrecurring expense for H-S to apply EEDS to the SJ30-2 would be $241,500; that ice tunnel tests of the EEDS system would be conducted at no cost to SSAC; and that SSAC would not need to fund development work required to bring EEDS to the status of production and delivery. A memorandum of understanding from SSAC to H-S set forth the terms of this agreement.
Pending the execution of a formal contract between the parties, H-S's sales manager Ron Kowalski faxed to SSAC on May 13, 1997, a termination liability schedule setting forth the termination liability exposure of SSAC in the amount of $241,500. SSAC issued the termination liability schedule to H-S on June 17, 1997, thus authorizing H-S to proceed with the adaptation of the EEDS system for the SJ30-2. In its July 11, 1997, acknowledgment of receipt of the termination liability schedule, H-S represented that it would provide SSAC with reliable products and on-time deliveries.
In January of 1998, H-S's lead EEDS engineer Joshua Goldberg attended a national interspace science meeting where he presented a paper representing that the EEDS system on the SJ30-2, bearing a minimum ice thickness of approximately 0.020 inches, would clear the surface twice a minute and would comply with FAA certification requirements.
The EEDS system was tested on a horizontal tail of the SJ30-2 in ice tunnel tests performed in October of 1998 at the NASA Lewis Research Tunnel. The EEDS system failed to perform and accomplish the deicing, and the tests had to be aborted. SSAC allowed H-S to retain the SJ30-2 test model horizontal tail in order to make necessary improvements and permit an additional round of testing at the NASA tunnel.
The second series of ice tunnel tests on the SJ30-2 horizontal tail was conducted in March of 1999, again at the NASA Lewis Icing Research Tunnel. The EEDS system functioned better then it had during October of 1998 tests, but failed to perform in accordance with the design specifications. At trial, H-S lead engineer Joshua Goldberg admitted that the system failed to do what it was supposed to do during the March of 1999 testing.
In early 1999, H-S was very concerned with the financial and technical risk associated with the EEDS program, and was considering discontinuing its development. H-S tried but was unable to classify the EEDS program as independent research and development for the purpose of obtaining funding from the federal government. H-S contract administrator Mary Dehais then was instructed to undertake a "pricing exercise" to increase the negotiated $13,900 unit price and the amount of nonrecurring expenses to SSAC.
SSAC on March 15, 1999, sent a letter to Ms. Dehais highlighting its disappointment with the second round of ice tunnel tests and the substantial discrepancies between the promised performance and the demonstrated performance at the March of 1999 ice tunnel tests. A meeting was held in San Antonio, Texas, where Mr. Goldberg discussed proposed solutions for the EEDS technology. Mr. Goldberg agreed to put his proposal in writing and submit a detailed program recovery plan to SSAC by April 1, 1999. The written recovery program plan was not received on April 1, 1999. On April 2, 1999, SSAC's vice president of procurement Alan Schwartz telephoned H-S's director of programs Rick Cleary to inquire about the recovery plan. Cleary was unaware that H-S had committed to a recovery plan, but promised a plan by April 7, 1999. No recovery plan was received on April 7, 1999.
On April 8, 1999, Mr. Schwartz sent a facsimile to H-S president Richard Burrell, indicating his disappointment with the ice tunnel test failures and the failure to provide a recovery plan in a timely manner. On April 8, 1999, H-S sent a letter to SSAC which challenged the discrepancies outlined in the SSAC engineering memorandum and attributed delay problems to a lack of definition from SSAC. H-S proposed a meeting to reach an agreement on sharing future costs. On May 13, 1999, H-S wrote to SSAC threatening to stop work on the SJ30-2 on May 14, 1999, unless SSAC agreed to renegotiate the unit price and nonrecurring cost responsibility, as well as the cost for future ice tunnel tests.
SSAC on May 19, 1999, wrote to H-S that the proposal contained in the May 13, 1999 letter was unacceptable, and recommended that in their mutual interest they terminate the relationship.
SSAC's May 19, 1999, letter outlines the substantial nature of the problems with the deicing system, including: system weight; that "rapid" deicing was only achievable following a significant delay (SSAC indicated that it would never have chosen the system if this delay had been reported at the outset); ice shedding which was uneven in the four zones on the horizontal tail and resulted in a horn shape of ice which took an average of five minutes to break; and ice bridging problems that resulted in significant accumulations of ice remaining on the horizontal tail structure.
The letter also pointed out the futility of debating performance requirements when massive ice horns several inches thick accumulated on the wing. The H-S representation as to ice accumulation was that it would not be greater than 0.060 inches. SSAC also noted the unacceptability of H-S's stop-work position, specifically indicating that it no longer considered the termination liability schedule applicable since H-S had not yet developed a certifiable system in accordance with the proposal and requirements.
H-S responded to SSAC's May 19, 1999, letter with a letter of June 21, 1999, acknowledging receipt of the May 19, 1999, letter and stating that it "agrees with SSAC's recommendation of termination." H-S requested return of proprietary data, which was complied with by SSAC.
Mindful of the above evidence heard by the jury, H-S's motions to set aside the verdict, for entry of judgment notwithstanding the verdict, for a new trial, and for remittitur are denied in accordance with the following discussion.
I. Motion to Set Aside Verdict and Order a New Trial
A. Insufficient Evidence
H-S has moved to set aside the verdict on the basis that there is insufficient evidence to support the verdict for SSAC on its counterclaim. A trial court in reviewing a motion to set aside the verdict must give the evidence offered at trial the most favorable construction to which it is reasonably entitled in support of the verdict. Shea v. Paczowski, 11 Conn. App. 232, 233-34, 526 A.2d 558 (1987). When reviewing the sufficiency of the evidence, the inquiry is "whether the jury reasonably could have concluded, upon the facts found and the inferences reasonably drawn therefrom, that the cumulative effect of the evidence established the necessary element . . ." (Citations omitted.) Bovat v. City of Waterbury, 258 Conn. 574, 593, 783 A.2d 1001 (2001). "Only under the most compelling circumstances may the court set aside a jury verdict because to do so interferes with a litigant's constitutional right in appropriate cases to have issues of fact decided by a jury." Shea v. Paczowski, supra, 11 Conn. App. 234.
The jury reasonably could have found that H-S made material misrepresentations regarding the performance capability of its EEDS deicing system, as well as the current state of development of the EEDS system. Misrepresentations could have been found with respect to the development of the EEDS technology from 1991 through 1995, when no development took place between 1992 and 1995. The representation that the EEDS system shed ice from the horizontal tail at a minimum ice thickness of 0.060 inches was later corrected to 0.020 inches. In the second round of ice tunnel tests, ice accumulations reached up to 2 inches in thickness.
H-S also represented that there was no maximum thickness of ice that the EBBS system could not shed from the horizontal tail. The second series of ice tunnel tests, in March of 1999, revealed substantial ice accumulations of up to 2 inches in thickness.
The jury could have found that H-S misrepresented the weight of the EEDS system, that it could have provided an EEDS blanket in the silver color required by SSAC, and that H-S misrepresented the ability of the EEDS system to "shed ice rapidly and to clear the surface twice a minute."
The jury also could have found that H-S misrepresented the price of the EEDS systems, its conformity with FAA regulations, and that SSAC would not have to bear the cost of the ice tunnel testing.
The jury could have found that H-S violated CUTPA by seeking to impose its developmental costs and price increases on its customer. Any of the above-noted misrepresentations would have justified a verdict that H-S violated CUTPA by engaging in unfair or deceptive trade practices.
B. Erroneous Evidentiary Rulings
1. Goodrich Testing Results
H-S claims that the court erred by excluding evidence of 2002 ice tunnel test results of a Goodrich deicing system on a SSAC airplane.
H-S sought to compare for the jury the results of the Goodrich pneumatic boot system in 2002 with the EEDS deicing test results in March of 1999. The Goodrich pneumatic boot system was the industry standard which had been used for decades. The H-S EEDS system was represented and sold to SSAC as state of the art, and was a substantially more expensive system. The performance of the Goodrich system in 2002 had no relevance to the issue whether SSAC was justified in terminating its relationship with H-S in 1999, based on the performance of the substantially different EEDS system in 1999. The Goodrich tests would not have been relevant to either the plaintiff's claims or to the SSAC counterclaim.
2. NASA Report
An EEDS system had been tested by NASA in the United States Air Force in connection with the B-1 Bomber program. The NASA test results were referenced in Mr. Goldberg's paper and in his testimony. The court precluded H-S's introduction of the NASA report as irrelevant to the issues in the case relating to testing of the H-S EEDS system in 1999. H-S claims that the NASA report would have supported its position with respect to the potential performance of the EEDS system. The court concluded that H-S did not market a research potential to SSAC; instead, it was selling the application of technology in a functioning system. The NASA report, relating to the electro-expulsive deicing system on a very different airplane, would have had no relevance to the inquiry about the performance of the H-S system in 1999. Mr. Goldberg was allowed to testify that he relied on the NASA data in his paper and in his assessment of the potential for the EEDS system.
C. H-S's CUTPA CLAIM
In its memorandum in support of its motion to order a new trial on the CUTPA claim, H-S presents its claim as follows:
That Sino induced Hamilton to invest substantial money and resources in the EEDS program based on Sino's representation that the EEDS would be the deicing system on the tail of the SJ30-2, that Hamilton would be able to recover its costs associated with the development of EEDS for Sino, and that Sino would issue purchase orders for EEDS. Instead, Sino willfully and in bad faith terminated the EEDS program without basis or communication, knowingly breached implied and express contracts which would have allowed for the completion of EEDS and reimbursement of Hamilton's expenses, and allowed Hamilton to incur further expense after it had decided to terminate the EEDS program.
Id., 14.
The evidence is undisputed that Hamilton sold the program to Sino, not the other way around, and that it never delivered a functioning deicing program. Having rejected H-S's contract, unjust enrichment, quantum meruit and implied covenant of good faith claims, the jury could hardly have been expected to award H-S's unsubstantiated CUTPA claim.
II. Motion for Remittitur
H-S has moved for remittitur of the jury's award of damages to SSAC. A leading case on the propriety of a remittitur is Buckman v. People's Express, 205 Conn. 166, 530 A.2d 596 (1957), in which the court held:
The issue is not whether this court would have awarded more or less. It is whether the total amount of the verdict falls within the necessarily flexible limits of fair and reasonable compensation or is so large as to offend the sense of justice and compel a conclusion that the jury (was) influenced by partiality, prejudice, or mistake.
Id., 175. SSAC's damage claims were supported by the testimony of Carol Zuniga. The court at trial precluded portions of the damage claim, and the remaining damages awarded by the jury are supported by evidence in the record.
The court now addresses the post-trial motions by SSAC.
I. Motion for Punitive Damages
SSAC has moved for an award of punitive damages pursuant to General Statutes § 42-110g (a) (CUTPA), providing that "[t]he court may, in its discretion, award punitive damages as it deems necessary and proper."
Awarding damages and attorneys fees under CUTPA is discretionary . . . Punitive damages are awarded when the evidence shows a reckless indifference to the rights of others or an intentional and wanton violation of those rights . . . The flavor of the basic requirement to justify an award of punitive damages is described in terms of wanton and malicious injury, evil motive and violence.
(Citations omitted; internal quotation marks omitted.) Nielsen v. Wisniewski, 32 Conn. App. 133, 138, 628 A.2d 25 (1993).
In seeking punitive damages, SSAC relies not only on the misrepresentations by H-S, but also on the coercive conduct by H-S in stopping work on the project as of May 14, 1999, unless SSAC agreed to renegotiate a higher price and assume the costs of further ice tunnel testing. SSAC further relies on H-S's conduct in agreeing to the termination of the relationship proposed by the May 19, 1999 letter, which specifically indicated that the termination liability schedule was no longer valid and proposed the termination of the relationship. In its response of June 21, 1999, H-S indicated that it agreed with SSAC's recommendation of termination. These developments are relevant in view of the vulnerability of SSAC, which was developing the first new aircraft of its type in this country in the last forty years. The financial vulnerability of the conduct's target was specifically discussed by the United States Supreme Court in its recent ruling on punitive damages. State Farm Mutual Automobile Insurance Co. v. Campbell, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003). H-S's decision to prosecute its complaint against SSAC in Connecticut also seems designed to exploit the economic vulnerability of SSAC in order to coerce financial capitulation. In calculating its claim for damages, H-S included a termination of liability schedule, which had never been issued. H-S's efforts to inflate its damage claim to 93 units rather than the referenced 20 units, rises to the level of bad faith and malice.
The jury based on substantial evidence found that H-S engaged in unfair and deceptive conduct in its dealings with SSAC in violation of CUTPA. The court finds that the conduct of H-S was wilful and in reckless disregard of SSAC's rights and the court awards an additional amount equal to the award of damages as punitive damages. Accordingly, SSAC is awarded $130,588.96 as punitive damages.
II. Motion for Attorneys Fees
The court may in its discretion award reasonable attorneys fees, costs, and litigation expenses under CUTPA, General Statutes § 42-110g (d). The court is inclined to exercise its discretion to award attorneys fees to SSAC, but in an amount attributable only to its CUTPA claims. SSAC in its motion for attorneys fees has not broken down its fees with respect to the CUTPA claims, and H-S has requested a hearing and an opportunity to examine SSAC's counsel on the issue of the breakdown of its fees.
The court directs the parties to schedule depositions relating to the issue of the breakdown of the attorneys fees on the CUTPA issues. Once the parties have conducted the necessary depositions relating to the breakdown of fees, costs and. expenses, they should notify the court and a hearing on the attorneys fees claim will be scheduled.
ROBERT F. McWEENY, J.