Opinion
NO. 217-2010CV-5002
11-16-2011
Pinefield Consulting, Inc. v. Port City Air, Inc.
ORDER
Pinefield Consulting, Inc. ("Pinefield") has brought this lawsuit against Port City Air, Inc. ("Port City") alleging that Port City breached its contract to conduct a comprehensive inspection of a Cessna Citation jet airplane that Pinefield owned. In April of 2007, the plane's right landing gear did not deploy, forcing the pilot to make an emergency landing, which caused damage to the plane. Pinefield alleges that this malfunction was a direct result of Port City's failure to do a comprehensive inspection in December of 2006. For the reasons stated in this Order, the Court finds in favor of the Plaintiff, and assesses damages at $467,082.00.
I
Pinefield is one of a number of corporations controlled by William MacAlpine ("MacAlpine"). In 2006, MacAlpine was in the land development business. Through his corporations, he bought, subdivided, and sold recreational lands around the country. The airplane in question was used for business travel. MacAlpine purchased the plane, a Cessna Citation Ultra jet, for $4,200,000.00. MacAlpine spent $300,000.00 improving it. It was hangared at the Pease airport. Port City did all the maintenance on the plane. In December 2006, Pinefield entered into a contract with Port City to do a phased inspection for $70,000.00. Unbeknownst to MacAlpine, prior to signing the contract, Port City had never done a phase one through five inspection on a Cessna Citation. It borrowed the manuals necessary to do the inspection from MacAlpine, the owner.
By the end of 2006, the real estate business was becoming less profitable and MacAlpine had decided to dispose of the Cessna Citation. He did not, however, inform Port City of his intention. On April 4, 2007, MacAlpine was heading to Rockford, Tennessee with his brother, his accountant, and two marketing people. While nearing the destination, the pilot, Stephen Pyne, informed him that the landing gear had failed to deploy.
Stephen Pyne is an experienced and capable jet pilot. He flew piston and turbine planes through the 1980's and 1990's. In 1997, he obtained a jet rating and was employed in corporate aviation until he recently retired. He was rated in the entire 500 series of Cessna jets. Pyne testified that on the day of the accident, when he was about 30 miles from the airport, he attempted to lower the landing gear electronically and was unable to do so. He heard a circuit breaker "pop." He pushed the circuit breaker back in and attempted to lower the landing gear again; the circuit breaker "popped" again. He and Gael Marshall, the co-pilot, studied the emergency checklist and decided not to try to lower the gear electronically again because of the risk of fire. Pyne then took the airplane to a "safe area" and went through emergency procedures to lower the landing gear. Pyne and Marshall pulled the emergency release handle, or "T handle" to a "detent stop." At that point the left landing gear and nose gear came down but not the right gear. Pyne testified the T handle was extremely difficult to pull and described pulling it as a "tug of war." He testified he was almost standing erect while pulling but was finally able to pull the handle all the way out. Pyne testified that he yawed the aircraft to get the right landing gear to drop but it would not do so. He communicated with the airport which visually confirmed that only two of the landing gears were down.
Marshal, an experienced jet pilot, qualified to fly Cessna jets, confirmed Pyne's version of events. Both Pyne and Marshal testified that Pyne did not turn the T handle as he was pulling it. Pyne activated pneumatic pressure to keep the two landing gears, which had dropped, from collapsing. This strategy is referred to by the parties as "blowing the bottle." Fortunately, Pyne was able to land the plane with no personal injury, although the plane suffered substantial damage when it landed.
After the plane landed, it was removed from the airfield by James E. Collins who worked in an aviation and maintenance business located at the airport called Aircraft Technicians, Inc. Collins removed the plane from the airfield with a crane. He took photos under the plane while it was hoisted in the air. He noted that there was pneumatic pressure on the actuator because the pilot was required to "blow the bottle" when the landing gear fell. Collins released the pressure on the hook that was preventing the landing gear from dropping, using a screwdriver. He concluded that there was a tenth of an inch to two-tenths of an inch difference in the cabling which controlled the landing gear to the point where the landing gear would have properly deployed.
No one went into the plane until an investigator from Cessna, Tom Moody, arrived. Moody was the first person in the cockpit. He observed that the T-handle was in the extended position. After he and Collins were able to get the landing gear to deploy electronically, Moody used the emergency deployment system. Moody testified that it took a great deal of force to pull the T-handle which would cause the landing gear to manually deploy. During the first actuation, the nose gear came down first, the left second, and the right hand gear almost did not come down. If the plane is properly rigged, the left and right gear should appear to come down at the same time. Moody testified that as they "worked the system" it became a little bit easier to deploy the right-hand gear. He found corrosion and oxidation in the T handle. According to Collins, the system was stiff in every part and there was corrosion on the cables. Corrosion results from lack of lubrication. Moody testified that he had never felt a T handle as stiff as this one and that it felt like it was binding or "galling." He thought something was either holding it or causing it to defect slightly, which would cause the inner tube to gall or bind with the metal. The binding or galling feeling existed in the whole travel of the T-handle.
Moody found that there was too much slack in the right cable; the slack was not consistent with Cessna standards. Moody testified that the existence of the slack was consistent with the failure of the right gear to deploy. He also testified that if the pilot had fully extended the T-handle and the right gear did not deploy, that would be consistent with too much slack in the right cable. However, he did not testify as to a cause for the accident. The plane's damage from the crash landing made it impossible for Moody to duplicate the failure to deploy.
Moody also testified that the left wheel well had uncapped wires and atypical splices. While these did not cause the accident, these problems should typically be addressed in an inspection. He also testified that there were two similar accidents in similar Cessna planes that resulted from misrigging.
Defendant moved in limine to exclude the testimony of Collins and Moody as undisclosed experts. The Court is not convinced that their testimony is expert testimony; rather they both testified to what they observed and did. Further, both refrained from giving opinions on the ultimate issues. Cf. Sprague v. Liberty Mutual Insurance Co., 177 F.R.D. 78, 81 (D.N.H. 1998). In any event, the Court did not rely on their testimony as experts, but only as fact witnesses. The Motion in Limine is DENIED.
Plaintiff produced Kenneth Smith as an expert witness. Smith received his Bachelor's Degree from the United States Naval Academy in 1973 and a Master's Degree in Engineering from the University of Michigan in 1974. He had a lengthy career in the Navy before retiring in 1995. After retiring, he worked as an engineering consultant. He is not an expert in the aviation industry but described his expertise in rigging.
Smith inspected the plane, but only after it had been repaired. He spoke with Collins and he relied on the pilot statements, the FAA reports, Collins' photo of the gear before the repair, the Cessna maintenance manuals, the April 6 Cessna parts catalogue, the 76 Cessna CD, and the Cessna bulletin about landing gear uplock. Based on the manual, he concluded that if the emergency handle was brought to detent, then all three wheels should drop. While he prepared several reports, the earlier reports were based on a misunderstanding of the actual facts.
In addition to the problems Moody found, Smith emphasized two facts in his testimony. First, one of the cables had a kink in it. Smith testified that the fact that a cable had a kink in it and was recently inspected calls into question the quality of the inspection. Second, he relied heavily on Moody's finding that there was two-tenths of an inch difference between the left side versus the right side from the uplock hook to the uplock. Very small differences are critical in cabling. He concluded, based on the Moody investigation, the pilot actions Pyne testified to, and the lack of another cause for the accident, that the plane was not properly rigged and that caused the failure of the right landing gear to manually deploy.
The Defendant produced Carl Snow as an expert. Mr. Snow is an experienced pilot, flight instructor, and capable mechanic. He criticized Pyne for "not understanding what's on the other end of the tee-cable." He believes that Pyne made a number of errors, including not trying to reach Cessna headquarters and not attempting to drop the hook by engaging in maneuvers which would result in zero gravity at some point. However, none of the procedures Snow suggested appear in the Cessna manual. Moody testified that if Cessna had been called, he did not know what, if any, further information could be given to the pilot. While Snow pointed to some possible causes of the accident, he did not testify as to what he believed had actually occurred.
A number of Port City employees testified. Steven Fox, Thomas Connery, Eric Logan, and Ray Lawless all testified about their inspection of the plane. They testified that the plane was properly inspected. Further, they disagreed that the plane was misrigged and that their work had anything to do with the accident.
However, the Court finds the expert testimony of Mr. Smith credible, and the factual testimony of Mr. Moody credible. In simplest terms, the evidence of other inadequacies that should have been observed during the inspection suggests that, while the Port City employees believe they had conducted a proper inspection, they did not do so. While the fact that other accidents occurred as a result of misrigging is not conclusive, it is some evidence that misrigging is a likely cause of an accident of this kind. There was some kinking found in the cabling. Additionally, there was slack in the right gear cable that was absent in the nose and left gear. There was other work that was not up to Cessna standards and this was either overlooked by or done by Port City. Finally, and most important, the T-handle was in a poor condition upon inspection post-accident and it was disposed of after the accident. It was binding, "ratchety," and had not been lubricated, making it very difficult to pull. It had not been used in the 4 months since the phased inspection because there had been no emergency landings during that time. The plane required re-rigging post-accident. After replacement of the handle and re-rigging, the system worked smoothly. The failure of Port City to properly service the T handle is compelling evidence that the phased inspection of the emergency gear system, including the rigging, was not done properly.
Based on the evidence, the Court finds that the Defendant breached its contractual duty to properly inspect the plane. Further, it was this breach of the Defendant's contractual duty to properly inspect the plane that led to the forced landing, which caused the damage to the plane.
II
The Plaintiff also claims that it is entitled to damages for the diminution of value of the plane, loss of use, the cost to repair the plane, the cost of the pilots' salaries while the plane was being repaired, the cost of travel from the crash site, and the cost of financing the plane. The Court finds that the Plaintiff is entitled to all damages proved except for the loss of use and cost of financing the plane, which are, in substance, the same thing.
In a contract action, the injured party generally has a right to damages based on his "expectation interest," which is measured by: "(a) the loss in the value to him of the other party's performance caused by its failure or deficiency; plus (b) any other loss, including incidental or consequential loss, caused by the breach; less (c) any cost or other loss that he has avoided by not having to perform." Restatement (Second) of Contracts, Section 347 (1979); see also Estate of Young by Bank of New England. N.A. v. Huysmans, 127 N.H. 461, 468 (1985). Under the second prong, the Plaintiff may only seek "consequential damages that could have been reasonably anticipated by the parties as likely to be caused by the [Defendant's breach. . . ." Robert E. Tardiff. Inc. v. Twin Oaks Realty Trust, 130 N.H. 673, 677 (1988).
Plaintiff s claim is a claim for special damages to a chattel. In order to make this claim, the Plaintiff must establish that the damages were foreseeable when the parties entered into the contract. The requirement of forseeability may be satisfied in either of two ways; as a matter of law if the damages follow the breach in the ordinary course of events, or by the Plaintiff specifically proving that the breaching party had reason to know the facts and foresee injury. Petrie-Clemons v. Butterfield. 122 N.H. 120, 124 (1982). Here, the fact that improper inspection of the emergency landing gear cabling may result in the plane crashing and causing damage to the plane, "follows the breach in the ordinary course of events". Id.
These consequential damages may, under some circumstances, include "loss of use damages," see Rogers v. Nelson. 97 N.H. 72, 75 (1951), which requires the Court to consider "[the] reasonable time for making the repairs to the [aircraft] and the value of [its] use." Id.
The law regarding the measure of damages for the "loss of use" of commercially owned property is less than clear. As the Colorado Court of Appeals recently noted, "[T]here is no uniformity in the way loss of use of damages are awarded.... Thus, many loss of use cases give little or no guidance as to which measure of damages is appropriate in a given case." Purco Fleet Serv., Inc. v. Koenig, 240 P.3d 435, 439 (Colo. App. 2010). Many courts hold that in the commercial context, a Plaintiff must demonstrate that an actual loss rather than a presumed loss occurred. Id. at 440-41; MCI Worldcom Network Serv., Inc. v. OSP Consultants. Inc., 585 S.E.2d 540, 543 (Va. 2003). This view arises from Justice Cardozo's opinion in Brooklyn Eastern Terminal v. United States, 287 U.S. 170, 174-176 (1932), in which the Court held that a ship owner who suffered loss of one of its three tugboats, but suffered no monetary damages because it kept a "spare boat" for emergencies, could not recover damages. See Brownstein at 491. However, this view is not universally accepted. As the Purco Fleet Services Inc. court noted:
Loss of use damages are generally treated in the same way in contract and tort actions, See generally Brownstein, "What's the Use? A Doctrinal and Policy Critique of the Measurement of Loss of Use Damages, 37 Rutgers Law Review 443, 43 n. 2 (1985) (hereafter "Brownstein").
[The loss of use] theory has been applied in an unusual manner in the context of personal automobiles. Toward the beginning of the Twentieth Century, as the family auto became less of a luxurious rarity and more a staple item needed for transport to the owner's job, courts began to award loss of use damages to automobile owners on the theory that there is an intrinsic value in the ability to have a car available for use. Alan E. Brownstein, What's the Use? A Doctrinal and Policy Critique of the Measurement of Loss of Use Damages, 37 Rutgers L. Rev., 433, 492-95 (1985). Under this intrinsic theory of loss, the existence of a loss of some (unspecified) magnitude is presumed once a vehicle is unavailable because it is being repaired. . . . The theory for awarding such damages rests on a so-called "egalitarian view," a concept that a car owner who might not be able to afford to rent a substitute should not be penalized for that inability by being denied damages for the rental amount, where a more wealthy240 P.3d at 439-40. The Restatement of Torts accepts the egalitarian view. See Restatement (Second) Torts Sec. 931, Comment b. Some courts have applied the "egalitarian view" to commercial cases. See, e.g., KLM N.V. v. United Technologies Corp., 610 F.2d 1052,1055-56 (2d Cir. 1979) (reasoning that it is the loss of the right to use that is compensable and adding, "[i]t is no answer to say to the victim of the tort: since you have failed to prove that you would have made a profit from the loss of use of the damaged property, you take nothing.").
owner who is able to rent a substitute might be awarded that measure of damages. MCI Worldcom Network Serv., Inc. v. Mastec. Inc., 370 F.3d 1074,1078 (11th Cir. 1978).
However, the New Hampshire Supreme Court has never accepted the "egalitarian view." Rather, in the few cases dealing with loss of use damages, the Court has allowed damages only where a plaintiff can prove actual harm. See, e.g., Gelinas v. Mackey, 123 N.H. 690, 695-96 (1983) (finding that the jury could properly have determined that no damages had been incurred for loss of use of the plaintiff's vehicle despite evidence that rental of a comparable vehicle would have cost $20 a day, but the plaintiff did not rent a substitute vehicle and presented no evidence that she either "needed the vehicle or was inconvenienced by its loss. . . ."); see also, e.g., Rogers v. Nelson, 97 N.H. 72, 75-76 (1951) (error to submit to jury damages for amount of train travel when automobile was damaged; damages included only the amount spent for train travel less what would have been spent for travel by automobile).
Given the New Hampshire Supreme Court's apparent rejection of the intrinsic loss theory for proving loss of use damages, the measure of such damages must be based on actual and demonstrable loss. Here, Plaintiff did not establish that it purchased a replacement airplane or that it leased another airplane. It did not establish that it lost business opportunities of which the Defendant was aware due to the unavailability of the airplane. It, therefore, cannot recover loss of use damages, which Plaintiff argues in this case would include the expense in maintaining the plane
III
The Defendant does not dispute that as a result of the crash, even after repair, the value of the plane was diminished, but disputes the amount of diminution in value. After the crash, MacAlpine sought to sell the plane, because he was told that the plane would be easier to sell if it was repaired and flown. He had the plane moved to Cessna because he believed that resale would be easier if Cessna reconditioned it. Cessna told him it would be a month or two for repairs, but in fact the repairs took seven months. MacAlpine did not lay off the pilots, Pyne and Marshall, because it was difficult to locate a pilot for this sort of aircraft. He had paid $25,000 for each to get them certified as pilots for the Citation. If he had let them go, he would have risked having to pay $50,000.00 to find two new pilots to certify. He testified that because the plane had crashed, the engine required a complete overhaul, and he paid $96,000.00 to do so. At trial, MacAlpine testified that he worked with his expert, William Quinn, an experienced and qualified airplane broker, to determine that $38,490.00 of the $96,000.00 would not have been spent if the plane had not crashed.
Both parties agreed that the repair resulted in a quantifiable diminution of value. MacAlpine hired Quinn to determine the diminution. Quinn found the diminution in value of this plane to be $335,000.00 to $340,000.00 after the accident. He claims that the damage to the vehicle caused the diminution. He further testified that buyers would be wary of damage to the wing of a plane because it is a primary structure. Quinn further testified that when the plane eventually was put on the market, they had 42 inquiries, but of the 42 inquiries only three were interested and two were low-ball offers. He put the plane on the market for $4,395,000.00 and sold it for $4,125,000.00. He believes that if the plane had not been damaged, it would have listed at $4,550,000 or $4,600,000,000 with an expectation that the plane would sell for $4,500,000.00 or $4,550,000.00.
The defense called David Cole who is an expert in sale of airplanes. Cole agreed that the damage from the accident diminished the plane's value. However, he placed that diminution of value at about five percent. Since he believed that the fair market value of the plane is $4,624,400.00, the five percent diminution is $231,000.00. He believes that the asking price was set too low and should have been set at $5,000,000.00.
The Court credits Quinn's testimony. He is capable and experienced, but much more importantly, actually accomplished the sale of the plane and arranged for the same. There is no doubt that there is some lack of exactness in any estimate of the fair market value of a good with a relatively small potential market. See generally Society Hill at Merrimack Condo Ass'n v. Town of Merrimack. 139 N.H. 253, 255-56 (1994). However, his experience based testimony is credible. He estimated the diminution in value at $335,000 to $340,000. The Court finds the diminution of value damages to be $337,500.00.
Plaintiff can also recover the costs to repair the plane and the cost of the pilots' salaries. Plaintiff chose to repair the aircraft, continue to pay the pilots, and to sell the plane after it was repaired, because it was more reasonable to do so than it would have been to sell the plane at a fire sale price before it was repaired. The Court finds no evidence that Port City was ever made aware of the Plaintiff's intention to sell the plane. However, this is of no moment, as under the facts of this case, the Plaintiff acted reasonably in repairing the plane before selling it.
Whether or not the Plaintiff can recover damages for the costs of engine repair and pilot salaries is contingent upon the "avoidability of damages" theory. Restatement (Second) Contracts, Section 350, states the general rule that:
(1) Except as stated in subsection 2, damages are not recoverable for the loss that the injured party could have avoided without undue risk, burden or humiliation.
(2) The injured party is not precluded from recovery by the rule stated in subsection (1) to the extent he has made reasonable but unsuccessful efforts to avoid loss.
As a general rule, a party cannot recover damages for loss he could have avoided by reasonable efforts. See Grenier v. Barclay Square Commercial Condo. Owners' Ass'n, 150 N.H. 111, 119 (2003) (recognizing that a party seeking damages "must take all reasonable steps to lessen his or her resultant loss."). As the Restatement notes,
[I]t is sometimes said that it is the 'duty' of the aggrieved party to mitigate damages but this is misleading, because he incurs no liability for his failure to act. The amount of loss that could reasonably have been avoided by stopping performance, making substitute arrangements or otherwise is simply subtracted from the amount that would otherwise have been recoverable as damages.Restatement (Second) Contracts, Section 350, Comment b. Whether or not the damages for the fixed costs of the aircraft are recoverable depends, ultimately, on whether or not the Plaintiff acted reasonably in deciding to repair the aircraft and then sell it, rather than selling it at a "fire sale" price. The Defendant bears the burden of proving that the Plaintiff failed to mitigate its damages, Grenier, 150 N.H. at 119, and "the law does not require... the [Plaintiff] [to have made] a perfect decision, but only a reasonable one." See Joseph M. Perillo, Corbin on Contracts, §57.11 (2005) ("[t]he doctrine of avoidable consequences merely requires reasonable efforts to mitigate damages.")
Here, the Court finds that the Plaintiff acted reasonably in deciding to repair the plane and then sell it after it was repaired and flown. MacAlpine testified that he relied on others with expertise who advised him to repair the aircraft and see to it that it is flown for at least some period of time before selling it. Nor is there evidence from which the Court could conclude that it was not reasonable for the Plaintiff to retain two pilots so that the plane could be promptly sold. The Court can infer from the testimony of the plaintiff that the availability of pilots is well known in the aviation business, and the loss from retained pilots is foreseeable under Petrie-Clemons, 122 N.H. 120. If the two pilots were dismissed, Plaintiff would run the risk of locating two pilots, hiring them, and likely paying $50,000.00 so that they could be certified. There is no evidence that it was unreasonable for MacAlpine to rely on Cessna's representation that the repair would only take a few months, rather than the 7 months it took. Under these circumstances, it was also not unreasonable for the Plaintiff to pay $79,000 to keep the pilots on for the 7 months the plane was being repaired, even though they had no plane to fly. A similar result must be reached with the insurance premiums Plaintiff paid to insure the plane while it was being repaired. It is a matter of common knowledge that insurance is necessary on any expensive item while it is repaired. Finally, because $38,490.00 in engine work was required for the plane to be flown to Cessna, it is recoverable.
IV
A different result must be reached, however, with respect to the Plaintiff s claim that it is entitled to the financing costs of the airplane. Plaintiff's claim is facially appealing; it argues that just as it was required to maintain pilots while the plane was being repaired, it was required to pay financing on the plane. The flaw in Plaintiff s argument is the false equivalence of financing a chattel and paying for a service in order to repair the chattel.
Financing represents an allocation of capital; presumably, the Plaintiff could have purchased the plane outright or financed a different percentage of its costs. There is no evidence that how Plaintiff chose to allocate its capital was ever disclosed to Defendant so as to create a specific obligation to pay finance costs in the event of damage to the plane. In the absence of such evidence, the finance costs must be considered nothing more than a loss of use claim.
This conclusion is illustrated by the following: if the Plaintiff had not financed the plane, it could not, under settled New Hampshire law, recover damages for loss of use, despite the fact that it had invested $4,000,00.00 of its capital in the plane, thereby (presumably) forgoing other investment opportunities which would have netted a return on its $4,000,000. It would be illogical to allow the Plaintiff to recover, in substance, sums it could not otherwise recover merely because it chose to finance the plane, or have its recovery depend upon the amount it chose to finance. It follows that Plaintiff cannot recover its financing costs.
In addition, Plaintiff seeks damages for the expense of returning from Tennessee after the plane crashed. Obviously, such costs are foreseeable if an improperly repaired plane crashes and stranded the Plaintiffs principals. See Restatement (Second) Contracts, Section 351. Plaintiff also seeks overtime charges for Mr. Collins work in the amount of $1,764. However, no evidence was introduced at trial as to the necessity or reasonableness of such charges, and therefore, no award can be made for that claim.
In sum, the Court finds that the Plaintiff is entitled to the following damages:
+-------------------------------------------------+ ¦Diminution of value ¦$337,500¦ +----------------------------------------+--------¦ ¦Engine work required to repair the plane¦$38,490 ¦ +----------------------------------------+--------¦ ¦Pilot's salaries ¦$79,692 ¦ +----------------------------------------+--------¦ ¦Post Accident travel, food, and, fuel ¦$11,400 ¦ +----------------------------------------+--------¦ ¦Total ¦$467,082¦ +-------------------------------------------------+
SO ORDERED.
Richard B. McNamara,
Presiding Justice
RBM/mrs