Carolina Indus. Products, Inc. v. Learjet, Inc.

189 F.Supp.2d 1147

CAROLINA INDUSTRIAL PRODUCTS, INC., Joseph Wilen, and J.W. Equities, L.L.C., Plaintiffs, v. LEARJET, INC., Raytheon Aircraft Services, Inc., and National Union Fire Insurance Co., Defendants.

No. 00-2366-JWL.

United States District Court, D. Kansas.

December 18, 2001.

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Edward A. McConwell, Catherine Moore, McConwell Law Offices, Mission, KS, for Plaintiffs.

Mark D. Katz, John M. Lilla, Sherman, Taff & Bangert, P.C., Kansas City, KS, Ron A. Sprague, Gendry & Sprague, P.C., San Antonio, TX, Jeff C. Spahn, Jr., Michael G. Jones, Martin, Pringle, Oliver, Wallace & Spikes, L.L.P., Wichita, KS, John W. Cowden, Mary C. O'Connell, Baker, Sterchi, Cowden & Rice, L.L.C., Kansas City, MO, Bradley Brown, Martin, Pringle, Oliver, Wallace & Spikes, L.L.P., Wichita, KS, for Defendants.

MEMORANDUM & ORDER

LUNGSTRUM, District Judge.

Before the court are defendant Learjet Inc.'s ("Learjet") summary judgment motion (Doc. 80), Learjet's supplemental motion for summary judgment (Doc. 166),¹ defendant Raytheon Aircraft Services, Inc.'s ("Raytheon") summary judgment motion (Doc. 172), defendant National Union Fire Insurance of Pittsburgh's ("National Union") motion for summary judgment (Doc. 164) and Carolina Industrial Products' ("Carolina Products") motion for partial summary judgment (Doc. 169). The motions are granted in part and denied in part as follows: summary judgment is granted to Learjet with respect to Counts One through Seven; summary judgment is granted to Raytheon with respect to Counts Ten and Twelve; summary judgment is granted to Raytheon in part with respect to Counts Eleven and Thirteen in that the plaintiffs may only recover damages for the repair of damages to N825D caused by the February 2000 landing accident; summary judgment is granted to National Union, in part, with respect to Counts Fourteen and Fifteen in that the court finds that National Union did not breach the insurance contract by not paying under the "total loss" provision of the policy; summary judgment is granted to National Union with respect to Count Fifteen; and the plaintiffs' partial summary judgment motion is denied.

1. Statement of facts

Carolina Products, J.W. Equities, L.L.C. ("J.W.Equities") and Joseph Wilen filed this action against defendants Learjet, Raytheon and National Union. The lawsuit is the outgrowth of a dispute between the parties concerning repairs to an aircraft owned by Carolina Products and operated by J.W. Equities.² The following facts are uncontroverted:

Learjet manufactured airplane model 25D, serial number 212 ("25D-212") in 1976 and model 25D, serial number 263 ("25D-263") in 1979. 25D-212 was damaged in a crash in 1985 and 25D-263 was damaged in a tornado in 1991. 25D-263 was determined to be a "total loss" by the insurer of the aircraft and was removed from Learjet's list of active aircraft. Maruice Houvis purchased 25D-263 and the fuselage of 25D-212 and rebuilt or repaired 25D-263 with some or all of the components of the fuselage of 25D-212. Mr. Houvis hired a Federal Aviation Administration ("FAA") Designated Engineer Representative ("DER"), Harold Kosola, to confirm that the replacement of the fuselage complied with FAA regulations. Mr. Kosola issued a report concluding that "[t]he replacement of the damaged fuselage of Lear model 25D, S/N 263 by using an Airworthy Fuselage from Lear model 25D, S/N 212 is structurally acceptable" and an FAA Form 8110-3 indicating that the fuselage replacement was in compliance with FAA regulations. In May 1994, Carolina Products purchased the airplane, registered as N825D and bearing the serial number 263. When Carolina Products purchased the plane, Joseph Wilen and other representatives of Carolina Products knew that the fuselage had been replaced.

Before purchasing the plane, Carolina Products hired Raytheon to complete work on N825D, which the plaintiffs allege in the pretrial order "included complete review and determination of the adequacy of all log book entries and the compliance with all airworthiness directives and service bulletins applicable to the aircraft." The plaintiffs allege that Raytheon breached its agreement with the plaintiffs by failing to warn the plaintiffs that the Learjet Service Bulletin 23/24/25-340, recommending replacement of the landing gear hydraulic solenoid valve, had not been followed. Raytheon disputes the plaintiffs' characterization of the work that was to be performed and argues that Raytheon was not obligated to determine whether the aircraft was in compliance with all service bulletins.

After Carolina Products purchased N825D, Raytheon performed, on several occasions, work related to the maintenance of the airplane. In 1994, Raytheon performed six and twelve-month inspections of N825D. The plaintiffs assert that these inspections required compliance with Learjet recommended service bulletins and that Raytheon did not identify that N825D was not in compliance with Learjet Service Bulletin 23/24/25-340, recommending replacement of the hydraulic solenoid valve. Raytheon also completed maintenance in 1997 that, according to the plaintiffs, required identification of all outstanding service bulletins.

In March of 1999, the plaintiffs requested that Raytheon perform a 600-hour inspection of N825D. The Raytheon maintenance proposal provided for the completion of a "300/600/1200 hour inspection." According to the plaintiffs, Raytheon breached the agreement by "failing to identify and comply with Service Bulletin 23/24/25-340; and by failing to inspect, test and/or replace valve 48C48603 with valve 48C48641." The work-order authorization for the maintenance included "Terms and Conditions" limiting Raytheon's liability to "repair and replacements" for "failure to perform Labor in accordance with Standards" and requires that an action for breach of warranty be brought within one year. The plaintiffs point out that the work-order was signed by a Raytheon employee, not Joseph Wilen, allege that it was signed "without the knowledge or consent of Joe Wilen," and argue that the limits on liability, therefore, are not enforceable.

In February of 2000, N825D was damaged in a landing accident. The plaintiffs allege that the accident would not have occurred if N825D was in compliance with Service Bulletin 23/24/25-340.

After the accident, Raytheon was asked to remove N825D from the runway and evaluate the airplane for needed repairs. On March 13, 2000, by means of a written document entitled "Authorization," Joseph Wilen authorized Raytheon and Hale Aircraft Engines to repair N825D. Mark Smith, a Raytheon employee, testified at his deposition that before Joseph Wilen signed the authorization, Mr. Smith told Mr. Wilen that the repairs could not be completed without support from Learjet. The fax cover sheet sending the authorization to Mr. Wilen indicates that the time needed for repairs to N825D will "be dependent on support from Learjet." Mr. Wilen testified in his deposition that he told Mr. Smith not to begin repairs to N825D unless they could be completed. On March 28, 2000, by a letter to Raytheon, Mr. Wilen rescinded his authorization to proceed with the repairs to N825D.

On May 1, 2000, Raytheon faxed to Mr. Wilen a proposal for the repair of N825D. The proposal included repair of the "out-board leading edge" and a stall test following repair to the leading edge. The proposal noted that completion of the stall test "will be dependent upon the cooperation of Bombardier/Learjet." The proposal was accepted. On June 23, 2000, Mr. Smith sent to Mr. Wilen a proposal, listing items that "are in addition to, or a revision of" the earlier proposal. The proposal noted that all repairs to the leading edge must be performed by Learjet and included a corresponding charge of $2,500 for "outside service." Mr. Wilen accepted the June 23, 2000 proposal.

The Learjet structural repair manual requires that repairs to the leading edge be performed by an authorized Learjet repair facility. Raytheon contacted Learjet about repairing the leading edge. Learjet responded by informing Raytheon that 25D-236 had been "attrited" in May of 1991 and sold for scrap and that Learjet would not "provide Engineering or Technical support for this aircraft." Raytheon completed all of the repairs to N825D except for the leading edge and stall test by mid-August 2000.³

The FAA initiated an investigation of the accident that included reviewing all of the maintenance records and logbook entries for N825D. At the conclusion of the investigation, the FAA stated that it "was unable to determine whether Lear 25D-263, in its present configuration, conformed to its original type design or any approved type design, and that it was in an airworthy condition." For this reason, on October 19, 2000, the FAA issued an order suspending the airworthiness certificate of N825D. By means of a settlement agreement signed April 3, 2001, the FAA dismissed its action against N825D. The settlement agreement provided that, upon the completion of a series of actions listed in the agreement, "the proposed action to suspend the airworthiness certificate of civil aircraft N825D is no longer necessary" and that the FAA agrees to issue an Airworthiness Certificate for N825D with a provision limiting the aircraft to flying at 45,000 feet.

The plaintiffs allege that, in performing the log book research in 1994, Raytheon breached its duty "to properly evaluate the books and records of N825D in May, 1994 to assure that all records met the requirements of its Flight Standards District Office" and to advise the plaintiffs "that the FAA Atlanta FSDO might question September, 1992 log book entries concerning repair of N825D."

National Union insurance policy GM3388558-01, effective on the date of the landing incident, provided coverage for "physical...