377 F.3d 645 | 6th Cir. | 2004
Before: MARTIN and CLAY, Circuit Judges; CUDAHY,
Senior Circuit Judge. [*] UNITED STATES COURT OF APPEALS _________________ FOR THE SIXTH CIRCUIT _________________ COUNSEL ARGUED: Kathleen McCree Lewis, DYKEMA GOSSETT, H.C. S MITH I NVESTMENTS , (cid:88) Detroit, Michigan, for Appellant. Jon R. Muth, MILLER, (cid:45) L.L.C., JOHNSON, SNELL & CUMMISKEY, Grand Rapids, (cid:45) Plaintiff-Appellee/ Michigan, for Appellee. ON BRIEF: Kathleen McCree (cid:45) Nos. 02-1506/1611 Cross-Appellant, Lewis, Kyle R. Dufrane, DYKEMA GOSSETT, Detroit, (cid:45) >
Michigan, Richard G. Ward, SULLIVAN, WARD, ASHER (cid:44) & PATTON, Southfield, Michigan, for Appellant. Jon R. v. (cid:45) Muth, Susan G. Davis, MILLER, JOHNSON, SNELL & (cid:45) CUMMISKEY, Grand Rapids, Michigan, for Appellee. O UTBOARD M ARINE (cid:45) (cid:45) C OMPANY , et al.,
_________________ (cid:45) Defendants, (cid:45) OPINION (cid:45) _________________ R AYTHEON A IRCRAFT (cid:45) S ERVICES , I NC ., (cid:45) BOYCE F. MARTIN, JR., Circuit Judge. H.C. Smith (cid:45) Defendant-Appellant/ Investments, L.L.C. hired Raytheon Aircraft Services, Inc. to (cid:45) Cross-Appellee. inspect a jet airplane that it was considering purchasing. (cid:45) Approximately one year after the inspection and subsequent (cid:78) purchase, Smith Investments discovered that Raytheon failed to detect that the airplane had extensive corrosion damage,
Appeal from the United States District Court which substantially diminished its value and safety. Smith for the Western District of Michigan at Grand Rapids. Investments filed suit against Raytheon, alleging negligent No. 00-00128—Richard A. Enslen, District Judge. inspection, negligent supply of information, and breach of contract with respect to the inspection.
Argued: March 11, 2004 Decided and Filed: August 4, 2004 claim. The district court awarded Smith Investments airplane. Mr. Huth also stated that Mr. Zeka told him during approximately $1.9 million in damages. a phone conversation that the airplane had been well kept.
After Mr. Zeka reported his findings to Travel Consultants Raytheon appeals the district-court judgment, arguing that Aviation, the sale was completed and Smith Investments took the court erred in granting Smith Investments' Rule 50 motion possession of the airplane. and in instructing the jury on the negligent-supply-of- information claim. Smith Investments cross-appeals, arguing Roughly one year later, in September 1998, the airplane that the district court erred in denying its Rule 50 motion and was taken to the Aviation Maintenance and Technical Support in instructing the jury that it could allocate to Smith center in St. Louis, Missouri, for a mandatory, 1200-hour, 24- Investments the fault of its agent, Travel Consultants month inspection. During the course of this inspection, Aviation. We find no error in any of the judgments of the extensive internal corrosion of the airplane was discovered. district court, and we affirm. Smith Investments incurred substantial costs in repairing the
corrosion uncovered during this inspection. In addition, the I. prospect that additional corrosion was yet to be discovered within the body of the airplane raised serious questions about In early 1997, Smith Investments hired Travel Consultants the airplane's safety and value. Aviation to assist it in its endeavor to locate and purchase a second-hand airplane for personal and charter use. Travel After learning about the corrosion, Smith Investments Consultants Aviation eventually located a 1969 Hawker- contacted Raytheon to inquire why this had not been Siddeley jet airplane in Florida at the Aero Toy Store, which
discovered when it inspected the airplane. Raytheon had purchased the airplane from Outboard Marine Company. responded by stating it was hired only to conduct a "Part 135" On July 10, 1997, Smith Investments submitted a conditional inspection and that Travel Consultants Aviation never offer to purchase the airplane for $2.2 million, subject to the requested a more extensive inspection that would have airplane being inspected by Raytheon at its Ft. Lauderdale, revealed the corrosion. Wolfgang Heuberger, Raytheon's Ft. Florida, location. Lauderdale service-center manager, stated in deposition that
no Raytheon employee would have agreed to conduct a "pre- Shortly thereafter, Tony Zeka, a Raytheon mechanic, purchase" inspection because of the vagueness of the term. inspected the airplane and then faxed a handwritten, nine- Raytheon will inspect airplanes, Mr. Heuberger stated, but page letter to Lloyd Huth, a Travel Consultants Aviation employee, that set forth his findings. The letter stated that the airplane's logbooks were not up to Federal Aviation [1] "Part 135" refers to the section of the Federal Aviation Regulations
that governs lo gbo ok-insp ection standa rds for charter airplanes. [2] "Squawks" refer to problems with the airplane that require repair or
replacement. Nos. 02-1506/1611 H.C. Smith Investments v. 5 6 H.C. Smith Investments v. Nos. 02-1506/1611 Outboard Marine Co., et al. Outboard Marine Co., et al. only for requests narrower or more specific than a "pre- Outboard Marine Company, the original owner of the purchase" inspection. In addition, according to John C. airplane, was named at the outset of the suit as a co- Willis, President of Raytheon Aircraft Services, the scope of defendant. The district court granted Outboard Marine's work requested was limited to the "Part 135" inspection, motion to dismiss the fraudulent-misrepresentation and which involved logbook research and a pre-flight check of the negligent-misrepresentation claims alleged by Smith engine and oil. Mr. Willis also stated that Raytheon stopped Investments. Outboard Marine also moved to dismiss the inspecting the airplane after Mr. Huth instructed Raytheon third claim against it, a breach-of-express-warranty claim. that Smith Investments would not be buying the airplane The district court denied this motion pending either a stay or based on the "Part 135" compliance issue that Mr. Zeka had termination of Outboard Marine's Chapter 11 bankruptcy reported earlier to Mr. Huth. Mr. Willis added that the proceeding in the Northern District of Illinois. airplane was removed from the Raytheon service center the
The case was tried before a jury in 2002. At the close of day after Mr. Huth relayed this message to Raytheon. Raytheon's defense, Smith Investments moved under Federal According to Smith Investments, Travel Consultants Rule of Civil Procedure 50 for judgment as a matter of law on Aviation directed Raytheon to conduct a comprehensive "pre- Raytheon's affirmative defense of Travel Consultant purchase" aircraft evaluation and Mr. Zeka represented to Aviation's comparative fault as a non-party. The district court Travel Consultants Aviation that he would complete this task. granted the motion in favor of Smith Investments, precluding Smith Investments contends that Mr. Zeka failed to disclose the jury from allocating fault to Smith Investments for any that the Ft. Lauderdale service center was not authorized by negligence of Travel Consultants Aviation as a non-party to Raytheon for Hawker inspections and, therefore, that its the suit. The next day, Smith Investments again moved under employees were unaware of the inspection criteria in Rule 50 for judgment as a matter of law on Raytheon's Raytheon's Hawker Evaluation Guide, which includes affirmative defense of Travel Consultants Aviation's inspection for corrosion. Smith Investments also alleges that comparative fault as an agent of Smith Investments. The the invoice submitted by Raytheon for its work, which states district court denied this motion and stated: "The unstated "evaluated aircraft," implies that Raytheon conducted a premise of yesterday's ruling as to [Travel Consultants comprehensive inspection of the airplane. Aviation] was that TCA did not occupy the position of a non-
party because TCA was acting as an agent of plaintiff. This II. clarification is obvious and the jury should be allowed to consider TCA's negligence as the negligence of a party." In 2000, Smith Investments filed its initial complaint against Raytheon and alleged breach-of-contract and The jury returned a verdict in favor of Smith Investments negligent-inspection claims. In 2002, Smith Investments
on the negligent-inspection and negligent-supply-of- amended its complaint for the second time and added a information claim and in favor of Raytheon on the breach-of- negligent-supply-of-information claim against Raytheon. contract claim. The jury allocated 80% of the comparative Raytheon answered the complaint and pleaded thirteen fault to Raytheon and 20% to Travel Consultants Aviation as affirmative defenses, including comparative fault of Smith Smith Investments' agent. The district court awarded Investments' agent, Travel Consultants Aviation. approximately $1.9 million in damages to Smith Investments. Nos. 02-1506/1611 H.C. Smith Investments v. 7 8 H.C. Smith Investments v. Nos. 02-1506/1611
Outboard Marine Co., et al. Outboard Marine Co., et al. On appeal, Raytheon argues that the district court erred in We review de novo a district court's grant of a judgment as granting Smith Investments' Rule 50 motion as to Travel a matter of law. Gray , 263 F.3d at 598. As a federal court Consultants Aviation's status as a non-party and in instructing sitting in diversity, we apply the standard for a motion for the jury on the negligent-supply-of-information claim. Smith judgment as a matter of law used in Florida. See Potti, 938 Investments cross-appeals and argues that the district court F.2d at 645. erred in denying its Rule 50 motion as to Travel Consultants Judgment as a matter of law is proper "only when the Aviation's status as an agent and in instructing the jury that it evidence and all inferences of fact, construed most strictly in could allocate to Smith Investments the fault of its agent.
favor of the non-moving party, cannot support in the minds of III. jurors any reasonable difference as to any material fact or inference." Stewart & Stevenson Servs., Inc. v. Westchester We review the denial of a Rule 50 motion de novo . Gray v. Fire Ins. Co. , 804 So. 2d 584, 588 (Fla. App. 2002). Toshiba Am. Consumer Prods., Inc. , 263 F.3d 595, 598 (6th Raytheon bore the burden of pleading comparative fault as an Cir. 2001). As a federal court sitting in diversity, we apply affirmative defense. See Fla. Stat. Ann. § 768.81(3)(e). This the standard for a motion for judgment as a matter of law used required Raytheon to demonstrate to the court "that there in Florida, the state law that governs this action. See Potti v. [was] legally sufficient evidence in the record from which the Duramed Pharm., Inc., 938 F.2d 641, 645 (6th Cir. 1991). jury [could] find that [Travel Consultants Aviation, the non-
party] was at fault." S. Bell Tel. & Tel. Co. v. Florida Dep't As to the allegations of improper jury instructions, we of Transp. , 668 So. 2d 1039, 1041 (Fla. App. 1996). Smith review those claims de novo as well. Fisher v. Ford Motor Investments moved for judgment as a matter of law and Co. , 224 F.3d 570, 576 (6th Cir. 2000). A district court's argued that Raytheon failed to demonstrate that legally refusal to give a jury instruction is reviewed for abuse of sufficient evidence existed to support a finding that Travel discretion. Ibid. Consultants Aviation was at fault. Specifically, Smith Investments argued that in Raytheon's attempt to ascribe
IV.
negligence to Travel Consultants Aviation as a non-party, Raytheon failed to articulate an applicable standard of
The first issue Raytheon alleges on appeal is that the district ordinary care or to establish that Travel Consultants court erred in granting Smith Investments' motion for Aviation's conduct fell short of the standard. The district judgment as a matter of law on Raytheon's affirmative court granted judgment as a matter of law on the grounds that defense of comparative fault. Specifically, Raytheon pleaded Travel Consultants Aviation was an agent of Smith that Travel Consultants Aviation, Smith Investments' Investments rather than a non-party. Instructing the jury, the purchasing agent, was comparatively liable for the damages. district court stated: By granting this motion in favor of Smith Investments, the district court precluded the jury from directly apportioning
An agency relationship existed between the plaintiff any negligence to Travel Consultants Aviation in its own [Smith Investments] and Travel Consultants [Aviation] capacity. . . . . An agent is a person who was employed to act for another whose actions are controlled by the employer or subject to the employer's right . . . to control. The
Nos. 02-1506/1611 H.C. Smith Investments v. 9 10 H.C. Smith Investments v. Nos. 02-1506/1611 Outboard Marine Co., et al. Outboard Marine Co., et al. plaintiff is responsible for the negligence of TCA, if such justifiably rely on this information in their business negligence occurred while TCA was performing services transactions if the supplier fails to exercise reasonable care or which it was employed to perform or while TCA was competence in communicating the information. Gilchrist acting at least in part because of a desire to serve the Timber Co. v. ITT Rayonier, Inc. , 696 So. 2d 334, 336 (Fla. plaintiff and was doing something that was reasonably 1997). Raytheon contends that liability for this tort requires incidental to its employment or something the doing of an affirmative statement, but that, at most, Raytheon made an which was reasonably foreseeable and to be expected of omission for which liability cannot be imposed. persons similarly employed.
We review de novo whether the district court's jury The effect of this instruction permitted the jury to allocate any instructions were proper. Fisher , 224 F.3d at 576. We review fault of Travel Consultants Aviation directly to Smith for abuse of discretion whether the district court properly Investments as an agent rather than to Travel Consultants refused to give a specific jury instruction. Ibid. Aviation as a non-party. We find no error in the district
The district court instructed the jury on the negligent- court's grant of the motion for judgment as a matter of law. supply-of-information claim as follows: Although Florida law permits a jury to apportion comparative fault to a non-party, see Fla. Stat. Ann. § 768.81(3)(e) and
The claim of the plaintiff [Smith Investments] is that Fabre v. Marin , 623 So. 2d 1182 (Fla. 1993) (overruled on there was information negligently supplied by the other grounds), a third party to whom fault may be attributed defendant [Raytheon], or negligent supply of as an agent should not also have fault attributed to it as a non- information. The following instructions relate to the party in the same suit. That would be duplicative. plaintiff's claim of negligent supply of information. Furthermore, we are unpersuaded that permitting the jury to Let me begin by explaining the plaintiff's negligent apportion any fault of Travel Consultants Aviation as a non- supply of information claim by informing you of the party rather than as an agent would have affected the outcome specific elements or items of proof that the plaintiff is of this case or would "support in the minds of jurors any required to prove by a preponderance of the evidence. reasonable difference as to any material fact or inference." And here there are eight of them. Not three or four. Stewart & Stevenson Servs. , 804 So. 2d at 588. Therefore, we First, that the defendant, in fact, supplied information affirm the district court's grant of the motion for judgment as to the plaintiff to use in making a business decision. a matter of law. Secondly, that the defendant supplied the information in the ordinary course of business as an aircraft service V. station. The second issue Raytheon argues on appeal is that the Third, that the defendant intended to supply this district court erroneously instructed the jury regarding information either directly or indirectly for the benefit of Raytheon's liability for the tort of negligent supply of the plaintiff. information. This tort imposes liability on one who, in the Fourth, that the information supplied was false and course of his business, profession, or employment, or in any misleading because of incompleteness. other transaction in which he has a pecuniary interest, supplies false information for the guidance of others who Nos. 02-1506/1611 H.C. Smith Investments v. 11 12 H.C. Smith Investments v. Nos. 02-1506/1611
Outboard Marine Co., et al. Outboard Marine Co., et al. Fifth, that the defendant failed to use reasonable care in Gilchrist Timber Co. , 696 So. 2d at 337. providing the information. Raytheon asserts that the phrase "suppl[ying] false Sixth, that had the defendant used reasonable care, it information" in § 552 requires an affirmative would have known that the information was false or misrepresentation, and that Raytheon made no affirmative misleading because of incompleteness. misrepresentation about the airplane. Contrary to that
Seventh, that the plaintiff justifiably relied on that assertion, we hold that Raytheon in fact made affirmative information. misrepresentations about the condition of the airplane in Mr. And eighth, that the negligent supply of false Zeka's nine-page letter to Travel Consultants Aviation. In this information was a legal cause of . . . damages. letter, Mr. Zeka reported that he had reviewed the airplane's logbooks and then he listed, over several pages, a series of
Florida has adopted the position set forth in the Restatement "squawks" he had discovered "[d]uring examination of the (Second) of Torts § 552 on negligent misrepresentation, aircraft[.]" In this list of "squawks," Mr. Zeka also referred to Gilchrist Timber Co. , 696 So. 2d at 339 ("By this opinion, we corrosion under one of the wings. In addition, Mr. Huth of adopt the Restatement (Second) of Torts' position on Travel Consultants Aviation stated in deposition that Mr. negligent misrepresentation contained in section 552"), which Zeka told him that the airplane had been well kept. We think reads:
it is relevant that these statements were made after Mr. Zeka represented to Mr. Huth that he was a Hawker expert and (1) One who, in the course of his business, profession or failed to inform him that Raytheon's Ft. Lauderdale service employment, or in any other transaction in which he has center was not an authorized Hawker inspection site. Though a pecuniary interest, supplies false information for the these last two considerations may constitute omissions, they guidance of others in their business transactions, is establish a context in which the affirmative misstatements of subject to liability for pecuniary loss caused to them by Mr. Zeka to Mr. Huth regarding the airplane's condition their justifiable reliance upon the information, if he fails would be reasonably relied upon. to exercise reasonable care or competence in obtaining or communicating the information.
Thus, we hold that the affirmative misstatements made by (2) Except as stated in Subsection (3), the liability stated Mr. Zeka to Mr. Huth about the airplane's condition are in Subsection (1) is limited to loss suffered (a) by the sufficient to support § 552 liability. Therefore, we find no person or one of a limited group of persons for whose error in the district court's jury instruction. benefit and guidance he intends to supply the information or knows that the recipient intends to supply it; and (b)
VI.
through reliance upon it in a transaction that he intends the information to influence or knows that the recipient
On cross-appeal, Smith Investments argues that the district so intends or in a substantially similar transaction. court erroneously instructed the jury that Travel Consultants (3) The liability of one who is under a public duty to give Aviation was its agent and, therefore, that the jury the information extends to loss suffered by any of the erroneously attributed Travel Consultants Aviation's liability class of persons for whose benefit the duty is created, in to Smith Investments. According to Smith Investments, any of the transactions in which it is intended to protect Travel Consultants Aviation was an independent contractor them. Nos. 02-1506/1611 H.C. Smith Investments v. 13 14 H.C. Smith Investments v. Nos. 02-1506/1611 Outboard Marine Co., et al. Outboard Marine Co., et al. for whom no liability can be attributed to Smith Investments. agent. Thus, even under this more stringent standard, we are Raytheon contends that this argument has no merit because convinced that an agency relationship existed: Smith Travel Consultants Aviation was an agent of Smith Investments maintained a right to control whether Travel Investments and that attributing its liability to Smith Consultants Aviation could negotiate the purchase of an Investments comports with the fundamental doctrines of airplane and, if so, to direct Travel Consultants Aviation in agency law. that purchase.
The propriety of a jury instruction is reviewed de novo . As the principal for Travel Consultants Aviation, Smith Fisher , 224 F.3d at 576. The refusal to give a jury instruction Investments is liable for the work Travel Consultants is reviewed for abuse of discretion. Ibid. Aviation conducted within the scope of its role as agent. See
Life Ins. Co. of N. Am. v. Del Aguila , 417 So. 2d 651 (Fla. We are unpersuaded by Smith Investments' argument and 1982) (Florida follows the basic doctrine of agency law hold that an agency relationship existed. First, designating wherein a principal is liable for the tortious conduct of his Travel Consultants Aviation as an agent of Smith Investments agent, even though not authorized, if the agent was acting established the requisite standing for Smith Investments to within the scope of his employment or his apparent authority). pursue its breach of contract claim against Raytheon. Indeed, As stated in the "Aircraft Acquisition Agreement," the Smith Investments explicitly refers to Travel Consultants inspection of the airplane was within the scope of Travel Aviation as its agent in (1) the "Aircraft Acquisition Consultants Aviation's role as Smith Investments' agent. Agreement," signed by both Smith Investments and Travel Therefore, we hold that Travel Consultants Aviation was an Consultants Aviation, in (2) its Second Amended Complaint agent of Smith Investments and, thus, the district court and Jury Demand, and in (3) its Reply Brief Supporting properly attributed the fault, if any, of Travel Consultants Plaintiff's Motion for Partial Summary Judgment. In
Aviation to Smith Investments. addition, this agency relationship was the "only judicial notice of the whole trial," and no party objected to this notice. VII.
We realize, however, that use of the term "agent" is not On cross-appeal, Smith Investments also argues that the legally determinative. Nazworth v. Swire Florida, Inc. , 486 district court erred in denying its motion for judgment as a So. 2d 637, 638 (Fla. App. 1986). Indeed, "[t]he standard for matter of law on Raytheon's affirmative defense of determining whether an agent is an independent contractor is comparative fault attributable to Travel Consultants Aviation. the degree of control exercised by the employer or owner over We review the denial of a motion for judgment as a matter the agent. More particularly, it is the right of control, and not of law de novo . Gray , 263 F.3d at 598. Under Florida law, actual control, which determines the relationship between the judgment as a matter of law is proper "only when the parties." Ibid. (internal citations omitted). Although Mr.
evidence and all inferences of fact, construed most strictly in Smith testified that he personally did not control how Travel favor of the non-moving party, cannot support in the minds of Consultants operated, he also testified that the relationship jurors any reasonable difference as to any material fact or between his company and Travel Consultants Aviation was inference." Stewart & Stevenson Servs., Inc. , 804 So. 2d at controlled by the Aircraft Acquisition Agreement, which 588. identified Travel Consultants Aviation as Smith Investments' Nos. 02-1506/1611 H.C. Smith Investments v. 15
Outboard Marine Co., et al. According to Smith Investments, Raytheon failed to establish an applicable standard of ordinary care for Travel Consultants Aviation and its breach of this standard. Smith Investments contends that this amounts to reversible error. Raytheon counters this claim, stating that it established a standard of care and the breach of this standard through the testimony of Robert Francis Stanford, an expert witness in the field of advising airplane purchasers. Mr. Stanford, whose line of work is similar to the services provided by Travel Consultants Aviation, testified about airplane inspections and how he guards his clients' interests during the airplane- acquisition process.
We hold that the district court committed no error in denying the motion for judgment as a matter of law and that Raytheon laid a proper foundation for a comparative- negligence affirmative defense. Furthermore, because an agency relationship existed between Smith Investments and Travel Consultants Aviation, we also hold that the jury permissibly apportioned a percentage of fault to Smith Investments, either because of negligence on its own part or for that of its agent. See Del Aguila , 417 So. 2d 651. Smith Investments pleaded that Travel Consultants Aviation was its agent, and documentary evidence and the conduct of the two companies proved an agency relationship existed.
We therefore find that Raytheon established an applicable standard of ordinary care for an agent in this context and a breach of this standard. We also find no merit to Smith Investments' allegation that Travel Consultants Aviation was not its agent. The district court's denial of the motion for judgment as a matter of law is affirmed.
VIII.
Based on the foregoing, we hereby affirm the district court's judgments in their entirety.
NOTES
[*] The Honorable Richard D. Cudahy, Senior Circuit Judge of the United States Court of Appeals for the Seventh Circuit, sitting by designation. 1 Nos. 02-1506/1611 H.C. Smith Investments v. 3 4 H.C. Smith Investments v. Nos. 02-1506/1611 Outboard Marine Co., et al. Outboard Marine Co., et al. Regulations "Part 135"
[1] standards (but that they could be with additional work) and listed the "squawks"
[2] that Mr. Zeka A jury found in favor of Smith Investments on the negligent-inspection and negligent-supply-of-information claims, and in favor of Raytheon on the breach-of-contract discovered while conducting a physical inspection of the