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P H I, Inc. v. Apical Industries, Inc.

United States Court of Appeals, Fifth Circuit

January 9, 2020

P H I, INCORPORATED, formerly known as Petroleum Helicopters, Incorporated, Plaintiff - Appellee
v.
APICAL INDUSTRIES, INCORPORATED, Defendant-Appellant

          Appeal from the United States District Court for the Western District of Louisiana

          Before OWEN, Chief Judge, and SMITH and DENNIS, Circuit Judges.

          JAMES L. DENNIS, CIRCUIT JUDGE

         PHI, Inc. sued Rolls-Royce, Apical Industries, and Offshore Helicopter Support Services (OHS), after a helicopter PHI owned was required to make an emergency landing in the Gulf of Mexico when its Rolls-Royce-manufactured engine failed. After the landing, the emergency flotation system manufactured by Apical and serviced by OHS partially deflated, causing the helicopter to turn over in the water and resulting in a total loss due to salt water incursion. Relatively early in the case, PHI's action against Rolls-Royce was severed and transferred to federal court in Indiana. That action later settled.

         Ahead of a jury trial in the Western District of Louisiana on PHI's claims of redhibition (a Louisiana warranty claim sounding in contract law) against Apical and breach of contract against OHS, the magistrate judge presiding over the case by the parties' consent excluded all evidence regarding the cause of the engine failure and determined that he would not submit the issue of Rolls-Royce's liability to the jury as a basis for reduction in the damages award against Apical. The magistrate judge premised these rulings on the mistaken belief that Rolls-Royce could not, as a matter of law, be held solidarily liable along with Apical and OHS for the loss of the helicopter. The jury ultimately found Apical liable for the loss of the helicopter. Because, under Louisiana law, Rolls-Royce is a potential solidary obligor along with Apical, and because a finding of solidary liability would result in a reduction of damages award against Apical due to Rolls-Royce's earlier settlement with PHI, the magistrate judge's pretrial exclusion and verdict form rulings were in error. Accordingly, we VACATE and REMAND for trial on the issue of solidary liability.

         I

         On December 1, 2011, a helicopter owned by PHI, Inc., formerly known as Petroleum Helicopters Inc., "sustained an engine failure and made an emergency water landing." In doing so, the helicopter pilot activated an emergency flotation system and executed a water landing. The pilot and the sole passenger escaped the helicopter unharmed on life rafts. A rescue boat picked up the pilot and passenger, dropped them off at a nearby oil platform, and returned to the helicopter. As the rescue boat then towed the helicopter to the platform, the right section of the flotation system deflated, causing the helicopter to flip over in the Gulf of Mexico. Although PHI recovered the helicopter from the Gulf, the incursion of salt water into the helicopter caused it to be a total loss. A post-accident inspection revealed that the right rear float was punctured, and, unlike the left rear float, it did not have a "doubler," a patch used to protect from chafing damage where the float connected to the helicopter's railing.

         PHI sued Apical Industries, Inc. (Apical), the manufacturer of the flotation system that failed while the helicopter was being towed, as well as Rolls-Royce and Offshore Helicopter Support Services, Inc. (OHS), in Louisiana state court. Rolls-Royce was the engine manufacturer, and OHS serviced the float system before the accident. After removal to federal court, [1] PHI's claims against Rolls-Royce were severed and transferred to Indiana based on a forum-selection clause.[2] The forum-selection clause was contained in a warranty agreement provided in connection with Rolls-Royce's 2011 sale of a replacement part to PHI called a No. 2 bearing.[3] PHI's case against Rolls-Royce in Indiana settled after that court denied summary judgment for Rolls-Royce on PHI's claim.

         Ahead of trial against Apical and OHS, the magistrate judge excluded evidence regarding the cause of the Rolls-Royce engine failure, determining that this evidence was not relevant to PHI's claims against Apical or OHS, or to any of Apical or OHS's defenses.[4] The magistrate judge also refused to submit to the jury a question about Rolls-Royce's liability. After a two-day trial, the jury found Apical's floats contained a redhibitory defect and OHS did not breach its contract with PHI. The jury awarded PHI $2, 180, 000 in damages, from which the magistrate judge later deducted $450, 230 to account for the value of the engine, the loss of which Apical was not responsible for. Apical appealed.

         II

         Apical asserts on appeal that the magistrate judge was incorrect to exclude evidence of the cause of the Rolls-Royce engine failure and to refuse to submit the issue of Rolls-Royce's liability to the jury. These contentions turn on two points: First, whether a limited warranty agreement between PHI and Rolls-Royce forecloses all potential liability on the part of Rolls-Royce for the salt-water damage caused to the helicopter; and second, if damages for saltwater incursion are in fact allowed, whether their availability makes Rolls-Royce a potential solidary obligor, entitling Apical to submit this question and evidence supporting it to a jury. We address each issue in turn.

         A

         The magistrate judge concluded that Rolls-Royce could not be solidarily liable with Apical and OHS, based on a limited warranty agreement executed between PHI and Rolls-Royce in connection with the sale of the No. 2 bearing in 2011 that waived consequential damages.[5] The magistrate judge reasoned that under the limited warranty, "Rolls[-]Royce would not be liable for the same performance as Apical and OHS, and therefore, Rolls-Royce would not be solidarily liable with them." The warranty the magistrate judge relied on provided:

THIS WARRANTY IS GIVEN EXPRESSLY AND IN PLACE OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR PARTICULAR PURPOSE. THERE ARE NOT UNDERSTANDINGS, AGREEMENTS, ...

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