McGowan v. Cooper Industries, Inc.

863 F.2d 1266, 27 Fed. R. Serv. 1084, 1988 U.S. App. LEXIS 17176, 1988 WL 135191

• Court: Court of Appeals for the Sixth Circuit
• Decided: December 20, 1988
• Docket: Nos. 86-6055, 86-6056, 86-6283, 86-6284 and 86-6285
• Status: Published

Opinions

RYAN, Circuit Judge.

Plaintiff George McGowan and intervening plaintiff Donald Berkley suffered severe injuries when a newly rebuilt air compressor owned by their employer, Pennwalt Corporation, exploded during a test run. They sued Cooper Industries, Inc., which manufactured the compressor, and Harold Babcock, a factory representative for Cooper who inspected the rebuilding of the compressor at Pennwalt’s plant in Calvert City, Kentucky. Their action was brought on negligence and product liability theories. In addition, third party actions were filed by the defendants against Pennwalt Corporation for indemnity and contribution. Pennwalt, in turn, filed a counterclaim against Cooper Industries and Babcock for property damage and reimbursement for worker compensation sums paid to Penn-walt’s employees, McGowan and Berkley.

The jury returned a verdict for Cooper Industries and Babcock, and the plaintiffs and Pennwalt now appeal.

The principal issue is whether the district court committed reversible error by excluding testimony offered by the plaintiffs and Pennwalt concerning the customary duties of factory representatives in Cooper’s industry, as well as testimony concerning Pennwalt’s routine business practice of deferring to the expertise of such factory representatives.

Our answer is that the court’s rulings excluding the evidence were, under the circumstances, error that resulted in substantial prejudice to the appellants. We must, therefore, vacate the district court’s judgment.

I.

Pennwalt Corporation operates a chemical plant in Calvert City, Kentucky, which employed plaintiff George McGowan and intervening plaintiff Donald Berkley. In March 1984, Pennwalt maintenance personnel were rebuilding a large air compressor which Pennwalt had previously purchased from the manufacturer, a subsidiary of defendant Cooper Industries, and which had been damaged in October 1983. Berkley was a maintenance foreman and McGowan was a mechanic working on the project.

The compressor was the principal component of a system which supplied compressed air throughout the Pennwalt plant for use in various plant functions. The compressor unit was hooked up to a series of discharge pipes which transported the compressed air to the place where it was needed. A block valve, which was located in the discharge piping some distance from the compressor itself, was closed so that the air flow could be stopped while the compressor was being repaired. Pennwalt had originally installed the block valve and discharge piping itself.

The rebuild project began shortly after the compressor was damaged, but could not be completed without Cooper’s advice and assistance. On March 8, 1984, Penn-walt requested assistance from Cooper and, the next day, Pennwalt issued a written “purchase requisition” requesting:

Services required for factory service man to inspect assembly of one ... air compressor.

Pennwalt’s subsequent “purchase order” to Cooper reiterated this transaction description. On March 12, Cooper sent defendant Babcock to the Pennwalt plant.

Babcock, who supervised the work of McGowan and the two mechanics rebuilding the compressor, suggested that some internal adjustments be made to the compressor unit. Once these adjustments were completed, on March 15, the compressor was considered ready for a test run. Bab-cock directed two successful preliminary test runs during which only the compressor motor was started. The purpose of these preliminary tests was to check for internal noise or vibration before compressing any air. A complete test was scheduled for later that day after the installation of the discharge pipes.

A Pennwalt employee, James Hurt, who died before trial, was summoned to start the compressor. Within a few seconds after it was started, the compressor exploded. McGowan lost both legs and Berkley and Babcock suffered leg and other injuries. A subsequent inspection showed that the discharge block valve in the piping attached to the compressor was closed at the time of the test.

The testimony of witnesses concerning the events which transpired immediately prior to the explosion is in substantial conflict. Babcock testified that his work on the compressor had been completed and that he remained at the Pennwalt plant solely as an observer. Hurt, the employee who started the compressor prior to the explosion, stated in his deposition that Bab-cock directed the test and instructed him to warm up the compressor before opening the block valve. Hurt further stated that he followed Babcock’s instructions because factory representatives are usually in charge of checking Pennwalt’s machines. Babcock denied that he gave Hurt any instructions or directions of any kind.

Following the accident, McGowan and his wife filed this action against defendants Cooper Industries and Babcock, seeking recovery on products liability and negligence theories. The complaint alleged that Bab-cock had negligently supervised the rebuild and start-up of the compressor. Berkley subsequently filed an intervening complaint which reiterated the same allegations.

Cooper filed a third-party complaint against Pennwalt and Berkley, alleging that the negligence of Pennwalt employees had caused the compressor explosion, and sought indemnity and contribution. Bab-cock also filed a third-party complaint against Pennwalt, seeking recovery for his injuries as well as indemnity and contribution. Pennwalt filed counterclaims against Cooper and Babcock seeking recovery for property damage and for workmen’s compensation payments made to McGowan and Berkley.

Babcock’s claims against Pennwalt were settled during the course of the trial. The remaining claims were submitted to the jury which was instructed to answer special interrogatories. The jury found that neither Cooper nor Babcock was liable but, contrary to the court’s instructions, completed the remaining interrogatories, finding Berkley and Pennwalt negligent, and announcing the amount of damages suffered by McGowan and Berkley.

The district court entered judgment dismissing plaintiffs’ claims. The McGowans, Berkley, and Pennwalt (referred to collectively as appellants) appeal. Babcock and Cooper (referred to collectively as appel-lees) filed a protective cross-appeal.

II.

At trial, appellants sought to introduce testimony by George Green concerning the customary duties of field service representatives in Cooper’s industry, and his opinion as to the lack of care exercised by Babcock on the rebuild project. Green testified that as an engineer he worked frequently with factory representatives and was generally familiar with their procedures. Appellants offered Green as an expert witness on the customs in Cooper’s industry.

The district court disallowed Green’s proffered testimony based on two separate rationale. First, the court held that Green’s testimony, if allowed, would tend to broaden the scope of Babcock’s duties. The court apparently reasoned that Bab-cock’s duties were limited to those contained in the “purchase order” issued by Pennwalt to Cooper Industries (“to inspect the assembly of one ... air compressor") and could not be expanded by parol evidence. Second, the court refused to allow Green to express his opinion on the care exercised by Babcock on the rebuild project, reasoning that the testimony would be an opinion on a matter which did not require scientific, technical, or other specialized knowledge and would not be helpful to the jury.

A.

With respect to Green’s proffered expert testimony on industry custom, appellants argue that the court should have permitted Green to testify because, based on his training and experience, he knew and could testify as to the duties customarily assumed by service representatives in Cooper’s industry. Appellants contend that factory representatives in Cooper’s industry, including Babcock, when called in for consultation, customarily take charge of all tasks associated with rebuilding and starting compressors, including tasks related to block valves and safety devices, even though such devices are not a part of the compressor units which Cooper manufactures. Appellants also contend that factory representatives customarily give directions to employees on final start-ups of rebuilt compressors. The appellants contend that Babcock was negligent in not noticing that the compressor’s block valve was closed before he directed the final start-up. The court disallowed the testimony, reading Pennwalt’s purchase order as limiting Babcock’s duties to work on the compressor unit itself, and not on the external piping, including the block valve. The court below apparently reasoned that Green’s proffered testimony would not be helpful because the scope of Babcock’s duty, as plainly stated in the purchase order, was not in issue. Appellants, however, contend that under the facts of this case, Kentucky law creates a duty separate and distinct from appellees’ contractual duty as described in the purchase order. We agree and thus conclude that the trial court erred in rejecting Green’s testimony as to the customs in Cooper’s industry concerning the duties of a manufacturer’s factory representative.

In Raymer v. United States, 660 F.2d 1136 (6th Cir.1981), cert. denied, 456 U.S. 944, 102 S.Ct. 2009, 72 L.Ed.2d 466 (1982), the personal representatives of two employees of a Kentucky coal mining company, Peabody Coal, brought suit against the United States under the Federal Tort Claims Act. The employees died when the front-end loader they were driving left an elevated road. Contrary to federal regulations, the loader was not equipped with roll bars. The personal representatives sought recovery in part based upon the Bureau of Mines’ allegedly negligent inspections of the company’s loader. The Bureau’s in-speetors had previously granted Peabody a number of extensions which effectively delayed Peabody’s mandatory compliance with the roll bar regulation.

This court was required to determine whether Kentucky recognized a cause of action for negligent inspection. We found that no Kentucky case had previously dealt with the issue but reasoned that the Supreme Court of Kentucky would impose the requirements of § 324A of the Second Restatement of Torts in formulating a cause of action based on negligent inspection. “We believe that the Kentucky court would impose essentially the same requirements for recovery, whether or not it adopted the precise formulation of Restatement [Section 324A].” Raymer, 660 F.2d at 1142-43. Section 324A provides that:

One who undertakes, gratuitously or for consideration, to render services to another which he should recognize as necessary for the protection of a third person or his things, is subject to liability to the third person for physical harm resulting from his failure to exercise reasonable care to protect his undertaking, if

(a) his failure to exercise reasonable care increases the risk of such harm, or

(b) he has undertaken to perform a duty owed by the other to the third person, or

(c) the harm is suffered because of reliance of the other or the third person upon the undertaking.

Raymer, 660 F.2d at 1142 (emphasis added).

The § 324A tort duties recognized in Raymer apply in this case and arise by operation of law, separate and distinct from appellees’ contractually created duties. Tort duties “are obligations imposed apart from and independent of promises made and therefore apart from any manifested intention of parties to a contract or other bargaining transaction.” Prosser & Keeton, Law of Torts § 92 at 656 (5th ed. 1984).

Under § 324A(c), the person conducting the inspection—

is subject to liability to a third person where the harm is suffered because of the reliance of the other for whom he undertakes to render the services, or of the third person himself, upon his undertaking. This is true, whether or not the negligence of the [inspector] has created any new risk or increased an existing one. Where the reliance of the other, or of the third person, has induced him to forgo other remedies or precautions against such a risk, the harm results from the negligence as fully as if the [inspector] had created the risk.

Restatement (Second) of Torts § 324A comment e (1965).

Evidence of the responsibilities that are customarily undertaken by factory representatives in Cooper’s Industries was crucial to enable the jury (1) to determine the contours of the duty of care assumed by Babcock, and (2) to assess the justifiability of appellants’ reliance. If it was customary in the air compressor rebuilding industry for manufacturers like Cooper, who are called in by a customer for consultation on air compressor repair and rebuilding jobs, to typically take charge and supervise the customer’s employees, and for purchasers and their employees, like Pennwalt, McGowan, and Berkley, to typically rely upon service representatives to inspect the entire air compressor hook up, including block valves and discharge pipes, then Cooper may have assumed a duty greater than that described in the purchase order itself (“to inspect assembly of one ... air compressor”). Of course, Cooper may argue that the purchase order evinces an intent not to assume a duty to inspect more than the rebuilt compressor itself. However, appellants were entitled to an opportunity to establish, if they could, that it is the custom in the industry to assume otherwise. Nonetheless, Green was precluded from testifying as an expert on the existence of an industry-wide duty broader than that stated in the purchase order. Assuming the adequacy of his qualifications as an expert on the customary duties of a factory representative in the industry — qualifications the court apparently did not question —Green, through his technical and specialized knowledge, could have helped the jury to better determine the scope of the duty assumed by Babcock.

The standard of review for a district court’s decision to exclude expert testimony on industry custom is an abuse of discretion. Otwell v. Motel 6, Inc., 755 F.2d 665 (8th Cir.1985). A trial court is accorded wide discretion in determining the admissibility of evidence challenged as irrelevant, and it is a discretion which is not disturbed on appeal if the reviewing court is able to say that the ruling excluding the evidence, even if erroneous, did not result in a substantial injustice, because

no error in the admission or exclusion of evidence is ground for reversal or granting a new trial unless refusal to take such action appears to the court to be inconsistent with substantial justice.

TCP Industries, Inc. v. Uniroyal, Inc., 661 F.2d 542, 550 (6th Cir.1981). The jury was instructed that Babcock, as an employee of Cooper, was under a duty to exercise the ordinary care generally required under the same or similar circumstances. The jury found that Babcock had complied with his duty. However, the court’s exclusion of Green’s testimony on industry custom enabled the jury to find that Babcock had complied with the standard of care of the purchase order rather than the potentially broader standard of § 324A(c). Assuming the purchase order was the parties’ written contract, § 324A(c) requires a weighing of circumstances beyond the contract terms themselves, including whether appellants’ reliance was justified, industry custom as a source of appellants’ reliance, and the contract itself as a possible limitation of the industry’s custom. Having been precluded by the court’s ruling from considering Bab-cock’s performance in the light of the full scope of his duties, the jury was unable to meaningfully apportion fault among Bab-cock, Cooper, Pennwalt, McGowan, and Berkley, in a manner consistent with substantial justice. Thus, we conclude that the trial court’s ruling excluding Green’s proffered evidence of the customary use of factory representatives in Cooper’s industry was error and not within the reasonable discretion of the district court, and, under the circumstances, unfairly prejudicial to the appellants.

B.

Appellants were also unsuccessful in their attempt to introduce testimony from Pennwalt personnel that Pennwalt routinely looked to factory representatives as experts who did everything necessary to restart compressors being repaired or rebuilt. In particular, appellants proffered the following testimony (on avowal) from Phil Wyatt, a Pennwalt employee:

Q. Mr. Wyatt, does Pennwalt have any standard policy or procedure that it follows when a manufacturer’s representative comes to the plant to work on a piece of machinery insofar as the supervision and direction of employees?

A. Yes, we do.

Q. Okay. What is that procedure?

A. Our normal procedure is that workmen are assigned to work with and for the factory service rep. He directs their moves. Throughout the course of the day, they spend virtually all of his time with the job and with those workmen, and he actually serves, for practical purposes, the front line of supervisor concerning that job and that job only.

Q. Was that procedure followed with regard to Mr. Babcock?

A. Yes, sir.

Q. And is this something, by that I mean the visit to Pennwalt by manufacturers’ representatives, is that something that happens once-a-year, or is it something that happens very often, or how would you characterize it?

A. It happens very, very often.

The rationale for admitting evidence of Pennwalt’s routine business practice is inextricably linked to the rationale for admitting evidence of the customs of Cooper’s industry; that is, to prove the scope of the duty undertaken by Babcock as a factory representative summoned to Pennwalt’s plant. The district court disallowed Wyatt’s testimony, reasoning that Penn-wait’s routine business practices, like Cooper’s industry customs, were inadmissible to “expand” the scope of Babcock’s and Cooper’s contractual duties beyond those described in the purchase order. However, as we have said, Kentucky law imposes the separate and distinct tort duties described in Restatement § 324A upon “[o]ne who undertakes ... for consideration to render service to another.” Consequently, just as in the case of Green’s proffered testimony on the custom in Cooper’s industry concerning the duties of a factory representative, Wyatt’s testimony of Pennwalt’s routine business practice in relying upon the expertise of a factory representative was relevant to establishing the contours of Babcock’s duties.

If the purchase order was the only source of Babcock’s duties, then its clear language would prevail over any proffered testimony on Pennwalt’s routine practices as a service customer. However, the duty which § 324A imposes may not be as limited as that expressed in the purchase order. Evidence of routine practices and expectations of service customers is as relevant as the industry customs of service representatives. Evidence that Pennwalt routinely relied on an industry custom in which service representatives directed entire maintenance and repair projects, including problems with both the compressor unit itself and the external discharge piping and block valves, would define the scope of Babcock’s duty more broadly than the duty expressed in the purchase order. Without this evidence, the jury was unable to make a meaningful apportionment of the fault of Babcock and Cooper in relation to the fault of Pennwalt and its employees. Like the exclusion of Green’s proffered testimony on the custom in Cooper’s industry, the exclusion of Wyatt’s testimony concerning the routine business practice in Pennwalt’s industry was an error which precluded the jury from receiving relevant evidence defining the duties of Babcock and Cooper and which substantially prejudiced appellants’ case. Accordingly, we are required to vacate the district court’s judgment. TCP Industries, Inc., 661 F.2d at 550.

III.

Appellants also proffered Green’s opinion testimony on the adequacy of Babcock’s performance on the compressor rebuild project. Green would have testified that Babcock (1) was “the most knowledgeable” person present with respect to compressor operations; (2) was actually performing a start-up operation for Pennwalt; and (3) was negligent in failing to confirm that the discharge valve was open, which was “the final responsibility of [Cooper] .... ” The district court excluded Green’s proffered testimony, concluding that it was not based on Green’s status as an expert. The court reasoned that the testimony was not based on “scientific, technical, or other specialized knowledge,” but rather on Green’s lay opinion of the facts of the case and that as such, his opinion would not “assist the jury on a fact that they can decide as well as an expert.” We agree entirely. Green’s testimony was not inadmissible solely because it embraced an ultimate issue in the case, Fed.R.Evid. 704(a). Rather, it was inadmissible either as a lay opinion under Rule 701 or as an expert opinion under Rule 702 simply because it would not have been “helpful ... to a determination of a fact in issue” or have “assisted] the trier of fact to understand the evidence.... ”

As the Advisory Committee note explains, certain opinions which embrace an ultimate issue will be objectionable on other grounds.

Under Rule 701 and 702 opinions must be helpful to the trier of fact, and Rule 403 provides for exclusion of evidence which wastes time. These provisions afford ample assurances against the admission of opinions which would merely tell the jury what result to reach.... They also stand ready to exclude opinions phrased in terms of inadequately explored legal criteria.

Torres v. County of Oakland, 758 F.2d 147, 150 (6th Cir.1985) (quoting Fed.R.Evid. 704 advisory committee’s note).

Appellants’ contention that Green’s testimony on the adequacy of Babcock’s performance demonstrates the existence of an industry custom ignores the distinction between the issues of duty and breach. Initially, the jury had to determine the appropriate scope of Babcock’s duty. In this regard, Green’s testimony on industry custom was helpful and should have been admitted under Rule 702 as specialized knowledge outside of a lay juror’s experience. But once the jury heard all of the evidence on the scope of Babcock’s duty, it was as qualified as Green to determine whether Babcock breached that duty. Green’s proffered testimony as to the adequacy of Bab-cock’s performance consisted of opinions which were not helpful to the jury because they addressed matters that were equally within the competence of the jurors to understand and decide, and thus were inadmissible under Fed.R.Evid. 701 and 702.

IV.

Although our disposition of the case obviates the need to address appellants’ remaining assignments of error, we nonetheless address two remaining issues of concern, in order to guide the district court in the event of retrial of the case.

The case was submitted to the jury upon special interrogatories. Instruction three asked the jury the following question:

Are you satisfied from the evidence that Harold Babcock failed to comply with his duty and that this failure was a substantial factor in causing the accident?

The jury answered “No.” Instruction four asked whether Cooper was liable on the products liability claims of Berkley and McGowan. The jury again answered “No.” The following directive succeeded instructions three and four:

If your answers to Instructions No. 3 or 4 are yes, please proceed to the next instruction. If your answers to Instructions No. 3 and 4 are no, then please return to the courtroom.

Contrary to their instructions, the jury completed the remaining interrogatories, finding both Berkley and Pennwalt negligent and computing the damages suffered by both McGowan ($1,061,673.89) and Berk-ley ($553,205.83).

Appellants argue that the verdict is meaningless because it both finds for the defendant and awards damages to the plaintiff. They cite Anderson’s Executrix v. Hockensmith, 322 S.W.2d 489 (Ky.Op.1959), in which the court ordered a new trial when a jury both awarded the plaintiff damages and found for the defendant. The Kentucky Court of Appeals (then Kentucky’s Supreme Court) held that:

[Wjhere a verdict is so uncertain, ambiguous, contradictory, or illogical that it cannot be clearly ascertained who it is for or against or what facts were found and the court cannot reasonably construe the language so as to give a fact to what the jury unmistakably found as a basis of a judgment thereon, the vice in the verdict is more than formal. Such a condition is of the substance and affects the merits of the case.

Anderson’s Executrix, 322 S.W.2d at pp. 490-91.

Anderson is inapposite to the case at bar. In Anderson, it was uncertain whether the jury found for the plaintiff or the defendant because there were no special interrogatories. In this case, the jury found that the appellees were not liable and that the plaintiffs had been damaged. However, the jury also went on to find third-party defendant Pennwalt and plaintiff Berkley negligent. Unlike Anderson, there is no confusion here over which parties the jury found responsible for Berk-ley’s and McGowan’s injuries. We can safely assume that the jury simply did not heed the court’s instruction to return to the courtroom after finding the appellees not liable but, instead, went on to complete the remaining instructions in a manner consistent with their conclusion that the plaintiffs had in fact been damaged, but that such damages resulted from the negligence of Pennwalt and Berkley, and not from that of the appellees. “Twenty-twenty” appellate hindsight suggests that the district court might have headed off any subsequent assignment of error in the matter by asking the jury to explain its reason for disregarding the court’s instruction to return to the courtroom if it answered interrogatories 3 and 4 in the negative.

V.

James Hurt, the Pennwalt employee who started the compressor and who died prior to the trial, gave four statements about the incident. Three were made shortly after the explosion, and one after the plaintiff brought this action. All four statements indicate that Babcock directed the start-up operation.

Hurt’s most recent statement, a deposition, was read at trial. After Babcock disputed Hurt’s testimony that Babcock ordered Hurt to start the compressor, appellants unsuccessfully sought to introduce Hurt’s earlier, consistent statements. Appellants contend the statements are admissible under Fed.R.Evid. 801(d)(1)(B), which provides:

A statement is not hearsay if the declar-ant testifies at the trial or hearing and is subject to cross-examination concerning the statement, and the statement is consistent with his testimony and is offered to rebut an expressed or implied charge against him of recent fabrication or improper influence or motive.

Appellant’s argument is without merit. The purpose of Rule 801(d)(1)(B) is to rehabilitate witnesses whose testimony is discredited, as the rule says, as being the result “of recent fabrication or improper influence or motive.” Appellants do not argue that the defendants have ever claimed, implicitly or explicitly, that Hurt’s deposition testimony was the product of recent fabrication or improper influence or motive.

Admitting Hurt’s prior statements would only serve to bolster his deposition testimony after it had been disputed by another witness. This would allow any witness whose testimony is disputed by his opponent to offer cumulative prior consistent statements which are hearsay and clearly not within the scope of 801(d)(1)(B).

VI.

Appellees Babcock and Cooper have filed a protective cross-appeal on the dismissal of their claims against Pennwalt for indemnity and contribution for any sums for which they may be liable to Berkley and McGowan. Since we must vacate the judgment entered by the district court, we reverse that portion of the district court’s decision dismissing appellees’ aforementioned claims.

VII.

Accordingly, we VACATE the judgment of the district court finding appellees not liable. Further, we REVERSE the judgment of the district court dismissing the claims of Babcock and Cooper for indemnity and contribution, and REMAND the case for proceedings consistent with this opinion.