Court Set Aside Previous $96 Million Damage Award
The Fourteenth Court of Appeals in
Houston, TX handed down a decision this week in an aviation fraud
case involving Lycoming engines division, upholding key components
of the jury's verdict while setting aside the damages award because
the damages were not recoverable by Texas law.
In 2005, a jury in Grimes County, TX found the Lycoming engines
division of Providence, RI-based Textron liable for fraud, and
ordered the company to pay approximately $96 million to Navasota,
TX-based Interstate Southwest Ltd., according to the company.
Later Lycoming launched a countersuit in its home state of
Pennsylvania, asking indemnity of $173 million.
In its decision, the court upheld the jury's finding the
crankshaft failures were caused solely by a defect in Lycoming's
design, and also held that the contract provision under which
Lycoming sought indemnity was unenforceable.
"The important thing to remember is that we defeated Lycoming's
$173 million claim, and that's still true," says Marty Rose of Rose
Walker, L.L.P., lead counsel for Interstate Southwest. "And it's
still true that the jury found Lycoming committed fraud."
Between 2000 and 2002, there were 24 failures and 12 deaths in
Cessnas, Pipers and other airplanes equipped with Lycoming engines.
Interstate Southwest supplied Lycoming with the crankshaft forgings
for those engines.
Lycoming blamed Interstate for the failures, but testing by
Interstate's legal team showed the trouble was a defect in
Lycoming's own design for the crankshafts.
The 2005 jury also found Lycoming committed fraud on Interstate,
and awarded Interstate nearly $10 million in actual damages and
another $86 million in exemplary damages. The trial court later
entered judgment for the full $96 million which the recent decision
The courtroom victory by the appellate court effectively
nullified Lycoming's $173 million counterclaim.