Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-89-06338/USCOURTS-ca10-89-06338-0/pdf.json

Parties Involved:
Airline Management Group, Inc.
Appellant
Richard Bernard
Appellant
Control Terminals, Inc.
Appellee
Onyx Aviation, Inc.
Not Party
Jack Richards
Appellant

Document Text:

.. D 

United States Court of Appeals 

Tenth Cir-::uit 

UNITED STATES COURT OF APPEALS APR 19 1991 

FOR THE TENTH CIRCUIT .ROBERT L. HOECKER 

CONTROL TERMINALS, INC., 

a Missouri corporation, 

v. 

Plaintiff-Appellee/ 

Cross-Appellant, 

) 

) 

) 

) 

) 

) 

) 

) 

AIRLINE MANAGEMENT GROUP, INC., ) 

a Florida corporation; RICHARD ) 

BERNARD; JACK RICHARDS; and RUTH) 

RICHARDS, ) 

and 

Defendants-Appellants/ 

Cross-Appellees, 

ONYX AVIATION, INC., an 

Oklahoma corporation, 

Defendant. 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

Clerk 

Nos. 89-6338 

89-6354 

(D.C. No. CIV-88-416-W) 

( W. D. Okla. ) 

ORDER AND JUDGMENT* 

Before McKAY and MOORE, Circuit Judges, and BROWN,** District 

Judge. 

*This order and judgment has no precedential value and shall not 

be cited, or used by any court within the Tenth Circuit, except 

for purposes of establishing the doctrines of the law of the 

case, res judicata, or collateral estoppel. 10th Cir. R. 36.3. 

**Honorable Wesley E. Brown, United States Senior District Judge 

for the District of Kansas, sitting by designation. 

Appellate Case: 89-6338 Document: 010110034268 Date Filed: 04/19/1991 Page: 1 
Control Terminals, Inc., appeals a decision by the United 

States District Court for the Western District of Oklahoma not to 

adjust jury awards for contract breaches. Airline Management 

Group, Inc., Richard Bernard, Jack Richards, and Ruth Richards 

also challenge the jury awards on cross-appeal. In addition, they 

contest several procedural matters, the piercing of the corporate 

veil, the consistency of the jury awards, and the jury instructions. We affirm on all grounds. 

I. BACKGROUND 

Control Terminals, Inc., is an air cargo company. Airline 

Management Group, Inc., leases aircraft and support services. 

Richard Bernard is president, a stockholder, and a director of 

Airline; Jack Richards is the secretary-treasurer and a director 

of Airline; Ruth Richards is a stockholder and director of 

Airline. 

In October 1987, Control Terminals and Airline entered into a 

lease agreement under which the lessor Airline would provide 

aircraft as well as crew, fuel, and maintenance for four flights a 

week. Although the agreement states it was "entered into" on 

October 9, 1987, some testimony suggested it was signed later. 

The agreement provides the term of the lease started on October 6, 

1987, and terminated January 6, 1988. In accordance with the 

lease, Control Terminals paid a $100,000 refundable security 

deposit and a $15,625 positioning fee. 1 Control Terminals also 

1The positioning fee covered the cost of flying the aircraft empty 

from its base in Florida to El Paso, Texas, where Control 

Terminals needed to use the aircraft. 

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Appellate Case: 89-6338 Document: 010110034268 Date Filed: 04/19/1991 Page: 2 
agreed to pay a depositioning fee if the contract did not extend 

beyond three months and an hourly rental rate of $3,750 per hour 

of flight time. 

On March 3, 1988, Control Terminals brought suit in the 

United States District Court for the Western District of Oklahoma 

against Airline and Richard Bernard, Jack Richards, and Ruth 

Richards, 2 alleging several claims, including breach of contract 

because Airline failed to provide aircraft on scheduled days. 

Airline filed a counterclaim, alleging that Control Terminals 

breached the lease by failing to use aircraft on scheduled days 

and failing to pay a depositioning fee, and that Control 

Terminals' former president wrongfully demanded $10,316 from 

Airline as a condition of awarding the lease to Airline, in 

violation of 49 u.s.c. § 1472(d)(2). 

The jury's initial Verdict #1 awarded Control Terminals 

"$213,000 plus any monies left from the security deposit after 

payment to Airline Management Group, Inc. of any monies owed for 

use of the airplane through December 18, 1987 as well as payment 

to Airline Management for 'positioning fees' at the beginning and 

the end of the contract." When the trial judge instructed the 

jury to provide a dollar figure, they computed this amount to be 

$298,000. The jury also pierced Airline's corporate veil, holding 

Richard Bernard, Jack Richards, and Ruth Richards personally 

liable for this amount. In Verdict #2, addressing Airline's 

counterclaim, the jury awarded Airline $64,000 for Control 

2control Terminals also sued Onyx 

the fuel. The jury found in 

involved in this appeal. 

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Aviation, Inc., which provided 

favor of Onyx, and Onyx is not 

Appellate Case: 89-6338 Document: 010110034268 Date Filed: 04/19/1991 Page: 3 
Terminals' failure to use and pay for aircraft on all agreed days, 

and $10,316 to cover the payment made to Control Terminals' 

president. 

Control Terminals filed a motion for judgment notwithstanding 

the verdict, arguing (1) its damages should be increased by the 

amount of the $100,000 security deposit it had paid to Airline; 

(2) damages awarded to Airline should be reduced by the amount of 

operating expenses saved by Airline on those days Control 

Terminals did not use the aircraft; and (3) the $10,316 award to 

Airline for wrongful payment to Control Terminals' president 

should be overturned because Airline does not have a private cause 

of action under 49 U.S.C. § 1472(d)(2). Airline moved for a new 

trial. 

The trial judge partially granted Control Terminals' motion, 

setting aside the award to Airline under 49 u.s.c. § 1472, but 

denied Control Terminals' other requests as well as Airline's 

motion for new trial. Thus, under the final judgment, Control 

Terminals received $298,000, and Airline received $64,000. 

II. AIRLINE'S BREACH OF CONTRACT 

The jury concluded that Airline did not provide aircraft on 

all the days required by the lease and awarded Control Terminals 

$298,000 for the breach. In its motion for judgment 

notwithstanding the verdict (JNOV), Control Terminals sought an 

increase3 in the award. Airline, on the other hand, moved for a 

3

Airline erroneously attempts to defeat Control Terminals' claim 

by characterizing it as a claim for additur. Black's Law 

(Continued to next page.) 

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Appellate Case: 89-6338 Document: 010110034268 Date Filed: 04/19/1991 Page: 4 
new trial, contending the award is excessive. 

We review Control Terminals' motion for JNOV de nova, 

examining the evidence in the light most favorable to the 

nonmoving party. JNOV should be granted if the evidence points 

only one way and is susceptible of no reasonable inferences 

supporting the nonmoving party. Zimmerman v. First Fed. Savings 

and Loan Ass'n, 848 F.2d 1047, 1051 (10th Cir. 1988). In the 

context of a claim for a jury award increase, we have held that 

"[a]bsent an award so grossly inadequate as to raise an 

irresistible inference that bias, prejudice, or passion invaded 

the trial or so as to shock the court's conscience, a jury's 

determination of damages will be upheld." Moore v. Subaru of Am., 

891 F.2d 1445, 1451-52 (10th Cir. 1989). We have also held that a 

jury award may be increased if necessary to meet a legal 

requirement. Rocky Mountain Tool & Mach. Co. v. Tecon Corp., 371 

F.2d 589, 598 (10th Cir. 1966) (court properly increased award 

against party who had to be jointly liable in amount). 

Control Terminals fails to show that the jury simply 

miscalculated the award. It posits, based on the jury's original 

description of the verdict, 4 that the jury started with the wrong 

(Continued from prior page.) 

Dictionary defines additur as an increase in a jury verdict given 

as a condition of denying a plaintiff's motion for new trial, with 

the consent of the defendant. The Supreme Court prohibited this 

practice in Dimick v. Schiedt, 293 U.S. 474 (1935), holding that 

under the Seventh Amendment, a trial court cannot deny plaintiff's 

motion for a new trial because of defendant's willingness to accept an increase in the jury award. 

4The jury initially stated its verdict as follows: "$213,000 plus 

any monies left from the security deposit after payment to Airline 

of any monies owed for use of the aircraft as well as payment for 

positioning fees at the beginning and end of the contract." 

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Appellate Case: 89-6338 Document: 010110034268 Date Filed: 04/19/1991 Page: 5 
figure. The initial dollar figure, Control Terminals argues, 

should be the cost of substitute aircraft beyond the price Control 

Terminals would have paid Airline. Control Terminals asserts the 

jury mistakenly deducted the security deposit of $100,000 from 

that amount and arrived at the $298,000 award as follows: 

$213,000 

+ 100,000 

15,000 

$298,000 

Cost of substitute aircraft beyond price 

which Control Terminals would have 

paid Airline, minus security deposit 

Security deposit 

Depositioning fee 

However, Control Terminals is merely speculating, without 

much rational basis, that the jury began with the figure of 

$213,000 because it deducted the security deposit from the 

replacement cost. We are not convinced that the jury made a 

simple mathematical error. First, it is far from obvious that the 

starting figure should be $313,000 ($213,000 + 100,000) because, 

according to Control Terminals' own testimony, its excess 

replacement cost was about $341,000, not $313,000. Second, the 

record reveals dispute over the number of days on which Airline 

breached, which affects the replacement cost to which Control 

Terminals is entitled. Control Terminals asserted Airline failed 

to provide aircraft on eighteen days. Airline responded that 

three of those days occurred before the lease was signed, two 

involved inclement weather, and on three of those days Airline did 

provide aircraft. The jury may simply have decided that the 

$300,000 plus incurred by Control Terminals was not all caused by 

Airline's breach. Because the evidence permits an inference other 

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Appellate Case: 89-6338 Document: 010110034268 Date Filed: 04/19/1991 Page: 6 
than a simple miscalculation by the jury, Control Terminals' 

motion for JNOV increasing the award was properly denied. 

Airline's motion for a new trial on the ground that the award 

is excessive is also without merit. We do not disturb the trial 

court's denial of such a motion unless there is "manifest abuse of 

discretion. " Brown v. McGraw-Edison Co., 736 F.2d 609, 616 (10th 

Cir. 1984). We see no reason to challenge the trial court's 

decision that the verdict amount was not "clearly, decidedly or 

overwhelmingly" against the weight of the evidence. Id. 

Airline also asserts that Control Terminals had a duty to 

mitigate its damages by taking advantage of its right to cancel 

the lease upon Airline's failure to perform any three flights in 

one month. However, Control Terminals only has a duty to take 

reasonable steps to mitigate damages. See Hidalgo Properties, 

Inc. v. Wachovia Mortgage Co., 617 F.2d 196, 200 (10th Cir. 1980). 

By finding substitute aircraft, Control Terminals took such steps 

because it was still able to complete responsibilities to its 

customers. Its duty to mitigate damages did not extend to 

cancelling the lease. 

III. CONTROL TERMINALS' BREACH OF CONTRACT 

The jury found that Control Terminals also breached the 

contract by failing to use aircraft on all scheduled days. In its 

motion for JNOV, Control Terminals sought a reduction in the 

jury's $64,000 award to Airline. Again, we review this claim de 

nova and consider whether there is any reasonable inference which 

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Appellate Case: 89-6338 Document: 010110034268 Date Filed: 04/19/1991 Page: 7 
could support the verdict. 5 Remittitur is appropriate only when 

the error in the verdict results from a specific misconception on 

the part of the jury and can be mechanically corrected without 

resolving a disputed issue of fact. Big John, B.V. v. Indian Head 

Grain Co., 718 F.2d 143, 150 (5th Cir. 1983); United States Potash 

Co. v. McNutt, 70 F.2d 126, 132 (10th Cir. 1934). 

Control Terminals argues Airline is entitled only to lost 

profits and that $64,000 reflects the full contract price without 

subtracting expenses which Airline did not have to incur because 

of the breach. Although Control Terminals builds a plausible case 

for remittitur, we believe there are reasonable inferences which 

could support the verdict. Our efforts to confirm Control 

Terminals' argument simply demonstrate the danger of secondguessing the jury's factual conclusions. 

Control Terminals' contention hinges on the assumption that 

the jury found it was guilty of breaching the contract on two 

days. Control Terminals also assumes the jury rounded up the 

rental fee of $3,750 per hour to $4,000 per hour and rounded down 

the hours of flight time per day from 8.1 hours to 8 hours. 

Therefore, it asserts, the jury reached its $64,000 award by 

multiplying 2 days x 8 hours per day x $4,000 per hour. Reducing 

this gross amount by the expenses Airline would have incurred if 

5Although we review a trial court's decision on a motion for 

remittitur for abuse of discretion, Royal College Shop, Inc. v. 

Northern Ins. Co. of N.Y., 895 F.2d 670, 677 (10th Cir. 1990), we 

evaluate Control Terminals' claim according to the type of motion 

it brought. Both the JNOV and remittitur standards give 

considerable deference to the factfinder. 

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Appellate Case: 89-6338 Document: 010110034268 Date Filed: 04/19/1991 Page: 8 
its aircraft had been used on two days, Control Terminals claims 

the proper award is $11,900: 

$64,000 

34,000 

18,100 

$11,900 

(aircraft sublease and crew costs)6 

(fuel costs) 7 

The scenario painted by Control Terminals has flaws, and it 

is not the only possible scenario. Control Terminals has only a 

speculative basis for concluding the jury rounded its figures. 

Without such an adjustment, the jury award would have been $60,750 

($3,750 x 8.1 x 2). More importantly, the record does not confirm 

the fuel cost figure contended by Control Terminals because the 

cited exhibit has not been designated in the record on appeal. 

Finally, an alternate set of inferences could as ·easily 

support the verdict. Airline contends Control Terminals breached 

the lease on seven days, not two. If the jury started with that 

conclusion, its calculations might have looked like this: 

$212,625 

119,070 

· 93,555 

??? 

??? 

($3,750 x 8.1 hours per day x 7 days) 

($2,100 x 8.1 hours per day x 7 days) 

(unspecified fuel costs) 

Remittitur under Control Terminals' theory depends on 

resolving the factual question of the number of days on which 

Control Terminals breached. The record reveals that Control 

Terminals did not use aircraft on twelve days, November 26, 

December 21 - 24, December 28 - 31, and January 4 - 6. Because 

6The parties agree that Airline subleased aircraft and crew at the 

rate of $2,100 per hour ($2,100 x 8.1 x 2 = $34,020). 

7For this figure, Control Terminals cites 

not designated in the record on appeal. 

the figure. 

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to an exhibit which is 

Airline does not contest 

Appellate Case: 89-6338 Document: 010110034268 Date Filed: 04/19/1991 Page: 9 
the lease permitted some cancellations by Control Terminals, these 

nonuses were not all breaches. The parties differ in their 

interpretations of the cancellation provision, which stated: 

"During the term of this Agreement, Lessor grants the option to 

Lessee to cancel five (5) flights, without penalty, for recognized 

national holidays and/or during the period of December 20, 1987, 

to January 4, 1988 .... " Airline contends this gave Control 

Terminals the right to cancel a total of five flights. Control 

Terminals asserts that the clause creates the right to ten 

cancellations, five on holidays and five between December 20 and 

January 4. Because of this factual dispute, we hold Control 

Terminals has not met the JNOV standard of showing that the 

evidence points only towards a mechanical error. 

IV. PROCEDURAL ISSUES 

In their cross-appeal, Airline, Richard Bernard, Jack 

Richards, and Ruth Richards raise a host of procedural challenges. 

We reject them all. At oral argument, defendants conceded they 

have waived the right to challenge Control Terminals' capacity to 

sue, and that federal diversity jurisdiction is proper. We 

conclude defendants have also waived the right to challenge venue 

and the joinder of Ruth Richards as a defendant because, as the 

trial court noted, these issues were not included in the Final 

Pretrial Order which sets forth the issues before the court. Fed. 

R. Civ. Proc. 16(e). 

Defendants also argue that suit against the directors and 

shareholders of Airline is premature. Relying on Oklahoma law, 

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Appellate Case: 89-6338 Document: 010110034268 Date Filed: 04/19/1991 Page: 10 
they argue 

shareholders 

suit cannot be 

until judgment 

brought against directors or 

has 

corporation and returned 

§ 1124 (West 1991). 

unsatisfied. 

been obtained against the 

Okla. Stat. Ann. tit. 18, 

However, the 

provision does not apply 

Moreover, according to 

when 

the 

the 

terms 

trial court concluded this 

corporate form is a sham. 

of the lease, Michigan, not 

Oklahoma, law governs any disputes arising out of the lease. 

V. PIERCING AIRLINE'S CORPORATE VEIL 

Defendants appeal the jury's decision to hold Richard 

Bernard, Jack Richards, and Ruth Richards personally liable for 

Airline's breach, seeking (1) a new trial because the decision to 

pierce the corporate veil was "totally unsupported in the 

evidence" and (2) reversal of the judgment because the jury 

instruction was erroneous. 

Keeping in mind that a new trial will not be granted unless 

the jury's verdict is "clearly, decidedly or overwhelmingly" 

against the weight of the evidence, we affirm the trial court 

because we find no abuse of discretion in its decision. See 

Brown, 736 F.2d at 616. Beyond asserting that they all testified 

corporate records and requirements were met, defendants provide 

little proof indicating the veil should not be pierced. Control 

Terminals cites testimony showing that Airline's corporate form 

was a sham. Corporate formalities, such as a clear division of 

stock ownership, formal shareholder meetings, and record keeping, 

were not always observed; Airline was not adequately capitalized; 

no dividends were paid; and less than arm's length transactions, 

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Appellate Case: 89-6338 Document: 010110034268 Date Filed: 04/19/1991 Page: 11 
such as unsigned loans and random salary payments, were conducted 

with the individual defendants. 

Defendants offered their own instruction on the issue of 

piercing the corporate veil, but that action does not constitute 

an objection to the court's instruction. In such circumstances, 

we will not review the instruction unless it is "'patently plainly 

erroneous and prejudicial.'" Zimmerman, 848 F.2d at 1054 

(citation omitted). The trial court instructed the jury to 

consider: disregard of corporate formalities, commingling of 

funds, failure to maintain corporate records, nature of ownership 

and control, undercapitalization, and diversion of corporate funds 

to noncorporate uses. This instruction accords with generally accepted law on the corporate form. See H. Henn & J. Alexander, 

Laws of Corporations, § 147, at 353, n.6 (3d ed. 1990); 

1 w. Fletcher, Cyclopedia of the Law of Private Corporations 

§ 41.30, at 663 (rev. perm. ed. 1990). 

VI. CONSISTENCY OF JURY VERDICTS 

The jury's initial description of Verdict #1 awarded Control 

Terminals damages for Airline's breach less payment to Airline of 

monies owed for aircraft used and positioning fees. In its 

Verdict #2, the jury awarded Airline $64,000. Airline contends 

these verdicts are inconsistent, because "the jury supposedly 

ascertained Airline's damages [in Verdict #2] yet still left 

calculations as to monies due Airline to be performed under 

verdict #1." No inconsistency exists between the two verdicts. 

Verdict #1 computes Airline's liability to Control Terminals for 

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Appellate Case: 89-6338 Document: 010110034268 Date Filed: 04/19/1991 Page: 12 
failure to provide aircraft and subtracts any money owed to 

Airline under the contract for uses of aircraft. Verdict i2 

computes Control Terminals' liability to Airline for failure to 

use aircraft on scheduled days, an entirely separate matter. 

VII. JURY INSTRUCTIONS 

Defendants did not raise any of these objections at trial, so 

we review only for plain error. Zimmerman, 848 F.2d at 1054. 

Jury instructions need only convey the proper issues and standards 

to the jury. Big Horn Coal Co. v. Commonwealth Edison Co., 852 

F.2d 1259, 1271 (10th Cir. 1988). We find no errors in the 

instructions. 

Briefly, defendants argue: 

(1) The court's supplementary instruction requiring the jury 

to quantify the damage award to Control Terminals failed to 

properly instruct the jury on respective awards to Control 

Terminals and Airline. This complaint appears to be merely a 

twist on the inconsistent verdicts argument and is equally without 

merit. 

(2) The court's instruction to the jury on breach of 

contract did not adequately convey the plaintiff's burden of 

proving the effective date of the lease. Defendants' proposed 

instruction stated in part that Control Terminals had to prove by 

a preponderance of the evidence "a contract existed and the 

effective date of that contract." The court charged the jury 

almost identically with finding "a contract existed on the dates 

alleged by the plaintiff" by a preponderance of the evidence. The 

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Appellate Case: 89-6338 Document: 010110034268 Date Filed: 04/19/1991 Page: 13 
' . 

court's reference in its Preliminary Statement to the parties 

"enter[ing] into a three-month lease agreement" does not amount to 

plain error. 

(3) The court failed to give Airline's requested instruction 

for punitive damages because of Control Terminals' demand for a 

kickback. Because the trial court ultimately held that Airline 

had no standing to challenge the kickback and Airline does not 

appeal this ruling, we hold this instruction challenge moot. 

AFFIRMED. 

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Entered for the Court 

John P. Moore 

Circuit Judge 

Appellate Case: 89-6338 Document: 010110034268 Date Filed: 04/19/1991 Page: 14