Opinion ID: 2087266
Heading Depth: 2
Heading Rank: 1

Heading: Delayed Delivery of Aircraft and the Resulting Smaller Fleet.

Text: The record fully supports the Court of Chancery's conclusion that Toolco delayed the growth of TWA's fleet of aircraft. Rummel testified that due to Howard Hughes' idiosyncratic temperament Toolco did not order planes for TWA until well after the other major airlines had done so. In late 1955 Toolco finally ordered eighteen Boeing 707-320's, fifteen Boeing 707-120's and thirty Convair CV-880's. Of these sixty-three planes only forty-five were eventually delivered to TWA. This reduction in the size of the fleet was deliberately caused by Toolco, who placed its order late and failed to negotiate for priority, thus putting TWA behind all of its competitors on Boeing's delivery schedule. Before the Boeing aircraft were delivered, Toolco sold the rights to six of the planes to Pan Am because Toolco was unable to obtain the necessary financing. Toolco had consistently refused to allow TWA to purchase any of the planes directly, choosing instead to lease them to TWA on a day-to-day basis. As to the CV-880's, Toolco intentionally interfered with their production, causing substantial delays in delivery, and diverted six of the planes to Northeast Airlines. Toolco's actions resulted in TWA having a forty-five, rather than the intended fifty-two, plane fleet, all to TWA's substantial detriment. The calculation of TWA's lost profits was the central issue at trial. To prove its damages TWA presented Edward L. Wemple, a transportation engineer and consultant, who testified regarding revenues and projected revenues at various times between 1956 and 1986. Much of Wemple's testimony regarding the probable success of TWA during the period at issue was corroborated by Rummel, the TWA-Toolco employee. These witnesses testified, based partially upon a 1959 report of Wemple's consulting firm, Coverdale & Colpitts, that TWA's passenger load factor would have increased substantially had TWA received delivery of all fifty-two jets. In addition to testifying to the success of TWA in the airline industry generally, Wemple constructed a pro forma jet fleet which he used to calculate the net revenue effect of a smaller fleet. Based upon TWA's revenue and operating experience in the subject years, Wemple calculated the loss of profits due to the delay in delivery of the Boeings and Convair aircraft, and the loss due to the non-delivery of five Convair 880's. Wemple concluded that TWA suffered a loss of $33.9 million in revenue. Finally, TWA called Joseph J. Rigney of Price, Waterhouse, an accounting firm, to reconstruct the financial records of TWA to determine the net effect on equity of the $33.9 million revenue loss. Using Wemple's figures and Rummel's operating expenses, as well as a pro forma financing plan presented by Dillon, Reed & Co., Inc., an investment banking firm, Rigney determined that the operation of a fifty-two plane fleet would have increased TWA's equity by $16.7 million. Based upon a careful study of the facts and figures presented, and after assessing the credibility of each of the expert witnesses, the trial judge determined that Toolco caused this loss in equity. Given our scope and standard of review, Levitt v. Bouvier, 287 A.2d at 673, the trial court's decision is fully supported by the record, and we accept its findings. Toolco argues that the damages are inflated by $5.8 million because Rigney of Price, Waterhouse included in his calculation certain accounting changes made in the last quarter of 1963. Before 1963 TWA charged overhaul expenses to a reserve on the basis of the number of hours flown. In 1963 TWA began charging the overhaul expenses as operating costs. This eliminated the overhaul reserve and created additional equity. Toolco objects to Rigney's inclusion of this sum in his damage calculations. The trial judge was satisfied that the use of this increased equity in calculating the damages was appropriate. We agree. The damage period selected by the court extended to the end of 1963. The selection of a 5¼ year damage period is supported by substantial evidence, and there was no error or abuse of discretion by the inclusion of the accounting changes in calculating damages through 1963.