Court Opinion

ID: 4148251
Source: CourtListenerOpinion
Date Created: 2017-02-24 17:07:52.662621+00
Date Added: 2024-06-11T14:45:21.052440
License: Public Domain

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D),
this Memorandum Decision shall not be                                   FILED
regarded as precedent or cited before any                         Feb 24 2017, 11:26 am
court except for the purpose of establishing
                                                                        CLERK
the defense of res judicata, collateral                             Indiana Supreme Court
                                                                       Court of Appeals
estoppel, or the law of the case.                                        and Tax Court

ATTORNEYS FOR APPELLANT                                  ATTORNEYS FOR APPELLEE
Nicholas A. Cummins                                      TIMKEN ALCOR AEROSPACE
David E. Prewitt                                         TECHNOLOGIES, INC.
Bennett, Bricklin & Saltzburg, LLC                       Mark D. Gerth
Philadelphia, Pennsylvania                               Pfenne P. Cantrell
Christine D. Campbell                                    Aerospace Technologies, Inc.
Schiller Barnes Maloney PLLC                             Indianapolis, Indiana
Louisville, Kentucky                                     ATTORNEYS FOR APPELLEE
                                                         HONAKER AVIATION, INC.
                                                         Douglas B. Bates
                                                         Chelsea R. Stanley
                                                         Stites & Harbison PLLC
                                                         Jeffersonville, Indiana
                                                         ATTORNEYS FOR APPELLEE
                                                         JET ACCESS AVIATION, LLC
                                                         Matthew W. Melton
                                                         Richard L. Norris
                                                         Norris Choplin Schroeder LLP
                                                         Indianapolis, Indiana

                                           IN THE
    COURT OF APPEALS OF INDIANA

Court of Appeals of Indiana | Memorandum Decision 10A04-1609-CT-2230 | February 24, 2017    Page 1 of 15
      Aviation Consultants U.S., Inc.,                         February 24, 2017
      Appellant-Plaintiff,                                     Court of Appeals Case No.
                                                               10A04-1609-CT-2230
              v.                                               Appeal from the Clark Circuit
                                                               Court
      Timken Alcor Aerospace                                   The Honorable Roger L. Duvall,
      Technologies, Inc.; Honaker                              Special Judge
      Aviation, Inc.; and Jet Access                           Trial Court Cause No.
      Aviation, LLC,                                           10C01-1410-CT-147
      Appellees-Defendants

      Baker, Judge.

[1]   After an airplane owned by Aviation Consultants U.S., Inc. (ACI), got into an

      accident and sustained significant damage as a result, ACI sued multiple

      entities for alleged negligence and other claims, including Timken Alcor

      Aerospace Technologies, Inc. (Timken), Honaker Aviation, Inc. (Honaker),

      and Jet Access Aviation, LLC (Jet Access). The trial court granted summary

      judgment in favor of Timken, Honaker, and Jet Access, and ACI now appeals.

      Finding no issues of material fact and that the appellees are entitled to judgment

      as a matter of law, we affirm.

                                                     Facts
[2]   During the relevant period of time, ACI owned and operated a Beechcraft King

      Air 200 aircraft (the Aircraft), which was equipped with two Pratt & Whitney

      (Pratt) engines. ACI intended to use the Aircraft to conduct commercial air

      charter flights. A Part 135 Federal Aviation Regulations (FAR) Certificate is a

      Court of Appeals of Indiana | Memorandum Decision 10A04-1609-CT-2230 | February 24, 2017   Page 2 of 15
      requirement to conduct commercial charter flights, but ACI did not hold a FAR

      Certificate. As a result, ACI had to affiliate with Jet Access, which was a

      holder of a FAR Certificate. To that end, ACI and Jet Access entered into an

      agreement (the Jet Access Agreement),1 pursuant to which ACI could conduct

      commercial air charter flights under Jet Access’s FAR Certificate. The Jet

      Access Agreement provided that Honaker, a Jet Access affiliated entity, 2 would

      perform certain work on the Aircraft.

[3]   In Spring 2012, ACI determined that the engines (the Original Engines) in the

      Aircraft were approaching the mandatory overhaul time. ACI solicited bids for

      the overhaul work; Timken was ultimately selected to do the work. As

      specified by the agreement between ACI and Timken (the Timken Agreement),3

      Timken arranged to lease interim replacement engines (the Leased Engines) to

      ACI while the Original Engines were being overhauled and serviced.

      Specifically, Timken arranged for ACI to fly the Aircraft to Honaker in Clark

      County to have the Original Engines removed and the Leased Engines

      installed. On June 8, 2012, Honaker removed the Original Engines and

      installed the Leased Engines. The Leased Engines are also Pratt engines.

[4]   On October 20, 2012, ACI conducted a commercial air charter flight on the

      Aircraft to Nova Scotia, Canada. The Aircraft was operating with the Leased

      1
          Pursuant to the contract, Kentucky law applies to the Jet Access Agreement.
      2
          Honaker and Jet Access have a common business address and common management/ownership.
      3
          Pursuant to the contract, Arizona law applies to the Timken Agreement.

      Court of Appeals of Indiana | Memorandum Decision 10A04-1609-CT-2230 | February 24, 2017   Page 3 of 15
      Engines at that time. When attempting to depart from the Canadian airport,

      the right engine on the Aircraft failed during the takeoff phase. The flight crew

      attempted to abort the takeoff and bring the Aircraft to a stop on the remaining

      runway, but was unable to do so and sustained a collapse of the nose gear and

      other damage to the Aircraft as a result.

[5]   On June 13, 2013, Timken filed a lawsuit in Arizona against ACI (the Arizona

      Lawsuit). In the Arizona Lawsuit, Timken sought payment for the overhaul of

      the Original Engines and for the alleged value of the Leased Engines. On

      November 7, 2013, Timken and ACI entered into a settlement agreement (the

      Settlement Agreement) that acknowledged two pending lawsuits 4 and settled for

      the sum of $450,000. The Settlement Agreement explicitly exempts ACI’s

      claims for damages arising from the quality of work performed by Timken on

      the Original or Leased Engines and any tort or product liability claims for

      damages arising from the alleged engine failure of the Leased Engines.

      Paragraph seventeen of the Settlement Agreement provides as follows:

              The [Settlement] Agreement constitutes a single, integrated
              written contract expressing the entire settlement of the Arizona
              Parties with respect to the Timken Alcor Released Claims and for
              the ACI Released Claims. All prior verbal and written
              communications, negotiations, and agreements relating to the
              settlement of those claims are superseded by the Agreement.

      4
       ACI had also filed a lawsuit against Timken in Pennsylvania, but that claim was dismissed for lack of
      personal jurisdiction.

      Court of Appeals of Indiana | Memorandum Decision 10A04-1609-CT-2230 | February 24, 2017        Page 4 of 15
      Appellant’s App. p. 115-16.

[6]   On October 17, 2014, ACI filed the instant lawsuit in Indiana to recover its

      damages from the accident. All of its claims stem from this essential allegation:

      the Leased Engines were defective and had not been properly serviced,

      maintained, inspected, or certified airworthy by Timken, Honaker, and Jet

      Access. Against Timken, ACI filed claims for strict liability, negligence, breach

      of implied and express warranties, fraud, and misrepresentation. Against Pratt,

      ACI filed claims for strict liability, negligence, and breach of express and

      implied warranties.5 Against Honaker, ACI filed a claim for negligence.

      Against Jet Access, ACI filed a claim for negligence. ACI sought incidental

      and consequential damages totaling approximately $2.4 million.

[7]   Timken filed a motion for partial summary judgment (relating solely to the

      issue of whether ACI could recover consequential or incidental damages) and

      Honaker and Jet Access each filed motions for summary judgment. Following

      briefing and a hearing, on September 2, 2016, the trial court granted the

      defendants’ motions. On September 9, 2016, ACI filed a motion to modify the

      order with respect to Timken, requesting that the trial court enter an order of

      full summary judgment in Timken’s favor. The trial court granted the motion.

      ACI now appeals.

      5
          Pratt was dismissed on August 12, 2016, and is not a party to this appeal.

      Court of Appeals of Indiana | Memorandum Decision 10A04-1609-CT-2230 | February 24, 2017   Page 5 of 15
                                   Discussion and Decision
                                     I. Standard of Review
[8]   Our standard of review on summary judgment is well established:

              We review summary judgment de novo, applying the same
              standard as the trial court: “Drawing all reasonable inferences in
              favor of . . . the non-moving parties, summary judgment is
              appropriate ‘if the designated evidentiary matter shows that there
              is no genuine issue as to any material fact and that the moving
              party is entitled to judgment as a matter of law.’” Williams v.
              Tharp, 914 N.E.2d 756, 761 (Ind. 2009) (quoting T.R. 56(C)). “A
              fact is ‘material’ if its resolution would affect the outcome of the
              case, and an issue is ‘genuine’ if a trier of fact is required to
              resolve the parties’ differing accounts of the truth, or if the
              undisputed material facts support conflicting reasonable
              inferences.” Id. (internal citations omitted).

      Hughley v. State, 15 N.E.3d 1000, 1003 (Ind. 2014).

                                               II. Timken
[9]   ACI makes two arguments in support of its contention that the trial court

      should not have granted summary judgment in Timken’s favor: (1) the

      Settlement Agreement supersedes the Timken Agreement, such that the hold

      harmless language in the Timken Agreement no longer has any effect; and

      (2) even if the Timken Agreement still applies, there is an issue of fact

      preventing summary judgment.

      Court of Appeals of Indiana | Memorandum Decision 10A04-1609-CT-2230 | February 24, 2017   Page 6 of 15
                A. The Settlement Agreement vs. The Timken
                                Agreement
[10]   The Timken Agreement contains the following language providing that Timken

       was not responsible for any consequential or incidental damages:

               A.       [ACI] shall be liable for and shall indemnify and hold
                        [Timken] harmless from and against all loss and damages
                        to the Leased Engine, which occurs during [ACI’s]
                        possession or control of the Leased Engine, except for
                        normal wear, and damage to the Leased Engine by reason
                        of [Timken’s] sole negligence. . . .

               B.       [ACI] shall indemnify and hold [Timken] harmless from
                        and against any and all liability, costs, expenses, claims or
                        demands by [ACI] or any third party of any nature,
                        whatsoever, except such liability resulting from [Timken’s]
                        sole negligence. . . .

               C.       As further consideration for this Agreement, it is specifically
                        agreed that [Timken] shall not be liable for any special
                        consequential, incidental or direct damages including but not
                        limited to any damages arising out of loss of use of the property,
                        however occasioned, whether or not resulting from [Timken’s]
                        imputed negligence.

       Timken App. Vol. II p. 56 (emphasis added). The trial court found that this

       language is fatal to ACI’s claims against Timken. With respect to the

       Settlement Agreement, the trial court held as follows:

               [The Arizona Lawsuit] was settle[d] and the parties executed a
               release. That release excepted out [ACI’s] claim[s] that are the
               basis of this current case. The Court believes that [the] release in

       Court of Appeals of Indiana | Memorandum Decision 10A04-1609-CT-2230 | February 24, 2017   Page 7 of 15
               the Arizona case did not void the contractual provisions of the
               lease. The purpose of the Arizona release was to resolve
               Defendant Timken’s claim for money under the lease while at the
               same time allow [ACI] and . . . Timken to litigate the issues
               under the lease concerning the representations and performance
               of the leased engine.

       Appellant’s App. p. 38.

[11]   ACI directs our attention to the parol evidence rule, which provides as follows:

       when a contract contains an integration clause—a written expression of the

       parties’ intent that the contract represents the complete and final agreement

       between them—then any evidence of prior or contemporaneous written

       expressions that would contradict that agreement is inadmissible. Pinnacle Peak

       Developers v. TRW Inv. Corp., 631 P.2d 540, 544-45 (Ariz. 1980). It is also true,

       however, that a court is to give the words of a contract their plain and common

       sense meaning. Aztar Corp. v. U.S. Fire Ins. Co., 224 P.3d 960, 966 (Ariz. 2010).

[12]   The Settlement Agreement’s integration clause reads as follows:

               The [Settlement] Agreement constitutes a single, integrated
               written contract expressing the entire settlement of the Arizona
               Parties with respect to the Timken Alcor Released Claims and for
               the ACI Released Claims. All prior verbal and written
               communications, negotiations, and agreements relating to the
               settlement of those claims are superseded by the Agreement.

       Appellant’s App. p. 115-16. The plain language of this clause clearly indicates

       that it applies solely to the “released claims” covered by the Settlement

       Agreement. Indeed, the Settlement Agreement explicitly exempts the claims

       Court of Appeals of Indiana | Memorandum Decision 10A04-1609-CT-2230 | February 24, 2017   Page 8 of 15
       filed by ACI in the Indiana lawsuit. We simply cannot conclude that the

       Indiana claims “relate to” the settlement of the claims covered by the

       Settlement Agreement. Under these circumstances, we believe that the trial

       court correctly concluded that the Settlement Agreement does not supersede the

       Timken Agreement with respect to the claims at issue in the instant litigation.

                                            B. Issue of Fact
[13]   ACI argues that, even if the original Timken Agreement applies, there is an

       issue of fact rendering summary judgment improper. The plain language of the

       Timken Agreement’s hold harmless provision provides that Timken is not liable

       for any special consequential, incidental, or direct damages, whether or not

       resulting from Timken’s negligence.

[14]   As a general rule, Arizona disfavors contractual provisions by which one party

       seeks to immunize itself against the consequences of its own torts. Salt River

       Project Agric. Improvement and Power Dist. v. Westinghouse Elec. Corp., 694 P.2d
198, 214 (Ariz. 1984), abrogated on other grounds by Phelps v. Firebird Raceway,

       Inc., 111 P.3d 1003 (Ariz. 2005). But absent any public policy to the contrary,

       Arizona allows parties to agree in advance that one party shall not be liable to

       the other for negligence, rationalizing that, despite the general disfavor of such

       provisions, there is no public policy impediment if the parties bargained for the

       limitation. Id. The Salt River Court also noted that there must be a factual

       showing that “the provision was part of the bargaining and negotiating

       process,” and that the parties should be allowed to present evidence on the

       Court of Appeals of Indiana | Memorandum Decision 10A04-1609-CT-2230 | February 24, 2017   Page 9 of 15
       following: “1) the parties’ actual bargaining strength; 2) the existence of any

       bargaining regarding product specifications; and 3) the existence of any actual

       bargaining or negotiation concerning the allocation of risks and limitation of

       liability.” Id. at 215. ACI argues that its claim against Timken survives

       summary judgment because the parties are allowed to present evidence as to

       whether the hold harmless provision in the Timken Agreement was the product

       of an arm’s length negotiation between two similarly situated entities.

[15]   The evidence designated by Timken6 in support of its partial summary

       judgment motion establishes the following:

            Timken and ACI are both commercial entities. Timken App. p. 17.
            ACI engaged in discussions with Timken, as well as other third-party
             overhaul corporations, regarding the overhaul of the Original Engines.
             Id. at 20.
            ACI and Timken engaged in negotiations leading up to the selection of
             Timken by ACI to overhaul the engines. Id. at 21.
            These negotiations took place between ACI and Tony Rossi, an agent of
             Timken. Ken Feltrop, President of ACI, signed the Timken Agreement
             on behalf of ACI. Id. at 57.
            The result of the negotiations was a complex Lease Agreement including
             multiple appendices and spanning four pages. The value of the
             agreement totaled a minimum of $5,000 per month and ACI was
             required to purchase an insurance policy worth $325,000. Id. at 54-57.

       6
        Timken frequently cites to a deposition of the president of ACI in its brief, but this evidence was not timely
       designated to the trial court and we will not consider it herein.

       Court of Appeals of Indiana | Memorandum Decision 10A04-1609-CT-2230 | February 24, 2017          Page 10 of 15
       Nothing in this evidence suggests a lack of meaningful negotiations or a

       disparity in the parties’ bargaining strength and abilities. ACI, a commercial

       entity, sought bids from Timken and its competitors, to perform an extensive

       and complicated engine overhaul. Throughout the process, ACI’s president

       and a representative of Timken were engaged in negotiations. Timken did not

       present ACI with a form contract on a take it or leave it basis; the contract was

       detailed, specific, and initialed by ACI’s president on each page. There is no

       evidence in the record that creates an issue of fact regarding the parties’

       negotiations or their respective bargaining strength. Under these circumstances,

       the trial court did not err by granting summary judgment in Timken’s favor.

                                 III. Honaker and Jet Access
[16]   ACI next argues that the trial court improperly granted summary judgment in

       favor of Honaker and Jet Access. ACI’s primary allegation against Honaker is

       that it negligently performed work on the Aircraft; its primary allegation against

       Jet Access is that it failed in its duty to properly certify the condition of the

       Aircraft and that it knew or should have known that the Aircraft was not in

       airworthy condition and that the engines were on the verge of failure.

[17]   The Jet Access Agreement contains the following indemnification provision:

               [ACI] and [Jet Access] (as applicable, the “Indemnifying Party”)
               shall indemnify and hold harmless each other . . . and all affiliated
               and subsidiary companies and organizations . . . (“Indemnified
               Parties”), except to the extent due to the gross negligence or

       Court of Appeals of Indiana | Memorandum Decision 10A04-1609-CT-2230 | February 24, 2017   Page 11 of 15
                  willful misconduct[7] of such Indemnified Parties, from and
                  against any and all loss, damage, liability, and cost including but
                  not limited to attorneys’ fees and legal costs, arising from damage
                  or destruction of property . . . . which are in any manner
                  whatsoever related to the performance or failure to perform
                  under this Agreement by the Indemnifying Party, and to which
                  the insurance required under Section 9 does not apply. . . .

                  . . . NOTWITHSTANDING ANYTHING IN THIS
                  AGREEMENT TO THE CONTRARY, NEITHER PARTY
                  SHALL BE LIABLE TO THE OTHER PARTY FOR
                  SPECIAL, INCIDENTAL, PUNITIVE OR
                  CONSEQUENTIAL DAMAGES . . . EVEN IF THAT PARTY
                  HAD BEEN ADVISED, KNEW OR SHOULD HAVE
                  KNOWN OF THE POSSIBLITY OF SUCH DAMAGES.

       Appellant’s App. Vol. II p. 94 (capitalization original; italicized emphasis

       added). We can only conclude that the plain language of this agreement means

       that neither Jet Access nor Honaker, as an affiliated entity of Jet Access, are

       liable for the alleged acts of negligence. ACI argues, however, that this

       provision is not enforceable in general or by Honaker.

                A. Enforceability of Indemnification Provision in
                                     General
[18]   First, ACI points out that the original version of the Jet Access Agreement that

       was signed by the parties has been lost. The version of the agreement in the

       record is an unsigned copy of that agreement. ACI argues, therefore, that we

       7
           ACI did not allege gross negligence or willful misconduct against Honaker or Jet Access.

       Court of Appeals of Indiana | Memorandum Decision 10A04-1609-CT-2230 | February 24, 2017       Page 12 of 15
       should not even consider the above indemnification provision. Both Jet Access

       and Honaker, however, designated the affidavit of Shawn Honaker (founder

       and Chief Executive Officer of Jet Access) in support of their summary

       judgment motions; the affidavit states that the version of the Jet Access

       Agreement in the record is “a true, accurate, and complete, unsigned copy of

       the . . . Agreement entered into between Jet Access and ACI.” Joint Appellees’

       App. Vol. II p. 52, 100. ACI designated no evidence whatsoever in its

       opposition to Honaker’s summary judgment motion, nor does it make any

       serious argument that the unsigned version of this document varies in any way

       from the original. Under these circumstances, we can only conclude that the

       unsigned version of the Jet Access Agreement is a true and accurate copy of the

       original agreement. Consequently, the indemnification provision stands.

[19]   Next, ACI argues that the indemnification provision is unenforceable because

       “Kentucky agreements to indemnify against an indemnitee’s own negligence

       are not valid.” Appellant’s Br. p. 12. We disagree, as “Kentucky courts have

       long upheld exculpatory clauses in arm’s length transactions between

       sophisticated parties with equal bargaining power and allowed such parties to

       bargain against liability for their own negligence . . . .” Cumberland Valley

       Contractors, Inc. v. Bell Cnty. Coal Corp., 238 S.W.3d 644, 654 (Ky. 2007). The

       case cited by ACI in support of this contention does not apply here because it

       held an indemnity contract with an uneducated person void under public policy

       due to the person’s inferior bargaining position. Speedway SuperAmerica, LLC v.

       Erwin, 250 S.W.3d 339, 344 (Ky. Ct. App. 2008). In the case before us, on the

       Court of Appeals of Indiana | Memorandum Decision 10A04-1609-CT-2230 | February 24, 2017   Page 13 of 15
       other hand, nothing in the record suggests that this transaction was anything

       other than an arm’s length transaction between sophisticated commercial

       parties with equal bargaining power.

[20]   ACI also seems to suggest, without elaboration, that the indemnification

       provision is unenforceable under the standard announced in Hargis v. Baize, 168
S.W.3d 36, 47 (Ky. 2005). Under Hargis, an exculpatory clause is valid only if:

               (1) it explicitly expresses an intention to exonerate by using the
               word “negligence;” or (2) it clearly and specifically indicates an
               intent to release a party from liability for a personal injury caused
               by that party’s own conduct; or (3) protection against negligence
               is the only reasonable construction of the contract language; or
               (4) the hazard experienced was clearly within the contemplation
               of the provision.

       Id. at 47. The indemnification provision in the Jet Access Agreement explicitly

       confirms an intent on the part of the signatories to be indemnified and held

       harmless for their own negligence; moreover, protection against negligence is

       the only reasonable construction of this contractual language. Consequently,

       Hargis does not prevent enforcement of the indemnification provision in the Jet

       Access Agreement.

                B. Honaker’s Right to Enforce Indemnification
                                 Provision
[21]   It is undisputed that Honaker is an affiliated entity of Jet Access. Id. at 45. It is

       likewise undisputed that Honaker performed the work in question in

       Court of Appeals of Indiana | Memorandum Decision 10A04-1609-CT-2230 | February 24, 2017   Page 14 of 15
       furtherance of the Jet Access Agreement. The plain language of the agreement,

       therefore, means that Honaker is not liable as a matter of law.

[22]   ACI also argues that because Honaker was not named in the Jet Access

       Agreement, it should not be permitted to enforce it. We disagree. ACI’s own

       complaint concedes that Honaker is an affiliated entity of Jet Access.

       Appellant’s App. Vol. II p. 94. Honaker’s designated affidavit likewise

       confirmed that Honaker is affiliated with Jet Access. Joint Appellees’ App.

       Vol. II p. 52, 100. And “affiliated” companies are explicitly protected by the

       indemnification provision. Therefore, Honaker is not a “stranger” to the

       contract and unquestionably has the right to enforce this provision of the Jet

       Access Agreement.8

[23]   In sum, we find that the indemnification provision in the Jet Access Agreement

       clearly states that neither Jet Access nor Honaker are liable for the claims

       alleged by ACI in this litigation. There are no issues of material fact and both

       Jet Access and Honaker are entitled to judgment as a matter of law.

[24]   The judgment of the trial court is affirmed.

       Mathias, J., and Pyle, J., concur.

       8
        ACI also alleges, with no citation to the record, that some of the work that Honaker performed occurred
       before the Jet Access Agreement was signed. With no evidence supporting this argument, it is simply an
       unsupported allegation that does not undercut the trial court’s order.

       Court of Appeals of Indiana | Memorandum Decision 10A04-1609-CT-2230 | February 24, 2017      Page 15 of 15