Mixed results for Textron in engine-failure suit

HOUSTON – A Texas appeals court has upheld key components of a 2005 jury verdict against the Lycoming engines division of Providence-based Textron Inc. (NYSE: TXT), but has set aside the lower court’s order that the company pay $96 million in damages to Interstate Southwest Ltd. of Navasota, Texas.
The case revolved around a reported 24 failures and 12 deaths, between 2000 and 2002, in Cessnas, Pipers and other small airplanes equipped with Lycoming engines that failed when the planes’ crankshafts broke in flight.
Interstate Southwest had supplied Lycoming with the crankshaft forgings for those engines. Lycoming blamed Interstate for the engine failures, but the other company’s legal team contended that testing showed the problem was Lycoming’s own crankshaft design.
The jury in the original lawsuit agreed, and also held that Lycoming had committed fraud against Interstate Southwest; it awarded Interstate nearly $10 million in actual and $86 in exemplary damages. The decision in that trial, signed by the judge on March 29, 2005, also effectively nullified a $173 million counterclaim from Lycoming.
The 14th Court of Appeals in Houston last week partially affirmed the verdict of the Grimes County jury. It agreed that the crankshaft failures were caused solely by a defect in the Lycoming design, and it affirmed the trial court’s conclusion that the contract provision under which Lycoming had sought damages was unenforceable under either Texas or Pennsylvania law.
But the appellate court also set aside the award of damages against Lycoming, ruling that “the affiliate [Interstate] has standing to assert the claims at issue, but the evidence is legally insufficient to support the actual damages awarded.”
(The full appeals court ruling in “Avco Corp., Textron Lycoming Reciprocating Engine Division of Avco Corp. v. Interstate Southwest Ltd.” (Case No. 14-05-00860-CV) can be viewed online at www.14thcoa.courts.state.tx.us.)
The decision was heralded as a victory by both companies. “The important thing to remember is that we defeated Lycoming’s $173 million claim, and that’s still true,” Interstate Southwest’s lead counsel in the case, Marty Rose of Dallas-based Rose-Walker LLP, said in a statement. “And it’s still true that the jury found Lycoming committed fraud.”
But Textron spokeswoman Kimberly R. Reingold had a different viewpoint, telling Providence Business News in an e-mail interview today: “Lycoming is very pleased that the court of appeals has reversed and rejected all of ISW’s claims for damages in this action and has made clear that Lycoming is free to pursue its claims for damages against ISW and IFI.”
Textron Inc. (NYSE: TXT) is an $11 billion company employing 40,000 people in 32 countries. Its brands include Bell Helicopter, Cessna Aircraft, Jacobsen, Kautex, Lycoming, E-Z-GO and Greenlee, among others. Additional information is available at www.textron.com.