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City of New York and New York City Transit Authority v. Pullman Inc.

decided: July 29, 1981.

THE CITY OF NEW YORK AND THE NEW YORK CITY TRANSIT AUTHORITY, PLAINTIFFS-APPELLEES,
v.
PULLMAN INCORPORATED, PULLMAN-STANDARD, A DIVISION OF PULLMAN INCORPORATED, AND ROCKWELL INTERNATIONAL CORPORATION, DEFENDANTS-APPELLANTS.



Appeal from a judgment entered on a jury verdict in the Southern District of New York, Edward Weinfeld, District Judge, awarding plaintiffs $72,000,000 for breach of warranty arising from their purchase of 754 subway cars from defendants. Affirmed.

Before Waterman and Timbers, Circuit Judges, and Lasker, District Judge*fn* .

Author: Timbers; Per Curiam

This is the case of a wise and comprehending trial judge whose three decades of experience on the federal bench had a direct bearing upon what we hold to have been correct rulings in this important case tried to a jury in November and December 1980.

The City of New York and The New York City Transit Authority (appellees) commenced this action*fn1 to recover from Pullman Incorporated, Pullman-Standard, a division of Pullman Incorporated, and Rockwell International Corporation (appellants) for breach of warranty arising from Pullman's sale of 754 subway cars to appellees.

At the conclusion of a five and one-half week trial, Edward Weinfeld, District Judge, the jury awarded $72 million in damages to appellees. From the amended judgment entered on that verdict on January 6, 1981, and the district court's order denying appellants' motion for a new trial or for judgment n.o.v., this appeal was taken.

We find that the principal questions presented on appeal are:

(1) Whether an interim report by the staff of the Urban Mass Transit Administration was properly excluded as hearsay. We hold that it was.

(2) Whether the district court properly instructed the jury regarding the measure of damages for breach of warranty. We hold that it did.

Other claims of error raised by appellants have been fully considered.

We affirm the judgment and order of the district court for the reasons stated below.

I. FACTS

On August 30, 1972, Pullman Incorporated and its division Pullman-Standard (together referred to as Pullman) contracted to sell 754 "R-46" subway cars to The New York City Transit Authority, acting for The City of New York. The total contract price was approximately $210 million. Rockwell International Corporation (Rockwell), under a subcontract with Pullman, agreed to design and manufacture 1,548 undercarriages or "trucks" for the R-46 cars at a subcontract price of about $20 million. The first of the R-46 cars was delivered to the City for testing in March 1975. Following the completion of on-line tests, deliveries continued until December 1978. By that time all 754 cars were in appellees' possession.

The R-46 cars were radically different from any subway cars which previously had been used in New York City. "Standard" cars, which had been purchased by the Transit Authority exclusively before the R-46 contract, had a coil-spring suspension and sat on a rigid single-frame steel casting which served as the undercarriage of each car. The R-46 had under each car a rubber primary suspension and an air bag secondary suspension, as well as a two piece frame, or dual, undercarriage.

Each undercarriage on the R-46 car had a cross-piece, or transom arm, which supported a 1700 pound motor. On March 27, 1977, a transom arm on the undercarriage of one of the R-46 cars in service fractured, causing the 1700 pound motor it supported to fall through upon the axle. Between March 1977 and the beginning of the trial of the instant case, periodic inspections disclosed potentially hazardous cracked transom arms on approximately 1000 of the 1548 undercarriages provided under the R-46 contract. One hundred of those undercarriages had to be scrapped. Those R-46 cars which are still operating have remained in service through a program of periodic inspections and spot-welding of cracks.

Pullman and Rockwell do not challenge on appeal the jury's essential finding that they were jointly liable for the failure of the R-46 cars.*fn2 According to the uncontroverted evidence, Rockwell designed the R-46 cars to withstand an average stress of 2.5g's, or 2.5 times the weight of the motor, when the cars were in service. When tested, the transom arms safely withstood up to 7g's. Once the subway cars were in use, however, the transom arms in fact were regularly subject to stresses of up to 18 times the weight of the motor-far more than the transom arms safely could withstand on a regular basis. The transom arms therefore cracked. Appellees claimed at trial that the unique suspension system and dual undercarriage design employed in the R-46 cars simply were unsuited for the actual use of the cars because they caused excessive vibration. They also claimed that other design, manufacture and testing flaws contributed to the serious cracking problem.

Soon after this problem developed, appellants designed a system for repairing the R-46 cars, referred to as a "retrofit". Appellants proposed in this way to correct the defects in the cars. The proposal essentially amounted to replacing the rubber suspension on the R-46 trucks with a coil-spring suspension similar to that used in standard undercarriages. Rockwell's testing of the retrofit design showed that the coil-spring suspension would reduce the peak stress on the transom arms to 7.5g's and would reduce the average stress on the transom arms to acceptable levels.

Appellants declined, however, to conduct additional testing requested by appellees to determine what effect the retrofit would have on other parts of the cars. Appellants asserted that the tests would be "irrelevant." Experts employed by the Transit Authority concluded that the retrofit would put stresses on untested parts of the cars that were not designed to take heavy loads and would not solve what they considered to be the fundamental problem, namely, that the dual undercarriage structure of the R-46 cars caused the cars to vibrate excessively and to crack. Appellees still claim that the retrofit would solve the R-46 safety problems. On May 1, 1979, the Transit Authority Board of Directors rejected the retrofit proposal as unsafe.

The instant action for breach of warrant by appellees against appellants was ...


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