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GREGORY v. GARRETT CORP.

December 16, 1983

GWENDOLYN L. GREGORY, Executrix under the Will of JOSEPH MORGAN GREGORY, Deceased, Plaintiffs, against THE GARRETT CORPORATION, COLT ELECTRONICS CO., INC., PHOENIX AEROSPACE, INC., and LOCKHEED CORP., Defendants; THE GARRETT CORPORATION and LOCKHEED CORPORATION, Third-Party Plaintiffs, against TEXASGULF, INC. and TEXASGULF AVIATION, INC., Third-Party Defendants.


The opinion of the court was delivered by: GOETTEL

GOETTEL, D.J.:

Presented is a motion for summary judgment that requires the Court to decide very close issues concerning the scope of an employer's immunity from suit under the workers' compensation statutes of New York, Connecticut, and North Carolina. Before those issues can be precisely formulated, however, the complexity of this case requires a fairly detailed accounting of its underlying facts.

 FACTS

 As has been true of a number of earlier cases involving airplane crashes, this one has grown into a formidable jungle of litigation. There are twenty-one related actions involving numerous direct claims, third-party claims, expert witnesses, requests for discovery, and motions, all springing from a simple but tragic event -- an airplane accident that resulted in the death of all persons aboard the aircraft. Those caught up in the litigation include the decedents' families, estates, and employers, as well as the owner and operator of the aircraft, the United States government, and all those corporations that were in any way involved in the design, manufacture, sale, installation, maintenance, or inspection of the critical aircraft components whose failure may have caused, at least in part, the aircraft to crash.

 The crash itself occurred at 6:40 p.m. on February 11, 1981, as corporate aircraft N520S, a Lockheed 731 JetStar owned and operated by TexasGulf Aviation, Inc. ("TGA"), approached for a landing at the Westchester County Airport, which lies just north of White Plains, New York. Of the eight persons who died when the JetStar crashed, two were members of its flight crew and six were employees of TexasGulf, Inc. ("TG"), the parent corporation and 100% shareholder of TGA. More specifically, those on board and their corporate affiliations were as follows: Passengers Dr. Charle F. Fogarty Chairman of the Board and Chief Executive Officer of TG Chairman of the Board of TGA Gordon N. McKee, Jr. Vice President and Treasurer of TG Vice President and Treasurer of TGA Robert J. Boyle Vice President of TG Clarence E. Drew Manager of Corporate Communi- cations at TG Frank J. Claydon, Jr. Vice President of TG Albert D. Woodling Accoaunting Superintendent of TG Flight Crew J. Morgan Gregory President and Director of TGA Shanley S. Sorenson Pilot for TGA

 Of the six passengers, four (Fogarty, McKee, Boyle, and Drew) were residents of Connecticut and worked for TG in Stamford, Connecticut. The other two passengers (Claydon and Woodling) were residents of North Carolina and worked at a TG office located there. TG is a major mining and mineral exploration company incorporated in Texas and maintaining its principal place of business in Stamford, Connecticut.

 The two flight crew members were also residents of Connecticut but worked at TGA's headquarters at the Westchester County Airport in New York. Originally a department of TG, TGA in 1973 was spun off as a subsidiary and incorporated in New York to enable TG to continue to maintain a fleet of readily available corporate aircraft yet still meet the ownership requirements of the Federal Aviation Agency (the "FAA"). *fn1"

 All eight of the decedents had been receiving their paychecks directly from TG, and all eight were covered by a workers' compensation insurance policy issued to TG and certain of TG's subsidiaries. Thus, as soon as the insurer verified that the crash had occurred during the course of the eight individuals' employment as they were returning from a business trip to Toronto, Ontario, approval was given for their surviving spouses (the "survivors") *fn2" to receive workers' compensation benefits in accordance with the terms of TG's insurance policy. The survivors of the six Connecticut residents accepted benefits under the terms of Connecticut's Workers' Compensation Act, while the two survivors of the North Carolina residents accepted benefits under the terms of North Carolina's Workers' Compensation Act.

 Not surprisingly, though, the fairly minimal benefits provided under the relevant workers' compensation statutes were hardly enough to match the income that the survivors had been accustomed to receiving while the employees were alive and earning considerable salaries. *fn3" However, under the applicable statutory provisions, TG as the passengers' employer was, and is, immune from any additional direct liability to the survivors. See Conn. Gen. Stat. Ann. § 31-284(a) (1972); N.C. Gen. Stat. § 97-10.1 (1979). Hence, the survivors had to look to other entities if they were to recover any further compensation for the losses they had suffered.

 Initially, the survivors followed the lead of TG and TGA, which had brought sui against a number of parties whose services and products were alleged to have caused the accident and thereby TGA's loss of the JetStar. See TexasGulf, Inc. v. Colt Electronics Co., No. 81 Civ. 7147 (S.D.N.Y. filed Nov. 17, 1981). *fn4" The theory of that pending action is that all those who were connected with the design, manufacture, sale, installation, and inspection of the JetStar's solid-state generator control units ("GCU's") are liable to TGA and TG for the loss of the aircraft because the GCU's failed to perform as specified on the night of the crash. Adopting a similar theory, the survivors filed a number of actions against the same five defendants involved in TGA's suit, namely: (1) Lockheed Corporation ("Lockheed"), which designed and manufactured the JetStar; (2) Phoenix Aerospace, Inc. ("Phoenix"), which designed and manufactured the GCU's that were installed in the Jet Star and were in use on the night of the crash; (3) Colt Electronics Co. ("Colt"), which adapted the GCU's for the JetStar and sold them to TGA; (4) The Garrett Corporation ("Garrett"), whose division, A Research Aviation Company, located in Islip, New York, installed the GCU's on the aircraft; and (5) the United States (through the FAA), which approved Colt's application for a Supplemental Type Certificate covering the modification of the JetStar's electrical system and the installation of the GCU's into the aircraft, and which is responsible for the conduct of the air traffic controllers who were in communication with the Jetstar on the night of the crash. *fn5"

 These defendant's have, in turn, impleaded TG and TGA as third-party defendants on the theory that the crash was actually caused by the negligence of the flight and maintenance personnel working out of TGA's office and hangar at the Westchester Airport. The five defendants seek contribution from TG and TGA for any liability that is actually found to be attributable to the latter two parties. *fn6" In addition, the survivors of four of the passengers have brought wrongful death actions directly against TGA on the theory that the workers' compensation immunity that admittedly protects TG, the parent corporation, does not extend to its subsidiary, TGA. *fn7"

 In the instant motion for summary judgment, TG and TGA seek dismissal of both the third-party claims and the direct claims. With respect to the third-party claims, TG and TGA put forth a two-part argument, both parts of which are essential to their motion. First, they argue that the issue of whether the third-party claims for contribution can be brought against TG as the employer is to be decided under the laws of Connecticut and North Carolina, and those laws clearly prohibit such claims. Second, TG and TGA argue that this immunity from contribution claims extends not only to TG but also to TGA, because the flight and maintenance crews and the passengers were co-employees, all in the employment of TG, and because TG and TGA must be considered as a single corporate entity. Garrett and the other defendants dispute both parts of TG's and TGA's argument. First, Garrett contends that New York law governs the issue of contribution and that New York's law clearly permits contribution claims in the workers' compensation context. Second, Garrett argues that even if Connecticut and North Carolina law were to apply, the scope of immunity under those states' laws would cover only TG and not TGA, because the two are separate corporate entities and TG is the sole employer of the passengers while TGA is the sole employer of the flight and maintenance crews.

 As for the claims of the four survivors who are suing TGA directly, TGA moves for summary judgment on the same grounds, i.e., that the laws of Connecticut and North Carolina apply and that TGA as well as TG is immune from suit under those laws. While all but one of the plaintiffs agree that Connecticut's and North Carolina's laws apply, they disagree with TGA as to the scope of immunity provided under those laws. Their contention is that TGA is not immune from suit by the passengers because, as a separate corporate entity, the owner and operator of the JetStar, and the sole employer of the flight and maintenance crews, TGA cannot be considered the alter ego of TG and its crew members cannot be treated as co-employees of the passengers.

 Having carefully reviewed the above arguments of the parties, the Court concludes for reasons set forth below that TG's and TGA's motion for summary judgment must be denied with respect to both the third-party claims and the direct claims, and that a full evidentiary hearing on the factual issues discussed below should be held as soon as possible.

 DISCUSSION

 The Court first considers the issues raised with respect to the actions involving third-party claims for contribution and then turns to the issues raised with respect to the plaintiffs direct suits against TGA.

 I. The Immunity Defense of TG and TGA With Respect to the Third-Party Claims of the Defendants

 With respect to the third-party claims, the initial issue is a conflict of laws question. All of the parties more or less agree upon what the law of each state is. *fn8" They also agree that if the Court determines that the law to be applied is that of New York, then there is no need to consider the second critical issue, that concerning the nature of the interrelationship of TG, TGA, and the flight and maintenance personnel. In other words, only if the Court finds that the law of Connecticut or North Carolina should be applied will it have to determine whether any immunity accorded TG also ...


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