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Breaking Legal Developments

11-11-2002

Published by:
Peter A. Lynch, Esq.
of Cozen O'Connor
palynch@cozen.com
http://www.cozen.com

 

EXECUTIVE SUMMARY:      This weekly newsletter covers:

  1. 1ST Cir. Upholds Verdict Based on Visual Inspection of Expert on Cause of Defect


(1) 1ST CIR. UPHOLDS VERDICT BASED ON VISUAL INSPECTION OF EXPERT ON CAUSE OF DEFECT

In Correa v. Cruisers (1st Cir. 2002), No. 011240, Defendants-appellants, Cruisers, a Division of KCS International, Inc., and Thermo Power Corporation, appeal from a jury verdict finding that they breached a warranty against hidden defects in the sale of a motorboat to plaintiffs. In accordance with the jury's verdict, the United States District Court for the District of Puerto Rico ordered rescission of the sales contract and return of the purchase price of the boat, plus interest. In addition, the jury awarded to the plaintiffs their costs for dockage, repair and maintenance, insurance premiums, and license fees. The district court further awarded attorney's fees based on its determination that defendants acted obstinately in the course of the litigation. On appeal, defendants-appellants contended that even if the claim was properly before the district court, the district court erred in allowing the testimony of plaintiffs' expert. The court affirmed in part and reversed in part, remanding the case for action consistent with the opinion.

On March 22, 1995, plaintiffs-appellees ("plaintiffs"), Arturo Correa ("Correa") and his wife Melissa Correa, purchased a 1995 Cruisers 3570-Esprit motor yacht ("yacht" or "boat") in San Juan, Puerto Rico from People's Marine. The yacht, manufactured by Cruisers, a Division of KCS International, Inc. ("Cruisers"), was equipped with two Crusader, model 454Xli, marine gasoline engines, manufactured by Thermo Power Corporation ("Crusader"). The plaintiffs paid $132,350 for the boat, which was delivered to them at the San Juan Bay Marina on June 11, 1995.

Pursuant to the sale of the yacht, both Cruisers and Crusader issued limited warranties, guaranteeing to repair or replace, free of charge, any defects in their respective products. Cruisers' warranty provided five years of coverage for the hull of the boat and one year for all other items manufactured by Cruisers. Crusader's warranty covered the engines for two years.

In the two months after the plaintiffs received their boat, they took several excursions to Fajardo, Puerto Rico and to the U.S. Virgin Islands. On these outings, plaintiffs experienced problems with the engines, including backfiring, stalling, and an inability to start. On July 26, 1995, Correa wrote a letter of complaint to Cruisers, with a copy to People's Marine, describing the problems that plaintiffs had encountered with the boat, including engine troubles.

Correa, in August of 1995, made further complaints to People's Marine about "hard starting" of the engines, meaning that the engines would not restart immediately after they had been running for awhile and were then shut off. Crusader was familiar with "hard starting" as a common symptom of "vapor lock," which other manufacturers had been experiencing in the summer of 1995 due to a new fuel pump in Crusader engines. Crusader had found that the installation of additional fuel booster pumps had solved the hard starting problem. Accordingly, it ordered two booster pumps, which were installed on plaintiffs' yacht by People's Marine sometime during September of 1995.

After the booster pumps were installed, the Correas continued to experience engine problems. On September 25, 1995, Correa wrote another letter to Cruisers, explaining that the engines were stalling and backfiring. In this letter, Correa informed Cruisers that he had already alerted People's Marine of the continuing problem.

On October 21, 1995, Crusader sent Paul Doppke, a certified Crusader marine engine specialist, to Puerto Rico to examine Correa's engines. Doppke found that the booster pumps had been misinstalled by People's Marine, which explained the continuing engine problems. Doppke removed the booster pumps and instead installed a new fuel delivery system that Crusader had found to eliminate the vapor lock problem. Doppke, with Correa aboard the yacht, then conducted a sea trial and performed diagnostic tests to determine how the engines were running. During the sea trial, which lasted over four hours, the engines ran without any difficulties.

During the trial, there was evidence that after the installation of the new fuel delivery system Correa took his boat out to watch an offshore race in San Juan Bay and experienced engine problems. On November 10, 1995, Correa again contacted Cruisers to alert the company. That same day, following the telephone conversation, Correa sent a letter indicating that he expected Cruisers and Crusader to fix his engines and Cruisers to repair the other problems with the boat, including, inter alia, leaks, a rusting ice-maker door, defective wipers, and a broken gas alarm, that had plagued him since the time of delivery or shortly thereafter.

In response to Correa's complaints, Cruisers and Crusader sent a team of their top management and technical personnel to Puerto Rico to inspect Correa's yacht. This team included Gerald Scott, Vice President and General Manager of Crusader; Jim Viestenz, President of Cruisers; Jim Hayes, Customer Service and Quality Control Manager for Cruisers; Andrew Prietz, Customer Service Manager for Crusader; Guillermo Cidre, owner of People's Marine; and Osmani del Pino, a mechanic employed by People's Marine. The Crusader and Cruisers representatives, along with Correa, took the boat out for a sea trial. The group experienced no noticeable engine problems. In addition, computer monitoring of the engines indicated that the engines were functioning properly. Prior to leaving, Gerald Scott asked Correa to call him directly if Correa experienced further engine problems so that he could ensure that Crusader would fix or replace the engines.

Immediately after this inspection visit, on December 6, 1995, Cruisers wrote to Correa to summarize the repairs and replacements that, pursuant to the inspection, would be made under warranty by People's Marine. On December 11, 1995, Crusader wrote to Correa, reassuring him that the engines were running properly according to the inspection, but suggesting that the propellers be repitched. After People's Marine had performed at least some of the prescribed replacements and repairs, Correa wrote another letter to Cruisers on December 26, 1995, detailing repairs that had not been completed by People's Marine and further repairs or replacements that were required. In this letter, Correa also advised Cruisers that People's Marine, in conducting the repairs, had noted that the engine water hoses were blistered and filled with water. In response, on January 12, 1996, Cruisers notified Correa that new water hoses were being sent to People's Marine for installation. There was testimony at trial that the boat would have been unusable until the water hoses were replaced because there was a danger of the boat sinking. Sometime after January 12, 1996, People's Marine did replace the engine water hoses, although it is unclear exactly when. Correa testified that the hoses were replaced in March or April of 1996.

At trial, there was testimony that Correa used his boat again in either January or February of 1996 to travel to Palomino Island, off the coast of Fajardo. There is a factual dispute as to whether Correa suffered engine problems during this venture. If Correa did experience problems during this trip, there was no evidence presented at trial that Correa made any further complaints to Cruisers, Crusader, or People's Marine. The evidence was also unclear as to whether this trip to Palomino Island occurred before or after the engine hoses were replaced.

The plaintiffs did not use their boat again until June of 1996. At this time they encountered engine problems while traveling to the U.S. Virgin Islands. On June 18, 1996, Correa again wrote to Cruisers detailing necessary repairs and service that had previously been communicated to Cruisers and/or People's Marine, but had not yet been completed. This letter, however, did not mention any problems with the engines. People's Marine responded on June 19, indicating that they had been trying to contact Correa to arrange a time to perform the necessary warranty service.

In August of 1996, Correa made further complaints to Guillermo Cidre of People's Marine about the engines and discussed the possibility of trading in his boat for a Cruisers 4270 (a higher-end model of motor yacht). On August 20, 1996, Correa wrote a letter to People's Marine memorializing his dissatisfaction with his yacht due to its engine problems. Correa also indicated in this letter that he would accept a Cruisers 4270 in exchange for his boat as compensation and settlement for his difficulties, as long as such settlement was confirmed by August 30, 1996. Correa sent a copy of this letter to Crusader and Cruisers on August 22, 1996.

Cruisers answered Correa's letter on September 9, 1996. Cruisers responded that it wanted another opportunity to inspect and repair Correa's boat, but that if a defect were found, Cruisers, Crusader, and People's Marine would allow Correa to trade-in his boat, valued at the full purchase price, in partial satisfaction towards a new Cruisers 4270, which would be sold to Correa at a discount of $63,831 from the normal retail price. Under this offer, the cost to Correa for the Cruisers 4270 would be $195,150 after the inclusion of the trade-in value and discount. Plaintiffs rejected this offer on September 26, 1996. Crusader, on October 9, 1996, also responded to Correa's September 9 letter and indicated that it was willing to perform warranty service on the engines, if needed, but that this required an inspection of the engines. Plaintiffs refused Crusader access to the boat.

On January 27, 1997, plaintiffs filed their complaint against Cruisers and Crusader in the District Court for the District of Puerto Rico, seeking rescission of the sales contract and damages for breach of warranty against hidden defects. At the end of plaintiffs' evidence, Cruisers and Crusader moved for judgment as a matter of law, claiming that the breach of warranty claim was barred by the statute of limitations. The district court denied the motion. The defendants, to no avail, renewed this argument at the close of all evidence. After an eight-day trial in March of 2000, the jury returned a verdict for the plaintiffs, finding both defendants liable for breach of warranty. Plaintiffs were granted rescission of the contract and were ordered to return the Cruisers 3570 Esprit boat to the defendants. The jury ordered the defendants to return the $132,350 purchase price of the boat, plus interest, and to reimburse plaintiffs for dockage fees of $14,980.38, maintenance and repair expenses of $3,350.28, insurance premiums of $13,326.00, and license fees of $1,164.95. Judgment was entered on March 23, 2000.

On appeal, defendants-appellants argued that the district court committed error because: the testimony of plaintiffs' expert should have been excluded.

Appellants asserted that even if plaintiffs' breach of warranty claim was properly before the court, the district court erred in allowing the testimony of plaintiffs' expert witness, Ramón Echeandía. In essence, plaintiffs' expert opined that the engines' fuel management system was defective, as evidenced by excessive smoke during their operation and sooty spark plugs, thereby causing engine stalling and backfiring. Appellants contended that the expert's testimony should have been excluded because he was not qualified, relied on a defective methodology, and gave irrelevant testimony.

Federal Rule of Evidence 702 imposes an important gatekeeper function on judges by requiring them to ensure that three requirements are met before admitting expert testimony: (1) the expert is qualified to testify by knowledge, skill, experience, training, or education; (2) the testimony concerns scientific, technical, or other specialized knowledge; and (3) the testimony is such that it will assist the trier of fact in understanding or determining a fact in issue. See Fed. R. Evid. 702; Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579> , 589, 592 (1993) (discussing trial judge's role in screening scientific expert testimony for reliability and relevancy); see also Kumho Tire Co. v. Carmichael, 526 U.S. 137, 141 (1999) (extending Daubert's gatekeeping obligation to technical and other specialized expert testimony); Diefenbach, 229 F.3d at 30 (setting forth three requirements of Rule 702).

At trial, defendants objected to the proffered testimony of Echeandía on three grounds. Defendants contended that Echeandía could not properly be qualified as an expert because he lacked education, training, and experience with fuel management systems, including marine systems. Second, defendants asserted that the expert's methodology was unreliable because he did not use any instruments to inspect the engines. Further, defendants argued that his proffered testimony was irrelevant because it related to fuel mismanagement rather than to engine stalling or backfiring. In response to these objections, the district court conducted an extensive voir dire as to Echeandía's qualifications and opinion. Upon conclusion of the voir dire, the district court found that Echeandía was qualified as an expert "in light of his experience."

Echeandía testified that he holds a bachelor's degree in mechanical engineering from the Mayagüez Agricultural College of the University of Puerto Rico. He obtained an engineering license after passing a qualifying exam given by the government of Puerto Rico and the College of Engineers.

In addition to his education, Echeandía testified as to his mechanical engineering experience, particularly as it corresponds to engine repair. He worked for the Puerto Rican Cement Company for five years, where he performed maintenance on heavy equipment, including work on Caterpillar, GM, Diesel, Wisconsin, Pearce, and Perkins engines. Echeandía then moved to Sea Train Line Container Division, where he worked for six years as maintenance engineer for all of the company's equipment, which included tractors, trailers, vans, diesel generators for refrigeration units, Johnson outboard motors, and Chevrolet and Ford engines. He also assisted the chief engineer with repair of auxiliary engines on vessels.

Echeandía then worked for approximately three years at Orbital de Puerto Rico, performing mechanical maintenance on gasoline and diesel engines. After his stint at Orbital, he bought Miami Rebuilders of Models, Inc., where he overhauled automobile engines, diesel engines, and marine engines for about three years. His work on specific marine engines included, inter alia, the rebuilding of approximately fifteen 454 Chevrolet ("Chevy") carburetor engines and twenty marine diesel engines. He then opened an automobile repair shop, in which he has been repairing fuel injection engines for more than twenty years. Echeandía was also able to explain to the court how a marine fuel injection engine differs from an automobile fuel injection engine.

Based upon these qualifications, the court of appeals found no abuse of discretion in the district court's decision to qualify Echeandí> a as an expert in mechanical engineering of engines based on his experience. Rule 702 permits qualification of an expert based on knowledge, skill, experience, training, or education. See Tokio Marine & Fire Ins. Co. v. Grove Mfg. Co., 958 F.2d 1169, 1175 (1st Cir. 1992) (citing United States v. Paiva, 892 F.2d 148, 160 (1st Cir. 1989)). Although plaintiffs' expert might not have qualified as an expert based solely on his educational background in marine engines, his experience repairing various marine and fuel-injection engines for over twenty years provided a basis for the district court to find him qualified to opine on the function of plaintiffs' marine engines. Thus, the court did not disturb the district court's qualification determination. See Diefenbach, 229 F.3d at 30 (noting that trial court has "broad discretionary powers" in qualification of experts and that court's decision will be affirmed unless there is clear error); United States v. Hoffman, 832 F.2d 1299, 1310 (1st Cir> . 1987) (same).

As for the expert's methodology, the district court had plaintiffs' expert describe how he arrived at his opinion regarding Correa's engines. Echeandía testified during voir dire that when he arrived to inspect the boat, Correa opened the engine hatches, and Echeandía made a visual inspection. Echeandía then stood next to the engines while Correa started the engines. Plaintiffs' expert attested to an excessive amount of smoke coming from the engines, indicating to him a bad fuel system. Echeandía testified that it is important for an engine to have the right proportions of gasoline and air flowing into it, otherwise the engine will not burn properly and the spark plugs will "foul up." A "fouled up" spark plug, according to Echeandía, can cause engine backfiring or problems starting the engine. After warming up the engines, Correa and Echeandía took the boat out for a test. After their return, Echeandía removed a spark plug from the engines and noted it was blackened from soot, rather than clean, as it should be in a properly functioning engine.

Defendants objected to Echeandía's methodology, complaining that a visual inspection, accompanied by removal of a spark plug, was insufficient to be reliable. Specifically, defendants noted that Echeandía did not use any instruments or gauges to determine whether Correa's engines were functioning properly. Nor did plaintiffs offer any evidence to show that this type of cursory examination is an accepted or recognized methodology for diagnosing marine engine problems.

The district court, however, accepted Echeandía's methodology as reliable. In reviewing the reliability of proffered expert testimony, the trial court conducts a "flexible inquiry," which includes consideration of "the verifiability of the expert's theory or technique, the error rate inherent therein, whether the theory or technique has been published and/or subjected to peer review, and its level of acceptance within the scientific community." Ruiz-Troche v. Pepsi Cola of P.R. Bottling Co., 161 F.3d 77, 81 (1st Cir. 1998). Acceptance of the methodology by the other party's expert may give additional credence to the reliability of the proffered testimony. See id. at 84 (opining that plaintiff's expert, who used the same scientific technique as defendant's expert, added validation to methodology of defendant's expert).

Although plaintiffs did not offer any evidence that Echeandía's visual inspection of the engines was a well-accepted method of diagnosing the existence of engine or fuel management problems, the court of appeals found it to be a matter of common sense that a visual inspection, including observation of excessive smoke and "fouled up" spark plugs, would be one acceptable way for a mechanic or engineer to detect an engine problem. Moreover, one of Crusader's experts, Andrew Prietz, offered support for Echeandía's methodology by acknowledging that a sooty spark plug is a sign of fuel mismanagement, which can cause stalling and shutting off of the engine. Taking into account the "flexible inquiry" that a district court conducts, the court of appeals could not say that the court committed "meaningful error" in admitting Echeandía's testimony. See Ruiz-Troche, 161 F.3d at 83 (stating that district court's reliability determination will only be reversed when there is a "'meaningful error in judgment'") (quoting Anderson v. Cryovac, Inc., 862 F.2d 910, 923 (1st Cir. 1988)).

Appellants further claim that Echeandía's testimony should have been excluded because it was irrelevant. The relevancy inquiry under Rule 702 focuses on whether the expert testimony "likely would assist the trier of fact to understand or determine a fact in issue." Id. at 81 (discussing "special relevancy" requirement of Rule 702). Appellants claim that Echeandí> a's testimony is irrelevant because it relates only to smoke and sooty spark plugs (i.e., the fuel management system), rather than to an engine stalling or starting problem, which is the alleged defect. The district court disagreed, however, and ruled > that the expert testimony was relevant. Because Echeandía explained that the excess smoke and "fouled up" spark plugs could cause engine backfiring or stalling, the court of appeals agreed with the district court that his testimony was relevant as to whether or not the engines were defective. Thus, there was no abuse of discretion in admitting the expert testimony.

Mr. Lynch can be reached at Cozen and O'Connor, 501 West Broadway, Suite 1610, San Diego, California 92101, 800-782-3366 (voice), 619-234-7831 (fax), palynch@cozen.com (e-mail), http://www.cozen.com. Follow us on Twitter at @firesandrain.

Please direct comments, suggestions, stories, and other items to the author by e-mail at palynch@cozen.com

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