Unpublished Disposition, 914 F.2d 261 (9th Cir. 1984)

MEMORANDUM^** 

Bell Helicopter Textron ("Bell") appeals the district court's judgment after a jury trial in favor of Tubesales in Bell's action for damages and indemnity. Bell sought to recover losses sustained and costs incurred in defending and settling three consolidated actions, brought in state court is Louisiana (the "Louisiana Litigation"), arising out of a crash of a helicopter containing Bell parts.

The district court had jurisdiction pursuant to 28 U.S.C. § 1332. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm.

Bell is a Texas corporation that manufactures helicopters. On May 28, 1982, Mr. Mays' family, Lloyds Underwriters, and Chem-Air (the owner of the helicopter) sued Bell in state court in Louisiana after Mr. Mays was killed in a helicopter crash. The first two suits were settled. The judge determined in the Chem-Air portion of the Louisiana Litigation that the accident was caused by defective tubing. As a result of that lawsuit, Bell paid out $1,578,424.50 in settlements, judgments, attorney's fees, and costs.

Tubesales is a Pennsylvania and California corporation that manufactures tubing. Tubesales had sold some "seamless 4130" tubing to Vard, who used it to manufacture a helicopter tail rotor driveshaft assembly which was sold to Bell. Bell then sold it to Texas Helicopter Corporation as a component of a tail rotor drive shaft replacement kit, who sold it to Campbell & Ward, who installed it on the Chem-Air helicopter that Mr. Mays was flying when he died.

On August 14, 1984, Bell sued Tubesales in the Central District of California seeking indemnity. Bell moved for summary judgment on the theory that they had vouched-in Tubesales by tendering the defense of the Louisiana Litigation to them, thus binding them to that judgment. The district judge refused to grant summary judgment to Bell after determining that Cal.Comm.Code Sec. 2607(5) (a) displaced the common-law doctrine of vouching-in, and that section did not apply to Bell and Tubesales because they are not in privity. The district court later reconsidered the latter part of the above ruling, and determined that privity was not required under the Cal.Comm.Code. The court finally granted partial summary judgment to Tubesales, holding that Tubesales was not bound to the Louisiana Litigation because Bell failed to comply with the notice requirements of Cal.Comm.Code Sec. 2607(5) (a). Tubesales defense at trial was that the drive shaft failed not because of any longitudinal seam in the tubing but because of corrosion-induced fatigue resulting from vulnerability to corrosion of the Bell-designed drive shaft assembly. The jury rendered a judgment for Tubesales.

Bell contends that the district court erred when it determined that (1) Cal.Com.Code Sec. 2607(5) (a) displaced the common-law doctrine of vouching-in, and (2) that section applies to parties not in privity but did not bind Tubesales to the Louisiana Litigation because Bell failed to meet the notice requirements of that section. We review de novo the district court's orders denying Bell's motion for summary judgment and granting Tubesales' partial summary judgment on vouching-in, to determine whether any genuine issue of material fact remains for trial and whether the substantive law was correctly applied. Ashton v. Cory, 780 F.2d 816, 818 (9th Cir. 1986). A district court's interpretation of state law is also reviewed de novo. Matter of McLinn, 739 F.2d 1395, 1397 (9th Cir. 1984) (en banc).

In its letter of May 21, 1982, Bell informed the president of Tubesales of the Louisiana Litigation and of the allegation that the accident resulted from a defective tube manufactured by Tubesales. This letter went on to state that "we are tendering the defense of Bell Helicopter Textron in this litigation to you." In Bell's second letter to Tubesales' insurance company, Bell states that "it is entitled to indemnity from the persons who supplied it with the tube and the people who manufactured the tube." Bell sent a final letter to Tubesales' insurance company on July 20, 1982, again stating " [f]or the reasons set forth in my May 21 letter to your insured, Bell Helicopter Textron hereby tenders the defense of this action to Superior Tube Company Inc. and Tubesales Inc. Please advise me of your intentions with respect to this tender." The insurance company responded on July 27, 1982, that it "respectfully decline [s] to accept tender of the defense of Bell Helicopter Textron. This decision is based on the lack of adequate information as described above."

Bell contends that it properly bound Tubesales to the results of the Louisiana Litigation under the common law doctrine of vouching-in, citing Washington Gaslight v. District of Columbia, 161 U.S. 316 (1896); Sampson v. Ohleyer, 22 Cal. 200 (1863); and Pezel v. Yerex, 56 Cal. App. 304 (1922). They further contend that the district court erred in ruling that Cal.Com.Code Sec. 2607(5) (a)¹  displaced the above common law rule, because that section applies only to warranties between sellers and buyers who are in privity of contract. Finally, they argue that even if Judge Takasugi was correct in applying the Cal.Com.Code, Bell fulfilled the requirements of that code section.

Bell's arguments for reversal lack merit. The California Supreme Court in Sampson held that in order to bind one party to a prior judgment under the common law doctrine of vouching in, the first party must give "full notice to his covenantor or party who has agreed to indemnify him, of the pendency of the suit, what it is he requires him to do in the suit, and the consequences which may follow if he neglect to defend the action. Mere knowledge or information of the existence of such an action is entirely insufficient to bind the party by the judgment." Sampson, 22 Cal. at 208. In Pezel, the court again explained that California was one of the jurisdictions with a very strict vouching-in doctrine, which requires that the seller be told "that he is called upon to come in and defend the suit, or that he is given an opportunity to do so, and that if he does not defend it, he will be held responsible for the result." Pezel, 56 Cal. App. at 309 (emphasis added).

Bell's letters failed to properly vouch-in Tubesales under either the common law or the Cal.Com.Code.²  Bell argues that the statement in their letter that they intended to seek indemnity was sufficient to vouch-in Tubesales. This argument fails, because indemnity is separate legal action that Bell must initiate. Threatening an indemnity action does not make clear that Tubesales will be bound by all findings of fact in the Louisiana judgment, for in an ordinary indemnity action the defendant may argue that he is not at fault.

Furthermore, we find that the California Code section was intended to codify California's strict common law vouching-in doctrine.³  The only case interpreting the Cal.Com.Code section at issue here is Bendix. In the initial personal injury action underlying that case, the plaintiff received a jury verdict after trial against a truck manufacturer and Bendix, the airbrake company, with a special finding that there had been a defect in the airbrake hose. Bendix had demanded before trial that Swan, the rubber company who manufactured the hose, assume defense of the action. Swan refused. At the subsequent indemnity trial that Bendix initiated against Swan, the trial judge refused to bind Swan to the results of the first trial, instead allowing the issue of liability to be relitigated. The jury in this second action found for Swan. On appeal, the court held that Bendix had failed to properly vouch-in Swan to the first litigation, because "although the letter explains emphatically that Bendix claims indemnity from Swan, it does not state expressly that unless Swan assumes the defense, it will be bound 'by any determination of fact common to the two litigations' in any subsequent action of Bendix against Swan. This is fatal to Bendix' case." Bendix, 55 Cal. App. 3d at 260.

Bell's attempts to distinguish Bendix are unavailing. Bell first argues that its federal indemnity claim is a products liability claim sounding in tort, and that section 2607(5) (a) applies only to contract and warranty claims. However, Bendix itself was a action for negligence, products liability, and breach of warranty. Bendix, 55 Cal. App. 3d at 258. Furthermore, the California Code section at issues applies when "the buyer is sued for breach of a warranty or any other obligation for which his seller is answerable over." Cal.Com.Code Sec. 2605(5) (a) (emphasis added). Bell next argues that in Bendix the buyer and seller of the allegedly faulty brake hose were in privity of contract, while Bell is a remote buyer from Tubesales. While this is true, the district judge correctly ruled that privity is irrelevant in this context. Privity is no longer required under California law to sue under a products liability theory, nor is privity mentioned in the text of the code section.

Thus under both the common law and the code section, Bell failed to properly vouch-in Tubesales. Though Bell fulfilled the first two requirements, in that it gave notice of the pendency of the suit and that it required Tubesales to take over the defense, it failed to fulfill the third requirement of giving notice to Tubesales of the consequences of a failure to defend, in that it never explicitly told Tubesales that if they refused to defend they would be bound by any adverse findings of facts in the Louisiana Litigation.⁴ 

Bell next contends that a reversal is mandated because the district court erred in numerous evidentiary rulings during the course of the trial. We review evidentiary rulings for an abuse of discretion and will not reverse absent some prejudice. Roberts v. College of the Desert, 870 F.2d 1411, 1418 (9th Cir. 1988). We also review a district judge's ruling concerning a motion for a new trial for an abuse of discretion. Hard v. Burlington Northern R.R., 812 F.2d 482, 483 (9th Cir. 1987). A party denied such a motion would need to demonstrate that the errors complained of more probably than not tainted the verdict. Kisor v. Johns-Manville Corp., 783 F.2d 1337, 1340 (9th Cir. 1986).

We hold that any errors committed here were harmless. The verdict for Tubesales was most likely a result of their convincing the jury, by the use of their own expert and the testimony of experts hired by Bell, that the crash was caused by a design defect and not by a defect in the tubing. We will address each evidentiary ruling in turn.

Bell first contends that the district judge erred in allowing Tubesales to pursue a line of questioning in its cross-examination of Mr. Richardson, a manager for Bell, regarding a Alert Services Bulletin ("ASB") which was the subject of an in limine order. Counsel for Tubesales asked Mr. Richardson if each of a number of Bell employees (all of whom were on the ASB circulation list) concurred with the statement "that this failure was a result of fatigue cracking originating at a corrosion area on the outer diameter of the tube under the bearing sleeve?" This statement is contained in the ASB and in a prior report by Mr. Darrow, a Bell employee. Bell now claims that counsel for Bell objected twice at trial to this "roll call" of employees, and such questioning violated the in limine order because it was related to the ASB. However, an examination of the record reveals that no objections to these specific questions were made.

Generally, where a party fails to make a contemporaneous objection to the admission of evidence, they cannot raise that issue on appeal. Fed.R.Evid. 103(a) (1). Even if a timely objection had been made, it is not clear to us that these questions violated the in limine order, since they do not enter the ASB into the record, and were used to impeach Mr. Richardson's position that the crash was caused by defective tubing.

Bell next contends that the district court erred in allowing Tubesales to assert in closing argument that Bell failed to call as rebuttal witnesses those Bell employees who allegedly believed the accident was caused by a design flaw of Bell's, and not by defective tubing. Again Bell did not object to these statements when they were made. In any case, we are unsure as to why Bell believes this statement was in error. These absent employees were not related only to the subject of the in limine order. They were also live witnesses who may have been able to rebut Tubesales' assertion that they believed the accident to be Bell's fault.

Bell's third assignment of error is that Tubesales was permitted to question Bell regarding its failure to recall driveshaft assemblies that were not tested in conformity with Bell's specification. This allegedly led the jury to believe that Bell had not recalled the shafts at all, which was not true. Again no objection was raised by Bell. Though this argument should not have been permitted, the lack of objection and prejudice precludes reversal on this ground.

Bell's final argument is that counsel for Tubesales made reference to facts not in evidence in his closing argument. First Tubesales counsel told the jury that magnaflux testing had occurred, and second he attempted to put before the jury a new failure mode. Counsel for Bell objected to both of these statements, and the objections were sustained. Counsel for Tubesales immediately ceased these lines of questioning, and counsel for Bell did not request cautionary instructions for the jury. No prejudicial error occurred.

Judgment for Tubesales is AFFIRMED.