Twin Coach Co. v. Chance Vought Aircraft, Inc.

The plaintiff herein is the Twin Coach Company, a Delaware corporation, with headquarters in Buffalo, N. Y. The defendant is Chance Yought Aircraft, Inc., a Delaware corporation, with headquarters in Dallas, Texas.

Defendant was the U. S. Navy’s prime contractor for the manufacture of certain fighter aircraft, said aircraft having been designed and developed by defendant. Among other things, it had decided to subcontract the wing component assemblies, and with reference thereto, it had investigated various manufacturers as potential subcontractors. It ultimately selected six firms as being qualified to submit bids. Plaintiff was one of the six.

Defendant invited the six firms to a briefing in Dallas, where it attempted to explain the scope of the work to be involved. The invitees were also given the opportunity to inspect the facilities with which defendant was currently fabricating the subject assemblies. Representations were also made relative

Each prospective bidder was also presented with a written request for proposal together with various related data to be used in preparing its bid. This data, as received by plaintiff, included, inter alla, a copy of the proposed fixed price subcontract (substantially identical to the one ultimately executed between the parties) ; certain project books, which were later referred to in and made part of the executed subcontract; and various drawings, specifications, operating sheets and manuals.

Plaintiff contends that its hid was substantially predicated upon these representations and data. The bid was accepted by defendant and a subcontract was executed on August 8, 1956.

This subcontract and its related documents provide for delivery by defendant to plaintiff of certain documents, tools, materials, completed parts and sub-assemblies. Defendant was also required to provide plaintiff with certain technical assistance and other information of a similar nature. Furthermore, plaintiff by its own efforts would acquire certain additional special tooling, using designs and specifications prepared and furnished by defendant. Plaintiff was also required to manufacture the assemblies pursuant to the above mentioned documents, using the above said technical assistance and tools. The finished wing units were to be shipped to defendant’s Dallas plant where the completed aircraft would be ultimately assembled. The subcontract also included an arbitration clause for the settlement of disputes.

Various disputes arose. Arbitrators were selected. Claims and answers were filed, and the parties appeared before the arbitrators, in Dallas, in October, 1958. However, this attempt to arbitrate was futile, for the parties were unable to agree upon the arbitrability of many of plaintiff’s claims. The arbitrators lacked the authority to determine their own jurisdiction, so an adjournment was granted to enable plaintiff to obtain a court

The complaint in the instant case was filed on July 30, 1959, and is divided into two “Causes of Action”, or counts. The “First Cause of Action” contains 23 numbered paragraphs, and is characterized by its drafters as setting forth those defaults and misrepresentations, etc., of the defendant as were embraced in plaintiff’s arbitration claims. Its ad damnum, clause alleges damages totalling $1,452,824. The “Second Cause of Action” claims damages in the amount of $205,000 emanating from defendant’s allegedly wrongful refusal to arbitrate all of those claims set forth in the first count as per the contractual agreement between the parties.

With reference to plaintiff’s “First Cause of Action”, defendant filed a Motion pursuant to Rule 12; with reference to the “Second Cause of Action” it filed an answer, counterclaim and defense. Decision on said motion has been delayed to the present time by virtue of plaintiff’s interposed motion to stay, which was denied. Interrogatories have also been filed by defendant seeking information substantially similar to that sought per its Rule 12 motion. These were answered, and at the present time Judge Carey is considering a motion of defendant pursuant to Rule 37 which seeks to elicit more complete answers.

The defendant divides its Rule 12 motion into two parts. It first moves pursuant to Rule 12(e) for a more definite statement of the complaint in the following respects: (a) whether plaintiff’s “First Cause of Action” is based on a breach of contract or on a tort, or both; (b) if on both, then which portions relate to breach of contract and which to tort; (c) which actions

An overall view of the “First Cause of Action” of the complaint as amended would now seem desirable. Pars. 1 to 4 set forth such background material as has been referred to above. Par. 5 describes the bid briefing in Dallas very much as describfed above. Par. 6 is of considerable importance and hence I quote:

“The information contained in the request for proposal and related data and the information obtained at the bid briefing included the representations by Defendant which are more fully set forth in paragraphs 14, 17, 19 and 21 hereafter. After consideration of the information contained in the request for proposal and related data, and of the information obtained at the bid briefing, and in reliance upon all such information, Plaintiff submitted bids which were later accepted by Defendant.”

Pars. 7 to 11 outline the duties and obligations of both parties with respect to such matters as tools, parts, specifications, deliveries, and technical assistance arising out of the subcontract, pretty much as I have set forth. Aversions are also made with respect to the overall dollar amount of the subcontract, the fact that plaintiff has performed it, and has been paid the fixed dollar amounts therein specified.

Par. 12 is, also, rather pertinent, and so I quote:

“The information referred to in Paragraph 6 was incorrect and misleading in material respects. Defendant knew or should

have known that such information was incorrect and misleading in such respects. Under all the circumstances, including those described above in Paragraph 5, Defendant intended Plaintiff to rely upon the information referred to in Paragraph 6 as an inducement to entering into the Subcontract and Plaintiff did rely thereon in entering into the Subcontract, to Plaintiff’s damage, as hereinafter set forth.”

Par. 13 alleges defendant’s breach of duties or obligations to furnish plaintiff in sufficient time with adequate, correct and proper parts, materials, project books, drawings, plans, specifications, engineering information and other technical assistance, with the conclusion that the scope of the work was substantially increased to plaintiff’s damage.

Par. 14 is one of those referred to in Par. 6 and, by reference thereto, in Par. 12. I will, therefore, quote it as representative of the specificity set forth in the similarly referenced Pars. 17, 19 and 21, which will be merely summarized in their proper sequence. Thus Par. 14 says:

“The project books, which were incorporated in the Subcontract by reference and form a part of the Subcontract, contain under the heading of “General Tooling Policy”, certain representations by the Defendant that the contract tools which Defendant would furnish, plus the line type assembly tools shown as vendor jig responsibility on the Subcontract Schedule Plan, were planned to be adequate to produce the requirement of thirty aircraft per month plus spares within Defendant’s facilities, and that the tools, as designed and constructed, were producing satisfactory parts and assemblies within Defendant’s facilities. Plaintiff is informed and verily believes that said tools were not adequate to produce the requirement of thirty aircraft per month plus spares within Defendant’s facilities and were not producing satisfactory parts and assemblies within Defendant’s facilities.”

The first part of defendant’s motion is pursuant to Rule 12 (e), which must be construed in the light of Rules 8(a) (1) and (2), 8(e) (1) and (2), 8(f), 9(b), 9(g), and 10(b).

To resolve this problem, I shall pose, and attempt to answer a series of related questions. My plan is to analyze the pertinent requirements set forth in my synthesis paragraph above, although I will not adhere to the order therein utilized. I observe at the offset that the complaint does aver sufficient facts upon which to base a claim for relief; it is reasonably short considering the nature of the case; and there apparently are two types of claims, i.e., one for fraud and one for breach of contract.

First: Is the element of fraud pleaded with sufficient particularity to satisfy the requirements of Rule 9(b)? To begin with, in every action of fraud there must be a deceiver and his victim. (1) The deceiver must make a false representation of a material fact to the victim. (2) The deceiver must have had knowledge of the falsity of his repressentation, while his victim

In its brief, plaintiff urges that the complaint, in this respect, is adequate, for the principal elements of fraud have been alleged, in that: (1) there are detailed descriptions of the representations, coupled with allegations of their falsity, as set forth in Pars. 14, 17, 19 and 21; (2) Par. 12 sets forth allegations of their materiality, defendant’s knowledge (or duty to have knowledge) of their falsity, and defendant’s intent that plaintiff rely thereon; and (3) in Pars. 12, 17, 19 and 21, it is alleged that plaintiff relied on defendant’s representations to its injury as set forth.

Having read these pertinent paragraphs and compared them with plaintiff’s characterization thereof, as just set forth, I react the following conclusions:

(1) The elements of knowledge have not been properly averred. To say “Defendant knew or should have known” is not adequate. Edgerton, Ch. J., dealt with an identical point in Merchant v. Davies, 1957, 100 U. S. App. D. C. 258 , 244

(3) My observations on organization will be dealt with below.

Second: Since there appears to be two types of claim, i.e., one in tort and one in contract, is it desirable to leave them together in one count or would it facilitate the clear presentation of the matters therein alleged should they be separated per Rule 10(b) ? As was noted above, defendant’s Rule 12 motion did not formally urge the application of Rule 10(b), however, it was so urged in defendant’s brief. Prof. Moore contends that the original form of Rule 12(e) was easily broad enough to support a Rule 10(b) type of objection, but since 12(e) has

The objective of Rule 10(b) is clarity in pleading, Moore, op. cit. [f 10.03. This is, of course, the same end as is sought by Rule 8(a) and (e).

Here we have in plaintiff’s “First Cause of Action”— or to use the proper parlance, “First Count” — at least two claims. The word “claim” as used in these rules designates “a group of facts or occurrences which gives rise to a right enforceable in the courts and takes the place of the well known phrase ‘cause of action’”. 1 Fed. Pract. & Pro. (Rules Ed.) § 324, p. 562.

There is a claim in tort founded upon fraud. There is also a claim in contract for breach. Both are intermingled as has been demonstrated above. Furthermore, there is but one ad damnum clause wherein all alleged damages are grouped into one undifferentiated figure. The fraud claim seems to have arisen solely from those negotiations and transactions which occurred prior to the execution of the subcontract. The breach of contract claim has to have arisen from occurrences subsequent to said execution. These are such separate occurrences as are referred to, in Rule 10(b). It is, of course, quite possible that

Therefore, for the purpose of facilitating a clearer presentation of the averred claims, I hold that this complaint must be redrafted so as to divide the so-called “First Cause of Action” into /two separate counts, one of which will be for the breach of contract claim, and the other for the fraud claim.

This holding makes it unnecessary to discuss the propriety of combining two claims in one count as per the permissiveness of Rule 8(e) (2). However, it is necessary to observe that the damages claimed in one count because of an allegedly false statement in the inducement may be the same as those damages claimed for breach of the same statement when considered as a contractual clause. Insofar as this type of situation might arise, such claims will be advanced in the alternative per Rule 8(e) (2).

Third: Are special damages claimed, and if so are they plead with the specificity required by Rule 9(g) ? It seems quite possible that in a case of this nature involving complex commercial and technical transactions that some of the damages legitimately claimed would fall into one of the various definitions of special damages. However, at this state of the proceedings, I am unable to say as a matter of law, precisely what portion of plaintiff’s alleged damages are “special” and which are “general”. Defendant has merely urged that “some” of plaintiff’s damages must be special. To illustrate its position, defendant refers to Par. 17 of the complaint with the observation that “the increased scope of work and the additional expense incurred in

“Special damages are those that are the natural, but not the necessary result of the act complained of. Consequently, they are not * * * implied by law.

“General damages are those necessarily and naturally resulting from the wrongful act or omission or which may be legally implied therefrom; or, as said in Baldwin v. Western R. Corporation, 4 Gray (Mass.) 333 , ‘such damages as any other person, as well as the plaintiff, might, under the same circumstances, have sustained, from the acts set out in the declaration.’ * *”

Taking these definitions, or any of the others, I have read, it seems virtually impossible to declare as a matter of law that defendant’s contention about Par. 17 of the complaint is valid. To make such a pronouncement upon a valid foundation, a great deal more details would be required than I now have available. But even if it be in some sense a special damage, I am of the opinion that for the purposes of this case, sui generis, there are sufficient facts pleaded to adequately advise the defendant of the probable evidence which will be introduced and to enable him to pursue discovery and prepare his defense. See 1 Fed. Pract. & Pro. § 308, p. 558. In a case of this complexity, some balance has to be struck between such Rules as 9(g) and 8(a). The pleadings must be construed so as to do substantial justice (Rule 8(f)). Hard practicality dictates that a certain tolerance be exercised in a case such as this. On any one item in the claim it is conceivable that if all the background facts

I am satisfied that once the complaint is redrafted in conformity with my instructions herein set forth, that it will adequately fulfill its notice serving function under our Rules of Procedure. If it should appear in the course of the pretrial discovery process that certain amendments to the pleadings are desirable to more adequately deal with any relevant issue of special damages, then such amendments may be had in conformity with Rule 15, if such amendments are reasonably required to do substantial justice.

In ruling as I have on this portion of defendant’s Rule 12(e) motion, I have effectively disposed of that portion of defendant’s motion as founded on Rule 12(f), wherein it was moved that that portion on the “First Cause of Action” relating to damages should be struck for failure to comply with Rule 9(g).

To summarize my holding herein, I require plaintiff to redraft its complaint. The “First Cause of Action” must be split into two distinct counts, one of which will set forth the tort claim for fraud and misrepresentation in the inducement of the subcontract, whereas the other will advance the claim for breach of the subcontract. The damages will be calibrated accordingly. The element of fraud shall be pleaded with greater particularity insofar as defendant’s knowledge, is concerned, and otherwise the pleadings shall generally aver those elements of fraud as set forth in my definition. All applicable rules shall be kept in

On presentation, Order, in conformity with this decision, will be entered.