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Northwest Airlines, Inc. v. Professional Aircraft Line Service

United States District Court, Eighth Circuit

December 4, 2013

NORTHWEST AIRLINES, INC., Creditor, Plaintiff,
v.
PROFESSIONAL AIRCRAFT LINE SERVICE, Debtor, Defendant,
v.
WESTCHESTER FIRE INSURANCE COMPANY, Garnishee.

Brian W. Thomson, Aleava Rael Sayre, Jeffrey A. Ehrich, and Steven P. Zabel, LEONARD STREET AND DEINARD, PA, for plaintiff.

Erin Fury Parkinson, MCGLINCHEY STAFFORD, PLLC, and Robert W.Vaccaro and Timothy R. Schupp, GASKINS, BENNETT, BIRRELL, SCHUPP, LLP, for garnishee.

MEMORANDUM OPINION AND ORDER ON PLAINTIFF'S MOTION TO CORRECT OR AMEND JUDGMENT

JOHN R. TUNHEIM, District Judge.

Northwest Airlines, Inc. ("NWA") secured a default judgment in Minnesota state court against defendant Professional Aircraft Line Service ("PALS"), an aircraft maintenance company, after PALS negligently handled an NWA aircraft. NWA now brings this garnishment action against garnishee Westchester Fire Insurance Company ("Westchester"), seeking to recover proceeds from an insurance policy that Westchester issued to PALS.

On March 25, 2013, the Court granted summary judgment in favor of NWA, finding that the compulsory insurance doctrine allowed NWA to recover the proceeds of Westchester's insurance policy, despite PALS' failure to notify Westchester of the underlying negligence claim. (Mem. Op. & Order, Mar. 25, 2013, Docket No. 68.) Although the March 25 order entered judgment in NWA's favor, it did not specify an amount of damages. ( See id. at 21.) NWA now brings a motion under Federal Rule of Civil Procedure 60(a), requesting that the Court correct or amend the judgment to reflect an award of damages in the amount of $5, 066, 806.57, which includes postjudgment interest on the state court default judgment, plus prejudgment interest in NWA's favor. Because the March 25 entry of judgment was incomplete in failing to include a damages award, the Court will grant NWA's motion to amend. The Court will, however, reduce NWA's damages request in light of the insurance policy's prohibition on the recovery of postjudgment interest.

BACKGROUND[1]

I. THE UNDERLYING ACCIDENT

On February 6, 2002, PALS' employees, while moving one of NWA's airplanes, caused a collision that resulted in more than $10 million in damages. (Sixth Aff. of Steven P. Zabel, Ex. 4 ¶¶ 3-13, Mar. 29, 2013, Docket No. 73.) At the time of the accident PALS was insured by Westchester under a liability policy ("the Policy") with a $5 million coverage limit per occurrence. (First Aff. of Robert W.Vaccaro, Ex. B at 3, Feb. 22, 2011, Docket No. 5.) The Policy provides that no person or organization has a right to sue under the Policy unless PALS notifies Westchester as soon as practicable of any occurrence which may result in a claim. ( Id., Ex. B at 19-20.) PALS failed to notify Westchester of the incident. ( Id., Ex. D.)

II. STATE COURT LITIGATION

On October 1, 2004, NWA served PALS with a summons and complaint in Minnesota state court, seeking to recover damages NWA incurred as a result of the airplane accident. (Sixth Zabel Aff., Ex. 4 ¶ 14.) On November 15, 2004, NWA and its insurer, Global Aerospace, Inc. ("Global"), notified Westchester's claims handler of the lawsuit and demanded that Westchester tender the $5 million limit of the Policy. (First Aff. of Steven P. Zabel, Ex. 13, Feb. 28, 2011, Docket No. 9.) On November 24, 2004, Westchester's claims handler notified PALS that Westchester was denying coverage under the Policy due to PALS' failure to provide notice of the claims and cooperate under the terms of the Policy. (First Vaccaro Aff., Ex. D.)

After PALS failed to respond to the state court summons and complaint, NWA moved for default judgment. (Sixth Zabel Aff., Ex. 4 ¶¶ 15, 17.) The state court granted NWA's motion on January 10, 2005, awarding $7, 295, 967 in property damage and $3, 312, 706 for damages attributed to loss of use of the airplane. ( Id., Ex. 4 ¶¶ 23-24.) The state court judgment was docketed on February 2, 2005, in the amount of $10, 635, 412.67. (First Zabel Aff., Ex. 15.)

NWA claims that it later recovered $6, 545, 966.35 from Global, which it contends should be subtracted from the state court judgment to determine the amount of damages for which Westchester is responsible. ( See Sixth Zabel Aff., Ex. 5; Mem. in Supp. of Mot. for Summ. J. at 28-29, July 30, 2012, Docket No. 50.)[2]

III. NEVADA LITIGATION

In November 2005 counsel for PALS made a demand against Westchester for a full policy limit defense relating to NWA's default judgment against PALS. (First Vaccaro Aff., Ex. G at 3.) On December 1, 2005, Westchester commenced an action in the United States District Court for the District of Nevada, seeking a declaration that it had no obligation to provide insurance ...


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