Rose•Walker, L.L.P.

03.29.2005

Judge Enters $96 Million Judgment Against Textron Lycoming

(Anderson, TX) – State District Judge Jerry Sandel of the 278th Judicial District Court in Anderson, Texas, has signed a $96 million judgment against airplane engine manufacturer Textron Lycoming (NYSE:TXT). The judgment results from a legal battle involving a number of small airplane engine failures that occurred when the airplanes' crankshafts broke in flight.

The judgment, entered today, totals $96,039,498.33 and includes $86,394,763.00 in punitive damages as well as awards for future attorneys' fees and interest. In February, a jury in Grimes County, Texas found Lycoming liable for fraud, ordered the company to pay actual and punitive damages to Navasota, Texas-based Interstate Southwest Ltd. and also found that the crankshaft failures in question resulted solely from Lycoming's defective design.

That verdict came following a seven week-long trial. In addition, the verdict effectively precluded Lycoming from pursuing a $173 million indemnity claim against Interstate, which it had previously filed in a Pennsylvania court.

"This judgment sends a clear signal that the original verdict was sound," says Marty Rose, who represents Interstate Southwest. "Our client has been vindicated. Between the judgment and its impact on the indemnity claim – we couldn't have hoped for a better result."

Between 2000 and 2002, there were 24 small airplane engine failures and 12 deaths in Cessnas, Pipers and other airplanes with Lycoming aircraft engines. Interstate Southwest supplied Lycoming with the crankshaft forgings for those engines.

Following those failures, Lycoming launched an investigation aimed at determining the cause. Its conclusion was that Interstate Southwest had overheated the forgings, weakening the steel.

But attorneys for Interstate, Mr. Rose and Hal Walker of Rose Walker in Dallas, found a different cause. Their experts were able to determine that Lycoming's design for the crankshafts, which dates back to smaller, lower horsepower engines from 40 years ago, was inadequate for the larger, higher horsepower engines that failed.

They also found that by adding Vanadium to the steel – something Lycoming decided to do just before the failures began – the company further limited the amount of stress the crankshafts could withstand. Lycoming had added Vanadium to make the steel harder and reduce the number of machining operations, ultimately saving the company money.

Ultimately, jurors agreed with lawyers for Interstate, and found that even Lycoming's investigation of the crankshaft failures was fraudulent.