Mountain Bird Inc. v. Goodrich Corporation , 369 F. App'x 940 ( 2010 )

FILED
United States Court of Appeals
Tenth Circuit
March 23, 2010
UNITED STATES COURT OF APPEALS
Elisabeth A. Shumaker
Clerk of Court
TENTH CIRCUIT
MOUNTAIN BIRD, INC.; SPIRIT AIR,
INC.,
Plaintiffs-Appellants, No. 09-3017
(D.C. Nos. 2:06-CV-02365-KHV and
v.
2:05-MD-01721-KHV)
GOODRICH CORPORATION; CESSNA (D. Kan.)
AIRCRAFT COMPANY,
Defendants-Appellees.
ORDER AND JUDGMENT*
Before LUCERO, MURPHY, and HOLMES, Circuit Judges.
Mountain Bird, Inc. and Spirit Air, Inc. appeal the district court’s dismissal of
their tort claims under Idaho’s economic loss rule. Exercising jurisdiction under 28
U.S.C. § 1291, we affirm.
* This order and judgment is not binding precedent, except under the doctrines of
law of the case, res judicata, and collateral estoppel. This court generally disfavors the
citation of orders and judgments; nevertheless, an order and judgment may be cited under
the terms and conditions of 10th Cir. R. 32.1.
I
In June 1999, Spirit Air ordered a Cessna Model 208B aircraft from the Cessna
Aircraft Company (“Cessna”). The plane featured an optional de-icing system “Certified
for Flight in Icing Conditions” for which Spirit Air paid an extra $46,515. Shortly after
the plane was delivered, Spirit Air purchased an after-market de-icing system that was
installed by Western Aircraft, Inc. Spirit Air claims both de-icing systems were
manufactured by the Goodrich Corporation (“Goodrich”).
Spirit Air then leased the plane to Mountain Bird, Inc. d/b/a Salmon Air, which
operated an air cargo service. On December 6, 2004, the plane crashed near Bellevue,
Idaho, killing the pilot and one passenger, and destroying the plane. Spirit Air1 alleges
that the crash was caused by ice accumulation.
In July 2006, Spirit Air filed suit against Cessna and Goodrich in the United States
District Court for the District of Idaho asserting claims for strict products liability and
negligence, and seeking $1.4 million in damages—the claimed value of the aircraft. The
Judicial Panel on Multidistrict Litigation transferred the case to the District of Kansas,
which maintains a master docket for Cessna 208 Series litigation. Both defendants filed
dispositive motions arguing that Idaho’s economic loss rule barred Spirit Air’s claims.
The district court agreed and entered summary judgment in favor of defendants. It later
certified its judgment as final pursuant to Fed. R. Civ. P. 54(b). Spirit Air timely
1
For ease of reference, we use “Spirit Air” hereinafter to refer to both appellants.
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appealed.
II
We review a grant of summary judgment de novo. Atlantic Richfield Co. v. Farm
Credit Bank of Wichita, 226 F.3d 1138, 1148 (10th Cir. 2000). A party is entitled to
summary judgment only if, viewing the evidence in the light most favorable to the non-
moving party, the movant is entitled to judgment as a matter of law. Id.The parties agree that Idaho law applies to this action. Idaho has adopted the
economic loss rule, which bars the buyer of a product from recovering “economic losses”
through tort. Blahd v. Richard B. Smith, Inc., 108 P.3d 996, 1000 (Idaho 2005).
“Economic loss includes costs of repair and replacement of defective property which is
the subject of the transaction, as well as commercial loss for inadequate value and
consequent loss of profits or use.” Salmon Rivers Sportsman Camps, Inc., v. Cessna
Aircraft Co., 544 P.2d 306, 309 (Idaho 1975). By contrast, “[p]roperty damage
encompasses damage to property other than that which is the subject of the transaction.”
Id.“Broadly speaking, the economic loss rule is intended to maintain the boundary
between contract law and tort law.” Level 3 Commc’ns, LLC v. Liebert Corp., 535 F.3d
1146, 1162 (10th Cir. 2008) (quotation omitted). In determining whether the economic
loss rule bars a claim, Idaho courts have focused on the duty alleged to have been
breached. “To found an action in tort, there must be a breach of duty apart from the
nonperformance of a contract.” Taylor v. Herbold, 483 P.2d 664, 669 (Idaho 1971).
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In Clark v. International Harvester Co., 581 P.2d 784 (Idaho 1978), the Idaho
Supreme Court illustrated this point. There, plaintiff Clark attempted to recover
economic losses based on his claim that an International Harvester tractor he purchased
was negligently designed. Id. at 787. The court described the differing duties imposed
under tort and contract, and the operation of the economic loss rule as follows:
The law of negligence requires the defendant to exercise due care to build a
tractor that does not harm person or property. If the defendant fails to
exercise such due care it is of course liable for the resulting injury to person
or property as well as other losses which naturally follow from that injury.
However, the law of negligence does not impose on International Harvester
a duty to build a tractor that plows fast enough and breaks down
infrequently enough for Clark to make a profit in his custom farming
business. This is not to say that such a duty could not arise by a warranty—
express or implied—by agreement of the parties or by representations of
the defendant, but the law of negligence imposes no such duty.
Id. at 794 (footnote omitted).
Spirit Air contends that its claims are rescued by three exceptions to the economic
loss rule: (1) the “special relationship” exception; (2) the “unique circumstances”
exception; and (3) the “parasitic loss” exception. We consider each infra.
A
“Ordinarily, a breach of contract is not a tort. A contract may, however, create a
state of things which furnishes the occasion for a tort.” Taylor, 483 P.2d at 669.
Recognizing “the relation of the plaintiff and the defendants” can give rise to a “duty to
take due care,” the Idaho courts sometimes permit the recovery of economic losses
otherwise barred by the economic loss rule under the special relationship exception. Id.-4-
This exception arises when “the relationship between the parties is such that it would be
equitable to impose such a duty. In other words, there is an extremely limited group of
cases where the law of negligence extends its protections to a party’s economic interest.”
Duffin v. Idaho Crop Improvement Ass’n, 895 P.2d 1195, 1201 (Idaho 1995).
Idaho has recognized only two special relationships as exceptions to the economic
loss rule: (1) “where a professional or quasi-professional performs personal services”;
and (2) “where an entity holds itself out to the public as having expertise regarding a
specialized function, and by so doing, knowingly induces reliance on its performance of
that function.” Blahd, 108 P.3d at 1001.
Spirit Air argues that the latter type of special relationship exists here with respect
to its claims against Cessna because Cessna self-certified that its de-icing system
complied with Federal Aviation Administration regulations. This argument relies
primarily on the Duffin case. There, plaintiffs purchased seed potatoes that had been
certified by the Idaho Crop Improvement Association (“ICIA”), a private, non-profit
corporation that was statutorily authorized as the sole potato-certifier in Idaho. 895 P.2d
at 1198, 1201. Potatoes grown from these seed potatoes were found to be diseased and
damaged plaintiffs’ crop. Id. at 1198. Although the trial court applied the economic loss
rule, the Idaho Supreme Court reversed:
ICIA has held itself out as having expertise in the performance of a
specialized function; it is the only entity which can certify seed potatoes in
the state of Idaho. ICIA knows that seed is sold at a higher price based on
the fact that it is certified. Indeed, it has engaged in a marketing campaign,
for the benefit of its members, the very purpose of which is to induce
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reliance by purchasers on the fact that seed has been certified. Under such
circumstances, ICIA occupies a special relationship with those whose
reliance it has knowingly induced.
Id. at 1201. However, the court refused to permit tort claims to proceed against the
Federal-State Inspection Service, which conducted a shipping point inspection of the
potatoes, because there was no evidence “that it has actively sought to induce reliance on
the part of purchasers.” Id. at 1198, 1201.
We agree with the district court that Spirit Air has failed to create a genuine issue
of material fact as to the application of the special relationship exception. Spirit Air
argues that Cessna held itself out as having expertise in certifying aircraft for flight in
icing conditions. It relies on two pieces of evidence. First, Spirit Air’s president
submitted an affidavit stating that if the plane had “not been certified for flight into
known icing conditions, I would not have purchased the aircraft. I relied on that
certification in making my decision to buy the aircraft.” Second, Spirit Air points to the
aircraft specifications form, which states that the plane is “Certified for Flight in Icing
Conditions.”
Based on these evidentiary items, Spirit Air contends that we can reasonably infer
Cessna marketed itself as an expert in de-icing certification services. We disagree.
Cessna certainly informed Spirit Air that its product was certified, but that materially
differs from claiming that it was a certification expert. Neither the affidavit nor the
specification document says anything about Cessna conducting a certification; each
simply notes that the plane was certified. As Cessna persuasively argues, we would not
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infer that a car manufacturer held itself out as a vehicle safety certification expert by
advertising that its cars complied with federal safety regulations. To do so would permit
the special relationship exception to swallow the rule by allowing tort claims against
every manufacturer of a regulated product. See Duffin, 895 P.2d at 1201 (describing the
special relationship exception as applying in an “extremely limited group of cases”).
Because Spirit Air has not presented evidence showing that Cessna held “itself out to the
public as having expertise regarding a specialized function,” we cannot conclude a
special relationship arose between the parties. Blahd, 108 P.3d at 1001.2
Further, the special relationship exception applies only when “the relationship
between the parties is such that it would be equitable to impose” independent tort duties.
Duffin, 895 P.2d at 1201. In Duffin, the certifying body and the purchasing party were
not in privity—the plaintiff bought ICIA-certified seed potatoes from a third party. Id. at
1198. As a result, the plaintiffs could not sue ICIA for breach of contract; tort law was
the only potential cause of action. Here, Spirit Air can sue the certifying entity, Cessna,
for breach of contract or breach of warranty. Spirit Air and Cessna are sophisticated
business entities that engaged in an arms-length transaction. We discern no equitable
basis to impose additional duties on Cessna.
B
In addition to the special relationship rule, Idaho courts permit tort claims
2
Spirit Air also cites to two deposition excerpts as evidence that Cessna held itself
out as being an expert de-icing certifier, but neither witness discussed the issue.
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normally barred by the economic loss rule when “unique circumstances requir[e] a
different allocation of risk.” Blahd, 108 P.3d at 1002 (quotation omitted). As appellees
point out, however, the Idaho courts have never applied this exception. Id.Spirit Air primarily relies on Union Oil Co. v. Oppen, 501 F.2d 558 (9th Cir.
1974), in fashioning its argument that the unique circumstances exception applies.
Although that case has not been adopted wholesale by the Idaho courts, it was cited in
Just’s, Inc. v. Arrington Construction Co., 583 P.2d 997 (Idaho 1978), which discussed
certain exceptions to the economic loss rule recognized in other jurisdictions. Id. at 1005.
In Union Oil, the Ninth Circuit recited several factors California courts consider in
determining whether economic losses are recoverable, and Spirit Air urges that those
factors be applied here. But the factors cited by Spirit Air are used to determine “whether
in a specific case the defendant will be held liable to a third person not in privity.” Union
Oil Co., 501 F.2d at 566 (emphasis added). They do not apply to cases such as the one at
bar.3 The district court correctly declined to utilize the Union Oil test.
Spirit Air also complains that the district court improperly treated this case in the
abstract by refusing to apply the unique circumstances exception on the ground that
“[p]urchases of planes are commonplace,” rather than looking to the equities involved in
this specific case. However, the district court’s analysis closely tracks that employed by
3
Several of the Union Oil factors cannot be applied here in a sensible fashion. For
example, the first two factors are “the extent to which the transaction was intended to
affect the plaintiff, [and] the foreseeability of harm to him.” Id. These factors would
always weigh in favor of plaintiff when it has a contract with the defendant.
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the Idaho courts. In Duffin, the court declined to apply the exception because “the
certification of seed potatoes is not a unique circumstance.” 895 P.2d at 1200-01(quotation omitted). Similarly, in Blahd, the court held that the “purchase of a residential
house is an everyday occurrence and does not create the type of unique circumstance
required to justify a different allocation of risk.” 108 P.3d at 1002.
By focusing on the nature of the transaction at issue in determining whether to
apply the unique circumstances exception, the Idaho courts remain faithful to the purpose
of the economic loss rule. In most circumstances, the “risk of harm to the product itself
due to the condition of the product would seem to be a type of risk that the parties to a
purchase and sale contract should be allowed to allocate pursuant to the terms of the
contract.” Tusch Enters. v. Coffin, 740 P.2d 1022, 1035 n.8 (Idaho 1987) (quotation
omitted). Although the unique circumstances exception recognizes this may not always
be the case, Spirit Air has failed to demonstrate that we should abandon the allocation of
risk to which it agreed when it purchased the plane at issue.
We do not discount the notion that the specific equities in a case may favor
application of the unique circumstances exception. Nonetheless, Spirit Air simply claims
that defendants committed negligence that resulted in economic loss. Far from being
unique, this type of claim is precisely that for which the economic loss rule was designed.
C
Finally, an exception to the economic loss rule exists when the alleged economic
loss is “parasitic to an injury to person or property.” Duffin, 895 P.2d at 1200. The
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Idaho Supreme Court described this exception as follows:
[C]ase[s] in which the plaintiff seeks recovery for purely economic losses
without alleging any attending personal injury or property damage must be
distinguished from cases involving the recovery of economic losses which
are parasitic to an injury to person or property. It is well established that in
the latter case economic losses are recoverable in a negligence action.
Restatement (Second) of Torts, § 766C, comment b, and illustration 5
(Tent. Draft No. 23, 1977).
Just’s, 583 P.2d at 1004 n.1 (additional citations omitted).
Spirit Air claims it fits within this exception because the pilot and a passenger
were killed in the crash.4 But Spirit Air did not suffer these personal injuries. Just’s
would seem to require that the “plaintiff . . . allege[] any attending personal injury or
property damage.” Id. (emphasis added). Courts in other jurisdictions have been more
explicit. See Turbomeca, S.A. v. French Aircraft Agency, Inc., 913 So. 2d 714, 716 (Fla.
Dist. Ct. App. 2005) (“Physical injury to third parties is insufficient to satisfy this
[parasitic] economic loss doctrine exception.”); Am. Drug Stores, Inc. v. A T & T Techs.,
Inc., 583 N.E.2d 694, 696 (Ill. Ct. App. 1991) (rejecting argument “that as long as some
person was injured or someone’s property was damaged by a sudden, calamitous event,
anyone else sustaining damage because of the event may seek recovery in tort, even if
4
Spirit Air also argues that because the plane and the after-market de-icing
equipment were purchased separately, destruction of the plane constitutes property
damage rather than economic loss with respect to the claims against Goodrich and thus
the claims against Cessna are parasitic on that property damage. However, Spirit Air did
not advance this argument before the district court. Accordingly, Spirit Air has waived
this contention and we will not consider it on appeal. See Cummings v. Norton, 393 F.3d
1186, 1190 (10th Cir. 2005) (arguments generally may not be raised for the first time on
appeal).
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those damages are strictly economic”).
The Restatement illustration cited in Just’s is consistent with a rule requiring
personal injury or property damage to the plaintiff:
A is engaged in the business of producing and selling mushrooms. Under a
contract with B Power Company, he is supplied with electric power to keep
his mushroom cellars at a uniform temperature. C, installing a pole for a
telephone line near the power line of B Company, negligently allows the
pole to fall on the power line and break it. Before the line can be repaired,
A’s mushrooms are killed by freezing. In an action for harm to the
mushrooms, C is subject to liability to A for their value, and also for
pecuniary loss to A’s business, if the loss is proved with reasonable
certainty.
Restatement (Second) of Torts, § 766C, comment b, illustration 5. The Restatement
(Third) of Torts, Products Liability, which was not yet published when Just’s was
decided, similarly requires loss to “the plaintiff’s person” or “the plaintiff’s property
other than the defective product itself.” Id. § 21(a), (c).
In light of these authorities, we affirm the district court’s conclusion that Idaho’s
parasitic loss exception does not apply when a third party suffers the host injury to person
or property upon which the economic loss is parasitic.
III
Spirit Air moved to certify to the Idaho Supreme Court “the issues raised in
Appellants’ brief.” This court has discretion as to whether to certify a question to a state
court. Oliveros v. Mitchell, 449 F.3d 1091, 1093 (10th Cir. 2006). Certification is
appropriate “where the question before us (1) may be determinative of the case at hand
and (2) is sufficiently novel that we feel uncomfortable attempting to decide it without
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further guidance.” Pino v. United States, 507 F.3d 1233, 1236 (10th Cir. 2007).
However, “we will not trouble our sister state courts every time an arguably unsettled
question of state law comes across our desks. When we see a reasonably clear and
principled course, we will seek to follow it ourselves.” Id. We generally will not certify
a question if the moving party seeks certification only after losing in district court.
Enfield ex rel. Enfield v. A.B. Chance Co., 228 F.3d 1245, 1255 (10th Cir. 2000).
Certification would be inappropriate here for three reasons. First, Spirit Air did
not seek to certify until after an adverse decision below. See id. Second, Spirit Air does
not provide a legal question for certification; it simply claims that the Idaho courts have
been unclear as to when the “unique circumstances” exception applies and with respect to
the meaning of “subject of the transaction.” Third, the issues cited by Spirit Air in its
motion for certification are neither determinative nor “sufficiently novel that we feel
uncomfortable attempting to decide [them] without further guidance.” Pino, 507 F.3d at
1236.
IV
The judgment of the district court is AFFIRMED. Spirit Air’s motion for
certification of questions of state law is DENIED.
ENTERED FOR THE COURT
Carlos F. Lucero
Circuit Judge
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