Powers v. Lycoming Engines , 328 F. App'x 121 ( 2009 )

Opinions of the United
2009 Decisions States Court of Appeals
for the Third Circuit
3-31-2009
Powers v. Lycoming Engines
Precedential or Non-Precedential: Non-Precedential
Docket No. 07-4710
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 07-4710
CHARLES POWERS, ON HIS OWN BEHALF
AND ON BEHALF OF THE CLASS DEFINED HEREIN;
CYNTHIA ANN POWERS
v.
LYCOMING ENGINES, A DIVISION OF AVCO CORPORATION;
AVCO CORPORATION; TEXTRON, INC.
(E.D. Pa. No. 06-cv-02993)
PLANE TIME, LLC,
on its own behalf and on behalf
of all others similarly situated
v.
LYCOMING ENGINES,
a Division of Avco Corporation;
AVCO CORPORATION; TEXTRON, INC.
(E.D. Pa. No. 06-cv-04228)
Avco Corporation, Appellant
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
District Judge: Honorable Timothy J. Savage
ARGUED DECEMBER 1, 2008
1
Before: AMBRO, WEIS and VAN ANTWERPEN, Circuit Judges.
(Filed: March 31, 2009)
Catherine B. Slavin, Esquire (ARGUED)
Cozen O’Connor
1900 Market Street, 3rd Floor
Philadelphia, PA 19103
Attorney for Appellant AVCO Corporation, on behalf of its Lycoming Engines Division
Joseph F. Roda, Esquire (ARGUED)
Michele S. Burkholder, Esquire
RodaNast, P.C.
801 Estelle Drive
Lancaster, PA 17601
Terrianne A. Benedetto, Esq.
Jonathan Shub, Esq.
Seeger Weiss
1515 Market Street, Suite 1380
Philadelphia, PA 19102
Attorneys for Appellees Charles Powers, Cynthia Powers and Plane Time, LLC
OPINION
WEIS, Circuit Judge.
Defendants appeal from a District Court’s order granting the plaintiffs’
motion to certify a class action. We conclude that the Court’s choice-of-law analysis was
incomplete and did not support certification. Accordingly, we will vacate and remand for
further consideration.
2
The parties are well aware of the facts and because this opinion is not
precedential, we need not repeat in detail the events giving rise to the claim.
Plaintiffs in this putative nationwide class action are purchasers of aircraft
equipped with engines produced by defendants. The amended complaint asserts that the
crankshafts in the engines are defective, similar models have failed in a number of
instances, and are more vulnerable to stresses in their ordinary and foreseeable use. Two
causes of action remain in the case -- theories of unjust enrichment and breach of implied
warranty of merchantability, both grounded in state law.
The District Court certified a class of,
“All persons or entities who reside in the District of Columbia
or any state, except California, who, before April 11, 2006
purchased an aircraft subject to Lycoming Mandatory Service
Bulletin 569A and either: (a) currently own that aircraft; or
(b) sold that aircraft on or after April 11, 2006. The Class
shall be divided into two sublcasses consisting of: (a) those
who currently own the subject aircraft and (b) those who sold
the aircraft on or after April 11, 2006.”
We granted leave to appeal and now review the District Court’s decision to
certify a class under an abuse of discretion standard. Danvers Motor Co., Inc. v. Ford
Motor Co., 543 F.3d 141, 147 (3d Cir. 2008).
The Federal Rules of Civil Procedure list the requirements plaintiffs must
satisfy before a class may be certified. They must meet “all of the [subsections] of Rule
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23(a) and come within one provision of Rule 23(b).” Georgine v. Amchem Prods., Inc.,
83 F.3d 610, 624 (3d Cir. 1996), aff’d sub nom., Amchem Prods., Inc. v. Windsor, 521
U.S. 591 (1997). They must show
“(1) [numerosity, i.e.,] the class is so numerous that joinder of
all members is impracticable;
(2) [commonality, i.e.,] there are questions of law or fact
common to the class;
(3) [typicality, i.e.,] the claims or defenses of the
representative parties are typical of the claims or defenses of
the class; and
(4) [adequacy of representation, i.e.,] the representative
parties will fairly and adequately protect the interests of the
class.”
Fed. R. Civ. P. 23(a).
The subsection of Rule 23(b) relevant here directs plaintiffs to demonstrate
predominance and superiority, i.e., “that the questions of law or fact common to class
members predominate over any questions affecting only individual members, and that a
class action is superior to other available methods for fairly and efficiently adjudicating
the controversy.” Fed. R. Civ. P. 23(b)(3).
To determine if the requirements of the Rule have been satisfied, a district
court must conduct a rigorous analysis. In re Hydrogen Peroxide Antitrust Litig., 552
F.3d 305, 309 (3d Cir. 2008). The mandates “set out in Rule 23 are not mere pleading
rules.” Id. at 316. Unless each requirement is actually met, a class cannot be certified.
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Id. at 320.
When conducting its strict inquiry, a “court may ‘delve beyond the
pleadings to determine whether the requirements for class certification are satisfied.’” Id.
at 316 (quoting Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154,
167 (3d Cir. 2001)). “An overlap between a class certification requirement and the merits
of a claim is no reason to decline to resolve relevant disputes when necessary to
determine whether a class certification requirement is met.” Id. Courts may inquire into
a claim’s merits and “‘consider the substantive elements of the plaintiffs’ case in order to
envision the form that a trial on those issues would take.’” Id. at 317 (quoting Newton,
259 F.3d at 166).
Review of the merits becomes especially important when considering the
predominance requirement of Rule 23(b)(3). Id. at 310-11. “[T]he ‘nature of the
evidence that will suffice to resolve a question determines whether the question is
common or individual.’” Id. at 311 (quoting Blades v. Monsanto Co., 400 F.3d 562, 566
(8th Cir. 2005)). Therefore, “‘a district court must formulate some prediction as to how
specific issues will play out in order to determine whether common or individual issues
predominate in a given case.’” Id. (quoting In re New Motor Vehicles Can. Exp.
Antitrust Litig., 522 F.3d 6, 20 (1st Cir. 2008)). Class certification is not proper “[i]f
proof of the essential elements of the cause of action requires individual treatment.” Id.(quoting Newton, 259 F.3d at 172).
In the matter before us, the District Court determined that plaintiffs had
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complied with the requirements of Rule 23. After first conducting a choice-of-law
analysis, the Court concluded that Pennsylvania law uniformly applied to both causes of
action and that the numerosity, commonality, typicality, and adequacy of representation
elements of Rule 23(a) were present. In addition, predominance and superiority of a class
action were evident to the Court, satisfying Rule 23(b)(3). When addressing superiority,
the Court noted that because Pennsylvania law applied to all class members, the case
could easily be managed at trial.
The District Court was correct to begin its analysis by considering choice of
law. A necessary precondition to deciding Rule 23 issues is a determination of the state
whose law will apply. See Huber v. Taylor, 469 F.3d 67, 82-83 (3d. Cir. 2006)
(consideration of the requirements for certification must be conducted in light of the
correct jurisdiction’s law); see also Spence v. Glock, Ges.m.b.H., 227 F.3d 308, 309-10
(5th Cir. 2000) (error in choice-of-law analysis resulted in an abuse of discretion “on the
issue of predominance under Rule 23(b)(3)” and required decertification of the class);
Castano v. Am. Tobacco Co., 84 F.3d 734, 741 (5th Cir. 1996) (“that a court know[s]
which law will apply before making a predominance determination is especially
important when there may be differences in state law”). We exercise plenary review over
the District Court’s choice-of-law analysis to determine which state’s substantive law
governs. Berg Chilling Sys., Inc. v. Hull Corp., 435 F.3d 455, 462 (3d Cir. 2006).
In diversity cases such as this, attempts to structure and certify nationwide
classes involving plaintiffs in all fifty states often turn on whether the law of a single state
6
or multiple states should be applied. Irreconcilable conflicts can be an impediment to
certification because they can offset the analysis of the legal commonality, typicality, and
adequacy requirements of Rule 23(a), and the superiority and predominance factors of
Rule 23(b)(3). For example, we have observed that nationwide class action movants must
credibly demonstrate, through an “extensive analysis” of state law variances, “that class
certification does not present insuperable obstacles.” In re Sch. Asbestos Litig., 789 F.2d
996, 1010 (3d Cir. 1986). This comprehensive analysis is necessary because aggregate
class action should not alter the applicable substantive legal rights of the plaintiffs. See
Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 821 (1985) (constitutional limitations on
choice of law apply even in nationwide class actions); see also Amchem Prods., 83 F.3d
at 627 (court must conduct an “individualized choice of law analysis to each plaintiff’s
claims” even in nationwide class actions).
Because plaintiffs commenced their action in Pennsylvania, we look to that
state’s law on conflicts. Huber, 469 F.3d at 73-74. Pennsylvania has “adopted a flexible
choice of law rule which weighs the interests [its] sister-states may have in the
transaction.” Commonwealth v. Eichinger, 915 A.2d 1122, 1133 (Pa. 2007); see also
Griffith v. United Air Lines, Inc., 203 A.2d 796, 805 (Pa. 1964). Application of that rule
requires a multi-faceted analysis, Hammersmith v. TIG Ins. Co., 480 F.3d 220, 230-31
(3d Cir. 2007), and since the inquiry “is issue-specific, different states’ laws may apply to
different issues in a single case.” Berg Chilling Sys., Inc., 435 F.3d at 462.
The first level of scrutiny considers whether “an actual or real conflict
7
[exists] between the potentially applicable laws.” Hammersmith, 480 F.3d at 230. Then,
“[i]f there are relevant differences between the laws, then the court should examine the
governmental policies underlying each law, and classify the conflict as a ‘true,’ ‘false,’ or
an ‘unprovided-for’ [(i.e., no interest)] situation.” Id. A district court must conduct a
deeper analysis only where “both jurisdictions’ interests would be impaired by the
application of the other’s laws (i.e., there is a true conflict).” Id.The second level of scrutiny affects only true conflicts and when they exist,
the Court must “determine which state has the ‘greater interest in the application of its
law.’” Id. at 231 (quoting Cipolla v. Shaposka, 267 A.2d 854, 856 (Pa. 1970)).
Pennsylvania requires that courts making that determination use a “combination of the
approaches of both the Restatement II (contacts establishing significant relationships) and
interests analysis (qualitative appraisal of the relevant States’ policies with respect to the
controversy).” Id. (quoting Melville v. Am. Home Assurance Co., 584 F.2d 1306, 1311
(3d Cir. 1978)) (internal quotations omitted).
It is not enough to simply count the states’ contacts; they should be weighed
“on a qualitative scale according to their relation to the policies and interests underlying
the [particular] issue.” Id. (quoting Shields v. Consol. Rail Corp., 810 F.2d 397, 400 (3d
Cir. 1987)) (alteration in original) (internal quotations omitted).
Once the survey has been completed and a choice of law is made, the Court
must then consider whether applying that law to all plaintiffs and class members violates
the Due Process and Full Faith and Credit Clauses. “[F]or a State’s substantive law to be
8
selected in a constitutionally permissible manner, that State must have a significant
contact or significant aggregation of contacts, creating state interests, such that choice of
its law is neither arbitrary nor fundamentally unfair.” Allstate Ins. Co. v. Hague, 449 U.S.
302, 312-13 (1981) (plurality opinion); see generally, 1 Joseph M. McLaughlin,
McLaughlin on Class Actions: Law and Practice § 5:46 (4th ed. 2007).
Determining whether such contacts and interests exist requires an
individualized scrutiny of “the claims asserted by each member of the plaintiff class.”
Shutts, 472 U.S. at 821-22; see also Amchem Prods., 83 F.3d at 627 (explaining that
Shutts requires an individualized choice-of-law analysis even in nationwide class
actions); In re St. Jude Med., Inc., 425 F.3d 1116, 1120 (8th Cir. 2005) (same). The
expectations of the parties constitute “an important element” in the inquiry. Shutts, 472
U.S. at 822.
Our review of the record persuades us that the choice-of-law examination
here had its shortcomings. As one instance, the District Court observed in its unjust
enrichment analysis that a true conflict existed between the relevant states’ laws because
Pennsylvania and some others preclude recovery if the parties had an express contract.1
Believing unjust enrichment to be a hybrid of contract and tort law, the Court purportedly
weighed the factors from sections 188 (concerning contracts) and 148 (relating to torts
involving fraud and misrepresentation) of the Restatement (Second) Conflict of Laws and
1
We are also doubtful that the first step in the choice-of-law analysis was fully
explored by the Court in the unjust enrichment claim and its relevant subsidiary issues.
9
concluded that Pennsylvania “has the most significant relationship to the transaction and
the parties.” Defendants were sued in Pennsylvania, manufactured the crankshafts there,
“issued service bulletins and instructions . . . about the crankshafts . . . in Pennsylvania,
and plan[] to replace [them] [t]here.”2
Contacts relevant to plaintiffs, the Court presumed, “took place in their
home states where they purchased, operate, and moor their aircraft.” Those contacts were
of minor significance, however, because the mobility of a plane permitted it to “have been
purchased and transported from a state other than a plaintiff’s home state” and the
crankshafts are “part of aircraft manufactured by others, [making it] unlikely that the
plaintiffs purchased the aircraft in reliance on anything [defendants] may have
represented.”
Pennsylvania, however, does not consider unjust enrichment to be either an
action in tort or contract. Unjust enrichment, rather, an equitable remedy and synonym
for quantum meruit, is “a form of restitution.” Mitchell v. Moore, 729 A.2d 1200, 1202
n.2 (Pa. Super. Ct. 1999); see also Ne. Fence & Iron Works, Inc. v. Murphy Quigley Co.,
933 A.2d 664, 667 (Pa. Super. Ct. 2007); Sack v. Feinman, 432 A.2d 971, 974 (Pa. 1981)
(citing Restatement of Restitution § 1 (1937) as a source for the elements of an unjust
enrichment claim); Meehan v. Cheltenham Twp., 189 A.2d 593, 595 (Pa. 1963) (same).
2
The record reveals that Lycoming Engines, though located in Pennsylvania, is a
division of AVCO Corporation, a Delaware corporation with its principal place of
business in Rhode Island. We note also that defendants contend the crankshafts were
forged in Texas.
10
The Restatement views restitution as an area of the law “which is neither contract nor
tort.” Restatement (Second) of Conflict of Laws § 221 introductory note (1971).
If there is a claim under Pennsylvania law that falls within the scope of
restitution under the Restatement (Second) Conflict of Laws,3 the following factors
should have been addressed in the choice-of-law examination: (1) the place where the
parties’ relationship was centered; (2) the state where defendants received the alleged
benefit or enrichment; (3) the location where the act bestowing the enrichment or benefit
was done; (4) the parties’ domicile, residence, place of business, and place of
incorporation; and (5) the jurisdiction “where a physical thing . . . , which was
substantially related to the enrichment, was situated at the time of the enrichment.” Id. §
221(2) (1971).
The Court’s analysis of the unjust enrichment issue lacked any discussion
of the policies underlying the various states’ laws permitting or precluding such a claim
when an express contract exists. The District Court failed to “weigh the [Restatement]
contacts on a qualitative scale according to their relation to the policies and interests
underlying the . . . issue.” Hammersmith, 480 F.3d at 231 (quoting Shields, 810 F.2d at
3
Although we have found no instance in which Pennsylvania has adopted section
221, our case law, in explaining the state’s choice-of-law approach, directs courts to “use
the Second Restatement of Conflict of laws as a starting point.” Berg Chilling Sys., Inc.
v. Hull Corp., 435 F.3d 455, 463 (3d Cir. 2006). “[T]o properly apply the Second
Restatement and remain true to the spirit of Pennsylvania’s ‘flexible approach,’ [courts]
must . . . characterize the particular issue . . . in order to settle on a given section of the
Restatement for guidance.” Id. Because Pennsylvania considers unjust enrichment to be
a form of restitution, we believe applying section 221 would be proper.
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400).
In another phase of the choice-of-law analysis, the Court observed that a
true conflict exists between Pennsylvania and the states which mandate that plaintiffs
demonstrate privity of contract in a claim for breach of the implied warranty of
merchantability. After describing several of the reasons certain jurisdictions require
privity, the Court concluded that Pennsylvania law governed because, among other
things, “[t]he manufacturer is located in Pennsylvania” and the privity states’ interests in
protecting their resident manufacturers will not be impinged.
The Court did not conduct an intensive multi-step choice-of-law analysis on
the breach of warranty issue, as is required in Pennsylvania. Its treatment of the choice-
of-law issue lacked a satisfactory discussion of the relevant Restatement factors, here “(1)
the place of contracting; (2) the place of negotiation . . .; (3) the place of performance; (4)
the location of the subject matter of the contract; and (5) the domicile, residence,
nationality, place of incorporation and place of business of the parties.” Id. at 233.
Similarly, the Court again failed to perform a sufficient qualitative weighing of the
contacts “according to their relation to the policies and interests underlying the . . . issue.”
Id. at 231 (quoting Shields, 810 F.2d at 400). The qualitative weighing which occurred
was questionable.
A proper application of Pennsylvania’s choice-of-law principles may have
indicated that the law of more than one state governs the parties’ dispute. Other Courts of
12
Appeals have confronted similar scenarios. See, e.g., In re Bridgestone/Firestone, Inc.,
288 F.3d 1012, 1018 (7th Cir. 2002); Kirkpatrick v. J.C. Bradford & Co., 827 F.2d 718,
725 n.6 (11th Cir. 1987).
Attempting to apply the law of a multiplicity of jurisdictions can present
problems of manageability for class certification under Rule 23(b)(3).4 See In re
Bridgestone/Firestone, Inc., 288 F.3d at 1018 (“[b]ecause these claims must be
adjudicated under the law of so many jurisdictions, a single nationwide class is not
manageable”); In re Am. Med. Sys., Inc., 75 F.3d 1069, 1085 (6th Cir. 1996) (“[i]f more
than a few of the laws of the fifty states differ, the district judge would face an impossible
task of instructing a jury on the relevant law”).
If a complete choice-of-law analysis had been conducted and indicated that
more than one jurisdiction’s law applied, consideration should have been given to
“whether variations in state laws present the types of insuperable obstacles which render
4
We note that plaintiffs did not present a plan to cope with the various theories of
liability or damages, which is becoming a commonplace requirement in class-action
litigation. See In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 319 (3d Cir.
2008). A plan may be particularly important in this type of nationwide class action
following our decision in In re Hydrogen Peroxide, where we made clear that
“conditional” certification is no longer acceptable. Id. at 318-19. Instead, each Rule 23
requirement must be subject to a rigorous analysis prior to certification. Id. at 316, 320.
In Bristow v. Lycoming Engines, No. Civ. S-06-1947 LKK/GGH, 2008 WL
850306 (E.D. Cal. Mar. 28, 2008), a case based on the same crankshaft defect and
applying the law of only one state, class-action status was vacated because the plaintiff
was unable to show class-wide damages and the manageability plan failed to resolve the
problem.
13
class action litigation unmanageable.” In re Warfarin Sodium Antitrust Litig., 391 F.3d
516, 529 (3d Cir. 2004). Another relevant inquiry would have been “whether varying
state laws [could] be grouped by shared elements and applied as a unit in such a way that
the litigation class is manageable.” Id.; see also In re Prudential Ins. Co. of Am. Sales
Practice Litig., 148 F.3d 283, 315 (3d Cir. 1998) (finding various states’ laws could be
applied in this fashion); In re Sch. Asbestos Litig., 789 F.2d at 1010-11 (plaintiffs made
“a credible showing” that a class action could be managed in this fashion).
We conclude that the District Court’s choice-of-law exploration was
insufficient and, consequently, the inquiry into Rule 23's predominance and superiority
requirements rested on questionable premises. An order certifying a class under such
circumstances requires a remand for an entirely new choice-of-law determination for both
the unjust enrichment and breach of implied warranty claims. See In re St. Jude Med.,
Inc., 425 F.3d at 1120-21 (failure to adequately evaluate choice-of-law issue necessitates
remand). Once a complete choice-of-law analysis has been conducted, a reevaluation of
whether plaintiffs have satisfied Rule 23's requirements for class certification will be
appropriate. See Huber, 469 F.3d at 82-83.
The Order of the District Court is vacated and the case is remanded for
further proceedings consistent with this Opinion.
____________________
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