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From Products Liability Law Daily, July 15, 2013

Indemnification claims in wrongful death case governed by forum state’s statute of limitations for torts

By John W. Scanlan, J.D.

Claims for non-contractual indemnification brought against the manufacturers of allegedly defective gear that was involved in a fatal airplane crash were time-barred because the two-year statute of limitations applicable to tort claims governed the suit rather than the six-year statute of limitations applicable to contractual claims, the Alabama Supreme Court held in reversing a trial court decision (Precision Gear Co. v. Continental Motors, Inc., July 12, 2013, Main, J.).

Background. In July 2005, three people were killed in an airplane accident when one of the two engines failed. The personal representatives of the decedents filed wrongful death and defective product claims in Alabama against multiple defendants, alleging that the crankshaft gear in the failed engine was defective, and this was the cause of the accident. Cessna Aircraft Company manufactured the aircraft, Teledyne Continental Motors manufactured the engine, Tulsair Beechcraft installed the engine on the airplane, Precision Gear companies manufactured the allegedly faulty gear, and General Metal Heat Treating heat-treated the gear. These defendants settled the claims against them in the wrongful death litigation.

Tulsair Beechcraft then filed suit against Continental Motors seeking statutory indemnification under Oklahoma law for the $250,000 it paid to settle the claims against it. Tulsair asserted that it was not negligent because it had received the allegedly defective engine already assembled, and that it was neither required nor prudent for it to disassemble engines to check each part. Continental Motors filed “non-contractual indemnification” claims against the Precision Gear companies (Precision Gear Company, Precision Gear LLC, and General Metal Heat Treating, Inc.) to recover the nearly $5 million that Teledyne Continental had paid to settle, asserting that the allegedly defective crankshaft gear did not meet the specifications it provided them.

Precision Gear and General Metal moved to dismiss the indemnity claims, arguing that they were time-barred under Alabama’s two-year statute of limitations applicable to indemnity actions arising from tort claims. Continental argued that under Oklahoma law, indemnity claims are classified as quasi-contractual and, therefore, the claims are governed by Alabama’s six-year statute of limitations.

The trial court denied the motions to dismiss on the ground that the indemnity claims were not time-barred. According to the court, the indemnity claim should be governed by the law of the place where the principle claim was, and Oklahoma was where the accident and the decedents’ deaths took place. Determining that it needed to apply an Alabama statute of limitations, the court applied the six-year statute of limitations for contractual actions because it agreed with Continental’s statement that Oklahoma law treated actions for indemnity as based on quasi-contract, rather than in tort as Alabama does. The trial court then granted a motion from the gear manufacturers to certify to the Alabama Supreme Court the issue of which statute of limitations applied—the statute applicable to torts or the statute applicable to contract.

Law of the forum state. Reversing the trial court, the Alabama Supreme Court determined that Alabama law should be used to characterize Continental’s indemnity claims. Alabama law follows the common law rule of lex loci delicti. Oklahoma substantive law applies to the claims, but Alabama law governs procedural matters before the trial court. The state high court found that the “great weight of authorities,” including a number of cases involving federal courts sitting in diversity and the Restatement (Second) of Conflict of Laws, have concluded that the law of the forum state should be used to characterize a claim for purposes of applying a statute of limitations. The court said that it found no case law holding that when a foreign state’s substantive law applies to a claim in a choice-of-laws situation, that state’s substantive law must also be used to characterize the claim for purposes of applying a statute of limitations. Because indemnity claims are tort claims under Alabama law, Alabama’s two-year statute of limitations for tort claims applied to the indemnity claims, and, therefore, the claims were time-barred.

Dissenting opinions. Two separate dissents were filed. Justice Murdock argued that Oklahoma’s substantive law should have been used to characterize the claim for purposes of the statute of limitations. Statutes of limitations may be procedural rules, but the question of the nature of a claim to which those statutes must be applied is substantive. Because Oklahoma’s substantive law governs the case, and Oklahoma substantive law characterizes indemnity claims as quasi-contractual, the applicable Alabama statute of limitations that should have been applied is the six-year statute of limitations for contractual actions. Therefore, the claims should not have been time-barred.

Justice Shaw dissented for similar reasons. He argued that the state high court should not have undertaken a second conflict-of-laws analysis to determine which Alabama statute of limitations applied. The determination of whether a claim is in the nature of a contract or a tort is an issue of substantive law, and once the court determined which substantive law and procedural law applied to the claims, it should not have engaged in that second analysis to select which Alabama procedural rule applied. The procedural rule that should have been applied is the one applicable to the substantive claims, which were contractual, he concluded.

The case number is 1110786.

Attorneys: Steven Casey (Jones Walker LLP) and Brian McCarthy (McDowell Knight Roedder & Sledge, L.L.C.) for Precision Gear Company, Precision Gear LLC, and General Metal Heat Treating, Inc. Cliff Brady (Brady Radcliff & Brown LLP), Douglas Brown (Swift, Currie, McGhee & Hiers, LLP), Edward Dean (Armbrecht Jackson LLP), and E. Berton Spence (Rumberger, Kirk & Caldwell) for Continental Motors, Inc.

Companies: Continental Motors, Inc.; Precision Gear Company; Precision Gear LLC; General Metal Heat Treating, Inc.

MainStory: TopStory JurisdictionNews AircraftWatercraftNews SofLReposeNews AlabamaNews OklahomaNews

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