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From Products Liability Law Daily, August 7, 2015

Judgment for aircraft maker’s successor, component manufacturers upheld in fatal Australian crash

By Susan Lasser, J.D.

In an action brought by the administrators of the estates of the passengers and crew in a fatal airplane crash, judgment as a matter of law in favor of the successor to the plane’s manufacturer, the manufacturer of the plane’s warning system, and the maker of navigational charts was upheld by the U.S. Court of Appeals for the Seventh Circuit, which had consolidated two appeals. In the first appeal, the court found that the successor had no duty to warn the plane’s operator of the need to install a more enhanced warning system, and that the operator did not rely on any alleged voluntary undertaking of a duty to warn. In the second appeal, the court determined that the administrators failed to present any evidence from which a reasonable jury could infer that the manufacturers’ products probably contributed to the crash, and that the warning system’s manufacturer had no duty to alert the customer that an improved system should be installed (Thornton v. M7 Aerospace LP, August 6, 2015, Williams, A.).

Background. None of the 15 crew and passengers on board a Transair-operated commuter aircraft which crashed on May 7, 2005, into terrain on its way to the Lockhart River airfield in Queensland, Australia, survived the crash. The administrators of the estates of all but one of the deceased filed suit against several defendants, including the successor to the plane’s manufacturer, the manufacturer of the plane’s warning system, and the manufacturer of the navigational charts, for their roles in the crash.

Successor to aircraft manufacturer. M7 Aerospace LP (M7) is the successor to the aircraft’s manufacturer, Fairchild Aircraft Inc. In 1990, the Federal Aviation Administration (FAA) issued Fairchild a Type Certificate to manufacture SA227-DC Metro aircrafts. The plane at issue was manufactured by Fairchild in 1992 and sold in 1993 to a non-party Mexican airline. It was eventually acquired by Transair (operator). In 2002, Fairchild filed for bankruptcy, and its assets were purchased at auction. An asset purchase agreement with Fairchild, stating that the assets would be free and clear of any liens, claims, and encumbrances, was assigned to M7, a privately held small business whose owners had no prior relationship with Fairchild. As a consequence of the acquired assets, M7 owned the rights to use the Fairchild name and to Fairchild’s technical publications. M7 also acquired the Type Certificate and was designated as the Original Equipment Manufacturer (OEM) for the Metro fleet, thereby giving it the exclusive right to manufacture proprietary parts for the Metro aircrafts. M7 builds and assembles aircraft parts; and it distributes a catalogue of parts for the Metro aircraft, as well as issues service bulletins and maintains and updates a list of Metro owners and operators. Transair was listed on a revised service customer list, indicating that it purchased parts from M7.

The estate administrators complained that at the time of the crash, the aircraft may have been fitted with a ground proximity warning system (GPWS), which warns the crew of approaching terrain, but it was not fitted with an enhanced ground proximity warning system (EGPWS), which had the capacity to alert the crew more quickly of terrain than the GPWS and provided pilots with more time to react. The Australian Transportation Safety Bureau (ATSB) concluded that if the plane had been equipped with an EGPWS, the crash could have been avoided. The administrators argued that M7 should have warned Transair of various defects in the aircraft, particularly of the need to install an EGPWS.

The estate administrators filed a negligence and strict products liability action against a number of defendants, including M7. The trial court granted summary judgment on vicarious liability claims (as successor-in-interest for the actions of its predecessor, Fairchild), but the administrators did not appeal this ruling. However, the administrators appealed the district court’s grant of summary judgment on direct liability claims against M7 for its alleged negligent breach of its own duty to warn and advise under operation of law and, in the alternative, under a theory of voluntarily undertaking a duty to warn.

Manufacturers of navigation charts and ground proximity warning system. A second appeal ruled upon by the court concerned the administrators’ strict liability and negligence claims against Jeppesen Sanderson (Jeppesen) and Honeywell International (Honeywell)—respectively, the manufacturers of the navigational charts allegedly on the plane and of the plane’s GPWS. Because cloud cover did not allow the flight crew to make a visual approach on the day of the crash, the pilots used an “RNAV instrument approach,” which is a nonprecision approach using cockpit instruments, including a global positioning system, to navigate between waypoints along a flight path. Jeppesen produced and sold charts for pilots to use while performing non-visual approaches into the Lockhart River airfield. It received source data for its approach charts from Airservices Australia (ASA), an entity owned by the Australian government. ASA designed the approach procedure into Lockhart River airfield. The decedent pilots had subscribed to Jeppesen’s chart service, but the court did not know whether the charts were used during the descent on the day of the crash. While the charts complied with ASA’s requirements, they did not indicate topography of the terrain below the descent path.

Honeywell was the manufacturer of GPWS units. It manufactured a GPWS unit which was fitted on the aircraft at issue in 2003 (but no wreckage of a GPWS unit was found after the crash). Honeywell also manufactured and sold EGPWS units, but it did not sell the EGPWS to the aircraft’s operator or tell the operator to purchase an EGPWS. After the crash, the ATSB report concluded that the plane crashed as a “result of a controlled flight into terrain”; that the flight crew unintentionally flew the aircraft into terrain without knowing the aircraft’s proximity to that terrain. Without the cockpit voice recorder, survivors, or witnesses, the ATSB could not determine why the plane flew into the ridge. Its report identified several “contributing safety factors” as well as “other safety factors,” one of which was that the approach chart could cause a pilot to lose situational awareness. The report noted several deficiencies in the design of the Jeppesen chart, mostly relating to the lack of clarity in the chart’s depictions.

Duty to warn by operation of law. After finding that it had both appellate and subject matter jurisdiction, the Seventh Circuit addressed first the administrators’ appeal concerning summary judgment for M7, the aircraft manufacturer’s successor. The administrators argued (1) that the trial court erred in finding that M7 did not have a duty to warn by operation of law about the need to install an EGPWS, and (2) that it was error to not find that M7 had voluntarily undertaken a duty to warn. The parties agreed that Illinois law governed the matter. Illinois courts have recognized a limited cause of action against the purchaser of a product line for failing to warn of defects in its predecessor’s products. To determine the presence of a nexus or relationship effective to create a duty to warn, the court considers four factors: (1) the succession to a predecessor’s service contracts; (2) coverage of the particular machine under a service contract; (3) service of that machine by the purchaser corporation; and (4) a purchaser corporation’s knowledge of defects and the location or owner of that machine.

The Seventh Circuit agreed with the trial court that there was an insufficient nexus between M7 and Transair to impose an independent duty to warn on M7 because none of the factors were met and the administrators failed to provide evidence of any relationship between M7 and Transair with respect to the aircraft at issue—M7 did not assume any of Fairchild’s service contracts, M7 never serviced the aircraft at issue, and there was no evidence that M7 knew Transair was the owner and operator of the aircraft. While the customer list could establish that M7 knew of the existence of Transair as an airline in general, the administrators presented no evidence from which a reasonable jury could conclude that M7 knew Transair was the operator of the aircraft.

While the estate administrators asserted that the successor had a continuing relationship with the product line in general, including servicing other Metros and issuing service and safety bulletins, Illinois courts have refused to adopt the product line exception to the general rule of nonliability for a purchaser of assets, and have been hesitant to impose a duty on a successor corporation “unless circumstances following the corporate transfer give rise to the duty.” Moreover, the court noted that Illinois decisions addressing the duty to warn by operation of law have rejected imposing liability where there was no continuing relationship between the successor and owner with respect to the specific machine at issue in the accident. The court would not impose a duty to warn where the successor had a relationship with the product line in general, but not with the specific owner and the specific machine. Under Illinois law, there was not enough of a continuing relationship between M7 and Transair with respect to the aircraft to justify the imposition of a duty.

Voluntary undertaking of a duty to warn. In addition to a duty to warn by operation of law, Illinois law offers a voluntary assumption of duty theory, in which “a duty to act reasonably may be imposed when a defendant negligently performs a voluntary undertaking.” However, the Seventh Circuit determined that even if the administrators were able to show that M7 voluntarily undertook the task of warning Transair of the need to install an EGPWS, they failed to establish that the harm suffered was the result of reliance upon the voluntary undertaking. There was no evidence presented that showed that the plaintiffs’ injuries occurred because of Transair’s reliance on M7, and no evidence that Transair relied on M7 to warn it of supposed defects. The administrators argued that because M7 held itself out as the original manufacturer and an authority on safety concerns for Metros, owners and operators relied on M7 to warn them of defects in the Metros. However, the Seventh Circuit found that whether other owners relied on M7 to warn of defects did not answer the question of whether Transair, the relevant entity, relied on M7. There was no evidence that Transair read M7’s newsletters, regularly checked the service bulletins, communicated with M7, or attended any of M7’s conferences. Finally, the court noted that Transair knew of the need to install an EGPWS, and as such it was illogical that Transair relied on M7’s lack of warning as justification for not installing an EGPWS when Transair was required by the ATSB to install the system.

Second appeal—manufacturers of charts and ground proximity warning system. The court of appeals also upheld summary judgment for Jeppesen and Honeywell on all claims because the administrators failed to establish a prima facie case that the manufacturers’ products contributed to the cause of the crash and that Honeywell owed a duty to advise of the existence of a superior product. Few facts were in the administrators’ favor because they did not comply with Local Rule 56.1’s provision requiring the non-moving party at the summary judgment stage to file a reply, including a statement of additional facts. Thus, the trial court only considered those facts included in the defendants’ statement of material facts. The administrators argued that the district court should have excused their failure to comply with the rule. However, the court found that there was no abuse of discretion by the district court’s application of the rule.

No evidence of causation—navigation charts. There was no evidence from which a reasonable jury could infer that Jeppesen’s charts probably contributed to the crash, according to the court of appeals. The administrators alleged that Jeppesen negligently prepared the navigation charts that the pilots used in conducting their approach to the airfield, and claimed that the failure of the charts to include the elevation of the terrain directly beneath the flight path, the failure to depict any terrain with colored contours and values, and the failure to depict an offset between the approach and the runway caused the pilots to believe they were safely flying over a valley and not over the mountain into which they crashed. They also alleged that the manner in which other information was depicted and the failure to include certain information on the charts caused the pilots to become confused, lose situational awareness, believe they were further along the flight path than they were, descend below the minimum safe altitude, and crash.

However, the administrators failed to provide evidence from which a reasonable jury could infer causation, the Seventh Circuit ruled. Illinois law requires that in a products liability action, whether based on strict liability or negligence, the plaintiff must demonstrate a causal relationship between the injury and the manufacturer’s product. Although the causal relationship can be proven by circumstantial evidence, a plaintiff must show that it was more than a mere possibility that the product caused the injury. Evidence justifying an inference of probability is required. The appellate court agreed with the trial court that there was no evidence properly before it demonstrating that Jeppesen’s charts probably contributed to the crash. Therefore, summary judgment was appropriate.

Evidence of causation—ground proximity warning system. As to the GPWS manufacturer, the administrators argued that its product failed to give an alert and therefore caused the crash. They also claimed that it negligently sold the GPWS to the initial operator when it knew the design of the GPWS was outdated and that the more effective EGPWS was available, and failed to advise the initial purchaser to get an EGPWS instead of a GPWS. After determining again that Illinois law was applicable, the appellate court found no evidence from which a reasonable jury could infer that a defect in the GPWS probably contributed to the crash. Because of evidentiary limitations, the plaintiffs relied on the ATSB report to argue that the GPWS was defective and its defects caused the crash. Regardless of what warning was given, however, the ATSB report stated that an alert five seconds before impact would not have provided the flight crew with enough time to avoid crashing into the ridge. Thus, the court found that even if the plane was fitted with a GPWS manufactured by Honeywell, and the GPWS malfunctioned or was defective as claimed, there was no evidence from which a jury could conclude that any defect in the GPWS contributed to the crash. Further, the administrators could not successfully argue without expert testimony that the GPWS was defective because it did not give more advanced warnings like the EGPWS would have. Expert testimony was required to establish that a product was defective or unreasonably dangerous. A product was not defective simply because an improved product was on the market.

Duty to warn. Finally, the appellate court rejected the administrators’ contention that the district court erred in finding that Honeywell did not have a duty to warn operators of the need to install an EGPWS. The Seventh Circuit agreed with the lower court that Honeywell did not have a duty to warn the initial purchaser because the administrators failed to establish that there was any “defect” in the design of the GPWS of which to warn. They failed to provide evidence that the GPWS was actually defectively designed or dangerous, and their failure to produce expert testimony as to any alleged design defect or dangerousness was fatal to their claim. Because the administrators’ claims of defect and causation were not supported by any evidence properly before the district court and because Honeywell owed no duty to warn any operator of the aircraft of the alleged defects in the GPWS, the court held that the district court properly granted judgment as a matter of law for the GPWS manufacturer.

The case is No. 14-1707.

Attorneys: Floyd Allen Wisner (Wisner Law Firm, PC) for Trad Thornton. Michael A. Pope (McDermott, Will & Emery LLP) for M7 Aerospace, LP. Anthony J. Monaco (Swanson, Martin & Bell, LLP) for Airservices Australia, Inc. Austin W. Bartlett (Adler, Murphy & McQuillen LLP) for Honeywell International, Inc. and Hamilton Sundstrand Corp. Grant J. Silvernale, III (Perkins Coie LLP) for Jeppesen Sanderson, Inc.

Companies: M7 Aerospace, LP; Airservices Australia, Inc.; Honeywell International, Inc.; Jeppesen Sanderson, Inc.; Hamilton Sundstrand Corp.

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