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Rotorcraft Leasing, LLC v. H.E.R.O.S., Inc.

Court of Appeals of Louisiana, Third Circuit

April 20, 2017

ROTORCRAFT LEASING, LLC AND CATLIN INSURANCE COMPANY, INC.
v.
H.E.R.O.S., INC. ET AL.

         APPEAL FROM THE FIFTEENTH JUDICIAL DISTRICT COURT PARISH OF LAFAYETTE, DOCKET NO. 11-15309 HONORABLE JULES D. EDWARDS, III, PRESIDING

          John R. Walker, Jones Fussell, L.L.P. ATTORNEY FOR PLAINTIFFS/APPELLANTS Rotorcraft Leasing, LLC and Catlin Insurance Company, Inc.

          Kenneth H. Laborde Brendan P. Doherty Bradley J. Schwab Gieger, Laborde & Laperouse, LLC One Shell Square ATTORNEY FOR DEFENDANT/APPELLEE Delavan, Inc.

          Court composed of Sylvia R. Cooks, Shannon J. Gremillion and Phyllis Montgomery Keaty, Judges.

          SYLVIA R. COOKS, JUDGE

         FACTS AND PROCEDURAL HISTORY

         The trial court granted summary judgment dismissing Rotorcraft Leasing, LLC (Rotorcraft) and Catlin Insurance Company, Inc.'s (Catlin) suit against H.E.R.O.S., Inc. (HEROS) and Delavan, Inc. (Delavan) for the loss of a 2008 Bell Helicopter, Model 206 L-4, owned by Rotorcraft. The helicopter was forced to make an emergency landing in the Gulf of Mexico on September 14, 2010, after it lost power. The pilot escaped uninjured, but the helicopter sank to the bottom of the gulf. Catlin paid its insured's claim for the loss valued at $2, 000, 000, less Rotorcraft's deductible of $300, 000.

         Rotorcraft first sued HEROS on September 9, 2011, alleging its claims present an admiralty and maritime matter under the "savings to suitors" clause of the Judiciary Act of 1789, and asserting it is entitled to relief under the Louisiana Products Liability Act and/or Louisiana's redhibition law. Rotorcraft later amended its suit adding Delavan as a defendant, maintaining Delavan manufactured the fuel nozzle alleged to be defective and alleged to be the cause of the crash. Rotorcraft settled its claims with HEROS and it is no longer a party to the litigation.

         Delavan filed a motion for partial summary judgment, motion for summary judgment, and a peremptory exception of prescription asserting: (1) Rotorcraft's products liability claim is barred by the East River[1] doctrine under federal maritime law; (2) Rotorcraft does not have a cause of action for redhibition because its purchase of the allegedly defective fuel nozzle was not a contract of sale but was, instead, a contract for repair services; and (3) any redhibition claim which Rotorcraft might have for the allegedly defective part is barred by La.Civ.Code art. 3499, ten-year liberative prescriptive period. The trial court granted partial summary judgment dismissing Rotorcraft's products liability claim applying the East River doctrine, and granted the motion for summary judgment dismissing Rotorcraft's contract-based redhibition claim. The trial court found it unnecessary to rule on the exception of prescription rendered moot by its summary judgment ruling.

         Rotorcraft appeals asserting the trial court erred as a matter of law in granting the motions. It asserts that Louisiana law on redhibition offers an available remedy to Rotorcraft if the fuel nozzle was defective and the cause of the crash. It also asserts the East River doctrine does not bar recovery of Rotorcraft's products liability claim because the allegedly defective nozzle did not result only in an economic loss of the defective nozzle itself but of the separate and distinct helicopter. Rotorcraft also asserts it timely filed suit and its claims are not barred by prescription.

         ANALYSIS

         We find the trial court erred as a matter of law in granting the motions for summary judgment. Louisiana Code of Civil Procedure Article 966(A)(3) (emphasis added) provides:

After an opportunity for adequate discovery, a motion for summary judgment shall be granted if the motion, memorandum, and supporting documents show that there is no genuine issue as to material fact and that the mover is entitled to judgment as a matter of law.

          "'Appellate courts review summary judgments de novo under the same criteria that govern the district court's consideration of whether summary judgment is appropriate.' Elliott v. Continental Cas. Co., 06-1505, p. 10 (La. 2/22/07), 949 So.2d 1247, 1253 (quoting Reynolds v. Select Props., Ltd., 93-1480 (La. 4/11/94), 634 So.2d 1180, 1183)." Field v. Lafayette Par. Sch. Bd., 16-495 p. 3 (La.App. 3 Cir. 11/9/16), 205 So.3d 986, 988, writ denied, 16-2141 (La. 1/13/17), __ So.3d __. We find the trial court erred as a matter of law in granting Delavan's motion for summary judgment based on its finding that Rotorcraft's potential products liability claim is barred under the East River doctrine. We also find it legally erred in finding Rotorcraft was barred from raising its claim under Louisiana's redhibition law.

         Products liability claim.

         The United States Supreme Court decision in East River would only bar Rotorcraft's potential products liability claim if the facts demonstrate that the allegedly defective product caused harm to itself and no other. Such is not the case. Rotorcraft purchased the allegedly defective fuel nozzle separate and distinct from the helicopter which it purchased many years prior. While it is true that the fuel nozzle is a component part of the engine, and the engine is part of the helicopter, it does not necessarily follow, as Delavan asserts, that in this instance we must treat the helicopter as the product rather than the fuel nozzle. The receipt for Rotorcraft's purchase of the fuel nozzle from HEROS dated March 25, 2010, indicates the item was "sold to" and delivered to Rotorcraft, for a purchase price of $1, 750 plus a used part. It is elementary that Rotorcraft's purchase of this product is a sale under Louisiana law. See La.Civ.Code art. 2439. Rotorcraft alleges this product failed, and its failure caused the helicopter to make a forced landing in the Gulf of Mexico and sink to the bottom of the gulf. The allegedly faulty product caused much damage to "other property, " not just damage to itself, and endangered the life of the pilot. The federal courts have clearly recognized that East River does not bar recovery in tort for such a loss.

East River, however, did not completely exclude tort claims for economic harm caused by a defective product. See Thomas J. Schoenbaum, Admiralty and Maritime Law § 3-11 at 120 (2d ed. 1994) ("[T]he East River court did not completely exclude tort product liability claims for purely economic losses."). A plaintiff may maintain a tort cause of action in admiralty when a defective product causes damage to "other property." East River, 476 U.S. at 867 ("In this case, there was no damage to 'other' property."); Saratoga Fishing, 117 S.Ct. at 1785 ("[A]n admiralty tort plaintiff cannot recover for the physical damage the defective product causes to the 'product itself'; [sic] but the plaintiff can recover for physical damage the product causes to 'other property.' "). In order to determine what constitutes "other property, " the Court must first define what is the allegedly defective "product." See Sea-Land Service, Inc. v. General Electric Co., 134, F.3d 149, 152 (3d Cir.1998).

Transco Syndicate No. 1, Ltd. v. Bollinger Shipyards, Inc., 1 F.Supp.2d 608, 610- 11 (E.D. La.1998) (emphasis added).

         In Transco the United States District Court for the Eastern District of Louisiana addressed the question of what constitutes "other property" and what defines the "product, " relying on the U.S. Supreme Court's holdings in East River and Saratoga Fishing Co. v. J.M. Martinac & Co., 520 U.S. 875, 117 S.Ct. 1783 (1997):

Fortunately, the Supreme Court has somewhat clarified East River's product-other property dichotomy in Saratoga Fishing Co. v. J.M. Martinac & Co., supra. In Saratoga Fishing, the initial purchaser of a vessel added a skiff, fishing net, and other equipment to the M/V Saratoga before selling the vessel with this additional equipment to a subsequent purchaser. When a defective hydraulic system in the vessel's engine room failed, the vessel caught fire and the ship sank. The secondary owner then filed suit against the manufacturer of the hydraulic system and the company that built the vessel. The issue presented to the Supreme Court was whether the skiff, fishing net, and other equipment added by the initial purchaser constituted "other property" under East River. The Court determined that they did:
When a Manufacturer places an item in the stream of commerce by selling it to an Initial User, that item is the 'product itself' under East River. Items added to the product by the Initial User are therefore 'other property, ' and the Initial User's sale of the product to a Subsequent User does not change these characterizations.

         Saratoga Fishing, 117 S.Ct. at 1786.

Transco, 1 F.Supp.2d at 611.

         In Transco, the owner of a tugboat, the MV Lacabi, contracted with Bollinger Shipyard (Bollinger) for repair and refurbishment of its vessel. That contract required that Bollinger install two "Good Runner" diesel engines on the vessel which were purchased by the owner from Diesel Engine & Parts Company (DEPCO). DEPCO bought one of the two engines from Diesel Specialists, Inc. (Diesel). Plaintiffs alleged this engine caused a fire on board the MV Lacabi and sued defendants for breach of contract and breach of warranty. DEPCO filed a third-party complaint against Diesel and a cross-claim against Bollinger alleging improper installation, and products liability under Louisiana products liability law. Diesel asserted the MV Lacabi was the "product" because the owner had contracted for refurbishment of the vessel which included installation of the allegedly defective engine. The owner maintained that it did not purchase the engine from Bollinger, but in fact purchased it from DEPCO who had purchased the engine from Diesel, and that its vessel constituted "other property" entitling it to recover for damages to the vessel. The federal district court found the claim was not barred by the East River doctrine relying on the U.S. Supreme Court's holding in Saratoga Fishing:

The Court [in Saratoga Fishing] therefore distinguished between components added to a product by a manufacturer before its initial sale, see, e.g., East River, 476 U.S. 858, 106 S.Ct. 2295, 90 L.Ed.2d 865; Shipco, Inc. v. Avondale Shipyards, Inc., 825 F.2d 925 (5th Cir.1987), and items added to the product by a subsequent user, see, e.g., Saratoga Fishing, 117 S.Ct. at 1788; Nicor Supply Ships Assocs. v. General Motors Corp., 876 F.2d 501 (5th Cir.1989). See Sea-Land Service, 134 F.3d at 153 (noting the Court's distinction).
This distinction is consistent with the "object of the contract test" adopted by the Fifth Circuit prior to Saratoga Fishing. In Shipco Inc. v. Avondale Shipyards, Inc., 825 F.2d 925, 928 (5th Cir.1987), the Fifth Circuit stated that "[i]n attempting to identify the product, a court must ask 'what is the object of the contract or bargain that governs the rights of the parties?' ". Id. The object of the parties' contract constitutes the "product" under East River. See also Petroleum Helicopters, Inc. v. Avco Corp., 930 F.2d 389, 392 n. 9 ("[T]he phrase 'other property' is construed by looking to the nature of the contract between the parties, and such a determination hence rests upon a contractual interpretation.").
Diesel asserts that the engine that DEPCO provided to Barnacle must be considered a component of the M/V LACABI-the product. Diesel argues that Barnacle contracted with Bollinger to refurbish the M/V LACABI and to install the two used engines Barnacle had purchased from DEPCO. Diesel therefore concludes that the "object" of Barnacle's contract with Bollinger was a completely refurbished and operating M/V LACABI. Diesel therefore asserts that the M/V LACABI is the "product" under East River and that plaintiffs should not be allowed to assert claims in tort simply because the vessel's engines were manufactured separately, sold independently, and subsequently installed into the vessel. Cf. Shipco, 825 F.2d at 929 ("We see no rational reason to give the buyer greater rights to recover economic losses for a defect in the product because the component is designed, constructed, or furnished by someone other than the final manufacturer."). In support of this argument, Diesel relies on the Fifth Circuit's decision in Shipco, 825 F.2d 925, and Petroleum Helicopters v. Avco Corp., 930 F.2d 389 (5th Cir.1991).
In Shipco, the Fifth Circuit dismissed a vessel owner's tort claims against a ship manufacturer and a steering system manufacturer for repair costs incurred due to an alleged design defect in the capscrews contained in the vessel's steering mechanism. Shipco, 825 F.2d at 926. The plaintiff argued that the damage to a vessel's steering system was "other property, " distinct from a defective capscrew. The Fifth Circuit looked to the transactions between the manufacturer and the purchaser and held that "[t]he complete vessels were obviously the objects of the [parties'] contract." Id. at 928. Although the vessels' steering mechanism had been manufactured independently, the vessel purchaser did not negotiate separately for his ships' component parts. The vessels were each purchased as a whole. Accordingly, the court held that each vessel was the "product" and that the plaintiff could not recover under East River.
In Petroleum Helicopters, a helicopter owner sued the manufacturer of a floatation device that had been placed inside its helicopter. The plaintiff alleged that its helicopter capsized when the safety floatation device failed to function during an emergency water landing in the Gulf of Mexico. The owner sought damages for the harm to its helicopter. Relying on Shipco, the Fifth Circuit affirmed the district court's dismissal of the plaintiff's claims. The court explained that the floatation device was part of the integrated helicopter purchased by the plaintiff. The court found that [the] helicopter was the East River product. The floatation device was simply a component part.
Finally, Diesel also relies on ERA Helicopters, Inc. v. Bell Helicopter Textron, Inc.,696 F.Supp. 1096 (E.D.La.1987), in which the court dismissed a helicopter owner's tort claims against the helicopter engine's manufacturer, holding that the engine was a component part of the helicopter. ...

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