Champlain Enterprises, Inc. v. U.S.

• Decision Date: 20 November 1996
• Docket Number: No. 94-CV-1356.,94-CV-1356.
• Citation: 945 F.Supp. 468
• Parties: CHAMPLAIN ENTERPRISES, INC., d/b/a CommutAir, Plaintiff, v. UNITED STATES of America and Beech Aircraft Company, Defendants.
• Court: U.S. District Court — Northern District of New York

945 F.Supp. 468

CHAMPLAIN ENTERPRISES, INC., d/b/a CommutAir, Plaintiff, v. UNITED STATES of America and Beech Aircraft Company, Defendants.

No. 94-CV-1356.

United States District Court, N.D. New York.

November 20, 1996.

COPYRIGHT MATERIAL OMITTED

Kroll & Tract, New York City (William C. Brown, of counsel), for Plaintiff.

Roemer, Wallens & Mineaux, LLP, Albany, NY (Matthew J. Kelly, of counsel), for Defendant Beech Aircraft Corp.

MEMORANDUM-DECISION & ORDER

McAVOY, Chief Judge.

I. BACKGROUND

This case arises from the crash of CommutAir Flight 4821. On January 3, 1992, the aircraft was on approach to Adirondack Airport in Saranac Lake, New York. It struck a mountain approximately 4.3 miles short of the runway and was destroyed. Two persons died and two persons survived the crash. In a related case, Momen, et al. v. U.S., et al. (94-CV-654), one of the survivors of the crash brought suit in this Court alleging negligence on the part of USAir, Champlain Enterprises (the plaintiff here), Beech Aircraft, and the United States.

Plaintiff, a New York corporation, is the owner/operator of the aircraft that crashed. Named as defendants in this action are the United States and Beech Aircraft — the manufacturer of the plane. Beech Aircraft Corp. ("Beech") is a Kansas corporation with its principle place of business in Wichita, Kansas. By Order dated October 15, 1996, this Court granted co-defendant United States' Motion for Summary Judgment and dismissed all claims against the United States in this action.

Currently pending before this Court is defendant Beech Aircraft's Motion to Dismiss for failure to state a claim and Plaintiff's Cross-Motion to Amend its Complaint, for a second time, to state additional causes of action against Beech Aircraft.

Plaintiff's Second and Third Causes of Action state claims against Beech. Plaintiff's Second Cause of Action asserts negligence in the design and manufacture of the aircraft's Instrument Landing System ("ILS") components as well as failure to instruct and warn concerning these deficiencies. Plaintiff's Third Cause of Action sounds in strict liability, in that Beech is alleged to have sold a product that was unreasonably dangerous. Plaintiff's proposed Second Amended Complaint seeks to add two additional causes of action for breach of express and implied warranties.

II. DISCUSSION

Defendant seeks dismissal of all claims contained in the Second and Third Causes of Action for failure to state claims upon which relief can be granted. In addition, Defendant opposes Plaintiff's motion to amend the Complaint on the grounds that Plaintiff's delay is prejudicial. The crux of Beech's dismissal argument is that a plaintiff cannot recover from the manufacturer of a product, for the loss of the product itself, based on theories of strict products liability or negligence.

A. Motion To Dismiss

Federal Rule of Civil Procedure 12(b)(6) provides that a cause of action shall be dismissed if the complaint fails "to state a claim upon which relief can be granted." In analyzing a motion to dismiss, the facts alleged by the plaintiff are assumed to be true and must be liberally construed in the light most favorable to the plaintiff. See, e.g., Easton v. Sundram, 947 F.2d 1011, 1014-15 (2d Cir. 1991), cert. denied, 504 U.S. 911, 112 S.Ct. 1943, 118 L.Ed.2d 548 (1992). While the court need not accept mere conclusions of law, the court should accept the pleader's description of what happened along with any conclusions that can reasonably be drawn therefrom. See Murray v. City of Milford, 380 F.2d 468 (2d Cir.1967).

Furthermore, when a party makes a Rule 12(b)(6) motion to dismiss, the court will limit its consideration to the facts asserted on the face of the complaint. Cosmas v. Hassett, 886 F.2d 8, 13 (2d Cir.1989). A complaint will not be dismissed for failure to state a claim unless it appears, beyond a doubt, that the plaintiff can prove no set of facts that would entitle them to relief. See Wanamaker v. Columbian Rope Co., 740 F.Supp. 127 (N.D.N.Y.1990).

With this standard in mind, the Court will address the sufficiency of Plaintiff's Second and Third Causes of Action.

B. Plaintiff's Second and Third Causes of Action

Plaintiff's Second and Third Causes of Action state claims against Beech for negligence and strict products liability. As an initial matter, the Court must determine what law to apply in a situation where an aircraft manufactured and sold in Kansas, by Kansas corporations, is operated by a New York corporation and crashes in New York State.

i. Choice of Law Analysis

In a diversity action, a federal court must apply the substantive law of the state in which it sits. See Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Because choice of law rules are substantive, we must apply the law that a New York State court would apply. Klaxon Co. v. Stentor Elec. Manuf. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941).

Here, Plaintiff argues that Kansas law should apply because of the choice-of-law provision in the aircraft sale agreement between Champlain and Beech Acceptance Corporation (not a defendant here). Although New York law gives full effect to parties' choice-of-law provisions, see Woodling v. Garrett Corp., 813 F.2d 543, 551 (2d Cir. 1987), the language in the sale agreement here is not dispositive. Under New York law, a choice-of-law provision indicating that a contract will be governed by a certain body of law does not dictate the law that will govern non-contract based claims. See Krock v. Lipsay, 97 F.3d 640, 644 (2d Cir. 1996); Klock v. Lehman Bros. Kuhn Loeb Inc., 584 F.Supp. 210, 215 (S.D.N.Y.1984) ("[I]t has been held in New York that a contractual choice of law provision governs only a cause of action sounding in contract.") (citing Knieriemen v. Bache Halsey Stuart Shields, Inc., 74 A.D.2d 290, 427 N.Y.S.2d 10, 12-13 (1st Dep't), lv. denied, 50 N.Y.2d 1021, 431 N.Y.S.2d 812, 410 N.E.2d 745 (1980)).

Under New York law, "in order for a choice-of-law provision to apply to claims for tort arising incident to the contract, the express language of the provision must be `sufficiently broad' as to encompass the entire relationship between the contracting parties." Krock, 97 F.3d at 645 (citing Turtur v. Rothschild Registry Int'l, Inc., 26 F.3d 304, 309-10 (2d Cir.1994)). Here, the choice-of-law clause in the parties' agreement states only that "[t]his Agreement shall be governed by the laws of the State of Kansas." (Brown Aff. Exh. A, at 9.) This language can not be read broadly enough to apply to negligence and products liability claims. Accord, Krock, 97 F.3d at 644 (holding that a similarly worded contractual provision does not cover fraudulent misrepresentation claims). Consequently, the Court must look to New York law to determine the body of law properly applicable to the present controversy.

In New York, the traditional choice of law rule for torts has been lex loci delicti, which mandates that a court apply the law of the state where the tort occurred. See Hadar v. Concordia Yacht Builders, 886 F.Supp. 1082, 1093 (S.D.N.Y.1995) (citing Schultz v. Boy Scouts of Am., Inc., 65 N.Y.2d 189, 491 N.Y.S.2d 90, 94, 480 N.E.2d 679, 682 (1985)). Nevertheless, under New York's more "recent" choice-of-law methodology, "New York has adopted an `interest analysis,' which requires that [] `the law of the jurisdiction having the greatest interest in the litigation ... be applied.'" Kalb, Voorhis & Co. v. American Fin. Corp., 8 F.3d 130, 132 (2d Cir.1993) (quoting Intercontinental Planning, Ltd. v. Daystrom, Inc., 24 N.Y.2d 372, 300 N.Y.S.2d 817, 823, 248 N.E.2d 576, 582 (1969)).

Initially, two separate inquiries are required to determine the greater interest: "(1) what are the significant contacts and in which jurisdiction are they located; and, (2) whether the purpose of the law is to regulate conduct or allocate loss." Padula v. Lilarn Properties Corp., 84 N.Y.2d 519, 620 N.Y.S.2d 310, 311, 644 N.E.2d 1001, 1002 (1994) (citing Schultz, 491 N.Y.S.2d at 95-96, 480 N.E.2d at 684-85).

Applying the second prong of New York's interest test first, it is clear that the purpose of negligence and product liability laws is to both regulate conduct and allocate loss. It is equally clear that both New York and Kansas have similar interests in regulating conduct and air safety. What is not clear, however, is how each state proposes to regulate that conduct through loss allocation. For example, Plaintiff concedes that if New York products liability and negligence law applies, it has "a significant hurdle to overcome" to recover economic losses associated with the destruction of the aircraft. (Plt's Mem. of Law in Support of Cross-Motion to Amend at 5) (citing Bocre Leasing Corp. v. General Motors Corp., 84 N.Y.2d 685, 621 N.Y.S.2d 497, 645 N.E.2d 1195 (1995) (denying recovery for purely economic losses based on strict liability and negligence)). Concomitantly, Plaintiff argues that Kansas law allows recovery for economic damages in this instance.¹

The Court notes that any approach that relies on a bright line between laws that regulate conduct and those that allocate loss is in many ways intuitively unsound. In essence, all laws regulate conduct to some degree. Even "purely" loss allocative laws affect conduct indirectly by acting as punishment and/or incentive. To classify a law as one or the other is in large degree an arbitrary determination. For example, the products liability and negligence standards at issue here regulate conduct, but the potential limitation on damages serves a loss allocation function. Simply labeling the law in question as loss-allocative or conduct-regulating does not end the inquiry.

Ultimately, under New York choice-of-law rules, the decision as to what law is to be applied turns on which state has the greatest interest in its law's application. See Miller v. Miller, 22 N.Y.2d 12, 290 N.Y.S.2d...