In re Air Crash Disaster, Detroit Metro. Airport

• Decision Date: 11 October 1989
• Docket Number: MDL No. 742. Civ. A. No. 87-CV-73263-DT.
• Citation: 757 F. Supp. 804
• Parties: In re AIR CRASH DISASTER AT DETROIT METROPOLITAN AIRPORT ON AUGUST 16, 1987. Carlos VALASQUEZ, Plaintiff, v. NORTHWEST AIRLINES, INC., a foreign corporation, and McDonnell Douglas Corporation, a foreign corporation, Defendants.
• Court: U.S. District Court — Western District of Michigan

757 F. Supp. 804

In re AIR CRASH DISASTER AT DETROIT METROPOLITAN AIRPORT ON AUGUST 16, 1987.

Carlos VALASQUEZ, Plaintiff, v. NORTHWEST AIRLINES, INC., a foreign corporation, and McDonnell Douglas Corporation, a foreign corporation, Defendants.

MDL No. 742. Civ. A. No. 87-CV-73263-DT.

United States District Court, E.D. Michigan, S.D.

October 11, 1989.

Richard Schaden, Arnold D. Portner, Gregory W. Stine, Birmingham, Mich., and Gary M. Bloom, Livonia, Mich., for plaintiff.

Carroll E. Dubuc, Washington, D.C. and Leonard E. Nagi, Detroit, Mich., for defendant, Northwest Airlines, Inc.

John J. Hennelly, Los Angeles, Cal., Donald E. Shely, and Kathryn J. Humphrey, Detroit, Mich., for defendant, McDonnell Douglas Corp.

ORDER

JULIAN ABELE COOK, JR., Chief Judge.

On July 17, 1989, the Defendant, McDonnell Douglas Corporation (MDC), filed a motion for a partial summary judgment which challenges some of the cross-claims that had been raised by the Defendant, Northwest Airlines, Inc. (Northwest), on the basis of an exculpatory clause within the purchase agreement covering the sale of the accident aircraft. In reliance upon this exculpatory clause, MDC requests the Court to dismiss Northwest's cross-claims which sound in negligence, violation of law, negligent misrepresentation, gross negligence, breach of warranty, and strict liability.¹ For the following reasons, MDC's motion for a partial summary judgment is granted.²

I

On May 1, 1980, MDC sold the accident aircraft, a DC-9 series aircraft which bore registration number N312RC to Northwest.³ Under the terms of the purchase agreement, MDC warranted to Northwest that the parts and components on the accident aircraft would be free from defects. Significantly, this warranty was limited to the repair or replacement of any defective part or component within the subject aircraft. See Purchase Agreement DAC 80-11-D, Exhibit C (Aircraft Support Services).⁴

The accident aircraft was ultimately delivered by MDC on December 8, 1982 and thereafter used by Northwest until the crash on August 16, 1987. Subsequent to the accident and the commencement of this litigation, Northwest cross-complained against MDC for contribution and indemnity on the bases of theories of, inter alia, negligence, negligent misrepresentation, strict liability in tort, and breach of warranty. In the motion at bar, MDC generally maintains that the exculpatory clause within the purchase agreement between the parties precludes Northwest from pursuing the foregoing theories of liability.⁵

II

The first issue, which has been presented to this Court, concerns the effect, if any, that should be given to the express choice of law provision within the purchase agreement.⁶ If that choice of law clause is valid, the law of California will govern the interpretation and effect of the exculpatory clause.

It has been long established that a federal court, in a diversity litigation, must apply the law of the forum state and its choice of law rules. Klaxton Co. v. Senator Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1942); Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). As this Court has previously noted, the Michigan Supreme Court recognizes the validity of contractual choice of law provisions if (1) there is a "reasonable relationship" between the chosen state and the transaction, and (2) its enforcement would not offend public policy considerations. Snider v. Lone Star Art Trading Co., Inc., 672 F.Supp. 977, 982 (E.D.Mich.1987), aff'd, 838 F.2d 1215 (6th Cir.1988); see also Parets v. Eaton Corp., 479 F.Supp. 512 (E.D.Mich.1979).

In response, Northwest initially contends that the enforcement of the choice of law clause, which has been advocated by MDC, would violate the public policy of Michigan.⁷ Northwest apparently acknowledges that should the law of California be applicable to this controversy, the exculpatory clause within the parties' purchase agreement could be construed to preclude its claims for indemnity against MDC if the latter is found to be culpable at the liability trial.⁸ Should this occur, Northwest maintains that the legislative purpose behind the Michigan Contribution Statute, M.C.L.A. § 600.2925a which reflects a policy in favor of an equal apportionment of liability among joint tortfeasors, would be offended.

This Court finds no merit in Northwest's position. Northwest supplies no case authority which would establish or even suggest that the Michigan courts would not interpret the exculpatory clause in this case to bar its claims against MDC for indemnity and contribution. Put another way, Northwest has not shown that the substantive law of California and Michigan differ concerning the standards of constructing contractual exculpatory clauses. Absent any variation between the substantive laws of these two states, it does not follow that the application of California substantive law would violate a public policy of Michigan. Indeed, even a variation between the substantive law of the forum and the chosen state would not — standing alone — render the choice of law provision ineffective. E.F. SCOLES & P. HAY, CONFLICT OF LAWS § 18.4 (1984).

This Court finds nothing within the case law of the state of Michigan which would suggest that it would not honor the contractual choice of law provision at issue in this case. Therefore, the law of the State of California will be applied by this Court for the purpose of construing the terms of the exculpatory clause and determining its effect, if any, on Northwest's cross claims against MDC.⁹ See Delta Air Lines, Inc. v. McDonnell Douglas Corporation, 503 F.2d 239, 243 (5th Cir.1974) (determined that Georgia choice of law rules would respect the parties' contractual forum selection clause and applied California law to determine effect of exculpatory clause).

III

California courts have often had occasion to consider the legal effect of MDC's exculpatory clause.¹⁰ In Delta Air Lines, Inc. v. Douglas Aircraft Co., 238 Cal.App.2d 95, 47 Cal.Rptr. 518 (Cal.Ct.App.1965), the California Court of Appeals was asked to determine whether the exculpatory clause insulated the Defendant from any breach of warranty and negligence allegations by Delta Air Lines. These theories of liability had been raised by Delta in an effort to recover its costs that had been expended in connection with the repair of a recently delivered DC-7 aircraft.

The Delta court determined that the exculpatory clause prevented the airline company from pursuing a civil action against Douglas Aircraft under the theories of negligence or breach of warranty. Thereafter, the Court upheld the validity of the exculpatory clause in the face of challenges based on public policy grounds and concluded that the purchase agreement took on an element of a contract of adhesion:

In short, all that is herein involved is the question of which of two equal bargainers should bear the risk of economic loss if the product sold proved to be defective. Under the contract before us, Delta (or its insurance carrier if any) bears that risk in return for a purchase price acceptable to it; had the clause been removed, the risk would have fallen on Douglas (or its insurance carrier if any), but in return for an increased price deemed adequate by it to compensate for the risk assumed. We can see no reason why Delta, having determined, as a matter of its business judgment, that the price fixed justified assuming the risk of loss, should now be allowed to shift the risk so assumed to Douglas, which had either agreed to assume it not been compensated for such an assumption.

Id. at 104, 47 Cal.Rptr. at 524 (footnote omitted).

In Philippine Airlines, Inc. v. McDonnell Douglas Corp., 189 Cal.App.3d 234, 234 Cal.Rptr. 423 (Cal.Ct.App.1987), the California Court of Appeals extended the reasoning of Delta and concluded that the exculpatory clause precluded the airline company from seeking indemnity against the defendant for payments made to personal injury claimants. In Philippine, a DC-10 aircraft, while being operated by Philippine Airlines, Inc. (PAL), apparently failed to properly take-off. As a result of the aborted take-off attempt, a number of the aircraft's passengers sustained personal injuries and, thereafter, filed personal injury claims against PAL. In turn, PAL filed a cross-claim against the defendant in which it sought indemnity based on the alleged negligent manufacture of the aircraft.

The Philippine court rejected the air carrier's argument that the exculpatory clause does not encompass its personal injury indemnity claims and stated:

The wording of the exculpatory clause is unambiguous and its meaning is clear. In it, the Defendant's liability was limited to the remedies set forth in the agreement. Defendant would not otherwise be liable for loss caused by its negligence, which loss would ordinarily include payment of claims filed against Philippine Airlines as a result of the Defendant's negligence. Moreover, the clause further provides that, except as otherwise stated in the agreement, Defendant would not be liable for consequential damages, a term defined by the Commercial Code as including "(a) any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and (b) injury to person or property proximately resulting from any breach of warranty." (Com. Code, § 2715).

....

... Thus, under the terms of the agreement, Defendant is exempt from any loss arising from its negligence, whether or not that loss could be defined as "consequential damages," and whether or not it represented payments for personal injury damages.

Id. at 239, 234 Cal.Rptr. at 424-25 (emphasis in original). Thereafter, the Court concluded that the disclaimer barred PAL's right to recover indemnity from the Defendant under a theory of negligent conduct.

In...