PHI, Inc. v. Apical Indus.
| Decision Date | 07 January 2021 |
| Docket Number | CIVIL ACTION NO. 6:13-cv-00015 |
| Parties | PHI, INC. v. APICAL INDUSTRIES, INC., ET AL. |
| Court | U.S. District Court — Western District of Louisiana |
BY CONSENT OF THE PARTIES
A jury trial was originally scheduled for November 16, 2020 pursuant to remand from the Fifth Circuit Court of Appeals. The trial was to be devoted solely to the issue of whether the defendant, Apical Industries, Inc., can be solidarily liable with the severed former defendant, Rolls-Royce Corporation, against whom the case proceeded in the Southern District of Indiana, for the damages awarded by the jury to the plaintiff, PHI, Inc., in this litigation. Due to the court's Ninth Supplemental Order Regarding Court Operations Under the Exigent Circumstances Created by the Covid-19-Pandemic, which prohibited jury trials in the Western District of Louisiana before the end of 2020, however, the trial date was upset and has not yet been rescheduled. As part of the opinion, the Fifth Circuit stated "[b]ecause the magistrate judge has made no findings relevant to these [choice of law] considerations and the parties have not briefed nor submitted evidence pointing to the laws of any state other than Louisiana for PHI's substantive claims, we proceed on the assumption that Louisiana law applies to these claims."1 The Fifth Circuit also intimated "no view" on any "legal rulings the magistrate judge may deem necessary to pass upon on remand."2 Thus, and with nothing but the utmost respect for the Fifth Circuit, after much thoughtful consideration and a detailed review of all the evidence and records in the cases here and in Indiana, this Court deemed it necessary to test the assumption that Louisiana law applies to the loss allocation between Apical and Rolls-Royce. Having received full briefing from the parties and oral argument on the choice-of-law analysis, and after a full review of the record and evidence in this court and the district court for the Southern District of Indiana, and with a thorough effort to reconcile all rulings from the Indiana court and the Fifth Circuit, this Court now finds that Indiana law applies to liability for consequential damages as well as to the apportionment of loss as between Rolls-Royce and Apical, precluding the applicability of solidary liability under the facts of this case.
The following facts are undisputed. On December 1, 2011, the engine in a helicopter owned by PHI malfunctioned, forcing the pilot to make an emergency landing in the Gulf of Mexico. The pilot activated the helicopter's emergencyflotation system, and the helicopter landed upright in the water. The pilot and passenger escaped the helicopter on life rafts without injury. The helicopter floated for a period of time before the right aft float deflated as the helicopter was being towed to a nearby oil production platform. After the float deflated, the helicopter capsized, rendering the helicopter a total loss.
This lawsuit began in December 2012 when PHI filed suit against Rolls-Royce Corporation, Apical Industries, Inc., and Offshore Helicopter Support Services, Inc. ("OHS") in Louisiana state court. With the consent of Rolls-Royce, Apical and OHS removed the action, and it was determined that this court has subject-matter jurisdiction under 28 U.S.C. § 1332.3
PHI alleged that the helicopter's engine was manufactured by defendant Rolls-Royce, that the engine contained one or more redhibitory defects, and that the defects - including but not limited to the engine's No. 2 bearing - caused the engine failure that necessitated the emergency water landing and resulted in the loss of the helicopter. PHI alleged that the helicopter's float system was designed, manufactured, and sold by defendant Apical, that the float system contained redhibitory defects, and that the defects in the float system resulted in the helicopterinverting into the saltwater of the Gulf of Mexico, resulting in the loss of the helicopter. PHI further alleged that OHS repaired, reworked, and overhauled the flotation system, that OHS's negligence in doing so caused the flotation system to fail, and that OHS's negligence resulted in the loss of the helicopter. In its amended complaint, PHI deleted the negligence claim against OHS and asserted a breach of contract claim against OHS in its place.
PHI specifically - but not exclusively - alleged that the helicopter's engine failed due to a problem with the No. 2 bearing. The No. 2 bearing on the helicopter at the time of the crash was a replacement part that PHI had purchased from Rolls-Royce. A limited warranty on the No. 2 bearing was issued by Rolls-Royce at the time of its purchase. The limited warranty reads as follows, in pertinent part:
In July 2013, Rolls-Royce filed a motion to dismiss or, alternatively, to transfer the action to the Southern District of Indiana,7 based on the forum selection clause in the limited warranty. The motion was denied as premature.8
After the United States Supreme Court decided Atlantic Marine Construction, Inc. v. United States District Court for the Western District of Texas, 571 U.S. 49 (2013), Rolls-Royce filed a motion seeking severance of PHI's claim against it and transfer of that claim to Indiana.9 Finding that enforcement of the forum selection clause in Rolls-Royce's limited warranty would, under the facts of this case, beunfair, unjust, and unreasonable, the motion was denied.10 Rolls-Royce then filed a petition for mandamus to the Fifth Circuit, which was granted, and PHI's claim against Rolls-Royce was severed and transferred to the United States District Court for the Southern District of Indiana, Indianapolis Division.11
After PHI's claim against Rolls-Royce was severed and transferred to Indiana, Rolls-Royce filed a motion for summary judgment, which was granted in part and denied in part in December 2016.12 In support of the motion, Rolls-Royce argued that it was entitled to summary judgment for three reasons: because the limited warranty for the No. 2 bearing excluded Rolls-Royce's potential liability for the loss of the helicopter, because the economic loss doctrine barred PHI's claims, and because the destruction of PHI's helicopter was due to a superseding cause (the failure of the float system).
The court explained that PHI was pursuing a breach of warranty claim against Rolls-Royce under Indiana law.13 The court then held that, because the doctrine ofeconomic loss applies only in the context of tortious injury while PHI's claim against Rolls-Royce was contractual in nature, summary judgment in favor of Rolls-Royce on that issue was warranted.14
Rolls-Royce argued that the failure of the flotation system was an unforeseen superseding cause that led to the loss of the helicopter, while PHI argued that the foreseeability of its helicopter capsizing following a water landing was an issue of fact for the jury to resolve. The court agreed with PHI and found that there was a genuine issue of material fact precluding summary judgment in Rolls-Royce's favor regarding the doctrine of superseding cause.15
Three separate issues were addressed regarding the limited warranty: the scope of the warranty, whether the warranty failed in its essential purpose, and whether the warranty was unconscionable. While Rolls-Royce argued that it was not liable to PHI because the limited warranty for the No. 2 bearing disclaimed any implied warranties for merchantability and gave PHI its exclusive remedy, i.e. repair of the bearing itself, PHI argued that the limited warranty did not foreclose all of its claims against Roll-Royce because the engine also contained an alleged design defect that was not subject to the limited warranty. The court recognized that PHI's amended complaint articulated a claim based on defects in the engine's manufactureor design that included but were not limited to the No. 2 bearing. Thus, the court held that "because the Limited Warranty applies only to the No. 2 bearing, a genuine issue of material fact remains regarding whether the engine contained a design defect."16 The court denied summary judgment in Rolls-Royce's favor on this issue.
PHI alternatively argued that, even if the limited warranty applied to the entire engine, the limited warranty was inapplicable because it failed in its essential purpose. The court noted that whether a limited remedy (such as the limited warranty at issue in this case) fails of its essential purpose is an issue of fact that a jury may determine.17 PHI argued that the limited warranty failed to serve its essential purpose because the total loss of the engine prevented any repair that might have been made to the No. 2 bearing, while Rolls-Royce argued that, under Indiana law, an exclusion of consequential...
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