Precision Gear Co. v. Cont'l Motors, Inc.

• Decision Date: 12 July 2013
• Docket Number: 1110786.
• Citation: 135 So.3d 953
• Parties: PRECISION GEAR COMPANY, Precision Gear LLC, and General Metal Heat Treating, Inc. v. CONTINENTAL MOTORS, INC.
• Court: Alabama Supreme Court

135 So.3d 953

PRECISION GEAR COMPANY, Precision Gear LLC, and General Metal Heat Treating, Inc.

v.CONTINENTAL MOTORS, INC.

1110786.

Supreme Court of Alabama.

July 12, 2013.

Edward S. Sledge III and Brian P. McCarthy of McDowell Knight Roedder & Sledge LLC, Mobile, for appellants Precision Gear LLC and Precision Gear Company; and Steven F. Casey and David A. Lester of Jones, Walker, Waechter, Poitevent, Carrère & Denègre LLP, Birmingham, for appellant General Metal Heat Treating, Inc.

Edward A. Dean, Sherri Rich Ginger, Mark B. Roberts, and Timothy A. Heisterhagen of Armbrecht Jackson LLP, Mobile, for appellee.

MAIN, Justice.

Precision Gear Company, Precision Gear LLC, and General Metal Heat Treating, Inc. (hereinafter collectively referred to as “the gear manufacturers”), third-party defendants in the underlying action, were granted permission to appeal from the trial court's interlocutory order denying their motion to dismiss the third-party claims against them filed by Continental Motors, Inc. See Rule 5, Ala. R.App. P. The trial court certified the following controlling question of law:

“In an action for non-contractual indemnification arising from an accident and alleged damage[ ] in Oklahoma, does Alabama's six year statute of limitation for implied contract actions control because Oklahoma law considers Oklahoma common law and Oklahoma statutory claims for indemnity as claims based upon contract implied in law or quasi-contract, or does Alabama's two year statute of limitation for tort actions control?”

We conclude that Alabama's two-year statute of limitations applies in this action and that Continental Motors' claims against the gear manufacturers are therefore time-barred. We reverse and remand.

I. Factual Background and Procedural History

On July 24, 2005, an aircraft accident occurred in Ada, Oklahoma. The accident was caused by the failure of one of two engines on the aircraft. The accident resulted in the deaths of the three persons who had been aboard the aircraft (hereinafter referred to as “the decedents”). All the litigation concerning the 2005 aircraft accident has taken place in Alabama. The decedents' personal representatives filed an action in the Mobile Circuit Court in 2007 alleging wrongful death and defective product (“the Womack litigation”) and naming as defendants Cessna Aircraft Company, Teledyne Continental Motors, Inc., Tulsair Beechcraft, Inc., Precision Gear Company, Precision Gear LLC (Precision Gear Company and Precision Gear LLC are hereinafter referred to as “Precision Gear”), and General Metal Heat Treating, Inc. The central allegation in the Womack litigation was that the crankshaft gear in the right engine was defective and that this defect caused the accident. Cessna manufactured the aircraft; Teledyne Continental manufactured the engine that failed; Tulsair Beechcraft installed the engine on the aircraft; Precision Gear manufactured the gear alleged to have been faulty; and General Metal heat-treated that gear. All the defendants settled the claims against them in the Womack litigation.

In June 2011, Tulsair Beechcraft sued Continental Motors in the Mobile Circuit Court, seeking statutory indemnity under Oklahoma law.¹ Tulsair Beechcraft contended it was not negligent, in that it received the allegedly defective aircraft engine fully assembled and merely installed it on the aircraft. Tulsair Beechcraft further contended that disassembly of an engine in order to check each part for potential defects was neither required nor prudent and, therefore, that it was entitled to reimbursement for its litigation expenses and the $250,000 it paid to settle the claims asserted against it in the Womack litigation. Continental Motors then filed what the trial court described in the controlling question of law in this case as “non-contractual indemnification” claims against the gear manufacturers seeking to recover the $4,974,036.25 Teledyne Continental had paid to defend and settle the Womack litigation.² Continental Motors alleges that the defective crankshaft gear failed to meet the applicable specifications it provided to Precision Gear for the fabrication of the gear and to General Metal for the heat treatment of the gear.

Precision Gear and General Metal moved separately to dismiss Continental Motors' indemnity claims. They argued, among other things, that Continental Motors' indemnity claims are time-barred by Alabama's two-year statute of limitations for indemnity actions arising from tort claims. Continental Motors opposed the motions, arguing that Oklahoma substantive law classifies indemnity claims as quasi-contractual and, therefore, that Alabama's six-year statute of limitations for contract claims governs its indemnity claims.

The trial court determined that because an indemnity action is derived from the principal claim, an indemnity action should be governed by the law of the place where the principal claim arose. The principal claim in this case was the wrongful-death claim, and there is no dispute that the aircraft accident and the decedents' deaths occurred in Oklahoma. Relying on cases from other jurisdictions because it found no Alabama law on point, the trial court concluded that a claim for indemnity is governed by the law of the state where the underlying tort occurred. The trial court further concluded that it must apply an Alabama statute of limitations. The trial court then concluded that because Oklahoma law considers an action for indemnityone based on quasi-contract, the applicable statute of limitations was Alabama's six-year statute of limitations for contract actions. Based on those conclusions, the trial court held that Continental Motors' indemnity claims were not time-barred and denied the gear manufacturers' motions to dismiss.

The gear manufacturers then filed a joint motion asking the trial court to certify the statute-of-limitations issue for an interlocutory appeal to this Court pursuant to Rule 5, Ala. R.App. P. After a response from Continental Motors, the trial court granted the joint motion and certified the previously quoted controlling question of law for permissive appeal. This Court granted the gear manufacturers' petition for permission to appeal.

II. Standard of Review

“Under Rule 5, Ala. R.App. P., a trial judge should certify for appeal an interlocutory order when that order ‘involves a controlling question of law as to which there is substantial ground for difference of opinion, [and when] an immediate appeal from the order would materially advance the ultimate termination of the litigation and ... would avoid protracted and expensive litigation.’ The trial court's action in certifying an order pursuant to Rule 5 is discretionary....”

Ex parte Liberty Nat'l Life Ins. Co., 825 So.2d 758, 762 (Ala.2002). “In conducting our de novo review of the question presented on a permissive appeal, ‘this Court will not expand its review ... beyond the question of law stated by the trial court. Any such expansion would usurp the responsibility entrusted to the trial court by Rule 5(a)[, Ala. R.App. P.].’ BE&K, Inc. v. Baker, 875 So.2d 1185, 1189 (Ala.2003).” Regions Bank v. Kramer, 98 So.3d 510, 513 (Ala.2012). Therefore, the only issue before this Court is the issue framed in the previously quoted question of law.

III. Analysis

In a conflict-of-laws situation, the principles that govern which state's substantive law applies to the case before us are well settled.

“Alabama law follows the traditional conflict-of-law principles of lex loci contractus and lex loci delicti. See Liberty Mut. Ins. Co. v. Wheelwright, 851 So.2d 466 (Ala.2002). Under the principles of lex loci contractus, a contract is governed by the law of the jurisdiction within which the contract is made. Cherry, Bekaert & Holland v. Brown, 582 So.2d 502 (Ala.1991). Under the principle of lex loci delicti, an Alabama court will determine the substantive rights of an injured party according to the law of the state where the injury occurred. Fitts v. Minnesota Mining & Mfg. Co., 581 So.2d 819 (Ala.1991).”

Lifestar Response of Alabama, Inc. v. Admiral Ins. Co., 17 So.3d 200, 213 (Ala.2009) (footnote omitted). The trial court so stated, and we agree. We also agree with the trial court's conclusion that “a claim for contribution or indemnity is governed by the law of the state where the underlying tort occurred.” ³

As to matters of procedure, however, Alabama applies its own procedural law, i.e., the law of the forum. Middleton v. Caterpillar Indus., Inc., 979 So.2d 53, 57 (Ala.2007) (“Although lex loci delicti governs substantive law, lex fori—the law of the forum—governs procedural matters.”). This Court has also held that, in most instances, statutes of limitations are procedural matters.

“Thus, we will apply another state's statute of limitations only when it is demonstrated that ‘the limitation is so inextricably bound up in the statute creating the right that it is deemed a portion of the substantive right itself.’ ”

Etheredge v. Genie Indus., Inc., 632 So.2d 1324, 1327 (Ala.1994) (quoting Cofer v. Ensor, 473 So.2d 984, 987 (Ala.1985)). In denying the gear manufacturers' motions to dismiss, the trial court concluded:

“Continental [Motors] claims indemnity from Precision [Gear] and [General Metal] pursuant to both Oklahoma common law and Okla. Stat. tit. 12, § 832.1. Section 832.1(A) states that ‘[a] manufacturer shall indemnify and hold harmless a seller against loss arising out of a product liability action, except for any loss caused by the seller's negligence, intentional misconduct, or other act or omission, such as negligently modifying or altering the product, for which the seller is independently liable.’ Oklahoma common law also ‘recognize[s] a right of indemnity when one—who was only constructively liable to the injured party and was in no manner responsible for the harm—is compelled to pay damages because of the tortious act by another.’ Braden v....