Tokio Marine and Fire Ins. Co., Ltd. v. McDonnell Douglas Corp.

• Citation: 617 F.2d 936
• Decision Date: 06 March 1980
• Docket Number: Nos. 17,22,D,s. 17
• Parties: 28 UCC Rep.Serv. 402 The TOKIO MARINE AND FIRE INSURANCE COMPANY, LIMITED, et al., Plaintiffs- Appellants-Cross-Appellees, v. McDONNELL DOUGLAS CORPORATION, Defendant-Appellee-Cross-Appellant. McDONNELL DOUGLAS CORPORATION, Defendant and Third-Party Plaintiff- Appellee-Cross-Appellant, v. JAPAN AIR LINES CO., LTD., Third-Party Defendant-Cross-Appellee. ockets 79-7045, 79-7065.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 936

617 F.2d 936

28 UCC Rep.Serv. 402

The TOKIO MARINE AND FIRE INSURANCE COMPANY, LIMITED, et

al., Plaintiffs- Appellants-Cross-Appellees, v. McDONNELL DOUGLAS CORPORATION, Defendant-Appellee-Cross-Appellant.

McDONNELL DOUGLAS CORPORATION, Defendant and Third-Party Plaintiff- Appellee-Cross-Appellant, v. JAPAN AIR LINES CO., LTD., Third-Party Defendant-Cross-Appellee.

Nos. 17, 22, Dockets 79-7045, 79-7065.

United States Court of Appeals Second Circuit.

Argued Oct. 26, 1979.

Decided March 6, 1980.

George N. Tompkins, Jr., (Condon & Forsyth, Lawrence Mentz and Desmond T. Barry, Jr., New York City, on the brief), for plaintiffs-appellants-cross-appellees Tokio Marine and Fire Insurance Co., Ltd., et al., and third-party defendant-cross-appellee Japan Air Lines Co., Ltd.

Harold U. McCoy, Mineola, N. Y. (Scott Fairgrieve and Crowe, McCoy, Agoglia, Fogarty & Zweibel, Mineola, N. Y., on the brief) for defendant and third-party plaintiff-appellee-cross-appellant McDonnell Douglas Corp.

Before MOORE, TIMBERS, and VAN GRAAFEILAND, Circuit Judges.

VAN GRAAFEILAND, Circuit Judge:

On November 28, 1972, a DC-8 plane, manufactured by McDonnell Douglas Corporation (McDonnell) and owned and operated by Japan Air Lines (JAL), crashed during take-off in Moscow, U.S.S.R., killing fifty-two passengers and seriously injuring ten others. Numerous lawsuits were brought against McDonnell and JAL on behalf of injured and deceased passengers, and all were settled. McDonnell, JAL, and JAL's subrogated insurance carriers, (hereinafter collectively referred to as Tokio Marine) are now litigating their own differences. Tokio Marine seeks recovery from McDonnell for loss of JAL's plane and contribution or indemnity for payments made in settlement of the passenger claims. McDonnell, in turn, seeks contribution or indemnity from Tokio Marine and JAL for payments it made on passenger claims.

The district court, Motley, J., granted summary judgment in favor of McDonnell on Tokio Marine's claims and in favor of Tokio Marine and JAL on McDonnell's counterclaim and crossclaim. We affirm.

The Property Damage Claim

Between 1956 and 1970, JAL, one of the largest airlines in the world, purchased forty-one DC-8 planes from McDonnell. The plane that crashed was the twenty-seventh in this series and was delivered to JAL on July 18, 1969. The contracts of purchase were lengthy and detailed, with hundreds of specifications, terms, and conditions, all of which were reviewed and approved by JAL's technical and legal departments. In addition, representatives of JAL were permitted to be present at the McDonnell plant throughout the manufacturing process.

The terms of McDonnell's sales warranties were negotiable and depended to some extent upon what its purchasers were willing to pay; the broader warranties commanded a higher price. See, e. g., Delta Air Lines, Inc. v. Douglas Aircraft Co., 238 Cal.App.2d 95, 103 & n.5, 47 Cal.Rptr. 518, 523 & n.5 (1965). In the warranty article of the contract for the plane that crashed, McDonnell agreed to repair or replace any defective equipment that became apparent to JAL within one year or 2,500 flying hours, whichever expired first after delivery of the aircraft, provided that the defect was reported to McDonnell in writing within sixty days after it became apparent. The article also provided:

"THE WARRANTY PROVIDED IN THIS ARTICLE AND THE OBLIGATIONS AND LIABILITIES OF SELLER THEREUNDER ARE EXCLUSIVE AND IN LIEU OF AND BUYER HEREBY WAIVES ALL OTHER REMEDIES, WARRANTIES, GUARANTIES OR LIABILITIES, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE (INCLUDING WITHOUT LIMITATION ANY OBLIGATIONS OF THE SELLER WITH RESPECT TO FITNESS, MERCHANTABILITY AND CONSEQUENTIAL DAMAGES) OR WHETHER OR NOT OCCASIONED BY SELLER'S NEGLIGENCE. THIS WARRANTY SHALL NOT BE EXTENDED, ALTERED OR VARIED EXCEPT BY A WRITTEN INSTRUMENT SIGNED BY SELLER AND BUYER."

Among the equipment covered by the one year or 2,500 hour repair or replacement warranty was the plane's spoiler system, which consisted of five rectangular panels on each wing that could be raised when the plane was landing to assist in bringing it to a halt. Because the spoilers interfered with the air flow over the wings, they were not to be used when the plane was in flight. To guard against this pilot error, the contract specifications called for a "heavy spring load" in the spoiler activating mechanism. Inadvertent extension of the spoilers was also to be prevented by some form of interlocking device. For purposes of the summary judgment motion, McDonnell conceded that neither the spring load nor the interlock was installed. It is undisputed, however, that, although JAL operated the plane for almost three and one-half years, it made no written complaint to McDonnell about the absence of these devices.

Tokio Marine contended below that the absence of the spring load and interlock was one of the producing causes of the crash and that therefore it was entitled to recover from McDonnell the full value of the plane. It gave several reasons why that recovery was not precluded by the warranty provisions above quoted. The district judge was not convinced, and we are similarly unpersuaded.

Tokio Marine asserted that its first cause of action was based upon strict liability in tort rather than breach of warranty and that California law, which the parties agree is applicable here, prohibits a manufacturer from disclaiming strict tort liability. We agree with the district judge that this argument is based upon a misconception of California law. Despite the absence of a definitive holding by the California Supreme Court, the United States Court of Appeals for the Ninth Circuit has concluded that the doctrine of strict tort liability would not be applied in California in a case where the sales contract was between two large corporations who had negotiated from positions of relatively equal strength and the plaintiff's claim was for damage to the property sold. Scandinavian Airlines System v. United Aircraft Corp., 601 F.2d 425, 429 (9th Cir. 1979). The court found support for its position in Kaiser Steel Corp. v. Westinghouse Electric Corp., 55 Cal.App.3d 737, 746-48, 127 Cal.Rptr. 838, 844-45 (1976), a decision of the California Court of Appeal.

It is difficult to fault the Ninth Circuit's holding. The court thoroughly analyzed California law, and its conclusion is supported by reasoning that has found acceptance in a number of jurisdictions. See, e. g., Fredonia Broadcasting Corp. v. RCA Corp., 481 F.2d 781, 797 (5th Cir. 1973); Southwest Forest Industries, Inc. v. Westinghouse Electric Corp., 422 F.2d 1013, 1020-21 (9th Cir.), cert. denied, 400 U.S. 902, 91 S.Ct. 138, 27 L.Ed.2d 138 (1970); Sioux City Community School Dist. v. International Tel. & Tel. Corp., 461 F.Supp. 662, 664-65 (N.D.Iowa 1978); Ebasco Services, Inc. v. Pennsylvania Power & Light Co., 460 F.Supp. 163, 222-26 (E.D.Pa.1978). Similar reasoning has prompted several courts to hold that the parties to a contract entered into in a commercial setting such as existed herein may disclaim or waive strict tort liability, see, e. g., Idaho Power Co. v. Westinghouse Electric Corp., 596 F.2d 924, 927-28 (9th Cir. 1979); Delta Air Lines, Inc. v. McDonnell Douglas Corp., 503 F.2d 239, 245-46 (5th Cir. 1974), cert. denied, 421 U.S. 965, 95 S.Ct. 1953, 44 L.Ed.2d 451 (1975), and it appears that California courts would reach a similar result. Delta Air Lines, Inc. v. Douglas Aircraft Co., supra, 238 Cal.App.2d at 101-05, 47 Cal.Rptr. at 522-24. Whichever line of authority we look to, the result is the same. McDonnell cannot be held liable under a theory of strict tort liability.

Tokio Marine's contentions that it might recover for McDonnell's negligent failure to warn or its negligent misrepresentations also were properly rejected by the district judge. The disclaimer clause was broadly inclusive, and there is no merit to Tokio Marine's argument that the parties intended to compartmentalize McDonnell's negligence under pre-delivery and post-delivery labels. JAL agreed to waive "all liabilities . . . arising by law or otherwise . . . whether or not caused by seller's negligence." This waiver is broad enough to include a claim for post-delivery failure to warn. Varig Airlines v. Boeing Co. (1975-1977 Transfer Binder) Prod. Liab. Rep. (CCH) P 8028 (W.D.Wash.1977); see Delta Air Lines, Inc. v. Douglas Aircraft Co., supra, 238 Cal.App.2d at 101, 47 Cal.Rptr. at 522.

Although Tokio Marine did not plead a cause of action for misrepresentation, it subsequently asserted a right to recover for negligent misrepresentation, contending that under California law a claim based upon misrepresentation could not be waived. In making this argument, Tokio Marine relied primarily upon Cal.Civ.Code § 1668, which holds that contracts aimed at excepting anyone from responsibility for fraud, willful injury, or willful or negligent violation of law are against public policy. This reliance was misplaced. Where there has been no violation of law, negligent misrepresentations in a commercial transaction such as that involved herein do not fall within the provisions of § 1668. Delta Air Lines, Inc. v. Douglas Aircraft Co., supra, 238 Cal.App.2d at 105-06, 47 Cal.Rptr. at 524-25; Werner v. Knoll, 89 Cal.App.2d 474, 475-77, 201 P.2d 45, 46-47 (1948).

The district court did not err in disposing of the foregoing issues by summary judgment. The court was required to determine as a question of law whether the terms of the contract were sufficiently ambiguous to permit any proof concerning the subjective intent of the parties. National Utility Service, Inc. v. Whirlpool Corp., 325 F.2d 779, 781 (2d Cir. 1963). Having correctly decided that no such ambiguity existed and that there was no material dispute on the facts, the district judge quite properly proceeded via the summary judgment route. Parish v. Howard, 459 F.2d 616, 618-20 (8th Cir. 1972); ...