Trans States Airlines v. Pratt & Whitney Canada, Inc.

• Decision Date: 19 June 1997
• Docket Number: No. 81291,81291
• Citation: 682 N.E.2d 45,224 Ill.Dec. 484,177 Ill.2d 21
• Parties: , 224 Ill.Dec. 484, 32 UCC Rep.Serv.2d 623, Prod.Liab.Rep. (CCH) P 15,117 TRANS STATES AIRLINES, Appellee, v. PRATT & WHITNEY CANADA, INC., Appellant.
• Court: Illinois Supreme Court

Page 45

682 N.E.2d 45

177 Ill.2d 21, 224 Ill.Dec. 484, 32

UCC Rep.Serv.2d 623,

Prod.Liab.Rep. (CCH) P 15,117

TRANS STATES AIRLINES, Appellee, v. PRATT & WHITNEY CANADA, INC., Appellant.

No. 81291.

Supreme Court of Illinois.

June 19, 1997.

Michael A. Pope, McDermott, Will & Emery, Chicago, John D. Dasso, Phelan, Cahill & Quinlan, Ltd., Chicago, for Pratt & Whitney.

Hugh G. McBreen, McBreen & Kopko, Chicago, for Trans States Airlines.

Chief Justice FREEMAN delivered the opinion of the court:

This cause is before us on questions of Illinois law certified by the United States Court of Appeals for the Seventh Circuit. 145 Ill.2d R. 20. The certified questions are as follows: (1) "For purposes of the economic loss doctrine, as developed by the Illinois Supreme Court in Moorman Manufacturing Co. v. National Tank Co., 91 Ill.2d 69, 61 Ill.Dec. 746, 435 N.E.2d 443 (1982) [and its progeny], does Illinois recognize a 'sudden and calamitous occurrence' exception to the doctrine under which recovery in tort is possible for injury to the single product?" (2) "Can a product and one of its component parts ever constitute two separate products[?]" and (3) "[D]id the airframe and the engine that failed in this case constitute a single product or two distinct products?"

For the reasons which follow, we answer question number one in the negative and question number two in the affirmative. Concerning question number three, we conclude that the engine and airframe in this case constitute a single product.

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff, Trans States Airlines, is a common carrier providing scheduled air service to the public. Defendant, Pratt & Whitney Canada, is a manufacturer of gas turbine engines for use on commercial aircraft.

In 1988 defendant manufactured the Pratt & Whitney PW120 engine bearing the serial number 120656. Defendant sold the engine new to Societe Nationale Industrielle Aerospatiale, Usine de Toulouse, Service de Comptabilte (Aerospatiale), a large French aircraft manufacturer, under a written sales contract that included an express warranty clause. The engine was sold with its own operating and maintenance manuals prepared by defendant. Aerospatiale incorporated the engine into one of its ATR 42-300 airplanes, N425TE, which it then sold to McDonnell Douglas Finance Corporation (MDFC), passing defendant's warranty through to MDFC. MDFC then leased the plane to a company called GPA ATR Inc. (GPA), which in turn subleased the plane to plaintiff in this cause. The engine was warranted separate and apart from the Aerospatiale airframe warranty.

Although the engine had passed through a number of hands between plaintiff and defendant, the engine warranty ran directly to plaintiff. It appeared as section 4(a) of the sales contract between defendant and Aerospatiale and provided for repair or replacement of the engine for a defect discovered within the first 90 days or 150 flight hours of operation, whichever occurred first.

Section 4(d) of the sales contract made this express warranty the "Buyer's" exclusive remedy, in lieu of any implied warranties and "any obligation, liability, right, claim, or remedy in contract or tort, whether or not arising from Seller's negligence, actual or imputed." A subsequent warranty and service agreement modified the express warranty, extending it to 1,000 flight hours, 1,000 flights, or six months, whichever occurred last.

The sublease agreement was solely between plaintiff and GPA. Pursuant to its terms, at the end of the lease term, plaintiff was obligated to return the aircraft with two engines. The agreement further provided that, upon return of the aircraft, the engines need not be the original engines which had been installed on the airframe. As per the agreement, a Pratt & Whitney PW120 engine certified for use on an ATR 42-300 was interchangeable with any other Pratt & Whitney PW120 engine.

On July 17, 1991, aircraft ATR 42-300, N425TE, being operated by plaintiff as flight 7128, experienced an overload failure of the left engine, serial number 120656, and an in-flight fire while on approach to landing at Greater Peoria Airport in Peoria, Illinois. After the pilot executed an emergency landing, the passengers were evacuated onto the runway, and the fire was extinguished by attending ground crew. Two of the passengers suffered minor personal injury.

The post-accident investigation revealed that the engine failed after some of its interturbine duct bolts loosened and fractured in flight. Bolt fragments hit the engine's power turbine blades, damaging the blades and causing an imbalance overload of the power turbine rotor. The resulting fire damaged both the engine and the body of the aircraft.

On March 6, 1992, plaintiff filed a three-count amended complaint against defendant in the District Court for the Northern District of Illinois. The complaint alleged claims based on (1) negligence, (2) breach of warranty, and (3) strict liability, all arising out of the defect in the engine which resulted in the in-flight fire. Plaintiff prayed for damages to cover the costs of repair of the engine and the airframe, lost revenues from cancelled flights and recovery of settlement fees paid to passengers on their personal injury claims against plaintiff.

Asserting the economic loss doctrine as a bar to plaintiff's tort claims, defendant moved for summary judgment. Defendant's motion was allowed in part and denied in part. See Trans States Airlines v. Pratt & Whitney Canada, Inc., 836 F.Supp. 541 (N.D.Ill.1993). Plaintiff subsequently motioned the court to reconsider the earlier ruling denying tort recovery of lost revenue and engine repair costs. Upon reconsideration, the court held that plaintiffs in Illinois may recover purely economic losses, including lost revenue and engine repair costs, if plaintiffs proved that (1) the product failed suddenly and calamitously, and (2) that the failure caused at least some economic losses. See Trans States Airlines v. Pratt & Whitney Canada, Inc., 875 F.Supp. 522 (N.D.Ill.1995).

The case was subsequently set for trial. Prior to commencement of trial, however, the parties requested that the district court certify for interlocutory review the question whether defendant's gas turbine engine and the Aerospatiale airframe were an integrated unit of the plaintiff's airplane under the economic loss doctrine as set forth in the United States Supreme Court's opinion in East River Steamship Corp. v. Transmerica Delaval, Inc., 476 U.S. 858, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986). The question was then certified to the Seventh Circuit Court of Appeals (28 U.S.C. § 1292(b) (1994)), and that court agreed to accept the appeal. See Trans States Airlines v. Pratt & Whitney Canada, Inc., 86 F.3d 725, 729 (7th Cir.1996).

The court of appeals found that the scope of Illinois' economic loss doctrine was determinative of plaintiff's contract and tort claims. The court perceived, however, that there was a need for the Illinois Supreme Court to authoritatively decide issues concerning the distinction between property damage and economic loss. Accordingly, the court of appeals certified three questions to this court. See Trans States Airlines v. Pratt & Whitney Canada, Inc., 86 F.3d 725 (7th Cir.1996).

Certification of Questions of State Law

Our Rule 20 permits the United States Court of Appeals for the Seventh Circuit to certify a question of Illinois law to the Supreme Court of Illinois, which question may be controlling in an action pending before the Court of Appeals and upon which no controlling Illinois authority exists. 145 Ill.2d R. 20.

DISCUSSION

This court's 1982 opinion in Moorman continues to generate questions concerning the scope of the economic loss doctrine. Our answers to the Seventh Circuit's certified questions will further define the parameters and operation of the doctrine in Illinois.

As an initial matter, we note that defendant's assertion that Illinois does not recognize a sudden and calamitous occurrence as an exception to the economic loss doctrine is only partially correct. In Moorman, this court adopted the following definition of economic loss: " 'damages for inadequate value, costs of repair and replacement of the defective product, or consequent loss of profits-without any claim of personal injury or damage to other property.' " (Emphasis added.) Moorman, 91 Ill.2d at 82, 61 Ill.Dec. 746, 435 N.E.2d 443, quoting Note, Economic Loss in Products Liability Jurisprudence, 66 Colum. L.Rev. 917, 918 (1966). Recently, in In re Chicago Flood Litigation, which like this case was presented to us with certified questions on the parameters of Moorman, we made clear that Illinois recognizes three exceptions to Moorman 's economic loss rule: (1) where the plaintiff sustains damage, i.e., personal injury or property damage, resulting from a sudden or dangerous occurrence; (2) where the plaintiff's damages are proximately caused by a defendant's intentional, false representation; and (3) where the plaintiff's damages are proximately caused by a negligent misrepresentation by a defendant in the business of supplying information for the guidance of others in their business transactions. In re Chicago Flood Litigation, 176 Ill.2d 179, 186-87, 223 Ill.Dec. 532, 535-36 680 N.E.2d 265, 268-69 (1997), citing Moorman, 91 Ill.2d at 86-89, 61 Ill.Dec. 746, 435 N.E.2d 443; see also In re Illinois Bell Switching Station Litigation, 161 Ill.2d 233, 240, 204 Ill.Dec. 216, 641 N.E.2d 440 (1994). "[T]he event, by itself, does not constitute an exception to the economic loss rule. Rather, the exception is composed of a sudden, dangerous, or calamitous event coupled with personal injury or property damage." In re Chicago Flood Litigation, 176 Ill.2d at 200, 223 Ill.Dec. at 542, 680 N.E.2d at 275.

The questions posed to us today involve construal of the first of the Moorman exceptions--the personal injury or property damage...