Land, Charles v. Yamaha Motor Corp

In the
United States Court of Appeals
For the Seventh Circuit

No. 01-2025

Charles Land and April Land,

Plaintiffs-Appellants,

v.

Yamaha Motor Corporation, U.S.A.,
and Yamaha Motor Co., LTD.,

Defendants-Appellees.

Appeal from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. IP00-0220C-HG--David F. Hamilton, Judge.

Argued October 29, 2001--Decided November 29, 2001

Before Flaum, Chief Judge, and Posner and
Diane P. Wood, Circuit Judges.

Flaum, Chief Judge. The district court
granted summary judgment in favor of
defendants Yamaha Motor Corporation,
U.S.A. ("YMUS") and Yamaha Motor Co.,
Ltd. ("YMC"), holding plaintiffs Charles
and April Land’s product liability suit
barred by the Indiana Statute of Repose.
For the reasons stated herein, we affirm.

I. Background

When appellant Charles Land, an Indiana
resident, attempted to start a Yamaha
WaveRunner Model WR500G on Heritage Lake
in Indiana on June 25, 1998, the vehicle
exploded and caused Land permanent back
injury. Both parties agree that the
WaveRunner was defective in design: it
allowed fuel fumes to accumulate in the
hull of the boat, posing serious risk of
fire upon ignition. The parties also
stipulate that the WaveRunner was in
substantially the same condition on the
day of Land’s injury as when it left the
possession of the defendants on July 7,
1987, and was delivered to the initial
user on July 28, 1987. For purposes of
the summary judgment motion, the district
court assumed that the plaintiffs could
prove their product liabil-ity claim on
the merits. That is, it assumed that when
the WaveRunner left the possession and
control of the defendants, it was in a
defective condition unreasonably
dangerous to anticipated users.
Furthermore, it is undisputed that the
Lands filed suit on December 23, 1999,
and that both the injury and the filing
of the suit occurred more than ten years
after the WaveRunner was delivered to
Wallace Richardson, the first user.

The Indiana Statute of Repose, Ind. Code
sec.34-20-3-1(b)(2), provides in relevant
part that product liability actions must
be commenced within ten years after the
delivery of the product to the initial
user or consumer.

YMC, a Japanese corporation with its
principal place of business in Japan,
designed, manufactured, and tested the
WaveRunner in Japan. It petitioned for an
exemption from the United States Coast
Guard’s requirement that every vehicle
like the WaveRunner have a fan to
ventilate fuel fumes out of the hull of
the boat. YMUS knew of the test results,
and, according to the Lands, gave false
information to the Coast Guard as to the
known danger of the WaveRunner design in
order to keep its exemption from the fan
requirement. YMUS, which maintains its
principal place of business in
California, participated in developing
the WaveRunner and imported it to the
United States. YMUS, while it has no
office in Indiana, is authorized and does
business in the state. On July 7, 1987,
YMUS sold and shipped the vehicle to a
boating store in Kentucky. On July 28,
1987, Wallace Richardson, an Indiana
resident, purchased the WaveRunner. Larry
Bush, another Indiana resident,
subsequently bought the WaveRunner in
1989 or 1990. Bush was the registered
owner when the WaveRunner caused Land’s
injury. From the time of Bush’s purchase,
the boat was registered, garaged, and
serviced in Indiana.
Between 1988 and 1998, 24 other
WaveRunners were reported to have
exploded. YMUS twice recalled certain
models of WaveRunners for modifications
to reduce the likelihood of fuel leakage.
It never recalled the WR500 series.

II. Discussion

Appellants argue that although they did
not commence their action until well over
ten years after delivery to the initial
user, their case is not barred because:
1) California law, which includes no
statute of repose, governs the action; 2)
Even if the Indiana Statute of Repose
does apply, the post-sale failure to warn
is outside its scope; and 3) The Statute
of Repose violates the Indiana
Constitution.

We review a grant of summary judgment de
novo, construing the evidence in the
light most favorable to the nonmoving
party. Gordon v. United Airlines, 246
F.3d 878, 885 (7th Cir. 2001). Summary
judgment is appropriate if there is no
genuine issue as to any material fact and
the moving party is entitled to judgment
as a matter of law. Id.

A. Choice of Law

A federal court sitting in diversity
jurisdiction must apply the substantive
law of the state in which it sits. Erie
R.R. Co. v. Tompkins, 304 U.S. 64 (1938);
Jean v. Dugan, 20 F.3d 255, 260 (7th Cir.
1994). The Erie doctrine extends to
choice-of-law principles and requires the
court to apply the conflicts rules of the
forum state. Id. (citing Klaxon Co. v.
Stentor Elec. Mfg. Co., 313 U.S. 487,
496-97 (1941)). Therefore, the district
court properly applied the choice-of-law
rule of Indiana.

Indiana applies a two-step conflicts
analysis. Hubbard Mfg. v. Greeson, 515
N.E.2d 1071, 1073 (Ind. 1987). First, the
court must determine if the place where
the last event necessary to make the
defendant liable--that is, the place of
the injury--is insignificant. Id. If it
is not, the law of that state applies.
Id. Only if the court finds that the
place of injury is insignificant does it
move to step two which requires the court
to consider "other factors such as: 1)
the place where the conduct causing the
injury occurred; 2) the residence or
place of business of the parties; and 3)
the place where the relationship is
centered." Id. at 1073-74. In the instant
case, we, like the district court, arrive
at the inevitable conclusion that the
place of the injury-- Indiana--is not
insignificant. Therefore, we apply
Indiana law and need not address the
second prong in Indiana’s choice-of-law
analysis. See Judge v. Pilot Oil Corp.,
205 F.3d 335 (7th Cir. 2000).
 Charles Land was injured while operating
the WaveRunner in Indiana. He was a
resident of Indiana, the owner of the
boat was a resident of Indiana, and the
boat had been garaged and serviced in
Indiana for a decade before it caused
Land’s injury. There is no evidence in
the record that the WaveRunner was ever
used outside of Indiana. It was not mere
fortuity that the injury occurred in
Indiana, as the Lands suggest by
comparing this choice-of-law
determination with those involving pass-
through automobile or airplane accidents
in which the place of the injury is given
little weight, and the argument that
Indiana’s contacts have little or no
relevance to the legal action simply
cannot withstand scrutiny. Therefore, our
analysis of Indiana choice-of-law policy
must end with step one.

The Lands argue that California, where
YMUS was incorporated and where the
defendant’s tortious conduct occurred,
has greater relevance. Maybe so./1 This
analysis belongs in step two of the
Indiana conflicts policy, however, which
we cannot reach. Some states use the
"most significant relationship" approach
suggested by the Restatement (Second) of
Conflict of Laws. If Indiana did so, we
would skip step one of our analysis and
instead "isolate the pertinent issue,
examine each state’s connection to the
occurrence, identify the governmental
policies espoused by each state relevant
to the issue, and proclaim applicable the
law of the state with the superior
interest." Jaurequi v. John Deere Co.,
986 F.2d 170, 173 (7th Cir. 1993)
(internal citations omitted). That case
might have a different outcome from the
one at hand. Indiana does not adhere to
the most significant relationship
analysis, however, and the Supreme Court
of Indiana has not signaled that it
intends to overrule Hubbard. Although
Hubbard does note some discomfort with
the rigid place of injury, or lex loci
delicti, approach, it still adheres to an
analysis that uses the place of injury as
a baseline. 515 N.E.2d at 1073-74. If the
place of injury is not insignificant, we
must apply its law regardless of the
greater interest another state may have.

The Lands propose an approach whereby
the law of the place of the tortious
conduct is controlling in product liabil
ity cases. The state of Indiana has given
us no indication that it intends to
change its choice-of-law policy to reach
such a result, and we decline to make
that policy decision for it. Indiana’s
contacts to this case are not
insignificant. Therefore, its law,
including the Statute of Repose, applies.

B. Post-Sale Negligence

The Lands alternately contend that even
if Indiana law applies, their case is not
barred by the Statute of Repose. They
claim, in part, that YMUS and YMC were
negligent when they breached their duty
to warn customers of the dangerous defect
in the WaveRunner that they learned of
after the original sale of the boat in
question. Because this duty arose after
the sale, they argue, that point in time
is irrelevant and the Statute of Repose
does not apply. The Indiana Products
Liability Act clearly states, however,
that it governs "all actions that are: 1)
brought by a user or consumer; 2) against
a manufacturer or seller; and 3) for
physical harm caused by a product;
regardless of the substantive legal
theory or theories upon which the action
is brought." Ind. Code sec.34-20-1-1.
Furthermore, the Supreme Court of Indiana
has held that the Statute of Repose
cannot be circumvented by claiming that
the manufacturer continued its negligence
after the initial sale by failing to warn
customers of known dangers. Dague v.
Piper Aircraft Corp., 418 N.E.2d 207
(Ind. 1981). Similarly, this Court has
held that post-sale failure-to-warn
claims merge with the underlying product
liability claims which are barred, in
their entirety, by the Indiana Statute of
Repose. Avery v. Mapco Gas Prods., 18
F.3d 448 (7th Cir. 1994). Unless the
defect in the product was not present at
the time of the initial sale, the Statute
of Repose bars all claims brought more
than ten years after that sale. See Stump
v. Indiana Equip. Co., 601 N.E.2d 398
(Ind. Ct. App. 1992) (noting that post-
sale negligence claims are not barred by
the Statute of Repose when no defect was
present at the time of the original
sale). In this case, the Lands concede
that the WaveRunner was in the same
defective condition at the time of
initial sale as it was at the time of
injury. They argue that a separate defect
arose with the failure to warn upon
knowledge of risk--a defect that was not
present at the time of the sale--and
therefore falls into the Stump exception
to the Statute of Repose. This argument
fails, however. If the product’s
underlying defect was present at the time
of the initial sale, as the WaveRunner’s
was, the post-sale duty to warn claim
does not circumvent the Statute of
Repose.

C. Constitutionality of the Statute of
Repose

Lastly, the Lands argue that even if
Indiana law applies and the Statute of
Repose would bar their claim in its
entirety, the statute violates Article I,
sec.sec. 12 and 23 of the Indiana
Constitution. Section 23 states that
"[t]he General Assembly shall not grant
to any citizen, or class of citizens,
privileges or immunities, which, upon the
same terms, shall not equally belong to
all citizens." Section 12 provides for
"remedy by due course of law" for
injuries to "person, property, or
reputation." Although several other
states have held that their statutes of
repose for product liability cases
violate their own state constitutions by
potentially extinguishing the right to
remedy before that right arises, Indiana
has expressly (and recently) held that
the Statute of Repose contained in the
Indiana Products Liability Act does not
violate Article I, sec.12 or sec.23 of
the state Constitution. McIntosh v.
Melroe Co., 729 N.E.2d 972, 973 (Ind.
2000) (The Statute of Repose is "a
permissible legislative decision to limit
the liability of manufacturers of goods
over ten years old and does not violate
either constitutional guarantee."). We
are bound by this decision.

III. Conclusion

Because Indiana law governs this case
and because the Indiana Statute of Repose
bars product liability actions that, like
this one, are brought more than ten years
after delivery of the product to the
initial user or consumer, we find that
the district court properly granted
summary judgment in favor of the
defendants. We AFFIRM.

FOOTNOTE
/1 However, the design, manufacture, and testing of
the WaveRunner largely took place in Japan, not
California, the parties had no relationship based
in California, and only one of the three parties
"resides" in California. It is far from clear
that, even if Indiana bore little relationship to
the action, California law would be deemed most
significant under the second step of Hubbard.