The Lima Delta Co. v. Gulfstream Aerospace Corp.

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

CORPORATION, a Delaware
Corporation, and GULFSTREAM
AEROSPACE CORPORATION, a
Georgia Corporation,

THE LIMA DELTA COMPANY, a )
Delaware Corporation, TRIDENT )
AVIATION SERVICES, LLC, a )
Delaware Limited Liability Company, )
and SOCIE'TE' COMMERCIALE ET )
INDUSTRIELLE KATANGAISE, )
)

Plaintiffs, ) C.A. No. N14C-02-042 MMJ
)
v. )
)
GULFSTREAM AEROSPACE )
)
)
)
)
)
)

Defendants.

Submitted: December 5, 2018
Decided: February 13, 2019

On Defendants’ Motion to Dismiss Plaintiffs’ Amended Complaint
GRANTED

OPINION

Jennifer L. Dering, Esquire, Joseph A. Martin, Esquire, Jeffrey Lubin, Esquire
(Argued), Martin Law Firm LLC, Attorneys for Plaintiffs

Brett D. Fallon, Esquire, Morris J ames LLP, Gary L. Halbert, Esquire (Argued),
Holland & Knight LLP, Attorneys for Defendants

JOHNSTON, J.

PROCEDURAL AND FACTUAL CONTEXT

A Gulfstream aircraft crashed on February l2, 2012 in the Democratic
Republic of the Congo. Defendant Gulfstream Aerospace Corporation, a Georgia
Corporation (“Gulfstream”)‘ manufactured the aircraft and sold it in January 1990.
Plaintiff The Lima Delta Company (“Lima Delta”) purchased the aircraft on the
secondary market on May 4, 2011. Plaintiff Socie’te' Commerciale et Industrielle
Katangaise (“Socikat”) is referred to in the Complaint as the “equitable 0Wner.”
Plaintiff Trident Aviation Services, LLC (“Trident”) managed the aircraft for
Socikat.

The Complaint Was filed on February 5, 2014. An Amended Complaint Was
filed August lO, 2018. Plaintiffs allege that the crash Was caused by failure of the
aircraft’s “brake-by-Wire” system. Plaintiffs seek damages on the bases of
negligence, strict liability, and breach of Warranty

Defendants seek dismissal of the Amended Complaint. Defendants contend
that: the tort claims are barred by the economic loss doctrine; the strict liability
claim is preempted by Delaware’s UCC; the fraud claim fails for lack of
particularity; and the breach of Warranty claim is precluded by the statute of

limitations.

l Delaware corporation Gulfstream Aerospace Corporation also is named as a Defendant.

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MOTION TO DISMISS STANDARD

In a Rule 12(b)(6) Motion to Dismiss, the Court must determine Whether the
claimant “may recover under any reasonably conceivable set of circumstances

susceptible of proof.”2 The Court must accept as true all Well-pleaded allegations3

Every reasonable factual inference Will be drawn in the non-moving party’s favor.4

If the claimant may recover under that standard of review, the Court must deny the

Motion to Dismiss.5

ANALYSIS
Strict Liability

Plaintiffs have WithdraWn their strict liability claim.

Economic Loss Doctrine
There is no recovery in tort for purely economic loss caused by a defective
product.6 Economic losses include monetary loss, cost of repair or replacement,

loss of business or employment opportunities, and diminution in value.7 The

: Spence v. Funk, 396 A.2d 967, 968 (Del.l978).

Ia'.

4 Wilmington Sav. Funa'. Soc ’v, F.S.B. v. Anderson, 2009 WL 597268, at *2 (Del. Super.) (citing
Doe v. Cahill, 884 A.2d 451, 458 (Del.2005)).

5 Spence, 396 A.2d at 968.

6 Danforth v. Acorn Structures, lnc., 608 A.2d ll94, ll98 (Del. 1992).

7 J. W. Walker & Sons, Inc. v. Constr. Mgmt. Serv., Inc., 2008 WL 1891385, at *l (Del. Super.).

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rationale underlying the economic loss doctrine is that the “increased cost to the
public that Would result from holding a manufacturer liable in tort for injury to the
product itself is not justified.”8 The UCC’s contractual Warranty, With limitations
on liability, is the appropriate remedy.9 In Delaware, the economic loss doctrine is
a complete bar to recovery in tort of economic losses caused by defective
products.10

Plaintiffs assert that this case presents a matter of first impression in
Delaware. Plaintiffs allege that the airplane crash Was caused by faulty brakes.
Fuither, Defendants knew the brakes Were defective, but failed to notify the
Federal Aviation Administration (“FAA”), as required. Five people Were killed in
the crash. Plaintiffs argue that those deaths are sufficient to make the economic
loss doctrine inapplicable in this case. Plaintiffs reason that Where personal injury
is clear, the product, i.e., braking system, has not damaged only itself. Rather, the
product has caused personal injury and damage to other property.

The focus of the economic loss doctrine analysis is the nature of damages
sought. ln this case, Plaintiffs are not requesting recovery for personal injuries.
Instead, Plaintiffs argue that the defective product is the braking system. The

damage is to Plaintiffs’ “other property” _ the aircraft. Plaintiffs concede that in

8 East River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 872 (1986).
9 Id. at 872-73.
'0 Danforth, 608 A.2d at 1200.

this lawsuit, they are not seeking personal injury damages or third-party property
damages. Plaintiffs request damages measured as the value of the aircraft, loss of
use of the aircraft, lost earnings, and incidental and consequential losses. Personal
injury damages and damages to property owned by non-parties are not part of this
action.

Plaintiffs cite Silivanch v. Celebri'ty Cruz'ses, Inc. 11 for the proposition that
the economic loss doctrine does not preclude a tort action where the defective
product causes personal injury, even if the plaintiff is not one of the injured.12 In
that case, the product was a water filter. Evidence demonstrated that the defective
design of the filter was a proximate cause of an outbreak of Legionnaires disease
on the ship.13

The Court finds Sz`livanch distinguishable The defective product Was the
filter. The defective filter damaged another product _ the ship’s water supply. The
tainted water supply directly caused the disease outbreak. There were no direct
claims in Sz`lz`vanch for personal injuries. The plaintiff was seeking indemnification

and contribution for the sick passengers’ claims. The damages awarded did not

11 171 F. supp. 2d 241 (s.D.N.Y. 2001).
'2 Id. at 272.
1314 at 253.

include the value of the allegedly defective product or the water/product damaged
by the filter.14

Defendants have presented authority from other jurisdictions, holding that
personal injuries and property damages suffered by non-parties are irrelevant to the
economic loss doctrine analysis.15 The Silivanch decision is against the weight of
authority.

Plaintiffs also argue that the economic loss doctrine does not bar their
negligent misrepresentation claim. A plaintiff seeking damages for negligent
misrepresentation, where the losses are solely economic, must demonstrate two
elements: (1) that the defendant supplied information to the plaintiff for use in
business transactions with third parties; and (2) that the defendant is in the business
of supplying information.16 Information must be the end and aim product of the
information-provider’s work.17 Defendants in this case provide information that is
merely incidental to the sale of the product. Defendants are not in the business of

supplying information.

14 Ia'. at 250-51.

15 See Mountain W. Heli'copters v. Textron, Inc., 13 Fed. Appx. 855, 856 (10th Cir. 2001); Am.
Eagle Ins. C0. v. Um`ted Techs. Corp., 48 F.3d 142, 145 (5th Cir. 1996); Marsulex Envtl. Techs. v.
Seli'p S.P.A., 247 F.Supp. 3d 504, 516-19 (M.D. Pa. 2017); Ensign U.S. Drilling, Inc. v.
Weatherford U.S. Ltd, P’ship, 2015 WL 4512320, at *4 (D. Colo.); Pysca Panama, S.A. v.
Tensar Earth Techs., Inc. 625 F.Supp. 2d 1198, 1247 (S.D. Fla. 2008); Midwest Helicopters
Airways, Inc. v. SikorskyAircraft, 849 F.Supp. 666, 672 (E.D. Wis. 1994).

16 Mi'llsboro Fire C0. v. Construc. Mgmt. Servs., Inc., 2006 WL 1867705, at *2 (Del. Super).

17 Riverbend Cmty., LLC v. Green Stone Eng’g, LLC, 2012 WL 1409013, at *4 (Del. Super).

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The Court finds that the economic loss doctrine bars Plaintiffs’ tort claims.
Plaintiffs seek only their own economic losses. Damages resulting from personal
injury or property damage to non-parties do not exempt application of the doctrine.
Additionally, Defendants are not information providers for purposes of Plaintiffs’

negligent misrepresentation claim.

Fraud

Rule 9(b) of the Superior Court Civil Rules provides that for all claims of
fraud, the circumstances must be pled with particularity. Particularity means the
time, place and content of the fraudulent act or omission; the identity of the person
making the misrepresentation or omission; and what that person intended to gain.18

Plaintiffs have alleged the following. First, Gulfstream misrepresented or
failed to disclose material facts regarding the aircraft’s brake-by-wire system.
Second, Gulfstream had knowledge that the brake-by-wire system was
“notoriously fraught with problems” from the first few years after the manufacture
Third, Gulfstream intended that purchasers would rely on the misrepresentations or
omissions that the aircraft was airworthyi Gulfstream was aware, or should have

been aware, that the representations were false or misleading, or that Gulfstream

18 MHS Capital LLC v. Goggin, 2018 WL 2149718, at *9 (Del. Ch.); Commonwealth Conslr. Co.
v. Cornerstone Fellowship Baptist Church, Inc., 2006 WL 2567916, at *25 (Del. Super.).

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acted with reckless indifference Fourth, Plaintiffs justifiably relied on
Gulfstream’s misrepresentations or omissions. Finally, Plaintiffs were damaged as
a result of that reliance

For purposes of this Motion to Dismiss, the Court assumes that the
following facts are true The brake-by-wire system failed. The aircraft pilots
assumed that the signal brakes were operating correctly. This assumption delayed
the pilots from taking additional action to slow the aircraft The original braking
system had a known defect. The defect was that the system signaled that the
brakes were working (a false positive) when the brakes were in fact failing. An
optional replacement system had been offered for sale by Gulfstream.

Plaintiffs provided an exhibit that lists numerous brake failures. However,
the exhibit lists events in which brakes may have been involved, not any specific
mechanical or design defects. Plaintiffs conceded at argument that they do not
know whether the listed failures were related to any particular design defect.
Plaintiffs further concede that they do not have a date upon which Gulfstream
failed to provide information to the FAA.

The Court finds that such alleged evidence might be sufficient to survive a
motion to dismiss for negligence or product liability claims. However, a greater
degree of specificity is required for pleading fraudulent concealment, failure to

disclose, or misrepresentation,

Plaintiffs’ allegations of fraud are conclusory. Essentially, Plaintiffs state
that because the brakes failed, the product must have been defective No particular
defect has been identified Such pleadings lack sufficient particularity for fraud

claims under Rule 9(b).

Warranties

An action for breach of warranty must be brought within four years after the
breach occurs.19 “A breach of warranty occurs when tender of delivery is made,
except that where a warranty explicitly extends to future performance of the goods
and discovery of the breach must await the time of such performance the cause of
action accrues when the breach is or should have been discovered.”Z° There is no
express warranty extension to future performance at issue in this case

Section 2-725 does not alter the law on tolling the statute of limitations21
In a breach of warranty claim, the statute of limitations may be tolled by fraudulent
concealment Fraudulent concealment must be pled with particularity.22 Silence
or failure to disclose does not constitute Haudulent concealment sufficient to

suspend the statute of limitations.23

19 6 Del. C. § 2-725.

211 6 Del. C. § 2-725(2).

21 6 Del. C. § 2-725(4).

22 ln re Estate of Lamberth, 2018 WL 3239902, at *4 (Del. Ch.); Boeing by Levit v. Shrontz,
1992 WL 81228, at *3 (D€l. Ch.).

23 Amoroso v. Joy Mfg. Co., 531 A.2d 619, 619-621 (Del. Super.).

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Plaintiffs’ fraudulent concealment allegations are based on Gulfstream’s
alleged failure to disclose information to the FAA. The Court finds these
allegations to be conclusory. For the same reasons the Court found Plaintiffs’
fraud claims must fail for lack of particularity, the fraudulent concealment tolling
argument is insufficient

Section 2-725(2) provides: “A cause of action accrues when the breach
occurs, regardless of the aggrieved party ’s lack of knowledge of the breach.”
(Emphasis added.) Plaintiffs argue that application of the explicit statutory
language is “nonsensical” because no plaintiff could have a “ripe viable cause of
action before it suffered damages....” Plaintiffs urge this Court to “interpret the
statute in a way that makes sense....”

The Court is constrained to interpret clear and unambiguous statutory
language as enacted by the General Assembly. By their nature, statutes of
limitation are somewhat arbitrary and can be draconian in application. Barring a
breach of warranty cause of action by a subsequent purchaser is neither unusual
nor unprecedented For example, a purchaser of a used automobile may not seek
relief from the manufacturer on the basis of breach of warranty when the warranty
period has expired. Automobile dealers may offer buyers the opportunity to buy

extended warranties, in recognition of the fact that manufacturers’ warranties are

limited in time

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The Court holds that the 4-year limitations period set forth in 6 Del. C. § 2-
725 bars Plaintiffs’ breach of warranty claim. Plaintiffs have failed to plead with
sufficient particularity any grounds for tolling on the basis of fraudulent

concealment

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CONCLUSION

The Court finds that the economic loss doctrine bars Plaintiffs’ tort claims.
Plaintiffs seek only their own economic losses. Damages resulting from personal
injury or property damage to non-parties do not exempt application of the doctrine
Additionally, Defendants are not information providers for purposes of Plaintiffs’
negligent misrepresentation claim.

Plaintiffs’ allegations of fraud are conclusory. Essentially, Plaintiffs state
that because the brakes failed, the product must have been defective No particular
defect has been identified. Such pleadings lack sufficient particularity f`or fraud
claims under Rule 9(b).

The Court holds that the 4-year limitations period set forth in 6 Del. C. § 2-
275 bars Plaintiffs’ breach of warranty claim. Plaintiffs have failed to plead with
sufficient particularity any grounds for tolling on the basis of fraudulent
concealment.

THEREFORE, Defendants’ Motion to Dismiss Plaintiffs’ Amended
Complaint is hereby GRANTED.

IT IS SO ORDERED.

The Wrable Wy M. Johnston

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