Aris Helicopters, Ltd. v. Allison Gas Turbine General Motors Corporation Bell Helicopter

932 F.2d 825, 91 Daily Journal DAR 5434, 91 Cal. Daily Op. Serv. 3376, 1991 U.S. App. LEXIS 8851, 1991 WL 72077

• Court: Court of Appeals for the Ninth Circuit
• Decided: May 9, 1991
• Docket: 90-15278
• Status: Published

Opinions

NOONAN, Circuit Judge:

Aris Helicopters, Ltd. (Aris) brought suit against Bell Helicopter Textron, Inc. and Allison Gas Turbine Division, General Motors Corporation (the defendants). Federal jurisdiction was based upon diversity of citizenship. The federal district court dismissed the complaint for failure to state a claim upon which relief can be granted. We reverse and remand.

ALLEGATIONS

Aris’s complaint alleged the following:

The defendants are the designers, manufacturers, sellers, and distributors of the Bell 206L-1 helicopter, which is equipped with an Allison 250-C28 engine, fuel system, fuel control and governor, collectively known as a Bell Long Ranger. Aris bought a Bell Long Ranger. On August 27, 1987 this helicopter crashed near Cove-lo, California due to a sudden loss of engine power.

The Bell Long Ranger was defective in design, material and manufacture so that it was unreasonably dangerous and unsafe for its intended use. Aris was unaware of its defects.

The crash of the helicopter caused damage to the helicopter itself and a loss of income to Aris along with additional insurance expenses and the expenses of the lease for a substitute helicopter in the total amount of $509,677.33.

PROCEEDINGS

On July 3, 1989 Aris filed a complaint with the allegations set out above in federal district court. On October 26, 1989 the district court in a reasoned order granted the defendants’ motion to dismiss for failure to state a claim. The district court relied on language in Kaiser Steel Corp. v. Westinghouse Elec. Corp., 55 Cal.App.3d 737, 747, 127 Cal.Rptr. 838, 844 (1976).

Aris appealed.

ANALYSIS

In a magisterial opinion Justice Traynor established that the law of California does not permit recovery for economic losses due to the negligent or unsafe manufacture of a product. Seely v. White Motor Co., 63 Cal.2d 9, 403 P.2d 145, 45 Cal.Rptr. 17 (1965). He reasoned that to permit recovery in tort would swallow the law of warranty. He added: “The rationale ... does not rest on the analysis of the financial strength or bargaining power of the parties to a particular action.” Id. at 18, 403 P.2d at 151, 45 Cal.Rptr. at 23. Seely is dispositive of the claims of Aris for economic loss. Under California law, they cannot be sustained.

Seely was extended by the Supreme Court of the United States in an admiralty case as authority for not permitting a plaintiff to recover from a manufacturer for injury to the product itself. East River S.S. Corp. v. Transamerica Delaval, 476 U.S. 858, 871, 106 S.Ct. 2295, 2302, 90 L.Ed.2d 865 (1986). If this case were brought in admiralty, this decision of the Supreme Court would control. However, the Supreme Court’s extended interpretation of Seely is not decisive as to what California law actually is. See Bancorp Leasing and Fin. Corp. v. Agusta Aviation Corp., 813 F.2d 272, 277 (9th Cir.1987).

Controlling authority in this circuit is Scandinavian Airlines Sys. v. United Aircraft Corp., 601 F.2d 425 (9th Cir.1979). In that case we adopted the rule set out in Kaiser Steel. The rule is that product liability does not apply between parties who meet four conditions: (1) they “deal in a commercial setting”; (2) they are in “positions of relatively equal economic strength”; (3) they “bargain the specifications of the product”; and (4) they “negotiate concerning the risk of loss from defects” in the product. Id. at 429 (quoting Kaiser Steel, 55 Cal.App.3d at 748, 127 Cal.Rptr. at 845).

None of these conditions can be determined by the simple inspection of the complaint filed by Aris for damage to the helicopter itself. Consequently, the case must be remanded to the district court.

REVERSED and REMANDED.