Monday, January 27, 2003
Appeals Court Throws Out $6 Million Punitive Award, Finds No Tort
By a MetNews Staff Writer
A $6 million punitive damage award in favor of a helicopter manufacturer against a company found to have sold it defective parts was thrown out Friday by this district’s Court of Appeal.
Div. Three upheld a verdict of more than $1.5 million in compensatory damages in favor of Robinson Helicopter Company, Inc. against Dana Corporation, based on jury findings of breach of contract and breach of warranty. But there was no tort and no basis for punitive damages, Justice Walter Croskey wrote for the appellate court.
The contract at issue was for the purchase of sprag clutches made by Formsprag, a division of Dana. The sprag clutch is a safety device that allows the rotor blades to continue turning if the helicopter loses power during flight, thus enabling the pilot to maintain control and land safely.
Robinson, which purchased nearly 4,000 of the clutches over a 12-year period, complained in 1998 that an unusually high number of clutches manufactured between July 1996 and October 1997 had failed. It was then that it learned, according to trial testimony, that Dana had changed the hardness level used in its manufacturing process during that period.
While there were no claims that defective clutches had caused accident or injury, Robinson was forced by U.S. and British aviation authorities to recall all of the clutches ground to the higher level of hardness—nearly 1,000—at a cost, the company said, of more than $1.5 million.
Dana disclaimed liability, contending that the problems were due to Robinson’s inadequate designs, which Dana said placed too much stress on the clutch assemblies. But the Los Angeles Superior Court jury, after a nine-day trial, concluded that Dana not only breached its contract and warranty, it misrepresented or concealed the fact that it had changed the manufacturing process.
But Croskey, writing for the Court of Appeal, agreed with Dana that Judge Jean Matusinka should not have allowed the tort theory to go to the jury. The tort claim, the appellate jurist declared, was barred by the “economic loss rule.”
The justice explained:
“That rule precludes a recovery in tort where the sale of a defective product has resulted in no property damage or bodily injury, but only economic loss to the buyer of that product. In California, the rule has operated to preclude a tort recovery by the purchaser of a defective product under either negligence or product liability theories. As we explain, the rule also should be applied to intentional fraud cases where such fraud has been committed in the performance, as opposed to the inducement, of the product sale contract.”
No Independent Tort
While the evidence supports the jury’s conclusion that the change in the manufacturing process was a breach of contract, and while Dana may have fraudulently concealed the breach, the defendant “did not commit an independent tortuous act,” nor did the concealment cause additional damage or detrimental reliance,” Croskey said.
Dana Corporation was represented on appeal by Edwin V. Woodsome Jr., David G. Meyer and Michael L. Resch of Howrey Simon Arnold & White, Lawrence R. Ramsey of Bowman and Brooke, and Thomas G. Cardelli of Cardelli, Hebert & Lanfear. Robinson was represented by Raymond E. Hane III of Waller Lansden Dortch & Davis, along with Tim A. Goetz and Edward J. Horowitz.
The case is Robinson Helicopter Company Inc. v. Dana Corporation, B150963.
Copyright 2003, Metropolitan News Company