In the other case, Aerolease of Am., Inc. v. Vreeland, 80 USLW 3475, 2012 US LEXIS 1506 (Feb. 21, 2012), the Supreme Court let stand a decision by the Florida Supreme Court rejecting the preemption defense raised by aircraft owners/lessors under 49 U.S.C. § 44112, which insulates passive owners of aircraft from liability for personal injury or death on land or water. The Florida Supreme Court ruled that the federal statute does not apply to the personal-injury or death claims of passengers inside an aircraft. Vreeland v. Ferrer, 71 So. 3d 70 (Fla. 2011).
Getz and Claims under the Government-Contractor Defense
In February 2007, an Army Special Operations Aviation Regiment MH-47E Chinook helicopter experienced a mid-flight engine failure and crashed in the Kabul province of Afghanistan, killing eight and injuring 14 soldiers.
The U.S. Army’s investigators determined that the aircraft’s engine-control system improperly shut down, which in turn caused the engines to fail. The aircraft manufacturers’ investigators opined that the aircraft’s engine failed due to water and ice ingestion.
The victims and family members commenced an action in California state court against Boeing, Honeywell, Goodrich, and ATEC—all contractors involved in the design and manufacture of the helicopter and its components. Boeing removed the action to the Northern District of California pursuant to the Federal Officer Removal Statute, 28 U.S.C. § 1442(a), which allows federal officers and agents to remove cases based on the assertion of a federal defense.
The defendants moved to dismiss all claims on the ground that they were barred by the government-contractor defense because the defendants had complied with the specifications of a federal government contract. In Boyle v. United Technologies Corp., 487 U.S. 500 (1988), the U.S. Supreme Court established the government-contractor defense based on the recognition that military procurement is an area of “uniquely federal concern” and that common-law design-defect claims against government contractors should be barred to the extent that they conflict with the discretionary function of the U.S. government. Id. at 504. In accordance with the test adopted by the Supreme Court in Boyle,product-liability claims against a government contractor are preempted where:
(1) the United States approved reasonably precise specifications;
(2) the equipment conformed to those specifications; and
(3) the supplier warned the United States about the dangers in the use of the equipment that were known to the supplier but not to the United States.
Id. at 512.
Applying this three-part test, the Ninth Circuit Court of Appeals in Getz affirmed the trial court’s ruling that the product-liability claims asserted against the defendant-contractors were preempted by the government-contractor defense. As to the first element of approval of specifications, the Ninth Circuit noted that the test is met if the government “engages in a thorough review of the allegedly defective design and takes an active role in testing and implementing that design.” Getz. v. The Boeing Co., 654 F.3d 852, 861 (9th Cir. 2011). Following Ninth Circuit precedent, the court stated that government approval of a design specification must “result from a continuous exchange and back and forth dialogue between the contractor and government” and that “when the government engages in a thorough review of the allegedly defective design and takes an active role in testing and implementing that design, Boyle’s first element is met.” Id. Based on the record evidence, the court found that the government scrutinized, tested, and made necessary changes to the design and the fact that the supplier retained some discretion with respect to implementation of the design did not defeat the defense. Id. at 861–2.
The court rejected the plaintiff’s argument that the government-contractor defense was inapplicable because the original design was created by a foreign company for a foreign government, stating that:
it makes no difference . . . that a similar engine control system had previously been developed for Great Britain’s Royal Air Force. Although Boyle makes the government contractor defense inapplicable when “a federal procurement officer orders, by model number, a quantity of stock helicopters that happened to be equipped with a particular design feature” this defense does not require the government to create the design or the specifications. As long as the United States makes “a significant policy judgment” in approving the design, nothing precludes the government from procuring designs and products that were initially developed for other nations.
Id. at 863.
In so ruling, the Ninth Circuit adopted the view expressed by the Eleventh Circuit in Brinson v. Raytheon, 571 F.3d 1348 (11th Cir. 2009), where that court held that the government-contractor defense applied, notwithstanding the fact that the product design at issue in that case was already patented before approval by the U.S. military, because the military had “carefully considered and reviewed the design prior to approval and implementation.” Id. at 1357. In applying that same rationale, the Ninth Circuit expressed concern over the potential chilling effect of expanded liability on contractors’ willingness to provide the U.S. military with equipment that was initially designed for another country or another purpose. Getz, 654 F.3d at 863.
In addressing the second element of the government-contractor defense, the Ninth Circuit again looked to its sister circuits in adopting a test for conformity with reasonably precise specifications. The court held that “absent some evidence of a latent manufacturing defect, a military contractor can establish conformity with reasonably precise specifications by showing ‘extensive government involvement in the design, review, development and testing of a product’ and by demonstrating ‘extensive acceptance and use of the product following production.’” Id. at 864 (citing Kerstetter v. Pac. Scientific Co., 210 F.3d 431, 435–36 (5th Cir. 2000)). The court found that the record contained sufficient evidence that the government had reviewed and tested the engine and systems, and the fact that the helicopter did not perform as intended does not, in and of itself, prevent application of the defense.
As to the third element of the defense, the court concluded that the U.S. Army was already aware of the potential risk of water- or ice-induced engine flameout and that the contractors were not required to warn the Army about dangers of which the Army was already aware. Likewise, the contractors were not required to warn of dangers about which they were not actually aware, thus rejecting the plaintiffs’ argument that the contractors had a duty to warn of “knowable” dangers.
Finally, the court held that plaintiffs could not state a claim for failure to warn under state law because the contractors showed that they “acted in compliance with reasonably precise specifications in deciding whether to provide a warning.” Id. at 866–7. State-law failure-to-warn claims are likewise preempted where the contractor demonstrates that the government “‘approved reasonably precise specifications’ thereby limiting the contractor’s ‘ability to comply with its duty to warn.’” Id. (citing Snell v. Bell Helicopter Textron, Inc., 107 F.3d 744 (9th cir. 1997)). Here, the court found that the government had exercised its discretion in choosing relevant warnings for the helicopter, that the warnings were contained in the helicopter manual that was delivered to the Army, and that the Army and contractors had equal knowledge of disclosed and undisclosed risks.
The Plaintiffs’ Petition for Writ of Certiorari
The plaintiffs filed a petition for writ of certiorari seeking review of the Ninth Circuit’s application of the government-contractor defense to preempt the state-law claims. The plaintiffs also challenged the court’s dismissal of a defendant, ATEC, for lack of personal jurisdiction on the ground that the Ninth Circuit improperly held that federal long-arm jurisdiction under Fed. R. Civ. P. 4(k)(2) (which allows a federal court to assert personal jurisdiction over a foreign defendant based on the defendant’s contacts with the United States as a whole, rather than with a single state) is applicable only to cases involving a federally created cause of action. The plaintiffs argued unsuccessfully that the defendants’ removal of the case to federal court based on the Federal Officer Removal Statute (28 U.S.C. § 1442(a)(1)) resulted in the claims necessarily arising under federal law for purposes of Rule 4(k)(2). The trial court and Ninth Circuit held that the claims were purely state-law-based claims for product liability and negligence and did not arise under federal law or allege any violation of a federal right. The Supreme Court denied certiorari on this issue as well as the government-contractor defense.
With respect to the application of the government-contractor defense, the plaintiffs challenged, inter alia, the following specific rulings by the Ninth Circuit:
- That it is not relevant for application of the government-contractor defense that a product was originally designed and manufactured by a foreign company for a foreign government prior to the U.S. military’s review and approval of the product specifications.
- That a plaintiff must prove a latent manufacturing defect to create a genuine issue of material fact regarding conformance to contractual specifications under the second Boyle requirement.
- That the government-contractor defense may displace a state-law-based duty to warn absent an actual conflict between the state-law duty to warn and the contract for equipment.
The petition focused on the differing approaches embraced by the Circuit Courts of Appeal in defining the scope and application of the Boyle three-part test, noting that the Ninth Circuit’s decision conflicted with several circuit-court decisions, as well as with the rationale and holding of Boyle. See Petition for Writ of Certiorari, Getz, 2011 U.S. Briefs 816, *17–18, 2011 U.S. S. Ct. Briefs LEXIS 2888, ** 32–4 (No. 11-816).
With respect to the first prong of the government-contractor defense test, the plaintiffs attacked the Ninth Circuit’s holding as creating a new rule that permits the court to disregard the fact that a product was previously designed by a foreign company for a foreign country without the U.S. government’s involvement. This rule, according to the plaintiffs, completely eliminates these facts from consideration in a Boyle analysis and conflicts with the requirement set forth in Boyle that the U.S. government exercise discretionary approval over reasonably precise design specifications. Id.
Similarly, the plaintiffs argued that the Ninth Circuit’s holding that a plaintiff must prove the existence of a latent manufacturing defect to prove nonconformity with specifications conflicts with Boyle’s requirement that the defendants must establish that the product conformed to specifications. The plaintiffs argued that the Supreme Court needed to:
make clear that for a plaintiff to create a genuine issue of material fact on the second Boyle requirement, evidence of a manufacturing defect is sufficient—but not necessary—and that the plaintiffs must only show that the product did not conform to contract specifications.
Id. at *19, **35.
Finally, with respect to the duty to warn issue, the plaintiffs noted that the Supreme Court has not addressed whether the government-contractor defense applies to preempt a state-law duty to warn. The plaintiffs argued that Boyle should not be extended to preempt state-law duty-to-warn claims because the duty to warn does not involve the uniquely federal interests that are at stake with respect to a manufacturer’s duty to comply with contractual requirements imposed by the government in the design of military equipment.
Even if the Court were to allow the extension of the government-contractor defense to failure-to-warn claims, the plaintiffs argued that a conflict exists among the circuit courts of appeals as to the appropriate test to apply for failure-to-warn claims. According to the plaintiffs, the Second and Eleventh Circuits allow preemption of state-law failure-to-warn claims only where the government prohibits warnings or explicitly requires warnings that conflict with the state duty to warn. See id. at *24, **42–3 (citing In re Joint E. and S. Dist. N.Y. Asbestos Litig., 897 F.2d 626 (2d Cir. 1990); Densberger v. United Techs. Corp., 297 F.3d 66 (2d Cir. 2002); Dorse v. Eagle-Picher Indus. Ind., 898 F.2d 1487 (11th Cir. 1990)). The Ninth, Fifth, Sixth, and Seventh Circuits apply a broader test similar to the Boyle three-part test for design defects. Id. at *24–5, **43–4 (citing Oliver v. Oshkosh Truck Corp., 96 F.3d 992 (7th Cir. 1996); Tate v Boeing Helicopters, 55 F.3d 1150 (6th Cir. 1995); Smith v. Xerox Corp., 866 F.2d 135, 136–8 (5th Cir. 1989)). The plaintiffs argued that the Supreme Court should resolve the conflict by adopting the test employed by the Second and Eleventh Circuits.
On February 21, 2012, the Supreme Court denied the plaintiffs’ petition for writ of certiorari, allowing the expansion of the government-contractor defense to cases where the original design was not created for the U.S. government. This is consistent with the Supreme Court’s denial of certiorari in several government-contractor-defense cases since Boyle. The Court appears in no hurry to further define the scope of immunity granted to government contractors.
The Preemptive Effect of the Aircraft Owner/Lessor Liability Statute
Vreeland v. Ferrer, 71 So. 3d 70 (Fla. 2011), cert denied, 80 U.S.L.W. 3475 (Feb. 21, 2012),involved the crash of a private plane shortly after takeoff from an airport in Lakeland, Florida, on January 14, 2005. The personal representative of the estate of the deceased passenger commenced a wrongful-death action in Florida state court against the out-of-possession owner of the aircraft, Aerolease of America, Inc. The plaintiff asserted a claim of negligent operation of the aircraft based on Florida’s “dangerous instrumentality” law, which imposes liability on the owner of a “dangerous instrumentality” for injuries or damages caused by the negligent operation of the vehicle where it is operated with the owners’ implied or express consent. Orefice v. Albert, 237 So. 2d 142 (Fla. 1970). The plaintiff also asserted that Aerolease negligently inspected and maintained the aircraft prior to leasing it.
The trial court granted summary judgment to Aerolease with respect to all claims on the grounds that 49 U.S.C. § 44112, a federal statute that immunizes out-of-possession owners of aircraft from liability for personal injury or death occurring on land or water, preempts Florida law, including the dangerous instrumentality doctrine. 49 U.S.C. § 44112 (1994) provides:
A lessor, owner, or secured party is liable for personal injury, death, or property loss or damage on land or water only when a civil aircraft, aircraft engine, or propeller is in the actual possession or control of the lessor, owner, or secured party, and the personal injury, death, or property loss or damage occurs because of—(1) the aircraft, engine, or propeller; or (2) the flight of, or an object falling from, the aircraft, engine, or propeller.
The trial court reviewed the legislative history of the federal statute and concluded that Congress intended the statute to shield a passive owner/lessor from liability under state law for injury or death sustained by aircraft passengers.
On appeal, the Florida Second District Court of Appeal affirmed the dismissal of the vicarious liability claims but reversed as to the claims of active negligence in the inspection and maintenance of the aircraft prior to leasing. Vreeland v. Ferrer, 28 So. 3d 906, 911 (Fla. 2d DCA 2010). With respect to the preemptive effect of the federal statute, the appellate court noted the inconsistency in court decisions interpreting the statute, but stated that the decisions finding preemption are better reasoned. See Matei v. Cessna Aircraft Co., 35 F.3d 1142 (7th Cir. 1994) (finding preemption); Rogers v. Ray Gardner Flying Serv.,Inc., 435 F.2d 1389 (5th Cir. 1970) (noting that 49 U.S.C. § 1404 preempts state law); Escheva v. Siberia Airlines, 499 F. Supp. 2d 493 (S.D.N.Y. 2007) (noting that a lessor is immune from vicarious liability); In re Lawrence W. Inlow Accident Litig., 2001 U.S. Dist. LEXIS 2747 (S.D. Ind. Feb. 7, 2001); Mangini v. Cessna Aircraft Co., 40 Conn. L. Rptr. 470 (Conn. Super. Ct. Dec. 7, 2005) (holding in favor of preemption); Coleman v. Windham Aviation, Inc., 2005 R.I. LEXIS 119 (R.I. Super. Ct. Jul. 18, 2005) (no preemption of vicarious-liability claim); Retzler v. Pratt & Whitney Co., 309 Ill. App. 3d 906, 723 N.E.2d 345 (Ill. App. Ct. 1999) (no preemption of state bailment law); Storie v. Southfield Leasing, Inc., 90 Mich. App. 612, 282 N.W.2d 417 (Mich. Ct. App. 1979), aff’d sub nom. Sexton v. Ryder Truck Rental, Inc., 413 Mich. 406, 320 N.W.2d 843 (Mich. 1982) (finding that 49 U.S.C. § 1404 was inapplicable to injury that occurred inside the aircraft). To hold otherwise, the court stated, would “create an obstacle to fulfilling [the] policy and goal” behind the statute to shield owners of private aircraft from liability for personal-injury and death claims when they are not in possession of the aircraft. Vreeland, 28 So. 3d at 911. The court distinguished the Florida Supreme Court’s application of the dangerous-instrumentality rule to airplanes as enunciated in Orefice v. Albert, 237 So. 2d 142 (Fla. 1970), by pointing out that the decision makes no mention of the federal statute (49 U.S.C. § 1404, which was in effect at the time the Orefice case was decided), and therefore the defendants likely did not raise the preemption argument in that case. Additionally, the Orefice decision was based in part on the existence of a Florida statutory scheme for aircraft safety that has since been repealed. Vreeland, 28 So. 3d at 912.
With respect to the reversal of the trial court’s grant of summary judgment to the aircraft owner on the active negligence claims (in other words, claims for negligent inspection and maintenance prior to leasing the aircraft), the Second District Court of Appeal stated that there was “no basis for attributing to the statute an intention to shield a party from having to answer for its own active negligence when the party has possession or control of the aircraft.” Id. at 913.
On further appeal, the Florida Supreme Court reversed with respect to the preemption of the vicarious liability claims, thereby allowing the plaintiff to proceed with all claims under Florida law against the aircraft owner. Vreeland v. Ferrer, 71 So. 3d 70 (Fla. 2011). The Florida Supreme Court applied an implied preemption analysis and narrowly construed the preemptive scope of the statute. The court reviewed the legislative history of 49 U.S.C. § 44112 and noted that every prior version of the statute referenced damage occurring “on the surface of the earth” or “on land or water,” which
may be read to specify that the limitation on liability only applies to death, injury, or damage that is caused to people or property that are physically on the ground or in the water. Specifically, the limitation on liability would apply only to individuals and property that are underneath the aircraft during its flight, ascent, or descent. Under this interpretation, Aerolease would not benefit from any limitation articulated by section 44112 because [the plaintiff] was not on ‘land or water’ at the time of the crash—he was a passenger inside the aircraft.
Id. at 80.
The court reasoned that this interpretation of 49 U.S.C. § 44112 comports with the legislative intent as articulated in the 1948 version of the statute, which contains the language “on the surface of the earth,” and that, by adopting that language, “Congress did not intend to preempt state law with regard to injuries to passengers or aircraft crew.” Id. at 81. The court distinguished the cases, finding in favor of preemption (which were relied on by the lower courts) and followed the analysis of the Michigan state court in Storie v. Southfield Leasing, Inc., 90 Mich. App. 612, 282 N.W.2d 417 (Mich. Ct. App. 1979), aff’d sub nom. Sexton v. Ryder Truck Rental, Inc., 413 Mich. 406, 320 N.W.2d 843 (Mich. 1982) (finding that 49 U.S.C. § 1404 was inapplicable to injury that occurred inside the aircraft), which was based on the predecessor statute.
Thus, based on the above analysis and the court’s previous decision in Orefice, the court held that the Florida dangerous-instrumentality rule imposes vicarious liability on an owner for the negligent operation of an aircraft where the owner was not in control of the aircraft, and that 49 U.S.C. § 44112 preempts the dangerous instrumentality rule where injury, death, or damage occurs on the land or water, but not inside the aircraft. 71 So. 3d at 75.
One judge dissented, adopting the lower court’s rationale that an airplane crash causes injury on the surface of the earth regardless of whether the person was sitting in the aircraft or standing on the ground and accused the majority of ignoring the clear, plain language of the statute and “def[ying] reality.” Id. at 85–6.
Aerolease filed a petition for writ of certiorari seeking review of the Florida Supreme Court’s decision so as to resolve the conflict among the courts regarding the scope of the preemptive effect of the federal statute. The U.S. Supreme Court denied certiorari on February 21, 2012, Aerolease of Am., Inc. v. Vreeland, 80 USLW 3475, 2012 US LEXIS 1506 (Feb. 21, 2012), thus leaving aircraft lessors to wonder what protection, if any, the federal statute actually provides and what impact this and other decisions finding against preemption of owner/lessor immunity may have on the aviation finance industry.
Keywords: litigation, mass torts, aviation, Supreme Court, preemption defenses, government-contractor defense, writ of certiorari