MDL Transferee Dismisses Fraud and Punitive Damages Claims
In In re Cessna 208 Series Aircraft Products Liability Litigation, MDL No. 1721, 2009 WL 274509 (D. Kan. Feb. 5, 2009), the plaintiffs -- the estates and relatives of 9 Washington residents who perished in a Cessna crash near Naches, Washington -- sued the aircraft manufacturer under a variety of theories for a plane crash allegedly caused by a faulty de-icing system. Cessna moved to dismiss the fraud and punitive damages counts of the Complaint.
Cessna's motion presented the court with two primary questions: (1) whose law applied? and (2) were the facts pled in the complaint sufficient to state a cause of action?
The choice of law question was particularly important, because Washington -- unlike Cessna's home state of Kansas -- does not allow punitive damages. The court used section 145(2) of the Restatement (Second) of Torts to evaluate the most significant relationship, looking at "(a) where the place of the injury occurred, (b) the place where the conduct causing the injury occurred, (c) the domicile, residence, nationality, place of incorporation and place of business of the parties, and (d) the place where the relationship, if any, between the parties is centered."
The court noted that the Restatement creates a sort of presumption that the law of the state where the injury occurred will govern, but observed that because the location of air crashes is simply fortuitous, the presumption is easily overcome in air crash cases.
The court reached a curious conclusion. Although the injury occurred in Washington and the plaintiffs were Washington residents, the court nevertheless chose to apply the law of Kansas because it was Cessna's principal place of business and the place where the misconduct allegedly took place. And yet, the court noted that Kansas's interests were in both "controlling behavior and in protecting defendant from liability." Id. at *4. Of course, the interest in protecting Cessna from liability would have been best served by applying Washington law, which does not allow punitive damages.
Indeed, the court's decision to apply Kansas law without going to the step of evaluating the "interests and public policies of potentially concerned jurisdictions" and the purposes "sought to be achieved by their relevant local law rules" was particularly ironic. Even in states that allow them, punitive damages are never viewed as a plaintiff's right or entitlement. Here, the court's decision favored the assertion of a punitive damages claim by residents of a state that bars them as a matter of public policy, using the law of a state that has an interest in protecting the defendant from punitive liability.
Despite the court's nonplussing decision on choice of law, the end result favored the defendant because the court concluded that plaintiffs had failed to meet their pleading burdens for fraud and punitive damages. The court began by citing Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955 (2007) for the proposition that plaintiffs must plead facts -- not labels, conclusions, and legal elements -- sufficient to plead a plausible claim. 2009 WL 274509 at *1. The court recognized that plaintiffs bear a clear and convincing burden of proof on the issue of reliance -- and yet plaintiffs had not pled that they themselves had received and relied upon any misrepresentations from Cessna. The court rejected the notion that a presumption of reliance could be borrowed from securities law based on a "fraud on the market" theory. It concluded that "[b]ecause plaintiffs have not alleged that they knew of Cessna's representations to the FAA or to pilots, they cannot establish that they received the information or that they detrimentally relied on it." Id. at *6.
