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Kalitta Air, LLC v. Central Texas Airborne Systems

July 22, 2005

KALITTA AIR, LLC, AS ASSIGNEE OF AMERICAN INTERNATIONAL AIRWAYS, INC., PLAINTIFF,
v.
CENTRAL TEXAS AIRBORNE SYSTEMS, INC., DEFENDANT.



ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR JUDGMENT AS A MATTER OF LAW AND CERTIFYING DECISION FOR INTERLOCUTORY APPEAL

The opinion of the court was delivered by: Claudia Wilken United States District Judge

Defendant Central Texas Airborne Systems, Inc., (CTAS) renews, pursuant to Federal Rule of Civil Procedure 50(b), its previous motion for judgment as a matter of law, on the grounds that Plaintiff Kalitta Air, LLC's claims for negligence and negligent misrepresentation are barred under the economic loss doctrine. Kalitta opposes the motion, and purportedly cross-moves for a ruling that, as a matter of law, the economic loss doctrine does not apply to bar its claims.*fn1

The matter was heard on June 24, 2005. Having considered all of the papers filed by the parties and oral argument on the motion, the Court grants CTAS' motion for judgment as a matter of law with respect to Kalitta's negligence claim but denies the motion with respect to the claim of negligent misrepresentation. The Court certifies its decision for interlocutory appeal pursuant to 28 U.S.C. § 1292(b).

BACKGROUND

This long-standing, multi-party dispute arises from the conversion of several Boeing 747s from passenger to cargo craft according to a design later determined by the FAA to be defective. The only remaining parties are Kalitta, the successor-in-interest of the owner of two such Boeing 747s, and CTAS, the FAA-licensed Repair Station that converted Kalitta's two planes. For a more extensive summary of the factual background of this case, see the Court's August 11, 2000 Order granting in part and denying in part CTAS' and former parties GATX and Pemco's motions for summary judgment, in which the Court granted summary judgment in favor of CTAS on Kalitta's negligence claim.

This matter has been tried twice. During the first trial in 2001, the jury found against Kalitta on its negligent misrepresentation claim against CTAS. Kalitta appealed this Court's adverse summary judgment ruling on its negligence claim and this Court's decision to exclude a certain FAA report from the jury during the 2001 trial on its negligent misrepresentation claim. The Ninth Circuit agreed with Kalitta on these points and so reversed and remanded. GATX/Airlog Co. v. Evergreen Int'l Airlines, Inc., No. 01-17165, 2002 WL 31804435 (9th Cir. Dec. 10, 2002).

CTAS subsequently moved for summary judgment on the grounds inter alia that any recovery on Kalitta's claims was barred by the economic loss rule.*fn2 The Court denied the motion, assuming without deciding that the economic loss rule applied to the negligence claim, but finding that Kalitta had introduced sufficient evidence to create a disputed issue of material fact as to whether its airplanes suffered physical damage as a result of CTAS' allegedly negligent performance of its contractual obligations. See December 11, 2003 Order Denying Defendant's Motion for Summary Judgment and Granting Plaintiff's Motion to Enforce Remand at 8. The Court also ruled that the economic loss doctrine did not apply to Kalitta's negligent misrepresentation claim. Id. at 9.

In response to a request by Kalitta for clarification, the Court concluded that the economic loss rule did apply to Kalitta's negligence claim, but that Kalitta could attempt to prove pursuant to Aas that it fell within an exception to the rule if it could show either damage to other property or involuntary out-of-pocket losses, or that the other factors identified in J'Aire Corp. v. Gregory, 24 Cal. 3d 799 (1979), were more strongly present than in Aas. See August 19, 2004 Order Granting Plaintiff's Request for Clarification and Denying Defendant's Request to File a Similar Request. After the hearing, the Court found that Kalitta had failed to make such a showing, and that the economic loss doctrine therefore applied to bar Kalitta's negligence claim. See September 20, 2004 Consolidated Order Clarifying Court's December 11, 2003 Order. Kalitta then moved for leave to file a motion for reconsideration of the September 20, 2004 Consolidated Order, and supported its motion with new evidence of out-of-pocket losses. CTAS opposed that motion. Both parties also submitted additional briefing on the issue of the economic loss doctrine in connection with CTAS' motion for an order bifurcating the trial and trying the economic loss issues first and with the proposed jury instructions. While resolving the parties' disputes over the jury instructions, the Court concluded that the question of whether the exception to the economic loss doctrine described in Aas applied to Kalitta was a disputed issue of fact for the jury to decide.*fn3

The Court instructed the jury on the economic loss doctrine, and explained that Kalitta could not recover under its negligence cause of action unless it proved that it had suffered (1) physical damage to its property other than the product CTAS provided, or (2) involuntary, out-of-pocket losses. February 15, 2005 Jury Instructions at 11. The jury was also charged with determining "what is the 'product' CTAS provided, and what is Kalitta's 'other property.'" Id. at 11-12.

Despite more than two weeks of deliberation and the parties' stipulation to a less than unanimous verdict, the jury was unable to reach a verdict on either the negligence or the negligent misrepresentation claims, or on the specific issue of whether Kalitta had suffered the type of harm needed to satisfy the economic loss rule. The Court declared a mistrial on March 2, 2005.

LEGAL STANDARD

A motion for judgment as a matter of law under Federal Rule of Civil Procedure 50(b) renews the moving party's prior Rule 50(a) motion for directed verdict at the close of all the evidence. The post-trial motion may be raised only as to the same claims and upon the same grounds as the prior motion. Murphy v. City of Long Beach, 914 F.2d 183, 186 (9th Cir. 1990); Collins v. City of San Diego, 841 F.2d 337, 342 (9th Cir. 1988). If no verdict was returned by the jury, the court may either order a new trial or direct entry of judgment as a matter of law. Fed. R. Civ. P. 50(b)(2).

Judgment as a matter of law after the verdict may be granted only when the evidence and its inferences, construed in the light most favorable to the non-moving party, permit only one reasonable conclusion as to the verdict. Where there is sufficient conflicting evidence, or if reasonable minds could differ over the verdict, judgment after the verdict is improper. See, e.g., Kern v. Levolor Lorentzen, Inc., 899 F.2d 772, 775 (9th Cir. 1990); AirSea Forwarders, Inc. v. Air Asia Co., 880 F.2d 176, 181 (9th Cir. 1989); Peterson v. Kennedy, 771 F.2d 1244, 1252 (9th Cir. 1985); L.A. Mem'l Coliseum Comm'n v. NFL, 726 F.2d 1381, 1387 (9th Cir. 1984). The fact that a mistrial was declared because of jury deadlock does not alter the standard to be applied. Headwaters Forest Defense v. County of Humboldt, 240 F.3d 1185, 1197 n.4 (9th Cir. 2000), cert. den., 537 U.S. 1000 (2002).

DISCUSSION

I. Negligence Claim

A. Applicability of the Economic ...


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