A used airplane caught fire during flight and sustained signifiant damage. Appellees commenced this tort action and alleged that ppellant negligently inspected the airplane’s maintenance logbooks n two separate occasions prior to the fire. Appellant moved for ummary judgment on appellees’ tort claims, contending that the
On appeal from the denial of summary judgment, “we view the evidence and all reasonable conclusions and inferences drawn from it, in the light most favorable to the nonmovant.” (Citation and footnote omitted.) Snellgrove v. Hyatt Corp.,
Service Bulletins Generally. Gulfstream issues three kinds of service bulletins to its customers regarding safety concerns, upgrades, and/or needed modifications to its airplanes. First, Gulf-stream issues Customer Bulletins (“CB”) to inform customers that a particular airplane part, system, or component is not fully performing as expected or potentially may create an unsafe condition. Compliance with all CBs is mandatory. Second, for problems that might pose an increased safety risk, Gulfstream issues Alert Customer Bulletins (“ACB”), which require action to correct an identified safety problem within a shorter period of time than CBs. Third, Gulfstream issues Aircraft Service Changes (“ASC”) when it develops a modification or upgrade for any parts or components on an airplane. An ASC may be optional, recommended, or mandatory.
The 1995 Service Bulletins. In 1995, Gulfstream discovered that the alternator feeder cable and hydraulic pump pressure line in the engine compartment of certain G-IV aircraft (which includes the airplane now owned by appellees) were prone to possible chafing. Accordingly, Gulfstream issued two service bulletins: (1) Alert Customer Bulletin No. 17 (“ACB 17”) and (2) Aircraft Service Change No. 372 (“ASC 372”). ACB 17 mandated a one-time inspection for the chafing condition and specifically required compliance with ASC 372. In turn, ASC 372 required the installation of clamps on the alternator feeder cable to eliminate chafing.
At the time the service bulletins were issued, the airplane was owned by a third party, Dresser Industries. On January 12, 1996, Dresser recorded in the airplane’s logbooks that it had complied with ACB 17. The licensed aircraft mechanic who performed the procedure for Dresser indicated in the aircraft logbook that there was “no chafing noted” on either the left or right engine alternator feeder cables. However, Dresser apparently did not comply with ASC 372; the anti-chafing clamps required by ASC 372 were never installed on the airplane.
K-C Aviation, Inc.’s 1997 Logbook Review. In 1997, a subsidiary of Wm. Wrigley Jr. Company purchased the used airplane. As a condition of sale, Wrigley arranged for a pre-purchase evaluation of the airplane by K-C Aviation, Inc. at the latter’s Dallas facility. To accomplish the evaluation, the parties entered into a Proposal for Work (the “Proposal”). The Proposal included a two-page document entitled “AIRCRAFT PREPURCHASE WAIVER OF LIABILITYAND ALL EXPRESS AND IMPLIED WARRANTIES” (the ‘Waiver Agreement").
Under the Proposal, K-C Aviation agreed to conduct certain inspections and evaluations of the airplane and its components, including a "Record Review Evaluation." Specifically, Paragraph 3.1 ~f the Proposal stated that K-C Aviation would "Perform a Prepurchase Records Review including . . . Customer Bulletins and I\ircraft Service Changes."
Gulfstream Appleton’s 1998 Logbook Review. A year and a half later, in December 1998, appellee Zeno Air asked Gulfstream Appleton to perform certain repair and inspection work on the airplane at the latter’s Wisconsin facility. Before the work was conducted, the parties entered into a “Work Authorization” contract. The Work Authorization did not mention or refer to any review of the airplane’s logbooks that would be conducted. Although the Work Authorization did not mention a review of the logbooks, the invoice prepared by Gulfstream Appleton after completing its repair and inspection work states that it “performed AD & CB research” and forwarded the results to Zeno Air. An “Aircraft Services Changes Research List” produced by Gulfstream Appleton during discovery suggests that the logbooks also were reviewed for compliance with over 30 different ASCs, including ASC 372.
The 1999 Fire. On March 13, 1999, as the airplane was in flight over Utah, a fire broke out in the airplane’s left engine, requiring the pilot to make an unscheduled landing in Colorado. No one was injured as a result of the fire or subsequent landing; however, the airplane itself was damaged and required significant repairs. It is undisputed for purposes of this appeal that the fire resulted'from chafing between the unclamped alternator feeder cable and a metal fuel line, resulting in electrical arcing that burned a hole in the fuel line, which in turn caused fuel to leak out onto the engine and ignite. Appellees presented evidence that if clamps had been placed on the alternator feeder cable in compliance with ASC 372, the chafing and fire would not have occurred.
The Present Lawsuit. Appellees filed the instant tort action against several parties, including appellant GASC, contending that K-C Aviation and Gulfstream Appleton negligently conducted the two logbook record reviews, and thus failed to discover and report to appellees that there had not been compliance with ASC 372. Appellees contend that the alleged negligence resulted in the fire an caused appellees to incur significant repair costs.
On June 15, 2004, the trial court denied appellant’s motions fo summary judgment brought on behalf of K-C Aviation and Gulf stream Appleton, based in part on the fact that there was a disput
Appellant filed two renewed motions for summary judgment, one for the tort claims pertaining to the 1997 K- C Aviation logbook review, and another for the tort claims pertaining to the 1998 Gulfstream Appleton logbook review. Among other things, appellant argued that appellees’ claims were barred by the Utah economic loss doctrine in light of the commercial contracts between appellees and K-C Aviation and Gulfstream Appleton. The trial court denied the renewed motion for summary judgment pertaining to the K-C Aviation logbook review on April 21, 2005.
Appellant filed a motion for reconsideration. On June 13, 2005, the trial court denied reconsideration of its previous order denying appellant’s renewed motion for summary judgment. On that same date, the trial court entered a separate order denying the renewed motion for summary judgment pertaining to the Gulfstream Appleton logbook review. Appellant obtained a timely certificate of immediate review from the trial court’s order denying its motion for reconsideration, and this Court subsequently granted appellant’s application for interlocutory appeal.
“Summary judgment is appropriate where the moving party shows he is entitled to judgment as a matter of law and there is no genuine issue as to any material fact. OCGA § 9-11-56 (c).” My Fair Lady of Ga. v. Harris,
Our review of the record and applicable case law leads us to conclude that the trial court erroneously denied summary judgment to appellant on appellees’ tort claims predicated on the logbook review by K-C Aviation, but properly denied summary judgment on the claims predicated on the review by Gulfstream Appleton.
The economic loss rule is a judicially created doctrine that marks the fundamental boundary between contract law, which protects expectancy interests created through agreement between the parties, and tort law, which protects individuals and their property from physical harm by imposing a duty of reasonable care.
(Citations omitted.) Hermansen v. Tasulis,
Based on this Utah and Colorado case law, a determination o whether the economic loss rule bars appellees’ tort claims require resolution of two primary questions. First, we must resolve whethe the losses incurred by appellees were economic losses of the typ covered by the rule. Second, we must resolve whether the source o
1. Whether Appellees Have Sustained An “Economic Loss.” Appellees contend that the economic loss rule has no application in this case because they are seeking damages for property damage, which they assert is different from economic loss. Economic loss must be distinguished from physical harm to property, since the latter is recoverable in tort. See Town of Alma,
Economic loss is defined as[ d]amages for inadequate value, costs of repair and replacement of the defective product, or consequent loss of profits — without any claim of personal injury or damage to other property [ — ] as well as the diminution in the value of the product because it is inferior in quality and does not work for the general purposes for which it was manufactured and sold.
(Citation and punctuation omitted; emphasis supplied.) Maack v. Resource Design & Constr.,
Here, appellees seek to recover repair costs for damage to the airplane that was the subject of the inspection contracts. Therefore, contrary to appellees’ assertion, appellees are seeking economic loss damages that come within the ambit of the economic loss rule. See Town of Alma,
2. Source Of The Duties Alleged To Be Breached. The next step of our inquiry is to determine the source of the duty of care alleged to have been breached by K-C Aviation and Gulfstream Appleton. In order to make this determination, we first must look to the contract between the parties, and “[i]f the tort claims are based on duties that are imposed by contract, then contract law provides the remedies for [the] economic losses.” (Citation omitted.) Parr v. Triple L & J Corp.,
There is an exception to this rule if “special circumstances” exist, such as where there is a “special relationship between the parties” supporting the imposition of an independent duty of care regardless of the parties’ contractual relationship. Grynberg,
(a) Source Of K-C Aviation’s Duty To Inspect The Logbooks. Appellant contends that the source of K-C Aviation’s duty to inspect the airplane’s logbooks for compliance with service bulletins was the Proposal and Waiver Agreement. We agree. As noted above, Paragraph 3.1 of the Proposal provided that K-C Aviation would “[perform a Pre-purchase Records Review including . . . Customer Bulletins and Aircraft Service Changes.” Given this provision, it is clear that K-C Aviation’s duty to inspect the logbooks for compliance with service bulletins was “called for in, and governed by,” the Proposal and any specific limitations placed thereon by the Waiver Agreement attached to the Proposal. Grynberg,
Appellees nevertheless argue that the economic loss rule should not apply because even if the duty to inspect the logbooks arose out of the Proposal and Waiver Agreement, neither of those agreements
On page 1 of the Waiver Agreement, the parties struck through a provision stating that
THE WAIVER OF LIABILITY... EXPRESSLY INCLUDES LIABILITY AND RESPONSIBILITY FOR DEFECTS, DAMAGES OR OTHER PROBLEMS WITH RESPECT TO THE AIRCRAFT OR ITS COMPONENT PARTS OR ACCESSORIES THAT WERE NOT DISCOVERED BY K-C AVIATION, INC. DURING THE EVALUATION OF THE AIRCRAFT DUE TO ITS OWN NEGLIGENCE.. ..
Likewise, in Paragraph 4 on page 2 of the Waiver Agreement, the parties struck through a provision stating that appellees “SPECIFICALLY WAIVE[ ] ANY OTHER OBLIGATION OR LIABILITY ON THE PART OF K-C AVIATION OR ITS DIRECTORS, OFFICERS, EMPLOYEES, OR AGENTS, WHETHER EXPRESS OR IMPLIED IN FACT OR BY LAW, OF ANY NATURE WHATSOEVER.”
Then, Paragraph 5 of the Waiver Agreement, entitled “Waiver and Indemnification,” was modified to state:
It is expressly understood and agreed that in undertaking the evaluations contemplated hereby, K-C Aviation expressly denies any liability or responsibility for undiscovered defects, damages or other problems with the Aircraft or its component parts or accessories whether or not the same should have been discovered by K-C Aviation in the evaluation— [T]he undersigned hereby waives any and all rights and causes of action that may arise as a result of the evaluation and any reports or comments of K-C Aviation in connection therewith, whether such right or cause of action be for incidental, special or consequential damages, personal injuries, property damage, repair costs or liabilities of any other kind or nature which the undersigned or its agents, contractors or employees could assert against K-C Aviation, unless caused by K-C Aviation’s negligence. . . .
(Emphasis supplied.) The “unless caused by K-C Aviation’s neglience” language was deliberately penciled into the written agreeent and initialed by the parties.
Arguing for a heightened standard of care, K- C Aviation contends that the quoted “unless caused by K-C Aviation’s negligence” language should be read as modifying only the second sentence of Paragraph 5, not the first sentence. Under this narrow interpretation, the Waiver Agreement would provide that K- C Aviation could be sued “if there was negligence of a kind unrelated to the failure to discover.” Applying Texas law,
Finally, appellees argue that there are three independent duties of care that exist separate and apart from their contract with K-C
[Even if a party has] an independent, well-recognized obligation imposed by tort law ..., the existence of such a duty is not determinative, because [courts] are directed first to determine whether the contract requires conformance to a particular standard before turning to an independent duty analysis. If a duty is found in the contract, as here, it is improper further to analyze the existence of an independent tort duty in determining whether an economic loss may he recovered.
(Citation omitted; emphasis in original.) Parr,
Nor have appellees pointed to a special relationship between the parties or other “special circumstances” justifying an independent tort action. See Grynberg,
For these reasons, the Utah economic loss doctrine bars appellees’ tort claims predicated on the alleged negligent logbook review performed by K-C Aviation. The trial court erred by failing to grant summary judgment to appellant.
(b) Source Of Gulfstream Appleton’s Duty To Inspect The Logbooks. Appellant argues that the source of Gulfstream Appleton’s duty to inspect the logbooks likewise arose out of the contract between the parties. However, the Work Authorization governing the work done by Gulfstream Appleton does not mention or refer to any review of the airplane’s logbooks that would be conducted. Thus, the Work Authorization is not the source of any duty to inspect the logbooks owed by Gulfstream Appleton; to the extent that Gulfstream Appleton undertook such an inspection, it fell outside the scope of the parties’ contractual agreement. As such, we conclude that the Utah economic loss doctrine does not bar appellees’ tort claims predicated on Gulfstream Appleton’s logbook inspection, since the duty to inspect was not called for in, or governed by, the contractual agreement between the parties. Compare Cooley v. Big Horn Harvestore Systems,
Nevertheless, appellant contends that even if the economic loss rule does not apply, appellees’ tort claims should have been dismissed because there was no duty of care imposed upon Gulfstream Appleto to inspect the logbooks for compliance with ASCs, the type of servic
It is true that the invoice Gulfstream Appleton prepared after completing its repair and inspection work reflects that it “performed AD & CB research” but mentions nothing about whether it also undertook a review of the airplane’s logbooks for compliance with ASCs. But, appellees point to another document in the record entitled “Aircraft Services Changes Research List,” which is a chart listing over 30 ASCs (including ASC 372) with handwritten notations as to whether and when there had been compliance with each ASC.
There is no explicit reference to Gulfstream Appleton anywhere on the Research List, and appellant emphasizes that the date printed on the Research List is “4/18/97,” before the logbook review undertaken by Gulfstream Appleton. However, in opposing summary judgment, appellees submitted an affidavit averring that the Research List was produced by Gulfstream Appleton as part of discovery in this lawsuit. Appellees also submitted the invoice prepared by Gulf-stream Appleton as part of its 1998 inspection work, which listed the relevant job number as “13120” and the number of airplane landings at the time of the inspection as “2769.” The same job number and number of landings appear on the Research List. Furthermore, appellees assert that the date printed on the Research List reflects the date upon which the blank chart itself was last revised, rather than when the Research List was filled in with information concerning compliance with ASCs. In support of this assertion, appellees point to a separate research list produced by Gulfstream Appleton charting compliance with CBs that has a date printed on it of
This combined circumstantial evidence, construed in the light most favorable to appellees (the parties opposing summary judgment), creates a genuine issue of material fact over whether the Research List was filled in by Gulfstream Appleton as part of its logbook review in 1998. See Salinas v. Skelton,
For these reasons, we conclude that appellees’ tort claims predicated on the logbook review by K-C Aviation were barred by the Utah economic loss doctrine, and, therefore, that the trial court erred in denying summary judgment to appellant on those claims. In contrast, we conclude that the trial court correctly denied summary judgment on appellees’ tort claims predicated on the logbook review by Gulf-stream Appleton, since those claims were not barred by the Utah economic loss doctrine, and the evidence construed most favorably to appellees supports imposing a tort duty of reasonable care upon Gulfstream Appleton.
Judgment affirmed in part and reversed in part.
Notes
The company that is now GASC appears in two capacities in this lawsuit (although it is only one defendant) because the logbook reviews at issue occurred before GASC existed in its current form. In July 1998, parent Gulfstream purchased K-C Aviation, Inc. — which included a Dallas facility and an Appleton, Wisconsin facility involved in this matter - and renamed th business “Gulfstream Aerospace Services Corporation.” For the sake of clarity, we will refei separately to “K-C Aviation” and “Gulfstream Appleton” in discussing the facts and contract, at issue.
In addition to service bulletins issued by Gulfstream, the Federal Aviation Administration (“FAA”) promulgates Airworthiness Directives (“AD”), which are issued when a conditio on an aircraft presents a serious safety risk.
Neither party contests the choice of law determinations made by the trial court.
It appears that the trial court inadvertently failed to enter an order addressing the separate renewed motion for summary judgment pertaining to the Gulfstream Appleton logbook review at that time.
Appellant did not obtain a certificate of immediate review from the trial court’s order denying the renewed motion for summary judgment pertaining to the Gulfstream Appleton logbook review. However, since we already have jurisdiction to address the trial court’s order ’enying appellant’s motion for reconsideration under OCGA § 5-6-34 (b), we have jurisdiction o address the order denying the renewed motion for summary judgment under OCGA§ 5-6-34 d). See, e.g., Aetna Cas. & Surety Co. v. Cantrell,
Although the Utah Supreme Court applied Wisconsin law in Questar Pipeline Co., th Court discussed Utah and Colorado cases dealing with the economic loss rule in the course o its analysis. See id. at 12-13.
We likewise reject appellees’ contention in a single sentence of their appellate brief that the modifications to the Waiver Agreement reflect that the parties intended to contract around the economic loss rule and allow appellees to sue in tort if K-C Aviation negligently reviewed the airplane logbooks. As modified, Paragraph 5 provided no more than that appellees waived any “causes of action that may arise . . . unless caused by K-C Aviation’s negligence.” (Emphasis supplied.) By its plain language, the modified provision simply stated that to the extent appellees otherwise had any causes of action under applicable law, those causes of action were not waived if K-C Aviation was negligent. The modification clearly did not purport to affirmatively create or resurrect causes of action that would not be available in the first instance undeapplicable law.
As previously noted, the trial court ruled that Texas law would govern the waive} provisions, and neither party has contested that ruling on appeal.
The trial court relied on Hermansen,
Our opinion in no way resolves whether appellees can satisfy the other elements of their tort claims, which are not at issue in this appeal.