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KLONDIKE HELICOPTERS, LTD. v. FAIRCHILD HILLER CORP.

December 10, 1971

KLONDIKE HELICOPTERS, LTD., PLAINTIFF,
v.
FAIRCHILD HILLER CORPORATION, DEFENDANT.



The opinion of the court was delivered by: McGARR, District Judge.

  MEMORANDUM OPINION AND ORDER

This is an action for damages resulting from the crash of a helicopter manufactured by the defendant and purchased by the plaintiff. Jurisdiction is based on diversity of citizenship. 28 U.S.C. § 1332. Plaintiff is a British Columbian citizen with its principal place of business in Canada. Defendant is a Maryland corporation with its principal place of business in Maryland. The helicopter in question was manufactured by defendant in California and sold to plaintiff on either October 7, 1964 or December 18, 1964. This contract was executed and the aircraft delivered in California. On September 17, 1967, the helicopter crashed in the Canadian province of British Columbia. This action was filed on December 17, 1970. Plaintiff has also filed an identical action against the defendant in the Superior Court of the State of Washington for King County.

Defendant has filed an answer to the complaint with an affirmative defense and a motion to dismiss. Defendant moves for dismissal on several grounds. First, he alleges that this action is barred by the appropriate statutes of limitations. Secondly, he alleges that the complaint is defective, as plaintiff has failed to allege freedom from contributory negligence. Finally, defendant alleges that this action should be dismissed on the doctrine of forum non conveniens or, alternatively, transferred to the United States District Court in Seattle, Washington. We will deal with the defendant's contentions in that order.

A federal district court sitting in a diversity action should apply the forum state's conflict of laws rules. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). This means we should reach the same result regarding conflicts of laws as an Illinois state court would if it were hearing this action. Plaintiff's amended complaint contains six counts. Two of the counts allege negligence by the defendant. Two counts assert a claim based on product liability. One count alleges that defendant breached a continuing contract to supply certain information relating to servicing the aircraft. A final count alleges breaches of both express and implied warranties. For statute of limitations purposes, the product liability counts will be treated with the negligence counts, as both clearly sound in tort. Williams v. Brown Manufacturing Co., 45 Ill.2d 418, 261 N.E.2d 305 (1970). The basic Illinois statute of limitations for actions of this sort relating to property damage may be found in Illinois Revised Statutes, Chapter 83 Section 16 (Smith-Hurd 1966). This section states that an action for damage to property shall be commenced within five years after the cause of action accrued. In negligence actions, a cause of action accrues when the last act occurred to create liability. Gray v. American Radiator and Standard Sanitary Corp., 22 Ill.2d 432, 176 N.E.2d 761 (1961). In the instant action, this occurred when the aircraft crashed. As the crash took place in September, 1967, and this action was filed in December, 1970, plaintiff is well within the Illinois statute of limitations. The Illinois courts have also held this last event rule applicable to product liability actions. Williams v. Brown Manufacturing Co., supra. Therefore, the product liability counts were also timely filed.

The contract counts, both as to breach of contract and those based on warranties, present different problems. The basic applicable statute of limitations may be found in Illinois Revised Statutes, Chapter 26, Section 2-725 (Smith-Hurd 1963). This section provides that an action for breach of any contract for sale must be commenced within four years after the cause of action has accrued. Subsection two goes on to state:

  (2) A cause of action accrues when the breach occurs,
  regardless of the aggrieved party's lack of knowledge
  of the breach. A breach of warranty occurs when
  tender of delivery is made, except that where a
  warranty explicitly extends to future performance of
  the goods and discovery of the breach must await the
  time of such performance the cause of action accrues
  when the breach is or should have been discovered.
  Ch. 26, § 2-725(2).

The exception contained in this subsection saves Count II of the complaint relating to a contract to provide information regarding servicing the aircraft as this contract called for a continuing duty to provide this information.

This exception also seems applicable to plaintiff's Count III. Plaintiff alleges that defendant breached both express and implied warranties. These warranties relate to the merchantability of the aircraft. It seems reasonable to expect a warranty of this nature to continue beyond the tender of delivery and extend for the life of the product. For this reason, the alleged warranties extended to future performance within the meaning of Section 2-725(2). The four year period began to run from the date of discovery of the alleged breach — 1967. Therefore, the plaintiff's Count III is not barred by the Illinois statute of limitations.

This result leads to the next problem in the analysis of the statute of limitations issue. Simply because an action is timely and properly brought under the forum's local statute of limitations does not necessarily mean that it may still not run afoul of other applicable statutes of limitations. The reason for this is the presence of the Illinois borrowing statute. Illinois Revised Statutes, Chapter 83, Section 21 (Smith-Hurd 1966). The Illinois borrowing statute states:

  When a cause of action has arisen in a state or
  territory out of this state, or in a foreign country,
  and, by the laws thereof, an action thereon cannot be
  maintained by reason of the lapse of time, an action
  thereon shall not be maintained in this state. Ch.
  83 § 21.

As Illinois' only connection with this action is the presence of this suit in our courts, it seems quite clear that the "cause of action" has arisen elsewhere. The problem, therefore, is to determine where the cause of action arose; what that forum's statute of limitations is; and whether the action would be barred there. Again, for the purpose of analysis, the tort and contract counts will be dealt with separately.

The first issue which requires resolution is the locus of the tort cause of action. The rule is that a tort cause of action has arisen "where the last act occurred to create liability." Manos v. Trans World Airlines, Inc., 295 F. Supp. 1170, 1175 (N.D.Ill. 1969). That decision by Chief Judge Robson of this Court involved an airplane crash in Italy. The plane had been manufactured and sold in Washington. Questions arose as to the applicable statute of limitations for both tort and warranty questions. This court held that under the Gray v. American Radiator and Standard Sanitary Corp., 22 Ill.2d 432, 176 N.E.2d 761 (1961) case, the tort occurred when the actual accident took place — the plane crash. While this court is quite aware that the Manos case was decided prior to the Illinois Supreme Court's decision in Ingersoll v. Klein, 46 Ill.2d 42, 262 N.E.2d 593 (1970), we feel that the court's reasoning in Manos is still valid. In Ingersoll, Illinois adopted the "most significant relationship" test of the Second Restatement of Conflicts to determine what substantive law should be applied to a tort action. Ingersoll does not speak to the issues of where and when a cause of action arises, but rather goes to the question of what substantive law shall govern it. However, even if we were to apply Ingersoll to determine what statute of limitations to apply, the result would be the same. Under the Gray-Manos approach, the crash in British Columbia is determinative. Under the Ingersoll-Second Restatement approach, it is necessary to determine what state had the most significant relationship with the action to justify application of its laws. As stated in Ingersoll, the forum should consider:

  (a) The place where the injury occurred. (b) The
  place where the conduct occurred. (c) The domicile,
  nationality, place of incorporation and place of
  business of the parties. (d) The place where the
  relationship of the parties is centered. 46 Ill.2d at
  48, 49, 262 N.E.2d at 596.

The injury involved occurred in British Columbia. The conduct occurred in California and British Columbia. The plaintiff is domiciled and has its principal place of business in British Columbia. The defendant is domiciled and has his principal place of business in Maryland. The relationship of the parties was originally centered in California, but in 1965 defendant moved its California manufacturing operation to Maryland and totally extinguished all of its California connections. As a result, the center of the relationship moved to British Columbia where the aircraft was used and where the defendant knew the aircraft was to be used. With these contacts in mind, it seems obvious that British Columbia has the most significant relationship with the action. Therefore, were we to apply the Gray-Manos "last event" test or the Ingersoll "most significant relationship" test, the result under the borrowing statute is the same. The tort cause of action arose in British Columbia. The British Columbian statute of limitations for tort actions is six years. Revised Statutes of British Columbia, Chapter 370, Section 3 (1960). ...


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