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Cunningham Charter Corporation v. Learjet

July 5, 2011

CUNNINGHAM CHARTER CORPORATION,
PLAINTIFF,
v.
LEARJET, INC.,
DEFENDANT.



The opinion of the court was delivered by: Herndon, Chief Judge:

MEMORANDUM & ORDER

I. Introduction

Before the Court is defendant Learjet, Inc.'s motion for partial summary judgment (Doc. 99), with plaintiff Cunningham Charter Corporation's response (Doc. 111) and defendant's reply (Doc. 114). After the motion was filed, plaintiff amended its complaint. Plaintiff now claims breach of warranty, products liability, breach of contract, fraudulent concealment, breach of implied duty of good faith and fair dealing, and fraud by silence, all arising from its purchase of a Learjet Model 45 aircraft from defendant (Doc. 128).

The instant motion attacks the products-liability and fraud claims. Defendant first argues that products liability is barred under Kansas law by the economic-loss doctrine. Second it argues that plaintiff's allegation of fraud should be dismissed because it was not pleaded with particularity under Federal Rule of Civil Procedure 9(b) and Illinois law.*fn1 The Court agrees with defendant that plaintiff's claim of products liability is barred. Therefore, defendant is entitled to judgment as a matter of law on that claim. As to fraud, however, plaintiff's amended complaint pleads enough particularity under federal procedural rules. Accordingly, defendant's motion is GRANTED IN PART AND DENIED IN PART.

II. Background

William R. Cunningham, as the former CEO of Transcraft Corporation, was in the market for a new jet aircraft. He nearly purchased one from Cessna Aircraft Company, giving Cessna a $100,000 nonrefundable down payment. Then defendant Learjet, Inc., lured Cunningham away from Cessna with the new Learjet Model 45. Defendant's overtures focused on the aircraft's superior quality and warranty coverage. Defendant gave Cunningham a document called the "Learjet 45-140 Proposal Summary" ("Proposal"), which described the general terms of the warranty, calling it "outstanding" and "most comprehensive," and saying it included both parts and labor (Doc. 128, ¶ 34 & Ex. 1, p. 6). The Proposal was effective through January 31, 1999, and on that date the parties agreed to the purchase and signed an Airplane Purchase Agreement ("APA") (Doc. 128, Ex. 2). Transcraft forfeited its $100,000 deposit to Cessna and later assigned its interest in the Learjet Model 45 to plaintiff.

Defendant allegedly received notice of at least 25 windshield failures in the Learjet Model 45s after the APA was signed and before the aircraft was delivered. Just before delivery and acceptance of the aircraft, defendant made the aircraft available to plaintiff for inspection and a test flight so plaintiff could check for defects, but defendant did not disclose to plaintiff its knowledge of the windshield failures at that time. Defendant delivered the aircraft to plaintiff on April 24, 2000, and accepted the final $7 million payment, again without disclosing its knowledge of windshield failures.

Since taking possession of the aircraft, plaintiff has had numerous problems, particularly with the windshields. Two failed during flight. During the warranty period, defendant replaced windshields but did not repair them. In the last three failures, defendant denied warranty coverage, and plaintiff paid $48,000 per windshield to replace them. Between January 1999--April 2005, over 100 Learjet Model 45s experienced at least 200 windshield failures. Plaintiff also asserts that the batteries were defectively designed.

In addition, plaintiff began incurring charges it believes should have been covered by the warranty. Plaintiff asked defendant about its warranty coverage, and Sales Support Administrator Spencer Bain responded by fax on February 19, 2002, confirming the same warranty terms as were in the Proposal (Doc. 128, Ex. 5).

The Proposal says the warranty covers parts and labor for 60 months on airframe and Learjet-manufactured components, avionics, and vendor-supplied items; but for 24 months on interior furnishings and exterior finishing.

But defendant claims that the actual warranty is described in section 12 of a separate document, the Specification & Description (Doc. 128, Ex. 6). There are several differences between the Proposal and section 12. For instance, section 12 requires 90 days' notice for warranty claims. It also specifies that repair work must be done by defendant or an authorized representative. Plaintiff alleges it was never given the section-12 warranty (Doc. 128, ¶ 40).

This case was originally filed as a class action and removed to federal court under the Class Action Fairness Act of 2005, 28 U.S.C. § 1332(d). The classes were not ultimately certified, but federal diversity jurisdiction is retained under the Act. See Cunningham Charter Corp. v. Learjet, Inc., 592 F.3d 805, 806 (2010). Both parties are incorporated in Delaware. Plaintiff's principal place of business is in Illinois; defendant's is in Kansas. The APA says "This Agreement shall be governed by and interpreted in accordance with the laws of the State of Kansas" (Doc. 128, Ex. 2, p. 3).

III. Discussion

A. Products ...


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