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Thornton v. M7 Aerospace LP

United States District Court, N.D. Illinois, Eastern Division

October 23, 2012

Trad THORNTON, administrator of the estate of Sally Urquhart, et al., Plaintiffs,
v.
M7 AEROSPACE LP, et al., Defendants.

Page 655

[Copyrighted Material Omitted]

Page 656

Floyd A. Wisner, Wisner Law Firm, St. Charles, IL, for Plaintiffs.

Gregory Micheil Canfield, Michael Gerard McQuillen, Austin William Bartlett, Christopher Jason Raistrick, Kevin William Murphy, Adler, Murphy & McQuillen, Michael A. Pope, Jocelyn D. Francoeur, Rachael L. Mamula, McDermott, Will & Emery LLP, Jonathan R. Buck, William Thomas Cahill, Perkins Coie LLC, Chicago, IL, Richard C. Coyle, Michael E. Scoville, Seattle, WA, for Defendants.

MEMORANDUM OPINION AND ORDER

AMY J. ST. EVE, District Judge.

This action arises out of a commuter airplane crash on May 7, 2005 near Lockhart River in Queensland, Australia. On May 4, 2007, the personal representatives of the deceased passengers filed a negligence and strict products liability action against Defendant M7 Aerospace LP and others. Defendant is the corporate successor to the original aircraft manufacturer. Before the Court is Defendant's motion for summary judgment on Counts VII, VIII, IX, X, XI, and XII of the Second Amended Complaint. (R. 74.) For the following reasons, the motion is granted.

BACKGROUND

I. Factual Background

A. Accident

On May 7, 2005, Transair was operating a commuter aircraft with service from Bamaga, Australia to Cairns, Australia, with an intermittent stop in Lockhart River, Australia. (R. 76 & 96, Undisputed Facts [1] ¶ 6; R. 76-1, Am. Compl. ¶ 3.) The aircraft was a Fairchild Aircraft SA227-DC Metro 23, with tail number VH-TFU (the " Subject Aircraft" ). ( See R. 76 & 96, Undisputed Facts ¶ 6.) On approach to Lockhart River Airport, the Subject Aircraft crashed, resulting in the deaths of the passengers and crew. The incident was one of the worst civil aviation accidents in Australian history.[2]

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B. Fairchild Aircraft, Inc.

" The Subject Aircraft was designed, manufactured, assembled, tested, and sold by Fairchild Aircraft, Inc." or " Fairchild." (R. 76 & 96, Undisputed Facts ¶ 7.) Fairchild, now defunct, " operated as an aircraft and aerospace manufacturing company until it filed for bankruptcy in 2002." ( Id. ¶ 8.) Fairchild was a wholly-owned subsidiary of Fairchild Dornier, a German corporation that also sought bankruptcy protection in 2002, halting its American operations. ( Id. ¶¶ 26-27.)

In 1990, the Federal Aviation Administration (" FAA" ) issued Fairchild a certificate to manufacture the type of aircraft involved in here— the SA227-DC— " based on Fairchild's design and testing specifications." ( Id. ¶¶ 7, 9.) " Fairchild manufactured the Subject Aircraft in 1992 to the specifications approved by the FAA and requested by the purchasing customer," a non-party Mexican airline, Aerovias de Mexico. ( Id. ¶ 10.) Fairchild sold the Subject Aircraft in 1992 and the Mexican company took delivery in January of 1993. ( Id. ¶ 11.) In 2000, Fairchild " ceased manufacturing aircraft" at its facility in San Antonio, Texas. ( Id. ¶ 12.) In July of that year, Fairchild " sold its last SA227-DC model aircraft." ( Id. ) " There are approximately 700 of this type of aircraft still flying today." (R. 96 & 108, Add'l Undisputed Facts ¶ 10.)

C. Bankruptcy and Asset Purchase

On July 25, 2002, " Fairchild filed a bankruptcy petition" in the Western District of Texas. (R. 76 & 96, Undisputed Facts ¶ 13.) At the time of its bankruptcy, Fairchild " concentrated its business on manufacturing and supporting Fairchild Dornier aircraft." ( Id. ¶ 26.)

4M Investments LLC (" 4M" ), a private investment company, acquired Fairchild's assets at an auction during the bankruptcy proceedings. ( Id. ¶ 13.) " 4M was formed in 2001 by Ted B. Miller, Jr., who is its sole owner and manager." ( Id. ¶ 14.) During the bankruptcy proceedings, " five qualified bidders," including 4M, made offers to purchase Fairchild's assets. ( Id. ¶ 15.) 4M won the action with the " highest and best" offer. ( Id. ) On December 12, 2002, following the action, Fairchild and 4M executed an Asset Purchase Agreement," which included these terms:

Definitions. " Liabilities" shall mean any direct or indirect liability, indebtedness, obligation, commitment, expense, claim, deficiency, guaranty or endorsement of or by any person or any type, whether accrued, absolute, contingent, matured, unmatured or other.
§ 2.3. Assumption of Liabilities. The only liabilities and obligations to be assumed herein by the Buyer in connection with the transfer of Assets from Sellers shall be: (a) Those liabilities and obligations to be performed after Closing pursuant to the Assumed Contracts, but only to the extent that such obligations arise as a result of operations after Closing or relate to products to be sold and delivered after Closing; (b) All obligations of Sellers under the Permits and Certificates, but only to the extent that such obligations arise as a result of operations after Closing; (c) The purchase price, including freight, insurance and the like, for goods in transit at the Closing or for goods delivered prior to the Closing and still on hand, but invoices have yet to be received ...; [and] (d) Standard warranties for the Subsidiaries' customers identified in the Subsidiaries sales journal for the twelve (12) months immediately prior to the Closing Date ....

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§ 2.4. Excluded Liability. Except as expressly identified [in § 2.3,] Buyer does not and will not assume or become obligated to pay, perform or discharge and will not be responsible for, any other liabilities or obligations of Sellers, whether accrued, absolute, contingent or otherwise, including, without limitation, liabilities or obligations based on, arising out of or in connection with any pre-Closing event or transaction, including, but not limited to ... (c) Liabilities of Sellers to third parties for (i) personal injury or property damage occurring prior to the Closing Date (ii) liability for personal injury or property damage arising at any time out of or in connection with goods manufactured, produced, distributed or sold by the Sellers prior to the Closing Date, including but not limited to any Product Liability claims ....

( Id. ¶¶ 15, 19-20.)

In a written order dated December 18, 2002, the Bankruptcy Court approved the Asset Purchase Agreement. The court stated " that the assets sold to 4M ‘ shall be free and clear of any liens, claims and encumbrances' " and that " 4M was ‘ not an insider or affiliate’ of Fairchild." ( Id. ¶¶ 16-17.) Then, in 2003, 4M assigned the Asset Purchase Agreement to Defendant M7, which in turn " assumed" the Asset Purchase Agreement. ( Id. ¶ 18.)

D. Successor Corporation— Defendant M7

1. Ownership and Assets

M7 is a " privately-held small business" that Mr. Miller (owner of 4M) and Mr. George Reese " formed in December 2002." ( Id. ¶¶ 12, 21-22.) Neither Mr. Miller nor Mr. Reese " had any prior relationship with or ownership interest in Fairchild" or any of its corporate affiliates. ( Id. ¶¶ 22, 23, 29.) M7 operates from a San Antonio facility that it purchased from Fairchild, and employs certain former employees of Fairchild, including mechanics who worked on the subject model aircraft. (R. 96 & 108, Add'l Undisputed Facts ¶¶ 4-5.)

" M7 did not assume any of Fairchild's service contracts relating to the Subject Aircraft, and M7 never serviced, maintained, or repaired the Subject Aircraft." (R. 76 & 96, Undisputed Facts ¶ 31.) M7 never had " any service contracts covering the Subject Aircraft with any owner or operator of the Subject Aircraft, including Transair." ( Id. ¶ 32.)

M7 owns " the rights to Fairchild's technical publications" and the " right to use the Fairchild name" as part of the assets it acquired in the bankruptcy sale." (R. 96 & 108, Add'l Undisputed Facts ¶ 12.) M7 also holds the " type certificate [for] the SA227-DC model" and is " the Original Equipment Manufacturer for the fleet of Fairchild-built Metro aircraft (among others)." (R. 76 & 96, Undisputed Facts ¶ 30.) " A type certificate is a document provided by the FAA which demonstrates [that] an aircraft model has met the requirements for FAA certification." (R. 96 & 108, Add'l Undisputed Facts ¶¶ 7-10.) As the holder of the type certificate, M7 had the right " to manufacture parts" and to hold " exclusive ownership of the technical data, including all drawings, reports and analyses used to either build, substantiate, or validate the aircraft design" ( Id. ¶ 8.) Defendant M7 obtained the type certificate to allow it to sell parts and support the fleet of existing aircraft manufactured under that certificate. ( Id. ¶ 10.)

2. Operations and Business Activities

" M7 began operations in April 2003 with three primary business units focused on ‘ Merlin’ [Model SA226] and ‘ Metro’ [Model SA227] aircraft." (R. 76 & 96, Undisputed Facts ¶ 24.) These units were: " (1) a part and product support division; (2) a government contracts division; and (3) a maintenance,

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repair and overhaul operation." ( Id. ¶¶ 24-25 (logical support to the government is the primary revenue-generating business).) At the San Antonio facility, M7 " manufactures parts for Merlin and Metro aircraft ... and builds and assembles aircraft parts for" other aerospace companies, including Boeing, Northrop Grumman, Lockheed Martin, and Sikorsky. ( Id. ¶ 25; see also R. 96 & 108, Add'l Undisputed Facts ¶ 11 ...


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