Sale of Helicopter Gone Bad: Economic Loss Doctrine Trumps Post-Sale Negligence Claim

On April 11, 2008, the Fifth Circuit Court of Appeals issued an opinion finding (or perhaps more accurately predicting) that Texas law does not except post-sale negligence claims from the "economic loss doctrine," thereby precluding a helicopter owner's recovery of purely economic losses on its claim against the manufacturer for damage caused to helicopter.

In Memorial Hermann Healthcare System Inc. v. Eurocopter Deutschland, GMBH, --- F.3d ---, 2008 WL 1113339 (5th Cir. 4/11/08), Memorial Hermann owned a helicopter it bought from the manufacturer, Eurocopter. When the helicopter's door separated and struck the rotor blades, it damaged the helicopter - - but caused no additional harm or injuries. Memorial Herman sued Eurocopter for post-sale negligence.  Specifically, it alleged that Eurocopter assumed a duty to warn its customers of defects to its products - - even after a sale.  And Eurocopter breached this duty when it failed to warn Memorial Hermann of a potential door defect despite knowledge of a similar accident.

Eurocopter moved to dismiss the lawsuit arguing that, even if it had this duty, the economic loss doctrine under Texas law precluded Memorial Hermann from recovering only economic losses. Agreeing with this defense, the district court dismissed the claim.  The Fifth Circuit affirmed the district court's decision, holding that the economic loss rule under Texas law provides that no duty in tort exists when plaintiffs have suffered only economic losses, therefore barring plaintiffs from recovering economic losses due to a defective product based on a negligence theory.  Moreover, the Fifth Circuit reasoned:

Appellants invite us to carve out an exception to Texas's economic loss rule for post-sale negligence claims. We decline this invitation. The Texas Supreme Court has unequivocally adopted a broad interpretation of the economic loss rule. According to the Texas Supreme Court, "the nature of the injury" may preclude plaintiffs from seeking relief in tort, and "[w]hen the injury is only the economic loss to the subject of a contract itself, the action sounds in contract alone."Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617, 618 (Tex.1986)…. The gravamen of Appellants' argument is that the Texas Supreme Court has not explicitly rejected an exception to the economic loss rule for post-sale negligence claims. Therefore, Appellants claim that we are free to create this exception under the guise of making an "Erie guess" as to what we believe the Texas Supreme Court would likely do….  Because Appellants have failed to provide a meaningful difference between post-sale negligence claims and other negligence claims, we are far from convinced that the Texas Supreme Court would recognize Appellants' proposed exception.

If you would like a copy of this opinion, or more information on the topic, please contact the Business Litigators at Clouse Dunn Khoshbin LLP at info@cdklawyers.com.