ALASKAN OIL, INC., Appellee, v. CENTRAL FLYING SERVICE, INC., Appellant
1992 WL 228534, 975 F.2d 553, 1992 U.S. App. LEXIS 22760 (1992)
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Rule of Law:
Arkansas law permits recovery under strict liability for economic losses limited to the defective product itself, consistent with the minority view, and broadly defines 'supplier' under its product liability statutes to include entities with a substantial financial interest in a sale, even if primarily acting as a broker.
Facts:
- In early 1987, Alaskan Oil, Inc. hired Corporate Airways to help it find a used aircraft for purchase.
- Corporate Airways’ president, Dan Steinman, entered into a contract to purchase a 1970 Beechcraft airplane owned by G.W. Davis Construction Company (Davis).
- Central Flying Service, Inc., which had possession of the aircraft and to which Davis owed a substantial amount of money for repair work and storage, brokered the deal.
- The purchase contract for the airplane was completed on March 3, 1987.
- In the year after the sale, Alaskan Oil experienced numerous problems with the plane, including the replacement of both engines, the fuel cell, and de-icing boots, and the discovery of large amounts of corrosion.
- In March 1988, an inspection in Wichita, Kansas, found the plane was so corroded as to be 'economically unfeasible' to repair.
- Alaskan Oil subsequently sold the aircraft for salvage.
- Central Flying Service had a substantial financial interest in the sale of the plane, receiving $53,000 of the $65,000 sale price to pay off the balance Davis owed it for maintenance and storage.
Procedural Posture:
- On December 19, 1989, Alaskan Oil, Inc. sued G.W. Davis Construction Company and Central Flying Service, Inc. in the U.S. District Court for the Eastern and Western Districts of Arkansas, alleging breach of warranty, fraud, and strict liability.
- The jury returned a verdict for Davis and Central Flying Service on the breach-of-warranty and fraud claims.
- The jury found in favor of Alaskan Oil, Inc. on its strict-liability claim, awarding it $54,500.00 and apportioning 80 percent of the liability to Central Flying Service.
- The District Court upheld the jury's findings.
- Central Flying Service appealed the District Court’s judgment regarding strict liability to the U.S. Court of Appeals for the Eighth Circuit (Appellant: Central Flying Service, Inc.; Appellee: Alaskan Oil, Inc.).
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Issue:
1. Does Arkansas law permit recovery under strict liability when the only damages suffered are economic losses to the defective product itself? 2. Was there sufficient evidence to support a jury's finding that a plane was in a defective condition and unreasonably dangerous when sold, even if it never crashed and no one was injured? 3. Can an entity that primarily brokered a sale but had a substantial financial interest in the transaction be considered a 'supplier' under Arkansas's strict liability statutes?
Opinions:
Majority - Richard S. Arnold
1. Yes, Arkansas law permits recovery under strict liability even when the only damages sustained are to the defective product itself. The court found that Arkansas has endorsed the minority view on this issue, as established by the Arkansas Supreme Court's extensive quoting of Santor v. A & M Karagheusian, Inc. (the progenitor of the minority view) in Blagg v. Fred Hunt Co., Inc. and its subsequent acknowledgement in Berkeley Pump Co. v. Reed-Joseph Land Co. that Blagg indicated Arkansas followed the Santor minority view. 2. Yes, there was sufficient evidence to support the jury’s conclusion that the plane was in a defective condition and unreasonably dangerous when it was sold. While Central Flying Service argued the plane never crashed and no one was injured, both sides presented evidence regarding the plane's history of corrosion problems, and the jury found Alaskan Oil's evidence more persuasive. The court will not disturb a jury’s factual findings when supported by evidence. 3. Yes, Central Flying Service can be considered a 'supplier' under Arkansas’s strict liability statutes. The court agreed with the District Court that Central Flying Service was more than a mere agent in the transaction; it had a 'substantial interest' in the sale because Davis owed it a significant amount ($53,000 out of a $65,000 sale) for maintenance and storage. Central Flying Service acted not only for Davis but also for its own account, fitting the statutory definition of an 'entity engaged in the business of selling a product' as defined in Ark.Code.Ann. §§ 4-86-102 and 16-116-102.
Analysis:
This case is significant for affirming Arkansas's adherence to the minority rule allowing strict liability recovery for economic damages confined to the product itself, diverging from the majority view led by East River Steamship Corp. v. Transamerica Delaval, Inc. It reinforces the broad interpretation of 'supplier' in product liability statutes, suggesting that financial self-interest in a sale can transform a broker into a 'supplier.' Furthermore, the decision underscores the appellate court's deference to jury findings on factual matters, such as a product's defective and unreasonably dangerous condition, when there is supporting evidence.
