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An Air Florida airplane crashed just after takeoff in the Potomac River located between Virginia and the District of Columbia after taking off from the Washington National Airport bound for Tampa and Fort Lauderdale, Florida. At least some of the crash activity occurred within the territorial borders of the District of Columbia. The airport is located across the Potomac River from the city of Washington, D.C., in Arlington, Virginia. A variety of claims were brought on behalf of the passengers (personal injury claims, survival claims) and their families (wrongful death claims) against the Boeing Company (the manufacturer of the plane) and Air Florida (the airline that owned and operated the plane during its flight). Most of the victims were residents of the District of Columbia or the state of Virginia, although some plaintiffs lived in other states, including the state of Washington. The claims against Boeing alleged that the plane was defectively designed and that Boeing failed to warn its customers (such as Air Florida) about the need to de-ice the wings of the plane to prevent it from pitching up on take-off. The complaint also alleged that Boeing sold the plane in question to Air Florida knowing it would be used at the Washington National Airport. The claims against Air Florida alleged both negligent failure adequately to de-ice the wings of the plane (the proximate cause of the crash) and inadequate pilot training resulting from a high level corporate decision. Boeing is incorporated and located in Washington state where the plane was designed, manufactured and initially sold. Air Florida’s corporate headquarters are in the state of Florida.
The opinion of the District Court follows this problem. The court came to the following conclusions about the applicable substantive law. Washington State does not allow punitive damages at all in personal injury, survival or wrongful death claims while the District of Columbia allows punitive damages in personal injury and survival claims but not in wrongful death cases. Virginia did not allow punitive damages in wrongful death claims at the time of the crash but did allow punitive damages for personal injury and survival claims and had changed its law by the time of trial to allow punitive damages in wrongful death claims. Florida permits punitive damages for personal injury, survival and wrongful death claims. The District Court applied the punitive damages law of the District of Columbia to the products liability claim against defendant Boeing.
Assume the following further facts. The named plaintiff is a victim passenger named Gidon Kremer. Boeing purchased an insurance contract from an insurance company, Jonathan Kadison Insurance Co. (Kadison) with its principal place of business in Chicago, Illinois, under which Kadison promised to reimburse Boeing if a court of law ever imposed a “damages” judgment on it. The insurance policy provided that “punitive damages are fully insured to the maximum extent permitted by law.” Under the law of Washington state and Virginia, insurance contracts that provide reimbursement for damages (both compensatory and punitive) are fully enforceable while under the law of both Illinois and the District of Columbia contracts insuring against punitive damages judgments are void as against public policy.
Kadison refused to reimburse Boeing for the punitive damages judgment owed to plaintiffs in the Washington Air Crash case, claiming that Illinois was the place where the contract was made and that Kadison was prohibited by the law of Illinois, the place where it did business and where the contact was made, to insure against punitive damages. Alternatively, Kadison argued that Washington, D.C. law should apply on this issue as the place of the injury and the place of the insured risk. Boeing brought Kadison into the lawsuit as a third-part defendant, claiming that if Boeing was liable to pay a punitive damages judgment to plaintiffs that Kadison had a contractual obligation to reimburse Boeing for that amount, arguing that Washington state law applied to the question, and, in the alternative, that Virginia law should apply as the place of departure. Boeing further argued that the contract was made in Washington state since Boeing was the insured and the place where the insured does business should be the presumptively applicable law in contracts generally; it further argued that this rule was preferable to a rule applying the law of the place of the insured risk when the risk could materialize in many states.
Assume further that the judgment of the District Court has been appealed to the Court of Appeals for the D.C. Circuit. The appeal is limited to two issues.
1. Does Washington state law or the law of the District of Columbia or the law of Virginia apply on the question of whether the manufacturer of the plane, defendant Boeing, is liable for punitive damages?
2. Does the law of Washington state, Illinois, the District of Columbia, or Virginia apply to the question of whether the contract insuring Boeing against a punitive damages award is enforceable?
π = Gidon Kremer (and class)
∆/3π = Boeing
3∆ = Kadison
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