Peregrine Falcon LLC et al v. Piaggio America, Inc. et al

Filing 127

MEMORANDUM DECISION AND ORDER - Plaintiffs Motion for Partial Summary Judgment (Dkt. 95 ) is GRANTED. Defendants Motion for Summary Judgment or Partial Summary Judgment against Plaintiffs Peregrine Falcon LLC and FastEnterprises LLC (Dkt. 97 ) is DENIED. Defendants Motion for Summary Judgment or Partial Summary Judgment Against Intervenor National Union Fire Insurance ofPittsburgh, PA (Dkt. 98 ) is DENIED. Signed by Judge B. Lynn Winmill. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (jd)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

PEREGRINE FALCON LLC, Trustee
of the Peregrine Falcon Leasing Trust,
and FAST ENTERPRISES, LLC, a
New York limited liability company,

Case No. 1:15-cv-00568-BLW
MEMORANDUM DECISION
AND ORDER

Plaintiffs,
v.
PIAGGIO AMERICA, INC, a
Delaware corporation,
Defendant.

v.
NATIONAL UNION FIRE
INSURANCE COMPANY OF
PITTSBURGH, PA, a Pennsylvania
company,
Intervenor.

INTRODUCTION
Pending before the Court are three summary judgment motions: Plaintiffs’
Motion for Partial Summary Judgment (Dkt. 95); Defendant Piaggio America
Inc.’s Motion for Summary Judgment or Partial Summary Judgment against
MEMORANDUM DECISION AND ORDER – 1

Plaintiffs Peregrine Falcon LLC and Fast Enterprises LLC (Dkt. 97); and
Defendant Piaggio America Inc.’s Motion for Summary Judgment or Partial
Summary Judgment Against Intervenor National Union Fire Insurance of
Pittsburgh, PA (Dkt. 98). Each motion has been fully briefed and oral argument
was held on the motions on December 17, 2019. For the reasons that follow, the
Court will grant Plaintiffs’ motion, will deny Defendant’s motion as to Plaintiffs,
and will deny Defendant’s motion as to the insurance Intervenor.
BACKGROUND
A.

The Airplane and How it Was Damaged
The claims in this matter pertain to damage to a custom-built passenger

airplane. On January 31, 2013, the airplane at issue was damaged when the landing
gear retracted after the airplane landed in Springfield, Illinois. Dkt. 95-4 at 2. The
pilot of the airplane aborted a landing attempt because the landing gear would not
lower through use of the hydraulic landing gear system. Dkt. 95-4 at 2. The pilot
and co-pilot initiated an emergency override of the hydraulic system. Id. To do so,
they turned off the hydraulic system and used a hand pump to manually lower the
landing gear. Id. Because the hydraulic system was needed for operation of the
airplane’s power steering and power braking systems, the pilots decided to
reengage the system prior to landing. Id. at 2-3. With the hydraulic system
reengaged, the pilots successfully landed the airplane and slowed it to walking

MEMORANDUM DECISION AND ORDER – 2

speed. Id. at 3. At that point, the landing gear retracted, and the airplane’s body
struck the ground. Id.
After the incident, the National Transportation Safety Board (NTSB)
produced an accident investigation report. (Dkt. 95-4.) The report details that the
Federal Aviation Administration (FAA) conducted an examination of the airplane.
Id. at 9. The FAA investigators found that the landing gear retracted when the
hydraulic system was turned on—even when the landing gear selector handle was
in the “gear down” position. Id. The FAA investigators removed the hydraulic
pump package from the airplane and used a computed tomography (CT) scan to
document the internal conditions of the system. The CT scan showed a single
metallic particle between a spooling mechanism and the directional housing that
controls whether the landing gear is in a lowered or raised position. Id. The FAA
investigators found that the particle resulted in a jammed spool mechanism, which
allowed hydraulic fluid to flow into the landing gear retraction lines. Id.
Significantly, the FAA’s “review of materials used in the directional control
valve did not match the material composition of the trapped particle.” Id. at 10. In
other words, the particle did not come from any of the materials used to
manufacture the internal parts of the hydraulic system. Somehow it was introduced
into the valve from an external source.

MEMORANDUM DECISION AND ORDER – 3

B.

Relationships between Entities
An understanding of the relationship between the entities involved in the

manufacture, sale, delivery, and management of the airplane is essential to the
Court’s analysis of the pending motions. The airplane was manufactured in Italy by
Piaggio Aero Industries, S.p.A. (“Piaggio Italy”) See Cert. of Airworthiness, Dkt.
97-27 at 2. Piaggio Italy is not a party to this action.
Defendant Piaggio America, Inc., is a Delaware corporation. (“Piaggio” or
“Piaggio America”). Dkt. 97-25 at 3. Piaggio is a sales and support organization
for Piaggio Italy. Dkt. 97-26. According to Piaggio, it “takes possess [sic] of the
aircraft to sell and deliver to a buyer after the aircraft has been built, tested,
inspected, and issued a Certificate of Airworthiness.” Id.
Charlie Bravo Aviation, LLC (“CBA”)—is a Texas company that brokered
the sale of the airplane for Plaintiff Fast Enterprises, LLC (“Fast”). Dkt. 97-15 at 23; Dkt. 97-25 at 3. CBA is not a party to this action. Fast is a New York private
flight chartering company with operations in Boise, Idaho. Dkt. 97-25 at 3.
Plaintiff Peregrine Falcon, LLC (“Peregrine”) is the Boise, Idaho company
that was assigned the sales agreement executed by CBA and Fast. Dkt. 97-18. The
assignment resulted in Fast’s title to the airplane being transferred to Peregrine.
Finally, Mountain Aviation Incorporated was the agent for Fast and
Peregrine that provided management services for the airplane at issue, including

MEMORANDUM DECISION AND ORDER – 4

providing flight crews and maintenance services between flights. Dkt. 97-25 at 4.
Mountain Aviation is not a party to this suit.
1. The Agreements
A cursory understanding of the four written agreements related to the
manufacture, sale, and delivery of the airplane is also essential to the Court’s
determination of the pending motions.
a. Sales Agreement 1
On December 21, 2012, Piaggio and CBA entered into a sales agreement for
the purchase of the airplane, a Piaggio 180 Avanti II aircraft (“Agreement 1”). Dkt.
97-9. Agreement 1 is entitled “Piaggio P.180 Avanti II Sales Agreement.” Id. at 2.
Agreement 1 identifies the Seller as “Piaggio America, Inc. (“Piaggio”)” and the
Buyer as “Charlie Bravo Aviation.” Id. Agreement 1 includes the purchase price
for the airplane, $7,455,572, payment terms, and the timeframe for delivery. Id. In
addition, Agreement 1 includes other special terms, an interior definition process,
and terms and conditions that incorporate warranties and warranty limitations. Id.
at 2-3.
b. Sales Agreement 2
Also on December 21, 2012, CBA and Fast entered into a sales agreement
for Fast’s purchase of the airplane from CBA (“Agreement 2”). Dkt. 97-10 at 2.
Like Agreement 1, Agreement 2 was entitled, “Piaggio P.180 Avanti II 1Sales

MEMORANDUM DECISION AND ORDER – 5

Agreement.” Id. Agreement 2 identifies “Charlie Bravo Aviation (“CBA”)” as the
Seller, “Fast Enterprises” as the Buyer, and “Piaggio” as the Manufacturer. Id.
Agreement 2 indicates the total purchase price for the airplane to be paid by Fast
was $6,750,000. Id. Agreement 2 contains many of the same terms and conditions
as Agreement 1, with some differences. Id. at 2-14.
According to the declaration of René Banglesdorf, the president of CBA, the
sale of the airplane took the form of a “back to back” transaction, common in the
industry. Dkt. 97-15 at 3. CBA acted as an intermediary between Fast and Piaggio.
Ms. Banglesdorf identified Piaggio as “the manufacturer.” Id. Simply put, CBA
bought the airplane from Piaggio under Agreement 1 and Fast bought the airplane
from CBA under Agreement 2.
c. Amendment 1
On September 23, 2013, Piaggio, CBA, and Fast Enterprises executed a
document entitled “First Amendment to Piaggio P.180 Avanti II Aircraft Sales
Agreements” (“Amendment 1”). Dkt. 106-4 at 2. Amendment 1 acknowledged the
existence of Agreement 1 and Agreement 2, and described the “back to back
transaction” where Piaggio would transfer the title of the airplane to CBA, and
CBA would immediately transfer the title of the airplane to Fast. Id. Amendment 1
also acknowledged that Fast was a third party beneficiary to Agreement 1. The
Amendment reduced the purchase price defined in Agreement 1 based on a

MEMORANDUM DECISION AND ORDER – 6

delivery-delay formula centered around the profits Fast would lose. Id.
Amendment 1 was signed by representatives of all three companies. Id. at 3.
d. Amendment 2
On December 18, 2013, Piaggio America, Inc., CBA, and Fast Enterprises,
entered into a document entitled, “Second Amendment to Piaggio P.180 Avanti II
Aircraft Sales Agreements” (“Amendment 2”). Dkt. 97-11. Like Amendment 1,
Amendment 2 acknowledges that Piaggio America and CBA entered into
Agreement 1 and CBA and Fast entered into Agreement 2, and that all parties
entered into Amendment 1. Id. at 2. Amendment 2 again reduced the purchase
price of the airplane due to additional delays. Id. Amendment 2 required Piaggio to
deliver the airplane to CBA so that CBA could immediately deliver the airplane to
Fast Enterprises. Id. Like Amendment 1, Amendment 2 was signed by
representatives of each of the three parties. Id. at 3.
In accordance with Agreement 1, Piaggio delivered the airplane to CBA in
Kansas on December 20, 2013. Dkt. 97-32 at 4. CBA then transported the airplane
to Texas, where Fast took possession. Dkt. 96 at 2. The airplane was put into use
by Plaintiffs in late January 2013, just days before the incident in Springfield,
Illinois. Id. at 2-3.

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C.

The Dispute
After the incident and the conclusion of the FAA’s investigation, Plaintiffs

provided Piaggio and CBA with a notice rejecting the airplane as a nonconforming good and that Plaintiffs were revoking acceptance under the Uniform
Commercial Code. Compl., Dkt. 1-3 at 8. Plaintiffs also provided notice that they
were rescinding the back-to-back sales agreements under which the airplane was
purchased. Id. Plaintiffs also demanded return of payment and other expenses. Id.
Plaintiffs originally made the airplane available for re-delivery to Piaggio or CBA,
but the record indicates Plaintiffs eventually sold the airplane in 2018.
In this action, Plaintiffs bring the following claims against Piaggio: breach
of contract; breach of express warranty; breach of implied warranty of
merchantability; breach of implied warranty of fitness for a particular purpose;
rejection of non-conforming goods; revocation of acceptance; negligence; product
liability; strict liability; and unjust enrichment. See Sec. Am. Compl., Dkt. 79.
LEGAL STANDARD
Summary judgment is appropriate where a party can show that, as to any
claim or defense, “there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). One of
the principal purposes of the summary judgment “is to isolate and dispose of
factually unsupported claims ....” Celotex Corp. v. Catrett, 477 U.S. 317, 323–24,

MEMORANDUM DECISION AND ORDER – 8

(1986). It is “not a disfavored procedural shortcut,” but is instead the “principal
tool[ ] by which factually insufficient claims or defenses [can] be isolated and
prevented from going to trial with the attendant unwarranted consumption of
public and private resources.” Id. at 327, 106 S.Ct. 2548. “[T]he mere existence of
some alleged factual dispute between the parties will not defeat an otherwise
properly supported motion for summary judgment.” Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 247–48, (1986). There must be a genuine dispute as to any
material fact—a fact “that may affect the outcome of the case.” Id. at 248.
When cross-motions for summary judgment are filed, the Court must
independently search the record for factual disputes. Fair Housing Council of
Riverside County, Inc. v. Riverside Two, 249 F.3d 1132, 1136 (9th Cir.2001). The
filing of cross-motions for summary judgment—where both parties essentially assert
that there are no material factual disputes—does not vitiate the court’s responsibility
to determine whether disputes as to material fact are present. Id.
The moving party bears the initial burden of demonstrating the absence of a
genuine dispute as to material fact. Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th
Cir. 2001) (en banc). To carry this burden, the moving party need not introduce
any affirmative evidence (such as affidavits or deposition excerpts) but may simply
point out the absence of evidence to support the nonmoving party’s case. Fairbank
v. Wunderman Cato Johnson, 212 F.3d 528, 532 (9th Cir. 2000).

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This shifts the burden to the non-moving party to produce evidence
sufficient to support a jury verdict in its favor. Devereaux, 263 F.3d at 1076. The
non-moving party must go beyond the pleadings and show “by [ ] affidavits, or by
the depositions, answers to interrogatories, or admissions on file” that a genuine
dispute of material fact exists. Celotex, 477 U.S. at 324.
However, the Court is “not required to comb through the record to find some
reason to deny a motion for summary judgment.” Carmen v. San Francisco
Unified Sch. Dist., 237 F.3d 1026, 1029 (9th Cir. 2001) (quotation omitted).
Instead, the “party opposing summary judgment must direct [the Court’s] attention
to specific triable facts.” Southern California Gas Co. v. City of Santa Ana, 336
F.3d 885, 889 (9th Cir. 2003).
ANALYSIS
I.

Plaintiffs’ Motion for Partial Summary Judgment
Plaintiffs move for the Court enter partial summary judgment in their favor

on the issue of defect. Dkt. 95. Specifically, Plaintiffs argue that the undisputed
facts show the airplane subject to this action was defective at the time it was
delivered by Piaggio, and thus was defective when it came into Plaintiffs’
possession. Dkt. 95-1 at 2.
Under Idaho law, a plaintiff asserting a products liability claim bears the
burden of proving (1) injury by the product; (2) that the injury was the result of a

MEMORANDUM DECISION AND ORDER – 10

defective or unsafe product; and (3) that the defect existed with the product left the
control of the manufacturer. Massey v. Conagra Foods, Inc., 328 P.3d 456, 460
(Idaho 2014) (citing Farmer v. Int’l Harvester Co., 553 P.2d 1306, 1310-11 (Idaho
1976)). Notably, Plaintiffs’ motion does not seek summary judgment on the
entirety of the prima facie products liability case. Instead, Plaintiffs ask the Court
to find there is no genuine issue of material fact the defect existed when the
airplane left the control of Piaggio.
The presence of a product defect is determined on a case-by-case basis.
Farmer at 1311. “A prima facie case [of defect] may be proved by direct or
circumstantial evidence of a malfunction of the product and the absence of
evidence of abnormal use and the absence of evidence of reasonable secondary
causes which would eliminate liability of the defendant. Reasonable inferences are
permissible in determining whether a product was defective.” Stanley v. Lennox
Indus., Inc.,102 P.3d 1104, 1107 (Idaho 2004). Notably, “[a] circumstantial
evidence showing … [requires] proof of: (1) the malfunction of the product; (2) the
lack of evidence of abnormal use; and (3) proof excluding the possibility of other
‘reasonable causes.’” Id. (quoting Doty v. Bishara, 848 P.2d 387, 390 (1992).
Circumstantial evidence invites the trier of fact to infer a defect.
A.

Evidence of a Malfunction of the Hydraulic System

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In this case, Plaintiffs point to ample, undisputed evidence of the
malfunction of the aircraft’s hydraulic system. The landing gear of the airplane is
operated by a hydraulic system. Nat’l Transportation Safety Board Aviation
Accident Factual Report, Dkt. 95-4 at 6. A critical component to the use of the
system is the directional control valve. Id. That valve controls the flow of hydraulic
fluid, and, the directional flow of hydraulic fluid moves the landing gear from a
“gear up” closed position, to a “gear down” position necessary for landing. Id.
When preparing to land in Springfield, Illinois, the pilots pressed the control
switch to move the landing gear into its “gear down” position. Id. at 2. Despite
being in the “gear down” switch position, the landing gear remained in a “gear up”
position. Id. The pilots’ initiated emergency procedures to manually override the
hydraulic system. Id. This entailed turning the hydraulic system off completely so
that they could manually pump the landing gear into a “gear down” position for
landing. Id. at 6.
When the airplane’s hydraulic system was inspected by the FAA, it was
determined that a metallic particle in the closed hydraulic system caused a jam,
resulting in the constant one-directional flow of hydraulic fluid and a constant
“gear up” position. Id. at 9. Thus, given the condition of the hydraulic system, the
only way to operate it was through the manual emergency process. Id. “About 60

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hand pump strokes over about 90 seconds are required for a positive down lock of
all landing gear.” Id. at 6.
Defendant argues that, because the manual emergency process worked
without incident, the landing gear was not defective. However, that argument
glosses over the significant fact that the system did not function as designed or
intended—it malfunctioned and thus out-of-the ordinary emergency procedures
were employed by the pilots. The emergency procedure necessitated rapid hand
pumping to successfully lower the landing gear. Further, to implement the
emergency procedure, pilots had to completely shut off the hydraulic system, a
decision that disabled other key safety features—power steering and power braking
capabilities. Defendant argues also that, the determination of whether the aircraft
was defective “calls for a legal conclusion and expert opinion” not provided by
Plaintiffs. Dkt. 105 at 11. However, Idaho law does not require a plaintiff to
provide expert testimony to establish defect. Jensen v. Am. Suzuki Motor Corp., 35
P.3d 776, 780-81 (Idaho 2001). Further, the evidence here does not appear to be
“so technical or difficult-to-follow that it cries out for expert interpretation.”
Hansen-Rice, Inc. v. Celotex Corp., 414 F. Supp. 2d 970, 975 (D. Idaho 2006).
For the reasons stated above, the Court finds there is no genuine issue of
material fact regarding the hydraulic system’s malfunction just prior to the pilots’
first attempt to land the airplane in Springfield, Illinois.

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B.

Absence of Evidence of Abnormal Use
Similarly, Plaintiffs have shown there is an absence of evidence of abnormal

use of the hydraulic system from the time the airplane arrived in the United States
through the date of the incident. There is no evidence in the record indicating or
hinting at abnormal use of the hydraulic landing gear prior to the Springfield
landing. See Dkt. 95-1 at 6. Defendants argue Plaintiffs cannot carry their burden
to show lack of abnormal use based solely on the fact that no incidents of abnormal
use were reported. The Court does not agree – that is precisely how a plaintiff
would show a lack of abnormal use. Thus, the burden shifts to Defendant to raise a
genuine issue for the jury as to the issue. Defendants cite no evidence of potential
abnormal use of the hydraulic system or the airplane prior to the Springfield,
Illinois landing attempt. Defendants assert that “four experts have tendered reports
regarding the nature and extent of pilot error that caused the gear to retract and the
ensuing property damage to occur.” Dkt. 105 at 14. However, this argument
conflates the issue of whether the defect caused the gear retraction after landing
with the question of whether there was a defect in the landing gear. As such, the
Court finds there is no genuine issue of material fact as to the issue of abnormal
use.

MEMORANDUM DECISION AND ORDER – 14

C.

Absence of Evidence of Reasonable Secondary Causes
Finally, to prove defect, Plaintiffs are required to show there is an absence of

evidence of reasonable secondary causes for the malfunction. To this end, both
Plaintiffs and Defendant begin to conflate the issues of whether the landing gear
malfunction was caused by something other than a defect with the separate factual
issue of when the particle may have been introduced into the hydraulic system—
i.e. the source of the particle. The Court need look only to the report of the NSTB
and the FAA’s investigation to conclude there is no genuine issue of material fact
regarding the conclusion that the hydraulic landing gear system malfunctioned and
was stuck in a “gear up” position because a foreign metal fragment jammed the
components that controlled the flow of hydraulic fluid. This same information and
conclusion is contained in an expert report provided by Defendant: “A foreign
object jammed in the directional control valve causing the valve to stick in the
retract position making it impossible to extend the landing gear normally.” (McFall
Dep., Dkt. 105-2 at 16).
In sum, the Court finds there is no genuine issue as to whether the hydraulic
landing gear system was defective. Thus, with defect so established, the analysis
shifts to the question of whether there is a genuine issue of material fact that the
defect existed when the product left the control of the manufacturer.

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D.

Existence of Defect When Airplane Left Control of Manufacturer
Importantly, there is no evidence that the product, the hydraulic pump, was

modified after it left the control of the manufacturer in Italy. Defendant argues that
there are genuine issues of material fact as to whether the defect existed at the time
the airplane was delivered because the origin of the metallic particle in the
hydraulic system is unknown, and thus it is reasonable to assume that the particle
was introduced after delivery by a third party. Id. at 5. Defendant offers no
evidence and no theory for how the foreign particle could have been introduced
into the closed hydraulic system after manufacture or after the airplane left
Defendant’s control in Texas. Defendant asserts that “the metallic particle was of a
different composition than any other metal used on the Aircraft.” Dkt. 105 at 5.
But, that broad assertion misses the mark. It is true, that the NSTB report stated
that, the FAA’s “review of materials used in the directional control valve did not
match the material composition of the trapped particle.” Id. at 10. The real
question, however, is how this foreign item found its way into the directional
control valve. Defendants have offered no evidence, or any theory, as to how the
particle could have been introduced post-delivery by a third party, so soon after it
was delivered to the purchaser. The only reasonable conclusion a jury could reach
is that the fragment was present on delivery.

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Finally, Piaggio raises issue with Plaintiffs’ request that the Court find the
entire aircraft was defective at the time of delivery—asserting any such finding, if
made, must necessarily be limited to the hydraulic system. The Court agrees and
will so limit its conclusion that there is no genuine issue of material fact that the
foreign metal particle in the closed hydraulic system was a defect present upon
delivery of the airplane by Piaggio. For the foregoing reasons, the Court will grant
Plaintiffs’ Motion for Partial Summary Judgment as so limited.
II.

Defendant’s Motion for Summary Judgment
The Court turns now to Defendant’s motion for summary judgment or partial

summary judgment against Plaintiffs. Defendant agues Plaintiffs alleged “patently
untrue ‘facts’” to survive Defendant’s motion to dismiss, and that now, the record
contains sufficient undisputed facts to show Plaintiffs’ allegations are untrue.
Defendant’s motion is divided into five arguments. The Court will analyze the
merits of each argument in turn.
A.

Waiver of Claims
Defendant first argue that Plaintiffs’ claims fail as a matter of law because

Plaintiffs released and waived the right to bring any claims against Piaggio
America, Inc. except for a limited warranty claim. (Dkt. 97 at 6-7.) Defendant
argues the sales agreement between CBA and Fast, Agreement 2, required Fast to
waive and release “all rights, claims, and remedies” related to the airplane, except

MEMORANDUM DECISION AND ORDER – 17

a limited warranty provision. Id. at 7. Defendant asserts the broad release was not
specific to claims against CBA, but that it applies generally to waive all rights,
claims, and remedies that Plaintiffs could bring related to the airplane, including
claims against Piaggio America, Inc.
The waiver language underlying Defendant’s argument is as follows:
THE WARRANTIES SET FORTH IN APPENDIX B OF THE
SPECIFICATION ARE EXCLUSIVE AND IN LIEU OF ALL
OTHER WARRANTIES (EXCEPT FOR THE WARRANTY OF
TITLE)
AND
REPRESENTATIONS,
IMPLIED
OR
STATUTORY, INCLUDING, BUT NOT LIMITED TO, ANY
IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS (INCLUDING FITNESS FOR A PARTICULAR
PURPOSE) RELATED TO THE AIRCRAFT OR ANY
MODIFICATIONS, REPAIRS, REPLACEMENT PARTS, OR
SERVICE CHANGE KITS WHICH MAY BE FURNISHED BY
CBA OR PIAGGIO TO BUYER FOR USE ON THE AIRCRAFT.
Except for the obligations expressly undertaken by CBA in this
Agreement and the warranties set forth in Appendix B of the
Specification and the Bill of Sale with respect to the Aircraft in the form
attached as Appendix C, BUYER hereby waives and releases for itself
and its insurers (through subrogation or otherwise) all rights, claims,
and remedies with respect to any and all warranties, express, implied,
or statutory (including, without limitation, any implied warranties of
merchantability and fitness, including fitness for a particular purpose),
duties, obligations, and liabilities of tort or contract arising by law or
otherwise, including (1) strict liability or product liability, (2) any
obligations of CBA with respect to incidental or consequential
damages, damages for loss of use, or damage relating to the market
value of the Aircraft. BUYER acknowledges and agrees to the terms,
conditions and exclusions (including without limitation, destruction of
the Aircraft beyond economical repair) of the Warranty set forth in
Appendix B of the Specification. This disclaimer shall not be
interpreted to expand BUYER’S remedies beyond those set forth in
Section 6.C. of the attached Terms and Conditions or to affect in any

MEMORANDUM DECISION AND ORDER – 18

way CBA’s obligations, if any, for third party claims tor property
damage, personal injury, or wrongful death.
Agreement 2, Dkt. 97-10 at 4-5.
Based on this language, Fast appears to have waived rights, remedies, and
express and implied warranties, as well as strict liability and products liability
claims as to CBA. Such waiver likely would have foreclosed many of the claims
made by Fast against CBA. The question becomes, however, whether Piaggio can
claim the benefit of such waivers as a third-party beneficiary of Agreement 2.
Although Piaggio was not a party to Agreement 2, Piaggio asserts it has the
legal right and ability to benefit from and enforce the waiver provision as a thirdparty beneficiary. Dkt. 97 at 8; citing Idaho Code § 29-102. As such, Piaggio
asserts Plaintiffs’ only remedy in this action is the repair or replacement of the
defective part—the hydraulic power pack. Dkt. 97 at 8.
Under Idaho law [I.C. § 29–102], if a party can demonstrate that a
contract was made expressly for its benefit, it may enforce that contract,
prior to rescission, as a third-party beneficiary. The test for determining
a party’s status as a third-party beneficiary capable of properly invoking
the protection of I.C. § 29-102, is whether the agreement reflects an
intent to benefit the third party. The third party must show that the
contract was made primarily for his benefit, and that it is not sufficient
that he be a mere incidental beneficiary. Further, the contract itself must
express an intent to benefit the third party. This intent must be gleaned
from the contract itself unless that document is ambiguous, whereupon
the circumstances surrounding its formation may be considered ... a
party must show that the contract was made for its direct benefit, and
that it is not merely an indirect beneficiary.

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Idaho Power Co. v. Hulet, 90 P.3d 335, 337–38 (Idaho 2004) (internal citations
and quotations omitted).
Thus, to establish itself as a third party beneficiary of Agreement 2, Piaggio
must show that Agreement 2 was made primarily for its benefit. In other words, the
agreement itself must clearly express an intent to benefit Piaggio America, Inc.
Agreement 2 identifies the Seller as “Charlie Bravo Aviation, LLC,” the
Buyer as “FAST ENTERPRISES,” and the Manufacturer as “Piaggio.” Agreement
2, Dkt. 97-10 at 3. The agreement sets out the purchase price for the airplane, the
payment schedule, and the schedule for delivery. Id. The agreement also sets out
the “interior definition process” allowing Fast to “define the interior” of the plane
to its specifications. Id. at 4. The agreement states that, “CBA and BUYER”
acknowledged that all terms and conditions as well as attachments and appendices
were expressly incorporated into the agreement. Id.
The agreement is signed by a representative for CBA and a representative
for Fast. Id. at 5. Attached to Agreement 2 are Terms and Conditions. Id. at 6-7.
The Terms and Conditions specifically mention “Piaggio” in the following ways.
First, under a section entitled “Inspection and Delivery” that CBA would tender the
airplane for inspection “at PIAGGIO’s Completion Facility,” and that Fast
Enterprises would complete its inspection within five days after the airplane being
“tendered by PIAGGIO.” 97-10 at 6. Second, in a section entitled “training,” the
terms and conditions detail that CBA would provide instruction for two pilots and
MEMORANDUM DECISION AND ORDER – 20

one maintenance person at “Flight Safety International … unless otherwise
specified by PIAGGIO” and that Piaggio would be responsible for all costs of
instruction and training during the specified training period. Id. Piaggio is not
specifically mentioned anywhere else in Agreement 2.1
Piaggio argues that other terms in Agreement 2 were necessarily intended to
benefit Piaggio, including that Plaintiff waived all product liability and strict
liability claims. Dkt. 97 at 8. Piaggio argues that CBA could not be subject to
product liability or strict liability claims as a broker to the sales agreements, only.
Id.
The fact that “Piaggio” is identified as the “manufacturer” of the airplane
within Agreement 2 is significant in regard to this motion for summary judgment.
In Defendant’s response to Plaintiffs’ Motion for Partial Summary Judgment,
Piaggio (Piaggio America, Inc.) is careful to point out that it is not the
manufacturer of the airplane—instead it acted solely as a sales agent and customer
service provider for Piaggio Italy, the manufacture of the airplane.2 Dkt. 97 at 22.

1

The Court notes the substantial similarities between Agreement 1, the sales agreement
executed by “Piaggio America, Inc.” and “Charlie Bravo Aviation” and Agreement 2. However,
the similarities do not resolve questions of fact regarding which “Piaggio” Agreement 2 was
meant to reference.
“Looking specifically to the Aircraft at issue, it is undisputed that it was manufactured
by Piaggio Aero Industries, S.p.A. in Genoa, Italy, as demonstrated by the U.S. FAA’s Standard
Airworthiness Certificate and the U.S. FAA’s Aircraft Statement of Conformity”; and “[i]t is
undisputed that Piaggio has “never manufactured a Piaggio P.180 Avanti II aircraft [because it]
2

(Continued)

MEMORANDUM DECISION AND ORDER – 21

Notably, if a contract is found to be ambiguous, courts hesitate to grant
summary judgment. San Diego Gas & Elec. Co. v. Canadian Hunter Mktg. Ltd.,
132 F.3d 1303 (9th Cir. 1997). Differing views on the intent of the parties at the
time of contracting raise genuine issues of material fact. Id.; See also Maffei v.
Northern Ins. Co., 12 F.3d 892, 898 (9th Cir. 1993).
When the language of a contract is clear and unambiguous, its
interpretation and legal effect are questions of law. An unambiguous
contract will be given its plain meaning. The purpose of interpreting a
contract is to determine the intent of the contracting parties at the time
the contract was entered. In determining the intent of the parties, this
Court must view the contract as a whole. If a contract is found
ambiguous, its interpretation is a question of fact. Whether a contract is
ambiguous is a question of law. A contract is ambiguous if it is
reasonably subject to conflicting interpretations.
Commercial Ventures, Inc. v. Rex M. & Lynn Lea Family Tr., 177 P.3d 955, 960
(Idaho 2008).
Piaggio, the sales and customer service agent, argues it is a third-party
beneficiary to Agreement 2, which clearly identifies “Piaggio” as the
“manufacturer.” This issue alone creates ambiguity and gives rise to questions of
fact for the jury regarding which “Piaggio” CBA and Fast Enterprises intended to
reference within Agreement 2.

is a sales and customer support entity.” Piaggio America’s Memorandum in Support of Summary
Judgment or Partial Summary Judgment, Dkt. 97 at 22.

MEMORANDUM DECISION AND ORDER – 22

Furthermore, as detailed above, Defendant argues that several of the
provisions in Agreement 2 “have no applicability other than providing Piaggio
with a benefit.” Dkt. 97 at 9. To illustrate the point, Defendant points to the waiver
of product liability and strict liability claims against CBA. Id. Defendant argues
such waiver could only be intended to benefit “Piaggio or Piaggio Aero Industries,
S.p.A.” Id. Yet, Defendant’s argument forecloses the result it seeks. If the waiver
provisions could be for the benefit of either Piaggio America or Piaggio Italy there
is a question of unresolved fact—whether the purported third-party beneficiary was
Piaggio America or the manufacturer, Piaggio Italy, or both.
For the foregoing reasons, the Court finds Defendant has failed to show
there is no genuine issue of material fact regarding whether the waiver in
Agreement 2, and other terms and conditions therein, were made for Piaggio
America, Inc.’s benefit. As such, the Court will deny the motion for summary
judgment.
B.

Contractual Privity Between Piaggio America and Fast Enterprises
Piaggio next contends that Fast and Peregrine are not in contractual privity

with Piaggio, and as a result, summary judgment should be granted to Defendant
on a majority of Plaintiffs’ claims. Dkt. 97 at 9. Piaggio argues, that, for privity to
exist, an entirely new agreement regarding delivery of the airplane from Piaggio to
Fast must exist. Id. Piaggio argues Fast is only in privity with CBA. Notably, the

MEMORANDUM DECISION AND ORDER – 23

Court addressed the issue of privity at the motion to dismiss stage. At that time, the
parties disagreed over which agreement, if any, existed between Fast and Piaggio.
The Court stated it was “confronted by a four-part agreement between the parties,
the exact meaning of which is unclear.” Memorandum and Order, Dkt. 91 at 6.
Under Idaho law, “privity” generally references “those who exchange the
[contractual] promissory words or those to whom the promissory words are
directed.” Wing v. Martin, 107 Idaho 267, 272, 688 P.2d 1172, 1177 (1984). “A
party must look to that person with whom [the party] is in a direct contractual
relationship for relief in the event that his expectations under the contract are not
met. Id.
Given that guidance, the Court turns back to the agreements at issue.
Agreement 1 sets forth a direct contractual relationship between the signatories,
Piaggio and CBA. Agreement 2 sets forth a direct contractual relationship between
the signatories, CBA and Fast. Amendments 1 and 2 create a direct contractual
relationship between the signatories, Piaggio, CBA, and Fast. Thus, as to
Amendment 1 and Amendment 2, Piaggio and Fast were in contractual privity.
Plaintiffs’ argument that Amendment 2 created privity between Piaggio and
Fast starts out with the following language: “Both Amendments, and what
commitments Piaggio made in them, must be viewed in the context of the facts that
drove their creation as well as what happened afterword.” Dkt. 106 at 13. In

MEMORANDUM DECISION AND ORDER – 24

contending there is no contractual privity between it and Fast, Piaggio makes this
argument: “The undisputed facts show that Piaggio did not ever contemplate—
much less intend—that CBA was being cut out of the deal through” Amendment 2.
Dkt. 97 at 14. And further on, “Piaggio was not intending on doing anything other
than ‘amending’” the sales agreements and Amendment 1 when it entered into
Amendment 2.
As at the motion to dismiss stage, the Court is still confronted with the fourpart agreement between the parties, the exact meaning of which is unclear. As is
evidenced by the parties’ arguments, they openly disagree as to what was intended
by Amendment 1 and Amendment 2 in relation to Agreement 1 and Agreement 2
and the modification of the duties and responsibilities of each party thereunder.
What is clear to the Court from the pages of briefing on the privity issue is that
there are differing views on the intent of the parties at the time of contracting.
These differing views raise genuine issues of material fact and preclude entry of
summary judgment.
C.

Rejection and Revocation Claims
Piaggio contends it is entitled to summary judgment on Plaintiffs’ rejection

claim because the undisputed facts show Plaintiffs accepted delivery of the aircraft.
Dkt. 97 at 20 (citing Idaho Code § 28-2-607). Piaggio argues that, under Idaho law,
rejection of goods must occur before acceptance. Id. By putting the airplane into

MEMORANDUM DECISION AND ORDER – 25

service, it is argued, Fast accepted the airplane. The section of Idaho Code cited by
Piaggio states that, “[a]cceptance of the goods by the buyer precludes rejection of
the goods accepted if made with knowledge of a nonconformity cannot be revoked
because of it unless the acceptance was on the reasonable assumption that the
nonconformity would be seasonable cured…” Here, there is no allegation or facts
that suggest Fast or any agent acting on its behalf accepted the airplane with
knowledge of the defect in the landing gear. Piaggio cites no other law or authority
for this argument.
Piaggio argues also that the lack of a buyer-seller relationship between
Plaintiffs and Piaggio is dispositive of the revocation claim because a buyer may
revoke acceptance only against the seller and Plaintiffs are not in privity with
Piaggio. Id. at 21 (citing Idaho Code § 28-2-607). However, as set forth above,
there are genuine issues of material fact foreclosing summary judgment in
Piaggio’s favor as to the privity question.
Finally, Piaggio argues the revocation claim also fails because, under Idaho
law, revocation of acceptance must occur before a substantial change in the
condition of the goods not caused by their own defects. Id. Piaggio asserts that
Plaintiffs “did not revoke acceptance until after damaging the aircraft.” Id.
Piaggio’s second argument is foreclosed by a material fact in dispute in this case:

MEMORANDUM DECISION AND ORDER – 26

whether the damage to the airplane was caused by pilot error or due to the defect in
the hydraulic landing gear system.
D.

Negligence Claim
Piaggio asserts it is entitled to summary judgment on Plaintiff’s negligence

claim because Piaggio took no part in the manufacture of the airplane. Dkt. 97 at
22. Piaggio argues also that, assuming Plaintiff’s negligence claim is premised on
the allegation that Piaggio breached some duty of care related to the sale of the
airplane, there is no evidence in the record to support the claim.
In response, Plaintiffs assert Piaggio is liable for negligence under Idaho
Code as a product seller who is “a wholly-owned subsidiary of the manufacturer,
or the manufacturer is a wholly-owned subsidiary of the produce seller.” Dkt. 106
at 20 (citing I.C. § 6-1407(d)). Indeed, the Court has recognized that Piaggio
America is a wholly-owned subsidiary of Piaggio Italy.3 Given that legal principle,
Plaintiff’s claim is that Piaggio America is liable for Piaggio Italy’s negligent
design or manufacture of the plane, not upon some theory related to negligence in
the sale of the plane. For these reasons, the Court will deny the motion for
summary judgment as to the negligence claims.

“[A]s Fast points out, § 6-1407’s bar on liability is excepted where “[t]he product seller
is a wholly-owned subsidiary of the manufacturer, or the manufacturer is a wholly-owned
subsidiary of the product seller.” I.C. § 6-1407(d). Piaggio, in its corporate disclosure, stated,
“Piaggio is a wholly owned subsidiary of Piaggio Aero Industries Spa, an Italian corporation.”
Dkt. 2 at 2. Thus, section 6-1407 does not bar Fast’s product liability claim.” Dkt. 91 at 11.
3

MEMORANDUM DECISION AND ORDER – 27

E.

Unjust Enrichment Claim
Finally, Piaggio asserts that Plaintiffs’ unjust enrichment claim fails as a

matter of law because Plaintiffs did not confer any benefit on Piaggio, and, even if
they had, such benefit was not unjust. Dkt. 97 at 23.
A party is unjustly enriched when it receives a benefit that would be
inequitable to retain without compensating the party that conferred the benefit.
Vanderford Co. v. Knudson, 165 P.3d 261, 271 (Idaho 2007). A party must show
three elements to establish a prima facie case for unjust enrichment: that plaintiff
conferred a benefit upon the defendant; that the defendant appreciated the benefit;
and that the circumstances are such that it would be inequitable for the defendant
to retain the benefit without compensating the plaintiff for its value. Id.
Defendant argues no benefit was conferred by Plaintiffs on Piaggio because
Plaintiffs paid CBA the full purchase price of the airplane under Agreement 2. The
subsequent benefit Piaggio received was from CBA, under Agreement 1. This
sanitized recitation of the facts and the payment relationships between the parties is
beguiling. The Court need only look to Amendment 1 and Amendment 2 to see
that there was a direct relationship between the delays in the manufacturing
process that would be attributed to Piaggio, and the ultimate payment they would
receive due to reductions Piaggio was willing to make in the purchase price.

MEMORANDUM DECISION AND ORDER – 28

Next, Piaggio argues that, even assuming that Plaintiffs conferred a benefit
on Piaggio, any such benefit was not inequitable. Piaggio argues that because
National Union has already repaired and replaced the malfunctioning part,
Plaintiffs have already been made whole from any potential injury resulting from a
defect in the airplane itself. Id. Again, this argument omits important aspects of the
claims in this case—including that Plaintiffs are seeking diminution in value
damages related to the resale of the airplane. There are disputed issues of material
fact that impact the viability of the unjust enrichment claims. As such, the Court
will deny summary judgment on defendant’s behalf as to the unjust enrichment
claims.
III.

Defendant’s Motion as to National Union
In a separate motion, seeks summary judgment against the claims of

intervenor National Union Fire Insurance Company (“National Union”). Piaggio
contends that National Union’s claims are wholly derivative of the claims being
brought by Plaintiffs, so that to the extent Piaggio prevails in its motion for partial
summary judgment filed against Plaintiffs, the rulings in that order will directly
impact and extinguish claims brought by National Union.
However, as stated in full detail above, the Court will deny Piaggio’s motion
for summary judgment in all respects. For this reason, the Court will also deny its
motion for summary judgment or partial summary judgment as to National Union.

MEMORANDUM DECISION AND ORDER – 29

CONCLUSION
In sum, the Court finds there is no genuine issue of material fact that a
foreign metal particle in the enclosed hydraulic landing gear system constitutes a
defect in the landing system under Idaho law. As such, the Court will grant
Plaintiffs’ Motion for Partial Summary Judgment. The Court finds however, that
there are genuine issues of material fact that preclude the entry of summary
judgment in favor of Defendant. Therefore, the Court will deny Defendants’
motions for summary judgment in full.
ORDER
IT IS ORDERED that:
1.

Plaintiffs’ Motion for Partial Summary Judgment (Dkt. 95) is
GRANTED.

2.

Defendant’s Motion for Summary Judgment or Partial Summary
Judgment against Plaintiffs Peregrine Falcon LLC and Fast
Enterprises LLC (Dkt. 97) is DENIED.

3.

Defendant’s Motion for Summary Judgment or Partial Summary
Judgment Against Intervenor National Union Fire Insurance of
Pittsburgh, PA (Dkt. 98) is DENIED.

DATED: March 4, 2020

_________________________
B. Lynn Winmill
U.S. District Court Judge

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