Wilmington Trust Company et al v. The Boeing Company et al

Filing 70

ORDER ON OBJECTIONS TO 57 REPORT AND RECOMMENDATION. The Report and Recommendation (Dkt. # 57 ) is adopted. The parties' objections (Dkts. ## 59 - 60 ) are sustained and overruled. Defendants' Motion to Dismiss (Dkt. # 41 ) is GRANTED in part and DENIED in part. Plaintiffs' WPLA claims and WCPA claims are DISMISSED. Signed by Judge Ricardo S. Martinez. (PM)

1
2
3
4
5
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

6
7

WILMINGTON TRUST COMPANY, et al.,

8

Plaintiffs,

9

ORDER ON OBJECTIONS TO REPORT
AND RECOMMENDATION

v.

10

CASE NO. C20-402 RSM-MAT

THE BOEING COMPANY, et al.,
11
Defendants.
12
13

I.

INTRODUCTION

14

This matter is before the Court for consideration of the Report and Recommendation

15

(R&R) of United States Magistrate Judge Mary Alice Theiler recommending that the Court grant

16

in part and deny in part The Boeing Company’s (Boeing or Defendant) partial motion to dismiss

17

Plaintiffs’1 claims. Dkt. #57. Plaintiffs bought, and accepted delivery of, variants of the Boeing

18

737 MAX aircraft from Boeing. After the second of two highly publicized Boeing 737 MAX

19

crashes and the subsequent grounding of all Boeing 737 MAX aircraft, Plaintiffs revoked

20

acceptance of their aircraft and filed this action, bringing claims for breach of contract, fraud,

21

material representation, and violations of the Washington Consumer Protection Act (WCPA) and

22
1

23
24

Plaintiffs are the Wilmington Trust Company (WTC), as Owner Trustee, and F & L Aviation
IV, LLC (F&L), as Beneficial Owner of aircraft bearing manufacturer’s serial number 61329,
and Brilliant Aviation Limited (Brilliant), owner and operator of aircraft bearing manufacturer’s
serial number 62743.
ORDER – 1

1

the Washington Product Liability Act (WPLA). Dkt. #1-2. Boeing sought dismissal of Plaintiffs’

2

non-contract claims. Dkt. #41. After consideration, Judge Theiler recommended that the Court

3

dismiss Plaintiffs’ WCPA claim, but otherwise permit Plaintiff’s non-contract claims—for fraud,

4

material misrepresentation, and violation of the WPLA—to proceed with Plaintiff’s contractual

5

claims. Dkt. #57 at 33. Both Plaintiffs and Defendant raise objections to Judge Theiler’s R&R.

6

Dkts. ##59–60. Having reviewed the objections, and responses thereto, the Court adopts the

7

R&R in part, as detailed below.
II.

8
A.

9

BACKGROUND2

Origins of the MAX

In August 2011, Boeing announced its plan to update its 737NG [aircraft
to] the 737 MAX. ([Dkt. #1-2], ¶30.) This announcement followed an earlier plan
to replace the 737NG with an entirely new aircraft to compete with the Airbus
A320neo, a new aircraft from Boeing’s competitor offering fuel-saving engines
with a “fly-by-wire” or computer-controlled system. (Id., ¶¶27-28.) Boeing
altered its plan shortly after American Airlines revealed a large purchase of Airbus
aircraft. (Id., ¶30.) The upgrade to the MAX would take less time than creating an
entirely new aircraft, but would include new, more fuel-efficient engines [while
retaining][3] manual and conventional flight controls. (Id., ¶¶28, 30.) Boeing also
sought to certify the MAX under the Amended Type Certificate originally granted
to the 737 by the Federal Aviation Administration (FAA) in December 1967. (Id.,
¶¶22, 30.)

10
11
12
13
14
15
16

B.

MAX Design and Defects

17
In designing the MAX, Boeing sought to create something similar to the
737NG to allow for quick certification, minimize pilot training, cut costs for
airlines, and compete with the A320neo. (Id., ¶31.) It imposed an internal directive
to avoid any requirement for 737NG-trained pilots to obtain MAX training in a

18
19
20
21

2

The Court adopts the factual background as set out in the R&R, making only minor alterations,
as noted.
3

22
23
24

The parties agree that this alteration is necessary to reflect the factual record. The R&R
indicates that the upgrade “would include new, more fuel-efficient engines and a fly-by-wire
system in place of manual and conventional flight controls.” Dkt. #57 at 3 (emphasis added).
Plaintiffs object that their complaint specifically alleged that “the 737 MAX retained previous
737’s manual conventional system for the primary flight controls and did not incorporate a flyby-wire system.” Dkt. #59 at 2 (citing Dkt. #1-2 at ¶¶ 28, 30). Defendants agree. Dkt. #64 at 3.
ORDER – 2

flight simulator, resulting in training that could be completed on a computer or
tablet in less than an hour. (Id., ¶¶32, 84.) “‘The company was trying to avoid
costs and trying to contain the level of change. They wanted the minimum change
to simplify the training differences, minimum change to reduce costs, and to get
it done quickly.’” (Id., ¶42.) Boeing also directed few if any changes be made to
the cockpit display. (Id.) The focus on reduced training was reflected in the
original MAX brochure and an offer to Southwest Airlines of a $1-million-perplane rebate if pilot training was required. (Id., ¶33.) Boeing employees described
the pace of work in creating the MAX as “frenetic”, on an “‘extremely
compressed’” timeline, with “sloppy blueprints” rushed to assembly technicians.
(Id., ¶31.)

1
2
3
4
5
6

Plaintiffs aver, on information and belief, that competitive pressures and
the marketing-driven directive to minimize training led Boeing to hide significant
issues with the MAX and to take shortcuts to quickly bring it to market. (Id., ¶35.)
Boeing moved the new, more fuel-efficient, but larger and heavier engines “up
and forward”, which allowed for compliance with regulatory requirements
without making extensive design changes to the aircraft. (Id., ¶36.) This new
location resulted in a propensity for the aircraft’s nose to abnormally “pitch up”
under certain unusual flight conditions, which could cause a dangerous
aerodynamic “stall.” (Id., ¶¶37-38.) Boeing engineers predicted this tendency in
2012, “early in the design process,” particularly in a high-speed test maneuver in
which the aircraft experiences significant G-forces. (Id., ¶37.) Rather than making
an aerodynamic change, Boeing developed a software fix – the MCAS
(Maneuvering Characteristics Augmentation System) – to automatically activate
a downward stabilizer when it sensed the aircraft was near a stall and experiencing
high G-forces. (Id., ¶39.)

7
8
9
10
11
12
13
14

“About a third of the way through flight testing in 2016”, after discovering
the same pitch up problem with certain low-speed, low-G maneuvers, Boeing
expanded the MCAS fix. (Id., ¶40.) In an effort to eliminate the pitch up tendency
at low speeds, Boeing made “critical and dangerous changes to MCAS.” (Id.)
Boeing made the anti-stall system four times more powerful, so that it pushed the
nose down more aggressively than originally designed, and eliminated
dependence on both an Angle of Attack (AOA) vane and a G-Force meter to sense
an impending stall, leaving MCAS to rely on only one of two AOA vanes on the
aircraft. (Id., ¶¶40-41.) It did not include self-diagnostic software in MCAS to
detect and deactivate an obviously malfunctioning AOA vane, and programmed
MCAS to reset itself five seconds after every application of pitch-down stabilizer
trim, never stopping so long as it believed the aircraft was close to stalling. (Id.)
Plaintiffs allege Boeing made these changes despite evidence of risks. For
example, in 2015, an employee raised concerns MCAS was vulnerable to
malfunctioning if a single sensor failed and, in November 2016, a test pilot
described the system as “running rampant” and the plane as “trimming itself like
cra[z]y”[4] in a flight simulator. (Id., ¶¶44-45.)

15
16
17
18
19
20
21
22
23
24

4

Alteration in original.

ORDER – 3

Plaintiffs allege Boeing withheld material information from plaintiffs,
other purchasers, pilots, and regulators. For instance, Boeing considered but
decided against including a cockpit alert that would tell pilots when MCAS
engaged. (Id.) It initially included but later removed information about MCAS in
drafts of materials supplied to purchasers and pilots, including flight crew
operating manuals. (Id., ¶¶57-59 (noting one exception in mechanic maintenance
manuals).) In June 2017, a Lion Air representative who informed Boeing of the
intent to conduct simulator training for transition to the MAX was told there was
“‘absolutely no reason’” for that requirement: “‘Once the engines are started,
there is only one difference between NG and MAX procedurally, and that is that
there is no OFF position of the gear handle. Boeing does not understand what is
to be gained by a three-hour simulator session, when the procedures are essentially
the same.’” (Id., ¶82.) Boeing employees expressed concern a decision by Lion
Air to require more training would influence other MAX operators. (Id.)

1
2
3
4
5
6
7
8

Plaintiffs aver Boeing provided incomplete or inaccurate information
about MCAS to the FAA. In as early as 2013, Boeing employees recognized that
treating MCAS as a new function would result in “‘a greater certification and
training impact’” and that it should instead be treated as an “‘addition to speed
trim.’” (Id., ¶85.) Boeing informed the FAA a malfunction in MCAS would mimic
a “trim runaway” error on which 737 pilots were already trained. (Id., ¶52.)
However, runaway trim involves continuous motion and can be stopped by hitting
a switch, while MCAS commanded “10 second bursts of trim followed by five
second pauses[]”[5] and restarted after a pilot released a trim switch. (Id., ¶53.)
Boeing also appears to have either falsely told or led the FAA to believe MCAS
obtained data from more than one sensor and would rarely, if ever, activate. (Id.,
¶52.)

9
10
11
12
13
14
15

In 2016, a Boeing official described performing a “jedi mind trick” to get
approval by regulators, and stated he “basically lied to the regulators
(unknowingly)[.]”[6] (Id., ¶54.) In 2017, the same individual stated “[d]elete
MCAS”,[7] in seeking approval to remove it from the manual. (Id., ¶58.) In March
of that year, a Boeing official stated: “I want to stress the importance of holding
firm that there will not be any type of simulator training required to transition
from NG to MAX. Boeing will not allow that to happen. We’ll go face to face
with any regulator who tries to make that a requirement.’” (Id., ¶84.) In a 2018
message apparently referring to interactions with the FAA, a Boeing employee
stated: “I still haven’t been forgiven by God for the covering up I did last
year[.]”[8] (Id., ¶83.)

16
17
18
19
20
21

5

Alteration in original.

22

6

Alteration in original.

23

7

Alteration in original.

24

8

Alteration in original.

ORDER – 4

6

Boeing reported a potential MCAS failure should be ranked as “major”
(causes “physical distress to occupants of aircraft”), rather than hazardous (likely
to result in “serious or fatal injury to small number” of occupants) or catastrophic
(likely to result in “multiple fatalities and/or loss of” aircraft). (Id., ¶¶46-49.)
However, the safety analysis originally submitted in support of certification did
not include the changes to MCAS’s increased power, resetting function, and
reliance on a single sensor. (Id.) In depicting MCAS as benign, unlikely to
activate, and similar to an already known error, Boeing succeeded in avoiding a
training requirement and removing it from the manual. (Id., ¶¶51-54.) The FAA
also agreed to waive requirements for cockpit alerts after Boeing argued their
addition would be “‘impractical” and cost too much. (Id., ¶50.)

7

C.

8

Plaintiffs allege that, in marketing to purchasers, Boeing claimed the
MAX would offer similar benefits to the A320neo, while ensuring 737NG-trained
pilots would need little or no additional training, and that the MAX would
maintain or exceed the 737NG’s reputation for safety and reliability. (Id., ¶¶55,
87.) For example, in 2014, Boeing’s publication Aero touted the MAX as offering
“‘improved fuel efficiency and reduced noise while extending the 737’s
reputation for reliability and retaining commonalities with the current 737 fleet.’”
(Id., ¶88.) At the 2017 Paris Air Show, the Boeing MAX Chief Pilot asserted the
MAX “‘is configured to be very common with the NG . . . so a pilot can walk into
[the cockpit][9] and will find everything he can just like he can in the NG’”; that
the MAX was FAA-approved for two-and-a-half hours of computer-based
training; and that “‘[t]he only minor difference’”[10] from the NG was in the
display, “to move some of the center console items here on the forward console.’”
(Id., ¶56.) He did not disclose the existence of MCAS. Nor did Boeing mention
MCAS in either the flight crew operating manuals or the Detail Specifications
provided to plaintiffs. (Id., ¶¶57-59.) It also failed to disclose the inadvertent
deactivation in most MAX aircraft of an “AOA disagree” warning light, despite
discovering that defect during software development in 2017. (Id., ¶¶60, 65.)
Plaintiffs allege Boeing oversold the benefits of the MAX, while underplaying,
denying, or failing to disclose material dangers, consistent with a “self-described
practice of having its sales force ‘lie [to purchasers] about how awesome our
airplanes are.’”[11] (Id., ¶62.)

1
2
3
4
5

9
10
11
12
13
14
15
16
17
18

Marketing of the MAX

19
D.

Crashes and Grounding

20
On October 28, 2018, Lion Air Flight 610 crashed some eleven minutes
after takeoff, killing all 189 passengers and crew on board. (Id., ¶63.) The single

21
22

9

23

10

Alteration in original.

24

11

Alteration in original.

Alteration in original.

ORDER – 5

1
2
3
4
5
6
7
8
9
10
11
12
13

AOA sensor incorrectly “‘told’” MCAS the aircraft was stalled and MCAS
pushed the aircraft’s nose down twenty-six times, eventually overcoming the
pilots’ efforts to avoid the crash. (Id.)
A Flight Crew Operations Manual Bulletin issued by Boeing on
November 6, 2018 did not mention MCAS. (Id., ¶¶65-66.) Boeing also issued
public statements suggesting pilot error caused the crash. (Id.) An Emergency
Airworthiness Directive issued by the FAA on the following day advised of the
“unsafe condition” posed by “an erroneously high single AOA sensor input” that
could lead to difficulty controlling the airplane and possible impact with terrain,
and ordered Boeing to modify its MAX manual to include specific warnings and
instructions on procedures to respond to an erroneously triggered MCAS. (Id.,
¶¶67-68 & n.54.) Two days later, Boeing disclosed the existence of MCAS in an
email to purchasers, pilots, and others, and advised pilots “‘can’ use electric trim
switches on the control column prior to hitting cutout switches to disable the
MCAS program.” (Id., ¶69.) Boeing also publicly claimed the “MAX is as safe as
any airplane that has ever flown the skies.” (Id., ¶90.) Boeing delivered [Boeing
Business Jet (BBJ)] MAX aircraft to WTC/F&L on November 28, 2018 and to
Brilliant on January 11, 2019. (Id., ¶70.)
On March 10, 2019, Ethiopian Air Flight 302 crashed some six minutes
after takeoff, killing all 157 passengers and crew on board. (Id., ¶71.) The crash
followed the persistent engagement of MCAS due to the failure of the single AOA
sensor relied upon and forced the aircraft into an unrecoverable dive. (Id., ¶72.) It
occurred despite the pilots’ success in hitting the cutout switches described in
Boeing’s emergency directive. (Id.)

14
15
16
17
18
19

Within three days of the crash, aviation regulators worldwide grounded all
MAX aircraft. (Id., ¶73.) On April 24, 2019, Boeing admitted MCAS activated in
response to erroneous AOA information in both the Lion Air and Ethiopian Air
crashes and that it was Boeing’s responsibility to eliminate that risk. (Id., ¶74.) To
date, the MAX remains grounded and investigations and other lawsuits are
ongoing. (Id., ¶¶74-85.) Plaintiffs each revoked acceptance of their aircraft by
written notice on January 29, 2020, but have been unable to return the aircraft
because of the continued grounding. (Id., ¶96.)
Dkt. #57 at 2–8.
III.

20

DISCUSSION

21

As Boeing’s motion to dismiss is dispositive, the Court “must determine de novo any part

22

of the magistrate judge’s disposition that has been properly objected to.” FED. R. CIV. P. 72(b).

23

“A judge of the court may accept, reject, or modify, in whole or in part, the findings or

24

recommendations made by the magistrate judge.” 28 U.S.C. § 636(b)(1).
ORDER – 6

1

A. Plaintiffs’ Fraud and Misrepresentation Claims

2

The R&R, after noting the parties’ general agreement that the similarities between fraud

3

and misrepresentation claims meant the claims could be addressed jointly, applied Federal Rule

4

of Civil Procedure 9(b)’s heightened pleading standard to both. Dkt. #57 at 11–12. Noting that

5

fraud and misrepresentation claims may rest upon two separate theories, the R&R considered the

6

claims under both a “misrepresentation of existing facts” theory and an “omission of existing

7

facts” theory. Id. at 12 (citing Zwicker v. Gen. Motors Corp., Case No. 2:07-cv-0291-JCC, 2007

8

WL 5309204 at *2, 4 (W.D. Wash. July 26, 2007)).

9

misrepresentation theory, noting that “[t]he complaint, in sum, does not plead with particularity

10

or identify misrepresentations on which plaintiffs could be said to have relied in deciding to

11

purchase MAX aircraft.” Dkt. #57 at 16. No party has objected to this conclusion and the Court

12

accordingly adopts the reasoning and conclusion of the R&R and considers only Plaintiffs’

13

fraudulent omission theory.

Judge Theiler dispatched with the

14

As to Plaintiffs’ fraudulent omission claims, the R&R concluded that Plaintiffs had

15

adequately alleged, in broad terms, that Boeing had notice of the MCAS issue and took active

16

steps to conceal relevant facts and that “[t]he omitted information—including, ultimately, the

17

risk that MCAS could cause a deadly airline crash—is self-evidently material.” Id. at 22. Boeing

18

objects to this result on two bases. First, Boeing objects that the R&R misapplied Washington’s

19

duty to disclose material facts, expanding the duty beyond its bounds. Dkt. #60 at 5. Second,

20

Boeing objects that the R&R fails to hold Plaintiffs to their Rule 9(b) obligation to plead the

21

omission of material facts with particularity and impermissibly concluded that Boeing’s

22

employees’ knowledge could be imputed to the company as a whole. Id. The Court does not

23

agree on either point, adopting the reasoning and conclusion of the R&R.

24

The Court’s de novo review reveals that the R&R was correct in concluding that Plaintiffs
ORDER – 7

1

adequately stated a claim for fraudulent omission premised on Boeing having a duty to disclose

2

known defects. Washington law provides that where a “manufacturer has superior information

3

regarding defects that are not readily ascertainable to customers, it has a duty to disclose that

4

information.” Dkt. #57 at 18 (quoting Short v. Hyundai Motor Co., 444 F. Supp. 3d 1267, 1280

5

(W.D. Wash. 2020)) (quotation marks and citations omitted). Plaintiffs’ allege that these

6

circumstances existed here.

7

Boeing’s objection argues that the R&R focuses on Boeing’s knowledge of the initial

8

aerodynamic deficiencies resulting in “pitching” and thereby expanded a manufacturer’s duty to

9

disclose back to the development stage of products, requiring manufacturers to disclose every

10

production hitch throughout a product’s development. Dkt. #60 at 9; id. at 2 (“R&R misapplies

11

. . . duty to disclose . . . and improperly creates a duty to disclose issues during product

12

development”). Boeing maintains that while it identified the “pitching” issues early in the

13

development of the 737 MAX, it subsequently developed and modified MCAS to remedy the

14

defect, absolving itself of any duty to disclose the initial deficiencies. Id. at 10. Indeed, Boeing

15

argues that “designing a complex product such as an airplane cannot involve a duty to disclose

16

to purchasers every design issue addressed during the development process.” Id. (citation

17

omitted).

18

But Boeing’s argument relies on an unnecessarily narrow reading of the deficiencies

19

alleged by Plaintiffs. Plaintiffs do not limit their deficiency allegations to the aerodynamic

20

deficiencies created by the addition and placement of larger engines, as Boeing represents.

21

Rather, and as the R&R notes, Plaintiffs additionally pointed to “the use of MCAS in lieu of

22

making aerodynamic changes; the impact of MCAS, such as how it could cause the MAX to

23

enter into a dive with a fault or malfunction in one of the aircraft’s two AOA sensors; and the

24

absence of any education or training on MCAS or emergency procedures for its malfunction.”
ORDER – 8

1

Dkt. #57 at 16 (citing Dkt. #1-2 at ¶¶ 133–35, 152–55). Boeing may wish to address only alleged

2

defects that it believes were “addressed during the development process,” Dkt. #60 at 10, but

3

Plaintiffs specifically allege that Boeing’s actions did not adequately remedy the identified

4

defects and did not provide for the safe operation of the 737 MAX.

5

Boeing also argues that Plaintiffs’ fraudulent omission claims fail to satisfy Rule 9(b)’s

6

heightened pleading standard because Plaintiffs have not alleged sufficient facts to impute

7

“knowledge” of the defects to the company as a whole or prior to sale of the aircraft. Id. at 11

8

(citing Pope v. Univ. of Wash., 121 Wash.2d 479, 493, 852 P.2d 1055, 1063 (1993)). The Court’s

9

de novo review again confirms that the R&R correctly considered the issue on the record, Dkt.

10

#57 at 17–22, and Boeing’s application of the relevant law is too stringent for the pleading phase.

11

For instance, the R&R notes that “the Rule 9(b) standard may be relaxed where

12

information is within a defendant’s control and a plaintiff ‘cannot be expected to have personal

13

knowledge of the relevant facts.” Dkt. #57 at 10 (citing Neubronner v. Milken, 6 F.3d 666, 672

14

(9th Cir. 1993)); see also Dkt. #60 at 13–14 (conceding the same). It is upon this legal base that

15

the R&R notes the numerous facts supporting an inference of Boeing’s knowledge of the relevant

16

defects. Plaintiffs alleged facts demonstrating that the cause of the relevant defects was known

17

as early as 2012, Boeing’s obfuscation of the issues to avoid more intensive certification and

18

training issues, continuing discovery of the scope of the MCAS issues, and continuing

19

nondisclosure of the issues or even the MCAS system. Dkt. #57 at 19–20. Taken as a whole,

20

Plaintiffs have alleged that the issues and defects were known in several portions of Boeing’s

21

operations, including engineering, testing, FAA compliance, and sales. This breadth, combined

22

with the importance of the 737 MAX’s success and the directive to avoid rigorous FAA

23

certification and training requirements, lead to the reasonable inference, at this stage of the case,

24

that knowledge of the issues can be imputed to the company as a whole. Id. at 21–22 (noting
ORDER – 9

1

that allegations of employee statements “merely buttress[] the inference of Boeing’s

2

knowledge”).

3

B. Plaintiffs’ WCPA Claim

4

As to Plaintiffs’ WCPA claim, the R&R ultimately determined that the claims were not

5

viable as the transactions fell outside the scope of the WCPA. Specifically, the R&R notes that

6

the transactions at issue do not have the capacity to deceive a substantial portion of the public,

7

thereby affecting the public interest, because Boeing engages in only 9-10 sales of Boeing

8

Business Jets per year and the parties to those transactions are sophisticated parties with equal

9

bargaining power. Dkt. #57 at 24–28.

10

Plaintiffs object to the R&R’s recommendation that the Court dismiss their WCPA claim.

11

Dkt. #59 at 2. But Plaintiffs’ scarce argument makes clear that the objection was primarily to

12

preserve the issue for any possible appeal. Id. at 1 (objecting “in light of uncertainty under Ninth

13

Circuit law as to whether a specific objection is required to preserve such an issue for an ultimate

14

appeal”). Defendants respond that the objection is too “general” as to require the Court’s de novo

15

review and that, regardless, the R&R correctly recommended dismissal of Plaintiffs’ WCPA

16

claims. Dkt. #64 at 5–8. The Court agrees and, to the extent necessary, denies Plaintiffs’

17

objection.

18

C. Plaintiffs’ WPLA Claim

19

The R&R recommends that the Court should permit Plaintiffs’ WPLA claims to proceed.

20

Dkt. #57 at 32. Boeing objects on the basis of many of the same arguments rejected by the R&R.

21

Dkt. #60 at 14–16. While the Court agrees with much of the R&R’s analysis, the Court ultimately

22

reaches the opposite result and dismisses Plaintiffs’ WPLA claim.

23

The WPLA provides a “cause of action for harm caused by products that are not designed,

24

constructed, or labeled in a reasonably safe manner.” Dkt. #57 at 28 (citing WASH. REV. CODE
ORDER – 10

1

§ 7.72.030). “Harm,” however, excludes “direct or consequential economic loss,” leaving purely

2

economic losses to contract law. Id. (citing WASH. REV. CODE § 7.72.010(6); Hofstee v. Dow,

3

109 Wash. App. 537, 543, 36 P.3d 1073, 1076–77 (2001)). But the determination of whether a

4

harm is purely economic turns on a more holistic “risk of harm analysis” considering (1) whether

5

the product’s failure was “sudden and dangerous” or (2) a more general evaluation of the nature

6

of the defect, the type of risk presented, and the manner in which the injury arose. Dkt. #57 at

7

29–30 (citing Wash. Water Power Co. v. Graybar Elec. Co., 112 Wash.2d 847, 857–60, 865–66,

8

774 P.2d 1199 (1989); Touchet Valley Grain Growers, Inc. v. Opp & Seibold Gen. Constr., Inc.,

9

119 Wash.2d 334, 351–52, 831 P.2d 724 (1992); Moodie v. Remington Arms Co., LLC, Case No.

10

2:13-cv-0172-JCC, 2013 WL 12191352 at *6 (W.D. Wash. Aug. 2, 2013)).

11

The R&R’s treatment of the WPLA claim rejects Boeing’s initial argument that Plaintiffs

12

cannot state a WPLA claim because their aircraft have not experienced the MCAS-related

13

malfunction during flight. Dkt. #57 at 31 (“the fact that a hazardous product defect has injured

14

only the product itself, and not persons or other property, is properly regarded as a ‘pure

15

fortuity[]’”) (quoting Graybar Elec. Co., 112 Wash.2d at 865–66). The R&R then considered

16

Plaintiffs’ alleged harms under the evaluative approach:

17
18
19
20

Plaintiffs allege the BBJ MAX aircraft were not reasonably safe as designed,
include defects that could cause the aircraft to enter into an unrecoverable dive
and crash, and that Boeing failed to inform them of the defects and the dangers
posed. The allegations set forth defects posing an unreasonable risk of harm to
persons, property, and the products themselves, implicating the safety-insurance
policies of tort law, and extending beyond products contracted for that simply did
not work as planned. Considered as such, the Court concludes plaintiffs state a
WPLA claim sufficient to withstand a motion to dismiss.

21
22

Dkt. #57 at 32 (citations omitted).

23

Boeing objects to the R&R on the basis that it “erroneously extend[ed] the WPLA to

24

purchasers of a product who have never used the product or been exposed to any potential harm
ORDER – 11

1

from it.” Dkt. #60 at 5. Boeing objects that the R&R looks to the crashes suffered by other

2

Boeing customers to consider the risk of harm inherent in Plaintiffs’ aircraft, effectively allowing

3

Plaintiffs to “bring a WPLA claim based on an accident involving another product belonging to

4

an unrelated customer.” Id. at 15. Boeing argues that the Court’s risk of harm analysis must

5

instead look to “a ‘product failure [that] has occurred’ involving the plaintiff’s own product and

6

look[] to whether that product failure posed a risk of harm to the individual plaintiff.” Id.

7

(citations omitted) (emphasis in original).

8

The Court agrees that the proper inquiry focuses on the harm suffered by the plaintiff.

9

See Plaza 600 Corp. v. W.R. Grace & Co.-Conn, No. C89-1562D, 1991 WL 539568, at *3 (W.D.

10

Wash. June 19, 1991) (“nature of the plaintiff’s alleged injury” is at the center of the court’s

11

consideration). This does not mean that the plaintiff must have suffered personal injury or even

12

damage to the product. See Pointe at Westport Harbor Homeowners’ Ass’n v. Engineers Nw.,

13

Inc., P.S., 193 Wash. App. 695, 704, 376 P.3d 1158, 1163 (2016) (“We disagree that an

14

engineer’s independent tort duty is limited to situations in which the engineers’ failure to exercise

15

reasonable care results in personal injury or physical damage to property.”). But the plaintiff

16

must have been exposed to some risk of harm.

17

Plaintiffs’ alleged harm flows from their central position that “had [they] known about

18

MCAS, the design changes of the MAX that required the use of MCAS, and the risk that these

19

modifications posed, Plaintiffs would not have purchased MAX aircraft from Boeing and would

20

not have accepted delivery.” Dkt. #1-2 at ¶ 97. Plaintiffs complain that they anticipated minimal

21

changes from the 737NG, the need for only limited training, and continuation of the 737NG’s

22

favorable safety record. Id. Accordingly, Plaintiffs allege that they now own “an aviation asset

23

that has lost substantial value, if not all value” and “have thus incurred significant damages in

24

the form of diminution of value, as well as additional damages in the form of additional expense,
ORDER – 12

1

costs of temporary cover, and other items.” Id. at ¶ 98. Beyond these clearly economic harms,

2

Plaintiffs allege only that, even after repairs, their intended users—“employees, associates,

3

purchasers, business partners, spouses, and children”—“may refuse to fly on the Aircraft.” Id.

4

at ¶ 99.12 Discounting their purely speculative claims, Plaintiffs do not allege a risk of harm.

5

This conclusion is wholly consistent with Washington law and the cases cited in the R&R.

6

First, Plaintiffs do not allege that they have flown the aircraft. Id. at ¶ 93 (indicating that the

7

aircraft were accepted on November 29, 2018, and January 11, 2019, and that when the 737MAX

8

was grounded, on March 13, 2019, both “Aircraft were undergoing finishing work at completion

9

facilities,” and that Plaintiffs have not been able to use the aircraft). As a result, Plaintiffs have

10

failed to present allegations that they were exposed to the possible failure of the MCAS system

11

or an attendant risk of harm. C.f. Touchet Valley, 119 Wash.2d at 351, 831 P.2d at 733 (faulty

12

construction of grain storage facility presented “real, nonspeculative danger of physical injury to

13

any persons walking in or about the” facility); Zwicker, 2007 WL 5309204 at *4 (W.D. Wash.

14

July 26, 2007) (plaintiff who operated vehicle with faulty speedometer, without incident, was

15

nevertheless exposed to significant risk of harm by possible failure). Plaintiffs’ complaint is,

16

instead, that Boeing’s faulty MCAS system resulted in the grounding of the 737 MAX, thereby

17

interfering with Plaintiffs’ ability to fly their aircraft—their contractual expectations.

18

Second, Plaintiffs do not allege that the MCAS defects render the aircraft inherently

19

dangerous. C.f. Moodie, 2013 WL 12191352 at *7 (finding “unreasonable risk of harm”

20

presented by defective gun which could fire without a trigger pull); Plaza 600 Corp., 1991 WL

21
12

22
23
24

As specifically related to their WPLA claims, Plaintiffs further allege that their harms include
“(a) payment of substantial sums to Boeing for the purchase of the Aircraft; (b) substantial sums
spent in connection with the completion of the Aircraft, (c) costs associated with the ownership
and loss of use of the Aircraft during the time they cannot be used for its intended purpose; (d)
loss in value; (e) justified fears and concerns and associated physical injuries; and (f) other costs
and losses to be proven at trial.” Dkt. #1-2 at ¶ 199.

ORDER – 13

1

539568 at *3 (W.D. Wash. June 19, 1991) (fireproofing product containing asbestos, which was

2

chipping and flaking above ceiling, did not result only in increased expense for work in the

3

contaminated area but also presented a real hazard to humans who may access the contaminated

4

area without adequate protection). In fact, Plaintiffs do not allege that MCAS poses a risk of

5

harm outside the aircraft’s operation in flight. See Hofstee, 109 Wash. App. at 543, 36 P.3d at

6

1076–77 (loss of use of cows during quarantine due to positive brucellosis test was economic

7

loss, a “failure to meet the expectations under the contract,” and not indicative of hazardous

8

product requiring protection of tort law, especially because further testing revealed no brucellosis

9

infection). Plaintiffs’ inability to operate their aircraft once again represents a failure to meet

10

their contractual expectations, not a risk of harm from an inherently unsafe product.

11

In sum, the Court concludes that Plaintiffs’ harms are contractual in nature. They

12

expected that their aircraft would “conform to the appropriate Type Certificate issued by the

13

United States Federal Aviation Administration (FAA) for the Aircraft and will obtain from the

14

FAA and furnish to Customer at Delivery of the Aircraft either a Standard Airworthiness

15

Certificate or an Export Certificate of Airworthiness.” Dkt. #1-2 at ¶ 91. Plaintiffs are barred,

16

by the economic loss rule, from pursing their claims under the WPLA.13

17

D. Plaintiffs’ Notice of Supplemental Authority

18

Lastly, the Court notes that Plaintiffs have filed a notice of supplemental authority and

19

have attached a deferred prosecution agreement between Boeing and the United States and a

20

waiver of indictment. Dkt. #67. Boeing opposes the filing as not in conformance with the Court’s

21

local rules because it presents factual materials as opposed to supplemental authority. See Local

22
13

23
24

The Court notes briefly that Plaintiffs do little to support the R&R’s treatment of their WPLA
claim in their response to Boeings objections. Plaintiffs devote less than one page of their 12page response to their WPLA claims and, even then, their arguments amount to merely asserting
that the R&R was correct and already rejected Boeing’s arguments.

ORDER – 14

1

Rules W.D. Wash. LCR 7(n) (prior to ruling on a motion, parties “may bring to the court’s

2

attention relevant authority issued after the date the party’s last brief was filed”). The Court

3

agrees and does not consider the facts set forth in the deferred prosecution agreement.
IV.

4

CONCLUSION

5

Accordingly, and having reviewed the R&R, the parties’ objections, and related briefing

6

and having conducted de novo review of the portions of the R&R to which objections were made,

7

the Court finds and ORDERS:

8
9
10
11
12
13
14

1. The Report and Recommendation (Dkt. #57) is adopted to the extent it is consistent with
this Order.
2. The parties’ objections (Dkts. ##59–60) are sustained and overruled as specified in this
Order.
3. Defendants’ Motion to Dismiss (Dkt. # 41) is GRANTED in part and DENIED in part.
Plaintiffs’ WPLA claims and WCPA claims are DISMISSED.
4. The Clerk is directed to send copies of this Order to the parties and to the Honorable Mary

15

Alice Theiler.

16

Dated this 26th day of February, 2021.

17
18

A

19

RICARDO S. MARTINEZ
CHIEF UNITED STATES DISTRICT JUDGE

20
21
22
23
24
ORDER – 15