In Isla Nena Air Services v. Cessna Aircraft Company et al., a pilot for the plaintiff, Isla Nena, was operating a C-208B Caravan along the northeast coast of Puerto Rico in clear weather when the engine failed and the Caravan lost power. Although the pilot was able to perform a controlled emergency water landing just off a beach, the Caravan suffered major damage to all of its components and the engine was destroyed. Fortunately, none of the passengers were seriously injured.
The NTSB determined that the damage to the engine was consistent with ingestion of a foreign object. Isla Nena sued Cessna (the aircraft manufacturer) and Pratt & Whitney (the engine manufacturer) asserting negligence and strict liability claims. It argued that certain engine inlet duct rivets were defectively designed or installed, which caused them to break off, and that the rest of the engine failed when it ingested one of the broken rivets. Isla Nena claimed to have suffered damages in the form of loss of value to the Caravan and engine, cost to repair the Caravan and engine, loss of use of the Caravan, and lost profits.
Cessna and Pratt & Whitney moved to dismiss the lawsuit arguing that Isla Nena was precluded from recovering damages based upon the economic loss doctrine, whether applied pursuant to admiralty law or under Puerto Rican law (Under the economic loss rule, a party generally may not recover in tort when a defective product harms only the product itself, rather than a person or other property).
The District Court agreed and dismissed Isla Nena’s negligence and strict liability claims. On appeal, the 1st Circuit Court of Appeals agreed with the Disctrict Court and affirmed the dismissal holding that Puerto Rican courts would apply the economic loss doctrine to bar the plaintiff’s claims. The Court noted that “the damages claimed arose entirely from the parties’ contractual relationship and would not have occurred apart from the parties’ contract” and as a result, “under Puerto Rico law, Isla Nena’s claims are barred by the economic loss rule.” The Court did not reach the issue of whether the economic loss doctrine under admiralty law precluded Isla Nena’s claims.