The opinion of the court was delivered by: Savage, J.
In these two consolidated putative nationwide class actions, we conduct a choice-oflaw analysis and then re-evaluation of whether the plaintiffs have satisfied Rule 23's requirements for class certification.
Moving for class certification under Fed. R. Civ. P. 23(b)(3), the plaintiffs seek to represent a class of owners or previous owners of aircraft equipped with engines designed and built by Lycoming Engines.*fn1 They claim that the engines were manufactured with defective crankshafts that can cause a total loss of engine power and in-flight engine failures, and that Lycoming knew of and concealed the defect that prevents the crankshafts from functioning as intended. They seek damages for the cost to replace the defective crankshafts, which includes parts, labor, transportation, storage, insurance, the loss of the use of the aircraft while the crankshafts are being replaced and the diminished value of the aircraft.
Lycoming contends that the case is inappropriate for class certification because the facts as to both liability and damages are not common to all members of the putative class, the claims and defenses of the named plaintiffs are not typical of the class, individual issues will predominate over the common issues, and a class action would be unmanageable. It argues that whether a given engine or crankshaft is defective, whether the planes containing the subject crankshafts were purchased used or new, and when each plaintiff had or has the crankshaft replaced are questions peculiar to each individual plaintiff and not amenable to class certification.
The plaintiffs argue that Pennsylvania law should apply to their claims because even if there is a true conflict with other states, Pennsylvania has significant contacts with the contract for the sale of the aircraft and has a materially greater interest in having its law applied. Lycoming, on the other hand, contends that Pennsylvania law cannot be applied because Pennsylvania does not have significant contacts with the contract of the sale for each aircraft.
We shall apply the law of the state of purchase because that state has the most significant contacts with the contract issue and has a greater interest in having its law enforced. In addition, applying Pennsylvania law under these circumstances would violate the Due Process Clause and the Full Faith and Credit Clause. We also conclude that the plaintiffs have not satisfied the predominance and superiority requirements of Rule 23(b)(3). Therefore, the motion for nationwide class certification will be denied.
Lycoming,*fn2 which is located in Williamsport, Pennsylvania, is a piston engine supplier for general aviation aircraft. It sells its engines worldwide to new aircraft manufacturers, such as Cessna and Piper, as well as to airframe manufacturers, aircraft brokers and individuals in need of a new or replacement engine. It sells its engines through 113 distributors, four of which are located in Pennsylvania, and the rest of which are worldwide. It also overhauls engines at its facility in Pennsylvania.*fn3
On February 21 and April 11, 2006, Lycoming issued two Mandatory Service Bulletins ("MSB"), 569 and 569A, requiring owners of the subject engines to retire and replace more than 4000 potentially defective crankshafts*fn4 that were manufactured between 1997 and 2002. The MSBs set a replacement deadline of the earliest of: February 21, 2009; the next time the engine crankcase is separated to allow inspection or replacement of parts; or at the next maintenance overhaul.*fn5
On May 25, 2006, the Federal Aviation Administration ("FAA") issued a proposed
Airworthiness Directive ("AD") mandating replacement of the same crankshafts addressed in the MSB. The FAA concluded that an "unsafe condition exists" because the "same metallurgical flaw that was found in 23 confirmed crankshaft failures in different groups of Lycoming 360 and 540 engines [which were covered in earlier MSB's issued in 2002 and 2005] has been found in the crankshafts of this group of engines."*fn6 The AD warned that if the crankshafts are not replaced, they will "result in total engine power loss, in-flight engine failure, and possible loss of the aircraft." The AD set a crankshaft replacement deadline of the earliest of the next separation of the engine crankcase, the next engine overhaul, or twelve years from the date the crankshaft first entered service or was last overhauled.
Plaintiffs claim that Lycoming had known for years that its crankshafts were unsafe and likely to fail. Based on several field reports of broken crankshafts Lycoming had received in 2002, it issued MSBs, which were followed by FAA action that grounded hundreds of aircrafts with faulty crankshafts. At that time, Lycoming purportedly paid $35 million to remove, ship and replace the defective crankshafts. In 2005, Lycoming issued two more MSBs and replaced the crankshafts covered by those MSBs at its expense.
Lycoming will replace the crankshafts subject to the most recent MSBs and the AD issued in 2006 for free if the owners have the engines overhauled at a Lycoming facility in Pennsylvania, or pay $14,000 of a $16,000 price for a "crankshaft and parts" kit for owners who replace the crankshafts elsewhere. It refuses to pay costs for labor, shipping, alternative transportation, loss of use or other incidental costs regardless of where and by whom the replacement is done.
A plaintiff class was certified, pursuant to Fed. R. Civ. P. 23(b)(3), consisting of:
All persons or entities who reside in the District of Columbia or any state, except California, who, before April 11, 2006 purchased an aircraft subject to Lycoming Mandatory Service Bulletin 569A and either: (a) currently own that aircraft; or (b) sold that aircraft on or after April 11, 2006. The Class shall be divided into two subclasses consisting of: (a) those who currently own the subject aircraft and (b) those who sold the aircraft on or after April 11, 2006.
Plaintiffs Charles Powers, Cynthia Powers and Plane Time, LLC were certified as class representatives.
The information available about the named and putative plaintiffs and their aircraft follows. Charles and Cynthia Powers are Maryland citizens. They own an aircraft in which an authorized Lycoming service center in Maryland installed, as part of an annual inspection on April 30, 2002, a Lycoming factory-overhauled engine that contains a qualifying crankshaft.*fn7 When they bought the engine, it had logged 2,632 hours. Plane Time is a Delaware limited liability company whose only member, John Car, is a South Carolina citizen. In 2004, it purchased an aircraft that was manufactured in 2002 and contained a qualifying crankshaft inside a new, zero-time Lycoming engine. At the time of Plane Time's purchase, the aircraft still contained the original Lycoming engine with qualifying crankshaft, which was then two years old.*fn8
Although little is known about them, putative plaintiffs comprise citizens of all states, except California, and the District of Columbia, who own or owned aircraft with a qualifying crankshaft. The group includes those, like the Powerses, who purchased a Lycoming engine from one of Lycoming's distributors, as well as others, like Plane Time, who acquired the qualifying crankshaft by purchasing a new or used aircraft that was already equipped with a Lycoming engine. At the time of purchase of the aircraft or just the engine, the engine was either factory new, factory-overhauled, zero-time rebuilt or used. The purchases were made in all 50 states and the District of Columbia, and possibly outside of the U.S. Some use their aircraft for business purposes, others for personal purposes, and some for both.
The plaintiffs filed separate initial complaints, seeking to represent themselves and a class of other purchasers of an aircraft containing an engine with a crankshaft subject to MSBs 569 and 569A. In his original complaint, Charles Powers brought claims for negligence, unjust enrichment, and violations of state unfair trade practices statutes, including Pennsylvania's Unfair Trade Practices and Consumer Protection Law. In the other action, the plaintiff asserted causes of action for negligence and unjust enrichment. In their amended consolidated complaint, the plaintiffs added claims for breach of implied warranty of merchantability and breach of implied warranty of fitness for a particular purpose, and dropped the negligence claim. Before initially moving for class certification, they withdrew the unfair trade practices and the breach of implied warranty of fitness for a specific purpose claims, leaving just the unjust enrichment and breach of implied warranty claims.
Plaintiffs' motion for class certification was granted. Lycoming appealed the class certification order. The Third Circuit Court of Appeals vacated the order certifying the class and remanded the case "for an entirely new choice-of-law determination for both the unjust enrichment and breach of implied warranty claims." Powers v. Lycoming Engines, Inc., 328 F.App'x 121, 128 (3d Cir. 2009). Once that analysis is done, we must decide whether the plaintiffs have satisfied the Rule 23 requirements for class certification. Id.
The parties were ordered to brief the choice-of-law issues raised in the Third Circuit's opinion. The plaintiffs have since voluntarily dismissed their unjust enrichment claim.*fn9 Therefore, the only remaining claim subject to the choice-of-law analysis is the breach of implied warranty of merchantability claim.
As the Third Circuit pointed out, irreconcilable conflicts can be an impediment to certification. Id. at 124. Because those conflicts affect the analysis of the typicality and adequacy requirements of Rule 23(a), and the manageability factor of the Rule 23(b)(3)(D) superiority test, the conflicts issues must be resolved before the class certification requirements are analyzed.
A federal court sitting in diversity must apply the choice-of-law rules of the forum state. Kaneff v. Delaware Title Loans, Inc., 587 F.3d 616, 621 (3d Cir. 2009) (citing Berg Chilling Sys., Inc. v. Hull Corp., 435 F.3d 455, 462 (3d Cir. 2006)). Accordingly, Pennsylvania choice of law rules apply here.
Pennsylvania uses a two-step process to resolve choice-of-law questions. We must first determine whether there is a real conflict. Mere differences in the states' laws do not necessarily constitute actual conflicts. Berg Chilling, 435 F.3d at 462. There is no conflict where the application of either state's law produces the same result. Id. Only where a state's governmental interests are frustrated by application of another state's law is there an actual conflict. Hammersmith v. TIG Ins. Co., 480 F.3d 220, 229-30 (3d Cir. 2007) (citing Lacey v. Cessna Aircraft Co., 932 F.2d 170, 187 (3d Cir. 1991)).
If there is a real conflict, we proceed to the second step and decide which state has the greater interest in the application of its law. LeJeune v. Bliss-Salem, Inc., 85 F.3d 1069, 1071 (3d Cir. 1996) (citing Cipolla v. Shaposka, 267 A.2d 854, 855 (Pa. 1970)). This "flexible inquiry" first considers each state's contacts with the issue under the Restatement (Second) of Conflict of Laws and then qualitatively weighs those contacts vis-a-vis the relevant states' policies and interests. Specialty Surfaces Int'l, Inc. v. Continental Cas. Co., 609 F.3d 223, 229-30 (3d Cir. 2010); Hammersmith, 480 F.3d at 227 (citing Griffith v. United Air Lines, Inc., 203 A.2d 796, 805-06 (Pa. 1964)). To determine which state has the greater contacts with the issue, we apply the appropriate Restatement section identifying the relevant contacts for the type of action at issue. Berg Chilling, 435 F.3d at 463, 467. After balancing the respective governmental policy interests of the affected states, we apply the law of the state having the greater interest in the determination of the issue. Garcia v. Plaza Oldsmobile Ltd., 421 F.3d 216, 220 (3d Cir. 2005).
All states, except Louisiana, have adopted § 2-314 of the Uniform Commercial Code ("U.C.C."), which provides that unless excluded or modified, a warranty that the goods are merchantable is implied in a contract for sale.*fn10 U.C.C. § 2-314 (2003). There are,nevertheless, significant differences among the states regarding the application of implied warranty of merchantability law. The most significant is the privity requirement.*fn11 Thirty-one states, including Pennsylvania, and the District of Columbia, do not require privity of contract to recover for breach of the implied warranty of merchantability where only economic damages are involved.*fn12 Eighteen states require privity ...