Robinson Helicopter Co. v. Dana Corp.

Dana Corporation (Dana) [1] appeals from a judgment in the sum of $7,533,924 (including $6 million in punitive damages) entered against it following a jury trial. This case arose out of a contract between Dana and the respondent, Robinson Helicopter Company, Inc. (Robinson), pursuant to which Dana manufactured and sold sprag clutches for use in the helicopters manufactured by Robinson. After a nine-day trial, the jury found Dana liable for breach of contract, breach of warranty and intentional fraud.

The principal issue presented involves the application of the economic loss rule. That rule precludes a recovery in tort where the sale of a defective product has resulted in no property damage or bodily injury, but only economic loss to the buyer of that product. In California, the rule has operated to preclude a tort recovery by the purchaser of a defective product under either negligence or product liability theories. As we explain, the rule also should be applied to intentional fraud cases where such fraud has been committed in the performance, as opposed to the inducement, of the product sale contract.

Dana argues that the trial court improperly permitted a…