## Facts

- Robinson manufactured helicopters that used sprag clutches as a safety mechanism allowing autorotation landings after power loss.
- Robinson’s helicopter designs were FAA type-certified; parts had to conform to FAA-approved specifications, and changes required FAA approval.
- Dana, Robinson’s exclusive clutch supplier, originally provided clutches meeting the approved hardness specification (50/55).
- In 1996, Dana began producing clutches at a different hardness (61/63) without notifying Robinson or the FAA, and the clutches did not conform to the approved design.
- Dana issued certificates of conformance representing the clutches complied with the relevant drawings and specifications.
- Beginning in 1998, the 61/63 clutches failed at a higher rate, prompting Robinson to recall and retrofit helicopters at roughly $1.56 million in parts and labor costs.
- Robinson sued for breach of contract, breach of warranty, and negligent and intentional misrepresentation, alleging Dana knowingly supplied nonconforming clutches and false certificates of conformance.
- A jury awarded compensatory damages of about $1.56 million and punitive damages of $6 million on the fraud-based claims; the Court of Appeal largely affirmed.
- The California Supreme Court granted review to decide whether the economic loss rule barred tort claims for intentional misrepresentation or fraud committed during contract performance.

## Issues

1. Whether the economic loss rule bars tort recovery for intentional misrepresentation or fraud in the performance of a contract when the plaintiff’s damages are primarily economic.
2. Whether providing knowingly false certificates of conformance constitutes independent tortious conduct sufficient to permit tort remedies (including punitive damages) despite the absence of personal injury or damage to other property.

## Decision

- The California Supreme Court held the economic loss rule did not bar Robinson’s fraud and intentional misrepresentation claims.
- The court treated Dana’s issuance of knowingly false certificates of conformance as affirmative misrepresentations that were independent of a mere failure to perform contractual obligations.
- The court emphasized that the conduct created a substantial risk of physical harm due to the safety-critical nature of the sprag clutch and implicated duties grounded in tort law and public policy.
- The judgment for Robinson on the fraud-based claims, including punitive damages, was affirmed.

## Legal Principles

- The economic loss rule generally confines a buyer to contract remedies for purely economic loss arising from disappointed commercial expectations.
- Tort recovery remains available when the defendant’s conduct violates a duty independent of the contract, including intentional misrepresentation or deceit.
- Affirmative, knowingly false representations made during contract performance (such as false certificates of conformance) can support an independent tort claim not barred by the economic loss rule.
- A substantial risk of physical harm created by the misrepresentation, even if the plaintiff’s realized losses are economic, supports allowing tort remedies and punitive damages to deter intentional fraud.
- The exception is limited: the rule does not convert ordinary breach of contract or warranty claims into tort claims absent independent fraudulent conduct.

## Conclusion

The court permitted tort damages, including punitive damages, because the supplier’s knowingly false certificates of conformance were affirmative misrepresentations independent of contract breach, and the deception regarding a safety-critical component created a substantial risk of physical harm beyond purely contractual disappointment.


Robinson Helicopter Co. v. Dana Corp., 34 Cal. 4th 979 (Cal. 2004)