Delta Air Lines Inc. v. Bombardier Inc.

Background

Delta and Bombardier entered into agreements concerning Bombardier’s C-Series aircraft. Those agreements required the issuance of credit memoranda—credits that could be applied to the purchase price of aircraft or to other goods and services purchased directly from Bombardier. Bombardier later assigned its rights and obligations to the C-Series Aircraft Limited Partnership, which was later renamed Airbus Canada. Airbus acquired a majority interest in that partnership and Bombardier eventually sold its remaining interest.

In December 2018, Delta and the partnership entered into Contract Change Order No. 3. The amendment defined “Seller” as the partnership, as Bombardier’s assignee, and provided that references to Bombardier throughout the agreements would be treated as references to “Seller,” except for a reference in Section 19.7. Because the agreements defined “Agreement” to include the related letter agreements, the court concluded that the amendment also changed the credit provisions. The provisions therefore allowed credits issued by Airbus Canada to be used for goods and services purchased directly from Airbus Canada, rather than from Bombardier.

After Airbus Canada issued credits when it delivered A-220 aircraft, Delta tried to use those credits for CRJ-related goods and services purchased from Bombardier. Bombardier refused to accept them, and Delta paid cash. Delta then asserted claims for breach of the purchase agreement, breach of requirements concerning Bombardier’s sale of its commercial jet business to Mitsubishi, indemnification under the assignment agreement, and breach of a guaranty.

Legal standard

Bombardier moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint does not adequately state a claim for relief. The court accepted factual allegations as true for purposes of the motion but considered the agreements because they were attached to or incorporated into the complaint. Under the New York law governing the agreements, the court applied the contracts’ plain language and dismissed claims based on clear, unambiguous terms.

Court’s analysis

Credit-related breach claims. The court held that the amendment unambiguously replaced references to Bombardier with references to Airbus Canada throughout the purchase agreement and letter agreements, except in Section 19.7. As amended, the credit provisions permitted credits issued by Airbus Canada to be used for goods and services purchased directly from Airbus Canada. They did not require Bombardier to redeem those credits.

The court rejected Delta’s argument that “deemed” references to Bombardier should refer to both Bombardier and Airbus Canada. It concluded that the word required references to Bombardier to be replaced by references to Airbus Canada, and that Delta’s reading would make the exception for Section 19.7 unnecessary. The court also held that Delta’s earlier dealings with Bombardier did not change the result because the written agreements were unambiguous and the 2018 amendment was between Delta and Airbus Canada, not Bombardier.

The court did not decide whether the original agreements, before the amendment, allowed credits from C-Series aircraft to be used for goods and services related to other aircraft. It stated that the amendment’s clear language resolved the claims.

Sale to Mitsubishi. Delta alleged that Bombardier violated Section 19.8 by selling its commercial jet business to Mitsubishi without obtaining required written assurances. The court held that, after the amendment, Section 19.8 applied the relevant obligation to “Seller,” meaning Airbus Canada, except for a separate reference to Bombardier concerning a sale of a majority interest in the C-Series program. Because Bombardier had already exited the C-Series business when it sold its other commercial jet business to Mitsubishi, the court concluded that the sale did not violate Section 19.8 as amended. The court dismissed this claim.

Indemnification claim. The court held that the assignment agreement did not require Bombardier to indemnify Delta for the consequences of the 2018 amendment. The indemnification provision covered increased costs or other adverse effects resulting from the assignment to the partnership. The court concluded that Delta’s alleged increased costs resulted from Delta’s own agreement with Airbus Canada to amend the contracts, not from the earlier assignment. The court dismissed the indemnification claim.

Guaranty claim. The court held that Delta did not adequately plead a breach of the guaranty. The claim depended on a continuing obligation for Bombardier to honor credits issued by Airbus Canada, but the court had already concluded that no such obligation existed. The complaint also alleged only hypothetically that Airbus Canada failed to facilitate Delta’s use of the credits or Bombardier’s acceptance of them; it did not allege that either event occurred. The court dismissed this claim.

Leave to amend and disposition

The court concluded that amending the claims concerning the purchase agreement, assignment agreement, and guaranty would be futile because the relevant contracts were unambiguous. In the conclusion, the court stated that Bombardier’s motion to dismiss was GRANTED. It directed the Clerk of Court to terminate the motion, enter judgment for Bombardier, and close the case.