StandardAero Aviation Holdings, Inc. v. Signature Aviation Limited

Background

StandardAero Aviation Holdings, Inc. brought the action against Signature Aviation Limited, formerly known as Signature Aviation PLC. StandardAero alleged that Signature failed to make capital expenditures required under a February 16, 2021 agreement for the sale of Signature’s engine repair and overhaul business. The sale closed on July 1, 2021.

The parties disputed the amount of capital expenditures required between January 1 and June 30, 2021. Signature spent $3,078,503 during that period. StandardAero alleged that the required amount was $10,216,042, while Signature argued that the required amount was zero.

StandardAero asserted claims for breach of contract and breach of the implied duty of good faith and fair dealing, and sought a declaratory judgment. Signature moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint does not state a legally sufficient claim.

Breach-of-Contract Claim

The agreement required Signature to make capital expenditures generally in accordance with a budget identified in Section 6.01(c)(xix). The schedule corresponding to that section contained the word “None,” but the following exhibit was titled “2021 Capex Budget” and contained a five-page table.

Signature argued that “None” meant it had no obligation to make capital expenditures. StandardAero argued that the word’s meaning was unclear in the context of the entire agreement. The court agreed with StandardAero. It reasoned that Signature’s interpretation could make the capital-expenditures budget meaningless, cause the general word “None” to override the specific budget figures, and create tension with other provisions governing expenditures during the period before closing.

The court also noted apparent drafting problems in the agreement, including missing subsections in the schedule and a reference to a nonexistent schedule elsewhere in the agreement. Because the court could not determine the parties’ intent from the agreement alone, it found the provision ambiguous. The court stated that outside, or “extrinsic,” evidence would be admitted to resolve the ambiguity. The court therefore denied Signature’s motion to dismiss the breach-of-contract claim.

Good-Faith-and-Fair-Dealing Claim

The court explained that every contract includes an implied duty of good faith and fair dealing, but that duty does not create rights separate from the contract. StandardAero’s claim was based on the same alleged failure to make the required capital expenditures and sought the same damages as its breach-of-contract claim.

Because the good-faith-and-fair-dealing claim duplicated the contract claim, the court granted Signature’s motion to dismiss that claim.

Declaratory-Judgment Claim

StandardAero argued that a declaration was needed to determine whether it properly presented an indemnification demand after Signature’s alleged breach. The court concluded that this issue concerned StandardAero’s obligations under the agreement and would be resolved through the breach-of-contract claim. Because a separate declaration would not clarify the parties’ uncertainty, the court granted Signature’s motion to dismiss the declaratory-judgment claim.

Other Motions and Disposition

The court granted StandardAero’s motion to file a sur-reply and denied StandardAero’s motion for oral argument. Overall, Signature’s motion to dismiss was granted in part and denied in part: it was denied as to the breach-of-contract claim and granted as to the implied-covenant and declaratory-judgment claims. Judge Analisa Torres directed the Clerk of Court to terminate the listed motions.