AUSTIN – The seller of a purportedly new airplane acted reprehensibly in concealing the craft’s used left engine but should not have to pay punitive damages because the purchase agreement limited liability, the Texas Supreme Court ruled Friday.
The court overturned $5.39 million in punitive damages awarded to Houston Astros owner Jim Crane and another investor, who paid $19.85 million for what they believed was a new Bombardier Challenger 300. They later learned the plane contained a used engine with a troubled history.
The buyers will get to keep $2.69 million in actual damages awarded by a jury after the court rejected Bombardier’s challenge to valuations offered by the buyers’ expert witness.
On the punitive damages issue, lawyers for Crane had argued, and Fifth Court of Appeals in Dallas had agreed, that clauses in the purchase and management agreements with Bombardier prohibiting punitive damages were unenforceable because of Bombardier’s fraud.
The Supreme Court, in a unanimous opinion, said it has never held that fraud vitiates such a clause.
“Under our strongly held principles of freedom to contract, we hold that the limitation-of-liability clauses are valid limited warranties that were the basis of the parties’ bargain,” said Justice Paul Green.
“Although Bombardier’s conduct in failing to provided SPEP and PE with the new engines they bargained for was reprehensible, the parties bargained to limit punitive damages.”
SPEP Aircraft Holdings and PE 300 Leasing are companies through which Crane and Neil Kelley initiated the jet purchase in 2010. Wallace Jefferson of Alexander Dubos Jefferson & Townsend represented the buyers.
The court upheld the actual damages against a challenge by Bombardier that the plaintiff’s appraisal expert’s testimony was a legally insufficient, unsupported opinion.
Evidence at the trial showed that the plane’s left engine had been repaired for interstage turbine temper temperature split and used on another aircraft. That engine also had experienced jet fuel contamination and damage during its initial shipping in 2008 that required it to be refurbished.
During oral arguments in December, Bombardier’s attorney Brett Kutnick attacked expert Devin Fogg’s conclusion that the plane was worth 10 percent less than the purchase price. Kutnick said the valuation was made without a firm methodology and without calculating comparable aircraft sales.
“What if there are no comparable sales?” Green had asked Kutnick, a partner at Jackson Walker.
Green said in his opinion said that finding comparable values for aircraft with certain damage might be impossible. For that reason the court “declined to apply any bright-line rule for determining whether an expert’s aircraft appraisal is conclusory as to aircraft valuation.”
While Fogg’s reasoning could have been more substantive, Green said, “he sufficiently linked his conclusions about the Challenger 300’s value to available facts about its issues and the marketplace.”
Read the opinion in Bombardier v. SPEP, et al.