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Federal District Court Examines Contract Interpretation Principles

331DC, LLC, et al. v. Dassault Falcon Jet Wilmington Corp.
Case No. 15-1217-LPS (United States District Court for the District of Delaware, January 27, 2017)
by Richard J. Medoff, Associate
Semmes, Bowen & Semmes (www.semmes.com)

Available at: http://www.ded.uscourts.gov/sites/default/files/opinions/lps/2017/january/15-1217.pdf

In 331DC, LLC, et al. v. Dassault Falcon Jet Wilmington Corp., the Plaintiffs filed a diversity action in the U.S. District Court for the District of Delaware (“the Court”) to recover damages allegedly caused by the Defendant’s negligent handling of an aircraft leased by the Plaintiffs. The Defendant filed a motion for summary judgment, pursuant to Fed. R. Civ. P. 56(a), on the basis that the parties’ contract contained a “limitation of liability” clause that barred the Plaintiffs from recovering damages “arising out of” the Defendant’s performance of aircraft maintenance services. Citing Parfi Holding AB v. Mirror Image Internet, Inc., 817 A.2d 149 (Del. 2002), the Court concluded that the limitation of liability clause did not apply, because the damage to the aircraft did not occur during the Defendant’s performance of any of the agreed upon maintenance or repair work pursuant to the parties’ contract. Thus, the Court denied the Defendant’s motion for summary judgment.

By way of factual background, Plaintiffs, 331DC, LLC (“331DC”) and Saltchuk Resources, Inc. (“Saltchuk”) (collectively, “Plaintiffs”), leased a 2008 Falcon Model 2000DX twin-engine business jet (the “Aircraft”) from GC Air, LLC, pursuant to an Aircraft Lease Agreement dated March 7, 2008. Defendant Dassault Falcon Jet Wilmington Corp. (“Defendant”) operated a service center for Falcon business jets at the New Castle County Airport in Delaware. In 2012, Saltchuk scheduled the Aircraft for maintenance and repairs. To that end, Saltchuk and Defendant executed an “Aircraft Work Proposal and Agreement,” and an “Aircraft Work Authorization” (collectively, the “Contract”). On January 14, 2013, Saltchuk presented the Aircraft to Defendant for the maintenance and repair work to be performed by Defendant.

Defendant stored the Aircraft until the maintenance and repair work could be completed. A portion of the work involved partial removal of the Aircraft’s interior. On February 24, 2013, the Aircraft was located in Hangar 3B. Defendant moved the Aircraft out of Hangar 3B to facilitate moving other aircraft out of the hangar. After towing the Aircraft out of Hangar 3B, Defendant left the Aircraft on a ramp outside of Hangar 3B, while winds at the New Castle County Airport were “gusting to 31.1 miles per hour.” The Aircraft “was parked sloped downward, increasing the angle of attack of the wing of the Aircraft and thereby increasing lift.” Approximately twenty (20) minutes after being parked on the ramp, “the Aircraft’s nose lifted off the ground, and the Aircraft tipped back on its main gears, causing the fuselage to come in contact with the ground” (the “Incident”). As a result of the Incident, “the Aircraft sustained internal and external damage, including damage to fuselage skins and to the Aircraft’s frame.”

Defendant “repaired the damage - at Defendant’s expense and to Saltchuk’s satisfaction - that had been caused during the Incident.” Defendant “remained in possession of the Aircraft from the date of the Incident, on February 24, 2013, through completion of the Aircraft’s repair, on September 22, 2013” (the “Repair Period”). During the Repair Period, Plaintiffs were not able to use the Aircraft. On December 29, 2015, Plaintiffs sued Defendant “under a negligence theory,” seeking “loss-of-use damages in the form of more than $1.1 million in lease payments for the Aircraft and roughly $500,000 in additional damages proximately caused by Defendant’s negligence.”

Defendant subsequently filed a motion for summary judgment, pursuant to Fed. R. Civ. P. 56(a), arguing that Plaintiffs were “not entitled to any relief in light of provisions in the Contract barring recovery of the damages sought by Plaintiffs.” Specifically, Defendant argued that Plaintiffs were “not entitled to indirect, incidental, or consequential damages.” Defendant noted that the Contract included a clause entitled “limitation of liability” which stated that “in no event shall [Defendant] be liable for any special, incidental, indirect or consequential damages (including without limitation, damages for loss of profits, or business interruption) arising out of [Defendant’s] performance of the aircraft services in connection with this agreement.” The parties “disputed whether the events of the Incident ‘arose out of ... performance of the aircraft services in connection with [the Contract],’ thus triggering the provision limiting damages.”

Defendant contended that the limitation on damages did apply to the Incident, arguing that the “damage to the Aircraft occurred because of conditions created by the work undertaken on the Aircraft pursuant to the Contract, specifically removal of the interior, and the need to park the Aircraft between sessions of active work on it.” Citing Pacific Insurance Co. v. Liberty Mutual Insurance Co., 956 A.2d 1246 (Del. 2008), Defendant argued that the phrase “arising out of” in the limitation provision was “commonly understood to have a broad meaning.” Thus, according to Defendant, “the accidental damage to the Aircraft arose out of Defendant’s performance of aircraft services” because there was a “meaningful linkage between the servicing of, and the damage to, the Aircraft.” See id. at 1256.

Citing Parfi Holding AB v. Mirror Image Internet, Inc., 817 A.2d 149 (Del. 2002), Plaintiffs countered that “Defendant’s liability did not arise out of performance of services under the Contract.” In Parfi, “the Delaware Supreme Court applied basic principles of contract interpretation in holding that fiduciary duty claims were beyond the scope of an arbitration clause in a contract.” Id. at 156. The Parfi Court “held that the fiduciary duties owed rested on an independent set of rights provided for in the Delaware corporation law.” Id. at 158.

The Court began its analysis by noting that “the general principles of contract interpretation articulated by the Delaware Supreme Court in Parfi” were “fully applicable” and “persuade the Court” that the “limitation of damages clause does not apply to the Incident.” The Court explained that “the purpose of the Contract at issue here was to perform maintenance and repair work on Plaintiffs’ Aircraft,” and that “the damage caused during the Incident did not take place during performance of any of the maintenance or repair work agreed to pursuant to the Contract.” Thus, the Court concluded that “the damages did not arise out of performance of the aircraft services in connection with the Contract.” The Court further explained that the “rights and duties at issue in this case sound in tort law,” and “because no maintenance work was being performed on the Aircraft pursuant to the Contract at the time of the Incident, these rights and duties are independent of the contractual rights and duties which the parties assumed by executing the Contract.” Thus, the Court agreed with Plaintiffs that their “independent” claim “under a negligence theory survives the Contract’s limitation on damages.” Accordingly, the Court denied Defendant’s motion for summary judgment.