Appeals Court Affirms $8.1 Million Verdict in Challenger 300 Case

On June 22, the Texas Court of Appeals (Fifth District) in Dallas affirmed a trial court jury verdict that upheld a claim for nearly $8.1 million in damages in a case filed against Bombardier Aerospace. The appellees, which included companies owned by James Crane and Neil Kelley, sued Bombardier for breach of contract and fraud by nondisclosure, arguing that in December 2010 Bombardier sold them a new Challenger 300 with undisclosed engine problems. According to the court’s memorandum opinion, “Despite the logbooks showing the left engine had been repaired for interstage turbine temperature split (ITT) and used on another aircraft before being placed on appellees’ aircraft, [the quality assurance programs administrator with Flexjet, which was managing the Challenger] did not disclose this information to either Crane or Kelley.”

The appellees had elected to place the Challenger 300 under management with Flexjet, which at that time was owned by Bombardier. The memorandum states in a footnote that the court considered Bombardier and Flexjet a single entity, “and the jury charge defined ‘Flexjet/Bombardier’ or ‘Defendant’ to mean ‘Flexjet/Bombardier Aerospace Corporation.’” Crane and Kelley paid $19.85 million for the Challenger and a management fee of $70,000 per month to Flexjet.

The purchase agreement with Bombardier included the granting of limited power of attorney for Bombardier to accept the airplane and register it on the appellees’ behalf. Crane elected not to seek an independent inspection of the new Challenger, and the acceptance of the aircraft and examination of the logbooks was left under the purview of Bombardier, in this case Flexjet’s quality assurance programs administrator. 

The memorandum goes on to explain the appellees’ claim about the engine problem, which surfaced during the delivery flight to Crane and Kelley. One of the pilots “noticed the left engine had a higher ITT than the right engine on start-up and cruise. [The pilot] mentioned the ITT split to the Flexjet maintenance department, and they said they knew about it and had it under control.” The pilot found out that the engine’s history “included previous jet fuel contamination and damage during its initial shipping in 2008. The damage required the left engine to be torn down and refurbished.” A footnote adds that “August 2008 emails from Honeywell, the engine’s manufacturer, noted ‘significant damage’ to the engine components and discussed the possibility of sending a mechanic to replace the damaged components.”

The pilot contacted his supervisor, who passed on the pilot’s concerns to her supervisors, according to the memorandum. After the supervisor reported the pilot’s concerns to her supervisors, she was later told that “Crane and Kelley did not need to know about the engine’s history and it was not her concern. [She and the pilot] were warned not to talk to Crane or Kelley.”

Crane and Kelley canceled the management contract with Flexjet on Feb. 1, 2012. At that point, Crane's director of maintenance “reviewed the logbooks, and discovered the mechanical damage history of the left engine. This history included: (1) the left engine suffering significant damage during shipment in 2008 that required its return to Honeywell for repairs; (2) the engine then being installed on an aircraft referred to as 241; (3) an ITT split in January 2009 requiring the engine’s removal; (4) after repair, the engine being reinstalled on 241 for a period of time but removed again in April 2009 for oil contamination; (5) the engine being installed on aircraft 294 in January 2010; and (6) finally, in June 2010, the left engine, which a Honeywell employee described as a ‘two-time loser,’ was installed on Crane and Kelley’s aircraft.”

“Bombardier is obviously disappointed with the decision entered by the court of appeals and we are evaluating the ruling before we decide the next steps,” a Bombardier spokesman told BJT sister publication Aviation International News. “We also believe that it is extremely important to stress some important facts in this case.

“First, the engine at issue here was never installed on another in-service aircraft. The engine had only hung on production aircraft and the flight hours accumulated were exclusively from production flights and testing.

“Second, the history of the engines, including the flight hours, was documented in the engine logs. These logs were available to the buyer at the time of delivery." (The court of appeals disagreed on this point, ruling that the jury could have found that the logbooks were incomplete.)

“Finally,” according to the Bombardier spokesman, "the aircraft has flown flawlessly for over four years since the purchase. To our knowledge, there were no significant or unusual maintenance or reliability issues with the engines since delivery.”