Boeing has been sued by a Russian aircraft leasing company for breach of contract arising out of the company’s order of thirty-five of Boeing’s troubled 737 Max aircraft. Avia Capital Services is a Russian aircraft leasing company with ties to the Russian government. It signed a contract to purchase thirty-five Boeing 737 Max aircraft, and paid Boeing a deposit of $35 million.
As you likely recall, the 737 Max was involved in two horrible crashes recently. The first crash involved Lion Air of Indonesia and the second involved Ethiopian Airlines. These two horrific crashes form the basis of the lawsuit filed by Avia.
Avia’s attorneys argue that Boeing misrepresented the facts regarding the certification and airworthiness of the aircraft, which it knew about at the time the parties signed the contract. Avia maintains that the new 737 Max was so different than the previous version, in terms of its weight, aerodynamics, and systems that Boeing should have required the plane be put through a new certification program that would have required pilot training for the specific differences and the issues raised. Avia claims Boeing intentionally failed to choose this route and instead misrepresented the steps needed to acquire certification for the aircraft.
Instead, the plane came out and was involved in two high profile crashes. Avia maintains that the aircraft have declined in value due to Boeing’s actions and omissions and public trust in Boeing aircraft has declined precipitously. In addition to return of its $35 million deposit, Avia is seeking $75 million in compensatory damages in the form of lost profits caused by the massive disruptions to aircraft routes due to the two previous crashes. Additionally, the company is seeking punitive damages for Boeings intentional wrongdoing.
Avia is also seeking damages for diminished business opportunities, arguing that the massive bad publicity has damaged its ability to attract customers that want to use its planes. Apparently many other 737 Max purchasers intend to file similar lawsuits to get out of their purchase agreements.
As we discuss in our contract law section, damages for lost profits tend to be difficult to recover. Lost profits have to be within the parties’ contemplation at the time they sign the contract, have to be provable with definite numbers and cannot be remote or speculative. Moreover, Boeing has defended against these lawsuits by insisting that its customers are bound by the contract and refusing to return any deposits or cancel any contracts. We will see how this case and others soon to follow will play out.
Contact the Spence Law Firm today to schedule a free consultation with a skilled Orlando contract lawyer.