Bombardier on the losing end in engine dispute
By Montreal Gazette
A Texas court of appeals has ruled against Bombardier Aerospace, confirming a lower-court decision that ordered the Montreal-based company to pay two Texas businessmen nearly US$8.1 million ($10.5 million Canadian) in damages. At issue was a used engine in a plane Bombardier sold to the men as “new.”
By Montreal Gazette
In late 2010, Jim Crane, the owner of the Houston Astros baseball team, and Neil Kelley, the CEO of an energy investment firm, purchased what they thought was a new Challenger 300 jet from Bombardier at a cost of almost US$20 million, according to the court ruling.
The men hired FlexJet, then a Bombardier subsidiary, to provide maintenance and operate the aircraft at a cost of US$70,000 a month.
Because the men trusted Bombardier – and believed the plane was new – they didn’t ask to review its logbook or seek an independent inspection of the plane.
“You wouldn’t think it would require an inspection,” Crane told a Dallas trial court.
However, one the plane’s engines had been installed on two different aircraft and had already gone through extensive repairs on two occasions, according to the court ruling.
It said several Bombardier employees, including a pilot, raised concerns about the condition of the engine and the fact that the buyers didn’t know it was used, but were instructed not to tell Crane or Kelley.
In 2012, Crane and Kelley cancelled the maintenance and service contract with Flexjet, and a company owned by Crane took over. It was only then that the plane’s owners discovered that a used engine – which had been described as a “two-time loser” by an employee of engine-maker Honeywell – had been installed on the plane.
They sued Bombardier, alleging that the company’s failure to disclose the plane’s history amounted to fraud and breach of contract.
A Dallas jury agreed, ruling in favour of Crane and Kelley and ordering Bombardier to pay the men US$2,694,160 in actual damages and US$5,388,320 in exemplary damages.
Bombardier appealed the ruling, arguing it didn’t have a duty to disclose the engine’s history and the plaintiffs could have found out that information at any time by examining the plane’s logbook.
However, in a June 22 ruling, the appeals court found that Bombardier did have a duty to disclose the engine’s history and failed to do so.
“The record indicates Bombardier had knowledge of the aircraft’s troubled history” before the sale, Justice David Bridges wrote in his ruling, “and therefore knew the aircraft had not been assembled in a regular or proper manner.”
There was also “overwhelming evidence that the engine’s logbooks did not include a complete record of the engine’s past mechanical problems,” Bridges wrote.
Because of that, the court disagreed with Bombardier’s claim that Kelley and Cole could have simply checked the logbooks. It was only after Kelley and Cole filed the lawsuit and received evidence from Bombardier and Honeywell that they learned the engine’s history, Bridges wrote.
However, Bombardier continues to dispute the characterization of the engine as “not new.”
The engine “was never installed on another in-service aircraft,” Bombardier spokesperson Simon Letendre wrote in an email to the Montreal Gazette on Tuesday. Instead, it was only used on production flights – flights used to make sure systems are working before delivery – and for testing, which he said is standard procedure. “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.”
Letendre said the plane has “flown flawlessly” since it was purchased.
“To our knowledge, there were no significant or unusual maintenance or reliability issues with the engines since delivery,” he said. “Bombardier is disappointed with the decision entered by the court of appeals. We are evaluating the decision and will not make any further comments before we decide the next steps.”