Opinion
No. 05-13-00133-CV
12-03-2014
SKY CAPITAL GROUP, LTD., D/B/A G5000, LTD., Appellant v. BOMBARDIER, INC., BOMBARDIER, INC., D/B/A BOMBARDIER AEROSPACE CORPORATION, BOMBARDIER AEROSPACE CORPORATION, AND LEARJET, INC., Appellees
On Appeal from the 44th Judicial District Court Dallas County, Texas
Trial Court Cause No. DC-08-02249
MEMORANDUM OPINION
Before Justices Bridges, Lang, and Evans
Opinion by Justice Evans
In this appeal following a jury trial, Sky Capital Group Ltd, d/b/a G5000, Ltd. contends the evidence is legally and factually insufficient to support the jury's refusal to find that Bombardier, Inc. failed to comply with the terms of a delivery agreement for a luxury jet aircraft. Sky Capital further contends the evidence is legally and factually insufficient to support the jury's refusal to find that Bombardier failed to comply with an express warranty contained in the aircraft purchase agreement. Finally, Sky Capital requests that, if we rule in its favor on either of its first two issues, we remand the cause with instructions to the trial court on two evidentiary issues. Because we conclude the evidence is both legally and factually sufficient to support the jury answers challenged by Sky Capital, we affirm the trial court's judgment.
I. FACTUAL BACKGROUND
Sky Capital is a single purpose company established for the sole purpose of acquiring and holding a single asset. In July 2004, Sky Capital began negotiating with Bombardier for the purchase of a Global 5000 custom executive aircraft. Throughout the process of purchasing and customizing the aircraft, Iouri Chliaifchtein, a Russian citizen living in London, made the decisions about the purchase, customization, delivery, and post-delivery work. Although Sky Capital's stated intent in purchasing the aircraft was to charter the plane to a variety of third parties, it is undisputed that Chliaifchtein was the primary user of the plane.
Sky Capital signed an Aircraft Purchase Agreement (APA) with Bombardier in November 2004. Pursuant to the APA, Bombardier manufactured a G5000 jet and flew it to Montreal, Canada for the completion and customization process. This process included such things as application of the exterior paint and installation of the interior. Sky Capital representatives closely monitored Bombardier's completion of the work as it was being done.
Towards the end of the completion process, Sky Capital and Bombardier signed a "Delivery Document," the purpose of which was to document Sky Capital's receipt of the aircraft and identify any remaining obligations of Bombardier at the time of delivery. These remaining obligations were listed as "Open Delivery Items" or "ODIs." Appendix B to the Delivery Document listed twenty-one ODIs that were primarily cosmetic including such things as changing the color of the entryway curtain, replacing a bathroom mirror, and replacing cracked molding. Appendix E listed twenty-six ODIs relating to the aircraft's Cabin Management System, such as problems with the onboard entertainment systems and the internet connectivity. The listed ODIs were to be addressed during two scheduled downtimes beginning on May 15, 2006 and December 1, 2006. Appendix A to the Delivery Document was a receipt signed by Sky Capital acknowledging its acceptance of the aircraft and stating that, except for the ODIs, the plane was completed in accordance with the APA.
According to Sky Capital, almost immediately after it accepted delivery of the aircraft, the plane began to experience multiple problems, including widow fogging and water system failures. These problems were not part of the listed ODIs. Due to the multiple additional issues raised by Sky Capital, the first downtime scheduled for May 15, 2006, was postponed by agreement to allow Bombardier time to prepare to address the additional problems. In September 2006, the plane was flown back to Montreal for maintenance work. Some of the ODIs were addressed at this time, along with approximately half of the additional issues raised by Sky Capital.
The second downtime scheduled for December 2006 was also postponed by agreement. By March, 2007, the second downtime had still not occurred and Bombardier arranged to meet in France with Chliaifchtein and John Astorino, a representative of Global Jet Luxembourg working with Chliaifchtein and Sky Capital. The purpose of the meeting was to confirm what work still needed to be done, obtain approvals from Chliaifchtein on designs and materials, and schedule the availability of the plane for maintenance and repair. Prior to the meeting, Bombardier sent an email to Astorino summarizing Bombardier's position. According to Bombardier, the delay in resolving the ODIs and other issues was due to Chliaifchtein's failure to make the plane available or to provide Bombardier with the approvals and design choices it needed to schedule the work.
When the parties met, Chliaifchtein made what Bombardier considered to be unreasonable, extra-contractual demands. As a result, no plan was put in place to complete the work on the plane. Approximately one month after the meeting, senior management at Bombardier sent an email to its employees stating that, with the exception of two tasks, work on the aircraft was being suspended and "an alternative strategy [would] be implemented."
In February 2008, shortly before the warranty on the plane was due to expire, Sky Capital flew the aircraft to Learjet, Inc., in Dallas, Texas. Learjet was not made aware that the plane would be arriving at its facility until after it was already in route. Although the plane was accepted at the facility, Bombardier told Learjet that it had concerns about Learjet attempting to perform any work on the ODIs. Learjet ultimately agreed to perform inspection, maintenance, and warranty work which began on February 27, 2008. The next day, Sky Capital filed this suit in Texas against Bombardier for fraud, fraudulent inducement, negligent misrepresentation, breach of contract, and breach of express warranty. Learjet was later added as a defendant.
The case was tried to a jury and, after several weeks of testimony, the jury found against Sky Capital on all of its claims. Sky Capital moved for a new trial and to disregard the jury's findings. The trial court denied the motion and this appeal followed.
II. ANALYSIS
In its first and second issues on appeal, Sky Capital contends the evidence is legally and factually insufficient to support the jury's answers of "no" to two of the questions presented in the jury charge regarding Bombardier's liability.
A. Standards of Review
When a party attacks the legal sufficiency of the evidence supporting an adverse finding on an issue on which it had the burden of proof, it must demonstrate on appeal that the evidence establishes, as a matter of law, all vital facts in support of an affirmative answer to the issue. See Dow Chemical Co. v. Francis, 46 S.W.3d 237, 241 (Tex. 2001). In reviewing the challenge, we first examine the record for evidence that supports the jury's finding, ignoring all evidence to the contrary unless it is undisputed and allows only one logical inference. See St. Joseph Hosp. v. Wolff, 94 S.W.3d 513, 520-21 (Tex. 2003). We consider all the evidence in the light most favorable to the prevailing party and indulge every reasonable inference in that party's favor. Id. at 520. Anything more than a scintilla of evidence is legally sufficient to support the jury's finding. See Examination Mgmt. Servs., Inc. v. Kersh Risk Mgmt., Inc., 367 S.W.3d 835, 840 (Tex. App.—Dallas 2012, no pet.). Only if there is no evidence to support the finding, do we then examine the entire record to determine if the contrary proposition is established as a matter of law. Francis, 46 S.W.3d at 241.
When a party attacks the factual sufficiency of the evidence supporting an adverse finding on an issue on which it had the burden of proof, it must demonstrate that the adverse finding is against the great weight and preponderance of the evidence. Id. at 242. We consider and weigh all the evidence and set aside the verdict only if the supporting evidence is so weak or if the finding is so against the great weight and preponderance that it is clearly wrong and unjust. Id. The triers of fact are the sole judges of the credibility of the witnesses and the weight to be given their testimony and we will not substitute our judgment for theirs even if we would have reached a different answer regarding the evidence. See Kersh, 367 S.W.3d at 840.
B. MATERIAL BREACH OF DELIVERY DOCUMENT
Sky Capital's first challenge is to the jury's negative response to Question No. 8 which asked:
Did Bombardier fail to comply with the Delivery Document?
A failure to comply must be material. The circumstances to consider in determining whether a failure to comply is material include:
a. the extent to which Sky Capital will be deprived of the benefit which it reasonably expected;
b. the extent to which Sky Capital can be adequately compensated for the part of that benefit of which it will be deprived;
c. the extent to which Bombardier will suffer forfeiture;
Sky Capital contends that the evidence is undisputed that Bombardier failed to complete all the ODIs listed in the Delivery Document and, therefore, the evidence conclusively established that Bombardier failed to comply with the contract. Bombardier responds that, although the evidence shows it did not complete all of the ODIs, the evidence is sufficient to support a finding that this failure was not material. Because the jury was instructed that Bombardier's failure to comply with the contract must be material to constitute a breach, Bombardier argues the evidence supports the jury's finding that there was no breach of the Delivery Document.d. the likelihood that Bombardier will cure its failure, taking into account the circumstances including any reasonable assurances;
e. the extent to which the behavior of Bombardier comports with standards of good faith and fair dealing.
A breach of contract occurs when a party fails to perform an act that it has expressly or impliedly promised to perform. Id. at 844. In this case, the trial court instructed the jury that Bombardier's failure to perform under the Delivery Document must have been material for a breach to have occurred. The issue of materiality is presented generally in the context of whether a party is excused from performing under a contract because of the other party's prior material breach. See generally Mustang Pipeline Co., Inc. v. Driver Pipeline Co., Inc., 134 S.W.3d 195, 198-200 (Tex. 2004). But here, Bombardier challenged whether its alleged breaches were material and argued based on the comment to section 101.2 of the pattern jury charge that an instruction on materiality should be included in the initial liability question. See Comm. on Pattern Jury Charges, State Bar of Tex., Texas Pattern Jury Charges: Business, Consumer, Insurance, Employment PJC 101.2 (2012). Sky Capital did not object to the form of the instruction, but argued that the instruction should not be submitted because there was no dispute "from an evidentiary standpoint" as to materiality. The trial court agreed with Bombardier that the materiality instruction should be included in the question about whether Bombardier failed to comply with the Delivery Document. Sky Capital does not challenge the propriety of the jury charge on appeal. Therefore, we measure the sufficiency of the evidence against the jury instruction that was given. See Wolff, 94 S.W.3d at 530.
The comment states that "If the parties dispute whether the alleged breach is a material one the court should insert any or all of the following instructions regarding materiality, as appropriate." Id. The instructions listed in the comment are the ones the trial court used in Question No.8.
Whether a breach of contract is material necessarily turns on the facts of each case. See Advance Components, Inc. v. Goodstein, 608 S.W.2d 737, 739 (Tex. App.—Dallas 1980, writ ref'd n.r.e.). The less the non-breaching party is deprived of the expected benefit of the contract, the less material the breach. See Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691, 693 (Tex. 1994). A jury's failure to find a fact vital to the plaintiff's recovery need not be supported by affirmative evidence. See Traylor v. Goulding, 497 S.W.2d 944, 945 (Tex. 1973). In this case, however, Bombardier points to both exhibits and testimony from a variety of witnesses that it contends supports the jury's finding that Bombardier did not commit a material breach of the Delivery Document.
Bombardier presented evidence to show that, of the original forty-seven ODIs, only a few had not been resolved at the time of trial. Of those, two involved purely aesthetic aspects of the plane. One was a request by Chliaifchtein for Bombardier to change the radius of the wooden inlay on the credenza. Bombardier provided evidence that this ODI had not been completed because Chliaifchtein never approved the proposed alternative inlay design. Another unresolved ODI involved a metal drip rail along the aircraft cabin wall. According to the Delivery Document, Chliaifchtein found the drip rails unacceptable because they were not symmetrical. Bombardier proposed putting a custom decorative wooden cap over the rails. These wooden caps, once again, required Chliaifchtein's design approval and Bombardier provided evidence that his approval was never received. Other ODIs concerned the design of the seats on the aircraft. Chliaifchtein wanted the seats changed despite the fact that he had approved the seats that were installed before the plane was delivered. The Delivery Document states that Chliaifchtein requested new seats with redesigned cushions and flat arm rests. As with the inlay and drip rails, the new seat design required Chliaifchtein's approval which, according to evidence Bombardier presented, was never given despite the fact that Bombardier created a model replacement seat for him to inspect at a scheduled meeting. Bombardier presented evidence that it flew to Nevada and to France to meet with Chliaifchtein to obtain his design approval for solutions to outstanding issues, but Chliaifchtein did not discuss the items that were the subject of those meetings.
With respect to the ODIs that related to the Cabin Management System, Bombardier presented evidence that only one remained unresolved at the time of trial. The unresolved ODI involved the installation of an audio/visual on-demand system that was still in development at the time the Delivery Document was signed. A representative for Sky Capital acknowledged that the company knew the system was an "at risk" item and the Delivery Document states that Sky Capital would be credited the full amount of the system if it was not installed. Finally, Bombardier presented substantial evidence that it made multiple attempts to create a plan to rectify the unresolved ODIs, but that these attempts were thwarted by Chliaifchtein's failure to cooperate.
In addition to the testimony about the nature of the unresolved ODIs and the attempts to correct them, the evidence showed that the plane was used primarily and frequently by Chliaifchtein and his family from the time the plane was delivered until the time suit was filed. The plane was also occasionally chartered by other parties. Overall, the plane was chartered the same average number of hours as other planes from the same operating company.
Examining this evidence in the light most favorable to the jury's answer to the material breach question and instruction, there was sufficient evidence for the jury to conclude that Sky Capital was not deprived of the benefit it reasonably expected from the Delivery Document. Bombardier presented evidence to show that most of the ODI's were resolved and the few that remained were prevented from being completed by Chliaifchtein's conduct. The jury could infer from the evidence of Chliaifchtein's unwillingness to cooperate and the continued use of the plane by Chliaifchtein and others that the unresolved ODIs did not impair the value of the plane to either Chliaifchtein or Sky Capital in any material respect. Furthermore, Bombardier's evidence of the efforts it made to resolve the ODIs supports a jury finding that it endeavored to fulfill all the terms of the Delivery Document so that its conduct comported with the standards of good faith and fair dealing in keeping with subpart "e" of the jury instruction on materiality.
On appeal, Sky Capital does not contend that any particular unresolved ODI was material as a matter of law. Instead, Sky Capital contends that the timely resolution of every ODI was material as a matter of law. Citing the Restatement (Second) of Contracts, Sky Capital argues that, in the sale of goods, a buyer is entitled to expect strict performance of the contract. See RESTATEMENT (SECOND) OF CONTRACTS § 241(a) cmt. b (1981). In this case, however, the jury was not instructed that strict performance was required because the materiality instruction allows for Sky Capital to be deprived of some of the benefit it reasonably expected without a material breach having occurred. The question asked the jury to determine whether the extent of any deprivation the jury found had occurred was material. Although Sky Capital suggests that the jury's determination of the extent of deprivation goes only to damages, the jury instruction makes it central to the determination of whether there was an actionable breach. Only a finding of a material failure to comply could result in a finding that Bombardier breached the contract in this case. Accordingly, under the instruction given to the jury, mere proof that Bombardier did not resolve all the ODIs does not, by itself, show a breach of the contract as a matter of law.
Sky Capital further argues that the extensive negotiations that resulted in the Delivery Document and the evidence that Sky Capital would not have accepted delivery of the aircraft without the Delivery Document, made every provision of the contract material as a matter of law. Sky Capital asserts that because the forty-seven ODIs were chosen by the company as the most critical items to be resolved, each item was necessarily material. Sky Capital cites no authority, and we have found none, to support a theory that evidence of vigorous negotiations by itself is sufficient to render every failure to comply with a contract material as a matter of law. Cf. Mustang Pipeline, 134 S.W.3d at 200 (failure to timely perform was breach as a matter of law based on express provision in contract that that time was of the essence). The jury was free to weigh the evidence of the negotiations with the other evidence presented to determine whether any of the unresolved ODIs, or combination of unresolved ODIs, was a material breach based on the factors set forth in the instruction in the charge.
Sky Capital next contends that the evidence Bombardier relies upon, such as Chliaifchtein's refusal to cooperate, is irrelevant to the materiality of Bombardier's breach and goes only to whether its failure to comply with the contract was excused. Because materiality was made a part of the initial breach question against Bombardier, Sky Capital's conduct was relevant to the issue of whether Bombardeir's conduct amounted to an actionable material breach and not just whether a breach by Bombardier was excused by a prior material breach by Sky Capital. As discussed above, the jury could infer from Chliaifchtein's unwillingness to cooperate and his continued use of the plane that Bombardier's failure to rectify all the ODIs did not deprive Sky Capital of the benefit of the Delivery Document in any material fashion. Evidence is legally sufficient if it would enable reasonable and fair-minded people to reach the verdict under review. See City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005). Having examined the evidence in light of the jury charge, we conclude the evidence is legally sufficient to support the jury's failure to find in favor of Sky Capital on the issue of breach of the Delivery Document.
The jury did not reach the issue of whether Bombardier's failure to comply with the Delivery Document was excused because of its negative answer to the breach question.
--------
We further conclude the evidence is factually sufficient to support the jury's failure to find in favor of Sky Capital. Although Sky Capital presented evidence that more than four ODIs remained unresolved at the time of trial, it acknowledges on appeal that Bombardier presented contrary evidence through both fact and expert witnesses. It is the factfinder's province to resolve conflicts in the evidence. Id. at 819. Sky Capital makes no argument and points to no evidence supporting the materiality of any individual ODI distinct from its arguments related to all the ODIs. And, although it was undisputed that some ODIs were not resolved by the deadlines set in the Delivery Document, nothing in the contract or the evidence presented at trial suggests that the deadlines set for resolving the ODIs were "of the essence" to the contract and Sky Capital does not argue on appeal that time was of the essence. See Mustang Pipeline, 134 S.W.3d at 199. Indeed, Bombardier presented evidence that resolution of the ODIs was delayed at Sky Capital's request.
Although Sky Capital points to the memo from Bombardier's senior management showing that the company discontinued its efforts to resolve the ODIs almost a year before suit was filed, this evidence goes only to the likelihood that Bombardier would cure its breach and whether its actions comported with standards of good faith and fair dealing. It has no bearing on whether the unresolved ODIs deprived Sky Capital of the expected benefit of the contract in a material way. Deprivation of the extended benefit is the primary consideration in determining the materiality of a breach. See Fedgess Shopping Ctrs., Ltd. v. MNC SSP, Inc., No. 14-07-00211-CV, 2007 WL 4387337 (Tex. App.—Houston [14th Dist.] Dec. 18, 2007, no pet.) (mem. op.). Furthermore, Bombardier presented evidence that this memo followed extensive attempts by the company to resolve the ODIs. After considering all the evidence, we conclude the jury's refusal to find that Bombardier failed to comply with the Delivery Document is not against the great weight and preponderance of the evidence or so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. We resolve Sky Capital's first issue against it.
C. BREACH OF WARRANTY
The second jury answer Sky Capital challenges on legal and factual sufficiency grounds is the jury's negative response to Question No. 17. Question No. 17 asked whether Bombardier "fail[ed] to comply with the express warranty in Section 15 of Schedule A to the APA." Section 15 states that the aircraft shall be, "in all reasonable material respects, in compliance with the Specification." One of the specifications was a "Material Specification" that stated "[a]ll fabrics and construction materials shall meet the requirements of FAR [Federal Aviation Regulation] 24.853 and 25.855 Amendment 25-72, and shall be tested in accordance with test listed below." The test included a requirement that flammability tests be performed on "representative as built configuration samples, as they will be installed on the aircraft . . . [and] must be in accordance with the aircraft's Flammability Test Matrix."
Sky Capital contends that the evidence shows as a matter of law that Bombardier failed to comply with its obligation to perform the flammability testing required by the specification because it failed to perform flammability tests on the required "as built configuration samples." Sky Capital contends that, at best, the evidence shows only that Bombardier complied with its own flammability test plan and there is no evidence that this plan met the testing requirements set forth in the specification.
The interior of the plane was installed in Montreal, Canada. Bombardier provided evidence that the flammability testing plan it used on the materials installed in the plane's interior was submitted to and approved by Transport Canada Civil Aviation, the Canadian civil aviation authority. Sky Capital's expert on the warranty issue, Richard Jamieson, testified that the relevant Transport Canada regulation was identical to the regulation of the American Federal Aviation Administration referenced in the specification. In addition, Bombardier provided evidence that the aircraft's interior was approved and certified by Transport Canada and that this certification specifically addressed the flammability of the materials used. Bombardier's expert, John Ereaux, testified that the testing methods used by Bombardier on the materials installed in the plane would be acceptable to not only Transport Canada and the FAA, but also to civil aviation authorities around the world. Sky Capital's expert conceded that the point of the testing required by the specification was to obtain certification of the aircraft under the applicable government regulations. Based on the evidence presented, the jury could conclude that the materials Bombardier installed on the aircraft complied with the specification "in all reasonable material respects," which is all that the warranty required. Any variation from the flammability testing required by the specification could be considered immaterial given the ultimate certification of the aircraft by the appropriate aviation authority. Sky Capital makes no argument and cites no evidence demonstrating how Bombardier's deviation from the testing required by the specification, if any, could be considered material in light of the plane's certification by Transport Canada.
The main point of contention between the parties on the warranty issue was whether Bombardier's test plan used appropriate samples for its flammability testing. Sky Capital argues that Bombardier's expert admitted the company failed to comply with the specification when he agreed with opposing counsel on cross examination that Bombardier "did not test every component as built as installed in this aircraft." The specification does not, however, require that every component be tested. The specification only requires that representative samples be subjected to testing. Ereaux testified that one sample may represent several components and Bombardier's samples were appropriate. Although Bombardier's and Sky Capital's experts disagreed as to whether the materials tested were appropriate representative samples, "[i]t is particularly within the jury's province to weigh opinion evidence and the judgment of experts" and "[t]he jury decides which expert to credit." See Kirkpatrick v. Mem'l Hosp. of Garland, 862 S.W.2d 762, 772 (Tex. App.—Dallas 1993, writ denied).
Sky Capital contends that Ereaux's testimony amounts to no evidence because it was entirely conclusory. According to Sky Capital, Ereaux did nothing more than express an unsubstantiated belief that Bombardier followed its own test plan. An expert's opinion amounts to no evidence only if it is based completely on speculation and surmise. See Creech v. Columbia Med. Cent. of Los Colinas Subsidiary, L.P., 411 S.W.3d 1, 13 (Tex. App.—Dallas 2013, no pet.). In this case, Ereaux, a former employee of Transport Canada, testified that he reviewed the test plan used by Bombardier along with Sky Capital's expert reports that addressed what they believed were Bombardier's deviations from the plan. Ereaux also reviewed Transport Canada's certification of the plane's interior. This documentation provided Ereaux with a basis for his opinion beyond mere speculation and surmise.
Sky Capital also contends that Ereaux's opinion failed to take into account evidence that at least one component installed on the aircraft was not listed as being in compliance with the test plan, two others had failed the flammability test, and six more were "inappropriately passed off as compliant." Weakness in the facts underlying an expert's opinion generally goes to the testimony's weight rather than its admissibility. Id. The evidence Sky Capital points to does not render Ereaux's testimony insufficient as a matter of law, but rather goes only to whether the jury's refusal to find that Bombardier violated the warranty was against the great weight and preponderance of the evidence. We cannot substitute our judgment for the jury's even if we would have reached a different conclusion. See Kersh, 367 S.W.3d at 840.
It was Sky Capital's burden to show that Bombardier breached the warranty by failing to meet the flammability testing requirement set forth in the specification in all reasonable material respects. After examining the evidence in the record under the applicable standards of review, we conclude the evidence is both legally and factually sufficient to support the jury's refusal to find in Sky Capital's favor on this issue. We resolve Sky Capital's second issue against it.
III. CONCLUSION
Having resolved the first two issues against Sky Capital, it is unnecessary for us to address Sky Capital's remaining issues and arguments. We affirm the trial court's judgment.
/David Evans/
DAVID EVANS
JUSTICE
130133F.P05
JUDGMENT
On Appeal from the 44th Judicial District Court, Dallas County, Texas
Trial Court Cause No. DC-08-02249.
Opinion delivered by Justice Evans. Justices Bridges and Lang participating.
In accordance with this Court's opinion of this date, the judgment of the trial court is AFFIRMED.
It is ORDERED that appellees BOMBARDIER, INC., BOMBARDIER, INC., D/B/A BOMBARDIER AEROSPACE CORPORATION, BOMBARDIER AEROSPACE CORPORATION, AND LEARJET, INC. recover their costs of this appeal from appellant SKY CAPITAL GROUP, LTD., D/B/A G5000, LTD.