The Tenth Circuit unraveled a $43 million verdict that software development company SolidFX LLC won against the Boeing Co. subsidiary Jeppesen Sanderson Inc. over a licensing agreement involving the development of e-book viewer applications, holding that lost profits are not recoverable under the parties’ contract.
The appeals panel’s Monday order wiped out the entirety of the $43.1 million jury award in the breach of contract and tort suit because the sum comprised estimates of SolidFX’s lost profits as a result of Jeppesen’s alleged breach of the licensing agreement, a recovery the panel said the contract barred.
“We conclude the license agreement unambiguously precludes the recovery of lost profits, irrespective of whether they are direct or consequential damages,” the court said. “But we also determine that, even if the agreement could be read to allow the recovery of direct lost profits, the lost profits awarded by the jury here are consequential damages and therefore not recoverable.”
The 27-page ruling clarifies the scope of consequential damages in a breach of contract suit — or those damages that do not directly flow from the contract but may be contemplated by the parties as the economic harm beyond the scope of the contract.
The Tenth Circuit also affirmed the district court’s grant of partial summary judgment to Jeppesen on SolidFX’s antitrust claims, on the basis the Boeing unit had a valid business justification for its refusal to share its intellectual property with SolidFX.
The court’s order concerns the April 2014 verdict awarded by a Colorado federal jury to the Foxborough, Massachusetts-based SolidFX against Jeppesen, which develops terminal charts necessary for pilots to navigate and land planes at specific airports.
SolidFX sued Keppesen in June 2011, claiming the Boeing unit breached the parties’ five-year contract under which SolidFX agreed to develop new software to allow pilots to access the Jeppesen’s terminal charts on e-book viewers.
The dispute originated after Apple Inc. introduced the iPad, and SolidFX requested that Jeppesen provide it with the necessary toolkit to develop an application for the tablet computer. The Boeing unit stalled, told SolidFX it wouldn’t provide the toolkit and instead later announced its own terminal chart application for the iPad.
SolidFX sued Jeppesen for antitrust violations, breach of contract and tort claims. The district court granted summary judgment to Jeppesen on the antitrust claims, but the rest of the claims headed to trial.
The jury found for SolidFX on all claims, awarding $43.1 million in damages that consisted of $20.1 million in lost profits from the software development company’s projected iPad app sales during the term of the contract; $21.4 million for lost business value had the parties allowed the licensing agreement to renew for another five years; $615,000 for lost profits due to Jeppesen’s refusal to provide the toolkit for terminal charts for an earlier version of an e-book viewer; plus other amounts.
U.S. District Judge William J. Martinez vacated a portion of the verdict relating to the lost business value of a renewed contract beyond 2014 but later restored it.
Jeppesen appealed that portion of the ruling allowing SolidFX to recover lost profits while SolidFX cross-appealed the toss of its antitrust claims on summary judgment. Jeppesen argued that the licensing agreement barred recovery of lost profits and that even if it did permit recovery of direct lost profits, the profits awarded by the jury were consequential damages and thus not recoverable.
The appeals court agreed after a surgical analysis of the language of the parties’ agreement, pointing to its syntax, structure and punctuation of the contract to determine it did not include lost profits.
“Although Section 8.2 greatly limits the available damages either party can recover in the event of breach, it is not the courts’ role to create or enforce a different contract than the one the parties negotiated,” the court held. “We must enforce the unambiguous exclusion of lost profits contained in Subsection 8.2.1.”
The court went further, saying that the verdict should still be reversed because the lost profits are consequential damages that also are not recoverable.
Finally, it held that the district judge was correct in tossing SolidFX’s antitrust claim since the software development company did not provide evidence that Jeppesen’s refusal to provide the toolkit to create an iPad app was driven by an anti-competitive motivation.
A representative for Jeppesen declined to comment Wednesday while a representative for SolidFX did not immediately respond to a request for comment.
Circuit Judges Paul J. Kelly, Jr., Monroe G. McKay and Carolyn B. McHugh sat on the panel.
Jeppesen Sanderson is represented by Craig S. Primis, John C. O’Quinn, Michael A. Glick, Jason M. Wilcox and Jennifer M. Bandy of Kirkland & Ellis LLP.
Solidfx is represented by Shannon Wells Stevenson, Kenzo Kawanabe, Benjamin B. Strawn and Emily L. Wasserman of Davis Graham & Stubbs LLP.
The case is SolidFX LLC v. Jeppesen Sanderson Inc., case number 15-1079, in the U.S. Court of Appeals for the Tenth Circuit.
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