A panel of the U.S. Court of Appeals for the 10th Circuit dismissed a more-than-$43 million jury verdict against a Colorado aviation company, and cleared it of fraud claims by a 2-1 vote.
SOLIDFX, LCC, a software company, filed a lawsuit a decade ago alleging antitrust violations and breach of contract against Englewood-based Jeppesen Sanderson, Inc. Jeppesen, which is a subsidiary of Boeing, creates airport-specific charts providing pilots information on how to navigate and land at the facilities. E.B. Jeppesen, for whom the Denver International Airport’s terminal is named, began selling “little black books” of charts in 1934. His company relocated to Colorado in 1941.
In 2008, Jeppesen started to negotiate an agreement for SOLIDFX to digitize the terminal charts. Jeppesen would provide its proprietary information to SOLIDFX, and SOLIDFX would market an e-reading device called iRex to display the charts. Although the agreement was not finalized by July 2009, Jeppesen had begun handing over its data and SOLIDFX started to sell iRex readers with the information loaded.
Within six months, Apple announced the first iPad. SOLIDFX asked Jeppesen to provide its data to develop an app that would work with the iPad. Instead, Jeppesen created its own app in May 2010 at no charge to its customers.
An eight-day trial in U.S. District Court resulted in a jury award of $43.1 million to SOLIDFX, primarily for lost profits stemming from the software company’s inability to market the iPad app. Included in the verdict were $173,000 in damages for fraudulent misrepresentation and $1 for fraudulent concealment.
Jeppesen argued that Colorado’s economic loss rule for disputes based in contracts barred it from paying the fraud claim, and the district court agreed. On appeal, a 10th Circuit panel went further and found that the companies’ contract “unambiguously precluded the recovery of lost profits,” and consequently waived virtually all of the jury's verdict.
SOLIDFX countered that because Jeppesen “intentionally and fraudulently breached [the contract] in bad faith,” any limit on damages should be unenforceable. The district court in 2018 concurred that Jeppesen still had committed breach of contract, fraudulent misrepresentation and concealment, and intentional interference with business relations. But it also acknowledged Jeppesen had no responsibility to pay profit-based damages per the 10th Circuit's order.
In a second appeal decided on Monday, Judge Mary Beck Briscoe emphasized in the opinion that the first appeals panel clearly ruled out any payment to SOLIDFX for lost profits, regardless of how SOLDFIX characterized the company’s conduct.
“Both parties agreed to bear the risk of lost profits and forego other damages,” she wrote. “This court’s instructions left no room for the district court to consider the same willful-and-wanton argument that this court rejected in holding the damages limitation enforceable.” Briscoe also blamed SOLIDFX for its “tactical litigation decision” to fruitlessly pursue lost profits as contributing to the outcome, instead of suing for products and services not rendered.
The panel’s majority of Briscoe and Judge Carolyn B. McHugh sided with Jeppesen again in noting that the district court’s second amended judgment in 2018 inaccurately characterized the fraud claims. Rejecting the court’s description that Jeppesen was only cleared of paying damages and not cleared of the act itself, Briscoe wrote that Colorado’s economic loss rule “necessarily meant that the fraud claims could not proceed at all; therefore, in the absence of any viable fraud claim, any finding of liability on such claims is without support.”
Judge Carlos F. Lucero dissented from the latter finding in Jeppesen’s favor, arguing that the company did not follow procedural rules and timelines for filing its appeal. In addition, he disagreed that because the district court excused Jeppesen of paying fraud damages, that necessarily erased the jury’s finding of fraud.
“I fail to see how the district court’s statement in its Second Amended Judgment that SOLIDFX ‘remains entitled to judgment’ is incorrect,” he wrote. “The Second Amended Judgment merely recognizes that the Original Judgment entered judgment for SOLIDFX on all claims, including the fraud claims.”
Lucero blasted the majority for, in his view, giving the defendant substantial leeway in pursing its appeal.
“Far too many procedural hurdles stood on the track that Jeppesen was required to run in order to receive the winner’s cup. One after another of those hurdles has been tripped by Jeppesen along the way,” he added. “My colleagues may well be willing to overlook those defaults. I am not.”
The case is SOLIDFX, LLC v. Jeppesen Sanderson, Inc.