United States District Court, N.D. Texas, Dallas Division
EUROTEC VERTICAL FLIGHT SOLUTIONS, LLC.
SAFRAN HELICOPTER ENGINES S.A.S., SAFRAN HELICOPTER ENGINES USA, INC., and SAFRAN HELICOPTER ENGINES CANADA, INC.
MEMORANDUM OPINION AND ORDER
GREN SCHOLER UNITED STATES DISTRICT JUDGE.
EuroTec Vertical Flight Solutions, LLC ("Plaintiff)
brings this action against Safran Helicopter Engines USA,
Inc. ("SafranHE USA"), and against Safran
Helicopter Engines S.A.S, ("SafranHE France") and
Safran Helicopter Engines Canada, Inc. ("SafranHE
Canada") (together, "International
Defendants," and collectively with SafranHE USA,
"Defendants"). In the Third Amended Complaint (the
"Complaint")-which is the fourth complaint in this
case- Plaintiff alleges violations of the Sherman Act, 15
U.S.C. §§ 1, 2, California Cartwright Act, Cal.
Bus. &Prof. Code § 16720 et seq., Kansas
Restraint of Trade Act, Kan. Stat. Ann. § 50-101 et
seq., § 35 of the Lanham Act, 15 U.S.C. §
1117, Texas Deceptive Trade Practices Consumer Protection Act
("DTPA"), Tex. Bus. & Com. Code Ann.
§§ 17.46, 17.50, as well as common law claims for
breach of contract, wrongful detention, conversion,
negligence, tortious interference, civil conspiracy, unfair
competition, misrepresentation, and concealment.
before the Court is Safran HE USA's and the International
Defendants' Motions to Dismiss [ECF Nos. 103, 104]. For
the foregoing reasons, the Court grants in part and denies in
part the Motions.
to Special Order 3-318, this case was transferred from the
docket of Judge Jane J, Boyle to the docket of this Court on
March 8, 2018.
filed its original complaint on October 23, 2015, and amended
the complaint to join new defendants on March 28, 2016. On
June 1, 2016, Defendants filed a Motion to Compel Arbitration
and a Motion to Dismiss, which the Court granted, staying the
case pending arbitration. Following arbitration, the Court
reopened the case on September 18, 2017, Plaintiff filed its
Second Amended Complaint on October 9, 2017, and Defendants
filed a new set of motions to dismiss. The Court held a
hearing on the second set of motions to dismiss on November
18, 2018. The Court dismissed the Second Amended Complaint in
its entirety but granted Plaintiffs motion for leave to
amend. Although the Court expressed hope that affording
Plaintiff an opportunity to replead would result in
"some of the weaker of [the] 14 claims . .. [getting]
taken out," ECF No. 92, at 65:21-23, Plaintiffs fourth
attempt includes thirty causes of actions over the
course of 130 pages, and includes many of the same weaker
claims as its prior attempt. See Third Am. Compl.
Defendants filed a third set of motions to dismiss on January
25, 2019, which is the subject of this Memorandum Opinion and
is a Kansas limited liability company that owns helicopters
and helicopter engines, is a certified repair station, and is
in the business of buying, selling, and leasing helicopters,
engines, and engine parts. See Third Am, Compl.
¶¶ 1-4. Plaintiff also provides consumers with
various services, including engine maintenance, repair, and
overhaul services ("MRO Services"). Id.
¶ 5. Defendants are manufacturers, marketers, sellers,
and lessors of helicopter engines and of modules, components,
parts, and accessories for those engines. Id.
¶¶ 9, 12-15, 18. Defendants also market and provide
MRO Services for their engines, Id.
the exception of SafranHE USA, which is a Delaware
corporation with its principal place of business in Dallas
County, Texas, the Defendants are foreign companies.
Id. ¶ 11. SafranHE France, formerly Turbomeca,
S.A. and Turbomeca S.A.S., is a French company and
domiciliary. Id. ¶7. SafranHE Canada is a
Canadian corporation and domiciliary. Id. ¶ 17.
Plaintiff contends, however, that there is a significant
unity of interest in ownership and control between the three
Defendants, such that they are alter egos of one another,
Id. ¶ 20. Plaintiff alleges that either
SafranHE France is able to exert a great degree of control
over the other Defendants, that Defendants are agents of one
another, or that they acted in concert, pursuant to
agreements, or as a joint venture, such that they should be
considered a single business enterprise. Id.
and military helicopters are designed and manufactured by
Airbus Helicopters ("Airbus"), Bell Helicopter,
Leonardo Helicopters, Sikorsky Aircraft Corporation and other
companies. Id. ¶ 70. According to Plaintiff,
approximately 45% of all civil and parapublic helicopters
worldwide are manufactured by Airbus. Id. ¶ 73.
Airbus does not manufacture the engines used in its
helicopters, instead relying on companies in the business of
designing and manufacturing engines. Id. ¶ 75.
Defendants are the largest manufacturers dedicated solely to
the manufacturing of helicopter engines, and compete with
"General Electric, Rolls-Royce, and Pratt & Whitney
alleges that there is one geographic market and two relevant
product markets. Id. ¶ 244. The geographic is
allegedly the United States, while the product markets are:
(1) market for Defendants' engines and parts; and (2)
market for MRO Services for Defendants' engines.
asserts that the relevant geographic market is the United
States. Id. ¶ 244. Nonetheless, Plaintiff
contends that (1) Defendants deal in the United States and
Canada; (2) Defendants' customers are located in the
United States and Canada, and turn to sellers in both
countries for engines and parts; and (3) sellers of Safran
engines and parts, as well as providers of MRO Services, view
as competition sellers and service providers in both the
United States and Canada. Id., ¶¶ 245-49.
Market for Engines and Parts
first relevant product market is allegedly the market for
Defendants' engines and parts. Id. ¶ 252,
Plaintiff states that SafranHE France is the largest supplier
of helicopter engines to Airbus, manufacturing all of the
engines for the ten Airbus models sold in the United States.
Id. ¶ 79. According to the Complaint, there are
approximately 1, 632 helicopters in existence with
Defendants' engines. Id. ¶ 74. Airbus's
other supplier, Pratt & Whitney Canada, is the exclusive
supplier for only one Airbus model. Id. Plaintiff
alleges that a consumer would not find it cost-effective
either to replace an entire engine or to seek FAA
recertification of a helicopter for use with another engine
to avoid paying Defendants' higher prices. Id.
engines and parts manufactured by Defendants are allegedly
neither interchangeable nor compatible with engines and parts
manufactured by other manufacturers. Id.
¶¶ 253-55. Thus, a part manufactured by General
Electric, for example, cannot be used in Defendants'
engines. Id. ¶ 257. According to
Plaintiffs, the demand for Defendants' engines and parts
is thus independent of the demand for other
manufacturers' engines and parts. Id. ¶
has not alleged, however, the total number of Airbus
helicopters or other facts from which the Court could deduce
Defendants' market share with Airbus. Similarly,
Plaintiff alleged that there are more than 2, 300 helicopters
with Defendants' engines, id. ¶ 81, but has
not alleged Defendants' market share of all engines or
parts in the United States or worldwide, aside from the
conclusory statement that Defendants have "a market
share of over 50 percent." Id. ¶ 668.
further claims that while some manufacturers use distributors
to sell engine parts, some sell refurbished or used parts,
and others sell new replacement parts, id.
¶¶ 83-86, Defendants are the sole distributors of
their own parts. Id. ¶¶ 670-71. Plaintiff
thus contends that Defendants have monopoly power in the
market for their own parts. Id. ¶¶ 668-73.
Market for MRO Services
alleges that there is a market for MRO Services.
Id., ¶ 93. Plaintiff asserts that
"[s]ervices provided to helicopter manufacturers are not
within [this] relevant [product] market." Id.
¶262. Some manufacturers provide MRO Services
themselves, while others authorize independent service
providers to perform MRO Services, Id. ¶¶
93-94. Purportedly, there is no
cross-elasticity between the MRO Services for
Defendants' engines and MRO Services for other
manufacturers' engines. Id. ¶ 263.
provide MRO Services and have also authorized other companies
to perform MRO Services subject to limitations-for example,
one company is authorized to perform only "Level 4"
engine repair and overhaul on a limited number of models,
Id. ¶¶ 93-100, Defendants allegedly choose
whom to authorize to perform repair services, restrain access
to technical information, and withhold the supply of parts
necessary to perform certain repairs. Id. ¶
264. Plaintiff also states, with no factual support, that
Defendants have a market share of at least 50% in the MRO
Services for their engines and parts, mirroring its
conclusory allegations regarding Defendants' share of the
engines and parts market. Compare Id. ¶ 674,
with Id. ¶ 668. Plaintiff thus contends that
Defendants have monopoly power in the MRO Services for their
engines and parts. Id. ¶¶ 674-83.
The Dispute over Parts
more than a decade, Plaintiff would request MRO Services or
engine parts from SafranHE USA or SafranHE Canada, and these
Defendants would honor Plaintiffs requests. Id.
¶¶ 101-03. Moreover, Plaintiff allegedly had a
business arrangement in which SafranHE USA provided it with
access to technical information, allowing Plaintiff to
perform MRO Services on Defendants' engines and parts.
Id. ¶ 104.
to the Complaint, Plaintiff would routinely send parts to
SafranHE USA or SafranHE Canada, requesting a quote of an
estimated cost for the inspection and service. Id.
¶ 109. SafranHE USA and SafranHE Canada would review the
documentation, disassemble the parts, and develop a quote for
Plaintiffs review, Id. ¶¶ 110-11. The
parties would then negotiate the nature of the service and
any remaining or unused parts would be promptly returned to
Plaintiff certified as airworthy or marked "as
is." Id. ¶¶ 112-18. Between
2001 and 2010, SafranHE USA and SafranHE Canada allowed their
customers to request "scrap parts" to be returned
in their "as is" condition without SafranHE USA or
SafranHE Canada certifying the pails as airworthy,
repairable, or unserviceable. Id. ¶¶
119-20. SafranHE USA and SafranHE Canada would also offer to
compensate Plaintiff if its part was lost in their course of
dealing. Id. ¶¶ 122-23.
USA and SafranHE Canada did not, however, return to Plaintiff
all of the parts it sent them for MRO Services. Id.
¶¶ 125-28 & Exs. A-C. They allegedly lost some
of the parts after assigning them work order numbers.
Id. ¶¶ 127-31. SafranHE USA and SafranHE
Canada marked some other parts as "scrap" but sent
them to SafranHE France to be made serviceable again.
Id. ¶¶ 136-38, According to Plaintiff,
SafranHE USA and SafranHE Canada agreed to compensate
Plaintiff for some of these parts, and the parties continued
discussing compensation for the remaining lost parts.
Id. ¶¶ 132-35, 139-47.
further alleges that SafranHE USA and SafranHE Canada
instituted a policy of "defacing" parts by
scratching through the part or serial number, engraving a
triangle into the part, or otherwise physically damaging the
part (the "Defacing Policy"). Id. ¶
148. A part that has been defaced allegedly cannot be
repaired or serviced pursuant to Federal Aviation
Administration ("FAA") regulations. Id.
¶ 149. Even if a part was "scrap," it was
still valuable to Plaintiff, Defendants, and their customers,
because it could become approved for use in engines if, among
other things, the manufacturer increased the usage or service
life, or the manufacturer or the FAA approved a new repair
method. Id. ¶¶ 150-51, Moreover, Plaintiff
alleges that the defacing of its parts was contrary to the
parties' course of dealing, FAA regulations, and SafranHE
USA's and SafranHE Canada's terms and conditions.
Id., ¶¶ 152-58, On prior occasions,
SafranHE USA and SafranHE Canada allegedly offered to
compensate Plaintiff for the defaced parts. Id.
2008 or early 2009, however, SafranHE USA began holding
Plaintiffs unserviceable parts pending policy review and gave
Plaintiff an option of either allowing SafranHE USA to hold
Plaintiffs parts, or allowing it to return the parts defaced.
Id. ¶¶ 159-60. Plaintiff claims that
SafranHE USA did not inform it of any decision to change the
original course of dealing, but also alleges that SafranHE
USA began including language in their quotes authorizing
SafranHE USA to deface the parts. Id. ¶¶
162-63. SafranHE USA emailed Plaintiff about the new Defacing
Policy on April 25, 2011, and sought to impose the policy on
any part already stored. Id. ¶¶ 164,
290-92. Subsequent attempts to resolve the dispute were
unfruitful, with SafranHE France requiring SafranHE USA to
implement the policy, and Plaintiff objecting to it and
refusing to allow its parts to be defaced. Id.
¶¶ 165-69, 171-76. Plaintiff claims that by this
time, SafranHE Canada had already defaced some of Plaintiff s
parts. Id. ¶ 170.
Plaintiff filed the present action, Defendants announced that
they would not deface parts before returning
"unsalvageable parts" to customers, so long as the
customers would sign an indemnification agreement holding
Defendants harmless and commit not to equip Defendants'
engines with unserviceable parts. Id. ¶¶
176-77. Defendants' authorized service providers adopted
similar requirements for returning unserviceable parts.
Id. ¶¶ 178-82.
addition to its allegations regarding the Defacing Policy,
Plaintiff complains about Defendants' policy regarding
engines and parts involved in an accident (the "Accident
Policy") and SafranHE USA and SafranHE Canada's
refusal to certify or return parts serviced by Plaintiff.
Id. ¶ 185. Pursuant to the Accident Policy,
Defendants allegedly restricted the scope of available repair
services unless certain conditions are met, id.
¶ 184, and SafranHE USA refused to return Plaintiffs
parts certified "as is." Id. ¶¶
190, 193, 290-92. Plaintiff, however, alleges that it never
agreed to be bound by this policy, that the policy is
contrary to the parties' course of dealing, and that the
policy is not required by FAA regulations. Id.
¶¶ 186-88, 191-92. Additionally, Defendants
allegedly refused to repair or certify parts that Plaintiff
serviced because Plaintiff was not "approved" to
perform Level 3 and 4 services. Id. ¶¶
194-95. As a result, Plaintiff contends that its parts are
not as marketable or profitable. Id. ¶ 198.
The Dispute over Plaintiff's Role as a Service
and 2008, Plaintiff and SafranHE USA discussed allowing
Plaintiff to be an authorized provider of "Level 3"
MRO Services. Id. ¶ 383. To meet SafranHE
USA's requirements, Plaintiff trained personnel and made
other investments. Id. ¶ 385. Nonetheless,
SafranHE France, through SafranHE USA, denied Plaintiffs
request to become an authorized service provider in 2008 and
again in 2009. Id. ¶¶ 386-88.
2010, however, SafranHE USA offered Plaintiff a Maintenance
Authorization Agreement ("MAA"), which allowed
Plaintiff to perform Level 3 maintenance. Id. ¶
389. Plaintiff maintains that it could not negotiate any
change to this agreement because of its significant
investment, and so agreed. Id. The MAA obligated
Defendants to provide Plaintiff with various documentation
including technical information. Id. ¶¶
389-92. Either party could terminate the MAA for any reason,
provided it gave ninety days' written notice.
Id. ¶ 393. A breaching party had thirty days to
cure a breach of the MAA. Id. ¶ 394.
2012, SafranHE USA and SafranHE France terminated Plaintiffs
access to certain technical information. Id.
¶¶ 395-402. Moreover, SafranHE USA allegedly
breached the MAA by refusing to train Plaintiffs technicians.
Id. ¶ 411. Mike Gaines admitted to SafranHE
USA's president that the MAA was still in effect, but
suggested that it be terminated. Id. ¶ 403.
According to Plaintiff, SafranHE USA attempted to formally
terminate the MAA in August 2014, when it sent Plaintiff a
notice of termination due to Plaintiffs breach of the MAA.
Id. ¶ 404, Plaintiff alleges, however, that the
termination letter was not effective to terminate the
agreement because Plaintiff did not receive notice that it
was in breach of the MAA,  Id. ¶405. Plaintiff
further alleges that it had a right to continued access to
Defendants' technical information because of its
substantial investment. Id. ¶ 406.
Alleged Anticompetitive Conduct
to Plaintiff, Defendants engaged in various anticompetitive
conduct. Plaintiffs allegations can be grouped into the
following categories: (1) MAAs; (2) the Defacing Policy and
the Accident Policy; (3) the Fleet Service Agreements; (4)
alleged price fixing; (5) alleged group boycott; (6) alleged
exclusive supply agreements; (7) other restraints on MRO
Services; and (8) monopolization allegations, (1)
Maintenance Authorization Agreements
alleges that the MAAs SafranHE USA signed with Plaintiff and
Helicopter Services of Nevada LLC ("HSN") restrain
competition in the engines and parts market and the MRO
Services market. Id. ¶¶ 421 -58. The MAAs
purportedly insulate Defendants from rivals offering less
expensive engine parts and services. Id.
¶¶ 433-34, 451-52. Plaintiff alleges to have been
harmed by its own MAA and by SafranHE USA's MAA with HSN.
Id. ¶¶ 438, 457.
Defacing and Accident Policies
also complains that Defendants conspired together and with
other MRO Service Providers to implement the "Defacing
Policy" and the Accident Policy. Id.
¶¶ 270-76. SafranHE France specifically required
authorized service providers to abide by the Defacing Policy,
and Defendants required service providers to observe the
Accident Policy through a series of service letters.
Id. ¶¶ 275-77. For example, SafranHE USA
and SafranHE France purportedly entered into contracts with
service providers Heli-One Colorado, Inc., Heli-One Canada,
Inc., and Heli-One American Support LLC (collectively
"Heli-One"), Advanced Helicopter Services of
Woodland, CA ("Advanced"), and Vector Aerospace
Helicopter Services, Inc. ("Vector"), requiring the
service providers to observe Defendants' policies.
Id. ¶ 278. Thus, Heli-One, Advanced, and Vector
have Defacing Policies. Id. ¶¶ 279-83.
Additionally, Defendants and other service providers return
unserviceable parts only after a customer agrees to indemnify
and hold them harmless, and agrees not to use unserviceable
parts in Defendants' engines or other helicopters.
Id., ¶¶ 285-87. Similarly, Plaintiff
claims that SafranHE USA and SafranHE Canada contracted with
Heli-One, Vector, and Advanced to enforce the Accident
Policy, meaning that Plaintiff has no available provider to
make parts involved in an accident serviceable again.
to Plaintiff, the alleged contracts adopting, and the
purported conspiracy to adopt, the Defacing Policy and
Accident Policy suppresses intrabrand competition in both the
engine and parts market and the MRO Services market.
Id. ¶ 294. The contracts and conspiracy
allegedly allow Defendants to entrench their position in the
markets for their own parts and services. Id. ¶
299. In other words, the alleged conduct is meant to prevent
the emergence of a market for second-hand parts and for
unauthorized repair centers. Id. ¶¶
Fleet Parts and Service Agreements
USA and SafranHE Canada allegedly entered into Fleet Service
Agreements or Fleet Parts Agreements with owners of
helicopter fleets. Under a Fleet Service Agreement, a fleet
owner is granted access to technical information solely for
the purpose of performing services on Defendants' parts
that the owners owned, leased, or operated. Id.
¶ 461. SafranHE USA purportedly has such agreements with
HSN and Papillon Airways, Inc. ("Papillon").
Id. ¶¶ 452-65. A Fleet Parts Agreement, in
turn, provides that SafranHE USA's or SafranHE
Canada's certification of any part they service for a
fleet owner is nontransferable. Id. ¶ 479.
According to Plaintiff, these agreements suppress intrabrand
competition for Defendants' parts and have harmed
Plaintiff. Id., ¶¶ 466, 471-75, 484,
claims that Defendants conspired to fix the price of MRO
Services. Id. ¶ 497-502. Specifically, SafranHE
USA allegedly entered into agreements with Heli-One,
Advanced, Arrow Aviation Company LLC ("Arrow"), and
Precision Aviation Services ("Precision"), whereby
these service providers agreed not to "undercut"
SafranHE USA's MRO Services pricing. Id.
¶¶ 497-500, Advanced, in turn, entered into similar
agreements with Rorotech Services, Inc.
("Rorotech") and Helicopter Specialties, Inc.
("Helicopter Specialties"). Id. ¶
501. Plaintiff contends that this scheme harms intrabrand
competition and has caused Plaintiff to pay higher prices for
MRO Services. Id. ¶¶ 508-12.
to the Complaint, Defendants were also concerned with whether
Plaintiff was a true end user of its parts, or whether it was
secretly reselling them. Id. ¶¶ 555-56.
Defendants asked Plaintiff about the real end user and were
allegedly not convinced by the information Plaintiff
provided. Id. ¶¶ 557-59. Beginning in
February 2015, SafranHE USA allegedly instructed its network
of authorized service providers not to do business with
Plaintiff. Id. ¶¶ 561-65. This alleged
group boycott was aimed at eliminating the market for
second-hand parts, and harmed competition and Plaintiff.
Id. ¶¶ 560-77.
Exclusive Supply Agreements
claims that Defendants entered into exclusive supply
agreements with Zodiac Aerospace ("Zodiac") and
other vendors, such that the vendors agreed to supply engine
parts and accessories only to Defendants. Id.
¶¶ 615-18. Defendants allegedly entered into such
agreements to ensure control over pricing, quality, and
reliability. Id. ¶¶ 617, 624. Plaintiff
asserts that customers complain that these supply agreements
increase time and cost. Id. ¶¶ 618-22.
Plaintiff argues that this vertical restraint harmed
Plaintiff, increased costs for consumers, and was
unreasonable, unjustified, and anticompetitive. Id.
Other Restraints on MRO Services
alleges that Defendants imposed other unreasonable restraints
on MRO Services. Defendants allegedly: (1) required the use
of Defendants' parts and prohibited the installation of a
customer's own parts or parts from other repair stations
not authorized by Defendants; (2) conditioned the sale of
some services on the purchase of modifications a customer has
not requested; and (3) conditioned the return of parts used
in a level of service a customer is not allowed to perform on
the return of the part to an authorized service center.
Id. ¶¶ 644-53. These restraints harmed
Plaintiff and are allegedly unreasonable, unjustified, and
anticompetitive. Id. ¶¶ 653-65.
Plaintiff alleges that Defendants monopolized or attempted to
monopolize the markets for Defendants' engines and parts
and MRO Services by: (1) preventing competition from
manufacturers of substitute parts by directing repair centers
to throw away any substitute part found in Defendants'
engines and by informing its customers of this fact; and (2)
preventing unauthorized repair centers from accessing
Defendants' technical information. Id.
¶¶ 689-92, 701. By taking these actions, Defendants
were purportedly able to obtain or maintain monopoly power in
the relevant markets. Id. ¶¶ 693-96, 700.
Summary of the Claims
alleges thirty separate state and federal law claims against
Defendants. For the sake of clarity, the Court will group
these claims into four categories: (1) breach of contract
claims; (2) antitrust claims; (3) tort claims; and (4)
deceptive practices claims.
Breach of Contract Claims
Count I, Plaintiff alleges that SafranHE USA and SafranHE
Canada breached an express or implied contract by losing,
misappropriating, defacing, withholding, or refusing to
certify Plaintiffs parts. In Count VIII, Plaintiff alleges
that SafranHE USA and SafranHE France breached the MAA.
Counts V and VI, brought under Sherman Act § 1 and
California's Cartwright Act, respectively, Plaintiff
alleges that Defendants are liable for conspiring and
entering into the Defacing Policy and Accident Policy
together and with other service providers. In Count VII,
Plaintiff alleges that Defendants imposed the Defacing Policy
on its unwilling customers in violation of Sherman Act §
1. In Counts IX and X, Plaintiff alleges that the MAAs
Defendants signed with Plaintiff and HSN unreasonably
restrain trade in violation of Sherman Act § 1. In
Counts XI and XII, Plaintiff claims that the Fleet Service
Agreements and the Fleet Parts Agreements violate Sherman Act
§ 1. In Counts XIII and XIV, Plaintiff seeks to recover
under Sherman Act § 1 and the Cartwright Act,
respectively, for the alleged price fixing. Counts XVII and
XVIII purport to state claims under Sherman Act § 1 and
the Cartwright Act, respectively, for the alleged group
boycott. In Count XX, Plaintiff claims that the alleged
exclusive supply agreements violate Sherman Act § 1,
Count XXI states a Sherman Act § 1 claim premised on the
various other restraints Defendants impose on the MRO