Opinion ID: 2974542
Heading Depth: 3
Heading Rank: 2

Heading: The Alternative-Meggitt Contract

Text: Alternative began preparing to retrofit aircraft for RVSM compliance several years before the FAA’s RVSM program was to take effect. On December 2, 1997, Alternative’s John Shirk contacted Meggitt’s Bryan Bullen, inquiring about Meggitt’s “line of RVSM instruments” because Alternative was “working on a Lockheed Jetstar II RVSM solution.” Joint App’x at 83. Bullen 1 Of particular relevance to this case is the fact that the Civil Aviation Authority, a public corporation established by the United Kingdom Parliament as an independent aviation regulator and provider of air traffic services, had already approved Meggitt’s equipment for use in aircraft flying in RVSM airspace. 2 An altimeter is an instrument that displays a plane’s altitude, and is thus necessary in order to determine a plane’s “vertical separation” from other nearby planes. 3 The particular type of aircraft this case concerns is called a Part 25 Transport Aircraft, which is of a certain weight, carries passengers, and is certified under Part 25 of the Federal Aviation Regulations. See 14 C.F.R. § 25.1. Examples include the Lockheed Jetstar, the Israel Westwind, and the Falcon. No. 05-2334 Alternative Aviation Servs. v. Meggitt, et al. Page 3 responded via fax on December 18 with “preliminary data regarding the Meggitt Avionics solution to the RVSM requirements.” Id. at 85. Bullen’s fax stated, in pertinent part, the Altimeter and Air Data Unit have the applicable FAA TSO approval,[4] are flight certified and in full production for both civil and military transport applications in the UK and USA as follows:- 5 UK RAF VC10 aircraft[ ] — RVSM requirement (Altimeter / Alerter / Air Data Unit) Raytheon / Beech 1900D[6] — Altimeter replacement (Altimeter). Id. Bullen then faxed Alternative’s Tod Wulff additional information, including brochures describing the technical aspects of the components. This information referred to Meggitt’s product as “the Meggitt Avionics RVSM system.” Id. at 104. In fact, one brochure described the system as “meeting RVSM requirements,”7 and suited for “New or Retrofit Programmes,” for “[a]ny Commercial or Military fixed wing or rotary wing aircraft,” including “transport aircraft” — the specific type that Alternative sought to retrofit. Id. at 113-15. Alternative claims it relied upon this language to mean that Meggitt was promising that its components would be approved by the FAA. Negotiations between Alternative and Meggitt continued over the next couple of years. On October 26, 1999, Meggitt’s John Perry emailed Alternative’s Wulff with a correction to an earlier misstatement made in the December 18, 1997 fax. Perry informed Wulff that in fact, the RVSM system “proposed to Alternative Avionics does not currently have FAA TSO approval . . . .” Id. at 181.8 Three days later, Perry followed up with Wulff, stating that the proposed design intended for Alternative was in service with the UK’s VC-10 aircraft, and that in order to deliver the product, Meggitt would need to apply for FAA TSO approval. Meggitt informed Alternative on November 16, 1999, that it could deliver its altimeters no earlier than September 2000. On February 16, 2000, Meggitt sent a proposal to Alternative for the sale of “RVSM compliant Altimetry systems.” On March 22, 2000, Alternative ordered ten RVSM Airdata System Shipsets9 from Meggitt for $53,190 apiece. 4 Before a manufacturer (here, Meggitt) can produce and sell equipment in the United States, it must first receive a type of FAA approval called a Technical Standard Order (“TSO”) certification. However, obtaining TSO certification does not necessarily mean that the equipment will be certified for use in a particular type of aircraft. 5 A VC-10 aircraft is similar to a Part 25 aircraft under FAA’s definition, but is not technically a Part 25 aircraft because it is not classified under the United States Federal Aviation Regulations. In essence, it is the UK version of a Part 25 aircraft. Both parties agree that even though the VC-10 is unclassified, it meets the technical criteria of a Part 25 aircraft. As discussed infra, relevant to the case at bar is the fact that the VC-10 aircraft — which were retrofitted with the same exact type of Meggitt altimeters sold to Alternative — were certified for flight in RVSM airspace by the UK’s Civil Aviation Authority. 6 The Raetheon/Beach 1900-D is a Part 23 aircraft, which is smaller than a Part 25 aircraft. The FAA has flight certified a Meggitt altimeter for use as part of the primary flight display system in a Raetheon/Beach 1900D, but not in the RVSM context, because most Part 23 aircraft do not reach the height of RVSM airspace. 7 Notably, the brochure did not specify which country or countries’ RSVM requirements it was referring to. 8 Apparently, this initial confusion regarding whether the FAA had TSO-approved the proposed altimeter stemmed from the fact that the altimeter’s initial military customer did not require TSO-approved equipment for RVSM qualification. 9 A “shipset” consists of two altimeters, two Air Data Units, and some ancillary components. For safety reasons, aircraft are equipped with two altimetry systems. No. 05-2334 Alternative Aviation Servs. v. Meggitt, et al. Page 4 Meggitt finally obtained TSO approval for the equipment incorporated in Alternative’s “RVSM Solution” in March 2001. Delivery began in April 2001. Between April 4, 2001, and August 31, 2001, Alternative installed eight shipsets of equipment on eight customers’ Part 25 aircraft. On September 21, 2001, Alternative ordered another ten shipsets of Meggitt’s equipment. It appears that Alternative first applied for a hardware STC on October 17, 2001. Thus, Alternative had installed eight shipsets and ordered ten more before applying for the hardware STC. Alternative installed four more shipsets in Part 25 aircraft after applying for the hardware STC on October 31, 2001, November 30, 2001, May 24, 2002, and June 3, 2002. After reviewing Alternative’s application for a hardware STC, the FAA found that the equipment was not certifiable for two 10 reasons: (1) Level A software was required, and the Meggitt equipment11used Level B software, and (2) High Intensity Radiative Fields (“HIRF”) special conditions were not met.12 On July 2, 2002, Meggitt expressed to Alternative that it “[could] see no ‘loop holes’ that would get the FAA to change their mind.” Id. at 228. On August 16, 2002, Meggitt sent a letter to Alternative stating, inter alia, it would not be able to provide Level A software before the end of 2003. On December 27, 2002, Alternative’s counsel informed Meggitt that Alternative was revoking its acceptance of Meggitt’s equipment. Alternative claims it gave Meggitt a commercially reasonable time to cure defects in its equipment, but after it was clear that the FAA would not RVSM-certify the altimetry systems, it chose to revoke acceptance.