ATA Airlines, Inc. v. Federal Express Corp.
2011 U.S. App. LEXIS 25818
| 7th Cir. | 2011Background
- ATA sued FedEx for breach of contract arising from the Civil Reserve Air Fleet arrangements within a three-year lead/participation framework.
- The core dispute concerns a 2007-2009 division of military passenger business between ATA and Omni, under a tripartite contract structure that fed into annual revenue-sharing and points transfers.
- A 2006 letter agreement purported to allocate 50/50 passenger distribution between ATA and Omni for FY07-FY09; Omni’s concurrence is inferred though not signed.
- In 2008 the contract was amended to reduce ATA’s share to accommodate Northwest/Delta interests, foreshadowing ATA’s later withdrawal in 2008 and eventual bankruptcy.
- ATA claimed damages for reliance on FedEx’s promise, seeking either expectation damages or promissory-estoppel-based recovery of about $28 million.
- The district court awarded damages, but the court of appeals reversed on contract and promissory-estoppel grounds, ultimately directing dismissal with prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Promissory estoppel preemption | ATA argues promissory estoppel relief is non-preempted by the AED Act. | FedEx contends any promissory-estoppel claim falls within AED preemption. | Not preempted; preemption did not apply to self-imposed undertakings. |
| Enforceability of the three-year contract / indefiniteness | ATA asserts a valid, enforceable division of business under the tripartite agreement. | FedEx argues the contract is indefinite, lacking crucial price/terms, hence unenforceable. | Not enforceable due to indefiniteness; price term unascertainable and not supplyable by interpretation. |
| Damages methodology and admissibility | ATA relied on Morriss’s regression to quantify lost profits from 2008-2009. | FedEx challenges reliability and admissibility of the regression under Rule 702; argues flawed, small-sample model. | Damages-based testimony rejected; regression analysis fatally flawed and not suitable to compute recoverable damages. |
| Remedy / dismissal with prejudice | If promissory-estoppel or contract damages were viable, ATA seeks relief. | FedEx contends judgment should be reversed and action dismissed. | Judgment reversed and case dismissed with prejudice. |
Key Cases Cited
- American Airlines, Inc. v. Wolens, 513 U.S. 219 (Supreme Court 1995) (AED preemption for airline regulation does not bar private contract claims arising from airline undertakings)
- Morales v. Trans World Airlines, Inc., 504 U.S. 374 (Supreme Court 1992) (airline regulation preemption framework related to the AED act)
- Doe v. HCA Health Services of Tennessee, Inc., 46 S.W.3d 191 (Tenn. 2001) (indefiniteness and missing terms affect enforceability of contracts)
- Four Eights, LLC v. Salem, 194 S.W.3d 484 (Tenn. App. 2005) (indefiniteness and contractual gaps limit enforceability)
- Garwood Packaging, Inc. v. Allen & Co., 378 F.3d 698 (7th Cir. 2004) (promissory estoppel scope and limitations in contract contexts)
- PFT Roberson, Inc. v. Volvo Trucks North America, Inc., 420 F.3d 728 (7th Cir. 2005) (interpretive boundaries for incomplete contracts)
- Haslund v. Simon Property Group, Inc., 378 F.3d 653 (7th Cir. 2004) (contingent, incomplete contracts and enforceability)
- Wood v. Mid-Valley Inc., 942 F.2d 425 (7th Cir. 1991) (reliance-based damages and evidentiary standards)
- DeKoven v. Plaza Associates, 599 F.3d 578 (7th Cir. 2010) (court appointment of experts to evaluate expert testimony)
- In re High Fructose Corn Syrup Antitrust Litigation, 296 F.3d 663 (7th Cir. 2002) (expert testimony standards and scientific evidence guidelines)