Boeing, the world’s largest aerospace company, has filed a lawsuit against GKN Aerospace, one of its suppliers, for breach of contract and fraud. Boeing claims that GKN Aerospace, a subsidiary of U.K.-based Melrose Industries PLC, has failed to meet its obligations to provide essential parts for two of its fighter jets, the F-15 and the F/A-18. Boeing also alleges that GKN Aerospace has been undercapitalized by its parent company, rendering it insolvent and unable to fulfill its contracts.
According to the lawsuit, filed in December 2022 in Delaware Chancery Court1, Boeing and GKN Aerospace have been in a contractual relationship for more than two decades. The parties entered into two “Strategic Agreements” in 2017 and 2018, which stipulated that GKN Aerospace would supply Boeing with complex parts such as winglets, leading edges, and fuselage panels for the F-15 and the F/A-18. The agreements also required GKN Aerospace to invest in its facilities, equipment, and personnel to ensure the quality and timeliness of its deliveries.
However, Boeing claims that GKN Aerospace has breached the agreements by failing to meet the production schedules, quality standards, and performance requirements set by Boeing. Boeing also accuses GKN Aerospace of misrepresenting its financial situation and concealing its inability to perform its obligations. Boeing alleges that GKN Aerospace’s parent company, Melrose Industries, has been siphoning off funds from GKN Aerospace to pay dividends to its shareholders and service its debt, leaving GKN Aerospace with insufficient capital to operate its business.
Boeing seeks to stop GKN Aerospace from closing its plant in Hazelwood
In February 2023, GKN Aerospace announced that it would close its plant in Hazelwood, Missouri, by the end of the year2. The plant employs about 600 workers and is responsible for producing parts for the F-15 and the F/A-18. GKN Aerospace cited the impact of the COVID-19 pandemic and the decline in demand for commercial aviation as the reasons for the closure.
Boeing argues that the closure of the Hazelwood plant would cause irreparable harm to its business and national security interests. Boeing asserts that it relies on GKN Aerospace as a sole-source supplier for some of the critical parts for the F-15 and the F/A-18, which are used by the U.S. Air Force and Navy. Boeing contends that it would take years and hundreds of millions of dollars to find and qualify an alternative supplier for these parts.
Boeing is seeking a preliminary injunction to prevent GKN Aerospace from closing the Hazelwood plant until it fulfills its contractual obligations or transfers them to another qualified supplier. Boeing is also seeking damages for breach of contract, fraud, and unjust enrichment.
GKN Aerospace denies Boeing’s allegations and moves to dismiss or stay the lawsuit
GKN Aerospace has denied Boeing’s allegations and moved to dismiss or stay the lawsuit3. GKN Aerospace argues that Boeing’s claims are barred by the statute of limitations, lack merit, and are motivated by bad faith. GKN Aerospace also contends that Boeing’s lawsuit is an attempt to interfere with a parallel litigation pending in Missouri state court.
In March 2023, GKN Aerospace filed a lawsuit against Boeing in St. Louis County Circuit Court4, seeking a declaratory judgment that it has not breached its contracts with Boeing and that it has the right to close its Hazelwood plant. GKN Aerospace claims that it has complied with all of its contractual obligations and that Boeing has no basis to seek an injunction or damages. GKN Aerospace also alleges that Boeing has been withholding payments, imposing unreasonable demands, and threatening litigation in order to pressure GKN Aerospace into accepting unfavorable terms.
GKN Aerospace asserts that the Missouri state court is the proper venue for resolving the dispute between the parties, as the contracts contain a forum selection clause that designates Missouri as the exclusive jurisdiction. GKN Aerospace also argues that the Delaware court should abstain from hearing the case under the doctrine of comity, which respects the authority of other courts to decide matters within their jurisdiction.
The Delaware court has scheduled a hearing on June 8, 2023, to consider GKN Aerospace’s motion to dismiss or stay the proceeding5. The Missouri court has denied GKN Aerospace’s motion for reconsideration of its order denying a temporary restraining order against Boeing.