             IN THE SUPERIOR COURT OF THE STATE OF DELAWARE


    THE BOEING COMPANY,                          )
                                                 )
                       Plaintiff,                )
                                                 )
                  v.                             )   C.A. No.: N14C-12-055 EMD CCLD
                                                 )
    SPIRIT AEROSYSTEMS, INC.,                    )
                                                 )
                       Defendant.                )
                                                 )
                                                 )
                                                 )
                                                 )

                                    Submitted: March 22, 2017
                                      Decided: June 27, 2017

             Upon Plaintiff The Boeing Company’s Motion for Summary Judgment
                                         DENIED

               Upon Defendant-Counterclaim Plaintiff Spirit Aerosystems, Inc.’s
                              Motion for Summary Judgment
                                       GRANTED

William M. Lafferty, Esquire, John P. DiTomo, Esquire, Barnaby Grzaslewicz, Esquire, Morris,
Nichols, Arsht & Tunnell LLP, Wilmington, Delaware, Craig S. Primis, Esquire, Michael A.
Glick, Esquire, Tracie L. Bryant, Esquire, Kirkland & Ellis LLP, Washington, DC, Eric F. Leon,
Equire, Kirkland & Ellis, New York, New York, Attorneys for Plaintiff The Boeing Company

John A. Sensing, Esquire, Jesse L. Noa, Esquire, Potter Anderson & Corroon LLP, Wilmington,
Delaware, Evan R. Chesler, Esquire, Darin P. McAtee, Esquire, Timothy G. Cameron, Esquire,
J. Wesley Earnhardt, Esquire, Caravath, Swaine & Moore LLP, New York, New York, Attorneys
for Defendant-Counterclaim Plaintiff Spirit Aerosystems, Inc.

DAVIS, J.

                                      I. INTRODUCTION

       This civil action is assigned to the Complex Commercial Litigation Division of the Court.

On December 5, 2014, Plaintiff The Boeing Company (“Boeing”) filed a Complaint (the

“Complaint”) against Defendant Spirit Aerosystems, Inc. (“Spirit”) for Breach of Contract and
Declaratory Judgment. Through the Complaint, Boeing seeks a declaration that Spirit breached

its indemnification obligation for liabilities arising out of certain pension and retiree medical

benefits. Spirit argues that it has no indemnification obligation to Boeing because the liabilities

at issue arose out of Boeing’s Collective Bargaining Agreements, not Boeing’s pension and

retiree medical benefits. On September 25, 2015, Spirit answered the Complaint and asserted

counterclaims against Boeing for Breach of Contract and Declaratory Judgment. Spirit seeks a

declaration that Boeing must indemnify Spirit for the costs associated with this and other legal

proceedings. Boeing answered Spirit’s counterclaims.

           On December 20, 2016, the parties filed cross-motions for summary judgment

(respectively, “Boeing’s Motion” and “Spirit’s Motion” and collectively, the “Motions.”). The

Motions seek summary judgment on the Breach of Contract and Declaratory Judgment counts

based on the parties’ differing characterization of the liabilities at issue. The Court held a

hearing on the Motions on March 22, 2017. At the hearing, the parties advised the Court that no

genuine issues of material fact existed. After hearing argument, the Court took the Motions

under advisement. The Court also took this civil action off the trial calendar as both parties

agreed that the various disputes between the parties would be resolved by the Motions.

           This is the Court’s decisions on the Motions. For the reasons set forth below, the Court

will DENY Boeing’s Motion and GRANT Spirit’s Motion.

                                       II. RELEVANT FACTS

A.         BOEING DIVESTS ITS MANUFACTURING FACILITIES

           Boeing’s business consists of the design, manufacturing, and sale of commercial jetliners

and military aircrafts.1 In 2003, Boeing began divesting some of its commercial aircraft part



1
    Compl. ¶ 10.

                                                   2
manufacturing facilities to third-party manufacturers.2 Under this divestiture strategy, Boeing

would sell its manufacturing plants to third-party manufacturers, but would retain supply

agreements with the buyers to obtain necessary parts.3 In June of 2005, Boeing sold its

manufacturing facilities in Wichita, Kansas and Tulsa and McAlester, Oklahoma (the “Kansas

and Oklahoma facilities”) to Spirit.4 The parties memorialized the sale through an Asset

Purchase Agreement (the “APA”).5

B.      THE APA

        The APA is a sophisticated agreement. As part of the APA, Boeing and Spirit

apportioned certain assets and liabilities related to the employees working at the Kansas and

Oklahoma facilities.6 The APA defines Spirit as the “Buyer” and Boeing as the “Seller.”7 For

purposes of this litigation, the relevant assets and liabilities are Boeing’s collective bargaining

agreements (“CBAs”) and Boeing’s benefit plans, including pension and retiree medical

benefits.8

        The APA is “governed by and construed in accordance with the internal Laws (as

opposed to the conflicts of Law provisions) of the State of Delaware.”9

        i.    The Assets and Excluded Assets

        Section 1 of the APA governs the purchase and sale of assets. Section 1.1(a)-(b) outlines

the Assets and Excluded Assets related to the purchase and sale of the Kansas and Oklahoma

facilities.10 Under Section 1.1(a), the Assets purchased by Spirit include:

2
   Id. ¶ 12.
3
  Id.
4
  Id. ¶ 14.
5
  Id.
6
   See Compl. Ex. A, Asset Purchase Agreement. Ex. A to the Complaint will be cited as “APA § __.”
7
   See APA at p. 1.
8
   The two Boeing benefit plans at issue in this litigation are The Boeing Company Employee Retirement Plan and
the Boeing North American Retirement Plan for Eligible Employees, both of which will be cited throughout this
Opinion as “Boeing’s Benefit Plans.”
9
   APA § 11.13.

                                                        3
                (v)     All Contracts primarily related to the Business other than with
        regard to third-party customers and subject to the provisions of Section 5.2(d) and
        5.2(e) (the “Assigned Contracts”), including but not limited to the Contracts set
        forth on Schedule 1.1(a)(v), but not including the Contracts described in Section
        1.1(b);

               (viii) Assets of Seller related to Benefit Plans to the extent provided in
        Section 6.2.11

Under Section 1.1(b), the Excluded Assets, or those not “conveye[d], assign[ed], or transfer[ed]”

to Spirit, include:

               (xi)        Assets of Seller related to all Benefit Plans, except as set forth in
        Section 6.2;

              (xiii) The existing collective bargaining agreements covering the
        employees of the Business.12

        Section 1.1(a)-(b) makes it clear what Spirit purchased from Boeing, with Section 1.1(a)

specifically listing the included assets and Section 1.1(b) specifically listing the excluded

assets.13

        ii.      The Assumed Liabilities and Excluded Liabilities

        Section 1.2 of the APA governs the assumption of liabilities by Spirit. Section 1.2(a)-(b)

explicitly allocates liability between Spirit and Boeing.14 Section 1.2(a) lists the liabilities

assumed by Spirit—defined in the APA as Assumed Liabilities.15 The Assumed Liabilities

include:

               (ii)    Liabilities arising after the Closing under the Assigned Contracts
        (other than Liabilities arising out of or relating to any act or omission that
        occurred prior to the Closing);




10
   See APA § 1.1(a)-(b).
11
   Id. § 1.1(a).
12
   Id. § 1.1(b).
13
   See id. § 1.1(a)-(b).
14
   See id. § 1.2(a)-(b).
15
   Id. § 1.2(a).

                                                     4
                (iii)    Liabilities of Seller arising after the Closing under any Assigned
         Contract included in the Assets that is entered into by Seller after the date hereof
         in accordance with the provisions of this Agreement (other than Liabilities to the
         extent arising out of or relating to any at or omission that occurred prior to the
         Closing);

                 (iv) Liabilities for pension Liability, Accrued Vacation, retiree medical
         flexible spending accounts, sick leave, and personal time to the extent provided in
         Section 6.2.16

Section 1.2(b) lists the Excluded Liabilities, or those “retained, paid, performed, and

discharged solely by” Boeing:

                (iv) Liabilities of Seller related to all Benefit plans, except as set forth in
         Section 6.2;

                 (xiii) Liabilities under any Contract not assumed by Buyer under Section
         1.2(a), including Liabilities arising out of or relating to Seller’s credit facilities or
         any security interest related thereto.17

Just like in Section 1.1(a)-(b), Section 1.2(a)-(b) makes it clear that Spirit shall not assume any

liabilities other than those specifically set forth in Section 1.2(a).18

         iii.      Pension and Retiree Medical Benefits

         Section 6.2 goes on to clarify the parties’ obligations related to employee benefit plans as

referenced throughout Sections 1.1 and 1.2.19 Section 6.2(a) establishes procedures for hiring

former Boeing employees, referred to under the APA as “Hired Employees.”20 With respect to

these Hired Employees, Spirit must:

         (i) provide compensation and levels of benefits under any Benefit Plan Buyer
         establishes for the Hired Employees (“Buyer’s Benefit Plans”) as determined by
         Buyer and (ii) credit periods of service prior to the Closing for purposes of
         determining eligibility (and benefit entitlement with respect to vacations and
         pension benefits pursuant to Sections 6.2(d) and 6.2(f)) under Buyer’s Benefit
         Plans so long as Seller furnishes Buyer will all information necessary to

16
   Id. § 1.2(a).
17
   Id. § 1.2(b).
18
   See id. § 1.2(a)-(b).
19
   See id. § 6.2.
20
   Id. § 6.2(a).

                                                    5
          implement this subsection 6.2(a)(ii) pursuant to the other provisions of this
          Agreement.21

Section 6.2(f) then requires Spirit to “establish or maintain” three separate union and non-union

pension plans for the Hired Employees, specifying that the pension plans must:

          . . . include credit for Hired Union Employees and Hired Non-Union Employees’
          past service with Seller for eligibility and vesting and, contingent upon the
          transfer of assets in accordance with this Section 6.2(f), early retirement benefits
          and benefit accrual previously recognized under Seller’s Pension Plans . . .
          Buyer’s Pension Plans shall further include, indefinitely, credit for Hired Union
          Employees’ and Hired Non-Union Employees’ service with Buyer for eligibility,
          vesting, and early retirement.22

Section 6.2(f) concludes by assigning liability for pension plan benefits as follows:

                  Buyer’s Pension Plans shall be liable for benefits with respect to service
          recognized under Seller’s Pension Plans on or prior to the Closing Date with
          respect to the Hired Union Employees and Non-Union Employees, contingent
          upon the transfers of assets in accordance with this Section 6.2(f). Buyer agrees
          that neither Seller nor Seller’s Pension Plans shall have any further responsibility
          with respect to the assets and Liabilities so transferred, including without
          limitation, obligations following such transfers with respect to the benefits
          accrued by the Hired Union Employees and Hired Non-Union Employees under
          the applicable Seller’s Pension Plans.23

          Finally, similar to Section 6.2(f), Section 6.2(g) requires Spirit to also “maintain” certain

retiree medical benefits, specifying that:

          . . . Buyer shall be responsible for and shall maintain retiree medical coverage for
          the benefit of each Hired Employee who was eligible for or could have become
          eligible for (after meeting applicable age and service requirements) retiree
          medical coverage maintained by Seller and who is not receiving retiree medical
          benefits from Seller, and shall provide each such Hired Employee full credit for
          periods of service prior to the Closing . . . subject to the provisions of any
          collective bargaining agreements between Buyer and the unions.24

Section 6.2(g) concludes by assigning liability as follows:



21
   Id.
22
   Id. § 6.2(f).
23
   Id.
24
   Id. § 6.2(g).

                                                    6
         Buyer agrees that Seller and its retiree medical plans shall have no further
         responsibilities after the Closing Date to provide to such Hired Employees retiree
         medical benefits. This Agreement does not limit Buyer’s ability to make changes
         in or amendments to any Buyer retiree medical plan following the Closing.25

         iv.       Indemnification Obligations

         After apportioning and clarifying liability, the APA provides certain indemnification

rights to each party.26 Under Section 9.1(a), Boeing must indemnify Spirit for:

         . . . any and all losses, Liabilities, damages, costs and expenses, including costs of
         investigation and defense and reasonable fees and expenses of lawyers, experts
         and other professionals (collectively, “Indemnifiable Damages”), incurred by such
         Buyer Group Member in connection with or arising from: (i) any breach of any
         warranty or the inaccuracy of any representation of Seller contained in this
         Agreement . . . , (iii) any breach by Seller of, or failure by Seller to perform, any
         of its covenants or obligations contained in this Agreement, (iv) the Excluded
         Liabilities . . . .27

Under Section 9.2(a), Spirit must indemnify Boeing for:

         . . . any and all Indemnifiable Damages incurred by such Seller Group Member in
         connection with or arising from: (i) any breach of warranty or the inaccuracy of
         any representation of Buyer contained in this Agreement . . . , (ii) any breach by
         Buyer of, or failure by Buyer to perform, any of its covenants and obligations
         contained in this Agreement, (iii) the Assumed Liabilities . . . .28

As to indemnification for liabilities, Spirit must indemnify Boeing for its Assumed Liabilities,

and Boeing must indemnify Spirit for the Excluded Liabilities under the terms of the APA.29

C.       BOEING DECIDES TO “TERMINATE” THE HIRED EMPLOYEES

         After the parties executed the APA, Boeing announced that former employees of Boeing

hired by Spirit (the “Hired Employees”) would be “terminated due to divestiture” rather than

“laid off” from Boeing.30 Boeing then transferred to Spirit’s pension fund the assets in the Hired



25
   Id.
26
   See id. §§ 9.1,9.2.
27
   Id. § 9.1(a).
28
   Id. § 9.2(a).
29
   See id. §§ 9.1,9.2.
30
   Compl. ¶ 29.

                                                   7
Employees’ retirement accounts and declared that it had no further pension or health benefits

obligations to the Hired Employees.31 Boeing’s decision to classify the Hired Employees as

“terminated” instead of “laid off” gives rise to the liabilities at issue in this case.

D.    BOEING IS SUED FOR BREACH OF ITS CBAS

        After Boeing terminated the Hired Employees, certain Hired Employees claimed that

Boeing breached its obligation under its CBAs to provide certain early retirement benefits. 32 The

Hired Employees claimed that Boeing should have classified them as “laid off” instead of

“terminated.”33 Had Boeing classified them as “laid off,” the Hired Employees could have

accessed a “layoff bridge” under Boeing’s Benefit Plans.34 Pursuant to that “bridge,” employees

who were laid off within six years of turning 55 and who had at least 10 years of service were

allowed to begin collecting early retirement benefits, including pension and retiree medical

benefits, upon reaching age 55.35 Boeing’s CBAs, however, placed limits on union employees’

entitlement to these early retirement benefits in cases of termination.36

        On July 21, 2005, the International Union, United Automobile, Aerospace and

Agricultural Implement Workers of America (the “UAW”) filed a grievance on behalf of certain

Hired Employees (the “UAW Grievants”) at the Oklahoma facilities.37 Boeing denied the

UAW’s grievance on September 20, 2005.38 Consistent with the CBA’s grievance procedure,

the UAW escalated its grievance to arbitration (the “UAW Arbitration”).39




31
   See Schedule 6.2(f) to the APA.
32
   Compl. ¶ 30.
33
   Id.
34
   Id.
35
   Id.
36
   See id.
37
   Id. ¶ 33.
38
   Id.
39
   Id. ¶ 34.

                                                    8
         Similarly, in June and August of 2005, the Society of Professional Engineering

Employees in Aerospace (“SPEEA”) and the International Association of Machinists and

Aerospace Workers (“IAM”) filed separate grievances on behalf of Hired Employees at the

Kansas facilities.40 Boeing declined to resolve the grievances.41 SPEEA and IAM then

commenced litigation.42 Later, individual union members brought a class action suit in United

States District Court for the District of Kansas (the “Kansas District Court”). This class action

suit was consolidated with the litigation brought by SPEEA and IAM (the “Harkness Class

Action”).

         i.   The UAW Arbitration

         The UAW Grievants claimed that Boeing’s decision to classify them as “terminated”

rather than “laid off” resulted in a breach of Boeing’s CBA.43 Article XI, Section 17 of the CBA

sets out the basis for breaking seniority and terminating employees.44 Article XI, Section 17

provides that a worker loses seniority rights, including the “layoff bridge” to early retirement

benefits in Boeing’s Benefit Plans, if the worker is terminated in any of eleven ways.45 The

UAW Grievants argued that Boeing breached its CBA by classifying them as “terminated”

because divestiture of Boeing facilities or alike are not among the listed ways to terminate a

worker under Article XI, Section 17.46 Consequently, the UAW Grievants asserted that Boeing

should have designated them as “laid off” after Boeing’s divestiture, which would have

preserved their rights to early retirement benefits under Boeing’s Benefit Plans.47


40
   Id. ¶ 39.
41
   Id.
42
   Id.
43
   See Spirit’s Mot. Ex. 20. Exhibits to the parties’ motions will be cited as “Spirit’s/Boeing’s Mot. Ex. __ at p.__”
or “Spirit’s/Boeing’s Mot. Ex. __ ” if no page number is provided.
44
   Boeing’s Mot. Ex. 14.
45
   Id.
46
   See Spirit’s Mot. Ex. 20.
47
   See Spirit’s Mot. Ex. 38 at p. 12–13.

                                                           9
         The arbitrator agreed with the UAW and sustained the grievance.48 The arbitrator found

that Boeing violated the CBA when it repudiated its obligation for early retirement benefits to

the workers who were, in essence, “laid off.”49 As a remedy, the arbitrator ordered Boeing to

“reinstate seniority of the employees and afford them benefits appurtenant thereto” (the “2008

Award”).50 After further disputes by the parties, the arbitrator directed the UAW Grievants to

apply to Boeing’s plan administrator for the plan benefits to which they were entitled.51 Should

the plan administrator deny their benefits claims, the arbitrator ordered Boeing to assume the

plan’s obligations to those workers minus any entitlement that they may have under their Spirit

benefit plans (the “2009 Award”).52

         Boeing appealed the 2009 Award, arguing that the relief ordered by the arbitrator violated

the Employee Retirement Income Security Act of 1974 (“ERISA”).53 Boeing argued that a claim

for ERISA benefits must be submitted to a plan administrator, as properly ordered by the

arbitrator.54 However, if an ERISA-benefit claim is denied, Boeing argued that a worker’s only

remedy is a suit under ERISA challenging the plan administrator’s interpretation of the plan.55

To make its claim, Boeing necessarily construed the arbitrator’s remedy as providing ERISA

benefits.

         The United States District Court for the Northern District of Illinois (the “Illinois District

Court”) and the United States Court of Appeals for the Seventh Circuit (the “Seventh Circuit”)

rejected Boeing’s claims and upheld the arbitrator’s award.56 The Illinois District Court and the


48
   Spirit’s Mot. Ex. 39.
49
   Id.
50
   Id.
51
   Id.
52
   Spirit’s Mot. Ex. 44.
53
   Boeing’s Mot. Ex. 20.
54
   Id.
55
   Id.
56
   See Spirit’s Mot. Ex. 48, Ex. 51.

                                                   10
Seventh Circuit both disagreed with Boeing’s classification of the award as one for ERISA

benefits.57

         ii.   The Harkness Class Action

         The Harkness Class Action arose out of the same circumstances as the UAW Arbitration.

Under the CBA at issue here, an employee’s active Boeing employment could end only in

specific, enumerated events. These specific, enumerated events included a situation where

Boeing “laid off” employees.58 The Harkness Class Action plaintiffs’ complaint alleged that

Boeing’s decision to “terminate due to divestiture” fits into the broad definition of “layoff”

enumerated in the CBA.59 The Harkness Class Action plaintiffs thus contended that their

“termination” was, in effect, a “lay off” such that they maintained their rights to the early

retirement benefits under Boeing’s Benefit Plans.60

         The Harkness Class Action plaintiffs sued for breach of contract, and violations of

ERISA and the Labor Management Relations Act of 1947 (“LMRA”).61 The complaint named

both Boeing and Spirit as defendants, as neither agreed to pay for the early retirement “bridging

rights” to pension and health benefits.62 After years of discovery, the Harkness Class Action

plaintiffs dismissed all claims against Spirit with prejudice.63

         Boeing and the Harkness Class Action plaintiffs filed cross-motions for summary

judgment.64 The Kansas District Court denied the cross-motions, finding that the CBAs were

ambiguous as to the meaning of “laid off.”65 On June 12, 2014, Boeing reached a settlement


57
   See id.
58
   Spirit’s Mot. Ex. 57 p. 7.
59
   Spirit’s Mot. Ex. 52 at 8.
60
   Id. at 8–18.
61
   Id. at 22–40.
62
   Id. at 1.
63
   Spirit’s Mot. Ex. 63 at p. 6.
64
   Compl. ¶ 40.
65
   Spirit’s Mot. Ex. 64 p. 37–38.

                                                 11
with the Harkness Class Action plaintiffs.66 Under the settlement, Boeing agreed to contribute to

a settlement fund for the benefit of class members to resolve their claims for pension and retiree

medical benefits.67

           Boeing now seeks indemnification from Spirit for the costs (and/or damages) Boeing paid

and will pay for the UAW Arbitration and the Harkness Class Action.

                                   III. PARTIES’ CONTENTIONS

A.       BOEING’S CONTENTIONS

           Boeing argues that the liabilities at issue are Spirit’s Assumed Liabilities under the APA.

To reach this conclusion, Boeing classifies the costs of the UAW Arbitration and the Harkness

Litigation as costs related to employee benefits assumed by Spirit under the APA. Boeing argues

that the payments made to the UAW Grievants and the Harkness Class Action plaintiffs were

payments for early retirement benefits due under Boeing’s Benefit Plans. Boeing claims, under

its interpretation, that Spirit is responsible for these benefits because Spirit assumed liability for

pension and retiree medical benefits for Hired Employees under Sections 1.2(a)(iv) and 6.2.

Therefore, Boeing contends that Spirit must indemnify Boeing for these Assumed Liabilities

under the terms of Section 9.2(a)(iii).

B.      SPIRIT’S CONTENTIONS

           Spirit argues that the liabilities at issue are Excluded Assets and Excluded Liabilities

under the APA. To reach this conclusion, Spirit classifies the costs of the UAW Arbitration and

Harkness Class Action as damages for breach of Boeing’s CBAs. Under this interpretation,

Spirit claims that it need not indemnify Boeing for the damages because, under the express

language of Sections 1.1(a)(v) and 1.1(b)(xiii), Boeing’s CBAs are Excluded Assets not assumed


66
     Compl. ¶ 43.
67
     Id.

                                                    12
by Spirit. Alternatively, Spirit contends that, even if Boeing is correct that the liabilities arose

out of Boeing’s Benefit Plans, Spirit did not agree under Sections 1.2(a)(iv) and 6.2 to assume

liability for Boeing’s Benefit Plans. Spirit argues that, instead, Section 6.2 required Spirit to

create its own benefit plans for the Hired Employees. As such, Spirit disclaims liability.

Moreover, Spirit asserts counterclaims for indemnification under Section 9.1(a)(iv) for those

costs incurred by Spirit in the various litigations relating to this issue under the APA.

                                        IV. STANDARD OF REVIEW

         The standard of review on a motion for summary judgment is well-settled. The Court’s

principal function when considering a motion for summary judgment is to examine the record to

determine whether genuine issues of material fact exist, “but not to decide such issues.”68

Summary judgment will be granted if, after viewing the record in a light most favorable to a

nonmoving party, no genuine issues of material fact exist and the moving party is entitled to

judgment as a matter of law.69 If, however, the record reveals that material facts are in dispute,

or if the factual record has not been developed thoroughly enough to allow the Court to apply the

law to the factual record, then summary judgment will not be granted.70 The moving party bears

the initial burden of demonstrating that the undisputed facts support his claims or defenses.71 If

the motion is properly supported, then the burden shifts to the non-moving party to demonstrate

that there are material issues of fact for the resolution by the ultimate fact-finder.72




68
   Merrill v. Crothall-American Inc., 606 A.2d 96, 99-100 (Del. 1992) (internal citations omitted); Oliver B. Cannon
& Sons, Inc. v. Dorr-Oliver, Inc., 312 A.2d 322, 325 (Del. Super. 1973).
69
   Id.
70
   Ebersole v. Lowengrub, 180 A.2d 467, 470 (Del. 1962); see also Cook v. City of Harrington, 1990 WL 35244 at
*3 (Del. Super. Feb. 22, 1990) (citing Ebersole, 180 A.2d at 467) (“Summary judgment will not be granted under
any circumstances when the record indicates . . . that it is desirable to inquire more thoroughly into the facts in order
to clarify the application of law to the circumstances.”).
71
   Moore v. Sizemore, 405 A.2d 679, 680 (Del. 1970) (citing Ebersole, 180 A.2d at 470).
72
   See Brzoska v. Olsen, 668 A.2d 1355, 1364 (Del. 1995).

                                                           13
           Where, as here, the parties have filed cross motions for summary judgment and have not

argued that there are genuine issues of material fact, “the Court shall deem the motions to be the

equivalent of a stipulation for decision on the merits based on the record submitted with the

motions.”73 Neither party’s motion will be granted unless no genuine issue of material fact exists

and one of the parties is entitled to judgment as a matter of law.74

                                             V. DISCUSSION

           Boeing’s claims and Spirit’s counterclaims all seek relief through the interpretation and

application of the terms of the APA. The APA is governed by Delaware law.75 Under Delaware

law, the Court generally interprets a contract as a matter of law.76 The Court may interpret an

unambiguous contract as a matter of law by giving clear and unambiguous terms their plain and

ordinary meaning.77 An ambiguity exists where a term has more than one interpretation.78 The

Court finds that the APA is unambiguous as to the claims and counterclaims asserted by the

parties.

A.         THE UAW ARBITRATION AND THE HARKNESS CLASS ACTION AROSE OUT OF BOEING’S
           CBAS

           Boeing and Spirit classify the liabilities at issue differently and, as a result, rely on

different provisions of the APA to allocate liability. To resolve this dispute, the Court first

analyzed the UAW Arbitration and the Harkness Class Action in order to determine the type of

liabilities at issue. After making this determination, the Court then determined how these

liabilities are apportioned in the APA, and accordingly, which party is liable. After a thorough

review of the various litigations and the APA, the Court finds that the liabilities associated with

73
   Super. Ct. Civ. R. 56(h).
74
   E.I. DuPont de Nemours and Co. v. Medtronic Vascular, Inc., 2013 WL 261415, at *10 (Del. Super. Jan. 18,
2013).
75
   APA § 11.13.
76
   O’Brien v. Progressive N. Ins. Co., 785 A.2d 281, 286 (Del. 2001).
77
   Id. at 288.
78
   Id.

                                                       14
the UAW Arbitration and the Harkness Class Action arose out of Boeing’s CBAs, not Boeing’s

Benefit Plans.

         i.    The UAW Arbitration arose from Boeing’s breach of its CBAs

         The Court finds that the UAW Arbitration arose out of Boeing’s CBAs, and more

specifically, Boeing’s breach of its CBAs. The UAW Grievants pursued their claim as arising

out of Boeing’s CBAs and prosecuted it as such. The UAW Grievants claimed that Boeing’s

decision to “terminate” rather than “lay off” certain Hired Employees resulted in a breach of

Boeing’s CBA.79 The UAW Grievants repeatedly characterized their claim in this light,

including on appeal to the Seventh Circuit when it stated, “This case is conceptually simple. An

employer took an action —‘terminating’ employees instead of laying them off — that their union

contended violated the collective bargaining agreement.”80 Additionally, in their request for

relief, the UAW Grievants asked to be reinstated and “made whole for any losses they suffered

as a result of the employer’s breach of contract, including make-whole relief for their loss of

pension and insurance benefits.”81

         Boeing argues the UAW Arbitration dealt with employee benefits because the UAW

Grievants principally sought pension and retiree medical benefits owed under Boeing’s Benefit

Plan.82 However, under Boeing’s own admission at the arbitration hearing, this was not the

purpose of the UAW arbitration or the intent of the parties in seeking arbitration. Boeing stated,

         The grievance involves only a narrow and limited contract interpretation issue.
         The Union’s only claim is that the Company, by designating certain bargaining
         unit members as terminated when it sold the plants where they worked,
         discharged them without cause in violation of Article XI, Section 17 of the
         contract.83

79
   Spirit’s Mot. Ex. 20.
80
   Spirit’s Mot. Ex. 49 at p. 19.
81
   Id. at 22.
82
   Boeing’s Mot. p. 31.
83
   Spirit’s Mot. Ex. 37 at p. 18.

                                                15
Under Boeing’s own approach to the arbitration, this made the issue before the arbitrator

a CBA issue, not a benefits issue.

         The parties’ approach to, or characterization of the arbitration is further supported by the

nature of the arbitration itself. In agreeing to arbitration, the parties asked the arbitrator to

answer two questions: whether the parties’ dispute involved the application and interpretation of

the CBA, and was therefore arbitral, and if so, whether Boeing violated a CBA.84 The arbitrator

answered both questions in the affirmative, noting as to the first that he “has limited jurisdiction

extending only to grievances involving interpretation or application of” the CBA.85 By finding

that he possessed jurisdiction, the arbitrator confirmed that the UAW arbitration involved the

application and interpretation of Boeing’s CBA. Had it simply been an employee benefits issue

as Boeing later argued, the arbitrator would not have had jurisdiction to arbitrate the claim.

         The arbitrator’s award is also instructive on the issue before the Court. The arbitrator

first ordered Boeing to “reinstate seniority of the employees and afford them benefits

appurtenant thereto” and later ordered Boeing to assume the plan’s obligations to the workers.86

Based on this characterization, Boeing argues that the UAW Arbitration was about employee

benefits because “the arbitrator held (and the courts agreed) that the Hired Employees were

entitled to the amounts they would have received under Boeing’s plans” had Boeing laid them

off.87 However, the arbitrator later clarified what he meant when he used the term “benefits” in

his decision. The arbitrator stated that “it was not his intent to use that term in the same manner

as it is used in [ERISA].”88 Rather, he meant it to be “a ‘short-hand’ way of referring to the


84
   Spirit’s Mot. Ex. 39.
85
   Id.
86
   See Spirit’s Mot. Ex. 39, Ex. 44.
87
   Boeing’s Mot. p. 28.
88
   Spirit’s Mot. Ex. 58.

                                                   16
remedy of making the affected employees whole for [Boeing’s] violation of the” CBA.89 As in

any breach of contract action, the arbitrator tried to give the UAW Grievants what they would

have been entitled to had they been laid off. The reasoning of the arbitrator confirms that his

award was a remedy of contract damages to compensate the UAW Grievants for Boeing’s breach

of its CBA.

         The courts involved agreed with the arbitrator’s decision as to what was at issue. In the

appeal of the arbitrator’s award, Boeing repeatedly construed the arbitrator’s award as providing

ERISA benefits and challenged the award for this reason. The Illinois District Court and the

Seventh Circuit disagreed. The Illinois District Court acknowledged that Boeing’s breach of the

CBA resulted in lost benefits under Boeing’s Benefit Plans.90 However, the Illinois District

Court held that the purpose of the arbitrator’s remedy was to “make those employees whole, by

placing them in the same status they held on the date of the sale and to require Boeing to provide

any benefits the employees lost as a result of the sale and Boeing’s breach” of the CBA.91

         The Seventh Circuit agreed with and affirmed the Illinois District Court’s rulings. The

Seventh Circuit also classified the remedy as damages for breach of contract, not benefits—“The

arbitrator awarded what amount to damages for breach of contract measured by the benefits of

which the breach deprived the workers, who were third-party beneficiaries under the collective

bargaining contract.”92

         In response to the foregoing, Boeing now argues, as a final point, that because the

arbitrator measured damages based on ERISA benefits, the damages are in fact an award for




89
   Id.
90
   See Spirit’s Mot. Ex. 48 at p. 7.
91
   Id.
92
   Spirit’s Mot. Ex. 51 at p. 7.

                                                 17
payment of ERISA benefits.93 The Court finds that what Boeing describes here, however, is how

expectation damages awards are calculated—by looking to the “reasonable expectations of the

parties ex ante.”94 Expectation damages reference what the aggrieved party stood to gain absent

the breach. In this case, the determination depends upon the benefits under Boeing’s Benefit

Plans. This does not mean, however, that the damages can be recast as something other than

contract damages. As the Illinois District Court noted, to do so in this case would “turn every

order that awards damages based on lost benefits to be paid over time into an ERISA plan.”95

The Court does not agree with Boeing’s interpretation of the damages award in the UAW

Arbitration, and finds that this award was for a breach of the CBA.

        ii.   The Harkness Class Action arose from Boeing’s breach of its CBAs

        The Harkness Class Action also arose from Boeing’s CBAs, and more specifically,

Boeing’s breach of its CBAs. Like the UAW Grievants, the Harkness Class Action plaintiffs

maintained claims predicated on a breach of a CBA. From the beginning, the Harkness Class

Action plaintiffs claimed that Boeing’s decision to “terminate” rather than “lay off” certain Hired

Employees resulted in a breach of Boeing’s CBAs. IAM explained that “the Union is filing this

grievance against [Boeing] on behalf of all adversely affected employees because of Boeing’s

violation of Attachment B to the CBA.”96 Similarly, SPEEA contested the coding of its

represented members as “terminated” and claimed that it violated Article 8 and Article 21 of the

CBA.97 Later during litigation in the Kansas District Court, the Harkness Class Action plaintiffs

argued that “the crux of the Complaint was that Boeing breached its CBAs . . . .”98 In essence,



93
   Boeing’s Mot. p. 28–29.
94
   See Sia Techs. Inc., v. PharmAthene, Inc., 132 A.3d 1108, 1130 (Del. 2015).
95
   Spirit’s Mot. Ex. 61 at p. 5.
96
   Spirit’s Mot. Ex. 18.
97
   Spirit’s Mot. Ex. 24.
98
   Spirit’s Mot. Ex. 69 at p. 36.

                                                        18
the promise by Boeing in the CBAs, and the breach of that promise, underpinned all of the

Harkness Class Action plaintiffs’ claims.

         Also similar to the UAW Arbitration, the nature of the Harkness Class Action is itself

instructive on the issue before the Court. To bring a claim under section 301 of the LMRA, as

the Harkness Class Action plaintiffs did, the claim must involve a CBA. Section 301 clearly

provides for “suits for violation of contracts between an employer and a labor organization.”99

The United States Supreme Court has subsequently interpreted section 301 as governing claims

“founded directly on rights created by [CBAs], and also claims substantially dependent on

analysis of a [CBA].”100 Therefore, absent a claim grounded in a CBA, the Harkness Class

Action plaintiffs could not have argued that Boeing violated section 301 of the LMRA.

         The Kansas District Court, though addressing the Harkness Class Action plaintiffs’

claims on cross-motions for summary judgment, ultimately reached the same conclusion as the

adjudicators in the UAW Arbitration. The Kansas District Court found that all of Harkness

Class Action plaintiffs’ claims fundamentally arose from an alleged CBA breach. The Kansas

District Court framed the case as follows: “[i]n this case, the contracts in question are the CBAs

and the fundamental issues revolve around the meaning and effect of the terms ‘laid off’ and

‘layoff,’ which appear numerous times in the CBAs as well as in Boeing documents.”101 The

Kansas District Court found the CBAs to be ambiguous with respect to the meaning of “laid off,”

and consequently denied summary judgment.102 While the Kansas District Court left the issue of

whether Boeing breached the CBA for trial, the ruling is clear that the dispute centered on

Boeing’s CBAs.


99
   29 U.S.C. § 185(a).
100
    Caterpillar, Inc. v. Williams, 482 U.S. 386, 387 (1987).
101
    Spirit’s Mot. Ex. 64 at p. 37.
102
    Id. at 37–39.

                                                          19
           iii.     In both cases, but for the CBAs, the UAW Grievants and the Harkness Class
                    Action plaintiffs could not have maintained a claim against Boeing

           Boeing contends that the two proceedings arose from Boeing’s Benefit Plans because the

litigants included members of Boeing’s Benefit Plans.103 The Court finds that Boeing’s

argument does little to prove that either proceeding arose from Boeing’s Benefit Plans. The

Court agrees that: (i) Boeing’s Benefit Plans set forth the early retirement benefits; and (ii) the

UAW Grievants and the Harkness Class Action plaintiffs sought to recover these early

retirement benefits. In both proceedings, however, the arbitrator or the applicable court

determined that the issue was whether Boeing improperly classified certain Hired Employees as

“terminated” under the terms of the CBAs. The Court agrees. It is the contractual terms of the

CBAs, not Boeing’s Benefit Plans, which directed the UAW Arbitration and Harkness Class

Action. Moreover, the CBAs’ contractual terms are what allowed both sets of parties to sustain a

claim for breach of contract.

           The Court’s determination that the UAW Arbitration and the Harkness Class Action

involved a breach of the CBAs is further supported by the fact that the proceedings exclusively

involved union members. The Court notes that only union members—or those covered by the

CBAs—commenced legal proceedings. This supports the finding that the CBAs, and not

Boeing’s Benefit Plans, gave rise to the two proceedings. Non-union members—or those not

covered by the CBAs—did not commence legal proceedings or join in the UAW Arbitration or

the Harkness Class Action. The logical conclusion is that the terms of Boeing’s Benefit Plans

did not place limits on early retirement benefits in cases of termination. Had Boeing’s Benefit

Plans done so, both union and non-union members could have challenged Boeing’s classification




103
      See Boeing’s Mot. p. 31.

                                                  20
of the employees as “terminated.” The Court reviewed the parties in those proceedings and it is

clear that the plaintiffs were only union members.

B.       BECAUSE THE LIABILITIES AROSE OUT OF BOEING’S CBAS, THE LIABILITIES ARE
         EXCLUDED ASSETS AND EXCLUDED LIABILITIES FOR WHICH SPIRIT HAS NO
         INDEMNIFICATION OBLIGATION

         By first classifying the liabilities at issue, the Court can now determine how the liabilities

are apportioned in the APA, and, ultimately, which party is liable. Based on the plain language

of Sections 1.1 and 1.2, Boeing’s CBAs constitute Excluded Assets and Excluded Liabilities not

transferred by Boeing or assumed by Spirit. Therefore, Spirit need not indemnify Boeing.

         Under Section 1.1(a)(v), the assets purchased by Spirit include “all Contracts primarily

related to the business . . . but not including the Contracts described in Section 1.1(b).”104

Section 1.1(b) then lists certain Excluded Assets not transferred or conveyed to Spirit, which

include contracts such as “the existing collective bargaining agreements covering employees of

the business.”105 The CBAs are considered contracts, as the APA defines “Contracts” broadly as

“any written contract, agreement, license, mortgage, note, guarantee, sublicense, consensual

obligation, commitment, lease, sales or purchase order or other legally binding commitment

(whether written or oral” in the nature of a contract.”106 Section 1.1(a)-(b) states that Spirit shall

not acquire any assets other than those specifically set forth in Section 1.1(a). Therefore, the

CBAs are clearly Excluded Assets retained by Boeing after the sale of the Kansas and Oklahoma

facilities.

         That the CBAs are an Excluded Asset is further reflected in the language of Section

1.2(a)-(b)—the provisions apportioning liability between the parties. Section 1.2(a) provides for

Spirit’s Assumed Liabilities, and states that the only contracts assumed by Spirit are “Assigned

104
    APA § 1.1(a)(v).
105
    Id. § 1.1(b)(xiii).
106
    See id. § 12.1 (emphasis added).

                                                   21
Contracts.” The APA previously defined “Assigned Contracts” in Section 1.1(a)(v) to mean “all

Contracts primarily related to the business . . . but not including the Contracts described in

Section 1.1(b).” The CBAs—specifically as Excluded Assets in Section 1.1(b)(xiii) and broadly

from the entirety of Section 1.2(a)—are not Assumed Liabilities under Section 1.2(a). Section

1.2(b) then provides for certain Excluded Liabilities not assumed by Spirit. The Excluded

Liabilities include “Liabilities under any Contract not assumed by Buyer under Section 1.2(a) . .

.”107 The CBAs are not one of the contracts assumed by Spirit and, therefore, are not Assumed

Liabilities under Section 1.2(a). Instead, the CBAs are Excluded Liabilities.

          Boeing nonetheless argues that Spirit assumed liability for the CBAs. Boeing interprets

Section 1.2(b)(xiii) as excluding certain “Liabilities,” not “Assets,” from Spirit’s Assumed

Liabilities. Put another way, Boeing reads Section 1.2(b)(xiii) as excluding contractual

“Liabilities” unless those “Liabilities” are assumed by Spirit pursuant to Section 1.2(a). Because

Spirit assumed “Liabilities for pension Liability, Accrued Vacation, retiree medical, flexible

spending accounts, sick leave, and personal time,”—all of which grew out of contracts—those

liabilities are not Excluded Liabilities, even if Spirit did not assume the entire contracts out of

which those liabilities arise.108

          In light of Spirit’s other Assumed Liabilities, the Court rejects Boeing’s reading of

Section 1.2(b)(xiii). Spirit’s assumption of liabilities in Section 1.2 reflects Spirit’s intent to

assume only those liabilities over which it had control. Multiple provisions throughout Section

1.2 state that Spirit assumed only those liabilities that arose after closing; Spirit did not assume

liability “arising out of any act or omission that occurred prior to closing.”109 In fact, the parties

carefully crafted Section 1.2(a)(iii) as a gap provision wherein Spirit disclaimed contractual

107
    Id. § 1.2(b)(xiii).
108
    See id. § 1.2(a)(iv).
109
    See id. § 1.2(a)(ii),(iii),(v),(vi), (vii),(ix).

                                                       22
liability for certain Assigned Contracts entered into by Boeing prior to closing.110 Boeing’s

interpretation would contravene this clear intent by having Spirit assume liability for Boeing’s

CBAs, which Boeing negotiated and executed before closing. The Court finds it illogical that

Spirit would agree in one discrete instance to assume the liabilities associated with Boeing’s

CBAs, when Spirit was not assuming those agreements or otherwise had control over the

agreements which could create those liabilities. The Court believes that the parties would have

included a cross-reference to Section 1.2(a)(iv) in Section 1.1(b)(xiii) had they intended to

subject this Excluded Asset to an exception.

          Boeing argues that, if the CBAs and related liabilities are Excluded Assets and Excluded

Liabilities, there is no scenario under which Spirit would be liable for Hired Employees’ pension

and retiree medical benefits. Boeing claims that this would render Section 1.2(a)(iv)

meaningless. This is not true. Under Section 6.2, Spirit agreed to establish three separate

pension plans for union and non-union Hired Employees, and then include credit for those Hired

Employees’ past service with Boeing for eligibility, vesting, early retirement, and accrued

benefits.111 The credit applied after Boeing transferred the assets in Boeing’s Pension Plans to

Spirit’s new pension plans.112 After this transfer, Boeing had no further obligation for those

assets.113 If, then, Spirit refused to credit the Hired Employees’ past service with Boeing, and the

Hired Employees’ sought payment from Boeing for their accrued service, Boeing could then

seek indemnification from Spirit.

          Nothing in Section 6.2, however, provides that Spirit assumed liability for Boeing’s

CBAs or the liabilities associated with those CBAs, including liability that resulted from


110
    See id. § 1.2(a)(iii).
111
    See id. § 6.2(a),(f).
112
    Id. § 6.2(f).
113
    Id.

                                                  23
Boeing’s breach of its own CBAs. Spirit’s only obligation was to create its own pension plans

and credit Hired Employees’ for its past service with Boeing subject to the conditions of its own

collective bargaining agreements.114 Spirit then created benefit plans that mirrored Boeing’s,

including its own “layoff bridge.” As it pertained to health benefits, however, Section 6.2(g)

allowed Spirit to “make changes in or amendments to any Buyer retiree medical plan following

the Closing.”115 Given all of this, the Court cannot find that Spirit agreed to assume the

liabilities of Boeing’s CBAs, including Boeing’s Benefit Plans.

         Therefore, Spirit need not indemnify Boeing for the liabilities arising from its CBAs

because the CBAs are Excluded Liabilities. Section 9.2(a) provides that Spirit need only

indemnify Boeing for its Assumed Liabilities. There is nothing in Section 9.2(a) providing that

Spirit must indemnify Boeing when Boeing bears its own retained liabilities. Accordingly, the

Court finds that Spirit did not breach is indemnity obligations under the APA, and it need not

indemnify Boeing for the costs related to the UAW Arbitration and the Harkness Class Action.

C.       BOEING MUST INDEMNIFY SPIRIT FOR THE COSTS OF LITIGATION STEMMING FROM THE
         PRESENT DISPUTE

          As a final matter, Spirit counterclaimed against Boeing for breach of contract and

declaratory judgment.116 Spirit contends that Boeing breached the APA by failing to honor its

obligation under Section 9.1(a) to indemnify Spirit for certain Indemnifiable Damages.117 As a

result, Spirit seeks a declaration that Spirit must indemnify it for fees, costs, and expenses for: (i)

participating in the Harkness Class Action, (ii) responding to Boeing’s indemnification demands




114
    See id. § 6.2(g) (explaining that Spirit “shall provide each such Hired Employee full credit for periods of service
prior to the Closing . . . subject to the provisions of any collective bargaining agreement between [Spirit] and the
unions).
115
    Id.
116
    See Answer ¶¶ 36–62.
117
    Id. ¶¶ 56–65.

                                                          24
and participating in the dispute resolution process, (iii) defending itself against Boeing’s

allegations and claims in this case, and (iv) asserting and prosecuting the Counterclaim.118

         The Court has already held that all liabilities related to Boeing’s CBAs are considered

Excluded Liabilities. Furthermore, under Section 9.1(a), Boeing must indemnify Spirit for

Indemnifiable Damages incurred by Spirit in connection with or arising from the Excluded

Liabilities.119 Consequently, because the costs and expenses cited by Spirit all arose from

Excluded Liabilities, i.e. Boeing’s CBAs, Boeing must indemnify Spirit for these costs and

expenses.

         As to the latter three items of damages, Spirit is also entitled to recovery under Section

11.15. Section 11.15 provides that a prevailing party is entitled to recover “reasonable attorneys’

fees and other costs incurred” in connection with any proceeding for the enforcement of the

APA, or “because of an alleged dispute, breach, default, or misrepresentation in connection with

any of the provisions” in the APA.120 Boeing brought this civil action to enforce the APA after

an alleged “breach” of Spirit’s indemnification obligation. Therefore, Spirit is entitled to recover

reasonable attorneys’ fees and other costs incurred in defending against Boeing’s claims and in

asserting its Counterclaim.121

                                              VI. CONCLUSION

         For the reasons set forth herein, the Court declares that Spirit did not breach the APA and

is not obligated to indemnify Boeing for the costs associated with the UAW Arbitration and the

Harkness Class Action. The Court further declares that Boeing breached the APA and is

obligated to indemnify Spirit for the costs stemming from the present dispute. Accordingly, the


118
    Id. ¶ 47.
119
    APA § 9.1(a).
120
    Id. § 11.15.
121
    The Court notes that Boeing did not respond to Spirit’s arguments for attorneys’ fees.

                                                          25
Court DENIES the Boeing Company’s Motion for Summary Judgment and GRANTS

Defendant-Counterclaim Plaintiff Spirit Aerosystems, Inc.’s Motion for Summary Judgment.

       IT IS SO ORDERED.

Dated: June 27, 2017
Wilmington, Delaware

                                                  /s/ Eric M. Davis
                                                  Eric M. Davis, Judge




                                             26
