MAJURO, Marshall Islands (Marianas Variety/PINA, Dec. 31) - German aircraft manufacturer Dornier Fairchild lost a US$4.2 million appeal in the Marshall Islands Supreme Court.

In a unanimous decision by the three American judges, an earlier High Court’s default judgment against Dornier was upheld.

The dispute centered on two down-payments totaling $2.1 million that Air Marshall Islands made to Dornier for the purchase of two Dornier 328 aircraft in 1999. The purchase was subsequently halted by Air Marshall Islands, but Dornier refused to refund the down-payment. This was even though Air Marshall Islands obtained a letter from Dornier that the downpayment would be reimbursed if promised financing for the balance of the more than $20 million cost did not materialize, the Supreme Court said.

Dornier, which is currently in the midst of bankruptcy proceedings in Germany, attempted to get the court to put a hold on Air Marshall Islands’ suit pending the outcome of arbitration. Dornier said this was a requirement of the Dornier 328 purchase agreement.

But the Supreme Court said that the sale agreement signed in 1999 was legally faulty. This was because it was not signed by authorized representatives of the airline and did not get the approval of the government’s Cabinet as was required. The Supreme Court said the lower court ruled correctly in rejecting Dornier’s arbitration motion because it required a legally binding sale agreement, which did not exist.

The Supreme Court pointed out that despite several court-ordered extensions of deadlines, Dornier never filed an answer to the airline’s complaint.

The Supreme Court panel said Dornier was at fault for repeatedly filing various motions, but never replying to the original complaint. This was despite directions from the High Court to do so, it said. When Dornier failed to file an answer, the High Court issued a default judgment for the airline. Air Marshall Islands has flown Dornier 228 planes for its domestic service since the mid-1980s.

January 01, 2003

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