Facts

Plaintiff Airis Holdings LLC of Houston, Texas develops and manages air cargo facilities in cooperation with government agencies. Airis and its attorneys, Duane Morris LLP, filed suit against defendant city and county of San Francisco, the city's Airport Commission and Airport Director, alleging breach of contract, breach of the implied covenant of good faith and fair dealing, promissory estoppel, and unjust enrichment.

Defendant Airport Commission unanimously awarded Airis a contract to develop a $250 million air cargo facility at SFO, subject to the Board of Supervisors' approval. Plaintiffs alleged that notwithstanding the approval of the Airport Commission, the Airport Director and staff clandestinely undermined the project before the City Board of Supervisors could approve it. In declining to proceed with the project, the Board of Supervisors expressed concerns over the sufficiency of lease payments to the airport, use of a private developer to build and manage the facility, and the fairness of the process by which plaintiff had been granted exclusive negotiation rights for the project. In addition, every major airline at SFO urged the Board to reject the Airis proposal.

Plaintiffs alleged that the Airport Director withheld information from the Board of Supervisors, which would have alleviated the Board's concerns with the project.

Damages

Airis' claim for $2.1 million in damages for out of pocket costs was submitted to the jury.

Result

The court rejected Airis' claims for lost profits, unjust enrichment and promissory estoppels. Airis conceded at the conclusion of the trial that the City did not breach any express contractual obligations. The jury found for plaintiffs, unanimously concluding that defendants breached the duty of good faith and fair dealing by failing to support the project before the Board of Supervisors, and by failing to respond adequately to an inquiry from the Board regarding the project. Plaintiffs were awarded $1.05 million for breach of the implied covenant of good faith and fair dealing. The defendants filed a post-trial motion for judgment notwithstanding the verdict and for new trial. The court concluded there was sufficient evidence that defendants breached the covenant of good faith and fair dealing in at least two significant respects, but granted JNOV on the grounds that the statute of limitations had run on the first major breach, and defendants failed to prove causation with respect to the second major breach. The court found no contractual duty as to the remaining alleged breaches. Plaintiffs have since appealed this ruling. The court subsequently awarded defendants $3.4 million in attorneys' fees and costs pursuant to an exclusive negotiation agreement between Airis and the City, which required the loser in a lawsuit to pay reasonable costs and attorney fees to the prevailing party.