LAN Airlines' Subsidiary Wins Summary Judgment in Breach of Contract Action

May 4, 2011

On May 5, Cleary Gottlieb won a summary judgment decision in favor of a subsidiary of LAN Airlines (LAN) on its claims against certain subsidiaries of New York based private equity firm MatlinPatterson Global Advisers, arising out of the parties’ mutual investment in a Brazilian airline. Justice Lowe of the New York State Supreme Court, Commercial Division found that MP breached its contractual obligations to LAN in connection with its affiliate’s sale of Varig to Gol Airlines, by not sharing proceeds received from the sale with LAN, in accordance with its relative investment. The Court rejected MP’s primary defense (and all of its others) that its affiliate’s alleged refusal to upstream the sale proceeds to MP (which they claimed resulted in an intense battle in Brazil between MP and its Brazilian co-investors) meant that MP’s “make-whole” obligations to LAN were not triggered.

With the exception of two requests for declaratory relief that overlapped with LAN’s affirmative claims, the Court also dismissed all of MP’s counterclaims against LAN.

The Court will now turn to an adjudication of the amount of damages that LAN’s subsidiary is entitled to receive.