American Airlines should face authorized risk to profitable card deal

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  • Santander Brazil can sue to flee branded card deal
  • COVID-19 affect on air journey devalued settlement, financial institution claims
  • Airline stated 10-year, multimillion greenback contract ought to stand

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(Reuters) – Banco Santander Brasil SA can transfer ahead with a lawsuit alleging the COVID-19 pandemic devalued a 10-year branded card settlement with American Airlines Inc value a whole lot of hundreds of thousands of {dollars} to the service, a New York federal decide dominated.

U.S. District Judge Rachel Kovner in Brooklyn stated on Thursday that the financial institution can pursue its declare that the airline’s non permanent cessation of flights to Brazil throughout the pandemic excused it from paying the airline hundreds of thousands of {dollars} a 12 months to amass award miles for cardholders.

Attorneys and spokespeople for the financial institution and airline didn’t instantly reply to requests for touch upon Friday.

The deal, which hit the four-year mark in April, permits Banco Santander to challenge American Airlines branded cost playing cards to clients in Brazil however requires it to purchase an undisclosed variety of award miles yearly.

American had urged Kovner to dismiss the case, saying that the contract has a provision permitting the financial institution to terminate the settlement if the airline’s market share decreased by greater than 50%. A months-long suspension of flights to Brazil to start with of the pandemic didn’t meet the factors, it stated.

Kovner stated the financial institution could proceed by arguing the unexpected disruption brought on by the pandemic excused it from performing underneath the contract.

But she dismissed its declare that the contract ended final summer time underneath a drive majeure provision. Kovner didn’t clarify her reasoning, however stated she is going to challenge an opinion.

The case is Banco Santander (Brasil) SA v. American Airlines Inc, U.S. District Court, Eastern District of New York, No. 1:20-cv-03098

For the financial institution: James Bromley and Jacob Cohen of Sullivan & Cromwell

For the airline: Mark Robertson, Anton Metlitsky and Anna Mohan of O’Melveny & Myers

Jody Godoy

Jody Godoy experiences on banking and securities regulation. Reach her at jody.godoy@thomsonreuters.com

REUTERS/Rachel Wisniewski