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(Reuters) – Banco Santander Brasil SA can move forward with a lawsuit alleging the COVID-19 pandemic devalued a 10-year branded card agreement with American Airlines Inc worth hundreds of millions of dollars to the carrier, a New York federal judge ruled.
U.S. District Judge Rachel Kovner in Brooklyn said on Thursday that the bank can pursue its claim that the airline's temporary cessation of flights to Brazil during the pandemic excused it from paying the airline millions of dollars a year to acquire award miles for cardholders.
Attorneys and spokespeople for the bank and airline did not immediately reply to requests for comment on Friday.
The deal, which hit the four-year mark in April, allows Banco Santander to issue American Airlines branded payment cards to customers in Brazil but requires it to buy an undisclosed number of award miles every year.
American had urged Kovner to dismiss the case, saying that the contract has a provision allowing the bank to terminate the agreement if the airline's market share decreased by more than 50%. A months-long suspension of flights to Brazil in the beginning of the pandemic did not meet the criteria, it said.
Kovner said the bank may proceed by arguing the unforeseen disruption caused by the pandemic excused it from performing under the contract.
But she dismissed its claim that the contract ended last summer under a force majeure provision. Kovner did not explain her reasoning, but said she will issue 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 bank: James Bromley and Jacob Cohen of Sullivan & Cromwell
For the airline: Mark Robertson, Anton Metlitsky and Anna Mohan of O’Melveny & Myers
Jody Godoy reports on banking and securities law. Reach her at [email protected]
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