LONDON — Virgin Group has come out on top in its legal battle over Brightline Holdings LLC in a United Kingdom court judgment. This comes after a $115 million [originally reported to be $250 million] lawsuit was filed by Virgin over the Brightline’s exit from its 20-year partnership in the Virgin Trains USA branding that began in 2018 and ultimately ended in 2020 [see “Digest: Brightline ends marketing agreement with Virgin Group” News Wire, Aug. 8, 2020].
A trial in London took place on July 3-6, 7, 10-14, 20, and 21. Evidence of facts in relation to events between July 2018 and July 2020 in addition to expert testimony on behalf of both parties were reviewed by Judge Mark Pelling KC of the High Court. In a judgment report by the Royal Courts of Justice and obtained by Trains News Wire, Pelling concludes that: “Brightline has failed to prove any of the three issues it had to prove if it was to succeed in its defense and for that reason the claim succeeds.”
In its termination of the agreement, Brightline claims the Virgin brand as being damaged during the global pandemic, that it’s no longer “a brand of international high repute,” and that it “would have repelled customers, investors and employees from the business, rather than attracting them to it.” The judgement report details Brightline’s failure in evidence to prove these claims.
Both parties have released statements in response to the Oct. 12, 2023, announcement:
- “The Virgin brand has been a symbol of global innovation, exceptional customer experience and entrepreneurship for more than 50 years. Today’s court judgement demonstrates the strength of our business and brand following Brightline’s attempts to breach a long-term licensing agreement. We continue to work with the most dynamic partners across the world to bring ideas to life and change business for good.” – Virgin Group
- “We’re disappointed in today’s ruling, made in a UK court, and plan to appeal the decision.” – Brightline Holdings LLC
You missed an important aspect. The agreement, signed by both, was to last 20 years, to presumably 2038. When one party unilaterally breaks a contract that both parties had agreed to in good faith it is common for matters to end up in court, no matter which side of the Atlantic it may be. Apparently Brightline failed to justify the excuses it used to renege. Likely the result would be the same in a US court.
Quite possibly the actual amount of the damages awarded will be ultimately be less than claimed.
This is the part I am struggling with. I remember Virgin did not have their equity stake ready by the contractual date. I was under the impression that this was a contract breach.
Virgin did have the stake about a week later than the deadline, but Brightline kicked the can on it.
So I am kind of confused as to who breached what and when. I would need to see the terms of that original equity/franchise agreement to know for sure.
It’s also possible that Brightline didn’t like some of the shell companies Virgin was using and where they were registered. From a British court perspective, money is money, but to the Americans, it may have had some baggage associated with it, hence the “reputational” position they are taking.
Speculation of course.
I do remember Virgin Group was in a full panic mode going into the pandemic trying to rearrange their holdings and assets to keep some of their entities alive. There was even write ups in the financial press at the time about the chess board of moves they were making which (in the opinion of those editors) did make it look sketchy because it appeared there wasn’t enough to go around. Virgin Group I recall did miss a deadline for its contracted equity contribution and Brightline pulled the plug pretty quickly after.
I have no knowledge of Brightline’s thinking, but seeing they are a Fortress Group creation, and have their ears to the financial streets, just like anyone else, they probably perceived all of the asset moves as a liquidity issue within Virgin, something they didn’t want to be aligned with.
Virgin *is* known to innovate, but they sometimes have a knack for cutting things a little too close for comfort financially. This is not a bad thing in totality, but can have reputational issues in some circles.
This is just a perception based on how I recollect the events at the time. I have no connection financially in either party.
So, a British company (Virgin) files a lawsuit against an American company (Brightline) in a British court, and surprise, surprise – they win. Who would have guessed that?
If the agreement ended in 2020, how does Virgin get away with this lawsuit?
Brightline will appeal, but…British company, British court. My guess their appeals won’t get far. Maybe they need to countersue here in the U.S…..