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Textron Aviation, Inc. v. Superior Air Charter, LLC

United States District Court, D. Kansas

November 21, 2019

TEXTRON AVIATION, INC., Plaintiff,
v.
SUPERIOR AIR CHARTER, LLC, Defendant SUPERIOR AIR CHARTER, LLC, Counter Claimant,
v.
TEXTRON AVIATION, INC., et al., Counter Defendants.

          MEMORANDUM AND ORDER

          JOHN W. BROOMES, UNITED STATES DISTRICT JUDGE

         This matter is before the court on Counterclaim Defendants' Motions to Dismiss (Docs. 51, 66.) The motions have been fully briefed and are ripe for decision. (Docs. 52, 64, 67, 69, 77, 82.) For the reasons stated herein, Counterclaim Defendants' motions are GRANTED.

         I. Background

         On June 26, 2018, Plaintiff Textron Aviation, Inc., (“Textron”) filed this action against Superior Air Charter, LLC (“SAC”). Plaintiff alleges that it is a successor in interest to Cessna Aircraft Company (“Cessna”) after a merger. Cessna and SAC entered into eight ProAdvantage agreements concerning eight different aircraft during 2012 to 2014. The ProAdvantage agreements provided price protection for maintenance costs and the ability to purchase parts directly. Pursuant to the terms, upon early termination, SAC must essentially pay any negative balance. The ProAdvantage agreements were allegedly terminated early. Textron also asserts that SAC breached a consignment agreement concerning aircraft parts and failed to pay on an open account. Textron seeks monetary damages, return of the consignment parts, attorney fees and interest. SAC previously moved to dismiss and compel arbitration. (Doc. 15.) This court denied SAC's motion. (Doc. 21.)

         On June 24, 2019, SAC filed an answer and asserted counterclaims against Textron, Cessna[1], Cessna Finance Corporation (“CFC”), and Donald Beverlin (collectively referred to as “Counterclaim Defendants”). (Doc. 30.) In essence, SAC contends that Counterclaim Defendants fraudulently induced SAC and related entities into entering the agreements concerning the sale of the aircraft. Textron and CFC are Kansas corporations. Beverlin is a California resident. SAC is a limited liability company organized in Delaware.

         SAC alleges that JetSuite, Inc., is a private jet charter airline that provides transportation services throughout the United States. JetSuite, Inc., formed JS CJ3, LLC to own the aircraft purchased from Textron and it formed SAC to operate the aircraft. (Doc. 30 at 9.) SAC referred to itself and these entities as “JetSuite” throughout the allegations in the counterclaims.[2] (Doc. 30 at 5.) According to the allegations, Beverlin was an agent of Textron and coordinated the purchase and financing of the eight CJ3 aircraft. Discussions to purchase the aircraft began in 2012. Beverlin, Textron, and CFC allegedly made representations regarding the aircraft's exceptional performance. Allegedly, Beverlin made these representations during his visits to California. (Doc. 30 at 12.) However, there were widespread problems that involved lavatory chemicals leaking from the toilet onto the aircraft's fuselage and other parts of the aircraft. This resulted in corrosion on the fuselage. This problem was due to an alleged flaw in the aircraft's design. SAC alleges that the corrosion problems in the CJ3 were known by Beverlin, Textron, and CFC. (Doc. 30 at 14.) Beverlin, Textron, and CFC failed to inform JetSuite about the corrosion problems.

         In September 2012, JetSuite entered into a Letter Agreement for the purchase of fifteen CJ3 aircraft. For each aircraft, JS CJ3 was required to execute a promissory note, security agreement, and a cross-default agreement. (Doc. 30 at 16.) JetSuite was to execute a guaranty.[3](Id.) Moreover, Textron required SAC to enter into the ProAdvantage agreements. SAC alleges that it was induced into entering the ProAdvantage agreements and that none of the agreements would have been entered into had the JetSuite entities known of the corrosion problems. SAC further alleges that JetSuite was also induced into entering the related agreements regarding the purchases of the aircraft.

         On March 23, 2017, JetSuite discovered corrosion on one of the aircraft. As a result, that aircraft needed extensive repairs. (Doc. 30 at 22-24.) The estimated cost of repair was $1, 215, 000 and the aircraft would not be ready to return to service for 395 days. The lavatory-related corrosion problems have resulted in four additional aircraft being out of service. The second aircraft was out of service around April 23, 2017. The third aircraft was out of service around December 1, 2017, and the fourth was out of service around December 15, 2017. (Id. at 24.) The remaining four aircraft have also required significant repairs. (Id. at 25.)

         SAC filed its answer and counterclaims against Counterclaim Defendants on June 24, 2019. SAC asserts the following counterclaims against Counterclaim Defendants: fraudulent inducement; fraudulent concealment; civil conspiracy; and fraudulent business acts under Cal. Bus. & Prof. Code § 17200, California's Unfair Competition Law (“UCL”). Counterclaim Defendants move for dismissal on various grounds.

         II. Motion to Dismiss Standards

         In order to withstand a motion to dismiss for failure to state a claim, a complaint must contain enough allegations of fact to state a claim to relief that is plausible on its face. Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1974 (2007)). All well-pleaded facts and the reasonable inferences derived from those facts are viewed in the light most favorable to SAC. Archuleta v. Wagner, 523 F.3d 1278, 1283 (10th Cir. 2008). Conclusory allegations, however, have no bearing upon the court's consideration. Shero v. City of Grove, Okla., 510 F.3d 1196, 1200 (10th Cir. 2007). Rule 12(b)(6) requires SAC to allege “enough factual allegations in the complaint to set forth a plausible claim.” Pueblo of Jemez v. United States, 790 F.3d 1143, 1171-72 (10th Cir. 2015) (internal citations omitted). In the end, the issue is not whether SAC will ultimately prevail, but whether SAC is entitled to offer evidence to support its claims. Beedle v. Wilson, 422 F.3d 1059, 1063 (10th Cir. 2005).

         III. Analysis

         A. Choice of Law

         “A federal court sitting in diversity jurisdiction must apply the substantive law of the state in which it sits, including that state's choice-of-law rules.” Hayden Outdoors, Inc. v. Niebur, 994 F.Supp.2d 1206, 1208 (D. Kan. 2014) (quoting Vazirani & Assoc's Fin., LLC v. Heitz, No. 11- 1032-MLB, 2011 WL 2295027, at *2 (D. Kan. June 8, 2011) (internal citation omitted)). In this case, the ProAdvantage agreements have a choice of law provision. “Federal courts in Kansas routinely enforce the parties' contractual choice-of-law provisions under Kansas choice-of-law rules.” Altrutech, Inc. v. Hooper Holmes, Inc., 6 F.Supp.2d 1269, 1273 (D. Kan. 1998); seeBrenner v. Oppenheimer & Co., 273 Kan. 525, 539, 44 P.3d 364, 375 (2002) (“Where the parties to a contract have entered an ...


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