Opinion
Case No. 00-2366-JWL
June 14, 2002
MEMORANDUM ORDER
Plaintiffs Carolina Industrial Products, Inc. ("Carolina Products"), Joseph Wilen, and J.W. Equities, L.L.C. ("J.W. Equities") brought this action against defendant Learjet, Inc. ("Learjet") asserting numerous claims related to Learjet's refusal to perform work on plaintiffs' airplane, N825D. A trial to the court on two of the claims, promissory estoppel and fraud, was held May 7, 2002 through May 8, 2002. In the pretrial order, plaintiffs alleged that Learjet "represented to plaintiffs on October 17, 2000, October 27, 2000 or January 19, 2001 that if the FAA was satisfied that the aircraft met type certificate requirements and was airworthy Learjet would support the aircraft like any other Model 25D Learjet." Plaintiffs' claim for fraud is premised on the argument that Learjet represented to plaintiffs its intent to treat N825D like any other Learjet if certain conditions were met knowing that it would not do so even if the conditions were met. Per the pretrial order, plaintiffs seek damages for the fraud claim in the amount of $204,798 for "monies expended," $250,000 for "lost benefit" and $5,000,000 in punitive damages. Plaintiffs' promissory estoppel claim is based on the same alleged representation and the argument that plaintiffs detrimentally relied on the representation and that Learjet should have known that plaintiffs would do so. Plaintiffs seek damages for the promissory estoppel claim in the amount of $204,798 for "cost of dealing with FAA" and seek injunctive relief.
The court has considered the evidence and arguments presented at trial and is now prepared to issue its findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52(a). For the reasons set out below, the court concludes that plaintiffs did not rely on representations by Learjet in deciding to defend the FAA suspension action instead of selling N825D for scrap; that any reliance by plaintiffs on representations made before November 1, 2000, was unreasonable and that Learjet should not have expected plaintiff to act in reliance on those representations; that plaintiffs would not have incurred damages if they had relied on representations made before November 1, 2000; that the conditions precedent to Learjet's promised actions in the November 1 letter were not met; that Learjet did what it represented it would do in a letter dated November 1, 2000 if the conditions precedent were met; that Learjet intended to do what it said it would do in the November 1 letter; and that, measured from the date of the trial, plaintiffs had no damages.
• Findings of fact
Learjet model 25D, serial number 263 ("25D-263") was damaged in 1991 and rebuilt with some or all of the components of the fuselage of Learjet model 25D, serial number 212 ("25D-212"). The resulting airplane, N825D, was purchased by Carolina Products in 1994. Joseph Wilen is the owner of Carolina Products. This lawsuit grew out of plaintiffs' difficulties in having N825D repaired following a landing accident. Plaintiffs sought Learjet's support in repairing N825D and Learjet refused. Plaintiffs subsequently filed a multi-count complaint against three defendants, including Learjet.
While the summary judgment record indicated that J.W. Equities operates N825D, plaintiffs neglected to present any testimony or evidence at trial about J.W. Equities.
Pursuant to Rule 26(f) of the Federal Rules of Civil Procedure, a meeting was held on October 17, 2001 at the office of plaintiffs' attorney, Edward McConwell. At some point during the meeting, Mr. McConwell and the attorney for Learjet, Ron Sprague, were discussing the airworthiness of N825D. John Cowden, attorney for another defendant, testified that the discussion was contentious and that Mr. Sprague was speaking loudly. According to Mr. McConwell, Mr. Sprague "began to get increasingly agitated and . . . said if the FAA ever says this airplane is airworthy and meets the type certificate requirements of 263, Learjet will put it back on the active list and fully support this aircraft just like it would any other aircraft, any other Learjet aircraft." Mr. Sprague's recollection was nearly identical: "My recollection is I said something to the of course that if the FAA ever determines that N825D is airworthy and is 25D-263 for airworthiness purposes then Learjet will treat it like any other Model 25D aircraft." Mr. Cowden who testified that he did not yet "know very much about the background or the underlying facts [of the case]" because his client had only recently become part of the litigation, remembered Mr. Sprague saying that "if the FAA says [N825D is] airworthy, then we will support it. But there is no way in hell you'll ever get that done."
To the extent that Mr. Cowden's recollection is different from that of Mr. McConwell and Mr. Sprague, the court accepts the version offered by Mr. McConwell and Mr. Sprague. Mr. Cowden was not yet well versed on the facts of the case. The significance of the condition that the FAA determine that N825D meets the type certificate requirements for the Learjet model 25D airplane with the serial number 263 ("25D-263"), a rather technical point, may not have been appreciated by Mr. Cowden and, thus, may not have imbedded in his memory. Mr. Sprague and Mr. Cowden agree that Mr. McConwell did not did not seek clarification of the statement or indicate to Mr. Sprague that he intended to convince the FAA that N825D is airworthy and meets the type certificate requirements for 25D-263 and hold Learjet to the commitment to treat N825D like any other Learjet. Mr. McConwell admitted that he did not seek clarification of the statement but believes that he "indicated to [Mr. Sprague] that we were going to take him up on what he was saying and proceed."
By October 17, Mr. McConwell and plaintiffs were aware that the FAA planned to issue an order suspending the airworthiness certificate for N825D for failure to meet the type certificate requirements for 25D-263, the serial number used by N825D. Mr. McConwell was so notified by written notice from the FAA dated October 12, 2001 which specified that an order suspending the airworthiness certificate of N825D "will be issued unless, on or prior to fifteen (15) days after your receipt of this letter you elect to proceed" by discussing the matter informally with the FAA, answering the charges in writing, requesting that the order issue immediately to allow an appeal to the NTSB, or surrendering the airworthiness certificate. Mr. McConwell testified that his client had three options, to proceed to discuss the matter informally with the FAA, to request that the order suspending the airworthiness certificate be issued immediately and file an appeal with the NTSB or to sell N825D for scrap. The evidence indicated that electing to request that the suspension order issue immediately and appealing to the NTSB does not preclude later entering into informal discussions with the FAA. In fact, after electing to request that the suspension order issue immediately and appealing to the NTSB, plaintiffs settled the controversy by means of informal discussion with the FAA resulting in a settlement agreement. Likewise, the option of selling N825D for scrap remained available even after plaintiffs elected to request that the order issue immediately and appealed to the NTSB.
On October 17, Mr. McConwell talked with his client by phone, told him about the Rule 26(f) meeting, repeated Mr. Sprague's statement and discussed how to proceed with the pending FAA action to suspend the airworthiness certificate of N825D. Mr. Wilen testified that Mr. McConwell told him that Mr. Sprague represented that "if the FAA would certify the airplane as airworthy and clear the airplane they would put it on the active list and support the airplane fully." According to Mr. Wilen,"[b]ased on the commitment that [Mr. Sprague] gave Ed and he communicated to me" Mr. Wilen decided on October 18 to challenge the FAA action "so [Learjet] could support the airplane and put it back on the [active airplane] list." Mr. Wilen testified that his decision was a "business decision" and that he believed that N825D would be worth more money if it was repaired and recognized by Learjet as an active airplane than if it were sold for scrap. The evidence indicated that White Industries offered to pay $461,000 in August of 2001 to purchase N825D for scrap and that it would have been worth approximately $75,000 more in October of 2000 if sold for scrap. If N825D were repaired and recognized as an active airplane by Learjet, the evidence indicated that on July 2, 2000, had N825D been fully repaired after being damaged, it would have been worth $1,200,000. When asked on cross-examination if he would have proceeded in the same manner absent Mr. Sprague's representations, Mr. Wilen testified that he did not know. Mr. Wilen admitted that, at his deposition, he agreed that he was going to defend the FAA enforcement action "regardless of any statements from Learjet."
Following his conversation with Mr. Wilen on October 18, Mr. McConwell faxed to the FAA "the waiver of all processing and asking for immediate issuance of the order," thereby allowing plaintiffs to appeal to the NTSB. On October 19, the FAA faxed to Mr. McConwell an order suspending the airworthiness certificate for N825D and on October 20, Mr. McConwell prepared and faxed a notice of appeal to the NTSB. On October 25, Mr. McConwell issued subpoenas to Learjet in connection with the NTSB appeal and Learjet responded by faxing a letter to Mr. McConwell from Mr. Sprague dated October 27, 2000. Mr. McConwell testified that he sent a copy of the October 27 letter to Mr. Wilen "[w]ithin a day or two after I got it." Mr. Sprague testified that he sent a copy of the October 27 letter to Anne Beaurivage, general counsel for Learjet, at the same time that he sent the letter to Mr. McConwell. Ms. Beaurivage read the letter and did not tell Mr. Sprague to withdraw the letter or take any action to repudiate any statements in the letter.
The October 27 letter read, in part:
You are also being formally advised of what I told you during our recent Rule 26(f) meeting, i.e., if the FAA ever says N825D is airworthy and that it is 25D-263 for airworthiness purposes, Learjet will treat it like any other Learjet Model 25D airplane.
Mr. McConwell responded to the October 27 letter with a letter to Mr. Sprague dated October 28, 2000. The October 28 letter read, in part:
Do I understand your letter to stipulate that if the FAA withdraws its enforcement action challenge to the airworthiness certificate of N825D, that Learjet, Inc. will provide technical support, parts, tooling and personnel like it would provide to any other Learjet Model 25D aircraft? If the statement is correct we should be able to narrow many of the issues in the litigation.
Mr. McConwell testified that the clarification he sought in the October 28 letter was related to the statement in the October 27 letter. Mr. Sprague responded to the October 28 letter on November 1, 2000. The November 1, 2000 letter read, in part:
I want to be very clear about Learjet's position on the future of N825D. If and when the FAA determines that N825D is properly designated as Learjet 25D-263, which Learjet denies, and that it is airworthy, which Learjet currently denies, then Learjet will place the aircraft back on its list of active aircraft and will sell its owner parts to support the aircraft. Learjet will not actively participate in any repair of the aircraft, will not provide tooling or personnel to support the aircraft, and will not re-write history with regard to how the plane has been modified, scrapped, salvaged, rebuilt and/or maintained.
Mr. Sprague testified that he had no authority to make representations about what Learjet would or would not do prior to November 1, 2000. According to Mr. Sprague, he "had no express authority in that regard" but as trial counsel, his "overall marching orders from Learjet were to try to figure out a way to get this case resolved as quickly and as easily as possible to try to get them to the table and negotiate some kind of settlement that wasn't going to cost us an arm and a leg." Ms. Beaurivage testified that Mr. Sprague did not have authority to make a settlement offer prior to November 1, 2000. There was no evidence indicating that Mr. Sprague was given authority to make the representation on October 17 or that Learjet knowingly permitted Mr. Sprague to make such a representation or held out Mr. Sprague as having authority to make the same. Mr. Sprague testified that he talked to Ms. Beaurviage on either October 30 or November 1 and that "a determination was made as to Learjet's position and I was authorized to relay that back to Mr. McConwell, which I did on November 1."
By a letter dated October 30, 2000, "[p]ursuant to the requirements of the scheduling order," Mr. McConwell offered to settle plaintiffs' claims against Learjet under several conditions, including:
At such time as the FAA withdraws or settles the current certificate of airworthiness enforcement action in such a manner as to allow the aircraft to be operated under the FARs to either 450 or 510, Learjet agrees to treat it as it would any other Model 25D aircraft by placing it on the rolls of Learjet as an active aircraft and by providing technical support, maintenance personnel, parts, tooling, equipment and other support normally supplied to owners of Learjet aircraft.
Mr. Sprague responded to the October 30 letter by a second letter dated November 1, 2000. The letter responded to each of the conditions suggested by plaintiffs in the October 30 letter, including:
In the event that the FAA determines that N825D is appropriately designated as Learjet 25D-263, or any other legal serial number for a Learjet aircraft, and further determines that the aircraft fully complies with the applicable Type Certificate, Learjet will recognize the aircraft by whatever designation is acknowledged by the FAA. (Learjet currently denies that N825D complies with any Learjet Type Certificate). In that event, Learjet will sell its' owner parts. Learjet will not provide other technical support such as maintenance personnel, tooling and equipment for this aircraft unless a full compliance inspection is done by Learjet such that Learjet is confident that the aircraft is fully compliant with the applicable Type Certificate and repaired consistent with Learjet manufacturing and service standards.
This second November 1 letter was a settlement offer and was not accepted by plaintiffs. There was no evidence indicating that plaintiffs relied on statements in this second November 1 letter.
Plaintiff began informal negotiations with the FAA and, on April 3, 2001, entered in to a settlement agreement. The settlement agreement provided for resolution of the matter without having a hearing before an administrative law judge. According to the settlement agreement, upon the accomplishment of eight "actions," the "proposed action to suspend the airworthiness certificate of civil aircraft N825D is no longer necessary." The "actions" include work completed by designated engineer representatives; incorporating language in the logbook of N825D providing that "all Airworthiness Directives hereinafter applicable to Learjet LR-25D S/n 212 and S/N 263 shall be complied with;" distinguishing the total [flight] time of the aircraft fuselage and [the] aircraft total [flight] time;" marking and identifying the aircraft "with reference to Learjet LR-25D S/N 263;" marking the fuselage assemblies removed from S/N 212 with identification plates of S/N 212;" and limiting the operation of N825D to flight at 45,000 feet. Also on April 3, 2001, the FAA issued an airworthiness certificate for N825D, listing the aircraft serial number as 263 and stating that the aircraft has been found to conform "to the type certificate therefor" and has been shown to meet the requirement of the applicable airworthiness code except that it is limited to a maximum operating altitude of 45,000 feet.
The evidence indicated that 25D-263 was originally certified to fly up to 51,000 feet but that in approximately 1981, "the FAA issued an airworthiness directive for the engine stall" which limited 25D-363 to flying at 45,000 feet until a kit was installed in the airplane. 25D-212, on the other hand, was originally certified to fly up to 45,000 feet and the installation of a kit does not permit it to fly above 45,000 feet. Ms. Beaurviage testified that the door on the fuselage of 25D-212 is somehow different than the door on the fuselage of 25D-263 and that a team from Learjet examined N825D and determined that it had the door from 25D-212 and, thus, did not meet the type certificate for 25D-263. Ms. Beaurviage also testified that the different design of the door on 25-D263 was necessary for certification to fly at 51,000 feet.
While Ms. Beaurivage was not qualified as an expert by the court to testify on matters related to airplane design, she was asked questions about the subject by plaintiffs' counsel and counsel did not object to her answers.
A letter to Mr. Sprague from Mr. McCowell, dated April 4, 2001, advised that the FAA has issued an airworthiness certificate "for N825D, Serial Number 263." A copy of the certificate was attached to the letter. Mr. McConwell requested, "pursuant to your commitment on behalf of Learjet . . . that Learjet would support the aircraft like any other Learjet," that N825D be "removed from the `attrited list' and included on all lists as an active aircraft," that arrangements be made to support the repair of the leading edge of N825D and that Learjet provide a list of pilots authorized to perform the stall test required after repair to the leading edge. By letter dated April 25, 2001, Mr. Sprague responded to Mr. McConwell:
If you want to work something out short of dismissing the case, give me a call, but don't count on Learjet's support for N825D as long as you are suing them. Specifically, at least until we fully understand the facts and circumstances which led to the compromise settlement between Carolina Industrial Products, Inc. and the FAA, I will not recommend that Learjet provide engineering or technical support to the leading edge damage to N825D with the lawsuit still pending.
As soon as you notify me that you are dismissing all claims against Learjet, Inc. relating to N825D with prejudice, I will notify Learjet Field Services that they can return N825D to the "Active List" and support it in whatever fashion they deem appropriate from an engineering and/or business viewpoint.
Ms. Beaurivage testified that N825D "has been considered active since the FAA action" awarding the airworthiness certificate. Ms. Beaurivage explained that she did not know exactly when it was entered into the active aircraft database but that Learjet considered it an active aircraft since the FAA issued the airworthiness certificate. Mr. McConwell testified that Exhibit 13, an undated list of all active aircraft, was provided by Mr. Sprague sometime after June 2001. The list does not include 25D-263. The list also does not include 25D-262, a plane which the parties stipulated crashed on June 12, 2001. Thus, the court infers that the list was printed sometime after June 12, 2001.
When asked if Learjet had refused to sell the owner of N825D parts since April 4, 2000, Mr. McConwell testified that he was not aware of the sale of parts being refused. Mr. McConwell also testified, however, that Learjet refused to support the repair of N825D by Flight International in April of 2001.
All remaining repairs to N825D have been completed, including the repair to the leading edge, which was completed by Garrett Aviation, a Learjet-authorized repair facility. Learjet provided a test pilot to perform the stall test required after repairing the leading edge.
In reaching its decision, the court makes several specific findings of fact:
Plaintiffs did not rely on Mr. Sprague's October 17 statement in deciding to defend the FAA's suspension action
The court finds that plaintiffs did not rely on representations made by Mr. Sprague in deciding to challenge the FAA action to suspend the airworthiness certificate of N825D. Mr. McConwell and Mr. Wilen testified that the decision to challenge the FAA action was made October 18. As of October 18, none of the letters regarding Learjet's position had been exchanged between counsel. The only representation about Learjet's intent should the FAA issue an airworthiness certificate for N825D was Mr. Sprague's statement at the Rule 26(f) meeting.
In his deposition, taken in August of 2001, Mr. Wilen testified that he was going to defend the FAA action whether or not Mr. Sprague made any representations about Learjet's intent to support N825D if the FAA found N825D airworthy. As explained below, this makes a great deal of financial sense. At his deposition, Mr. Wilen had nine claims against Learjet. The claims for promissory estoppel and fraud had only been added the previous month by an amended complaint. Because plaintiffs had only recently added the claims for promissory estoppel and fraud and because plaintiffs had seven other claims pending against Learjet, the court believes that, at his deposition, Mr. Wilen was likely not unduly focused on how he needed to testify to support the elements of promissory estoppel and fraud and likely gave candid responses. The court subsequently granted summary judgment to Learjet on the seven other claims and plaintiffs proceeded to trial only on the claims of promissory estoppel and fraud.
At trial, Mr. Wilen changed his testimony. He testified that he did not know whether he would have defended the FAA suspension action absent Mr. Sprague's representation. When asked if he would have defended the FAA action if he never had heard Mr. Sprague's representation, Mr. Wilen said, "I don't think I had enough financial information at that moment to make that decision. I might not have because I was the one who raised it with Ed several times about salvage and/or what could I sell the airplane [for] right now. . . ." Mr. Wilen tried to explain his inconsistent deposition testimony. He said that because the deposition was taken eight months after he made the decision to defend the FAA action, "when you asked me [if] was I going to defend it, all this had already happened, so the answer was of course yes, I was going to defend it because I had already committed to defend it." Mr. Sprague then asked, "In fact you answered under oath that day sure we were going to defend it. Correct?" Mr. Wilen, admitted that he had and explained that he gave the answer "because we had already made the commitment to defend it."
Mr. Wilen's explanation of his earlier testimony is unpersuasive. In fact, observing his demeanor, even he seemed unsure of his answers and unconvinced by his own logic. The fact that Mr. Wilen later committed to defending the FAA action has no bearing on whether that commitment to defend the action would have been made absent the statement by Mr. Sprague. Mr. Wilen's explanation that he answered the deposition question by indicating unequivocally that he would have defended the action simply because he ultimately reached that decision supports only the inference that Mr. Wilen is willing to conform his testimony to best support his case. Because Mr. Wilen was focused on the elements of the fraud and promissory estoppel claims at trial and likely was not at his deposition and because his demeanor at trial and illogical explanation of his deposition testimony suggest that he was backing out of his earlier testimony because he realized that it hurt his claims at trial, the court accepts Mr. Wilen's deposition testimony over his testimony at trial.
Mr. Wilen testified at trial that the decision of whether to challenge the FAA action instead of selling N825D for scrap was a "business decision." The evidence showed that selling N825D for scrap in October of 2000 would yield approximately $536,000 and that repairing N825D and convincing the FAA to issue an airworthiness certificate would place the value of N825D at approximately $1,200,000. In other words, choosing to repair N825D and challenge the FAA action, concerning which Mr. McConwell testified that he believed he "could get the job done," would be a favorable business decision in the amount of $664,000 minus the cost of challenging the FAA action and completing the repairs.
The evidence indicated that, as of October of 2000, the only remaining repair to N825D related to the accident was repair of the leading edge. The invoice from Garrett Aviation reflected charges to plaintiffs in the amount of $12,615.83 for repairing the leading edge and $8,412.84 for the services of a test pilot related to repairing the leading edge. The invoice also reflected charges in the amount of $10,323.22 for services associated with ferrying N825D to Garret Aviation for completion of the repairs. Thus, only if Mr. Wilen believed that the costs associated with convincing the FAA that N825D was airworthy would exceed $630,000, or that the effort might be unsuccessful, would a "business decision" yield any result other than challenging the FAA action.
Mr. McConwell testified that, after discussing the matter with Mr. Wilen on October 18, Mr. Wilen instructed him that "if the FAA were going to cooperate with us, [to] try to get to the bottom of this issue, and that we could expedite the matter to go forward full steam. . . ." After talking with the FAA that day, Mr. McConwell testified that he "was convinced that we could get to the bottom of it." The court concludes, based on this testimony, that Mr. McConwell and Mr. Wilen believed that they could succeed in getting the FAA to issue an airworthiness certificate for N825D.
Mr. McConwell testified that one way to defend the FAA action was to hire Learjet to do a full compliance inspection but that Learjet had indicated that such an inspection could cost $200,000 to $300,000 and that he believed that the cost could reach as high as $600,000. Mr. McConwell concluded that this option "economically wouldn't work." Because Mr. McConwell believed that "it was obvious that we couldn't get information from Learjet at any reasonable price," plaintiffs pursued another option, described by Mr. McConwell as retaining a designated engineer representative. The invoices admitted into evidence indicated that this option cost plaintiffs approximately $44,000. Mr. McConwell also testified that he billed plaintiff approximately $72,000 in fees for his representation in the matter. Mr. Wilen testified that repairing N825D and convincing the FAA to issue the airworthiness certificate cost him, in total, approximately $150,000. Based on this evidence, the court concludes that Mr. Wilen and Mr. McConwell believed that they could convince the FAA to issue an airworthiness certificate and repair N825D for far less than $630,000. Thus, a "business decision" would lead only to the conclusion that plaintiffs should challenge the FAA suspension action without regard to any representations made by Mr. Sprague or Learjet.
The October 28 letter from Mr. McConwell to Mr. Sprague supports the court's finding that plaintiffs did not rely on Mr. Sprague's representation. In the letter, Mr. McConwell seeks clarification of Learjet's position "if the FAA withdraws its enforcement action challenge to the airworthiness certificate of N825D." The letter does not indicate that plaintiff had already acted in reliance upon the representation. The court does not believe that had plaintiffs acted in detrimental reliance upon Mr. Sprague's statement at the October 17 meeting, which is restated in the October 27 letter, Mr. McConwell would be seeking clarification of the representations on October 28. Instead, the court would expect that Mr. McConwell would tell Mr. Sprague that plaintiffs had acted in reliance upon the statement and describe what plaintiffs understood the statement to mean.
In addition, the court does not believe that a reasonable person would rely on the statement by Mr. Sprague at the October 17 meeting. The discussion between Mr. Sprague and Mr. McConwell took place almost as an afterthought at a meeting to discuss scheduling in the lawsuit. It was contentious, Mr. Sprague was speaking with a raised voice and, according to Mr. McConwell, Mr. Sprague was agitated. The court finds it difficult to believe that Mr. McConwell would have taken Mr. Sprague's comment to his client and advised his client that he could rely on the statement in making a major business decision without clarifying what Mr. Sprague meant, ensuring that Mr. Sprague had authority to make the statement, or getting the representation in writing.
In summary, Mr. Wilen testified at his deposition that he would have defended the FAA action without regard to any representations by Learjet and the court accepts this testimony over his testimony at trial. Evidence indicates that the only financially wise decision was to challenge the FAA action without regard to what Learjet would do. The language in the October 28 letter from Mr. McConwell seeks clarification of Learjet's position instead of informing Learjet that it relied on Mr. Sprague's comments. The court believes that the context of Mr. Sprague's statement at the October 17 meeting makes it unlikely that Mr. McCowell would have advised his client to rely on the statement. Therefore, the court finds that plaintiffs did not rely on Mr. Sprague's statement in deciding to challenge the FAA action instead of selling N825D for scrap.
If plaintiffs actually relied on representations made before November 1, 2000, the reliance was unreasonable after receipt of the November 1 letter
The second element of promissory estoppel, as set out in the pretrial order, is that Learjet intended or should have known that plaintiffs would act to their detriment in reliance upon Mr. Sprague's representations. As the court has explained, the context of the October 17 representation makes it unreasonable for a party to rely on Mr. Sprague's statement and the court does not believe that the evidence showed that Learjet either intended or should have known that plaintiffs would rely on Mr. Sprague's statement, made in the heat of a contentious discussion, about the airworthiness of N825D. The same is not necessarily true of the statement made in the October 27 letter. The court need not reach this issue, however, because even if plaintiffs reasonably relied on the representation made in the October 27 letter and Learjet should have known that plaintiffs would rely upon the representation, any reliance on the October 27 letter that extends beyond November 1, 2000 was unreasonable.
The November 1 letter responded to Mr. McConwell's request for clarification of the representation made at the October 17 meeting and in the October 27 letter. It was specific about what Learjet would do if the FAA issued an airworthiness certificate to N825D and "determine[d] that N825D is properly designated as Learjet 25D-263." To the extent that prior representations, or plaintiffs' interpretation of such representations, were inconsistent with the substance of the November 1 letter, any continued reliance on the prior representations by plaintiffs would be unreasonable. The court concludes that Learjet did not intend nor should have expected that plaintiffs would continue to rely on representations made before they received the November 1 letter.
If plaintiffs actually relied on the October 17 statement or the October 27 letter prior to receiving the November 1 letter, they suffered no harm. Between October 27 and November 1, plaintiffs did not make any decisions or take any action in reliance upon the representation made in the October 27 letter. The evidence indicates that, as of November 1, 2000, plaintiffs had not incurred any costs or obligations as a result of the decision to defend the FAA suspension action, allegedly made in reliance upon Mr. Sprague's October 17 statement. The evidence showed that the plaintiffs' election to proceed by appealing to the NTSB did not foreclose any options to plaintiffs and there was no evidence that the salvage value of N825D decreased between October 18 and November 1 or that plaintiffs otherwise suffered a loss by November 1.
The conditions precedent in the November 1 letter were not met
In the November 1 letter, Mr. Sprague said that if the FAA issues an airworthiness certificate to N825D and "determines that N825D is properly designated as Learjet 25D-263," that Learjet would take certain actions. The court finds that the FAA did not determine that N825D is properly designated as Learjet 25D-263 and, thus, Learjet was not obligated to take any actions.
The November 1 letter explained:
I cannot disagree with [plaintiffs'] general notion that you can use serviceable, authentic parts from a salvage yard, under certain circumstances to repair an aircraft. The trick is you have to use the right parts. You can't teach a parrot to quack and claim that it is a duck . . . and you can't take a non-compliant fuselage off an older Learjet, put the wings, engine and other parts of a newer Learjet on it and pretend that it's the newer Learjet.
With all of that said, I want to be very clear about Learjet's position on the future of N825D. If and when the FAA determines that N825D is properly designated as Learjet 25D-263, which Learjet denies, and that it is airworthy. . . .
The November 1 letter makes it clear that Learjet believed that N825D did not meet the type certificate requirements of 25D-263 because N285D includes the fuselage of an older Learjet. Pursuant to regulations, an airplane is not airworthy unless it meets the type certificate requirements for its serial number. The court construes the condition in the November 1 letter that "the FAA determine that N825D is properly designated as Learjet 25D-263" as meaning that the FAA determine that N825D meets the type certificate requirements for 25D-263. It would be an unreasonable interpretation of the letter to conclude that Mr. Sprague intended to condition Learjet's action on nothing more than the FAA selecting serial number 263 instead of 212 for use by N825D, even if it found that N825D did not meet the type certificate requirements for 25D-263.
In the October 27 letter and the October 17 statement, Learjet also conditions its actions on such a determination by the FAA.
The FAA settlement agreement, pursuant to which an airworthiness certificate was issued, does not find that N285D meets the type certificate requirements for 25D-263. While the agreement assigns serial number 263 to N825D, it requires that the plane comply with all service bulletins for both 25D-212 and 25D-263 and carry identification plates for both 25D-212 and 25D-263. If anything, the settlement agreement recognizes that N825D is a combination of two Learjets and is not properly considered 25D-263 for airworthiness purposes. The restriction on altitude under the new airworthiness certificate is illustrative. Unlike 25D-263, N825D does not have the appropriate design to be certified to fly above 45,000 feet. The installation of a kit that would permit 25D-263 to fly up to 51,000 feet would not permit N825D to fly above 45,000 feet. The new airworthiness certificate recognizes this limitation on the design of N825D and provides so on the certificate itself. While the small-print, form language on the airworthiness certificate card says that the aircraft has been found to conform "to the type certificate therefor," the court does not believe this signifies that the FAA determined that N285D conforms to the type certificate requirements for 25D-263. To the extent that this is implied by the language, the details of the settlement agreement rebut that implication. Based on the evidence, the court finds that the FAA did not determine that N825D complies with the type certificate requirements of 25D-263 and, thus, that the FAA did not conclude that N825D is properly designated as Learjet 25D-263 within the meaning of the November 1 letter.
Learjet has done everything it said that it would do in the November 1 letter if the conditions precedent were met
In the November 1 letter, Mr. Sprague said that if the FAA issues an airworthiness certificate to N825D and "determines that N825D is properly designated as Learjet 25D-263, . . . Learjet will place the aircraft back on its list of active aircraft and will sell its owner parts to support the aircraft" but "will not actively participate in any repair of the aircraft, will not provide tooling or personnel to support the aircraft, and will not re-write history with regard to how the plane has been modified, scrapped, salvaged, rebuilt and/or maintained." The court concludes that Learjet has done what it said it would do if the conditions precedent were met since the FAA issued N825D an airworthiness certificate on April 3, 2001.
The evidence suggesting that Learjet did not do what it promised to do in the November 1 letter consists of plaintiffs' exhibit 13 and Mr. Sprague's April 25 letter. Exhibit 13, according to Mr. Sprague, is a "computer generated report listing Model 25D Learjets by aircraft serial number and then listing operator name and owner name and it shows only those aircraft that are listed as active in the customer data base." Because the list does not include 25D-262, as explained earlier, the court infers that the list was printed sometime after June 12, 2001. The list also does not include 25D-263. In the letter dated April 25, 2001, written after Learjet was notified of the FAA action, Mr. Sprague said that as soon he is notified that plaintiffs are dismissing all claims against Learjet, "I will notify Learjet Field Services that they can return N825D to the `Active List' and support it in whatever fashion they deem appropriate. . . ." Mr. Sprague explained in the letter that "at least until we fully understand the facts and circumstances which led to the compromise settlement between Carolina Industrial Products, Inc. and the FAA, I will not recommend that Learjet provide engineering or technical support to the leading edge damage to N825D with the lawsuit still pending." The court construes the April 25 letter as meaning that until Learjet understands the FAA settlement agreement and thereby verifies that the FAA determined N825D is properly designated as 25D-263 or until plaintiffs dismiss the case, Learjet will not list N825D as an active airplane.
Ms. Beaurivage testified that N825D "has been considered active since the [resolution of the] FAA action." She also testified that N825D "has been supported and considered an active aircraft" but that she is "not sure at all what physical moment they entered it on the aircraft owner database." There was no evidence controverting her testimony that N825D is currently listed as an active aircraft.
While exhibit 13 and the April 25 letter provide strong evidence that Learjet did not immediately enter N825D into the customer service database after receiving notice of the FAA action, the court does not believe that a delay of two or three months in listing N825D as an active aircraft means that Learjet did not do what it promised in the November 1 letter or added a condition to those set out in the November 1 letter. The November 1 letter does not set out a time-frame for Learjet's promised actions should the FAA issue N825D a new airworthiness certificate. Because of the absence of a time-frame, the court construes the November 1 letter as meaning that Learjet will take the promised actions within a reasonable period of time following notice that the conditions precedent have been met. It would be an unreasonable interpretation of the November 1 letter to conclude that Learjet was not entitled to discover whether the conditions precedent were met before listing N825D as an active airplane. Thus, the court concludes that Learjet was entitled to verify that the FAA issued an airworthiness certificate to N825D and determine whether the FAA had found that N825D "is properly designated as Learjet 25D-263," which the court understands to mean that N825D complies with the type certificate requirements of 25D-263.
The evidence indicates that Mr. McConwell attached a copy of the airworthiness certificate to his April 4 letter notifying Learjet of the FAA action but, significantly, did not attach a copy of the settlement agreement disclosing the terms of the settlement. Thus, Learjet could not determine whether the conditions precedent were met based on Mr. McConwell's April 4 letter giving notice of the settlement with the FAA. The conclusion that the April 25 letter simply means that so long as the litigation is pending, Learjet intends to verify that the conditions precedent set out in the November 1 letter have been met before listing N825D as an active aircraft is consistent with exhibit 13, indicating that Learjet did not immediately list 25D-263 as an active aircraft. The court finds that delaying listing N825D as an active aircraft until Learjet determined that the conditions precedent in the November 1 letter were met does not constitute a violation of the promised action in the November 1 letter. Further, because neither the April 25 letter nor exhibit 13 conflict with Ms. Beaurivage's testimony that Learjet accepted the FAA decision and listed N825D as an active aircraft, the court finds that Learjet has placed the aircraft back on its list of active aircraft as promised in the November 1 letter and that it did so within a reasonable period of time following notice that the conditions precedent had been met.
There was no evidence showing that Learjet refused to sell parts to Carolina Products. While there was evidence that Learjet refused to support the repair of N825D by Flight International, the November 1 letter explains that Learjet will not "actively participate in any repair of the aircraft." The evidence did not indicate that the support requested by Flight International was the sale of parts. Because the November 1 letter promised only to list N825D as an active aircraft and sell parts to its owner, the refusal to support repairs by Flight International is not evidence indicating that Learjet did not fulfill its promise. In sum, the court finds that Learjet has done everything that it said it would do in its November 1, 2000 letter.
Learjet intended to do what it said it would do in the November 1 letter
Plaintiffs presented no evidence indicating that Learjet made representations about actions it would take in the November 1, 2000, letter when it did not intend to take those actions even if the conditions precedent were met. Ms. Beaurivage testified that she formulated the position on behalf of Learjet and authorized Mr. Sprague to inform plaintiffs of the position. Absent any evidence indicating that Ms. Beaurivage knew that Learjet would not do what she said it would do, the court finds that Learjet intended to add 25D-263 to the list of active airplanes and sell parts to its owners if certain conditions were met when it made the representation.
At the time of trial, plaintiffs were in no worse position because of Mr. Sprague's representations than if they had never been made
At the time of trial, N825D was repaired, had an airworthiness certificate, was considered active by Learjet and Learjet would sell parts to its owners like any other Learjet. Learjet still refused to "actively participate in any repair of the aircraft" because of product liability concerns, but Learjet's active participation in future repairs of N825D is not necessary because other Learjet-authorized repair facilities can perform the work. There was also no evidence indicating that N825D will ever need future repairs. Likewise, there was no evidence indicating that Learjet's refusal to actively participate in the future repair of N825D negatively affects the airplane's value.
• Conclusions of law
In order to prevail on the claim for promissory estoppel or the claim for fraud under Kansas law, plaintiffs must prove that they actually relied on Mr. Sprague's representations. Templeton v. Kansas Parole Board, 27 Kan. App. 2d 471, 474 (2000) (setting out the elements of promissory estoppel); Smith v. Stephens, 23 Kan. App. 2d 1013, 1015 (1997) (setting out the elements of fraud). The court found that plaintiffs did not so rely and, thus, plaintiffs may not prevail on either claim.
If plaintiffs had actually relied on Mr. Sprague's October 17 statement, the court holds that Mr. Sprague did not have authority to bind Learjet. The court found that Learjet did not give authority to or permit Mr. Sprague to make the representation on October 17 or hold out Mr. Sprague as having authority to make the same. As this court explained in Mulvaney v. St. Louis Southwestern R.R. Co., 1992 WL 370613 (D.Kan. Oct. 29, 1992), under Kansas law, "the relationship between an attorney and a client is one of agency and general rules of agency apply to that relationship." Because Mr. Sprague was not given actual authority to make the representation or apparent authority, defined by Kansas law as authority which "the principal knowingly permits the agent to exercise or which he holds him out as possessing," Mulvaney, 1992 WL 370613 at *2, Mr. Sprague could not bind Learjet to the representation he made on October 17.
In order to prevail on the claim for fraud, plaintiffs must prove that they justifiably relied on Mr. Sprague's representations, Smith, 23 Kan. App. 2d at 1015, and, in order to prevail on the claim for promissory estoppel, plaintiffs must prove that Learjet reasonably expected plaintiffs to act in reliance on Mr. Sprague's representations, Templeton, 27 Kan. App. 2d at 474. As explained above, the court believes that any reliance by plaintiffs on Mr. Sprague's representations made before the November 1, 2000 letter was unreasonable after plaintiffs received the November 1 letter and that Learjet should not have expected plaintiff to act in reliance on those earlier representations after November 1, 2000.
The parties stipulate in the pretrial order that Kansas law applies to these claims.
Because the court found that plaintiffs would have incurred no damages if they relied on representations made by Mr. Sprague before November 1, 2000, plaintiffs could only prevail if they proved that Learjet did not do what it represented it would do in the November 1 letter and that the conditions precedent to Learjet's actions in the November 1 letter were met. As explained above, the court found that the conditions precedent to Learjet's actions were not met and that Learjet did what it represented it would do in the November 1 letter if the conditions precedent were met. Thus, plaintiffs cannot prevail on either claim.
In order to prevail on the fraud claim, plaintiffs must prove that Learjet made the representation in the November 1 letter knowing it not to be true. Smith, 23 Kan. App. 2d at 1015. Because the court found that Learjet intended to do what it said it would do in the November 1 letter, plaintiffs cannot prevail.
As explained above, the court found that, measured from the date of the trial, plaintiffs had no damages. Plaintiffs argue that the court should measure damages from the date of April 3, 2001, the date that the FAA issued a new airworthiness certificate for N825D. Had Learjet represented in the November 1 letter that it would take the promised actions on the same day that the FAA issued an airworthiness certificate, plaintiffs would have a good argument. Instead, the November 1 letter did not specify a time frame in which Learjet agreed to take the promised actions if the conditions precedent were met. As explained earlier, the court believes that a reasonable interpretation of the letter allows Learjet time to verify that the conditions precedent were met before taking the promised actions. As the court found, Learjet ultimately did what it promised to do in the November 1 letter and that it did so within a reasonable time after the FAA issued the airworthiness certificate. Measuring damages from a point before Learjet had a reasonable opportunity to perform the promised actions, as the plaintiffs advocate, would result in plaintiffs getting both the increased value of N825D following Learjet's actions and damages for the decreased value to N825D prior to Learjet's actions, an impermissible double recovery.
In fact, plaintiffs did not put on any evidence that they were damaged at any time, such as by showing that a willing buyer offered to pay a certain sum on an unfulfilled condition that the plane were listed by Learjet.
To the extent that plaintiffs seek an injunction requiring that Learjet actively support the repair of N825D in the future, plaintiffs presented no evidence showing that N825D would need future repairs, thus they lack standing because they are not "immediately in danger of sustaining some direct injury," City of Los Angeles v. Lyons, 461 U.S. 95, 101-02 (1983). In addition, the evidence showed that, in the November 1 letter, Learjet represented that it would not actively support the repairs of N825D. Because the November 1 letter does not support a claim for an injunction and because the court found that reliance on any representations prior to November 1, 2000, was unreasonable following receipt of the November 1 letter, the court concludes that the evidence does not support plaintiff's claim for injunctive relief.
Judgement is entered in favor of defendants for all of these reasons.
IT IS THEREFORE ORDERED BY THE COURT that judgment be entered in favor of defendant Learjet on plaintiffs' claims of promissory estoppel and fraud.