Tort/Negligence – Aircraft Purchase – Defendants’ Advice – FAA Charter Certificate – Airworthiness

Carmayer, LLC v. Koury Aviation, Inc. (Lawyers Weekly No. 020-087-17, 44 pp.) (Michael Robinson, J.) 2017 NCBC 80

Holding: The record clearly shows that defendant Hurlocker is an expert in getting planes included on Federal Aviation Regulation Part 135 certificates; however, there is no such showing for defendant Koury. Therefore, plaintiff may go forward with this part of its negligent misrepresentation claim against Koury but not Hurlocker.

Plaintiff’s motion to amend its complaint is denied. Defendants’ motion for summary judgment is granted in part and denied in part.

Facts

Plaintiff sought to buy a plane and have it certified under defendant Koury Aviation’s Federal Aviation Regulation Part 135 certificate so that defendants could rent out the plane and generate a profit for plaintiff. Plaintiff found a 1976 Cessna 421C twin-engine propeller aircraft and bought it.

Defendants were unable to get the Cessna certified under Koury Aviation’s Part 135 certificate in 2014. Since then, plaintiff has spent about $200,000 on maintenance and repairs for the Cessna.

Motion to Amend

The court denies plaintiff’s motion to amend its complaint to assert an alternative claim for breach of contract. One of plaintiff’s members, Amiel Rossabi, is a licensed North Carolina attorney, and he signed the complaint as counsel for plaintiff. In his deposition, he testified that a breach of contract was not alleged because he “chose[] to allege other things.” As the material facts were clearly known to plaintiff from the outset, its 17-month delay in seeking to amend its complaint was entirely undue.

Negligent Misrepresentation

Plaintiff asserts that, prior to its purchase of the Cessna, defendants made the following negligent misrepresentations to plaintiff: (1) the accuracy of defendants’ pro forma regarding potential profits; (2) defendants were experts in chartering aircraft under Part 135; (3) defendants would inspect the Cessna and the logbooks and advise plaintiff if the plane was the right one to purchase for Part 135 certification; (4) the costs of putting the Cessna on a Part 135 certificate; and (5) defendants knew what was required to put the Cessna on Koury Aviation’s Part 135 Certificate by the end of 2014. Additionally, plaintiff contends that, (6) after it purchased the Cessna, defendants misrepresented the airworthiness of the plane and the status of adding the aircraft to Koury Aviation’s Part 135 Certificate.

First, plaintiff did not justifiably rely on the pro forma because it was a contingent future estimate of the potential profits from to the Cessna. Further, plaintiff did not make any inquiry into the pro forma. Defendants are entitled to summary judgment on plaintiff’s negligent misrepresentation claim to the extent the claim is based on the pro forma.

Second, the undisputed evidence shows that, in three years, while defendant Hurlocker was Koury Aviation’s director of maintenance, Koury Aviation added and operated six jets on Koury Aviation’s Part 135 Certificate with little to no problems with the FAA, and, according to plaintiff’s expert, an individual who has added six aircraft to a Part 135 certificate in three years is an expert in putting aircraft on a Part 135 certificate.

Further, Hurlocker testified that he participated in getting a Cessna twin-engine plane on a Part 135 certificate for another charter company in 1987 and that he maintained the plane on the Part 135 certificate until 2005 or 2006.

Therefore, defendants are entitled to judgment as a matter of law on plaintiff’s negligent misrepresentation claim to the extent that such claim is based on defendants’ representation that Hurlocker was an expert.

However, there is a genuine issue of material fact as to whether defendants’ alleged representation that defendant Koury was an expert in chartering aircraft under Part 135 was made without reasonable care. Plaintiff submitted deposition testimony of Koury stating that he does not know how to put a plane on a Part 135 certificate and that he has never known how to do so.

Defendants’ motion for summary judgment on plaintiff’s negligent misrepresentation claim is denied to the extent that such claim is based on defendants’ representation that Koury was an expert.

Third, Hurlocker’s representation that he was going to inspect the plane and advise plaintiff and any alleged omissions by Hurlocker, are not the supplying of information necessary to serve as a basis for a negligent misrepresentation claim. The record is devoid of any evidence that Hurlocker represented that he was capable of inspecting the plane to determine whether it was a good plane to purchase, airworthy, or easily capable of being added to Koury Aviation’s Part 135 Certificate. Therefore, defendants are entitled to summary judgment on plaintiff’s negligent misrepresentation claim to the extent that claim is based on representations regarding Hurlocker’s inspection.

Fourth, there is no evidence in the record that Hurlocker represented that the price estimates he provided covered all repairs necessary to get the plane on a Part 135 Certificate, or that plaintiff’s member Rocco Scarfone asked for such specific price estimates. Therefore, defendants are entitled to summary judgment on plaintiff’s negligent misrepresentation claim to the extent the claim is based on representations regarding the costs of putting the Cessna on Koury Aviation’s Part 135 Certificate.

Fifth, it is undisputed that defendants represented to plaintiff that the Cessna would be added to Koury Aviation’s Part 135 Certificate by the end of 2014 and that it was not, and still has not been, certified under Part 135. However, there is a genuine issue of material fact as to whether defendants made this representation without reasonable care.

There is a difference of opinion in the industry as to whether the FAA requires an aircraft to be maintained on the factory maintenance program. Given the conflicting expert opinions, there is a genuine issue of material fact as to whether defendants negligently misrepresented that they knew what was required to put the Cessna on Koury Aviation’s Part 135 Certificate by the end of 2014.

Sixth, the parties’ lease agreement governs defendants’ duty to properly advise plaintiff of the Cessna’s condition and certification status; as a result, plaintiff’s negligent  misrepresentation claim based on defendants’ representations after the purchase of the Cessna are barred by the economic loss rule.

Negligence

Because plaintiff’s negligence claim is indistinguishable from its negligent misrepresentation claim, defendants are entitled to judgment as a matter of law on plaintiff’s negligence claim.

Gross Negligence

Plaintiff contends that defendants were grossly negligent in encouraging Scarfone, Rossabi, and their guests to use the Cessna from November 2014 through May 2015 when it was not airworthy.

Defendants have pointed to undisputed evidence that they did not know the aircraft was not airworthy during the period in question. Defendants first learned that the 2014 annual inspection was not properly performed and that the plane was not airworthy in June 2015, at which time defendants sent the plane for a full annual inspection.

The undisputed evidence shows that Defendants did not intentionally or deliberately encourage Scarfone and Rossabi to fly on the Cessna knowing that it was unsafe. Moreover, there is no evidence that plaintiff sustained any damage as a result of flying the plane when it was not airworthy.

Breach of Fiduciary Duty

The undisputed evidence shows that plaintiff was in control of every aspect of the purchase of the Cessna and that defendants did not possess all the authority or technical information regarding the plane. Plaintiff identified the Cessna and independently selected and hired Oklahoma mechanic Barry Bredensteiner to do the pre-purchase inspection, and Steve Montgomery of Cimarron Aviation in Tulsa – someone whom neither Koury nor Hurlocker knew of – conducted the 100-hour annual inspection prior to plaintiff buying the plane.

Although Hurlocker asked Scarfone to call him to go over Hurlocker’s findings, Scarfone did not call him. Instead, Scarfone proceeded to close on the purchase of the plane, demonstrating defendants’ lack of domination and influence over plaintiff.

Plaintiff merely contends that defendants held themselves out as experts and that plaintiff was relying on defendants. This is insufficient to create a fiduciary relationship.

Motions granted in part, denied in part.