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Rayfield Aviation, LLC v. Lyon Aviation, Inc.

United States District Court, M.D. North Carolina

March 31, 2014

RAYFIELD AVIATION, LLC, Plaintiff,
v.
LYON AVIATION, INC., Defendant.

MEMORANDUM OPINION AND ORDER

THOMAS D. SCHROEDER, District Judge.

Before the court in this contract dispute are cross-motions for summary judgment pursuant to Federal Rule of Civil Procedure 56. Plaintiff Rayfield Aviation, LLC ("Rayfield"), moves for partial summary judgment as to liability on its breach of contract claim. (Doc. 120.) Defendant Lyon Aviation, Inc. ("Lyon"), moves for summary judgment on Rayfield's claim. (Doc. 121.) For the reasons set forth below, Rayfield's motion will be denied, Lyon's motion will be granted, and the case will be dismissed.

I. BACKGROUND

A. The Parties

Rayfield is a limited liability company organized in 2007 under Delaware law with its principal place of business in North Carolina.[1] (Doc. 98 ¶ 1; Doc. 99 ¶ 1.) Beginning in 2008, George Townsend acted as Rayfield's Vice President and Chief Financial Officer. (Townsend 30(b)(6) Dep. at 15.)[2] During the relevant period, Rayfield's major assets included two airplanes: a 1988 Gulfstream G-IV (the "G4"); and a Hawker. (Id. at 56.)

Lyon is a Massachusetts corporation with its principal place of business in Pittsfield, Massachusetts. (Doc. 98 ¶ 2; Doc. 99 ¶ 2; Mike Lyon Aff. ¶ 3.)[3] During the relevant time, Mike Lyon was the corporation's president. (Mike Lyon Aff. ¶ 2.) Lyon is a family-owned business that provides fuel, maintenance, hangar services, flight instruction, charter flights, and charter aircraft management. (Id. ¶ 3.) Charter flights operations constitute a significant portion of its business. (Id. ¶ 4.)

B. The Contract

In March 2009, Townsend and Mike Lyon began discussing the possibility of a relationship between their two companies. Each enjoyed full responsibility to negotiate on behalf of his respective party. (Doc. 61-1 ¶ 3; Mike Lyon Aff. ¶ 5.) On March 6, Mike Lyon sent Townsend an introductory letter describing Lyon's business and thanking Townsend for considering Lyon as Rayfield's jet management company. (Doc. 126-17 at 3-4.) The letter included a bullet-point list of proposed contract terms and provided Townsend with contact information for persons affiliated with Lyon. (Id. at 5-6.) After exchanging several drafts (Docs. 124-21, 124-22, 124-25, 124-26, 124-27), the parties entered into an "Aircraft Lease and Management Services Agreement" (the "Agreement") on May 1, 2009, for a term of up to three years. (Doc. 124-8.)

The Agreement provided that Rayfield would lease its G4 to Lyon "for purposes of enabling [Lyon] to conduct charter flights." (Id. § 3.1.) In exchange for a management fee of $26, 666.67 per month (id. §§ 2.17, 5.1, Schedule 1 ¶ 3), Lyon agreed to pay Rayfield rent "in an amount equal to the Charter Revenues collected by [Lyon] during the preceding month, " with the incentive that if charter flights exceeded 150 hours in that period, Lyon was to keep fifteen percent of the month's excess Charter Revenue (id. § 4.1). Charter Revenue was defined as "100% of (a) the actual invoice charges for such flights, (b) the fuel surcharges for such flights, and (c) all forfeited deposits or other amounts realized from cancelled or delayed flights." (Id. § 2.7.) Charter Revenue was not to include "incidental expenses charged to the charter customers associated with overnights, landing fees, catering, deicing taxes and similar expenses." (Id.)

C. Course of Performance

After executing the Agreement, Lyon sent Rayfield monthly statements that included invoices for each charter flight operated in the previous month. (Townsend 30(b)(6) Dep. at 139.) Each statement included a summary of revenue for the month's charter flights as well as a copy of the invoice Lyon sent to each charter customer. (See, e.g., Doc. 124-34 at 3-11 (January 2010 statement and invoices).) The revenue summary included an entry for each charter flight taken that month and recorded hours flown, rate per hour, total invoiced amount, total fuel surcharge, any commission to Lyon (which was left blank if Lyon did not reach its 150-hour incentive), and net amount to Rayfield. (See, e.g., id. at 3 (summary of revenue for January 2010).) The net amount paid to Rayfield was the sum of the total invoiced amount and the fuel surcharge (and any forfeited deposits, if applicable), less any commission for exceeding the 150-hour incentive. (Id.) The attached invoices, which were copies of what Lyon had sent its charter customers, included the total invoiced amount (the rate per hour for the flight multiplied by total hours flown), the fuel surcharges, and any other expenses associated with that flight for which Lyon billed the customer, such as "handling fees, " "overnight fees, " "landing fees, " "catering, " and "flight attendant fees." (See, e.g., id. at 4-11 (January 2010 invoices); Mike Lyon Dep. I at 88-89.)[4] Rayfield does not dispute that the Agreement contemplates Lyon's passing certain expenses of operating each charter flight to its charter customers. (Townsend 30(b)(6) Dep. at 159-60, 163, 165; Mike Lyon Dep. I at 76.)

D. The Alleged Breach

Monthly during the first year of the contract, Lyon sent Rayfield the revenue, summaries, and copies of charter invoices, as outlined above, and Rayfield complied with its obligations under the Agreement. On two monthly cycles, Rayfield also paid Lyon performance bonuses under the Agreement for exceeding the 150-hour target. (Eugene Rayfield 30(b)(6) Dep. at 197-98.)[5] By May 2010, however, Townsend began to express concern over Rayfield's revenue under the Agreement.[6] After receiving the April 2010 statement, Townsend wrote to Mike Lyon: "I'm a bit taken aback with the distribution of reported revenue between charter revenue (our revenue) and incidental expenses (your revenue) as defined in Section 2.7 of our [A]greement." (Doc. 124-17 at 2.) Townsend believed that Rayfield was to receive as Charter Revenue all amounts Lyon's invoices reflect were charged to Lyon's charter customers, except for "minor" expenses (which Townsend contends should be one or two percent of Charter Revenue). (Townsend 30(b)(6) Dep. at 134-35, 161.) According to Rayfield, Lyon withheld revenue from the total it should have received, principally in the form of large, round "handling fees" Lyon included on many of its invoices to customers (see, e.g., Doc. 124-34 at 5 ($14, 000 handling fee)). (Townsend 30(b)(6) Dep. at 152; Townsend Dep. at 132-33.)[7]

On January 19, 2011, Rayfield gave thirty days' notice of termination of the Agreement. (Doc. 124-9 at 2.) Rayfield calculates that over their relationship Lyon improperly excluded from revenue $822, 800.60 in charges, which Lyon contends are "incidental expenses" under Section 2.7. (Eugene Rayfield 30(b)(6) Dep. at 73.) "Handling fees" represent $654, 071.91 of this amount, in addition to flight attendant fees, fees for additional flight crew, credit card conversion fees, and direct operating costs. (Id. at 137-38.) "Handling fees" encompass an assortment of expenses associated with specific flights, and there is no dispute that under the Agreement Lyon is ...


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