McMahan Jets, LLC v. Roadlink Transp., Inc., Civil Action No. 2:11–cv–03112–WGY.

• Decision Date: 18 December 2014
• Docket Number: Civil Action No. 2:11–cv–03112–WGY.
• Citation: 68 F.Supp.3d 817
• Parties: McMAHAN JETS, LLC, Plaintiff, v. ROADLINK TRANSPORTATION, INC., Rizo Jet Aviation Services, LLC, and John/Jane Doe, Defendants.
• Court: U.S. District Court — Western District of Tennessee

68 F.Supp.3d 817

McMAHAN JETS, LLC, Plaintiff

v.ROADLINK TRANSPORTATION, INC., Rizo Jet Aviation Services, LLC, and John/Jane Doe, Defendants.

Civil Action No. 2:11–cv–03112–WGY.

United States District Court, W.D. Tennessee, Western Division.

Filed Dec. 17, 2014.

Signed Dec. 18, 2014.

Ralph D. Golden, Golden Law Firm, Adam M. Nahmias, Law Offices of Libby & Nahmias, Memphis, TN, Wayne E. Ferrell, Jr., Jackson, MS, James K. Dukes, Sr., Dukes, Dukes and Wood, Hattiesburg, MS, for Plaintiff.

J. Brook Lathram, Annie Tauer Christoff, John S. Golwen, Jonathan Edward Nelson, Bass Berry & Sims PLC, Memphis, TN, for Defendant Roadlink Transportation, Inc.

John C. Robertson, Memphis, TN, pro se.

FINDINGS OF FACT, RULINGS OF LAW, AND ORDER FOR JUDGMENT

YOUNG, District Judge.¹

I. INTRODUCTION

McMahan Jets, LLC (“McMahan”) brings this diversity case against Roadlink Transportation, Inc. (“Roadlink”), Rizo Jet Aviation Services, LLC (“Rizo”), and John and Jane Doe, the purported owners of Roadlink. The case arises from the sale of a Cessna Citation Aircraft (“the Aircraft”) by Roadlink to McMahan. The Aircraft is now, and was at the time of the sale, not airworthy. The central issue in this case is who should bear the loss: the grossly negligent seller or the nearly equally careless buyer?

Much of the procedural history of this action has already been summarized by the Court in a previous opinion, McMahan Jets, LLC v. Roadlink Transp., Inc., 926 F.Supp.2d 999, 1001–02 (W.D.Tenn.2013), and as such, will only be briefly limned here.

On November 10, 2011, McMahan filed a complaint in the Chancery Court of Shelby County, Tennessee. Compl. Breach Contract & Other Relief (“Compl.”), ECF No. 1–2. Rizo timely removed on December 21, 2011. Rizo Jet Aviation Servs., LLC's Not. Removal & Mot. Dismiss Improper Venue, ECF No. 1. After entertaining various motions, on February 28, 2013, this Court denied Roadlink's motion to dismiss for lack of personal jurisdiction, and the case proceeded toward trial. McMahan, 926 F.Supp.2d at 1005.

On November 25, 2013, Roadlink filed a motion for summary judgment on all counts, Accompanied by a memorandum and statement of material facts. See Mot. Summ. J. Roadlink Transp., Inc. (“Roadlink's Mot.”), ECF No. 94; Am. Mem. Roadlink Transp., Inc. Supp. Mot. Summ. J. Compliance With Ct.'s Order Dec. 5, 2013 (“Roadlink's Mem.”), ECF No. 97–1. McMahan responded on January 8, 2014. See McMahan Jets, LLC's Resp. Am. Statement Material Facts Filed Supp. Mot. Summ. J. Roadlink Transp., Inc. & McMahan Jets, LLC's Additional Material Facts (“McMahan's Resp.”), ECF No. 98; McMahan Jets, LLC's Br. Opp'n Mot. Summ. J. Roadlink Transp., Inc. (“McMahan's Opp'n”), ECF No. 99. Roadlink replied on January 15, 2014. See Reply Mem. Roadlink Transp., Inc. Supp. Mot. Summ. J., ECF No. 101.

This Court held a motion session on February 14, 2014, at which time it took the matter under advisement. Minute Entry, Feb. 14, 2014, ECF No. 102. Thereafter, the parties agreed to forego the summary judgment motion and to try the case to the Court. Minute Entry, Mar. 12, 2014, ECF No. 108. A two-day jury-waived trial ensued on May 1 and 2, 2014. Minute Entry, May 1, 2014, ECF No. 121; Minute Entry, May 2, 2014, ECF No. 122.

II. FINDINGS OF FACT

The Aircraft is a Cessna Citation, a sleek swept-wing corporate jet with a posh passenger cabin that can accommodate four to five passengers in overstuffed chairs or couches. While the Aircraft was in service in Venezuela in the 1990s, CR Aviation of Orlando, Florida maintained the Aircraft. During this period, the interior passenger space was reconfigured, replacing two chairs with a couch situated atop the Aircraft's forward carry-through spar on the floor of the passenger compartment. The forward carry-through spar is a major structural component of an aircraft, being the wing spar in the center section within the fuselage and the attach point for the wings. As part of this reconfiguration, certain holes were bored in the forward carry-through spar to accommodate the speaker system for the passenger compartment. Drilling such holes is not a major alteration in an aircraft. A Styrofoam close-out panel was fitted around the spar and the floor was then tastefully carpeted (that is to say, the holes in the forward carry-through spar were not visible to a casual inspection).

Unsurprisingly, aircraft—as mechanically complex flying objects—are inspected. Although it does not appear on this record that periodic inspections are required, various inspections take place, most often when aircraft are bought and sold. Inspections can be at various levels of detail, from cursory to very detailed. The most detailed type of inspection is a “phase 1–5 inspection.” This most detailed type of inspection is expensive, with estimates varying—dependent on aircraft type, age, and history of defects—from $35,000 to over $100,000. Everyone agrees that a phase 1–5 inspection is sufficiently thorough to reveal the holes in the forward carry-through spar.

And so it was with this Aircraft. During a phase 1–5 inspection in 2000, CR Aviation had discovered the several holes drilled in the Aircraft's forward carry-through spar. CR Aviation nevertheless issued an airworthiness certificate. Similarly, in 2001, Sierra–NA (“Sierra”) performed another phase 1–5 inspection.

While it was owned by Roadlink, the Aircraft underwent at least two further phase 1–5 inspections. Cliff Gottschalk (“Gottschalk”) was Roadlink's Director of Avionics. A skilled FAA-certified mechanic, he himself performed a phase 1–5 inspection on the Aircraft in 2004 and again in October 2007. In the course of the 2004 inspection, he noted “holes in fwd spar [i.e. the forward carry-through spar],” but said “previously OK'd by CR Aviation and Sierra–NA” and returned the plane to service as airworthy. An experienced pilot, Gottschalk flew this Aircraft for approximately 250 hours both before and after these two inspections.

Enter Dr. Lynn McMahan (“Dr. McMahan”). Dr. McMahan is a successful physician and resident of Hattiesburg, Mississippi with a penchant for flying. Earning his pilot's license in 1998, McMahan had twenty to thirty hours of “second seat,” or co-pilot, flying in Cessna Citations by 2007. He liked the Citation model and, wanting a plane with the ability to fly from Mississippi to the West Coast, he told his mechanic to start looking. Then, in November 2007, McMahan himself saw the Aircraft in Uvalde, Texas and commenced inquiries seeking to purchase it.

At this time, the Aircraft was in for maintenance by Sierra. Manuel Rizo (“Rizo”) was an FAA-certified aircraft mechanic employed by Sierra. Rizo got a call from Xavier Barrios (“Barrios”), who said, “A Doctor is looking at [the Aircraft]. Is it for sale?”

Rizo called Gottschalk, with whom he was acquainted. Gottschalk got back to him, saying, “Flying J [a Roadlink subsidiary] would take an offer.” Sensing a financial opportunity, Rizo set himself up as a broker for Roadlink. This was the first time he had ever acted in that capacity.

On his part, Dr. McMahan, having now focused his interest on the Aircraft, asked his pilot Paul Daughtry (“Daughtry”) to help him with the purchase of the Aircraft. Daughtry took upon himself the role of broker for McMahan, and a faithless agent he proved to be.

Rizo knew that Roadlink wanted $1,900,000 for the Aircraft. Daughtry knew Dr. McMahan was willing to pay $2,100,000 for the Aircraft. Rizo and Daughtry agreed that they would structure a sale from Roadlink to Rizo² for $1,900,000 and from Rizo to McMahan for $2,100,000.³ Unbeknownst to McMahan, the two would then split the $200,000 spread, characterizing it as a broker's fee. While the record is unclear on the point, it appears Roadlink was willing to go along with this arrangement to avoid paying Rizo a broker's commission.

Rizo and Daughtry then drafted the two contracts from other aircraft purchase and sale agreements with which they were familiar. The two contracts are in all material respects—save for purchase price—mirror images of each other.⁴

On January 10, 2008, McMahan entered into the purchase agreement (the “Agreement”) with Rizo. See Roadlink's Mot., Ex. F, Aircraft Purchase Agreement Rizo Jet Aviation Servs. LLC (“Agreement”), ECF No. 94–8. This Agreement set the purchase price of the Aircraft at $2,100,000. Id. § 2.1. The Agreement contains several clauses germane to this action.

First, it set out a “Pre–Purchase Inspection” process, whereby the Agreement was “subject to Purchaser's pre-purchase inspection,” including a test flight. Id. § 3.1. The Agreement also obligated the seller to “provide copies of logbooks, engine covers and other Aircraft accessories for inspection,” and to “deliver the Aircraft for the pre-purchase inspection with all systems, functioning normally and in compliance with all Airworthiness Directives and Mandatory Service Bulletins.” Id. § 3.2. After completing the inspection, McMahan would then provide a “list of discrepancies” to the Seller, who would have “[five] business days to review the list” and either “(a) pay to have the Airworthy discrepancies repaired at Seller's expense and to complete the sale; (b) reduce the Purchase Price of the Aircraft to Purchaser's satisfaction; or (c) to decline to pay the costs of defined Airworthy discrepancies and to terminate this Agreement.” Id. After the inspection, the purchaser was to “sign a Technical Acceptance Letter,” which would list the relevant discrepancies. Id. § 3.3. The final decision to proceed with the agreement was McMahan's—as “[a]cceptance or non-acceptance of the Aircraft [was to] be at Purchaser's sole discretion.” Id. § 3.4.

Second, the Agreement set out three warranty conditions. The Agreement stated that the:

Aircraft will be delivered “AS IS WHERE IS”, subject to the Seller's satisfaction of the conditions of Section 3.2, if necessary, with all available log books, ground covers, operating manuals, loose equipment, wiring

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