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VFS Financing, Inc. v. Falcon Fifty LLC

United States District Court, S.D. New York

April 30, 2014

VFS FINANCING, INC., and GE EQUIPMENT CORPORATE AIRCRAFT TRUST 2012-1 LLC, Plaintiffs,
v.
FALCON FIFTY LLC, SKY KING LLC, PHILIP L. ROGERS, and ALISA K. ROGERS, Defendants,
v.
GENERAL ELECTRIC CAPITAL CORPORATION, and CANAL AIR LLC, Third-Party Defendants

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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For Plaintiffs and Third-Party Defendants: Christopher A. Lynch, Esq., Reed Smith, New York, NY.

For Defendants: Kenneth Michael Murray, Esq., Beugelmans, PLLC, New York, NY; Neil R. Lapinski, Esq., Philip A. Giordano, Esq., Wilmington, DE.

OPINION

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OPINION AND ORDER

Shira A. Scheindlin, U.S.D.J.

I. INTRODUCTION

VFS Financing, Inc. (" VFS" ) and GE Equipment Corporate Aircraft Trust 2012-1 LLC (" GEECAT" ) bring this diversity action against Falcon Fifty LLC (" Falcon Fifty" ), Sky King LLC (" Sky King" ), and Philip and Alisa Rogers seeking damages for the alleged breach of two financing agreements that facilitated defendants' purchase of two airplanes in 2009 and 2010. Defendants bring the following counterclaims: 1) breach of contract against VFS; 2) breach of the implied covenant of good faith and fair dealing against GEECAT; and 3) violation of the New York Retail Installment Sales Act, N.Y. Pers. Prop. § § 401, et seq. (" NYRISA" ) against both VFS and GEECAT. Defendants also bring the following claims in a third-party complaint: 1) tortious interference with contract against General Electric Capital Corporation (" GE Capital" ); 2) breach of contract against GE Capital; and 3) violation of NYRISA against both GE Capital and Canal Air LLC (" Canal" ).

Plaintiffs and third-party defendants now move to dismiss defendants' counterclaims and third-party claims under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. For the following reasons, the motion is GRANTED in part and DENIED in part.

II. BACKGROUND[1]

A. The Falcon Loan

Phil Rogers was the President and CEO of Catch the Wind, Inc. (" CTW" ), a company that develops, manufactures and sells laser-based wind sensing equipment.[2] Phil Rogers and his wife Alisa also sat on CTW's board of directors.[3] At some point in 2009, CTW " became interested in owning a corporate aircraft, a Dassault Falcon 50" (the " Falcon Aircraft" ),[4] and established Falcon Fifty LLC, a Delaware limited liability company whose members were CTW (75% ownership interest) and Tristar

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Aviation LLC (" Tristar" ) (25% ownership interest). Falcon Fifty was formed as a single purpose entity for the purpose of owning the aircraft. Phil and Alisa Rogers, through another LLC, are the members of Tristar. " The Rogers' ownership of Falcon Fifty, through Tristar, was intended to allow the Rogers' personal use of the Falcon Aircraft." [5]

Falcon Fifty purchased the Falcon Aircraft from GEECAT through a financing agreement with VFS (the " Falcon Loan" ). GEECAT is a limited liability company whose sole member is GE Capital and VFS is a wholly owned-subsidiary of GE Capital. VFS and GE Capital are both Delaware corporations.

The contract governing the Falcon Loan (the " Falcon Security Agreement" ), provides that " [Falcon Fifty] shall be in default under this Agreement . . . upon the occurrence of . . . any merger or consolidation involving [Falcon Fifty] . . . or any change in control . . . with respect to [Falcon Fifty]." [6] The Falcon Security Agreement further provides that " THIS AGREEMENT AND THE DEBT DOCUMENTS SHALL NOT BE CHANGED OR TERMINATED, NOR SHALL ANY WAIVER BE GIVEN, ORALLY OR BY COURSE OF CONDUCT, BUT ONLY IN A WRITING SIGNED BY BOTH PARTIES HERETO" and that " [n]o waiver by [VFS] of any default shall operate as a waiver of any other default or of the same default on a future occasion." [7] Phil and Alisa Rogers personally guaranteed the Falcon Loan.

B. The Sky King Loan

In 2010, Phil and Alisa Rogers, " through [Sky King], another single purpose entity," purchased a Raytheon Beech Premier 1A (the " Premier Aircraft" ) from Canal.[8] Canal is a wholly-owned subsidiary of GE Capital and affiliate of GEECAT.[9] VFS provided the financing for this purchase (the " Sky King Loan" ). The terms of the Sky King Loan are substantially similar to the Falcon Loan and also include a personal guarantee from the Rogers.

The Sky King Security Agreement provides

[Sky King] shall be in default under this Agreement and each of the other Debt Documents upon the occurrence . . . of any default under any other agreement beyond any applicable grace or cure periods set forth therein . . . between [Sky King], and Guarantor and/or parent entities, subsidiaries, or affiliates (on the one hand) and [VFS] (or any of its affiliates, subsidiaries or parent entities (on the other hand).[10]

The Sky King Security Agreement also includes waiver provisions identical to the Falcon Security Agreement. Both agreements include a choice of law provision stating that the agreements are governed by New York law and that any dispute should be adjudicated in either federal or state courts in New York. On June 27, 2012, VFS assigned all of its rights, title, and interests in and to the Sky King Loan to GEECAT, but remained the subservicer of the loan.

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C. Change in Falcon Fifty ...


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