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Jet Parts Engineering, Inc. v. Quest Aviation Supply, Inc.

United States District Court, W.D. Washington, Seattle

March 23, 2017

JET PARTS ENGINEERING, INC., Plaintiff,
v.
QUEST AVIATION SUPPLY, INC., et al., Defendants.

          ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

          RICARDO S. MARTINEZ CHIEF UNITED STATES DISTRICT JUDGE.

         I. INTRODUCTION

         This matter comes before the Court on Defendants' Motion for Summary Judgment. Dkt. #52. Defendants ask the Court to dismiss all of Plaintiff's claims on the basis that it cannot meet the elements of its claims on the facts in this record. Id. Plaintiff opposes summary judgment, arguing that disputes of material fact require this Court to allow a jury to decide the claims. Dkt. #69-1. For the reasons discussed herein, the Court GRANTS IN PART AND DENIES IN PART Defendants' Motion for Summary Judgment.[1]

         II. BACKGROUND

         This matter arises out of a contract dispute between the parties. Plaintiff Jet Parts Engineering, Inc. (“JPE”) is a Washington corporation. Dkt. #19 at ¶ 1.1. JPE is engaged in the business of designing, manufacturing, distributing, and selling replacement jet parts. Dkt. #19 at ¶ 1.1. Defendant Quest Aviation Supply, Inc. (“Quest”) is a California corporation previously engaged in the business of designing, manufacturing and selling replacement airplane parts. Id. at ¶ 1.2. Defendant Brent K. de Ruyter was the CEO and the sole shareholder of Quest. Id. at ¶ 1.3. JPE and Quest designed, manufactured, distributed, and sold replacement jet parts pursuant to Parts Manufacturer Approval (“PMA”) from the Federal Aviation Administration (“FAA”). Dkts. #53 at ¶ ¶ 2 and 3 and #60 at ¶ 2. The grant of PMA authority means that approved parts may be installed on commercial aircrafts as an equivalent alternative to corresponding original equipment manufacturer (“OEM”) parts. Id.

         At the end of 2012 and beginning of 2013, JPE and Quest entered into negotiations for the sale of Quest to JPE. Dkts. #60 at ¶ 5 and #53 at ¶ ¶ 6-10 and Exs. A-D thereto. There were several offers from JPE; however, the final offer was to purchase Quest for $1.7 million and employ Mr. de Ruyter as a consultant for five months. Dkt. #60 at ¶ 10 and Ex. D thereto. Ultimately, the sale was not consummated. Instead, JPE and Quest entered into two Distribution Agreements, which provided that JPE would attempt to sell Quest-manufactured parts to two airlines - Air France and Delta. When those airlines chose to purchase such parts, Quest would provide them to JPE based on purchase orders from JPE to Quest. Dkts. #60 at ¶ ¶ 5-8 and Exs. A and B thereto and #53 at ¶ 12 and Exs. E and F thereto.

         In March 2014, Mr. de Ruyter received an unsolicited offer from HEICO, an aircraft parts supplier headquartered in Florida, to purchase Quest's assets. Dkt. #53 at ¶ 13. The offer was to purchase the assets for all cash, and was in an amount significantly higher than what had previously been offered by JPE. Dkt. #53 at ¶ 13. Quest informed JPE of the offer. Although JPE subsequently negotiated with Quest to purchase its assets, Quest ultimately accepted HEICO's offer. Dkts. #60 at ¶ ¶ 11-12 and #53 at ¶ 13. After the sale of the assets to HEICO, the proceeds were distributed to Quest's sole shareholder, Mr. de Ruyter. Dkt. #62, Exs. A at 15:11-15 and E. More specific facts surrounding this transaction and the claims resulting therefrom are further discussed below.

         On April 3, 2015, JPE filed the instant lawsuit. Dkt. #1. JPE now alleges causes of action for breach of contract against both Quest and Mr. de Ruyter, unjust enrichment against both Quest and Mr. de Ruyter, and fraudulent transfer against Quest. Dkt. #29 at ¶ ¶ 4.1-4.40. Defendants have moved for summary judgment on all claims.

         III. DISCUSSION

         A. Standard of Review for Motions of Summary Judgment

         Summary judgment is appropriate where “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). In ruling on summary judgment, a court does not weigh evidence to determine the truth of the matter, but “only determine[s] whether there is a genuine issue for trial.” Crane v. Conoco, Inc., 41 F.3d 547, 549 (9th Cir. 1994) (citing Federal Deposit Ins. Corp. v. O'Melveny & Meyers, 969 F.2d 744, 747 (9th Cir. 1992)). Material facts are those which might affect the outcome of the suit under governing law. Anderson, 477 U.S. at 248.

         The Court must draw all reasonable inferences in favor of the non-moving party. See O'Melveny & Meyers, 969 F.2d at 747, rev'd on other grounds, 512 U.S. 79 (1994). However, the nonmoving party must make a “sufficient showing on an essential element of her case with respect to which she has the burden of proof” to survive summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Further, “[t]he mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff.” Anderson, 477 U.S. at 251.

         B. Applicable Law

         The parties appear to agree that this matter is governed by Washington law. Indeed, the Distribution Agreements at issue contain a governing law provision that provides for governance and construction of the Agreements under Washington law. Dkts. #57-5 at ¶ 14.9 and #57-6 at ¶ 14.9. Accordingly, the Court applies such law to the instant motion.

         C. Breach of Contract Claims

         Defendants first argue that Plaintiff cannot prove breach of contract against either Quest or Mr. de Ruyter. Dkt. #52 at 10-18. To prevail on a breach of contract claim under Washington law, a plaintiff must establish (1) the existence of a contractual duty, (2) defendant's breach of that duty, and that (3) defendant's breach of that duty caused damages to the plaintiff whom the duty is owed. Nw. Indep. Forest Mfrs. v. Dep't of Labor & Indus., 78 Wn.App. 707, 712, 899 P.2d 6 (1995). Plaintiff alleges that Defendants breached the Distribution Agreements in multiple ways (dkt. #29 at ¶ 4.5), addressed in turn below.

         1. Right of First Refusal

         Plaintiff alleges that Quest breached the Distribution Agreements by failing to provide Plaintiff a good faith opportunity to match HEICO's bid or option to purchase Quest's assets. Dkt. #29 at ¶ 4.5(c). Section 13.2 of the Agreements reads:

During the term of this Agreement, and for a period of six (6) months thereafter, in the event SUPPLIER decides to offer any of its assets, or stock for sale, SUPPLIER agrees to notify DISTRIBUTOR of such intent and provides [sic] the DISTIRBUTOR with an opportunity to meet any other potential buyer's terms and conditions.

Dkt. #57, Exs. E and F at ¶ 13.2. Thus, the Agreements gave rise to a duty by Quest to inform JPE of its intent to sell its assets and provide JPE with an opportunity to meet the potential buyer's terms and conditions.

         The parties agree that on March 28, 2014, Mr. de Ruyter notified Vice President and Director of Operations of JPE, Nadim Fattaleh, of HEICO's offer. Dkts. #53 at ¶ 13, Ex. H and #60 at ¶ 11, Ex. D. JPE acknowledges that such “notice was pursuant to § 13.2 of the Distribution Agreements.” Dkt. #60 at ¶ 11. Mr. Fattaleh thanked Mr. de Ruyter, and stated that JPE was interested in the opportunity to meet the terms and conditions of the offer. Dkt. #60, Ex. D. He asked for a copy of the offer from the other party, “after redacting any information you are not allowed to share with us, ” and Quest's most recent financial statement. Id. (emphasis added). Quest provided a redacted version of the offer, which did not reveal the identity of the proposed purchaser. Dkt. #53, Ex. H. The redacted version did identify the following terms: proposed purchase price, escrow, inventory, representations and warranties, indemnification (without identifying the proposed indemnitee), real estate (without identifying the proposed purchaser), and expenses.[2] Id. Quest also provided its most recent financial statement. Id. The “purchase price” term contained no redactions, and stated that transaction structure would be a purchase of all assets for a cash amount (less escrow) on a debt free basis. Id.

         On April 1, 2014, Mr. Fattaleh responded to Mr. de Ruyter, stating that the offer had been redacted to the point where JPE was unable to fully evaluate it. Dkt. #53, Ex. I. Accordingly, Mr. Fattaleh asked for a copy of the agreement that essentially included every term and redacted only the Offeror's name. Dkt. #53, Ex. I. Mr. de Ruyter responded that the redacted offer represented the terms and conditions of the potential buyer, and that the redactions were only non-essential items that protected the anonymity of the buyer. Id. Mr. de Ruyter then stated that the Distribution Agreement did not obligate him to do anything more that provide the applicable terms and conditions, which he had done, and asked for a response from JPE. Id.

         In response, JPE sent a Letter of Intent offering to acquire Quest for the same purchase price in cash. Dkt. #53, Ex. L. However, the offer was structured such that the purchase price would be paid in installments, with a sum certain up front, a sum certain at closing, and the balance to be paid in the form of earn out payments over the course of ten years. Id. The offer also included an option for the continued employment of Quest's President and CEO for five years, and other terms. Id. As noted above, Quest rejected JPE's offer.

         JPE now essentially argues that Quest never provided it with a fair opportunity to meet the terms and conditions of HEICO's offer because it was only provided with a heavily redacted version of the offer, which prevented them from making a meaningful offer. Dkt. #69-1 at 18. JPE further asserts that Quest's actions are questions of material fact. Id. The Court disagrees.

         With respect to materiality, the Court notes that “the substantive law will identify which facts are material.” Anderson, 477 U.S. at 248. Specifically, a “material” fact is one which is “relevant to an element of a claim or defense and whose existence might affect the outcome of the suit.” T.W. Electrical Serv., Inc. v. Pacific Electrical Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987). Mere “[d]isputes over irrelevant or unnecessary facts, ” therefore, “will not preclude a grant of summary judgment.” Id. Determining whether a “genuine” issue exists is often a close question. Id. The Court must consider the substantive evidentiary burden the nonmoving party must meet at trial - e.g. a preponderance of the evidence in most civil cases. Anderson, 477 U.S. at 252. No genuine issue for trial exists where the record, taken as a whole, could not lead a rational trier of fact to find for the non-moving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citing First Nat. Bank of Ariz. V. Cities Service Co., 391 U.S. 253, 289, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968)).

         In this case, the duty set out in § 13.2 of the Distribution Agreements was that Quest was to provide notice of intent to sell its assets and provide an opportunity to JPE to meet the other potential buyer's terms and conditions. There is no dispute that Mr. de Ruyter provided such notice prior to the sale of its assets to HEICO. While JPE asserts that it could not make a meaningful offer because of the redactions to HEICO's offer, the record demonstrates that the material terms were conveyed, and that the redactions did not hide anything material to the purchase price or purchase structure. Moreover, JPE does not identify which redacted provisions, if any, would have meaningfully informed its offer had it known about such provisions at the time it made its offer. Thus, on this record, the Court agrees with Quest that undisputed evidence establishes that Quest satisfied the requirements of § 13.2, and no genuine issue exists for trial. Accordingly, the Court finds that the breach of contract claim based on an alleged breach of § 13.2 shall be dismissed.

         2. Assignment of Distribution Agreements

         Plaintiff also alleges that Quest breached the Distribution Agreements by failing “to properly seek assignment of the Distribution Agreements and the sale of the substantial part of its assets was to a competitor.” Dkt. #29 ...


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