N111KJ, LLC v. Cessna Aircraft Company
676 F. App'x 887
| 11th Cir. | 2017Background
- N111KJ, LLC bought a Cessna Citation jet for $7.2M; the purchase agreement included a Special Condition that Cessna would pay management fees for participation in the CitationAir Jet Management program for five years (program administered by Cessna subsidiary CitationShares). The contract contained a Kansas choice-of-law clause.
- About three years later Cessna disenrolled the jet from the management program; plaintiff alleges this occurred because Cessna agreed to stop competing management programs as part of a large sale to NetJets.
- Plaintiff sold the jet at a loss (about 72% of purchase price) and sued Cessna for fraudulent inducement and breach of contract (both a common-law breach theory and a UCC-based breach theory). District court dismissed all claims with prejudice under Rule 12(b)(6).
- On appeal, the Eleventh Circuit assumed the complaint’s factual allegations true and considered choice-of-law and substantive sufficiency under Kansas law (per the contract’s clause and Florida conflict rules).
- The court held plaintiff adequately pleaded fraudulent inducement under Kansas law and that the UCC governs the purchase agreement (predominant-purpose test), allowing a UCC breach claim based on implied-in-fact condition and duty of good faith; the common-law breach claim was dismissed because the UCC applies.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicable law for fraudulent-inducement claim | Choice-of-law clause should not bar Kansas-law fraud claim; alternatively, Kansas law applies | Florida conflict rules require applying Florida law | Choice-of-law clause governs; under Florida procedure, plaintiff affirmed contract by seeking damages, so Kansas law applies |
| Sufficiency of fraudulent-inducement allegations | Alleged specific false promises about net cash flow and 90% residual value; Cessna had superior knowledge and plaintiff relied on statements | Parol-evidence rule/merger clause bars reliance on oral promises outside written agreement | Under Kansas law, parol evidence is admissible for fraud-in-the-inducement; pleadings suffice to state fraud claim — reversed dismissal |
| Whether the UCC or common law governs breach claim | Purchase agreement is primarily for sale of goods; UCC governs breach claims | Disenrollment arose from a separate services/management contract, so common law controls | Predominant-purpose test favors goods (airplane) so UCC governs; common-law breach claim dismissed as displaced by UCC |
| UCC breach theory: did Cessna breach by disenrolling the jet? | Special Condition and contract structure created an implied-in-fact condition that Cessna would keep jet enrolled (or pay fees) for up to five years; disenrollment frustrated plaintiff’s bargain and violated UCC duty of good faith | No express five-year obligation in purchase agreement; management agreement initial term was three years with renewals, so no ongoing duty | Allegations that Cessna disenrolled the jet and prevented occurrence of a condition state a plausible UCC claim for breach and violation of good-faith duty — reversed dismissal |
Key Cases Cited
- Butler v. Sheriff of Palm Beach Cty., 685 F.3d 1261 (11th Cir. 2012) (standard for Rule 12(b)(6) review)
- Mazzoni Farms, Inc. v. E.I. DuPont De Nemours & Co., 761 So. 2d 306 (Fla. 2000) (choice-of-law clause controls fraud-in-the-inducement when contract is affirmed)
- Mazzoni Farms, Inc. v. E.I. DuPont De Nemours & Co., 223 F.3d 1275 (11th Cir. 2000) (receiving Florida Supreme Court’s answer)
- K-B Trucking Co. v. Riss Int’l Corp., 763 F.2d 1148 (10th Cir. 1985) (misrepresentations about future earnings may be actionable fraud when promisor has superior knowledge)
- Culp v. Bloss, 457 P.2d 154 (Kan. 1969) (parol evidence admissible where contract procured by fraudulent representations)
- Bergman v. Commerce Tr. Co., 129 P.3d 624 (Kan. Ct. App. 2006) (definition and effect of implied-in-fact conditions)