VFS Financing, Inc. v. Falcon Fifty LLC
17 F. Supp. 3d 372
| S.D.N.Y. | 2014Background
- VFS Financing, Inc. and GE Equipment Corporate Aircraft Trust 2012-1 LLC financed the Falcon Fifty and Sky King aircraft purchases; defendants Falcon Fifty, Sky King, and the Rogers provided guarantees.
- Falcon Fifty’s ownership shifted in 2010 from CTW to a CTW/Tristar structure, with CTW subsequently withdrawing, leaving Tristar as the sole member; CTW had business purpose for the Falcon Aircraft, while Tristar did not.
- Falcon Fifty leased the Falcon Aircraft to Third parties and VFS consented to prior leases, but later withheld consent to a two-year Stellar lease sought to keep payments current.
- The Falcon Security Agreement and Sky King Security Agreement included default provisions and waiver terms, with cross-default provisions linking the Falcon and Sky King loans if defaults occurred.
- In October 2010, after ownership changes, VFS approved a Short Hills lease; later, VFS refused consent for a Stellar lease, prompting default and cross-default under the Sky King loan.
- Defendants asserted counterclaims for breach of contract against VFS, breach of the implied covenant against GEECAT, and NYRISA claims; third-party claims included tortious interference with contract against GE Capital and GE Capital-related breach.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of contract vs. waiver | VFS’s performance excused by prior material breach; election of remedies supports continued performance. | VFS unreasonably withheld consent to a two-year Stellar lease, causing defaults. | Plaintiffs’ claims survive; reasonable inference that consent withholding was improper and caused default. |
| Covenant of good faith and fair dealing | GEECAT’s subagent acted to trigger default; duties implied by contract were violated by VFS/GEECAT. | No separate covenant breach; the claim arises from the underlying contract. | Remains viable against GEECAT; court denies dismissal. |
| NYRISA applicability | NYRISA governs otherwise retail installment sales; Rogers’ personal use creates a NYRISA issue. | NYRISA applies to goods sold for business use; planes were purchased for business purposes. | NYRISA claims dismissed with prejudice. |
| Piercing the corporate veil | GE Capital dominates VFS/GEECAT and thus liable for breaches. | Alter-ego piercing requires more than shared management; evidence insufficient. | Dismissed against GE Capital without leave to amend. |
| Tortious interference with contract | GE Capital’s Bonnell interfered with Falcon/Sky King loans and the Stellar lease. | Interference claims require improper means; no improper acts alleged regarding Stellar lease. | Tortious interference with Falcon/Sky King loans allowed; Stellar lease interference granted with leave to amend. |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading must plead plausible, non-conclusory facts)
- Wilson v. Merrill Lynch & Co., 671 F.3d 120 (2d Cir.2011) (Iqbal pleading standard applied to determine sufficiency)
- M/A-COM Sec. Corp. v. Galesi, 904 F.2d 134 (2d Cir.1990) (material breach and continued performance implications)
- Capmark Fin. Group Inc. v. Goldman Sachs Credit Partners L.P., 491 B.R. 335 (Bankr.S.D.N.Y.2013) (alter-ego and piercing analysis in bankruptcy context)
- NetJets Aviation, Inc. v. LHC Commc’ns, LLC, 537 F.3d 168 (2d Cir.2008) (piercing the corporate veil considerations)
- Geyer v. Ingersoll Publ'n Co., 621 A.2d 784 (Del.Ch.1992) (Delaware veil-piercing factors and injustice requirement)
- ESPN, Inc. v. Office of Com’r of Baseball, 76 F.Supp.2d 383 (S.D.N.Y.1999) (applicability of fiduciary and good-faith principles in contract disputes)
- Frank Felix Assocs., Ltd. v. Austin Drugs, Inc., 111 F.3d 284 (2d Cir.1997) (avoidance of circular pleadings and standard of proof)