“Parting is such sweet sorrow” may have befitted the relationship between Romeo and Juliet, but for UAL Corp. and Gulfstream Aerospace, the parting is far from sweet.
UAL’s United BizJet Holdings filed suit in the Circuit Court of Cook County, Ill., in late May against Gulfstream, accusing the Savannah, Ga. manufacturer of causing “irreparable damage” by illegally withholding the return of deposits on aircraft ordered and optioned for United BizJet’s now-defunct Avolar fractional-ownership program.
The suit further alleges that Gulfstream has refused to remarket the firm-ordered aircraft on behalf of United BizJet, as provided for in master aircraft sales agreements. UAL expects Gulfstream to “return to BizJet any funds on deposit for the aircraft sold, less certain remarketing expenses.”
Gulfstream declined to comment for this article, but according to the suit the company owes UAL about $39.5 million for deposits on a firm order for 36 aircraft (12 GIV-SPs, GVs and GV-SPs, and 24 G200s) and about $11.5 million for deposits on options for 63 aircraft, “plus interest, consequential damage caused by the breach [of contract] and attorney fees.”
Under the sales contract, the deposits for the options should have been refunded no later than 10 days after the date on which BizJet notified Gulfstream that it was relinquishing its rights to any of the optioned aircraft, according to a copy of the master sales agreements obtained by AIN.
An exchange of correspondence in March and April between the two companies preceded the lawsuit. On March 22, UAL announced that it would begin an “orderly shutdown” of BizJet. Three days after receiving the notification, Gulfstream replied in a letter to BizJet, “In light of the public announcement by UAL Corp., Gulfstream hereby exercises its rights to terminate the agreements in their entirety…” BizJet maintains that the sales agreements “do not provide any basis for the purported termination attempted” by Gulfstream.
In a March 27 letter to Gulfstream, BizJet officially notified the manufacturer that it was “relinquishing its rights to all of the option aircraft” and, accordingly, requested return of the deposits. BizJet’s letter also served notice it was electing to have Gulfstream remarket all the firm ordered aircraft, as specified in the sales agreements.
Gulfstream told UAL in an April 30 letter to BizJet that the manufacturer was “not obligated to refund the deposits” on the optioned aircraft. The letter did not acknowledge BizJet’s request for Gulfstream to remarket the ordered aircraft, according to BizJet.
On April 5 BizJet responded with a letter reiterating its demands, and on April 11 Gulfstream responded with a letter reiterating its refusal–a position that, in the opinion of UAL, violates contractual obligations in the wording of the master sales agreements.
According to the lawsuit, Gulfstream is taking the position that it “validly terminated the sales agreements and that such termination relieves it of any responsibility to remarket or other obligations” concerning the ordered aircraft. BizJet alleges that Gulfstream did not validly terminate the agreements and that “in any event, [Gulfstream] is not relieved of its remarketing and other obligations.”
BizJet further claims it is being harmed because Gulfstream’s “failure to comply with remarketing provisions of the agreements excludes BizJet from the marketing process.” As a result, BizJet “does not know what (if any) efforts are being made to remarket the aircraft, what (if any) offers Gulfstream is receiving for the aircraft and what (if any) sales Gulfstream has made of the aircraft.” UAL maintains that Gulfstream’s failure to comply with the remarketing provisions “has caused…BizJet irreparable injury.”
The master aircraft sales agreements also reveal that the UAL division would have received a 12-percent discount off the list price of some of the aircraft ordered (at least the GIV-SPs, GVs and GV-SPs).
Avolar operated only three months before shutting down in March.
