Corrections Corporation of Ame v. Beth Scharrer, et al

Filing

Opinion issued by court as to Appellant CXW. Decision: Affirmed. Opinion type: Non-Published. Opinion method: Per Curiam. Motion to dismiss appeal for lack of standing filed by Appellee The N169SL Fractional Owners is DENIED. [7393175-2]. The opinion is also available through the Court's Opinions page at this link http://www.ca11.uscourts.gov/opinions.

Case: 15-10303

Date Filed: 02/03/2016

Page: 1 of 5

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 15-10303
________________________
D.C. Docket Nos. 8:14-cv-01742-JSM; 8:13-bk-09719-CPM
In Re: AVANTAIR, INC.,
f.k.a. Ardent Acquisition Corp.,
Debtor.
____________________________________________________
CORRECTIONS CORPORATION OF AMERICA,
d.b.a. CCA of Tennessee, Inc.,
Plaintiff - Appellant,
versus
BETH ANN SCHARRER,
as Chapter 7 for the Bankruptcy Estate of Avantair, Inc.,
THE N169SL FRACTIONAL OWNERS,
Defendants - Appellees.
________________________
Appeal from the United States District Court
for the Middle District of Florida
________________________
(February 3, 2016)

Case: 15-10303

Date Filed: 02/03/2016

Page: 2 of 5

Before TJOFLAT and ROSENBAUM, Circuit Judges, and RESTANI, * Judge.
PER CURIAM:
Is my airplane still my airplane when all of its parts have been removed?
Or, as better characterized under the facts of this case, is your airplane now my
airplane after my airplane’s parts have been installed on yours?

Appellant

Corrections Corporation of America (“CCA”) invites us to resolve this variation on
the Paradox of Theseus’s Ship by answering a resounding “yes” to the latter
question and, in doing so, to vacate the sales approach adopted by the Bankruptcy
Court in this case in favor of an approach that would recognize ownership interests
of every aircraft owner in one another’s planes. We decline CCA’s invitation to
drift into this philosophical turbulence, though, and affirm the well-grounded
rulings of the Bankruptcy Court.1
This case arises out of the involuntary bankruptcy proceedings of Avantair,
Inc., a company that ran a fractional-owner aircraft operation under Subpart K of
Part 91 of the Federal Aviation Regulations, 14 C.F.R. §§ 91.1001 – 91.443. To
participate in Avantair’s program, CCA and others purchased at least one-sixteenth
shares in specific airplanes via a Purchase Agreement.

Then, through a

*

Honorable Jane A. Restani, Judge for the United States Court of International Trade,
sitting by designation.
1

The N169SL Appellees filed a motion to dismiss the appeal, arguing that CCA was not
a “person aggrieved” by the Bankruptcy Court’s order. Because CCA’s ultimate financial
position remains speculative at this point, we find CCA sufficiently aggrieved to pursue this
appeal and deny the Appellees’ motion. See Atkinson v. Ernie Haire Ford, Inc. (In re Ernie
Haire Ford, Inc.), 764 F.3d 1321, 1325 (11th Cir. 2014).
2

Case: 15-10303

Date Filed: 02/03/2016

Page: 3 of 5

“Management and Dry Lease Agreement,” the owners leased their interests in the
planes back to Avantair, who was responsible for scheduling flights at the owners’
request and maintaining the planes in an airworthy condition. The interpretation of
the program documents is the crux of this appeal.
When Avantair began experiencing financial troubles, the quality of its
maintenance operations took a nose dive. To keep as many planes as possible
flying, Avantair cannibalized parts from other planes in the fleet, effectively
grounding the donor planes. In addition, Avantair failed to keep adequate safety
records of the part transfers. When the Federal Aviation Administration caught
wind of Avantair’s activities, it grounded Avantair’s fleet, forcing the company to
cease operations and eventually enter bankruptcy.
To prevent loss or theft of the planes and to maximize their value to the
estate, the Bankruptcy Trustee, in cooperation with some of the fractional owners,
developed a plan to sell the aircraft. The sales proceeds would first be distributed
to various categories of creditors, and any funds left over would then be distributed
to the shareholders of the particular plane sold.
CCA objected to distributing the proceeds from the sale of a specific plane
to just that plane’s shareholders.

First, CCA argued that fractional-share

participants did not actually buy ownership interests in any plane but rather just
purchased flight time. And even if the shareholders owned their planes, CCA
3

Case: 15-10303

Date Filed: 02/03/2016

Page: 4 of 5

asserted, Avantair’s pervasive parts-swapping practice essentially gave each
participant an ownership interest in every other plane in the program.
Accordingly, CCA demanded a “pooling” approach to the distribution of sales
proceeds—proceeds would be held until every plane was sold, and then the entire
fund would be distributed among the owners. To do otherwise, in CCA’s view,
would unjustly enrich the owners of the maintained and airworthy planes at the
expense of the owners of the donor planes whose parts were used to maintain them.
The Bankruptcy Court overruled CCA’s objections, and the District Court affirmed
that determination.
We review the Bankruptcy Court’s findings of law de novo and its findings
of fact for clear error. Piazza v. Nueterra Healthcare Physical Therapy, LLC (In re
Piazza), 719 F.3d 1253, 1260 (11th Cir. 2013).

The Bankruptcy Court’s

construction of contract language is a legal determination that we review de novo.
Equitable Life Assurance Soc’y v. Sublett (In re Sublett), 895 F.2d 1381, 1383–84
(11th Cir. 1990).
In overruling CCA’s objections, the Bankruptcy Court concluded that the
program documents unambiguously designed a fractional-ownership program, with
each shareholder necessarily owning a share of a specific plane. The Bankruptcy
Court further found that the program documents executed by the participantowners authorized Avantair to swap parts between planes to maximize the
4

Case: 15-10303

Date Filed: 02/03/2016

Page: 5 of 5

efficiency of the program. To the extent that Avantair failed to replace parts or
maintain the donor planes, the Bankruptcy Court determined that the owners of
such planes have a claim against Avantair (or the estate) for breaching its
obligations to replace parts or maintain the donor planes but that the authorized
swapping of parts did not and could not commingle the participants’ ownership
interests. With the benefit of the parties’ arguments and after a de novo review of
the record, we discern no error in the Bankruptcy Court’s reasoning or rulings and
affirm the order of the District Court affirming the order of the Bankruptcy Court.
AFFIRMED.

5