Dupont et al v. Freight Feeder Aircraft Corporation, Inc. et al

Filing 88

MEMORANDUM AND ORDER, The Court GRANTS the motion for partial summary judgment and/or to dismiss filed by Bridges and Littlefield (Doc. 72 ); DISMISSES Count 2 with prejudice as to Bridges and Littlefield; and DIRECTS the Clerk of Court to enter judgment accordingly at the close of the case. Defendants Bridges and Littlefield are terminated as parties to this case. The only remaining claim is Count 1 for breach of contract against FFAC. Signed by Judge J. Phil Gilbert on 10/21/2014. (jdh)

UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
JOHN J. DUPONT and RANDY MOSELEY,
Plaintiffs,
v.

Case No. 13-cv-256-JPG-DGW

FREIGHT FEEDER AIRCRAFT CORPORATION,
INC., L. DAVID BRIDGES, R. DARBY BOLAND,
STEPHEN CARMICHAEL, H. CLIFF SAYLOR,
EDWARD F. EATON, WILL WEEKS and KIM
LITTLEFIELD,
Defendants.
MEMORANDUM AND ORDER
This matter comes before the Court on the motion for partial summary judgment and/or to
dismiss Count 2 filed by defendants L. David Bridges and Kim Littlefield (Doc. 72). Plaintiffs
John J. Dupont and Randy Moseley have responded to the motion (Doc. 77).
I.

Background
This case stems from a May 2011 settlement agreement (and several addenda thereto)

(collectively, “the Settlement Agreement”) between the parties to this case and others who are not
present in this lawsuit. The Settlement Agreement resolved another case in this district, Freight
Feeder Aircraft Corp. v. Dupont, 11-cv-259-JPG-DGW, involving allegation of securities fraud,
fraudulent misrepresentation, negligent misrepresentation, misappropriate of trade secrets, breach
of contract, promissory estoppel, breach of the duty of good faith and fair dealing, breach of
fiduciary duty and self-dealing.
In an order dated February 13, 2014, Magistrate Judge Donald G. Wilkerson described the
plaintiffs’ view of the events leading to the filing of Freight Feeder Aircraft Corp. v. Dupont:
According to the First Amended Complaint, John J. Dupont founded American

Utilicraft Corporation (now named Utilicraft) in 1990 in order to produce
specialized freight aircraft. In 2007, Freight Feeder Aircraft Corporation
(“FFAC”) entered into an Asset Purchase Agreement with Utilicraft, to purchase
certain patents related to the design, use, and control of freight aircrafts, and an
employment agreement with Dupont [that allowed him to retain management
control over FFAC. Utilicraft also obtained royalty and ownership interests in
FFAC.] In 2009, the individual Defendants (who appear to be the principals and
directors of FFAC) sought to buyout Dupont’s interest in FFAC and terminate his
employment agreement. The buyout agreement contained various clauses in
which FFAC would compensate Dupont for relinquishing his interests in FFAC.
Plaintiffs allege that FFAC failed to execute its part of the agreement, by failing to
pay certain sums to Dupont, and further represented to him (in January 2010) that
the buy-out agreement (a liability for FFAC) would be held by a shell corporation
once the assets of FFAC were sold to a third party, MidAmerica Aircraft
Corporation (“MidAmerica,” which also is owned and controlled by the individuals
controlling FFAC). Plaintiff Randy Moseley began employment with FFAC in
December 2007 as its Chief Financial Officer and director. He also had an
employment agreement with FFAC that “has been inexorably terminated” by the
sale of FFAC’s assets to MidAmerica.
Memorandum and Order at 1-2 (Doc. 64) (footnotes omitted). Freight Feeder Aircraft Corp. v.
Dupont was settled by the Settlement Agreement at issue in this case.
The Court described the salient parts of the Settlement Agreement in an order dated
October 24, 2013.
Among other things, the Settlement Agreement obligated Freight Feeder to make
reasonable efforts to negotiate and close a sale of its assets, to pay certain sums to Dupont
and Moseley following the sale, and to pay Dupont certain sums on a monthly basis if the
sale did not occur within a certain time after the Settlement Agreement was executed. The
Settlement Agreement specifically states, in pertinent part:
5.35 Freight Feeder shall use commercially reasonable efforts to
successfully close a Freight Feeder Asset Sale within six (6) months of the
Signature Date. Should the Funding Date not occur within six (6) months
following the Signature Date, beginning in the seventh month following the
Signature Date Freight Feeder shall pay to Dupont monthly payments of
Ten Thousand Dollars ($10,000) (the “Adequate Protection Payment”) for
each month that a Freight Feeder Asset Sale has not been closed. The
Adequate Protection Payment shall be due on the fifteenth (15th) day of
each given month.
. . . . The addenda to the Settlement Agreement extended the Settlement Agreement’s
deadlines.
2

Memorandum and Order at 2 (Doc. 56).
In this suit, Dupont and Moseley bring a claim against FFAC for breach of the Settlement
Agreement (Count 1). They also sue a number of individual parties to the Settlement Agreement
(defendants Bridges, R. Darby Boland, Kevin Williams, Carmichael, Saylor, Edward F. Eaton,
Will Weeks and Kim Littlefield) for fraud based on a January 7, 2013, representation by their
counsel (Count 2). The only remaining individual defendants are Bridges and Littlefield.
In the pending motion, Bridges and Littlefield ask the Court for summary judgment on
Count 2 or, in the alternative, to dismiss Count 2 for failure to state a claim. The Court considers
only the request for summary judgment, which is dispositive of Count 2.
II.

Summary Judgment Standard
Summary judgment must be granted “if 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); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Spath v. Hayes Wheels Int’l-Ind.,
Inc., 211 F.3d 392, 396 (7th Cir. 2000). The reviewing court must construe the evidence in the
light most favorable to the nonmoving party and draw all reasonable inferences in favor of that
party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); Chelios v. Heavener, 520
F.3d 678, 685 (7th Cir. 2008); Spath, 211 F.3d at 396.
The initial summary judgment burden of production is on the moving party to show the
Court that there is no reason to have a trial. Celotex, 477 U.S. at 323; Modrowski v. Pigatto, 712
F.3d 1166, 1168 (7th Cir. 2013). Where the non-moving party carries the burden of proof at trial,
the moving party may satisfy its burden of production in one of two ways. It may present
evidence that affirmatively negates an essential element of the non-moving party’s case, see Fed.
R. Civ. P. 56(c)(1)(A), or it may point to an absence of evidence to support an essential element of
3

the non-moving party’s case without actually submitting any evidence, see Fed. R. Civ. P.
56(c)(1)(B). Celotex, 477 U.S. at 322-25; Modrowski, 712 F.3d at 1169. Where the moving
party fails to meet its strict burden, a court cannot enter summary judgment for the moving party
even if the opposing party fails to present relevant evidence in response to the motion. Cooper v.
Lane, 969 F.2d 368, 371 (7th Cir. 1992).
In responding to a summary judgment motion, the nonmoving party may not simply rest
upon the allegations contained in the pleadings but must present specific facts to show that a
genuine issue of material fact exists. Celotex, 477 U.S. at 322-26; Anderson, 477 U.S. at 256-57;
Modrowski, 712 F.3d at 1168. A genuine issue of material fact is not demonstrated by the mere
existence of “some alleged factual dispute between the parties,” Anderson, 477 U.S. at 247, or by
“some metaphysical doubt as to the material facts,” Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 586 (1986). Rather, a genuine issue of material fact exists only if “a
fair-minded jury could return a verdict for the [nonmoving party] on the evidence presented.”
Anderson, 477 U.S. at 252.
III.

Relevant Facts
Viewed in the light most favorable to Dupont and Moseley, the evidence establishes the

following relevant facts.
By late 2012, FFAC had not been able to negotiate and sell its assets as contemplated in the
Settlement Agreement and had incurred the obligation under the Settlement Agreement to pay
Dupont monthly $10,000 “Adequate Protection Payments.”
In an e-mail dated January 7, 2013, the defendants’ counsel told the plaintiffs’ counsel that
FFAC did not have sufficient funds to pay Dupont the December 2012 payment but that Bridges
“thinks he will be in a better position to fund the monthly payments if the FFAC team assumes

4

control over [Utilicraft],” that is, if Dupont and Mosely resigned from their positions with
Utilicraft, a major FFAC shareholder, and allowed FFAC’s management to assume control over
Utilicraft. This statement attributable to Bridges is the representation that serves as the basis for
Count 2.
This statement was made while the parties were negotiating a third addendum to the
Settlement Agreement. In those negotiations, the plaintiffs’ counsel expressed concern about
tying Dupont and Moseley’s resignations to Dupont’s receipt of Adequate Protection Payments.
The plaintiffs’ counsel also confirmed that Dupont and Mosely supported transitioning Utilicraft’s
management to FFAC people to raise the value of Utilicraft stock and independent of whether
monthly payments under the Settlement Agreement were made.
Ultimately, Dupont and Moseley resigned from Utilicraft, but that did not result in more
investment in FFAC. FFAC paid Dupont $10,000 in January 2013 but missed the February 2013
and all subsequent Adequate Protection Payments. Several months later, FFAC sold the assets it
had originally obtained from Utilicraft to a third party, Covenant Aerospace, Inc., which
developed the aircraft originally designed by Utilicraft.
Bridges does not contest that he made the statement attributed to him on January 7, 2013,
but explains in an affidavit that, at that time, he truly believed FFAC would be more likely to be
able to make the required payments to Dupont if Dupont and Mosely resigned from Utilicraft. He
believed that under Dupont’s leadership, Utilicraft’s share value had decreased and that other
Utilicraft shareholders would be more likely to invest in FFAC if Dupont was not involved in
controlling Utilicraft, a major FFAC shareholder.
In fact, Utilicraft did not decrease in value under Dupont’s and Moseley’s leadership,
which now leads Dupont to believe Bridges’ January 7, 2013, statement was an intentional

5

falsehood.
IV.

Analysis
In order to prevail on a common law fraud claim, a plaintiff must prove “(1) a false

statement of material fact; (2) defendant’s knowledge that the statement was false; (3) defendant’s
intent that the statement induce the plaintiff to act; (4) plaintiff’s reliance upon the truth of the
statement; and (5) plaintiff’s damages resulting from reliance on the statement.” Connick v. Suzuki
Motor Co., 675 N.E.2d 584, 591 (Ill. 1996). The defendants challenge the plaintiffs’ ability to
prove a false statement, reliance on the statement and damages from any reliance.
As a preliminary matter, the Court notes that there is no evidence from which a reasonable
jury could find that Littlefield made any statement on or around January 7, 2013, much less a false
one of material fact. The e-mail upon which the plaintiffs rely to show a false statement clearly
attributes the statement in question to Bridges alone, not Littlefield or anyone else. Because there
is no evidence of a false statement from Littlefield on or around January 7, 2013, Littlefield is
entitled to summary judgment on Count 2.
With respect to the allegedly false statement by Bridges, the defendants note that Bridges
did not absolutely promise that FFAC would be able to make Adequate Protection Payments to
Dupont if he and Moseley resigned. He simply stated that, in his opinion, FFAC would be in a
better position to make such payments. This is the kind of opinion statement that cannot serve as
the basis for a common law fraud claim. “Courts do not deem statements regarding future or
contingent events, expectations and probabilities as fraud. Rather, courts regard such statements
as mere expressions of opinion or mere promises or conjectures upon which the other party has no
right to rely.” Hofner v. Glenn Ingram & Co., 489 N.E.2d 311, 317 (Ill. App. Ct. 1985) (citing
Hayes v. Disque, 82 N.E.2d 350, 355 (1948) (“a charge of misrepresentation must be predicated

6

upon statements of fact, rather than mere expression of opinion or prophesy.”)). Here, it was
merely Bridges’ opinion that the plaintiffs’ resignations would help find investors in FFAC, not a
statement of fact that the resignations would, in fact, achieve that end.
Furthermore, there is no evidence from which a reasonable jury could find Bridges did not
truly hold the opinion he expressed in his statement. The plaintiffs point to that fact that under
their leadership the value of Utilicraft did not decline to argue there is a genuine issue of material
fact about whether Bridges actually though investors would be more likely to invest in FFAC
without Dupont managing it. The Court finds that, even if Utilicraft did not decline in value
under the plaintiffs’ leadership, there is not enough evidence for a reasonable jury to find Bridges
actually knew that or that he did not honestly believe getting rid of Dupont and Moseley would
attract investors to FFAC.
The plaintiffs also point to FFAC’s ultimate transfer of assets to Covenant Aerospace as
evidence that Bridges had no intention of having FFAC pay Dupont the Adequate Protection
Payments due to him and that Bridges’ January 7, 2013, statement was an intentional falsehood.
Those conclusions do not follow from FFAC’s conduct, which, except for the failure to make
payments to the plaintiffs, appears to be consistent with what was contemplated by the Settlement
Agreement. For example, § 3.29 of the Settlement Agreement acknowledges that investment in
FFAC would take the form of an asset sale to a new corporate entity in exchange for cash, royalties
and an equity interest in the new entity. Dupont and Moseley further agreed that such an asset
sale was reasonable and necessary for FFAC to accomplish its business goals. Settlement
Agreement §§ 5.06 & 5.20. The fact that FFAC has actually accomplished the transfer of assets,
by itself, is not sufficient to cause a reasonable jury to conclude that Bridges never intended to pay
Dupont his monthly payments. If the asset transfer did not occur as contemplated by the

7

Settlement Agreement, the plaintiffs’ remedy lies with FFAC for breach of contract, not with
Bridges.
Because no reasonable jury could find that Bridges or Littlefield committed common law
fraud by making a false statement of material fact on or around January 7, 2013, the Court finds
that Bridges and Littlefield are entitled to summary judgment on Count 2. The Court therefore
need not address their arguments regarding reliance or the pleading of damages.
V.

Conclusion
For the foregoing reasons, the Court:


GRANTS the motion for partial summary judgment and/or to dismiss filed by Bridges and
Littlefield (Doc. 72);



DISMISSES Count 2 with prejudice as to Bridges and Littlefield; and



DIRECTS the Clerk of Court to enter judgment accordingly at the close of the case.

Defendants Bridges and Littlefield are terminated as parties to this case. The only remaining
claim is Count 1 for breach of contract against FFAC.
IT IS SO ORDERED.
DATED: October 21, 2014
s/J. Phil Gilbert
J. PHIL GILBERT
DISTRICT JUDGE

8