Duncan Aviation, Inc. v. Flexjet, LLC

Filing 32

MEMORANDUM AND ORDER - Flexjet's motion to dismiss or stay this action (filing 24 ) is denied. This matter is referred to the Magistrate Judge for case progression. Ordered by Senior Judge John M. Gerrard. (MKR)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
DUNCAN AVIATION, INC.,
Plaintiff,
4:24-CV-3004
vs.
MEMORANDUM AND ORDER
FLEXJET, LLC,
Defendant.

This is a breach-of-contract case involving unpaid bailment charges for
aircraft equipment. The plaintiff, Duncan Aviation, Inc., alleges that the
defendant, Flexjet, LLC, owes it several million dollars under a series of
bailment agreements. Filing 22 at 6; see filing 22-1. This matter is before the
Court on Flexjet's motion to dismiss or, in the alternative, to stay the action.
Filing 24. The motion will be denied.
I. STANDARD OF REVIEW
To survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6), a complaint
must contain sufficient factual matter, accepted as true, to state a claim to
relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
A claim has facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged. Id. While the Court must accept as true all facts
pleaded by the non-moving party and grant all reasonable inferences from the
pleadings in favor of the non-moving party, Gallagher v. City of Clayton, 699
F.3d 1013, 1016 (8th Cir. 2012), a pleading that offers labels and conclusions
or a formulaic recitation of the elements of a cause of action will not do. Iqbal,

556 U.S. at 678. Determining whether a complaint states a plausible claim for
relief will require the reviewing court to draw on its judicial experience and
common sense. Id. at 679.
When deciding a motion to dismiss under Rule 12(b)(6), the Court is
normally limited to considering the facts alleged in the complaint. If the Court
considers matters outside the pleadings, the motion to dismiss must be
converted to one for summary judgment. Fed. R. Civ. P. 12(d). However, the
Court may consider materials that are necessarily embraced by the pleadings
without converting the motion. Mattes v. ABC Plastics, Inc., 323 F.3d 695, 697
n.4 (8th Cir. 2003). Documents necessarily embraced by the pleadings include
those whose contents are alleged in a complaint and whose authenticity no
party questions, but which are not physically attached to the pleading. Ashanti
v. City of Golden Valley, 666 F.3d 1148, 1151 (8th Cir. 2012).
II. BACKGROUND
Flexjet is a fractional jet ownership company that owns a number of
aircraft. Filing 22 at 2. Duncan is an aircraft maintenance and repair company
based in Lincoln, Nebraska. Filing 22 at 1-2. Flexjet has delivered aircraft to
Duncan for maintenance, and Duncan allows Flexjet to temporarily use jet
engines owned by Duncan while repairs are being performed. Filing 22 at 2.
Flexjet's use of Duncan's equipment is governed by a series of bailment
agreements, all of which are substantively similar or identical. See generally
filing 22-1.
Duncan filed this lawsuit because Flexjet has been using Duncan's
equipment, but Duncan has not been paid. Filing 22 at 6-8. Flexjet moved to
dismiss Duncan's claims against it, arguing the unambiguous terms of the
bailment

agreements

indicate

that

a

different

company—Honeywell

International, Inc.—is responsible for paying the bailment charges pursuant
2

to a Mechanical Services Agreement between Honeywell and Flexjet. Flexjet
sued Honeywell in a New York state court regarding the scope of that
agreement.
Terms of the Bailment Agreements
As relevant to Flexjet's motion, the bailment agreements provide:
• Flexjet is the customer. Filing 22-1 at 1.
• There is an "Associated Agreement," named the "MSA," which is the
Mechanical Services Agreement between Flexjet and Honeywell. Id.;
filing 22 at 4; see also filing 20-4.
• Under Block 16, the bailment rates include a $2,349.81 hourly operating
charge and a minimum charge of $15,000. E.g., filing 22-1 at 1.
• Pursuant to Block 19: "'Published rental rates stated in Blocks 16(a-d)
apply for 'non-MSP covered events and/or MSP account is in PAR'
Operator Continues to Pay MSP As Normal." Id. (quotations in
original).1
• The bailment agreements, under Section 2.1 in the "Additional Terms
and Conditions," state as follows:
(A) Customer will pay the Operating Charges, Minimum
Charge,

Deposit,

Advance

Payment,

and

other

charges/fees (as applicable) . . . provided on page one of
this Agreement. . . .
(B) If Duncan Aviation provides Equipment as a rental or
bailment under a maintenance plan or agreement

MSP, apparently, is an abbreviation for Honeywell's maintenance service plan, which
Duncan describes as a "quasi-insurance plan." See filing 30 at 22.
1

3

identified in sections nine through fifteen, and
i.

Customer's

equipment

covered

under

the

maintenance plan or agreement ceases to be covered
under that maintenance plan or agreement, or
ii.

Duncan Aviation determines after the execution of
Duncan Aviation's standard bailment agreement,
that repairs of Customer's equipment covered under
the maintenance plan or agreement are in fact not
covered by that maintenance plan or agreement,

then, Duncan Aviation may charge Customer Duncan
Aviation's standard Equipment operating charges.
E.g., filing 22-1 at 2.
III. DISCUSSION
1. MOTION TO DISMISS
Flexjet argues the contract unambiguously states that Flexjet is not
responsible for paying the bailment charges, and so Duncan has failed to state
a claim for breach of contract as a matter of law. Flexjet's motion to dismiss is
premised on its interpretation of the bailment agreements.
In interpreting a contract, the Court must first determine, as a matter
of law, whether the language is ambiguous. David Fiala, Ltd. v. Harrison, 860
N.W.2d 391, 395-96 (Neb. 2015). A contract written in clear and unambiguous
language is not subject to interpretation or construction and must be enforced
according to its terms. Davenport Ltd. P'ship v. 75th & Dodge I, L.P., 780
N.W.2d 416, 422 (Neb. 2010). However, a contract is ambiguous when a word,
phrase, or provision in the contract has, or is susceptible of, at least two
reasonable but conflicting interpretations or meanings. Id. And if a court
4

determines that ambiguity exist, the interpretive meaning is a question of fact
for the fact finder. Id. at 423.
According to Flexjet, its agreement with Honeywell is an "MSP," and
under the unambiguous terms in Block 19, Flexjet only has an obligation to
"Pay MSP As Normal." See, e.g., filing 22-1 at 1. However, under Section 2.1 in
the "Additional Terms and Conditions," Flexjet may be charged operating
charges if the customer's equipment is not covered under a maintenance plan
for some reason. E.g., filing 22-1 at 2. The Court finds the language in Section
2.1 unambiguous, but the language in Block 19 is about as clear as mud. Under
Section 2.1, if Flexjet's repairs are not covered by a maintenance service plan
or agreement, then Flexjet is responsible for paying the bailment charges for
using Duncan's equipment while the repairs are being performed.2 Otherwise,
the maintenance service plan covers Duncan's repairs and the use of Duncan's
equipment. But Block 19 is quoting some unidentified other source and the
grammar is difficult to parse, so it does not provide Flexjet with unambiguous
protection from paying the bailment charges assessed while Flexjet used
Duncan's equipment.
Flexjet argues that Duncan did not allege facts supporting an inference
that Flexjet's services stopped being covered by a maintenance plan. Flexjet
argues that Duncan's assertion that Honeywell "has discontinued payment for
such services by Duncan to Flexjet" is a legal conclusion. The Court disagrees.
Drawing inferences in favor of Duncan, the fact that Honeywell did not cover

Duncan argues that the MSA is not an MSP, and the provision in Block 19 does not apply
to Duncan's agreement with Flexjet. See filing 30 at 22-23. In the event that the MSA proves
not to be an MSP—although it certainly walks and quacks like one at this point—then
certainly the unambiguous terms of the contract would impose an obligation on Flexjet to pay
for the services provided by Duncan. In either case, Duncan has sufficiently pled a breach of
contract.
2

5

Flexjet's expenses pursuant to a maintenance plan or agreement indicates that
the condition precedent under Section 2.1 was met, and Flexjet's obligation to
pay the bailment charges was triggered. Filing 22 at 4, 6; Fed. R. Civ. P. 8(e).
Whether Honeywell stopped covering Flexjet's expenses and whether
Flexjet's services were covered by a maintenance plan are factual questions,
not legal ones. Flexjet appears to argue that Honeywell wrongfully refused to
fulfill its obligations under the MSA, and Flexjet's obligation to pay Duncan
never arose. But whether the condition precedent was met and actually
triggered Flexjet's obligation to pay is a question that requires further factual
development and cannot be decided on a motion to dismiss.
Drawing inferences in favor of the plaintiff, Duncan has stated a claim
for a breach of contract. Duncan has also stated a claim for various forms of
equitable relief. A plaintiff is able to prosecute multiple remedies, even to final
adjudication, so long as the plaintiff receives but one satisfaction. Penn. Nat.
Mut. Cas. Ins. Co. v. City of Pine Bluff, 354 F.3d 945, 951 (8th Cir. 2004).
Duncan has alleged facts which support its various claims of equitable relief,
and Flexjet's motion to dismiss will be denied.
2. ABSTENTION
Flexjet argues that whether its equipment is covered by a maintenance
plan is subject to litigation currently pending in New York state court, and so
this Court should abstain based on Colo. River Water Conservation Dist. v.
United States, 424 U.S. 800 (1976). See, e.g., Fru-Con Const. Corp. v. Controlled
Air, Inc., 574 F.3d 527, 534 (8th Cir. 2009). Federal courts have a "virtually
unflagging obligation" to exercise their jurisdiction, even in the face of a
pending state court action involving the same subject matter. Id. (quoting
Mountain Pure, LLC v. Turner Holdings, LLC, 439 F.3d 920, 926 (8th Cir.
2006)). A federal court may divest itself of jurisdiction by abstaining only when
6

parallel state and federal actions exist and exceptional circumstances warrant
abstention. Id. (citing Colo. River, 424 U.S. at 817-18).
To determine whether proceedings are parallel, a court must determine
whether there is a substantial similarity between the state and federal
proceedings, which occurs when there is a substantial likelihood that the state
proceeding will fully dispose of the claims presented in the federal court. Id.
This analysis focuses on matters as they currently exist, not as they could or
might be. Id. Jurisdiction must be exercised if there is any doubt as to the
parallel nature of the state and federal proceedings. Id. (citing AAR Int'l, Inc.
v. Nimelias Enter. S.A., 250 F.3d 510, 520 (7th Cir. 2001)); see also Cottrell v.
Duke, 737 F.3d 1238, 1245 (8th Cir. 2013).
This lawsuit can only be said to be parallel to the state lawsuit where
there are "substantially similar parties" litigating "substantially similar
issues." Fru-Con, 574 F.3d at 535. To determine whether parallel proceedings
exist, courts compare the sources of law, required evidentiary showings,
measures of damages, and treatment on appeal for each claim. Cottrell, 737
F.3d at 1245. Flexjet argues that Duncan is "substantially similar" to
Honeywell, and that Duncan's interests in this lawsuit are harmonized with
Honeywell's interest in the New York lawsuit.
The Court isn't convinced. Here, the bailment agreements are governed
by Nebraska law, filing 22-1 at 5, while the agreement between Honeywell and
is governed by the state of New York, filing 20-5 at 22. And the required
evidentiary showings are different in the two cases: In its lawsuit against
Honeywell, Flexjet has to show Honeywell breached that contract, while here,
Duncan has to show that Flexjet breached this contract. Whether Honeywell
breached its contract with Flexjet may be irrelevant to the legal issues
presented in the federal suit. The same is even more true for the New York
7

case: whether Flexjet breached the contract with Duncan is irrelevant to
whether Honeywell breached its contract with Flexjet. See CRW Mech.
Consulting and Fabrication, LLC v. Sandine, No. 8:10-cv-407, 2022 WL
343616, at *3 (D. Neb. Feb. 4, 2022).
Flexjet argues that if Honeywell wrongly refused to pay Duncan's
bailment charges under the MSA, then the condition precedent in Section 2.1
was not triggered. According to Flexjet, that legal question is pending before
the New York state court. But according to the contract between Flexjet and
Duncan, if "Duncan Aviation determines . . . that repairs of [Flexjet's]
equipment are in fact not covered by [a] maintenance plan or agreement," then
it is Flexjet's obligation to pay the bailment charges. Filing 22-1 at 2. Duncan's
determination is independent and separate from Honeywell's obligations to
Flexjet, and could reasonably be based on Honeywell's "discontinued payment"
for services provided to Flexjet. See filing 22 at 4; filing 22-1 at 2. Honeywell's
alleged wrongful conduct may be of no concern, and, if that's the case, Flexjet's
defense to this lawsuit must be that Duncan acted wrongfully, which is not a
question presented in the New York lawsuit.
The actions are not parallel. Colorado River abstention is not
appropriate. For the sake of completeness, the Court has also considered the
six non-exhaustive factors to determine whether exceptional circumstances
warrant abstention, Fru-Con, 574 F.3d at 535, which only further demonstrate
the differences between the state and federal lawsuits. Those factors are:
(1) whether there is a res over which one court has established
jurisdiction, (2) the inconvenience of the federal forum, (3) whether
maintaining separate actions may result in piecemeal litigation,
unless the relevant law would require piecemeal litigation and the
federal court issue is easily severed, (4) which case has priority—
8

not necessarily which case was filed first but a greater emphasis
on the relative progress made in the cases, (5) whether state or
federal law controls, especially favoring the exercise of jurisdiction
where federal law controls, and (6) the adequacy of the state forum
to protect the federal plaintiff's rights.
Id.
In these circumstances, there is no res over which a court has established
jurisdiction. Flexjet acknowledges that Nebraska and New York are equally
convenient forums. Filing 28 at 29. There is no risk of piecemeal litigation,
because, again, the claims are legally distinct—the New York lawsuit is about
Honeywell's alleged wrongs, and this lawsuit is about Duncan's determination
that Flexjet's repairs were not covered by a maintenance plan or agreement.
The New York case has certainly progressed further than this case, but again,
the issues in that case are different than those presented here. And state law
controls in both the federal and state courts—however, the bailment
agreements at issue here are governed by Nebraska law, see filing 22-1 at 5,
which a Nebraska federal court is better suited to adjudge than a New York
state court. And the adequacy of the New York forum to protect Duncan's
rights is a neutral factor.
All-in-all, this case does not present the extraordinary conditions
required by Colorado River for this Court to disregard its obligation to exercise
the jurisdiction it is given. Fru-Con, 574 F.3d at 540. If the New York court
determines that Honeywell is responsible for the payments to Duncan, Flexjet
can seek reimbursement for any judgment that might be entered against it in
this lawsuit. Duncan has the right to pursue its claims against Flexjet in this
court. Accordingly,
9

IT IS ORDERED:
1.

Flexjet's motion to dismiss or stay this action (filing 24) is
denied.

2.

This matter is referred to the Magistrate Judge for case
progression.

Dated this 29th day of August, 2024.
BY THE COURT:

John M. Gerrard
Senior United States District Judge

10