Lance and Linda Neibauer Joint Trust v. Kurgan

Filing 45

ORDER: The Trusts motion for summary judgment 22 is GRANTED. Kurgans motion for summary judgment 23 is DENIED. The Trust is awarded $13,896.39 on its breach of contract claim and $46,730.36 on its intentional interference with contract claim. The Trust is also entitled to costs and prejudgment and post-judgment interest. Signed on 12/16/2014 by Judge Michael J. McShane. (cp)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON

THE LANCE AND LINDA NEIBAUER
JOINT TRUST, by and through LANCE
NEIBAUER, as trustee,
Case No. 6:14-cv-01192-MC
Plaintiff,

ORDER

v.
MICHAEL J. KURGAN, an individual,
Defendant.
_____________________________
MCSHANE, Judge:
Plaintiff Lance and Linda Neibauer Joint Trust leased a 2001 Piper Meridian (Aircraft) to
defendant Michael Kurgan. The lease ran from September 20, 2013 until March 20, 2014. The
lease gave Kurgan the option of buying the Aircraft provided that he notified the Trust of that
intention at least 30 days before the end of the Lease. In December 2013, the parties entered into
an addendum to the lease, extending it by an additional year if, but only if, Kurgan paid the Trust
$96,000 by March 20, 2014. Kurgan did not pay the Trust any amount towards the $96,000.
On April 3, 2014, Kurgan proposed returning the Aircraft to the Trust or renting the
Aircraft by the hour. The Trust rejected the hourly rental proposal and Kurgan returned the
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Aircraft on April 5, 2014, 16 days after the termination of the lease. On April 22, 2014, The
Trust entered into an Aircraft Purchase Agreement (APA) for sale of the Aircraft to Enertron,
Inc. On April 23, 2014, Kurgan attempted to exercise his purchase option. The Trust did not
accept Kurgan’s offer, as Kurgan’s option expired over one month before and because the Trust
had the signed APA with Enertron to purchase the Aircraft.
The Trust alleges that Kurgan intentionally interfered with the Trust’s agreement to sell
the Aircraft to Enertron and breached the original lease agreement. The Trust also asks the court
for a declaratory judgment stating that on and after March 20, 2014, Kurgan has no right to
purchase the Aircraft.
Kurgan alleges that the Trust breached the lease agreement first. Kurgan also brings
counterclaims against the Trust alleging tortious interference, fraud, breach of contract, and
breach of implied covenant of good faith and fair dealing.
Because Kurgan clearly breached the lease and then improperly interfered with the
Trust’s sale of the aircraft with a third party, the Trust’s motion for summary judgment is
GRANTED. As Kurgan’s claims and counterclaims have no basis in fact, law, or equity,
Kurgan’s motions are DENIED.
STANDARD OF REVIEW
The court must grant summary judgment if there is no genuine issue of material fact and
the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). An issue is
“genuine” if a reasonable jury could return a verdict in favor of the non-moving party. Rivera v.
Phillip Morris, Inc., 395 F.3d 1142, 1146 (9th Cir. 2005) (citing Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986)). A fact is “material” if it could affect the outcome of the case. Id. The
court reviews evidence and draws inferences in the light most favorable to the non-moving party.
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Miller v. Glenn Miller Prods., Inc., 454 F.3d 975, 988 (9th Cir. 2006) (quoting Hunt v.
Cromartie, 526 U.S. 541, 552 (1999)). When the moving party has met its burden, the nonmoving party must present “specific facts showing that there is a genuine issue for trial.”
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (quoting Fed. R. Civ. P.
56(e)).
DISCUSSION
I.

Breach of Contract
The original Lease signed by Kurgan and the Trust provided for a six month lease term,

commencing when Kurgan took possession of the Aircraft following the completion of the hot
goods section. Lease, ¶ 1. On September 20, 2013, Kurgan took possession of the Aircraft
following completion of the hot goods section. Therefore, the lease term ended on March 20,
2014, six months after September 20, 2013. The lease provided Kurgan the option of purchasing
the Aircraft “At any time during the lease term[.]” Lease, ¶ 6. The lease contained the following
section titled “END OF LEASE TERM:”
More than 30 days prior to the end of the Lease Term, the Lessee must notify the
Owner of his Intentions. At this time, there are two options:
a. Purchase the Aircraft. With terms as set out in Paragraph 6.
b. Terminate the Lease. If Lessee decides to terminate the lease, he shall return the
Aircraft to Keystone Aviation in Aurora, OR, and engage the Facility in an
Annual Inspection. All Airworthiness squawks found during this inspection shall
be the responsibility of the Lessee.
Lease, ¶ 7.
On December 12, 2013, Kurgan and the Trust signed an addendum providing Kurgan the
option of extending the lease for another year, on the condition that Kurgan pay the Trust
$96,000 “no later than March 20, 2014.”
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The lease and the addendum are crystal clear. No later than March 20, 2014, Kurgan had
to: (1) purchase the Aircraft under the terms of the original lease; (2) return the Aircraft to
Oregon for an annual inspection (and pay for all airworthiness squawks); or (3) extend the lease
one year by paying the trust $96,000, kicking in the addendum. Kurgan did none of those things.
Additionally, it is undisputed that Kurgan did not notify the trust of his intention to exercise his
purchase option on or before March 20, 2014.
Instead of performing his obligations under the lease, Kurgan simply kept the Aircraft.
Kurgan attempts to point to the addendum, arguing that under its terms he could not exercise his
option to purchase the Aircraft before March 20, 2014. This argument blindly ignores the fact
that under the unambiguous terms of the addendum, the addendum became null and void when
Kurgan did not pay the trust $96,000 by March 20, 2014. Addendum, ¶ 1.
By not returning the Aircraft until April 5, 2014, Kurgan breached the contract. The trust
seeks a prorated amount of $4,000 (half the monthly lease amount of $8,000) for the two weeks
Kurgan kept the Aircraft after the end of the lease term. Kurgan also breached by not paying for
the Airworthiness squawks found during the Annual Inspection. The Trust paid for the squawks,
a total of $9,879.39. Finally, the trust seeks $17 for a landing fee it paid while Kurgan controlled
the Aircraft after the end of the lease term. The Trust is entitled to all of these damages and is
therefore awarded $13,896.39 in damages, prejudgment and postjudgment interest, and costs on
its breach of contract claim.
The Trust also seeks a declaratory judgment that as of March 20, 2014, Kurgan had and
has no right or option to purchase the Aircraft. The Court has the authority to issue such a
declaration under 28 U.S.C. §2201(a). As discussed above, it is clear that Kurgan’s option to
purchase the Aircraft expired, at the very latest, on March 20, 2014. It is undisputed that Kurgan
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made no offer to purchase the Aircraft before that date. Therefore, the trust’s motion for a
declaratory judgment that as of March 21, 2014, Kurgan had and has no option to purchase the
Aircraft is GRANTED.
Kurgan’s counterclaims deserve limited discussion here. Although Kurgan spills much
ink advancing his theories, his counterclaims have no basis in law or equity. In fact, as discussed
below, all of the equities here lay with the trust as Kurgan, even before any litigation, simply
threatened the trust and innocent third parties with frivolous arguments intended solely to harass,
intimidate, confuse, and drive up the attorney’s fees for his opponents.
For example, Kurgan argues that the trust breached the lease first, by failing to provide an
airworthy Aircraft. In support of this argument, Kurgan points to a receipt for $780.06 dated
September 24, 2013. Kurgan appears to argue the Trust breached the lease, as an airworthy
aircraft would not require minor repairs shortly after delivery. 1 Kurgan, however, never argued
prior to litigation that the Trust breached the lease in any manner. Kurgan’s attempt at rescission
comes much too late, as Kurgan simply kept the benefit of the lease for many months, and even
signed an addendum to the lease after learning of the Trust’s alleged breach. See DCCI, LLC v.
Keith, 2014 WL 1269696 at * 4 n.3 (D. Or. 2014) (party waives right to rescind by delaying
demanding rescission while maintaining possession of benefit received)(citing Davenport v.
Vlach, 81 Or. App. 553, 556 (1986)).
Kurgan’s fraud-based rescission argument suffers the same fate. With no support, Kurgan
baldly asserts the Trust committed fraud by colluding with a mechanic to keep the hot goods
section repair under $30,000. Had the repair exceeded $30,000, either party could have

1

$464.64 of the $780.06 appears to be for fuel, as opposed to any issue related to the aircraft’s airworthiness.

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terminated the lease. Kurgan, however, saw all of the receipts back in September 2013. His
attempt to rescind the lease comes, once again, much too late. Id.
Kurgan also argues the Trust breached the lease by engaging a third party buyer prior to
the termination of the lease. The only support for this claim is the APA between the Trust and
Enertron. That document states that Enertron and the Trust made and entered into a purchase
agreement on February 10, 2014. Kurgan Ex. in Supp. of Def.’s Mot. for Summ. J. or Partial
Summ. J. 21. However, the parties signed the APA in April of 2014. Id. Neibauer submitted a
declaration, supported by emails to the broker and Enertron, demonstrating that the Trust did not
attempt to sell the Aircraft until after Kurgan returned it. Second Neibauer Decl., ¶ 19; Ex. 1-4.
Neibauer provided a declaration stating the February 10, 2014 effective date is simply a
typographical error. Id. at ¶ 24. A scrivener’s error in the APA, especially in light of the
declaration and exhibits demonstrating that the Trust did not attempt to sell the Aircraft before
the end of the lease term, does not create a genuine issue of material fact that the Trust breached
the lease.
Additionally, even if the Trust had in fact breached by engaging Enertron in February of
2014, Kurgan did not suffer any damages. “Damage is an essential element of any breach of
contract action.” Moini v. Hewes, 93 Or. App. 598, 602-03 (1988). Kurgan never attempted to
exercise the option to purchase the airplane prior to the termination of the Lease Agreement.
Additionally, Kurgan only learned of the scrivener’s error during discovery, long after his option
expired. Therefore, even assuming the Trust breached the lease, which it did not, Kurgan did not
suffer any damages.
II.

Intentional Interference with Contract
In Oregon, a claim for intentional interference with contract requires that:

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1) The plaintiff had a contract or a reasonable expectancy of economic advantage; 2) the
defendant knew of the contract or expectancy; 3) the defendant intentionally interfered
with the contract or expectancy; 4) the defendant’s means or motive were improper or
wrongful by some measure beyond the fact of the interference itself; and 5) the plaintiff
was damaged as a result.
Leaco Enterprises, Inc. v. Gen. Elec. Co., 737 F. Supp. 605, 609 (D. Or. 1990). In this case, the
Trust proves each element. The Trust had a contract to sell the Aircraft to Enertron and Kurgan
was aware of this contract. See generally Neibauer Decl. Ex. 10(APA) and Neibauer Decl., Exs.
13, 14. Kurgan intentionally interfered with the contract by clouding the title of the lease via the
FAA (Neibauer Decl., Ex. 12), informing the Trust and Enertron of his intent to file legal claims
(Neibauer Decl., Ex. 13, 14), and filing a lawsuit in California against the Trust (Fox Decl., Ex.
1). The only real question is whether Kurgan’s interference was done through improper means
and caused damages.
IIa.

Improper Means

Improper means “must violate some objective, identifiable standard, such as a statute or
other regulation, or a recognized rule of common law, or, perhaps, an established standard of a
trade or profession.” Nw. Natural Gas Co. v. Chase Gardens, Inc., 328 Or. 487, 498 (1999). The
Trust argues that Kurgan’s actions were improper in two ways: (1) by filing an unfounded
lawsuit against the Trust in California, and (2) by using threats and intimidation to disrupt the
Trust’s sale to Enertron.
Improper means include “violence, threats or other intimidation, deceit or
misrepresentation, bribery, unfounded litigation, defamation, or disparaging falsehood. “ Top
Serv. Body Shop, Inc. v. Allstate Ins. Co., 283 Or. 201, 210 n. 11 (1978). Fraud allegations may
also satisfy the element of improper means. Thompson v. Tel. & Data Sys., Inc., 130 Or. App.
302, 313, 881 P.2d 819, 826 opinion adhered to as modified on reconsideration, 132 Or. App.
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103, 888 P.2d 16 (1994). It is not necessary to prove all elements of another tort in making out an
interference claim. Top Serv. Body Shop, Inc., 283 Or. at 210 n. 11.
In this case, Kurgan emailed the broker threatening that “a buyer might be subject to a
torturous (sic) interference claim if they are trying to induce the owner by paying more than my
contract price.” Neibauer Decl. Ex. 13. Kurgan also directly contacted Enertron’s agent stating
he had a right to the Aircraft, which he did not. Neibauer Decl. Ex. 14. Kurgan even went so far
as to file the expired lease with the FAA, clouding the Aircraft’s title and slowing down the sale.
Neibauer Decl. Ex. 12. All of this occurred after Kurgan’s lease expired, after Kurgan returned
the plane, and after Kurgan cancelled his insurance on the plane. In other words, Kurgan had no
right to the Aircraft and no contract with the Trust. His actions only served to delay the sale of
the Aircraft and cause the Trust and Enertron to incur legal fees and renegotiate a lower Aircraft
price. Further, Kurgan’s arguments regarding his option to purchase the aircraft are (and were)
frivolous. As noted, the terms of the lease are clear. Kurgan performed none of the steps required
to execute either his option or the addendum. Instead, Kurgan simply kept the aircraft for an
additional two weeks before returning it and then refused to pay for the squawks.
Kurgan’s actions caused considerable damages to the Trust. Not only did they incur legal
fees, but they also were forced to lower the price in order to compensate for Enertron’s legal
expenditures. Before Kurgan interjected himself into the Trust’s contract with Enertron to sell
the aircraft, the Trust had a signed APA in which Enertron agreed to purchase the Aircraft for
$825,000. After Kurgan threatened the Trust and Enertron with a frivolous lawsuit, the Trust had
to lower the price to $805,000. Kurgan is liable for those damages. 2

2

Kurgan argues the amount of the Trust’s damages is a question for the jury. This appears to be one more attempt
by Kurgan simply to drive up the attorney’s fees for the Trust. The fact remains that before Kurgan interfered in

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The Trust is also awarded fees incurred defending Kurgan’s frivolous California lawsuit.
The Trust incurred $26,422.16 in costs and fees defending Kurgan’s California action. Fox Decl.,
¶ 7, Ex. 5. The Trust incurred these costs and fees as a direct result of Kurgan’s intentional
interference with the Enertron contract. 3
Finally, the Trust is entitled to recover $308.20 in insurance it had to purchase due to
Kurgan’s interference. The APA called for the Trust to maintain insurance on the aircraft until
the closing date of May 30, 2014. Due to Kurgan’s interference, the sale did not close until June
9, 2014. $308.20 is the cost of insurance from June 1 through June 9, 2014.
CONCLUSION
The Trust’s motion for summary judgment, ECF No. 22, is GRANTED. Kurgan’s motion
for summary judgment, ECF No. 23, is DENIED. The Trust is awarded $13,896.39 on its breach
of contract claim and $46,730.36 on its intentional interference with contract claim. The Trust is
also entitled to costs and prejudgment and post-judgment interest.

IT IS SO ORDERED.
DATED this 16th day of December, 2014.

______/s/ Michael J. McShane__
Michael McShane
United States District Judge

the sale, the Trust had a signed APA with Enertron for $825,000. After Kurgan’s interference, the Trust had to
reduce the price by $20,000 and indemnify Enertron. ECF No. 28, ¶ 24.
3
I note the Trust does not seek to recover over $40,000 in fees incurred in this action. The Trust also does not seek
punitive damages at this time.

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