United States District Court, D. Arizona
HONORABLE JOHN Z. BOYLE UNITED STATES MAGISTRATE JUDGE
before the Court is Third Party Defendants', Darrin and
Tina Cannon, f/d/b/a Phoenix Heliparts, Inc. (the
“Cannons”), Motion to Dismiss all claims in Third
Party Plaintiff Robert Reish's Third Party Complaint
(“TPC”) (doc. 23) pursuant to Federal Rule of
Civil Procedure 12(b)(6). (Doc. 43.) Specifically, the
Cannons argue that Reish's claims are barred by the
doctrine of res judicata, are inappropriate under Rule 14(a),
and erroneously attempt to hold the Cannons individually
liable for equitable indemnity and contribution where the
underlying claims are not based in tort. (Id. at 1.)
The Court will grant the Motion in part.
third-party-litigation stems from the Azerbaijan Ministry of
Defense's suit of Robert Reish over his alleged breach of
a contract between them regarding the purchase and sale of a
helicopter. (Doc. 1.) Defendant Reish asserts that his
culpability in the underlying lawsuit, if any, can be
properly attributed to the Cannons, and filed his TPC against
the Cannons concurrently with his answer to AMOD's
complaint. (Doc. 23.) With that posture of the parties in
mind, the following facts are asserted in the TPC, and are
taken as true for the purposes of this motion.
Factual History as to Reish and PHP.
November 13, 2017, Reish filed an answer to AMOD's
Complaint (doc. 1). (Doc. 23.) Included therein was
Reish's TPC alleging claims against Darrin and Tina
Cannon. (Id.) At the outset, the Court notes that
Reish's TPC is not the model of clarity. Stated plainly,
it is meandering, poorly formulated, difficult to read, and
largely unintelligible for considerable portions of its
factual allegations. That said, to the best of the
Court's ability to interpret the TPC, Reish alleges the
Agreements between Reish and PHP.
2004, Reish heard about PHP as an entity, and was told to
contact PHP on a possible future contract to refurbish a
helicopter Reish had just purchased. (Doc. 23 at 38, ¶
8.) Several years later, between 2011 and 2017, Reish entered
into several agreements with PHP for various services,
including the purchase, sale, or refurbishment of four
separate helicopters. Specifically, Reish alleges the
following agreements: (1) the purchase and refurbishment of
Helicopter #600FF from PHP in 2011 (id.,
¶¶ 14-16); (2) the purchase of Helicopter #0041FF
from PHP in 2013-14 (id., ¶¶ 17-19, 24,
26, 28); (3) the purchase of Helicopter # 1170229D from PHP
in 2014 (id., ¶¶ 22, 25, 26, 28); (4) the
purchase of Helicopter #0175FF from PHP customer, Fedorchuck
Leasing, LLC, in 2014 (id., ¶¶ 35, 36).
The 41FF Sales Agreement.
February 13, 2014, PHP and Reish executed a contract for PHP
to sell Reish a MD Helicopter, Model 369FF, Serial No. 0041FF
(the “41FF”) for the “Base Project
Price” of $1, 395, 000. The 41FF had previously been
wrecked, and PHP needed to make significant repairs before it
could deliver it to Reish in compliance with the 41FF sales
agreement. (See doc. 43, ex. 2, at 18, ¶ 4 (the
41FF Sales Agreement, requiring that the 41FF be delivered
“with all systems operational, a current Airworthiness
Certificate, Flight records up to date, all mandatory
Airworthiness Directives and Service Bulletins complied
with.”)). Because of the pending necessary repairs, the
total price in the February 13, 2014 41FF Sales Agreement was
left as “TBD” (to be determined), and the
delivery date was set as “seven months after Reish paid
his deposit and after the parties had agreed upon the scope
of work.” (Id., ¶ 9).
failed to complete the repairs on the 41FF, render it
airworthy, or deliver it to Reish by the delivery deadline.
(Doc. 23 at 38.) As late as September 2015, Reish was still
pushing PHP to finish the 41FF so he could sell it to another
The Ryuko Note.
April 2015, on behalf of PHP, Cannon contacted Reish and
asked for a loan of $850, 000. (Doc. 23 at 50, ¶ 40.)
Reish agreed to lend Cannon/PHP the money from his close
corporation, Ryuko, Inc., in exchange for a discount note for
$1, 275, 000. (Id., ¶ 41.) As part of the deal,
PHP “would receive credit against this note for part of
the purchase price of [the 41FF] and Serial Number
#175FF.” (Id.) Reish and Cannon executed the
installment note (the “Ryuko Note”) in favor of
“Ryuko, Inc. Trustees Robert C. Reish and/or Kathleen
A. Reish” calling for payment by PHP of $1, 275, 000 on
or before April 1, 2016.
April 21, 2015, Ryuko wired $850, 000 to PHP in connection
with the Ryuko Note. (Id.) Reish asserts that
completion of the Ryuko Note and wiring of funds to PHP
effected payment for the remaining balance owed on the 41FF.
(Id., ¶ 42 (“Hence, with this $1, 275,
000.00 deal the two MD 530F Helicopters (serial number
#0041FF . . . #0175FF . . .) and a third Hughes Helicopter
[#1170229D] would . . . be fully paid.”); see also
In re Phoenix Heliparts Inc., 2:16-ap-00331-DPC.
PHP's Chapter 11 Filing.
September 18, 2015, PHP filed its chapter 11 bankruptcy case.
See In re Phoenix Heliparts Inc., 15-bk-12003-DPC at
Docket 1. The bankruptcy filing was precipitated by
a January 2015 state court judgment against PHP for $26
million and the state court's subsequent order requiring
PHP to post a supersedeas appellate bond for $6, 765, 260.89.
(Bankr. Doc. 1.) On October 22, 2015, the Court appointed
Louis Mukai as chapter 11 Trustee for PHP. (Bankr. Doc. 108.)
Sale of the 41FF from Reish to AMOD.
to the appointment of Mr. Mukai as PHP's chapter 11
Trustee in October 2015, Tina Cannon, without permission of
the Trustee or the bankruptcy court, and on behalf of Reish,
orchestrated the sale of the 41FF from Reish to AMOD. (Doc.
23 at 56, ¶ 53-54.) At that time, the 41FF's chain
of title had become tangled, resulting in a need for Tina
Cannon make numerous title transfers to facilitate the sale.
Specifically, in November 2015, Cannon had to arrange for
title to be transferred from the 41FF's prior owner,
RotorMate, to PHP, and for an accompanying Wells Fargo lien
on the 41FF to be released. (Id.) Once that transfer
was complete, Cannon completed documents purporting to
transfer title of the 41FF from PHP to Reish and again from
Reish to AMOD. (Id.)
“was unaware of any Chapter 11 Bankruptcy involving
[PHP] until sometime in January 2016.” (Doc. 23 at 38.)
At all times prior, “Reish was told by [Tina] Cannon
that [PHP] had title and ownership of [the 41FF].”
(Id.) On March 29, 2016, Reish filed a position
paper with the bankruptcy court titled “Statement of
Position of Robert & Kathrine Reish and Ryuko, Inc. Re:
Post Petition/Post Trustee Appointment Sale of Reish/Ryuko
Helicopters to ‘AMOD' by Tina Cannon.” (Doc.
43 at 3; Bankr. Doc. 356.) Therein, Reish argued that he
maintained possession of the 41FF, and that it was not estate
property at the time relief was ordered in the bankruptcy, or
anytime thereafter. (Id.) On May 31, 2016, the
bankruptcy court entered an order confirming the
Trustee's First Amended Plan of Liquidation. (Bankr. Dkt.
11, 2016, Reish initiated an adversarial proceeding in the
matter by filing a complaint against Trustee Louie Mukai
“[t]o determine validity of Ownership Interest in [the
41FF].” See Reish v. Phoenix Heliparts Inc.,
2:16-ap-00331-DPC at Docket 1 (Bankr. D. Ariz. July 11,
2016). On February 9, 2017, the bankruptcy court
held oral argument on the parties' cross motions for
summary judgment in the adversarial proceeding. (APBankr.
Doc. 35.) On May 4, 2017, the bankruptcy court issued its
order granting the Trustee's motion for summary judgment
seeking to avoid the transfer of the 41FF under § 549 of
the bankruptcy code. (APBankr. Doc. 42.) As a result of that
ruling, “[t]he bankruptcy Trustee now claims an
interest in the sales proceeds that Reish received from AMOD
because of the sale of [the 41FF], which the Trustee claims
was estate property when sold.” (Doc. 23 at 42, ¶
after the bankruptcy court's May 4, 2017 order Reish
filed an appeal, and on May 7, 2018, the Bankruptcy Appellate
Panel of the Ninth Circuit granted him relief. In re
Phoenix Heliparts Inc., 2018 WL 2107796 at *1 (B.A.P.
9th Cir. May 7, 2018). Specifically, the appellate court held
that the lower court had applied the wrong legal standard,
vacated the lower court's order, and remanded for further
proceedings. See id.
Underlying Litigation and Current Procedural
February 28, 2017, the Azerbaijan Ministry of Defense (AMOD)
filed the underlying lawsuit against Robert Reish, alleging
nine claims: (1) breach of contract; (2) breach of the
implied covenant of good faith and fair dealing; (3) breach
of warranty; (4) fraud and deceit; (5) intentional
misrepresentation (6) concealment; (7) conversion; (8)
violation of the Arizona Consumer Fraud Act; and (9) unjust
enrichment. (Doc. 1; Doc. 26 (Amended Complaint).)
AMOD's Complaint, they allege the following facts. On
November 11, 2015, AMOD and Reish entered into a
“Helicopter Purchase Agreement” (the Agreement).
(Doc. 26, ¶ 22.) The Agreement provided that AMOD would
pay Reish $2, 322, 000.00 in exchange for a “one fully
operational and test-flight ready 530F Helicopter serial
number 00041FF.” (Id., ¶ 23.) In the
Agreement, Reish made written representations regarding the
helicopter, including that: “[t]he Helicopter will be
delivered with all systems operational, Flight records up to
date, all mandatory Federal Aviation Administration
(‘FAA') Airworthiness Directives and Service
Bulletins complied with. Helicopter to be delivered to SELLER
at Phoenix Heliparts facility in Mesa, Arizona[, ]” and
that “[t]he SELLER warrants that the title of the
Helicopter will be free and clear of all encumbrances at the
time of said delivery of the helicopter to the PURCHASER and
that the FAA Bill of Sale conveying title is executed by a
fully authorized person or persons.” (Id.,
¶ 24 (citing Exhibit A, ¶¶ 4, 8).)
asserts that, during preliminary negotiations for the
helicopter purchase, Ms. Tina Cannon, President of Phoenix
Heliparts, Inc., was identified to AMOD's Counsel as
Reish's representative and agent in the negotiations.
(Id., ¶¶ 14-15.) It is Ms. Cannon, in her
capacity as Reish's Agent, whom AMOD alleges
“mislead [AMOD] regarding Defendant Reish's intent
and ability to fully perform under the Agreement.”
(Id., Exh. C.) Specifically, AMOD asserts that
“Defendant Reish, acting in his own capacity and/or by
and through his agent Cannon, misled the [AMOD] to believe
that he was the lawful owner of and held title to the MD530F
helicopter that is the subject of this dispute.” (Doc.
1, ¶ 17.; Doc. 26, ¶¶ 62-65) AMOD asserts
“on information and belief” that Reish “did
not hold title to the aircraft shell and parts, ” and
“the aircraft shell and parts have not been assembled
into an airworthy aircraft in full compliance with all the
terms and requirements of the Agreement between the
parties.” (Doc. 26, ¶ 58.)
the close of escrow, AMOD contacted Reish and Ms. Cannon on
numerous occasions, both by phone and in writing, to notify
Reish of his failure to comply with certain terms.
(Id., ¶¶ 36-38.) On June 3, 2016,
AMOD's Counsel sent a letter to Reish's Counsel
offering to “waive any and all additional rights and
remedies it was entitled to as a result of Defendant
Reish's breach of the contract in exchange for the return
of the [AMOD's] funds in the total amount of $2, 322,
000.00.” (Id., ¶ 37). Reish did not
respond to AMOD's offer of settlement before the deadline
expired. (Id.) On July 25, 2016, a formal Notice of
Revocation of Acceptance was mailed by AMOD's Counsel to
Reish's Counsel. (Id., ¶ 38.) Despite that,
“[t]o date, Defendant Reish has not provided the