Syntelco Ltd. v. Reish

          ORDER

          Honorable John Z. Boyle, United States Magistrate Judge.

         Pending before the Court is Third-Party Defendants', Darrin and Tina Cannon, f/d/b/a Phoenix Heliparts, Inc. (the “Cannons”), Motion for Summary Judgment on all remaining counts. (Doc. 69.) Specifically, the Cannons argue that Third Party Plaintiff Robert Reish has waived all claims against the Cannons for all actions that are the subject of this suit. (Id. at 1.) The Court will deny the Motion.

         I. Background.

         This 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 MD Helicopter, Model 369FF, Serial No. 0041FF (the “41FF”). (Doc. 1.) Defendant Reish has filed a third-party complaint against the Cannons alleging fraud relating to matters arising out of and relating to the 41FF and seeking equitable indemnity as to AMOD's claims against him. (Doc. 23.) On Summary Judgment, the Cannons allege that Reish has waived his third-party claims against them for all actions that are the subject of this action. (Doc. 69 at 1.) With that procedural posture in mind, the Court briefly summarizes the following relevant facts.

         A. Reish, the Cannons, and PHP.

         Phoenix Heliparts, Inc. (“PHP”) was a corporation that dealt in aircraft resoration and sales. (See Doc. 23 at 39, ¶¶ 12-14; doc. 43.) PHP was operated by Tina Cannon, President, and Darrin Cannon, vice president of operations. (Doc. 70, ¶¶ 2-3; doc. 73 at 2.) Reish hired PHP on multiple occasions to assist with the purchase, restoration, and sale of various aircraft. (See Doc. 23 at 38-60.)

         On February 13, 2014, PHP and Reish executed a contract for PHP to sell Reish the 41FF, the helicopter at issue in this action. 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.”)). Reish alleges that PHP 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 party.

         B. PHP's Chapter 11 Filing.

         On September 18, 2015, PHP filed its chapter 11 bankruptcy case. (Doc. 70, ¶ 1; doc. 73 at 1.) See also In re Phoenix Heliparts Inc., 15-bk-12003-DPC at Docket 1.^[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 bankruptcy court appointed Louis Mukai as chapter 11 Trustee for PHP. (Bankr. Doc. 108.)

         On May 31, 2016, the bankruptcy court approved the Trustee's First Amended Liquidation Plan (the “Plan”). (Doc. 77 at 17 (Bankr. Doc. 482).) The bankruptcy court's approval Order established the Phoenix Heliparts Liquidation Trust (“Liquidation Trust”), installed Louis Mukai as the Liquidation Trustee. (Id.) The Order also provided the Liquidation Trust with the exclusive right to “institute, prosecute, abandon, settle or compromise any causes of action, in accordance with the terms of the Plan and the Liquidation Trust Agreement” and stated that “the Liquidation Trustee will have standing, under state and/or federal bankruptcy law or otherwise, to file, litigate and settle the any remaining causes of action as provided in the Plan and the Liquidation Trust Agreement.” (Id. at 14-15.) Under the terms of the Plan that was approved by the court, the Liquidation Trust shall “succeed[ed] to all property, rights, powers, causes of action, and other rights of the Debtor and the Trustee, subject only to the terms of the Sale order and APA.” (Id. at 37.)^[2]

         The Liquidation Trust Agreement and Declaration of Trust states that “the primary purpose of the Liquidation Trust is (i) oversee and direct the liquidation of the Trust Assets for the benefit of the Beneficiaries thereunder; and (ii) distribute any proceeds of the Trust Assets received by the Liquidation Trust to the Beneficiaries pursuant to the terms of the Plan.” (Id. at 47.) The Declaration also provides context as to what liabilities were to be conveyed to the Liquidation Trust from the Debtors and the Estate upon approval of the Plan.

1.5 Assignment and Assumption of Certain Liabilities. In accordance with Section 1 hereof, the Debtor hereby irrevocably transfer, assign and convey the Trust Assets to the Liquidation Trust, and the Liquidation Trustee on behalf of the Liquidation Trust hereby assumes and agrees that all such Trust Assets are being transferred to the Liquidation Trust subject to the following liabilities, if any, that arise out of or relate to any known or unknown claim (as such term is defined in Section 101(5) of the Bankruptcy Code) or causes of action against the Debtor or their respective Estates:

a) all fees payable pursuant to Section 1930 of title 28 of the United States Code until such time as the Bankruptcy Court enters a final decree closing each Debtor's Chapter 11 Case;

b) any expenses incurred and unpaid, or to be incurred, by the Liquidation Trustee in the performance of its administrative duties in respect of the winding up of the Debtor' Estates, including the filing of final tax returns. For the avoidance of all doubt, in no event shall the Liquidation Trustee pay any tax liability for any member, shareholder or owner of a business entity (as defined in Reg. ...