Associated Air Center LP v. Tary Network, LTD

CourtCourt of Appeals of Texas
DecidedMarch 4, 2015
Docket05-13-00685-CV
StatusPublished

This text of Associated Air Center LP v. Tary Network, LTD (Associated Air Center LP v. Tary Network, LTD) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Associated Air Center LP v. Tary Network, LTD, (Tex. Ct. App. 2015).

Opinion

Reversed and Remanded and Opinion Filed March 4, 2015

S In The Court of Appeals Fifth District of Texas at Dallas No. 05-13-00685-CV

ASSOCIATED AIR CENTER LP F/K/A A LANDMARK AVIATION CO.; ASSOCIATED AIR CENTER INTERNATIONAL, INC.; AND DAE AVIATION HOLDINGS, INC. D/B/A DUBAI AEROSPACE, Appellants V. TARY NETWORK LTD. AND CITADELLA INTERNATIONAL GROUP LTD., Appellees

On Appeal from the 162nd Judicial District Court Dallas County, Texas Trial Court Cause No. 10-01620

MEMORANDUM OPINION Before Justices Francis, Evans, and Stoddart Opinion by Justice Francis Tary Network Ltd. and Citadella International Group Ltd. sued appellants Associated Air

Center LP, Associated Air Center International, Inc. and DAE Aviation Holdings, Inc. d/b/a

Dubai Aerospace for alleged breaches of obligations under letters of intent regarding the interior

finish-out of luxury jet airplanes. As a result of a pretrial sanction for discovery misconduct,

appellants were not allowed to present evidence of their affirmative defenses at trial. After

hearing two weeks of testimony, a jury found in appellees’ favor.

The dispositive issue in this appeal is whether the trial court’s death penalty sanction was

error. Because the record fails to show that the trial court considered any lesser sanction, we conclude it was error. We therefore reverse the trial court’s judgment and remand for further

proceedings consistent with this opinion.

In the mid to late 2000s, there was a demand for luxury business aircraft, but supply was

limited. Recognizing a potential to make money, Iouri Chliaifchtein, a London-based

businessman, came up with a business plan to purchase “green” or unfinished aircraft, secure

“slots” at a completion center for the finish-out of the plane’s interior, and then package the two

positions for sale at a profit. He formed special purpose entities, Tary and Citadella, to secure

the contracts with the aircraft manufacturers and the completion centers.

In October 2006, Chliaifchtein came to Dallas and met with AAC’s vice president of

sales and marketing, Patricio Altuna. AAC completes aircraft interiors. Chliaifchtein explained

his business model and said he wanted the “highest level of completions that AAC does.” Two

months later, appellees entered into contracts with Boeing and Airbus for the future delivery of

two aircraft, each costing about $46.5 million. Then, after months of negotiations, in late 2007,

Citadella and AAC executed a Letter of Intent regarding the completion of the Citadella aircraft.

Tary executed a similar Letter of Intent in June 2008. The LOIs secured future completion slots

for the aircraft and required AAC to negotiate in good faith with appellees to agree on a

preliminary specification/design package, works schedule, and contract price for the interior

finish-out to incorporate into a definitive agreement. Both LOIs contained milestone dates for

finalizing and signing the definitive agreements. According to the LOIs, each appellee put up a

$2 million deposit to secure the completion slots. The LOIs also set out the conditions upon

which the deposit, or some portion, would be refunded. DAE guaranteed the return of the

deposits under the LOI terms.

Ultimately, a definitive agreement was never finalized, and the aircraft were never

delivered to AAC. Appellees asserted that appellants, once they had secured the $4 million in

–2– deposits, began unilaterally increasing the completion prices and failed to negotiate in good faith

to reach agreements on the interior of the aircraft. Appellees demanded the return of their

deposits, and appellants refused. In February 2010, appellees sued appellants, alleging causes of

action for fraud, fraud in the inducement, breach of contract, conversion of the deposits, money

had and received/unjust enrichment, and conspiracy to defraud. The AAC defendants and DAE

filed separate identical answers, asserting a general denial and affirmative defenses.

Shortly after filing suit, appellees served appellants with their first set of combined

discovery requests. Included in the requests and as relevant to this appeal, appellees sought

documents related to each of appellants’ pleaded affirmative defenses.1 Thereafter, appellants

served their objections and responses, and asserted the same multiple objections to each of the

requests.2

In April 2012, as the July trial date neared, new counsel substituted into the case to

represent appellees and, over the next week, a flurry of motions followed. First, appellees filed

two identical no-evidence motions for summary judgment – one directed at the AAC defendants

and one directed at DAE – on appellants’ affirmative defenses. The next day, appellees filed a

motion for expedited hearing on appellants’ two-year-old discovery objections, including the

requests related to the pleaded affirmative defenses, and requested the court to overrule each

objection and to compel appellants to respond fully. Two days after that, appellees noticed a

1 Specifically, the requests sought “all documents related to” the following: “any revocation”, “any material breach of any agreement allegedly committed by either Tary or Citadella”, “any fraud that allegedly bars, in whole or part, the claims of either Tary or Citadella”, “any estoppel that allegedly bars, in whole or in part, the claims of either Tary or Citadella”, “any representation by Tary or Citadella that [AAC International] relied upon”, “any representation by Tary or Citadella that [AAC LP] relied upon”, “any waiver of any rights by either Tary or Citadella”, “any discharge of the obligations of [AAC International] and/or [AAC LP]”, “Tary or Citadella’s alleged failure to mitigate their damages”, “any act or omission by Tary or Citadella that allegedly caused Tary or Citadella’s injuries”, “any counterclaim or setoff”, “any condition precedent that has not been performed, that has been waived, that has been excused, or that has been otherwise satisfied”, and “the failure of any agreement with Tary and/or Citadella to comply with the statute of frauds.” 2 The objections were as follows: “Defendants object to this request as lacking specificity and not stated with reasonable particularity. Defendants object to this request as overly broad in time and scope, unduly burdensome, and seeking documents that are neither relevant nor reasonably calculated to lead to the discovery of admissible evidence. Defendants further object to this request on the basis that it is an improper request for ‘all documents’ and is merely a fishing expedition which is prohibited. Defendants object to this request as calling for confidential, proprietary, and competitive information.”

–3– deposition of AAC’s corporate representative to occur a week later on multiple topics divided

into 150 subparts. After the deposition, appellees filed a “motion to set topics” for hearing and

motion to compel. Among other things, appellees complained that appellants’ counsel had

instructed the corporate representative, Chris Schechter, not to answer any questions about the

factual bases for each affirmative defense despite the fact appellants had not objected to the

category requesting such testimony.3 Appellees moved to compel answers to the questions and

requested costs and attorneys’ fees in connection with reconvening the deposition. Alternatively,

they sought to strike appellants’ defenses.

While the discovery motions were pending, appellants filed a response to the no-evidence

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