BP Group, Inc. v. Kloeber

Facts

BP Group, a Florida corporation, leased a Gulfstream G200 aircraft from Wachovia National Bank pursuant to a headlease that prohibited assignment or subleasing without Wachovia’s consent. On August 20, 2008, BP Group and Capital Wings Airlines (CWA), a Texas corporation wholly owned by Corsair Aviation LLC, executed an Aircraft Management Agreement (AMA) giving CWA rights to use the aircraft in commercial charter operations. David Kloeber, Jr., who served as Chief Manager and sole Governor of Corsair and was its majority owner, signed the AMA for CWA and personally guaranteed CWA’s performance. The parties originally negotiated the transaction as a sublease, but Wachovia refused consent because CWA intended commercial charter use. The parties restructured the transaction as a management agreement based on advice from BP Group’s aviation counsel, despite concerns from CWA’s representatives that the FAA would still consider it a lease and Wachovia would not consent. BP Group never sought Wachovia’s consent for the AMA. Under the AMA, CWA could refurbish the aircraft at its expense without accruing rent. The aircraft was sent to West Star Aviation for refurbishing and painting at a cost of $647,887.03, but West Star would not release the aircraft until paid. After West Star held the aircraft for over six months, BP Group paid the bill on May 1, 2009, and retrieved the aircraft. BP Group subsequently entered into a management agreement with Priester Aviation. BP Group sued CWA and Kloeber for breach of contract and guaranty.