FRAUD/JUDGMENT AS A MATTER OF LAW - GE CAPITAL AVIATION SERVICES, INC. V. PEMCO WORLD AIR SERVICES, INC.
In GE Capital Aviation Services, Inc. v. Pemco World Air Services, Inc., [Ms. 1090350, Mar. 30, 2012] __ So. 3d __(Ala. 2012), the Supreme Court held that the trial court erred in denying the defendant's motions for judgment as a matter of law and a new trial on the plaintiff's fraud and implied contract claims. The plaintiff, Pemco World Air Services, Inc. ("Pemco"), operated an aircraft maintenance and repair business in Dale County, Alabama. In late 2002 and early 2003, Pemco entered into a series of contracts with GE Capital Aviation Services, Inc. ("GE Capital") through which Pemco agreed to convert two of GE Capital's Boeing 767s from passenger to freight aircraft. Pemco also agreed to perform the inspections and maintenance work that was necessary to satisfy Federal Aviation Administration requirements for the aircraft. Pemco's work on the aircraft cost far more than the parties originally projected. Ultimately, Pemco filed suit against GE Capital alleging breach of express and implied contracts, fraudulent misrepresentation, and fraudulent suppression. The essence of Pemco's claims was that GE Capital misrepresented its intent to require Pemco to perform maintenance and inspection work not originally anticipated under the contracts and also suppressed this intent along with the condition of the aircraft from Pemco. The case was tried to a Dale County jury, which returned a verdict for Pemco on all of its claims and awarded Pemco compensatory damages of $2,147,129 and punitive damages of $6,500,000. On appeal to the Supreme Court of Alabama, GE Capital argued that the trial court erred in denying its motions for judgment of a matter law and a new trial. The Court agreed with GE Capital, in part, holding that GE Capital was entitled to judgment as a matter of law on all of Pemco's fraud claims and was also entitled to a new trial on Pemco's claims for breach of express contract claim. The Court found that Pemco failed to present substantial evidence of fraudulent misrepresentation by GE Capital. In reaching this conclusion, the Court emphasized that the contracts at issue were between two large national and international corporations, were negotiated in detail by the parties and their counsel, and that the language of the contracts was clear and unambiguous regarding the scope of Pemco's work. Thus, while GE Capital may have breached the contracts by insisting that Pemco perform additional work, the Court found no evidence of a false representation. Accordingly, the Court held that Pemco's fraudulent misrepresentation claim should not have been submitted to the jury. The Court also concluded that Pemco failed to present substantial evidence of fraudulent suppression by GE Capital. During the trial, Pemco argued that GE Capital had suppressed two material facts: 1) the condition of the aircraft; and 2) the scope of work it would require Pemco to perform. The Court pointed out that the condition of the aircraft could not have been material to Pemco because Pemco never even asked to inspect the aircraft before entering into the contract. Moreover, as to Pemco's scope of work under the contract, the Court again emphasized that the contracts were negotiated between large and sophisticated companies and that Pemco's scope of work was clearly laid out in the contracts. In reviewing the record, the Court found that Pemco's fraudulent suppression claim was "mere speculation" and there was "no evidence presented . . . indicating that GE Capital suppressed from Pemco any material fact." Consequently, the Court held that the claim should not have been submitted to the jury. In turning to Pemco's breach of express and implied contracts claims, the Court found ample evidence in the record establishing that GE Capital had breached the express contracts between the parties. However, the Court found no evidence supporting Pemco's claim that GE capital breached an implied contract. The Court concluded that this created a "good count-bad count" situation.