Gulfstream asks court to dismiss UAL lawsuit

 - May 7, 2008, 9:29 AM

Gulfstream Aerospace has filed a motion asking the Chicago Cook County Circuit Court to dismiss a United BizJet Holdings lawsuit or stay all proceedings on the grounds that the litigation was filed in violation of “alternate dispute resolution” (ADR) agreements between the two companies.

UAL, on behalf of its now-defunct United BizJet Holdings business aviation unit, filed the lawsuit earlier this year to retrieve more than $50 million in deposits the company said it paid Gulfstream for a firm order for 36 GIV-SPs and GVs and options for 63 more. The jets had been slated to join UAL’s Avolar fractional-ownership program, but the program was shut down before any of the aircraft were delivered (AIN, July, page 1).

According to Gulfstream’s motion (Gulfstream officials declined to comment), the agreements were “mandatory” and “expressly provide that the parties engage in a two-step ADR procedure before initiating litigation–the parties must first participate in senior officer discussions for 60 days, and if the dispute cannot be resolved by that means, then, second, engage a mediator or third party to aid the parties in resolving the dispute for an additional 60 days. Should both of these means to resolve the dispute fail, then, and only then, may litigation be pursued by either party.”

Gulfstream not only accuses UAL of violating the provisions of the agreements but also alleges that BizJet filed litigation “only 15 days into the senior officer discussions, and has steadfastly refused to engage in mediation, despite Gulfstream’s repeated demands.”

BizJet filed an opposition to the motion in September, claiming that it complied with the first step of the ADR, but “declined to engage in the second step of the dispute resolution process, mediation, because the agreements make clear that mediation is not mandatory, but instead permissive and subject to the parties’ mutual agreement.”

According to a request that Gulfstream’s motion be denied, BizJet contends that on May 12 the parties’ representatives met in Arlington Heights, Ill., to discuss the issues. Two days later and the issues still unresolved, the senior officials agreed to continue their discussions by teleconference on May 28, said the BizJet filing. At the conclusion of that telecon, BizJet said, the representative for Gulfstream asked, “Where do we go from here?” BizJet’s representative said “there was no use in continuing senior officer discussions because further discussions would not be fruitful.” The BizJet filing said that Gulfstream’s representative replied, “I couldn’t agree more,” and the parties “agreed to cease the senior officer discussions.”

BizJet alleges that Gulfstream requested that they proceed to the second step of the dispute-resolution process by engaging a mediator. “Consistent with the fact that the agreements do not require the parties to participate in mediation, BizJet declined to engage a mediator.” Its lawsuit followed.

No date had been set at press time for a hearing on the motion for dismissal, the opposition filing to the motion or the trial on the lawsuit itself. Meanwhile, UAL is in imminent danger of running out of money and filing for bankruptcy court protection. What effect this might have on the lawsuit is unclear.