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NO IN THE SUPREME COURT OF TEXAS AIRCRAFT

VIEWS: 2 PAGES: 15

									                    NO. 07-0148



         IN THE SUPREME COURT OF TEXAS



             AIRCRAFT NETWORK, LLC,

                                  Petitioner,

                        v.

   ASSOCIATED AVIATION UNDERWRITERS, INC. and
           CESSNA AIRCRAFT COMPANY,

                                  Respondents.


AIRCRAFT NETWORK, LLC’S REPLY BRIEF TO ASSOCIATED
AVIATION UNDERWRITERS, INC. AND CESSNA AIRCRAFT
        COMPANY’S RESPONSE TO AIRCRAFT
       NETWORK, LLC’S PETITION FOR REVIEW




                      MUNCK BUTRUS, P.C.
                      J. Robert Arnett II
                      State Bar No. 01332900
                      Jamil N. Alibhai
                      State Bar No. 00793248
                      900 Three Galleria Tower
                      13155 Noel Road
                      Dallas, Texas 75240
                      (972) 628-3600
                      (972) 628-3616 (fax)

                      ATTORNEYS FOR PETITIONER
                      AIRCRAFT NETWORK, LLC
                                         TABLE OF CONTENTS

                                                                                                               Page

TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

INDEX OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii

ARGUMENT AND AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

A.       The Court of Appeals’ Ruling That Aircraft Network Lacks Standing
         To Sue AAU For Fraud And Other Common Law Claims Is
         Wrong And Conflicts With This Court’s Decisions . . . . . . . . . . . . . . . . . . . . 1

B.       Aircraft Network Is Entitled to Recover Loss of Use Damages
         For The Time During Which It Did Not Have Its Aircraft
         Or Any Substitute Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

PRAYER FOR RELIEF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

CERTIFICATE OF SERVICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11




                                                          i
                                       INDEX OF AUTHORITIES

CASES                                                                                                             Page

Allright, Inc. v. Lowe, 500 S.W.2d 190
(Tex. Civ. App. — Houston [14th Dist.] 1973, no writ) . . . . . . . . . . . . . . . . . . . . . . . 7

Allstate Ins. Co. v. Watson, 876 S.W.2d 145 (Tex. 1994) . . . . . . . . . . . . . . . . . . . . . . . . 2

Austin Nursing Center, Inc. v. Lovato,
171 S.W.3d 845 (Tex. 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

B.D. Holt Co. v. OCE, Inc., 971 S.W.2d 618
(Tex. App. – San Antonio 1998, pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

DiGrazia v. Atlantic Mutual Ins. Co., 944 S.W.2d 731
(Tex. App. – Texarkana 1997, no writ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Ethio Express Shuttle Service, Inc. v. City of Houston,
164 S.W.3d 751 (Tex. App. – Houston [14 th Dist.] 2005, no pet.) . . . . . . . . . . . . . . . 4

First State Bank of Miami v. Fatheree, 847 S.W.2d 391
(Tex. App. – Amarillo 1993, writ denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Foley v. Parlier, 68 S.W.3d 870
(Tex. App. – Fort Worth 2002, no pet.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Fryman v. Fryman, 926 S.W.2d 602
(Tex. App. – Fort Worth 1996, writ denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Honeycutt v. Billingsley, 992 S.W.2d 570
(Tex. App. – Houston [1 st Dist.] 1999, pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Hunt v. Bass, 664 S.W.2d 323 (Tex. 1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

King v. Shawver, 30 S.W.2d 930
(Tex. Civ. App. – Fort Worth 1930, no writ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6



                                                            ii
Luna v. North Star Dodge Sales, Inc., 667 S.W.2d 115 (Tex. 1984) . . . . . . . . . . . . . . 7, 9

McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests
991 S.W.2d 787 (Tex. 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Nootsie, Inc. v. Williamson County Appraisal Dist.,
925 S.W.2d 659 (Tex. 1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Offshore Petroleum Divers, Inc. v. Cromp, 952 S.W.2d 954
(Tex. App. – Beaumont 1997, pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Parker v. State Farm Mut. Auto. Ins. Co., 83 S.W.3d 179
(Tex. App. – San Antonio 2002, no pet.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Shannon v. Law-Yone, 950 S.W.2d 429
(Tex. App. – Fort Worth 1997, writ denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 6

Tilton v. Marshall, 925 S.W.2d 672
(Tex. 1996) (orig. proceeding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Transport Ins. Co. v. Faircloth, 898 S.W. 2d 269 (Tex. 1995) . . . . . . . . . . . . . . . . . . . 2, 3

Transportation Ins. Co. v. Moriel, 879 S.W.2d 10 (Tex. 1994) . . . . . . . . . . . . . . . . . . . . 7

Unitrust, Inc. v. Jet Fleet Corp., 673 S.W.2d 619
(Tex. App. — Dallas 1984, no writ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Webb-North Motor Co. v. Ross, 42 S.W.2d 1086
(Tex. Civ. App. — Austin 1931, writ dism’d w.o.j.) . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Williams v. Lara, 52 S.W.3d 171 (Tex. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3




                                                           iii
TO THE HONORABLE JUSTICES OF THE
SUPREME COURT OF TEXAS:

      Petitioner Aircraft Network, LLC (“Aircraft Network”) filed its petition for

review requesting that this Court review the decision of the court of appeals in

two respects. First, the court of appeals’ decision that Aircraft Network lacked

standing to bring common law fraud claims against an insurance company is

contrary to this Court’s holdings and creates a unique privilege for insurance

companies to commit fraud. Second, the court of appeals’ decision regarding loss

of use damages conflicts with prior decisions of this Court and will deprive

injured parties of full compensation for their loss. The court of appeals’ decisions

are not merely erroneous, but also are fundamentally unjust and will have

continuing negative ramifications on the jurisprudence of Texas. This Court

should review these decisions and correct them.

                      ARGUMENTS AND AUTHORITIES

A.    The Court of Appeals’ Ruling That Aircraft Network Lacks Standing To
      Sue AAU For Fraud And Other Common Law Claims Is Wrong And
      Conflicts With This Court’s Decisions

      This Court should review and correct the court of appeals’ decision that

Aircraft Network lacked standing to sue Associated Aviation Underwriters, Inc.

(“AAU”) for fraud and other common law claims because AAU is an insurance




                                         1
company. The following points are not contested by AAU and Cessna Aircraft

Company (“Cessna”) in their response:

•    As found by the jury, AAU committed actual, intentional, common law fraud

     against Aircraft Network and caused it to suffer over $200,000 in damages.

•    Standing to bring common law claims, under this Court’s precedents, is

     determined by whether the plaintiff is a person aggrieved. Austin Nursing

     Center, Inc. v. Lovato, 171 S.W.3d 845, 848 (Tex. 2005).

•    Aircraft Network is a person aggrieved by AAU’s fraud and has standing to

     bring common law claims. See id.; Nootsie, Inc. v. Williamson County Appraisal

     Dist., 925 S.W.2d 659, 661 (Tex. 1996).

•    The court of appeals ruled that Aircraft Network lacked standing to bring any

     claims – including common law claims – against AAU, relying upon Transport

     Ins. Co. v. Faircloth, 898 S.W. 2d 269 (Tex. 1995) and Allstate Ins. Co. v. Watson,

     876 S.W.2d 145 (Tex. 1994). Slip op. at 4.

•    The specific holdings in Watson and Faircloth upon which the court of appeals

     relied dealt with statutory standing to bring claims under the Insurance Code

     and incorporated sections of the DTPA – not standing to bring common law

     claims. Faircloth, 898 S.W.2d at 274.; Watson, 876 S.W.2d at 150.




                                          2
•     Common law standing and statutory standing are different, and the lack of

      statutory standing does not deprive a plaintiff of common law standing. See

      Faircloth, 898 S.W.2d at 274; see also Williams v. Lara, 52 S.W.3d 171, 178 (Tex.

      2001); Hunt v. Bass, 664 S.W.2d 323, 324 (Tex. 1984).

•     The effect of the court of appeals’ decision is to create a unique immunity for

      insurance companies to commit fraud.

•     No other class of person under the law, including fiduciaries, would be

      immune from liability for committing such fraud on a third party. See

      McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests, 991 S.W.2d 787,

      791-92 (Tex. 1999).

      These uncontested points demonstrate that the court of appeals failed to

follow this Court’s precedents, made a decision that is wrong and fundamentally

unjust, and purports to create a rule that will deprive injured parties of any remedy

against insurance companies that defraud them. This Court should review this

decision and reverse the court of appeals.

      AAU attempts to avoid this result by arguing that Faircloth and cases in which

insurance companies have been held liable for common law fraud perpetrated upon

third parties are “distinguishable” because they usually involve insurance

companies who obtained releases by fraud.          This is a distinction without a



                                          3
difference, i.e., a distinction between the cases that has no logical connection, and

makes no difference, to the result reached. This type of argumentation is routinely

rejected by Texas courts. See, e.g., Ethio Express Shuttle Service, Inc. v. City of Houston,

164 S.W.3d 751, 756 (Tex. App. – Houston [14 th Dist.] 2005, no pet.); Parker v. State

Farm Mut. Auto. Ins. Co., 83 S.W.3d 179, 182 (Tex. App. – San Antonio 2002, no pet.);

Honeycutt v. Billingsley, 992 S.W.2d 570, 585 (Tex. App. – Houston [1 st Dist.] 1999, pet.

denied); B.D. Holt Co. v. OCE, Inc., 971 S.W.2d 618, 621 (Tex. App. – San Antonio

1998, pet. denied); Fryman v. Fryman, 926 S.W.2d 602, 605 (Tex. App. – Fort Worth

1996, writ denied).

       AAU offers no rationale for a rule that insurance companies should be

allowed to commit fraud with impunity so long as the damages caused by such

fraud are something other than the injured party being induced to release claims.1

There is no basis for drawing such a distinction, or for attempting to circumscribe

actionable fraud within some narrow category. Further, no case cited by AAU

draws such a distinction between types of fraud.




       1
        AAU expands its proposed rule somewhat to include fraud that induces the
defrauded party to delay bringing suit until after limitations expires. This is to account
for the result in DiGrazia v. Atlantic Mutual Ins. Co., 944 S.W.2d 731, 733 (Tex. App. –
Texarkana 1997, no writ), where an insurance company was held liable for such fraud
committed upon a third party. This demonstrates the absence of any logic or principle
supporting AAU’s proposed rule.

                                             4
      Fraud consists of many forms and species, and is generally defined as any

cunning or artifice used to cheat or deceive another. Shannon v. Law-Yone, 950

S.W.2d 429, 436 (Tex. App. – Fort Worth 1997, writ denied); First State Bank of Miami

v. Fatheree, 847 S.W.2d 391, 395 (Tex. App. – Amarillo 1993, writ denied). Fraud

embraces all multifarious means to gain advantage over another by false suggestions

or suppression of the truth, including all surprise, tricks, cunning, dissembling, and

unfair ways by which another is cheated. First State Bank of Miami, 847 S.W.2d at

396. Thus, equity leaves open the way to punish frauds and to redress wrongs

perpetrated by means of fraud in whatever form it may appear. Id.

      Therefore, an insurance company fraudulently obtaining a release and

fraudulently inducing a party to incur expenditures are equally actionable. AAU

offers no reason why an insurance company should be shielded from liability for

fraud of any variety, and offers no rational explanation why an insurance company

should be shielded from liability for all varieties of fraud other than fraudulently

obtaining a release. In fact, there is no explanation. All varieties of intentional fraud

are actionable, including the fraud perpetrated by AAU here.

      Further, there is no basis for AAU’s drawing a distinction between the kinds

of harm caused by fraud. The elements of fraud only require that the defrauded

party be injured as a result of reliance on the fraudulent misrepresentation. Shannon,



                                           5
950 S.W.2d at 436-37.     Damages recoverable for fraud include out of pocket

expenditures made in reliance on the misrepresentation. See Tilton v. Marshall, 925

S.W.2d 672, 680 (Tex. 1996) (orig. proceeding); Foley v. Parlier, 68 S.W.3d 870, 884-85

(Tex. App. – Fort Worth 2002, no pet.); Offshore Petroleum Divers, Inc. v. Cromp, 952

S.W.2d 954, 957 (Tex. App. – Beaumont 1997, pet. denied). It is not essential to

actionable fraud that the guilty party should derive any benefit from his

misrepresentation. King v. Shawver, 30 S.W.2d 930, 932 (Tex. Civ. App. – Fort Worth

1930, no writ). Thus, agents are liable for misrepresentations made on behalf of

their principals, even though they derive no personal benefit from the fraud. Id.

      Here, AAU committed intentional common law fraud upon Aircraft Network

by unconditionally promising to reimburse it for certain expenses of substitute

aircraft, with the intention of not honoring that promise. In reliance upon those

fraudulent misrepresentations, Aircraft Network incurred hundreds of thousands

of dollars in expenses. The jury unanimously found, by clear and convincing

evidence, that AAU committed fraud 2 and awarded Aircraft Network a portion of



      2
        AAU’s arguments that Aircraft Network’s claim is really for unfair claims
settlement practices is reminiscent of its argument to the jury that it was merely
engaged in settlement negotiations and made no promises or commitments. The jury
rejected this argument and found not only that AAU made promises, but also that it
made those promises fraudulently. AAU fails to acknowledge that Aircraft Network
sued it because it committed intentional fraud, and that Aircraft Network proved by
clear and convincing evidence to a unanimous jury that AAU committed fraud. This is
a fraud case, not an unfair claims settlement practices case.

                                          6
the out-of-pocket expenses it had incurred. The court of appeals’ decision that

Aircraft Network has no remedy simply because the party that defrauded it was an

insurance company is contrary to Texas law and creates a pernicious license for

insurance companies to practice fraud with impunity. This Court should review

and correct this decision.

B.    Aircraft Network Is Entitled to Recover Loss of Use Damages For The Time
      During Which It Did Not Have Its Aircraft Or Any Substitute Aircraft.

      This Court should also review and correct the court of appeals’ decision on

loss of use damages, which misapplied this Court’s precedents on such damages.

AAU and Cessna do not contest the following points:

•     Compensatory damages are intended to make the plaintiff “whole” for any

      losses resulting from the defendants’ interference with the plaintiff’s rights.

      See Transportation Ins. Co. v. Moriel, 879 S.W.2d 10, 16 (Tex. 1994).

•     The owner of a damaged chattel can recover the reasonable value of the loss

      of use of the chattel while it is being repaired. See Allright, Inc. v. Lowe, 500

      S.W.2d 190, 192 (Tex. Civ. App. — Houston [14th Dist.] 1973, no writ); Webb-

      North Motor Co. v. Ross, 42 S.W.2d 1086, 1088 (Tex. Civ. App. — Austin 1931,

      writ dism’d w.o.j.).

•     The owner need not rent a replacement and may recover for compensable

      inconvenience for loss of use of its property. Luna v. North Star Dodge Sales,


                                          7
      Inc., 667 S.W.2d 115, 118-19 (Tex. 1984); Unitrust, Inc. v. Jet Fleet Corp., 673

      S.W.2d 619, 622 (Tex. App. — Dallas 1984, no writ).

•     Aircraft Network lost the use of its Aircraft for three months, during which

      it rented substitute aircraft on six specific occasions totaling 24 days, and went

      without access to any aircraft for in excess of two months.

•     The cost of leasing a similar aircraft on a monthly basis was $176,000.00.

•     The jury awarded Aircraft Network a portion of its out-of-pocket expenses for

      the 24 days it rented substitute aircraft ($210,517.66) plus approximately one

      month’s rental value for the remaining time it was deprived of its Aircraft

      ($166,000.00).

•     The court of appeals reversed the award of $166,000.00 on the ground that it

      was duplicative of the expenses incurred for 24 days’ use of substitute

      aircraft, leaving Aircraft Network uncompensated for the remaining time.

      Slip op. at 13.

      These uncontested points demonstrate that the court of appeals failed to

follow this Court’s precedents and made an erroneous decision that will deprive

injured parties of full compensation for the loss of use of their property. This Court

should review this decision and reverse the court of appeals.




                                          8
      Cessna argues if an injured party, for whatever reason, rents a replacement

vehicle for only a portion of the time it is deprived of the use of its property, it

cannot be compensated for the remaining time it suffers the loss of use of its

property. Cessna’s argument distills down to the position that if the injured party

does not actually rent a replacement vehicle, then it did not really need its property

and suffers no loss by being deprived of it.       Essentially, Cessna argues that

ownership and possession of a vehicle has no value unless it is actually being used.

This is directly contrary to this Court’s decision in Luna, 667 S.W.2d at 118-19.

      Cessna’s argument is also factually wrong. The evidence at trial included

Cessna’s own statements highlighting the value and benefit of having a jet available

for business purposes on a moment’s notice. (RRv13 Ex. 109; RRv6 145-46). The

evidence further showed that locating substitute aircraft for specific trips involved

considerable time and effort. (RRv5 114, 137; RRv6 149-50). Aircraft Network also

introduced evidence of its lost opportunities to make business trips because it did

not have an aircraft available on a moment’s notice. (RRv12 Ex. 4, 50; RRv3 39-41;

RRv4 101-04, 107-08, 112, 195-96; RRv5 127-28).          Finally, Aircraft Network

introduced evidence of the considerable “carrying costs” of having an aircraft

immediately available. (RRv12 Ex 67; RRv4 113; RRv5 120-33, 140-43).




                                          9
      In sum, the evidence established that Aircraft Network suffered a loss during

the periods it did not actually rent a replacement aircraft. The jury weighed the

evidence, rejected the same argument Cessna is making now, and awarded Aircraft

Network $166,000.00 for such loss. The court of appeals erred in reversing the jury’s

award, and failed to follow this Court’s precedents that injured parties should be

compensated to make them whole, including compensable inconvenience for loss

of use. Because the court of appeals’ decision involves an issue of continuing

importance to the jurisprudence of Texas and, if applied in future cases, threatens

to deprive injured parties of full compensation, this Court should review the

decision and reverse the court of appeals.

                               PRAYER FOR RELIEF

      WHEREFORE, for the foregoing reasons, Petitioner Aircraft Network, L.L.C.,

respectfully requests that this Honorable Court grant its petition for review, reverse

the court of appeals’ ruling on standing, hold that Aircraft Network has standing to

bring its common law claims for fraud and other wrongs against AAU, affirm the

jury’s verdicts on those claims, reverse the court of appeals’ decision on loss of use

damages, affirm the jury’s verdict of such damages, and grant such other and

further relief as the Court finds just and equitable.




                                          10
      Respectfully submitted, this 25 th day of June, 2007.

                                MUNCK BUTRUS, P.C.


                                By:    /s/ J. Robert Arnett II
                                       J. Robert Arnett II
                                       State Bar No. 01332900
                                       Jamil N. Alibhai
                                       State Bar No. 00793248

                                900 Three Galleria Tower
                                13155 Noel Road
                                Dallas, Texas 75240
                                Telephone: (972) 628-3600
                                Telecopy: (972) 628-3616

                                ATTORNEYS FOR PETITIONER
                                AIRCRAFT NETWORK, LLC




                           CERTIFICATE OF SERVICE

      I certify that I caused a true and correct copy of the foregoing document to be
served on Respondents Cessna Aircraft Company and Associated Aviation
Underwriters, Inc., by and through their counsel of record, Fred J. Meier and
Jonathan Cunningham, Winstead PC, 5400 Renaissance Tower, 1201 Elm Street,
Dallas, Texas 75270, and Craig T. Enoch, Winstead PC, 401 Congress Avenue, Suite
2100, Austin, Texas 78701, and on counsel for Amicus Curiae, Hugh L. Brady, Box
13132, Capitol Station, Austin, Texas 78711-3132, via certified mail, return receipt
requested, on June 25, 2007.


                                              /s/ J. Robert Arnett II
                                              J. Robert Arnett II



                                         11

								
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