Epic Amended Complaint

Case 3:09-cv-00628-AC

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Filed 07/10/2009

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U.S. DISTRICT COURT DISTRICT OF OREGON, EUGENE DIVISION CASE NO. 3:09CV-628-AC BLUE SKY AVGROUP, LLC., A Florida Limited Liability Company, Plaintiff, vs. EPIC AIR LLC., a Delaware Limited Liability Company; AIRCRAFT COMPLETION SERVICES, LLC, a Delaware Limited Liability Company and AIRCRAFT INVESTOR RESOURCES, a Nevada Limited Liability Company, Defendant. _______________________________________/ AMENDED COMPLAINT FOR APPOINTMENT OF A RECEIVER COMPLAINT FOR DAMAGES The Plaintiff herein, BLUE SKY AVGROUP, LLC., a Florida limited liability company (BLUE SKY) sues the Defendant, EPIC AIR LLC., a Delaware Limited Liability Company (EPIC); AIRCRAFT COMPLETION SERVICES, LLC, a Delaware Limited Liability Company (ACS) and AIRCRAFT INVESTOR RESOURCES, LLC., a Nevada Limited Liability Company (AIR) and state: THE PARTIES: 1. The Plaintiff herein, BLUE SKY, is a Florida limited liability company. 2. The Defendants herein are EPIC, is a Delaware limited liability company maintaining its principal place of business and doing business in Bend, Oregon, ACS, a Delaware limited liability company maintaining its principal place of business and doing business in Bend, Oregon and AIR, a Nevada Limited Liability Company maintaining its principal place of business and doing business in Bend, Oregon. JURISDICTION: 3. This Court has jurisdiction pursuant to diversity jurisdiction, 28 USC Section -1-

Case 3:09-cv-00628-AC

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1332(a)(1), in that the parties to this controversy are citizens of different states. 4. The matter in controversy exceeds the sum of $75,000.00, exclusive of interest, attorney’s fees and costs. 5. Jurisdiction with respect to the dispute between these parties is also invoked pursuant to Section 12 ( c) of the Contracts between BLUE SKY and EPIC, as well as between BLUE SKY and ACS, dated April 30, 2008. Section 12 ( c) of this contract contains the parties’ consent to the exclusive jurisdiction of the State and Federal Courts in DesChutes County, Oregon and further contains an agreement to be governed by and construed under the laws of the State of Oregon. COUNT I: COMPLAINT FOR APPOINTMENT OF A RECEIVER: 6. On approximately April 30, 2008, BLUE SKY and EPIC entered into an Airframe Purchase Agreement. A copy of this Agreement is attached hereto as Exhibit “A”. This contract called for the delivery of an “experimental” aircraft frame to BLUE SKY. A companion and simultaneously executed Completion Assistance Agreement between BLUE SKY and ACS called for completion, certification and airworthiness and delivery from EPIC to BLUE SKY in Bend, Oregon. (Exhibit “I” hereto). 7. Notwithstanding the fact that BLUE SKY had written agreements with EPIC and ACS, the Defendant, AIR undertook to and did furnish employment and payroll services, at least, to EPIC and ACS. It is unknown how the funds delivered to EPIC by BLUE SKY flowed from EPIC to either AIR or ACS: however, it is believed that EPIC, ACS and AIR have commingled and misappropriated the funds furnished from BLUE SKY for the benefit of EPIC and ACS. 8. The Agreement (Exhibit “A”) together with the contemporaneously executed Completion Assistance Agreement, required a series of payments, ultimately totaling $1,844,800.00 to be made by BLUE SKY to EPIC in advance of the work being done to complete and deliver the airplane. 9. The payment of $1,844,800.00 was required to be made for the airplane’s fabrication and assembly. Copies of the airframe purchase price and aircraft certification and aircraft purchase and completion payment schedule are attached hereto as Exhibits “B” and “C”. 10. Based on some changes in the requirements for the airplane, BLUE SKY, funded and -2-

Case 3:09-cv-00628-AC

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prepaid as the airframe was fabricated and the airplane was assembled. The total payments made through to and including a payment of $242,840.00 paid on March 5, 2009 amounts to $1,844,800.00. This payment schedule by BLUE SKY is attached hereto as Exhibit “D”. All progress payments were billed and timely paid. The billings are reflected herein as Composite Exhibit “E”. 11. Although the agreement between BLUE SKY and ACS, calls for the assembly payments to be made to ACS, such assembly payments were, in fact, made to EPIC, EPIC invoiced such payments and EPIC also furnished documentation (describing the requirements of payments (Exhibit “C”) and acknowledging, on EPIC’s stationary, receipt of such payments (Exhibit “E”). 12. It is unknown whether or how payments furnished by BLUE SKY were delivered to ACS or AIR. 13. Assembly of the airplane was undertaken by EPIC, the aircraft was assigned Build No. 30 and Tail No. N5Z. 14. As part of the agreements among the parties, EPIC, ACS and/or AIR, jointly and collectively, undertook to acquire and furnish to BLUE SKY a Pratt Whitney PT6-67A engine for installation and use in the airplane being constructed for BLUE SKY. 15. Commencing approximately January of 2009, BLUE SKY, through its member, Rich Lucibella, began to make inquiry concerning the seeming delay of construction and delay of delivery of the Pratt Whitney engine. Responding to Rich Lucibella’s inquiries: A. On January 29, 2009 EPIC wrote that the aircraft engine delivery had to be renegotiated (Exhibit “F” hereto); B. On March 4, 2009, EPIC wrote to BLUE SKY reflecting, among other things, that it was struggling with cash flow Exhibit “G” hereto); C. On March 5, 2009 EPIC again wrote to BLUE SKY indicating that there had been some changes from Pratt Whitney but the aircraft engine specified on the BLUE SKY Contract would be delivered on April 23, 2009 (Exhibit “H” hereto); D. On March 5, 2009 EPIC again wrote to BLUE SKY enclosing the purchase order between EPIC and Pratt Whitney indicating that the engine specified for BLUE SKY was scheduled for delivery on April 23, 2009 (Exhibit “H” hereto). -3-

Case 3:09-cv-00628-AC

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16. Based on the correspondence between BLUE SKY and EPIC, and EPIC’s representation that the airplane engine would be delivered on April 23, 2009, BLUE SKY caused the additional sums of $242,848.00 to be delivered to EPIC. 17. The designated Pratt Whitney engine designated to BLUE SKY was not delivered on April 23, 2009 and, upon inquiry by BLUE SKY, EPIC identified on May 1, 2009 that it was struggling financially and, as of May 18, 2009, EPIC notified BLUE SKY that it was unable to provide information in connection with the engine delivery. 18. This Pratt Whitney PT6-67A aircraft engine is furnished at a cost of $450,000.00 to $750,000.00. BLUE SKY is unaware, and has not been informed, as to whether the payment for such engine, already pre-paid by BLUE SKY, is being furnished by credit, credit lines, COD or otherwise. 19. BLUE SKY, similarly, does not know whether the Pratt Whitney engine designated to BLUE SKY has been acquired and utilized for the benefit of other airplanes in various stages of construction. 20. BLUE SKY is only aware that EPIC, by its own admission, is struggling and has not secured any recent orders for airframe kits or airplane construction. 21. EPIC, ACR and AIR have both the financial ability to complete acquisition of the aircraft and administrative ability to maintain its business in such a fashion that construction can be completed. 22. BLUE SKY currently has a partially completed airframe which it has invested almost $2,000,000.00. Such airframe will be rendered valueless unless EPIC has both the financial ability to complete acquisition of the aircraft and administrative ability to maintain its business in such a fashion that construction can be completed. 23. In addition to the inability of EPIC, ACR and AIR to identify or otherwise account for the delivery of BLUE SKY’S engine for which it has been pre-paid, EPIC has been unwilling to account for or evidence receipt of BLUE SKY’s propeller and avionics. Such goods were prepaid. 24. The actions of EPIC, ACR and AIR in being unable to identify or otherwise account for BLUE SKY’S Pratt Whitney Engine No. PT6-67A has resulted in BLUE SKY maintaining a reasonable and well founded fear that EPIC has misappropriated either the Pratt Whitney engine -4-

Case 3:09-cv-00628-AC

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or BLUE SKY’S pre-paid funds representing payment for this engine and completion of the airplane. 25. BLUE SKY reasonably believes that the appointment of a receiver is necessary to take control over the assets and liabilities of EPIC, ACS and AIR to accurately document and account for various stages of production of BLUE SKY’S airplane as well as the aircraft of other purchasers in various stages of assembly 26. The appointment of a receiver will best protect BLUE SKY and other purchasers from the apparently inability of EPIC, ACS and AIR to render such an accounting or any explanation. 27. BLUE SKY has no plain, adequate or efficient remedy at law, particularly in view of the dependency of BLUE SKY and other purchasers on the value of its equity resting entirely with EPIC’s, ACS’s and AIR’s control of parts and production. 28. BLUE SKY now faces immediate and irreparable harm in the event the continued delay or stoppage in production remains unabated. 29. In accordance with Section 12(d) of the Agreement, BLUE SKY is entitled to an award of attorney’s fees and costs at such time it is determined to be the prevailing party in this dispute. BLUE SKY has engaged counsel to represent it in these proceedings and has obligated itself to pay counsel its fees, together with costs of this action. WHEREFORE, BLUE SKY prays the Court to: A. Take jurisdiction over the parties and subject matter of this action. B. Appoint a Receiver over the business operations, assets and liabilities of EPIC, ACR and AIR; C. Require such Receiver to, as soon as practicable, render an accounting as to the assets and liabilities of EPIC, ACR and AIR as well as rendering an accounting as to the allocations of pre-paid funds from BLUE SKY and all other purchasers of airframes and assembly of airplanes. D. Render a full and final report to the Court in connection with the solvency of EPIC, ACR and AIR; E. At such time as a full and final accounting is rendered, the Court shall render such other and further orders as may do justice and equity to the parties. F. Award BLUE SKY its attorney[‘s fees and costs of this action. -5-

Case 3:09-cv-00628-AC

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Filed 07/10/2009

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COUNT II: FRAUD AND THE INDUCEMENT: BLUE SKY realleges and reasserted all Paragraphs numbered 1 through 15, as if fully set forth herein. 30. At the time EPIC represented to BLUE SKY that the Pratt Whitney engine was to be delivered on April 23, 2009, EPIC knew, or in the exercise of reasonable care, should have known that such Pratt Whitney engine No. PT6-67A was not going to be delivered by Pratt Whitney to EPIC’s Bend, Oregon assembly facility. 31. BLUE SKY relied on the truthfulness of EPIC’S representation concerning delivery of Pratt Whitney engine No. PT6-67A in tendering payment to EPIC of $242,848.00. 32. The representations of EPIC to BLUE SKY with respect to the representation that Pratt Whitney engine No. PT6-67A were false, were false when made, were made with a willful and reckless disregard for the personal and property rights of BLUE SKY and were made for the purposes of inducing BLUE SKY to part with the sum of $242,848.00 by delivering same to EPIC. 33. BLUE SKY relied on the representations of EPIC in furnishing EPIC with the sum of $242,848.00. 34. As a direct and proximate result of the fraudulent misrepresentations of EPIC, BLUE SKY has been damaged generally in the sum of $242,848.00 and specially in that BLUE SKY’S total investment in the airplane of $1,844,800.00 has been rendered totally valueless as a result of the failure to secure, deliver and participate in the installation of such engine in BLUE SKY’S airplane. 35. In accordance with Section 12(d), BLUE SKY, upon being deemed the prevailing party in this action, is entitled to payment from EPIC of its attorney’s fees and costs. BLUE SKY has engaged counsel to represent it in these proceedings and has obligated itself to pay counsel its fees, together with costs of this action. WHEREFORE, BLUE SKY demands damages against EPIC, both general damages and special damages, demands attorney’s fees, pre-judgment and post-judgment interest and costs of this action. COUNT III: BREACH OF CONTRACT: The Plaintiff in this action, realleges and reavers the allegations contained in Paragraphs -6-

Case 3:09-cv-00628-AC

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1 through 15 as if fully set forth herein. 36. The Agreements entered into between BLUE SKY and EPIC (Exhibit “A” hereto), together with the contemporaneously executed Completion Assistance Agreement (Exhibit “I” hereto), constitutes contracts between BLUE SKY, EPIC and ACS for the fabrication, assembly and delivery of an airplane. 37. BLUE SKY in accordance with the payment schedules contained in Exhibits “B” and “C”, and in accordance with the invoices rendered, has completely paid, and has in fact, overpaid for the purchase, assembly and delivery of its airplane. 38. As a consequence of the foregoing, BLUE SKY has fully performed its obligations. 39. EPIC and ACS have breached its Agreements by failing to fully and properly assemble, complete and deliver the airplane to BLUE SKY. 40. EPIC has further completely failed to account to BLUE SKY for any authorized or reasonable delay in the delivery of the airplane. 41. As a direct and proximate result of the breach of contract by EPIC and ACS, BLUE SKY has been damaged. 42. Upon information and belief, EPIC, upon receipt of funds from BLUE SKY, has diverted a portion of such funds to AIR. AIR is not a party to any contracts between BLUE SKY and either EPIC or ACS and, to the extent that AIR has received such funds, holds them in a custodial capacity for the benefit of BLUE SKY. 43. All conditions precedent to the filing of this action have been waived or excused. 44. In accordance with Section 12(d), BLUE SKY, upon being deemed the prevailing party in this action, is entitled to payment from EPIC of its attorney’s fees and costs. BLUE SKY has engaged counsel to represent it in these proceedings and has obligated itself to pay counsel its fees, together with costs of this action. WHEREFORE, BLUE SKY demands judgment for damages against EPIC, ACS and AIR, demands judgment for pre-judgment interest and post-judgment interest, and further demands judgment for attorney’s fees and costs. I HEREBY CERTIFY that a copy of the foregoing was electronically filed with the

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Case 3:09-cv-00628-AC

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Clerk, U.S. District Court and mailed this 9th day of July, 2009, to: Jeffrey T. Eager, Esquire, BALYEAT EAGER & STEELE, 920 N.W. Bond Street, Suite 209, Bend, Oregon 97701. Michael F. Van Hoomissen, Esquire 1618 S.W. 1st Avenue, Suite 319 Portland, Oregon 97201 Telephone: (503) 221-1529 Facsimile: (503) 221-6222 - and LAW OFFICES OF NORMAN MALINSKI, P.A. 2875 Northeast 191st Street, Suite 508 Aventura, Florida 33180 Telephone: (305) 937-4242 Facsimile: (305) 937-4261 By:_______________________ Norman Malinski

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