Lycoming Crankshaft Manufacturer Dodges Bullet in Failure Cases

The Supreme Court of Texas upheld a jury verdict in favor of Interstate Southwest and against Lycoming involving the manufacture of faulty crankshafts that were installed in Lycoming engines. In 2005, a Texas jury only found Interstate blameless and determined that Lycoming was liable for fraud. Lycoming appealed and the Supreme Court rejected the appeal.

The case began in 2003 when crankshafts began failing in many Lycoming engines and Lycoming launched a massive recall. Two class action cases filed on behalf of damaged aircraft owners are ongoing.  Lycoming sued Interstate to recover its losses because Interstate made the crankshafts.  The Texas jury found Lycoming had a faulty design and Interstate was not to blame for the failures.  Appellate courts had already reduced a $96 million judgment in favor of Interstate to allow Interstate to recover only attorneys fees, and eliminated a $186 million counterclaim by Lycoming.

Source: AvWeb

Eclipse VLJ Buyer Sues for Refund

AvWeb reported this week that the British buyer of an Eclipse 500 very light jet is reportedly suing the manufacturer to recover its $180,000 deposit.  According to the report, the order has been cancelled and a refund of the deposit is past due.  The buyer, London-based Ice Blue Air, signed a purchase agreement in July of 2006 to purchase a $1.5 million Eclipse 500, and Eclipse claims that the buyer is not entitled to a refund of the deposit per the purchase agreement. Eclipse has also said that refunds will be delayed until its next round of financing is in place, possibly as late as the end of the year.

The lawsuit alleges that Eclipse has raised the price of the aircraft to $2.15 million since Ice Blue placed its order, and the purchase agreement allows for cancellation and a full refund in the event that the jet's final price is raised. Ice Blue says the refund was due on Aug. 1, and filed the lawsuit on Aug. 5. Based on previous AvWeb reports, this may be the first of many such lawsuits as the manufacturer faces substantial financial problems associated with the production of its aircraft. 

Depending on the language of the purchase agreement, buyers may be entitled to a full or partial refund, which might result in what amounts to a "run on the bank."  In the event that Eclipse later declares bankruptcy, those to file their claims first may be entitled to greater rights over other creditors, leading to an an even more rapid deterioration in Eclipse's financial health as buyers seek to get in line ahead of other buyers. 

If you are an Eclipse buyer that has questions about your deposit, please give us a call, we will be glad to discuss your options.