Cirrus Aircraft and its co-founder head back to court

Cirrus Aircraft Corp. co-founder and former CEO Alan Klapmeier soon will be back in court, battling the company he once led.

On April 19, the Minnesota Supreme Court agreed to consider Klapmeier’s petition for a review of a lower court’s order that he pay Cirrus more than $670,000 to cover expenses incurred by the company during its appeal of a lawsuit filed and initially won by Klapmeier.

In a wild reversal of fortune, the Minnesota Court of Appeals earlier overturned a 2014 jury verdict that would have awarded Klapmeier $10 million in damages. He sued Cirrus for allegedly violating a “nondisparagement” clause in a settlement agreement signed after his 2009 departure from the company.

Klapmeier alleged that comments former Cirrus CEO Brent Wouters made about him damaged his reputation in the industry and made it difficult for him to raise money for a new venture called Kestrel Aircraft Co. Kestrel has since joined forces with New Mexico-based Eclipse Aerospace to form ONE Aviation Corp. Klapmeier now serves as CEO of that company.

When the Court of Appeals overturned the lower court’s case it not only stripped Klapmeier of the $10 million he had been awarded but also ordered him to pay $670,863.88 to reimburse Cirrus for expenses the company had incurred during the appeal.

Klapmeier unsuccessfully appealed the decision to the Minnesota Supreme Court in December.

However, the court subsequently has agreed to a more narrow review of the Court of Appeals’ determination of expenses in the case.

Klapmeier’s petition questions the legitimacy of the $670,583 in borrowing costs Cirrus claims to have incurred in order to obtain an appeals bond required to secure the $10 million award that was later nullified.

Cirrus borrowed the needed funds from Superior Aerospace Insurance Co., a sister business that shares the aircraft maker’s same owner — China Aviation Industry General Aircraft.

Klapmeier’s petition asserts “the ‘borrowing costs’ were merely ‘recorded’ on a promissory note among affiliated Chinese state-owned subsidiaries.” It also claims “China Aviation Industry essentially borrowed money from itself, on terms that were devoid of actual bargaining and that do not require repayment.”

Curtis Landherr, Cirrus’ general counsel, stands by the legitimacy of the transaction, and as for the shared ownership between Cirrus and the bond-holder, Superior Aerospace Insurance Co., he noted: “The Court of Appeals didn’t have any concerns about that.”

When asked about whether the terms of the financing through Superior Aerospace were fair and competitive, Landherr responded: “We’re not going to comment on an active litigation matter and look forward to the review process playing out.”

Neither Klapmeier nor his attorney returned repeated calls from the News Tribune requesting comment Thursday and Friday.

But their court documents accuse Cirrus of attempting to punish Klapmeier by saddling him with exorbitant expenses. An objection filed on his behalf with the Court of Appeals said: “The appellant (Cirrus) now seeks to complete its campaign against the respondent (Klapmeier) by imposing unprecedented and unsupported appellate costs designed to crush (him), rather than actually compensate (the company) for incidental expenses of an appeal.”

Landherr rejected any such motive, saying: “That’s completely false. These are costs that the rules say the prevailing party in an appeal are entitled to get, and so we sought those costs. It does not at all in any way have anything to do with retaliation... We’re not getting any of our legal fees back, so it’s certainly not the full costs that we incurred in the litigation.”

The Minnesota Supreme Court has not yet set a hearing date for the case.

Original article can be found here:  http://www.duluthnewstribune.com