LOS ANGELES -- After a four-month trial, a Los Angeles Superior Court jury Friday ordered General Electric to pay more than $64 million to American Aviation Industries, an AAI spokeswoman said.
But General Electric, in turn, was awarded $9 million to $10 million on its countersuit in the same trial, according to AAI spokeswoman Diane Rumbaugh, who said punitive damages against General Electric, the Fairfield, Conn.-based conglomerate, have yet to be determined, the spokeswoman said.
The verdicts came in a complex suit filed by Geoffrey Miller and David Eisenstadt, owners of AAI, a Van Nuys airline consulting company.
Six years ago, the two men hit on the idea of refurbishing used Lockheed-built JetStar corporate jets with new jet engines that were quieter and had a longer range. The finished, overhauled jets, which would be called FanStars, would be a comparative bargain at $6.8 million each. They could be sold to customers who already owned aircraft and seemed ideal for corporations with frequent overseas travel.
Miller and Eisenstadt approached General Electric, a major jet-engine builder, seeking engines and a steady source of funding, according to trial testimony.
The plaintiffs contended AAI and GE became joint venture partners to manufacture and sell the FanStar. General Electric was to supply the turbofan engines for the older planes and to fund and market the project with AAI through GE's General Electric Capital Corp., a financial-services company, the plaintiffs claimed.
But within two years, according to AAI, General Electric allegedly began withholding cash from the smaller company and eventually cut off AAI altogether.
'GECC became unhappy with AAI's control of the venture and purposely broke funding contracts to force AAI owners off the project,' contended Peter J. Bezek, one of the plaintiffs' trial attorneys.
Moreover, in late 1986, GE promised to continue funding the project, causing another investor from from pumping $10 million into American Aviation, according to AAI.
Finally, in February 1987, according to trial testimony, GE cut off all financial backing. Without the money, AAI fell behind with its creditors, including GECC, and GECC began to liquidate the smaller company.
American Aviation sued for $109 million, which it contended was its future profits had it continued with two planned projects.
General Electric, in turn, countered there never was a formal joint venture, but that it was merely AAI's engine supplier and lender.
Furthermore, after a test flight of the FanStar's prototype, no orders were taken, GE's lawyer argued. Moreover, AAI defaulted on some of its GE loans and was paying Miller and Eisenstadt sky-high salaries, defense lawyer Bertrand M. Cooper contended.
General Electric countersued, seeking more than $10 million for the defaulted loans.
The exact amounts of the verdicts were unavailable late Friday.
