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Woodward v. Algie

United States District Court, S.D. Indiana, Indianapolis Division

September 28, 2016



          Denise K. LaRue United States Magistrate Judge.


         This Cause came before the Court for a bench trial on Monday, August 29, 2016.

         Appearing were plaintiff Harold Loyd Woodward, proceeding pro se; defendants David Algie and Linda Algie; and Matthew B. Barr and Alexander Pape Orlowski, attorneys representing Defendants. Plaintiff and Defendants testified and evidentiary exhibits were admitted. At the trial, Dr. Woodward dismissed all of his claims against Linda Algie, and Linda Algie dismissed her counterclaim for promissory estoppel. Therefore, the Court dismissed Linda Algie from this Cause.

         The following claims were tried:

         Dr. Woodward's claim for breach of contract.

         Mr. Woodward proceeded to trial on the following alleged breaches of contract by David Algie: (a) Mr. Algie's failure to complete the LP1 prototype airplane to the point of flight certification by the contract deadline; (b) Mr. Algie's interference with Dr. Woodward's exclusive rights to market and sell LP1 kits; (c) Mr. Algie's refusal to pay sales commissions to Dr. Woodward; and (d) Mr. Algies' refusal to surrender LP1 properties to be commercially marketed by Dr. Woodward. Pretrial Order [doc. 243], § A.1.; Verified Amended Complaint for Damages and Injunctive and other Equitable Relief [doc. 118] (“Amended Complaint”), Count 1, ¶¶ 66-73.

         Dr. Woodward's claim for deception and conversion.

         Dr. Woodward alleges that, through deceptive practices, misrepresentations, improper conduct, bad faith, fraudulent conveyances, and misappropriation of funds, Mr. Algie conveyed, encumbered, took, and misappropriated assets and funds belonging to his and Dr. Woodward's partnership, to the detriment of the partnership and Dr. Woodward. Dr. Woodward asserts that these acts constitute deception and conversion under Indiana Code § 35-43-4-3, in that Mr. Algie knowingly or intentionally exerted unauthorized control over the partnership assets. Pretrial Order, § A.2.; Amended Complaint [doc. 118], Count 4, ¶¶ 92-99.

         Mr. Algie's counterclaim for promissory estoppel.

         Mr. Algie alleges that Dr. Woodward's promise to fly the LP1 prototype to airshows for marketing purposes and to fly it for the number of miles required by the Federal Aviation Administration for final flight certification (“mile logging”), without compensation and paying for all costs and expenses thereof, was the dispositive inducement for Mr. Algie to execute the contract, leave his lucrative career in the Indy-car field, and devote his full-time efforts to finalizing the LP1 prototype. Mr. Algie alleges that Dr. Woodward's repudiation of his promise in October 2012 injured him by causing him to lose his Indy-car salary since early 2010 and by rendering it unlikely that he can return to that field of work. Pretrial Order, § A.3.; Counter Complaint . . . and Temporary Injunction [doc. 122] (“Counter Complaint”), First Cause of Action, ¶¶ 31-36.

         Findings of Facts

         1. Defendant David Algie was born in New Zealand in 1963. After graduating from high school at the age of fifteen, he started training as an apprentice panel beater.[1]About two and one-half years later, he moved to the United States and began working successively for various IndyCar racing teams as a fabricator, mechanic, and body man, until the end of 2009. He has no formal education or degrees beyond high school and developed his knowledge and skills through private study and on-the-job training. Much of his career involved designing and constructing parts and car-body components from composites including carbon fiber and epoxy resin compounds.[2] He also obtained experience working with engines and other components of IndyCar racing cars.

         2. Some time before 1993, Mr. Algie began thinking about applying his expertise with composites and his knowledge of engines and other racing-car technologies to the development of a kit airplane. He believed that he could design and produce a kit aircraft that would be better than kits currently on the market. The chief advantages he foresaw were lighter weight and easier assembly, permitting a kit buyer to assemble the aircraft himself, without hiring a skilled kit engineer. Mr. Algie started in 1993 with studying, designing, and drawing, and he started cutting parts for the prototype in 1995. He named the airplane the “LP1, ” for “light plane one.”

         3. Plaintiff Harold Loyd Woodward is a resident of Texas. He testified to the following biographical facts. He is a physician certified in emergency-room medicine (currently practicing as a part-time emergency-room doctor). He has an M.B.A. from Ohio State University. He is part owner of Woodward Aerospace, a limited-liability corporation that he formed with his son, which is involved in selling kit aircraft in the United States and the world. He received his pilot's license in 1977 and has been an aviation enthusiast for forty years. He has accumulated over 10, 000 hours of flight time and has received ratings in single-engine, mutliengine, complex-aircraft instrument, and other ratings. He built his first kit aircraft in 1978 and has participated in over six builds of kit aircraft. He has designed over six concept aircraft. He has over two hundred flight hours in an aircraft with the same engine that is in the LP1.

         4. Dr. Woodward first became aware of the LP1 and Mr. Algie in 2008, through the internet, and he initiated contact with Mr. Algie by e-mail that year. There followed further communications and an invitation by Mr. Algie for Dr. Woodward to visit Indianapolis to see the LP1. Dr. Woodward visited Mr. Algie and his shop in Indianapolis twice in 2009.

         5. Dr. Woodward and Mr. Algie discussions turned to proposals for Dr. Woodward to provide financial support to Mr. Algie to further his work on the LP1. Dr. Woodward drafted and sent to Mr. Algie a proposed agreement (“Contract Agreement”). Mr. Algie, his wife, Linda Algie, and Dr. Woodard signed the agreement, which bears the date December 30, 2009. The Contract Agreement reads as follows:

         Contract Agreement

The purpose of the contract is to facilitate the completion of the David Algie's Light Plane 1 hence named the LP1. This will simply be referred to as the Agreement.
Parties to this contract are David Algie, Linda Algie, and Loyd Woodward a single man.
David Algie will receive from Loyd Woodward the sum of $7000.00 per month for one year. This will be used for support of David Algie so that he can devote his efforts to complete the LP1 to the point of flight certification.
Loyd Woodward will receive from David Algie the right to exclusively market the LP1 and its technology. It is understood that David Algie may have sold up to 5 kits already and these will not be subject to this agreement. For an additional sum of $40, 000.00 Loyd Woodward will have purchasing rights of an LP1 for his individual use.
Loyd Woodward will also receive the rights to commercially market all improvements, inventions, and/or discoveries made during the development of the LP1, whether patentable, copyrightable or not. Loyd Woodward reserves the right to assign these rights to a business entity. These rights shall be joint property of David Algie and Loyd Woodward. Should unforeseen circumstances prevent David Algie from completing the project within 24 months then Loyd Woodward has the obligation and right to commercially market all properties regarding the LP1 now in custody of David Algie.

         Executed this 30th Day of December 2009

         [signatures of Dr. Woodward, Mr. Algie, and Mrs. Algie] Defendant's Exhibit A.

         6. Dr. Woodward and Mr. Algie agree that the Contract Agreement is a valid contract.

         7. Before he had encountered Dr. Woodward, Mr. Algie, who is not a pilot and does not have a pilot's license, had secured a test pilot, Steve Flattum, who had agreed to serve as test pilot for the LP1 prototype free-of-charge. (A test pilot performs flight tests of a newly designed aircraft to evaluate the design.) Mr. Flattum declined to pilot the “mile-logging, ” or “fly off, ” flights free-of-charge. Mile-logging refers to the forty hours of restricted-area flying that the Federal Aviation Administration requires before finally certifying an aircraft as safe. Mr. Flattum also required payment to fly the prototype to air shows and other events that would be most advantageous for marketing the LP1. Mr. Algie testified that Mr. Flattum was willing to serve as test pilot without payment because it is a matter of honor and prestige among test pilots to be the first to fly new experimental aircraft during their development. Mr. Flattum was not interested in flying the ordinary mile-logging and air-show flights without compensation.

         8. Mr. Algie estimated that it would cost $15, 000 to complete the required mile-logging hours. He estimated that it would cost $35, 000 to promote the LP1 at air shows for one year, including payments for space rental (thousands of dollars), fuel to fly the prototype there and back, pilot's time (Mr. Flattum wanted $500 per day), and pilot's accommodations (e.g., lodging, meals).

         9. Before the Contract Agreement was signed, Mr. Algie expressed to Dr. Woodward his desire to find a pilot who would fly the prototype free-of-charge for mile-logging and air-show marketing and who also would cover the expenses of doing so.

         10. Before the Contract Agreement was signed, Dr. Woodward expressed to Mr. Algie his enthusiasm to fly the LP1 prototype in general and to fly it to air shows and promote the LP1 kits.

         11. Dr. Woodward and Mr. Algie did not agree, either before or after the Contract Agreement was executed, to give Dr. Woodward a sales commission of “no more than twenty percent” of the sales price of each LP1 kit that he sold through exercising his marketing rights under the Contract Agreement.

         12. Dr. Woodward and Mr. Algie did not enter into a currently enforceable agreement giving Dr. Woodward the right to a sales commission of $5, 000 for each LP1 kit that he sold through exercising his marketing rights under the Contract Agreement. After the Contract Agreement was executed, Mr. Algie asked Dr. Woodward about the Contract Agreement not giving him much direct financial benefit. Dr. Woodward responded that he would take $5, 000 per kit sold. Mr. Algie agreed. This agreement was not reduced to writing. When Mr. Algie later asked Dr. Woodward further about the commission, Dr. Woodward responded that he did not need that money, he just wanted to see the LP1 fly. This abnegated their oral agreement for a $5, 000 per-kit commission. Both Dr. Woodward and Mr. Algie treated the earlier agreement as null and void. Dr. Woodward has not made a claim for a $5, 000-per-kit commission.

         13. Mr. Algie did not agree to enter into a legal ...

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