GE Told to Pay $64 Million to Van Nuys Firm

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 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 to not pump $10 million into American Aviation, according to AAI.

Finally, in February, 1987, according to trial testimony, GE cut off all financial backing.