Spencer Fane LLP Logo

Court Rejects Claim That Fractional-Share Owner Holds An Interest In Operator’s Entire Fleet

The bankruptcy of fractional-share operator Avantair triggered a dispute regarding exactly what property its fractional-share owners held. Like other fractional-share operators, Avantair operated a fleet of airplanes, selling fractional shares in each of them to individual participants. Using Fractional Share Contracts consisting of interlocking purchase agreements, dry lease agreements, and fractional use agreements, Avantair controlled, operated, and maintained a fleet of aircraft owned by its participants. The participants, while holding title to a fractional interest in a specific aircraft, contractually agreed to allow Avantair to use the aircraft when needed by other fractional owners or, if necessary, by owners of interests in other Avantair aircraft. Each participant had access to its own aircraft when available. When the aircraft was not available, however, Avantair could serve the participant’s needs with other aircraft from its fleet.

Based on the contractual access to aircraft throughout the Avantair fleet, fractional owner CCA of Tennessee, Inc. argued that it actually owned a pro rata share of Avantair’s entire fleet and should share in the proceeds on this basis when the fleet was liquidated in bankruptcy. The Federal Court for the Middle District of Florida, however, rejected this claim, holding that the Fractional Share Contract gave CCA a fractional share only of the specific aircraft named in its agreement.