UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report: Commission File Number
June 10, 1997 1-8319
GATX CAPITAL CORPORATION
Incorporated in the IRS Employer Identification Number
State of Delaware 94-1661392
Four Embarcadero Center
San Francisco, CA 94111
(415) 955-3200
Item 5. Other Events
As previously reported, GATX/Airlog Company ("Airlog"), a
California General Partnership, of which a subsidiary of the Company is
a partner, and the Company, filed a complaint for Declaratory Judgment
against Evergreen International Airlines, Inc. ("Evergreen") in the
United States District Court for the Northern District of California (No.
C96-2494) seeking a declaration that neither the Company nor Airlog
has any liability to Evergreen as a result of the issuance of Airworthiness
Directive 96-01-03 (the "Airworthiness Directive") by the Federal
Aviation Administration (the "FAA") in January of 1996. The effect of
the Airworthiness Directive is to reduce significantly the amount of
freight that three of Evergreen's B747 aircraft may carry. These three
aircraft, along with a fourth no longer owned by Evergreen, were
modified from passenger to freight configuration by subcontractors of
Airlog, pursuant to contracts between Airlog and Evergreen or one of its
affiliates. The four aircraft are part of a group of ten B747 aircraft (the
"Affected Aircraft") that were modified by subcontractors of Airlog
pursuant to a design approved by the FAA at the time the modifications
were made, and which are subject to the Airworthiness Directive.
Evergreen filed an answer and counterclaim asserting that Airlog and
the Company are liable to it under a number of legal theories in
connection with the application of the Airworthiness Directive to the
three aircraft.
On June 5, 1997, the Court ruled on a Motion For Partial
Summary Judgment that had been filed by Airlog and the Company
with respect to several of Evergreen's counterclaims. The Court granted
the Motion as to Evergreen's counterclaim that alleged Airlog breached
its warranty under the Purchase Agreement pursuant to which Airlog
sold one of the converted aircraft to Evergreen, and denied the Motion
as to Evergreen's counterclaim that Airlog breached its warranty under
the Modification Agreements pursuant to which Airlog manufactured
and installed freighter conversion kits with respect to two other aircraft
owned by Evergreen. The court ruled that the Purchase Agreement was
a contract for the sale of goods and that claims thereunder were barred
by the four year statute of limitations under the California Commercial
Code (the "Code"). The Court ruled that the Modification Agreements
were contracts of services not governed by the Code, and that any
applicable statute of limitations did not begin to run until Evergreen had,
or should have had, knowledge of the alleged breach. The Court also
denied the Motion with respect to Evergreen's counterclaim in which it
alleged that Airlog negligently misrepresented certain facts which
purportedly induced Evergreen to enter into the Purchase and
Modification Agreements.
The Court's ruling bars Evergreen from recovering under its
claim for breach of warranty under the Purchase Agreement, and permits
Evergreen (subject to reconsideration or appeal) to proceed with its
claim for breach of warranty under the Modification Agreements and its
claim of negligent misrepresentation. The ruling does not represent a
decision that Evergreen is entitled to prevail on those claims. Airlog
and the Company have other defenses to those claims that they intend to
assert vigorously.
American International Airways, Inc. ("AIA") has filed a Joint
Case Management Statement and Proposed Order in the litigation which
it previously filed against Airlog, Airlog Management Corp. and the
Company in the United States District Court for the Northern District of
California (97-0378), specifying the damages it has allegedly suffered as
a result of the application of the Airworthiness Directive to the two
Affected Aircraft owned by it. In the pleading, AIA alleges that it
sustained damages of $43,787,954 to date, and further alleges that it
continues to accrue damages of $1,800,000 per month until the aircraft
in question are operational.
The Company, Airlog, Airlog Management Company and
GATX Aircraft Corporation have entered into a Tolling Agreement
dated as of May 6, 1997, with The Bank of New York . Under the
Tolling Agreement, the parties have agreed that any defense of
expiration of the statute of limitations or statute of repose or laches
applicable to any causes of action arising out of the sale of goods or
services in connection with the Affected Aircraft owned by The Bank of
New York by or on behalf of the parties thereto is tolled to and
including May 6, 1999.
The Company has recently been informed that Tower Airlines,
the owner of one of the Affected Aircraft, has filed a complaint against
Airlog and the Company. As of the date of this report, no summons has
been served on either Airlog or the Company with respect to such
action, and the Company has no further information with respect
thereto.
Although it is impossible to predict the outcome of any litigation
with certainty, Airlog and the Company continue to believe the above
described claims are without merit and that they have adequate defenses
thereto.
Signatures
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GATX CAPITAL CORPORATION
/s/ Michael E. Cromar
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Michael E. Cromar
Vice President and
Chief Financial Officer
June 10, 1997
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