## Facts

- A group of developers modified a Lockheed T-33 aircraft to create the “Skyfox,” intended as a low-cost, multi-role aircraft for military customers.
- The developers granted Boeing Military Airplane Company exclusive worldwide rights to produce and sell the Skyfox, with the developers to receive a $150,000 royalty per aircraft sold.
- The written agreement disclaimed any obligation for Boeing to produce or sell aircraft, disclaimed any joint venture or fiduciary relationship, and included an integration clause.
- Boeing did not produce or sell any Skyfox aircraft and terminated the agreement after two years.
- The developers sued in diversity, alleging fraud in the inducement/misrepresentation and concealment, breach of the implied covenant of good faith and fair dealing, and breach of fiduciary duty.
- The developers sought damages primarily measured by projected royalties from sales of 450 Skyfox aircraft and also sought return of certain materials/equipment retained after termination.
- The district court granted summary judgment to Boeing on all claims.

## Issues

1. Whether the evidence created a triable issue under Kansas law that Boeing fraudulently induced the agreement or misrepresented/concealed material facts, including whether reliance on alleged extra-contractual assurances was justifiable.
2. Whether Kansas law implied a covenant of good faith and fair dealing requiring Boeing to develop, produce, or market the Skyfox notwithstanding express contractual disclaimers.
3. Whether the parties’ arm’s-length commercial relationship and contract created a fiduciary or joint-venture-type duty.
4. Whether claimed lost royalties based on projected sales of 450 aircraft were recoverable or impermissibly speculative under Kansas law.

## Decision

- The Tenth Circuit affirmed summary judgment for Boeing on all claims.
- The court held the fraud-based claims failed because plaintiffs did not present evidence sufficient to show actionable misrepresentation/concealment and justifiable reliance in light of the integrated contract’s express disclaimers.
- The court held the implied covenant of good faith and fair dealing could not be used to impose production or marketing obligations inconsistent with the agreement’s express terms.
- The court held no fiduciary relationship or joint venture arose as a matter of law given the commercial, arm’s-length context and the contract’s express disclaimer.
- The court held plaintiffs’ lost-royalty damages theory was too speculative, particularly because the product had no established sales history and Boeing had no contractual obligation to produce or sell any aircraft.

## Legal Principles

- Under Kansas law, fraud requires proof of a material misrepresentation (or actionable concealment), intent to induce reliance, justifiable reliance, and resulting damages; an integrated written agreement that contradicts alleged oral assurances weighs heavily against justifiable reliance.
- The implied covenant of good faith and fair dealing under Kansas law cannot negate or override express contract terms or create duties the parties did not bargain for.
- Fiduciary duties are not implied in ordinary arm’s-length commercial dealings absent special trust, domination, or other circumstances sufficient to overcome express contractual disclaimers.
- Lost profits or royalty-based expectancy damages must be proven with reasonable certainty; projections tied to a new product without established sales and without a contractual production commitment are not recoverable when speculative.

## Conclusion

The court affirmed summary judgment because the written, integrated agreement foreclosed reasonable reliance on contrary alleged assurances, Kansas law did not permit using good faith to impose duties inconsistent with the contract, no fiduciary relationship existed in an arm’s-length arrangement with express disclaimers, and the claimed lost royalties were too speculative to award.


Flight Concepts Ltd. P’ship v. Boeing Co., 38 F.3d 1152 (10th Cir. 1994)