Regions Commercial Equipment Finance, LLC v. Performance Aviation, LLC et al

Filing 45

ORDER denying Plaintiff's 24 Motion to Amend; granting Plaintiff's 32 Motion to Strike Defendants' jury demand; and granting Plaintiff's 40 Amended Motion for Leave to File a Second Amended Complaint. Signed by District Judge Keith Starrett on November 8, 2016 (dsl)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
EASTERN DIVISION
REGIONS COMMERCIAL EQUIPMENT
FINANCE, LLC
V.

PLAINTIFF

CIVIL ACTION NO. 2:16-CV-110-KS-JCG

PERFORMANCE AVIATION, LLC, et al.

DEFENDANTS

MEMORANDUM OPINION AND ORDER
For the reasons below, the Court grants Plaintiff’s Amended Motion for Leave
to File [40] a Second Amended Complaint, denies Plaintiff’s Motion to Amend [24] the
pleadings to conform to issues tried by consent, and grants Plaintiff’s Motion to Strike
[32] Defendants’ jury demand.
I. BACKGROUND
This is a breach of contract dispute. Plaintiff financed Defendant Performance
Aviation LLC’s purchase of two aircraft. The loans were secured by security
agreements granting Plaintiff a security interest in the aircraft themselves and
guaranty agreements executed by Defendants Wade Walters Consulting, Inc., Prime
Care Revenue Management, LLC, Prime Care Management Group, LLC, Wade
Walters, and Dorothy Walters.
On January 20, 2016, the United States seized the aircraft pursuant to a
criminal investigation. Plaintiff claims that Defendants have defaulted on the terms
of their loan agreements because they failed to make regular payments and because
the government seizure constitutes an event of default under the loan documents.

Accordingly, Plaintiff accelerated the amount owed on each aircraft.
Plaintiff claims that the government communicated its intention to release the
aircraft in the near future. Plaintiff filed this suit in July 2016 [1], asserting that
Defendants breached various contracts related to the loans. Plaintiff seeks the amount
due on each loan, attorney’s fees, costs, interest, and injunctive relief.
On the same day Plaintiff filed its Verified Complaint [1], it filed a Motion [4]
for a temporary restraining order and preliminary injunction. Plaintiff sought entry
of an order enjoining Defendants from liquidating, disposing, destroying, using, selling,
transferring, and/or transporting the aircraft from their current locations once the
government releases them. The Court denied the motion [11] with respect to the
request for a temporary restraining order, but it held the motion in abeyance with
respect to the request for a preliminary injunction.
On August 23, 2016, the Court held a hearing on Plaintiff’s request for a
preliminary injunction. After hearing the parties’ evidence and argument, the Court
granted the motion and enjoined Defendants from liquidating, disposing, destroying,
using, selling, transferring, and/or transporting the aircraft. However, the Court
denied Plaintiff’s request for immediate possession of the aircraft insofar as it was
outside the scope of relief requested in Plaintiff’s pleadings. The Court now addresses
several motions filed by Plaintiffs, which are all finally ripe for review.
II. AMENDED MOTION FOR LEAVE TO FILE [40]
First, the Court grants Plaintiff’s Amended Motion for Leave to File [40] a
Second Amended Complaint as unopposed.
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III. MOTION TO AMEND [24]
Next, Plaintiff filed a Motion to Amend [24] its pleadings and the Court’s ruling
to conform to issues it argues were tried by consent at the preliminary injunction
hearing. Specifically, Plaintiff argues that the parties specifically litigated and argued
the issue of whether Plaintiff was entitled to immediate possession of the aircraft,
rather than just an injunction barring Defendants from selling, using, transporting,
or otherwise altering or disposing of the aircraft. Accordingly, Plaintiff contends that
the Court should amend its previous order and the pleadings to conform to the issues
tried by consent at the hearing, pursuant to Rule 15(b)(2).
Plaintiff seeks the execution of a provisional remedy before it has received a
judgment. “Rule 64(a) of the Federal Rules of Civil Procedure allows courts to seize
property to the extent allowed by the laws of the state where the court is located.”
A.T.N. Indus., Inc. v. Gross, 632 F. App’x 185, 192 (5th Cir. 2015); see also FED. R. CIV.
P. 64. Mississippi law provides the provisional remedy of a writ of replevin, with or
without notice and a hearing. MISS. CODE ANN. §§ 11-37-101, 11-37-131; see also Order,
CSI Compresco Operating, LLC v. Brooks, No. 2:16-CV-120-KS-MTP (S.D. Miss. Aug.
11, 2016), ECF No. 3 (addressing and applying replevin statutes). In fact, Plaintiff’s
proposed Verified Second Amended Complaint [40-1], which the Court just granted
Plaintiff leave to file, includes a count of replevin, citing MISS. CODE ANN. § 11-37-101,
et seq.
This Court does not take lightly the execution of a provisional remedy before an
entry of judgment. In fact, the Fifth Circuit has questioned the constitutionality of
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Mississippi’s replevin statute, see In re Foust, 310 F.3d 849, 858 (5th Cir. 2002), leading
the undersigned judge to conclude that, at a minimum, a provisional remedy such as
replevin should only be granted where the movant has scrupulously adhered to the
relevant rules and statutes. Here, the Court does not believe it was clear from the
record or the pre-hearing notice provided to Defendants that Plaintiff sought
immediate possession of the aircraft, or that the hearing would constitute a “final
hearing” as contemplated by MISS. CODE ANN. § 11-37-131. Indeed, as noted above,
Plaintiff’s newly amended pleading includes a count of replevin, citing MISS. CODE
ANN. § 11-37-101, et seq.
For these reasons, the Court denies Plaintiff’s Motion to Amend [24] the
pleadings and its prior ruling. Plaintiff sought and received leave to file a Verified
Second Amended Complaint which includes a count of replevin. Plaintiff is free to
comply with the relevant statutes and seek immediate possession pursuant to that
claim for relief.
IV. MOTION TO STRIKE [32]
Plaintiff filed a Motion to Strike [32] Defendants’ jury demand, arguing that
Defendants waived their right to jury in the loan documents. Defendants oppose the
motion, but they only presented argument relevant to Defendant Dorothy Walters.
The Promissory Notes [13-1, 13-2] executed by Defendant Performance Aviation,
LLC contained the following provision:
MAKER HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A)
ARISING UNDER THIS NOTE, THE ABOVE REFERENCED
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SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENTS, OR
(B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO THE FOREGOING, OR THE TRANSACTIONS RELATED HERETO
OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING; AND MAKER HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION THAT IS DECIDED BY COURT TRIAL SHALL BE
DECIDED WITHOUT A JURY, AND THAT PAYEE MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT MAKER
HERETO TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
Exhibit 1 to Verified Amended Complaint at 3, Regions Commercial Equip. Fin. v.
Performance Aviation, LLC, No. 2:16-CV-110-KS-JCG (S.D. Miss. Aug. 4, 2016), ECF
No. 13-1. Likewise, the Continuing Guaranty Agreement [13-5] executed by Defendants
Wade Walters Consulting, Inc., Wade Walters, Dorothy Walters, and Prime Care
Revenue Management, LLC includes the following provision: “THE GUARANTORS
HEREBY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY LITIGATION ARISING
UNDER THIS GUARANTY.” Exhibit 5 to Verified Amended Complaint at 2, Regions
Commercial Equip. Fin. v. Performance Aviation, LLC, No. 2:16-CV-110-KS-JCG (S.D.
Miss. Aug. 4, 2016), ECF No. 13-5. Defendants do not dispute the authenticity of these
loan documents.
A private litigant may waive its right to a jury in civil cases. Commodity Futures
Trading Com v. Schor, 478 U.S. 833, 848-49, 106 S. Ct. 3245, 92 L. Ed. 2d 675 (1986).
But the waiver must be “voluntary, knowing, and intelligently made.” D. H. Overmeyer
Co. v. Frick Co., 405 U.S. 174, 186, 92 S. Ct. 775, 31 L. Ed. 2d 124 (1972). Federal
courts have considered the following factors in making this determination:
(1) whether there was a gross disparity in bargaining power between the
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parties; (2) the business or professional experience of the party opposing
the waiver; (3) whether the opposing party had an opportunity to
negotiate the contract terms; (4) whether the clause containing the
waiver was inconspicuous; and (5) whether the opposing party was
represented by counsel.
Branch Banking & Trust Co. v. Price, No. 2:11-CV-23-KS-MTP, 2011 U.S. Dist. LEXIS
129367, at *3-*4 (S.D. Miss. Nov. 8, 2011) (citing cases).
“[A]s the right of jury trial is fundamental, courts indulge every reasonable
presumption against waiver.” Aetna Ins. Co. v. Kennedy, 301 U.S. 389, 393, 57 S. Ct.
809, 81 L. Ed. 1177 (1937). However, the Fifth Circuit has not addressed whether the
movant or opposing party bears the burden of proof on a motion to enforce a
contractual waiver of the right to trial by jury. See RDO Fin. Servs. Co. v. Powell, 191
F. Supp. 2d 811, 813 (N.D. Tex. 2002); Westside-Marrero Jeep Eagle v. Chrysler Corp.,
56 F. Supp. 2d 694, 707 (E.D. La. 1999). Circuits are split on this issue. See Bakrac,
Inc. v. Villager Franchise Sys., 164 F. App’x 820, 823 n. 1 (11th Cir. 2006) (citing Pierce
v. Atchison, Topeka & Santa Fe Ry. Co., 110 F.3d 431, 435 n. 4 (7th Cir. 1997)
(collecting cases)). The Court will assume, without deciding, that Plaintiff, as the
movant, has the burden of proof.
First, the Court notes that “jury trial waivers are common in loan agreements
and loan guarantees, and these are regularly enforced.” Westside-Marrero, 56 F. Supp.
2d at 706 (citing cases). Therefore, Defendant’s need for financing is not sufficient to
demonstrate a gross disparity in bargaining power. “To invalidate a waiver provision,
. . . the bargaining differential must be the kind of ‘extreme bargaining disadvantage’
or ‘gross disparity in bargaining power’ that occurs only in certain exceptional
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circumstances.” Id. at 709. The Court notes that Defendants Wade and Dorothy
Walters are the principles of the Defendant corporations, and they are not without
financial means. In addition to the aircraft at issue in this case, the government seized
a considerable amount of funds deposited in various bank accounts. Therefore, the
Court concludes that Defendants could have sought financing from a different source
if they objected to the jury waiver provisions, or they could have simply paid out of
pocket. This factor weighs in favor of enforcing the waivers.
Second, Defendants conceded at the preliminary injunction hearing [33-1] that
Defendant Wade Walters is a sophisticated businessman, and it is undisputed that he
is one of the principles of the three corporate Defendants – Performance Aviation, LLC,
Prime Care Revenue Management, LLC, and Prime Care Management Group, LLC.
As for Defendant Dorothy Walters, Defendants presented her affidavit [39-1], in which
she claims that she “has no business experience,” has “no experience in lending or
banking,” and is “not actively engaged in the day-to-day operations of the companies
or in corresponding with Regions regarding the companies’ financial matters.”
However, Dorothy Walters signed the same document as her husband on the same date
[13-5], mitigating her alleged lack of sophistication. This factor is neutral.
Third, Dorothy Walters stated in her affidavit [39-1] that she “was never
informed that any of the documents were negotiable,” and that she was “only
instructed to ‘sign here’ by” Plaintiff. However, Walters does not claim that she
attempted to negotiate the terms of the guaranty agreement and was not permitted to
do so, or that she even desired to negotiate the terms of the guaranty. “Simply because
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[the parties] did not attempt to negotiate the provisions does not mean that, in fact, the
waiver or other terms in the contracts were not negotiable.” Id. at 707 (citing Morgan
Guar. Trust Co. v. Crane, 36 F. Supp. 2d 602, 604 (S.D.N.Y. 1999)). This factor is
neutral.
Fourth, the waiver provisions are not less conspicuous than the other provisions
of the contracts in which they are located. In both the Promissory Notes [13-1, 13-2]
and the Guaranty Agreement [13-5], the waiver provisions were printed in the same
font size as the surrounding provisions, but they were in all capitalized letters,
distinguishing them from the surrounding provisions. They are not in smaller print
than the rest of the documents or sandwiched between more prominent text. Even if
Defendants declined to read the contracts they entered, a cursory glance through the
documents would have revealed that the jury waivers were important. Id. at 708. This
factor weighs in favor of enforcing the waivers.
Finally, Defendant Dorothy Walters stated [39-1] that she was “not represented
by any attorney in relation to [the] transaction.” Once again, though, the Court notes
that it is undisputed that Defendant Wade Walters is a sophisticated businessman,
and Dorothy Walters signed the same documents as he did on the same day.
Nevertheless, this factor weighs against enforcing the waivers.
In summary, the record does not reflect a gross disparity in bargaining power
among the parties. Defendants Wade and Dorothy Walters possessed substantial
assets at the time of the relevant transaction, and they were the principals for the
Defendant corporations. It is undisputed that Wade Walters is a sophisticated
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businessman, and his wife, Dorothy, signed the same documents as he did on the same
day. The jury waivers were set apart from the other provisions of the documents in allcapitalized letters. Despite Dorothy Walters’ alleged lack of sophistication and
Defendants’ lack of legal representation with respect to the transaction, the Court
concludes that the circumstances surrounding the execution of the loan documents
demonstrate that Defendants voluntarily, knowingly, and intelligently waived their
right to a jury trial. D. H. Overmeyer Co., 405 U.S. at 186. The Court grants Plaintiff’s
Motion to Strike [32].
V. CONCLUSION
For the reasons above, the Court grants Plaintiff’s Amended Motion for Leave
to File [40] a Second Amended Complaint, denies Plaintiff’s Motion to Amend [24] the
pleadings to conform to issues tried by consent, and grants Plaintiff’s Motion to Strike
[32] Defendants’ jury demand.
SO ORDERED AND ADJUDGED this 8th day of November, 2016.
s/Keith Starrett
UNITED STATES DISTRICT JUDGE

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