Regions Commercial Equipment Finance, LLC v. Performance Aviation, LLC et al
Filing
77
ORDER granting 48 Motion for an Order directing Clerk to issue summons for a replevin hearing ; denying 51 Motion to Dismiss; granting 61 Motion to Strike ; denying 65 Motion to determine the applicable law. Signed by District Judge Keith Starrett on 1/24/2017 (dtj)
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 denies Defendants’ Motion [65] to determine
the applicable law, grants Plaintiff’s Motion to Strike [61] Defendants’ Notice of Jury
Demand [56], denies Defendants’ Motion to Dismiss [51], and grants Plaintiff’s
Motion [48] for an order directing the Clerk to issues summons for a replevin hearing.
I. BACKGROUND
The Court previously discussed the factual and procedural background of this
case. See Regions Commercial Equip. Fin., LLC v. Performance Aviation, LLC, No.
2:16-CV-110-KS-JCG, 2016 U.S. Dist. LEXIS 96658 (S.D. Miss. July 22, 2016); Regions
Commercial Equip. Fin., LLC v. Performance Aviation, LLC, No. 2:16-CV-110-KS-JCG,
2016 U.S. Dist. LEXIS 154782 (S.D. Miss. Nov. 8, 2016). On November 9, 2016,
Plaintiff filed a Verified Second Amended Complaint [47], which included a specific
claim of replevin. Two days later, Plaintiff filed a Motion [48] for the Court to direct the
Clerk to issue summons for a replevin hearing.
Defendants objected [49] to the motion and filed a Motion to Dismiss [51] the
replevin claim. Later, Defendants filed a Notice of Jury Demand [56] – despite the
Court’s prior Order [45] granting Plaintiff’s Motion to Strike [32] their initial jury
demand – and Plaintiff promptly filed a Motion to Strike [61] it. Finally, Defendants
filed a Motion to Determine [65] the law applicable in this case. All pending motions
are ripe for the Court’s review.
II. MOTION TO DETERMINE APPLICABLE LAW [65]
Defendants filed a motion for the Court to determine that Mississippi law
applies to all issues in this case. In response, Plaintiff argues that Alabama law
applies, as provided in the loan documents.
Indeed, the Promissory Notes executed by Defendant Performance Aviation, LLC
provide: “THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE STATUTES AND LAWS OF THE STATE OF ALABAMA
. . . .” Exhibit 1 to Second Amended Complaint at 4, Regions Commercial Equip. Fin.,
LLC v. Performance Aviation, LLC, No. 2:16-CV-110-KS-JCG (S.D. Miss. Nov. 9, 2016),
ECF No. 47-1; Exhibit 2 to Second Amended Complaint at 4, Regions Commercial
Equip. Fin., LLC v. Performance Aviation, LLC, No. 2:16-CV-110-KS-JCG (S.D. Miss.
Nov. 9, 2016), ECF No. 47-2.
Likewise, the Aircraft Security Agreements executed by Performance provide:
“THIS AGREEMENT, THE NOTE AND ANY GUARANTY . . . SHALL BE
GOVERNED IN ALL RESPECTS BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF ALABAMA . . . .” Exhibit 3
to Second Amended Complaint at 10, Regions Commercial Equip. Fin., LLC v.
Performance Aviation, LLC, No. 2:16-CV-110-KS-JCG (S.D. Miss. Nov. 9, 2016), ECF
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No. 47-3; Exhibit 4 to Second Amended Complaint at 10, Regions Commercial Equip.
Fin., LLC v. Performance Aviation, LLC, No. 2:16-CV-110-KS-JCG (S.D. Miss. Nov. 9,
2016), ECF No. 47-4.
Finally, the Continuing Guaranty Agreements executed by Defendants Wade
Walters Consulting, Inc., Prime Care Revenue Management, LLC, Prime Care
Management Group, LLC, Wade Walters, and Dorothy Walters provide: “This
Guaranty shall be governed by, and construed in accordance with, Alabama law.”
Exhibit 5 to Second Amended Complaint at 2, Regions Commercial Equip. Fin., LLC
v. Performance Aviation, LLC, No. 2:16-CV-110-KS-JCG (S.D. Miss. Nov. 9, 2016), ECF
No. 47-5.
A federal court sitting in diversity is bound to follow the substantive law of the
forum state, including that state’s choice-of-law rules. Klaxon Co. v. Stentor Electric
Mfg. Co., 313 U.S. 487, 496, 61 S. Ct. 1020, 1021, 85 L. Ed. 1477 (1941); see also Sorrels
Steel Co., Inc. v. Great Sw. Corp., 906 F.2d 158, 167 (5th Cir. 1990). Under Mississippi
law, Courts must “give effect to an express agreement that the laws of a specified
jurisdiction shall govern, particularly where some material element of the contract has
a real relation to, or connection with, such jurisdiction. The intention of the parties as
to the law governing [the transaction] will be respected in the absence of anything
violating the public policy of the forum jurisdiction.” Miller v. Fannin, 481 So. 2d 261,
262 (Miss. 1985); see also Herring Gas Co. v. Magee, 22 F.3d 603, 607 (5th Cir. 1994)
(“Under Mississippi law, contracting parties can decide which state’s law will govern
their agreement.”). Therefore, barring some meritorious defense to enforcement of the
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contracts, the Court will respect the parties’ agreement and apply Alabama law.
First, Defendants contend that the loan documents are unenforceable contracts
of adhesion. “A contract of adhesion has been described as one that is drafted
unilaterally by the dominant party and then presented on a ‘take-it-or-leave-it’ basis
to the weaker party who has no real opportunity to bargain about its terms.” East
Ford, Inc. v. Taylor, 826 So. 2d 709, 716 (Miss. 2002). Such contracts are not
automatically void, though. Id. Contracts of adhesion are “procedurally unconscionable
only where the stronger party’s terms are unnegotiable and the weaker party is
prevented by market factors, timing or other pressures from being able to contract with
another party on more favorable terms or to refrain from contracting at all.” Id.
Defendants provided no evidence regarding the market factors, timing, or other
pressures surrounding the execution of the loan documents. They have not
demonstrated that they were unable to contract with another party on more favorable
terms, or that they could not refrain from contracting altogether. In fact, this Court
previously noted that Defendants Wade and Dorothy Walters, the principals of the
corporate Defendants, had substantial assets at the time of the transactions at issue,
which were later seized by the government. Defendants could have sought alternative
financing, or they could have paid for the planes outright. Therefore, the loan
documents are not unenforceable contracts of adhesion.
Defendants also argue that the loan documents are ambiguous and must be
construed against Plaintiff, the party who drafted them. First, Defendants note that
the Promissory Notes contain the following language: “Borrower [Performance] hereby
4
expressly submits to the jurisdiction and venue of all federal and state courts located
in the State of Alabama, Jefferson County . . . .” Exhibits 1 and 2 [47-1, 47-2], at 3. This
language creates no ambiguity, as jurisdiction and venue are a separate issue from
choice of law.
Next, Defendants apparently argue that the Aircraft Security Agreements’
definition of the term “Applicable Law” creates an ambiguity as to the parties’ choice
of law. The Security Agreements provide:
“Applicable Law” shall mean all statutes, laws, ordinances, rules,
regulations and court or administrative orders of any Government
Authority applicable to the person, party, conduct, question, covenant, or
Collateral in question, including all applicable common law and equitable
principles, state, and federal constitutions, statutes, rules, regulations,
and orders of governmental bodies and all judicial orders, judgments and
decrees and including any of the foregoing applicable to the registration,
use, ownership, operation, maintenance, overhauling, or condition of the
Collateral, or any part thereof.
Exhibits 3 and 4 [47-3, 47-4], at 1. This section creates no ambiguity as to the parties’
choice of law for the construction and enforcement of the contract, as it merely defines
the term “Applicable Law,” as used within the contract. Defendants did not direct the
Court to any contract language providing that “Applicable Law,” as defined above,
governs the construction and enforcement of the contract. Rather, the parties explicitly
chose Alabama law.
Finally, Defendants argue that the Court must not enforce the parties’ choice of
law because the State of Mississippi has a strong interest in protecting the rights of
debtors and guarantors. Defendants apparently contend that applying Alabama law
would violate the public policy of the State of Mississippi. Miller, 481 So. 2d at 262.
5
However, Defendants failed to demonstrate how applying Alabama law would violate
Mississippi public policy. They cited no Alabama law and provided no analysis of the
issues presented by this case. They represented – without providing any legal citation
– that Alabama has not fully adopted the UCC, as Mississippi purportedly has done.
This is insufficient to demonstrate that applying Alabama law would run contrary to
Mississippi public policy. Indeed, the Court does not “refrain from applying the chosen
law merely because this would lead to a different result than would be obtained under
the local law of the state of the otherwise applicable law.” PIC Group, Inc. v.
LandCoast Insulation, Inc., 718 F. Supp. 2d 795, 800 (S.D. Miss. 2010).
For these reasons, the Court denies Defendants’ Motion [65] to determine the
applicable law.1
III. MOTION TO STRIKE [61]
Plaintiff argues that the Court should strike Defendants’ second jury demand
for the same reasons provided in the Court’s prior order striking their first jury
demand. See Regions Commer. Equip. Fin., LLC, 2016 U.S. Dist. LEXIS 154782 at *6*11. In response, Defendants argue that MISS. CODE ANN. § 11-37-147 grants them the
right to a trial by jury on Plaintiff’s replevin claim, which they contend falls outside the
1
Defendants devoted a substantial portion of their briefing to Mississippi’s
center-of-gravity test. Because the Court finds that the loan documents included
enforceable choice-of-law provisions, there is no need to conduct the center-ofgravity analysis. Auto Parts Mfg. Miss. v. King Constr. of Houston, LLC, 74 F. Supp.
3d 744, 756 n. 11 (N.D. Miss. 2014). To the extent Defendants raised any additional
arguments for the first time in their reply brief, the Court will not consider them.
Wallace v. County of Comal, 400 F.3d 284, 292 (5th Cir. 2005).
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scope of the loan documents’ jury waivers.
The jury waiver provision in the promissory notes [47-1, 47-2] executed by
Defendant Performance Aviation, LLC applies to “ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION . . . IN ANY WAY CONNECTED WITH OR RELATED TO”
the loan documents. Likewise, the jury waiver provision in the Continuing Guaranty
Agreement [47-5] executed by Defendants Wade Walters Consulting, Inc., Wade
Walters, Dorothy Walters, and Prime Care Revenue Management, LLC applies to
“ANY LITIGATION ARISING UNDER THIS GUARANTY.”
This litigation arises under and is related to the promissory notes and guaranty
insofar as Plaintiff seeks to enforce the loan documents. Although one of the remedies
Plaintiff seeks – replevin – may be a creature of statute under Mississippi law, that
has no bearing on the fundamental nature of the litigation, which is the enforcement
of the loan documents. Although Defendants have a statutory right to a jury trial in
connection with a replevin, see MISS. CODE ANN. § 11-37-147, they may waive that
right. See, e.g. Keelon v. Davis, 475 F. Supp. 204, 205 (N.D. Miss. 1979) (where parties
waived jury trial, replevin was tried to the court); G. A. C. Trans-World Acceptance
Corp. v. Migrothy, 230 So. 2d 577 (Miss. 1970) (replevin tried to court, jury having been
waived). As the Court found in its previous opinion, Regions Commer. Equip. Fin.,
LLC, 2016 U.S. Dist. LEXIS 154782 at *6-*11, Defendants waived their right to a jury
trial. Accordingly, the Court grants Plaintiff’s Motion to Strike [61] Defendants’
second jury demand.
IV. MOTION TO DISMISS [51]
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Defendants filed a Motion to Dismiss [51] Plaintiff’s replevin claim. To survive
a motion to dismiss under Rule 12(b)(6), “a complaint must contain sufficient factual
matter, accepted as true, to state a claim to relief that is plausible on its face.” Great
Lakes Dredge & Dock Co. LLC v. La. State, 624 F.3d 201, 210 (5th Cir. 2010)
(punctuation omitted). “To be plausible, the complaint’s factual allegations must be
enough to raise a right to relief above the speculative level.” Id. (punctuation omitted).
The Court must “accept all well-pleaded facts as true and construe the complaint in the
light most favorable to the plaintiff.” Id. But the Court will not accept as true
“conclusory allegations, unwarranted factual inferences, or legal conclusions.” Id.
Likewise, “a formulaic recitation of the elements of a cause of action will not do.”
PSKS, Inc. v. Leegin Creative Leather Prods., Inc., 615 F.3d 412, 417 (5th Cir. 2010)
(punctuation omitted). “While legal conclusions can provide the framework of a
complaint, they must be supported by factual allegations.” Ashcroft v. Iqbal, 556 U.S.
662, 679, 129 S. Ct. 1937, 1950, 173 L. Ed. 2d 868 (2009). When considering a Rule
12(b)(6) motion, the Court may also consider documents referred to in the operative
pleading and central to the plaintiff’s claims. Collins v. Morgan Stanley Dean Witter,
224 F.3d 496, 498 (5th Cir. 2000). Likewise, the Court may rely on “briefs and oral
arguments in connection with the motion . . . .” Gen. Retail Servs., Inc. v. Wireless Toyz
Franchise, LLC, 255 F. App’x 775, 785 (5th Cir. 2007).
Defendants argue that Plaintiff failed to plead a viable replevin claim because
1) replevin can not be maintained against one not in possession of the property, and
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2) this Court has no jurisdiction over a replevin under MISS. CODE ANN. § 11-37-101.2
Neither argument has merit, and Defendants’ motion must be denied.
To initiate a replevin action with notice to the adverse party and a hearing, one
must “file a declaration under oath setting forth these matters shown in
subparagraphs (a) through (e) of Section 11-37-101 . . . ,” the elements of a replevin
without notice and a hearing. MISS. CODE ANN. § 11-37-131.3 Therefore, Plaintiff’s
Verified Second Amended Complaint [47] must contain allegations of the following
elements:
(a)
A description of any personal property;
(b)
The value thereof, giving the value of each separate article and the
value of the total of all articles;
(c)
The plaintiff is entitled to the immediate possession thereof,
setting forth all facts and circumstances upon which the plaintiff
relies for his claim, and exhibiting all contracts and documents
evidencing his claim;
(d)
That the property is in the possession of the defendant; and
(e)
That the defendant wrongfully took and detains or wrongfully
detains the same . . . .
2
In their Reply [63], Defendants also argued that “nothing about the replevin
is proper,” and that Mississippi’s replevin statute is unconstitutional. The Court
does not consider arguments raised for the first time in reply. Wallace, 400 F.3d at
292.
3
Although Alabama law applies to Plaintiff’s substantive claims, as explained
above, the Federal Rules of Civil Procedure incorporate “every remedy . . . available
. . . under the law of the state where the court is located . . . .” FED. R. CIV. P. 64(a).
Accordingly, the Court refers to Mississippi law with respect to Plaintiff’s claim for
replevin, which is a provisional remedy.
9
MISS. CODE ANN. § 11-37-101(a)-(e).
Defendants argue that Plaintiff specifically alleged that the subject aircraft are
in the possession of the United States, and, therefore, that it has not alleged sufficient
allegations to support a replevin claim. However, the Mississippi Supreme Court has
held that an action for replevin may be maintained where the defendant has
constructive, rather than actual, possession of the disputed property. See GMAC v.
Fairley, 359 So. 2d 1386, 1388 (Miss. 1978). “Constructive possession” is “possession
not actual but assumed to exist, where one claims to hold by virtue of some title,
without having the actual occupancy . . . .” Searcy v. Tomlinson Interests, Inc., 358 So.
2d 373, 375 (Miss. 1978). It is also defined as “[c]ontrol or dominion over a property
without actual possession or custody of it.” Black’s Law Dictionary 1351 (10th ed.
2014).
It is undisputed that Defendant Performance Aviation, LLC holds title to the
aircraft. Likewise, it is undisputed that Defendants Wade and Dorothy Walters are the
only members of Performance Aviation, LLC. In teleconferences with the Court on
December 15 and 20, 2016, Assistant United States Attorney Pamela Hicks
represented to the Court that the Government was ready to release the planes, and
that the only reason they had not already been released to Defendants was this Court’s
preliminary injunction order [25]. Accordingly, the Court finds that Defendants have
constructive possession of the aircraft.
Moreover, “[i]n an action of replevin, it is particularly necessary to consider the
nature of the personal property replevied.” Hung Kwong Leung v. Law, 247 So. 2d 695,
10
696 (Miss. 1971). For example, if a “plaintiff must prove by an eyewitness that
defendant had possession of the property at the very moment suit was filed, then it
would be virtually impossible to successfully bring a replevin action for small items of
personal property such as jewelry.” Id. Likewise, an airplane is a large, mobile item of
personal property that is frequently housed in a hangar owned and/or managed by
another party. For example, the aircraft at issue here were not held by Defendants in
Hattiesburg, Mississippi, before they were seized by the government. Rather, they
were – and remain – housed in hangars in Houston, Texas, and Fort Lauderdale,
Florida. Therefore, the Court’s definition of “possession” should emphasize control or
dominion over the property, rather than actual possession or custody. As explained
above, but for this Court’s preliminary injunction order [25], the Government would
have already released the aircraft to Defendant, to do with as they wish.
Defendants also argue that this Court lacks jurisdiction over Plaintiff’s replevin
claim because the statute provides that a replevin petition must be filed before “a judge
of the Supreme Court, a judge of the circuit court, a chancellor, a county judge, a
justice of the peace or other duly elected judge . . . .” MISS. CODE ANN. § 11-37-131. This
argument is nonsense. Rule 64 incorporates “every remedy . . . available . . . under the
law of the state where the court is located . . . .” FED. R. CIV. P. 64(a). The rule
specifically provides: “The remedies available under this rule include the following –
however designated and regardless of whether state procedure requires an
independent action: . . . replevin . . . .” FED. R. CIV. P. 64(b). “Although state law
ordinarily determines when and how a provisional remedy is obtained, it has no effect
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on the underlying action to which the provisional remedy is incident. That action
continues to be conducted under the Civil Rules regardless of what procedures the
state may employ in suits in which provisional remedies have been obtained.” 11A
Charles Alan Wright & Arthur Miller, Federal Practice and Procedure § 2932 (3d ed.
2016).
For these reasons, the Court denies Defendants’ Motion to Dismiss [51]
Plaintiff’s replevin claim.
V. MOTION DIRECTING SUMMONS [48]
Plaintiff filed a Motion [48] for the Court to direct the Clerk to issue summons
for a replevin hearing. “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 notice and a hearing:
If any person, his agent or attorney, shall desire to institute an action of
replevin without the necessity of posting bond, and without requesting
the immediate seizure of the property in question, he shall file a
declaration under oath setting forth these matters shown in
subparagraphs (a) through (e) of Section 11-37-101 and shall present such
pleadings to a judge of the Supreme Court, a judge of the circuit court, a
chancellor, a county judge, a justice of the peace or other duly elected
judge, and such judge shall issue a fiat directing the clerk of such court,
or a deputy clerk to issue a summons to the defendant, to appear before
a court or judge having jurisdiction, as determined by the value of the
property as alleged in the declaration, and as outlined in Section 11-37101, with said process being returnable in termtime or in vacation, upon
at least five (5) days’ notice, summoning the defendant to appear for a
final hearing to determine the rights of the parties as to possession, and
upon such final hearing the court shall enter judgment accordingly.
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MISS. CODE ANN. § 11-37-131. The party seeking a replevin must file a declaration
setting forth the following matters:
(a)
A description of any personal property;
(b)
The value thereof, giving the value of each separate article and the
value of the total of all articles;
(c)
The plaintiff is entitled to the immediate possession thereof,
setting forth all facts and circumstances upon which the plaintiff
relies for his claim, and exhibiting all contracts and documents
evidencing his claim;
(d)
That the property is in the possession of the defendant; and
(e)
That the defendant wrongfully took and detains or wrongfully
detains the same . . . .
MISS. CODE ANN. § 11-37-101.
Plaintiff’s Verified Second Amended Complaint [47] contains a description of the
aircraft at issue. See Verified Second Amended Complaint at 3-4, Regions Comm.
Equip. Fin., LLC v. Performance Aviation, LLC, No. 2:16-CV-110-KS-MTP (S.D. Miss.
Nov. 9, 2016), ECF No. 47. The pleading also alleges the value of the aircraft. Id. at 12.
The allegations of the Verified Second Amended Complaint, the exhibits attached
thereto, and the admissions of Defendants’ counsel in hearings before the Court
establish that Plaintiff is entitled to possession of the aircraft. Indeed, Defendants’
counsel admitted during a hearing on August 23, 2016, that Defendants had defaulted
on the loans.4 Finally, as explained above, the record demonstrates that Defendants
4
Defendants argued that Mississippi law entitles them to an opportunity to
cure the default, and that Plaintiff had refused the cure. In response, Plaintiff
argued that Alabama law applies and requires Defendants to pay the full amount
13
have and wrongfully maintain constructive possession of the aircraft.
For these reasons, the Court grants Plaintiff’s Motion [48] to direct the Clerk
to issues summons for a final hearing to determine the rights of the parties with
respect to the subject aircraft.
VI. CONCLUSION
For these reasons, the Court grants Plaintiff’s Motion to Strike [61] Defendants’
Notice of Jury Demand [56], denies Defendants’ Motion [65] to determine the
applicable law, denies Defendants’ Motion to Dismiss [51] Plaintiff’s replevin claim,
and grants Plaintiff’s Motion [48] for an order directing the Clerk to issues summons
for a replevin hearing.
The Court directs counsel for Plaintiff to submit to the Court via e-mail a
proposed summons that complies with the requirements of MISS. CODE ANN. § 11-37131. The Court will contact the parties’ counsel to schedule the replevin hearing. Once
the Court chooses a date, it will enter an order to issue summons.
SO ORDERED AND ADJUDGED this
24th
day of January, 2017.
owing on the notes, rather than simply bring the payments current. The Court
settled this dispute above; the parties chose Alabama law to govern the contracts’
construction and enforcement.
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s/Keith Starrett
UNITED STATES DISTRICT JUDGE
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