Aveos Fleet Performance Inc. v. Vision Airlines, Inc.
Filing
73
DECISION & ORDER granting # 57 Plaintiff's motion to voluntarily dismiss its Complaint and retain jurisdiction to enforce the parties' settlement agreement pursuant to Fed.R.Civ.P. 41(a)(2). The Court retains jurisdiction of this action to enforce the parties' settlement agreement of October 21, 2013. Signed by Judge Glenn T. Suddaby on 1/13/14. (lmw)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
____________________________________
AVEOS FLEET PERFORMANCE, INC.,
Plaintiff,
8:11-CV-0950
(GTS/CFH)
v.
VISION AIRLINES, INC.,
Defendant.
____________________________________
APPEARANCES:
OF COUNSEL:
THE FOONT LAW FIRM
Counsel for Plaintiff
11909 Reynolds Avenue
Potomac, MD 20854
BRIAN E. FOONT, ESQ.
CONDON & FORSYTH LLP
Co-Counsel for Plaintiff
7 Times Square
New York, NY 10036
JOHN MAGGIO, ESQ.
GANZ WOLKENBREIT & SIEGFELD LLP
Counsel for Defendant
One Columbia Circle
Albany, NY 12203
ROBERT E. GANZ, ESQ.
GLENN T. SUDDABY, United States District Judge
DECISION and ORDER
Currently before the Court, in this diversity action filed by Aveos Fleet Performance Inc.
(“Plaintiff”) (Dkt. No. 28) against Vision Airlines, Inc. (“Defendant”) asserting a claim of breach
of contract, is Plaintiff’s motion to voluntarily dismiss its Complaint and retain jurisdiction to
enforce the parties’ settlement agreement, pursuant to Fed. R. Civ. P. 41(a)(2). (Dkt. No. 57.)
For the reasons set forth below, Plaintiff’s motion is granted.
I.
RELEVANT BACKGROUND
A.
Plaintiff’s Complaint
Generally, liberally construed, Plaintiff’s Complaint alleges that, because Defendant
breached the terms of its Engine Technical Services Agreement with Plaintiff, Plaintiff is entitled
to damages of $3,959,256.49, plus interest through the date payment is made in accordance with
the Agreement, as well as prejudgment interest and costs. (Dkt. No. 1, Attach. 1.)
B.
Relevant Procedural History
By Text Order dated July 3, 2013, the Court directed the parties to submit to, and
complete, mediation by October 31, 2013. (Dkt. No. 48.)
On October 21, 2013, the parties submitted to mediation before an agreed-upon mediator,
Daniel J. Hurteau, Esq., of Nixon Peabody, in Albany, New York. (Dkt. No. 48; Dkt. No. 49;
Dkt. No. 60, at ¶ 5.) The mediation was attended by Mr. Brian Foont, co-counsel for Plaintiff.
(Dkt. No. 60, at ¶ 6.) The mediation was also attended by Defendant’s Vice President of
Maintenance, Mike Smith. (Dkt. No. 52; Dkt. No. 60, at ¶ 6; Dkt. No. 60, Attach. 1, at 4.) Both
Mr. Foont and Mr. Smith represented that they had unfettered authority to settle the case, in
accordance with Local Rule 83.11-5(b). (Dkt. No. 60, at ¶ 6; Dkt. No. 71.) After approximately
six hours of uninterrupted mediation, the parties agreed upon the terms of settlement of this
litigation and executed a settlement agreement. (Dkt. No. 60, at ¶ 7; Dkt. No. 58, Attach. 1.)
In pertinent part, the settlement agreement provided as follows:
a.
Defendant was to pay Plaintiff $50,000 by October 31, 2013. (Dkt. No. 58,
Attach. 1, at ¶ 1.)
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b.
Defendant was to conduct an inspection of the parts and engines that are the
subject of this action by November 6, 2013, to determine if they have sustained
any material damage since they were last inspected in July of 2013. (Id. at ¶ 2.)
If Defendant notified Plaintiff of a material defect by close of business November
6, 2013, the settlement agreement would be void; otherwise, the settlement
agreement would be fully effective. (Id. at ¶ 2.)
c.
If there was no material defect observed, Defendant agreed to pay Plaintiff
$150,000 by November 8, 2013, after which Defendant was to take possession of
the parts as well as a white packaged JT9D engine labeled VS4A by November
11, 2013. (Id. at ¶ 3.) If the payment was not made by November 11, 2013,
Defendant forfeited its rights to the white packaged JT9D engine labeled VS4A.
(Id. at ¶ 7.a.)
d.
Defendant was to pay Plaintiff $100,000 on or before December 16, 2013, after
which Defendant was to take possession of the remaining JT9D engine and parts
by the close of business on December 20, 2013. (Id. at ¶ 4.) If the payment was
not made by December 20, 2013, Defendant forfeited its rights to the remaining
JT9D engines and parts. (Id. at ¶ 7.b.)
e.
Defendant was to pay Plaintiff $250,000 on or before January 30, 2014, after
which Defendant was to take possession of the CFM-56 engine (Serial # 858267)
by close of business on January 31, 2014. (Id. at ¶ 5.) If the payment was not
made on or before January 30, 2014, Defendant shall be deemed to have released
its rights to the CFM-56 engine. (Id. at ¶ 6.)
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On November 8, 2013, counsel for Defendant notified counsel for Plaintiff for the first
time that Defendant’s lending bank, International Bank of Commerce, holds a security lien on all
of the engines and parts that are the subject of this action, and has objected to any liquidation of
them by Plaintiff (should Defendant fail to make payment pursuant to the terms of the settlement
agreement). (Dkt. Nos. 52, 53.) Counsel for Defendant also notified counsel for Plaintiff that
Defendant’s insurance company would be willing to fund the settlement after an inspection of
the engines and parts, and the making of a report of its findings to the bank. (Dkt. Nos. 52, 53.)
Finally, counsel for Defendant advised that, by the close of business that day, counsel would
obtain the available dates for the insurance company’s inspection; however, counsel did not
provide those dates to counsel for Plaintiff that day or on the following days. (Dkt. Nos. 52, 53.)
Meanwhile, by Text Order dated November 13, 2013, the Court directed the parties to
submit a status report with regard to the mediation and potential settlement of the case by
November 20, 2013. (Dkt. No. 50.)
On November 14, 2013, Mr. Hurteau filed a report with the Court stating that the case
had been settled. (Dkt. No. 51.)
On November 20, 2013, Plaintiff filed a status report stating that Defendant had not yet
made any payments but that, because the parties had executed a settlement agreement, the Court
should dismiss the action except to retain jurisdiction to enforce the term of the settlement
agreement. (Dkt. No. 53.) Defendant filed a status report confirming that it had not made any
payments but stating, inter alia, that the case should not be dismissed because the settlement
agreement had been executed “imperfectly and, perhaps, in an unenforceable manner.” (Dkt.
No. 52.)
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At some point between November 20, 2013, and December 6, 2013, Plaintiff’s counsel
spoke to Defendant’s counsel and was advised that, by the term “imperfectly” executed,
Defendant’s counsel meant that the authorized representatives had signed the settlement
agreement on the wrong signature blocks. (Dkt. No. 60, at ¶ 12.)
C.
Parties’ Arguments on Plaintiff’s Motion for Voluntary Dismissal
Generally, in support of its motion for voluntary dismissal, Plaintiff asserts the following
four arguments: (1) generally, a motion for voluntary dismissal should be granted absent some
showing of prejudice to defendant, and here no such showing has been made, because this case
has been settled; (2) the settlement agreement is both valid and binding under the applicable law
(i.e., New York contract law), because (a) it was in writing, (b) it resolved all outstanding claims,
(c) it contained all material terms, including a merger clause, and (d) it was executed by
representatives who had, or sufficiently represented to have, unfettered authority to settle the
case, which the opposing party had no reason to doubt; (3) Defendant’s argument that the
settlement agreement is unenforceable because the parties’ authorized representatives signed on
the wrong signature blocks is unavailing, because such an error is immaterial to the substance of
the settlement agreement, to which there was a clearly demonstrated meeting of the minds; and
(4) the fact that a settlement agreement may turn out to be onerous or unfavorable to a party does
not render it unenforceable. (Dkt. No. 57.)
Generally, in opposition to Plaintiff’s motion, Defendant asserts the following five
arguments for why the settlement agreement is unenforceable: (1) Defendant’s representative,
Mike Smith, negotiated outside of the parameters given to him by Defendant’s president, Bill
Acor; (2) while it was represented to Defendant that Attorney Foont was authorized by Plaintiff
to resolve the matter, no written statement of authority was provided to Defendant; (3) the
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settlement agreement was “mis-signed” by the parties; (4) at the time of contract formation, the
payment and inspection schedules were difficult to comply with, given Mr. Acor’s travel
schedule, the need to bring persons to Montreal for an inspection, and the lien held on the
engines in question by Defendant’s lending back; and (5) the doctrines of waiver and/or estoppel
apply because, when Defendant informed Plaintiff that it could not meet the contractual
deadlines, “no specific action was taken by Plaintiff to enforcement the agreement and cause
forfeitures of fights.” (Dkt. No. 69, at ¶¶ 3-11.)1
Generally, in reply to Defendant’s opposition, Plaintiff asserts the following seven
arguments: (1) Defendant’s opposition fails to assert any argument that the settlement agreement
is unenforceable; (2) for example, Mr. Foont was conferred valid settlement authority, and he
represented that fact to Defendant before the mediation; (3) even if the conferral of that
settlement authority was in some way flawed, Plaintiff is currently seeking to enforce, not
renounce, that settlement agreement, which amounts to ratification of the agreement; (4)
moreover, Defendant does not provide sufficient evidence to prove that fulfilling its obligations
under the settlement agreement would be impossible; (5) indeed, Defendant has not shared with
Plaintiff its particular assertions regarding its bank and insurer objecting to the settlement, nor
has Plaintiff even taken the first step under the settlement agreement (i.e., making an
unconditional payment of $50,000; (6) furthermore, Defendant’s opposition fails to assert any
grounds on which to conclude that it would be prejudiced by dismissal; and (7) finally, sending
the parties back to mediation would not only be contrary to New York contract law but would
actually undermine the mediation process. (Dkt. No. 72.)
1
The Court notes that, as expected, Mr. Ganz zealously made every credible legal
argument available to Defendant under the circumstances.
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II.
GOVERNING LEGAL STANDARD
Rule 41(a)(2) of the Federal Rules of Civil Procedure provides as follows, in pertinent
part: “Except as provided in Rule 41(a)(1), an action may be dismissed at the plaintiff’s request
only by court order, on terms that the court considers proper. . . . Unless the order states
otherwise, a dismissal under this paragraph (2) is without prejudice.” Fed. R. Civ. P. 41(a)(2).
“Two lines of authority have developed with respect to the circumstances under which a
dismissal without prejudice might be improper.” Camilli v. Grimes, 436 F.3d 120, 123 (2d
Cir.2006). “One line indicates that such a dismissal would be improper if the defendant would
suffer some plain legal prejudice other than the mere prospect of a second lawsuit.” Camilli, 436
F.3d at 123 (internal quotation marks omitted). In this context, “plain legal prejudice” is defined
as “the plight of a defendant who is ready to pursue a claim against the plaintiff in the same
action that the plaintiff is seeking to have dismissed” (for example, where “the cause has
proceeded so far that the defendant is in a position to demand on the pleadings an opportunity to
seek affirmative relief and he would be prejudiced by being remitted to a separate action”). Id.
at 124.
“Another line indicates that the test for dismissal without prejudice involves
consideration of various factors, . . . including (1) the plaintiff's diligence in bringing the motion,
(2) any undue vexatiousness on the plaintiff's part, (3) the extent to which the suit has
progressed, including the defendant's efforts and expense in preparation for trial, (4) the
duplicative expense of relitigation, and (5) the adequacy of the plaintiff's explanation for the
need to dismiss.” Id. at 123.
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III.
ANALYSIS
After carefully considering the matter, the Court grant’s Plaintiff’s motion for the reasons
stated in Plaintiff’s memoranda of law. See, supra, Part I.C. of this Decision and Order. The
Court would add eight points.
First, with regard to Defendant’s argument about its representative’s settlement
parameters, whether a party’s representative negotiated a settlement agreement outside of the
parameters given to him by the party is generally immaterial to a settlement agreement’s
enforceability, where the representative was acting with apparent authority (i.e., the opposing
party had no objective reason to believe that the representative was acting outside the scope of
his or her authority). See Graphic Commc’ns Int’l Union v. Case-Hoyt Corp., 95-CV-1624,
1997 WL 610765, at *6 (N.D.N.Y. Sept. 25, 1997) (Pooler, J.) (“Case-Hoyt does not attempt to
argue that the union negotiators had any objective reason to believe that Whitman and Cotton
were acting outside the scope of their authority during the settlement negotiations. Because there
is no issue of material fact regarding the bases on which to find apparent authority, the Florack
settlement agreement is enforceable.”). Here, the following facts are undisputed: (1)
Defendant’s Memorandum for Mediation (submitted to the mediator only) identified Mike Smith
as a person expected to attend the mediation with full settlement authority; (2) Mr. Smith
attended the mediation session, along with Plaintiff’s counsel; (3) Mr. Smith was Defendant’s
Vice President of Maintenance; (4) before and/or during the mediation, Mr. Smith represented
that he possessed unfettered authority to settle the case, in accordance with Local Rule 83.115(b); (5) during the mediation, Mr. Smith conferred with Bill Acor once by telephone; and (6)
both Plaintiff and the mediator believed Mr. Smith to be acting with valid settlement authority,
and relied on that fact. (Dkt. No. 51; Dkt. No. 53; Dkt. No. 60, at ¶ 6; Dkt. No. 60, Attach. 1, at
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4; Dkt. No. 69, at ¶ 7; Dkt. No. 71; Dkt. No. 72, Attach. 1.) As a result, the Court finds that, at
the very least, Mr. Smith was acting with apparent authority.
Second, Defendant’s argument that Plaintiff’s representative did not have “a written
statement of authority” is unavailing. Local Rule 83.11-5 requires only (a) a Memorandum for
Mediation identifying, in pertinent part, each person expected to attend the mediation and each
person who has full settlement authority, and (b) the attendance of an individual with authority to
settle the lawsuit. N.D.N.Y. L.R. 83.11-5(a),(b). Here, the following facts are undisputed: (1)
while Plaintiff’s Memorandum for Mediation (submitted to the mediator only) did not identify
Brian Foont as a person expected to attend the mediation with full settlement authority, the office
of Plaintiff’s Chief Restructuring Officer (who could not attend the mediation due to a court
appearance in Montreal the same day as the mediation)2 specifically authorized Mr. Foont to
appear at the mediation on Plaintiff’s behalf and act with full settlement authority; (2) Mr. Foont
(who was counsel to Plaintiff) attended the mediation session, along with his co-counsel, John
Maggio; (3) before the mediation started, Mr. Foont informed Defendant that he possessed
unfettered authority to settle the case, in accordance with Local Rule 83.11-5(b); (4) during the
mediation, Mr. Foont communicated the settlement terms to, and confirmed those terms with, the
office of the Chief Restructuring Officer; (5) the mediator believed Mr. Foont to be acting with
valid settlement authority; and (6) with regard to whether Defendant believed Mr. Foont to be
acting with valid settlement authority, that belief was (at the very least) sufficient enough for
Defendant to negotiate 13 paragraphs of terms with Mr. Foont and sign a settlement agreement
with him. (Dkt. No. 53; Dkt. No. 60, at ¶ 6; Dkt. No. 60, Attach. 1, at 4; Dkt. No. 69, at ¶ 6; Dkt.
No. 72, at 2.) As a result, the Court finds that Mr. Foont was acting with sufficient authority.
2
Plaintiff’s Chief Operating Office was appointed by the Quebec Superior Court to
operate Plaintiff while in liquidation.
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Third, with regard to Defendant’s argument about the agreement’s signature blocks,
generally, signing on the wrong signature block of an agreement does not invalidate that
agreement. Cf. Lakeview Outlets, Inc. v. Uram, 95-CV-0136, 1996 WL 571520, at *4, n.14
(N.D.N.Y. Oct. 2, 1996) (McCurn, J.) (“Mr. Uram had inadvertently signed [the lease] on the
wrong line . . . . [E]ven though the signature lines are transposed, Mr. Uram did sign in his
corporate capacity on behalf of Fashion Factory . . . .”). Defendant does not even suggest that
the parties’ representatives were confused about their respective roles in the mediation (much
less the express terms of the settlement agreement).
Fourth, with regard to Defendant’s argument about the difficulty of performance, the
difficulty or even improbability of performance does not relieve a party of its obligations under
an agreement. See Standard Oil Co. of New York v. Central Dredging, 233 N.Y.S. 279, 282
(N.Y. App. Div., 3d Dept., 1929) (“Difficulty or even improbability of accomplishment without
great financial loss will not release an obligor.”); cf. Powell v. Omnicom, 497 F.3d 124, 128 (2d
Cir. 2007) (“When a party makes a deliberate, strategic choice to settle, a court cannot relieve
him of that choice simply because his assessment of the consequences was incorrect.”). As for
any argument that performance was impossible, the Court will not linger on the fact that the
purported impossibility was due solely to Defendant’s own conduct (and should have been
known by Defendant at the time of formation). See AMF, Inc. v. Cattalani, 430 N.Y.S.2d 731,
733 (N.Y. App. Div., 4th Dept. 1980) (“The situation allegedly making performance impossible,
viz., Doncat's eviction, was created by Doncat's own conduct; Doncat, therefore, is not relieved
of its duty to perform . . . .”); Ward v. Melis, 859 N.Y.S. 900, at *4 (N.Y. Sup. Ct., Sullivan
Cnty. 2004) (“It is basic contract law that one who prevents or makes impossible the
performance of a contract cannot take advantage of its non-performance.”). More important is
the fact that (1) the lien in no way made it impossible for Defendant to make the required
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payments, and (2) in any event, the lien does not actually make the interest forfeiture impossible,
because the agreement causes merely Defendant (not the bank) to forfeit its interest in the
engines and parts (in the event Defendant fails to make the required payments).
Fifth, with regard to Defendant’s argument about the doctrines of waiver and/or estoppel,
Defendant cites no legal authority for the point of law that Plaintiff has waived its right to
enforce the settlement agreement, or is estopped from enforcing that settlement agreement,
because it failed to act after Defendant anticipatorily repudiated the settlement agreement.
Indeed, generally, a non-repudiating party retains the right to bring an action against the
repudiating party, regardless of whether the non-repudiating party encourages the repudiating
party to withdraw the repudiation or it remains silent on the issue. See Restatement (Second) of
Contracts § 257 (1981) (“The injured party does not change the effect of a repudiation by urging
the repudiator to perform in spite of his repudiation or to retract his repudiation.”). The Court
notes that, under the settlement, no specific action need be taken by Plaintiff when Defendant
fails to meet its contractual deadlines. (See generally Dkt. No. 58, Attach. 1.)
Sixth, under the “plain legal prejudice” standard identified above in Part II of this
Decision and Order, the Court finds no such plain legal prejudice. Defendant has asserted no
counterclaim that would be harmed by a dismissal of Plaintiff’s Complaint and retention of
jurisdiction to enforce the parties’ settlement agreement. (Dkt. No. 6 [Def.’s Answer].)
Moreover, “[t]he merits of a hypothetical second lawsuit are not relevant to the question of
whether dismissal without prejudice would impose a ‘plain legal prejudice’ . . . .” NAACP New
York State Conference v. New York State Bd. of Elect., 10-CV-2950, 2012 WL 3288850, at *2
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(E.D.N.Y. Aug. 9, 2012).3 In any event, Defendant has merely provided grounds to conclude
that the settlement agreement is unfavorable to Defendant, not that the agreement is
unenforceable.
At the time the settlement agreement was executed, the bank’s purported security lien (of which
Defendant should have known) could not even become problematic to Defendant unless
Defendant breached the agreement by failing to make the required payments; furthermore, that
issue could be resolved by a timely claim by the bank (including through intervention in the
current proceeding, which has not occurred). Indeed, it is difficult for the Court to conclude that
the lien is in any way material to the agreement, which (again) causes merely Defendant (not the
bank) to forfeit its interest in the engines and parts (in the event that Defendant does not pay the
required amounts). The Court reaches a similar conclusion with regard to the claims process
established by Defendant’s insurer: the process should have been known by Defendant at the
time of the settlement, it should have been complied with in a timely fashion by Defendant
following the settlement, and in any event it is immaterial to the terms of the agreement.
Seventh, under the five-factor test identified above in Part II of this Decision and Order,
the Court finds that those factors weigh decidedly in favor of dismissal. Plaintiff was diligent in
first requesting to voluntarily dismiss the claims against Defendant on November 20, 2013, only
30 days after the parties executed their settlement agreement on October 21, 2013. The Court
cannot find any undue vexatiousness committed by Plaintiff, or even asserted by Defendant.
3
Cf. SmithKline Beecham Corp. v. Pentech Pharm., Inc., 261 F. Supp.2d 1002,
1006 (N.D. Ill. 2003) (“[I]nconsistently [a nonparty] bases its opposition to [plaintiff’s] motion
to [voluntarily] dismiss not on any . . . ‘plain legal prejudice’ from the dismissal of the suit but on
the alleged illegality of the settlement agreement that motivated the motion.”) (emphasis in
original).
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Moreover, the Court does not find that the lawsuit has progressed to a stage by which any
findings have been made concerning the merits, or by which the parties have filed pretrial
motions in limine, proposed jury instructions, etc. Similarly, the Court does not find that there
would be duplicative expenses during a second proceeding, the scope of which would appear to
be more limited than the scope of the current proceeding. Finally, Plaintiff’s explanation of the
need to dismiss is adequate: in light of its settlement with Defendant, there is no need to proceed
with its breach-of-contract claim against Defendant, who have agreed to settle the case. The
Court notes that the Eastern District of New York has granted a motion to voluntarily dismiss an
action under analogous circumstances. See NAACP New York State Conference, 2012 WL
3288850, at *2 (applying five-factor test in granting plaintiff’s motion to voluntarily dismiss the
action without prejudice to refiling in the event defendant refuses to comply with the parties’
settlement agreement).
Eighth, this Decision and Order is in no way meant to disparage defense counsel’s fine
work in this litigation. Rather, it is his client that has brought about this dismissal through
entering into a settlement agreement (and then failing to perform). The Court understands the
reason for defense counsel’s request for an Order directing the parties to submit to further
mediation in order to work through various issues that have arisen (including the funding of the
settlement through Defendant’s insurer, and the assertion of lien rights by Defendant’s bank).
However, granting such a request would require the Court to set aside a valid and enforceable
settlement agreement merely so that Defendant has more time to do something that it has been
able, but apparently unwilling, to do for some 12 weeks now (i.e., either [1] pay Plaintiff the
agreed-upon amount while seeking reimbursement from its insurer and permitting the bank to
assert its rights, or [2] persuade Plaintiff to amend the settlement agreement such that Plaintiff
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will forgo forfeiture of the various engines and parts for an additional sum of money). Simply
stated, the Court finds such an Order to be repugnant to both the law and justice.
ACCORDINGLY, it is
ORDERED that Plaintiff’s motion to voluntarily dismiss its Complaint and retain
jurisdiction to enforce the parties’ settlement agreement, pursuant to Fed. R. Civ. P. 41(a)(2).
(Dkt. No. 57), is GRANTED. The Court retains jurisdiction of this action to enforce the parties’
settlement agreement of October 21, 2013.
Dated: January 13, 2014
Syracuse, New York
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