BLB Aviation S.C., LLC v. Jet Linx Aviation, LLC

• Decision Date: 09 May 2014
• Docket Number: Nos. 12–3461,12–3508.,s. 12–3461
• Citation: 748 F.3d 829
• Parties: BLB AVIATION SOUTH CAROLINA, LLC, Plaintiff–Appellee v. JET LINX AVIATION, LLC; Jet Linx Aviation Corporation; Jet Linx Management Company, LLC, Defendants–Appellants. Jamie Walker, Defendant. BLB Aviation South Carolina, LLC, Plaintiff–Appellant v. Jet Linx Aviation, LLC; Jet Linx Aviation Corporation; Jet Linx Management Company, LLC, Defendants–Appellees. Jamie Walker, Defendant.
• Court: U.S. Court of Appeals — Eighth Circuit

748 F.3d 829

BLB AVIATION SOUTH CAROLINA, LLC, Plaintiff–Appellee

v.JET LINX AVIATION, LLC; Jet Linx Aviation Corporation; Jet Linx Management Company, LLC, Defendants–Appellants.

Jamie Walker, Defendant.

BLB Aviation South Carolina, LLC, Plaintiff–Appellant

v.Jet Linx Aviation, LLC; Jet Linx Aviation Corporation; Jet Linx Management Company, LLC, Defendants–Appellees.

Jamie Walker, Defendant.

Nos. 12–3461, 12–3508.

United States Court of Appeals, Eighth Circuit.

Submitted: Nov. 19, 2013.

Filed: May 9, 2014.

Diana Vogt, Omaha, NE, (James David Sherrets, Robert S. Sherrets, Omaha, NE, on the brief), for appellant/cross-appellee.

James M. Bausch, argued, Omaha, NE, (Megan S. Wright, Jonathan J. Papik, Omaha, NE, on the brief), for appellee/cross-appellant.

Before WOLLMAN, COLLOTON, and GRUENDER, Circuit Judges.

GRUENDER, Circuit Judge.

BLB Aviation South Carolina, LLC (“BLB”) brought this action against Jet Linx Aviation Corporation; Jet Linx Aviation, LLC; Jet Linx Management Company, LLC (collectively, “Jet Linx” ¹); and Jamie Walker. Jet Linx then counterclaimed. After a bench trial, the district court awarded $163,953.17 in damages to BLB and $158,014.98 in damages to Jet Linx due to the parties' breaches of their agreements. Having ended trial almost where they began it, both parties appeal. We affirm in part and reverse and remand in part.

I. Background

BLB is an aviation company that owns airplanes, some of which are leased for charter flights. BLB is owned by Barry L. Bellue, Sr. (“Barry Bellue”) and his son Barry L. Bellue, Jr. (“Lee Bellue”). Jet Linx operates an aircraft charter business. Jamie Walker was an employee of Jet Linx at all relevant times.

In March 2007, Walker sent BLB a letter about the possibility of leasing one or more of BLB's airplanes for Jet Linx's charter services. Shortly thereafter, Lee Bellue and Walker discussed the possibility of BLB purchasing an airplane and leasing it to Jet Linx. To explore this prospect, BLB contacted an aircraft broker about purchasing the type of aircraft that Jet Linx had indicated would be suitable for such a lease. The broker identified such an aircraft, which had a registration number of N400GK (“N400GK”).

Prior to purchasing the N400GK, on or about June 20, 2007, BLB and Jet Linx entered into a dry lease agreement for the N400GK (“DLA”). In the DLA, which became effective on August 1, 2007, Jet Linx “guarantee[d] [BLB] a minimum monthly lease payment of $47,100 per month, no matter the number of actual hours flown.” Jet Linx, which was responsible for maintenance of the N400GK under the DLA, further agreed that “[a]ll inspections, repairs, modifications, maintenance, and overhaul work ... will be performedin accordance with the standards set by the Federal Aviation Regulations” and agreed to “maintain all log books and records ... in accordance with the Federal Aviation Regulations.” While Jet Linx was responsible for maintaining the N400GK, BLB was responsible for paying for the maintenance performed on the airplane. On or about August 10, 2007, BLB purchased the N400GK for approximately $1,300,000. BLB also spent approximately $50,000 to refurbish the airplane's interior.

BLB delivered the N400GK to Jet Linx on or about August 24, 2007. However, due to unexpected maintenance issues, the N400GK did not make a charter flight until October 2007. That October, Lee Bellue contacted Walker because BLB had not received any lease payments for the N400GK from Jet Linx. Lee Bellue explained that he was required to make monthly payments of $15,000 to his bank. Jet Linx then paid BLB $15,000. Jet Linx claims that BLB agreed to accept this amount as the full lease payment for August and September 2007.

In addition to the DLA, BLB and Jet Linx also negotiated a lease agreement for Jet Linx to charter one of BLB's existing airplanes, which had a registration number of N789DJ (“N789DJ”). In August 2007, the parties signed a management services agreement for the N789DJ (“MSA”). Pursuant to the MSA, BLB agreed to reimburse Jet Linx for certain expenses for the N789DJ. As with the DLA, Jet Linx agreed in the MSA to “maintain the [N789DJ] in compliance with all applicable Federal Aviation Regulations” and “ensur[e] [that] the aircraft complies with FAA maintenance requirements for accurate record entries.” The MSA also provided that Jet Linx “does not assume any liability for damages caused by or resulting from, directly or indirectly, wholly or in part, any failure or fault other than its negligence.”

On February 19, 2008, two Jet Linx pilots—James Clark and Shannon Montanye—flew the N789DJ from Omaha, Nebraska to Sioux Falls, South Dakota. Upon arrival in Sioux Falls, Clark performed a post-flight inspection of the airplane. Clark reported that he “pulled the cap on the port engine to find the oil in acceptable levels and replaced the cap and pushed the cap closing trigger in the down position and proceeded to the starboard engine and repeated the process.” After Clark's inspection, the airplane was stored in a hangar overnight. Early the next morning, Clark and Montanye prepared the airplane for another flight. However, neither pilot performed a pre-flight inspection. After the plane taxied and was cleared for takeoff, Montanye noticed that the oil-pressure light was illuminated and that the oil-pressure gauge read zero. Montanye alerted an individual in the flight-control tower of this issue, who suggested that the aircraft taxi off of the active runway. Montanye also called Tony Boatwright, the head of maintenance at Jet Linx, who instructed the pilots to shut down the engine, which they did. Because the oil level in the engine had dropped below the minimum level specified in the airplane's maintenance manual, a mechanic performed a teardown inspection of the N789DJ's engine and then performed necessary maintenance, resulting in significant expenses. The mechanic found a crack in the oil cap, which Boatwright subsequently observed when the oil cap was returned to Jet Linx.

Shortly after the oil-loss incident, Clark and Montanye submitted statements describing the incident to Mike Kopp, Jet Linx's chief pilot. Kopp placed a disciplinary report in Clark's employee file that concluded that the pilots had failed to check the oil and the security of the oil cap on the morning of the flight and had failed to shut down the engine promptly upon realizing that the engine had lost oil pressure. The disciplinary report stated that “[t]he lack of proper preflight and operational procedures in an abnormal situation caused the need for engine removal and inspection as well as generator replacement due to oil damage.” The teardown inspection and repair costs totaled $158,014.98. In December 2008, after asking its insurer whether these repairs would be covered, Jet Linx sent an invoice to BLB for this amount, which BLB refused to pay.

Following the oil-loss incident, the parties' disagreements escalated. By mid2008, Barry Bellue had requested that the N789DJ be returned to BLB, and Jet Linx had informed BLB that it would not renew the DLA under its existing terms. As their contractual relationships came to an end, the parties discussed the outstanding expenses related to the airplanes. On August 6, 2008, Jamie Barrett, a Jet Linx employee, sent a letter to Barry Bellue (the “August 2008 letter”) in which Barrett claimed that Jet Linx agreed with Barry Bellue's proposal to end the DLA and reimburse Jet Linx for certain maintenance expenses under the MSA. As part of this purported agreement, the letter detailed that Jet Linx would pay BLB $16,000 per month for June and July 2008 for the lease of the N400GK rather than $47,100 per month. After deducting the amount Jet Linx calculated that BLB owed to Jet Linx, the August 2008 letter asserted that Jet Linx owed BLB a total of $12,347.50 and enclosed a check for that amount. Two days later, Barry Bellue sent an email to Barrett and Walker, complaining about what he termed the “creative charges” in “our final wrap up.” Barry Bellue concluded this email by stating, “You guys are shady and unscrupulous business dudes that talk a noble and sacred line to you[r] unsuspecting clients. I will keep open my options.” Nevertheless, on August 14, BLB deposited the check that accompanied the August 2008 letter.

BLB brought this action against Jet Linx and Walker; Jet Linx then counterclaimed against BLB. After a bench trial, the district court concluded that: (1) Jet Linx and BLB did not reach an accord and satisfaction by virtue of the August 2008 letter; (2) Jet Linx breached the DLA by failing to make full lease payments to BLB for each month of the lease term; (3) Jet Linx breached the MSA by “marking up” the cost of maintenance for the N789DJ; (4) Jet Linx breached the MSA and the DLA by failing to maintain the airplanes' maintenance records and part tags, but BLB failed to prove any damages; and (5) BLB breached the MSA by refusing to reimburse Jet Linx for the maintenance expenses it incurred in connection with the oil-loss incident. Jet Linx appeals, and BLB cross-appeals.

II. Discussion

Because both parties cite state law for the standard of review, we look to state law for the standard of review in accordance with the practice of our prior opinions that considered an appeal following a bench trial in a diversity action.²See, e.g., Pohl v. Cnty. of Furnas, 682 F.3d 745, 751 (8th Cir.2012); John T. Jones Constr. Co. v. Hoot Gen. Constr. Co., Inc., 613 F.3d 778, 782–83 (8th Cir.2010); see also

Access Telecomm. v. Sw. Bell Tel. Co., 137 F.3d 605, 608 (8th Cir.1998) (applying standard of review that both parties argued “[w]ithout deciding the standard-of-review question, which is best left to be resolved in a case in which it is contested”). The parties further agree that Nebraska law governs this diversity action. In an appeal from a bench trial in a law action, “the trial court's factual findings have the effect of a...