BLB Aviation S.C., LLC v. Jet Linx Aviation, LLC
| Decision Date | 14 December 2015 |
| Docket Number | No. 14–3365.,14–3365. |
| Citation | 808 F.3d 389 |
| Parties | BLB AVIATION SOUTH CAROLINA, LLC, Plaintiff–Appellant v. JET LINX AVIATION, LLC; Jet Linx Aviation Corporation; Jet Linx Management Company, LLC; Jamie Walker, Defendants–Appellees. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Jonathan J. Papik, argued, James M. Bausch, Megan S. Wright, on the brief, Omaha, NE, for Plaintiff–Appellant.
Diana Vogt, argued, James David Sherrets, Jared Olson, on the brief, Omaha, NE, for Defendants–Appellees.
Before RILEY, Chief Judge, BYE and GRUENDER, Circuit Judges.
BLB Aviation South Carolina, LLC ("BLB") sued Jet Linx Aviation Corporation; Jet Linx Aviation, LLC; Jet Linx Management Company, LLC (collectively, "Jet Linx"1 ); and Jamie Walker for damages arising from breach of contract. Jet Linx counterclaimed. After a bench trial, the district court awarded damages to both parties, and both parties appealed. We affirmed in part, but we reversed and remanded for the district court to analyze whether the cost-of-repair damages BLB sought would entail unreasonable economic waste before choosing between the cost-of-repair and diminution-in-value measures of damages. On remand, the district court2 found BLB's damages too speculative under either measure of damages, thereby precluding recovery. We affirm.
The facts underlying this case are set forth more extensively in our previous opinion. BLB Aviation South Carolina, LLC v. Jet Linx Aviation, LLC, 748 F.3d 829, 841 (8th Cir.2014) [hereinafter "BLB I "]. We recite only the facts relevant to the current appeal.
BLB is an aviation company that owns airplanes, some of which are leased for charter flights. BLB is owned by Barry L. Bellue, Sr. and his son Barry L. Bellue, Jr. ("Lee Bellue"). Jet Linx operates an aircraft charter business. Jamie Walker was an employee of Jet Linx.
The parties' relationship began when Walker inquired about the possibility of leasing one or more BLB 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. BLB and Jet Linx then entered into a dry-lease agreement for one aircraft, which had the registration number N400GK. The lease agreement made Jet Linx responsible for maintenance of N400GK. Jet Linx further agreed that "[a]ll inspections, repairs, modifications, maintenance, and overhaul work ... will be performed in accordance with the standards set by the Federal Aviation Regulations" and agreed to "maintain log books and records ... in accordance with the Federal Aviation Regulations." The lease agreement required BLB to pay for the maintenance performed by Jet Linx on N400GK.
BLB and Jet Linx also negotiated a management-services agreement for Jet Linx to charter another of BLB's airplanes, registered as N789DJ. Pursuant to this services agreement, BLB agreed to reimburse Jet Linx for certain expenses for N789DJ. As with the N400GK lease agreement, Jet Linx agreed to "ensure that all maintenance and repair work on N789DJ was performed in accordance with the standards set out in the Federal Aviation Regulations and to ensure that all such maintenance work was accurately recorded in accordance with the Federal Aviation Regulations."
Following a maintenance incident that resulted in disputed repair costs, the parties' relationship deteriorated. Barry Bellue requested that N789DJ be returned to BLB, and Jet Linx informed BLB that it would not renew the N400GK lease agreement under its existing terms.
BLB brought this action for damages against Jet Linx and Walker alleging breach of contract; Jet Linx then counterclaimed against BLB.3 After a bench trial, the district court concluded that Jet Linx had breached the N400GK dry-lease agreement and the N789DJ management-services agreement by failing to keep proper records and parts tags for maintenance performed by Jet Linx on the airplanes. However, the court declined to award damages because it found that BLB had failed to prove them with sufficient certainty. Jet Linx appealed, and BLB cross-appealed.
In BLB I, we affirmed the district court on four issues, but we reversed and remanded for further analysis on the appropriate measure of damages to award to BLB for Jet Linx's breach. Specifically, we disagreed with the district court for having "concluded that the diminution in the value of the airplanes is the proper measure of BLB's damages without undertaking any ... analysis" regarding whether the cost-of-repair measure of damages would entail unreasonable economic waste. BLB I, 748 F.3d at 841. "Absent such a finding," we wrote, "it was error for the district court to choose diminution in value as the appropriate measure of BLB's damages." Id. (citation omitted).
On remand, after analyzing BLB's damages under both the cost-of-repair and diminution-in-value measures, the district court again found that BLB failed to prove damages with sufficient certainty. BLB again appeals. For the reasons set forth below, we affirm.
Because both parties cite Nebraska law for the standard of review, we apply Nebraska law "in accordance with the practice of our prior opinions that considered an appeal following a bench trial in a diversity action."4 BLB I, 748 F.3d at 835. Accordingly, in this appeal from a bench trial, "the trial court's factual findings have the effect of a jury verdict and will not be disturbed on appeal unless clearly wrong." City of Scottsbluff v. Waste Connections of Neb., Inc., 282 Neb. 848, 809 N.W.2d 725, 739 (2011). "[W]e independently review questions of law decided by a [district] court," id., noting that, in a contracts case, "[w]hile the amount of damages presents a question of fact, the proper measure of damages presents a question of law." Connelly v. City of Omaha, 284 Neb. 131, 816 N.W.2d 742, 753 (2012).
This case presents two issues. First, we must address BLB's contention that cost of repair represents the correct measure of damages because Jet Linx failed to carry its burden to show economic waste would result. Second, we must determine whether the district court erred in finding that BLB did not prove its damages with sufficient certainty. We address each issue in turn.
On appeal, BLB first argues that the district court erred by finding that BLB was not entitled to damages measured by the cost of repair, namely, the $171,363.37 that BLB's expert testified represents the cost to rectify the lack of maintenance records and part tags by redoing the underlying maintenance work. BLB's expert, Keith Flinn, arrived at that figure by summing the amounts Jet Linx had previously billed BLB for maintenance work on both airplanes for which documentation and parts tags subsequently were determined to be missing. Although Jet Linx failed to provide a complete set of maintenance records and parts tags when it returned the airplanes, the parties do not dispute that Jet Linx provided the underlying maintenance.
The appropriate choice between the available measures of damages "depends upon the evidence in the particular case." Fink v. Denbeck, 206 Neb. 462, 293 N.W.2d 398, 401–02 (1980). If a defect in the performance of a contract can be remedied, the ordinary measure of damages is the cost of repair. Id. at 402. As we noted in BLB I, "the plaintiff is entitled to damages measured by the cost of repair ‘unless [the defendant] proves affirmatively and convincingly that such construction and completion would involve an unreasonable economic waste.’ " 748 F.3d at 841 (quoting Moss v. Speck, 209 Neb. 46, 306 N.W.2d 156, 158 (1981) (quoting 5 A. Corbin, Contracts § 488 (1964))). Diminution-in-value damages provide the alternative measure, consisting of the "difference in value between the thing as represented and its actual value." Fink, 293 N.W.2d. at 402.5 Thus, cost of repair supplies the default measure unless the breaching party shows that economic waste would result.
Economic waste occurs where "the cost of completion as required by the contract greatly outweighs the benefit to the owner to do so." 13 Am.Jur.2d Building, Etc. Contracts § 82 ; see also A–1 Track & Tennis, Inc. v. Asphalt Maint., Inc., No. A–99–433, 2000 WL 781371, at *5 (Neb.Ct.App. June 20, 2000) (). BLB insists that cost of repair is the proper measure of damages and that repairing the damage of missing maintenance records and parts tags necessitates completely redoing the underlying maintenance work. However, the notion of replacing undisputedly good parts with new parts for the sake of obtaining complete maintenance records exemplifies unreasonable economic waste. Undertaking such repairs would be grossly disproportional to the value a new set of records and parts tags would add to the airplanes, particularly when, as Jet Linx shows here, several cheaper alternatives are available. Jet Linx's expert, Allen E. King, testified that remedying Jet Linx's breach did not necessitate redoing the underlying repairs, explaining alternative methods of compliance with Federal Aviation Regulation maintenance action record requirements beyond keeping a particular type of logbook or parts tags. Other methods of verifying a given airplane part include examining a type certificate data sheet, looking at an illustrative parts catalog, reviewing the aircraft equipment list that comes with the airplane, or physically inspecting the part and verifying it with the manufacturer. Even BLB's expert, Flinn, acknowledged the availability of other, more reasonable alternatives to remedy Jet Linx's breach. Flinn testified that, in order to remedy incomplete maintenance records and parts tags, "you'd have to go back and look and either redo that maintenance task that you don't have a record for, or if you don't have a parts tag for[,...
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