CH Acquisitions 2, LLC v. Aquila Aviation L.P.
| Decision Date | 30 March 2018 |
| Docket Number | No. 16 Civ. 2030 (RJS),16 Civ. 2030 (RJS) |
| Parties | CH ACQUISITIONS 2, LLC, Plaintiff, v. AQUILA AVIATION L.P. & WELLS FARGO BANK NORTHWEST, N.A., Defendants. |
| Court | U.S. District Court — Southern District of New York |
This action involves dueling breach of contract claims arising from the failed sale of a 1999 Boeing Business Jet (the "BBJ") worth more than $20 million. Specifically, Plaintiff CH Acquisitions 2, LLC ("CH") seeks the return of its $1.5 million deposit on the aircraft, while Defendants Aquila Aviation ("Aquila") and Wells Fargo Bank Northwest, National Association ("Wells Fargo" and, together with Aquila, "Defendants") seek over $3.7 million in actual damages that resulted from CH's alleged breach of the sale contract.
Having presided over a bench trial in this action, the Court now issues the following findings of fact and conclusions of law in accordance with Federal Rule of Civil Procedure 52(a). For the reasons set forth below, the Court finds that Plaintiff has failed to meet its burden of proof with respect to its claim, that Defendants have satisfied their burden with respect to their claims, and that Defendants are entitled to $3,725,000 in damages and their reasonable attorneys' fees, costs, and expenses. Accordingly, the Court enters judgment for Defendants.
Plaintiff commenced this action on March 18, 2016 (Doc. No. 1), and Defendants responded with an answer and counterclaims on April 20, 2016 (Doc. No. 9). Following the conclusion of discovery, the case proceeded to trial on June 26, 2017, and was conducted in accordance with the Court's Individual Rules for non-jury proceedings. Specifically, the parties submitted affidavits containing the direct testimony of their respective witnesses, as well as copies of all exhibits and deposition transcripts that they intended to offer as evidence. The parties were then invited to call those witnesses whom they wished to cross-examine at trial. In all, seven witnesses - Chantal De Vos, Sonny Benzion Cohen Kahn, Robert Gallagher, Robert Charles Vickers, Matthew Ross, Marc Foulkrod, and Gary Weissel - submitted affidavits and testified before the Court. In addition, Defendants called non-party witness Edward Ashley, who gave both direct and cross-examination testimony during trial. Trial concluded on July 10, 2017. At the close of the trial, the Court orally found that CH had failed to prove Defendants' alleged breach of contract by a preponderance of the evidence and that Defendants had proven CH's breach of contract; the Court reserved judgment on the issue of damages. (Transcript of Trial Proceedings, July 10, 2017, at 1305:25-1306:18.)
To prevail on their respective claims, the parties must present evidence in support of the allegations set forth in their complaint and counterclaims and prove those allegations by a preponderance of the evidence. See Diesel Props S.R.L. v. Greystone Bus. Credit II LLC, 631 F.3d 42, 52 (2d Cir. 2011). "The burden of showing something by a preponderance of the evidence . . . simply requires the trier of fact to believe that the existence of a fact is more probable than its nonexistence[.]" Metro. Stevedore Co. v. Rambo, 521 U.S. 121, 137 n.9 (1997). As the finder of fact, the Court is entitled to make credibility findings about the witnesses and testimony and to draw reasonable inferences from the evidence presented. See Merck Eprova AG v. Gnosis S.p.A., 901 F. Supp. 2d 436, 448 (S.D.N.Y. 2012), aff'd, 760 F.3d 247 (2d Cir. 2014).
CH is a Delaware limited liability company with its principal place of business in Miami, Florida. (Stip. ¶ 2.) Although owned by three trusts for the benefit of individuals residing in New York and Florida (id. ¶¶ 3-4), CH is actually one limited liability company in a cluster of corporations and partnerships that together comprise the real estate business of Crescent Heights, Inc. (See De Vos Aff. ¶ 3; Kahn Aff. ¶ 3.) As a result, while CH is the plaintiff in this action and the contracting party for the BBJ, it acted primarily through individuals and officers associated with Crescent Heights. Sonny Kahn is the chairman and chief executive officer of Crescent Heights and the principal actor in this drama involving the failed purchase of a luxury corporate jet. (Kahn Aff. ¶ 1.)
Aquila is a British Virgin Islands Limited Partnership that is ultimately controlled by the Legatum Group, a private investment partnership based in Dubai, United Arab Emirates. (Stip. ¶ 5; Vickers Aff. ¶¶ 5, 9.) In 2008, Aquila took ownership of the BBJ, although Wells Fargo held actual title to the aircraft. (Stip. ¶ 6; Vickers Aff. ¶¶ 11-12.)
For many years, Crescent Heights has maintained a number of private corporate aircraft (De Vos Aff. ¶ 7), which are managed by Chantal De Vos, Crescent Heights's Operations Manager for Special Projects, and maintained by Steve Vrabic, Director of Maintenance for the company's airplane fleet. (Id. ¶¶ 1, 11-15.) In the summer of 2015, Sonny Kahn was exploring the possibility of acquiring another aircraft for the company when he became aware that Aquila's BBJ was on the market. (Id. ¶ 22; Kahn Aff. ¶ 4.) At that time, Marc Foulkrod - and his company Avjet Global Sales was serving as the broker for the BBJ, which was stored at an Avjet facility in Burbank, California. (Foulkrod Aff. ¶¶ 1, 11, 13.) Kahn inspected the aircraft in Burbank several times starting that summer; he liked the BBJ and initiated negotiations to purchase it. (Kahn Aff. ¶ 5; Foulkrod Aff. ¶¶ 13-16.) To facilitate the purchase, Crescent Heights retained aviation consultant Patrick Murphy to perform a review of the BBJ's documentary records and assist with the pre-purchase inspection of the aircraft. (De Vos Aff. ¶ 30.)
On December 4, 2015, CH entered into a letter of intent ("LOI") with Aquila to purchase the BBJ for $27.725 million. (JX 2.) The LOI required CH to put down a $1.5 million deposit. (Id.) At this time, the BBJ was in San Antonio, Texas, undergoing its regular maintenance check - known as a B-Check - conducted by Vision Technology San Antonio Aerospace ("VT San Antonio"). (Stip. ¶ 19; Tr. 636:4-637:7.) After the LOI was signed, De Vos dispatched Murphy and Vrabic to San Antonio to start their review of the BBJ's records. (Stip. ¶ 20; De Vos Aff. ¶ 31.) At the same time, Matthew Ross - Aquila's Director of Maintenance - flew from Dubai to San Antonio to assist in the records review. (Ross Aff. ¶¶ 6-7, 13.) Aquila hired Chris Argyros, a contractor, to help Ross with this process. (Id. ¶ 16.)
On January 15, 2016, CH and Aquila entered into the Aircraft Purchase Agreement ("APA"). (Stip. ¶ 21; PX 7, DX 33 ("APA").) Like the LOI, the APA established a purchase price of $27.725 million and required a $1.5 million deposit, which would be refundable only under very narrow circumstances. (See APA §§ 2(A), 7, 17, 29.) Specifically, the APA anticipated that, after the completion of the B-check, the BBJ would be subject to an inspection process, after which - absent any issues - CH would accept delivery of the aircraft. (See APA § 7.) To that end, the APA provided that:
Upon completion of the Inspection, Purchaser shall either (i) accept the Aircraft, subject to no corrective work being performed on the same, . . . (ii) accept the Aircraft, subject to Seller's correction of airworthiness discrepancy items . . . , or (iii) reject the Aircraft but only in the event any airworthiness discrepancy, major corrosion, or major damage (including, without limitation, damage history to the airframe, any engine or material part, missing logs and/or records or failure to comply with the Aircraft Specifications attached hereto as Exhibit A) is found during the Inspection. Purchaser shall notify Seller of its decision in writing no later than three (3) business days after receipt by Purchaser and Seller of the Inspection Facility's written results of the Inspection.
(Id. § 7(D).) If CH rejected the aircraft pursuant to Section 7(D)(iii), the security deposit would be immediately refunded. (Id. § 7(E).)
The APA also provided four scenarios that would result in the purchase agreement being "terminated": (1) by CH if Aquila breached its obligations under the APA or delivered the BBJ in an unsatisfactory state; (2) by Aquila if CH breached any of its obligations under the APA or failed to accept delivery of the BBJ; (3) by either party in the event of loss of the aircraft or damage exceeding $300,000; or (4) by CH following a contractually-defined "Event of Force Majeure." (Id. § 29.) To effect a termination, the terminating party was required to "give written notice of such termination to the other party[.]" (Id.) If the APA was terminated by way of options (1), (3) , and (4) above, CH would recover its deposit, but if the APA was terminated by way of option (2), Aquila would retain the deposit "as liquidated damages, without any further obligation on the part of [CH] as [Aquila's] . . . sole remedy." (Id.)
Although representatives of both parties were already on site at VT San Antonio with access to the BBJ, the signing of the APA allowed for the pre-purchase inspection to begin in earnest. (See id. § 7.) On January 20, 2016, five days after the parties executed the APA, Vrabic sent Ross an email including a list that Murphy had compiled of 93 issues - identified as "discrepancies" - with the BBJ's documentation. (PX 9; see Stip. ¶ 22; Ross Aff. ¶ 18.) Ross was able to resolve 27 discrepancies on the first day. (DX 35.) Five days later, by January 25, Ross had resolved 76 of the 93 identified discrepancies. (DX 43.) However, Ross had trouble locating two manuals - the Aircraft Maintenance Manual and the Illustrated Parts Catalogue Supplement - that were deemed to be key "aircraft documents" required by the APA. In searching for those documents, Ross learned that they were never turned over when the...
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