Continental Airlines, Inc. v. Lelakis, 95 Civ. 10518 (SAS).

• Decision Date: 19 September 1996
• Docket Number: No. 95 Civ. 10518 (SAS).,95 Civ. 10518 (SAS).
• Parties: CONTINENTAL AIRLINES, INC., Plaintiff, v. Antonios E. LELAKIS, Defendant.
• Court: U.S. District Court — Southern District of New York

943 F.Supp. 300

CONTINENTAL AIRLINES, INC., Plaintiff, v. Antonios E. LELAKIS, Defendant.

No. 95 Civ. 10518 (SAS).

United States District Court, S.D. New York.

September 19, 1996.

Andrew S. Ratzkin, Arnold & Porter, New York City, for Plaintiff.

Gavin J. Rooney, Lawrence M. Rolnick, Lowenstein, Sandler, Kohl, Fisher & Boylan, Roseland, NJ, for Defendant.

MEMORANDUM OPINION

SCHEINDLIN, District Judge.

I. INTRODUCTION

Plaintiff Continental Airlines, Inc. ("Continental") sues Antonios Lelakis ("Lelakis") to collect $10,735,329.02, plus interest, under a guaranty agreement entered into by the parties in October 1994 as security for payment on a promissory note. The underlying note was executed by Regency Holdings (Cayman) Inc. ("Regency Holdings"), the corporation of which Lelakis was Chairman of the Board of Directors at all times relevant to this proceeding. Continental commenced this action by filing a motion for summary judgment in lieu of a complaint pursuant to New York Civil Practice Law and Rules § 3213, in New York State Supreme Court in November 1995. It was removed to this Court by defendant in December 1995 based on diversity of citizenship under 28 U.S.C. § 1332.

Continental has moved for summary judgment on the guaranty. In response, Lelakis does not dispute that he executed the guaranty as security for the note, nor that the note is past due and owing. Instead, Lelakis alleges three affirmative defenses that he asserts relieve him of his obligation under the guaranty: 1) that Continental fraudulently induced him to sign the guaranty by misrepresenting the nature of his personal liability pursuant to it; 2) that his signing of the guaranty resulted from economic duress; and 3) that the risks of the guaranty have changed dramatically due to events beyond his control, discharging him as a matter of law. For the reasons set forth below, Continental's motion is granted.

II. FACTUAL BACKGROUND

Plaintiff Continental is a Delaware corporation with its principal office in Houston, Texas. Continental engages in the delivery of air travel services in the United States and throughout the world. See Complaint at ¶ 1. On August 29, 1989, plaintiff entered into a "Universal Air Travel Plan Subscriber's Contract" (the "UATP") with Regency Cruises, Inc. ("Regency Cruises"), the then-owner and operator of a fleet of pleasure ships. See Certification of Antonios E. Lelakis ("Lelakis Cert."), dated July 10, 1996, at ¶ 4. Regency Cruises is a wholly owned subsidiary of Regency Holdings. Id. at ¶ 6. Defendant Antonios E. Lelakis, a Greek citizen¹, was Chairman of the Board of Directors of Regency Holdings during 1994. Id.

Under the UATP, plaintiff established an "Air Travel Plan Account" that permitted Regency Cruises to purchase air travel and other travel-related services from Continental and other airline and travel companies and charge those expenses to the Air Travel Plan Account. See Affidavit of Lawrence Kellner, Chief Financial Officer of Continental, in Support of Motion for Summary Judgment ("Kellner Aff."), dated June 27, 1996, at ¶¶ 7, 8. Pursuant to the UATP, plaintiff was entitled to bill Regency Cruises on at least a monthly basis for current and prior unpaid charges to Regency Cruises' Air Travel Plan Account. Id. at ¶ 9.

Starting in July 1994 and continuing through October 1994, Regency Cruises began to fall behind in its payments to the Air Travel Plan Account. Id. at ¶¶ 14-20. In September and October 1994, representatives of Continental and Regency Holdings met several times in an attempt to address the delinquent status of the account. See Affidavit of Michael Cox, Vice President and Treasurer of Continental, in Support of Motion for Summary Judgment ("Cox Aff."), dated July 18, 1996, at ¶¶ 3-5. As a result of these consultations, in October 1994 the UATP was amended, in relevant part, to provide that Regency Holdings would be jointly and severally liable with Regency Cruises for any existing debt as well as for the continuing performance of Regency Cruises under the UATP Contract. Kellner Aff. at ¶ 21. In addition, on October 20, 1994, Regency Holdings executed a promissory note to Continental in the amount of $10,476,992.23 for past due amounts under the UATP, plus interest. Id. at ¶ 22. Regency Holdings pledged to pay by June 30, 1995, with the initial payment of principal and interest due on January 16, 1995. Id.

Finally, on that same date, defendant executed an individual guaranty to Continental for $10,476,992.23 as security for the note. Id. at ¶ 23. Under the guaranty, Lelakis agreed to guarantee unconditionally "the prompt payment of all principal of and interest on the [Regency Holdings] Note when due, whether by acceleration or otherwise." Affidavit of Andrew S. Ratzkin, attorney for Continental, in Support of Plaintiff's Motion for Summary Judgment ("Ratzkin Aff."), dated June 27, 1996, Exhibit B at ¶ 3. Additionally, the guaranty authorized Continental to "change the amount, time or manner of payment of the sums required to be paid pursuant to the Note; (b) change any of the terms, covenants, conditions or provisions of the Note; [and] (c) amend, modify, change or supplement the Note...." Id. at ¶ 6. The guaranty was drafted by counsel for Regency Holdings, Robert Shaw, at the request of Regency Holdings' Chief Financial Officer, David Groelinger. See Certification of Robert Shaw, counsel to Regency Cruises and Regency Holdings, in Opposition to Plaintiff's Motion for Summary Judgment, undated, at ¶ 4.

Plaintiff alleges and defendant does not dispute that Regency Holdings made no payment under the note. See Plaintiff's Statement of Material Facts Pursuant to Local Rule 3(g) at ¶ 28; Defendant's Civil Rule 3(g) Statement of Disputed Facts at ¶ 1. As a consequence, in January 1995, Regency Holdings executed an amended and restated promissory note to plaintiff in the amount of $10,735,329.02 to reflect accumulated interest. See Ratzkin Aff., Exhibit C. Plaintiff and Regency Holdings also negotiated a repayment schedule that would have satisfied the amended note by June 1995. Id. Plaintiff alleges that Regency Holdings made only the first two payments under the amended note but failed to make any subsequent payments. See Kellner Aff. at ¶ 30. In response, on March 2, 1995, plaintiff notified both defendant and Regency Holdings that Regency Holdings was in default under the amended note, accelerated the amounts due and demanded payment. Id. at ¶ 31. Plaintiff alleges that Regency Holdings made three additional payments toward the amended note after March 2, 1995. Id. at ¶ 32. The parties do not dispute that defendant has made no payments to Continental pursuant to the guaranty.

In November 1995, Regency Holdings, together with its subsidiaries, including Regency Cruises, voluntarily filed for bankruptcy under Chapter 11. Affidavit of John Luth, Senior Vice President — Business Units & Chief Information Officer of Continental, in Support of Motion for Summary Judgment ("Luth Aff."), dated July 19, 1996, at ¶ 11.

III. DISCUSSION

A. Standard for Summary Judgment

A party is entitled to summary judgment when there is "no genuine issue of material fact" and the undisputed facts warrant judgment for the moving party as a matter of law. See Fed.R.Civ.P. 56(c); Celotex v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The burden of demonstrating the absence of a material factual dispute rests on the moving party. See Gallo v. Prudential Residential Services, Ltd., 22 F.3d 1219, 1223 (2d Cir.1994). The nonmoving party must present "significant probative supporting evidence" that a factual dispute exists. Fed.R.Civ.P. 56(e); Anderson, 477 U.S. at 249, 106 S.Ct. at 2510-11. Whether a fact has a bearing on the outcome of the motion is determined by the governing substantive law. Id. at 248, 106 S.Ct. at 2510.

The court is not to try issues of fact, but to determine whether issues exist to be tried. See Balderman v. United States Veterans Admin., 870 F.2d 57, 60 (2d Cir.1989); Donahue v. Windsor Locks Bd. of Fire Comm'rs, 834 F.2d 54, 58 (2d Cir.1987). All ambiguities must be resolved and all inferences drawn in favor of the party against whom summary judgment is sought. See Anderson, 477 U.S. at 255, 106 S.Ct. at 2513-14; Donahue, 834 F.2d at 57, 60. If there is any evidence in the record from which a reasonable inference could be drawn in favor of the non-moving party on a material issue of fact, summary judgment is improper. See Chambers v. TRM Copy Centers Corp., 43 F.3d 29, 37 (2d Cir.1994).

In contract actions, "summary judgment is appropriate where the language of the contract is unambiguous, and reasonable persons could not differ as to its meaning." United States v. 0.35 of an Acre of Land, 706 F.Supp. 1064, 1070 (S.D.N.Y.1988). A court may not draw any inference or give any construction to the terms of a written contract that "may be in conflict with the clearly expressed language of the written agreement." Id.

B. Summary Judgment on the Guaranty

The governing law in this matter is the law of contracts. The objective of contract interpretation is to give effect to the expressed intentions of the parties. See Hunt Ltd. v. Lifschultz Fast Freight, Inc., 889 F.2d 1274, 1277 (2d Cir.1989). Guaranty agreements are to be construed under ordinary principles of contract construction. See Banco Portugues do Atlantico v. Asland, S.A., 745 F.Supp. 962, 967 (S.D.N.Y.1990). If the intent of the parties is clear from the four corners of the agreement, its interpretation is a matter of law that the court may determine by summary judgment. See Thompson v. Gjivoje, 896 F.2d 716, 721 (2d Cir.1990). "Where contractual language is plain on its face, it should be so construed as a matter of law in the summary judgment context." Price v. Bartkowiak, 715 F.Supp. 76, 79 (S.D.N.Y.1989).

The...