Deutsche Bank Trust Co. Americas v. Tradewinds Airlines, Inc.
| Decision Date | 29 April 2009 |
| Docket Number | 03 CVS 12215 |
| Parties | DEUTSCHE BANK TRUST COMPANY AMERICAS, Plaintiff v. TRADEWINDS AIRLINES, INC., TRADEWINDS HOLDINGS, INC. COREOLIS HOLDINGS, INC., DAVID ROBB, RICHARD RESSLER, JEFF CONRY, GEORGE MCCONNAUGHEY, DAVID JOHNSON, JOHN and JANE DOES NO. 1-50, Defendants v. P-G NEWCO LLC, S-C NEWCO LLC, C-S AVIATION SERVICES, WELLS FARGO BANK NORTHWEST, NA and DOES No. 1-20, Third-Party Defendants |
| Court | Superior Court of North Carolina |
Tuggle Duggins & Meschan, P.A. by J. Nathan Duggins, III and Emma C. Merritt for Defendant and Third-Party Plaintiff TradeWinds Airlines, Inc.
Ellis & Winters LLP by Paul K. Sun, Jr., Rebecca M. Rich, and Curtis J. Shipley for Third-Party Defendant C-S Aviation Services, Inc.
{1} THIS MATTER is before the Court on Third-Party Defendant C-S Aviation Services, Inc.'s ("C-S Aviation") Motion to Set Aside Entry of Default and Default Judgment (the "Motion to Set Aside"). The Entry of Default and Default Judgment were entered in favor of Defendant and Third-Party Plaintiff TradeWinds Airlines, Inc. ("TradeWinds"). Also currently pending are Coreolis Holdings, Inc.'s ("Coreolis") and TradeWinds Holdings, Inc.'s ("Holdings") Motion for Default Judgment.
{2} Like aircraft lined up for departure, the litigation involving TradeWinds is stacked up on the taxiway awaiting clearance for takeoff. First in line is the bankruptcy case in Florida. Chief Judge Emeritus A. Jay Cristol of the United States Bankruptcy Court for the Southern District of Florida Miami Division is piloting that flight, and until he lifts the stay of litigation in bankruptcy, the cases in line behind him will not be cleared for takeoff. Second in line is the North Carolina litigation. It cannot proceed until the stay is lifted. This Order provides some guidance to the other courts of the likely flight plan for the North Carolina case once the stay is lifted. Last in line is the plane from New York. United States District Court Judge John F. Keenan has entered an order staying that litigation until the North Carolina courts can rule on the Motion to Set Aside the original Default Judgment. Judge Keenan cannot determine what North Carolina judgment to enforce until it is a final judgment.[1]
{3} TradeWinds filed for Chapter 11 bankruptcy protection in the Southern District of Florida on June 25, 2008. TradeWinds' bankruptcy estate is currently involved in litigation under Chapter 7 of the United States Bankruptcy Code. On February 10, 2008, Judge Cristol issued a Memorandum Decision granting the motion of the Chapter 7 Trustee for TradeWinds' bankruptcy estate to enforce an automatic stay against fellow Defendants and Third-Party Plaintiffs Coreolis and Holdings. See In re TradeWinds Airlines, Inc., No. 08-20394-BKC-AJC, slip op. at 3 (Bankr. S.D.Fla. Feb. 10, 2009). Coreolis and Holdings filed a joint Motion to Amend the Default Judgment in this Court. The bankruptcy court stated that the "[Default] Judgment is property of the [TradeWinds] estate and any action taken with respect to that Judgment, whether to correct an error or to vacate the Judgment completely, is an act in violation of the stay." Id. at 6.
{4} Because the stay issued by the bankruptcy court precludes action from this Court at this time, this Court declines to enter any order on C-S Aviation's Motion to Set Aside the Default Judgment. The Court further stays all pending motions until the stay order is lifted by Judge Cristol. Under North Carolina Rule of Civil Procedure 60(b)(6), however, it is likely that extraordinary circumstances exist that would require setting aside the Default Judgment so that the damages of TradeWinds, Coreolis, and Holdings might be litigated. Additionally, C-S Aviation may have valid defenses to the damages awarded against it.
{5} This action was filed in Guilford County on November 14, 2003. Pursuant to Rules 2.1 and 2.2 of the General Rules of Practice for the Superior and District Courts, the case was designated complex business and assigned to the undersigned Special Superior Court Judge for Complex Business Cases by order of the Chief Justice of the Supreme Court of North Carolina on January 15, 2004.
{6} In January 2004, Defendants and Third-Party Plaintiffs TradeWinds, Coreolis, and Holdings (collectively "the TradeWinds Group") filed a third-party complaint against Third-Party Defendants P-G Newco LLC, S-C Newco LLC, C-S Aviation, Wells Fargo Bank Northwest, N.A., and Does No. 1-20. The claims against C-S Aviation were for fraudulent inducement, breach of contract, and unfair and deceptive trade practices.
{7} On August 2, 2004, the TradeWinds Group filed a motion, pursuant to Rule 55(a) of the North Carolina Rules of Civil Procedure, for Entry of Default against C-S Aviation. Because C-S Aviation failed to file an Answer or otherwise respond to the Third-Party Complaint, the Court entered a Default against the company on August 19, 2004. At that time, the TradeWinds Group was represented by Larry B. Sitton, Robert R. Marcus, and Heather Howell Wright, of Smith Moore Leatherwood LLP.
{8} Following a settlement agreement between the original Plaintiffs and Defendants, the Court ordered the dismissal of all claims in this dispute, except Plaintiff Deutsche Bank's claims against Defendant David Robb and the TradeWinds Group's third-party claims against C-S Aviation. On December 22, 2006, the Court dismissed the remaining Deutsche Bank claims.
{9} On April 17, 2007, the Court closed its file in this matter.
{10} In the spring of 2008, TradeWinds became aware of the possibility of piercing C-S Aviation's corporate veil to reach the company's owners.
{11} On April 14, 2008, TradeWinds, acting alone and with new counsel, filed a Motion for Default Judgment against C-S Aviation. In support of its motion, TradeWinds provided the affidavit of Jeffrey Conry, Chief Executive Officer and President of TradeWinds since 2000.
{12} The Court held a hearing on the Motion for Default Judgment on June 19, 2008, and C-S Aviation did not appear to challenge it. On June 27, 2008, the Court granted the Default Judgment, finding that C-S Aviation breached its leases with TradeWinds and that its conduct constituted unfair and deceptive trade practices under Chapter 75 of the North Carolina General Statutes. The Court awarded TradeWinds $16, 326, 528.94 as a direct result C-S Aviation's breach. Adding treble damages and prejudgment interest, the Court ruled that TradeWinds was entitled to recover $54, 867, 872.49 from C-S Aviation.
{13} The next business day, on June 20, 2008, TradeWinds filed an action in the United States District Court for the Southern District of New York (TradeWinds Airlines, Inc. v. Soros, No. 08 Civ. 5901 (S.D.N.Y)) (the "Soros suit") seeking to recover the Default Judgment by piercing C-S Aviation's corporate veil.
{14} On July 25, 2008, TradeWinds filed a voluntary petition in the United States Bankruptcy Court in the Southern District of Florida seeking relief under Chapter 11 of the Bankruptcy Code. The case was converted to a Chapter 7 proceeding by Order dated October 29, 2008.[2]
{15} On July 31, 2008, the Court again closed its file in this matter without knowledge of the Soros suit or the bankruptcy.
{16} Then, on August 27, 2008, C-S Aviation filed a Motion to Set Aside Entry of Default and Default Judgment under Rules 55(d) and 60(b)(1), (3), (4), (5), and (6) of the North Carolina Rules of Civil Procedure.
{17} On November 13, 2008, Coreolis and Holdings filed a Motion to Revise the Default Judgment so that they could be added as beneficiaries of the judgment. The Court heard oral arguments on both the Motion to Set Aside the Entry of Default and Default Judgment and the Motion to Revise the Default Judgment on January 27, 2009.
{18} On February 10, 2009, the United States Bankruptcy Court for the Southern District of Florida issued a stay of litigation against Coreolis and Holdings to prevent the former parent companies of TradeWinds from altering the Default Judgment issued by this Court.
{19} Pursuant to that court's ruling, Coreolis and Holdings withdrew their Motion to Revise the Default Judgment.
{20} Coreolis and Holdings filed their own Motion for Default Judgment on March 6, 2009.
{21} Defendant and Third-Party Plaintiff TradeWinds is a certified air-freight carrier organized under the laws of Delaware, having its principal place of business in Greensboro, North Carolina. TradeWinds is currently involved in a Chapter 7 bankruptcy proceeding in the Southern District of Florida. See In re TradeWinds Airlines, Inc., No. 08-20394-BKC-AJC (Bankr. S.D.Fla.).
{22} Defendant and Third-Party Plaintiff Holdings is a corporation organized under the laws of Delaware, having its principal place of business in Greensboro, North Carolina. (Third-Party Compl. ¶ 6.) When this litigation began, Holdings was the sole shareholder of TradeWinds. (TradeWinds' Notice of Filing, Ex. A, Mar. 6, 2009.) On April 29, 2005, Holdings pledged all TradeWinds' stock to Wells Fargo. (TradeWinds' Notice of Filing, Ex. A, Mar. 6, 2009.) On November 1, 2006, after TradeWinds defaulted on its loan, Wells Fargo foreclosed on TradeWinds' stock. (TradeWinds' Notice of Filing, Ex. A, Mar. 6, 2009.)
{23} Defendant and Third-Party Plaintiff Coreolis is a corporation organized under the laws of Delaware, having its principal place of business in Los Angeles, California. (Third-Party Compl. ¶ 7.)
{24} Third-Party Defendant C-S Aviation is a corporation organized under the laws of Delaware. (Third-Party Compl. ¶ 9.) C-S Aviation was "Lessor's Aircraft Manager." (Third-Party Def. C-S Aviation Services, Inc.'s Br. Supp. Mot. Set Aside Entry Default & Default J. ("Br. Supp. Mot. Set Aside") 5.)
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