First Tech. Capital, Inc. v. JPMorgan Chase Bank, N.A.

• Decision Date: 09 October 2014
• Docket Number: No. 5:12–CV–289–REW.,5:12–CV–289–REW.
• Citation: 53 F.Supp.3d 972
• Parties: FIRST TECHNOLOGY CAPITAL, INC., Plaintiff/Counterclaim Defendant, v. JPMORGAN CHASE BANK, N.A., Defendant/Counterclaimant, v. James L. Bates, Counterclaim Defendant.
• Court: U.S. District Court — Eastern District of Kentucky

53 F.Supp.3d 972

FIRST TECHNOLOGY CAPITAL, INC., Plaintiff/Counterclaim Defendant

v.JPMORGAN CHASE BANK, N.A., Defendant/Counterclaimant

v.James L. Bates, Counterclaim Defendant.

No. 5:12–CV–289–REW.

United States District Court, E.D. Kentucky, Central Division, Lexington.

Signed Oct. 9, 2014.

Andrew M. Stephens, Michael Joseph Gartland, J. Wesley Harned, Lexington, KY, for Plaintiff/Counterclaim Defendant.

David B. Tachau, Dustin E. Meek, Katherine E. Mckune, Louisville, KY, for Defendant/Counterclaimant.

MEMORANDUM OPINION AND ORDER

ROBERT E. WIER, United States Magistrate Judge.

The Court considers the parties' cross-motions for summary judgment. Plaintiff and Counterclaim Defendant, First Technology Capital, Inc. (FTC), filed a (since removed, on diversity) petition for declaratory judgment on the underlying contract claim. Defendant and Counterclaimant, JPMorgan Chase Bank, N.A. (Chase), filed contract, fraud, and unjust enrichment counterclaims against FTC and, on the latter counts, individually, against James L. Bates, the President of FTC. Both sides now seek judgment as a matter of law on the claims.

In this hotly disputed commercial case, there actually is little fight over the facts. The parties scarcely contest the sequence or specifics of the communications and dealings between them. Rather, the parties train their considerable fire on the legal effect and actionability of a short relevant history in the early summer of 2012. Through extensive briefing and oral argument¹ the Court has fully heard and considered the positions of Chase and FTC/Bates² on dueling summary judgment motions. The summary judgment standards, on this fully developed record, direct judgment for FTC and Bates³ and against Chase on all claims. For the reasons that follow, there was no valid contract on June 28. Further, as to the fraud and negligent misrepresentation claims, Chase did not rely reasonably to its detriment on misrepresentations from FTC or its agent, attorney Bunch, and there otherwise was no actionable fraud. Finally, no basis exists for application of the equitable principles of unjust enrichment.

Chase cites many wounds

from its dealings with FTC, but, legally at least, those largely are self-inflicted; Chase has no remedy in this case, and FTC and Bates are entitled to judgment as a matter of law.

I. Relevant Factual and Procedural Background

First Technology Capital, Inc. (FTC), is a Kentucky corporation owned by James L. Bates. DE # 7 (Disclosure Statement). FTC, as part of its daily operations, acquires and/or invests in various assets.

In September 2010, FTC executed a Term Promissory Note with Tennessee Commerce Bank for approximately $10.47 million dollars in order to purchase 100% of the beneficial interest in Dougherty Air XVIII Investment Trust. Dougherty Air administered the subject Trust as owner trustee. The Trust owned (or contemporaneously acquired) a 1999 McDonnell Douglas MD–83 (DC–9–83), tail number N973TW. The Trust leased the MD–83 to American Airlines, Inc. through a long-term lease. FTC acquired a beneficial interest in the Trust and a right to (at least most portions of) future lease payments. As part of the Promissory Note and financing terms, FTC assigned Tennessee Commercial Bank a 100% security interest in FTC's assets, to include its beneficial interest in the Trust and any ensuing proceeds. DE # 100–1 (Bates Affidavit) at 2–3, ¶¶ 3–5; DE # 101–18 (UCC Financing Statements); see also DE # 34 (First Amended Counterclaim) at 6–7, ¶ 18 (generally discussing documents).

American Airlines suspended lease payments on November 29, 2011, after filing for Chapter 11 bankruptcy reorganization. See In re AMR Corp., et al., No. 11–153463(SHL) (Bankr.S.D.N.Y.). In January 2012, American Airlines renegotiated the terms of the lease. See DE # 100–2 (Partial Term Sheet). The term sheet to which the parties agreed awarded the “Lessor” a “separate and distinct stipulated, allowed general unsecured nonpriority pre-petition claim” against American Airlines in the amount of $22,886,139. Id.⁴ The parties do not dispute that, around this same time, the Federal Deposit Insurance Corporation (FDIC) took over Tennessee Commerce Bank and acquired its assets. Thus, as receiver of the bank, the FDIC acquired FTC's loans (including the loan related to the MD–83) and became the lienholder on FTC's assets.

Prompted by the FDIC's entrance on the scene, and in an effort to negotiate terms of a discounted payoff of its indebtedness to the Tennessee Commerce Bank (and the FDIC), FTC engaged Intuitive Processes and Controls (iPAC). See DE # 101–22 (email chain from FTC to iPAC principals). FTC made an initial Offer of Compromise to the FDIC on April 20, 2012. DE # 101–25 (detailing initial offer and providing updated (July 13, 2012) receivables). On June 14, 2012, Bunch corresponded with Hon. Matthew Haddock, an attorney with iPAC, about an FDIC deal. DE # 101–26. Haddock advised Bunch: “Now, [iPAC] will do our best in this area, but there are no promises and even estimates are difficult. You may end up having to bid.” Id.

On June 20, 2012, the bankruptcy court allowed the identified claim. See DE # 100–3 (Stipulation) at 14 (“The general unsecured non-priority pre-petition claim against American set forth in Section 5.1 of the Term Sheet is hereby allowed.”). Within days, FTC began marketing the claim. W. Thomas Bunch, FTC and Bates's long-time attorney, emailed Matthew Pennella at Chase on June 22, 2012:

We represent First Technology Capital, a company located near Lexington, Kentucky in Versailles, Kentucky. FTC was the owner of a beneficial interest in an aircraft leased to American Airlines. On Wednesday the order (attached hereto) was entered approving the modified lease and granting FTC an allowed unsecured claim of $22,886,139 (this is in Sec. 5.1 on the unredacted copy which can be provided if we proceed). FTC is interested in the sale, assignment and transfer of this claim. The sale must be without recourse. Mr. Bates, the principal of FTC, is looking upward toward $10 million for the sale of this claim. Would you be interested; if so make me your highest and best offer.

Id. at 3 (June 22 Email from Bunch to Pennella). Bunch attached the redacted second stipulation to the email, promptly forwarded to John C. Barone, as Pennella was out of the office.

Chase, via Barone, made an initial offer within hours:

Thank you for all your help today on First Technology Capitals [sic ]. JPMorgan is very interested in working with you and your client on their allowed American Airlines, Inc. Claim for $22,886,139.00. For your reference, JPMorgan is pleased to provide First Technology Capital with a firm bid of 33% on this claim, which will result in net proceeds to your client of $7,552,425.87. This bid is good until 5pm EST today. If acceptable, please let me know and I will send you an email confirmation. We look forward to Mr. Bates response.

DE # 101–30 (email from Barone to Bunch). FTC did not accept the offer, but, through Bunch, expressed FTC's desire to continue negotiations after the weekend. DE # 101–31 (email from Bunch to Barone); see also DE # 101–32 (email exchanges between Bunch and Barone). Barone reached out to Bunch on Monday, June 25, noting volatility in the market and stating: “I would love to try and lock this up, subject to documentation, today if Mr. Bates is interested.” DE # 101–32 (email from Barone to Bunch). Barone emailed Bunch again on Tuesday, June 26. DE # 101–33. The correspondence affirmed Chase's interest in FTC's claim and extended a 32.75% bid. Id. Discussions with Chase continued throughout the day on June 27. DE # 101–34.

On Thursday, June 28, 2012, Bunch emailed Barone regarding a bid U.S. Bank purportedly made to FTC. Following additional emails between Bunch and Barone and Bunch and Bates, Barone presented Chase's “best and final” offer:

First, thank you again for giving JPMorgan the opportunity to bid on your claim, this is an important transaction for us.... I spoke with our desk and JPMorgan is please[d] [to] provide you with a best and final bid at 35.75% on your $22mm allowed American Airlines, Inc. claim. This bid is good until 5pm EST today, June 28, 2012 and is subject to review of your due diligence and execution of a Transfer of Claim agreement. We [sic ] very interested in working with you on this opportunity and hope this is reflected in our bid. Please confirm via email if we are done and you would like to lock in this price.

DE # 101–37 (email from Barone to Bates and Bunch). FTC accepted the offer at 5:19 p.m. on Thursday, June 28. DE # 101–38 (“JC: Mr. Bates has authorized me to accept your offer below during our agreed extended time. I will have Mr. Bates confirm this by separate email. Please advise when we may close. I would like to do the extra and final paperwork tomorrow afternoon: we are both exhausted right now.”). Barone responded:

Thank you for your email. Upon Mr. Bates confirmation email, we will be done at 35.75% subject to the provisions outlined under our initial bid. Please have Mr. Bates send me an email with his confirmation. Thank you again for choosing to work with JPMorgan on this important transaction.

DE # 101–39 (email from Barone to Bunch and Bates). That same evening, Bates, Barone, Bunch, and a Chase trader participated in a telephone conference, during which Bates orally confirmed the transaction. See DE # 101–40 (email from Bunch to Barone discussing telephone conference). Later that night, Bates personally confirmed the email from Bunch. DE # 101–2 (Email from Bates to Barone) (“JC, This will confirm the email from Tom. Thanks, JIM.”).

Following this flurry of activity, both parties confirmed the sale with their respective companies that evening. DE # 101–3 (email from Bates to FTC employees: “Dan and Doug, The AA Claim has been sold at .3575....”); DE # 101–41 (email from Barone to Chase employees: “Guys, JPMorgan buys a $22,886,139.00 allowed American...