In re Midway Airlines, Inc., Bankruptcy No. 91 B 06449

• Court: U.S. Bankruptcy Court — Northern District of Illinois
• Writing for the Court: JOHN H. SQUIRES
• Citation: In re Midway Airlines, Inc., 180 B.R. 851 (Bankr. N.D. Ill. 1995)
• Decision Date: 10 March 1995
• Docket Number: 91 B 06450 and 91 B 06451. Adv. No. 91 A 01176.,Bankruptcy No. 91 B 06449
• Parties: In re MIDWAY AIRLINES, INC., Midway Airlines (1987), Inc., Midway Aircraft Engineering, Inc., Debtors. Sheldon L. SOLOW, Trustee of Midway Airlines, Inc., Midway Airlines (1987), Inc., and Midway Aircraft Engineering, Inc., Plaintiffs-Counterdefendants, v. NORTHWEST AIRLINES, INC., Defendant-Counterplaintiff.

180 B.R. 851 (1995)

In re MIDWAY AIRLINES, INC., Midway Airlines (1987), Inc., Midway Aircraft Engineering, Inc., Debtors Sheldon L. SOLOW, Trustee of Midway Airlines, Inc., Midway Airlines (1987), Inc., and Midway Aircraft Engineering, Inc., Plaintiffs-Counterdefendants, v. NORTHWEST AIRLINES, INC., Defendant-Counterplaintiff.

Bankruptcy Nos. 91 B 06449, 91 B 06450 and 91 B 06451. Adv. No. 91 A 01176.

United States Bankruptcy Court, N.D. Illinois, Eastern Division.

March 10, 1995.

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Sarah R. Wolff, M. Marshall Seeder, Thomas J. Bamonte, Anne K. Berleman, Sachnoff & Weaver, Ltd., H. Roderic Heard, Matthew Hurd, Wildman, Harrold, Allen & Dixon, Chicago, IL, for Sheldon L. Solow, Trustee of Midway Airlines, Inc., Midway Aircraft Engineering, Inc., and Midway Airlines, (1987), Inc.

Richard T. Franch, David P. Sanders, James A. McKenna, Robert T. Markowski, Lawrence S. Schaner, Edie P. Steinberg, David M. Gormley, Jenner & Block, Chicago, IL, for Northwest Airlines, Inc.

MEMORANDUM OPINION

JOHN H. SQUIRES, Bankruptcy Judge.

                        TABLE OF CONTENTS
                ----------------------------------------------------------------------------
                  MEMORANDUM OPINION ................................................ 860
                  SUMMARY OF DECISION ............................................... 861
                  THE UNDERLYING MATERIAL BACKGROUND FOR ALL COUNTS
                    OF THE COMPLAINT ................................................ 862
                  COUNT I ........................................................... 883
                           FINDINGS OF FACT ......................................... 883
                           CONCLUSIONS OF LAW ....................................... 912
                  COUNT III ......................................................... 925
                           FINDINGS OF FACT ......................................... 925
                           CONCLUSIONS OF LAW ....................................... 937
                  COUNT IV .......................................................... 940
                           FINDINGS OF FACT ......................................... 940
                           CONCLUSIONS OF LAW ....................................... 943
                  COUNT V ........................................................... 946
                           FINDINGS OF FACT ......................................... 946
                           CONCLUSIONS OF LAW ....................................... 960
                  COUNT VI .......................................................... 967
                           FINDINGS OF FACT ......................................... 967
                           CONCLUSIONS OF LAW ....................................... 967
                  COUNT VII ......................................................... 974
                           FINDINGS OF FACT ......................................... 974
                           CONCLUSIONS OF LAW ....................................... 974
                  COUNT VIII ......................................................... 977
                           FINDINGS OF FACT ......................................... 977
                           CONCLUSIONS OF LAW ....................................... 979
                  COUNT IX .......................................................... 983
                           FINDINGS OF FACT ......................................... 983
                           CONCLUSIONS OF LAW ....................................... 985
                  NORTHWEST'S COUNTERCLAIM .......................................... 987
                           BACKGROUND FACTS FOR COUNT I ............................. 987
                  NORTHWEST'S COUNTERCLAIM .......................................... 996
                  COUNT I ........................................................... 996
                           FINDINGS OF FACT ......................................... 996
                           CONCLUSIONS OF LAW ...................................... 1003
                  COUNT II ......................................................... 1008
                           FINDINGS OF FACT ........................................ 1008
                           CONCLUSIONS OF LAW ...................................... 1008
                  CONCLUSION ....................................................... 1008
                

This matter comes before the Court on the amended complaint filed by Sheldon L. Solow, trustee (the "Trustee") of the estates of the debtors, Midway Airlines, Inc., Midway Aircraft Engineering, Inc., and Midway Airlines (1987), Inc. (collectively referred to as "Midway") against Northwest Airlines, Inc. ("Northwest"), and on the counterclaim of Northwest. For the reasons set forth herein, the Court, having considered all of the evidence adduced at trial, hereby grants judgment in favor of Northwest and against the Trustee on Counts I, III, IV, V, VI, VII, and VIII of the Complaint. The Court grants judgment in favor of the Trustee and against Northwest on Count IX of the Complaint. As to the Counterclaim, the Court grants judgment in favor of the Trustee and against Northwest on Counts I and II of the Counterclaim.

Had this matter been tried before Sir Walter Scott, he may have described it as follows: "Oh, what a tangled web parties create, when oral contracts they try to make!" With that paraphrase in mind, the Court summarizes its decision and makes the following findings of fact and conclusions of law.

SUMMARY OF DECISION

Midway brought this lawsuit against Northwest after the parties failed to consummate a proposed purchase and sale of Midway's non-gate assets. Northwest filed a two-count counterclaim against Midway. The following recitation constitutes a summary of the Court's decision in this adversary proceeding. Pursuant to Count I of its Complaint, Midway filed a breach of contract claim against Northwest for an alleged agreement formed on October 8, 1991 for the purchase and sale of substantially all of Midway's non-gate assets. The Court holds that no such agreement was made between the parties. The only binding agreement reached by the parties on October 8 with respect to Midway's non-gate assets was to negotiate in good faith consistent with their representations to the Court and to use their best efforts to close the transaction within thirty days.

Under Count III of its Complaint, Midway claims that Northwest breached a covenant set forth in the parties' Asset Purchase Agreement to negotiate in good faith for the non-gate assets. The Court holds that Northwest did negotiate in good faith for the purchase of Midway's non-gate assets and therefore did not breach the covenant.

In Count IV of the Complaint, Midway asserts a claim for promissory estoppel against Northwest. Midway argues that Northwest promised to purchase the non-gate assets from Midway and to fund Midway's operating losses. The Court holds that Northwest did not make an unambiguous promise to purchase substantially all of Midway's assets or to fund Midway's operating losses, and thus Northwest is not promissorily estopped from claiming there was no binding and enforceable agreement for the non-gate assets.

Pursuant to Count V of the Complaint, Midway alleges that Northwest committed fraudulent misrepresentation by making several misrepresentations of material fact at the October 8, 1991 court hearing and subsequently thereafter. The Court holds that Midway failed to prove all of the requisite elements of fraudulent misrepresentation with respect to each alleged instance.

In Count VI of the Complaint, Midway asserts a claim for equitable estoppel. Midway makes substantially the same allegations with respect to this claim as it does with respect to the fraudulent misrepresentation claim in Count V. The Court holds that Midway failed to prove all of the requisite elements of equitable estoppel, and thus Northwest is not equitably estopped from asserting there was no binding and enforceable agreement for the non-gate assets.

Under Count VII, Midway alleges that Northwest committed negligently misrepresentation with respect to several material facts in connection with the proposed purchase and sale of Midway's non-gate assets. The same alleged misrepresentations that form the basis of Counts V and VI are asserted in this count. The Court holds that Northwest is not in the business of supplying information for the guidance of others in their business transactions. Accordingly, Midway may not recover its alleged economic losses under this theory.

Pursuant to Count VIII, Midway asserts a claim for intentional interference with prospective economic advantage. Midway claims that Northwest interfered with a prospective business relationship it had with Southwest Airlines Co. The Court holds that Midway failed to sustain its burden of proving that Northwest tortiously interfered with Midway's prospective business relationship with Southwest Airlines. The Court holds that even if Northwest did interfere with a prospective economic advantage, Northwest's conduct was justified under a competitor's privilege.

Finally, in Count IX of the Complaint, Midway asserts that Northwest breached a covenant set forth in the Gate Sale Agreement to reimburse Midway for the October 1991 lease arrearage payment Midway made to the City of Chicago and for the October 1991 and November 1991 security deposit payments Midway made to the City of Chicago. The Court holds that there is no agreement requiring Northwest to assume the security deposit payments Midway owed to the City of Chicago. Thus, Northwest's refusal to reimburse Midway's security deposit payments is justified. However, pursuant to the Gate Sale Agreement, Northwest's failure to pay the October 1991 lease arrearage payment constitutes a breach of that separate agreement. As a result of that breach, Midway is entitled to damages in the sum of $190,345.49 plus $31,602.57 as pre-judgment interest, as well as post-judgment interest.

In Count I of Northwest's Counterclaim, Northwest alleges that Midway fraudulently misrepresented that its data submitted to the United States Department of Transportation...