Southern Travel Club, Inc. v. Carnival Air Lines, Inc.
| Decision Date | 24 March 1993 |
| Docket Number | 92-3766,Nos. 92-3595,s. 92-3595 |
| Parties | SOUTHERN TRAVEL CLUB, INC., Plaintiff-Appellant, v. CARNIVAL AIR LINES, INC., Defendant-Appellee. SOUTHERN TRAVEL CLUB, INC., Plaintiff-Appellant, Cross-Appellee, v. CARNIVAL AIR LINES, INC., Defendant-Appellee, Cross-Appellant. Summary Calendar. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Vito Zuppardo, President, Southern Travel Club, Inc., Metairie, LA, for plaintiff-appellant.
Daniel Edward Knowles, III, Robert D. Hoffman, Jr., Burke & Mayer, New Orleans, LA, for Carnival Air Lines, Inc.
Appeals from the United States District Court for the Eastern District of Louisiana.
Before KING, DAVIS and WIENER, Circuit Judges.
Southern Travel Club, Inc. ("Southern Travel") appeals from two adverse decisions of the district court. In No. 92-3595, Southern Travel appeals from the district court's order dismissing with prejudice its breach of contract claims against Carnival Airlines, Inc. ("Carnival"). In No. 92-3766, Southern Travel appeals the district court's order awarding Carnival costs and attorney's fees in an amount yet to be determined. For the following reasons, we affirm the district court's judgment in No. 3595, and dismiss Southern Travel's appeal in No. 92-3766.
On January 28, 1991, Southern Travel and Carnival entered into two, substantially similar passenger airplane charter agreements. Under the first charter agreement, which was to commence on May 2, 1991, Carnival agreed to provide Southern Travel with a "737-200" type aircraft to make two round trip flights per week between Las Vegas and New Orleans. Under the second such agreement, which was to commence on May 17, 1991, Carnival agreed to provide Southern Travel with the same type of aircraft to make two round trip flights per week between Las Vegas and Birmingham, Alabama. Both of the agreements provided that:
(1) Carnival was to supply an aircraft capable of making non-stop trips between Las Vegas and New Orleans/Birmingham; 1
(2) Carnival could, at its option, substitute comparable or larger aircraft of a type different than that specified on the cover page without penalty, provided that any such substitute aircraft did not result in an increase in the charter price paid by Southern Travel;
(3) If, for any reason, Carnival determined, prior to a given flight's departure, that the landing facilities at any point on the itinerary of the charter were inadequate for a safe operation, or if landing was prohibited or restricted by law, statute or regulation, Carnival could substitute the nearest landing point at which, in Carnival's sole judgment, suitable landing facilities were available and landing could be made; and
(4) Although the term of the agreement was for six months, the agreement could be cancelled by either party with sixty days notice without penalty.
In accordance with the first charter agreement, the twice-a-week flights between Las Vegas and New Orleans began on May 2, 1991. The round trip, non-stop flights between the two cities apparently occurred without incident during the first week of the agreement. On May 11, 1991, however, the plane flying from New Orleans to Las Vegas made an unscheduled stop in Houston. When some of Southern Travel's passengers complained about the unscheduled stop, Southern Travel in turn complained to Carnival.
Upon receiving Southern Travel's complaint about the unscheduled stop in Houston, Carnival decided to exercise its termination rights under the two charter agreements. By letter dated May 13, 1991, Carnival notified Southern Travel that it planned to "cease operating the Las Vegas program to both New Orleans and Birmingham effective sixty days from that date." And, after notifying Southern Travel of its intent to terminate the charter agreements, Carnival substituted a larger aircraft (a "727-100" type aircraft) to fly during the remaining sixty days of the contracts.
Over the next few days, the parties attempted to renegotiate the charter agreements, but the negotiations were unsuccessful. Southern Travel then approached other carriers about taking over the charter service between Las Vegas and New Orleans/Birmingham. American Trans Air agreed to take over the twice-a-week round trip flights between Las Vegas and New Orleans/Birmingham, but as a condition of its agreement, required Southern Travel to put down a cash deposit and prepay the first four flights, for a total of $157,900.
Having quickly found a substitute carrier, Southern Travel decided that it did not want to wait the full sixty days for its charter agreements with Carnival to terminate. Accordingly, on May 22, 1991, Southern Travel requested immediate termination of its charter agreements with Carnival. Southern Travel also requested that Carnival return $201,940 in pre-paid aircraft time and deposits.
In response to Southern Travel's request for immediate termination, Carnival faxed Southern Travel a letter setting forth a "reconciliation" of accounts. In this letter dated May 23, 1991, Carnival agreed to refund $176,310 to Southern Travel. The letter further provided:
This payment releases both Southern Travel Club and Carnival Air Lines from any further liability and/or responsibility arising out of our contracts. Your return fax of this agreement will be a final release by both parties.
Upon receiving the fax, Southern Travel's President signed the letter and faxed it back to Carnival. And, several days later, Southern Travel received a check in the amount of $176,310 from Carnival.
Despite executing the release, Southern Travel filed a breach of contract suit against Carnival in state court in July 1991. Carnival removed the case to federal district court based on diversity of citizenship. The case was tried to the district court on June 15, 1992, and after Southern Travel had presented its evidence, Carnival moved for a involuntary dismissal under Rule 41(b) of the Federal Rules of Civil Procedure. The district court treated the motion as one for judgment on partial findings under Rule 52(c) of the Federal Rules of Civil Procedure and, by order dated June 15, 1992, dismissed Southern Travel's breach of contract claims with prejudice. On June 26, 1992, Southern Travel filed a timely notice of appeal from the order dismissing its breach of contract claims.
Thereafter, Carnival filed a motion for Rule 11 sanctions against Southern Travel and its attorney. In a memorandum ruling dated August 13, 1992, the district court found that Southern Travel's suit against Carnival was "frivolous." It stated:
Prior to the filing of this action, [Southern Travel] had resolved its claim against [Carnival] and released [Carnival] from further liability. [Southern Travel] subsequently filed this lawsuit, contending that it signed the release under economic duress, such that, if it did not obtain the [$176,310] refund immediately, it would go out of business. During the trial of this matter, [Carnival] introduced [Southern Travel's] bank records, which indicated that [Southern Travel] had sufficient funds. In particular, [Southern Travel] had sufficient funds to engage another entity to provide the desired services. Surely, [Southern Travel] was aware of its financial ability at the time it executed the release. Accordingly, [Southern Travel] knew it had not suffered from economic duress when it executed the release. As such, [Southern Travel's] filing of this action was wholly meritless.
Having found that Southern Travel and its attorney violated Rule 11, the district court then considered what would constitute an appropriate sanction. It concluded that, because Carnival could have timely filed a motion for summary judgment that would have disposed of Southern Travel's claim, Carnival was only entitled to recover the attorney's fees and costs that would have been incurred in (a) filing an answer to Southern Travel's complaint, (b) preparing a motion for summary judgment, and (c) conducting and responding to related discovery. Thus, while the district court granted Carnival's motion for Rule 11 sanctions, it referred to a magistrate judge the determination of the appropriate amount of fees and costs. Southern Travel filed a notice of appeal from this memorandum ruling on September 1, 1992.
As already discussed, the district court granted Carnival's motion for "involuntary dismissal"--or judgment as a matter of law--at the close of Southern Travel's case. In accordance with Rule 52 of the Federal Rules of Civil Procedure, 2 the district court rendered certain findings of fact and conclusions of law. Among other things, the district court determined that (1) by executing the letter dated May 23, 1991 and returning it to Carnival, Southern Travel released Carnival from any liability for breach of contract, and (2) Southern Travel was not under economic duress when it executed and returned the release to Carnival. 3
On appeal, Southern Travel contends that the district court erred by dismissing its breach of contract claims against Carnival. Southern Travel raises several arguments to support its position, only one of which we need consider on appeal. 4 In particular, we must address Southern Travel's argument that, because it signed the release under economic duress, the release is invalid.
Because the district court's finding of "no economic duress" was made in accordance with Rule 52(c), we review it only for clear error. See Advisory Committee Notes to Rule 52(c) (); see also Benton v. Blair, 228 F.2d 55, 58 (5th Cir.1956). That is, we will not set aside the district court's finding in this regard unless,...
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