United States District Court, N.D. Illinois, Eastern Division
September 27, 2004.
TRADEWINDS AVIATION, INC. and CORPORATE EAGLE CAPITAL, L.L.C., Plaintiffs,
JET SUPPORT SERVICES, INC., Defendant.
The opinion of the court was delivered by: RONALD GUZMAN, District Judge
MEMORANDUM OPINION AND ORDER
In this diversity action, plaintiffs Tradewinds Aviation, Inc.
("Tradewinds") and Corporate Eagle Capital, L.L.C. ("Corporate
Eagle") seek compensatory and consequential damages, costs, and
attorneys' fees for breach of contract against defendant Jet
Support Services, Inc. ("JSSI"). In Count II of the Amended
Complaint, Corporate Eagle alleges breach of contract as a
third-party beneficiary. JSSI, in separate motions, moves to (1)
dismiss Count II for failure to state a claim upon which relief
may be granted pursuant to Federal Rule of Civil Procedure
("Rule") 12(b)(6); and (2) strike Plaintiffs' jury demand and
prayer for consequential damages. For the reasons set forth
below, the Court denies the motion to dismiss and grants the
motion to strike.
The following facts from the Amended Complaint are presumed to
be true for the purposes of this motion to dismiss. See Conley
v. Gibson, 355 U.S. 41, 45-46 (1957). Tradewinds, which operates
a corporate aircraft management service, and Corporate Eagle,
which owns corporate aircraft, are participants in a joint venture. (Am. Compl. ¶¶
1-2, 6.) Pursuant to the joint venture, Corporate Eagle owns
certain aircrafts in Tradewinds' fleet, Corporate Eagle leases
the aircrafts to third parties, and Tradewinds provides
management services for the aircrafts. (Id. ¶ 6.) One of the
Corporate Eagle aircrafts that Tradewinds manages is a Hawker
aircraft with the serial number NA-0291 and registration number
N947CE ("Hawker Aircraft"). (Id.)
Tradewinds and JSSI entered into a contract whereby JSSI would
provide, among other things, programs for the repair and
maintenance of the turbine engines identified in the Application
section of the contract. (Id. ¶ 7; Am. Compl. Ex. A, JSSI
Complete Engine Maintenance Program Contract ["Contract"] at
8.)*fn1 The Application lists the Hawker Aircraft and
explicitly notes that Corporate Eagle is the owner of the
aircraft. (Am. Compl. Ex. A, Contract at 21.)
After Tradewinds and JSSI entered into the contract, the Hawker
Aircraft twice sustained engine damage. (Am. Compl. ¶¶ 9, 11.) On
both occasions the Hawker Aircraft was taken to a JSSI-authorized
repair facility, and the faulty engine was replaced with a loaner
engine. (Id. ¶¶ 10, 12.) The damaged engine was submitted to
JSSI for replacement or repair, and the repair and rental costs
were submitted to JSSI for reimbursement. (Id. ¶ 13.) JSSI has
not repaired or replaced the engine or reimbursed plaintiffs for
the aforementioned charges. (Id. ¶ 14.) JSSI denies liability
under the contract, contending that the engines were damaged from
pilots hot starting the engines, damage that is not covered under
the contract. (Id.) Plaintiffs deny hot starting the engines
and allege that JSSI has failed to satisfy its obligations under
the contract. (Id. ¶ 16.) Corporate Eagle alleges that it was an intended third-party
beneficiary of the contract and that JSSI therefore breached
contractual obligations owed to Corporate Eagle. (Id. ¶ 27.)
Corporate Eagle further alleges that JSSI was aware that
Tradewinds managed Corporate Eagle aircrafts and that JSSI
entered into the contract contemplating that it would benefit
Corporate Eagle if a Corporate Eagle aircraft engine required
maintenance. (Id. ¶¶ 7, 24.)
Among other things, Plaintiffs pray for damages for all
natural, proximate and probable or direct consequential damages.
(Id. ¶ B.) In addition, Plaintiffs demand a jury trial.
Defendant now moves to dismiss Count II and to strike Plaintiffs'
jury demand and their request for consequential damages.
I. Motion to Dismiss
A motion to dismiss under Rule 12(b)(6) challenges whether the
complaint sets forth a claim upon which relief may be granted.
Gen. Elec. Capital Corp. v. Lease Resolution Corp.,
128 F.3d 1074, 1080 (7th Cir. 1997). In deciding a motion to dismiss, the
Court must assume all well-pleaded facts as true and draw all
reasonable inferences from such facts in favor of the
claimant.*fn2 Conley, 355 U.S. at 45-46. Furthermore,
under the federal notice pleading standard, a short and plain
statement of the claim and the grounds for such claim is
sufficient to survive a motion to dismiss; detailed facts are not
required. Id. at 47. JSSI's motion to dismiss argues that Corporate Eagle is not a
third-party beneficiary of the contract and thus lacks standing
to sue for breach of contract. "Whether a plaintiff is a
third-party beneficiary of a contract is a legal conclusion that
[the Court] need not accept for the purpose of a motion to
dismiss." Choi v. Chase Manhattan Mortgage Co.,
63 F.Supp. 2d 874, 881 (N.D. Ill. 1999); see Christakos v. Intercounty Title
Co., No. 99 C 8334, 2001 WL 138896, at *4 (N.D. Ill. Feb. 16,
The parties agree that Illinois law governs the interpretation
of the contract. (Am. Compl. Ex. A, Contract at 13.) Under
Illinois law, there is a strong presumption against third-party
beneficiaries because it is assumed that parties to a contract
intend the contract to apply only to them. Quinn v. McGraw-Hill
Cos., Inc., 168 F.3d 331, 334 (7th Cir. 1999). However, a
third-party beneficiary does have standing to sue on a contract,
although not a party to the contract, if the contracting parties
intended the third party to benefit from the contract. Am.
United Logistics, Inc. v. Catellus Dev. Corp., 319 F.3d 921, 930
(7th Cir. 2003) (explaining that a third party who receives an
unintended benefit from the contract is an incidental third party
and does not have standing). The intent of the contracting
parties is "based on the contract as a whole as well as the
understandings between the parties at the time of the contract's
execution." Id. The surrounding circumstances at the time of
execution are also taken into account. F.W. Hempel & Co., Inc.
v. Metal World, Inc., 721 F.2d 610, 613 (7th Cir. 1983); McCoy
v. Ill. Int'l Port Dist., 778 N.E.2d 705, 712 (Ill.App. Ct.
2002). The best evidence of the parties' intent is express
language in the contract identifying the third-party beneficiary,
but an implied showing may be sufficient if "`the implication
that the contract applies to third parties [is] so strong as to
be practically an express declaration.'" Quinn, 168 F.3d at 334 (quoting 155 Harbor Drive Condo. Ass'n v. Harbor
Point, Inc., 568 N.E.2d 365, 375 (Ill.App. Ct. 1991)).
JSSI argues that Corporate Eagle is not a third-party
beneficiary because the contract expressly excludes third-party
beneficiaries. (Def.'s Mot. Dismiss at 3.) The provision states,
in part, that the rights and obligations of the parties are for
the exclusive benefit of such parties and shall not benefit any
unrelated third parties. (Am. Compl. Ex. A, Contract at 13.)
Corporate Eagle argues that it is not an unrelated party because
of its joint venture with Tradewinds. (Pl.'s Resp. Mot. Dismiss
at 6.) After reviewing the Amended Complaint (including the
attached contract) and making all reasonable inferences in favor
of the plaintiff, the Court finds that Corporate Eagle has set
forth a claim upon which relief may be granted. Corporate Eagle
alleges that JSSI was aware that Tradewinds managed Corporate
Eagle aircrafts. (Am. Compl. ¶ 24.) In addition, Corporate Eagle
alleges that JSSI and Tradewinds "clearly contemplated" that the
contract would benefit Corporate Eagle if one of its aircraft had
engine problems. (Id. ¶ 7.) The contract also expressly
provides for the coverage of engines listed in the Application.
(Id. Ex. A, Contract at 8.) The Hawker Aircraft is included in
the Application, and Corporate Eagle is listed as its owner.
(Id. at 19-21.) As a result, Corporate Eagle is expressly
included in the contract, and the alleged circumstances
surrounding the contract's execution may show that Corporate
Eagle was an intended third-party beneficiary. See Paukovitz v.
Imperial Homes, Inc., 649 N.E.2d 473, 475-76 (Ill.App. Ct.
1995) (reversing the dismissal of the plaintiff's third-party
beneficiary breach of contract claim because the plaintiff's name
appeared on the contract, and the parties to the contract
negotiated with the knowledge the plaintiff would benefit from
the contract). Accordingly, it is reasonable to infer that Tradewinds and JSSI
intended the contract to benefit Corporate Eagle and did not
intend for the provision against third-party beneficiaries to
apply to Corporate Eagle. See Am. United Logistics,
319 F.3d at 930-31 (holding that the plaintiff stated a claim as a
third-party beneficiary despite express contractual language that
"`nothing herein is intended to create any third party benefit,'"
when a separate contractual provision expressly conferred an
intended benefit on the plaintiff and the circumstances
surrounding the contract's execution supported the intention).
Despite the strong presumption against third-party beneficiaries
under Illinois law, the Court finds that the allegations in the
Amended Complaint, taken as true and with all reasonable
inferences drawn in favor of Corporate Eagle, are sufficient to
set forth a third-party beneficiary breach of contract claim.
Therefore, JSSI's motion to dismiss Count II is denied.
II. Motion to Strike Jury Demand
JSSI argues Plaintiffs' jury demand should be stricken because
the contract at issue contains an express "Waiver of Jury Trial"
provision. Although the Seventh Amendment to the United States
Constitution guarantees the right to a jury trial in civil cases,
the right may be waived if contracting parties knowingly and
voluntarily agree to a waiver. In re Reggie Packing Co., Inc.,
671 F. Supp. 571, 573 (N.D. Ill. 1987). Because of the
fundamental nature of a jury trial, every reasonable presumption
is indulged against waiver. Whirlpool Fin. Corp. v. Sevaux,
866 F. Supp. 1102, 1105 (N.D. Ill. 1994). Courts consider four
factors in determining whether a party knowingly and voluntarily
entered into a waiver: "(1) the parties' negotiations concerning
the waiver provision, if any; (2) the conspicuousness of the provision; (3) the relative
bargaining power of the parties; and (4) whether the waiving
party's counsel had an opportunity to review the
With respect to the first factor, the absence of negotiations
tends to militate against a finding of waiver. Id. at 1106.
When a form contract is not susceptible to negotiation, there is
a presumption that the parties did not knowingly and voluntarily
agree to the waiver. See Heller Fin., Inc. v. Finch-Bayless
Equip. Co., Inc., No. 90 C 1672, 1990 WL 77500, at *2 (N.D. Ill.
May 31, 1990). Plaintiffs argue that the contract was a form
contract, routinely used by JSSI, "without substantial
negotiations for all provisions in the contract." (Pl.'s Resp.
Mot. Strike at 6-7 (emphasis added).) In addition, Tradewinds
attaches an affidavit from its president stating that Tradewinds
entered into the contract without negotiations. (Pl.'s Resp. Mot.
Strike Ex. B, Nini Aff. ¶ 4.) Although Plaintiffs do not allege
that the contract could not be negotiated, only that there were
no substantial negotiations, JSSI offers no argument that the
terms were in fact susceptible to negotiation. Therefore, this
factor therefore weighs in favor of Plaintiffs and against a
finding of waiver.
The second factor to be considered is the conspicuousness of
the waiver provision. A waiver provision is conspicuous when it
stands out from the majority of the document. See Household
Commercial Fin. Svcs. Inc. v. Suddarth, No. 01 C 4355, 2002 WL
31017608, at *8 (N.D. Ill. Sept. 9, 2002) (finding a provision conspicuous when the font was in
all capital letters and in boldface type); see also Mellon Bank,
N.A. v. Miglin, No. 92 C 4059, 1993 WL 281111, at *12 (N.D. Ill.
Apr. 29, 1993) (finding the waiver provision sufficiently
conspicuous when the typeface was the same as all other
provisions within the seven page contract and distinguishing a
case in which the provision was hidden in a twenty-two page
document); In re Reggie, 671 F. Supp. at 574 (holding that a
waiver clause was conspicuous where it was found "at the end of a
paragraph, just two inches above the parties' signatures").
The waiver provision in the contract, entitled "Waiver of Jury
Trial," reads: "EACH OF THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION BASED HEREON. . . ." (Am.
Compl. Ex. A, Contract at 14.) The waiver provision is one of
only two provisions in all capital letters within the
fifteen-page contract, and it plainly stands out from the
majority of the document. Because the provision is sufficiently
conspicuous, this factor weighs in favor of waiver.
Third, the Court must analyze the relative bargaining power of
the parties. Typically, sophisticated and experienced parties to
a contract do not present bargaining power issues serious enough
to invalidate a waiver provision. See Mellon Bank, 1993 WL
281111, at *12 (distinguishing its facts, involving sophisticated
and experienced businessmen, from cases where a party desperately
needed funds or had no opportunity to negotiate); see also
Bonfield v. AAMCO Transmissions, Inc., 717 F. Supp. 589, 596
(N.D. Ill. 1989) (holding that the jury waiver was enforceable,
despite the defendant's unwillingness to accept changes to a
contract, because the plaintiff could freely reject the deal).
Tradewinds deals with multimillion-dollar aircrafts in the
ordinary course of business and is a sophisticated and experienced party. In addition, Plaintiffs
do not argue that they had no choice but to enter into the
contract. This factor therefore weighs in JSSI's favor.
The last factor addresses whether the party's counsel had an
opportunity to review the contract. Plaintiffs contend that they
did not employ or retain an attorney to review the contract, but
they do not argue that they could not have done so. (Pl.'s Resp.
Mot. Dismiss at 7.) Courts have enforced jury waivers when, as in
this case, the parties have an opportunity to review the contract
but choose not to do so. See Bonfield, 717 F. Supp. at 596;
Sutter Ins. Co. v. Applied Sys., Inc., No. 02 C 5849, 2004 WL
161508, at *7 (N.D. Ill. Jan. 26, 2004); Household, 2002 WL
31017608, at *8. Accordingly, this factor also weighs in favor of
Plaintiffs' final argument is that the Tradewinds
representative who signed the contract did not realize that he
was "signing away Plaintiffs' right to a jury trial." (Pl.'s
Resp. Mot. Dismiss at 6.) However, "the failure to read an
agreement provides defendants no relief from the application of a
jury waiver provision." Household, 2002 WL 31017608, at *8.
Three of the four relevant factors clearly militate in favor of
finding that Plaintiffs waived their right to a jury trial, and
JSSI's motion to strike the jury demand is therefore granted.
III. Motion to Strike Request for Consequential Damages
Paragraph B in the Amended Complaint's prayer for relief
requests a "further award for any and all natural, proximate and
probable or direct consequential damages." (Am. Compl. ¶ B.) JSSI
argues that this request for damages should be stricken because
the contract states: "JSSI shall in no event be liable to the
Customer for any loss of revenue, loss of profits or any similar
business loss arising from the failure of JSSI to perform its
obligations hereunder," and "[i]n no event shall JSSI be liable
for consequential or incidental damages incurred by Customer."
(Am. Compl. Ex. A, Contract at 8.) "Waivers of consequential damages are not
prohibited unless `unconscionable,' and the same principle has,
sensibly in our view, been assumed applicable to waivers of
incidental damages." Cole Energy Dev. Co. v. Ingersoll-Rand
Co., 8 F.3d 607, 611 (7th Cir. 1993) (quoting 810 ILL. COMP.
STAT. § 5/2-719(3)). Plaintiffs do not contend that the
contract's waiver of consequential or incidental damages
provision is unconscionable, and they do not otherwise argue that
Paragraph B should not be stricken. Instead, Plaintiffs opine
that Paragraphs 21(d)-(f), which were not even addressed in
JSSI's motion, should not be stricken. The Court finds that the
contract expressly waives the right to recover consequential and
incidental damages, and Plaintiffs have failed to offer any proof
or argument that this provision should not be enforced.
Therefore, JSSI's motion to strike is granted, and Paragraph B of
the prayer for relief is stricken to the extent that it seeks an
award for consequential or incidental damages.
For the reasons set forth above, JSSI's motion to dismiss [doc.
no. 22-1] is denied, and JSSI's motion to strike [doc. no. 23-1]
is granted. Plaintiffs' Motion for Leave to Supplement Response
Brief to Motion to Dismiss [doc. no. 34-1] is denied.