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BA Jacobs Flight Services, LLC v. RutAir Ltd.

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

January 20, 2017

BA JACOBS FLIGHT SERVICES, LLC, an Illinois Limited Liability Company, Plaintiff,
v.
RUTAIR LIMITED, a/k/a RUTAIR LLC, a Jamaica Corporation, and GEORGE LEVY, an individual, Defendants.

          MEMORANDUM OPINION AND ORDER

          JEFFREY T. GILBERT, MAGISTRATE JUDGE

         The Court assumes familiarity with, and incorporates by reference, the underlying facts as set forth in its previous Memorandum Opinions and Orders in this case. See [ECF Nos.74, 88], Briefly, on December 1, 2010, Plaintiff BA Jacobs Flight Services, LLC ("BA Jacobs") entered into a lease agreement (the "Lease Agreement") with Defendant RutAir Limited ("RutAir"), in which BA Jacobs agreed to lease to RutAir a new 2010 Cessna Caravan 208B airplane (the "Aircraft") for a period of five years with monthly rent of $25, 000, among other terms. As a condition of BA Jacobs entering into the Lease Agreement, Defendant George Levy signed a guaranty (the "Guaranty Agreement") in which he agreed to guarantee personally RutAir's payments under the Lease Agreement up to $300, 000 in the event of a breach of that Agreement and to pay attorneys' fees and costs incurred by BA Jacobs in enforcing its rights under the Guaranty Agreement.

         On January 27, 2015, this Court issued a Memorandum Opinion and Order [ECF No.74], in which it concluded that RutAir had breached the Lease Agreement. The Court granted partial summary judgment in favor of BA Jacobs and against RutAir and George Levy as to their respective liability under the Lease Agreement and the Guaranty Agreement.

         BA Jacobs then sought summary judgment on its claim for damages as a result of RutAir's breach of the Lease Agreement. On December 8, 2015, the Court issued a second Memorandum Opinion and Order [ECF No. 88] denying that motion and set this matter for an evidentiary hearing for BA Jacobs to prove up its damages. Specifically, the Court held that the acceleration clause in the Lease Agreement is an unenforceable penalty, and therefore, BA Jacobs is not entitled to accelerate the lease payments under the Agreement. Notwithstanding its holding that the acceleration clause is unenforceable, the Court recognized that BA Jacobs still is entitled to recover its actual damages.

         The Court held an evidentiary hearing in this matter on February 17, 2016, and it was continued to and completed on March 4, 2016. The parties submitted pre-trial and post-trial briefs. [ECF Nos. 95, 96, 106, 108, 112]. The Court now must determine the monetary damages to which BA Jacobs is entitled as a result of RutAir's breach of the Lease Agreement. This Memorandum Opinion and Order memorializes the Court's findings of fact and conclusions of law with respect to BA Jacobs' damages in accordance with Rule 52 of the Federal Rules of Civil Procedure.

         At the evidentiary hearing and in the pre-trial and post-trial briefing, the parties agreed on very little with respect to how to calculate BA Jacobs' damages in this case. In its post-trial brief, BA Jacobs claims that its actual damages include all of the unpaid monthly rent payments under the Lease Agreement for the full term of the Agreement ($1, 500, 000), minus the depreciation of the Aircraft ($400, 000), minus the refurbishing costs of the Aircraft ($100, 000), minus the early recapture from the sale of the Aircraft ($330, 000) for a total of $670, 000, plus the costs incurred in chartering the Aircraft after it was repossessed and before it was sold ($50, 000) for a total of $720, 000 in actual damages. Plaintiffs Post-Trial Brief, [ECF No. 106, at 3]. BA Jacobs then calculates late fees in the amount of $743, 850 for a total damage award of $1, 463, 850. Plaintiffs Post-Trial Brief, [ECF No. 106, at 3].

         In contrast, RutAir asserts that BA Jacobs' actual damages include $45, 545 for past due delinquent payments as of the date when the Aircraft was repossessed, $110, 000 in profits on the rent payment due under the Lease Agreement after the Aircraft was repossessed but prior to it being sold between April 2011 and February 2012. RutAir maintains that BA Jacobs' actual damages in this case are only $155, 545. Defendant's Post-Trial Brief, [ECF No. 108, at 2]. RutAir argues that the $50, 000 in mitigation damages claimed by BA Jacobs should not be attributed to RutAir because they are not factually substantiated. Defendant's Post-Trial Brief, [ECF No. 108, at 3 n.1]. But even if the Court does include the $50, 000 in mitigation losses, RutAir argues that the total damages award then would be $205, 545. Defendant's Post-Trial Brief, [ECF No. 108, at 3].

         The starting point for our analysis is this Court's holding in its previous Memorandum Opinion and Order, which states in relevant part:

In the instant case, the Court finds that the acceleration clause in the Lease Agreement is an unenforceable penalty because the Lease Agreement does not take into account the effect of the early recapture of the leased Aircraft, which BA Jacobs subsequently has sold. Because BA Jacobs no longer owns the Aircraft and does not have any financial obligations related to the Aircraft, the acceleration clause in the Lease Agreement obligating RutAir to pay the remaining monthly rent payments for the remainder of the term of the Lease Agreement, which would amount to $1, 400, 000, 00 for the 56 additional months of the term, would create a windfall for B A Jacobs,
***
The Court finds that the losses to BA Jacobs are calculated easily, and that the liquidated damages allowed for in the Lease Agreement do not approximate the actual damages in this case. While actual damages may include, among other damages, loss of the monthly rent payments after the Aircraft was repossessed but prior to it being sold, once the Aircraft is sold, BA Jacobs no longer has the carrying costs of the equipment and recovering all of the monthly rent payments would be a windfall for BA Jacobs. This creates an incentive to default RutAir, repossess and sell the Aircraft as soon as possible, and collect the remaining lease payments anyway.

[ECF No. 88, at 4-5], Even though the Court concluded that the acceleration clause is unenforceable, BA Jacobs still is entitled to recover its actual damages. [ECF No. 88, at 6], Illinois law seeks to place the non-breaching party in as satisfactory a position as it would have been had the breach not occurred and had the contract been performed. See Equity Insurance Managers of Illinois, LLC v. McNichols, 324 Ill.App.3d 830, 837, 755 N.E.75, 80 (1st Dist. 2001).

         The Court is not persuaded by either party's proposed calculation of damages. BA Jacobs' alleged damages are largely speculative and unsupported by the evidence. Moreover, its damages calculation starts from the premise that it should recover all of the monthly rent payments during the entire term of the Lease Agreement. As discussed above, however, the Court previously concluded that the acceleration clause is a penalty and not enforceable. [ECF No. 88, at 4-5], Awarding BA Jacobs the total amount of the monthly payments due under the full term of the Lease Agreement would constitute a windfall for that reason, and the Court therefore disagrees with the underlying premise of BA Jacobs' damages calculation.

         The damages calculation offered by RutAir also is unpersuasive. It is unclear to the Court the reasons why and how RutAir limits BA Jacobs' actual damages to $155, 545. RutAir simply asserts without explanation that the past due rent plus the profits from the Lease Agreement from the date of repossession to the date of sale totals $155, 545. Rut Air, however, offers no explanation or reason why it excludes from its damage calculation the $15, 000 monthly loan ...


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