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Giuliano v. Anchorage Advisors, LLC

United States District Court, D. Oregon

May 13, 2014

ALFRED THOMAS GIULIANO, Plaintiff,
v.
ANCHORAGE ADVISORS, LLC, ANCHORAGE CAPITAL GROUP, LLC, and NEXGEN AVIATION CAPITAL, LLC, Defendants

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[Copyrighted Material Omitted]

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For Alfred Thomas Giuliano, Plaintiff: C. Dana Hobart, Elisha E. Weiner, Joseph N. Akrotirianakis, LEAD ATTORNEYS, PRO HAC VICE, Hobart Linzer, LLP, Los Angeles, CA; David A. Bledsoe, LEAD ATTORNEY, Perkins Coie, LLP, Portland, OR.

For Anchorage Advisors, LLC, Anchorage Capital Group, LLC, Nexgen Aviation Capital, LLC, Defendants: Marc B. Schlesinger, Michael G. Davies, LEAD ATTORNEY, PRO HAC VICE, Vedder Price P.C., New York, NY; Thomas V. Dulcich, William J. Ohle, LEAD ATTORNEYS, Schwabe Williamson & Wyatt, PC, Portland, OR.

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OPINION AND ORDER

Honorable Paul Papak, United States Magistrate Judge.

Former plaintiffs Evergreen International Airlines, Inc., and Evergreen International Aviation, Inc. (collectively, " Evergreen" ), filed this action against defendants Anchorage Advisors, LLC, Anchorage Capital Group, LLC, and Nexgen Aviation Capital, LLC, on November 22, 2011. Evergreen amended its complaint effective August 1, 2013. Effective April 9, 2014, following Evergreen's Chapter 7 bankruptcy, Alfred Thomas Giuliano (the " trustee" ) was substituted into this action as plaintiff in Evergreen's stead. By and through Evergreen's amended complaint, the trustee alleges defendants' liability for: (i) intentional interference with business relations, (ii) breach of fiduciary duty, and (iii) civil conspiracy. This court has subject-matter jurisdiction over the trustee's claims based on the complete diversity of the parties and the amount in controversy.

Now before the court are defendants' motion (#120) for summary judgment as to all three of Evergreen's claims, the trustee's motion (#123) for partial summary judgment as to Evergreen's claim for breach of fiduciary duty only, and the trustees' motion (#155) to strike certain evidence upon which defendants rely in support of their motion for summary judgment. I have considered the motions, oral argument on behalf of the parties, and all of the pleadings and papers on file. For the reasons set forth below, the trustee's motion (#155) to strike is denied as discussed below, the trustee's motion (#123) for partial summary judgment is denied, and defendants' motion (#120) for summary judgment is granted.

LEGAL STANDARDS

I. Cross-Motions for Summary Judgment

Summary judgment is appropriate " if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). A party taking the position that a material fact either " cannot be or is genuinely disputed" must support that position either by citation to specific evidence of record " including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials," by showing that the evidence

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of record does not establish either the presence or absence of such a dispute, or by showing that an opposing party is unable to produce sufficient admissible evidence to establish the presence or absence of such a dispute. Fed.R.Civ.P. 56(c). The substantive law governing a claim or defense determines whether a fact is material. See Moreland v. Las Vegas Metro. Police Dep't, 159 F.3d 365, 369 (9th Cir. 1998).

Summary judgment is not proper if material factual issues exist for trial. See, e.g., Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Warren v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir. 1995), cert. denied, 516 U.S. 1171, 116 S.Ct. 1261, 134 L.Ed.2d 209 (1996). In evaluating a motion for summary judgment, the district courts of the United States must draw all reasonable inferences in favor of the nonmoving party, and may neither make credibility determinations nor perform any weighing of the evidence. See, e.g., Lytle v. Household Mfg., Inc., 494 U.S. 545, 554-55, 110 S.Ct. 1331, 108 L.Ed.2d 504 (1990); Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000).

On cross-motions for summary judgment, the court must consider each motion separately to determine whether either party has met its burden with the facts construed in the light most favorable to the other. See Fed.R.Civ.P. 56; see also, e.g., Fair Hous. Council v. Riverside Two, 249 F.3d 1132, 1136 (9th Cir. 2001). A court may not grant summary judgment where the court finds unresolved issues of material fact, even where the parties allege the absence of any material disputed facts. See id.

II. Motion to Strike

A. Federal Civil Procedure Rule 12(f)

Federal Civil Procedure Rule 12 provides that the district courts " may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter" on their own initiative or pursuant to a party's motion. Fed.R.Civ.P. 12(f). The disposition of a motion to strike is within the discretion of the district court. See Federal Sav. & Loan Ins. Corp. v. Gemini Management, 921 F.2d 241, 244 (9th Cir. 1990). Motions to strike are disfavored and infrequently granted. See Stabilisierungsfonds Für Wein v. Kaiser Stuhl Wine Distribs. Pty., Ltd., 647 F.2d 200, 201, 201 n.1, 207 U.S.App.D.C. 375 (D.C. Cir. 1981); Pease & Curren Refining, Inc. v. Spectrolab, Inc., 744 F.Supp. 945, 947 (C.D. Cal. 1990), abrogated on other grounds by Stanton Road Ass'n v. Lohrey Enters., 984 F.2d 1015 (9th Cir. 1993).

B. Inherent Power

It is well established that the district courts enjoy an inherent power to manage and control their own dockets. See, e.g., Landis v. N. Am. Co., 299 U.S. 248, 254, 57 S.Ct. 163, 81 L.Ed. 153 (1936) (affirming " the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants" ). It is clear that this inherent power includes the authority to sanction procedural impropriety in an appropriate manner. See, e.g., Chambers v. NASCO, Inc., 501 U.S. 32, 44-45, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991) (noting that " [a] primary aspect" of the courts' inherent power " is the ability to fashion an appropriate sanction for conduct which abuses the judicial process; " holding that because

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" outright dismissal of a lawsuit . . . is within the court's discretion," in consequence less severe sanctions are " undoubtedly within a court's inherent power as well" ); Atchison, T. & S.F. Ry. v. Hercules Inc., 146 F.3d 1071, 1074 (9th Cir. 1998) (" well established that district courts have inherent power to control their dockets and may impose sanctions, including dismissal, in the exercise of that discretion" ) (citations, internal quotation marks omitted); see also Lamos v. Astrue, 275 F.App'x 617, (9th Cir. 2008) (unpublished disposition) (affirming inherent power of the courts to strike documents other than pleadings from the docket); Centillium Communs., Inc. v. A. Mut. Ins. Co., (D. Cal. 2008) (striking a procedurally improper motion pursuant to the court's inherent power).

MATERIAL FACTS

I. The Parties

Former plaintiffs Evergreen International Airlines, Inc. (" Evergreen Airlines" ), and Evergreen International Aviation, Inc. (" Evergreen Aviation" ), are each Oregon corporations which at all material times maintained their principal places of business in McMinnville, Oregon. Prior to the former plaintiffs' voluntary Chapter 7 bankruptcy of December 31, 2013, Evergreen Airlines was a cargo airline that operated contract freight services and offered chartered and scheduled flights and so-called " wet lease" services, and Evergreen Aviation was an aviation services company primarily providing commercial and forestry helicopter services. Since not later than December 31, 2013, both Evergreen Airlines and Evergreen Aviation have ceased all business operations.

Each former plaintiff was at all material times a privately owned company the majority of the shares of which were held by their founder, Delford Smith, and the remainder of the shares of which were held by a member of Smith's immediate family. Prior to cessation of the plaintiff entities' operations, Smith exercised control over each company's day-to-day operations, with authority to appoint members of each company's board of directors, to hire and fire employees, and to make final decisions regarding the financing and acquisition of aircraft.

Defendant Anchorage Advisors, LLC, was a Delaware limited liability company with its principal place of business in New York, New York. Defendant Anchorage Capital Group, LLC (collectively with Anchorage Advisors, LLC, " Anchorage" ), the successor-in-interest to Anchorage Advisors, LLC, is likewise a Delaware limited liability company with its principal place of business in New York, New York. Defendant NexGen Aviation Capital, LLC, is a Delaware limited liability company with its principal place of business in Bedford, New York. The defendants are investment firms specializing non-exclusively in the aviation industry.

II. The Parties' Dispute[1]

In or around August 2006, third party Avion Aircraft Trading HF (an Icelandic company headquartered in Iceland; hereinafter, " Avion" ) entered into three separate agreements with third party Socié té Air France (a French company headquartered in France; hereinafter, " Air France" ), each for the purchase of a 747-400 airplane (collectively, the " aircraft" ) by Avion from Air France. Collectively, the

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three Avion/Air France agreements provided that Avion would purchase the first of the three aircraft from Air France on October 31, 2009, the second on October 31, 2010, and the third on November 30, 2010. The Avion/Air France agreements further provided that Avion would pay a deposit of $4 million toward the purchase of each one of the three aircraft. Accordingly, Avion paid Air France a total deposit of $12 million in or around August 2006 toward the purchase of the three aircraft.

In October 2006, at a time when Evergreen carried a burden of approximately $240 million in first-lien debt and approximately $100 million in second-lien debt, Evergreen entered into a refinancing arrangement with its primary lender, Credit Suisse. Pursuant to that refinancing arrangement, Evergreen agreed to the imposition of strict covenants regarding its debt and EBITDA ratios, capital expenditures, and free cash flow, including a five-year financial plan with mandatory growth and financial milestones. See Declaration of Michael G. Davies (" Davies Decl." ), Exh. E at 32:2 - 37:10, 100:11 - 104:18, Exh. 65, Exh. 66.

In August 2007, Evergreen entered into three separate contracts with Avion, each for the purchase by Evergreen from Avion of one of the three 747-400 aircraft that were the subjects of the Avion/Air France agreements, respectively for $50 million, $48 million, and $50 million. See Davies Decl., Exhs. 46-48. Each of the Evergreen/Avion contracts provided that it was to be governed by New York law. At the time Evergreen and Avion entered into the Evergreen/Avion contracts, Avion had not yet taken possession of any of the three aircraft from Air France. Pursuant to the Evergreen/Avion contracts, in or around August 2007 Evergreen paid Avion a deposit of $5 million toward the purchase of each of the three aircraft, or a total deposit of $15 million. Under the Evergreen/Avion contracts, Avion was obliged to deliver to Evergreen the 747-400 airplane bearing Serial No. 25238 on October 31, 2009, the 747-400 airplane bearing Serial No. 25302 on October 31, 2010, and the 747-400 airplane bearing Serial No. 25630 on November 30, 2010, the same dates that Avion would receive each of the aircraft from Air France under the Avion/Air France agreements.

Notwithstanding that the Evergreen/Avion agreements provided that Evergreen would purchase the aircraft directly from Avion, from the outset of the Evergreen/Avion business relationship, Evergreen contemplated that it would assign its purchase rights under the Evergreen/Avion contracts to a third party, and then lease the aircraft from that third party for its own business purposes under an operational lease. After entering into the Evergreen/Avion contracts, Evergreen immediately began the process of identifying a third party willing and able to serve as purchaser and operating lessor of the aircraft. In August 2007, Evergreen approached third party Dubai Aerospace and spent months in negotiations to determine if that company could meet Evergreen's needs. Ultimately those negotiations failed, in part because Dubai Aerospace would have required Evergreen to make certain deposits toward the purchase of the aircraft that Evergreen was unable to do under the terms of its covenants with Credit Suisse.

By not later than the first quarter of 2009, Evergreen was aware that it was not in compliance with its covenants with Credit Suisse, and that in consequence it was strictly forbidden under those covenants either to expend or to borrow the capital necessary to purchase any of the aircraft from Avion. As a result, Evergreen was aware that the only practical

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means available to it of obtaining the use of the aircraft it had contracted to purchase from Avion was to arrange an " off the books" operating lease. See Davies Decl., Exh E at 34:23 - 37:10. Moreover, Evergreen estimated that such an arrangement would only be profitable to it in the event its monthly payments under such a leasing arrangement totaled a maximum of approximately $500,000 for each aircraft. See Davies Decl., Exh E at 39:11 - 40:3.

In May 2009, Evergreen approached Air France directly to determine whether Air France would be willing to lease the aircraft to it until such time as Evergreen was able to finance their purchase. Air France flatly rejected any such arrangement, making clear its position that, under the Avion/Air France agreements, it had (and would exercise) the right to retain Avion's deposit of $4 million per aircraft and to seek a new buyer for the aircraft in the event of Avion's failure to purchase the aircraft by the agreed-upon dates.

Evergreen next entered into negotiations with Fulcrum Aviation Group, resulting by October 2009 in a memorandum of understanding. Under the Fulcrum memorandum of understanding, Fulcrum would provide financing to Delford Smith who would then personally purchase the aircraft and lease them to Evergreen at monthly rates ranging from approximately $480,000 to $690,000. In parallel with that contemplated arrangement, Evergreen retained the services of a broker, BDM Financial Services (" BDM" ), to find alternative financing. Under its arrangement with Evergreen, in the event it was successful in obtaining financing, BDM would receive 1% of the financed amount of the first financed aircraft, and 0.75% of the financed amount of any additional financed aircraft. BDM sought financing for the purchase of the aircraft from entities including Huntington Financial Group, Compass Capital, Varilease, VX Financial, Carval Capital, and Goldman Sachs, in each case without success.

By late 2009 (if not before), Avion was experiencing its own difficulties in financing the purchase of the first of the three aircraft from Air France. Avion successfully negotiated with Air France to obtain its forbearance in refraining from declaring Avion in default under the first of the three Avion/Air France agreements, in order to permit Avion additional time to finance the contemplated purchase. When Avion was unable to effect the purchase of the first airplane from Air France by October 31, 2009, and was consequently unable to deliver that airplane to Evergreen by the agreed-upon date, Evergreen forebore (in its turn) to declare Avion in default of the first Evergreen/Avion contract.

In early December 2009, Fulcrum Aviation Group advised Evergreen that it had been unable to arrange the financing contemplated under the Fulcrum memorandum of understanding. For that reason Evergreen's contemplated arrangement with Fulcrum collapsed.

In early January 2010, BDM initiated contact with Aziz Hassanali, a senior analyst at Anchorage, to determine whether Anchorage might finance the purchase of the aircraft. Hassanali requested further information, and in the meantime contacted Farhood Azima, principal of NexGen, to inquire whether NexGen would be interested in the opportunity. Hassanali initially proposed through BDM that Anchorage and NexGen would purchase the aircraft and lease them to Evergreen under a ten-year lease at a monthly rate of $700,000, and Evergreen's Chief Financial Officer Don Lachman responded that Evergreen could not make a deal work unless the monthly lease payments were within the range from $475,000 to $525,000.

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On January 26, 2010, Azima sent Evergreen a term sheet proposing an arrangement under which NexGen would accept assignment of Evergeen's purchase rights under the first of the three Evergreen/Avion contracts, would purchase the first of the three aircraft pursuant to that assignment at an assumed net purchase price of $34 million,[2] and would lease the purchased aircraft to Evergreen under a ten-year lease at a monthly rate of $600,000. Aziz' cover letter stated that the proposed terms were " for discussion purposes and subject to change to reflect improvements in the aircraft purchase transaction, as well as due diligence findings and further negotiation." Declaration of Joseph N. Akrotirianakis in support of Evergreen's motion (#123) for partial summary judgment (" Akrotirianakis Decl. I" ), Exh. 29, p. 1. Similarly, the term sheet itself contained in its preamble, in an all-capitalized font, the following disclaimer:

THIS PRELIMINARY, NON-BINDING INDICATION OF INTEREST IS NOT A COMMITMENT OF ANY KIND BY [NEXGEN] TO LEASE TO [EVERGREEN] OR OF [EVERGREEN] TO LEASE FROM [NEXGEN], TO PERFORM DUE DILIGENCE OR TO CONDUCT OR CONTINUE ANY DISCUSSIONS OR NEGOTIATIONS CONCERNING A POTENTIAL TRANSACTION INVOLVING ANY ASSETS, AND IS NOT TO BE CONSTRUED AS SUCH. [NEXGEN] AND [EVERGREEN] MAY DISCONTINUE ANY SUCH DISCUSSIONS OR NEGOTIATIONS AT ANY TIME, WITH OR WITHOUT NOTICE, IN EACH OF THEIR SOLE DISCRETION.

Id. at 2. Aziz stated in his cover letter that " although th[e] term sheet contemplate[d] a single aircraft lease, [defendants] would be interested in additional aircraft under similar terms." Id. at 1. In addition, the term sheet closed with the additional disclaimer that:

This Letter of Intent does not constitute a lease, offer to lease or agreement to lease the Aircraft. No such binding agreement or offer shall exist until the parties enter into definitive agreements for such lease, and no lease shall occur until all conditions precedent as set forth in such definitive agreements are met or waived and a closing thereunder occurs.

Id. at 6. By its terms, the proposal would remain open until March 10, 2010.

Following its receipt of NexGen's proposed term sheet, Evergreen continued seeking alternative financing arrangements, including through Fulcrum Aviation Group and through renewed direct approaches to Air France, without success. During this time, Evergreen learned that it would lose a lucrative contract it had with the Boeing Company, which would entail Evergreen's loss of $45 million in revenue and $8 million in free cash flow. Evergreen did not advise defendants in advance of this impending loss, nor did it advise defendants of the lost contract when it ultimately occurred, at some time in or around February 2010. Simultaneously, Evergreen and defendants continued to negotiate the arrangement first proposed by NexGen on January 26, 2010.

On February 4, 2010, Azima sent Hassanali an email message indicating the desirability of ...


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