SASCHA WALTER, AS THE INSOLVENCY ADMINISTRATOR OF THE ESTATE OF AERO LLOYD FLUGREISEN GMBH & CO LUFTBERKEHRS-KG CORPORATION, Plaintiff,
THE MARK TRAVEL CORPORATION, a Nevada Corporation; and TRANS GLOBAL TOURS, L.L.C., a Minnesota Limited Liability Company, Defendants.
MEMORANDUM AND ORDER
ERIC F. MELGREN, UNITED STATES DISTRICT JUDGE.
Plaintiff Sascha Walter was appointed by a German court to serve as the administrator of the bankruptcy estate of a German charter airline, Aero Lloyd Flugreisen GmbH & Co Luftverkers-KG. In 2003, Aero Lloyd went through the German bankruptcy process and its administrator settled all outstanding transactions between Aero Lloyd and Ryan International Airlines, Inc. Aero Lloyd and Ryan later entered into an Accord and Release in which Ryan assigned any payment claims Ryan might have had against Mark Travel Corporation and Trans Global Tours. Plaintiff brought a breach of contract claim against Defendants Mark Travel Corporation and Trans Global Tours for the money allegedly due to Ryan International Airlines. The Court ordered the Defendants to submit to arbitration with Plaintiff. The arbitrators awarded Plaintiff $1, 132, 338.00 for the recoverable payment claims.
This matter is before the Court on two motions relating to the arbitration award. Plaintiff moves to confirm the award, and Defendants move to vacate the award. For the following reasons, the Court denies Defendants’ Motion to Vacate the Arbitration Award (Doc. 63) and grants Plaintiff’s Motion to Enforce the Arbitration Award (Doc. 68).
I. Factual and Procedural Background
Plaintiff Sascha Walter is a citizen of Germany and is the successor Insolvency Administrator of the Estate of Aero Lloyd (“Aero Lloyd”). Defendants are The Mark Travel Corporation, doing business as Funjet Vacations, and Trans Global Tours, L.L.C. (collectively referred to as “Mark Travel”). Ryan International Airlines, Inc. (“Ryan”) is a corporation incorporated in Kansas. Ryan’s principal place of business was originally in Wichita, Kansas. Ryan moved its principal offices to Rockford, Illinois, in 2006 but remains incorporated in Kansas.
This case involves a series of leases, charter agreements, and letter agreements. Pursuant to the agreements, Aero Lloyd supplied European aircraft to Ryan, Ryan operated the aircraft with crews and maintenance personnel, and Mark Travel supplied passengers and the initial revenue stream. Mark Travel collected revenue and paid Ryan based on Ryan’s calculation of the number of hours flown by the aircraft, and Ryan covered its expenses for operating the airplanes and retained a fixed fee. Ryan would then pay the balance leftover to Aero Lloyd. The parties structured the three-party arrangement by drafting leases between Aero Lloyd and Ryan, charter agreements between Mark Travel and Ryan, and letter agreements between Aero Lloyd and Ryan and between Aero Lloyd and Mark Travel.
In June 2002, Ryan and Mark Travel signed a charter agreement for six seasonal aircraft. Under the charter agreement, each aircraft was required to fly a minimum number of hours. If Mark Travel did not schedule the required minimum number of hours, Mark Travel was liable to Ryan for the difference between the required number of hours and the hours actually flown (“shortfall hours”). The charter agreement provided that the agreement would be governed by the laws of the State of New York and contained the following dispute resolution provision:
In the event of a controversy between the parties arising out of or relating to this Agreement, or the performance thereof, the following shall apply:
A. The parties shall at all times exercise good faith and attempt to resolve the dispute.
B. The dispute shall be referred by either party by notice to the other, to the chief executive officers of the parties who shall in good faith endeavor to resolve the dispute within twenty-one (21) days.
C. If the chief executive officers have not resolved the dispute within that time period, either party, by notice to the other, may cause the dispute to be mediated. Within ten (10) days following this notice, the chief executive officers shall endeavor to jointly select a mediator who shall establish a mediation process which the parties shall follow.
D. If the chief executive officers are unable to jointly select a mediator within the time period or if the mediator determines that the mediation is deadlocked, the dispute shall be determined by arbitration in accordance with the rules then in force of The American Arbitration Association, and judgment on the award rendered may be entered in any court having jurisdiction over the parties.
During this time, Aero Lloyd and Mark Travel entered into a letter agreement. Under the letter agreement, Aero Lloyd would lease six aircraft to Ryan under written lease agreements, and Mark Travel would charter the six aircraft from Ryan under a charter agreement. The letter agreement also provided that Mark Travel would not change the terms of its charter agreement with Ryan without Aero Lloyd’s advance written consent and that Mark Travel would have “no liability to Aero Lloyd for any breach or failure of Ryan or the Operator under the Charter Agreement.” Aero Lloyd signed a similar letter agreement with Ryan.
In April 2003, Aero Lloyd and Mark Travel signed another letter agreement for a single aircraft to operate in the United States year-round from June 2003 through May 2004. The letter agreement for the year-round plane also provided that Mark Travel would not change the terms of the year-round charter agreement without the prior consent of Aero Lloyd. Mark Travel and Ryan signed a charter agreement for the year-round plane.
In September 2003, the parties made arrangements for the second year of the seasonal aircraft. Ryan and Mark Travel executed a charter agreement for the use of six aircraft based at five different cities. This charter agreement contained the same choice of law and dispute resolution provision as the earlier charter agreements.
In October 2003, Aero Lloyd filed preliminary insolvency proceedings in Germany, and on December 17, 2003, Aero Lloyd was adjudged bankrupt and was placed under the administration of Dr. Gerhard Walter in his capacity as Insolvency Administrator. Mark Travel and Ryan were concerned about whether the airplanes they were expecting for the November 2003 winter season would be delivered. Because of these concerns, Mark Travel emailed Mallachy Corrigan, who was Aero Lloyd’s representative in the United States and had been involved in the discussions surrounding the agreements. Mark Travel and Ryan considered Corrigan to be the “voice of Aero Lloyd” in the United States. Aero Lloyd ultimately fulfilled its obligations for the seasonal airplanes but called the year-round airplane back to Germany in April 2004.
Following the callback of the year-round plane, Aero Lloyd alleged that Mark Travel owed Ryan money under the charter agreements for shortfall hours and that the amounts due were for the ultimate benefit of Aero Lloyd under its lease with Ryan. Aero Lloyd made claim against Ryan for the shortfall hours, and Ryan and Aero Lloyd entered into an Accord and Release. In the Accord and Release, Ryan stated that it believed Mark Travel did not owe Ryan payment claims and that collection efforts would damages Ryan’s business relationship with Mark Travel. Ryan nonetheless assigned to Aero Lloyd’s Insolvency Administrator any payment claims Ryan had against Mark Travel. The Accord and Release also contained a choice of law provision stating that it would in all respects be governed by the laws of the State of New York.
After Aero Lloyd’s attempts to follow the charter agreements’ dispute resolution provision failed, Aero Lloyd filed a lawsuit in January 2009 in the District of Kansas seeking to recover payment claims from Mark Travel, or in the alternative, requesting that the Court enter an order compelling Mark Travel to submit to arbitration. In December 2009, the Court denied Mark Travel’s motion to dismiss the complaint, or in the alternative, transfer the case to the Eastern District of Wisconsin, and in May 2010, the Court granted Aero Lloyd’s motion to compel discovery. Because Aero Lloyd is a European entity, the American Arbitration Association referred the matter to the International Centre for Dispute Resolution (“ICDR”). The ICDR panel held a seven-day evidentiary hearing and issued an award on October 24, 2012.
In the award, the ICDR panel found that the shortfall hours claims were valid, were assigned properly to Aero Lloyd, and could be asserted by Aero Lloyd against Mark Travel. The panel also found that the alleged oral agreements Mark Travel claimed reduced its liability for shortfall hours were not valid. The panel concluded that Ryan would have prevailed (and thus Aero Lloyd prevailed) on the claims for shortfall hours for two seasonal aircraft. The panel awarded $558, 350 for the seasonal Detroit A320 plane, $92, 325.00 for the seasonal St. Louis A320 planed, and $481, 663 in interest. Altogether, the panel awarded Aero Lloyd $1, 132, 338 for the recoverable shortfall hours. The panel rejected Aero Lloyd’s claim regarding the shortfall hours of the year-round plane.
On January 23, 2013, Mark Travel filed a Motion to Vacate Arbitration Award (Doc. 63), and on February 22, 2013, Aero Lloyd filed a Motion to Enforce Arbitration Award (Doc. 68). The matters are ...