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UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
)
MESA AIR GROUP, INC. and )
FREEDOM AIRLINES, INC., )
)
Plaintiffs, ) CIVIL ACTION FILE
v. ) NO.: 1:08-CV-1334-CC
)
DELTA AIR LINES, INC., )
)
Defendant. ))
PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
SUBMITTED BY DEFENDANT DELTA AIR LINES, INC.
Catherine M. ONeilGeorgia Bar No. 553714David E. Meadows
Georgia Bar No. 500352Christine A. HopkinsonGeorgia Bar No. 142106Joseph P. RockersGeorgia Bar No. 611220
KING & SPALDING LLP1180 Peachtree StreetAtlanta, Georgia 30309(404) 572-4600 (p)
(404) 572-5100 (f)
Counsel for DefendantDelta Air Lines, Inc.
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TABLE OF CONTENTS
FINDINGS OF FACT ............................................................................................1
A. Background......................................................................................................1
B. The Partnership Between Delta and its Regional Carriers..............................3
C. Freedoms Flying Under the ERJ Agreement .................................................5
D. Plaintiffs Attempt to Obtain Agreement from Delta That CoordinatedCancellations Would Not Impact Freedoms Completion Rate......................6
E. Mr. Bates Claim That an Agreement Had Been Reached..............................9
F. New Documentary Evidence Demonstrates That No AgreementWas Reached .................................................................................................10
(i) Evidence Relating to the Lowering of Incentive Goals ......................10
(ii) Evidence Relating to the Pilot Bonus Program...................................12
(iii) Evidence From Other Documents.......................................................15
(iv) The July 13 E-mail is Not Sufficient ContemporaneousEvidence of an Agreement ..................................................................16
G. Mr. Bates Conduct Confirms That No Agreement Had BeenReached..........................................................................................................19
H. Mr. Bates Inconsistent Accounts Undermine the Existence ofAny Agreement..............................................................................................24
I. Ms. Boyds Testimony That No Agreement Was Reached Is
Credible and Corroborated by the Record.....................................................28
J. September 2007 Was a Challenging Month for Plaintiffs ............................32
K. Plaintiffs Inexplicably Take Credit For Coordinated Cancellationsin September 2007 .........................................................................................32
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(ii) Delta Is Not Equitably Estopped from Terminating the ERJAgreement ...........................................................................................65
D. Delta Did Not Waive its Rights Under the ERJ Agreement .........................71
E. The Parties Did Not Orally Modify or Mutually Depart fromthe Written Terms of the ERJ Agreement .....................................................72
F. Delta Did Not Breach its Express and Implied Duty of Good Faith.............76
G. Plaintiffs Are Not Entitled to Their Attorneys Fees and Costs....................79
(i) New York Law Precludes an Award of Attorneys Fees and Costs ...80
(ii) Georgia Law Precludes an Award of Attorneys Fees and Costs.......82
H. Plaintiffs Breached the ERJ Agreement........................................................85
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Defendant Delta Air Lines, Inc. (Delta) respectfully submits the following
proposed findings of fact and conclusions of law in the above-captioned matter:
FINDINGS OF FACT
A.
Background
1. Delta is the largest airline in the world. Since 2005, Plaintiffs Mesa
Air Group, Inc. (Mesa) and Freedom Airlines, Inc. (Freedom) (collectively,
Plaintiffs) have provided regional jet service under various code-share
arrangements with Delta and operated aircraft as part of the Delta Connection
program. [Pl. Ex. 21; Doc. No. 119 1, 21; Doc. No. 56 (May 14, 2008 D.
Bornhorst Dep.) at 8:89:3, 11:712:1]
2. On May 3, 2005, Delta and Plaintiffs entered into a contract (the ERJ
Agreement), whereby Plaintiffs would operate ERJ-145 aircraft, which are 50-
seat regional jets. [Pl. Ex. 21]
3. Under the terms of the ERJ Agreement, Freedom is required to
achieve certain minimum performance standards with regard to the completion of
flights.
1
[Pl. Ex. 21 11(F)(vi)] If Freedom fails to maintain a completion rate of
1While not at issue in this litigation, the ERJ Agreement also addresses
Freedoms on-time performance. On-time performance is measured in terms ofarrivals within 14 minutes of scheduled arrival time, or A-14. [Pl. Ex. 21 10(A)(iii); Doc. No. 59 (May 20, 2008 S. Wagner Dep.) at 18:1417]
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95% during any three (3) months during any consecutive six (6) month period,
Delta has the right to terminate the ERJ Agreement immediately and at its sole
option. [Id.]
4. The completion rate is defined as the number of flights completed
divided by the number flights scheduled. [Hrg. Tr. at 415:29; Doc. No. 75 (May
16, 2008 C. Tyler Dep.) at 16:417:4] Under the express terms of the contract,
flights operated with no revenue passengers or completed over four hours late are
not considered to be completed flights. [Pl. Ex. 21 11(F)(vi)]
5. On March 28, 2008, Deltas Don Bornhorst notified Plaintiffs that
Delta was electing to terminate the ERJ Agreement effective immediately as a
result of Freedoms failure to maintain a completion rate of 95% for the months of
October 2007, December 2007 and February 2008. [Pl. Ex. 57; Hrg. Tr. at
534:24535:7]
6. On April 7, 2008, Plaintiffs filed a Complaint for Declaratory
Judgment, Specific Performance and Injunctive Relief, seeking, inter alia, a
declaration that no grounds existed for termination of the ERJ Agreement and
preliminary and permanent injunctive relief. [Doc. No. 1]
7. This Court held a preliminary injunction hearing (the Preliminary
Hearing) on May 27-29, 2008. [Doc. No. 4345] At the conclusion of the
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Preliminary Hearing, the Court issued an order granting the preliminary injunction
on the ground that Plaintiffs demonstrated a likelihood of success on the merits as
to their claim for equitable estoppel. [Doc. No. 80 at 27 66]
8. The original Complaint did not assert a claim for equitable estoppel.
[Doc. No. 1] However, after the Preliminary Hearing, Plaintiffs subsequently
amended the Complaint to assert the estoppel claim as well as claims for binding
oral modification and mutual departure. [Doc. No. 119]
9. This case came before the Court for a trial on the merits on April 20-
23, 2010. [Doc. No. 14851]
B. The Partnership Between Delta and its Regional Carriers
10. Delta is responsible for setting the schedules and fares for all Delta
Connection carriers, including Freedom. [Pl. Ex. 21 1 (B)(C); Doc. No. 56 at
12:1813:8] Delta Connection carriers fly under the Delta name and airline code,
DL. [Pl. Ex. 21 1(A)] Customers do not distinguish between Deltas mainline
operations and its regional carriers; thus, Freedom flights, like other regional
carrier flights, are viewed by the public as Delta flights, and performance failures
by Delta Connection carriers are attributed to Delta. [Trial Tr. at 303:1318; Doc.
No. 56 at 8:139:3]
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11. Deltas primary concerns in operating an airline, in addition to safety,
are completion and on-time performance: ensuring that customers reach their
destinations and reach them on time. [Doc. No. 56 at 15:318]
12. During periods of irregular operations involving weather, congestion
or other air traffic control (ATC) restrictions, it may not be possible to fly all of the
flights scheduled to operate during a given period of time. [Doc. No. 80 at 4 6]
In anticipation of such circumstances, Deltas Operations Control Center (OCC)
convenes coordination calls with Freedom and other Delta Connection carriers in
an effort to minimize the disruption to overall operations and to the customer that
might otherwise result during these periods. [Hrg. Tr. at 506:15507:8, 508:17
512:1]
13. Deltas objective in convening these calls is to pre-cancel certain
flights in sufficient time to notify passengers impacted by the cancellations before
they leave for the airport and to re-accommodate the passengers on other flights.
[Hrg. Tr. at 546:824; Doc. No. 56 at 25:112] In determining which flights to
cancel, Delta seeks to minimize the inconvenience to the passengers. [Doc. No. 56
at 36:1415]
14. This practice of canceling flights in anticipation of weather-,
congestion- or ATC-related events is sometimes referred to as proactive
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thinning, and the cancellations are referred to as coordinated cancellations. The
practice benefits not only Delta and its customers, but also Freedom and other
regional carriers that participate in those cancellations, because it often avoids
additional delays and disruptions that might otherwise flow from the weather or
ATC event. [Doc. No. 56 at 33:1534:6; Hrg. Tr. at 508:17510:5]
15. The ERJ Agreement does not say anything about whether Freedom is
obligated to accept coordinated cancellations. Generally, however, Freedom
accepted coordinated cancellations [Hrg. Tr. at 558:1217], at least until late 2008.
[Trial Tr. at 229:810]
C. Freedoms Flying Under the ERJ Agreement
16. The ERJ Agreement does not establish a specific hub location for the
Freedom aircraft, and Delta is free to change the hub location with prior notice.
[Pl. Ex. 21] The ERJ Agreement only provides that Delta may not change the hub
location to certain hubs identified in Article 1(C). [Pl. Ex. 21 1(C)] John F.
Kennedy International Airport (JFK) is not one of the hub locations that is
expressly identified in Article 1. [Id.]
17. Freedom began flying under the ERJ Agreement in 2005, and, at that
time, its base of operations was in Orlando, Florida. [Hrg. Tr. at 69:1216, 304:1
8] In late 2006 or early 2007, however, Delta notified Freedom that it would be
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moving more of Freedoms ERJ flights to JFK. [Doc. No. 80 at 7 15; Hrg. Tr. at
73:610]
18. JFK is a difficult operating environment, and Freedom had experience
operating in JFK. As a result, Plaintiffs were concerned that moving a significant
number of flights to JFK could impact Freedoms performance. [Hrg. Tr. at
391:1216]
D. Plaintiffs Attempt to Obtain Agreement from Delta That CoordinatedCancellations Would Not Impact Freedoms Completion Rate
19. Beginning in early February 2007, Jorn Bates, a former Delta
employee who was then Freedoms Chief Operating Officer, contacted Courtney
Boyd, a Director for Delta Connection, to discuss the possibility of getting some
dispensation with regard to the performance metrics in the ERJ Agreement to
account for Freedoms move to JFK. [Hrg. Tr. 303:16304:16; Pl. Ex. 47] In
particular, Mr. Bates spoke with Ms. Boyd by telephone on February 5, 2007, and
followed up with an e-mail communication on February 6, 2007, seeking to recap
for agreement what had been discussed the day before. [Pl. Ex. 47]
20.
After receiving a second inquiry from Mr. Bates regarding his e-mail
of February 6, Ms. Boyd informed Mr. Bates that she was running the issue by the
ops team and would get back to him soon. [Pl. Ex. 47] In fact, Ms. Boyd did
seek the opinion of Stan Moore, a manager in Deltas Operations group, although
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Mr. Moore was not a decision maker with regard to the terms of the contract.
[Trial Tr. at 287:210; Pl. Ex. 61]
21. Mr. Bates, himself, also raised the issue of credit for coordinated
cancellationswhich Mr. Bates referred to as commanded cancellationswith
Mr. Moore on February 14 and again on February 22. Mr. Moore told Mr. Bates
he would have to get with Courtney on that issue. [Def. Ex. 30 (MAG040938
39); Doc. No. 164 (Nov. 13, 2009 J. Bates Dep.) at 240:24241:5]
22. In the communications with Ms. Boyd and Mr. Moore, Mr. Bates
sought to obtain agreement not only on credit for so-called commanded
cancellations but also on the issue of four-hour late flights. [SeePl. Ex. 47; Def.
Ex. 30; Hrg. Tr. at 303:1622, 305:310, 306:20307:4] In particular, Mr. Bates
sought an agreement that Freedom would be credited with the completion of
four-hour late flights and compensated in the normal manner. [Pl. Ex. 47; Def.
Ex. 30; Hrg. Tr. at 305:310]
23. Mr. Bates acknowledged that he failed to reach any agreement on the
issues of coordinated cancellations or four-hour late flights as of March 19, 2007.
[Hrg. Tr. 306:17, 319:18; Doc. No. 164 at 338:1122] His last e-mail
communication with Ms. Boyd also made clear that these issues had not been
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resolved as of that date. [Pl. Ex. 47] Plaintiffs do not dispute that no agreement
had been reached as of March 19.
24. At the same time that Mr. Bates was inquiring about these issues with
Delta, Ms. Boyd was in the middle of negotiating with Plaintiffs an amendment to
the ERJ Agreement. [Trial. Tr. at 281:1720, 288:38; Hrg. Tr. at 438:1017] A
written amendment was actually executed on March 13, 2007. [Doc. No. 78-3;
Doc. No. 76 (May 16, 2008 J. Bates Dep.) at 72:118] In addition, Ms. Boyd was
negotiating with Plaintiffs for the operation of CRJ900 regional aircraft; the CRJ
agreement also was executed on March 13, 2007. [Trial Tr. at 288:38; Def. Ex.
24] Finally, Ms. Boyd was in the process of re-negotiating all thirteen of the Delta
Connection agreements as part of Deltas reorganization, so that Delta could
emerge from bankruptcy. [Trial Tr. at 288:313]
25. The issues relating to coordinated cancellations or four-hour late
flights could have been raised by Plaintiffs as part of the formal amendment to the
ERJ Agreement, but they were not. [Trial Tr. at 288:318]
26. Because Ms. Boyd would have expected Plaintiffs to raise any big
issue as part of the negotiations and the various drafts that were going back and
forth between Delta and Freedom in March 2007, she did not put much emphasis
on the e-mails from Mr. Bates. [Trial Tr. at 288:1418] She understood the issue
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had been dropped in March. [Doc. No. 64 (May 21, 2008 C. Boyd Dep.) at 83:24
84:17]
E. Mr. Bates Claim That an Agreement Had Been Reached
27. In their Complaint, Plaintiffs alleged that Mr. Bates reached an oral
agreement with Ms. Boyd to allow credit for coordinated cancellations. [Doc. No.
119 39] At the Preliminary Hearing, Mr. Bates specifically testified that he had a
thirty to forty-five-minute meeting with Ms. Boyd in her office in late March or
early April of 2007. [Hrg. Tr. 306:8307:4] During that meeting, according to
Mr. Bates testimony, Ms. Boyd agreed to three things: (1) that Freedom would
receive credit for so-called commanded cancellations when calculating the
completion rate for purposes of the ERJ Agreements default or termination
provision as well as for incentive payments; (2) that flights completed more than
four hours late would be counted as completed flights; and (3) that Freedom would
be credited for cancellations resulting from damage caused by ground handlers.
[Hrg. Tr. at 318:9319:11]
28. At the Preliminary Hearing, Ms. Boyd denied that any such agreement
had been reached. [Hrg. Tr. at 396:1116] This Court credited the testimony of
Mr. Bates over that of Ms. Boyd. [Doc. No. 80 at 1213 28]
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F. New Documentary Evidence Demonstrates That No Agreement Was
Reached
29. At trial, Delta offered new documents in evidence that had not been
presented at the Preliminary Hearing and had not been used with witnesses in prior
depositions in May 2008. According to letters from Plaintiffs counsel, Plaintiffs
produced a total of 68,142 pages of documents in May 2008 in connection with the
Preliminary Hearing. [Def. Ex. 153] Of that production, 44,120 pages were not
produced until after the May 16 deposition of Mr. Bates. [Id.] Of that, a combined
total of 36,294 pages were produced on May 19 and May 20the day before and
the day of the deposition of Joseph Serratelli, who took over for Mr. Bates in
January 2008 as Freedoms Chief Operating Officer. [Id.]
(i) Evidence Relating to the Lowering of Incentive Goals
30. According to e-mails and other documents, in the summer of 2007,
Plaintiffs asked Delta to lower the incentive goals in the ERJ Agreement. [Def.
Ex. 17, 75; see also Hrg. Tr. at 398:1121] The incentive goals are set forth in
Schedule 3 to the ERJ Agreement [Pl. Ex. 21], and they establish the monthly
completion rate that Plaintiffs must achieve in order to earn an additional 1%
incentive mark-up over and above the reimbursements and base mark-up paid
under the contract. [Doc. No. 80 at 23 3; Doc. No. 66 (May 22, 2008 C.
Higgins Dep.) at 34:1217; Trial Tr. at 184:1220] These incentive goals had been
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established in 2005, when the ERJ Agreement was first executed, and Freedom had
continued to operate under the original Schedule. [Def. Ex. 36 (MAG027900); see
also Def. Ex. 17, 68]
31. With Freedoms increased flying in JFK, Plaintiffs apparently asked
that Delta decrease the incentive goals, arguing that otherwise the goals would be
difficult for Plaintiffs to achieve. [Hrg. Tr. at 398:1519; Def. Ex. 16, 17, 36
(MAG027901), 77, 105; Doc. No. 64 at 84:1286:10] Delta agreed to consider a
proposal, but Plaintiffs never presented anything to Ms. Boyd or the Commercial
group. [Hrg. Tr. at 398:1519; Doc. No. 64 at 85:186:4]
32. The discussions regarding lower incentive goals contradict the idea
that Mr. Bates already had reached an agreement to receive credit for coordinated
cancels. Indeed, Ms. Boyd testified that Delta would not have entertained the
idea of lower goals if we had agreed already to add back in commanded or
coordinated cancellations. [Hrg. Tr. at 398:1921] Delta might agree to change
the incentive goals or to change the definition of the completion rate, but not both.
[Doc. No. 64 at 84:1225]
33. Plaintiffs apparently sent a draft presentation regarding the incentive
goals to Deltas Glen Hauenstein; it contains no reference to an existing agreement
with Delta to exclude coordinated cancellations from the calculation of the
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completion rate. [Def. Ex. 36] To the contrary, the document, which was prepared
by Mr. Bates and Mr. Ornstein, repeatedly refers to the total completion factor or
TCF. [Id.; Doc. No. 164 at 287:12288:17]
34. Plaintiffs also produced a July 19, 2007 summary, which discusses
Freedoms increased flying in the Northeast (i.e., JFK) and the need to renegotiate
the incentive goals of the ERJ Agreement. It suggests obtaining [a]t a minimum,
written agreement stating that proactively thinned or [cancels] caused by Ground
Handlers are computed as completed flights. [Def. Ex. 17 (MAG000066)]
35. This document contradicts Mr. Bates Preliminary Hearing testimony
that he already had obtained an agreement from Delta to credit coordinated
cancellations and cancellations resulting from damage caused by ground handlers
when calculating completion rate. [Hrg. Tr. 306:20307:4]
(ii) Evidence Relating to the Pilot Bonus Program
36. In April 2007, Plaintiffs established a pilot bonus program for the ERJ
pilots to incentivize attendance and performance. [Def. Ex. 46; Doc. No. 165
(Mar. 8, 2010 R. Gumm Dep.) at 180:23181:4, 208:68] Under the program, if
Plaintiffs met the monthly completion rate goal set forth in the ERJ Agreement and
received the additional 1% mark-up payment from Delta, then Plaintiffs would
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share a portion of that money with the pilots in the form of a bonus. [Doc. No. 165
at 180:18181:4]
37. The completion rate goal established for the pilot bonus program was
set slightly higher than the contractual goal set forth in the ERJ Agreement. [Doc.
No. 164 at 270:1116, 272:25, 297:22298:1] The goal, however, was
established to be in line with or to mirror the Delta goals. [Def. Ex. 33; Doc.
No. 164 at 270:710; Def. Ex. 2829, 4647, 50]
38. Mr. Bates distributed regular memos to the Freedom pilots discussing
the terms of the bonus program and providing updates on what performance was
required in order to reach the bonus program goal. [Doc. No. 165 at 183:9184:2;
Doc. No. 164 at 293:19296:15; Def. Ex. 2829, 33, 37, 39, 4041, 43, 53]
39. In every memo between April 2007 and October 11, 2007, the
completion rate goal is expressly described as TCF or total completion factor.
[Def. Ex. 29, 33, 37, 39, 41, 43, 46, 5657, 110] One memo, dated September 6,
2007, expressly states that TCF means that all cancels are counted. [Def. Ex. 33]
Another notes that cancels, including flights Freedom was asked by Delta to
cancel, accounted for a 2.72 hit to the TCF. [Def. Ex. 29]
40. Credit for coordinated cancels is never discussed in any pilot bonus
memo until October 3, 2007, when Mr. Bates states that, [a]fter removing the
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cancels Delta asked us to take to streamline operations in JFK, [Freedom] met [the]
goal and the pilots would be receiving bonus checks for September flying. [Def.
Ex. 43; Doc. No. 164 at 311:8312:16, 315:716; Doc. No. 165 at 228:17]
41. Mr. Bates October 3 memo to the pilots contradicts an earlier memo
he had sent on September 28, 2007 expressly informing the pilots that they would
notbe receiving bonus checks for September flying because they had missed the
completion goal. [Def. Ex. 41]
42. Mr. Bates could only speculate about what happened between
September 28 and October 3 that caused him to exclude the coordinated
cancellations from the completion rate in connection with the pilot bonus. [Doc.
No. 164 at 315:17317:7] Ryan Gumm, Freedoms Chief Pilot in 2007, similarly
could not recall any specifics about the change, saying only that it was [Mr.
Bates] call on how they wanted to do it. [Doc. No. 165 at 228:1229:6]
43. On October 2, 2007, Mr. Gumm took over responsibility for sending
the pilot bonus updates. [Def. Ex. 56; Doc. No. 165 at 221:18222:15] In
preparing the memo, Mr. Gumm originally used a template provided by Mr. Bates,
which did not identify or discuss credit for coordinated cancellations. [Doc. No.
165 at 222:16224:20]
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44. Somewhere between October 2 and October 6, Mr. Bates provided
Mr. Gumm with a new template for the pilot bonus memos, which contained a line
that specifically takes out mainline initiated cancels. [Doc. No. 165 at 236:17
238:3;Def. Ex 57] Mr. Gumm could not recall the circumstances surrounding the
new template, but he had not been told by Mr. Bates earlier in the month that the
program would be changing. [Doc. No. 165 at 225:1520]
45.
Mr. Bates tried to explain his failure to include in the pilot bonus
memos any information about the alleged agreement with Delta to credit
coordinated cancellations by stating that it was more information than [the pilots]
needed to know. [Doc. No. 76 at 143:613] However, Mr. Gumm, who was a
pilot, testified that pilots would have been able to understand this information.
[Doc. No. 165 at 154:1014, 155:1157:16, 233:719]
(iii) Evidence From Other Documents
46. Plaintiffs documents indicate that Mr. Ornstein believed Freedoms
performance goal was based on TCF or total completion factor. [Def. Ex. 35]
When Mr. Ornstein stated to Mr. Bates, assuming our goal is based on TCF, Mr.
Bates did nothing to correct the assumption; nor did he mention any agreement on
coordinated cancellations. [Id.]
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47. Mr. Bates alleged agreement with Delta does not appear among the
list of items identified as Accomplishments of the Freedom team in either March
2007 or April 2007. [Def. Ex. 48 (MAG038971), 49]
48. In a February 19, 2008 e-mail exchange between Joe Serratelli and
Mark Rutkowski of Delta, Mr. Serratelli stated his hope that Freedom and Delta
could get to a better place on the issue of coordinated cancellationswhich he
also referred to as requested cancels in the e-mailand that commanded
cancels could truly be out of the making it or not making it equation. [Def.
Ex. 60]
49. Mr. Serratelli explained this February 19, 2008, e-mail by saying that
it related to the airline industry in general and not to Freedom, and he maintained
that Freedom already had an agreement to take coordinated cancels out of the
equation. [Doc. No. 166 (Mar. 9, 2010 J. Serratelli Dep.) at 145:1518] Mr.
Serratellis attempt to explain this e-mail is simply not credible. [Doc. No. 166 at
140:13147:22]
(iv) The July 13 E-mail is Not Sufficient Contemporaneous Evidence
of an Agreement
50. This Court concluded, based upon the preliminary record, that Mr.
Bates referred to the agreement with Ms. Boyd in contemporaneous
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communications [Doc. No. 80 at 11 24], but that finding has been undermined by
the complete record at trial.
51. Specifically, Plaintiffs relied heavily on a single PDF document that
appears to capture an e-mail string between Mr. Bates and others at Delta dated
July 13, 2007. [Pl. Ex. 45; see also Pl. Ex. 79] The circumstances surrounding
that document are suspicious.
52.
The PDF document, which is essentially a photograph, was created
on July 23, 2007 at 11:34 a.m. EDT [Trial Tr. at 269:1618; Def. Ex. 146; Pl. Ex.
107]the same time Mr. Bates appears to have e-mailed a response to Mr. Ford.
[Pl. Ex. 78] The 11:34 a.m. e-mail to Mr. Ford is not captured in the PDF that was
created, however. [Pl. Ex. 79]No original electronic e-mail existed on Mr. Bates
hard drive, and no original electronic e-mail was produced in the litigation. [See
Trial Tr. at 149:1921; Pl. Ex. 117] Based on the other electronic documents
produced by Mr. Bates [Def. Ex. 90],2it is unusual for him to maintain e-mails in
PDF form.
2Mr. Bates production is concerning. Although he appears to have
maintained a number of documents from 2007 and 2008, few of the mostsignificant communications with Mr. Serratelli or with Delta were found amonghis documents. [Def. Ex. 90]
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53. The PDF, itself, was kept in a separate folder on Mr. Bates computer
entitled Open Project Items. [Trial Tr. 267:23268:14] On April 6, 2010,
Plaintiffs produced, for the first time, another PDF document that contained what
appeared to be the same e-mail string, including the July 13 communication. [Def.
Ex. 136; Pl. Ex. 78; Trial Tr. 267:1822] Plaintiffs provided no explanation for
why this document had not been found and produced earlier in the litigation. [Def.
Ex. 136] This PDF was created on July 24, shortly after a response from Mr. Ford
had been received. [Def. Ex. 146; Pl. Ex. 78, 107; Trial Tr. at 263:713] The two
PDFs were the only documents in the separate Open Projects Items folder.
[Trial Tr. at 267:23268:14]
54. When questioned about the e-mail in his November 2009 deposition,
Mr. Bates gave conflicting explanations for why the document existed in PDF
format; his explanations are not credible and are contradicted by the record. [Doc.
No. 164 at 322:10326:20; see also Def. Ex. 33, 44, 69] His explanations
understandably led Delta to question the authenticity of the communication.
55. The topic of the July communication is Freedom Daily Stats, and it
concerns the automation of the morning ops report. [Pl. Ex. 45] Deltas witnesses
testified that they recalled the subject matter relating to the report, but they did not
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recall or understand the reference to credit for coordinated cancellations.3 [Doc.
No. 60 (May 23, 2008 W. Aaron Dep.) at 71:1275:3; Hrg. Tr. at 443:18444:11]
Even assuming the e-mail had been sent, it was not understood by anyone at Delta
as notice of any agreement. [Doc. No. 60 at 72:1222] Moreover, Ms. Boyds
testimony that she did not focus on the e-mail because it was not addressed to her
and because it dealt with a matter that was not her responsibility is credible [Hrg.
Tr. at 443:18444:11], and it explains why she would not have responded.
56. The existence of this single communication, particularly given the
circumstances surrounding its creation and production, is not sufficient to
overcome the weight of other evidence contradicting the existence of any
agreement.
G. Mr. Bates Conduct Confirms That No Agreement Had Been Reached
57. Mr. Bates did not know whether he had informed Mr. Ornstein of the
alleged agreement with Delta, even though he admitted that, as CEO of the
3Plaintiffs played an excerpt from the deposition of Deltas Wayne Aaronregarding this e-mail. [Pl. Ex. 132] It is not clear from the excerpt or the recordwhether Mr. Aaron recalled the e-mail as a result of his deposition preparation orrecalled having seen it in 2007. He made clear, however, that the focus of the e-mail, in his mind, was the automation of the report, and that was what his teamresponded to. [Doc. No. 60 at 73:915, 74:1775:3]
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company, Mr. Ornstein might need to know that information. [Doc. No. 164 at
254:12255:4]
58. Plaintiffs offered no e-mails or other documents between Mr. Bates
and Mr. Ornstein or Mr. Lotz in which Mr. Bates told them he reached an
agreement. Plaintiffs witnesses acknowledged, however, that the ERJ Agreement
and the agreement regarding coordinated cancellations were important to
Freedom. [Doc. No. 166 at 127:1120; Doc. No. 164 at 276:13; Doc. No. 75 at
29:1730:9]
59. Mr. Bates did not inform Mr. Tyler of the alleged agreement until
September 2007, even though Mr. Tyler had responsibility for invoicing Delta
under the ERJ Agreement. [Hrg. Tr. at 243:215; Doc. No. 76 at 185:512; Doc.
No. 164 at 318:13319:4]
60. Mr. Bates did not inform Mr. McDannell, Director of East Coast
Operations for Freedom, that any agreement had been reached, even though
Mr. McDannell testified that it would have been important for him to be made
aware of such an agreement. [Hrg. Tr. at 392:21393:19]
61. Mr. Bates did not inform Mr. Gumm of any alleged agreement with
Ms. Boyd or with Delta to exclude coordinated cancellations, even though
Mr. Gumm was part of management. [Doc. No. 165 at 230:1317, 240:517].
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62. Although Mr. Serratelli testified in deposition that he had been told of
the alleged agreement [Doc. No. 74 (May 20, 2008 J. Serratelli Dep.) at 8:89:14,
72:1073:15; Doc. No. 166 at 135:20137:16], his testimony is contradicted by
Mr. McDannell and Mr. Gumm and is not credible.
63. Despite statements in documents authored by Mr. Bates that he tried
to get his agreement with Ms. Boyd in writing [see Def. Ex. 30, 34], Plaintiffs
offered no e-mails or other communications with Ms. Boyd after March 2007
seeking to confirm the alleged agreement in writing.
64. The only e-mails between Mr. Bates and Ms. Boyd regarding the
terms of the alleged agreement are e-mails in February and March 2007. [Pl. Ex.
47] Again, Plaintiffs admit no agreement was reached as a result of these
communications. [Hrg. Tr. at 319:18]
65. Mr. Bates had lunch with Anthony Canitano of Delta on April 4,
2007. [Def. Ex. 152 (MAGX0042223, MAGX00451718); Trial. Tr. at 199:10
14] Mr. Canitano had responsibility for the Freedom relationship at that time, and
he communicated with Mr. Bates on various issues relating to the ERJ and CRJ
connection agreements. [Trial Tr. at 196:12198:23] Mr. Bates did not say
anything to Mr. Canitano about reaching any agreement with Ms. Boyd relating to
the ERJ Agreement, even though, by Mr. Bates own testimony, he would have
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would reflect a credit for coordinated cancels. [Doc. No. 164 at 264:1217,
264:23265:1]
68. On February 21, 2008, Mr. Serratelli sent an e-mail to Mr. Bates
informing him about the meeting he had had at Delta. [Def. Ex. 31; Doc. No. 164
at 257:16258:2; Doc. No. 166 at 163:20164:3] Mr. Serratelli reported that Ms.
Boyd expressly said that, for the performance minimum in the ERJ Agreement,
no forgiveness for commanded cancels. [Def. Ex. 31; Doc. No. 164 at 257:16
259:3; Doc. No. 166 at 157:1624; see alsoTrial. Tr. at 297:23298:9]
69. In responding to Mr. Serratellis e-mail, Mr. Bates did not say
anything about Deltas position on coordinated cancels, and specifically did not
say that Ms. Boyds statement was contrary to a prior agreement he had with her.
[Def. Ex. 31; Doc. No. 164 at 265:29; Doc. No. 166 at 164:412] Mr. Bates
failed to comment even though, in his response, he expressly corrected a separate
statement that Ms. Boyd apparently had made during the meeting which Mr. Bates
believed was wrong. [Doc. No. 164 at 265:1025; Doc. No. 166 at 165:117]
70. In March 2008, when Mr. Serratelli informed Mr. Bates that Delta
was looking at data for four hour late flights and no revenue passengers going back
into 2007, Mr. Bates responded Yikes. They finally figured out how to track
that. [Def. Ex. 18] Mr. Bates reaction, as reflected in the e-mail, contradicts Mr.
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Bates testimony that Delta had agreed to allow such flights to be counted as
completed.
H. Mr. Bates Inconsistent Accounts Undermine the Existence of Any
Agreement
71. Mr. Bates has provided varying accounts of the alleged agreement he
reached with Ms. Boyd. First, in the phone call with Don Bornhorst of Delta on
February 28, 2008, Mr. Bates and Mr. Ornstein stated only that they had an
agreement with any number of Delta officials5 that coordinated cancellations
would not be counted against Freedom. [Hrg. Tr. at 529:7530:15]
72. Shortly after getting off the telephone with Mr. Bornhorst, Mr. Bates
sent an e-mail to Ms. Boyd in an effort to shed some additional light on the
alleged agreement.6
[Pl. Ex. 43] Mr. Bates recounted his clear recollection of
their earlier discussion, which, according to the e-mail, centered on the impact
5Mr. Ornstein also mentioned an alleged agreement he had with Deltasformer COO, Mr. Whitehurst. The testimony makes clear that Mr. Whitehurstsimply told Mr. Ornstein that Delta was not trying to screw [Freedom] with themove to JFK and that it was not Deltas intention to penalize [Freedom] formoving to JFK. Mr. Whitehurst made no specific agreement to credit coordinated
cancellations or to count four-hour late flights as completed. [Doc. No. 55 (May12, 2008 J. Whitehurst Dep.) at 72:1973:6; Hrg. Tr. at 287:1525]6Mr. Bates demeanor during the questioning on this e-mail exemplifies his
lack of credibility. Mr. Bates refused to agree that this e-mail was written after hehad just got[ten] off the phone with Mr. Bornhorst and Mr. Ornstein, eventhough the word just was the word Mr. Bates himself had used in the e-mail.[Doc. No. 164 at 280:1323]
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that Delta Commanded Cancellations had on [Freedoms] incentive payments since
we moved a significant amount of flying to the Northeast. [Id.] He stated, at that
time, that he and Ms. Boyd agreed to the specific language that any commanded
cancellations would be backed-out for the purpose of commercial purposes and
not operational performance goals. [Id.]
73. On February 29, 2008, Mr. Bates sent an e-mail to Mr. Serratelli, Mr.
Ornstein and Mr. Lotz saying that he had tried to get [the agreement] in writing
but that Delta (Courtney) would not reply to [his] 2 separate requests to get [it] in
writing. [Def. Ex. 34]
74. On March 7, 2008, in response to a request from Mr. Ornstein and Mr.
Serratelli [see Def. Ex. 64], Mr. Bates drafted a summary of his discussions
regarding coordinated cancellations. [Def. Ex. 30] In the summary, which Mr.
Bates admitted was written for his boss and, therefore, was intended to be accurate
[Doc. No. 164 at 234:1924], Mr. Bates stated that he met with Ms. Boyd in early
March. [Def. Ex. 30 (MAG040939)] He used the language from his February 28
e-mail [Pl. Ex. 43], and stated that he and Ms. Boyd agreed to the language that
any commanded cancellations would be backed-out for the purpose of
commercial purposes and not operational performance goals. [Def. Ex. 30
(MAG040939)]
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75. Also in the summary, Mr. Bates stated that he and Ms. Boyd agreed
that cancels that were caused by ground handlers would also be backed out of the
completion factor performance for commercial purposes. [Id.]
76. Mr. Bates again stated that he had repeatedly sent e-mails requesting
a more formal agreement and did not receive a written reply. [Id.]
77. In a March 9, 2008, e-mail to Mr. Serratelli, Mr. Bates informed Mr.
Serratelli to be wary of your flights that complete over 4 hours late, as the
contract states [Freedom] will not be paid for them. [Def. Ex. 19] Significantly,
he also expressly stated that this was another issued [he] asked Courtney to
resolve and in which [he] did not receive a response or resolution. [Id.] The
reference to this was a reference to the issue of four-hour late flights and whether
they would be counted as completed flights. [Doc. No. 164 at 330:1219; Doc.
No. 166 at 206:21207:8]
78. In his deposition in May 2008, Mr. Bates testified that he met with
Ms. Boyd not in early March but in middle to late March. [Doc. No. 76 at 67:4
6] After being presented with his March 19, 2007 e-mail showing that there was
no agreement as of that date, however, he stated that the meeting was not in
middle to late March but in the last two weeks of March, possibly the first week
in April 2007. [Doc. No. 76 at 74:1518]
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79. Mr. Bates testified that when he met with Ms. Boyd he reached a
verbal agreement on the issues of coordinated cancels and cancels caused by
baggage handlers. [Doc. No. 76 at 67:725] He also testified that he and Ms.
Boyd agreed to the following definition of completion rate: number of flights
scheduled minus number of flights cancelled by Delta minus number of other
airline damages, divided by number of flights operated. [Doc. No. 76 at 66:22
67:3, 76:1421]
80. At his May 2008 deposition, Mr. Bates testified that he did not know
if the agreement was in writing. [Doc. No. 76 at 68:15]
81. At the Preliminary Hearing, Mr. Bates testified that his meeting with
Ms. Boyd occurred in late March or early April. [Hrg. Tr. at 306:8307:4] At
the meeting, according to Mr. Bates testimony, he and Ms. Boyd agreed to three
specific things: that coordinated cancellations would not be counted against the
completion rate, that cancels caused by ground handlers similarly would not be
counted, and that four-hour late flights would be counted as completed flights.
[Hrg. Tr. at 306:8307:4, 318:23319:11]
82. At the Preliminary Hearing, Mr. Bates stated definitively that he did
notseek to get the agreement in writing; he had her word. [Hrg. Tr. at 307:17
24]
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83. In a deposition following the Preliminary Hearing, when confronted
with his March 9 e-mail to Mr. Serratelli [Def. Ex. 19], Mr. Bates admitted that the
other issue (in addition to four-hour late flights) that was not resolved with Delta
could have been the issue of credit for coordinated cancellations. [Doc. No. 164
at 331:1321] This statement is contrary to his testimony at the Preliminary
Hearing that he reached agreement with Ms. Boyd on both of these issues.
84.
Based on the full record before the Court, including in particular the
more recent depositions of Mr. Bates [Doc. No. 164] and Mr. Serratelli [Doc. No.
166], the Courts prior finding that Mr. Bates testimony was credible must be
reversed.
I. Ms. Boyds Testimony That No Agreement Was Reached Is Credible
and Corroborated by the Record
85. Although this Court originally found Ms. Boyds testimony regarding
the alleged agreement to be not credible based upon the incomplete record
presented at the Preliminary Hearing, the Court now reverses that finding in light
of the complete record.
86.
Ms. Boyd testified at trial that, when she first testified in May 2008,
she was extremely nervous, because she had never been in a trial and had never
been deposed or cross-examined before. [Trial Tr. at 283:611] She stated that
she really let it get to [her] and she lost her confidence. [Id.] Ms. Boyd also
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noted that she didnt do a very good job in the pretrial hearing of explaining what
else was going on in March 2007the time of the alleged agreement. [Trial Tr.
at 287:1820]
87. Prior to her trial testimony, Ms. Boyd reviewed her files, including e-
mails to her team and to the Operations team. [Trial Tr. at 279:915] She had not
done that at the time of the Preliminary Hearing in 2008, because it was all very
rushed and she didnt have time review all of that. [Trial Tr. at 279:24280:5]
88. While Ms. Boyd was still nervous at trial [seeTrial. Tr. at 277:36],
she answered questions clearly and directly on both direct and cross-examination.
89. Ms. Boyd testified that she did not reach an agreement with Mr. Bates
in late March or early April of 2007 to give Freedom credit for coordinated or
commanded cancellations. [Trial Tr. at 277:712]
90. She similarly testified that she did not reach an agreement with Mr.
Bates to credit cancels caused by ground handlers or to count four-hour late flights
as completed flights. [Trial Tr. at 277:1322]
91. Her testimony on these points is consistent with her prior testimony at
the Preliminary Hearing and during her deposition. [Hrg. Tr. at 396:1116; Doc.
No. 64 at 65:1925, 80:517]
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92. Ms. Boyd stated she was very certain of her testimony. [Trial Tr. at
277:2324] She explained first, that she did not have authority to reach an
agreement to change the terms of the ERJ Agreement without running it by the
head of Delta Connection, and that she never did that. [Trial Tr. at 277:25279:4;
Hrg. Tr. at 431:18432:1]
93. Ms. Boyds testimony on this point is corroborated by the testimony
of Wayne Aaron, who took over from Sean Anderson as Vice President of Delta
Connection. [Doc. No. 60 at 4:235:11] Mr. Aaron testified that Ms. Boyd never
said anything about any agreement with Freedom relating to coordinated
cancellations, and that he never heard about such an agreement from anyone else
either. [Doc. No. 60 at 68:110, 75:1719]
94. Ms. Boyd also noted that she was certain she never reached such an
agreement because, in looking at documents where she was asked to lay out the
terms of the various agreements, she never once mentioned anything about
coordinated cancellations. [Trial. Tr. at 279:923]
95. Ms. Boyd prepared decs or presentations for the new heads of Delta
Connection, including Don Bornhorst, and for Deltas new CEO, Richard
Anderson, and the presentations stated that the ERJ Agreement simply looks at
total cancellations, total completion. [Id.]
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96. Ms. Boyd testified she never told any of her colleagues in Delta
Connection that she had reached an agreement with Mr. Bates. [Trial. Tr. at
280:69] Her testimony is corroborated by the testimony of Mr. Higgins, Mr.
Canitano, Mr. Aaron, and Mr. Patel, who all stated that Ms. Boyd never told them
anything about an agreement that she had reached with Mr. Bates. [Trial Tr. at
203:311; Doc. No. 58 (May 20, 2008 H. Patel Dep.) at 62:2163:2; Doc. No. 60
at 68:110; Doc. No. 66 at 66:711, 67:1419]
97. Ms. Boyd testified that she never would have agreed to language
regarding commanded cancellations, because that was more of a Mesa term . . .
not a Delta term. [Trial Tr. at 280:21281:17]
98. Ms. Boyds testimony that no agreement was ever reached on the
issues of coordinated cancellations, four-hour late flights, and cancels caused by
ground handlers is credible and corroborated by other evidence in the record. [See,
e.g., Def. Ex. 1719, 31, 62; Doc. No. 166 at 156:17157:24]
99. Ms. Boyd also testified that she specifically told Mr. Serratelli in
February 2008 that there is no credit for coordinated cancellations under the ERJ
Agreement. [Trial Tr. at 298:39] Her testimony on this point is corroborated by
Plaintiffs own internal e-mails. [Def. Ex. 31]
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J. September 2007 Was a Challenging Month for Plaintiffs
100.
Mesa faced financial difficulties in September 2007, and by the end of
2007 Mesa recorded a quarterly loss of $2.8 million. [Pl. Ex. 27 at 17]
101. Sometime in or before September 2007, the pilots had issued a vote of
no confidence in Mesas management. [Def. Ex. 45; Doc. No. 165 at 169:5170:6]
102. Additionally, Freedoms contract with Delta for the Dash-8 aircraft
had been cancelled, and the flying was discontinued as of late August or early
September 2007. [Trial Tr. at 317:20318:7] The Dash-8 contract contained a
provision that credited coordinated cancellations [Pl. Ex. 23; Trial Tr. at 317:23
318:7],and that flying had helped Freedom make its completion numbers for the
ERJs. [Def. Ex. 36 (MAG02788992, MAG027900)] Freedom argued that,
without that flying, the performance goals would not be attainable. [Def. Ex. 36
(MAG027900)]
K. Plaintiffs Inexplicably Take Credit For Coordinated Cancellations in
September 2007
103. Plaintiffs did not seek to credit commanded cancellations until
September 2007. [Doc. No. 75 at 46:1625; Hrg. Tr. at 225:912, 225:2023,
227:49]
104. Not one of the MAG ReportsMesas internal operational report
specifically identifies an entry for cmd cxls (commanded cancellations) until
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October 2007. [Pl. Ex. 20; Trial Tr. at 240:19241:15] Even the September 2007
MAG Report refers only to total completion and excludes any references to
coordinated cancellations. [Pl. Ex. 20 (MAG001218)]
105. The September 2007 MAG Report similarly states that Freedom
miss[ed] the required 97.9% total completion factor goal to qualify for the 1%
incentive mark-up for the month of September 2007. [Pl. Ex. 20 (MAG001218)]
106.
On October 1, 2007, Mr. Bates advised Mr. Tyler, for the first time, to
credit coordinated cancellations in connection with the billing process. [Hrg. Tr. at
225:912, 258:14259:17] At the same time, Mr. Bates specifically instructed Mr.
Tyler to bill Delta per your process. [Pl. Ex. 44]
107. Although Mr. Lotz testified that Mesas billing department manually
adjusted the September MAG Report for the commanded cancellations [Trial Tr.
at 73:825], on cross-examination he admitted he did not actually know if that had
occurred. [Trial Tr. at 243:89] The MAG Report itself contains no asterisk or
other notation indicating that the completion rate had been adjusted. [Pl. Ex. 20;
Trial Tr. at 244:815]
108. The exclusion of the coordinated cancellations from the completion
rate calculation increased the completion factor to a point at which Freedom would
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receive the additional 1% incentive mark-up for September 2007. [Hrg. Tr. at
253:1323, 313:717; Def. Ex. 141]
L. Plaintiffs September Invoice Intentionally Misreports the Completion
Factor
109. The billing process for every month of flying up to September 2007
had been to source the MAG Report on the invoice as the source of the
completion factor [Trial Tr. at 246:18; Hrg. Tr. at 249:610, 254:21255:22], and
that same process was used in every month after September 2007. [Pl. Ex. 1419;
Trial Tr. at 246:910]
110. Having been told to bill for September according to the normal
process [Pl. Ex. 44], Mr. Tyler created an invoice for the September 2007 flying
that identified the MAG Report as the source of Plaintiffs 98.0% completion
factor, even though the MAG Report clearly reflected a completion factor of only
97.7%. [Pl. Ex. 14, 20]
111. Plaintiffs internally changed the format of the MAG Report in
October 2007 to calculate the completion factor based on a credit for coordinated
cancellations. [Pl. Ex. 20; Trial Tr. at 240:6241:11] They did not go back to
reformat or change the September MAG Report, however, to reflect any
adjustment for coordinated cancellations, even though Mr. Lotz admitted they
could have. [Trial Tr. at 245:719]
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112. The final invoice for September flying was not transmitted to Delta by
Mr. Tyler until December 19, 2007. [Def. Ex. 141]
113. The invoice submitted to Delta did not have any asterisk or notation
indicating that the completion factor had been adjusted for coordinated
cancellations. [Trial Tr. at 244:1619; Pl. Ex. 14]
M. Delta Discovers the Discrepancy in the Completion Factor but is Misled
About the Reason for the Discrepancy
114. Hemang Patel was the Delta Finance employee with responsibility for
the Freedom contracts from approximately September 2007 until June 2008. [Def.
Ex. 158 (Apr. 18, 2010 H. Patel Dep.) at 4:144:23, 6:237:1]
115. After receiving Plaintiffs revised final September invoice on
December 19, Mr. Patel commenced his internal process of reviewing the invoice
and comparing it to Plaintiffs pre-bill as well as to Deltas estimated close.
[Def. Ex. 158 at 13:1114:17, 17:720; Doc. No. 58 at 11:1912:20, 25:1026:15]
116. The pre-bill is a bill submitted by Plaintiffs to Delta in the month
preceding the flying, which estimates the amount that Plaintiffs will earn for that
month based on the flying schedule and estimated costs. [Trial Tr. at 161:321;
Def. Ex. 158 at 7:78:5] Assuming there are no significant discrepancies between
the pre-bill and Deltas internal forecasts, Delta pays the pre-bill in four equal
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installments during the month the flying occurs. [Trial Tr. at 161:321; Def. Ex.
158 at 7:1010:2, 12:1718:10]
117. After the month of flying is completed, Delta will close the month
by reviewing actual hours flown to calculate its own estimate of the amount due
Plaintiffs for the month. [Def. Ex. 158 at 14:817; Doc. No. 58 at 26:813, 51:1
6]
118.
Within 60 to 90 days of completing the flying, Plaintiffs generate a
true up that reflects actual hours flown and costs incurred for the prior flying.
That true up or invoice also reconciles the actual amounts against the estimated
amounts in the original pre-bill, and identifies whether Plaintiffs are owed a
payment from Delta or whether Delta is due a credit. [Def. Ex. 158 at 13:1114:7;
see also Trial Tr. at 244:2024]
119. Once Delta receives the invoice from Plaintiffs, Mr. Patels job is to
review it and identify any significant discrepancies both between the invoice and
the pre-bill and between the invoice and Deltas close. [Def. Ex. 158 at
13:1814:7, 15:1516:2; Doc. No. 58 at 11:1912:20, 25:1026:15; Trial Tr. at
161:321, 294:1518]
120. The average monthly invoice for the ERJ flying was approximately
$20 million. [Def. Ex. 158 at 9:311] Accordingly, Mr. Patel focused primarily
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on major discrepancies amounting to more than a couple hundred thousand
dollars. [Def. Ex. 158 at 15:1516:2]
121. He also focused particularly on discrepancies that would change the
amount of mark-up to be paid under the contract. [Def. Ex. 158 at 22:919; Doc.
No. 58 at 63:1924]
122. In reviewing Plaintiffs invoice for the September flying, Mr. Patel
noticed a discrepancy between the 98.0% completion factor which had been
reported by Plaintiffs and the 97.7% completion factor data he had been provided
by Deltas Operations group. [Def. Ex. 141; Def. Ex. 158 at 22:919, 23:20
24:12; Doc. No. 58 at 48:2251:6] The discrepancy accounted for the difference
between Deltas calculation that no additional incentive mark-up was due and
Plaintiffs calculation that an additional 1% incentive mark-up was owed. [Def.
Ex. 141; Def. Ex. 158 at 22:919, 23:2024:12; Doc. No. 58 at 48:2249:5] The
amount of mark-up at issue was around $150,000. [Pl. Ex. 14; Def. Ex. 97; Def.
Ex. 158 at 23:1619]
123. Mr. Patel questioned Mr. Tyler about the discrepancy on December
21, 2007. [Def. Ex. 141] Mr. Tyler responded by e-mail on December 21 that the
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raw 97.7% completion does not take into account the 17 flights7that Delta asked
us to cancel, with the proviso that these would not count against our completion
factor. [Id.] Mr. Tyler said nothing about a specific agreement with Delta, and he
did not say that Plaintiffs got credit for commanded cancellations. [Id.] Mr.
Tyler concluded that the inclusion of the canceled flights increased the completion
rate to 97.99%. [Id.]
124.
Mr. Bates, who was copied on the response to Mr. Patel, apparently
did not elaborate on Mr. Tylers explanation. [Id.] No response has been offered
into evidence.
125. Mr. Patel did not interpret the e-mail as describing any agreement
with Delta to exclude coordinated cancellations when calculating the completion
rate. [Def. Ex. 158 at 24:2225:7, 67:1768:8] He understood the e-mail to mean
that Freedom had made some particular arrangement for the month of September
2007, and he accepted Mr. Tylers explanation. [Def. Ex. 158 at 67:1768:8] Mr.
Patel testified he had no reason to doubt Mr. Tyler. [Def. Ex. 158 at 66:1923;
see also Def. Ex. 158 at 24:2225:7, 67:1768:8; Doc. No. 58 at 61:1062:2]
7At trial, Mr. Lotz testified that Mesas database reflected only 16
commanded cancellations for September 2007. [Trial Tr. at 73:1516, 238:22240:5; Def. Ex. 151]
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N. Delta Takes a Credit for the September Invoice in January 2008
126.
Once Mr. Patel reviews an invoice from the Finance side, he meets
with his counterpart from the Commercial group to discuss the invoice and to get
approval for any payments. [Def. Ex. 158 at 13:1114:7, 21:1223; Trial Tr. at
160:22161:25; Doc. No. 58 at 25:1021] If Delta is owed a credit in a given
month, no formal approval form is necessary, although the invoice is still reviewed
with someone from the Commercial group. [Def. Ex. 158 at 21:1223, 57:711;
see also Doc. No. 58 at 11:1912:20]
127. In December 2007, Mr. Patels counterpart was Chris Higgins. [Def.
Ex. 158 at 21:2422:8; Doc. No. 58 at 6:237:1] Mr. Higgins had just started with
Delta Connection in December. [Trial Tr. at 158:20159:6]
128. December 21, 2007 fell on the Friday before the Christmas holidays.
[Def. Ex. 141; Trial Tr. at 167:10168:2]
129. Mr. Patel tried to complete the settlement process for Plaintiffs
September invoice quickly given not only the holidays, but also the fact that it was
year end. [Def. Ex. 158 at 21:2422:8]
130. Mr. Patel prepared certain settlement materials which he used to go
through the September invoice with Mr. Higgins. [Def. Ex. 97; Trial Tr. at
162:16163:4, 164:821; Def. Ex. 158 at 20:1721:23] The discussion regarding
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Plaintiffs September invoice was the first settlement discussion Mr. Higgins had
with Mr. Patel relating to any of the connection agreements for which he was
responsible. [Trial Tr. at 162:115]
131. In the meeting with Mr. Higgins, Mr. Patel specifically identified a
number of variances between the invoice and Deltas calculations, including a
variance in the mark-up to be paid. [Def. Ex. 97; Def. Ex. 158 at 22:919]
132.
Mr. Patel informed Mr. Higgins that he would follow up with Mesa
about the variance, and he did so by sending the e-mail to Mr. Tyler on December
21. [Def. Ex. 141; Def. Ex. 158 at 23:2024:2]
133. Mr. Higgins did not specifically recall the e-mail between Mr. Tyler
and Mr. Patel. He testified that he believed he opened the e-mail but that, when he
saw it was addressed to Mr. Patel, he assumed Mr. Patel would handle it. [Trial Tr.
at 186:413; Doc. No. 66 at 46:2348:16]
134. At the time the e-mail arrived, Mr. Higgins was occupied with another
significant project for Deltas labor group, which he was attempting to complete
before leaving for the holidays. [Trial Tr. at 167:10168:2; Doc. No. 66 at 47:17
48:16]
135. Given Mr. Higgins recent move into the position at Delta
Connection, he did not understand precisely what Mr. Tyler was saying in the e-
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mail, but he did not believe the e-mail was referring to an agreement to change the
terms of the contract. [Trial Tr. at 188:1118, 193:22194:4; Doc. No. 66 at
46:1222]
136. Neither Mr. Patel nor Mr. Higgins brought the discrepancy regarding
the completion factor or Mr. Tylers e-mail to the attention of Ms. Boyd [Trial Tr.
at 187:1523, 316:22317:4; Doc. No. 58 at 76:812], although Ms. Boyd
acknowledged they should have. [Trial Tr. at 300:14301:2]
137. After receiving an explanation from Mr. Tyler, Mr. Patel processed
the September invoice. [Def. Ex. 158 at 25:811] Delta was to receive a credit in
connection with the September flying, so that credit was simply applied against the
first January 2008 pre-bill. [Def. Ex. 158 at 25:816]
O. Delta Processes the October Invoice and Takes a Credit in January
2008
138. On December 31, 2007, Mr. Tyler sent Delta the invoice for the
October flying. [Def. Ex. 93]
139. Plaintiffs invoice reported a completion factor of 96.5% and
identified the source as the MAG Report. [Pl. Ex. 15] The completion rate was
calculated by taking credit for coordinated cancellations [seePl. Ex. 20], but the
invoice did not make any reference to that fact. [Pl. Ex. 15]
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140. The 96.5% completion factor was below the 98.9% completion rate
needed to achieve the additional 1% incentive mark-up under the ERJ Agreement.
[Pl. Ex. 20 (MAG001219); Pl. Ex. 21 (Schedule 3)]
141. Mr. Patel did not focus on the completion factor in the October
invoice, because it did not trigger a variance in the mark-up. [Def. Ex. 158 at
27:1428:6] Mr. Patel processed the October invoice in January. [Def. Ex. 93;
Def. Ex. 158 at 29:1521] Again, Delta was owed a significant credit, which Mr.
Patel applied against the second January 2008 pre-bill. [Def. Ex. 93, 98; Def.
Ex. 158 at 29:1524; Hrg. Tr. at 230:1823]
142. Plaintiffs pre-bill estimates exceeded actual costs and mark-up
amounts in virtually every month between June and December 2007, resulting in a
credit to Delta at the time of settlement.8 [Def. Ex. 158 at 56:957:6; Def. Ex. 94
100] Accordingly, Ms. Boyds approval was not required to process the invoices.
[Def. Ex. 158 at 59:657:11; Trial Tr. at 300:2325]
P. Delta Acknowledges its Payment Process Was Sloppy
143. According to Ms. Boyd, Delta had procedures in place for the Finance
group when processing invoices. [Trial Tr. at 282:1721] Under these procedures,
8The only month in which Plaintiffs were owed money at the time ofsettlement was July 2007, where the settlement reflected that Plaintiffs were owed
just over $131,000. [Def. Ex. 95]
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the Finance group should have been looking at the reported operational
performance data and comparing it against Deltas own monthly performance
summary. [Id.; see alsoDef. Ex. 145]
144. Delta Connection experienced considerable turnover, and, apparently,
those procedures were not being followed, and the Finance group was not tying the
ops stats in the invoices to the ops team data. [Def. Ex. 145; see alsoTrial Tr. at
121:123, 282:2224]
145. According to Ms. Boyd, Delta relied too much on the carriers
word. [Trial Tr. at 297:910] Delta relied on the information coming in on the
invoice instead of relying on the information in the performance database. [Trial
Tr. at 129:13]
146. Both Mr. Bornhorst and Ms. Boyd acknowledged that Deltas controls
were insufficient. [Trial Tr. at 129:2225, 297:411] Ms. Boyd remarked that the
controls were very sloppy, at best, and that Deltas various groups were not
communicating well. [Trial Tr. at 297:411]
147. When Ms. Boyd became aware of the problems with Deltas controls,
she moved quickly to remind Deltas Finance, Commercial and Operations groups
about the procedures that should be followed. [Trial Tr. at 282:12283:2; Def. Ex.
86]
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148. Moreover, as a result of what occurred with Plaintiffs invoices, Delta
implemented a number of changes. [Trial Tr. at 282:16]
Q. Plaintiffs Could Not Have Relied Upon Deltas Payment of the Invoices
149. The credits associated with the September and October invoices were
applied in January 2008, after the flying for all months through December had
been completed. [Hrg. Tr. at 230:1823; Def. Ex. 158 at 25:816, 29:1521; see
also Def. Ex. 93]
150. Contrary to Plaintiffs position, Mr. Patels failure to respond during
the Christmas holidays to Mr. Tylers December 21 e-mail could not reasonably be
interpreted by anyone at Freedom as a representation or acknowledgement by
Delta that commanded cancellations could be taken out of the calculation of the
completion factor for purposes of the contract.
151. Mr. Serratelli did not know how Delta had treated the invoices which
were based on credit for coordinated cancellations. [Def. Ex. 111; Doc. No. 166 at
194:218] In his meeting with Ms. Boyd on February 21, 2008, he did not say
anything about having been paid based on a credit for coordinated cancellations.
[Trial Tr. at 315:79]
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152. Mr. Ornstein did not know how Delta had treated the invoices
reflecting credits for coordinated cancels. [Def. Ex. 64; see also Hrg. Tr. at 530:6
15]
153. Contrary to testimony at the Preliminary Hearing, there is no credible
evidence that Plaintiffs agreed to accept coordinated cancellations because
management understood Freedom received credit for them. In fact, the record
shows that Freedom took the cancellations in 2008 even when Delta had made
clear that Freedom was notreceiving credit for them. [Pl. Ex. 20; Def. Ex. 31, 60,
62]
R. Delta Uncovers Plaintiffs Overbilling
154. In February 2008, Mr. Patel was not aware of the methodology
Plaintiffs used to calculate the completion factor in their invoices. [Def. Ex. 158 at
32:614, 34:2335:5] Mr. Patel also was not aware of what a MAG Report was,
and he had never seen one. [Def. Ex. 158 at 30:1331:12, 33:2534:7, 41:1721]
155. In connection with his February 2008 close, Mr. Patel e-mailed Mr.
Tyler on February 28, 2008, to ask Mr. Tyler to send operating performance for
Freedom by aircraft type. [Def. Ex. 144] Mr. Tyler responded by sending Mr.
Patel the Delta Operational Summary for February 2008. [Id.] This document is
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known as the MAG Report [cf. Pl. Ex. 20], but that title does not appear anywhere
on the document.
156. Mr. Patel followed up later on February 28 and asked Mr. Tyler to
provide details about the methodology that Freedom used to calculate the
completion factor in the settlement. [Def. Ex. 47] Mr. Tyler did not respond to
the e-mail. [Def. Ex. 158 at 37:1117]
157.
On the same dateFebruary 28Mr. Bornhorst learned that
Plaintiffs alleged they had an agreement to exclude coordinated cancellations from
the completion rate, and that they had been billing Delta based on exclusion of
those cancellations. [Hrg. Tr. at 399:22400:7] Ms. Boyd also received an e-mail
from Mr. Bates referencing the alleged agreement. [Pl. Ex. 43] As a result of
those communications, Ms. Boyd asked Mr. Patel to research whether Freedom
had pulled coordinated cancellations out of the bills. [Def. Ex. 83; Hrg. Tr. at
400:15401:14] Ms. Boyd was not aware, prior to this time, that Freedom was
removing any cancellations from their incentive compensation calculations. [Id.;
Hrg. Tr. at 400:1014; Trial Tr. at 281:21282:2]
158. Mr. Patel reviewed the prior invoices and was unable to conclude how
commanded cancellations may have impacted Freedoms incentive
compensation calculations. [Def. Ex. 84; Def. Ex. 158 at 39:440:7] As a result,
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Mr. Patel sent a reminder to Mr. Tyler about the e-mail of February 28, and again
asked Mr. Tyler to provide details on how Freedom calculated the completion
factor. [Def. Ex. 147; Def. Ex. 158 at 39:418] Mr. Patel never received a
response. [Def. Ex. 158 at 37:1117; see alsoDef. Ex. 67]
159. Plaintiffs internal documents show that Mr. Tyler intentionally
ignored the request from Mr. Patel, stating the less said the better at this moment.
[Def. Ex. 67]
160. As Delta began looking into the invoices submitted by Freedom, Delta
also began to question whether Freedom was complying with the requirement in
the ERJ Agreement that four-hour late flights not be counted as completed flights.
[Pl. Ex. 67; Hrg. Tr. at 401:1524] On March 18, 2008, Ms. Boyd asked Joy
Bennett of Delta to look at the information she had begun compiling on Freedoms
late flights9to see how many flights were completed over four hours late. [Pl. Ex.
67; Trial Tr. at 307:1923; Hrg. Tr. at 401:25402:23]
9Ms. Bennett had begun a project in late December or early January toattempt to calculate flights completed over four hours late. [Trial Tr. at 305:12306:17, 308:1215] The project was undertaken in connection with Deltasnegotiations with Freedom over the CRJ900 Agreement. [Trial Tr. at 308:1220]Delta learned in that project that Freedom was close to being in default and thatit had been flying a lot of late flights. [Trial Tr. at 305:2024]
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161. The analysis showed that Plaintiffs had been including four-hour late
flights as completed flights for purposes of the completion factor reported in
their invoices. [Def. Ex. 143; Trial Tr. at 174:6175:6] In fact, according to the
testimony of Mr. Tyler, Freedom had been doing that all along, even though it was
contrary to the express terms of the ERJ Agreement. [Hrg. Tr. at 260:2261:4]
Mr. Bates knew Delta could not track that information. [Def. Ex. 18; Trial Tr. at
316:1315]
162. On March 25, 2008, Mr. Patel prepared a summary that showed the
amounts that Delta had been overbilled by Plaintiffs for base mark-up and
incentive compensation, based upon the inflated completion factor. [Def. Ex. 143]
The summary took into account both coordinated cancels and four-hour late
flights. [Id.; Def. Ex. 158 at 43:145:1] The total amount of the overbillings for
the months of September 2007 through December 2007 exceeded $1.4 million.
[Def. Ex. 143; Def. Ex. 158 at 43:145:1]
163. On March 17, 2008, Delta recouped approximately $293,301 of the
amount it had been overbilled for incentive compensation by offsetting that amount
against Plaintiffs March pre-bill. [Pl. Ex. 67; see alsoDef. Ex. 158 at 46:314,
50:322, 51:719]
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164. The parties stipulated that, if coordinated cancellations are not
credited against the completion factor, and if four-hour late flights are not counted
as completed flights,10Delta was overbilled by $3,232,024 between June 2007 and
December 2007. [Doc. No. 168]
S. Delta Has the Right to Terminate the ERJ Agreement
165. When coordinated cancellations are not credited against the
completion rate, and when four-hour late flights and flights flown with no revenue
passengers are not included as completed flights, Freedom is in default in the
months of October 2007 and December 2007, because it did not achieve a total
completion factor of 95%. [Pl. Ex. 57; Hrg. Tr. at 402:24403:2; Doc. No. 168]
166. Moreover, the parties do not dispute that Freedom did not achieve
and could not have achieveda 95% completion factor in February 2008. [Doc.
No. 140-2 at 5; Doc. No. 80 at 22 51]
167. Delta had the absolute right to terminate the ERJ Agreement, at its
sole option, for Freedoms failure to maintain a 95% completion rate in October,
December and February. [Pl. Ex. 21 11(F)(vi)]
10The calculations also take into account flights flown with no revenue
passengers.
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T. Delta Did Not Act in Bad Faith in Terminating the Agreement
168.
Freedom was one of Deltas worst performing carriers even in 2007
[Trial Tr. at 299:1220; Hrg. Tr. at 537:15538:10], and Delta had numerous
discussions with Freedom in 2007 and 2008 to try to improve their performance.
[Doc. No. 56 at 207:414; see alsoDef. Ex. 92] Freedoms plans for improving
their performance were not sufficient, and Delta did not have faith that
performance would improve. [Hrg. Tr. at 538:610] Freedom was failing
[Deltas] customers, and Delta could not tolerate an operator that ran below 95%.
[Doc. No. 61 (May 23, 2008 E. Bastian Dep.) at 61:1565:3]
169. There is no evidence that Delta, at any time, attempted to force
Freedom into default by requesting coordinated cancellations. In fact, Mr.
Bornhorst specifically stated that Delta did not do that. [Trial Tr. at 232:1619]
170. Nor did Delta terminate the agreement simply to reduce its 50-seat jet
capacity; Delta looked to terminate agreements with carriers that were not
performing. [Hrg. Tr. at 535:1316; Hrg. Tr. at 450:16451:13; Doc. No. 61 at
84:420] In fact, Delta would have had to find a way to replace some of the
Freedom flying, because those aircraft were in excess of the capacity Delta was
looking to reduce. [Doc. No. 61 at 65:368:9, 79:1625]
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171. Delta was not aware, prior to February 28, 2008, that Freedom was
taking credit for coordinated cancellations [Hrg. Tr. at 400:1014; 529:23
530:1],11and Delta had no reason to believe Freedom would do so, when Delta had
clearly told Freedom on several occasions that coordinated cancellations were not
excluded from the completion rate. [Trial Tr. at 315:16, 1218]
172. Delta was not aware, prior to March 2008, that Freedom was counting
four-hour late flights and flights with no-revenue passengers as completed flights,
and Delta would have no reason to believe Freedom would do so, when the
contract expressly prohibited that. [Pl. Ex. 21 11(F)(vi); Trial Tr. at 120:1620,
129:1521, 303:21309:5] Delta relied on Freedom to report its completion rate
according to the terms of the contract. [Trial Tr. at 303:68]
173. The fact that information existed within Delta databases regarding
Freedoms flight schedules, departures and arrivals was not sufficient to put
Deltas Commercial group on notice that Freedom was reporting its completion
rate in violation of the contract. [Trial Tr. at 128:21129:21, 309:19310:6] Delta
understood its data on this issue to be unreliable [Trial Tr. at 316:612], and it did
11Given that there was no agreement with Ms. Boyd regarding coordinated
cancellations, Mr. Tylers e-mail to Mr. Patelwhich Mr. Patel interpreted as aspecial arrangement for the month of September onlyis not sufficient to putDelta on notice of this fact.
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not develop a reliable way to track this information until early 2008. [Trial Tr. at
305:20306:24, 308:1219, 316:612; Doc. No. 56 at 203:5204:9] When it did
so, Delta discussed the issue of late flights with Freedom in connection with the
CRJ flying. [Trial Tr. at 308:1219; Def. Ex. 18]
174. Delta took reasonable steps to ensure that its completion rate
calculations and its calculations regarding the amounts Delta had been overbilled
were accurate prior to making a decision to terminate. [Hrg. Tr. at 403:713,
534:512; Doc. No. 56 at 205:17206:7] Delta did not seek to terminate the
agreement as a pretext, but rather exercised its business judgment that it did not
wish to continue a partnership with a carrier who had been underperforming and
overbilling. [Hrg. Tr. at 537:25538:10; Doc. No. 61 at 61:719] Delta had no
obligation to discuss Freedoms default status with Plaintiffs prior to terminating
the ERJ Agreement.12 [Pl. Ex. 21]
175. In contrast, Plaintiffs conduct is troubling. Plaintiffs consistently
reported a completion rate on the invoices that they knew had been calculated in
12Plaintiffs make much of a March 20, 2008 e-mail from Ms. Boyd to
Plaintiffs in which Ms. Boyd says that Freedom would see . . . increased flying inJFK by summer. [Pl. Ex. 66] But, as the complete record demonstrates, Deltawas not aware at the time of this e-mail that Freedom had defaulted under the ERJAgreement. Nor does this e-mail, in any event, suggest that Freedoms
performance somehow warranted increased flying; instead, Ms. Boyd is merelyinforming Plaintiffs that Delta was contemplating repositioning certain ofFreedoms flights from Orlando to JFK. [Id.]
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violation of the contract; they took steps to conceal what they were doing from
Delta; they falsely claimed they had reached an agreement with Ms. Boyd that had
never been reached; and they hampered Deltas ability to discover the truth by
failing to timely produce key evidence.
176. Moreover, after the Preliminary Hearing, Plaintiffs forced Delta into
amending the ERJ Agreement with respect to coordinated cancellations [Trial Tr.
at 228:11230:1]; an express condition of that amendment was that it was not to be
used in any way in this litigation. [Pl. Ex. 74; Trial Tr. at 230:28] Nevertheless,
Plaintiffs introduced evidence of the agreement at trial. [Trial Tr. at 39:1540:12]
U. Plaintiffs Claim for Attorneys Fees and Related Costs Is Unsupported
177. Plaintiffs claim almost $3 million in attorneys fees, expenses and
other costs. [Doc. No. 140-2 at 9; Trial Tr. at 44:2245:2, 50:2021]
178. Plaintiffs were facing numerous financial issues in March 2008. Mesa
reported in its June 2008 10-Q, for example, that the company may be required to
seek bankruptcy protection if Mesa is not able to restructure certain contractual
obligations and commitments, including a $77.8 million senior convertible note.
[Mesa Air Group, Inc., Quarterly Report for Period Ending March 31, 2008 (Form
10-Q), at 3133 (June 30, 2008); Trial Tr. at 68:2469:18]
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179. Mesa also reported that the companys liquidity could be adversely
affected if the holders of certain senior convertible notes exercised their right to
require the company to redeem those notes. [Id.]
180. Mesa also reported that it did not have enough cash to pay
bondholders if they exercised their put right in January of 2009. [Trial Tr. at
56:1017]
181.
Mesa faced the likelihood of bankruptcy despite the conduct of Delta.
[See Def. Ex. 148 at 11; Trial Tr. at 55:1756:2, 66:169:18; Doc. No. 169 (Apr.
16, 2010 Seabury Group Dep.) at 59:116]
(i) Cadwalader
182. Plaintiffs retained the law firm Cadwalader, Wickersham & Taft LLP
(Cadwalader) to assist Mesa in preparing a bankruptcy filing; Cadwalader did
not perform any work for the Preliminary Hearing. [Trial Tr. at 42:2443:5, 43:9
44:6]
183. Mesa paid Cadwalader a $500,000 retainer on May 6, 2008. [Pl. Ex.
84; Trial Tr. at 44:2223, 59:112, 1719]
184. Cadwalader invoiced Mesa on June 18, 2008, for fees and expenses
totaling $1,028,963.32. [Id.] There is no evidence that anyone from Mesa
reviewed the invoice, however, and Mesa paid nothing against the June invoice
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other than informing Cadwalader they could keep the retainer. [Trial Tr. at 59:20
61:7] Because the $500,000 payment cannot be tied to any specific work
performed by Cadwalader, there is no evidence that the fees charged and the
amounts paid are reasonable.
(ii) Seabury
185. Mesa also retained the Seabury Group (Seabury), a consulting firm,
to assist with certain bond issues and cash management work and also assist Mesa
in exploring the possibility of completing an out-of-court restructuring. [Trial Tr.
at 43:15, 61:1365:13] Seabury billed Plaintiffs a total of about $1.5 million, and
Plaintiffs are seeking to recover around $413,000. [Pl. Ex. 82; Doc. No. 169 at
49:1920; Trial Tr. at 47:2450:22]
186. Mesa has none of the actual invoices that detail the time spent on the
cash management work. [Pl. Ex. 82; Doc. No. 169 at 54:2556:2; Trial Tr. at
63:35, 70:1271:1] The invoices, and all other documents related to the
engagement, were destroyed by Seabury, because, as a condition of the
engagement, Mesa required that Seabury agree to destroy that information. [Doc.
No. 169 at 54:2556:2]
187. Mr. Lotz first testified that he never heard of the request to destroy
the documents. [Trial Tr. at 71:1315] On redirect examination, he testified that it
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ma[d]e sense to [him] that, because Seabury consulted for the airline industry,
Mesa made that request to make sure that Seaburys work was not given to Mesas
competitors. [Trial Tr. at 75:19] Seabury, however, characterized Mesas request
as not a usual request. [Doc. No. 169 at 55:1756:2]
188. Neither Plaintiffs nor Seabury could state whether the expenses
claimed were related to the cash management work or the bond work. [Trial Tr. at
63:1664:9; Doc. No. 169 at 62:2163:17]
189. Seaburys witness was not familiar with the specifics of the work
done for Plaintiffs. [Doc. No. 169 at 53:510, 54:813] Because there is no
evidence to substantiate the actual work done by Seabury, and because there is no
evidence that Seaburys rates are in line with industry standards for this type of
consulting work [Doc. No. 169 at 56:1358:11, 59:2060:8], there is no basis to
conclude that Seaburys fees are reasonable.
(iii) Grant Thornton
190. Plaintiffs hired Grant Thornton LLP (Grant Thornton) to handle the
production of electronic documents. [Doc. No. 170 (Apr. 13, 2010 D. Anderson
Dep.) at 13:1514:1] The documents to be produced were documents responsive
to Deltas request for production in this case. [Doc. No. 170 at 13:1514:1]
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191. Grant Thornton had internal staffing issues in connection with the
engagement for Plaintiffs, and one of Grant Thorntons employees was fired, in
part, as a result of his management of the project. [Doc. No. 170 at 45:2346:17,
56:1957:12]
192. Grant Thornton brought in its National Partner in charge of its