BOC Aviation Ltd. v. AirBridgeCargo Airlines, LLC

669 F.Supp.3d 204

BOCA AVIATION LIMITED, Plaintiff, v. AIRBRIDGECARGO AIRLINES, LLC, and Volga-Dnepr Logistics B.V., Defendants.

22-cv-2070 (LJL)

United States District Court, S.D. New York

Signed April 11, 2023

Edward Joseph Heppt, John G. McCarthy, Smith Gambrell & Russell, LLP, New York, NY, for Plaintiff.

Gabrielle Yvonne Vazquez, Patrick Alan Train-Gutierrez, Jeffrey Ephraim Glatt, McGrail & Bensinger LLP, New York, NY, for Defendants.

OPINION AND ORDER

LEWIS J. LIMAN, United States District Judge:

This case arises from the imposition of E.U. sanctions on the Russian Federation, following Russia's invasion of Ukraine, and the imposition of Russian sanctions on foreign assets, including internationally leased aircraft. In February 2022, following the invasion, a number of governments, including the United States and the European Union, imposed sanctions on Russia that adversely affected the ability of air carriers based in Russia to perform their aircraft lease obligations. Walton Direct Testimony ("Walton Test.") ¶ 21. The Russian Federation then issued regulations with their own restrictions and consequences. Id.

Three aircraft, including their airframes, engines, and accompanying items of equipment, are at issue in this case. The aircraft were leased by Plaintiff BOC Aviation Limited ("BOCA" or "Plaintiff" or "Lessor") to Defendant AirBridgeCargo Airlines, LLC ("AirBridge" or "Lessee"), pursuant to leases that were guaranteed by Defendant Volga-Dnepr Logistics, B.V. ("Volga-Dnepr," and with AirBridge, "Defendants"). After the invasion and due to events triggered by the imposition of sanctions, Plaintiff declared "Events of Default" under the leases and attempted, with only partial success, to exercise its rights to retake the aircrafts. This case was initiated by Plaintiff on March 14, 2022, by filing of a complaint alleging breaches of the leases and guaranties and a motion seeking emergency relief. Dkt. Nos. 1, 4. On March 25, 2022, the Court issued an ex parte order for an injunction and immediate possession of one of the aircraft, Dkt. No. 26, which allowed Plaintiff to recover one of the planes and two of its four engines, with the other two engines remaining in Russia. The other two aircraft also are currently in Russia. Following subsequent proceedings, by bench decision on November 16, 2022, the Court granted Plaintiff's motion for a preliminary injunction ordering, inter alia, Defendants to deliver title to two engines with respect to the one recovered aircraft that are of the same or an improved model to the engines remaining in Russia by November 21, 2021. That decision was followed by several subsequent orders imposing contempt sanctions on Defendants payable to both Plaintiff and the Court due to their failure to comply with the Court's orders. See Dkt. Nos. 91, 124, 135.

On April 3, 2023, the Court held a one-day bench trial. The Court received testimony on direct examination by declaration of one witness: David Walton, the Deputy Managing Director and Chief Operating Officer of Plaintiff. Defendants initially proposed offering three witnesses but offered no witnesses at trial. This Opinion and Order constitutes the Court's findings of fact and conclusions of law for purposes of Federal Rule of Civil Procedure 52(a)(1). To the extent any statement labeled as a finding of fact is a conclusion of law, it shall be deemed a conclusion of law, and vice versa.

FINDINGS OF FACT

I. The Relevant Parties and Persons

Plaintiff BOCA is a corporation organized and existing under the laws of Singapore that is engaged in the aviation business, principally with respect to the purchasing, selling, and leasing of commercial aircraft. Dkt. No. 143-1 ¶ 1; Walton Test. ¶ 4. It is a global aircraft operating and leasing company whose shares are publicly traded. Walton Test. ¶ 4. As of December 31, 2022, BOCA owned, managed, and had on order a total of 633 aircraft. Id. ¶ 5. It has airline customers in Asia, the Middle East, Europe, Latin America, and North America. Id. ¶ 6. In the United States, BOCA aircraft are operated by American Airlines, United Airlines, Southwest, and Frontier Airlines. Id.

Defendant AirBridge is a limited liability company organized and existing under the laws of the Russian Federation that operates cargo airline services. Dkt. No. 143-1 ¶ 2. AirBridge is a wholly-owned subsidiary of parent corporation and defendant Volga-Dnepr. Id. Volga-Dnepr is a company incorporated under the laws of the Netherlands. Id. ¶ 3.

Non-party Rainbow Leasing Limited ("Rainbow") is a company incorporated under the laws of Ireland and is an indirect partial subsidiary of Volga-Dnepr. Id. ¶¶ 4-6. Rainbow is wholly owned by non-party Volga-Dnepr Airlines (Ireland) Limited ("V-D Ireland"). Id. ¶ 5. In turn, Volga-Dnepr owns 68.7 percent of V-D Ireland. Id. ¶ 6. Rainbow is the owner of three aircraft engines involved in this case: one bearing the engine serial number ("ESN") 959228 ("Rainbow Engine 1"), which was attached to the aircraft that was repossessed by BOCA following this Court's March 25, 2022 Order for immediate possession;¹ and two engines bearing ESN 959208 ("Rainbow Engine 2") and ESN 959221 ("Rainbow Engine 3"), unattached to any of BOCA's aircrafts and currently in GE Aviation overhaul shops. Id. ¶ 27; Walton Test. ¶¶ 45, 50; Dkt. No. 70.

SB Leasing Ireland Limited ("SBLI") is a leasing company unaffiliated with any of the parties to this lawsuit. SBLI is the owner of an aircraft engine bearing ESN 959350 ("SBLI Engine"), which was attached to the aircraft that was repossessed by BOCA. Dkt. No. 143-1 ¶ 27.

II. BOCA Acquires Title to the Airframes Leased to AirBridge and Guaranteed by Volga-Dnepr

As previously noted, this case involves the return of three Boeing Aircraft (collectively, the "Aircrafts").² On March 30, 2017, BOCA acquired ownership of two Boeing Model 747-8F airframes respectively bearing manufacturer's serial number ("MSN") 60117 and MSN 60118, each equipped with four General Electric Model GEnx-2b67/P engines. Dkt. No. 143-1 ¶¶ 7, 9. On October 31, 2017, BOCA acquired ownership of a third Boeing Model 747-8F aircraft with an airframe bearing serial number MSN 60119, also equipped with four General Electric Model GEnx-2b67/P engines. Id. ¶ 12. Each Aircraft was registered on the aircraft registry in Bermuda. Id. ¶¶ 8, 11, 14. Further, each Aircraft is outfitted as a cargo aircraft. Tr. 55. This Opinion and Order refers to each Aircraft as the "'117 Aircraft," "'118 Aircraft," and "'119 Aircraft."

Of relevance here, when AirBridge took delivery of the '118 Aircraft pursuant to its Lease Agreement, General Electric Model GEnx-2b67/P engine with ESN 959449 ("BOCA Engine 959449") and General Electric Model GEnx-2b67/P engine with ESN 959452 ("BOCA Engine 959452") (collectively, the "BOCA Engines") were installed on its airframe and were part of BOCA's purchase of the Aircraft. Dkt. No. 143-1 ¶ 10; Pl. Ex. 3 at BOCA_00004423.

At the time BOCA acquired title to the '117 and '118 Aircrafts, each was under lease to AirBridge, pursuant to lease agreements guaranteed by Volga-Dnepr. On March 30, 2017, the day BOCA acquired title to the aircraft, BOCA also entered into Assignment, Assumption and Amendment Agreements with respect to the '117 Aircraft and the '118 Aircraft. Dkt. No. 143-1. ¶¶ 7, 9; Pl. Exs. 1, 3. The Court refers to the individual agreement as an "Assignment Agreement," with each particular agreement noted by the MSN of the airframe, e.g., the "'117 Assignment Agreement." Each Assignment Agreement incorporated the prior aircraft lease agreement for the '117 Aircraft and the '118 Aircraft, with BOCA as the new lessor. Dkt. No. 143-1 ¶¶ 7, 9; Pl. Exs. 1, 3.

When BOCA acquired ownership of the '119 Aircraft on October 31, 2017, it was on lease to an affiliate of Defendants, an non-party airline called CargoLogicAir Ltd. ("CargoLogic"). Dkt. No. 143-1 ¶ 12. That same day, BOCA, non-party BCC Equipment Leasing Corporation, CargoLogic, and Volga-Dnepr entered into an Assignment, Assumption and Amendment Agreement (the "'119 Assignment Agreement") with respect to the '119 Aircraft that incorporated the prior lease and with BOCA as the new lessor. Walton Test. ¶ 17. On January 31, 2020, BOCA entered into an Assignment, Assumption and Amendment Agreement with respect to '119 Aircraft with CargoLogic and Volga-Dnepr, which incorporated the prior lease and replaced CargoLogic with AirBridge as the new lessee. Dkt. No. 143-1 ¶ 13; Walton Test. ¶ 18.

Volga-Dnepr executed guaranty agreements as to each lease agreement, which guaranteed, inter alia, the due and punctual performance and observance by AirBridge of all obligations under the lease agreements and the due and punctual payment of each amount that AirBridge is or may become obligated to pay under the lease agreements. Dkt. No. 143-1 ¶¶ 15, 16, 38; Pl. Exs. 2, 4, 6.

Because the parties agree that each of the lease agreements and guaranty agreements contain identical terms except with respect to the identity of the airframe and the stipulated loss values of those airframes, Pretrial Conf. Tr. 3, the Court, for the purposes of convenience and brevity, cites Plaintiff's Exhibit 1, the Amended and Restated Aircraft Lease Agreement with respect to the '117 Aircraft, dated as of November 13, 2015, and as amended and restated as of March 30, 2017, as the "Lease Agreement," Pl. Ex. 1 at BOCA_00004234. Individual lease agreements are referred to as, e.g., the "'117 Lease Agreement." The Court likewise cites Plaintiff's Exhibit 2, the Guaranty Agreement for the '117 Aircraft, as the "Guaranty," Pl. Ex. 2, and refers individual guaranty agreements as, e.g., the "'117 Guaranty."

III. Relevant Provisions of the Lease Agreements

The Lease Agreements provide for BOCA to lease to AirBridge each of the three Aircrafts for a defined term, subject to the condition precedent (among others) that BOCA has received the Guaranties from Volga-Dnepr and...