Equip. Leasing Grp. of Am. v. Pure Midstream, LLC

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EQUIPMENT LEASING GROUP OF AMERICA, LLC, and CIBM BANK Plaintiffs, v. PURE MIDSTREAM, LLC, PURE AVIATION, LLC WY, PURE AVIATION, LLC MT AND PURE AVIATION AP, LLC and CARLO DOMENIC DIMARCO, Defendants.

No. 1:23-cv-16099

United States District Court, N.D. Illinois

October 7, 2024

MEMORANDUM OPINION AND ORDER

Honorable Beth W. Jantz, Magistrate Judge

Plaintiffs Equipment Leasing Group of America LLC (“ELGA”) and CIBM Bank (“CIBM”) brought suit against Defendants for an alleged breach of an Aircraft Financing Agreement (the “AFA”). Dkt. 56 at 1-2. Plaintiffs filed a Motion for Preliminary Injunction (dkt. 53) and the Court held an evidentiary hearing on July 10th, 2024, August 28th, 2024, and September 4th, 2024. This Memorandum Opinion and Order will serve as and constitute the Court's findings of fact and conclusions of law, pursuant to Federal Rule of Civil Procedure 52.

For the reasons that follow, Plaintiffs' Motion for Preliminary Injunction (dkt. 53) is DENIED. Plaintiffs' Motion (dkt 149) to exclude part of Peter Hickey's expert testimony is DENIED. Defendants' Motion (dkt. 149) to exclude part of Gary Trebels' expert testimony is DENIED.

The following Motions remain pending at this time Plaintiffs' Motion to Dismiss (dkt. 74); Defendants' Amended Motion for Judgment on the Pleadings or in the Alternative for Default Judgment (dkt. 76); Plaintiffs' Motion to Strike and for Sanctions (dkt. 80); and Plaintiffs' Motion to Enforce and for Sanctions (dkt. 139), which is pending in part. Given the change in defense counsel over time, Defendants should come prepared to the next status hearing to address whether they will be standing by their pending motion (dkt. 76) or whether they plan to withdraw it as premature.

A status hearing is set for 10/31/24 at 11:15 a.m. The Parties should also come prepared with a joint proposed discovery plan to move the case forward and to update the Court on any renewed interest in settlement, both of which the Parties should discuss between themselves ahead of the status hearing.

BACKGROUND

On or around December 31st, 2022, Plaintiff ELGA and Defendant Pure Midstream, LLC (“Pure Midstream”) entered into the AFA to enable Pure Midstream to purchase a Hawker/Beechcraft plane, Serial No. RC047 (the “Aircraft”). Pls.' Ex. 1. Guaranties also were issued by the other four Defendants: Pure Aviation, LLC (WY); Pure Aviation, LLC (MT); Pure Aviation AP, LLC; and the managing member of Pure Midstream, Carlo DiMarco (“DiMarco”). Pls.' Exs. 3a, 3b, 3c, 3d. ELGA paid out $2.4 million to Pure Midstream per the AFA. Dkt. 53 at 5; DiMarco Hr'g Test., Sept. 4, 2024. ELGA later sold its rights under the AFA to Plaintiff CIBM Bank. Dkt. 56 ¶ 20. On November 17th, 2023, ELGA filed the Complaint (dkt. 1) in this suit, alleging several defaults under the AFA. CIBM bank later joined the suit and together Plaintiffs seek to recover more than $3.7 million. Dkt. 56. Five months after the initial Complaint (dkt. 1) was filed, on April 2nd, 2024, Plaintiffs filed the instant Motion for Preliminary Injunction (dkt. 53), asking the Court to enjoin Pure Midstream from moving the Aircraft, for immediate access to the Aircraft, and for immediate possession of the Aircraft to prepare it for sale, id. at 1, and later also requesting as relief the ability to actually “sell or lease the Aircraft as a means of recovering the amount owed to them,” dkt. 108 at 2.

Per the AFA, Pure Midstream was required to pay monthly amounts to ELGA. Pls.' Ex. 1. The AFA allowed Pure Midstream to “prepay the Indebtedness.” Id. It also gave ELGA a first priority security interest in the Aircraft, required Pure Midstream to maintain the Aircraft, required Pure Midstream to provide ELGA with certain financial information, and set forth various remedies in the event of default, including the right to repossess the Aircraft. Id.

In March of 2023, the Parties entered into a First Amendment to the AFA which adjusted the monthly payments due. Defs.' Ex. 35. The First Amendment was sent to DiMarco with an amortization schedule that listed out the monthly “payment” amounts, as well as the monthly “interest” and “principal” amounts, which together added up to the monthly “payment” amounts. Pls.' Ex. 17.

Pure Midstream made all of its payments on time until August of 2023. G. Trebels Hr'g Test., Aug. 28, 2024. Days before the August 1st, 2023 payment was due, DiMarco texted Rudy Trebels, a co-owner of ELGA, asking that the payment be postponed and indicating that he was going through a refinance. Defs.' Ex. 41. There was no response by text, but DiMarco testified that he spoke to Rudy Trebels on the phone and told him that he was going through a refinancing and that he wanted a payoff of the AFA with ELGA. DiMarco Hr'g Test., Sept. 4, 2024. On August 29th, an email request for payoff was sent to ELGA by Defendants' Controller. Pls.' Ex. 26. By September 1st, neither the August nor the September payments had been made. B. Trebels Hr'g Test., July 10, 2024.

On September 5th, DiMarco texted Brian Trebels, “Could you confirm we have asked for a payoff statement twice. We are closing by the 10th on it[.]” Pls.' Ex. 36. That same day, Brian Trebels sent a letter to DiMarco stating that the payoff amount was $3,360,076.00 and referring to the AFA as a “lease.” B. Trebels Hr'g Test., July 10, 2024. After receiving the letter, DiMarco sent an email to ELGA attaching the amortization schedule and suggesting that the payoff amount was incorrect. Defs.' Ex. 45. He also texted Rudy Trebels, “On this deal. I'm being told we are in a lease. This was a purchase with a balloon.. .I'm also being told my payoff is over $1.3m higher than actual [sic] of the deal? It's only been 7 mos how could this be?” Defs.' Ex. 41. Rudy Trebels responded, “Let me check and will get back to you. It is not a lease but a finance agreement - but not made to be paid off early.” Id.

The next day, on September 6th, Brian Trebels sent a second letter to DiMarco stating that the total payoff amount was $3,470,604 and that the AFA was in default. Pls.' Ex. 7. DiMarco texted Brian Trebels, “There is a mistake on the payoff. When is a good time to review?” Pls.' Ex. 36. Brian Trebels responded that the August and September payments bounced and another late fee, along with bounce fees, were incurred. Id. He stated that he would look at payoff once monthly payment was received, as payoff amount was a “moving target with the bounces.” Id. DiMarco explained he needed a “payoff number to close,” and that it needed to follow the amortization schedule, while Brian Trebels stated that he “thought it was a full payout.” Id. On September 7th, DiMarco sent an email to Brian Trebels which in part stated, “We have payments missing and it doesn't comport to the [l]oan amortization that [ELGA] provided during and after for the amended deal after signing. Let's review.” Defs.' Ex. 45.

To put it simply, the Parties disagreed about how a prepayment payoff would be calculated. ELGA apparently believed, based on the terms of the AFA, that prepayment would require Pure Midstream to pay all of the remaining monthly payments in full at the time of prepayment, which included paying both the principal and interest for each month. Pure Midstream and DiMarco apparently believed that prepayment required it to pay only the principal amount of the remaining payments, as that would be the point of paying off a financing or loan agreement early. While this disagreement (and Defendants' arguments about anticipatory repudiation) may need to be resolved at some point down the road, it is unnecessary for the Court to do so now, as the preliminary injunction is being denied on other grounds, as explained below.

On September 21st, ELGA, through counsel, sent Pure Midstream a letter stating that it was in default and that it would accelerate all amounts due if the account was not made current within ten days. Defs.' Ex. 49. On September 27th, the August payment was made. B. Trebels Hr'g Test., July 10, 2024. On September 29th, an ELGA representative told DiMarco by email that the amount to bring his account current was $60,470.80, which included the September payment, plus late fees and bounce fees from both August and September. Defs.' Ex. 45. It is unclear when exactly, but this amount was paid prior to the end of 2023. B. Trebels Hr'g Test., July 10, 2023; DiMarco Hr'g Test., Sept. 4, 2024. Indeed, Pure Midstream made all payments through the end of 2023, even though not all of them were timely made. G. Trebels Hr'g Test., Aug. 24, 2024.

ELGA stopped sending invoices to Pure Midstream in January of 2024, and Pure Midstream stopped making payments at that time. B. Trebels Hr'g Test., July 10, 2024; DiMarco Hr'g Test., Sept. 4, 2024. DiMarco testified that he withheld payments because he believed the Parties were making progress towards settlement from January to April of 2024. Id. Indeed, at the end of January, the Parties reported to the Court that settlement discussions were taking place, dkt. 31, requested a settlement conference in February, dkt. 38, and were working with the Court on settlement through mid-March, dkt. 47, all according to the docket in this case.

As noted above, on April 2nd, 2024, five months after the initial Complaint (dkt. 1) in this case was filed, Plaintiffs filed their Motion for Preliminary Injunction (dkt. 53) asking the Court to enjoin Pure Midstream from moving the Aircraft, for immediate access to the Aircraft, for immediate possession of the Aircraft to prepare it for sale, id. at 1, and later also requesting as relief the ability to “sell or lease the Aircraft as a means of recovering the amount owed to them,” dkt. 108 at 2. Defendants' Response (dkt. 64), filed on April...