Jet Midwest Int'l Co. v. Jet Midwest Grp., LLC

93 F.4th 408

JET MIDWEST INTERNATIONAL CO., LTD., Plaintiff - Appellee v. JET MIDWEST GROUP, LLC; Paul Kraus; Karen Kraus, Defendants

F. Paul Ohadi, in his capacity as trustee

and legal representative of the F. Paul Ohadi Trust dated December 15, 1999

and in his individual capacity; F. Paul Ohadi Trust, dated December 15, 1999;

Kenneth M. Woolley, Defendants - AppellantsJet Midwest Inc., DefendantKMW Business Jets; Alta Airlines Holdings, Defendants - AppellantsJet Midwest International Co., Ltd., Plaintiff - Appellant v. Jet Midwest Group, LLC; Paul Kraus; Karen Kraus, Defendants

F. Paul Ohadi, in his capacity as trustee

and legal representative of the F. Paul Ohadi Trust dated December 15, 1999

and in his individual capacity; F. Paul Ohadi Trust, dated December 15, 1999;

Kenneth M. Woolley, Defendants - Appellees

Jet Midwest Inc., Defendant

KMW Business Jets, LLC; Alta Airlines Holdings, LLC, Defendants - Appellees

No. 21-1795

No. 21-1858

United States Court of Appeals, Eighth Circuit

Submitted: September 20, 2023

Filed: February 9, 2024

Appeals from United States District Court for the Western District of Missouri - St. Joseph

Counsel who presented argument on behalf of the appellants/cross appellees and appeared on the appellants/cross appellees' brief was Teresa Marie Pilatowicz, of Phoenix, AZ. The following attorney(s) also appeared on the appellants/cross appellees' brief; Gerald M. Gordon, of Las Vegas, NV., Erika Pike Turner, of Las Vegas, NV., John R. McDonald, of Minneapolis, MN., Scott Michael Flaherty, of Minneapolis, MN.

Counsel who presented argument on behalf of the appellee/cross appellant and appeared on the appellee/cross appellant's brief was Geoffrey R. Sant, of New York, NY. The following attorney(s) also appeared on the appellee/cross appellant's brief; Eric B. Epstein, of New York, NY., Carol Lee, of New York, NY., Michelle K. Ng, of New York, NY., Carrie Savage, of Kansas City, MO.

Before SMITH, Chief Judge, MELLOY and ERICKSON, Circuit Judges.

SMITH, Chief Judge.

F. Paul Ohadi, in his capacity as trustee and legal representative of the F. Paul Ohadi Trust dated December 15, 1999, and in his individual capacity; the F. Paul Ohadi Trust, dated December 15, 1999; Kenneth M. Woolley; KMW Business Jets, LLC; and Alta Airlines Holdings, LLC (collectively, "Ohadi/Woolley defendants") appeal the district court's order awarding attorneys' fees to Jet Midwest International Co., Ltd. (Jet Midwest International) in the amount of $6,565,297.19, plus contractual interest of 14 percent accruing on the date of each invoice at issue. Jet Midwest International cross-appeals, arguing that the district court erred in not awarding all of its requested fees and costs pursuant to a contractual fee-shifting provision. We vacate the award of attorneys' fees and costs and remand for further proceedings consistent with this opinion.

I. Background

In September 2015, Jet Midwest International and Jet Midwest Group, LLC (JMG) entered into a Term Loan Agreement for Jet Midwest International to loan JMG $6.5 million to fund its acquisition of a Boeing 737-700 aircraft. The Term Loan Agreement contained the following fee-shifting provision:

Borrower [JMG] agrees to pay on demand all costs and expenses in connection with the preparation, execution, delivery, filing, recording, and administration of any of the Loan Documents, including the reasonable fees and out-of-pocket expenses of counsel for Lender [Jet Midwest International], with respect to the items noted above and with respect to advising Lender as to its rights and responsibilities under any of the Loan Documents; provided, however, that Borrower's payment obligations in this sentence shall not exceed, and shall be capped at, $20,000. Borrower agrees to pay on demand all costs and expenses, if any, in connection with the enforcement of any of the Loan Documents.

Jet Midwest Int'l Co. v. Jet Midwest Grp., LLC, 932 F.3d 1102, 1105-06 (8th Cir. 2019).¹

The Term Loan Agreement required JMG to repay the loan within one year. But JMG never repaid any of the principal on the loan. As a result, Jet Midwest International filed the Term Loan Action against JMG. See Jet Midwest Int'l Co. v. Jet Midwest Grp., LLC, No. 5:17-cv-06005-FJG (W.D. Mo.). The district court granted summary judgment in favor of Jet Midwest International, concluding that JMG had failed to repay the principal balance of the loan and had failed to pay interest in accordance with the Term Loan Agreement.

Shortly thereafter, Jet Midwest International moved for an order requiring JMG to reimburse Jet Midwest International for attorneys' fees incurred in the Term Loan Action. Although the district court denied the motion, this court reversed on appeal. We concluded that the Term Loan Agreement's "use of the sweeping language 'all costs and expenses' reflects the parties' intent that JMG would pay Jet Midwest International's attorneys' fees and other costs for enforcing as well as preparing the agreement." Jet Midwest Int'l, 932 F.3d at 1106. Thus, Jet Midwest International was entitled to "all" attorneys' fees incurred in "enforcing" the Term Loan Agreement. Id. We remanded to the district court "for consideration of an appropriate award." Id. at 1107. The district court subsequently awarded Jet Midwest International attorneys' fees in the amount of $823,341.04, plus contractual interest of 14 percent accruing on the date of each invoice at issue.

After the district court awarded summary judgment in the Term Loan Action, Jet Midwest International attempted to collect on the judgment by garnishing JMG's bank accounts, but JMG had no remaining funds to collect. Jet Midwest International then filed the instant Fraudulent Transfer Action under the Missouri Uniform Fraudulent Transfer Act (MUFTA). It alleged that JMG refused to pay the judgment in the Term Loan Action and had fraudulently transferred its assets to the Ohadi/Woolley defendants. The district court conducted a bench trial and entered judgment in Jet Midwest International's favor on all of its causes of action. The actions included the following: (1) a cause of action against JMG as the transferor pursuant to the MUFTA (Count I); (2) a cause of action against the Ohadi/Woolley defendants as the transferees under the MUFTA (Count II); (3) a cause of action against all defendants for civil conspiracy (Count III); and a cause of action for declaratory judgment against the Ohadi Trust (Count IV). Ultimately, the district court determined that JMG fraudulently transferred cash and share certificates valued at $41,054,949.67. The district court ordered as follows:

[M]onetary damages are awarded, jointly and severally, against Kenneth M. Woolley, the Ohadi Trust, and F. Paul Ohadi in his capacity as trustee and legal representative of the Ohadi Trust and in his individual capacity, in the following amount:

(a) $6,500,000.00; plus,

(b) $75,833.37 in interest that was due but unpaid as of October 26, 2017; plus,

(c) $2,090,326.37 in additional unpaid interest accruing through May 31, 2019; plus,

(d) additional interest at a rate of 14% per annum from June 1, 2019 until this award of monetary damages is satisfied; plus, (e) such additional amounts as may be awarded to Jet Midwest International in fees and costs in Case No. 17-cv-06005.

But the sum of (a) through (e), above, shall not exceed a maximum total monetary damages award of $41,054,949.67.

R. Doc. 700, at 2 (emphases added).

After entry of judgment in the Fraudulent Transfer Action, Jet Midwest International sought reimbursement of its fees and costs. It requested attorneys' fees and costs in the amount of $8,753,729.59 at an interest rate of 14 percent from the date of each invoice until the award is paid.² It argued that it was entitled to such fees pursuant to the district court's order entering judgment in favor of Jet Midwest International and this court's opinion in Jet Midwest International, 932 F.3d 1102. The Ohadi/Woolley defendants opposed the motion, arguing that "they were not a party to the Term Loan [A]greement and that [the] Eighth Circuit Order states that [Jet Midwest International] shall recover [its] fees against JMG." Jet Midwest Int'l Co., 2021 WL 1397224, at *2. The district court, however, concluded that the Ohadi/Woolley defendants were jointly and severally liable for fees and costs based on its prior holding that the Ohadi/Woolley defendants "violated the [MUFTA] and colluded and conspired with each other in doing so." Id. (citing Trimble v. Pracna, 51 S.W.3d 481, 500 (Mo. Ct. App. 2001) ("A civil conspiracy is an agreement or understanding between two or more persons to do an unlawful act or use unlawful means to do an otherwise lawful act.")).

After determining that Jet Midwest International was entitled to a fee award, the court addressed the reasonableness of the fee request of $8,753,729.59. Jet Midwest International justified its fee request based on the length of the litigation (two years); the number of defendants (nine prior to bifurcation); "the extraordinary complexity of the fraudulent scheme engaged in by defendants"; and "the nature of the services [counsel] provided, the importance and amount of money involved, the degree of responsibility, [and the] skill and result achieved." Id. at *3. It supported its fee request with two declarations; "numerous attached exhibits detailing the attorneys who worked on the case, a summary of their backgrounds and what work they performed on this case"; and "a lodestar chart detailing the names of all the timekeepers, the dates they worked on the case, their position, their actual hourly rate, the total hours worked and the total fees for each timekeeper." Id. "Of the total [fee] amount, $1,117,791.24 was for costs incurred in connection with the retention of three expert witnesses . . . . [and] $364,748.32 was attributable to other third-party costs, including printing, legal research and court reporting services." Id. And its "fee request re...