If you didn’t think a case with a $55 million default judgment could get more interesting, you were wrong. The Business Court awarded a total of $82 million in damages this week against a company that successfully set aside the lesser default judgment.
In Deutsche Bank Trust Co. Americas v. TradeWinds Airlines, Inc., three airline-related plaintiffs sued a lessor of large airplanes. The lessor was funded by deep pockets including George Soros, but not so deep as to enter an appearance before entry of default. One of the plaintiffs went around its compatriots, moving for and obtaining a $55 million default judgment, then entering bankruptcy in order to avoid further proceedings. We posted last April about an order in which the Business Court declined to rule during the pendency of a bankruptcy stay, but in which the Court gave strong hints about its likely ruling once the stay was lifted. Last September, those hints became rulings, as the default judgment was set aside (although the entry of default remained in place).
So what did the defendant gain by having a $55 million award set aside? An $82 million judgment instead, following a 6-day bench trial. Here’s how the Court got there:
- Two of the plaintiffs (Coreolis and TradeWinds Holdings) lost a combined $11,544,000 that they had to pay in settlement of claims against them due to the defendant’s fraudulent inducement.
- TradeWinds itself suffered almost $2.7 million in repair costs, $6.2 million in lease payment losses, and $7.2 million in other damages due to engine failures, for a total of $16.1 million.
- The allegation amounting to unfair and deceptive trade practices were deemed admitted due to the entry of default, so both awards were statutorily trebled. That resulted in over $34 million in damages to Coreolis and Tradewinds Holdings and over $48 million for TradeWinds.
It wasn’t all bad news for the Defendant — in a separate Order, the Court declined to award attorneys’ fees. The Court found that, because the case was intertwined with efforts to pierce the defendant’s corporate veil in New York (to reach Soros and others), this particular case was not capable of resolution, and thus was not the subject of an unwarranted refusal to settle. In addition, the Court criticized the damages sought by TradeWinds Holdings and Coreolis that were in excess of the ultimate award: "If those damage claims did not cross the border of speculation, they reached the very edge of the line."