Regions Commercial Equipment Finance, LLC v. Performance Aviation, LLC

          MEMORANDUM OPINION AND ORDER

          KEITH STARRETT, UNITED STATES DISTRICT JUDGE

         For the reasons below, the Court denies Defendants' Motion [65] to determine the applicable law, grants Plaintiff's Motion to Strike [61] Defendants' Notice of Jury Demand [56], denies Defendants' Motion to Dismiss [51], and grants Plaintiff's Motion [48] for an order directing the Clerk to issues summons for a replevin hearing.

         I. Background

         The Court previously discussed the factual and procedural background of this case. See Regions Commercial Equip. Fin., LLC v. Performance Aviation, LLC, No. 2:16-CV-110-KS-JCG, 2016 U.S. Dist. LEXIS 96658 (S.D.Miss. July 22, 2016); Regions Commercial Equip. Fin., LLC v. Performance Aviation, LLC, No. 2:16-CV-110-KS-JCG, 2016 U.S. Dist. LEXIS 154782 (S.D.Miss. Nov. 8, 2016). On November 9, 2016, Plaintiff filed a Verified Second Amended Complaint [47], which included a specific claim of replevin. Two days later, Plaintiff filed a Motion [48] for the Court to direct the Clerk to issue summons for a replevin hearing.

         Defendants objected [49] to the motion and filed a Motion to Dismiss [51] the replevin claim. Later, Defendants filed a Notice of Jury Demand [56] - despite the Court's prior Order [45] granting Plaintiff's Motion to Strike [32] their initial jury demand - and Plaintiff promptly filed a Motion to Strike [61] it. Finally, Defendants filed a Motion to Determine [65] the law applicable in this case. All pending motions are ripe for the Court's review.

         II. Motion to Determine Applicable Law [65]

         Defendants filed a motion for the Court to determine that Mississippi law applies to all issues in this case. In response, Plaintiff argues that Alabama law applies, as provided in the loan documents.

         Indeed, the Promissory Notes executed by Defendant Performance Aviation, LLC provide: “THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE STATUTES AND LAWS OF THE STATE OF ALABAMA . . . .” Exhibit 1 to Second Amended Complaint at 4, Regions Commercial Equip. Fin., LLC v. Performance Aviation, LLC, No. 2:16-CV-110-KS-JCG (S.D.Miss. Nov. 9, 2016), ECF No. 47-1; Exhibit 2 to Second Amended Complaint at 4, Regions Commercial Equip. Fin., LLC v. Performance Aviation, LLC, No. 2:16-CV-110-KS-JCG (S.D.Miss. Nov. 9, 2016), ECF No. 47-2.

         Likewise, the Aircraft Security Agreements executed by Performance provide: “THIS AGREEMENT, THE NOTE AND ANY GUARANTY . . . SHALL BE GOVERNED IN ALL RESPECTS BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ALABAMA . . . .” Exhibit 3 to Second Amended Complaint at 10, Regions Commercial Equip. Fin., LLC v. Performance Aviation, LLC, No. 2:16-CV-110-KS-JCG (S.D.Miss. Nov. 9, 2016), ECF No. 47-3; Exhibit 4 to Second Amended Complaint at 10, Regions Commercial Equip. Fin., LLC v. Performance Aviation, LLC, No. 2:16-CV-110-KS-JCG (S.D.Miss. Nov. 9, 2016), ECF No. 47-4.

         Finally, the Continuing Guaranty Agreements executed by Defendants Wade Walters Consulting, Inc., Prime Care Revenue Management, LLC, Prime Care Management Group, LLC, Wade Walters, and Dorothy Walters provide: “This Guaranty shall be governed by, and construed in accordance with, Alabama law.” Exhibit 5 to Second Amended Complaint at 2, Regions Commercial Equip. Fin., LLC v. Performance Aviation, LLC, No. 2:16-CV-110-KS-JCG (S.D.Miss. Nov. 9, 2016), ECF No. 47-5.

         A federal court sitting in diversity is bound to follow the substantive law of the forum state, including that state's choice-of-law rules. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941); see also Sorrels Steel Co., Inc. v. Great Sw. Corp., 906 F.2d 158, 167 (5th Cir. 1990). Under Mississippi law, Courts must “give effect to an express agreement that the laws of a specified jurisdiction shall govern, particularly where some material element of the contract has a real relation to, or connection with, such jurisdiction. The intention of the parties as to the law governing [the transaction] will be respected in the absence of anything violating the public policy of the forum jurisdiction.” Miller v. Fannin, 481 So.2d 261, 262 (Miss. 1985); see also Herring Gas Co. v. Magee, 22 F.3d 603, 607 (5th Cir. 1994) (“Under Mississippi law, contracting parties can decide which state's law will govern their agreement.”). Therefore, barring some meritorious defense to enforcement of the contracts, the Court will respect the parties' agreement and apply Alabama law.

         First, Defendants contend that the loan documents are unenforceable contracts of adhesion. “A contract of adhesion has been described as one that is drafted unilaterally by the dominant party and then presented on a ‘take-it-or-leave-it' basis to the weaker party who has no real opportunity to bargain about its terms.” East Ford, Inc. v. Taylor, 826 So.2d 709, 716 (Miss. 2002). Such contracts are not automatically void, though. Id. Contracts of adhesion are “procedurally unconscionable only where the stronger party's terms are unnegotiable and the weaker party is prevented by market factors, timing or other pressures from being able to contract with another party on more favorable terms or to refrain from contracting at all.” Id.

         Defendants provided no evidence regarding the market factors, timing, or other pressures surrounding the execution of the loan documents. They have not demonstrated that they were unable to contract with another party on more favorable terms, or that they could not refrain from contracting altogether. In fact, this Court previously noted that Defendants Wade and Dorothy Walters, the principals of the corporate Defendants, had substantial assets at the time of the transactions at issue, which were later seized by the government. Defendants could have sought alternative financing, or they could have paid for the planes outright. Therefore, the loan documents are not unenforceable contracts of adhesion.

         Defendants also argue that the loan documents are ambiguous and must be construed against Plaintiff, the party who drafted them. First, Defendants note that the Promissory Notes contain the following language: “Borrower [Performance] hereby expressly submits to the jurisdiction and venue of all federal and state courts located in the State of Alabama, Jefferson County . . . .” Exhibits 1 and 2 [47-1, 47-2], at 3. This language creates no ambiguity, as jurisdiction and venue are a separate issue from choice of law.

         Next, Defendants apparently argue that the Aircraft Security Agreements' definition of the term “Applicable Law” creates an ambiguity as to the parties' choice of law. The Security Agreements provide:

“Applicable Law” shall mean all statutes, laws, ordinances, rules, regulations and court or administrative orders of any Government Authority applicable to the person, party, conduct, question, covenant, or Collateral in question, including all applicable common law and equitable principles, state, and federal constitutions, statutes, rules, regulations, and orders of governmental bodies and all judicial orders, judgments and decrees and including any of the foregoing applicable to the registration, use, ownership, operation, maintenance, overhauling, or condition of the Collateral, or any part thereof.

Exhibits 3 and 4 [47-3, 47-4], at 1. This section creates no ambiguity as to the parties' choice of law for the construction and enforcement of the contract, as it merely defines the term “Applicable Law, ” as used within the contract. Defendants did not direct the Court to any contract language providing that “Applicable Law, ” as defined above, governs the construction and enforcement of the contract. Rather, the parties explicitly chose Alabama law.

         Finally, Defendants argue that the Court must not enforce the parties' choice of law because the State of Mississippi has a strong interest in protecting the rights of debtors and guarantors. Defendants apparently contend that applying Alabama law would ...