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Bakko Aviation, LLC v. KK Air, LLC

United States District Court, D. Minnesota

April 17, 2017

Bakko Aviation, LLC, Plaintiff,
v.
KK Air, LLC, and Justin Smith, Defendants.

          Jason G. Lina, Esq., Fluegel, Anderson, McLaughlin & Brutlag, Chtd., counsel for Plaintiff.

          Justin Smith, Pro Se, Defendant.

          MEMORANDUM OPINION AND ORDER

          DONOVAN W. FRANK UNITED STATES DISTRICT JUDGE

         INTRODUCTION

         This matter is before the Court on a Motion for Default Judgment brought by Bakko Aviation, LLC (“Plaintiff”). (Doc. No. 14.) Also before the Court is an untimely Motion to Dismiss for Lack of Personal Jurisdiction and for Failure to State a Claim Upon Which Relief Can Be Granted brought by Defendant Justin Smith (“Smith”). (Doc. No. 19.) Defendant KK Air, LLC (“KK Air”) has not answered or otherwise appeared to defend this action. For the reasons set forth below, the Court grants Plaintiff's Motion in part and denies Smith's Motion.

         BACKGROUND

         I. Plaintiff's Complaint

         This action arises out of a lease agreement (“Lease”) between Plaintiff and KK Air, a Texas corporation, entered into on or about August 10, 2012. (Doc. No. 1 (“Compl.”) ¶¶ 2, 6.) Under the Lease, KK Air agreed to pay Plaintiff monthly payments of $15, 000 in exchange for the exclusive use of an aircraft[1] for a four-year term. (Id. ¶ 7.) Along with the required monthly payments, the Lease required KK Air to pay a $25, 000 security deposit. (Id.) KK Air was also required to log and report all flight hours to Plaintiff and to make payments of $70 per hour flown pursuant to the Lease terms. (Id.)

         The Lease imposed several obligations upon KK Air regarding repairs, maintenance, and inspections, including monthly maintenance reporting to Plaintiff. (Id. ¶¶ 7-11.) According to Plaintiff, KK Air had an obligation to immediately report any damage to the aircraft and incur the necessary expenses to fully repair the aircraft upon Plaintiff's approval of such repairs. (Id. ¶ 12.) Upon termination, KK Air was required to return the aircraft to Plaintiff in Glenwood, Minnesota at KK Air's expense. (Id. ¶ 13.) Plaintiff alleges the aircraft was required to be delivered “with all maintenance inspection up-to-date, duly certified as an airworthy aircraft, with all equipment, systems, radios, [and] appliances in the same condition as received [f]rom Plaintiff, normal wear and tear excepted.” (Id. ¶ 14.) Plaintiff asserts that the prevailing party in a lawsuit relating to the Lease is entitled to reasonable attorney fees. (Id. ¶ 16.)

         According to the Complaint, KK Air failed to pay the $25, 000 security deposit, and as of November 2, 2015, owed $67, 227.15 in past-due monthly lease payments and $122, 500 for unpaid expenses associated with 1, 750 incurred flight hours. (Id. ¶¶ 19-22.) Plaintiff terminated the Lease on or about September 17, 2015. (Id. ¶ 24.) KK Air failed to return the aircraft to Minnesota as required by the Lease. (Id.) On October 14, 2015, Plaintiff recovered the aircraft from KK Air in Texas, incurring approximately $25, 000 in recovery expenses. (Id. ¶ 25.)

         Plaintiff alleges upon information and belief that KK Air damaged the aircraft, failed to inform Plaintiff of such damages, and performed poor quality repair work using non-approved components without Plaintiff's permission. (Id. ¶¶ 26-28.) Due to KK Air's substandard repairs, Plaintiff asserts it has incurred at least $350, 000 in repair expenses. (Id. ¶ 29.) Similarly, Plaintiff alleges KK Air performed improper maintenance, repairs, and updates that resulted in the aircraft being declared not airworthy by the FAA. (Id. ¶¶ 30-31.) According to Plaintiff, in order to obtain airworthiness certification, Plaintiff has had to incur significant expenses. (Id. ¶ 31.)

         Plaintiff's Complaint asserts breach-of-contract and negligence claims against both KK Air and Smith. (Id. ¶¶ 32-37.) Plaintiff alleges upon information and belief that Smith “formed or maintained Defendant KK Air, LLC, as his personal alter ego.” (Id. ¶ 34.) Specifically, Plaintiff alleges upon information and belief that Smith did so “by (1) insufficiently capitalizing the corporation; (2) failing to observe corporate formalities; (3) maintaining the insolvency of the corporation; and ([4]) siphoning corporate assets for individual dealings.” (Id.) Plaintiff also alleges upon information and belief that Smith was responsible for the substandard repairs and maintenance. (Id. ¶ 35.) The Complaint asserts that the alleged breach of contract and negligence have caused Plaintiff to incur damages in excess of $500, 000 plus attorney fees. (Id. ¶ 36.) According to the Complaint, “Plaintiff is entitled to the equitable remedy of piercing the corporate veil to hold Defendant Justin Smith liable for damages alleged herein against Defendant KK Air, LLC.” (Id. ¶ 37.)

         II. Procedural Background

         On March 23, 2016, Plaintiff commenced this action by filing a Complaint. (See generally Compl.) The Defendants were served on July 22, 2016, with Smith being served as both an individual and as agent of KK Air. (See Doc. Nos. 9, 10.) Both Defendants failed to plead or otherwise defend the action within the time permitted following service, and a Clerk's Entry of Default was filed on August 29, 2016. (Doc. No. 13.) On September 6, 2016, Plaintiff filed a Motion for Default Judgment seeking a default judgment for Defendants' alleged breach of contract, (Doc. No. 14), and a hearing on this motion was set for November 4, 2016, (Doc. No. 16).

         On November 3, 2016, Defendant Justin Smith submitted via e-mail to the Court a pro se Motion to Dismiss for Lack of Personal Jurisdiction and for Failure to State a Claim Upon Which Relief Can Be Granted. This motion was filed on the docket on November 4, 2016. (Doc. No. 19.) The Court held the scheduled hearing on Plaintiff's Motion for Default Judgment on November 4, 2016, and counsel for Plaintiff appeared. Neither Defendant made an appearance. (Doc. No. 20.)

         On November 17, 2016, the Court ordered Smith to pay Plaintiff's attorney fees and costs associated with bringing the Motion for Default Judgment within thirty days as a condition of going forward in defending the case. (Doc. No. 24.) Defendant Justin Smith did not pay any attorney fees and costs. Pursuant to the Court's request, on January 5, 2017, Plaintiff filed a letter brief addressing the jurisdictional issues raised in Defendant Justin Smith's untimely motion. (Doc. No. 25.) The ...


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