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SO Ordered

SO Ordered

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Published by loop_cr9603

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Published by: loop_cr9603 on May 05, 2010
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05/27/2010

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ATI-2420887v8
 
IN THE UNITED STATES DISTRICT COURTFOR THE NORTHERN DISTRICT OF GEORGIAATLANTA DIVISIONMESA AIR GROUP, INC. andFREEDOM AIRLINES, INC.,Plaintiffs,v.DELTA AIR LINES, INC.,Defendant.::::::::::CIVIL ACTIONFILE NO. 1:08-CV-1334-CC[PROPOSED] FINDINGS OF FACT AND CONCLUSIONS OF LAW
This case came before the Court first, for hearing on May 27-29, 2008, onPlaintiffs’ Motion for Preliminary Injunction [Doc. No. 24] and again, for a trial onthe merits on April 20-23, 2010. Having carefully considered the evidencepresented on behalf of Plaintiffs Mesa Air Group, Inc. (“Mesa”), and its wholly-owned subsidiary, Freedom Airlines, Inc. “Freedom”) and Defendant Delta AirLines, Inc. (“Delta”), the credibility of the witnesses, the briefing of the partiesand the applicable law, the Court ORDERS and DECLARES (1) Delta is estoppedfrom terminating the Delta Connection Agreement based on the grounds set forthin the March 28, 2008 termination letter; (2) the grounds proffered in Delta’stermination letter are invalid; (3) the Contract remains in effect, subject to itsterms; (4) Delta’s conduct in attempting to terminate the Contract breached the
Case 1:08-cv-01334-CC Document 172 Filed 05/04/2010 Page 1 of 66
 
 
ATI-2420887v8
 
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implied and express duties of good faith and fair dealing; and (5) as a result of Delta’s bad faith conduct, Plaintiffs are entitled to recover their attorneys fees andlitigation expenses. Regarding Delta’s counterclaim, the Court DENIES Delta’sclaims for Breach of Contract and breach of the express and implied duty of goodfaith. In support of its ruling, the Court makes the following findings of fact andconclusions of law as provided in Federal Rule of Civil Procedure 52(a):
I.
 
FINDINGS OF FACT
A.
 
The Delta Connection Agreement.
 1.
 
Mesa, Freedom and Delta entered into the “Delta ConnectionAgreement” on May 3, 2005, under which Freedom operates up to 36 ERJ-145regional jet aircraft (the “Aircraft”) for Delta under the Delta name and airlinecode, “DL.” (Third Am. Compl. ¶ 1; Pls.’ Ex. 21.)
1
 2.
 
Freedom’s schedules and fares are set and published by Delta.Freedom supplies the Aircraft, flight crews and other personnel and operates the
1
Mesa and Delta entered into "Amendment Number One" on March 13,2007. (Third Am. Compl. ¶ 20; Answer ¶ 20.) (the Delta Connection Agreement,together with Amendment Number One, is referred to herein as the "Contract").Amendment Number One provided for the addition and removal of certain Aircraftand addressed issues related to Delta's emergence from bankruptcy, but theContract terms relevant to this action were unchanged. (
 Id.
)
Case 1:08-cv-01334-CC Document 172 Filed 05/04/2010 Page 2 of 66
 
 
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Aircraft. (Third Am. Compl. ¶ 21; Answer ¶¶ 1, 21; Preliminary InjunctionHearing Transcript (hereinafter “Hr’g Tr.”)
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97:25; 98:1-5; Pls.’ Ex. 21)3.
 
Delta is obligated to pay Mesa: (1) certain “Direct Costs” defined inthe Contract; (2) a “Base Mark-up,” consisting of a 4% mark-up of Direct Costs forany month in which Mesa achieves a “completion rate” of at least 95%; and(3) “Monthly Incentive Compensation,” consisting of an additional 1% mark-up of Direct Costs for any month in which Mesa achieves a designated monthlyincentive goal - generally a “completion rate” of 97% or more. (Pls.’ Ex. 21,Art. 3; Hr’g Tr. 221:18-222:14.) The Contract provides Mesa with monthlyrevenues of approximately $20 million. (Hr’g Tr. 102:15-17.)4.
 
The Contract does not allow termination without cause or for theconvenience of Delta until November 2012; however, Delta is entitled to terminatethe Contract early if Freedom “fails to maintain a completion rate of 95% duringany three months of any consecutive six month period ....” (Pls.’ Ex. 21, Art.11.F(vi).) The Contract does not expressly define “completion rate.” (Pls. Ex. 21;Hr’g Tr. 416:4-6.) Delta contends that Freedom’s completion rate was less than
2
Pursuant to the February 18, 2010 Stipulation between the Parties, allevidence and testimony presented in connection with the May 27-29, 2008Preliminary Injunction Hearing shall be considered part of the record for final judgment. (Stipulation [# 133].)
Case 1:08-cv-01334-CC Document 172 Filed 05/04/2010 Page 3 of 66

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