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Town of Islip v. Eastern Air Lines

June 16, 1986

TOWN OF ISLIP, PLAINTIFF-APPELLEE,
v.
EASTERN AIR LINES, INCORPORATED, DEFENDANT-APPELLANT



Appeal from a judgment of the Eastern District, Wexler, J., holding in civil contempt and fining the defendant for failing to comply with the terms of a permanent injunction. Vacated.

Author: Lumbard

Before FEINBERG, Chief Judge, LUMBARD and WINTER, Circuit Judges

LUMBARD, Circuit Judge:

Eastern Air Lines, Inc., appeals from the entry of a judgment of civil contempt in the Eastern District, Leonard D. Wexler, J., based on Eastern's alleged willful noncompliance with a permanent injunction that Judge Wexler issued in favor of the plaintiff, the Town of Islip. The permanent injunction required Eastern to discontinue two of its six daily flights out of Islip's MacArthur Airport, Judge Wexler issued his oral ruling on November 5, 1985, and written findings of fact and conclusion of law on December 3. Eastern still had failed to cut back its schedule, however, by December 10, when the contempt order issued.

Eastern argues that the judgment of contempt was improper because the district court's injunction order failed, both in its oral form and its subsequent written form, to provide Eastern with a clear understanding of that it was legally required to do. In the alternative, Eastern argues that the contempt order was improper because it was based on a permanent injunction whose effect had been stayed by order of this court. Eastern also argues that the district court abused its discretion by "hastily" and "erroneously" issuing the contempt order. Because we agree that the district court's injunction orders contained material ambiguities, and believe that Eastern took reasonable steps to secure clarification, which was not forthcoming, we vacate the judgment of contempt.

On January 8, 1985, Northeastern Airways filed a Chapter Eleven petition in the Bankruptcy Court for the Southern District of Florida. That same day, as a part of Northeastern's nationwide reduction of flight operations, the airline discontinued its four flights at MacArthur Airport. Eastern, which already had tow flight a day out of MacArthur, wanted to obtain the Northeastern slots. Discussions to that effect were held on January 8 between Arnold Aikens, Eastern's attorney, and Alfred Werner, who is Commissioner of Aviation and Transportation for the Town of Islip and also manger of MacArthur. That same day, the parties agreed that Eastern would be allowed to increase its service by taking over the four Northeastern flights; Eastern implemented the new schedule on January 9.

Islip permitted Eastern to increase its flights on the condition that it would relinquish the four flights on a one-for-one basis if Northeastern were to resume its schedule. Islip requested this one-for-one reduction condition as a means of limiting the total number of flights going in and out of MacArthur Airport. This numerical limit was expected, in turn, to help control the MacArthur noise pollution problem that has affected 3600 Islip residents, and that the Town has been attempting to cope with since April, 1984. The oral agreement was initially referred to in a January 17, 1985 letter from Islip to Eastern.

Shortly thereafter, Northeastern informed Islip that it intended to resume flights out of MacArthur, effective February 8. On February 1, Islip wrote to Eastern Requesting that Eastern reduce its flights accordingly, but in a February 14 letter Eastern responded that, according to its view of the "one-for-one" agreement, such cessation was not required. Eastern's letter argued that the oral negotiations had provided that Eastern's promise to reduce its flight would be triggered only if Northeastern's resumption of operation at MacArthur was by order of the Bankruptcy Court, and at that time the court had entered no order. Islip wrote back that it disagreed with Eastern's construction of the agreement. Nevertheless, Eastern and Northeastern began simultaneous operations out of MacArthur. The dispute took another turn on March 4, 1985, when Northeastern again suspended flights at MacArthur.

Eastern continued its flights. On June 6, 1985, Northeastern again informed Werner that it intended to resume operations at MacArthur, beginning on June 21, Islip objected to this plan, and hearing regarding the plan ensued in the Bankruptcy Court. At the same time, however, Islip requested Eastern to reduce its flights should the plan take effect, which Eastern refused to do. On June 20, the Bankruptcy Court issued an order enjoining Islip from interfering with Northeastern's resumption of one flight per day at MacArthur beginning on June 21, and a second flight per day thirty days thereafter.*fn1 Islip believed that the revival of Northeastern flight status by order of the bankruptcy court satisfied even Eastern's view of the conditions precedent to the agreement, and asked Eastern to reduce its operations accordingly. Eastern again declined to do so, stating that by then it had a protected claim to the disputed slots.

On July 1, 1985, Islip brought an action against Eastern in the New York State Supreme Court, seeking an injunction requiring Eastern "to reduce its daily departures on a One-for-one basis as Northeastern increased its departures." Eastern removed the case to the Eastern District on July 24, on the basis of diversity of citizenship. The district court reviewed the documents referring to the agreement, and held a hearing on Islip's application for a preliminary injunction on August 9. Eastern's theory was that the Bankruptcy Court's June 20 order was not the kind of order that the parties had agreed would activate Eastern's promise to reduce its operations. Eastern argued that the January 8 negotiation had occurred prior to the Bankruptcy Court's resolution of claims to immediate repossession lodged against Northeastern's aircraft by its creditors. In this context, Eastern thought the parties understood that if this attempt to repossess failed, then Northeastern would be in a position to reclaim its slots. If, on the other hand, the claims succeeded, the contract's condition would be satisfied and Eastern's right to the extra slots would vest. According to Eastern, this vesting occurred on March 4, 1985, when the Bankruptcy Court ordered repossession.

Islip agreed that Eastern's promise to reduce operations would arise only by order of the Bankruptcy Court, but argued that the June 20 order had been sufficient. In Islip's view, the contractual condition was an open-ended attempt to preserve the Town's cap on flights, and accordingly any order of the Bankruptcy Court restoring Northeastern's flight status--whenever decided--would activate Eastern's obligation to cut back on flights. Having heard argument, the district court issued a preliminary injunction of August 9 directing Eastern "to specifically perform its agreement to reduce flights . . . on a one for one basis at Northeastern flights are added pursuant to order of the U.S. Bankruptcy Court." The district court delayed the effective date of the order to September 30, 1985. Eastern appealed the grant of the preliminary injunction and, on October 4, this panel remanded the case for trial of the contract issues within 45 days; we also continued the delay of the injunction's effectiveness "until disposition of this appeal or further order of this court." Our order further directed the parties to file with our Clerk, on December 3, a written report advising us of the Case's status in the district court.

After expedited discovery, the district court conducted a bench trial on November 4 and 5, 1985. Primarily through the testimony of Aikens, Eastern's attorney, the airline presented its theory that the oral agreement had provided that Eastern would have to relinquish the flight slots only if Northeastern regained its slots at Islip by virtue of a Bankruptcy Court Order stemming from the then-pending repossession claims. Werner, the manage of MacArthur, presented Islip's contrary view that the agreement mend called for one-for-one reduction of Eastern's flights if Northeastern should resume flying as a result of any Bankruptcy Court order. After the close of proceedings on November 5, Judge Wexler stated "permanent injunction granted," and directed that an order by submitted. he then stated: "For the record, so we are clear, I will come out with findings of fact and conclusions and I will ask the town to submit findings."*fn2

On the next day, November 6, Northeastern again ceased operation at MacArthur. Easter, believing that the injunction was no longer effective even under the Town's prevailing interpretation of the agreement at trial, continued its fights at the airport; Eastern also awaited the Town's proposed findings, as well as the written order that Judge Wexler had stated would follow his ruling. By November 15, Eastern had received Islip's proposed findings--which did not address Northeastern's discontinued status at Islip--and accordingly submitted a response by affidavit to Judge Wexler. The affidavit stated objections to the proposal, and also noted Eastern's view that the permanent injunction should not have any effect because Northeastern's complete cessation of flights at MacArthur had rendered the action moot at the time it was decided.*fn3 Eastern argued that, because there was no longer any "one-for-one" substitution for Eastern to comply with, it need nor reduce its flights, and the district court should revise its order accordingly.

On November 18, 1985, Islip responded to Eastern's papers in a letter to Judge Wexler which for the first time clearly stated Islip's position that Northeastern's flight status was irrelevant to Eastern's obligation to reduce its flights. The letter argued that Eastern should have stopped flying when Northeastern resumed in June, 1985, and therefore that Eastern had, at that point, been divested of its right to the slots. the Town stated that Northeastern's slits, again vacant, did not belong to Eastern but instead would be filled according to a so-called "Interim Environmental Management Plan." In a letter to Judge Wexler dated November 19 1985, Eastern described as "novel, creative and not supported by [Islip's] testimony on trial," the Town's view ...


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