The opinion of the court was delivered by: Reggie B. Walton United States District Judge
The plaintiff brings this action alleging that the defendant breached certain lease agreements for railcars it acquired from the plaintiff by failing to make the required lease and interest payments for the cars pursuant to the agreements. Second Amended Complaint ("Compl.") ¶¶ 1; 42-43. Specifically the plaintiff alleges in its Second Amended Complaint a breach of contract claim (Count I) and a restitution/unjust enrichment claim (Count II). Id. at ¶¶ 41-49. The plaintiff has now filed a motion for partial summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure as to Count I of the Second Amended Complaint alleging that the defendant breached the terms and conditions of the Sublease of Railroad Equipment (Amtrak Sublease No. 01-AS) ("Sublease") entered into by the parties.*fn1 Plaintiff's Motion For Partial Summary Judgment.*fn2 For the reasons set forth below, the Court grants the plaintiff's motion for partial summary judgment as to its claim for the defendant's breach of the Sublease.
The plaintiff in this action is the National Railroad Passenger Corporation ("Amtrak") and the defendant is ExpressTrak, L.L.C. ("ExpressTrak"). ExpressTrak, Inc., predecessor of ExpressTrak, was established in 1996 by R. Franklin Unger ("Unger") and Robert Walker (" Walker") for the purpose of transporting food and other perishable goods across the country in temperature-controlled railroad cars. Exhibits submitted with Plaintiff's Memorandum of Law In Support of Plaintiff's Motion for Partial Summary Judgment ("Amtrak Ex.") (ExpressTrak Business Plan dated Feb. 21, 2000). To accomplish this objective, ExpressTrak eventually entered into a joint venture with Amtrak, pursuant to which ExpressTrak would have its express railcars attached to high speed Amtrak passenger trains to shorten the time of transcontinental rail delivery of its perishable commodities. Amtrak Ex. 3 (chronology of Events: ExpressTrak-Amtrak Negotiations). ExpressTrak*fn3 , in it reincarnation, formally commenced operations in April 1998 and thereafter entered into a "roadrailer" agreement with Amtrak.*fn4 Amtrak Ex. 7 (letter of Agreement-Roadrailer Units dated Apr. 6, 1998); Amtrak Ex. 8 (letter from Unger to Gagen dated Apr. 21, 1999).
On January 8, 1999, Amtrak, ExpressTrak, and Soave Enterprises executed a Memorandum of Understanding setting forth "the essential elements of an 8-car prototype demonstration that the parties hope[d] [would] lead to the joint operation of a substantial refrigerated express service," whereby Amtrak would initially lease from The CIT Group ("CIT") and refurbish 8 cars at a cost of approximately $1.5 million that it would use to transport ExpressTrak's products. Amtrak Ex. 11 (Memorandum of Understanding dated Jan. 8, 1999) at AM 0009668-0009669. The Memorandum of Understanding also outlined the basic contours of the contemplated expanded business between the parties if (1) the prototype demonstration was successful and (2) Amtrak decided to acquire additional refrigerated express cars. See id. at AM 0009675. Amtrak solicited bids for the refurbishing work for the prototype program and acquired a right of first refusal from CIT on 225 refrigerated railcars that could be used for expanded service if the prototype program was successful. Amtrak Ex. 12 (letter from Victoria McManus to Carol Dillon dated Mar. 22, 1999).
The bidding process for refurbishing the prototype cars for the expanded service was unsuccessful. Amtrak Ex. 16 (letter from Arlene Friner to Walker and Unger dated July 23, 1999). As a result, in July 1999, Amtrak advised ExpressTrak that "[t]wice Amtrak has solicited proposals, at considerable expense and effort," but that the "first proposal resulted in only one bid that was materially non-responsive in numerous respects" and "there were no responses to the second proposal."Id. Consequently, Amtrak advised ExpressTrak that it was "not feasible" to proceed with the prototype program by acquiring and refurbishing the eight prototype cars and then with the expanded service in accordance with the terms contemplated by the parties in the Memorandum of Understanding. Id.
Consequently, ExpressTrak acquired the responsibility of either building or refurbishing the prototype railcars. Amtrak Ex. 16 (letter from Arlene Friner to Walker and Unger dated July 23, 1999). Morever, Amtrak advised ExpressTrak that if the parties proceeded with the expanded program beyond the prototype stage, Amtrak would not be willing to acquire or lease the additional railcars. Id. However, Amtrak expressed its interest in continuing the relationship with ExpressTrak. Id. As a result of further negotiations, Amtrak agreed to "explore the feasibility of [entering into] an alternative arrangement in which [it] [would] finance the equipment but the risks associated with ownership and operation [would] [be] transferred to [ExpressTrak] or third parties." Exhibits to Defendant's Opposition to Plaintiff's Motion for Partial Summary Judgment ("ExpressTrak Ex.") 6 (letter from Unger to Friner dated Sept. 21, 1999); Amtrak Ex. 19 (letter from Friner to Unger dated Oct. 1, 1999). Thus, the parties abandoned the Memorandum of Understanding and executed the Agreement Between Amtrak and ExpressTrak for Temperature Controlled Perishables Express Transportation ("Operating Agreement") on October 27, 1999, which called for Amtrak to provide for the same intercity transportation services for ExpressTrak. Amtrak Ex. 20, ExpressTrak Ex. 7 (Operating Agreement).
The Operating Agreement required ExpressTrak to acquire the railcars and enter into a contract with a vendor to have the cars refurbished in accordance with Amtrak's specifications. Id. §§ 1.1,1.2. Pursuant to the Operating Agreement, the parties contemplated that ExpressTrak would cause the refurbished cars to be conveyed to a third-party lessor, who would thereafter own and retain title to the cars. Id. § 1.8. The third-party lessor would in turn lease the cars to Amtrak, and Amtrak would then sublease the cars to ExpressTrak. Id. Under this arrangement, Amtrak would make the lease payments to the third-party lessor, and ExpressTrak would simultaneously make equivalent lease payments to Amtrak. Id.
After the execution of the Operating Agreement, Amtrak issued an offering memorandum to over 30 sophisticated institutional investors, including GE Capital, Banc One, Boeing Capital, and Orix USA Corporation ("Orix"), seeking bids to finance the project. Amtrak Ex. 22 (letter from Carol Dillon to Unger dated July 10, 2000); 23 (facsimile from Sue Sparks to Raj Srinath dated June 12, 2000); ExpressTrak Ex. 19 (letter from Dillon to Unger dated July 10, 2000). Amtrak initially awarded the bid for the entire fleet to Boeing Capital. Amtrak Ex. 22 (letter from Dillon to Unger dated July 10, 2000). When negotiations with Boeing Capital stalled in the fall of 2000, Amtrak secured an alternative financing commitment from Orix to refurbish approximately 110 refrigerated railcars for the expanded fleet at a cost not to exceed $13.86 million. Amtrak Ex. 24 (letter from Dillon to Unger dated Oct. 19, 2000); ExpressTrak Ex. 23 (Proposal for Rebuilt Refer Boxcars dated Sept. 13, 2000). Subsequently, Amtrak secured commitment letters from Boeing Capital to finance the remaining refrigerated railcars (approximately 250 cars) for the expanded fleet. Amtrak Ex. 25 (Boeing Commitment Letter dated Mar. 30, 2001); ExpressTrak Ex. 29 (letter from Boeing Capital to Sparks dated Nov. 20, 2000).
On November 9, 2001, the Amtrak Reform Council*fn5 issued its finding that Amtrak would fail to achieve operational self-sufficiency by December 2, 2002, as required by Congress.*fn6 ExpressTrak Ex. 40 (letter from Orix to Amtrak dated Nov. 16, 2001). Relying on that revelation, as well as other events, Orix, on November 16, 2001, provided notice to Amtrak, ExpressTrak, and Ebenezer Railcar Services ("Ebenezer")*fn7 that it was suspending its commitment to provide financing for refurbishing any further cars. Id. As of that time, Orix had financed 55 cars (1prototype car previously owned by ExpressTrak and 54 cars refurbished by Ebenezer). Def.'s Opp'n. Mem. at 18. An additional 55 cars remained to be refurbished by Ebenezer under its contract with ExpressTrak. Id. ExpressTrak therefore invoked the guarantee agreement of December 28, 2000, that had been made by Amtrak. ExpressTrak Ex. 33 (letter from Friner to Unger dated Dec. 28, 2000). Under this agreement, Amtrak agreed to fund or obtain third-party financing to refurbish the remaining 55 cars. ExpressTrak Ex. 88 (letter from Unger to Sargrad dated Nov. 21, 2001). By a letter agreement of November 30, 2001 ("Letter Agreement"), Amtrak and ExpressTrak agreed to enter into a direct lease of these remaining cars being refurbished by Ebenezer and, pending execution of a more formal Direct Lease, to have the Letter Agreement itself serve as the lease between the parties. ExpressTrak Ex. 89 (letter from Dale Stein to ExpressTrak dated Nov. 30, 2001).
Orix's Headlease to Amtrak
Consistent with the terms of the Operating Agreement between Amtrak and ExpressTrak, on May 15, 2001, Amtrak entered into a Lease of Railroad Equipment (Amtrak Lease No. 01-A) ("Headlease") with Orix. Pl.'s Mem. at 10; Amtrak Ex. 31(Headlease).*fn8 Amtrak was required under the Headlease to make quarterly rent payments to Orix by wire on each January 1, April 1, July 1, and October 1. Amtrak Ex. 31(Headlease) §§1.1, 4.1. Such payments were required to be made by Amtrak "by noon Washington, D.C. time on the date payment is due in United States Dollars in immediately available funds." Id. § 4.3. Any payment not made on the date payment was due was subject to mandatory interest penalties that were required to be paid "without necessity of demand." Id. § 4.2.
Amtrak's obligation to pay rent under the Headlease was explicitly recognized to be "absolute and unconditional." Id. § 5.2(I). This absolute and unconditional obligation to pay rent on the specified due dates manifested itself in several different ways. Pl.'s Mem. at 11. First, Amtrak automatically defaulted on the Headlease if it failed to make any rent payments "within 5 days after the same shall become due." Amtrak Ex. 31 (Headlease) § 13.1 (I). This default event was triggered irrespective of whether "it was voluntary or involuntary," and the failure to pay rent on time was the only default event that the parties explicitly agreed to exempt from any right to cure. Id. §§ 13.1 (iv), 13.4. Once a default event occurred, Orix "in its sole discretion," had the contractual right to "cancel or terminate" the Headlease "by notice in writing" so long as Amtrak had not remedied the breach prior to receipt of such notice. Id. § 13.2 (ii). At that point, Amtrak's rights of possession and use in the railcars "absolutely cease[d] and terminate[d] as though [the Headlease] had never been made," and Orix could demand return of all such railcars at Amtrak's expense. Id.
Second, Amtrak agreed to waive any potential defenses if it should fail to honor the strict payment obligations. Pl.'s Mem. at 11. Specifically, the Headlease states that Amtrak was not entitled "to any abatement, deferral or suspension of Rent, reduction thereof or setoff against Rent, including abatements, reductions, deferrals, suspensions or setoffs due, or alleged to be due, by reason of any past, present or future claims" against Orix "either under this Lease or otherwise." Id. §5.2(I). Similarly, Amtrak agreed to waive "any and all existing or future claims to any offset against the rent payments due hereunder, and agre[ed] to make such payments regardless of any offset or claim which may be asserted by [Amtrak] or on its behalf." Id. § 13.4.
Finally, the Headlease contained three explicit anti-waiver provisions that governed Amtrak's payment obligations and prevented Amtrak from subsequently attempting to alter its absolute and unconditional obligation to make timely payments absent a written amendment signed by both parties. Id. §§ 13.3, 13.4, 21.2. For instance, Section 21.2 states that no waiver of any Headlease "provisions or ...