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AMERICAN AIRLINES, INC. v. CITY OF PHILADELPHIA

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA


March 8, 1977

AMERICAN AIRLINES, INC., et al
v.
CITY OF PHILADELPHIA

The opinion of the court was delivered by: ALFRED L. LUONGO

LUONGO, J.

 MARCH 8, 1977

 There is before me plaintiffs' Motion to Exclude Interim Interest and other charges. *fn1" A tracing of the tortured course of this litigation is necessary for an understanding of the motion.

 Plaintiffs are nine commercial airlines which have, for a number of years, leased space in the City of Philadelphia's Airports. *fn2" Long term leases which expired on August 31, 1973 were extended to May 31, 1974 to enable the parties to continue negotiations for new leases for the expanded and improved facilities which the City was constructing at International Airport. The negotiations were not successful and the City threatened to impose a unilateral schedule of rentals, fees and charges in the place of negotiated ones. On May 31, 1974 the City's Department of Commerce did file a Regulation, effective Fiscal Year 1975 (commencing July 1, 1974) establishing rates and charges which were approximately three times as much as those called for under the expired leases.

 The Airlines filed this suit on June 20, 1974, charging that the Regulation was unreasonable and discriminatory in violation of the Fourteenth Amendment, the Federal Aviation Act (49 U.S.C. § 1513), and the Airport and Airway Development Act of 1970 (49 U.S.C. §§ 1701, 1718), and that it imposed an impermissible burden on commerce because the rates, charges and fees thereby established were in excess of the charges required to maintain the facility. The relief sought was an injunction *fn3" against charges in excess of those required for operation and maintenance of the Airports. Alternatively, in a second count, the Airlines alleged that on June 18, 1974 they had filed a complaint with the Federal Aviation Administration seeking to rescind the City's schedule of rates, charges and fees. Pointing out that the FAA lacked power to issue a stay, plaintiffs sought from this court a stay of the new rates and charges pending final decision by the FAA or an appellate court.

 The case was assigned to the calendar of my colleague, Judge Herbert A. Fogel. On July 17, 1974 the parties advised Judge Fogel that they had entered into a temporary "settlement" regarding rates and charges to be paid pending hearing on plaintiffs' request for a permanent injunction. Hearing on the permanent injunction was scheduled for October 15, 1974, but was (postponed to November 25, 1974 upon representations to the court that the parties were engaged in discussions with the view to final settlement of the entire controversy. The November 25, 1974 hearing was cancelled when it was reported to the court that the parties had reached agreement, but that the agreement required memorialization by a written document, preparation of which would require substantial time, effort and negotiations. What happened thereafter is the subject of substantial dispute between the parties and has led to the filing of a series of motions.

 Plaintiffs allege that after some sixteen months of extended negotiation, the parties finally ironed out all proposed changes and amendments which were incorporated into a document (hereinafter referred to as the Agreement). According to plaintiffs, on March 10, 1976, the parties met for the sole purpose of making final mechanical and proofreading refinements of the Agreement, but instead the City insisted on changes of substance imposing charges totalling approximately $ 2,500,000 per year more than thdse provided in the Agreement. The Agreement was not signed.

 Contending that the parties had in fact entered into a binding settlement agreement notwithstanding their failure to sign the Agreement, plaintiffs, on April 20, 1976, filed a "Motion to Enforce Settlement Agreement." The City opposed that motion, denying that a settlement had in fact been agreed to, and contending further, as a matter of law, that the City's representatives did not have the power to enter into the alleged settlement. In due course, the City filed a "Motion for Summary Judgment" in its favor on plaintiffs' "Motion to Enforce Settlement Agreement." On September 8, 1976 I denied the City's Motion for Summary Judgment, ruling that there were material issues of fact for trial.

 While these matters were pending, on May 4, 1976, the City's Department of Commerce promulgated Regulation 2 fixing rentals, charges and fees for Fiscal Year 1977 (commencing July 1, 1976) at an annual rate of approximately $ 22 million as compared to the approximately $ 14 million provided under the Agreement. On June 17, 1976, plaintiffs filed a "Motion to Suspend Regulation 2." *fn4" The Motion to Suspend charged that counsel for the parties had stipulated and agreed that, pending decision on the Motion to Enforce Settlement Agreement, the Airlines would move into the new space and make payments in accordance with the terms of the Agreement: that the Airlines had, pursuant to that understanding, moved into the new space, but notwithstanding that stipulation and agreement, the City had promulgated Regulation 2. The City denied that there had been such a stipulation and agreement.

 On June 29, 1976, Judge Fogel ruled that the parties had indeed so stipulated and entered an Order granting plaintiffs' Motion to Suspend Regulation 2 upon certain conditions including, inter alia, that (a) pending final determination of plaintiffs' Motion to Enforce Settlement Agreement, the parties were to be bound by the Agreement and the City was to charge "in accordance with rates calculated pursuant" thereto; (b) disputes concerning interpretation of the Agreement were to be presented to the court for resolution; and (c) plaintiffs were not to delay or withhold payment of billings made by the City on the basis of alleged incorrectness or invalidity of the billings, except upon specific authorization of the court. Following entry of the June 29 Order, the City submitted to the Airlines invoices for amounts to be charged monthly during Fiscal Year 1977 which, on an annualized basis, totalled: Domestic Terminal Building $ 14,482,328 Landing Fees 8,640,591 Ramp Area 284,000 $ 23,406,919

19770308

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