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Chester County Aviation Holdings, Inc. v. Chester County Aviation Authority

United States District Court, E.D. Pennsylvania

August 26, 2013

CHESTER COUNTY AVIATION HOLDINGS, INC., Plaintiff,
v.
CHESTER COUNTY AVIATION AUTHORITY, et al., Defendants

Page 1099

For CHESTER COUNTY AVIATION HOLDINGS, INC., Plaintiff: DOUGLAS EVAN RESS, LEAD ATTORNEY, BENJAMIN MICHAEL MATHER, KAUFMAN COREN & RESS PC, PHILADELPHIA, PA.

For CHESTER COUNTY AVIATION AUTHORITY, ALBERT A. KOENIG, Defendants: CHRISTOPHER A. TINARI, MICHAEL R. MILLER, MARGOLIS EDELSTEIN, PHILADELPHIA, PA.

OPINION

Page 1100

Restrepo, J.

I. INTRODUCTION

This action arises out of a contract between Chester County Aviation Holdings

Page 1101

(" CCAH" ), a fixed-base operator (" FBO" ) [1], and Chester County Aviation Authority (the " Aviation Authority" or " Authority" ), a municipal agency under Chester County, Pennsylvania. The contract permitted CCAH to provide various services in connection with the day-to-day operations of G.O. Carlson Airport (the " Airport" ), an airport owned by Chester County and located in Coatesville. In exchange for retaining the revenue brought in by the Airport, CCAH was to make regular rent payments to the Aviation Authority and provide maintenance to the Airport. See Compl. (Doc. 1) ¶ ¶ 9, 14, 24.

The relationship between CCAH and the Authority recently soured, and on June 28, 2012, CCAH commenced this action against the Authority and its Chairman, Albert Koenig. By way of 42 U.S.C. § 1983, Plaintiff alleges that the Authority violated its substantive and procedural due process rights under the Fourteenth Amendment to the U.S. Constitution (Counts I and II). Id. at ¶ ¶ 75-87. Plaintiff also alleges breach of contract by the Authority (Count III) and tortious interference with contract by Chairman Koenig (Count IV) as pendent state law claims. Id. at ¶ ¶ 88-99.

Presently before the Court is Defendants' Motion to Dismiss the Complaint. For the reasons set forth below, Defendants' motion will be GRANTED.

II. FACTUAL BACKGROUND

On November 23, 2005, Plaintiff CCAH and its affiliate, JetDirect Aviation, LLC, entered into a Fixed Base Operation Lease and Operating Agreement (the " Lease" ) with Defendant Aviation Authority for a term of twenty-five years. Id. at ¶ ¶ 21-23. Pursuant to the terms of the Lease, Plaintiff was permitted to provide " fuel sales, fuel delivery, aircraft sales, aircraft storage and tie downs, line service and pilot/passenger services and facilities, aircraft rental and aircraft charter service" at the Airport and retain the revenue from these services; in exchange, Plaintiff agreed to make fixed rent payments to the Authority and pay an additional rent of three (3) percent of the gross revenue brought in at the Airport. Id. at ¶ ¶ 24, 26.

According to Plaintiff, the economic downturn detrimentally affected its business at the Airport due, at least in part, to a drop in fuel sales. By 2010, Plaintiff was unable to make its rent payments and meet its maintenance obligations under the Lease. See Doc. No. 15 at 6. In an effort to accommodate Plaintiff's financial difficulties, the Authority agreed to amend the Lease (hereinafter " First Amendment to the Lease" ) to memorialize a $13,760 loan from Defendant to Plaintiff, adjust Plaintiff's rent payments between August 2010 and January 2011, and postpone some of Plaintiff's maintenance obligations. Compl. ¶ 32.

However, the Amendment did not alleviate Plaintiff's economic difficulties, and Plaintiff now alleges that the Aviation Authority played a role in its continued loss of profitability. Specifically, Plaintiff claims that the Authority violated a non-compete covenant in the Lease by allowing Global Air, a fuel supplier to various aviation operations and therefore a direct competitor to Plaintiff, to provide fuel at the Airport. Compl. ¶ ¶ 27, 35, 38; Lease (Doc. No. 13) § 4.2. Importantly, while Global Air had been supplying fuel at the Airport since 1999 - more than five years

Page 1102

prior to execution of the Lease at issue in this matter - Plaintiff only complained to the Aviation Authority for the first time in April 2011. Compl. ¶ 38. Plaintiff alleges that the Aviation Authority agreed to investigate its claim of unfair competition but ultimately never responded to its concerns, although Plaintiff suggests that the Authority may have discussed the issue in a closed executive session during its May 2011 monthly meeting. Id. at ¶ ¶ 41-42. According to the Complaint, the Aviation Authority continues to allow Global Air to provide fuel at the Airport to date. Id.

Plaintiff next alleges that the Aviation Authority refused to cooperate with Plaintiff's efforts to improve its business performance at the Airport. In May or June 2011, Plaintiff retained FBO Solutions Group (" FSG" ) to develop a marketing campaign to attract new tenants to the Airport and increase fuel sales. Id. at ¶ 43. FSG proposed a joint marketing campaign involving Plaintiff, the Aviation Authority, and other stakeholders. Id. While the Authority considered the matter at its June and August 2011 monthly meetings, it ultimately decided to not participate in the marketing scheme. Id. at ¶ ¶ 44-46. Plaintiff contends that this was a purposeful attempt by the Aviation Authority to " hamper Plaintiff's business." Id. at ¶ 78.

When it later became clear that business at the Airport was not improving, Plaintiff attempted to sell its business and assign its rights under the Lease to a third party. The Lease requires Plaintiff to obtain the Authority's written consent prior to assigning its leasehold interests; in turn, the Authority cannot unreasonably withhold consent to a proposed assignment. Id. at ¶ 28; Lease at § 14.1 (" Neither the whole nor any part of this Agreement nor the leased premises may be assigned, transferred, or sublet by Operator, either by process or operation of law, or in any other manner whatsoever without the prior written consent of Authority. Said consent shall not be unreasonably withheld." ). The crux of Plaintiff's Complaint involves two occasions where it alleges that the Authority unreasonably prevented assignments proposed by Plaintiff.

The first instance involved Galaxy FBO (" Galaxy" ), an FBO who allegedly approached Plaintiff in August 2011 about the possibility of purchasing the assignment for approximately $5.6 million. Compl. ¶ 48. Galaxy, on its own volition, decided to withdraw its offer sometime after meeting with Aviation Authority representatives, allegedly due to concerns that the Authority was disregarding its obligations under the Lease with Plaintiff and " intentionally hampering [Plaintiff's] ability to effectively run an FBO operation." Id. at ¶ 51. Here, again, Plaintiff alleges that any discussion by the Authority of Galaxy's proposal was conducted in closed execution sessions rather than in those portions of Aviation Authority's meeting open to the public. Id. at ¶ 52.

The second instance allegedly occurred a few months later, when Plaintiff was approached by another FBO, Airport Property Partners LLC (" APP" ), about the possibility of purchasing its business at the Airport. Id. at ¶ 53. Without first obtaining the Authority's written consent to the assignment, Plaintiff entered into an agreement with APP's local operating entity, Chester County FBO LLC, for the sale of Plaintiff's business and assignment of its interest under the Lease for a purchase price of roughly $5.3 million. Id. at ¶ 54. Only after the execution of this agreement did APP approach the Authority to obtain its consent to the assignment. Id. at ¶ 55. At that time, the Authority advised that it would not approve the assignment unless APP agreed to certain material changes in

Page 1103

the Lease. Id. Specifically, Plaintiff alleges that the Airport Authority required APP to agree to increased maintenance obligations and provide both a corporate guarantee and a personal guarantee from its principal. Id. at ¶ 59. Plaintiff suggests these demands were unreasonable given APP's " financial wherewithal, financial stability, [and] well-established experience and record as an FBO operator." Id. at ¶ 56. Plaintiff alleges that the Aviation's position regarding the APP assignment was " motivated by bias, bad faith, or partisan or personal motives unrelated to the merits," as shown by a January 10, 2012 email from the Authority's attorney to APP's attorney indicating that the Authority's ultimate objective was to end the tenancy relationship and take over the FBO services at the Airport itself. Id. at ¶ ¶ 56-57. That email reads:

I should add here as an FYI, we have a contingent of Authority members who would rather the Authority take over the FBO operation on behalf of the County. Also, early in your and my conversation the guarantee was raised by me because it has heretofore been a consistent position of the Authority. Unfortunately, therefore, the " improved situation" argument doesn't resonate well with the Authority inasmuch as it holds as an alternative to the present situation (and has been discussed for the period since the rent rebate was requested by the current FBO), the belief it would be in a superior position if it simply took over the operation from the outset. I am reasonably certain it will want a guarantee of the obligations with an entity that actually had assets/financial viability now as a condition of assignment under the circumstances, especially with a $5.7 million dollar bond attached to it.

Id. At a meeting later that day, the Authority allegedly discussed APP's offer during a closed executive session. Id. at ¶ 58.

According to the Complaint, APP agreed to provide a corporate guarantee and to take on certain maintenance obligations at the Airport for a period of eighteen months. Id. at ¶ 60. However, APP's principal refused to provide a personal guarantee, at least initially. Id. In lieu of the personal guarantee, APP provided data regarding its revenue to debt ratio at its other operation sites, which purportedly showed that the Authority's " concerns about APP's financial health and ability to operate the FBO were misplaced." Id. at ¶ 62. Plaintiff alleges that the Authority discussed APP's counter-proposal in a closed executive session during its February 2012 meeting, but never formally responded to it. Id. at ¶ ¶ 63-64.

By email dated March 26, 2012, Thom Harrow, APP's principal, reengaged with the Aviation Authority regarding the assignment of the lease. See Doc. No. 26 at 21. This time, Harrow agreed to provide a personal guarantee for APP's fixed rental obligations for a period of five years and to undertake the additional maintenance obligations that the Authority had earlier insisted upon. Id. The Authority responded to Harrow explaining that financials were only one of several concerns it has regarding the proposed transaction between Plaintiff and APP. Id. at 20. The Complaint does not state the final disposition of APP's offer but seems to sugggest that APP stopped pursuing its purchase of Plaintiff's business. Id.

Plaintiff's financial condition did not improve during this time, and on February 16, 2012, the Authority sent a letter to Plaintiff informing Plaintiff that it was in default of certain terms set forth in the First Amendment to the Lease. Id. at ¶ 65. Shortly after, the Authority contacted

Page 1104

Plaintiff and expressed an interest in purchasing its FBO business at the Airport. Id. at ¶ 66. Plaintiff subsequently gave the Aviation Authority permission to inspect its financial records. Id. at ¶ 67. In a letter dated April 12, 2012, the Aviation Authority offered to purchase Plaintiff's FBO operation for $3.2 million, an amount which Plaintiff complains is " substantially less than fair market value" given that APP and Galaxy had offered almost $2 million more only months earlier. Id. at ¶ ¶ 69-71. Further, the amount was just ...


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