SEA AIR SHUTTLE v. Virgin Islands Port Authority

• Decision Date: 13 March 1992
• Docket Number: Civ. A. No. 1991-0009.
• Citation: 800 F. Supp. 293
• Parties: SEA AIR SHUTTLE CORPORATION d/b/a VISS and Sea Air Shuttle Corporation of the Virgin Islands, Plaintiffs, v. The VIRGIN ISLANDS PORT AUTHORITY and Caribbean Airboats, Inc.
• Court: U.S. District Court — Virgin Islands

800 F. Supp. 293

SEA AIR SHUTTLE CORPORATION d/b/a VISS and Sea Air Shuttle Corporation of the Virgin Islands, Plaintiffs, v. The VIRGIN ISLANDS PORT AUTHORITY and Caribbean Airboats, Inc.

Civ. A. No. 1991-0009.

District Court, Virgin Islands, D. St. Croix.

March 13, 1992.

Andrew C. Simpson, Britain H. Bryant, Christiansted, V.I., for plaintiffs.

Carey-Anne Moody, Christiansted, St. Croix, V.I., Maria Tankenson Hodge, St. Thomas, V.I., for defendants.

MEMORANDUM AND ORDER

HUYETT, District Judge, Sitting by Designation.

This action concerns a dispute over the purported award¹ by defendant Virgin Islands Port Authority ("VIPA") of an exclusive lease to defendant Caribbean Airboats, Inc. ("CAI") to use seaplane ramps owned by VIPA. Defendant VIPA moves for summary judgment on the three counts of the third amended complaint.² Plaintiffs Sea Air Shuttle Corporation and Sea Air Shuttle Corporation of the Virgin Islands (referred to collectively as "plaintiff Sea Air") oppose VIPA's motion for summary judgment and have filed a cross-motion for summary judgment. In addition, Sea Air has moved for a preliminary and permanent injunction and for summary judgment on the complaint for declaratory relief. Defendants VIPA and CAI respond to this cross-motion for summary judgment and motion for preliminary and permanent injunction by arguing that defendants are entitled to judgment as a matter of law. For the reasons stated below, I shall grant defendant VIPA's motion for summary judgment and deny plaintiff Sea Air's cross-motion for summary judgment and motion for preliminary and permanent injunction.

I. INTRODUCTION

Prior to September of 1989, when Hurricane Hugo struck the United States Virgin Islands, a seaplane service was operated by Virgin Islands Seaplane Shuttle ("VISS"). VISS provided passenger air service between downtown Christiansted, St. Croix, downtown Charlotte Amalie, St. Thomas, downtown San Juan, Puerto Rico, downtown Roadtown, Tortola, and St. John. As a result of destruction caused by Hurricane Hugo, VISS went out of business and seaplane service between the islands was interrupted. Among the physical structures that VISS used prior to its demise were seaplane ramps on St. Thomas and St. Croix owned by VIPA.

In early 1990, VIPA issued a Request For Proposals ("RFP") to lease the seaplane ramps on St. Thomas and St. Croix. Caribbean Airline Services, Inc. ("CAS") was one of eight companies that presented a proposal to VIPA before the June 22, 1990 deadline to submit lease proposals. Sea Air did not submit a proposal. VIPA's staff reviewed the eight proposals and presented three to VIPA's Governing Board as the most viable of the eight proposals submitted. The CAS proposal was one of three that the staff of VIPA recommended to VIPA's Governing Board for additional consideration. The two other proposals recommended for further consideration were those submitted by American Aircraft Management Co. and defendant CAI. It is undisputed that VIPA's staff considered the proposal submitted by CAS to be the most viable of the three bids recommended for further consideration by VIPA's Governing Board.

On June 23, 1990, Anthony Tirri, president of CAS, and Arnaldo Deleo, president of Sea Air, entered into an oral agreement in which CAS agreed to assign its interest in the VIPA lease proposal to Sea Air. See Deleo Aff. at ¶ 4. On August 29, 1990, the three finalists — CAS, American Aircraft Management Co., and CAI — made presentations to the Governing Board of VIPA. CAS and Sea Air presented a proposal together and CAS submitted a written statement informing VIPA that "CAS had agreed to transfer its lease of the seaplane bases ..." See Sea Air's Opposition to CAI's Motion to Dismiss at Exhibit A. The proposal submitted by CAS and Sea Air made clear that Sea Air would operate the seaplane service if VIPA approved the CAS proposal. The proposal submitted by CAS and Sea Air specifically stated:

two sister corporations have been established to operate VISS in Puerto Rico and the Virgin Islands for logistical and financial reasons. SASH Sea Air Shuttle Corporation will operate VISS using initially Mallard aircraft leased from CAS. The new airline will operate with many ex-old VISS employees some of whom have already been employed by SASH. The organization's officers and managers will be: A. Deleo, President CEO (EAL); H. Worman, Director Maintenance (Ex VISS); J.S. Jervis, Director Flt. Operations (Ex VISS); J. Coto, Chief Pilot (Ex VISS); John Richards, Shuttle Director (Ex VISS).

Id.

The individuals representing CAS and Sea Air respectively at the August 29, 1990 meeting were Anthony Tirri, president of CAS, and Arnaldo Deleo, president of Sea Air. During the CAS/Sea Air presentation, Mr. Tirri stated:

As President, we CAS purchased the assets of V.I. Seaplane Shuttle when they went into bankruptcy for the purpose of taking over and started Sea Air International. Caribbean Airline Services will be the leasing corporation which will own and lease aircraft, the same type as previously used ...

See Sea Air's Opposition to CAI's Motion to Dismiss at Exhibit B, ¶ 10 (Minutes of the VIPA Board Meeting of August 29, 1990).

In the August 29, 1990 presentation, CAS and Sea Air made clear that Sea Air would operate the seaplane service, while CAS would lease the seaplanes.

The August 29, 1990 CAS/Sea Air proposal listed the following CAS/Sea Air assets and attributes in support of the position that Sea Air represented the best of the three finalists before VIPA: (1) Sea Air's full use and control of three seaplanes with an option on a fourth seaplane; (2) Sea Air's employment of twenty-six (26) employees in anticipation of commencing seaplane service, many of whom were former non-management employees of VISS; (3) Sea Air's completion of all necessary flight training; (4) Federal Aviation Administration (FAA) approval of flight training, operations, and maintenance manuals; (5) Department of Transportation ("DOT") certification; and (6) a proposed annual fee of $150,000 for use of the seaplane ramps. In contrast, at the time of the August 29 proposal meeting, defendant CAI (1) neither owned nor leased any aircraft; (2) employed no pilots, mechanics, or other non-management personnel; (3) possessed no FAA Carrier Operating Certificate or FAA approved flight training, operations, or maintenance manuals; (4) possessed no DOT certification; and (5) proposed a smaller annual fee to lease the seaplane ramps than the fee proposed by CAS/Sea Air.

On September 10, 1990, CAS and Sea Air agreed in writing that CAS would assign its interest in the lease proposal to Sea Air.³ The September 10, 1990 stockholders' agreement entered into by Sea Air Shuttle Corporation, CAS, Anthony C. Tirri, Salvatore J. Labate, Arnaldo Deleo and other Sea Air Shuttle Corporation investors ("the stockholders' agreement") provided that CAS would transfer all of its rights in the seaplane ramp bid or lease to Sea Air Shuttle Corporation of the Virgin Islands in the event that the CAS bid was accepted by VIPA. See Sea Air's Opposition to CAI's Motion to Dismiss at Exhibit C.

By letter of October 4, 1990, Robert S. Griggs, counsel for Sea Air, informed Eric Dawson, Commissioner of VIPA, that the stockholders' agreement had been signed and that the agreement's assignment provisions were contingent on VIPA's acceptance of the CAS proposal. The October 4 letter included, inter alia, (1) a request that VIPA treat the CAS proposal as a Sea Air proposal; and (2) information requested by VIPA regarding Sea Air shareholders. The letter listed Sea Air Shuttle Corporation of the Virgin Islands' shareholders as Arnaldo Deleo, Roland H. Moore, Robert S. Griggs, Betty F. Griggs, Peter Nelson, Lewis F. Huck, Virginia Huck, Irene Cerqueira, Anthony C. Tirri, and Salvatore J. Labate. Also, the October 4 letter represented that Sea Air Shuttle Corporation of the Virgin Islands and Sea Air Shuttle Corporation possessed the same shareholders. Finally, the October 4 letter stated that Anthony C. Tirri was the sole shareholder of CAS.

On November 26, 1990, pursuant to a request by VIPA, Sea Air ratified CAS' June 18 proposal to lease the seaplane ramps. At no time did VIPA explicitly affirm or reject the validity of the purported assignment made by CAS to Sea Air or the acceptability to VIPA of the arrangement contemplated by CAS and Sea Air. VIPA made clear through its conduct, however, that it intended to consider the CAS/Sea Air proposal on the terms contemplated by CAS and Sea Air.

After reviewing the August 29, 1990 oral presentations of the three finalists — CAS/Sea Air, American Aircraft Management Company, and defendant CAI — VIPA's Governing Board requested that the Virgin Islands Department of Justice conduct a background investigation of the principals of the three companies being considered as lessees of the seaplane ramps.⁴ On November 28, 1990, VIPA's Governing Board voted to hold executive session to receive the investigative reports from the Department of Justice.

An investigator from the Virgin Islands Department of Justice reported to VIPA's Governing Board during this executive session. The investigator informed the Board that the president and chief executive officer of American Aircraft Management Company had recently been indicted in Arizona for depositing funds in financial institutions in violation of federal currency transaction reporting requirements. Further, the investigator reported that Anthony Tirri, CAS' president, was previously the president of another airline that had received a number of Federal Aviation Association ("FAA") citations and fines for safety violations.⁵ The investigator also reported that Salvatore Labate, a principal of Sea Air until early November 1990, had been indicted but acquitted on charges of conspiring to smuggle drugs into the United States in 1976.⁶ The investigator addressed the relationship between...