LOUISVILLE & JEFFERSON CO. A. BD. v. American Airlines

• Decision Date: 15 April 1958
• Docket Number: Civ. A. No. 3503,3506.,3504
• Citation: 160 F. Supp. 771
• Parties: LOUISVILLE AND JEFFERSON COUNTY AIR BOARD, Plaintiff, v. AMERICAN AIRLINES, Inc. (a corporation), Defendant. LOUISVILLE AND JEFFERSON COUNTY AIR BOARD, Plaintiff, v. TRANS WORLD AIRLINES, Inc. (a corporation), Defendant. LOUISVILLE AND JEFFERSON COUNTY AIR BOARD, Plaintiff, v. EASTERN AIR LINES, Inc. (a corporation), Defendant.
• Court: U.S. District Court — Western District of Kentucky

160 F. Supp. 771

LOUISVILLE AND JEFFERSON COUNTY AIR BOARD, Plaintiff, v.AMERICAN AIRLINES, Inc. (a corporation), Defendant.

LOUISVILLE AND JEFFERSON COUNTY AIR BOARD, Plaintiff, v.TRANS WORLD AIRLINES, Inc. (a corporation), Defendant.

LOUISVILLE AND JEFFERSON COUNTY AIR BOARD, Plaintiff, v.EASTERN AIR LINES, Inc. (a corporation), Defendant.

Civ. A. Nos. 3503, 3504, 3506.

United States District Court W. D. Kentucky, Louisville Division.

April 15, 1958.

James W. Stites, T. Kennedy Helm, Jr., Louisville, Ky., for plaintiff.

Wilson W. Wyatt, Gordon B. Davidson, Louisville, Ky., for defendants.

BROOKS, District Judge.

Separate actions were instituted by the plaintiff, Louisville and Jefferson County Air Board, against the defendantEastern Air Lines, Inc., the defendantAmerican Airlines, Inc., and the defendantTrans World Airlines, Inc.The plaintiff will be referred to herein as the Air Board and the defendants as the Airlines.These cases are presently submitted on the Air Board's motion for partial summary judgment and motion of the Airlines to stay proceedings until arbitration shall be had in accordance with the provisions of the lease agreements between the parties.

The facts essential to a decision in these cases are not in dispute.In 1947 each of the Airlines entered into similar lease agreements with the Air Board for the use of facilities at Standiford Field at certain agreed rentals for a period of ten years.The leases granted the Airlines an option to renew for a like period, Article II of the leases providing:

"* * * Lessor hereby grants to Lessee an option to renew this lease for one (1) additional term of ten (10) years, rentals, fees and charges to be mutually agreed upon, provided that Lessee shall notify Lessor in writing of Lessee's exercise of such option as to any such renewal term not less than six (6) months before the expiration of the original term hereof. * * *"

The Airlines gave the Air Board timely notice of their renewal of their options and the renewals of the options were acknowledged by the Air Board.After the exercise of the options certain negotiations took place between the parties in an attempt to agree upon the rentals for the renewal terms, but the parties were unable to reach an agreement.In event of failure to mutually agree upon renewal terms after exercise of the options, Article III(C) of the leases provides:

"Rentals and Fees for Renewal Term.In the event Lessee exercises its option to renew this Lease in accordance with the provisions hereof, the rentals, fees and charges for such renewal term shall be as mutually agreed upon between Lessor and Lessee prior to the end of the term.The rentals, fees and charges applicable for each such renewal term shall be paid by Lessee to Lessor in the same manner as hereinabove provided.

"In the event that Lessor and Lessee do not mutually agree as to such rentals, fees and charges for any such renewal term, the same shall be determined by arbitration, as hereinafter provided, and pending such determination the rentals, fees and charges last in effect shall continue in full force and effect."

Article XIX of the leases further provides as follows:

"Any controversy or claim arising out of or relating to, the provisions of Article II, * * * (and)Article III(C) * * * of this Agreement, which shall not have been settled by agreement between the parties hereto within ninety (90) days after notice of such controversy or claim has been served by the claimant upon the other party, shall be settled by arbitration in accordance with Chapter 417 of Kentucky Revised Statutes and the Commercial Arbitration Rules of Procedure, then obtaining, of the American Arbitration Association, and judgment upon the award rendered may be entered in any court having jurisdiction thereof."

Prior to the expiration of the original term of the leases on June 11, 1957, the Air Board gave the Airlines a notice of controversy provided for in Article XIX, but no steps have been taken by the parties to initiate arbitration proceedings, and they have not been able to mutually agree upon rental terms for the renewal period.The original term of the leases having expired on October 31, 1957, the Airlines are now seeking to enforce the arbitration provisions of the leases which the Air Board refuses to acknowledge as binding upon it.

The controlling issue to be decided is whether or not the covenant in the leases to submit to arbitration the question of rentals for the renewal term is a valid and enforceable agreement.

The Air Board was created by statute.It is a body "politic and corporate with the usual corporate attributes, and in its corporate name may sue and be sued, contract and be contracted with, and do all things reasonable or necessary to effectively carry out the work contemplated by KRS 183.140 to 183.210."It is a bipartisan body composed of six members appointed jointly by the Mayor of Louisville and the Judge of Jefferson County.KRS 183.140.The express purpose for the creation of the Air Board was "to establish and maintain one or more airports and facilities to provide for transportation by air of passengers, property, express and mail, and to provide one or more airports and facilities for the use of the Federal Government."KRS 183.150.The Legislature gave the Air Board"such powers as may be necessary or desirable to promote aviation and the development of facilities for air travel and transportation."KRS 183.150.The Air Board is empowered to acquire property by condemnation or otherwise and to "erect, equip, operate and maintain, on such land, buildings and equipment necessary and proper to establish, conduct and maintain airports or air navigation facilities."KRS 183.170.It is given the right to "prescribe such rules and regulations as it deems necessary,"KRS 183.160; to "borrow money on its own credit in anticipation of the revenue to be derived from appropriations or other income for the fiscal year in which the money is borrowed,"KRS 183.200; to "issue revenue bonds under the same conditions as are provided for other governmental units,"KRS 183.205andKRS 183.215; and in this connection if revenue bonds are issued for the acquisition of airport facilities, the Air Board is required to "definitely fix and determine the amount of revenue necessary to be set apart and applied to the payment of principal and interest of the bonds * * *," and the Air Board is required to see that "the rates and fees to be charged for the services of the airport facilities shall be fixed and revised from time to time so as to be sufficient to provide for payment of interest upon all bonds and to create a sinking fund to pay the principal thereof...