Arrow Air, Inc. v. United States

• Citation: 649 F. Supp. 993
• Decision Date: 29 October 1986
• Docket Number: Civ. A. No. 86-2696.
• Parties: ARROW AIR, INC., Plaintiff, v. UNITED STATES of America, Hon. Caspar W. Weinberger, Hon. Edward C. Aldridge, Defendants.
• Court: U.S. District Court — District of Columbia

649 F. Supp. 993

ARROW AIR, INC., Plaintiff, v. UNITED STATES of America, Hon. Caspar W. Weinberger, Hon. Edward C. Aldridge, Defendants.

Civ. A. No. 86-2696.

United States District Court, District of Columbia.

October 29, 1986.

David L. Vaughan, Edward M. Lebow, Washington, D.C., for plaintiff.

Stuart Newberger, Asst. U.S. Atty., Office of the U.S. Atty., Judiciary Center, Washington, D.C., for defendants.

MEMORANDUM OPINION

NORMA HOLLOWAY JOHNSON, District Judge.

Plaintiff Arrow Air, Inc. (Arrow), a charter air carrier which until recently had been doing business with the Department of Defense (DOD) on an ongoing basis, brought this action for declaratory and injunctive relief challenging a DOD determination that found Arrow "not capable" of performing certain airlift services for the Military Airlift Command (MAC)¹ for fiscal year 1987.² Named as defendants are the United States, the Secretary of Defense, and the Secretary of the Air Force. Jurisdiction is asserted to exist under 28 U.S.C. §§ 1331 and 1346. The case is presently before the Court on plaintiff's motion for a preliminary injunction. Having considered the motion, defendants' opposition thereto, the parties' legal memoranda, the arguments of counsel, and the record herein, the Court concludes that Arrow is not entitled to the extraordinary relief requested because it has failed to demonstrate (1) that it has a substantial likelihood of success on the merits and (2) that it will suffer irreparable injury absent such relief. The following constitutes the Court's findings of fact and conclusions of law required by Rule 52(a).³

BACKGROUND

Arrow Air, Inc., a Delaware corporation with its principal place of business in Miami, Florida, is a charter air carrier of persons, property, and mail duly licensed by the Federal Aviation Administration (FAA). Arrow does business with both governmental and private purchasers of airlift services. Since 1981, it has been engaged in providing air transportation services on a contractual basis to various components of the DOD, including MAC. Through its MAC contracts, Arrow generated approximately $22 million in revenue during fiscal year 1986, a sum representing roughly twenty-five percent of its gross revenues for that period. Arrow's remaining revenues during fiscal 1986 were derived from non-government work. Arrow is presently in Chapter 11 reorganization proceedings under the bankruptcy laws.⁴

As noted earlier, MAC is a principal subdivision of the United States Air Force and is designated as the "Single Manager Operating Agency" for certain categories of DOD airlift requirements. In addition to exercising command and control over all military airlift resources worldwide, MAC is responsible for procuring any necessary contract airlift services for (1) DOD long-term (in excess of ninety days) airlifts within the continental United States, and (2) DOD international airlifts.

Arrow in recent years has participated in contracts issued by MAC under the Civil Reserve Air Fleet (CRAF) program. CRAF is a voluntary DOD program with private industry whereby civil air carriers may offer to dedicate both equipment and crews for use in contingency airlift operations during times of national crisis. Various "stages" of commitment are available under the CRAF program for eligible carriers. Participation is encouraged, inter alia, by apportioning fixed-price contracts for certain categories of DOD peacetime transportation requirements among the participating carriers in accordance with their capabilities and a pre-established methodology for measuring the quantum of their participation in the CRAF program. Solicitation of CRAF participation is noncompetitive; contract rates are fixed in advance. In the years preceding the challenged determination of ineligibility, Arrow, as a participant in the CRAF program, was awarded contracts in the "long range international" service category.

On December 12, 1985, an Arrow flight, not chartered by MAC, was involved in a tragic accident. A DC-8 aircraft operated by Arrow crashed immediately following takeoff from Gander International Airport, Newfoundland. The plane carried 248 United States soldiers from the 101st Airborne Division and 8 crewmembers. The soldiers were returning home to their families following tours of duty in the Middle East as members of the Multinational Peacekeeping Force stationed in the Sinai Desert. All 256 persons on board were killed.

Although the Arrow flight which crashed at Gander had been chartered by the Multinational Peacekeeping Organization and not by MAC, an evaluation of Arrow operations and maintenance was conducted by MAC immediately following the accident. While the preliminary results did identify some problems, it was initially determined, based upon MAC's own evaluation and information provided to MAC by the FAA, that no sufficient basis existed for suspension of DOD flights with Arrow. Accordingly, MAC continued to do business as usual with Arrow until early February 1986.

During early February 1986, the House of Representatives, Committee on Armed Services, Subcommittee on Investigations, was conducting hearings on the Gander crash. The Subcommittee heard testimony critical of Arrow's operations including, for example, testimony that Arrow was not reporting safety violations and operating irregularities to the FAA as required and that Arrow crews were often pressured to fly under unsafe conditions. The hearings concluded on February 6, 1986, with the adoption of a resolution by the Subcommittee requesting the Secretary of Defense to suspend all contracts with Arrow Air pending completion of the Gander accident investigation. Also during the first week of February 1986,⁵ the FAA, which was then conducting a special inspection of Arrow triggered by the Gander incident, disclosed to MAC, inter alia, that Arrow was improperly using foreign-sourced spare parts on its aircraft. On February 7, 1986, all MAC charter activity with Arrow Air was temporarily suspended because of concerns regarding Arrow's safety and capability.

MAC resumed cargo-only airlift operations with Arrow on April 10, 1986, following resolution of the earlier concerns and correction of the deficiencies noticed prior to the suspension. The resumption of charter activity was accompanied by a bilateral modification of the MAC contract with Arrow which substituted cargo-only service for passenger service. MAC contract flights with Arrow continued on this basis until the expiration of the contract for fiscal year 1986 on September 30.

On June 5, 1986, Arrow submitted a proposal to MAC in response to a request for proposals (RFP) for "International Air Transportation Services for the Civil Reserve Air Fleet (CRAF) — Long Range International", solicitation number F 11626-86-R-0030. Attachment 1, plaintiff's motion for a preliminary injunction. The RFP contained the requirements for the award by MAC of contracts for international civil air transportation services for fiscal year 1987. Arrow's proposal under this RFP was for the award of the successor contract to the one awarded Arrow for fiscal year 1986.

Following submission of its proposal in response to the fiscal year 1987 RFP, Arrow's capability to perform airlift services was evaluated pursuant to a process set forth in MAC Regulation 70-1 (MACR 70-1).⁶ Under this process, the Contract Airlift Capability Survey Committee (the Committee), a group of senior MAC officers whose membership and duties are fixed by MACR 70-1, is responsible for performing an evaluation of the capability of MAC contractors and for submitting a capability finding and recommendation to the Commander in Chief of MAC (CINCMAC), who has authority under MACR 70-1 to make final capability determinations.

On July 21 and 22, 1986, the Committee conducted an on-site inspection of Arrow. At a subsequent meeting on August 26, 1986, the Committee members voted unanimously to find Arrow "not capable". The Committee Report⁷ indicated that the Committee's finding was based on consideration of a number of relevant factors instead of any single element, but that the most important factor bearing on capability was air safety. The Report further indicated that the Committee, in arriving at its conclusion, considered Arrow's (1) past performance, (2) financial condition, (3) accident experience and accident prevention program, and (4) FAA violations. With respect to Arrow's financial condition, the Report noted that Arrow had earlier filed a Chapter 11 bankruptcy action, but that the Committee did not consider that fact "in and of itself ... to be disqualifying." It was noted, however, that "Arrow continues to be under financial pressure due to, among other things, its loss of commercial revenues in the wake of the Gander crash ... and that the Committee continues to be concerned that Arrow's financial status could be reflective of deteriorating management and maintenance capabilities." In its conclusion, the Report stated that

the Committee fully recognized that there is significant doubt ... on the question of Arrow Air's capability to safely perform airlift missions for the DOD. Because the factors about which we are uncertain could contribute to catastrophic mishaps, it was determined that this significant level of doubt was unacceptable.... Therefore, after all deliberations, the Committee voted unanimously to find Arrow Air not capable of performing airlift services for the DOD.

Thereafter, on September 2, 1986, General Duane H. Cassidy, CINCMAC, issued a "Memorandum of Decision" which indicated that he concurred with the Committee's finding and determined Arrow to be "not capable". On that same date, by letter from Thomas F. Cygan, MAC's Contract Officer, Arrow was advised of CINCMAC's determination and provided with a copy of General Cassidy's memorandum decision. The September 2 letter from the Contract Officer also informed Arrow that, in...