7ASR3d191

SAMOA

AVIATION, INC., dba SAMOA AIR, Plaintiff,

 

v.

 

AMERICAN SAMOA GOVERNMENT, Defendant.

 

High

Court of American Samoa

Trial

Division

 

CA

No. 98-03

 

December

1, 2003

 

 

[1]

In order to show a substantial likelihood of success at trial on the merits, to

support a motion for a preliminary injunction, a movant merely needs to raise

questions so serious and difficult as to call for more deliberate

consideration, or at least demonstrate a fair question for litigation.

 

[2]

As a general proposition, the availability of an adequate legal remedy

precludes equitable injunctive relief.

 

[3]

The existence of a legal remedy is not alone sufficient to deprive a movant of

equitable relief—it must be speedy, adequate, and efficacious, and preserve the

movant’s rights at the present time and not as of a future date.

 

[4]

Where movant demonstrated that defendant had engaged in an ongoing course of

conduct that was tantamount to unfair, and possibly bad faith, interfering with

the very performance term under which 

sought termination of the lease, movant had sufficiently shown

“substantial likelihood of success at trial on the merits” in order support a

preliminary injunction.

 

[5]

The ruin of a party’s business constitutes irreparable harm.

 

[6] Where eviction would irrevocably

disrupt sale of company, and cause territory to lose its only “Part 121”

carrier, element of “great or irreparable injury” was shown, justifying

preliminary injunction.

 

Before RICHMOND, Associate Justice,

MAMEA, Associate Judge, and TAPOPO, Associate Judge.

 

Counsel:          For Plaintiff, Marshall Ashley

 For Defendant, Fiti A. Sunia, Attorney General

 

PRELIMINARY INJUNCTION

 

On November 13, 2003, Plaintiff Samoa

Aviation, Inc. (“Samoa Air”) brought this action for injunctive relief preventing

Defendant American Samoa Government (“ASG”) from terminating its lease of

office and ticket counter space in the terminal building at the Pago Pago

International Airport.  ASG answered,

denying any wrongful termination of the lease and affirmatively alleging

various grounds precluding injunctive relief, and counterclaimed for Samoa

Air’s immediate eviction from the leased premises.  Samoa Air’s application for a preliminary

injunction was heard on November 20, 2003. 

Both counsel were present.

 

Preliminary Injunction Grounds

 

A preliminary injunction is

appropriately issued only when “(1) there is a substantial likelihood that the

applicant will prevail at trial on the merits and that a permanent injunction

will be issued against the opposing party; and (2) great or irreparable injury

will result to the applicant before a full and final trial can be fairly held

on whether a permanent injunction should issue.”  A.S.C.A. § 43.1301(j).

 

[1-3]

To show a substantial likelihood of success at trial on the merits, “a movant

merely needs to raise questions so serious and difficult as to call for more

deliberate consideration, or at least demonstrate a fair question for

litigation.”  Samoa Aviation, Inc. v.

Bendall, 28 A.S.R.2d 101, 103-04 (Trial Div. 1995) (citations

omitted).  As a general proposition, the

availability of an adequate legal remedy precludes equitable injunctive

relief.  See White v. Sparkill Realty

Corp., 280 U.S. 500, 510 (1930). 

However, the existence of a legal remedy is not alone sufficient to

deprive a movant of equitable relief.  See

Stewart Dry Goods Co. v. Lewis, 287 U.S. 9, 11 (1932).  The legal remedy must be speedy, adequate,

and efficacious, and preserve the movant’s rights at the present time and not

as of a future date.  Id.               

 

Findings of Fact

 

1. 

The Lease Cancellation Notice

 

On November 6, 2003, ASG issued a

notice entitled “Lease Cancellation” terminating Samoa Air’s lease of office

and ticket counter spaces in the terminal at the Pago Pago International

Airport (“the airport”).  Samoa Air

received the notice on or about the same day. 

The stated grounds for the termination was based on Article XIII(1)(F)

of the parties’ lease agreement authorizing ASG to cancel the lease upon Samoa

Air’s abandonment of air transportation service at the airport or reduction of

service to and from the airport to less than four flights per day for a period

of more than one month. 

 

Samoa Air

denies abandonment of its air transportation operations at the airport, and ASG

does not advocate otherwise.  Samoa Air

concedes that it is not presently providing air service to and from the airport

and that its service has been reduced below the four daily flights minimum for

more than one month.  Samoa Air

maintains, however, that each party to a contract has a duty of good faith and

fair dealing in the performance and enforcement of the contract, see Restatement (Second) of Contracts § 205 (1981), and

that ASG has grossly violated that duty in a highly discriminatory manner.[1]

 

2.  Context of the Lease Cancellation       

 

Samoa Air is a

federally licensed “Part 121” air service carrier.  This status authorizes Samoa Air to provide

scheduled commercial air services to and from the airport.  It is the only “Part 121” air carrier with

authority to provide air service between the airport and the Manu`a Islands and

between the airport and [Western] Samoa. Polynesian Airlines (“PAL”) has

similar status but as a foreign carrier operating from Samoa under different

auspices.  Locally, PAL only regularly

operates flights between the airport and Samoa. “Part 121” status also imposes

considerable legal regulatory requirements upon an air carrier, particularly in

reference to marketing services and aircraft safety.

 

Samoa Air is

presently unable to engage in air operations.  

It has only one Twin Otter aircraft. 

Under federally imposed safety standards, the aircraft’s components are

subject to specified lifetimes.  In July

2003, Samoa Air learned that changes in the aircraft’s frame would soon be

required.[2]  Samoa Air’s flight operations completely

ceased on this account on October 30, 2003. 

The time estimate to accomplish the frame changes is three to four

weeks.  Samoa Air attempted to lease

another aircraft to service its Manu`a Island and Samoa routes during this

period.  Samoa Air made preliminary

arrangements for the frame change and an interim leased aircraft.  However, it did not have the ready cash to

pay for the changes and the downpayment required to obtain the substitute

aircraft.

 

Two other air

carriers, Inter Island Air and Vision Air, have immediate capability to serve

the route between the airport and the Manu`a Islands.  Vision Air, however, is an authorized “Part

135” carrier, not a “Part 121” carrier. 

“Part 135” carriers can only operate charter services, contracted on a

case-by-case basis.  They cannot provide

scheduled commercial air services, and are not subject to the same safety

scrutiny as a “Part 121” carrier. 

Apparently, Inter Island Air does not yet have formal federal approval

to provide air services.    

 

3.  Samoa Air’s Proposal for ASG’s Financial

Assistance

 

In August 2003, the cessation of Samoa

Air’s operations approached.  As the only

“Part 121” air carrier between the airport and the Manu`a Islands, Samoa Air

representatives approached the Governor with a request for funds to alleviate

Samoa Air’s immediate cash flow problems and enable it to lease an aircraft

while its own aircraft was undergoing frame changes.  The Governor denied the request and, in

essence, stated that when he would inform Samoa Air of his plan to remove its

“inept management” when he was ready. 

 

A short time later, on August 31, 2003,

the Governor proposed legislation to the Legislature of American Samoa to

appropriate $500,000 to ensure continuing air service to the Manu`a Islands and

give the Governor discretion to use the funds to cope with the transportation

void.  Samoa Air representatives then

discussed with legislative committee members possible use of these funds on a

reimbursable basis to alleviate its immediate cash flow problem.  They believed the legislators were favorably

receptive to this idea. 

 

The $500,000 appropriation was enacted

without, as originally proposed, any limitation by specific directions on the

Governor’s discretion for expenditure of the funds.  On September 11, 2003, Samoa Air proposed to

the Governor that it be afforded use of the appropriated funds on a

reimbursable basis, $100,000 for the frame changes and $150,000 for the

substitute leased aircraft.  Citing a

lack of necessary documentation, the Acting Governor rejected Samoa Air’s

proposal on the same day.  Though the

rejection letter offered to meet for further discussions, the Governor’s legal

counsel informed Samoa Air a short time later that its proposal simply would

never be accepted.

 

The Governor has apparently authorized

use of the appropriated $500,000 to subsidize, as may be necessary, PAL’s

scheduled flight operations and Inter Island Air’s charter flight operations

between the airport and the Manu`a Islands. 

The U.S. Department of Transportation has given PAL, though a foreign

air carrier, temporary permission to service this route, apparently until the

current problems with this needed service is solved.  

 

4. 

Samoa Air’s Proposal to Aloha Airlines

 

In November 2002, addressing continuing

complaints and other problems with Hawaiian Airlines’ air service between

Honolulu and the airport, Samoa Air representatives proposed to Aloha Airlines

representatives a joint venture under which Aloha would provide commercial air

services to American Samoa with Samoa Air handling ground services at the

airport and other necessary assistance through its facilities here.  However, in the spring of 2003, the Governor

directly requested Aloha Airlines to provide air services to American Samoa,

and since then, Aloha has not returned Samoa Air’s communications to pursue the

joint venture proposal.

 

It has now been publicly announced that

Aloha Airlines will start providing air services to American Samoa in December

2003.  Aloha representatives recently

measured Samoa Air’s office space at the airport and, on the date of this

application hearing, were present in the Territory preparing for this

advent. 

 

5. 

Samoa Air’s Charter Proposal to ASG

 

In June 2003, again addressing the

ongoing air service problems with Hawaiian Airlines, a Samoa Air representative

advised the Governor of its plan to charter aircraft from Omni Airlines to provide

flights between Honolulu and the airport. 

The Governor concurred in the charter idea and indicated that ASG had

funds available for this purpose.  During

this meeting, the Governor did not even look at Samoa Air’s written proposal

and at least indirectly indicated that funds for this purpose would not be made

available to Samoa Air. 

 

However, later in June 2003, the

Governor advised Samoa Air by a telephone call that ASG would financially help

with deposits for charter flights. 

Acting on this information, Samoa Air spent considerable time and

expense filing necessary paperwork with the U.S. Department of Transportation

and hiring personnel in Hawaii and American Samoa to set up charter

operations.  One day in early July 2003,

the Governor’s legal counsel asked Samoa Air to document its charter

arrangements, but on the following day he advised Samoa Air that ASG would deal

directly with Omni Airlines for a charter program and would only consider

having Samoa Air handle ground services.           

 

6. 

Samoa Air’s Indebtedness to ASG

 

Samoa Air has outstanding debts of

approximately two million dollars, of which approximately $350,000 is owed to

ASG for rent of Samoa Air’s airport facilities, landing fees, income taxes, and

other charges.  In turn, ASG owes Samoa

Air a presently unspecified but lesser amount. 

Even after August 31, 2003, when the Governor directed all ASG agencies

to route all requests for payments to Samoa Air to the Governor’s Office, Samoa

Air responded to two requests by ASG’s medical center for emergency air

services.  Samoa Air has not received any

payments from ASG for the two emergencies and only a single payment on another

statement for outstanding services since the Governor’s directive. 

 

ASG has a long-standing and well-known

history of forbearance in debt collection efforts, not just debts owed by Samoa

Air but also by other users of the airport’s facilities and other obligors

generally, as well as delaying payments of its own obligations.  ASG’s forbearances generally, and with

respect to Samoa Air particularly, have yet not, by any reasonable

characterization, reached the level of constituting a waiver of payment of

debts to it.  However, the forbearance in

this case is certainly indicative of ASG’s relationship with Samoa Air in

general and the manner of the performance and enforcement of the lease

agreement in particular. 

 

7. 

Samoa Air’s Diminished Sale Value

 

ASG is well aware that the present

owners of Samoa Air are endeavoring to sell the company to another owner.  On September 25, 2003, the Governor advised

Samoa Air that, in effect, he had encouraged other airlines to work with Samoa

Air on an American Samoan solution to the Manu`a air service problem.  In October 2003, envisioning ASG’s

forgiveness of Samoa Air’s debts, Island Air and Vision Air sought to buy Samoa

Air.  However, after negotiations, Samoa

Air determined that neither Island Air nor Vision Air had sufficient funds to

purchase and conduct Samoa Air’s operations.    

 

The present owners of Samoa Air are in

the midst of serious negotiations for the sale of the company to a reportedly

respected and solvent airline operating out of the Territory of Guam.  Samoa Air believes that the sale can be

finalized in December 2003.  The

prospective buyer airline is aware of Samoa Air’s indebtedness and, according

to Samoa Air, is willing and able to assume responsibility for the debts.  The prospective buyer is also aware of ASG’s

lease cancellation notice to Samoa Air and, again according to Samoa Air, views

the loss of office and ticket counter space at the airport as substantially

diminishing Samoa Air’s value.  Samoa

Air’s chief executive officer believes that this diminished value will

seriously impact sale of Samoa Air at otherwise fair market value.  It is therefore important that Samoa Air

retains office and ticket counter space at the airport to get back on its

financial and operational feet.

 

Conclusions

 

[4]

Taking into consideration the foregoing facts as a whole, we conclude that ASG

has demonstrated an ongoing course of conduct that is tantamount to unfair, and

perhaps bad faith, dealings with Samoa Air. 

ASG purposely interfered with Samoa Air’s performance of the four daily

flights condition required by Article XIII(1)(F) of the airport office and ticket

counter space lease agreement.  See

Restatement (Second) of Contracts § 205 cmt.

d.  This interference, along with a

habitual forbearance in collecting Samoa Air’s debts to ASG, show that ASG also

abused its power to enforce the lease agreement.  See id. § 205 cmt. e.  The evidence warrants, at the very least,

further and greater in-depth analysis of the lease cancellation and surrounding

circumstances.  For preliminary injunction

purposes, the element of the substantial likelihood of success at trial on the

merits and ultimate issuance of a permanent injunction in Samoa Air’s favor

against ASG has been sufficiently shown. 

See Samoa Aviation, Inc., 28 A.S.R.2d at 103-05.

 

[5]

In regards to irreparable harm, ASG argues that Samoa Air’s injury, if any, is

adequately remedied by monetary damages. 

However, the ruin of a party’s business constitutes irreparable

harm.  See Samoa Aviation, Inc.,

28 A.S.R.2d at 105; see also Wisconsin Gas Co. v. Fed. Energy Regulatory

Comm’n, 758 F.2d 669, 674 (D.C. Cir. 1985). 

The immediate termination of Samoa Air’s office and ticket counter space

lease at the airport destroys Samoa Air’s efforts to continue flight

operations, because, in the current situation, termination will irrevocably

disrupt sale of the company at a fair market value to a buyer who is ready,

willing, and able to take over Samoa Air’s air service operations.  Furthermore, loss of American Samoa’s only

“Part 121” carrier will cause harm to the people and Territory of American

Samoa.  See Samoa Aviation, Inc.,

26 A.S.R.2d at 105.  Therefore, the

element of great or irreparable injury to Samoa Air as a result of the lease

cancellation before a full and final trial can be held is also sufficiently

established.

 

Samoa Air is entitled to a preliminary

injunction preventing ASG from evicting Samoa Air from its leased premises at

the airport.

 

Here, as in most disputes seeking

judicial resolution, we encourage settlement. 

While it is not our role or intent to venture into the realm of the

Executive Branch’s operations, perhaps, Samoa Air could be allowed to relocate

to another space at the airport or share space with another carrier. 

 

Order

 

1. 

Samoa Air’s application for a preliminary injunction against ASG is

granted.

 

2. 

During the pendency of this action, or until further order of this

Court, ASG, its officers, agents, servants, employees, and attorneys, and those

persons in active concert or participation with them, are enjoined: (1) from

evicting or attempting to evict Samoa Air from its office and ticket counter

space in the terminal at the airport, (2) from preventing Samoa Air from using

common use areas at the airport as described in the Lease Agreement, and (3)

from preventing Samoa Air full and free right of ingress and egress from the

premises described in injunctions (1) and (2) above.

 

It is so ordered.

 

**********