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HomeMy WebLinkAbout01-5974Jack F. Hurley, Jr., Esquire Attorney I.D. No. 24414 Dean F. Piermattei, Esquire Attorney I.D. No. 54837 Timothy J. Nieman, Esquire Attorney I.D. No. 66042 RHOADS & SINON LLP One South Market Sq., 12th Floor P.O. Box 1146 Harrisburg, PA 17108-1146 (717) 233-5731 BAA HARRISBURG, INC., Plaimiff, SUSQUEHANNA AREA REGIONAL AIRPORT AUTHORITY, Defendant. IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA NO. 014097 IN EQUITY JURY TRIAL DEMANDED COURT ORDER AND NOW, this / ~' day of October, 2001 it is hereby ORDERED that this case is transferred from the Equity Docket to the Civil Docket where it will be reassigned a Civil Docket number. All further proceedings in this matter shall be docketed to the Civil Docket number. BY THE COURT: 404432.1 OF T~E ~o,' .. ,~. .... )T L,tlOTAFIY OIOCTI6 Pt~ I:01 CUMBER~J~iD COUNTY ~NS~V~A ROBERT H, LONG, 3R? SHERILL T. MOYER 3AN P, PADEN RICHARD B. WOOD SHAWN D. LOCHINGER 3AMES H. CAWLEY DEAN f. PIERMATTEI KENNETH L. JOEL~ ]~HO~kD~ ~ ~I1~01~ LLP ATTORNEYS AT LAW TWELFTH FLOOR ONE SOUTH MARKET SQUARE P.O. BOX 1146 HARRISBURG, PA 17108-1146 TELEPHONE (717) 233-5731 FAX (717) 231.-6637 EMAIL dpierma~ei@rhoads-sinon.com WEBS[TE: www.rhoads-sinon.com October 12, 2001 OFCOUNSEL FRANK A. $INON HENRY W. RHOADS JOHN C. DOWLING R. STEPHEN SHIBLA PAUL H. RHOAD$ JOHN M. MUSSELNAN CLYLE R. HENDERSHOT 1922-1980 DIRECT DIAL NO. (717) 233-5731 FILE NOi 6216/01 Re: BAA Harrisburg, Inc. v. Susquehanna Area Regional Airport Authority, Docket No. 01-4097 Honorable Kevin A. Hess Cumberland County Courthouse One Courthouse Square Carlisle, PA 17013-3387 Dear Judge Hess: I am writing as a follow-up to my conversation with your secretary regarding the transferring of this matter from the Equity side to the Law side. In light of your ruling both parties are in agreement that this matter should be transferred to the Civil Docket. I am enclosing a letter from Michael Kelly who represents BAA Harrisburg in this matter. I am also enclosing a copy of a proposed Order. If there are any questions or problems, please feel free to call me. Ve~ truly yours, RHOADS & SINON LLP B ' e'~e ~J~.~iermattei DFP/tlp Enclosures cc: Michael Kelly, Esquire ( w/encl. ) Counsel for BAA Harrisburg 404428.1 McNees Wallace & Nurick c attorneys at Jaw September 21, 2001 VIA FACSIMILE AND U.S, MAIL Dean F, Piermattei, Esquire Rhoads & Slnon LLP One South Market Square Harrisburg, PA 17101 RE: BAA Harrisburg, Inc. v. SARAA Dear Dean: We have filed a Second Amended Complaint. It was filed in the current equity action. We agree that this matter now should be transferred to the law side of the Court. We propose to accomplish this transfer through a joint stipulation and order. If your clients are agreeable to this, I will draft a stipulation and order. Please let me know. Sincerely, MRK:nfc Michael R. Kelley ~.~--'"~ .... PO Box 1166 - 100 P~NE STREET ' HARRISBURG, PA 17108-1166 - TEL: T17.Z32.Sn00 - FAX; 717,Z37,5300. WWW:~IWN.COM COLUMBUS, OH ° HAZLETON, PA ' WASHINGTON, DC BAA HARRISBURG, INC., Plaintiff, go SUSQUEHANNA AREA REGIONAL AIRPORT AUTHORITY, Defendant. IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA NO. 01-5974 CIVIL COMPLAINT JURY TRIAL DEMANDED NOTICE TO PLEAD TO: PlaintiffBAA Harrisburg, Inc. YOU ARE HEREBY NOTIFIED TO FILE A WRITTEN RESPONSE TO THE ENCLOSED NEW MATTER AND COUNTERCLAIM WITHIN TWENTY (20) DAYS FROM SERVICE HEREOF OR A JUDGMENT MAY BE ENTERED AGAINST YOU. RHOADS & SINON LLP By: ~'~-- Jae ey, Jr, E~quire Dean F. Piermattei, Esquire Timothy J. Nieman, Esquire One South Market Square P. O. Box 1146 Harrisburg, PA 17108-1146 (717) 233-5731 FOLEY & LARDNER Thomas R. Devine, Esquire David T. Ralston, Jr., Esquire 888 Sixteenth Street, N.W. Washington, D.C. 200006-4103 (202) 835-8000 Date: October 24, 2001 Attorneys for Susquehanna Area Regional Airport Authority Jack F. Hurley, Jr., Esquire Attorney I.D. No. 24414 Dean F. Piermattei, Esquire Attorney I.D. No. 54837 Timothy J. Nieman, Esquire Attorney I.D. No. 66042 RHOADS & SINON LLP One South Market Sq., 12th Floor P.O. Box 1146 Harrisburg, PA 17108-1146 (717) 233-5731 BAA HARRISBURG, INC., Plaintiff, SUSQUEHANNA AREA REGIONAL AIRPORT AUTHORITY, Defendant. IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA NO. 01-5974 CIVIL COMPLAINT JURY TRIAL DEMANDED ANSWER TO SECOND AMENDED COMPLAINT~ NEW MATTER AND COUNTERCLAIM NOW COMES, Defendant Susquehanna Area Regional Airport Authority ("SARAA") by and through its attorneys, Rhoads & Sinon LLP and Foley & Lardner, and files the within Answer, New Matter and Counterclaim as follows: 1. Admitted. 2. Admitted. 3. Denied. SARAA is governed by a board of directors which currently is comprised of fourteen (14) members representing Dauphin County, Cumberland County, York County, City of Harrisburg, City of York, Lower Swatara Township end Fairview Township. 402793.1 4. Admitted. 5. It is admitted that on December 16, 1997 SARAA and BAA Harrisburg, Inc. ("BAAH") entered into an "Agreement for the Management Operation and Maintenance of Harrisburg International Airport and Capital City Airport" (the "Agreement"). 6. Admitted in part. It is admitted that BAAH began to perform under the Agreement on or about January 3, 1998. It is denied that BAAH ever fully performed its responsibilities under the Agreement. 7. Denied. The terms of the Agreement speak for themselves and any attempt by BAAH to misconstrue or limit these t~mas is specifically denied. 8. Denied. The terms of the Agreement speak for themselves and any attempt by BAAH to misconstrue or limit these terms is specifically denied. 9. Denied. The terms of the Agreement speak for themselves and any attempt by BAAH to misconsa'ue or limit these t~tms is specifically denied. 10. Denied. The terms of the Agreement speak for themselves and any attempt by BAAH to misconstrue or limit these terms is specifically denied. By way of further answer, it is admitted that the airport police were employed by SARAA. 11. Denied. The terms of the Agreement speak for themselves and any attempt by BAAH to misconstrue or limit these terms is specifically denied. 12. Denied. The terms of the Agreement speak for themselves and any attempt by BAAH to misconstrue or limit these terms is specifically denied. -2- 13. Denied. The allegations in this paragraph are specifically denied. By way of further answer BAAH failed to meet its contractual requirements under the Agreement, including, but not limited to, the following: (i) BAAI-I did not provide the promised skills and experience; (ii) BAAH did not utilize its best efforts in promoting air service at HIA; (iii) BAAH did not ensure compliance with legal requirements concerning, inter alia, procurement, worker's compensation and other insurance; and (iv) BAAH did not maintain a professional, positive and responsive relationship with SARAA's Board. BAAH's failure to perform is further detailed in the Notices of Default which were sent to BAAH on February 19, 2001, April 2, 2001 and April 6, 2001. A copy of these notices are attached hereto as Exhibit "A" and incorporated herein by reference. 14. Denied. By way of further answer, BAAH refused to engage in any discussion of items of concern raised by SARAA at the meeting; SARAA indicated that, absent a mutually agreeable resolution, it was prepared to follow the formal default procedures under the contract to achieve a resolution through mediation or litigation; and any expression of a desire to terminate BAAl-Ps role at the Airports was a direct result of BAAH's failure to perform its obligations under the Agreement, as detailed above. 15. Denied. SARAA's letter of March 23, 2001 speaks for itself and any attempt by BAA/-I to misconstrue or limit the content of this letter is specifically denied. 16. Admitted in part. It is admitted that attached to the Answer to Second Amended Complaint as Exhibit "C" is a letter dated March 30, 2001 sent by BAAH to SA_RAA. The letter speaks for itself. The remaining allegations in this paragraph are specifically denied. By way of further answer, the allegations set forth in the March 30, 2001 letter are specifically denied. -3- 17. Denied as stated. It is admitted that SARAA sent a Notice of Default dated April 2, 2001. The Notice of Defanlt speaks for itself. 18. Denied. The allegations of this paragraph are specifically denied. 19. Denied. The terms of the Agreement speak for themselves and any attempt by BAAH to misconstrue or limit these terms is specifically denied. 20. Denied. It is specifically denied that SARAA was in default of any of its obligations under the Agreement. 21. Denied. The allegations of this paragraph are specifically denied for the reasons set forth above. 22. Admitted. 23. Admitted. 24-25. Admitted that the letter from SARAA's Executive Director is attached to the Second Amended Complaint as Exhibit "E." By way of further answer, the letter speaks for itself and any attempt by BAAH to misconstrue or limit the language of this letter is specifically denied. 26. Admitted, in part, denied, in part. It is specifically denied that the SARAA Board held a meeting on June 29, 2001. By way of further answer, on June 29, 2001, the SARAA Executive Committee held an Executive Session wherein it met with the Negotiating Committee and reviewed the Negotiating Committee's pmpnsal to terminate the Agreement with BAAH. The Executive Committee gave its endorsement of the Negotiating Committee's decision to -4- proceed with sending a Notice of Termination subject to the ratification and confirmation by the SARAA Board at the earliest possible time. The SARAA Board did not take action at the June 29, 2001 meeting. At a special public meeting of the SARAA Board on July 3, 2001, the SARAA Board voted to ratify and confirm the actions of the Negotiating Committee. 27. Denied. The allegations in this paragraph are specifically denied for the reasons set forth in paragraph 26 above. 28. Denied. The allegations in this paragraph are specifically denied for the reasons set forth above. By way of further answer, it was the Negotiating Committee that terminated the Agreement subject to ratification and confirmation by the SARAA Board which occurred on July 3, 2001. At the time the Agreement was terminated most if not all of BAAH's employees were offered employment with SARAA pursuant to the terms of the Agreement. The BAAH employees who refused employment with SARAA were prevented from returning to their place of employment at the Airports. BREACH OF CONTRACT 29. The averments contained in Paragraph 29 do not require a responsive pleading. By way of further answer, SARAA's answers set forth above are incorporated herein by reference. 30-34. Denied. The averments contained in these paragraphs are legal conclusions and do not require a response. To the extent that these paragraphs contain factual averments, same are denied for the reasons set forth above. -5- WHEREFORE, Defendant respectfully requests judgment in its favor and against Plaintiff dismissing the Second Amended Complaint and awarding Defendant its costs for defending this action, including reasonable attorneys' fees. NEW MATTER 35. BAAH breached the Agreement and, accordingly, is barred from recovepj under the Agreement. 36. BAAH has failed to satisfy and plead all of the conditions precedent which would allow it to recover under the Agreement. 37. BAAH acted in a fraudulent manner. WHEREFORE, Defendant respectfully requests judgment in its favor and against Plaintiff dismissing the Second Amended Complaint and awarding Defendant its cost for defending this action including reasonable attorney fees. COUNTERCLAIM BREACH OF CONTRACT 38. Defendant incorporates herein by reference its responses to Paragraphs 1 through 37. 39. Pursuant to the Agreement, BAAH was required to fully operate, manage and market Harrisburg International Airport ("HIA") and Capital City Airport ("CCA") (collectively the "Airports"). (A tree and correct copy of the Agreement is attached as Exhibit "A" to Plaintiff's Second Amended Complaint and incorporated herein by reference). -6- 40. Pursuant to Section 3.01 of the Agreement, Plaintiff had an obligation to provide expertise and use its best efforts in fulfilling its obligations under the Agreement. Specifically, Section 3.01 provides as follows: Section 3.01. Relationship of Parties. (a) The relationship of the parties to this Agreement shall be that of owner and independent contractor except as may othenvise be specifically stated herein. As of the Effective Date, the Authority will be owner of the Airport Facilities and the Contractor shall act as an independent contractor to the Authority for the safe, professional, and cost efficient management and operation of the Airport Facilities. (b) The Contractor will make available, either through its direct employees or employees of its affiliates, expertise in the management, operation and maintenance of airport facilities. The Authority is relying on such expertise to provide the best and most efficient management, operation and maintenance of the Airport Facilities. The Contractor shall at all times use its best efforts in the course of the performance of its responsibilities hereunder and shall use its best efforts to inform and educate the SARAA Board regarding all matters related to the operation of the Airport Facilities and the aviation industry in general as it relates to and affects the Airport Facilities. (Agreement, §3.01). 41. In performing its obligations, however, BAAH engaged in the following conduct which demonstrates its failure to utilize expertise and/or its best efforts in managing, operating and maintaining the Airports: (a) BAAH failed to employ individuals with air service experience and specifically failed to employ a marketing personnel with aviation experience, despite SARAA's direct request and urging that BAAI-I hire experienced aviation -7- marketing personnel. BAAH's failure to employ experienced aviation marketing personnel caused SARAA to suffer lost revenues; Co) BAAH concluded that "standard marketing efforts" were sufficient to develop air service, even at a time when enplanements at HIA were dropping significantly; (c) As acknowledged by BAAI-I officials during a February meeting with SAP, AA, BAAH failed to recognize fundamental changes in the United States air service market, as well as the measures necessary to promote air service at the Airports; (d) As acknowledged by BAAH officials during a March meeting with SAP, AA, BAAH underestimated the development of operations by Southwest Airlines at Baltimore-Washington International Airport ("BWI"), the primary threat to HIA identified by BAAI-I; (e) BAAH failed to recognize and discuss existing conditions in the United States Air Service market, particularly the impact of operations of low fare carriers, that were recognized and discussed by the airport industry and the federal government prior to 1998; (0 In developing a marketing plan for HIA in February, 2001, to address the material decline in enplanements that had befallen the Airport in the previous two years, BAAH merely drew upon steps that had been taken by other publicly owned and operated airports in the United States, including many -8- measures discussed and considered by United States airports for a number years, even preceding the Agreement; and (g) In its February, 2001 marketing plan, BAAH included the establishment and full funding by SARAA of a Regional Economic Task Force, despite the fact that such an activity would be prohibited by federal law and the Federal Aviation Administration's Policy and Procedures Concerning the Use of Airport Revenue, and thus could potentially subject SARAA to substantial penalties. 42. Despite the express contractual duty to utilize its expertise in the management operation and maintenance of airport facilities, as well as the express, contractual duty to utilize its best efforts in performing under the Agreement, Plaintiff has failed to utilize its expertise or its best efforts in managing, marketing, or operating the Airports for the reasons set forth above and in the Notices of Default which are attached hereto as Exhibit "A." 43. In Section 24.25 of the Agreement, Plaintiff agreed to exercise high standards of business conduct in managing, maintaining, and operating the Airports: Section 24.25. Business Conduct. The maintenance of extremely high standards of honesty, integrity, impartiality, and conduct by the Contractor, its employees and agents is essential to assure the proper performance of this Agreement and the maintenance of public confidence in the Authority. The Contractor shall uphold and meet these high standards and use its best judgment to avoid misconduct and conflicts of interest and require the same of its officers, employees and agents. (Agreement, {}24.25). -9- 44. Despite this express, contractual obligation, Plaintiff contacted the office of a Maryland State Senator and the Maryland Department of Transportation regarding the subject or privatization of BWI and failed to answer inquiries posed by SARAA regarding a newspaper article linking BAAH to privatization efforts at BWI, a conflict of interest under the Agreement. 45. Specifically, at a March 22, 2001 meeting, SARAA representatives asked BAAH officials, in response to the article, the following questions: whether there have been discussions or correspondence between BAAH and BWI on privatization, overseeing concessions, or other matters; whether BAAH is aware of any activities at BWI that will affect HIA; to identify BAAH's intentions with respect to BWI; and whether BAAH thought it had a duty to inform SARAA of developments or potential developments at BWI, including BAAI-I's potential role at BWI. Plaintiff failed to respond to SARAA's inquiries in violation of the duties imposed under Section 24.25 of the Agreement. 46. BAAH further breached its contractual obligations by writing a letter dated March 30, 2001 addressed to "Dear Community Leader" and delivering this letter to community leaders, including the Mayor of Harrisburg, as well as the political subdivisions that constitute members of SARAA. (A tree and correct copy of the Letter is attached hereto as Exhibit "B" and incorporated herein by reference). 47. In that regard, the letter, dated March 30, 2001, was written on the letterhead of David M. Fleet, Airport Director, BAA Harrisburg and Harrisburg International Airport, and signed by David J. Roberts, Chairman, BAA Harrisburg, Inc. 48. In the letter, Mr. Roberts, a BAAH representative, stated that the SAR.AA Board failed to "embrace[ ] the partnership," "demonstrated a lack of commitment to both the spirit and -10- legal requirement of the contract," and made "inaccurate and unfounded accusations" against BAAH resulting from SARAA's "own lack of cooperation and overt hostility to BAA's professional management team." (Exhibit B). 49. The letter constitutes an improper, unprofessional and adverse attempt to interfere with SARAA's relationship with its constituent members and the public, as well as SARAA's own deliberations concerning its contractual relationship with BAAH. 50. Additionally, in the letter, BAAH materially misstates to the public the legal nature of the Agreement, presenting false and derogatory assertions regarding SARAA's acts and conduct, as well as inaccurate, misleading and harmful representations to public authorities and the general public. 51. In writing and delivering the letter containing material misstatements of fact regarding SARAA and the Agreement, BAAH violated its contractual obligation under Section 24.25 of the Agreement which requires BAAH to maintain high standards of honesty, integrity, impartiality and conduct in performing its contractual obligations and maintaining its contractual relationship with SARAA. 52. The letter also constitutes a violation of BAAH's obligation under Section 14.02(t') of the Agreement which states that "It]he Contractur shall maintain a professional, positive, and responsive working relationship with the Airlines, the SARAA Board, and other representatives of SARAA, regulatory authorities, suppliers of materials, utilities, and services, and the public." (Agreement, §14.02(0). -11- 53. Despite the express, contractual requirement that BAAH maintain a professional, positive, and responsive working relationship with the SARAA Board, BAAH misrepresented -- to the public -- the nature of the Agreement and SARAA's conduct thereunder, a breach of Section 14.02(0 of the Agreement. 54. Moreover, in writing and delivering the letter, BAAH violated its obligation to act in the best interests of the Authority pursuant to Section 3.02 of the Agreement which provides that "[t]he Contractor hereby assumes all responsibility for prudent and diligent exercise of the rights and powers delegated hereunder and shall use such delegated rights and powers solely in the best interests of the Authority." (Agreement, §3.02(c)). 55. Finally, by writing the letter containing material misstatements regarding SARAA and the Agreement on HIA letterhead, BAAH violated its obligations with respect to use of iliA letterhead which must, under Section 3.02(c), be used only in the "best interests of the Authority." Id. 56. In Section 13.01(e) of the Agreement, Plaintiff expressly agreed to provide Workers' Compensation Insurance: Section 13.01.. Contractor to Provide Insurance. The Contractor shall obtain and continuously maintain without interruption, during the Term and any Renewal term, the following insurance for the operations and activities on or at the Airport Facilities from Lloyd's Underwriters or a licensed insurance company or companies approved by the Authority and rated by Best's Rating at A- or better: (e) Workers' Compensation Insurance with limits in amounts that fully comply with applicable statutory limits in the Commonwealth of Pennsylvania (including coverage for the -12- airport police). The scope of coverage afforded by the insurance shall also comply with applicable statutory requirements in the Commonwealth of Pennsylvania. This scope shall include, but not be limited to, coverage for injury, death or occupational disease of employees of the Contractor and the Authority arising out of and/or in the scope of their employment. (Agreement, § 13.01 (e)). 57. Contrary to the express obligation in the Agreement, Plaintiff failed to provide Workers' Compensation insurance in compliance with the statutory mandates of the Commonwealth of Pennsylvania. 58. In Section 3.06 of the Agreement, Plaintiff expressly agreed to provide professional services, including Airfield Maintenance and Snow Removal, and Purchasing and Contracts Management. (Agreement, §§3.06Co)(1), 3.06(c)(6)). 59. In addition, under Section 3.03(a) of the Agreement, Plaintiff agreed to administer and enforce all contracts in the best interest of SARAA: Section 3.03. Contract Administration. (a) The Contractor shall administer and enforce on behalf of and in the name of the Authority all of the Authority Agreements or any other leases, agreements, contracts, documents, and instruments which the Authority reasonably requests, consistent with the t,m~s of this Agreement and all Legal Requirements and in a manner consistent with the best and most efficient operation, maintenance, and management of the Airport Facilities including, without limitation, the collection and payment of all sums due under the Authority Agreements or any other leases, agreements, contracts, documents, and instruments which the Authority reasonably requests and the giving and receiving of notices and requests to and from the parties to the Authority Agreements or any other leases, agreements, contracts, documents, and instruments which the Authority reasonably requests. Without limiting the foregoing, the Authority specifically authorizes the Contractor to request and demand all rent and other such charges -13- and to institute legal proceedings through such collection agencies or law firm(s) as the Contractor shall deem necessary or appropriate, on behalf of, and in the name of, the Authority. All ~nt and other charges shall be paid directly to the Authority. All actions taken by the Contractor pursuant to this Section 3.03(a) shall be ratified and confirmed by the SARAA Board as necessary or appropriate. (Agreement, §3.03(a)). 60. Plaintiff failed to perform its contractual duties and obligations pursuant to Sections 3.03(a), 3.06(b)(1), and 3.06(c)(6) of the Agreement by negligently and improperly preparing and administering the public procurement documents for the purchase of a runway snow broom vehicle. As a result, SARAA was required to obtain the runway snow broom vehicle fi'om a different company, at a significantly increased expense and with significant time and effort on the part of SAR_AA staff and Board members. 61. Plaintiff failed to perform its contractual duties and obligations pursuant to Section 3.03(a) of the Agreement by falling to properly administer the lease with Stambangh's Air Services for Buildings 28 and 134 at Ilia by performing approximately $40,000.00 of maintenance on the Stambaugh leased premises which Stambangh was obligated to perform under the terms of the Stambaugh lease. 62. Plaintiff also failed to perform its contractual duties and obligations pursuant to Section 3.03(a) of the Agreement by failing to properly administer the Stambaugh lease in failing to require Stambangh's to provide insurance coverage in compliance with Article 14 of the lease. 63. In addition, Plaintiff failed to comply with SARAA's public procurement policy and the procurement laws of the Commonwealth of Pennsylvania in the acquisition of a used paint machine (E-Z Liner Paint Striper) mounted on a 1989 Chevrolet chassis in violation of -14- Sections 3.03(a) and 10.01 which provides that "[t]he Contractor shall comply with all Legal Requirements." (Agreement, §10.01). 64. Plaintiff's failure to perform the requisite duties and provide the requisite services to which it was contractually obligated, in the manner by which it was contractually obligated, constitutes Events of Default under Section 16.01(b) of the Agreement. (Agreement, §16.01(b)). 65. In compliance with Section 16.03 of the Agreement, SARAA provided BAA.H with written notice of each Event of Default and an oppommity to cure the defaults. (See Exhibit A). 66. Specifically, BAAH was notified by letters dated February 19, 2001 of the following Events of Default: BAAH's failure to provide workers' compensation insurance; BAAI-I's negligent and improper preparation and administration of the public procurement documents for the purchase of a runway snow broom vehicle; BAAH's failure to properly administer the lease with Stambaugh's by performing $40,000.00 of maintenance on the leased premises; BAAH's failure to properly administer the lease with Stambaugh's by failing to require Stambaugh's to provide insurance coverage in compliance with the Stambaugh's lease; and BAAH's failure to comply with SARAA's procurement policy and the procurement laws of the Commonwealth of Pennsylvania in the acquisition of a used paint machine. (See Exhibit "A" attached hereto). 67. Similarly, by letter dated April 2, 2001, counsel for SARAA notified BAAH of the Events of Default under Section 3.01 of the Agreement, as well as Section 24.25 of the Agreement. (See Exhibit A). - 15- 68. By letter dated April 6, 2001, counsel for SARAA notified BAAH of the Events of Default under the Agreement based on the letter sent by BAAH to community leaders. (See Exhibit A). 69. Despite the extensive notification in compliance with the Agreement, BAAH failed to cure the above Events of Default. Such failure to cure the above Events of Default constitutes a material breach of the Agreement. 70. Pursuant to Article XVII of the Agreement, SARAA engaged in dispute resolution with BAAH in an attempt to resolve the dispute between the parties in good faith. The dispute resolution, however, including the mediation, was unsuccessful. 71. As a result of BAAI-I's failure to perform it's responsibilities under the Agreement, the Agreement was terminated. 72. As a result of BAAH's breach of the Agreement, SARAA has suffered damages including but not limited to (1) a decrease in enplanements HIA which is estimated to result in a loss of approximately $25,000,000; (2) injury to the reputation of HIA; (3) damages caused by the failure to adhere to both Federal and State laws; and (4) increased risk of civil liability associated with the operation of the Airports. 73. SARAA has also incurred the cost of defending against BAAH's frivolous attempt to obtain injunctive relief and, pursuant to the Agreement, as the prevailing party SARAA is entitled to receive payment from BAAI-I of SARAA's costs, including reasonable attorneys' fees associated with defending the Preliminary Injunction action and the present action filed by BAAH. -16- 74. SAR.AA has satisfied all conditions precedent which would allow it to recover pursuant to the Agreement. WHEREFORE, Defendant Susquehanna Area Regional Airport Authority demands judgment in its favor and against Plaintiff BAA Harrisburg, Inc. in an amount in excess of $25,000.00, together with interest, costs, attorneys' fees and any other relief that this Court deems appropriate. Date: October 24, 2001 By: Respectfully submitted, RHOADS & SINON LLP Jack F. Hurle~, Jr., Esquire Dean F. Piermattei, Esquire Timothy J. Nieman, Esquire One South Market Square P. O. Box 1146 Harrisburg, PA 17108-1146 (717) 233-5731 FOLEY & LARDNER Thomas R. Devine, Esquire David T. Ralston, Jr., Esquire 888 Sixteenth Street, N.W. Washington, D.C. 200006-4103 (202) 835-8000 Attorneys for Susquehanna Area Regional Airport Authority -17- 0ct-12-00 03:47P P.01 VERIlY[CATION David Mclnlosh. deposes and ~ys, sttbjcct to ~c ~nalties of 18 P~. C.S. ~ 49(~ ~l~ing tn unswnm t~lsificati,~n tn authorities, ~at he is the Chni~an Regional Ai~n Authority, that he makes this vcfi~ntion by fn~xh i, the ~bregoing ~sw¢: m Second Amend~ Complaint aztd New Matter arc linc mid correct tn fl~e ~ of his knowledge, info~ation ~d b~icf. Da~'Mclnlosh, Cha~ ~-~oar~ X Suscluehanna Area Regioria! Airporl Authority 208 Ai?port Drive ' ' ' ' Middletown, Penns~lva nia 17057 (717) 948-4630 Fax (7171 948-4653 February 119, 2001 . VIA: TELECOPIER -'{317) 48%5177 ' ' AND CERTIFIED MAIL'. ' ' RETURN RECEIPT REQUESTED Mr. David J. Ro.berts INDI~NA2OLIS INTERNATIONAi~ AIRPORT Bok 1O0, 2500 Sbuth. High S~ho~l Road ' Ifidianapolif. IN' 46241:.' . .Re:- Notice of Default - Agreement for the Management, 'Opin-aiion a~d Mainlenance of HarH~burg.Internatlonal , '. Airport a'nd Capffa! C fy.Airport . ' Dear'Mr. Robe~ts: '"" ' This .is to notify BAA. Harrfsburg, Inc. that the follbwing .e.vent is'a default ~y BAA Harrisburg, Inc. under the t~rns of the Agreement for. the' Management, Operation and Maintenance of Harrisburg.International Airport .and Capital City Airport, dated as Of December'16, 1997, by i/nd bet~;~en the Susqqehanna Area Regional Airport Authohty and BA~'Harrisburg, Inc.: BAA Harrisburg, Inc; has failed to provide tnsurance coverage to SARAA in accordance with the terms..of Article XHI of the Agreement, including, but not limited to, failure to provide workers"compcnsation insurance coverage in'compliance with the statutory reqmrements of the Commonwealth of Pennsylvania, failure to .include' SAILazA as a named insured on all policies and to .fl~ereby :.provide."cqual 'coverage to SARAA 'on all .policies and.failure to .'. ideniify'of...to pr0i3er!yi:'.i&nti.fy capital city 'Airport as.an insui'ed . location on relevant poli~ies.' - SARA& reserves th~ right to pursue any and ali rights and remedies under"the .Agreement, or: at 'law br m equity, if this defa~tlt in' not ,cured. by..BAA':Han-isburg Within the cure period prbvided under the Agreement. Sincerely, Executive Director' DGF_Ydnh cc: Mr. David Mclntosh Jack F. Hurley, Jr., Esquire Robert D. Swhier, Jr., Esquire Mr. David Fleet S00202 Susouehanna:',4rea 'Regional .airport Authod~y .208 Airport Dr!.v.e . .... , : Middletowh, Pennsylvania 17057 (717) 948-4630 Fax (717) 948-4653 ViA ~ELECO~'mR-- (317) 487-5.177 .... ANn CS~mD NSU~ - ' ' ' . . ':' '~~'~$T~D.~ .'~. : ..... Mn. David ~. KObem~: '.'.... · · '" '~POL~s ~O~'~0~T ' ' BOX' I00, 2500 ~6Ud~ Hi~h"S~hd'~l ~0~d' .. : ' ' ' ':'~apolis;'~'~62~l '" '" '" : R N ' ' fD 'lt ..... ~ ' e: ohce'o efau -A~reemen~for the ana~ement, . Oper~io~. and ~ifitenh'ace bf Ha~rlsburE Xnte~nnfion~I :'. '"".~.., . ~ '"'..V; ,-.. "' .,/~:.:..- . -.. ~ " Th{s 'is' '~0 no~i~y B~' HatTisbu;~, Inc.. flm~ thc sonowi s ven s de'miniS' H .is urs, i;:c: under :te~s of.the A~;eemcnt ~or the Msn~em~t, Operation ~d '~s~ten~ce of H~bur~ ~te~tibnal ~0~ ~d capital · adm~istedn~.: thc'. 'pdbuq ' ~roc~ement ~ocumentS:"'f&; the' '"':" puPchasc o~ ~ ~nw~y .snow ~r0om vehicle resultih~ i~ S~ :: Stewa~:.S~cvenson Powcr, .~c.~ rstl{e~ ~:~ Kov~tch'MeSicM" ' ...'.. ~quipmem .at anadditio~al. Cos~. to S~ ~ $35,000 in the ... purch~e .p~ce o~.~e:~ehicle, as well ~ si~nifiqa~t additional . time' and'cffo~ 'o'~ S~'staff. sn~ Bo~d.. m~b~r~, expended '.. i~ addressin~ this default b~B~ H~sb~r~. " 2. -~silure to. ~;o~erly administer' the' lease. ' wi~ Stnm~aUsh's ~ Se~ices ~o; Build~s 28 and 134 st the Han~sbur~ ~temstional Ai~o~ by perfo~in~ approximately $40,000 o~ m~in~cn~ce on ~e St~mbaugh leased premises · . ~ch. Smmbau~h ~w~ ob~is~te~ to .peffo~ under the m~s o~. ' ' In addition to pro~id~n~ s notice o~ de~mtlL, S~ hereby noLi~es B~ Ha~sbur~, Inc. thnt.S~ is demsndin~ i~de~ifiCafio~ by B~ Ha~sbu;~, ~c. 'in the S00203 SA_KAA" in purchasing the 'runway_ snow' broom equipment vehicle an'd in making repairs'to'the' Stambaugh' leased' premises whibh ~We/-c: the' responsibility, of the .tenant..fin~ier ..the :lease.. .?ayment.0t~.the ;amount of $75,000:is.to.'be.i'emittSd'it6'.SAR_AA · -. with/n thir~.'(36)'days:ofthd ~ite.Ot~th/~ rett~f:" ';' : . . · .. · .: ... . SAR.NA' reserves ~t~ right to p?rsue m~y m~d ail rights ~nd.~sme. dies of. SAP, AA 'under..the:Agreemeut, or aiJaw ' ·... 0r in equity, resultir/g f~omthese defaults'by.BAA Harrisburg. Siff~erely, .; 7, - ,' j' :' ?'...' .. . ." 1~.":. - :.;:. " :" · E~e~ufivelJireetbr? . . . . ' ' .... Robert D. Swhi~t,' J~; Esquire S00204 Susquehanna Area Regional Airport Authority 208 Airport Drive MiddletoWn, Pennsylvania 17057 (717) 948.4630 Fax (717) 948-4653 Febmm-y ~I 9~ 2001 VIA TELECOPIER- (31 ?) 487-5177 AN~ CZRT~m~ MAre. I~ETURN 1RECEIPT REQUESTED Mr. David J. Roberts : . INDIANAP OLIS'IN~ERaNAT~ONAI. AIRPOP~T ' BOX 100, 2500 South High Sch06I Rofid Indianapolis, IN 46241 ' ' Re: Notice of Default- Agreement for the Management,. Operation and M~iintenanee of Harrisburg Internatinnal Airport and Capital C!t~.Airport Dear Mr. Roberts: ' , . ' · This is to notify BAA Harrisburg, Inc. that the folloyving event 4s 'a default by BAA. Hai-fisUurg,:Inc. under the terms 6f the Agreer;rient for the:Management, Operation and Maintenance of Harrisburg International Airport and Capital iCity A. irpol't, dated 'as of December 16, '1997, by and between'the' Sbsquehanna Area Regional -Airport Afiih0rity and BAA Harrisburg, Inc.: BAA failed to properly administer the FAR Access Control Upgrade Project to put .into..pl~ee proper controls .for the " compliance of the'project with the Davis-Bacon Act. Specifically, BAA.failed to monitor eon~'act pax, roll. submisgions to insure that the prevailing wage rates were paid: BA~ accepted contract certifications that were not' nbt/riz~d, time' rdports which were not signed by employees, and 'invoices which did not'have appropriate .supporting time reports. The .failure of BAA' Harrisburg,. Inc. to properly administer the FAR' Access Control Upgrade Project resulted lathe auditor conducting SARAA's Federal OMB Compliance Supplemeht for Single .Audits of State and Local G0vemmem for 1999 ms¢ing a statement of non-compliance in the Audif repfrt. SAKAiA reserves the right to pursue any and all rights and remedies of SARAA under the Agreement, Or at law or in equity, resulting from this default by BAA Harrisburg: Sincm;ely, Executive Director DGH/dnh cc: Mr. David M¢Intosh Jack F. Hurley, .Ir. RoBert D. Swhier, Jr., Esquire Mr. David Flee~ S00205 Susquehanna Area Regional Airport ,4uthodty 208 Airport Drive Middletown, Pennsylvania 17057 (717) 948-4630 Fax (7171 948-4653 .Febmarylg. ,2001 VIA TELECOPIER - (317) 487-5177 AND .CERTIFIED MA~L RETUR~ RECEIPT I~EQUESTEB - ~. David J. ~obe~ ' ' ' IND~OLIS ~E~ATION~=m ~OR~. BOx .100, 2500Sou~ Hig~ School Road ~di~apoli~;'~ 46241 Re: Notice'ofDefault- Agreement for the Management, Operafi6n'and Maintenance of Harrisburg International ~irport and Capital City Airport Dea~Mf.'l~ol~rts: - · :: ,.:..: : . . ' This is to notify BAh. Harrisburg, Inc. that 'the following .eVent' is a .default .by.BAA. Ha~sburg, Inc. under the terms of the Agreement for the Management, Operation and Maintenance of Hardsburg-Lnternational Airport and Capital ~Cit') Airport, 'dated .as 'of DeCember t6 '1997, by and between th~ Su~queharma Ar~a R~giofial Airpgrt Authority and Bg._A Harrisburg, Inc.: · - . The £ailure to comply with' 'SARA. A's public procurement, policy and.the procurement laws of Pennsylvania in the acqflisition of a'i~sed paint:machine (E-Z Liner Paint Striper) mounted on ,5 1989 Chevrolet chassis. SARAA reserves the right to pursue any and all rights and remedies, of SARAA' under the Agreement, or at law or in eqmty, resulting'from this default by BAA Harrisburg. .s]n~erely,. '. r ': Executive Director DOH/dn.h cc: Mr. David McIntosh 3a~k F. Hurley, Jr. Robert D Swhier, Jr., Esquire Mr. David Fleet S00206 Susquehanna'Area Regional Airport Autho#ty 208 Airport DriVe".. · ' .... ' Middletowr Penfl~ylvan[a 170i~7. (717) 948-4630 Fax (717) 948-4653 AND'CERTIFIED ]VIAIL : ~d{anapolis, ~.46241 ... Re: Nol~ce 'of. ~efa~lt - Agreement' fo~. fl~e Management, O~erati0n ~nd.~ainfen~nce'~f Hn(ms~grg I~te'nintionhl Ah'port. following event is a flefahlt by B~ H~sbarg,' Inc. under the te~s of fl~e A~eement for ~e.M~agement, Operxtion find Maintenance H~sb~g.Intema~onal Ai~o~ and Capital CiW Ai~}'~,'dated as of '.December 16,.:!997 .by.and.be~e~n 'tHe' Susqueha~a ~s B~ Hamisburg,': Ific~. hag fail~fl to properly adminis'te~' the Lease be~veen S~ and S~mbaugh's Air Semites,.... Inc,'~ .dated ~a~ua~ l"g, 2000, for. po~ons~ of'Building 2S and Specifically, B~ H~isburg f~ile~ to require Stambaugh'.s to provide 'insurance cov~ge m compliance"with'~fi~le 14 of the Lease.. ~e deflciehcies, of stamba~gh's insurance' coverage are nu~erated in the · le~er of Febma~ 14/20Ot-.~ddressed.to the Prope~ Minag~ 'of 'S~ rese~i ihe Pight to pursue' any and al'I rights an~ remedies ufid~ ~the A~e~ent,' or at law or in equiW~ if. this defa~k ~ in .n0t'..du~ed .by: ~ Ha~sbu~g x~thin .'the cure. peHod gince~ely~.< ' Executive Dkector ]'" DGH/dnh Enclosure cc: Mr. David Mclntosh Jack F. Hurley, Jr., Esquire Robert D. S',vhier/;Tr., Esquire Mr: David Fleet S00207 FOLEY LARDNER Atta~t D 202-835-8096 Td. evlnc~'tblc'71aw, com .. April 2, 2001 VIA TE!',EI*AX 317-,~8T-5177 and 317--632-2962 and Certified U.S. Mail Mr. David J. RobertS BAA Harrisburg, Inc... IndianapoLis Iat=~iohal Airport Box 100, 2500 South High School Rd. Indianapolis, Indiana 46241 Fax: (317) 487-5177 Mr. Robert D. Swhiex, Jr. Esq. DANN PECAR NEWMAN & KLEINMAN, p.c. one American Square, Suite 2300 Box 82008 I~3dianapolis, Indiana, 46282 Fax: (317) 632-2962 474347,..~003 Re: Notice of Default to BAA by Susq,,eha-na Area Regional Airport Authority Gelltl~mLcn: · Pursuant to Articles XVI and X'Vrl of thc Agreement for thc Management. Operation and Maintenance of Harrisburg International Ai-,lmrt ("IliA" or the 'Airport',) and Capital City Aiq>ort between the Susquehanna Area Regional Airport Authority ('SARAA" or 'the Authority") and BAA Harrisburg, Inc. ('BAA"), dated December 16, 1997 (the -Agreemenr"), SAR&A hereby provides notice of default to BAA for the reaSons set forth below. Under scctiou 16.01(b). r. he Authority asserts that BAA has breached representations, S00221 covenants, warranties and obligations of BAA under the Agreement, and such breaches have had a Ivlatedal Adverse Effect, as defined in Se~,/on 1.36 of the Agreenaeut. 1) Breach of Section 3.01 Duty of BAA to Provide Expertise and Use its Best Efforts in Carrying out its Responsibilities Under the Agreement. Section 3,01 (b) contains the followin§ zequirements: The Contractor will make available, either through its d.irect employees or employees of its affilh~es, expertise ia the management, operation and mnintenance of airport facilities;-. Ttxe'Authoriyy is rely/ng on such expertise to provide the best .n,~ mos~ efficient r~.nagement, operatiun and maintenance of the Airport Facilities. Ttte Contractor shall at all times use its best efforts in the course of the performance of its ~espousibilities hereunder and shall use its beat efforts to kdorm and ectueate the SA2.AA Boarg~regarding all matters relatecl to the operation of the Airport Facilities and the aviatiO/z industry ia general as it relates to and affects the Airport FacLLities. , iTtxus, it ia clear from the agree~nent that the Aathority was relying on the expertise BA~:promised to deliver. Under Pemlsylvauia law, "best efforts" is a higher standard than the cUStOmary duty of gOOd faith inherent in all contracts. Com'ts often look to the intent of the par-des in deter,n~n~,~ what ~best efforts" is meant to encompass. It is clear from the contract that the parties intended to set a very high standard. For instance oa page 1, the Agreement states that the best and most efficient Wunagcmeut, operation and maintenance of the AL'pon facilities requires unique and specializ~cl $~'illn~ together with experience in improving and managing kighly-regarded, world-class airports of similar or larger size; and · . . the Authority desires . . . to contract for the management, operation and maintenance for the AiEport Facilities wilh an organization which has the specialized professional skills and experience to operate the Airport Facilities in the best and most efficient manner possible. ~ (Emphasis added). Moreover, as shown above, the very paragraph in which the phrase ~best efforts" appears states that "The contractor will make available, eithe'f through its direct employees or employees of its affiliates, expertise in the management, operation and maintenance of airport facilities. The Authority is relying on such expertise to provide the bert and most efficient management, operation and maintenance of the Airport fadlitie~. ' Paxa. 3.01(b) (emphasis added). 2 S00222 BAA has uot made available expertise in promoting the airport or used best efforts to do so. For example, BAA hired a marketing person with no aviation experience - in spite of thc fact that SARAA had urged BAA w hire experienced aviation marketing persouncl. As another example, BAA officials acknowledged at a meeting with SARAA in February that BAA had .not recognized thzr fund~,~ml changes had occurl:ed in ~ U.S. ah: service market and in the measures n~xicd to be taken by airports to promote air service at their facilities: In a meeting in March, the Chairm,- of BAA Harrisburg stated that BAA had ullderestirnate.d.., thc dcvelopmem of operafious by Southwest Airlines at BWI, the primary tl~eat to the Airport id~,~tit-ted by BAA. This does not indicate that BAA provided expertise k w/i'n:qukcd W provide under the Agreement. .ia yet another example, BAA recently put together a marketing plan to acklzess the renu:rial decline in enpla~cmcn~s that had befallen thc ai~ort in thc past ~wo years. Ia doing so, BAA !nrl?.ated tl~...t'it drew upon steps that had been taken by publicly owned and operated airports in the U.S. Many of these measures had been discussed and considered by U.S, ail-ports for a number of years, even preceding the SARAA-BAA contract. Again, this evidence~ a lack of cxpc~isc ou BA.A's pa~, and a fail~re to provide such cxpcriisc w thc Audimrity in a timely a~d cffcc~fivc manner. A specific example in tim BAA plan illustrates the lack of expertise and best efforts put forth by BAA. The plan includ~l thc cstablislnnent and full funding by SAP, AA of a Regional Economic Task Fore~, despite the fact that such an activit3, would, be prohibited by federal statute and the FAA's Policy and Procedures Concerning the Use of Airport Reveuue (64 Fed. Reg. 7696 ct seq., February 16,1999). Violation of those fedex'al requirements could subject the Authority to substantial penalties. Again, this proposal evidences BAA's lack of expertise and failure to provide best_efforts to address thc challenges faced by the Airport. Even under BAA's plan. BAA projects it would now take ~nnther year just to stabilize the situation at thc Aizport, with only modest improvements over the next two years - i.e., six y~ar~ into thc BAA contract. By any objective meamtre, BAA's own aclmowledged performance iu u-u~yzing and responding w thc air service market in thc U.S. as it relates to air service development at the Airport fell far short of the Standard of b~t efforts by a company with expertise in ~hc arca. A.~dcle II of the Agreement m~es it abundantly clear that a "material increas~ in eaplaacments at IliA" is one of the three primary ways in which the parties intended mat SARAA would benefit fi.om BAA's devotion of its best efforts in applying its world-class skill and expertise to the challenge of ru~nln~ the airport. Thus, there can be no doubt that a drop in enplanements is a "material" adverse effect. In response to ~ARAA's concern that BAA has not used best efforts to assess general industry trends affecting the airport, educat= the Board on such Lssucs, and develop and S00223 implement zn effective marketing strategy. B~ ~ p~ a ~ ~o by Da~ ~ to ~ Boar~, ~1~ ~ ~ p~e~m6on ~e by ~. B~t l~t ~y. U~tely, ~o~ ~ do ~ot rcbu~ S~'s ~ ~t B~ did ~ot ~o~ ~y e~e ~ ~o~ m~rke~g ~d ~fi ~ pl~ to ~ wi~ ~e impa~ on ~ of e~g ~ ~wi~ o~afiom of Sou~WeSt ~ B~. Nor do ~ey rebut ~c ~m ~t B~ ~ pe~cl wi~ no ~fien~ ~ av~on m~g, ~ ~at k w~ S~ ~ ~ m ~c ~e B~ assochfion scmln~s on ~e mbjcc0, m~er rh,n BAA edu~fi-[ ac S~ B~d ~ ~q~ ~c su~Seq~ a~owie~em~t by BAA ~t it ~d ~ly ~ou~ ~at sr~a~rd ~g effom w~ ~ ~a w~ n~ m dcv~lop ~r sc~e, ~ at a ~ w~n ~~ at ~A w~ dropp~ p~iW~y, ~ ~er ~i~c~ ~t B~ ~d not ~v~, or ~e ~st cffom ~..~liv~, ~e ~ e~c m d~ effectively ~ the ~: to ~e · .'/he Authority relied upon the promise of ctelivery of experthe and best efforts by BAA whe!x the Authority entered into the Agreement. This is specifically set forth in the A§re~ent, in section 3.01Co). Inclusion of that section in the agreement demonstxates that this was a critical part Of thc Aathority's exp~_ ~,fion of con~act peffO~--ce by BAA. Simply put, the Author/ty expected BAA w p/-0v/de cxpex-~/s¢ and use its best efforts in the course of the conwact. Such expertise and best efforts were needed precisely when the Airport faced serious threats to, and a $iglfifmant decline in, enplanements. The Authority could not afford the lag time that occurred for BAA to recogtfize the problem, and the subsequent fits and starts as BAA attempted, inadequately ancl belatedly, to address th~ problem through unqualified personnel and a lack of planning, Quite simply, the Authority deserved the benefit of its bargain, a~d it did not receive it. ~) Breach of Section 24.25 Duty to M-i-*~i'' Extremely High Standards of Honesty, Integrity, Impartimllty, and Conduct and to Avoid Misconduct au.d Con[licts of ~nterest BAA is required under Section 24.25 of the contract to maintain %xtrcmely high standards of honesty, integXRy, imparrfality, and conduct" and to "use its best juflgment to avoid misconduct and con_elicts of interest ~nd require the same of its officers, employces and agents." In Sat regard, SARAA has twi~ raised with BAA SARAA's concertos about a newspaper article linking BAA tO privatization efforts at Baltimore-Washingtnn International Airpor~ (BWI), and has asked BAA: Whether there have been discussions or correspondence between BAA and BVfl (whether on priyatiza6on or overseeing concessions or anything else); Whether BAA is aware of any ~ctivifies a~ BWI bat will affect thc Airporq S00224 What BA~'s intenrlons ~re with respect to BWI; aad W~cther BAA did not ~h~-k R hazi a duty to illform SARAA of developmcRts or potentizl developmeuts at BWI, or a ~ot~ BAA rol~ there? SARAA posed t~ese questions at a ls~¢h 22 meeting with BAA, at which time you declined to answer. SARAA again posed these questions to BAA in the March 23 letter, wb. ich, at your reques[, included a snmm:ll'y of the points SARMA had made at thc March 22 meeti!2g.. Y~t/'h~ve y.e.t to respond, and $ARAA conclud~ t~at yo~ lack of respouse to simple, hig~y-'televa~t questio _ns indicates that BAA has had some contact with BWI that conflicts with BAA's obligations to SARAA to maima~ the highest standards of honesty, integrity, Lu~, _and co~dnet, to uSe its best efforts to avoid misconduct and conflicts of intents{, a~d to act in ..thc bat iaterests of SARAA. (See section 3.02(0). Comqusinn · As a result of thc above circnmgtanccs, the Authority is comp¢llcd to issuc this Notice of D2fault pursuant to thc Agrecmcnt. SARAA reserves the right to pursue any and all rights and remedies of SARAA under the Agreement, or at law.or in cqu[ty, rc~ulfing from these defaults by BAA. Mot-cover, this Listing of Events of Default is not exhaustive; SARAA has already sent BAA other letters of default, and may scad additional lettexs of defauk. cc. David Mclntosh ~[ack I-Iurley Terry l~organ Sincerely, Thomas R. Devine Counsel for Susquuhanua A.rea Regional Airport Authority S00225 BRUSSELS CHICAGO DENVER DETROIT JACKSONVILLE LOS ANGELES MADISON MILWAUKEE EMAIL ADDRESS Dralston~foleylaw.com FOLEY & LARDNER 888 SIXTEENTH STREET, N.W., 7'" FLOOR WASHINGTON, D.C. 20006-4103 TELEPHONE: (202) 672-5300 FACSIMILE: (202) 835-8136 WRITER'S DIRECT LINE 202-835-8131 April 6, 2001 ORLANDO SACRAMENTO SAN DIEGO SAN FRANCISCO TALLAHASSEE TAMPA WASHINGTON, D.C. WEST PALM BEACH CLIENT/MATTER NUMBER 4745474)003 VIA TELEFAX A~D CERTIFIED lt/r_AlL Mr. David j. Roberts Chairman BAA Harrisburg, Inc. Indianapolis International Airport Box 100, 2500 South High School Rd. Indianapolis, Indiana 46241 Fax: (317) 487-5177 Robert D. Swb-[er, Jr. Esq. Dann Pecar Newmam & Kleinman, P.C. One American Square, Suite 2300 Box 82008 Indianapolis, Indiana 46282 Fax: (317) 632-2962 Re: Notice of Default Gentlemen: Pursuant to Section 16.03 and Articles XVI and XVII of the Agreement for the Management, Operation and Maintenance of Harrisburg Intermitional Airport ("HIA' or the "Airport") and Capital City Airport between the Susquehanna Ai-ea Regional Airport Authority ("SARAA" or "the Authority") and BAA Harrisburg, Inc. ("BAA"), dated December 16, 1997 (the "Agreement"), SAP~A hereby provides notice o[ default to B/hOt for the reasons set forth below. Under section 1.6.01(b), the Authority asserts that BAA has breached representations, covenants, warranties and obligations of BAA under the Agreernent, and such breaches have had a Material Adverse Effect, as defined in Section 1.36 of the Agreement. ~Sr^Ut,S,ED ~..~ S00226 Mr. David J. Roberts Robert D. Swh/er, Jr., Esq. April 6, 2001 Page 2 of 6 Exhibit 1 hereto is a letter dated March 30, 2001, on the letterhead of the David M. Fleet, Airport Director, BAA Harr/sburg and Harrisburg International Ah-port, signed by David J. Roberts, Chairman, BAA Han-/sburg, Inc. {"Roberts Letter".) The Roberts Letter is addressed to "Dear Commun/ty Leader," and was delivered on March 30 to thc Mayor of Harrisburg and apparently delivered to other political subdivisions that are constituent members of the Authority. {Exhibit 2.) Benish Associates, a firm not known to be in the employ of the Authorit"4',, provided the Roberts Letter to a member of the Authority Board several days after it was delivered to the addressees. Notably, the Roberts Letter was dehvered to its recipients before the Authority received the "notice of default" referenced in the letter. The Roberts Letter states that 'we," (sic) (presumably BAA Harrisburg, Inc.) have managed HIA and Capital Cities Airport since 1998 under a "professional services contract" with SARA& presumably referring to the Agreement. The letter further states that "fundamental to the contract was the "partnership" relationship between SARAA and BAA. The Roberts Letter further states that the "SARAA Board" has not "embraced the partnership," has ~demonstrated a lack of commitment to both the spirit and legal requirement of the contract[,)" a~nd has made "inaccurate and unfounded accusations" against BAA that, the letter asserts, result from SARAA's "own lack of cooperation and overt hostility to BAA's professional management team." The Roberts Letter contains serious, material misstatements of fact concerning the Agreement, the conduct of the Authority, and BAA's. performance under the Agreement. The Roberts Letter, apparently issued on behalf of BAA, bredches BAA obligations under the Agreement, as it violates BAA's duties to cooperate, act in good faith, and act in the best interest of the Authority, represents a.n act, outside the scope of BAA's delegated authority, designed to interfere improperly with, and usurp, the Authority's powers under the Agreement, and violates the express contract requirement that BAA employ proper business conduct. Accordingly, the Roberts Letter constitutes several "Event{s) of Default" under Section 16.01{b) of the Agreement as it breaches representations and warranties of the Contractor with a Material Adverse Effect on the Authority, as detailed below. I. The Roberts Letter Contains Material Misstatements of Fact The Roberts Letter asserts that thc Agreemeat is a "partnership" and that the Authority has not "embraced the partnership." Contrary to that assertion, Section 24.09 of the Agreement states that nature of the relationship between the Authority and BAA is that of "owner and independent contractor," and expressly states that "Nothing herein is intended to, or shall be construed to, create the relationship or the partners, of joint venturers or of employment S00227 Mr. David J. Roberts Robert D. Swhier, Jr., Esq. April 6, 2001 Page 3 of 6 between the Authority and the Contractor." Sim/lax language is found in Section 3.0 l(a) of the Agreement. Accordingly, the Roberts Letter fundamentally and seriously misstates the legal nature and tenor of the Agreement. Contrary to the Roberts Letter, a "partnership" relationship is not, and could not be "fundamental to the contract"; indeed, the Agreement expressly provides to the contrary. Consequently, there has never been a contractual or other legal partnership "to be embraced," and the balance of the assertions predicated on the existence of a partnership relationship under the Agreement are obviously erroneous. (I note parenthetically that this misstatement is so fundamentally at odds with the terms of the Agreement that either BAA's understanding of the Agreement is altogether flawed, or BAA attempted deliberately to mislead publ/c authorities.) In a similar vein, the Roberts Letter falsely states that the Authority Board has (1) not cooperated with BAA, (2) made inaccurate and unfounded statements about BAA, and (3) been overtly hostile to BAA's management team. Each of these statements is without factual basis, and notably, no factual support: is provided in the Roberts Letter. The Roberts Letter also falsely states that BAA has "consistently worked to resolve the issues . . privately." As the Roberts Letter graphically demonstrates, precisely the opposite is the case, as BAA has made very public attempts to involve outside officials and entities in the disputes, including retaining lobbyists to work actively against decisions of the Authority. Finally, contrary to the Roberts Letter, the Authority has not "elected to issue an ultimatum" to BAA requiring issuance of a %otice of default." Dispositively, the "notice of default" issued on March 30 by BAA makes no reference to an "ultimatum," and does not state that it is in response to such. More important, to imply that a "notice of default" is a proper "assertive" response to genuine issues as to BAA performance evinces a callous disregard for BAA's obligations under the Agreement and suggests strongly that BAA issued the notice of delhult in a bad fa/th attempt to deflect attention from its own defaults. The R,a'berts Letter Breaehe¢l f:he Agreement~ Causing .&dverse Effects. The Roberts Letter Breaches BAA's Duties of Cooperation, Good Faith and Best Interests of thc Authority. 10200 I1 500228 Mr. David J. Roberts Robert D. Swhier, Jr., Esq. April 6, 2001 Page 4 of 6 Section 14.02(t) expressly requires that BAA shall "maintain a professional, positive and responsive working relationship with . . . the SARAA Board, and other representatives of the Authority... and the public." Section 3.08 further requires that BAA shall "at all times act in good faith and cooperate fully with (i) the Authority, its agents, employees, contractors, subcontractors . . ." Moreover, Section 3.02 requires that BAA act in the "best interests" of the Authority when performing its delegated duties, and among the delegated duties covered by the "best interests" requirement is "Public Relations" under Section 3.06(c)(4). The Roberts Letter represents an improper, unprofessional and adverse attempt to interfere with the Authority's relationship with its constituent members and the public, and the Authority's own deliberations concerning its contractual relationship with BAA. Additionally, the misstatements as to the legal nature of the Agreement, and the false and derogatory assertions as Authority acts or conduct, present an inaccurate, misleading and harmful presentation to public authorities and the general public. The apparent purpose of the Roberts Letter is to cast the Authority in an adverse light and undermine public confidence in the Authority, thereby compromising its position in negotiations with BAA and advancing BAA's corporate interest. Its obvious effects are to poison the contractual and operational relationships with the Authority, to raise serious questions as to BAA's bonafides in the contract dispute, and to cause serious and unnecessary public harm to the Authority. In short, the Roberts Letter is entirely inimical to the BAA's role as a contractor for the Authority, patently contrary to the best interests of the Authority, and is a calculated attempt to undermine public confidence in the Authority. The Authority did not authorize the Roberts Letter, and BAA is not authorized under the Agreement to use HIA letterhead to advance solely corporate positions contrary to the Authority. Moreover, the letter is not within the scope of BAA's duties under' the Agreement, is not a proper, good t'aith response (contractual or otherwise) to the Authority's expressed concerns as to BAA's failure of performance under the Agreement, and attempts to place the Authority in a highly adverse light. BAA is entitled to use HIA letterhead pursuant to a delegation of power [rom the Authority. That very delegation under the Agreement carries with it the contractual duty to use such delegated rights and powers "solely in the best interests of thc Authority." Sectioa 3.02(c). The Roberts Letter is on HIA letterhead and is patently not solely in the best interests of the Authority. To the contrax3,, it is squarely opposed to the interests of the Authority, and is not a "prudent and diligent exercise" or' the delegated rights and powers, id. As such, the Roberts Letter is a material breach of BAA's duty to maintain a" · ' professional, positive and responsive working relationship" with the S00229 Mr. David J. Roberts Robert D. Swhier, Jr., Esq. April 6, 2001 Page 5 of 6 SARAA Board, representatives of the Authority and the public, its duty to act %t ail times" in "good faith,'' its duty to "cooperate fullf' with the Authority, its duty to perform its delegated duties in the best interests of the Authority, and to exercise delegated powers prudently and diligently, all in breach of the foregoing sections of the Agreement. Moreover, for the reasons, stated, the Roberts Letter constitutes either a grossly neghgent or willful violation of the aforesaid sections of the Agreement. The Roberts Letter, Outside the Scope of BAA's Authority under the Agreement, Interferes With and Usurps the Authority% Powers. Section 4.01 provides that the Authority has expressly retained "direct control and fins, approval" of "strategic and central functions with respect to the A/rport Facilities," including without limitation "Marketing and Development policies" and "All other powers not delegated to" BAg. under the Agreement. Section 22.17 reserves to the Authority's Board, not BAA, full power and authority to act on behalf of the Authority. Section 22.02 reserves to the Authority the right to conduct performance audits and eva,ual, ohs of BAA at "such times as the Authority deems necessarf' and BAA agrees to cooperate with such audits. These sections, in conjunction, inter alia, with Section 4.02 and Articles XVI amd XVII, reserve to the Authority the responsibility for determining BAA's compl/ance with the Agreement. The Roberts Letter, improperly presented on the off,cia, airport letterhead of David M. Fleet, HIA Airport Director, expressly attacked and criticized conduct and actions of the Authority's Board, failed to disclose that BAA was acting solely in advancing its corporate interests, implied that BAA had independent authority to represent the interests of the Authority in this matter, and sought to interfere with the Board's reserved powers under the Agreement.~ Such action is outside the scope of duties delegated to BAA, constitutes an improper representation that such action is within the scope o£ BAA's responsibilities, and represents an unlawful usurpation o£, and interference with, the Board's statutory authority and contractually reserved responsibly to monitor BAA's compliance with the Agreement. As such, BAA has breached Section 4.01 and the related sections noted, and its actions constitute either gross negligence or willful, intentional breach of the Agreement.2 The Roberts Letter Breaches BAA's Duty to Maintain Proper Busines~ Conduct. ~ Section 24 20 expressly precludes BAA from using any promotional device without the Authority's prior wntten consant. 2 Section 24.15 expressly provides there arc no iutcoded third-party bancficiaries to thc A. grecmcnt, and S¢cti0ns 3.04 ,md 10.14 provide that BAA reports, including reports concerning litigation in which both the Authority and BAA are parties, a~e to be made ate SARAA Board Chairman, the Managemant Comafittee Clulirmlm, or the Authority. Consequently, there was no contractual basis for contact with m~y party except thc Authorily as lo disputes under thc Agreement S00230 Mr. Dav/d J. Roberts Robert D. Swhier, Jr., Esq. April 6, 2001 Page 6 of 6 Section 24.25 commits BAA to maintaining "extremely high standards of integrity, impartiality, and conducC' as %ssential to assure proper performance oF the A~oreement and to maintaining 'public confidence in the Authority.~ The Roberts Letter violated this contractual requirement as it seeks to advance BAA's corporate interest through improper use of HIA letterhead, by public dissemination of material misstatements of fact about the Agreement and the Authority, and by attempting to undermine public confidence in the Authority. BAA's actions in this regard constitute gross negligence or willful breach of the Agreement. IlL Conclusion Pursuant to Section 16.03, BAA is directed to cure the foregoing breaches. In the event BAA fails to cure the foregoing breaches within the cure period in the Agreement, the Authority reserves the fight to pursue any and all fights and remedies under the Agreement, or at law or in equity, resulting from BAA's defaults. This listing of Events of DefaUlt is not exclusive as there are other outstanding, uncured notices of default, and others may now exist. Very truly yours, FOLEY/~ LARDNER Enclosures CC: Chairman David Mclntosh (w/encs.) Jack Hurley, Esq. (w/encs.) Thomas R. Devine, Esq. (w/encs.) 800231 S00232 BENISH ASSOCIATES Cover S00233 BAA Harrisburg I~. David M. Fleet Hamsburg International A/~3rt 208 ~rDor~ ~ Attachment C T17.946.4~42 Fax:. 717-~48-,3870 lviateh 30, 2001 m~. T~y ~ have re.on. David ~, Roberts Chairmaa, BAA Harrisburg, Inc. S00220 CERTIFICATE OF SERVICE I hereby certify that on this 24th day of October, 2001, a true and correct copy of the foregoing Answer to Second Amended Complaint, New Matter and Counterclaim was served by means of Hand Delivery upon: Alan R. Boynton, Jr., Esquire McNees, Wallace and Nurick 100 Pine Street Harrisburg, PA 17108-1166 ~ -.< BAA HARRISBURG, iNC., Plaintiff SUSQUEHANNA AREA REGIONAL AIRPORT AUTHORITY, Defendant : IN THE COURT OF COMMON PLEAS : OF CUMBERLAND COUNTY, PENNSYLVANIA : : CIVIL ACTION NO. 01-5974 : PRAECIPE TO MARK THE ACTION SATISFIED, DISCONTINUED, AND ENDED WITH PREJUDICE TO THE PROTHONOTARY: Please mark the this action as satisfied, discontinued, and ended with prejudice as to all claims by all parties. RHOADS & SINON LLP 1 S Market Square Harrisburg, PA 17101 (717) 233-5731 Attorneys for Defendant Dated: McNEES WALLACE & NURICK LLC By Donald B. Kaufman {~) i.D. No. 49764 100 Pine Street P.O. Box 1166 Harrisburg, PA 17108-1166 (717) 232-8000 Attorneys for Plaintiff Dated: