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Mesa loses as judge keeps Aloha suit alive
Thursday March 22, 5:13 pm ET
Aloha Airlines can proceed with its suit against the parent company of interisland rival go!, after court rejection of a motion to dismiss the case.
Phoenix-based Mesa Air Group Inc. (Nasdaq:
MESA -
News), which launched go! last June and has driven a money-losing fare war by all interisland carriers, had sought dismissal of a Jan. 9 complaint accusing it of predatory pricing and fraud.
U.S. District Judge David Ezra, in a Monday ruling, rejected the motion to dismiss on numerous grounds involving a detailed list of case law citations, rejecting one Mesa argument by saying that to accept it would leave "little room for any state contract claim against an airline." Ezra said the primary issue was "compliance with the confidentiality agreements" signed by Mesa.
A key aspect of the litigation is an e-mail from Mesa consultant Mo Garfinkel to Peter Murnane, its chief financial officer, which the court described as "indicating that Mesa should enter the market and push Aloha out." Mesa CEO Jonathan Ornstein has told PBN the e-mail was a joke, while Aloha takes it seriously and sees it as evidence of a plan to weaken Aloha by using a protracted fare war to drain its cash.
Aloha said Ornstein once told a group of prospective investors that he knew a budget interisland carrier could succeed because Mesa had "the benefit of looking at both Aloha and Hawaiian when they were in bankruptcy." As a possible bidder for both carriers Mesa did see internal documents, such as financial projections and strategic plans, but signed contracts promising not to use the information for any purpose other than deciding whether to make an offer, and to destroy the information afterwards.
Aloha charges that Mesa passed on trade secrets it should have destroyed. Ornstein has said the information was publicly available and didn't really rise to the level of trade secrets. However, in a ruling last year over a separate suit by Hawaiian Airlines, Judge Robert Faris specified that Mesa's promise not to reveal information was not void if the information was trivial.
"Aloha is not challenging the prices, per se, but rather it is challenging the means by which Mesa was able to determine those prices, i.e., through breaching its contract and implied covenant of good faith and fair dealing with Aloha," Ezra said.
Ezra even described as a "reasonable inference" that a Mesa executive "falsely represented" that Mesa would comply with confidentiality agreements it signed. Published March 22, 2007 by Pacific Business News</I>