Arctic Circle Air Co. is suing the Rhode Island-based Independence Bank over the bank's demand for payment of $155,000 in “break-up fees.”
Arctic Circle Air Co., through counsel Michael W. Dotts, sued Independence Bank for alleged violation of the Commonwealth Consumer Protection Act.
The cargo and passengers airline asked the Superior Court to issue a judgment declaring that the company is not liable for any “break-up fees” to the bank.
Arctic Circle also wants the court to issue an injunction preventing the bank from enforcing its liens while the lawsuit is pending.
The plaintiff asked the court to order Independence Bank to release its liens from the company's aircraft once the court action is concluded.
Arctic Circle is also demanding unspecified damages, attorney's fees, and court costs.
According to the complaint, Arctic Circle and Independence Bank agreed on a $600,000 interim loan in 2011.
Dotts said the interim loan was made to Arctic Circle by Independence Bank while the bank was attempting to obtain a $3-million loan from the U.S. Department of Agriculture for Arctic Circle.
The lawyer said that, in 2011 the Commonwealth Development Authority was interested in investing in Arctic Circle and sent $600,000 to Independence Bank.
CDA's $600,000, Dotts said, ended up being used as collateral by Independence Bank for its interim loan to Arctic Circle.
On Nov. 30, 2012, Arctic Circle advised Independence Bank that the company did not want the bank to pursue the loan.
Dotts alleged that Independence Bank then applied the $600,000 provided by CDA to pay the interim loan.
Dotts said that after Arctic Circle instructed Independence Bank to discontinue pursuing the loan, the bank asserted that the company owed about $155,000 in “break-up fees.”
The bank's assertion, Dotts said, was apparently based on a letter agreement dated May 29, 2012, that specified “break-up fees.”
According to Dotts, the May 29 letter agreement was superseded and replaced by letter agreements in August and October 2012, and commitment letters in September and November 2012, none of which provide for “break-up fees.”
Dotts said that Independence Bank has refused to release liens on Arctic Circle's aircraft until “break-up fees” are paid, in violation of the Commonwealth Consumer Protection Act.
Dotts said that after the expiration of the interim loan, Independence Bank demanded that Arctic Circle pay the $600,000, plus $155,000 in “break-up fees.”
The lawyer pointed out that there was no mention made in the promissory note and security agreements that Arctic Circle was obligated to pay “break-up fees.”
In December 2012, Arctic Circle president Tony Pellegrino disclosed during a ÇDA board meeting that their company has turned down the $3-million loan offer from Independence Bank, saying that the proposal came with “too much restrictions.”
A day after Pellegrino's announcement, Independence Bank business development director Michael Sammartino issued a statement, saying that Arctic Circle already closed the loan.
Sammartino said that Arctic Circle now owes the bank a tremendous amount of fees and that they will collect them.