Home  |  Weather  |  Advertising  |  Classifieds  |  Subscription  |  Contact Us  |  About Us  |  Archives
Home|Weather|Advertising|Classifieds|Subscription|Contact Us|About Us|Archives

link exchange; in-house ad

Thursday, April 24, 2014

Judge denies bid to stop Saipan Air’s racketeering suit

The federal court has denied a motion to stop Saipan Air Inc. from pursuing its $50-million racketeering lawsuit against three executives of Swift Air LLC.

U.S. District Court for the NMI Chief Judge Ramona V. Manglona issued an order Thursday denying a motion for summary judgment filed by Donald A. Stukes, Jeffry Conry, and Boris Van Lier, who assert that Saipan Air Inc. is prevented from going ahead with this lawsuit due to the Chapter 11 reorganization plan of Swift Air Inc.

Manglona ruled that the language of 9.7 section of the reorganization plan is far short of clear enough to alert Saipan Air that by assenting to such a plan it was agreeing to abandon this lawsuit.

The judge said this section of the plan is ambiguous and therefore cannot be the basis to bar Saipan Air’s claims.

Manglona said res judicata principles do not bar Saipan Air’s claims against Stukes, Conry, and Van Lier.

Res judicata doctrine, also known as claim preclusion, bars litigation in a subsequent action of any claims that were raised or could have been raised in the prior action.

According to court records, the defendants were employees, officers, or advisers of Swift Air, an Arizona corporation. Conry was chief executive officer, Van Lier was director of operations, and Stukes was chief restructuring officer and also an employee of ASI Advisors LLC.

In April 2012, Saipan Air and Swift Air entered into an agreement for Swift Air to provide Saipan Air with aircraft, crew, maintenance, and insurance.

Over the next two months, Saipan Air wired a total of $1.267 million to Swift Air and provided a $524,000 letter of credit to secure delivery of an aircraft by July 1, 2012.

On June 21, 2012, Van Lier, acting on behalf of Swift Air, sent a letter to Saipan Air purporting to terminate the agreement. Less than a week later, on June 27, Swift Air filed for bankruptcy in the District of Arizona under Chapter II of the Bankruptcy Code.

In response, Saipan Air took action on two fronts. In Arizona, it actively participated in the bankruptcy case. In the initial filings, Saipan Air was listed as Swift Air’s second-largest unsecured creditor.

Swift Air’s chief operating officer, Adam Ferguson, chaired the creditor’s committee. On July 8, 2012 Ferguson swore out a declaration in support of its $1.276 million claim.

Ferguson alleged that a series of broken promises, misrepresentation, and outright lies by Conry, Van Lier, and other agents of Swift Air induced Saipan Air to enter into the agreement.

Around the same time, Saipan Air brought court action in the U.S. District Court for the NMI against the three defendants for fraud, unjust enrichment, and violations of the Racketeer Influenced and Corrupt Organization Act.

The complaint, filed July 12, 2012, alleged that the defendants fraudulently induced Saipan Air to transfer money and other assets to Swift Air.

On Aug. 21, 2013, in the bankruptcy case, Swift Air filed a third amended plan of reorganization. Section 9.7 of the reorganization plan enjoins all persons asserting any claims “against any of the released parties based upon, attributable to, arising out of or relating to any claim against or equity interest in the debtor” from “commencing or continuing in any manner any action or other proceeding of any kind with respect to any such claims…”

On Oct. 1, 2013, the bankruptcy court entered an order confirming the plan. Saipan Air did not appeal the confirmation plan, and the time for filing notice of appeal expired on Oct. 15, 2013.

In her order denying the defendants’ motion, Manglona said even if the injunction applies to the lawsuit, the federal court would not necessarily have the authority to enforce it.

Typically, Manglona said, enforcement authority lies with the court that issued the injunction—in this instance, the Bankruptcy Court of the District of Arizona.

Indeed, she said, the Arizona court expressly retained jurisdiction over the Chapter II case after the plan’s effective date.

Nevertheless, Manglona said, the injunction effectively ends this lawsuit if it shows that Saipan Air’s claims against the individual defendants have already been settled in the Arizona bankruptcy case.

This result, she said, comes about through application of the doctrine of claim preclusion, or res judicata.

Manglona said claims are precluded when there has been a final judgment on the merits by a court of competent jurisdiction involving the same parties and the same claims.

Unless the applicable provisions of the confirmed plan are clear and unambiguous, “the principles of res judicata do not bar [the claim],” Manglona said.

To determine whether section 9.7 of the plan clearly and unambiguously enjoins related claims against the individual defendants, the rule of contract interpretation must be applied, she said.

Manglona said the law of the state in which the plan was confirmed governs the interpretation of plan provisions and therefore, Arizona law governs interpretation of terms of the Swift Air plan.

Defendants assert that under Arizona law, section 9.7 of the plan is not ambiguous.

But Manglona finds this argument unpersuasive.

Manglona said there really is no dispute between the litigants about what “released parties” means: it means parties who are released from liability—in this case, liability on creditors’ claims related to the Swift Air bankruptcy.

Manglona said the problem is identifying who the released parties are.

“No dictionary will help settle that question. What is needed is language somewhere within the four corners of the plan either expressly naming each released party or clearly delineating the classes of persons or entities who are released.

“This plan has none,” the judge pointed out.

Under Ninth Circuit precedent, Manglona said, the released parties must be clearly identifiable in order for a provision releasing claims to have preclusive effect.

Without guideposts within the plan as to who is and is not within the class of released parties, the meaning cannot be discerned with clarity, she said.

Because the Swift Air plan and confirming order do not identify the released parties, releasing parties, and released claims with any specificity whatsoever, Manglona said it cannot be said with confidence that Saipan Air released its fraud and RICO claims against these individual defendants.

Attorney Steven Pixley is counsel for Saipan Air, while attorney Michael White is representing the defendants.

Back to top Email This Story Print This Story


Home | Weather | Advertising | Classifieds | Subscription | Contact Us | About Us | Archives
©2006 Saipan Tribune. All Rights Reserved