Wednesday, May 9, 2018

Legend Airlines existed for 8 months. The $133M lawsuit over its Love Field demise lives on

Allan McArtor, Legend Airlines' president and CEO, discusses his company's fate in an interview at Legend headquarters following the company's voluntary suspension of operations on Dec. 2, 2000. The airline was losing $1 million a week during its short-lived existence.
(2000 File Photo/The Associated Press)

A lawsuit over the late Legend Airlines turns 10 this year — and to mark the occasion, a federal appeals court has vacated a judge's 2-year-old ruling that awarded more than $133 million to the financiers behind the short-lived carrier and its Dallas Love Field terminal.

Monday's ruling from the United States Court of Appeals for the Federal Circuit is yet another chapter in the ongoing saga of the airline that once tried to take on Southwest Airlines and American Airlines by offering lobster-and-champagne service at peanuts-and-soda prices. Legend operated for less than a year in 2000. Litigation surrounding its demise will seemingly last forever.

Federal Claims Judge Margaret Sweeney ruled in 2016 that when President George W. Bush formally amended the Wright Amendment on Oct. 13, 2006, reducing the number of Love Field's gates from 32 to 20, the feds took Legend's by-then-empty terminal on Lemmon Avenue and rendered it worthless — an inverse condemnation, in legalese.

Sweeney ordered the U.S. government to pay the investors $133 million, plus interest "compounded annually from October 13, 2006, the date of the taking."

For Legend's investors, the ruling was supposed to be a happy ending to a courthouse drama that began in 1996. That's when Dallas businessman Bruce Leadbetter partnered with Allan McArtor, a former head of the Federal Aviation Administration, to launch an airline using legally loopholed 56-seat planes that could fly further than the Wright Amendment's four neighboring states.

Legend was immediately under siege — from Southwest, American, DFW International Airport, Fort Worth, Dallas Mayor Ron Kirk, U.S. Sen. Kay Bailey Hutchison. Lawsuits were filed; rulings, appealed. It looked like the airline would never get off the ground.

When the airline finally did launch 18 summers ago, with first-class service and TV screens on every seat and long-stem roses encased in the bulkhead, it was nothing short of a miracle. But the airline, broken by those long legal battles, lasted only eight months, eventually filing for Chapter 11.

"It was so successful," McArtor said Tuesday, "we got eliminated."

Thus began even more litigation, including a lawsuit filed in 2008 by Love Terminal Partners and Virginia Aerospace, LLC, which alleged that Dallas City Hall and the federal government had illegally taken the late Legend terminal. That lawsuit, from which Dallas was dropped, led to the $133 million judgement against the U.S. government in April 2016. "It's been a long time," investor Alan Naul told The Dallas Morning News in July 2016. "We can celebrate when we actually have money."

On Monday the U.S. Court of Appeals for the Federal Circuit extinguished that celebration.

A three-judge panel reversed Sweeney's award, insisting the federal government didn't take the terminal because, essentially, there was nothing left to take. According to the 24-page ruling, Legend's space was no longer a viable moneymaker after Bush signed the Wright Amendment Reform Act in October 2006 that allowed for long-haul flights out of Love Field. Dallas City Hall demolished the Legend terminal in 2009.

As far as the Federal Circuit is concerned, the terminal simply had no future: Legend had gone bankrupt in 2000, only eight months after its first flight. Its other tenant, Atlantic Southeast Airlines, had moved into Love Field's main terminal. And, according to the ruling, no other airline wanted it — even though Legend investors have long insisted they were in talks at the time to sell the terminal to Pinnacle Airlines for $100 million.

As a result, says the Federal Circuit's ruling, Love Terminal Partners and Virginia Aerospace were $13 million in the hole and standing at Love Field without a shovel, even before the Wright Amendment was amended.

Says the ruling, "since there was no adverse economic impact, there can be no taking."

Naul said Tuesday he and the other defendants are "in the process of reviewing the ruling and our options with our lawyers," and that he would have no comment for several days. Plaintiffs' attorney Roger Marzulla also was not available.

Though not a plaintiff in this suit, McArter testified during the seven-day trial and remains friends with the airline's investors. He had not heard about the Federal Circuit's ruling until informed by a reporter Tuesday morning.

'I am stunned, very stunned," said McArtor, now chairman emeritus at Airbus Americas. "Because if that terminal wasn't worth anything, a lot of people went to great lengths to make sure it never saw another airplane."

(Robert Wilonsky - The Dallas Moring News)

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