The cities of Ontario and Los Angeles are on track to go to trial in the lawsuit the San Bernardino County city has brought against the megalopolis in the attempt to win back ownership and control of Ontario International Airport.
In 1967, when 200,000 passengers were moving through Ontario Airport’s gates, the city of Ontario entered into a joint powers agreement with Los Angeles to have LA use its division of airports to manage and run the airport. Los Angeles was able to use its leverage with many airlines based on its control of gate positions and other perks at Los Angeles International Airport to induce airlines to fly into and out of Ontario Airport.
Under Los Angeles’s guidance, Ontario airport prospered and ridership there increased dramatically. Los Angles saw to it that Ontario Airport’s gravel parking lot was paved and its runway was extended to become the longest commercial runway in Southern California. In 1985, after performance criteria laid out in the original joint powers agreement were met, the Ontario City Council, with then-mayor Robert Ellingwood absent, voted to deed the airport to Los Angeles for no consideration. Ontario Airport continued to grow in the years thereafter, as Los Angeles and the corporate entity it had created to run its airport division, Los Angeles World Airport, upgraded, improved, modernized and expanded the airport, including the addition of two state-of-the-art, world-class terminals and a concourse in the late 1990s. Ontario Airport had become a primary asset to the city of Ontario, though Ontario technically did not own it, and in 2007, ridership reached an all-time high of 7.2 million passengers.
But with the economic downturn that settled over the nation, state and region that year, passenger traffic at Ontario Airport dropped off precipitously the next year and continued to decline as the recession lingered. By 2010, Ontario officials were pressuring Los Angeles officials to do something about the declining numbers at Ontario Airport. Simultaneously, Los Angeles World Airport officials were pushing ahead with a modernization and upgrading undertaking at Los Angeles International Airport initiated in 2006. As the number of passengers at Ontario Airport dwindled and some airlines discontinued flying into and out of Ontario while ridership increased at Los Angeles International Airport, Ontario officials began to suggest that Ontario Airport was being neglected. Soon Ontario officials were charging Los Angeles with purposefully mismanaging Ontario Airport as part of a strategy to benefit Los Angeles International Airport. Ontario then initiated a public relations campaign aimed at pressuring Los Angeles to return the airport to Ontario. The terms and stridency of this campaign escalated, poisoning relations between the two cities and their officials. As the 2013 Los Angeles municipal election approached, Ontario officials sought to make alliances with both of the candidates who qualified for the May 2013 run-off for mayor, Wendy Gruel and Eric Garcetti. Ontario officials expressed hope that they would be able to make headway in dealing with Garcetti, who proved the eventual victor. Nevertheless, in June 2013, just prior to Garcetti being sworn in as mayor, Ontario sued Los Angeles, using the high powered and well connected Washington-D.C.-based law firm of Sheppard Mullin Richter and Hampton, which also has an office in Los Angeles, to represent it.
Ontario aggressively pursued the lawsuit, and Ontario councilman Alan Wapner, in particular, was highly visible and vocal in asserting Ontario’s position outside the context of the court and Sheppard Mullin Richter and Hampton’s court filings.
Ontario had five prongs in its suit. The first prong was that the entire deal between Ontario and Los Angeles was invalid in that the Joint Powers Agreement was flawed and unenforceable. The second prong was that the transfer of the airport to Los Angeles in 1985 was illegal in that it had taken place as a consequence of a simple vote of the city council and should have entailed a full vote of the city’s electorate. The third prong was that Los Angeles had breached its contract with Ontario i.e., the terms of the joint powers agreement. The fourth prong was breach of the fiduciary duty Los Angeles has toward Ontario as a consequence of the joint powers agreement. And the fifth prong is breach of good faith and fair dealing on the city of Los Angeles’s part.
The case was filed in Riverside Superior Court to avoid any conflicts that might occur because of bias toward one party or another in San Bernardino or Los Angeles counties. Judge Gloria Connor Trask is hearing the case in Riverside.
With regard to the first two prongs, Trask in January tentatively ruled and then in February confirmed that Ontario’s efforts to have the 1967 joint powers authority agreement invalidated and 1985 agreement giving Los Angeles the airport declared void had come too late and were barred by the statute of limitations even if the agreement and the transfer were flawed on legal or procedural grounds.
Thus, three-fifths of Ontario’s lawsuit has already been wiped out. The remaining issues to be litigated after Judge Trask’s recent ruling pertain to breach of contract, breach of fiduciary duty and breach of good faith and fair dealing.
Ontario’s road to victory has grown even more tortuous. Earlier, in December, Ontario had scored what appeared to be a crucial tactical advantage when Trask ruled that Los Angeles had to provide to Ontario over 2,000 internal Los Angeles city and Los Angeles World Airport documents sought by Ontario in its suit as part of the discovery process. Those included memos, emails, letters, communications and other materials relating to Los Angeles World Airport’s managerial and administrative actions regarding Ontario Airport. It is the theory of the Sheppard Mullin Richter & Hampton legal team representing Ontario composed of attorneys Andre Cronthall, Scott Sveslosky and Catherine La Tempa that among those documents is a smoking gun or several smoking guns showing that Los Angeles World Airport officials were indeed slighting Ontario Airport and doing so purposefully because they were trying to drive passengers away from Ontario to Los Angeles.
The attorneys for Los Angeles, however, did not fully comply with Trask’s order, claiming that 399 of the documents fall under attorney-client privilege, They appealed the ruling to the Fourth State Court of Appeals. Joshua Stambaugh, an attorney representing Los Angeles asserted in January that many of the documents sought were communications from individuals who are not named in the suit and are not likely to be added as defendants to the suit. The self-evaluation and personnel files of a person who is not a defendant in the case are protected by the attorney-client privilege and the state Constitution’s right to privacy, Stambaugh said. Moreover, Stambaugh maintained that Los Angeles, in evaluating the sought-after documents, had learned that the 399 documents in question contain attorney-client information that is not discoverable.
Last week the appeals court ruled that Trask should reconsider her decision. The appeals court did not direct Trask to prohibit Ontario from seeing any or all of the 399 documents in dispute, but suggested that a more rigorous evaluation with regard to them needs to be made.
Ontario yet maintains that it has a right to examine the documents. Typically, in such disputes, an ostensibly uninterested legal expert, either another judge or an attorney with no connection to the case, will be appointed as a special master. That special master would then evaluate each of the documents to ascertain if they are privileged or if they are eligible for discovery.
At this point, there is not enough information available for outsiders to know whether Ontario’s case would rise or fall on the strength of the documents in dispute. This week, Cronthall told the Sentinel that he believes there is adequate information available for his client, Ontario, to prevail in the matter if it goes to trial as anticipated on August 17.
“All three causes of action arise from the same set of facts,” Cronthall said. “They all hinge on the joint powers agreement (“JPA”) entered into between Ontario and Los Angeles in 1967. The JPA created LA’s contractual obligation to use its best efforts to develop air service at Ontario International Airport. LA breached that obligation by, among other things, failing to use its best efforts to grow air service at Ontario Airport. Instead LA reduced the marketing budget for Ontario Airport, caused staffing levels and resulting labor costs to remain unreasonably high, collected an administrative fee that was unreasonably high, reduced to part time status the manager and assistant manager of the airport, and allowed the overall cost per enplaned passenger to increase and then remain too high.”
Cronthall said, “The breach of the implied good faith and fair dealing is based on LA’s above breaches plus LA’s failure to permit Ontario to receive the benefits that should have been derived from the agreement. LA failed not only to meaningfully market and advertise Ontario Airport, it took no significant steps to reverse Ontario International Airport’s downturn from 7.2 million enplaned passengers in 2007 to less than 4 million through 2013. Also, for example, chief operating officer Steve Martin acknowledged that LA’s air service development was either nonexistent or dead in the water, but Los Angeles World Airports decided to ‘leave the ineptitude as is.’”
Cronthall said,”LA’s failure to use best efforts and its other breaches also amount to a breach of fiduciary duty. By entering together into the JPA, LA and Ontario essentially formed a partnership or joint venture, triggering fiduciary obligations. Its failure to use best efforts and other breaches constituted a breach of fiduciary duty as well.”
Moreover, Ontario intends to revive the first two prongs of the lawsuit, Cronthall said. .
“Ontario also intends to appeal Judge Trask’s ruling granting LA summary adjudication as to Ontario’s causes of action for rescission and reformation,” he told the Sentinel.
Los Angeles World Airports officials have consistently refused to discuss the lawsuit outside of making references to court filings. In defending their operation and management of Ontario Airport and in addressing the six year-long downturn in ridership there, they have said the lingering recession had a devastating impact on aviation enterprises in general, that outlying hub airports geographically removed from major population centers such as Ontario were particularly hard hit and that the decisions by some airlines to reduce or eliminate flights to such outlying hubs in response to the contracting air travel market were ones made internally and independently over which Los Angeles World Airport has no control.