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Starlite Aviation Operations Ltd. v. Erickson Incorporated

United States District Court, D. Oregon

May 18, 2015

STARLITE AVIATION OPERATIONS LTD., an Irish corporation, Plaintiff,
v.
ERICKSON INCORPORATED, an Oregon Corporation; and ERICKSON HELICOPTERS, INC. f/k/a EVERGREEN HELICOPTERS, INC., an Oregon corporation, Defendants.

James H. Neale, Sarah O'Connell, NORTON ROSE FULLBRIGHT US, LLP, New York, NY, Timothy S. DeJong, Robert Shlachter, STOLL STOLL BERNE LOKTING & SHLACHTER, PC, Portland, OR, Attorneys for Plaintiff.

Joel A. Parker, SCHWABE WILLIAMSON & WYATT, PC, Portland, OR, Daniel A. Broderick, Steven J. Roman, DICKSTEIN SHAPIRO LLP, Washington, DC, Attorneys for Defendants.

OPINION & ORDER

MARCO A. HERNNDEZ, District Judge.

Plaintiff Starlite Aviation Operations Ltd. ("Plaintiff") brings this action against Defendants Erickson Incorporated ("Erickson") and Erickson Helicopters, Inc. ("EHI"), (collectively, "Defendants"). On July 18, 2011, Plaintiff and Defendants' predecessor, Evergreen Helicopters, Inc. ("Evergreen"), entered into a contract, the Aircraft Services Agreement ("Agreement"). Plaintiff contends that on April 7, 2015, Defendants[1] terminated the Agreement without valid justification.

Now before the Court is Plaintiff's Motion for Preliminary Injunction. Plaintiff asks this Court to enjoin Defendants from terminating the Agreement and restrain them from further steps to implement such termination. The Court heard oral argument on April 30, 2015, and issued an Order from the bench, indicating that this Opinion & Order would follow. The Court granted the Motion for Preliminary Injunction for the reasons below.

BACKGROUND

Plaintiff is an aviation company which offers a range of helicopter services worldwide, including "passenger and cargo transport, aircraft maintenance, helicopter sales and charter, pilot training and aircraft management." Compl. ¶ 2. EHI is engaged in the business of "operating and maintaining aircraft and conducting aircraft charter operations." Id. at ¶ 3. Erickson is a "leading global provider of aviation services" to a mix of commercial and government customers. Id. at ¶ 4. EHI is a wholly-owned subsidiary of Erickson, which was formerly known as Evergreen. Id.

In 2011, Fluor Intercontinental, Inc., a prime contractor for the United States Department of Defense, awarded Evergreen a contract in support of Fluor's performance of a contract with the U.S. Army. Wahlberg Decl. ¶ 4. Under the contract with Fluor, Evergreen was required to provide eight aircraft to supply helicopter airlift services in Afghanistan. Id. at ¶ 5. Evergreen had four aircraft; therefore, Evergreen contracted with Plaintiff to provide the additional four aircraft. Id. at ¶¶ 7, 9. The Agreement between Defendants and Plaintiff is "essentially a subsubcontract." Id. at ¶ 7. Plaintiff provides EHI with aircraft, spare parts, maintenance, and other services in support of EHI's contract with Fluor. Id.; Pl.'s Ex. 1[2].

The Agreement between Evergreen and Plaintiff states that Plaintiff "shall provide a Flight Manager' onboard the Aircraft for each flight." Pl.'s Ex. 1 at ¶ 4(d). Plaintiff was to provide flight managers for all aircraft-both Plaintiff's and Defendants'. However, because Plaintiff is a foreign company without the certifications needed to perform the work directly, the Agreement was structured so that Defendants would hire Plaintiff's pilots and flight managers as contract employees for the period when they were actually in Afghanistan and ready to fly. Id. at ¶ 11. Plaintiff was responsible for the payroll and travel expenses for flight managers of Plaintiff's aircraft. Pl.'s Ex. 1 at ¶ 4(d). In addition, the Agreement states that Plaintiff would schedule the travel for Defendants' flight managers and Defendants would reimburse Plaintiff for such costs. Id.

From the beginning of the Agreement, in July 2011, until the summer of 2014, the parties performed under the Agreement with regard to flight managers in the following way: Plaintiff[3] would provide flight manager candidates to EHI for its approval. Ford Decl. ¶ 8. EHI had to approve of the candidates because EHI hired the candidates as contract employees. Id. After EHI approved a candidate, Plaintiff would coordinate with EHI to arrange any required documentation or training. Id. Then, EHI would process a letter of authorization (LOA) from Fluor, permitting the individual to serve in Afghanistan. Id. Once the LOA was approved, Plaintiff arranged the candidates' travel into Afghanistan. Id. The process generally took between eight and twelve weeks from submitting the application to obtaining the LOA. Id. at ¶ 9. EHI did not allow Plaintiff to have back-up personnel in place; therefore, even if Plaintiff was aware that a flight manager was resigning, Plaintiff could not process a replacement candidate until after the resignation. Id. at ¶ 10.

Beginning in the summer of 2014, the course of performance between the parties under the Agreement began to change. In June 2014, after a flight manager resigned, Plaintiff provided EHI with application documents for a replacement candidate. Id. at ¶ 15. In response, Derek Watt from EHI responded, "Erickson will be filling this position internally due to a shuffling of personnel throughout all of our contracts." Pl.'s Ex. 5. In addition, Erickson Director of Operations Ron Black informed Plaintiff's Crew HR Manager Tarryn Ford that EHI was working on obtaining flight managers without Plaintiff's input. Ford. Decl. ¶ 23.

In or around late September 2014, one of the flight managers requested leave to attend to certain family issues. Ford Decl. ¶ 23. In an October 13, 2014 email, Ms. Ford emailed Mr. Black and notified him that this leave would require "a serious juggle on the roster to keep the [flight manager] manpower levels up." Pl.'s Ex. 10 at 1. Mr. Black's responded, "I have one new hire that will be starting in processing today and will be making offers to one or two more this week." Id. Plaintiff provides other emails that demonstrate that EHI increasingly assumed responsibility from Plaintiff for recruiting and processing flight manager candidates. See, e.g., Pl.'s Exs. 13, 16, 17, 32, 33.

On March 20, 2015, Erickson issued Plaintiff a notice of termination of the Agreement (the "March 20 Notice"). Pl.'s Ex. 2. Erickson stated that Plaintiff had failed to perform under the Agreement multiple times. Compl. at ¶ 8; Pl.'s Ex. 2. Specifically, the March 20 Notice stated that Plaintiff had been unable "to consistently meet its obligation to provide the required number of Flight Managers per aircraft as required by Section 4(d) of the Agreement" during specified time periods between January 12 and March 20, 2015. Id.

On March 23, 2015, Plaintiff wrote Erickson, objecting to the termination and demanding that Defendants withdraw the March 20 Notice. Compl. ¶ 13. On March 26, 2015, Plaintiff filed a complaint with this Court. That day, the parties conferred and agreed in writing that EHI would withdraw the March 20 Notice in order for the parties to discuss settlement and to give Plaintiff an opportunity to cure the alleged breaches. However, the parties did not reach a settlement. On April 7, 2015, EHI sent Plaintiff another letter terminating the Agreement (the "April 7 Notice"). Pl.'s Mot. Ex. 33.

Defendants intend to "self-perform" the remainder of the Agreement. Compl. ¶ 12. Defendants have shipped helicopters and other equipment to the area of operations to replace the helicopters and equipment used by Plaintiff to perform the Agreement. Id. at ¶ 14. Defendants have solicited Plaintiff's employees to work for Defendants and have called meetings to implement the demobilization of Plaintiff's aircraft and personnel. Id.

Additional facts are incorporated into the discussion below.

STANDARDS

A party seeking a preliminary injunction "must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest." Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008). The plaintiff "must establish that irreparable harm is likely, not just possible[.]" Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1131 (9th Cir. 2011) (emphasis in original). The court may apply a sliding scale test, under which "the elements of the preliminary injunction test are balanced, so that a stronger showing of one element may offset a weaker showing of another." Id.

Nevertheless, the party requesting a preliminary injunction must carry its burden of persuasion by a "clear showing'" of the four required elements set forth above. Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (per curiam); Lopez v. Brewer, 680 F.3d 1068, 1072 (9th Cir. 2012) (a "preliminary injunction is an extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear showing, carries the burden of persuasion'") (quoting Mazurek, 520 U.S. at 972) (emphasis in original).

DISCUSSION

The Court grants Plaintiff's Motion for Preliminary Injunction because Plaintiff establishes a likelihood of success on the merits and a likelihood of irreparable harm in the absence of preliminary relief. In addition, the Court finds that the balance of the equities and the public interest tips in Plaintiff's favor.

I. The Claims in the Complaint

Plaintiff brings two claims against Defendants. First, Plaintiff seeks a declaratory judgment under 28 U.S.C. § 2201(a) that: (a) Plaintiff has not breached the Agreement in any of the ways described in the Notice; (b) the Notice is ineffective to terminate the Agreement; (c) the Agreement remains in full force and effect; and (d) Plaintiff has the right to continue performing it, without interference from Defendants. Compl. ¶ 17. Second, Plaintiff requests that this Court preliminarily and permanently enjoin Defendants from terminating the Agreement and prohibit Defendants from taking further steps to implement the termination or otherwise interfere with Plaintiff's performance. Id. at ¶ 21.

II. Likelihood of Success on the Merits

Plaintiff argues that Defendants lacked valid justification to terminate the Agreement because Plaintiff did not breach the Agreement or, alternatively, any breach by ...


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