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AIR SUPPORT INTERN., INC. v. ATLAS AIR

June 15, 1999

AIR SUPPORT INTERNATIONAL, INC., PLAINTIFF,
v.
ATLAS AIR, INC., DEFENDANT.



The opinion of the court was delivered by: Gershon, District Judge.

Opinion and Order

FACTS

Unless otherwise indicated, the following facts are undisputed.

A. The Parties

Defendant Atlas is a Delaware corporation with its principal place of business in Colorado. Atlas is a public company doing business in New York. Atlas was organized in 1992 and began operations upon Federal Aviation Administration certification in February 1993. It operates Boeing 747 cargo aircraft worldwide.

Atlas does not operate its own scheduled service. Rather, Atlas leases out its aircraft and crew to other airlines which need additional cargo capacity, but which choose not to undertake the investment of acquiring additional aircraft and crew. These leases are called ACMI or "wet" leases; "ACMI" stands for aircraft, crew, maintenance and insurance, which are the four elements Atlas provides in a wet lease. The customer airline provides route authority, traffic rights, landing rights, cargo and rental payments. Atlas and the customer agree on a flight schedule and a required minimum monthly number of flight hours.

Plaintiff Air Support is a New York corporation organized in 1989, which began operations in 1994. Air Support's principal place of business is in New York. Its sole shareholder and full-time employee is Carsten Petersen ("Petersen"), a Danish citizen. Air Support's business is to broker wet leases and charters between airlines and wet lease operators such as Atlas. While working for another company in 1993, Petersen met the principals of Atlas at JFK International Airport.

B. The First Contract

On September 8, 1994, Atlas and Air Support entered into an agreement (the "First Contract"). The First Contract was in the form of a letter from David M. McElroy, then the Chief Operating Officer of Atlas, to Carsten Petersen, the President of Air Support. The First Contract, signed by both parties and with a handwritten date of September 8, 1994, provided in pertinent part that:

  This letter will confirm our agreement whereby you
  will seek to obtain charter contracts, leases or
  cargo loads for Atlas Air, Inc.
  1. You will solicit business in the following
  geographical areas: South America, Central America,
  Europe (except KLM, Air France, Lufthansa, Cargolux,
  British Airways), Middle East (except Saudia,
  Emirates). . . .
  4. Atlas will pay you a commission on any contract
  with a new carrier where you have previously secured
  the business equal to 3% of the actual net proceeds,
  payable within 10 days of receipt of payment from the
  contracting party. You should clear prospective
  clients with Mr. McElroy or Mr. Chowdry, to avoid
  parties Atlas has previously contacted. Commissions
  on contract renewals from your clients will be
  mutually agreed upon.
  5. This agreement may be terminated by either party
  on 30 days advance written notice. . . .
  7. You are an agent of Atlas in connection with any
  transaction accepted hereunder. . . .
  8. This Agreement will be governed by the laws of the
  State of New York, USA, and any litigation related
  hereto must be conducted before the courts of that
  state to whose jurisdiction you hereby consent.
  9. This is the full and complete contract between the
  parties, and no other written or oral understandings
  are effective. This agreement cannot be amended
  orally or by course of dealing, but only by a written
  agreement signed by both parties.

On May 3, 1995, Atlas notified Air Support that it would be terminating the First Contract with Air Support on June 2, 1995, pursuant to the First Contract's 30-day notice provision.

The SAS Lease

The facts preceding the signing of the wet lease between Scandinavian Airline Systems ("SAS") and Atlas are undisputed. On November 16, 1993, Air Support's Petersen supplied a written analysis to Atlas regarding eastbound cargo routes from the United States to the Far East through Scandinavia. On November 18, 1993, Petersen wrote to Atlas that SAS was closing its Copenhagen-Los Angeles route and reducing its Scandinavia-New York service by fifty percent, thereby intensifying the demand for cargo service over these routes.

In March 1994, Petersen contacted SAS headquarters in Sweden on behalf of Atlas. Petersen also contacted Henric Nauckoff, SAS Director of Cargo Sales and Services in North America. On March 9, 1994, Petersen submitted a report to Atlas in which Petersen analyzed various scenarios under which Atlas could possibly do business with SAS, including a standard ACMI or wet lease, charters, or a joint venture between Atlas and SAS since it appeared that SAS desired some degree of risk-sharing, that is, that Atlas would bear part of the cost should SAS's planes end up not being fully loaded.

On March 10, 1994, Atlas's McElroy sent SAS an introductory letter proposing a straight (i.e., no risk-sharing) agreement between SAS and Atlas, to start in April 1994, under which SAS would pay Atlas $6,000 per block hour. The letter also stated that "Atlas will consider a reduce [sic] rate during marketing development period and/or a joint venture proposal for the route."

On April 22, 1994, SAS employee Einar Longva wrote a letter to Atlas's Vice-President of Operations, James T. Matheny, in which he referenced a trip to Europe which Matheny had taken to meet with SAS. Petersen had arranged the trip and attended the meeting in question. In his letter to Matheny, on which Petersen was copied, Longva stated that "we would, at this time, based on a cooperation formula which at a later stage could develop into a firm long term wet lease agreement on traditional terms and conditions, like to propose" a risk-sharing lease agreement.

On May 6, 1994, Atlas's Matheny prepared a draft of a response to Longva's proposal, which Matheny first sent to Petersen for comments. In the final version of this letter, dated May 6, 1994, Atlas made a modified risk-sharing proposal to SAS, stating "Atlas is certainly willing to share the risk of developing this routing." On May 26, 1994, SAS responded to Matheny's risk-sharing proposal of May 6, 1994, with a counter-proposal in which Atlas would bear more of the risk. On that same day, Matheny responded to SAS's counter-proposal with a letter stating that "we will study your proposal carefully and provide a response in the very near future. I am confident that we can come to agreement on terms which will be acceptable to both airlines and result in a profitable venture for this freighter route. We look forward to finalizing an agreement soon."

There are no communications in the record between SAS and Atlas from May to October 1994. On November 7, 1994, Petersen sent SAS route information regarding distances between New York, Stockholm, Tokyo and Hong Kong. On November 8, 1994, Petersen sent a letter to executives Michael Chowdry, John Blue and David McElroy of Atlas, which stated that:

On November 9, 1994, Petersen wrote to SAS with a proposal for SAS to wet-lease "a Boeing 747-200F, once weekly from New York via Gothenburg to Japan." Drafts of proposals were then exchanged between Atlas and SAS. On January 16, 1995, David McElroy of Atlas sent a letter to SAS summarizing the proposed terms for the "start-up phase of your service." These terms included some risk-sharing. On January 30, 1995, Air Support's Petersen sent Atlas a memo which stated that "according to my [Petersen's] sources, Atlas Air, Inc. will get the contract."

On April 3, 1995, without notifying Air Support, Atlas's Matheny sent SAS a letter stating:

  As follow up to our most recent discussions
  concerning freighter service for SAS, we have tried
  hard to procure additional aircraft, but without
  success. Currently, the aircraft we are adding to our
  fleet are committed to long term, full utilization
  contracts.
  Regrettably, Atlas will not have aircraft
  availability with which to provide service to SAS
  ...

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