Guam airport asks court stay order voiding Lotte deal
The Guam International Airport Authority has asked the Superior Court to stay its February order that voided the airport’s concession agreement with Lotte Duty Free Guam, pending final resolution of the long disputed contract award.
GIAA has appealed the Superior Court’s earlier order granting summary judgement in favor of the DFS, which lost the bid to Lotte.
GIAA attorneys said a stay of the contract cancellation pending appeal would “avoid substantial harm to GIAA, its bondholders, signatory airlines, the traveling public and visitor industry.”
GIAA’s motion to stay has been pending for almost three months. Unable to obtain an immediate stay of the court’s judgment on April 26, 2018, the GIAA Board of Directors approved a mediation term sheet with Lotte that resolves outstanding issues between the two parties relating to the specialty retail concession that has been operated by Lotte since July 2013 and the on-going $110 million Terminal Building Structural Upgrade and Concourse Isolation Project.
"The term sheet ensures that the specialty retail services Lotte provides to the traveling public continues," airport officials said. "The term sheet, arrived at in a mediation conducted by Frederick Horecky on April 3 and 4, was entered into by the two parties to address the uncertainty created by the Court’s order voiding and setting aside the Lotte concession agreement – a decision and order that has been appealed to
the Supreme Court of Guam by GIAA – as well as issues related to the long-awaited third floor project, which is now underway."
Ricardo Duenas, GIAA board chairman, said without a stay, the airport is in an untenable position. “The Court’s order voided the concession contract with Lotte, but ordered GIAA to abide by the terms of the contract until a new procurement could take place. It put no such requirement on Lotte, which meant Lotte was effectively free to walk away from Guam – an outcome that would have been disastrous for GIAA and the future of the airport," he added.
Additionally, Deunas said, "the order also calls into question all of GIAA’s concession contracts and is a serious threat to GIAA’s ability to run the Airport efficiently and cost-effectively. For example, GIAA cannot solicit for food and beverage concession services using an RFP as every other airport in the world is able to do.”
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Duenas maintained the Lotte concession contract is “the most favorable contract for the airport in its history and a major basis for the GIAA’s credit rating, its $247 million bond and overall financial budget, including capital improvement projects.” said Duenas.
He added that the third floor project, which will be a tremendous upgrade to the airport, will also have an impact on Lotte’s operations over the next 24 months, so it was reasonable for GIAA to provide a reduction in rent during that time.
“The mediation term sheet keeps Lotte in the Airport until the litigation can be resolved, which is a good thing for all parties,” Duenas said. “GIAA is very appreciative of Lotte’s renewed commitment to the Airport and people of Guam as exhibited by their participation in the
mediation and adoption of the term sheet.”
At a hearing before Judge Arthur Barcinas scheduled for Friday, May 4, GIAA’s attorneys will again be asking the judge to stay his February order until the Guam Supreme Court has a chance to review the case.
“At this point the only harm being done is to the Airport and the people of Guam and we are hopeful that the Superior Court will take notice and act accordingly,” Duenas said. “The Supreme Court should and will be the ultimate decider of this case. We are asking that the order
be stayed so that GIAA can do its job – running a world class airport – while the legal process runs its course.”
The contract between the airport and Lotte began in May 2013. The company has paid about $70 million of the $154 million in minimum rent it is obligated to pay over the term of the contract and has also made $23 million in capital improvements at the airport.
Lotte’s minimum annual guaranteed rent is more than triple the $5 million that DFS was paying under its previous contracts.