It's been almost a year since the bruising battle over providing taxi service at John Wayne Airport resulted in American Taxi winning the county contract, but the scars have yet to fade. Now, with American Taxi having filed for bankruptcy, competitors are in an uproar again, demanding the county toss out the contract.
"I'm mad and I'm disgusted at the county," said Hossein Nabati, owner of A Taxi Co. A Taxi was the top-ranked company among competitors last year but lost the bid when it couldn't provide adequate insurance for its vehicles.
Instead, county supervisors picked American Taxi, a company barely 4 months old at the time.
Nabati and other cab company owners believe that with the busy summer season nearly here, the county should pull American Taxi's contract because county policy prohibits it from doing business with a bankrupt firm.
Two weeks ago, American Taxi President Rick Shorling notified John Wayne Airport officials that the company would seek protection under Chapter 11, which helps companies make an orderly and equitable settlement of obligations as they keep possession of the business. In its court filing, American Taxi said it has $10 million in assets but more than that in debt.
According to Shorling, he filed, in part, to head off a hostile takeover of his company by two creditors. The company has promised to continue service at the airport with no interruptions, airport officials said.
Michael C. Casey, president of California Yellow Cab, who was part of a consortium that also made a bid for the John Wayne contract, said that American Taxi's bankruptcy offers evidence that the county and county staff "made a huge error" choosing American, "a young company without any financial backing."
"We had a joint venture group of very experienced cab company people with lots of financial backing, and we should have been there," Casey said.
Some of American Taxi's competitors have frequently questioned the company's finances and its ability to pay for a fleet of 170 new natural gas-powered taxis. Under its contract, American Taxi must pay the county about $1.4 million over the three-year contract; county officials say the firm is current on its installments. The cab company is not required to tell the county how much profit it makes on the contract, but estimates run from $5 million to $7 million.
Robert E. Palmer, an attorney who represents Nabati's firm, said that American Taxi is in default on its county agreement because the contract specifically prohibits bankruptcy and allows the county an option to terminate the agreement.
Civil Suits Filed as Officials Keep Watch
American Taxi is also mired in civil lawsuits filed by Nabati's firm, listing the company, Shorling and another company official, Lyle Overby, as defendants. Another civil suit filed in January by a former partner in American Taxi accuses Overby and Shorling of fraud and breach of contract, claims they denied through their attorney.
Airport officials are monitoring American Taxi's operations "very closely" but do not plan any action against the company because of the bankruptcy filing, said Airport Director Alan L. Murphy.
"We prefer to be doing business with financially healthy companies," Murphy said, "but Bankruptcy Court provides a stay of any actions against the taxi company. If there was an issue with their compliance or insurance, and there isn't, then we would go into Bankruptcy Court to protect the interest of the citizens."
In fact, Robert Cashman, a John Wayne Airport Commission member, said there may be a way for the commission to help American Taxi, which has complained that it's losing money because the contract requires it to have at least 120 cabs available at peak hours.
"Apparently, the 120 figure gives them a fixed overhead that is very costly, perhaps too costly," Cashman said. "They say a lower number of 80 cabs can do the job, but our airport officials prefer having 120 because the busy summer season is almost here."
In the past, other airport contractors were able to get out of their contracts when they were affected by unexpected expenses such as higher labor costs, Cashman said. One landscaper, for example, was allowed to terminate the agreement without penalty, but the bidding process was reopened, he said.
"We could even open [the contract] up and bring in a second company," Cashman said. "The airport has done business with other firms that have filed for bankruptcy, such as TWA, Continental and America West. This is nothing unusual."
Murphy said the county has a contingency plan in case American Taxi cannot fulfill the terms of its contract. He gave no details.
American Taxi's attorney, Maryann Cazzell, acknowledged that there have been many lawsuits filed against the firm, but attributed the latest round of rhetoric to "false rumors" by A Taxi.