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Two heavyweights clash at Van Nuys Airport

The lawsuit filed by Maguire Aviation against Castle & Cooke Aviation Services alleges the latter violated its lease with Los Angeles World Airports, which runs the facility.

September 29, 2009|Dan Weikel

Van Nuys Airport has been plagued with budget deficits for years. Audits have uncovered mismanagement, poor tenant relations, lost business opportunities and facilities that were leased in violation of federal regulations.

Now, a dispute between two prominent business leaders and political heavyweights is raising more questions about the management of one of the busiest general aviation airports in the nation.

Real estate magnate Robert F. Maguire and billionaire David H. Murdock, the chief executive of Dole Food Co., are locked in a legal battle involving their aviation service companies, which are competitors at Van Nuys.

In August, Maguire Aviation Inc. sued Murdock's Castle & Cooke Aviation Services Inc. in Los Angeles County Superior Court. The case alleges that Murdock's company has violated its lease with Los Angeles World Airports, the city agency that owns Van Nuys and Los Angeles International, and misrepresented itself as a "fixed-base operator" in order to sell millions of dollars a year in aircraft fuel.

Fixed-based operators are businesses that offer aircraft owners a wide range of services, including hangars, office space, fuel and maintenance.

To qualify as such, companies must lease at least seven acres and meet other minimum standards for insurance, personnel and improvements.

Maguire, who has denounced Castle & Cooke as a "rogue operator," seeks damages for lost fuel sales and a court order to prevent Murdock's firm from selling fuel.

The 74-year-old businessman also opposes a pending proposal by airport managers to lease Castle & Cooke more land so that Murdock's operation would qualify as a fixed-base operator with full fueling privileges. Airport commissioners are considering the deal, despite years of complaints about illegal fueling and a recent letter the airport agency sent to Castle & Cooke ordering the company to comply with its lease.

"What appalls us most is that Castle & Cooke could potentially be elevated to a full-fledged fixed-base operator without ever being held accountable for disregarding the rules it should have played by," Maguire said. "Giving Castle & Cooke a pass would be bad public policy, set a terrible precedent and send the wrong message."

Representatives for Castle & Cook Aviation did not return calls for comment, despite repeated efforts. Gina Marie Lindsey, executive director of Los Angeles World Airports, declined to discuss the lawsuit.

Castle & Cooke Aviation occupies about 4.8 acres, which is less than the seven required to become a fixed-base operator and gain the right to sell fuel for planes other than those based in its hangars. The firm's parent company is Murdock's Castle & Cooke, which owns Dole Foods and real estate in Hawaii.

Maguire's fixed-base operation covers about 60 acres and includes hangars, offices, fuel farms and aprons. He says he has invested about $200 million in the business, which opened in 2006.

Maguire, who is active in civic affairs and local politics, founded Maguire Properties Inc., a major developer of commercial real estate in Los Angeles. Murdock has been a GOP fundraiser.

With his complaints to airport officials largely unheeded, Maguire said, he sued Castle & Cooke Aviation on Aug. 25.

The case includes photographs of airplanes being fueled purportedly in violation of Castle & Cooke's lease.

Those operations allegedly involve visiting aircraft and almost 60 airplanes based in hangars subleased by Castle & Cooke.

Maguire estimates that the loss in fuel sales to his firm and the three other fixed-base operators at Van Nuys is about $5 million to $6 million a year.

The lawsuit cites a July 1 letter from Los Angeles World Airports, which warns Castle & Cooke that it is not an authorized fixed-base operator.

"Castle & Cooke," the letter states, "must immediately stop referring to itself as a fixed-base operator and remove any reference to that in its marketing materials," such as ads, brochures and websites.

On Sept. 21, Maguire told the city's Board of Airport Commissioners about his concerns before it met in a closed executive session.

Board members postponed a decision on the Castle & Cooke proposal, saying that they had not obtained a report from the city's chief administrative officer.

Maguire contends that the airport agency's failure to enforce the Castle & Cooke lease has allowed the firm to act as a fixed-base operator without having to pay the higher rent or make the millions of dollars in improvements the airport agency requires of such operators.

He estimates that Van Nuys, which is facing a deficit of several million dollars next year, has lost about $28 million in rent and interest assuming the lease violations occurred during the last 10 years.

Maguire also says the pending deal with Castle & Cooke would cut its annual rent in half, from $560,000 to $296,000, costing the airport revenue.

"This is not a battle between billionaires," Maguire said. "This is about a public agency not taking a tenant's lease violations seriously, failing to enforce the lease for over 10 years and pushing through an ill-conceived plan to make the problem go away."

Lindsey said the airport agency's handling of the Castle & Cooke matter had not caused financial harm to Van Nuys.

She described the pending deal with the company as a fair and "competitive" proposal that was based on a "sound business model" for Van Nuys.

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dan.weikel@latimes.com

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