Airline’s ticket-sales complaint is grounded

A judge criticizes both plaintiff Hawaiian and defendant Mesa Air

Striking a blow to Hawaiian Airlines Inc.'s attempt to hobble Mesa Air Group Inc.'s startup interisland carrier go! through litigation, a federal judge denied Hawaiian's request yesterday for a court order prohibiting Mesa from selling tickets in Hawaii.

But U.S. Bankruptcy Judge Robert Faris also lashed Mesa with criticism, saying "the evidence raises real doubts about the propriety of Mesa's conduct." Faris levied particularly harsh comments against Mesa's executive vice president and chief financial officer, George Murnane III, calling his "self-contradictory testimony ... profoundly troubling."

Although Faris said Hawaiian failed to meet the onerous requirements needed to get the court order against Mesa, the judge said Hawaiian can pursue the injunction as part of a final judgment in the litigation. Faris also said Mesa likely will be found to have violated a confidentiality agreement at the center of the dispute.

At issue is a nondisclosure agreement Mesa entered into with Hawaiian when Hawaiian was seeking investors to bail it out of bankruptcy. Hawaiian has alleged that Phoenix-based Mesa violated the agreement by using Hawaiian's protected information in a Mesa business plan to come into Hawaii.

Faris ruled yesterday that "Mesa probably breached the confidentiality agreement," as Hawaiian alleges. But Faris said that Hawaiian failed to meet the second part of a two-part test because Hawaiian failed to show that Mesa's action caused Hawaiian irreparable harm.

Jonathan Ornstein, Mesa's chairman and chief executive, cheered the ruling.

"We're very pleased that the judge ruled in our favor and denied this motion," he said. "We think it's in the best interest of the people of Hawaii for us to be able to provide low fares."

Hawaiian executives also were pleased.

"We always understood that the request for the injunction carried a very high burden," said Bruce Bennett, an attorney for Hawaiian. "But we saw it as an opportunity to make progress in the litigation, and we made plenty of progress."

Not only did Faris determine that there was a likelihood that Mesa had violated the nondisclosure agreement, as Hawaiian alleged, the judge also expressed skepticism about Mesa's management, Bennett said.

"Mesa's credibility is clearly found to be wanting by a judge who has seen all sides of this dispute," Bennett said.

In a memo accompanying his order, Faris criticized Mesa executives for misleading statements concerning their use of Hawaiian's information. The judge singled out Murnane in particular.

In one instance, Faris pointed to testimony in which Murnane stated, "At no time was the information I obtained (from Hawaiian) used in any fashion whatsoever in evaluating or considering whether Mesa would enter the Hawaiian interisland air service market or in formulating its plan to do so."

But Faris said Murnane later was "forced to admit that his initial testimony was incorrect in some respects." For instance, the judge said that Murnane eventually acknowledged that Mesa had used the information provided by Hawaiian repeatedly, in a memo sent to potential Mesa investors and in information sent to Mesa's board of directors.

"Mr. Murnane now testifies that although he does not remember doing any of these things, he must have done all of them," Faris wrote.

Another discrepancy Faris pointed to involves Mesa's internal discussions about the benefits of killing off an established Hawaii airline.

Faris pointed out that Murnane stated in a declaration that at "no time did Mesa base its business plan or decision to enter the Hawaiian market on (Aloha Airlines) or (Hawaiian Airlines) exiting the market." Furthermore, Faris wrote, Murnane testified that Mesa had not even analyzed what would happen to Mesa's business if a competitor were to fold.

"Both statements," Faris wrote, "are false."

As evidence, Faris pointed to the following language from a memo written by Murnane to a consultant one week before Mesa announced its plans to enter the interisland market: "I agree that if we assume (Aloha) stays in market and in business forever, this project makes no sense," Murnane wrote. "We definitely don't want to wait for them to die, rather we should be the ones who give them the last push. ... Clearly, if we can get (Aloha) out of the market without anyone else stepping in this is a home run."

Ornstein acknowledged that Mesa might have considered what would happen if Aloha failed. But he said the scenario played no role in the company's decision to enter the Hawaii market.

"In the end when we made the decision to do it, we never thought Aloha had to go out of business," he said.

Stu Glauberman, a spokesman for Aloha, declined to comment, saying Aloha was not a party to the litigation.

Ornstein also repeated Mesa's oft-stated message that Hawaiian's suit is simply an attempt to shut down a low-cost carrier that has brought $19 interisland fares to the islands.

"Most people in Hawaii see this for what it is: a blatant attempt to stifle competition," he said "The fact of the matter is, we won; the motion was denied."