Consultant reaches deal with Hawaiian

A lawsuit had said Mo Garfinkle gave inside data to Mesa

Hawaiian Airlines has settled its lawsuit against its former consultant yesterday ahead of a high-stakes trial that could force Mesa Air Group's go! out of the interisland market.

Mo Garfinkle, chairman and chief executive of GCW Consulting, was accused by Hawaiian of providing confidential information to Mesa. Garfinkle was hired as a consultant for Mesa several months after he finished consulting for Hawaiian Airlines' parent, Hawaiian Holdings, during Hawaiian's bankruptcy.

Hawaiian is seeking $173 million in damages, plus interest and attorney fees, and an injunction to prevent go! from selling tickets for one year.

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The airline consultant accused by Hawaiian Airlines of misusing confidential information in connection with Mesa Air Group's entry into the Hawaii market settled his part of the case yesterday, before the start of a high-stakes trial that could determine the future of Mesa's interisland carrier, go!

Mo Garfinkle, chairman and chief executive of Arlington, Va.-based GCW Consulting, declined to comment on the terms or his reasons for settling, leaving open the question whether the deal will help or hurt Mesa.

The Phoenix-based carrier is now the sole remaining defendant in the lawsuit, in which Hawaiian is seeking $173 million in damages, plus interest and attorney fees, and an injunction to prevent go! from selling tickets for one year.

The settlement held up the start of the federal Bankruptcy Court trial for four hours yesterday.

Afterward, Hawaiian attorney Sidney Levinson said that in light of the confidentiality agreement, he would agree not to question Mesa on any information provided to it by Garfinkle's company.

Garfinkle was a consultant for Hawaiian Airlines' parent, Hawaiian Holdings, from late 2003 to late 2004 during the airline's bankruptcy. He began working as a consultant for Mesa in spring 2005, continuing through go!'s launch in June 2006.

Garfinkle was accused by Hawaiian of using confidential information acquired during his work for the local carrier in his subsequent work with Mesa. Garfinkle has denied this.

Mesa attorney Maxwell Blecher characterized Garfinkle's settlement as "helpful" for Mesa.

"As a result of that settlement, they withdrew claims that they had been pressing for the past two years against Mesa, so the result will be it will shorten the trial a good deal," Blecher said.

Mark Dunkerley, president and CEO of Hawaiian, described the settlement as being in the best interest of Hawaiian, but would not elaborate further.

Dunkerley was to have testified yesterday, the first day of the trial, but his testimony was pushed back to Monday morning after the delay caused by the Garfinkle settlement and the opening arguments.

The trial follows a three-day pretrial evidentiary hearing in which Bankruptcy Judge Robert Faris ruled that:

» Mesa kept whatever confidential information it got from Hawaiian and did not return or destroy it as the confidentiality agreement required.

» Mesa misused any confidential information it got from Hawaiian when deciding whether to enter into the Hawaii market.

» The misuse of any such confidential information was a substantial factor in Mesa's decision to enter the market.

Faris, though, left open the issue of deciding whether, and to what extent, the information that Hawaiian gave to Mesa was generally available to the public. If the information is found to be publicly available, then the damages imposed by Faris upon Mesa would be reduced.

Levinson said in his opening arguments yesterday that Mesa has to prove that the information it got from Hawaiian could have been accessed by a member of the public at that point in time in May 2004, and not available publicly at a later date.

"The fact the information could be inferred or surmised is not the same as published material," he said.

But Blecher said the information either was available from the public record, or an industry analyst with some skill could easily reconstruct it.

Blecher said Hawaiian sued Mesa because it regarded Mesa as a threat due to Mesa's low costs, significant amount of cash, experience and profitability. He showed the court an internal Hawaiian memo that Dunkerley wrote to employees in which he described some of those Mesa characteristics after Mesa announced it was coming into Hawaii.

"Unlike Mahalo, Discovery and (Mid-Pacific), and the rest of those guys that have gone under, he saw this as a serious competitor," Blecher said. "So somewhere along the line, he got the idea after he figured out we could take him to the cleaners, he figured out that he had some kind of a lawsuit which he could use to put us out of business and raise prices so he can enjoy his little monopoly in conjunction with Aloha."

Referring to that internal Hawaiian employee memo, Jonathan Ornstein, chairman and CEO of Mesa, said "it's nice to finally find common ground with Mark Dunkerley. I agree with his assessment that we are well organized, well financed and unlike any other competitor they have faced before, and that is precisely why we are all in court."

Dunkerley said in no way was Hawaiian trying to avoid a competitive fight.

"We compete against lots of different airlines," he said. "We're very used to dealing with competition in all its forms. The accusation that somehow we're working to get Mesa out of the market is just sort of absurd. They reached an agreement with us, and they breached the agreement with us and we're seeking to enforce our rights."