City sued for $15.3M by Bend airport tenants

The companies allege breach of contract and fraud

By Marina Starleaf Riker, The Bulletin

The city of Bend is heading to court to defend against two aviation companies at the Bend Municipal Airport that filed a $15.3 million lawsuit alleging fraud and breach of contract.

The case is headed to trial May 9, marking the culmination of years of legal battles between the city of Bend and Aero Facilities and Professional Air, two tenants at the Bend Municipal Airport. The companies say the city committed fraud and breached the contracts when dealing with development and lease agreements at the airport, but the city says the companies’ claims aren’t valid.

The original, 132-page lawsuit was filed in February 2013 and asked for $4 million, but it was changed in 2014 to ask for $15.3 million. The lawsuit stems from problems with a 2006 development agreement between the city and Aero Facilities. The agreement allowed the company to develop aviation facilities including a fueling station at the east side of the Bend Municipal Airport. But in 2011, the city decided it wanted to change the agreement and eventually chose to let another company build a fuel station for aircraft, according to the lawsuit.

Aero Facilities says it spent at least $4.1 million on improvements to the east side of the airport, and it is seeking about $11.85 million for lost profits and damages. Meanwhile, Professional Air, which shares some of the same owners as Aero Facilities, is seeking about $3.5 million for damages and lost profits after the city allegedly removed some of the company’s customer parking and tried to double the cost of rent.

According to the lawsuit, Professional Air and Aero Facilities have “common business objectives.” If Aero Facilities had problems, for example, that would hurt Professional Air, according to the lawsuit.

Neither the companies nor their attorney could be reached after multiple calls for comment.

The city, on the other hand, doesn’t agree with the companies’ accusations. City attorney Gary Firestone said the city has more than 25 arguments for why their allegations aren’t valid.

“We pretty much deny all of their claims,” Firestone said.

The city’s arguments include saying Aero Facilities is in breach of its lease and failed to comply with the Oregon Tort Claims Act, which sets limitations for damages. The city also says it acted within its legal scope when dealing with the development and lease agreements, and that the companies’ claims are barred by an applicable statute of limitations.

The Federal Aviation Administration has also looked into the problems between the tenants and the city. The FAA ruled in the city’s favor in 2014 and is currently investigating a second complaint.

The city spent about $175,000 to hire an outside attorney to deal with the FAA proceedings. But the city’s legal costs for the tort claim are covered by the city’s insurance policy, Firestone said.

­— Reporter: 541-633-2160, mriker@bendbulletin.com

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