The Lemmon Avenue Terminal at Dallas Love Field Airport was demolished in 2009. Ten years later, two sides embroiled in a lawsuit are still debating whether or not the terminal had any value.
The two sides — Love Terminal Partners and Virginia Aerospace, and the U.S. government — are gearing up for a potential showdown in the U.S. Supreme Court.
Hundreds of millions of dollars are on the line, and other parties, like JetBlue Airways Corp. (Nasdaq: JBLU) and the Texas Attorney General, have weighed in on the argument.
If the U.S. Supreme Court decides to hear the case, it could bring an end to an ordeal 20 years in the making.
How we ended up here
Love Terminal Partners and Virginia Aerospace are entities created by Dallas real estate firm The Hampstead Group as investment vehicles in the Love Field space.
LTP built a six-gate terminal, the Lemmon Avenue Terminal, at Dallas Love Field that opened in early 2000. A carrier called Legend Airlines began flying out of the terminal later that year but filed for bankruptcy eight months later in December 2000.
Another airline, Atlantic Southeast Airlines, also flew out of the Lemmon Avenue Terminal but moved to the main terminal at Love Field in 2001.
For years, LTP courted other airlines to fly out of the Lemmon Avenue Terminal. But the industry was suffering from weak passenger demand after Sept. 11.
Though the market began rebounding a few years later, Hampstead’s plans were disrupted in 2006 when the Wright Amendment Reform Act — which restricted Love Field commercial service — was altered.
Wright Amendment Reform Act
WARA ordered a decrease in the number of gates at Love Field from 32 to 20. That put the Lemmon Avenue terminal and its six gates on the chopping block. The property was taken, and the terminal was demolished in 2009.
WARA dictated “no federal funds or passenger facility charges may be used to remove gates at the Lemmon Avenue facility, Love Field, in reducing the number of gates as required under this Act.”
Investors in the Lemmon Avenue Terminal understand the government has a right to take land, but they were and still are flummoxed at the circumstances.
“When we made this investment, we never in a millions years thought about an outcome where the federal government would come in and say, ‘No one can ever use this terminal again’ and they would never pay us anything for it,” said Alan Naul, an investor in the project.
“That’s just not something you think about as an investor,” he added. “It seems like the craziest scenario you can come up with.”
Legal battle
In July 2008, the Hampstead-backed entities sued the government, arguing it deserved just compensation for the Lemmon Avenue Terminal.
The legal fight dragged on for years. Eventually, the group behind the terminal was awarded $133 million plus interest dating back to when WARA was enacted in October 2006.
Last May, however, the decision was overturned. The Federal Circuit said that, because the terminal was losing money, it had no value and the government didn’t have to pay the $133 million award.
In its reversal, the Federal Circuit said that between acquiring the lease in 1999 and the enactment of WARA in 2006, the plaintiffs suffered a net loss of $13 million.
The Federal Circuit said the “plaintiffs failed to demonstrate that their property would have had value (with the Wright Amendment in effect) that was adversely affected by government action.”
Now what?
Hampstead has spent the last year rallying support for its case in an effort to have it heard by the U.S. Supreme Court. The group hopes the Supreme Court would overturn the Federal Circuit’s decision and order payment for the taken land.
Even though JetBlue doesn’t have commercial service out of Love Field, the carrier submitted a filing this month in support of the investors. JetBlue said in 2006 it was negotiating for space at the now nonexistent terminal.
“Isolated from other carriers and newly constructed, the Lemmon Avenue Terminal fit JetBlue’s growing low-fare, high-frills brand, and provided an attractive option for serving the Dallas market despite then-current regulatory restrictions,” JetBlue said in the filing. The airline declined to comment for this story.
Attorneys General for Texas, Arkansas, Oklahoma and Utah also filed a document in support of the effort, evoking John Adams in their introduction: “Property must be secured or liberty cannot exist.”
Road to the U.S. Supreme Court
Before the Supreme Court can make a ruling on the issue, the case has to pass a key test — getting heard by the nation’s highest court.
Usually, between 7,000 to 8,000 cases are submitted annually to the court and approximately 70-85 get heard, said Dr. Kimi King, a professor in the University of North Texas’ Department of Political Science.
The chances of the Love Terminal Partners case getting heard are substantially higher because the federal government is a party in the case, she said.
“If this were just a regular case in the Supreme Court — like I’m just Joe Shmoe suing some other business partner — and the government’s not involved in any way, my chance of getting my case heard would be about 1 percent,” King said. “But if the federal government is on my case as a party, it’s 70 percent.”
The High Court might agree to hear the appeal before it goes out for June recess, but even if it is selected, it will not be heard until the October 2020 term, King said.