Complaint, Air Excursions LLC v. Yellen, No. 1:21-cv-01769 (D.D.C.), Doc. 1 (July 1, 2021)

Summary

Complaint for Declaratory and Injunctive Relief, filed July 1, 2021 as Document 1 in Air Excursions LLC v. Yellen, Civil Action No. 1:21-cv-1769, in the U.S. District Court for the District of Columbia. Plaintiff Air Excursions LLC sues Janet L. Yellen, Secretary of the United States Department of the Treasury, and the Department of the Treasury. It alleges that Treasury disbursed over $30 million in Payroll Support Program funds to a recipient that was not entitled to receive them. The complaint asks the court to direct remedial measures, including clawback authority under 15 U.S.C. §§ 9073 and 9093, and to bar further disbursements to FLOAT purporting to act as the successor to Corvus. It also asks for attorneys' fees and costs under 28 U.S.C. § 2412. Kenneth S. Nankin signs as counsel for the plaintiff.

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“Complaint, Air Excursions LLC v. Yellen, No. 1:21-cv-01769 (D.D.C.), Doc. 1 (July 1, 2021).” Original at storage.courtlistener.com. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/complaint-air-excursions-llc-v-yellen-no-1-21-cv-01769-d-d-c-doc-1-jul-23f92f1150/, SHA-256 c7b948662590e406be0befb6c36c9e9dbbb7af75970e04b64740385ee1950423.

Full text

Case 1:21-cv-01769 Document 1 Filed 07/01/21 Page 1 of 15

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

AIR EXCURSIONS LLC *
8907 Yandukin Drive *
Juneau, Alaska 99801 *
*
Plaintiff, *
*
v. * Civil Action No. 1:21-cv-1769
*
JANET L. YELLEN, in her official capacity *
as Secretary of the United States Department *
of the Treasury *
1500 Pennsylvania Avenue, NW *
Washington, DC 20220 *
*
and *
*
UNITED STATES DEPARTMENT OF *
THE TREASURY *
1500 Pennsylvania Avenue, NW *
Washington, DC 20220 *
*
Defendants. *

COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF

Plaintiff Air Excursions LLC (“Air Excursions”), by counsel, states as follows as its

Complaint for Declaratory and Injunctive Relief against Defendant Janet L. Yellen, in her

official capacity as Secretary of the United States Department of the Treasury, and Defendant

United States Department of the Treasury (“Treasury”):

Introduction

1. Treasury’s objective in implementing the Coronavirus Aid, Relief, and Economic

Security Act (“CARES Act”), Pub. L. No. 116-136, 134 Stat. 281 (2020), as stated on its
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website, is “ensuring that the [CARES] programs achieve their intended purpose, provide for

accountability and transparency, and are free from fraud and abuse.” As described herein,

Treasury has disbursed over $30 million in Payroll Support Program (“PSP”) funds made

available by the CARES Act and other federal statutes to a recipient that was not entitled to

receive them. By providing this windfall, Treasury violated the foregoing statutes, failed to

achieve the PSP’s “intended purpose” of supporting air carrier workers and caused Air

Excursions to sustain economic injury. Granting of the relief requested in this Complaint for

Declaratory and Injunctive Relief is the only way to prevent Treasury from continuing to

distort the relevant passenger air services markets by rendering the ineligible funds recipient

as the “winner” in those markets over current competitors and potential new entrants,

including Air Excursions.

Parties

2. Plaintiff Air Excursions LLC is an Alaska limited liability company that was

formed in 1999 and has its principal place of business at 8907 Yandukin Drive, Juneau,

Alaska 99801. Air Excursions and Kalinin Aviation LLC (“Kalinin”) both do business as

“Alaska Seaplanes” and operate common branded flights using that trade name. Air

Excursions and Kalinin are wholly owned by Kalinin Holdings, Inc.

3. Air Excursions is a Federal Aviation Administration-certificated air carrier

operating pursuant to 14 C.F.R. Parts 119 and 135 of the Federal Aviation Regulations, and

the company holds a United States Department of Transportation (“DOT”) Certificate of

Public Convenience and Necessity. As Alaska Seaplanes, Air Excursions and Kalinin

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provide (i) commuter air transportation in the Alaska markets of Juneau, Angoon, Elfin

Cove, Excursion Inlet, Gustavus, Haines, Hoonah, Kake, Klawock, Pelican, Petersburg,

Sitka, Skagway and Tenakee Springs, and in the Canada market of Whitehorse, Yukon, (ii)

custom charter air transportation throughout Southeast Alaska, Western Canada and the

Pacific Northwest, and (iii) air freight, United States mail and United Parcel Service all-

cargo air transportation throughout Southeast Alaska, Western Canada and the Pacific

Northwest.

4. Defendant Janet L. Yellen is the Secretary of the United States Department of the

Treasury and is sued in her official capacity.

5. Defendant United States Department of the Treasury is an agency of the United

States government. Treasury is responsible for, among other things, the disbursement of

United States government funds under the CARES Act.

Jurisdiction and Venue

6. This Court has subject matter jurisdiction over this action under 28 U.S.C. § 1331

because Air Excursions asserts claims under the CARES Act, the Administrative Procedure

Act (“APA”), 5 U.S.C. §§ 701-706, and other federal statutes, as noted below. Thus, this

action presents a federal question “arising under the Constitution, laws, or treaties of the

United States.”

7. Venue is proper in this District pursuant to 28 U.S.C. § 1391(e) and 5 U.S.C. § 703

because Defendant Janet L. Yellen is an officer of the United States Department of the

Treasury, Defendant United States Department of the Treasury is an agency of the United

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States government and a substantial part of the actions or omissions giving rise to Air

Excursions’s claims occurred in this District.

Facts

A. Payroll Support Under the CARES Act and Subsequent Federal
Legislation

8. The CARES Act was signed into law on March 27, 2020. Through Division A,

Title IV, Subtitle B, “Air Carrier Worker Support,” of the CARES Act, Congress provided

up to $25 billion in payroll support funds for passenger air carriers to “exclusively be used

for the continuation of payment of employee wages, salaries, and benefits.” 15 U.S.C. §

9072(a).

9. The CARES Act provides that “[f]inancial assistance provided to an air carrier or

contractor under this subtitle shall be in such form, on such terms and conditions (including

requirements for audits and the clawback of any financial assistance provided upon failure by

a passenger air carrier, cargo air carrier, or contractor to honor the assurances specified in

section 4114), as the Secretary determines appropriate.” 15 U.S.C. § 9073(b).

10. Through the Airline Worker Support Extension provisions of the Consolidated

Appropriations Act, 2021 (“the CAA”), which was signed into law on December 27, 2020,

Congress authorized an additional $15 billion in payroll support for passenger air carriers.

11. Through the Air Transportation Payroll Support Program Extension provisions of

the American Rescue Plan Act of 2021 (“the ARP”), which was signed into law on March

11, 2021, Congress authorized an additional $14 billion in payroll support for passenger air

carriers.
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B. Corvus Airlines, Inc. Applies for Payroll Support Funds

12. Corvus Airlines, Inc. (“Corvus”) was formed as a corporation in the State of

Washington on January 14, 1959, under the name “Era Helicopters, Inc.” The company

operated helicopters to support offshore oil drilling operations and, later, fixed-wing aircraft

to support the construction of the trans-Alaska pipeline.

13. By its Order 83-6-47, issued on June 16, 1983, DOT found Corvus fit to engage

in interstate passenger air transportation, and Corvus thereafter provided scheduled air

transportation as a certificated air carrier.

14. On or about April 3, 2020, Corvus submitted an application to Treasury for a PSP

grant under the CARES Act.

15. On or about April 5, 2020, Corvus filed a voluntary petition for relief under

Chapter 11 of the Bankruptcy Code with the United States Bankruptcy Court for the District

of Delaware (“the Bankruptcy Court”), commencing Case No. 20-10759.

16. On or about April 5, 2020, according to the sworn declaration of Corvus’s Chief

Financial Officer filed in Case No. 20-10759, Corvus “laid off almost all of its remaining

workforce, other than a very small number of employees necessary to the administration of”

the bankruptcy case and ceased all of its operations.

17. By an order entered on April 8, 2020, the Bankruptcy Court consolidated that

case with other Chapter 11 cases for related debtors in the case In re Ravn Air Group, Inc. et

al., Case No. 20-10755 (“the Main Case”).

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18. On or about May 14, 2020, Corvus received correspondence from Treasury

indicating that it had been conditionally approved to move forward with its PSP application.

19. On or about June 5, 2020, Treasury sent Corvus a PSP Agreement to execute.

20. On June 23, 2020, Corvus and the other debtors filed an “Emergency Motion” in

the Main Case seeking “an Order Authorizing Entry Into Payroll Support Program

Agreements and Granting Related Relief.”

21. A PSP Agreement was attached as an exhibit to the Emergency Motion; it shows

“Corvus Airlines, Inc.” as “Recipient,” with a PSP Participant Number of PSA-2004031350

and an Employer Identification Number of 92-0027666.

22. The PSP Agreement defines “Recipient” to include “the Signatory Entity” and its

“successors, and assigns.” Paragraph 48 provides that the Agreement “shall bind and inure

to the benefit of the parties and their respective heirs, executors, administrators, successors,

and assigns.” By an Order entered on June 28, 2020, the Bankruptcy Court granted the

Emergency Motion.

23. The PSP Agreement requires that “[t]he Recipient shall use the Payroll Support

exclusively for the continuation of payment of Wages, Salaries, and Benefits to the

Employees of the Recipient.”

C. The Sale of Corvus’s Assets

24. By an order entered on June 26, 2020, the Bankruptcy Court confirmed the

“Chapter 11 Plan of Liquidation” that Corvus and the other debtors in the Main Case had

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proposed. That order provided for the “the speedy yet efficient disposition” of the assets of

Corvus and the other debtors.

25. Thus, unlike the typical Chapter 11 case, in which the debtor reorganizes, gets

debts discharged and emerges from the case to continue its operations, Corvus opted to sell

its assets and discontinue its operations.

26. And that it is exactly what Corvus did. By a notice filed on July 30, 2020 in the

Main Case, Corvus and the other debtors identified the purchasers of certain of their assets.

One purchaser of assets that the notice identified was FLOAT Shuttle, Inc.

27. FLOAT Shuttle, Inc. is a part owner of FLOAT ALASKA LLC (“FLOAT”), a

Delaware limited liability company that was formed on July 10, 2020. Upon information and

belief, since its formation FLOAT has been holding itself out to the public as “Corvus

Airlines, Inc. dba Ravn Alaska” or “Corvus Airlines d/b/a Ravn Alaska.”

28. By an Order entered on August 5, 2020 (“the Sale Order”), the Bankruptcy Court

approved an Asset Purchase Agreement among Corvus, FLOAT and the other debtors in the

Main Case.

29. In exchange for a purchase price of $8,000,000, Corvus and the other debtors

agreed to sell to FLOAT, among other things: (i) six Dash 8-100 aircraft, one Saab 340-B

aircraft, ground support equipment and certain intellectual property (including the trade name

“Corvus” and its corporate name), (ii) “all of the capital stock of Corvus Airlines, Inc., a

Washington corporation,” (iii) “Seller’s Air Carrier Certificate(s) and Operations

Specifications issued by the FAA under 14 CFR Part 121,” and (iv) “all right, title, and

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interest of the Seller in and to any and all federal loans, grants, subsidies, or other forms of

funding with respect to Corvus and/or the Part 121 Certificates, including, without limitation,

to monies or rights to monies pursuant to the Coronavirus Aid, Relief, and Economic

Security (CARES) Act, Pub. L. No. 116-136, 134 Stat. 281 (2020) and any amendments and

any account opened to hold such monies.”

30. In the Sale Order, the Bankruptcy Court expressly and repeatedly made it clear

that FLOAT (“the Buyer”) is not the successor to Corvus or the other debtors (“the

Debtors”):

The Buyer is not a mere continuation of the Debtors or their
estates, or any of them, and there is no continuity of enterprise
between the Buyer and the Debtors, or any of them. The Buyer
is not holding itself out to the public as a continuation of the
Debtors. The Buyer is not a successor to the Debtors or their
estates by reason of any theory of law or equity, and the
Transaction does not amount to a consolidation, merger, or de
facto merger of the Buyer and the Debtors, or any of them.

Sale Order at 4, Section V.K.

Upon the consummation of the Sale of the Acquired Assets to
Buyer, (a) Buyer shall not be, as a result of the purchase of the
Acquired Assets or otherwise, considered to have continued the
business operations associated with the Acquired Assets without
interruption or substantial change, and (b) substantial continuity
in the operation of the Debtors’ business before and after the
purchase of the Acquired Assets shall not be considered to exist.

Sale Order at 7, Section VII.P.

Buyer shall not be deemed to be a successor to the Debtors, or
otherwise liable, for any liability of the Debtors under ERISA or
otherwise.

Sale Order at 7, Section VII.Q.
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Without limiting the generality of the foregoing, and except as
otherwise specifically provided herein or in the APA, the Buyer
shall not be liable for any Claims or Liens against the Debtors or
any of their predecessors or affiliates, and the Buyer shall have
no successor or vicarious liabilities of any kind or character,
including, but not limited to, under any theory of antitrust,
environmental, successor, or transferee liability, labor law, de
facto merger, mere continuation, or substantial continuity,
whether known or unknown, now existing or hereafter arising,
whether fixed or contingent, whether asserted or unasserted,
whether legal or equitable, whether liquidated or unliquidated,
including, but not limited to, liabilities on account of warranties,
intercompany loans, and receivables among the Debtors, and
any taxes arising, accruing, or payable under, out of, in
connection with, or in any way relating to the operation of any
of the Acquired Assets except as expressly assumed under the
APA.

Sale Order at 18, Section V.27.

Except as provided in the APA and this Sale Order and without
limiting other applicable provisions of this Sale Order, the
Buyer is not, by virtue of the consummation of the Transaction,
assuming, nor shall it be liable or responsible for, as a successor
or otherwise (including with respect to successor or vicarious
liabilities of any kind or character), under any theory of law or
equity.

Sale Order at 20, Section V.31.

Buyer shall not be deemed or considered a successor to the
Debtors or the Debtors’ estates by reason of any theory of law
or equity.

Sale Order at 21, Section V.32. A copy of the Sale Order is attached as Exhibit A hereto.

31. Upon information and belief, the parties to the foregoing Asset Purchase

Agreement closed on the transaction on August 7, 2020.

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32. Upon information and belief, Treasury approved its execution of the foregoing

PSP Agreement based on the mistaken belief of its Payroll Support Program Decision

Committee that Corvus “was purchased at auction due to bankruptcy,” when, in fact, Corvus

was taken apart in the Main Case and sold, piece by piece, to FLOAT and other purchasers.

As a result, the Corvus entity that had submitted the PSP Application in April 2020 no longer

existed as of the closing.

D. Treasury Disburses Payroll Support Funds to an Ineligible Recipient

33. Upon information and belief and based on the PSP Agreement, in or about

August 2020, Treasury disbursed to “Corvus Airlines, Inc.” CARES Act Payroll Support

funds totaling $10,297,313.

34. Upon information and belief and based on the PSP Agreement, the actual

recipient of the funds was FLOAT, acting under the theory that it is the successor to Corvus,

a defunct and bankrupt entity with no assets or operations.

35. However, given the express terms of the Sale Order, FLOAT is not the successor

to Corvus. The Sale Order’s terms on the successor issue are clear and enforceable. Because

FLOAT is not the successor to Corvus, FLOAT was not eligible to receive the Payroll

Support funds.

36. In a proceeding before DOT, FLOAT argued that it was the successor to Corvus,

but DOT declined to address this issue:

With respect to Alaska Central’s allegation that the Department
failed to address the legal status of Corvus as the successor
company of the previous Corvus, we reiterate our position that
this issue is not relevant to our fitness determination. . . . Based
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on our review of the record, we tentatively found Corvus fit,
willing, and able to resume operations and the issue of Corvus’s
legal status has no bearing on our tentative findings of Corvus’s
fitness in Order 2020-10-6.

DOT Order 2020-11-18 (served November 20, 2020).

37. Thus, upon information and belief, there has been no ruling by DOT, or any other

regulatory or judicial authority, disturbing the Bankruptcy Court’s multiple determinations in

the Sale Order that FLOAT is not the successor to Corvus.

38. Upon information and belief, FLOAT, again acting under the baseless theory that

it is the successor to Corvus, applied on or about January 11, 2021 for Payroll Support funds

under the CAA. Upon information and belief, in or about April 2021, Treasury disbursed

CAA Payroll Support funds totaling $10,478,223 to FLOAT in response to its application.

39. Upon information and belief, FLOAT, again acting under the baseless theory that

it is the successor to Corvus, applied for Payroll Support funds under the ARP. Upon

information and belief, in or about April 2021, Treasury disbursed ARP Payroll Support

funds totaling $9,773,038 to FLOAT in response to its application.

E. Treasury’s Unlawful Disbursements Have Caused Air Excursions to
Sustain Economic Injury in Fact

40. After Corvus ceased operations in April 2020, Air Excursions developed a plan to

begin passenger air transportation on certain routes in Alaska that Corvus had served,

including between Anchorage and Dutch Harbor. By a press release issued on or about July

28, 2020, Air Excursions (as Alaska Seaplanes) announced its plan publicly.

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41. Aided by Treasury’s unlawful disbursements, beginning in or about November

2020, FLOAT began providing passenger air transportation on certain of the routes that Air

Excursions intended to serve, including between Anchorage and Dutch Harbor.

42. In 2021, Air Excursions has attempted to implement its plan referenced above.

To that end, in March 2021 Air Excursions attempted to obtain commuter aircraft gate space

at Ted Stevens Anchorage International Airport (“ANC”) for charter operations using

Embraer 145 aircraft. FLOAT, as Ravn Alaska, has leased all of the commuter aircraft gates

at ANC, although, upon information and belief, it is actually using only about half such

gates. As required by the airport’s management, Air Excursions approached FLOAT to

discuss subleasing gate space. FLOAT refused to negotiate in good faith, so no sublease

agreement was reached.

43. By its disbursements, Treasury has improperly subsidized FLOAT with a

windfall that it did not earn and was not entitled to receive, thereby allowing FLOAT to

suppress existing competition and prevent potential market entrants. Among other things,

Treasury’s actions have enabled FLOAT to prevent Air Excursions from entering the

Anchorage-Dutch Harbor passenger air transportation market, causing Air Excursions to

sustain an economic injury in fact.

44. Granting of the relief that Air Excursions requests in this action would likely

redress Air Excursions’s injury in fact. FLOAT would lose Treasury’s improper subsidies,

which would likely cause FLOAT to curtail its anticompetitive conduct.

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Count I – Declaratory and Injunctive Relief Under the APA

45. Air Excursions restates and incorporates herein by reference paragraphs 1

through 44 of this Complaint for Declaratory and Injunctive Relief.

46. Treasury’s disbursement of Payroll Support funds, as described above, constitutes

final agency action within the meaning of 5 U.S.C. § 704. Air Excursions has no other

adequate remedy in a court. Accordingly, Treasury’s disbursement of such funds is subject

to judicial review under 5 U.S.C. § 704.

47. Treasury disbursed Payroll Support funds, as described above, to an ineligible

recipient. In so doing, Treasury violated the CARES Act, the CAA and the ARP and its

actions were, within the meaning of 5 U.S.C. § 706(2), arbitrary and capricious, an abuse of

discretion, contrary to law or otherwise not in accordance with law, in excess of statutory

jurisdiction, authority or limitations and without observance of procedure required by law.

48. As a direct and proximate result of Treasury’s acts and omissions, Air Excursions

is likely to sustain economic injuries and thus, pursuant to 5 U.S.C. §§ 702, 705 and 706 and

28 U.S.C. §§ 2201 and 2202, Air Excursions is entitled to (i) declaratory and injunctive relief

setting aside Treasury’s disbursement of Payroll Support funds as described above, (ii)

declaratory and injunctive relief prohibiting Treasury from disbursing additional Payroll

Support funds to FLOAT, and (iii) an award of its reasonable attorneys’ fees and costs

pursuant to 28 U.S.C. § 2412.

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49. This cause of action is not an attempt to collect or recover a claim against any

debtor within the meaning of 11 U.S.C. § 362, and Air Excursions disclaims any such

attempt or any other act that may be considered to violate 11 U.S.C. § 362.

Request for Relief

WHEREFORE, Plaintiff Air Excursions LLC requests that the Court:

a. Enter judgment pursuant to 5 U.S.C. §§ 702 and 706 and 28 U.S.C. §§ 2201 and

2202 declaring that (i) Defendants disbursed Payroll Support funds, as described above, to an

ineligible recipient, (ii) by their actions, Defendants violated the CARES Act, the CAA and

the ARP, and (iii) Defendants’ actions were, within the meaning of 5 U.S.C. § 706(2),

arbitrary and capricious, an abuse of discretion, contrary to law or otherwise not in

accordance with law, in excess of statutory jurisdiction, authority or limitations and without

observance of procedure required by law;

b. Award preliminary and permanent injunctive relief pursuant to 5 U.S.C. §§ 702,

705 and 706 directing that Defendants (i) take remedial measures, including without

limitation the exercise of clawback authority under 15 U.S.C. §§ 9073 and 9093, as to the

Payroll Support funds that Treasury disbursed as described above, and (ii) refrain from any

additional disbursements to FLOAT purporting to act as the successor to Corvus;

c. Award Air Excursions its reasonable attorneys’ fees and costs pursuant to 28

U.S.C. § 2412; and

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d. Award such other legal or equitable relief as the Court deems proper.

Respectfully submitted,

Dated: July 1, 2021 /s/ Kenneth S. Nankin
Kenneth S. Nankin (DC Bar No. 420058)
Nankin & Verma PLLC
700 King Farm Boulevard, Suite 550
Rockville, Maryland 20850
(202) 463-4911 - telephone
(202) 463-6177 - fax
ksn@nankin.com

Counsel for Plaintiff Air Excursions LLC

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