Airport attorney appeals to Guam Supreme Court for DFS back rent

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Genevieve P. Rapadas, Guam and San Francisco Associate of the Calvo Fisher Jacob law firm (Source: Calvo Fisher & Jacob LLP website)
“These legal actions, accompanied by a DFS campaign of falsehoods and innuendo directed against GIAA, its board and employees, and counsel have been a drain on public resources and aimed at restoring DFS’s monopoly position at GIAA.” -From a news release appearing on the Guam International Airport Authority website

 

Guam – Luxury retailer DFS Guam may indeed have just won its years-long court battle with Guam International Airport Authority over back rent related to a disputed lease award to competitor Lotte Duty Free Guam, but GIAA and its private law firm aren’t giving in without a fight.
According to a news release posted on its website, the airport authority is now pleading its case to the Guam Supreme Court after a recent decision by the island’s Superior Court upheld a three-year-old arbitration panel’s determination that GIAA had breached one of the contracts governing DFS’s duty-free retail operations when the airport authority seized DFS’s bond-posted funds — and that GIAA must return the money to DFS.

“It’s GIAA’s position that this dispute, which is part of the ongoing litigation with DFS, never should have gone to arbitration in the first place and we are looking forward to the Supreme Court’s review,” said Genevieve P. Rapadas, counsel for GIAA. “The lease at issue clearly states that any disputes must be resolved by the Courts of Guam, not by an off-island arbitration panel.”

Rapadas is listed as a Guam and San Francisco Associate of the Calvo Fisher & Jacob LLP regional law firm and specializing in commercial disputes, among other areas. Calvo Fisher & Jacob Guam Partner Eduardo A. “Champ” Calvo is the first cousin of recently retired Guam Gov. Eddie Calvo, under whose administration the airport lease dispute first arose.

The well-known Guam-based Calvo family of local and regional business fame has been at the center of the retail lease controversy for the last couple of years, ever since DFS attorneys publicly accused at least one Calvo family member, John Calvo, of profiting illegally from the Lotte venture and thereby suggesting deepening conflicts of interest related to Champ Calvo’s law firm’s airport representation under the gubernatorial administration of his cousin Gov. Eddie Calvo.

As PNC reported in February of 2017:

DFS attorneys say they’ve uncovered evidence that Lotte Duty Free Consultant Tony Sgro was paid “under the table” for successfully arranging a win for Lotte on an RFP for retail space at the AB Won Pat International Airport.

Even more concerning, DFS says they believe Sgro then funneled money to others, including John Calvo, the President of MidPac Distributors.

It’s a rather bold allegation to make, but Attorney Patrick Civille who represents DFS Guam in an ongoing procurement battle over an airport concession contract, says he’s uncovered yet more evidence of impropriety. This time, however, it deals with actions after the Guam Airport Authority awarded the lucrative concession contract to Lotte Duty Free.

Civille’s co-counsel Attorney Jay Shrinivasan said, “We have evidence that Mr. Sgro was paid or promised to be paid for a contract that was disclosed to auditors among other people in the amount of $4 million-plus, $4.3 million. We also have evidence or have seen evidene that Mr. Sgro paid checks in the amount of $47,800 multiple times and other amounts to Mr. John Calvo–amounts that haven’t been explained.”

Shrinivasan is referencing an investigation Civille conducted in which Civille says he saw copies of several Bank of Guam checks written by Sgro payable to Calvo who is the brother of Eduardo “Champ” Calvo. Champ Calvo’s law firm is the legal counsel for the Guam Airport Authority.

At the center of this controversy is a lucrative airport concession contract that was awarded to Lotte Duty Free back in 2012. Losing bidder DFS Guam protested the RFP citing, among other reasons, evidence of bribery when airport officials allegedly received gifts from Lotte representatives. The case became entangled in a drawn-out court battle and is now on the eve of trial.

At the time, Lotte attorney Cesar Cabot vehemently denied any wrongdoing on the part of Sgro:

“Unequivocally no, Lotte did not pay Sgro a success fee.” In fact, Cabot says Sgro’s position with Lotte was disclosed in the RFP tender, including Sgro’s consulting fee.

Cabot told PNC “We don’t know where DFS is getting this information from and it’s just totally wrong that they continue to feed these lies out to the public that they know are untrue.”

While Cabot acknowledges that a success fee would be illegal, he says that whatever payments DFS believes they may have uncovered, it was not a success fee and Cabot indicated that it was “for work that was prepared in addition to work that was extraneous to the work that Tony Sgro was doing for Lotte at the Airport.” Cabot said it is not relevant to the lawsuit and has nothing to do with the RFP.

As PNC reported Monday, the Superior Court agreed with arbitrators and ordered GIAA to pay the money back, plus interest and attorneys fees, stating that the airport authority’s objections to pay are groundless. The court has determined that GIAA owes DFS a total of $2.9 million, including $1.8 million in “wrongfully” taken money, $600,000 in interest, plus litigation costs.

A release from DFS states, “the arbitrators ordered GIAA to return the $1.8 million plus pay DFS’s legal fees and 6% annual interest. GIAA refused to return DFS’s money, resulting in the accrual of significant interest, and then spent even more money on its ill-conceived and unsuccessful effort to overturn the arbitrators’ decision.”

“Once again, we are heartened that the rule of law has prevailed, and that GIAA’s baseless litigation tactics have now been twice rejected in this wrongful taking of DFS’s money,” said DFS attorney Maurice M. Suh. “Without good and honest government, the true losers will continue to be the people of Guam.”

Here is the official “News Release” from GIAA counsel, Calvo Fisher & Jacob LLP:

GIAA to Appeal Superior Court Order Re: Arbitration Award in Airport Rent Dispute

Wednesday, January 23, 2019

The Antonio B. Won Pat International Airport Authority, Guam (“GIAA”) has filed a notice of appeal with the Guam Supreme Court of a recent decision by the Guam Superior Court that upheld a 2016 arbitration award to DFS Guam L.P. (“DFS”) in a dispute relating to the drawdown of a letter of credit and unpaid holdover rent owed by DFS to GIAA.

The dispute between GIAA and DFS is about an approximately $2.1 million in back rent and damages owed by DFS for a portion of the retail space at the Airport that DFS occupied at the end of its lease term prior to turning over the space to Lotte Duty Free Guam, LLP (“Lotte”) as the new concessionaire in July 2013. When DFS refused to pay the holdover rent expressly provided for under the lease, GIAA drew down approximately $2.1 million on a letter of credit DFS provided as security for all its leases under its Airport concession.

“It’s GIAA’s position that this dispute, which is part of the ongoing litigation with DFS, never should have gone to arbitration in the first place and we are looking forward to the Supreme Court’s review,” said Genevieve Rapadas, counsel for GIAA. “The lease at issue clearly states that any disputes must be resolved by the Courts of Guam, not by an off-island arbitration panel.”

Attorney Rapadas went on to say, “The issue DFS is trying to avoid is the clear language of the lease which provides that DFS owes the holdover rent claimed by GIAA. DFS and GIAA explicitly agreed in the relevant lease that all disputes, including the holdover rent dispute, were to be decided by the Guam Superior Court. DFS, through the arbitration over GIAA’s draw down on a letter of credit provided by DFS as security, is trying to side step a determination on the merits of the holdover rent issue by the Guam Superior Court.”

DFS, the duty free concessionaire for over 40 years, lost the specialty retail concession contract at the Airport in 2013 in a fair, open and competitive solicitation process to Lotte. Since then DFS has launched a series of expensive protests and lawsuits. These legal actions, accompanied by a DFS campaign of falsehoods and innuendo directed against GIAA, its board and employees, and counsel have been a drain on public resources and aimed at restoring DFS’s monopoly position at GIAA.

GIAA stands behind the 2012-2013 procurement, the first competitive one in the history of GIAA, that resulted in the best contract that GIAA has ever had. The Lotte contract, which has been in place for the last five years, has paid more than $70 million in revenue to GIAA in contrast to the $32 million paid by DFS during the last five years of its contract. The current contract has enabled GIAA to undertake millions of dollars of capital improvement projects that will strengthen GIAA’s ability to efficiently facilitate the entry and exit of hundreds of thousands of travelers.

For any questions, please contact Genevieve Rapadas at 646-9355 or grapadas@calvofisher.com.