Thursday Federal U.S. Bankruptcy Judge Lloyd King disqualified Mesa Air Group as a co-bidder for the right to use the “Aloha Airlines” corporate identity.
You may recall that Ron Burkle’s Yucaipa Co., Aloha’s largest creditor, had put together a cozy little deal with Mesa Air Group last last year that would have seen Burkle drop the antitrust lawsuit that Aloha had filed against Mesa Air Group in which Aloha alleged that Mesa had attempted to drive Aloha out of business by starting up its lowfare carrier “go!” in Hawaii. In return, Mesa had agreed to enter into a “licensing” agreement in which it would pay Yucaipa for the right to use the “Aloha” name and brand.
There was just one little hitch to this deal.
It had to be approved by the bankruptcy judge handling the Aloha bankruptcy.
And here is where the plan came unglued.
In December, after Yucaipa bid the highest amount for the use of the “Aloha” name as part of the airline’s bankruptcy proceedings, (over Hawaiian Airline’s competing bid), Judge King blocked the deal as he questioned the motives behind the move by both airlines.
“How about all the people whose lives were devastated in this case?” asked King, noting that Mesa and go! were largely blamed for Aloha’s demise. “Doesn’t that count? Is it just the money?”
At that time, King postponed a hearing that would have given the okay to the proposed licensing pact, and instead set a new date of Feb. 19 — so that opponents and supporters of the deal would have more time to respond.
In March, Judge King threw out the sale of the Aloha Airlines name and other intellectual property to Mesa.
Judge King, emphasizing that the auction to buy Aloha’s intellectual property should have been a public process, blasted the attorneys conducting the auction for refusing to allow Honolulu Advertiser reporter Rick Daysog into the proceedings. Daysog wrote a letter to the court voicing his complaint about his being excluded from the proceedings. King ruled that the auction must be reheld.
Which brings us to Thursday.
According to a report in the Star-Bulletin dated May 15, King said he was denying a renewed motion by Aloha’s Chapter 7 trustee, Dane Field, to conduct an auction for Aloha’s intellectual property rights because Yucaipa had a deal to license the Aloha name to go! for 10 years.
“Standing alone, with no connections to Mesa and appropriate assurance that no interest in the Aloha IP would ever pass to Mesa, there is no apparent cause to deny Yucaipa the ability to credit bid,” King wrote.
However, he said that since the trustee’s motion and the asset purchase agreement do not identify Mesa as a co-purchaser or even mention the license of the intellectual property which Yucaipa is obligated to give to Mesa, “cause exists to deny the credit bid.”
“This court has an independent power and duty to examine the propriety of a proposed sale of property of a bankruptcy estate, and it cannot allow its authority to be misused in a way that would reward Mesa for its misconduct,” King said.