In re Asanda Air II LLC

600 B.R. 714
CourtUnited States Bankruptcy Court, N.D. Georgia
DecidedApril 24, 2019
DocketCASE NUMBER 19-10404-WHD
StatusPublished
Cited by4 cases

This text of 600 B.R. 714 (In re Asanda Air II LLC) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, N.D. Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Asanda Air II LLC, 600 B.R. 714 (Ga. 2019).

Opinion

W. Homer Drake, U.S. Bankruptcy Court Judge

Before the Court is the Motion to Dismiss or, in the Alternative, Motion for Relief from the Automatic Stay (hereinafter the "Motion"), (Doc. No. 20), filed by Delta Air Lines, Inc. (hereinafter "Delta") in the above-styled bankruptcy proceeding. Asanda Air II LLC (hereinafter the "Debtor") opposes Delta's motion. This matter constitutes a core proceeding over which this Court has subject jurisdiction. See 28 U.S.C. §§ 157(b)(2) ; § 1334. Hearing on the motion occurred on April 3, *7172019, (hereinafter the "Initial Hearing"), and continued to April 16, 2019, (hereinafter the "Final Hearing"), during which counsel for both the Debtor and Delta presented arguments and evidence. This Order constitutes a final order within the meaning of 28 U.S.C. § 158(a). For the reasons set forth below, Delta's Motion to Dismiss is granted.

Background

Delta is one of the world's leading airlines, with operations in a vast number of airports throughout the world. To attract and retain high-value customers, Delta provides many different amenities - one of which is the Delta Sky Club. The Delta Sky Club is a premium airport lounge, available to only a limited selection of Delta customers, that offers a members-only lounge area, along with various amenities. Relevant to this case are the Delta Sky Clubs in John F. Kennedy International Airport (hereinafter "JFK"), located in New York, New York; Seattle-Tacoma International Airport (hereinafter "SEA"), located in Seattle, Washington; and Atlanta Hartsfield-Jackson International Airport (hereinafter "ATL"), located in Atlanta, Georgia.

The Debtor is an LLC that was organized under the laws of the state of New York in September of 2016, and continued as such until January 3, 2019, at which time it became an LLC organized under the laws of the State of Georgia. The Debtor's General Manager is Gene Frisco (hereinafter "Mr. Frisco"). The Debtor is controlled by Concept Heaven Inc. (hereinafter "Concept Heaven"), a Delaware corporation that owns 70.74% of the outstanding interests of the Debtor. Mr. Frisco's adult children each indirectly own 45% of the shares of Concept Heaven. Concept Heaven also owns 40% of the outstanding shares of an entity named RelateLOOP LLC (hereinafter "RelateLOOP").

The Debtor provides spa services and related retail offerings within the three (3) aforementioned Sky Clubs: JFK, SEA, and ATL (hereinafter "The Sky Clubs"). On October 10, 2016, the Debtor and Delta entered into a Spa Services Agreement (hereinafter the "Agreement"), through which the Debtor would operate spas and sell beauty products within The Sky Clubs. The Agreement, inter alia , grants the Debtor a license to occupy certain space within The Sky Clubs in which to operate its spa business and sell related products. The Agreement also grants the Debtor a nonexclusive royalty-free license for use of certain Delta trademarks. This limited license is non-assignable without Delta's prior written consent. The Agreement contractually expires on October 9, 2019. However, the Agreement not only includes a mutual right of termination for convenience, but also includes an ipso facto termination clause that may be exercised by Delta upon the occurrence of an event of default - including filing a petition for relief under the Bankruptcy Code.

The Debtor has no other operations or locations outside of The Sky Clubs. All the Debtor's income is derived from and produced through the Agreement and The Sky Clubs, the majority of which comes from patrons use of Delta Sky Miles as payment, rather than relying on other payment methods. As of the date of this Order, the Debtor has not paid any rent to Delta pursuant to the Agreement.

On November 8, 2019, Delta hand delivered a termination notice dated October 19, 2018 to Mr. Frisco terminating the Agreement, citing the growth of foot traffic in The Sky Clubs and the need to expand the seating capacity therein. The termination notice states Delta's intent to terminate the Agreement as to JFK and ATL. On February 19, 2019, the Debtor *718received notice of Delta's intent to terminate the Agreement as to SEA.

The Debtor, through its several responses to Delta's termination notice, asserted that the notice itself was defective and threatened Delta with litigation for alleged tortious conduct. Significantly, the Debtor's responses also included threats to file bankruptcy in order to insure its ability to continue operations within The Sky Clubs until the contracted termination date.

On February 19, 2019, Delta filed a Petition for Declaratory Judgment in the Superior Court of Fulton County (hereinafter the "State Court Proceeding"). Through this proceeding, Delta sought a judicial declaration that, inter alia , the termination notice was effective. Thereafter, Delta moved to transfer the State Court Proceeding to the Business Case Division of Fulton County Superior Court, and later moved to expedite the proceedings, due to the ongoing harm to its brand resulting from its inability to repurpose the space currently occupied by the Debtor. The deadline to respond to Delta's petition was March 1, 2019.

On February 28, 2019, the Debtor filed the instant request for relief under Chapter 11 of the Bankruptcy Code, staying the State Court Proceeding. The Debtor's Petition and Statement of Financial Affairs (hereinafter the "SOFA") contained the following information relevant to the Motion before the Court:

1. The address of the Debtor's principal place of business is 503 Las Brasis Ct., Peachtree City, Ga (hereinafter the "PTC Address").
2. Other than the Agreement, the Debtor is not a party to any executory contracts or unexpired leases.
3. Concept Heaven is the only insider to receive payment in the year preceding the petition date.

Along with the Petition and SOFA, the Debtor filed a Motion for Permission to Pay Pre-Petition Priority Wages, Salaries or Commissions (hereinafter the "Wage Motion"). (Doc. 7). The Debtor sought to pay $ 49,177.25 in pre- and post-petition wages owed to its employees. This motion requested permission to pay individual employees only, and did not mention payment to any entities. On March 13, 2019, the Court entered an order (hereinafter the "Wage Order") granting the request.

On March 8, 2019, Delta filed the Motion seeking to dismiss the Debtor's case, or, alternatively, relief from the automatic stay. (Doc. 20). On March 13, 2019, Delta filed an ex parte motion for 2004 examination of the Debtor, (Doc. 26), and, on March 19, 2019, the Court entered an Order (hereinafter the "2004 Order") granting the 2004 examination, (Doc. 29). The 2004 Order directs the Debtor to, among other things, comply with twelve (12) enumerated document requests by no later than March 28, 2019.

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Bluebook (online)
600 B.R. 714, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-asanda-air-ii-llc-ganb-2019.