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200806799_1

200806799_1

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Published by: Johnny Bender Bender on Apr 11, 2013
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04/11/2013

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Sheppard Mullin Richter & Hampton LLP1300 I Street, N.W., 11th Floor EastWashington, DC 20005-3314202.218.0000 main202.218.0020 main faxwww.sheppardmullin.com
202.218.0007 directrgoldberg@sheppardmullin.com 213.620.1780 directacronthall@sheppardmullin.com File Number: 29XG-165589
 April 11, 2013
VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED(ORIGINAL VERSION), W/COPIES BY HAND DELIVERY AND EMAIL
 Ms. Sandra J. Miller SecretaryLos Angeles Board of Airport CommissionersLos Angeles World Airports1 World WayLos Angeles, California 90045Email:millers@lawa.org 
VIA CERTIFIED MAIL RETURN RECEIPT REQUESTED(ORIGINAL VERSION), W/COPY BY HAND DELIVERY
Ms. June LagmayCity ClerkOffice of the City Clerk200 North Spring StreetRoom 395, City HallLos Angeles, California 90012Re: Ontario International AirportDear Secretary Miller and Clerk Lagmay:The City of Ontario, California ("Claimant" or "Ontario"), by and through its undersignedspecial counsel, hereby submits this administrative claim to the City of Los Angeles, California("Los Angeles") in connection with Los Angeles' operation, management and control of OntarioInternational Airport ("ONT" or "Airport"). This claim is made and submitted pursuant to the Cityof Los Angeles Administrative Code, sec. 5.169, the City of Los Angeles Charter, sec. 350, andthe California Government Claims Act, Cal. Government Code sec. 900, et seq. (the "ClaimsCode").
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By submitting this claim, Ontario does waive its position that the above-referenced provisions do notapply to some or all of its legal or equitable claims or requests for relief recited herein.
 
 Ms. Sandra J. Miller, et al.
 April 11, 2013
 
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The existence and vitality of the Airport is of extreme importance to Ontario and itscitizens and taxpayers, to those living and working in Southern California, and especially tothose seeking to fly into and out of Southern California. The Airport is not merely a symbol ocivic pride – rather, it is a critical engine for economic growth and prosperity in SouthernCalifornia. If an airport thrives, so can the surrounding population. If an airport is left to wither and "die on the vine," the economic impact on the region, and the business owners, residentsand taxpayers in the region can be catastrophic. At the heart of this administrative claim is thecontention that as a matter of fundamental public policy it is indefensible and inexcusable toattempt to deprive the citizens and taxpayers of California of the use of a modern, accessibleand passenger-friendly airport with frequent and price competitive flights that is properlymanaged by an operator committed to pursuing the best interests of the airport and surroundingcommunity.Unfortunately, the current situation at ONT is one of chronic neglect andmismanagement by its operator, and the operator's unwillingness to comply with its contractualand other legal obligations to further the best interests of ONT. As a result, the financial andoperational situation at ONT is now dire and increasingly urgent. For several decades Los Angeles through its Department of Airports, now known as Los Angeles World Airports("LAWA") – has owned, operated and managed ONT in addition to Los Angeles International Airport ("LAX"). Both are located in some of the most urbanized and densely populated areas of the United States.Yet LAWA is currently driving ONT into financial and operational ruin, constituting amaterial breach of written agreements between Los Angeles and Ontario. LAWA overtly favorsLAX to the extreme prejudice of ONT and to the detriment of each and every resident of Southern California, and those around the world seeking to fly to the area. As a direct result of its neglect of ONT, LAWA has caused a negative economic loss of at least $540 million in 2012,and an estimated loss of over 10,000 jobs in the Ontario area. These are real economic effectson individuals and businesses whose livelihoods depend on the continued success and viabilityof the Airport.The Airport's bleak prospects became even more desperate when, on October 3, 2011,the Los Angeles Board of Airport Commissioners ("BOAC") decided to exclude ONT from thescope of a new major contract approved for marketing to airlines and consumers. BOAC optedto focus solely on LAX – despite the fact that prior contracts included marketing services for ONT. LAWA senior management subsequently suggested that BOAC consider closing one of ONT's two passenger terminals.More recently, LAWA rejected the City of Ontario's offer to have the recently createdOntario International Airport Authority ("OIAA") take control of ONT, assume all of ONT’sliabilities, and fairly compensate LAWA for any unreimbursed expenditures. On October 10,2012, the Los Angeles City Council confirmed the rejection of Ontario’s offer for the transfer of ONT.
 
 Ms. Sandra J. Miller, et al.
 April 11, 2013
 
Page 3
Concerning any potential transfer, members of the City Council expressed concerns thatthe city "protect LAX as the prime regional airport," noted that "it would be a sin" to transfer ONT, and asked the Council to consider whether a transfer "would steal our business" fromLAX.These actions are examples of breaches of fiduciary obligations and the terms of writtenagreements between the City of Ontario and the City of Los Angeles relating to ONT. Inexchange for the right to own, operate and control ONT, the City of Los Angeles expresslyagreed to use its "best efforts" to attract new air service to ONT. Specifically, the 1967 contractbetween the City of Los Angeles and the City of Ontario for the "Joint Exercise of Powers inRelation to Ontario International Airport" ("Joint Powers Agreement" or "JPA") requires Los Angeles to "exercise its best efforts to attract and obtain additional regular scheduled airlineservice for ONT . . . ." JPA sec. 9, Exhibit 1 hereto.This "best efforts" obligation is also incorporated into the 1985 "Agreement Between theCity of Los Angeles and the City of Ontario for the Acquisition of Ontario International Airport bythe City of Los Angeles" (the "Acquisition Agreement"), Exhibit 2 hereto. Thus, Los Angeles'rights to ONT are conditioned on its continuing obligation to "attract and obtain additionalregular scheduled airline service for ONT."Los Angeles is clearly in breach of its "best efforts" obligation under the Joint Powers Agreement. For several years, Los Angeles widely championed a public policy known as airport"regionalization," whereby BOAC would adopt, and LAWA would execute, policies designed toencourage airlines, passengers and cargo companies to forgo crowded, overtaxed and manytimes difficult to reach LAX in favor of ONT. In addition, a 2006 settlement agreement withvarious LAX neighboring jurisdictions requires Los Angeles to pursue this regionalizationstrategy. Pursuit of the regionalization objective helped cause ONT to serve airport-highnumbers of 7.2 million passengers in both 2005 and 2007.Unfortunately for Ontario and its citizens, the regionalization policy has proven to be a"fair weather" policy. LAWA now takes actions that prop up LAX at the direct expense of ONT.It goes out of its way to protect the primary (and favored) asset (LAX), with ONT left to suffer ahuge decline in air service and passengers. Worse still, current LAWA management hasrepudiated Los Angeles' obligation to try to expand airline service at ONT. As noted throughoutthis claim, some members of the BOAC and LAWA executives have made public statementsindicating a preference for LAX over ONT - a direct and material violation of the Joint Powers Agreement and Acquisition Agreement. Similar statements have been made more recently bymembers of the Los Angeles City Council. This demise of regionalization has producedsignificant negative economic and employment consequences for the citizens of the inlandregion in particular, and Southern California in general.In statements to the BOAC and the media, LAWA has suggested that the serious declinein passenger levels and scheduled air service at ONT is simply due to the decline in the overalleconomy. This is fundamentally flawed reasoning for several reasons. First, LAX's financesand utilization have weathered the economic recession intact and LAX recently enjoyedincreases in passenger and cargo levels and is in the process of spending billions of dollars to

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