January 6, 2017
from the United States District Court for the Northern
District of Indiana, Hammond Division. No.
2:15-cv-00368-JVB-JEM - Joseph S. Van Bokkelen, Judge.
Wood, Chief Judge, and Bauer and Rovner, Circuit Judges.
Gary Jet Center, Inc. is a Fixed Base Operator
(FBO) at the Gary/Chicago International Airport.
Defendant-appellee Gary/Chicago International Airport
Authority is a municipal corporation that owns and operates
the Gary Airport. Defendants-appellees Mays, Dillard,
Pritchett, Cooper, and Irving, are members of the
Authority's board. Defendant-appellee AFCO AvPORTS
Management LLC manages operations at the Gary Airport.
Jet began operating at Gary Airport after entering into a
lease with the Authority on December 9, 1991. The rules and
regulations that control the operation of FBOs are commonly
referred to as "Minimum Standards." In the Fall of
2006, Gary Jet and the Authority began negotiating a lease
extension. At that time, the Minimum Standards contained a
1.5% charge on gross revenue. The rule stated that the
Authority "intend[ed] to enforce" the 1.5%
provision "for all commercial FBO services on the
airport on or after" January 1, 2001, "pending the
expiration of existing leases which do not incorporate these
Jet's original lease did not contain this provision, and
the Authority had not attempted to collect such a payment
from Gary Jet prior to the Fall of 2006. Gary Jet objected to
the provision, and the parties settled on an alternative
-Gary Jet would instead pay a "supplemental rent"
consisting of 10% of the amount of all fuel flowage, parking,
and landing fees that Gary Jet paid to the Authority each
Jet and the Authority entered into a First Amended Lease
Agreement on January 1, 2007 ("2007 Lease"). The
lease stated that its term was 39 years, ending on December
31, 2045. The lease required Gary Jet to pay base rent plus
the supplemental rent described above. The lease stated Gary
Jet "shall abide by the provisions" of the Minimum
Standards, except when those standards conflict with the 2007
Lease. In the event of a conflict, the terms of the 2007
Lease controlled. The lease further stated that the Minimum
Standards "shall be a part of and be made applicable
to" any subsequent FBO lease agreement.
December 9, 2013, Gary Jet filed suit against the Authority
claiming breach of contract and a constitutional violation
under 42 U.S.C. § 1983. See Gary Jet Ctr. v.
Gary/Chi. Int'l Airport Auth., et ah, No.
2:13-cv-453 (N.D. Ind. Dec. 9, 2013). The parties entered
into a settlement and mutual release agreement ("2014
Settlement Agreement") effective August 7, 2014. As part
of the agreement, Gary Jet agreed to work in good faith with
the Authority to develop revised minimum standards ("New
Minimum Standards") for FBOs at the airport.
Additionally, the parties agreed that the New Minimum
Standards controlled in the event of a conflict between Gary
Jet's lease and the New Minimum Standards. Gary Jet also
contends that the parties agreed to waive the provision of
the Minimum Standards requiring Gary jet to pay the Authority
1.5% of its gross revenue.
28, 2014, Gary Jet and the Authority agreed to amend the 2007
Lease with a revised lease ("2014 Amended Lease").
The 2014 Amended Lease included a provision in which the
parties agreed that the Minimum Standards con- trolled in the
event of any conflicts with the terms of the 2014 Amended
Lease. Gary Jet executed the 2014 Amended Lease and the 2014
Settlement Agreement contemporaneously.
Jet and the Authority began exchanging drafts of the New
Minimum Standards on December 5, 2014. The initial draft did
not include a provision requiring Gary Jet to pay the
Authority a percentage of gross revenue. On May 7, 2015, the
Authority notified Gary Jet that it intended to include in
the New Minimum Standards a requirement that each FBO pay the
Authority a percentage of its gross revenues. Gary Jet
objected, but the Authority approved the New Minimum
Standards with the gross revenue provision on September 14,
Jet contends that the New Minimum Standards altered its
relationship with the Authority by: requiring 1.5% of Gary
Jet's gross revenue; raising rent from $0.43 to $0.50 per
square foot; compelling the disclosure of confidential
business information concerning Gary Jet's revenues; and
requiring Gary Jet to pay to maintain the fuel farm. Gary Jet
argues that the New Minimum Standards violate the Contracts
Clause of the United States Constitution by impairing the
obligations of the 2007 Lease. It also argues that the New
Minimum Standards exceed the Authority's power under
Indiana law, and constitute a breach of the 2014 Settlement
Jet filed suit on September 24, 2015. The Authority moved to
dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6)
on October 19, 2015. The district court granted the motion as
to the Contracts-Clause claim without prejudice on December
18, 2015. It declined to dismiss the state law claims pending
further briefing on the issue of supplemental jurisdiction.
At Gary Jet's ...