DFS names GIAA in new lawsuit

By Doug Newhouse |

DFS Guam has amended its lawsuit on the Guam duty free contract ‘award’, naming both Lotte Guam and Guam International Airport Authority as defendants.

DFS says this is part of its ‘ongoing effort to vindicate its rights and ensure a fair bidding process’. The amended lawsuit dated July 2, 2013 (today) alleges that Lotte and various GIAA officials engaged in a variety of ‘misconduct’, which ultimately resulted in ‘clear bias on the part of the GlAA’.

This allegedly followed a Request for Proposals regarding the duty-free concession at the A.B. Won Pat International Airport that was issued in July 2012.

As reported before, DFS is maintaining that after a lengthy bidding process, the GlAA ‘improperly awarded the contract’ to Lotte in April 2013.


Maurice M. Suh, the lawyer with Gibson, Dunn & Crutcher who is acting as counsel to DFS pulled no punches when he said: “DFS is amending its Complaint now because the deeper we dig, the more dirt we find.

“For example, thanks to its ‘Sunshine Act’ requests, DFS is now in possession of evidence that shows that the GlAA allowed Lotte to submit a new bid proposal that featured significantly altered key terms after the final deadline for submissions had come and gone and the GIAA had already seen all of the competing bids.

“And one of the most important terms in this second proposal – the minimum annual rent guarantee – topped the offer that DFS made in its proposal, which the GIAA had received a month before, by less than 1%.”

DFS maintains that Lotte was the only proposer who was given ‘this unfair opportunity to change its proposal’ after the deadline had passed and all competing bids had been disclosed to GIAA. In its complaint, DFS also alleges – as reported previously – that Lotte improperly provided GIAA officials with gifts throughout the bidding period, and engaged in other misconduct.” Lotte has vigorously denied this.

William Blair of Blair, Sterling, Johnson and Martinez, who is also Counsel to DFS added: “Although DFS has now taken its case to court, we would still like to work cooperatively with the GIAA to serve the best interests of the people and the government of Guam. We’re committed to ensuring that the people of Guam don’t lose any concession revenues due to this dispute.”


Guam Airport.


As part of this, DFS also serves a reminder in its statement that it has already publicly offered to voluntarily match the higher guaranteed rent that GIAA would receive ‘under its illegal contract with Lotte’ – equal to an additional $10.9m annually – beginning on July 21, 2013. This is the date on which the GIAA is seeking to install Lotte in the airport, and DFS says it will continue meeting this obligation until the litigation process concludes.

Attorney Suh for DFS further maintains that ‘compromised bidding and selection’ has effectively rendered the contract that Lotte signed with the GIAA ‘legally invalid’ and he is calling for a halt to the timetable for Lotte to move into the airport on July 21.

He said: “We think it would therefore be unfair to everyone involved for Lotte to move in now, while this dispute is still ongoing, only to have to move out again on short notice in the near future after we prove our case. Having two unnecessary transition periods in such a short time span would significantly drain concession revenues and seriously inconvenience travellers.”

Suh repeated DFS’ earlier offer to maintain revenues to the State: “And DFS is willing to show its good faith by putting its money where its mouth is – ready to work with the GIAA to memorialize our offer to match the higher rent that Lotte would otherwise pay during the interim period while we litigate this.”

DFS Attorney Blair added: “To the extent that they’re still considering some of these issues, DFS once again urges the GIAA to conduct a thorough and independent investigation befitting the seriousness of the allegations.

“While DFS is certainly interested in vindicating its own legal rights, as a proud long-time corporate citizen of this island we’re also interested in ensuring that the people of Guam enjoy a fair and transparent procurement process. We believe that it’s important for public contracts to be awarded based on merit, not favours. And that’s not what happened here.”


The DFS Guam Galleria in Tumon Bay which Lotte has made reference to in its allegations.


DFS’ statement is certainly very detailed and follows allegations levelled at it by Lotte Guam’s legal representative yesterday. For example, Lotte called for an investigation into iPads it alleges were lent to the bid evaluation committee by DFS and never collected.

It also wants the GIAA to look into whether DFS has diverted sales from its downtown store, while claiming that the $10.9m that DFS has offered to pay while the investigation continues is an attempt to gain some form of extension to its old contract.


But DFS has rejected all of these claims maintaining that they are merely being made to try to avoid an investigation which it is continuing to insist upon.

In its amended suit, DFS also makes its feelings clear about the GIAA’s conduct in its introduction where it also clearly accuses both Lotte and the GIAA of collusion. DFS said: “At every turn, Defendent GIAA has impermissibly favoured Defendent Lotte throughout the RFP process and turned a willful blind eye towards Defendent Lotte’s misconduct; in fact, Defendent GIAA has worked with Defendent Lotte to conceal their unlawful conduct and the resulting impact on DFS and the other proposers that responded to the RFP.”

DFS accuses the GIAA of being an ‘active participant in the misconduct’ and claims that the GIAA has ‘gone so far as to threaten DFS with sanctions if it does not drop this lawsuit.’

DFS adds: “In other words, merely challenging a government agency’s award of a public bid to a competitor has elicited threats and recriminations not from the competitor, as one might expect, but rather from the government agency itself.


A.B. Won Pat International Airport in Guam.


“Defendant GIAA is thus not behaving like a neutral public agency with nothing to hide or regret. Because of this critical difference, the assertions and positions of Defendant GIAA should be viewed for what they are – assertions and positions of a co-conspirator, not an independent governmental body lawfully discharging its administrative functions.”

Under this new suit, DFS is asking the court to find that Lotte ‘is a non-responsible proposer’ under the terms of the RFP and its current proposal is invalid and should be voided. DFS also wants a new RFP issued alongside an injunction preventing Lotte from participating.

It is also seeking an independent ‘monitor or special master’ at the expense of the GIAA ‘to supervise Defendent GIAA’s future conduct in connection with the new RFP process’.

DFS is also seeking ‘reasonable costs and fees’ and the normal costs any court awards where it finds just and proper cause for the same.

At the end of the working day on July 2, Lotte Guam had not formally responded to this latest turn of events.

This latest amended lawsuit reference is Civil Case Number: CV-0685-13, involving DFS GUAM (plaintiff) versus THE A.B. WON PAT INTERNATIONAL AIRPORT AUTHORITY, GUAM, and LOTTE DUTY FREE GUAM LLC, and THE TERRITORY OF GUAM, and DOES 1-10, INCLUSIVE (defendants).


[TOP IMAGE: Guam Judicial Center where the Superior Court is based and where this case will be heard].


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