Air Lease Corporation (ALC) chief executive Steven Udvar-Hazy and 10 of the lessor's top managers are facing legal action from American International Group (AIG), parent of International Lease Finance Corporation, alleging they stole trade secrets before leaving the latter business in 2010. AIG is seeking "hundreds of millions of dollars" in compensation.
AIG filed a civil lawsuit with the Los Angeles Superior Court on 24 April, naming Udvar-Hazy, John Plueger, Marc Baer, Grant Levy, Michael Bai, Housni Chraibi, Lance Pekala, Chi Yan, Robert McNitt, Jenny Van Le and William MacCary. In a statement, ALC says it will fight the lawsuit.
The insurer says in court documents it is "entitled to recover a substantial portion of ALC's business, which may be hundreds of millions of dollars."
AIG alleges before resigning their employment, the former ILFC executives "engaged in massive downloading and theft of ILFC's confidential trade secret information (several thousand electronic files). These flies were then loaded en masse onto ALC's servers."
AIG says forensic analysis shows that many of these files became the "blueprint for customer communications, contracts, pricing, marketing and other strategies upon which ALC built its business."
Included in these files was ILFC's "sin list" - the lessor's detailed payment history spreadsheet. AIG alleges this list provided ALC with a competitive advantage "particularly as a start-up that was dependent on cash flow, because it signalled the payment activity of the customer population."
AIG alleges before Udvar-Hazy could hire employees at ALC he needed to "land several aircraft deals quickly in order to attract lender and investors."
While he was still the acting chief executive of ILFC, Udvar-Hazy directed the firm's executives to "divert company opportunities to his new company," AIG claims. After Udvar-Hazy resigned he instructed these individual to "remain behind at ILFC to finalise the deals."
"Only after these deals were secured did Udvar-Hazy give these executives the green light to resign from ILFC and join his new company," the court documents state.
AIG highlights three aircraft financing deals set up by ALC with Air France, Air New Zealand and Garuda.
It alleges that in January 2010, instead of securing the sale and leaseback of multiple aircraft with Air France for ILFC, Michael Baer, then the firm's president of marketing, used his personal email account to negotiate a deal on behalf of ALC. Baer included Udvar-Hazy in email exchanges, says AIG.
"When Air France expressed reservations about doing business with ALC, which had not opened for business and was not yet funded, Baer (still employed by ILFC) and Udvar-Hazy jointly assured Air France that ALC was already purchasing and leasing planes and had secured over $2 billion in credit with promises of funding soon to come."
Also in the same month, Grant Levy, then a vice-president at ILFC, was supposed to be negotiating a deal with Air New Zealand to lease two aircraft from ILFC, alleges AIG. Instead, AIG says Udvar-Hazy and Levy "persuaded" Air New Zealand to lease these aircraft from ALC.
"Incredibly, Levy suggested to Airbus that ILFC had authorised him to negotiate on ALC's behalf so that he could pressure Airbus to extend ILFC's preferred purchasing terms to ALC. At the completion of negotiations, Levy simply substituted ALC's for ILFC's name into an ILFC agreement, which the parties executed," AIG claims.
Additionally, on 2 March, AIG alleges Levy, while still a senior ILFC executive, directed a sale and leaseback opportunity on several aircraft with Garuda to ALC by providing the airline with Udvar-Hazy's personal email account.
ALC, which Udvar-Hazy and Plueger launched in 2010, says in a statement that ILFC filed the compliant because the lessor "has struggled with an ageing fleet, heavy debt load, and loss of talent, and has failed to complete a planned IPO [initial public offering].
"Unable to compete effectively and perceiving Air Lease as a growing threat, AIG/ILFC has now resorted to a baseless trade secrets lawsuit that Air Lease will vigorously contest and defeat.
"And while AIG/ILFC wastes its time in court, Air Lease, under the leadership of Steven Udvar-Hazy, one of the most influential figures in the aircraft leasing industry, will continue to focus on providing the best products and services for airlines worldwide."