Fjord v. Amr Corp. (In re Amr Corp.)

• Decision Date: 14 March 2014
• Docket Number: Case No. 11–15463 (SHL) (Jointly Administered),Adv. Pro. No. 13–01392 (SHL)
• Parties: In re: AMR Corporation, et al., Debtors. Carolyn Fjord, et al., Plaintiffs, v. AMR Corporation, American Airlines, US Airways Group Inc. and US Airways, Inc., Defendants, Official Committee of Unsecured Creditors, As Intervenor.
• Court: United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York

506 B.R. 368

In re: AMR Corporation, et al., Debtors.

Carolyn Fjord, et al., Plaintiffs,

v.AMR Corporation, American Airlines, US Airways Group Inc. and US Airways, Inc., Defendants,Official Committee of Unsecured Creditors, As Intervenor.

Case No. 11–15463 (SHL) (Jointly Administered)

Adv. Pro. No. 13–01392 (SHL)

United States Bankruptcy Court, S.D. New York.

Signed March 14, 2014

Latham & Watkins LLP, Counsel for Defendants US Airways/ American Airlines Group, 505 Montgomery Street, Suite 2000, San Francisco, CA 94111-6538, By: Daniel M. Wall, Esq., Alfred C. Pfeiffer, Jr., Esq., Sadik Huseny, Esq.

Weil, Gotshal & Manges LLP, Counsel for Defendants and Reorganized Debtors AMR Corporation and American Airlines, 767 Fifth Avenue, New York, NY 10153, By: Stephen Karotkin, Esq., Alfredo R. Perez, Esq., Stephen A. Youngman, Esq., Richard Mullen, Esq.

Skadden, Arps, Slate, Meagher, & Flom LLP, Four Times Square, New York, New York 10036, Counsel for Intervenor the Official Committee of Unsecured Creditors, By: Jay M. Goffman, Esq., James A. Keyte, Esq., Kenneth B. Schwartz, Esq., and 155 North Wacker Drive, Chicago, Illinois 60606, By: John Wm. Butler, Jr., Esq., Albert L. Hogan III, Esq., John K. Lyons, Esq.

Alioto Law Firm, Counsel for Clayton Plaintiffs, One Sansome Street, 35th Floor, San Francisco, CA 94104, By: Joseph M. Alioto, Esq.

Messina Law Firm, P.C., Counsel for Clayton Plaintiffs, 961 Holmdel Road, Holmdel, NJ 07733, By: Gil D. Messina, Esq.

Chapter 11

MEMORANDUM OF DECISION

SEAN H. LANE, UNITED STATES BANKRUPTCY JUDGE

Before the Court is the Plaintiffs' motion to amend the complaint in the above-captioned civil antitrust action that challenges the merger between American Airlines and U.S. Airways. (the “Motion”) (ECF No. 91).¹

The Motion proposes a number of changes. First, the Plaintiffs seek to add factual allegations, some that relate to events before consummation of the merger in December 2013 while others involve subsequent events. See generally Proposed First Amended Complaint (the “PAC”) (ECF No. 91 Ex. 4). Second, the Motion addresses the Plaintiffs' proposed relief by seeking to: a) add a new claim for treble money damages under Section 4 of the Clayton Antitrust Act (15 U.S.C. § 15(a)) ( the “Clayton Act”); b) add a request for a preliminary injunction requiring the defendants to hold their assets separate during the pendency of the case; and c) modify the language regarding the divestiture and associated declaratory relief sought under Section 16 of the Clayton Act (15 U.S.C. § 26). See PAC at 41, Prayer for Relief A–D. Third and finally, the Plaintiffs seek to add a demand for a jury trial. PAC at 1, 43.

Defendants, AMR Corporation and U.S. Airways, and the Official Committee of Unsecured Creditors as intervenors (jointly, the “Defendants”) jointly oppose the Motion (the “Opp.”) (ECF No. 93). While Defendants do not object to the proposed changes regarding new factual allegations and divestiture, they strenuously object to the remaining relief. See Feb. 13 Hr'g. Tr. at 44:19–23 (ECF No. 100). The Defendants protest that the Plaintiffs have already waived their right to a jury trial, have failed to state a claim for damages, and are not entitled to the requested “hold separate” injunction.

For the reasons stated below, the Court grants the Motion in part and denies it in part. More specifically, the Court permits the uncontested amendments that assert new factual allegations and revise the proposed divestiture relief. But the Court denies the rest of the Motion. While the Court concludes that Plaintiffs have not waived their right to demand a jury, the proposed amended complaint fails to assert a sufficient basis for treble damages suffered by these individual plaintiffs. As the Plaintiffs' jury demand rests upon their proposed new treble damages claim, the request to add a jury demand must be denied as well. Finally, the Court considers the request for a “hold separate” injunction to have been withdrawn based on the statements of Plaintiffs' counsel at the hearing.

BACKGROUND

I. History of Debtors' Bankruptcy

The Debtors commenced their Chapter 11 cases in late November 2011. More than a year later, the Debtors negotiated a merger agreement with U.S. Airways to serve as the centerpiece of their reorganization. This Court approved the merger agreement between the Debtors and U.S. Airways in early May 2013. See Order Approving Merger (Main ECF No. 8096). Despite this Court's blessing, it was understood that regulatory approval was necessary for the merger to go forward and such approval was not expected until after confirmation of a plan of reorganization in the late summer of 2013. The Debtors subsequently filed a Second Amended Joint Chapter 11 Plan (the “Plan”) and accompanying disclosure statement (the “Disclosure Statement”), which relied on the merger between the Debtors and U.S. Airways. (Main ECF Nos. 8590 and 8591). By order in early June 2013, the Court approved the Disclosure Statement, and scheduled a hearing on confirmation of the Plan for the middle of August. See Order Approving Disclosure Statement (Main ECF No. 8614). The deadline to file objections to confirmation was the end of July. Id. at 13.

In early July, the Plaintiffs sued U.S. Airways in the Northern District of California to enjoin the merger. See Fjord v. U.S. Airways Group, Inc., 13–cv–03041–SBA (N.D.Cal. July 2, 2013).² At the end of that month, the Plaintiffs objected to confirmation of the Plan. See Objection to Confirmation of Plan. (Main ECF No. 9356). Even though they did not object to the Court's earlier approval of the merger, the Plaintiffs' objection argued that the proposed merger violated antitrust laws. Id. In the objection, the Plaintiffs also contended that these antitrust concerns should be addressed in an Article III court, rather than in bankruptcy court. Id. at 5, 9.

One week after their objection to confirmation, the Plaintiffs filed this adversary proceeding against U.S. Airways, AMR Corporation, and American Airlines. See Compl. at 25 (ECF No. 1). The Complaint sought to enjoin the proposed merger for violating Section 7 of the Clayton Antitrust Act while also seeking costs including attorney's fees. Compl. at 25, Prayer for Relief C, D. Lastly, the Complaint asked for “such other and further relief to which [Plaintiffs] may be entitled and which the Court finds to be just and appropriate.” Compl. at 26, Prayer for Relief E.

Two days before the August confirmation hearing, the United States Department of Justice (the “DOJ”) filed an action in the United States District Court for the District of Columbia alleging that the planned merger would substantially lessen competition and thus would violate Section 7 of the Clayton Act (the “DOJ Action”). The DOJ Action was joined by several states and was scheduled for a trial in late November 2013. At the August confirmation hearing, this Court requested additional briefing from the parties regarding the impact of the DOJ Action on confirmation and the future of these Chapter 11 cases. See Aug. 15 Hr'g Tr. at 12:8–23 (ECF No. 28). At that hearing, the Plaintiffs' counsel also indicated their intent to proceed with their Clayton Act claims in this adversary proceeding, independent of the DOJ Action. Id. at 57:11–23. In late August, the Plaintiffs filed a motion to withdraw the reference to the Bankruptcy Court and transfer this case to the District Court. See Motion to Withdraw the Reference (ECF No. 29).

At a subsequent hearing on confirmation in September, the Court overruled the Plaintiffs' confirmation objection and confirmed the Plan. On that same date, the parties discussed the status of this adversary proceeding. See generally Sept. 12 Hr'g. Tr. at 80–106 (ECF No. 43). At that time, Plaintiffs' counsel represented to the Court that they preferred to try their antitrust case in the Bankruptcy Court, rather than to move forward with their pending motion to withdraw the reference in the District Court. Id. at 81:13–15 (“[C]ertainly it would be my preference to try the case before Your Honor”); Id. at 84:7 (“[W]e will withdraw [the motion to withdraw the reference].”). Plaintiffs in fact withdrew that motion.

Two months later, the Debtors and U.S. Airways publicly announced a settlement of the DOJ Action. The Settlement generally calls for the divestiture of various slots and gates at several airports throughout the country. See Motion for Approval of Settlement ¶ 16 (Main ECF No. 10610). The terms of the Settlement resolved “all claims asserted in the Complaint filed in the DOJ Action.” Id. The Debtors filed motions seeking the Court's approval of the settlement and entry of an order permitting immediate consummation of the merger between AMR and U.S. Airways. See Motion for Entry of Order Approving Settlement (Main ECF No. 10610) (filed Nov. 12, 2013); Motion for Entry of Order Regarding Consummation of Merger (ECF No. 47) (filed Nov. 12, 2013). The sole objection to the Debtors' motions was filed by the Plaintiffs on November 21, 2013, and it took the form of a motion for a temporary restraining order seeking to block the merger (the “TRO Motion”) (ECF No. 57). The Debtors and the Committee filed a joint reply brief and opposition to the TRO Motion on Saturday, November 23, 2013. (ECF No. 64). The Court held a hearing on both the Debtors' motion to consummate the merger and the Plaintiffs' TRO Motion on November 25, 2013. At that hearing, the Court asked Plaintiffs' counsel to elaborate on the identities of the plaintiffs and how they would be harmed by the merger. Nov. 25 Hr'g. Tr. at 35:21–22, 36:16–17 (ECF No. 79).

On November 27, 2013, the Court issued a memorandum of decision, denying the Plaintiffs' request for a TRO, approving the settlement of the DOJ Action, and permitting consummation of the merger (the “TRO Opinion”). See Fjord v. AMR Corp. (In re AMR Corp.) 502 B.R. 23 (Bankr.S.D.N.Y.2013). The TRO Opinion...