Fjord v. AMR Corp. (In re AMR Corp.)
| Decision Date | 27 November 2013 |
| Docket Number | Adv. Pro. No. 13-01392 (SHL),Case No. 11-15463 (SHL) |
| Parties | In re: AMR CORPORATION, et al., Debtors. CAROLYN FJORD, et al., Plaintiffs, v. AMR CORPORATION, AMERICAN AIRLINES, AMERICAN GROUP, INC. and AMERICAN, 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 |
In re: AMR CORPORATION, et al., Debtors.
CAROLYN FJORD, et al., Plaintiffs,
v.
AMR CORPORATION, AMERICAN AIRLINES, AMERICAN GROUP, INC.
and AMERICAN, INC., Defendants,
OFFICIAL COMMITTEE OF UNSECURED CREDITORS, As Intervenor.
Case No. 11-15463 (SHL)
Adv. Pro. No. 13-01392 (SHL)
UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK
Dated: November 27, 2013
APPEARANCES:
WEIL, GOTSHAL & MANGES LLP
Counsel for Defendants and Debtors AMR Corporation
and American Airlines, Inc.
By: Stephen Karotkin, Esq.
Alfredo R. Pérez, Esq.
Stephen A. Youngman, Esq.
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SKADDEN ARPS SLATE MEAGHER & FLOM LLP
Counsel for Intervenor the Official Committee of Unsecured
Creditors
Four Times Square
By: Jay M. Goffman, Esq.
James A. Keyte, Esq.
Kenneth B. Schwartz, Esq.
-and-
By: John Wm. Butler, Jr., Esq.
Albert L. Hogan III, Esq.
LATHAM & WATKINS LLP
Counsel for Defendants US Airways Group, Inc.
and US Airways, Inc.
By: Daniel M. Wall, Esq.
Alfred C. Pfeiffer, Jr., Esq.
Sadik Huseny, Esq.
ALIOTO LAW FIRM
Counsel for Clayton Plaintiffs
By: Joseph M. Alioto, Esq.
COOK COLLECTION ATTORNEYS
Counsel for Clayton Plaintiffs
By: David J. Cook, Esq.
MESSINA LAW FIRM, P.C.
Counsel for Clayton Plaintiffs
By: Gil D. Messina, Esq.
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MINAMI TAMAKI LLP
Counsel for Clayton Plaintiffs
By: Derek G. Howard, Esq.
STEPTOE & JOHNSON LLP
Counsel for the Allied Pilots Association
By: Filiberto Agusti, Esq.
Joshua Robert Taylor, Esq.
JAMES & HOFFMAN, P.C.
Counsel for the Allied Pilots Association
By: Edgar N. James, Esq.
Kathy L. Krieger, Esq.
David P. Dean, Esq.
GUERRIERI, CLAYMAN, BARTOS & PARCELLI, P.C.
Counsel for the Association of Professional Flight Attendants
By: Robert S. Clayman, Esq.
N. Skelly Harper, Esq.
TRANSPORT WORKERS UNION OF AMERICA
General Counsel
By: David Rosen, Esq.
O'DONNELL, SCHWARTZ & ANDERSON, P.C.
Counsel for the Transport Workers Union of America, AFL-CIO
By: Richard S. Edelman, Esq.
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LOWENSTEIN SANDLER PC
Counsel for the Transport Workers Union of America, AFL-CIO
By: Sharon L. Levine, Esq.
Jeffrey Blumenfeld, Esq.
MILBANK, TWEED, HADLEY & McCLOY LLP
Counsel for the Ad Hoc Committee of AMR Corporation
Creditors
By: Gerard Uzzi, Esq.
Erik K. Stodola, Esq.
SEAN H. LANE
UNITED STATES BANKRUPTCY JUDGE
Before the Court are three motions in the above-captioned Chapter 11 cases and adversary proceeding. All of the motions relate, on the one hand, to the Debtors' desire to consummate their plan of reorganization by completing their merger with US Airways and, on the other hand, the desire of the Plaintiffs in the adversary proceeding to block that event.
Turning first to the Debtors, they filed a motion on November 12, 2013, for approval of a settlement under Bankruptcy Rule 9019 between AMR Corporation ("AMR"), US Airways Group, Inc. ("US Airways," and together with AMR, the "DOJ Defendants"), the U.S. Department of Justice (the "DOJ") and the states of Arizona, Florida, Tennessee, Michigan, Pennsylvania, Virginia and the District of Columbia (collectively the "Plaintiff States," and together with the DOJ, the "DOJ Plaintiffs"). Publicly announced on November 12, 2013, the settlement resolves claims asserted in an antitrust action brought by the DOJ in the U.S. District Court for the District of Columbia (the "DOJ Action") alleging that a merger between AMR and
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US Airways would violate Section 7 of the Clayton Antitrust Act (the "Clayton Act"). The Debtors also seek a determination that entry into the settlement will not necessitate re-solicitation of the Debtors' second amended plan of reorganization that was previously confirmed by this Court.
On November 12, 2013, the Debtors also filed a related motion requesting that the Court permit the merger between AMR and US Airways to be consummated without delay, notwithstanding the pendency of an adversary proceeding brought by several individuals (the "Clayton Plaintiffs") under the private civil antitrust suit provision in Section 16 of the Clayton Act (the "Clayton Adversary"). The Debtors' major constituencies have filed statements in support of the relief requested by the Debtors, including the Allied Pilots Association, the Association of Professional Flight Attendants, the Transport Workers Union of America, AFL-CIO and an Ad Hoc Committee of AMR Corporation Creditors. The Committee of Unsecured Creditors also supports the Debtors' motions. The sole objection to Debtors' motions was filed by the Clayton Plaintiffs, who filed a motion for a temporary restraining order seeking to block the merger (the "TRO Motion"). The Plaintiffs filed the TRO Motion on Thursday November 21, 2013, as their opposition to the Debtors' motions. The Debtors and Defendants in the Clayton Adversary filed their reply brief and opposition to the TRO Motion on Saturday November 23, 2013 (the "Reply"), and the Court held a hearing on all the motions on November 25, 2013.
For the reasons explained more fully below, the Court grants the Debtors' motions and denies the Clayton Plaintiffs' request for a TRO.
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The Debtors commenced their Chapter 11 cases on November 29, 2011. During the pendency of the cases, the Debtors explored various strategic restructuring alternatives, including a plan of reorganization in which the Debtors would emerge as a stand-alone entity, without entering into a strategic business combination or obtaining new equity investments. The Debtors, however, ultimately determined that a merger with US Airways would maximize value for the Debtors' stakeholders.
On February 13, 2013, the Debtors entered into an agreement and plan of merger with US Airways. The agreement provides that the merger is to be effectuated pursuant to the Debtors' plan of reorganization and consummation of the merger is to take place contemporaneously with the effective date of the plan. One of the conditions to the merger is that the parties obtain necessary regulatory approval. On May 10, 2013, this Court entered an order approving the merger agreement. On June 5, 2013 the Debtors filed the Second Amended Joint Chapter 11 Plan and accompanying Disclosure Statement. The plan was predicated upon the merger.
On August 6, 2013, the Clayton Plaintiffs filed the Clayton Adversary in the Debtors' Chapter 11 cases. The complaint filed in the Clayton Adversary alleges that the merger "may substantially lessen competition or tend to create a monopoly in any section of the country," thereby violating Section 7 of the Clayton Act. 15 U.S.C. § 18. In their complaint, the Clayton Plaintiffs seek to enjoin the merger or to require divestiture. See Compl. at 25. The Clayton Plaintiffs also seek costs, including attorney's fees under Section 16 of the Clayton Act. See id.
On August 13, 2013, the DOJ filed the DOJ Action alleging, among other things, that the merger would substantially lessen competition in violation of Section 7 of the Clayton Act. The
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DOJ Action also sought to permanently enjoin the merger. Various states joined the DOJ Action as plaintiffs. A trial in the DOJ Action was scheduled to commence on November 25, 2013.
On August 15, 2013, a hearing was held on confirmation of the Debtors' plan. At the hearing, the Court requested additional submissions with respect to the impact of the DOJ Action on confirmation of the plan. After considering those submissions, the Court subsequently determined that confirmation was appropriate notwithstanding the existence of the DOJ Action, and, therefore, the Court overruled the objection to confirmation filed by the Clayton Plaintiffs. See Hr'g Tr., Sept. 12, 2013 (ECF No. 10205). After resolving other objections, see In re AMR Corp., 497 B.R. 690 (Bankr. S.D.N.Y. 2013), the Court entered an order confirming the plan dated October 21, 2013. (ECF No. 10367). The Confirmation Order states that the sections of the Plan providing for the release of the Debtors, the discharge of claims, and plan injunctions do not apply to the claims asserted in the Clayton Adversary.
On November 12, 2013, a settlement of the DOJ Action was publicly announced. The settlement includes and is incorporated in: (a) a proposed final judgment with the DOJ Plaintiffs, (b) an Asset Preservation Order and Stipulation entered by the District Court that consents to entry of the Proposed Final Judgment following compliance with the requirements of the Antitrust Procedures and Penalties Act, (c) a supplemental stipulated order with the Plaintiff States, and (d) an agreement between US Airways, AMR and the U.S. Department of Transportation.
The details of the settlement are too complicated to set forth here in detail. But as a general matter, AMR and US Airways will divest their rights to 104 slots at Washington Reagan National Airport and 34 slots at New York LaGuardia Airport under the terms of the final judgment, along with accompanying gates. Additionally, AMR and US Airways will divest two
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gates each at Boston Logan International Airport, Chicago O'Hare International Airport, Dallas Love Field, Los Angeles International Airport and Miami International Airport. AMR and US Airways will also divest their rights in the associated ground facilities, including ticket counters, hold-rooms, leased jet bridges and operations space.
The divestitures will be made to acquiring entities that are approved by the United States in consultation with the Plaintiff States. Prior to divestiture of any assets, it must be demonstrated to the satisfaction of the United States that the divested assets will remain viable, and the divesture of such assets will remedy the competitive harm alleged in the DOJ Action. The United States must also be satisfied that none of the terms of any agreement regarding the divestiture of assets will give AMR and US Airways the ability to unreasonably raise the acquirer's costs, to lower the acquirer's efficiency, or otherwise to interfere in the ability of the acquirer to effectively compete. AMR and US Airways may not reacquire any...
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