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

• Decision Date: 31 March 2015
• Docket Number: Case No. 11–15463SHL Jointly Administered,Adv. Pro. No. 13–01392SHL
• Parties: In re AMR Corporation, et al., Reorganized 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

527 B.R. 874

In re AMR Corporation, et al., Reorganized Debtors.Carolyn Fjord, et al., Plaintiffs

v. AMR Corporation, American Airlines, American Group, Inc. and American, Inc., DefendantsOfficial Committee of Unsecured Creditors, As Intervenor.

Case No. 11–15463SHL Jointly Administered

Adv. Pro. No. 13–01392SHL

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

Signed March 31, 2015

ALIOTO LAW FIRM, One Sansome Street, 35th Floor, San Francisco, CA 94104, By: Joseph M. Alioto, Esq., Counsel for Plaintiffs

MESSINA LAW FIRM, P.C., 961 Holmdel Road, Holmdel, NJ 07733, By: Gil D. Messina, Esq., Counsel for Plaintiffs

LATHAM & WATKINS LLP, 505 Montgomery Street, Suite 2000, San Francisco, CA 94111, By: Daniel M. Wall, Esq., Sadik Huseny, Esq., Counsel for Defendants and merged entity American Airlines Group, Inc.

MEMORANDUM OF DECISION

SEAN H. LANE, UNITED STATES BANKRUPTCY JUDGE

Before the Court is the Plaintiffs' motion to amend and supplement the complaint (the “Motion”) (ECF No. 106) in this civil antitrust action challenging the merger between American Airlines and U.S. Airways that took place in December 2013. The Motion seeks to add a claim for treble damages under Section 4 of the Clayton Antitrust Act (15 U.S.C. § 15(a) ) (the “Clayton Act”) and a demand for a jury trial. This is the Plaintiffs' second attempt to add a damages claim and related jury demand. The Court denied the Plaintiffs' first motion to amend because the proposed amendments failed to assert a sufficient basis for the damages suffered by the individual Plaintiffs. See Fjord v. AMR Corp. (In re AMR Corp.), 506 B.R. 368, 386 (Bankr.S.D.N.Y.2014). The Defendants oppose this new Motion, contending that the proposed amendments still fail to state a damages claim for a variety of reasons. For the reasons explained below, the Court agrees and denies the Motion.

BACKGROUND

A detailed account of the Debtors' bankruptcy case and the early stages of this adversary proceeding can be found in the Court's decision on the Plaintiffs' first motion to amend, familiarity with which is assumed. See generally Fjord, 506 B.R. at 373–76. But some brief history is necessary to understand the issues raised by the Motion.

In November 2013, the Plaintiffs sought a temporary restraining order to block the proposed merger between American and U.S. Airways, a merger that formed the basis of the Debtors' reorganization. At the hearing on the TRO motion, the Court asked Plaintiffs' counsel to provide information about the individual Plaintiffs and how they would be harmed by the merger. Nov. 25 Hr'g Tr. 35:21–22, 36:16–17 (ECF No. 79). Plaintiffs' counsel could not identify allegations in the complaint that addressed the harm to the named Plaintiffs. Id. at 36:18–22. After the hearing, the Court denied the request for a TRO and permitted consummation of the merger because Plaintiffs failed to demonstrate irreparable harm or a likelihood of success on the merits of their antitrust claims. See Fjord v. AMR Corp. (In re AMR Corp.), 502 B.R. 23 (Bankr.S.D.N.Y.2013). That decision highlighted examples of the deficiencies in the Plaintiffs' pleadings, including the lack of information regarding the individual Plaintiffs and the failure to articulate how they would be harmed by the merger. Id. at 33–35.

In January 2014, the Plaintiffs filed their first motion to amend the complaint. In that motion, the Plaintiffs sought to add new factual allegations, a claim for treble damages under Section 4, and a demand for a jury trial. They also sought to modify language regarding the divestiture and declaratory relief sought under Section 16 of the Clayton Act, 15 U.S.C. § 26. See Proposed First Amended Complaint at 1, 38–39, Prayer for Relief A–D (ECF No. 91–2).¹ The Court granted in part and denied in part the first motion to amend. See Fjord, 506 B.R. 368. On the one hand, the Court permitted amendment to include new factual allegations that arose after the merger and revisions of the proposed divestiture relief.² On the other hand, the Court denied the remainder of the requested relief, finding that the proposed amended complaint failed to assert a sufficient basis for treble damages allegedly suffered by the individual Plaintiffs. Id. at 385–86. Consistent with the Court's ruling, the Plaintiffs filed an amended complaint in April 2014 (the “Amended Complaint”) (ECF No. 103).

The Plaintiffs filed a second motion to amend and supplement the complaint (ECF No. 105), again seeking to add a damages claim and a jury trial demand. In this motion, the Plaintiffs sought to add over 160 new paragraphs to the Amended Complaint, but their abbreviated papers contained only a cursory explanation about why the Plaintiffs would be entitled to the relief sought.³ The Court subsequently expressed concern about the boilerplate content of the motion, noting that it would be inappropriate for the Plaintiffs to raise new arguments for the first time in the reply brief. May 16 Hr'g Tr. 14:7–16:21 (ECF No. 107). To address these concerns, the Plaintiffs filed a revised motion to file a second amended complaint (ECF No. 106), which is the matter now before the Court.

The proposed second amended and supplemental complaint (the “PSASC”) (ECF No. 106–1, Ex. A) identifies forty named Plaintiffs. In ruling on the Plaintiffs' first motion to amend the complaint, the Court observed that the complaint provided little, if any, information about the actual Plaintiffs. See Fjord, 506 B.R. at 385–86. In this second attempt to amend the complaint, the Plaintiffs propose extensive new allegations about individual Plaintiffs. But notwithstanding the additional text, the Plaintiffs still have failed to allege any information regarding twenty-seven of the Plaintiffs.⁴ As to the remaining thirteen Plaintiffs, the alleged injuries can be generally grouped into three categories: personal injuries to the Plaintiffs regarding their own travel plans, see, e.g., PSASC ¶ 248 (Ms. Fjord purchased tickets for her family departing from San Francisco rather than Sacramento); injuries to Plaintiffs' travel agencies or travel-related businesses, see, e.g., PSASC ¶¶ 195, 198–200 (Ms. Jolly lost customers for her annual Paris group trips); and injuries suffered by the Plaintiffs' clients, see, e.g., PSASC ¶¶ 257–62 (Mr. Fry's client has paid increased airfare on routes out of Philadelphia).⁵

DISCUSSION

I. Applicable Legal Standards

A party may amend its pleading as a matter of course within the time limits imposed by Rule 15(a)(1) of the Federal Rules of Civil Procedure. When a party seeks to amend its pleadings outside of the prescribed time frames, the opposing party must consent or the moving party must obtain leave of the court. Fed.R.Civ.P. 15(a)(2), incorporated in these proceedings by Fed. R. Bankr. P. 7015. Rule 15(a)(2) provides that “[t]he court should freely give leave [to amend the complaint] when justice so requires.” Id. “[S]ummary disposition of all litigation, especially antitrust cases, is not favored and ... amendments should be freely and liberally granted to the end that all cases are decided on their merits.” Food Basket, Inc. v. Albertson's, Inc., 383 F.2d 785, 788 (10th Cir.1967). The decision to grant or deny a motion to amend rests within the “sound judicial discretion of the trial court.” Adelphia Recovery Trust v. FPL Grp., Inc. (In re Adelphia Commc'ns Corp.), 452 B.R. 484, 489 (Bankr.S.D.N.Y.2011). A court may exercise its discretion to deny leave to amend a pleading where: (i) the movant has acted with undue delay, bad faith, or a dilatory motive; (ii) the movant has repeatedly failed to cure a deficient pleading; (iii) the amendment would unduly prejudice the opposing party; or (iv) the amendment would be futile.See, e.g., Tronox Inc. v. Kerr McGee Corp. (In re Tronox Inc.), 503 B.R. 239, 340 (Bankr.S.D.N.Y.2013) (citing Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962) ).

The same standard applies to motions to supplement the complaint pursuant to Rule 15(d). See Music Deli & Groceries, Inc. v. I.R.S., Dist. of Manhattan, 781 F.Supp. 992, 997 (S.D.N.Y.1991) (“Although Rule 15(d) does not include Rule 15(a)'s mandate that leave to amend be freely given when justice so requires, the same standards apply to motions under both of these subdivisions.... Thus leave to supplement should be freely granted ‘[i]n the absence of any apparent or declared reason—such as undue delay, bad faith or dilatory motive ....’ ”) (quoting Foman, 371 U.S. at 182, 83 S.Ct. 227 ). It is well established that leave to amend or supplement should be denied if the amendment or supplement would be futile. Houston Pipeline Co. LP v. Enron Corp. (In re Enron Corp.), 367 B.R. 373, 382 (Bankr.S.D.N.Y.2007) ; see also Kalimantano GmbH v. Motion in Time, Inc., 939 F.Supp.2d 392, 403 (S.D.N.Y.2013). An amendment is futile when the proposed changes would be subject to ‘immediate dismissal’ for failure to state a claim or on some other ground. See Enron, 367 B.R. at 382 ; see also Health–Chem Corp. v. Baker, 915 F.2d 805, 810 (2d Cir.1990). The party opposing an amendment has the burden to establish that a proposed amendment would be futile. Velez v. Fogarty, 2008 WL 5062601, at *3, 2008 U.S. Dist. LEXIS 96999, at *9 (S.D.N.Y. Nov. 20, 2008) (citations omitted). When a defendant objects to a proposed amended complaint, therefore, the court may scrutinize that complaint as if it were subject to a motion to dismiss under Rule 12(b)(6). Id. at *10. In such a circumstance, the court must “assume the truth of the well-pled factual allegations in the complaint and must draw all reasonable interests against the defendant.” Penn Grp., LLC v. Slater, 2007 WL 2020099, at *4, 2007 U.S. Dist. LEXIS 50651, at *11 (S.D.N.Y.2007). Under Rule 12(b)(6), a court must determine whether the well-pleaded factual allegations, assumed to be true, “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct....