Fjord v. AMR Corp. (In re AMR Corp.)
| Decision Date | 29 January 2021 |
| Docket Number | Case No. 11-15463 (SHL) (Confirmed),Adv. No. 13-01392 (SHL) |
| Citation | 625 B.R. 215 |
| Parties | IN RE: AMR CORPORATION, et al., Reorganized Debtors. Carolyn Fjord, et al., Plaintiffs v. AMR Corporation, et al., Defendants. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
LATHAM & WATKINS, Counsel for Defendant Merged Entity American Airlines Group Inc., 505 Montgomery Street, Suite 2000, San Francisco, CA 94111, By: Daniel M. Wall, Esq., Sadik Huseny, Esq.
ALIOTO LAW FIRM, Counsel for the Clayton Act Plaintiffs, One Sansome Street, 35th Floor, San Francisco, CA 94104, By: Joseph M. Alioto, Esq., Jamie L. Miller, Esq.
MESSINA LAW FIRM, P.C., Counsel for the Clayton Act Plaintiffs, 961 Holmdel Road, Holmdel, NJ 07733, By: Gil D. Messina, Esq.
NEDEAU LAW FIRM, Counsel for the Clayton Act Plaintiffs, 154 Baker Street, San Francisco, CA 94117, By: Christopher A. Nedeau, Esq.
DISCUSSION...––––
Before the Court are the merits of the First Amended Complaint (the "First Amended Complaint") [Adv. Proc. ECF No. 103] of the plaintiffs (the "Plaintiffs")1 in the above-captioned adversary proceeding. The Plaintiffs allege that the merger (the "Merger") between AMR Corporation ("AMR") and US Airways Group, Inc. ("US Airways")—which ultimately formed American Airlines Group Inc. ("AAG" or the "Defendants")2 —violates Section 7 of the Clayton Antitrust Act, 15 U.S.C. § 18 (the "Clayton Antitrust Act").3 Accordingly, the Plaintiffs seek, among other things, a final judgment of divestiture to unwind the Merger as well as injunctive relief to enjoin any future mergers pursuant to Section 16 of the Clayton Antitrust Act, 15 U.S.C. § 26. The Court held a trial on the Plaintiffs' Section 7 claim as it had been narrowed by the Court's prior rulings in the case, including the parties' summary judgment motions discussed in greater detail below. For the reasons set forth below, the Court denies the Plaintiffs' requested relief and grants judgment to the Defendants. The following constitutes the Court's findings of fact and conclusions of law after trial, including relevant procedural background in the case.4
In late November 2011, AMR and certain of its affiliates and subsidiaries (collectively, the "Debtors") filed a voluntary petition for Chapter 11 relief in the United States Bankruptcy Court for the Southern District of New York. See Voluntary Petition [Case No. 11-15463, ECF No. 1]; Plaintiffs Carolyn Fjord, et. al.’s and Defendant American Airlines Group Inc.’s Stipulation of Undisputed Facts ¶ 7 [Adv. Proc. ECF No. 214-1] (the "Undisputed Facts"). The Debtors initially contemplated reorganizing in Chapter 11 as a standalone entity. See In re AMR Corp., et al., 477 B.R. 384, 417 (Bankr. S.D.N.Y. 2012) (" AMR I ") (). Ultimately, the Debtors—with the support of the Official Committee of Unsecured Creditors—pivoted to a reorganization predicated upon a merger between AMR and US Airways that would ultimately result in the combined entity, AAG, which would continue to operate under the "American Airlines" name. See In re AMR Corp ., et al. , 490 B.R. 158, 160 (Bankr. S.D.N.Y. 2013) (" AMR II ") (). Prior to the Merger, US Airways was a Delaware corporation and holding company whose primary business was the operation of a network of air carriers through its subsidiaries that included, among others, US Airways Inc. See Undisputed Facts ¶¶ 5–6. On February 13, 2013, the Debtors entered into an agreement and plan of merger with US Airways which the Court approved on May 10, 2013. See Order Authorizing and Approving (I) Merger Agreement Among AMR Corporation, AMR Merger Sub, Inc., and US Airways Group, Inc., (II) Debtors' Execution of and Performance Under Merger Agreement, (III) Certain Employee Compensation and Benefit Arrangements, (IV) Termination Fees, and (V) Related Relief [Case No. 11-15463, ECF No. 8096]. Shortly thereafter, on June 5, 2013, the Debtors filed the Second Amended Joint Chapter 11 Plan, which was predicated upon the Merger. See Second Amended Joint Chapter 11 Plan [Case No. 11-15463, ECF No. 8590].
The Plaintiffs commenced this adversary proceeding in the Debtors' Chapter 11 cases in August 2013. They alleged that the proposed Merger between AMR and US Airways would violate Section 7 of the Clayton Antitrust Act, as its "effect ... may be substantially to lessen competition, or to tend to create a monopoly in the transportation of airline passengers in the United States." Complaint for Injunctive Relief Against Violation of Section 7 of the Clayton Antitrust Act ¶ 166 [Adv. Proc. ECF No. 1] (the "Initial Complaint"); see also id . at ¶¶ 1–5. Accordingly, the Plaintiffs sought preliminary and permanent injunctive relief to enjoin the Debtors from consummating the Merger and/or requiring divestiture as well as the Plaintiffs' recovery of legal and reasonable attorneys' fees pursuant to Section 16 of the Clayton Antitrust Act, 15 U.S.C. § 26.5 Id. at 25.
Shortly after the commencement of the Plaintiffs' adversary proceeding, the United States Department of Justice (the "DOJ"), joined by several states (together with the DOJ, the "DOJ Plaintiffs"), filed a complaint against AMR and US Airways in the U.S. District Court for the District of Columbia seeking to enjoin the Merger (the "DOJ Proceeding"). See Complaint, United States, et al. v. US Airways Grp., Inc., et al., No. 13-CV-01236 (D.D.C. Aug. 13, 2013), ECF No. 1 (the "DOJ Complaint"); Undisputed Facts ¶ 9. Alleging that the Merger would violate Section 7 of the Clayton Antitrust Act, the DOJ Plaintiffs asserted that the effect of the Merger would "likely ... be to lessen competition substantially, or tend to create a monopoly, in interstate trade and commerce in the relevant markets" which were defined to be "city pair[s]," comprised of a "flight's departure and arrival cities." DOJ Complaint ¶¶ 26, 28, 95. The DOJ Plaintiffs asserted that the Merger, among other things, would result in a substantial dampening of competition among network airlines in these city pairs, thereby leading to an increase in prices, a reduction in output, and a lessening of service. See id. ¶ 96. Such predicted effects were argued to be most pronounced at Ronald Reagan Washington National Airport due to its requirement of "slots for takeoffs and landings" that would ultimately restrict new entry. Id. ¶¶ 30–31; see also id. ¶¶ 10, 84–86, 96.
The DOJ Plaintiffs utilized the Herfindahl-Hirschman Index ("HHI") as a measurement for market concentration, which is generally calculated as the sum of the squares of market shares of each identified market participant. See U.S. DEP'T OF JUSTICE AND FED. TRADE COMM'N, HORIZONTAL MERGER GUIDELINES § 5.3 (2010) (the "Horizontal Merger Guidelines") (summarizing the methodology to calculate HHI figures). They found more than 1,000 domestic city-pairs where the estimated post-Merger HHI concentration levels and level increases would be deemed "presumptively illegal" under the DOJ's Horizontal Merger Guidelines.6 See DOJ Complaint ¶ 38, App. A (listing more than 1,000 "presumptively illegal" city-pairs); see also Horizontal Merger Guidelines § 5.3 (). In early September 2013, the DOJ Plaintiffs amended the DOJ Complaint to include an additional plaintiff, the state of Michigan, as well as an updated list of 1,008 city-pairs and the corresponding HHI calculations (the "DOJ City-Pairs") that the DOJ deemed to be presumptively illegal under the Horizontal Merger Guidelines. See Amended Complaint, United States, et al. v. US Airways Grp., Inc., et al., No. 13-CV-01236 ...
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