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

• Decision Date: 27 November 2013
• Docket Number: Case No. 11–5463 (SHL) (Jointly Administered),Adv. Pro. No. 13–1392 (SHL)
• Citation: 502 B.R. 23
• 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: U.S. Bankruptcy Court — Southern District of New York

502 B.R. 23

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. 11–5463 (SHL) (Jointly Administered)

Adv. Pro. No. 13–1392 (SHL)

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

Filed November 27, 2013

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

Skadden Arps Slate Meagher & Flom LLP, Counsel for Intervenor the Official Committee of Unsecured Creditors, Four Times Square, New York, New York 10036, 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.

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

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

Cook Collection Attorneys, Counsel for Clayton Plaintiffs, 165 Fell Street, San Francisco, CA 94102, By: David J. Cook, Esq.

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

Minami Tamaki LLP, Counsel for Clayton Plaintiffs, 360 Post Street, 8th Floor, San Francisco, CA 94109, By: Derek G. Howard, Esq.

Steptoe & Johnson LLP, Counsel for the Allied Pilots Association, 1330 Connecticut Avenue, N.W., Washington, D.C. 20036, By: Filiberto Agusti, Esq. Joshua Robert Taylor, Esq.

James & Hoffman, P.C., Counsel for the Allied Pilots Association, 1130 Connecticut Avenue, N.W., Suite 950, Washington, D.C. 20036, 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, 1625 Massachusetts Avenue, N.W., Suite 700, Washington, D.C. 20036, By: Robert S. Clayman, Esq., N. Skelly Harper, Esq.

Transport Workers Union of America, General Counsel, 501 3rd Street, NW, 9th Floor, Washington, DC 20001, By: David Rosen, Esq.

O'Donnell, Schwartz & Anderson, P.C., Counsel for the Transport Workers Union of America, AFL-CIO, 1300 L Street, N.W., Suite 1200, Washington, D.C. 20005, By: Richard S. Edelman, Esq.

Lowenstein Sandler PC, Counsel for the Transport Workers Union of America, AFL-CIO, 65 Livingston Avenue, Roseland, New Jersey 07068, By: Sharon L. Levine, Esq., Jeffrey Blumenfeld, Esq.Milbank, Tweed, Hadley & McCloy LLP, Counsel for the Ad Hoc Committee of AMR Corporation Creditors, 1 Chase Manhattan Plaza, New York, NY 10005, By: Gerard Uzzi, Esq., Erik K. Stodola, Esq.

Chapter 11

MEMORANDUM OF DECISION

SEAN H. LANE, UNITED STATES BANKRUPTCY JUDGE

INTRODUCTION

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 U.S. 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”), U.S. 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 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 U.S. 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.

BACKGROUND

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 reorganizationin 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 U.S. Airways would maximize value for the Debtors' stakeholders.

On February 13, 2013, the Debtors entered into an agreement and plan of merger with U.S. 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 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 U.S. 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 U.S. 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 U.S. Airways will divest two 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 U.S. Airways will also divest their rights in the associated ground facilities,...