AMR Corporation

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UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK 	FOR PUBLICATION
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In re: 	Chapter 11
AMR CORPORATION, et al., 	Case No. 11-15463 (SHL)
Debtors. 	(Jointly Administered)
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CAROLYN FJORD, et al.,
Plaintiffs,
v. 	Adv. Pro. No. 13-01392 (SHL)
AMR CORPORATION, AMERICAN AIRLINES,
AMERICAN GROUP, INC. and AMERICAN, INC.,
Defendants,
OFFICIAL COMMITTEE OF UNSECURED
CREDITORS,
As Intervenor.
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MEMORANDUM OF DECISION
A P P E A R A N C E S :
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.
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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.
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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.
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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.
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 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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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 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 interest or part of
the divested assets for a period of ten years.
The stipulation between AMR, US Airways and the Plaintiff States, provides that the
newly merged entity (referred to as New American) will maintain hubs for a period of at least
three years at Charlotte Douglas International Airport, John F. Kennedy International Airport,
Los Angeles International Airport, Miami International Airport, Chicago O’Hare International
Airport, Philadelphia International Airport and Phoenix Sky Harbor International Airport.
Additionally New American will continue to provide daily scheduled service from one or more
of its hubs to certain airports in the Plaintiff States for a period of five years.
The agreement between AMR, US Airways and the Department of Transportation
requires New American to continue to serve certain medium, small and non-hub airports from
Washington Reagan National Airport for a period of at least five years.
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The Asset Preservation Agreement provides that AMR and US Airways shall take all
necessary steps to ensure that the assets proposed to be divested will be maintained until the
divestitures have been completed. AMR and US Airways have agreed not to cause the wasting
or deterioration of the assets or to cause the assets to be operated in a manner inconsistent with
applicable law. AMR and US Airways have also agreed not to sell, transfer, encumber or
otherwise impair the viability, marketability or competitiveness of the assets.
DISCUSSION
A. The Relevant Legal Standards
Section 16 of the Clayton Act authorizes private individuals to sue for injunctive relief
for a violation of Section 7 of the Clayton Act. In relevant part, Section 16 provides:
Any person shall be entitled to sue for and have injunctive relief in any court of
the United States having jurisdiction against threatened loss or damage by a
violation of the antitrust laws including sections 13, 14, 18, and 19 of this title,
when and under the same principles for injunctive relief against threatened
conduct that will cause loss or damage is granted by courts of equity under rules
governing the procedures, and upon execution of a proper bond, and showing that
the danger of irreparable loss or damage is immediate a preliminary injunction
may issue.
15 U.S.C. § 26.
Section 7 of the Clayton Act provides for the standard against which the purported
violation should be measured:
No person engaged in commerce or in any activity affecting commerce shall
acquire the whole or any part of any of the stock….where the effect of such
acquisition may be to substantially lessen competition or tend to create a
monopoly.
15 U.S.C. § 18.
Federal Rule of Bankruptcy Procedure 7065 addresses injunctive relief by incorporating
Federal Rule of Civil Procedure 65 in adversary proceedings, except that a temporary restraining
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order or preliminary injunction may be issued on application of a debtor, trustee, or debtor in
possession without compliance with Rule 65(c).1 The Rules require this Court, upon the
issuance of a TRO, to set forth why it was issued, its specific terms, and the act or acts restrained
or required in reasonable detail.
It is well established that “the basis of injunctive relief in the federal courts has always
been irreparable harm and inadequacy of legal remedies.” Sampson v. Murray, 415 U.S. 61, 88
(1974). The Second Circuit has described the test for injunctive relief as (1) probable success on
the merits and irreparable injury or (2) sufficiently serious questions as to the merits which
constitute fair grounds for litigation and the balance of the hardships tips decidedly to the party
requesting relief.2 Vantico Holdings S.A. v. Apollo Mgmt., 247 F. Supp. 2d 437, 451 (S.D.N.Y.
2003) (citing AIM Int'l Trading, LLC v. Valcucine SpA., 188 F. Supp. 2d 384, 387 (S.D.N.Y.
2002) (quoting Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70, 72 (2d Cir. 1979));
Triebwasser and Katz v. AT&T, 535 F.2d 1356, 1358 (2d Cir. 1976); Consolidated Gold Fields
PLC v. Minorco, S.A., 871 F.2d 252, 256 (2d Cir. 1989); Gulf & Western Indus., Inc. v. Great
Atlantic & Pacific Tea Co., 476 F.2d 687, 692 (2d Cir. 1973). “Injunctive relief ‘is an
extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear
showing, carries the burden of persuasion.’” Air Line Pilots Ass’n v. U.A.L., 2011 WL 4543820
at *1 (E.D.N.Y. Sept. 29, 2011) (quoting Mazurek v. Armstrong, 520 U.S. 968, 972 (1997)). In
the Second Circuit, all these principles have been reiterated time and time again, with the Circuit
1 	Rule 65(c) provides for the posting of security to cover losses incurred by any party found to have been
wrongfully restrained or enjoined.
2 	The Defendants note a nuance in how courts in this Circuit have articulated the standard for injunctive
relief. Reply at 17, n.7 (Adv. Pro. ECF No. 64). See N.Y. Progress & Prot. PAC v. Walsh, 2013 U.S. App. LEXIS
21579 at *4 (citing Winter v. Natural Resource Defense Council, Inc., 555 U.S. 7, 20 (2008)) (stating that four
elements all must be satisfied: irreparable harm, likelihood of success on the merits, balance of equities tips in the
moving party’s favor, and injunctive relief is in the public interest). The Court notes that all the formulations
include irreparable harm and a review of the merits. The Court’s result today would be the same regardless of which
formulation of the test is used.
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noting the broad level of discretion vested with the trial court in determining whether the
extraordinary remedy of injunctive relief is appropriate in the context of antitrust litigation. See
Moore v. Consol. Edison Co. of N.Y., Inc., 409 F.3d 506, 511 (2d Cir. 2005); Green Party of N.Y.
v. N.Y. State Bd. of Elections, 389 F.3d 411, 418 (2d Cir. 2004); Columbia Pictures Indus., Inc.
v. Am. Broad. Cos., 501 F.2d 894, 897 (2d Cir. 1974).
Given the overlap of these motions, the Court will address the TRO Motion first, as it sets
forth the only objection to the relief requested in the Debtors’ motions. The Court will discuss
each element of the TRO inquiry separately.
B. The Requested TRO
1. 	Irreparable Harm
The Court turns first to the issue of irreparable harm, which is the most important
prerequisite for injunctive relief. See Faiveley Transport Malmo AB v. Wabtec Corp., 559 F.3d
110, 118 (2d Cir. 2009)); see also Ranger Oil Ltd. v. Petrobank Energy and Res., Ltd., 2000 U.S.
Dist. LEXIS 7571 at *22 (S.D.N.Y May 23, 2000). The irreparable harm requirement asks
whether the alleged injury to be suffered is likely and imminent, as opposed to remote or
speculative, and whether it is capable of being fully remedied by money damages. Faiveley, 559
F.3d at 118. When considering irreparable harm, “mere injuries, however substantial, in terms of
time, money and energy expended in the absence of a stay are not enough. The possibility that
adequate compensatory or other corrective relief will be available at a later date, in the ordinary
course of litigation, weighs heavily against a claim of irreparable harm.” Sampson, 415 U.S. at
90 (citing Virginia Petroleum Jobbers Assn. v. FPC, 259 F.2d 921 (D.C. 1958)).
Applying that standard here, the Court concludes that this factor weighs against the
granting of a TRO for several reasons. As a threshold matter, the Clayton Plaintiffs have failed
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to demonstrate irreparable harm to them as individuals. The Plaintiffs describe themselves as
individuals who “are and will be direct purchasers of airline tickets from defendants.” Compl. at
2. They are further identified as “passengers and travel agents who have purchased airline
tickets from defendants in the past and who are expected to do so in the future.” Compl. at ¶ 5.
The only other description of these individuals in the record before the hearing on these motions
was a general statement made by Plaintiffs’ counsel at the hearing on September 24, 2013:
These are not just ordinary plaintiffs I want to point out, but they
know about who they are. These are people who have been in the
industry and know a lot about the industry.
Hr’g. Tr., Sept. 24, 2013 at 55 (ECF No. 10248).
Despite these allegations, however, there are no affidavits or declarations from any of the
Plaintiffs. The Court has no evidence whatsoever regarding who the Plaintiffs are, what the
nature of their interest in the airline industry is, or how they will be individually harmed by the
proposed merger.3 In failing to provide such evidence, the Plaintiffs ignore a key requirement
for the relief they seek. As the Supreme Court has explained, a plaintiff seeking an injunction
under Section 16 of the Clayton Act must show a threat of “antitrust injury” to fulfill the
standing requirement. Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 113 (1986) (cited
in Moore Corp. v. Wallace Computer Servs., 907 F. Supp. 1545, 1565 (D. Del. 1995)). In this
case, therefore, the Court need only “consider those injuries plaintiffs advance that are personal
to them . . . and cannot consider any injuries that plaintiffs allege would be suffered by the
general air carrier flying public as a whole.” Malaney v. UAL Corp., 2010 U.S. Dist. LEXIS
106049 at *46 (N.D. Cal. Sept. 27, 2010) (emphasis added) (citing United States v. Borden Co.,
3 	In responding to the Court’s question about evidence at the hearing, Plaintiffs’ counsel referred to
information in the Plaintiffs’ answers to interrogatories. Of course, such discovery is not filed with the Court as a
matter of course and only makes its way into the record if it is submitted by a party. It was not submitted to the
Court by the Plaintiffs here.
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347 U.S. 514, 518 (1954)), aff’d 2011 U.S. App. LEXIS 10638 (9th Cir. May 23, 2011); see also
Levitch v. Columbia Broad. Sys., Inc., 495 F. Supp. 649, 669 (S.D.N.Y. 1980).4
The court in Malaney addressed this issue in an antitrust case filed by the same counsel
representing the Plaintiffs here. See Malaney, 2010 U.S. Dist. LEXIS 106049 at *45-46. In
Malaney, the plaintiffs sought to enjoin the airline merger of Continental and United. The
plaintiffs provided evidence by affidavit and at an evidentiary hearing. The evidence included
information about how and to what extent the individual plaintiffs purchased airline tickets,
which airports they used, and their use of frequent flyer reward programs. But even armed with
this evidence, the court in Malaney was not satisfied that the particular plaintiffs, given their
posture in the market, would suffer the type of immediate irreparable injury sufficient to justify
injunctive relief. Id. at *48. Notwithstanding the Malaney plaintiffs’ allegation that the merger
would adversely affect any consumer participating in the airline market, the court found that the
plaintiffs still needed to establish how those effects were personal to them. Having failed to do
so, the court rejected the request for injunctive relief.5
4 	As the Second Circuit explained in Daniel v. Am. Bd. of Emergency Med., 428 F.3d 408 (2d Cir. 2005),
Congress did not intend the antitrust laws to provide a remedy in damages for all
injuries that might conceivably be traced to an antitrust violation.” Associated
Gen. Contractors of California, Inc. v. California State Council of Carpenters,
459 U.S. 519, 534 (1983). Just as in common-law tort and contract litigation,
concepts such as “foreseeability and proximate cause, directness of injury,
certainty of damages, and privity of contract” circumscribe a party’s right to
recovery, so in antitrust actions “the plaintiff’s harm, the alleged wrongdoing by
the defendants, and the relationship between them,” can limit the right to sue . . .
The same logic applies to claims for injunctive relief under Section 16 of the
Clayton Act.
Id. at 436; see also National Auto Brokers Corp. v. General Motors Corp., 60 F.R.D. 476, 492 (S.D.N.Y. 1973) (to
obtain injunctive relief, a plaintiff must demonstrate that “he is threatened with loss or damage . . . ‘of a sort
personal to the plaintiff.’”) (quoting United States v. Borden Co., 347 U.S. 514, 518, (1954)).
5 	Notably, the alleged injury in that case is similar, if not identical to the injuries alleged in this case.
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By contrast here, no evidence of individual harm has been provided by the Clayton
Plaintiffs, thus leaving the Court in the dark as to the immediate and irreparable harm the merger
might cause to these individuals. See Air Line Pilots Ass’n v. United Air Lines, Inc., 2011 WL
4543820 at *2 (E.D.N.Y. Sept. 29, 2011) (stating that to obtain injunctive relief, plaintiffs need
to show they would “personally suffer actual and imminent injury”).6 While the standard for
such evidence is more relaxed in a TRO hearing than a hearing on the merits, it is problematic to
simply present no evidence on such a crucial point. Cf. University of Texas v. Camenisch, 451
U.S. 390, 395 (1981) (“The purpose of a preliminary injunction is merely to preserve the relative
positions of the parties until a trial on the merits can be held. Given this limited purpose, and
given the haste that is often necessary if those positions are to be preserved, a preliminary
injunction is customarily granted on the basis of procedures that are less formal and evidence
that is less complete than in a trial on the merits”). The Plaintiffs’ failure on this score is
particularly puzzling given the Court’s prior comments to the Plaintiffs on this topic. See, Hr’g
Tr., Aug. 15, 2013, at 55:9-20 (ECF No. 9903) (noting that a request for injunctive relief is
“traditionally accompanied by declarations . . . It is highly unusual . . . and perhaps completely
unprecedented for a successful application of that type to be without such things because that’s
what the law requires.”).7
6 	At the hearing, the Plaintiffs sought to excuse their failure to provide evidence for a variety of reasons. But
the Court is unpersuaded. The Court is particularly skeptical of Plaintiffs’ position because they have had access in
the DOJ Action to millions of pages of documents, as well as numerous deposition transcripts.
7 	At the hearing, the Clayton Plaintiffs requested to supplement their submission with additional documents.
But the Court denied that request given all the circumstances in this case, including that the Plaintiffs waited until
noon on Thursday November 23, 2013, to file their TRO Motion that they requested be heard on Monday,
November 26, 2013. Cf. SEC v. Frank, 388 F.2d 486, 490 (2d Cir. 1968) (“One standard with respect to the taking
of evidence derivable from this framework is that where interlocutory relief is truly needed, Rule 65 demands such
but only such thoroughness as a burdened federal judiciary can reasonably be expected to attain within twenty
days.”); Consolidated Gold Fields PLC v. Minorco, S.A., 871 F.2d 252, 256 (2d Cir. 1989) (“There is no hard and
fast rule in this circuit that oral testimony must be taken on a motion for a preliminary injunction or that the court
can in no circumstances dispose of the motion on the papers before it.”) (quoting Redac Project 6426, Inc. v.
Allstate Insurance Co., 402 F.2d 789, 790 (2d Cir. 1968)).
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In the place of the requisite evidence, the TRO Motion contains a number of sweeping
and conclusory allegations about the harm to these individual plaintiffs. Even assuming that
such statements had evidentiary support—and they do not—they would be insufficient to satisfy
the irreparable harm element for purposes of the TRO motion. For example, the TRO Motion
states in conclusory fashion that “plaintiffs can demonstrate irreparable harm by reason of
capacity reductions, elimination of the Advantage Fare, loss of benefits from AMR as a
standalone company . . . .” See TRO Motion at 21. The Motion goes on to make other similarly
broad allegations, including that “[c]reating the world’s largest airlines . . . would adversely
affect millions of consumers and a TRO will serve the public interest.” Id. at 18; see also id. at
20 (“There is no adequate remedy at law given the national market and the number of sub-market
city or airport-pairs involved and the fact that the rise in prices will be diffused over a broad
segment of the flying public, flights will become unavailable or less frequent, and amenities and
services will be cut.”). But once again, there is nothing said of the harm to the individual
Plaintiffs.
The only evidence submitted in support of the TRO Motion is a single declaration from
Plaintiffs’ expert, Mr. Darren Bush, together with a variety of documents. These also fail to
establish irreparable harm. It is unclear whether Mr. Bush was tasked with addressing the
question of irreparable harm to the Clayton Plaintiffs as his affidavit states:
I have been asked to render an opinion regarding the probability that Carolyn
Fjord and the other Private Plaintiffs in this matter are likely to succeed on the
merits . . . .
Affidavit of Darren Bush (“Bush Aff.”), at 2 (ECF No. 57-3).
In any event, Mr. Bush’s testimony is insufficient to establish irreparable harm to justify
the requested injunctive relief. He fails to address the specific harm, in economic terms or
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otherwise, that these specific Plaintiffs would suffer should the merger go forward. Instead he
reiterates the broader allegations found in the Complaint and TRO Motion, as well as those
contained in the Amended DOJ Complaint. Like the allegations in the TRO Motion itself, his
testimony on these broader allegations is largely conclusory with Mr. Bush presenting little
analysis of his own, instead citing to allegations made by the Government in the DOJ Action or
in various reports.
In addition, the Plaintiffs also fail to establish irreparable harm justifying the blocking of
the merger for another independent reason: they have the alternative remedy of divestiture
available if they prevail on the merits of their lawsuit. As the Supreme Court has explained:
“Section 16 [of the Clayton Act], construed to authorize a private divestiture remedy when
appropriate, in light of equitable principles, fits well in a statutory scheme that favors private
enforcement, subjects mergers to searching scrutiny, and regards divestiture as the remedy best
suited the redress the ills of an anticompetitive merger.” California v. American Stores Co. 495
U.S. 271, 274 (1990). The Defendants explicitly concede the availability of the divestiture
remedy. See Reply at 23 ¶¶ 62, 63 (Adv. Pro. ECF No. 64) (noting that “there are ample post-
consummation remedies available” if Plaintiffs succeed at trial, and that ‘[p]artial divestiture is
well-established in the law as a means of curing the potential Section 7 problems raised by a
merger, particularly where there are significant efficiencies and business justifications (as there
are there) for the overall transaction”) (citations omitted). The Plaintiffs have not alleged, much
less established, that divestiture is unavailable or somehow inadequate if they prevailed on the
merits of their lawsuit.8
8 	Indeed, courts in the Southern District of New York have recognized divestiture as an appropriate remedy
for violations of the Clayton Act. See Julius Nasso Concrete Corp. v. DIC Concrete Corp., 467 F. Supp. 1016, 1025
(S.D.N.Y. 1979) (“Carving out an exception for divestiture from the general grant of power to fashion equitable
remedies is contrary to the general purpose behind section 7 and this Court agrees that there is not sufficient reason
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Indeed, Plaintiffs have not established that an award of money damages would be
inadequate for at least some of the alleged anticompetitive harms, including the alleged increase
in airline ticket and fee prices that Plaintiffs contend will result from the merger. See Compl. ¶
165; see Taleff v. Southwest Airlines Co., 828 F. Supp. 2d 1118, 1125 (N.D.Cal. 2011) (rejecting
request for injunction where plaintiff represented by Alioto law firm alleged damages from
Southwest-AirTran airline merger in form of higher ticket prices and diminished services and
finding that plaintiffs had not demonstrated that monetary damages would be inadequate); Blue
Shield of VA v. Mccready, 457 U.S. 465, 482-83 (1982) (noting that Clayton Act provides for
damages for private antitrust plaintiffs as a form of redress for an increase in prices arising from
unlawful anti-competitive behavior).
Finally, the Court notes that the Plaintiffs’ claim of irreparable harm is undercut by their
delay in seeking injunctive relief and by their general delay in bringing these issues to this Court.
The Clayton Adversary was filed in early August, merely a few days before the start of the
hearing on confirmation. But that was months after this merger was approved by this Court
without any objection. And when Plaintiffs finally decided to act regarding the merger, they
failed to seek injunctive relief by motion at the same time they filed the Complaint.9
Moreover, the Court and the parties explicitly discussed the posture of the Clayton
Adversary in the event of the settlement of the DOJ Action, with each side reserving its rights to
to do so absent express Congressional mandate.”); Fuchs Sugars and Syrups, Inc., v. Amstar Corp. 402 F. Supp.
636, 640 (S.D.N.Y. 1975) (concluding that divestiture is a potential remedy for private parties injured by violations
of the Clayton Act); see also Cia. Petrolera Caribe, Inc. v. Arco Caribbean, Inc., 754 F.2d 404, 417 (1 st Cir. 1985).
9 	Mr. Alioto actually filed a lawsuit in the Northern District of California challenging the merger in early
July—without seeking a lifting of the bankruptcy stay—but then waited more than a month to file the Clayton
Adversary.
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seek relief. See generally Hr’g. Tr. September 24, 2013, at 32, 62, 65, 67 (ECF No. 10248);10 see
also Order of Oct. 15, 2013, at ¶¶ 7, 12 (Adv. Proc. ECF No. 44).11 When the settlement finally
happened, the Debtors immediately exercised their rights by filing these two motions with the
Court. By contrast, the Plaintiffs waited nine days to act. While the Court can understand why a
delay of nine days might be understandable in certain circumstances, there is no legitimate
reason here. There is nothing about the Plaintiffs’ eventual submission that justifies such a
delay. Indeed, the vast majority of the documents relied upon in the TRO Motion predate the
settlement of the DOJ Action by many months. See American Antitrust Institute study published
on August 8, 2012, Exh. B to Decl. of Gil Messina (Adv. Pro. ECF No. 58-2); MIT study
published in May 2013 Exh. C to Decl. of Gil Messina (Adv. Pro. ECF No. 58-3); GAO Report,
published June 19, 2013, Errata Exh. A to Decl. of Gil Messina (Adv. Pro. ECF No. 59). See
also Plaintiff’s Original Complaint, Exh. 1 to Bush Aff. (Adv. Proc. ECF No. 57-4); DOJ
Amended Complaint, Exh. 2 to Bush Aff. (Adv. Pro. ECF No. 57-5). Moreover, there is little in-
depth analysis provided in the TRO Motion or Mr. Bush’s testimony on new developments such
as why the settlement is insufficient or how it impacts Plaintiffs’ claims.
For all these reasons, the Court finds that Plaintiffs have utterly failed to establish
irreparable harm, a deficiency that standing alone dooms their request for injunctive relief.
10 	Indeed, counsel for US Airways stated that if the DOJ action ended and the Clayton Plaintiffs “want to
come in the next day and say that even though she’s cleared the merger that you should stop it, they get that
opportunity.” Id. at 32.
11 	The scheduling order in the Clayton Adversary provides that “[n]otwithstanding anything contained herein
to the contrary, in the event of any resolution of the DOJ Action in favor of the Defendants, (a) Defendants reserve
all of their rights to seek to consummate the merger . . . and (b) Plaintiffs reserve all of their rights to seek in this
Court appropriate relief enjoining consummation of such merger, pending disposition of the Adversary Proceeding.”
Id. at ¶ 12.
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2. 	Probability Of Success On The Merits
In any event, the Plaintiffs also do not justify an injunction based on their likelihood of
success on the merits. To establish a Section 7 violation, Plaintiffs must show that the Merger is
reasonably likely to cause anticompetitive effects. United States v. Oracle Corp., 331 F. Supp.
2d 1098, 1109-10 (N.D. Cal. 2004). Section 7 deals in probabilities, not “ephemeral
possibilities.” United States v. Marine Bancorporation, 418 U.S. 602, 622-623 (citing Brown
Shoe Co. v. United States, 370 U.S. 294, 317 (1962)). Ultimately, to prevail on a Section 7
claim, plaintiffs must show a loss of competition that is “sufficiently probable and imminent.”
Marine Bancorporation, 418 U.S. at 623 n.22 (citing United States v. Continental Can Co., 378
U.S. 441, 458 (1964)). Merger review often relies on an analysis of competitive effects in light
of economic factors. See Hosp. Corp. of Am. v. FTC, 807 F.2d 1381, 1386 (7th Cir. 1986).
Substantial competitive harm is likely to result if a merger creates or enhances “market
power,” a term that has specific meaning in antitrust law. Id. Merger analysis begins with
defining the relevant market. See id.; see also PepsiCo, Inc. v. Coca-Cola Co., 315 F. 3d 101,
105 (2d Cir. 2002); United States v. H&R Block, 833 F. Supp. 2d 36, 50 (D.D.C. 2011). A
relevant market has two components: the relevant product market and the relevant geographic
market. See PepsiCo, 315 F.3d at 105; Brown Shoe, 370 U.S. at 324. The relevant geographic
market identifies the geographic area in which the defendants compete in marketing their
products or services. It is the area to which consumers can practically turn for alternative
sources of the product and in which the antitrust defendants face competition. California v.
Sutter Health Sys., 130 F. Supp. 2d 1109, 1120 (N.D. Cal. 2001). The relevant product market, a
term specific to antitrust analysis, is “determined by the reasonable interchangeability of use [by
consumers] or the cross-elasticity of demand between the product itself and substitutes for it.”
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Brown Shoe, 370 U.S. at 325; see also Chapman v. New York State Div. for Youth, 546 F.3d 230,
237-38 (2d Cir. 2008). Essentially, to be part of the same relevant product market, products must
be viable substitutes. United States v. Syufy Enters., 712 F. Supp. 1486, 1399 (N.D. Cal. 1989);
see also Chapman, 546 F.3d at 238 (products must be “roughly equivalent”); In re Wireless Tel.
Svcs. Antitrust Litig., 2003 U.S. Dist. LEXIS 13886 (S.D.N.Y. Aug. 12, 2003) at *27-28
(products must be “acceptable substitutes”).
Once the relevant market is determined, courts then consider the transaction’s possible
anticompetitive effects in that market. “By showing that a transaction will lead to undue
concentration in the market for a particular product in a particular geographic area, the
government establishes a presumption that the transaction will substantially lessen competition.”
United States v. Baker Hughes, 908 F. 2d 981, 982 (D.C. Cir. 1990); United States v. Citizens &
Southern Nat’l Bank, 422 U.S. 86, 120 (1975). An antitrust defendant may rebut that
presumption by showing that the market-share statistics do not accurately demonstrate the
merger’s probable effects on competition in the relevant market. Id. Although market share and
the overall concentration level of the industry are relevant in an antitrust review, these factors are
“not conclusive indicators of anticompetitive effects.” United States v. Gen. Dynamics Corp.,
415 U.S. 486, 498 (1974). “Evidence of market concentration simply provides a convenient
starting point for a broader inquiry into future competitiveness . . . .” Baker Hughes, 908 F. 2d at
984. A transaction must “be functionally viewed, in the context of its particular industry.”
Brown Shoe, 370 U.S. at 321-22. A court may consider a host of factors including whether the
industry was fragmented or concentrated, whether it was dominated by a few leaders or
consistently distributed among participating companies, and whether new competition readily
enters the market or faces barriers. Id.; see also Baker Hughes, 908 F. 2d at 985. A court may
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consider the market’s structure, history, and probable future. Continental Can, 378 U.S. at
458.12
While a final adjudication on the merits still remains, the evidence before the Court is
insufficient to justify the requested relief, particularly when compared to the more fulsome
record made by the Defendants. Several of the deficiencies in Plaintiffs’ submission are worthy
of mention.
First, Plaintiffs’ submission is largely conclusory, relying upon the work of others while
presenting little independent analysis. It is well established that an expert’s opinion is entitled to
less weight under such circumstances. Arista Records LLC v. Usenet.com, Inc., 608 F. Supp. 2d
409, 434-35 (S.D.N.Y. 2009) (“An expert who simply regurgitates what a party has told him
provides no assistance to the trier of fact through the application of specialized knowledge.”); see
United States v. Scop, 846 F.2d 135, 139 (2d Cir. 1988), rev’d in part on reh’g on other grounds,
856 F.2d 5 (2d Cir. 1988) (“Rule 704 [of the Federal Rules of Evidence] was not intended to
allow experts to offer opinions embodying legal conclusions.”). Mr. Bush, the Plaintiffs’ sole
expert, relies heavily on the allegations in the complaint filed in the DOJ Action.13 In addition,
Mr. Bush refers to a 2012 report issued by the American Antitrust Institute and Business Travel
Coalition (the “AAI Report”) and testimony from the United States Government Accountability
12 	Based on Supreme Court decisions from the 1960s such as Brown Shoe, the Plaintiffs advocate a very
stringent rule that market share alone can establish a successful Section 7 antitrust claim. Defendants disagree,
presenting a more comprehensive review of the subject that includes more recent case law. As the Court is not
ruling on the ultimate merits of the Section 7 claim here, the Court is not making any final determination now of the
nuances of the standard to be applied on the merits. But a quick review of the relevant antitrust case law suggests
that antitrust law has evolved since the 1960s to encompass a more flexible, industry-specific analysis. For purposes
of the TRO request at issue, therefore, the Court uses the standard described above as a reference point to discuss the
merits of Plaintiffs’ case.
13 	There was no trial or decision on the merits in the DOJ case. Therefore, the allegations in the DOJ
Complaint have not been proved true or false and remain merely allegations.
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Office before the United States Senate on June 21, 2013 (the “GAO Report”). Mr. Bush offers
little in the way of original opinions and analysis.
One example of this problem lies in the discussion of market share. Merger
concentration is typically measured by the Herfindahl-Hirschman Index (“HHI”).14 Pursuant to
the Government’s Merger Guidelines, a market is considered highly concentrated if the HHI is
greater than 2,500. Any increase of more than 200 points is considered to be a significant
increase in concentration. In addressing this issue, Mr. Bush simply quotes the DOJ Complaint,
stating that over 1,000 city-pair markets would have a post-merger HHI over 2,500 and an HHI
increase of over 200. Bush does not elaborate on this point, offering no original opinion or
analysis.15
By relying so heavily on others’ conclusions, the Plaintiffs also fail to sufficiently address
the merger in the context of the DOJ Settlement (the “New Merger”), which is the transaction
now before the Court. FTC v. Libbey, Inc., 211 F. Supp. 2d 34, 46 (D.D.C. 2002) (where parties
14 	HHI is an index used to measure concentration in a market, which is calculated by squaring the market
share of each firm competing in a market and then summing the resulting numbers. See United States Department
of Justice and Federal Trade Commission Horizontal Merger Guidelines, § 5.3 (August 19, 2010) available at
www.justice.gov/atr/public/guidelines/hmg-2010.html#5 (the “Merger Guidelines”). The DOJ uses HHI numbers to
determine thresholds for when an industry is considered highly concentrated or when potential mergers require
investigation. Id.
15 	The HHI issue highlights the difficulties of relying too heavily upon other parties for one’s analysis. While
the DOJ Complaint includes this information, the Court is mindful that the DOJ has, in fact, decided to settle its
lawsuit. So one must assume that the anticompetitive concerns raised by this HHI information have, in the opinion
of the DOJ, been satisfactorily addressed by the terms of the settlement of the DOJ Action. As Defendants’ counsel
pointed out at argument, the DOJ has specifically concluded that the settlement of the Government’s antitrust case,
complete with its contemplated divestitures, yields better results for the public than blocking the merger as originally
proposed. See Remarks as Prepared for Delivery by Assistant Attorney General Bill Baer at the Conference Call
Regarding the Justice Department’s Proposed Settlement with US Airways and American Airlines (November 12,
2013) http://www.justice.gov/atr/public/press_releases/2013/301626.htm (“this settlement . . . provides more
competition than exists today in this industry”); see also Jack Nicas, Big Airline Merger Is Cleared to Fly, THE
WALL STREET JOURNAL (Nov. 12, 2013)
http://online.wsj.com/news/articles/SB10001424052702304644104579193804169829002 (“Bill Baer, the
department's antitrust chief, said the settlement was better for competition than if the government had won a court
injunction against the merger, because the concessions will allow low-cost carriers to expand at major airports.”).
Without some independent analysis, it is difficult for the Court to draw conclusions from the statements and analysis
of the Government upon which the Plaintiffs heavily rely, including the DOJ Complaint and the GAO Report.
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to merger agreement have amended the agreement to alleviate government’s antitrust concerns, a
court must evaluate the new agreement in deciding whether to issue an injunction). Mr. Bush
and the Plaintiffs rely most heavily upon documents that predate the November 2013 DOJ
Settlement. While the DOJ Complaint, the 2012 AAI Report, and the GAO Report from June
2013 contemplate a merger between American and US Airways, none of those documents
addresses the New Merger.
In addition to the lack of evidence, the Defendants raise several additional issues about
the Plaintiffs’ arguments. For example, Plaintiffs assert that there are two markets—a national
market based on competition between systems and other submarkets consisting of “certain city-
pairs.” While the Defendants accept that city-pairs are the properly defined market, see Reply at
37 n.10 (Adv. Pro. ECF No. 64), neither Mr. Bush’s report nor the Plaintiffs’ pleadings identify
which city-pairs are at issue in light of the New Merger. In the same vein, the Defendants raise
questions about the Plaintiffs’ theory about a national market for airline travel. A product market
contemplates products that are viable substitutes for each other. Plaintiffs’ theory of a national
market would require a conclusion that all flights compete with each other. For example, a flight
from Los Angeles to New York would compete with a flight from Detroit to Seattle. Plaintiffs
have not explained why that would be true here as Mr. Bush does not present any analysis to
support such a conclusion.16 And Defendants have raised a legitimate question regarding why,
even if a national market existed, such a market would not be deemed “highly concentrated”
using the prevailing industry standards.17
16 	One court has, in fact, rejected the Plaintiffs’ theory that a national market exists for airline travel. See
Malaney v. UAL Corp., 2011 U.S. App. LEXIS 10638 at *4-5 (9th Cir. May 23, 2011), affirming 2010 Dist. LEXIS
106049.
17 	Defendants’ expert calculated that the post-merger system-wide HHI will be 1768, which is below the
Merger Guidelines threshold for highly concentrated markets. Declaration of Janusz Ordover ¶ 71 (ECF No. 67).
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The Court has a similar reaction when considering the Plaintiffs’ analysis on a variety of
other issues, including allegations regarding the loss of the US Airways Advantage Fare
program, higher future fares due to coordinated interaction or tacit collusion among airline
carriers, and reduction in capacity and service. In each instance, Mr. Bush takes only a few
paragraphs to summarily conclude that each of these harms is likely to happen, but Defendants
raise significant questions on each of these points using detailed expert analysis. While the
Court is mindful once again that it is not called upon now to resolve these issues on the merits,
the Court concludes for purposes of the requested TRO that Plaintiffs’ analysis of the merits falls
short of that necessary to justify injunctive relief.18
3. 	Balance Of Hardships/Public Interest
The Court also finds that the Plaintiffs have failed to demonstrate that the balance of
hardships and public interest tip in their favor. Weighing Plaintiffs’ failure to show irreparable
harm against the harm defendants would suffer as a consequence of a TRO, the Court concludes
that the balance of hardships tips against the granting of an injunction.
The Defendants provided the Court with voluminous declarations from various advisers,
consultants, and executive management members attesting to the harm that would be suffered by
the Defendants (and other parties) by virtue of a temporary restraining order. Declarations were
provided from: 1) Beverly Goulet, the SVP and Chief Integration Officer of AMR; 2) Gregg
Polle, a managing director of Moelis and Company that serves as the investment advisor to the
Creditor’s Committee; and 3) Stephen Johnson, the Executive Vice President of Corporate and
18 	At the hearing, Defendants’ counsel focused his discussion of the likelihood of success on the role of low
cost carriers (“LCCs”) in the airline industry, a topic frequently discussed during the lengthy trial before the Court
on the rejection of collective bargaining agreements under Section 1113. Counsel stated that the existence of LCCs
plays a significant role in, among other things, competitive pricing in the industry and that the settlement furthers the
ability of LCCs to flourish by allowing them access to key airports where they previously were hampered by slot
and gate restrictions. Once again, the Plaintiffs have presented little analysis on that issue.
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Government Affairs at US Airways. See Goulet Decl. (Adv. Pro. ECF No. 61); Polle Decl.
(Adv. Pro. ECF No. 62); Johnson Decl. (Adv. Pro. ECF No. 63)). As explained by these
witnesses, the delay of consummating the Merger would cause significant economic harm to the
Debtors in a variety of ways including: a decline in stock prices with a 10% decline in price
equating to a $400 million dollar decline in shareholder value, Polle Decl. at ¶ 14; a loss of the
sunk costs invested in the planning, negotiation and financing of the Merger, Polle Decl. at ¶ 17;
and a negative impact on the value of potential recoveries for the Defendants’ economic
stakeholders. Goulet Decl. at 4, 5; Polle Decl. at ¶ 10. 19
As these witnesses explain, delaying or enjoining the merger is also very likely to have a
significant negative impact on the employees at both AMR and US Airways. See Goulet Decl. at
4 (“further delay in implementing the Merger . . . would only serve to exacerbate this anxiety and
uncertainty and adversely impact employee morale, with the potential negative impact on
performance, customer service, and the risk of losing critical employees.”); see also Johnson
Decl. at 8 (“uncertainty associated with delay will inevitably mean the loss of valued
employees.”).
For their part, the Plaintiffs contend that the Defendants will not suffer any harm from an
injunction. TRO Motion at 21 (“Defendants, on the other hand, will suffer little or no prejudice,
given that they should await Tunney Act approval rather than run the risk of merging before the
public has commented and the district court has ruled on the settlement. Further, Defendants do
not expect to receive their operating certificate that will enable them to operate as a single entity
for at least a year. Lastly, Defendants assumed—and prepared for—a trial with the DOJ in
which they did not expect to receive a final judgment . . . until approximately mid-January
19 	A more fulsome analysis of the calculations involved in quantifying the risk from delaying the merger is
contained in paragraphs 12, 15 and 16 of the Polle Declaration.
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2014.”). But that Court rejects Plaintiffs’ argument given the evidence of harm described above.
Moreover, Plaintiffs’ argument is based upon the faulty assumption that the Tunney bars
consummation of the merger and thus an injunction will not cause any additional delay.20 But as
Defendants explain, “[n]othing in the Tunney Act” prevents consummation of the merger. See
Edstrom v. Anheuser-Busch InBev SA/NV, 2013 U.S. Dist. LEXIS 131386 at *24-25 (N.D. Cal.
Sept. 13, 2013) (rejecting notion that Tunney Act bars consummation of merger absent grant of
injunction); see also United States v. SBC Commc’ns, Inc., 489 F. Supp. 2d 1, 8 (D.D.C. 2007).21
Finally, the Court notes that Plaintiffs have made no offer to post an appropriate bond, a
requirement clearly set out in Rule 65. See, e.g., Ginsberg v. Inbev SA/NV, 2008 U.S. Dist.
LEXIS 93636 at *17 (E.D. Mo. Nov. 18, 2008) (district court balanced potential harm to
defendants against the fact that the Alioto Firm “neither posted, nor offered to post, any type of
bond to support their claims.”). See also 15 U.S.C. § 26 (providing for injunctive relief in an
antitrust case upon execution of a proper bond).
C. The Motion Under Rule 9019
Having dispensed with the Clayton Plaintiffs’ request for a TRO, the Court turns to the
Debtors’ motions, the first of which seeks approval under Bankruptcy Rule 9019 of the
settlement in the DOJ Action.
Federal Rule of Bankruptcy Procedure 9019(a) proves that “[o]n motion by the [debtor in
possession] and after notice and a hearing, the court may approve a compromise or settlement.”
In approving a settlement, a court must “review the reasonableness of the proposed settlement
20 	See TRO Motion at 14 (“Under the Tunney Act, the settlement is subject to public comment for a period of
60 days, and the district court retains jurisdiction to ultimately approve or disapprove the merger.”).
21 	Indeed, the Court noted at the hearing that the Plaintiffs should seek redress from the United States District
Court for the District of Columbia to the extent the Plaintiffs claim there is anything about the DOJ Action that
prevents consummation of the Merger.
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[and] . . . make an informed judgment as to whether the settlement is fair and equitable and in the
best interests of the estate.” In re Worldcom, Inc., 347 B.R. 123, 137 (Bankr. S.D.N.Y. 2006);
see also Air Line Pilots Ass’n, Int’l v. Am. Nat’l Bank & Trust Co. (In re Ionosphere Clubs, Inc.),
156 B.R. 414, 426 (S.D.N.Y. 1993). The Court, however, need not “conduct a ‘mini trial’ on the
issue. The Court need only ‘canvass the issues’ to determine if the ‘settlement falls below the
lowest point in the range of reasonableness.’” Worldcom, 347 B.R. at 137 (quoting In re
Teltronics Serv., Inc., 762 F.2d 185, 189 (2d Cir. 1985)).
The factors to consider in approving a settlement include: (1) the balance between the
litigation’s possibility of success and the settlement’s future benefits; (2) the likelihood of
complex and protracted litigation, with its attendant expense, inconvenience, and delay,
including the difficulty in collecting on the judgment; (3) the paramount interests of the
creditors, including each affected class’s relative benefits and the degree to which creditors either
do not object to or affirmatively support the proposed settlement; (4) whether other parties
in interest support the settlement; (5) the competency and experience of counsel supporting the
settlement; (6) the nature and breadth of releases to be obtained by officers and directors; and (7)
the extent to which the settlement is the product of arm’s length bargaining. In re Iridium
Operating LLC, 478 F.3d 452, 462 (2d Cir. 2007).
“Settlements or compromises are favored in bankruptcy and, in fact, encouraged . . . ‘In
administering reorganization proceedings in an economical and practical manner it will often be
wise to arrange the settlement of claims as to which there are substantial and reasonable
doubts.’” In re Adelphia Communs. Corp., 368 B.R. 140, 226 (Bankr. S.D.N.Y. 2007) (quoting
Protective Committee for Independent Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390
U.S. 414, 424 (1968)). “The decision whether to accept or reject a compromise lies within the
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sound discretion of the court.” Adelphia, 368 B.R. at 226. And “[w]hile the bankruptcy court
may consider the objections lodged by parties in interest, such objections are not controlling.
Similarly, although weight should be given to the opinions of counsel for the debtors and any
creditors’ committees on the reasonableness of the proposed settlement, the bankruptcy court
must still make informed and independent judgment. The Court must consider whether the
proposed compromise is fair and equitable by appraising itself of all the factors relevant to an
‘assessment of the wisdom of the proposed compromise.’” Worldcom, 347 B.R. at 137 (quoting
TMT Trailer, 390 U.S. at 424).
Applying these standards to the present motion, the Court finds that the settlement easily
satisfies the requirements for approval under Rule 9019, as well as the immediate consummation
of the merger. The balance between the litigation's possibility of success and the settlement's
future benefits weighs heavily in favor of approving the settlement. The issues raised in the DOJ
Action are complex and the risks that would accompany the Debtors’ failure to prevail in the
DOJ Action are substantial considering the history and position of these Chapter 11 cases. Such
risks include: (1) the abandonment of the merger and the substantial value it creates, (2) the
continued administration of the Debtors’ cases while another plan of reorganization is formulated
and pursued, at a huge expense to the estate and its creditors, and (iii) the delay in making
distributions to the Debtors’ creditors and shareholders.
The Debtors’ management and the AMR Board of Directors, in conjunction with the
Debtors’ and Committee’s professionals, have analyzed and vetted the terms of the settlement
and the effect that the divestiture will have. They have concluded—and the Court concurs—that
the benefits to be derived from the settlement far outweigh the continued pursuit of the DOJ
Action and the risk and uncertainty associated therewith. Such benefits include the ability of the
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Debtors to promptly consummate the merger so that the value of the merger can be realized by
the Debtors’ creditors, employees and the AMR shareholders. Furthermore, as discussed in
detail below, the economics of the settlement do not materially or adversely change or alter the
distributions under the Plan.
Rejection of the settlement will unquestionably result in complex, protracted and costly
litigation in the form of the DOJ Action. As the Debtors note, upon the commencement of the
DOJ Action back in August, the parties were fully engaged in discovery and trial preparation.
This included the cumulative production by the parties of over 2 million documents and the
deposition of 28 individuals. The parties also have held weekly meetings with a special master
appointed by the District Court to discuss discovery progress. Trial in the DOJ Action was set to
commence on November 25, 2013, and would surely move forward were the settlement to be
rejected.
The paramount interests of the creditors clearly weigh in favor of approving the
settlement, and thereby the merger. As described above, numerous witnesses attest that a delay
in consummation of the merger would cause great harm to the Debtors and their business
enterprise, as well as the Debtors’ employees, creditors and equity interest holders. See
generally Goulet Decl.; Polle Decl.; Johnson Decl.
Both creditors and equity holders will receive a recovery under the Debtors’ confirmed
plan. See Polle Decl. ¶ 13. General unsecured creditors are projected to receive a full recovery
(including interest), while American’s employees would receive an equity stake in New
American valued at more than $2 billion and holders of American’s equity would receive New
American stock valued at more than $4 billion. See Johnson Decl. ¶ 11; Polle Decl. ¶ 16.
Creditors are being paid through stock in the newly merged entity. Specifically, 72% of the
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equity of New American will be distributed to the Debtors’ stakeholders. See Polle Decl. ¶ 16.
Since the announcement of the merger, AMR’s share value has risen more than 900%. See Polle
Decl. ¶ 12. A delay in the merger may have a negative impact on AMR’s share price as well as
the share price of US Airways, which is being used as the reference security prior to the effective
date of the plan. Even a 10% decline in share price could represent nearly a $400 million decline
in shareholder value. See Polle Decl. ¶ 14.
Furthermore, a delay in the merger would subject these economic stakeholders to the
market risk associated with the securities they are to receive under the Plan, including the risk
that outside events will affect the airlines or the airline industry as a whole. See Goulet Decl. ¶5;
Polle Decl. ¶ 16. A delay in the merger will also delay a realization of the benefits flowing from
the synergies resulting from a combination of the business of the Debtors and US Airways,
which are projected at $1 billion by 2015. See Goulet Decl. ¶5; Polle Decl. ¶ 18; Johnson Decl.
¶¶ 10 and 14. These synergies include savings derived from the combination of headquarters,
airport locations and other facilities, the elimination of duplicate systems, improvements in
purchasing, reductions in advertising costs and rationalization in headcount. See Polle Decl. ¶
18. Delay in the merger would lead to millions of dollars per week in lost savings, which would
in turn cause a direct detriment to the Debtors’ economic stakeholders who, as noted above, will
be the future stockholders of New American. See Goulet Decl. ¶ 5; Polle Decl. ¶ 18.
The delay will also harm the Debtors’ employees through a loss of increased
compensation, which is estimated to amount to approximately $400 million annually, or nearly
$1.1 million lost for every day of delay. See Johnson Decl ¶ 14. A delay in the merger would
also lead to a delay in the more than $2 billion equity stake for the employees promised by the
merger, as well as an exacerbation in the anxiety and uncertainty that has resulted from the
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merger itself. See Goulet Decl. ¶ 5; Johnson Decl. ¶¶ 13-14. Further delay could adversely
impact employee morale, which could in turn have a negative impact on performance, customer
service and the loss of key personnel. See Goulet Decl. ¶ 5; Johnson Decl. ¶ 14.
And finally, a delay in the merger, with its corresponding delay in the consummation of
the plan, will harm the estate itself through the continued accrual of administrative costs and a
negative impact on the Debtors’ ability to re-establish normal business relationships with their
vendors, suppliers and business partners. See Goulet Decl. ¶ 5.
Both the Debtors’ creditors and other parties in interest overwhelmingly support the
settlement. As noted above, the Debtors’ major constituencies have voiced support for the
settlement, including the Committee of Unsecured Creditors, 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 only objection to the
settlement is from the Clayton Plaintiffs, who are neither creditors nor equity holders of the
Debtors and who currently have no economic interest in the administration of the Debtors’
estates.
Additionally, counsel supporting the settlement—including both Debtors’ counsel and
counsel for the creditors’ committee—have demonstrated competence and experience throughout
the pendency of these Chapter 11 cases. The Debtors’ professionals include attorneys with
extensive experience in antitrust litigation and who are familiar with the legal and factual issues
involved in the DOJ Action and the claims and defenses asserted therein. The Court has no
doubts regarding the ability of the professionals in these cases to reach a settlement that is the
best result for the Debtors’ estate and creditors. Finally, the settlement is clearly the result of
arms’ length bargaining between the parties. The parties in the DOJ Action were fully engaged
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in discovery and trial preparation. At the same time, they were engaged in ongoing discussions
to resolve the DOJ Action on a consensual basis. Over the last several weeks, those discussions
intensified and culminated in the settlement, the result of protracted and good-faith negotiations.
See Johnson Decl. ¶ 7.
For all these reasons, the Court finds that the settlement is fair and equitable and in the
best interests of the estate and falls well above the lowest point in the range of reasonableness.
In the 9019 motion, the Debtors also seek a ruling that the settlement will not materially
and adversely affect the creditors and equity holder such as to require re-solicitation of the plan.
Such a request is contemplated by paragraph 36 of the Confirmation Order, which provides in
relevant part:
In the event that the Debtors and US Airways reach settlement in the DOJ Action,
the Debtors shall file a motion with the Court seeking approval of the Debtors’
execution of and entry into such settlement. In addition to determining whether to
approve any such settlement under Bankruptcy Rule 9019(a), the Court shall
determine whether the settlement would materially and adversely affect the
treatment of holders of Claims and AMR Equity Interests under the Plan such that
the Court should require the re-solicitation of such holders’ previous acceptances
or rejections of the Plan.
The Court finds that the settlement will not materially and adversely affect the treatment
of the Debtors’ claim holders and AMR Equity Interests and re-solicitation of the plan is
therefore unnecessary. The settlement will not alter the treatment of holders of Claims and AMR
Equity Interests under the plan. The settlement also maintains the relative priority and
distribution scheme to holders of Claims and AMR Equity Interests under the plan.
Additionally, the economic impact of the Settlement on the global business of New American
will not adversely affect distributions under the plan.
Distribution value under the plan is based on the price of a reference security, which
subsequent to the effective date of the plan will be the common stock of New American. The
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plan includes a reference mechanic where, at certain measurement periods, additional
distributions will be made to holders of AMR Equity Interests when the volume-weighted
average price of the reference security trades above a price referred to as the value hurdle price.
See Plan § 1.247. The value hurdle price indicates both the price at which additional value will
waterfall down to holders of AMR Equity Interests, as well as the price at which all holders of
allowed claims will receive a full recovery. See Declaration of Homer Parkhill, dated November
22, 2013, ¶15. The Debtors currently calculate, when making certain assumptions, that the value
hurdle price is approximately $16.64. Id. at ¶ 16.
The trading market price of US Airways common stock is currently the best indicator of
the value of New American Common Stock. Id. at ¶ 11. Thus, the way in which the plan is
structured would indicate that the treatment of holders of Claims and AMR Equity Interests
under the plan is not materially and adversely affected by the settlement unless the trading price
for US Airways common stock falls below the value hurdle price of $16.64. Indeed, the Court
need not even begin such an analysis until the stock falls below the value hurdle price. On
August 7, 2013 the volume weighted average price of US Airways common stock was $19.11
per share. See Parkhill Decl. ¶ 12. As of November 21, 2013, that price has increased to $24.12
per share. Id. Based upon this trading market price of US Airways common stock, the aggregate
implied value to be distributed under the plan to holders of allowed claims, AMR equity interests
and recipients of employee equity awards has increased by approximately $2.7 billion since
August 7, 2013, six days to the commencement of the DOJ Action on August 13, 2013. See
Parkhill Decl. ¶ 22. Additionally, the trading value of AMR common stock has increased during
that time period from $5.85 on August 7, 2013 to $12.00 on November 21, 2013. Id. at ¶ 23.
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For these reasons, the Court finds that the settlement does not materially and adversely
affect the treatment of holders of Claims and AMR Equity Interests under the Plan such that the
Court should require the re-solicitation of such holders’ previous acceptances or rejections of the
Plan.22
D. Motion for Entry of an Order Regarding Consummation of the Merger
Consistent with the Court’s rulings above, the Court will also grant the Debtors’ motion
to permit the merger to be consummated without delay, despite the pendency of the Clayton
Adversary. This request is consistent with the scheduling order entered in the Clayton
Adversary, which states that “in the event of any resolution of the DOJ Action in favor of
Defendants . . . Defendants reserve all rights to seek to consummate the merger that is the subject
of the DOJ Action by filing a motion with the Bankruptcy Court on an expedited basis.”
Scheduling Order ¶ 12. For the reasons set forth above, the Court finds that the benefits to
allowing the merger to proceed are numerous, the most important being the consummation of the
plan and the resulting distribution to the creditors and stockholders with an economic stake in
these cases.
22 	To the extent that approval of the settlement is covered under Section 1127(b) of the Bankruptcy Code, the
Court finds that the circumstances are warranted and this confirmed plan, when considered in light of the settlement,
would satisfy Section 1129 of the Bankruptcy Code.
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CONCLUSION
For all the reasons set forth above, the Court denies the Plaintiffs’ request for a temporary
restraining order and grants the Debtors’ motions seeking approval of the settlement in the DOJ
Action and consummation of the merger.
Dated: New York, New York
November 27, 2013
/s/ Sean H. Lane
UNITED STATES BANKRUPTCY JUDGE
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