Avianca Holdings S.A.

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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In re:
AVIANCA HOLDINGS S.A., et al1
Debtors and Reorganized Debtors.
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NOT FOR PUBLICATION
Chapter 11
Case No. 20-11133 (MG)
MEMORANDUM OPINION SUSTAINING THE OBJECTION OF AEROVÍAS DEL
CONTINENTE AMERICANO S.A. AVIANCA TO CLAIM NUMBER 1729
FILED BY THE ASOCIACIÓN COLOMBIANA DE AVIADORES CIVILES
A P P E A R A N C E S:
Milbank LLP
Counsel for Debtors and Reorganized Debtors
55 Hudson Yards
New York, New York 10001
By: 	Dennis F. Dunne, Esq.
Evan R. Fleck, Esq.
Benjamin Schak, Esq.
Gregory A. Bray, Esq.
James & Hoffman, P.C.
Counsel for Asociación Colombiana de
Aviadores Civiles (ACDAC)
1629 K Street NW, Suite 1050
Washington, DC 20006
By: 	Ryan E. Griffin, Esq.
1 	The Debtors and Reorganized Debtors in these chapter 11 cases, and each Debtors’ and Reorganized Debtors’ federal
tax identification number (to the extent applicable), are as follows: Avianca Holdings S.A. (N/A) n/k/a HVA Associated Corp.;
Aero Transporte de Carga Unión, S.A. de C.V. (N/A); Aeroinversiones de Honduras, S.A. (N/A); Aerovías del Continente
Americano S.A. Avianca (N/A); Airlease Holdings One Ltd. (N/A); America Central (Canada) Corp. (00-1071563); America
Central Corp. (65-0444665); AV International Holdco S.A. (N/A); AV International Holdings S.A. (N/A); AV International
Investments S.A. (N/A); AV International Ventures S.A. (N/A); AV Investments One Colombia S.A.S. (N/A); AV Investments
Two Colombia S.A.S. (N/A); AV Loyalty Bermuda Ltd. (N/A); AV Taca International Holdco S.A. (N/A); 	Enterprises S.A.
(N/A); Avianca Costa Rica S.A. (N/A); Avianca Leasing, LLC (47-2628716); Avianca, Inc. (13-1868573); Avianca-Ecuador
S.A. (N/A); Aviaservicios, S.A. (N/A); Aviateca, S.A. (N/A); Avifreight Holding Mexico, S.A.P.I. de C.V. (N/A); C.R. Int’l
Enterprises, Inc. (59-2240957); Grupo Taca Holdings Limited (N/A); International Trade Marks Agency Inc. (N/A); Inversiones
del Caribe, S.A. (N/A); Isleña de Inversiones, S.A. de C.V. (N/A); Latin Airways Corp. (N/A); Latin Logistics, LLC (41-
2187926); Nicaragüense de Aviación, Sociedad Anónima (N/A); Regional Express Américas S.A.S. (N/A); Ronair N.V. (N/A);
Servicio Terrestre, Aéreo y Rampa S.A. (N/A); Servicios Aeroportuarios Integrados SAI S.A.S. (92-4006439); Taca de
Honduras, S.A. de C.V. (N/A); Taca de México, S.A. (N/A); Taca International Airlines S.A. (N/A); Taca S.A. (N/A); Tampa
Cargo S.A.S. (N/A); Technical and Training Services, S.A. de C.V. (N/A). The Debtors’ and Reorganized Debtors’ principal
offices are located at Avenida Calle 26 # 59 – 15 Bogotá, Colombia.
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MARTIN GLENN
CHIEF UNITED STATES BANKRUPTCY JUDGE
Pending before the Court is the objection (the “Objection,” ECF Doc. # 2660) of
Reorganized Debtor Aerovías del Continente Americano S.A. Avianca (“Avianca” or “Debtor”)
pursuant to sections 105 and 502(b) of the Bankruptcy Code, to proof of claim numbered 1729
(the “Claim”) filed by the Asociación Colombiana de Aviadores Civiles (“ACDAC”). Attached
to the objection as Exhibits A-F are: the Declaration of Paola María Villota Martínez, Vice
President of Human Affairs of Avianca (the “Villota Declaration”), the Claim, excerpts of
Judgment T-069 (as defined below), excerpts from the 2017 Arbitration Award (as defined
below), several Columbian court judgments and Avianca’s incentive calculation payments.
ACDAC filed a response (the “Response,” ECF Doc. # 2687.) The Debtors filed a reply (the
“Reply,” ECF Doc. # 2697) For the reasons described below, the Court SUSTAINS the
Objection.
I. 	BACKGROUND
ACDAC represents about half of Avianca’s Colombian pilots. (Villota Declaration ¶ 5.)
ACDAC has maintained a collective bargaining agreement (convención colectiva) with Avianca
since 2009. (Id.) In October 2013, following a failed round of negotiations led by the
Colombian Ministry of Labor, Avianca offered non-union Colombian pilots a Voluntary Benefits
Plan (Plan Voluntario de Beneficios). (See id. ¶ 6.) Among other things, the Voluntary Benefits
Plan included a monthly incentive payment for operational efficiency and a semi-annual
incentive payment for efficient fuel usage. See id. ACDAC did not accept the Voluntary
Benefits Plan and took the position that the Voluntary Benefits Plan was not permissible under
Colombian law. (See id.)
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Subsequently, certain members of ACDAC filed actions before Colombian courts arguing
that Avianca’s unilateral offer of a compensation package had undermined their right to bargain
collectively under Colombian law, and certain actions were reviewed by the Colombian
Constitutional Court. 	(See id. ¶ 7.) 	The Colombian Constitutional Court largely accepted
ACDAC’s arguments in its February 2015 judgment, excerpted in relevant part at Exhibit C of
the Motion (“Judgment T-069”). 	( See id.) 	Among other things, the court ordered Avianca to
extend the Voluntary Benefits Plan to ACDAC members, with the same criteria offered to non-
unionized pilots. See Judgment T-069 (first paragraph of fifth decretal section).
By late 2017, Avianca and ACDAC had not yet agreed on the terms of a new collective
bargaining agreement, and ACDAC had commenced a strike. (See Villota Decl. ¶ 8.) In an
effort to resolve the dispute, the Colombian Ministry of Labor ordered Avianca and ACDAC to
appear before an arbitration panel (tribunal de arbitramento). (See id.) The panel’s decision (the
“2017 Arbitration Award” and, together with Judgment T-069, the “Compensation Decrees”)
adopted a certain level of salary increases and also provided that efficiency and fuel bonuses
“shall be paid in 100% of [their] corresponding value, pursuant to [Judgment] T[-]069 of 2015.”
2017 Arbitration Award, cl. 201, excerpted in relevant part at Exhibit D of the Objection.
ACDAC filed the Claim on January 20, 2021. The Claim asserts that “Debtor is obligated
under Judgment T-069/15 and the 2017 Arbitration Award to pay monthly operational efficiency
incentives and semiannual fuel bonuses to ACDAC members at 100% of the benefit levels paid
to non-union pilots.” (See Claim.) The Claim asserts that the “the amount of this claim is
currently unknown but can be determined through Debtor’s payroll records.” (Id.).
The heart of the dispute is as follows: Avianca interprets the 2017 Arbitration Award’s
requirement that the payment of incentives “shall be paid in 100% corresponding value, pursuant
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to ruling T069 of 2015” to require Avianca to pay 100% of earned incentives that non-union
pilots achieved based on performance. (Objection ¶ 18.) ACDAC interprets this same language
to require Avianca to pay the maximum achievable incentive bonus regardless of whether the
pilot achieves the performance milestones, which essentially amounts to the argument that the
incentive payments are a fixed bonus that ACDAC pilots are entitled to regardless of
performance. (Response ¶ 22.) If Avianca’s interpretation of the claim amount is correct, then
the Claim amount is zero and the Claim should be disallowed. If ACDAC’s interpretation is
correct, then the claim has a positive value. The Debtors also argue that the Claim should be
disallowed because it is untimely and does not attach sufficient documentation to be considered
prima facie valid. (Reply ¶¶ 16–28.)
II. 	LEGAL STANDARD
Section 501(a) of the Bankruptcy Code provides that “[a] creditor . . . may file a proof of
claim” to claim an interest in a debtor’s bankruptcy estate. 11 U.S.C. § 501(a). Section 502(a)
provides that a claim or interest, properly filed, “is deemed allowed, unless a party in interest . . .
objects.” 11 U.S.C. § 502(a).
Under section 502, if an objection is made, the court shall determine the amount of such
claim “as of the filing date.” In re Solutia, Inc., 379 B.R. 473, 483 (Bankr. S.D.N.Y. 2007)
(citation omitted). Section 502(b)(1) provides that claims may be disallowed if they are
“unenforceable against the debtor and property of the debtor, under any agreement or applicable
law.” 11 U.S.C. § 502(b)(1). To determine whether a claim is allowable by law, bankruptcy
courts look to “applicable nonbankruptcy law.” In re W.R. Grace & Co., 346 B.R. 672, 674
(Bankr. D. Del. 2006).
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“To overcome this prima facie evidence, an objecting party must come forth with
evidence which, if believed, would refute at least one of the allegations essential to the claim.”
Sherman v. Novak (In re Reilly), 245 B.R. 768, 773 (2d Cir. B.A.P. 2000). By producing
“evidence equal in force to the prima facie case,” an objector can negate a claim’s presumptive
legal validity, thereby shifting the burden back to the claimant to “prove by a preponderance of
the evidence that under applicable law the claim should be allowed.” Creamer v. Motors
Liquidation Co. GUC Trust (In re Motors Liquidation Co.), No. 12 Civ. 6074 (RJS), 2013 WL
5549643, at *3 (S.D.N.Y. Sept. 26, 2013) (internal quotation marks omitted); see also In re
Allegheny Int’l, Inc., 954 F.2d 167, 173–74 (3d Cir. 1992) (laying out identical burden-shifting
framework).
III. 	DISCUSSION
The Court finds that even assuming the Claim is timely and prima facie valid, issues
which the Court does not reach here, the Debtors have met their burden of overcoming the prima
facie evidence by refuting “at least one of the allegations essential to the claim.” Sherman v.
Novak (In re Reilly), 245 B.R at 773. ACDAC’s central allegation is that the Debtors have not
complied with their obligations under the Compensation Decrees regarding incentive payments.
Avianca has refuted this essential allegation.
ACDAC does not appear to dispute that if the Court accepts Avianca’s interpretation,
then the Claim has zero value since the Debtors are currently paying incentives using an identical
formula for union and non-union pilots.2 Avianca has produced sufficient evidence3 for the
2 	See Response ¶¶ 12(“Following Judgment T069, Avianca began applying the Incentives to ACDAC pilots
as well as non-union pilots”), 30 n.4 (“these spreadsheets do appear to indicate the [sic] Avianca applies the
same formula for all pilots”).
3 	While ACDAC filed a response, they submitted no declaration in support of their Response.
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Court to determine that their interpretation of Judgment T-069 and the 2017 Arbitration Award is
proper and that accordingly the Claim has zero value.
First, Avianca has shown that on seven occasions Colombian courts have endorsed
Avianca’s interpretation of the 2017 Arbitration Award as requiring equal, but not better,
payment of incentives to union pilots vs. non-union pilots. (See Objection ¶ 9; Villota
Declaration ¶ 12). Further, in their Reply the Debtors attached copies of the translations of the
relevant portions of the Colombian court judgments, which confirm that Avianca has properly
characterized the judgments. (Reply, Exhibits C-F.) No Colombian court has ever endorsed
ACDAC’s interpretation of the Compensation Decrees and at the hearing neither counsel for
Avianca nor ACDAC identified any currently pending Colombian litigation on the subject. (See
Villota Declaration ¶ 12.)
Avianca correctly points out that U.S. Courts ordinarily defer to the judgment of foreign
Courts. See Pravin Banker Assocs. v. Banco Popular Del Peru, 109 F.3d 850, 854 (2d Cir.1997)
(“Under the principles of international comity, United States courts ordinarily . . . defer to
[judicial acts and] proceedings taking place in foreign countries, allowing those acts and
proceedings to have extraterritorial effect in the United States” unless doing so “would be
contrary to the policies or prejudicial to the interests of the United States.”); In re SLS Capital,
S.A., 2015 Bankr. LEXIS 2468, at *25 (Bankr. S.D.N.Y. July 20, 2015) (granting comity to a
Luxembourg court order interpreting its own liquidation order, as this was “consistent with the
principles of comity because there was no evidence that the proceedings in the Luxembourg
[c]ourt were not fair and impartial”). Here, under principles of comity, the Court defers to the
judgment of Colombian courts who have accepted Avianca’s interpretation of the Compensation
Decrees.
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The Court also agrees with Avianca that the plain language of the Compensation Decrees
supports Avianca’s interpretation. ACDAC interprets the language in the 2017 Arbitration
Award that each incentive “shall be paid in 100% of its corresponding value” to mean that “no
calculation or formula . . . is required . . . ACDAC pilots are simply entitled . . . to 100% of the
available incentive premiums.” (Response ¶ 23.) But the language in the 2017 Arbitration
award indicates that such payments are to be made “in accordance with judgment T069 of
2015.” (Reply, Exhibit A) (emphasis added). This language indicates that the 2017 Arbitration
Award simply confirmed that Avianca was obligated to comply with Judgment T-069 and did
not purport to expand Avianca’s obligations thereunder. See id.
In support of its interpretation, ACDAC also points to paragraph 2 of the 2017
Arbitration Award which provides that Avianca “must pay only the difference, should there be
one, between the values paid during 2017, and as of the date of issue of this Arbitration Award,
so that there is no double payment, for the same item.” (Response ¶ 24 (citing 2017 Arbitration
Award).) ACDAC then argues that if Avianca was already in compliance with its incentive
payments, this paragraph would be superfluous since there would be no additional amounts to
pay. However, the clause in paragraph 2 indicates the difference only needs to be paid “should
there be one” and thus is not superfluous, but a reaffirmation of the Debtors’ obligation to pay
incentive bonuses, should they owe any, under Judgment T-069. (See Reply, Exhibit A.)
Accordingly, the Court accepts Avianca’s interpretation of the Compensation Decrees
and finds that the Claim has zero value. Therefore, the Objection is SUSTAINED.
/ / / /
/ / / /
/ / / /
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A separate order will be entered granting the requested relief.
Dated: 	January 20, 2023
New York, New York
_____Martin Glenn____________
MARTIN GLENN
Chief United States Bankruptcy Judge
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