12-4867...12-4867 in the united states court of appeals for the second circuit dpwn holdings (usa),...
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12-4867IN THE
United States Court of AppealsFOR THE SECOND CIRCUIT
DPWN HOLDINGS (USA), INCORPORATED,
Plaintiff – Counter-Defendant – Appellee,
v.
UNITED AIRLINES, INC. D/B/A, UNITED AIRLINES, UNITED CONTINENTAL HOLDINGS, INC. F/K/A UAL CORPORATION,
Defendants – Counter-Claimants – Appellants.
On Interlocutory Appeal from the United States District Courtfor the Eastern District of New York
APPELLEE’S BRIEF AND SUPPLEMENTAL APPENDIX
J. Peter Coll, Jr.Orrick, Herrington & Sutcliffe LLP51 West 52nd StreetNew York, New York 10019-6142Tel: (212) 506-5000
Garret G. RasmussenRobert M. LoebRachel Wainer ApterAntony P. KimRyan K. QuillianOrrick, Herrington & Sutcliffe LLP1152 15th Street, N.W.Washington, D.C. 20005Tel: (202) 339-8400
Counsel for Plaintiff – Counter-Defendant – Appellee, DPWN HOLDINGS (USA), INC.
CORPORATE DISCLOSURE STATEMENT
Pursuant to Federal Rule of Appellate Procedure 26.1, DPWN Holdings
(USA), Inc. (“DHL”) provides its corporate disclosure as follows:
1. DHL is a wholly-owned subsidiary of Deutsche Post Beteiligungen
Holding GmbH, which is, in turn, a wholly-owned subsidiary of Deutsche Post,
A.G. (“DPAG”). DPAG is a company publicly traded in Germany on the
Frankfurt Stock Exchange.
Respectfully Submitted,
/s/ Garret G. Rasmussen /s/ J. Peter Coll, Jr.
Garret G. RasmussenRobert M. LoebRachel Wainer ApterAntony P. KimRyan K. QuillianOrrick, Herrington & Sutcliffe LLP1152 15th Street, N.W.Washington, D.C. 20005Tel: (202) 339-8400
J. Peter Coll, Jr.Orrick, Herrington & Sutcliffe LLP51 West 52nd StreetNew York, New York 10019-6142Tel: (212) 506-5000
Counsel for Plaintiff – Counter-Defendant – Appellee, DPWN HOLDINGS (USA), INC.
TABLE OF CONTENTS
Page
-i-
TABLE OF AUTHORITIES.................................................................................. iii
PRELIMINARY STATEMENT ..............................................................................1
JURISDICTIONAL STATEMENT .........................................................................4
STATEMENT OF THE ISSUES .............................................................................4
STATEMENT OF THE CASE.................................................................................5
STATEMENT OF FACTS .......................................................................................6
United Participated in a Conspiracy to Fix Fuel Surcharges .........................6
Rather Than Inform Its Creditors, United Concealed Its Role in the Price-Fixing Conspiracy During and After Its Bankruptcy Case.................13
The District Court Proceedings ....................................................................15
SUMMARY OF ARGUMENT..............................................................................18
STANDARD OF REVIEW....................................................................................21
ARGUMENT..........................................................................................................22
I. THE DISTRICT COURT PROPERLY HELD THAT WHERE UNITED KNEW OF DHL’S ANTITRUST CLAIM AGAINST IT, CONCEALED THE CLAIM, AND DHL COULD NOT HAVE DISCOVERED THE CLAIM PRIOR TO CONFIRMATION OF UNITED’S BANKRUPTCY PLAN, DHL’S ANTITRUST CLAIM WAS NOT DISCHARGED.............21
A. The Due Process Clause Mandates Meaningful Notice. .........22
1. Due Process Requirements Apply in Bankruptcy and Preclude Discharge of a Claim Where Notice Is Inadequate..................................................................24
2. Knowledge of the Debtor and Creditor Is Key in Determining Whether Notice Is Adequate in a Particular Case...............................................................25
B. The District Court Correctly Held that Notice of the Antitrust Claim Was Required Under the Particular Facts of this Case...............................................................................30
TABLE OF CONTENTS(continued)
Page
-ii-
1. The Cases Cited by United Offer No Basis to Question the District Court’s Holding...........................31
2. The District Court’s Ruling Is Consistent with Bankruptcy Practice and Does Not Impose Impractical New Burdens on Debtors ...........................35
3. The District Court’s Ruling Is Consistent with Important Public Policy Underlying the Antitrust Laws...............................................................................40
C. Where the Notice Provided to DHL Was Constitutionally Insufficient, DHL Is Not Now Required to Seek to Reopen the Bankruptcy Proceeding and File a Late Proof of Claim ...................................................................................43
1. United Waived Its Argument by Failing to Present it to the District Court....................................................45
2. Where Notice Is Constitutionally Inadequate, the Creditor’s Claim Is Not Discharged and the Creditor Can Pursue the Claim Outside of Bankruptcy.....................................................................48
3. DHL Had No Meaningful Opportunity to Be Heard in United’s Bankruptcy After it Discovered its Antitrust Claim in 2010 ............................................45
4. Requiring DHL to Now Proceed in the Bankruptcy Court Would Lead to Duplicative Litigation ................48
5. United’s Appeal to Equity and Fairness Is Misplaced.......................................................................49
CONCLUSION.......................................................................................................53
CERTIFICATE OF COMPLIANCE
APPENDIX
CERTIFICATE OF SERVICE
-iii-
TABLE OF AUTHORITIES
Page(s)Federal Cases
Acevedo v. Van Dorn Plastic Mach. Co.,68 B.R. 495 (Bankr. E.D.N.Y. 1986) ................................................................. 29
In re Am. Express Merchs.’ Litig., 667 F.3d 204 (2d Cir. 2012) ...............................................................................47
In re Arch Wireless, Inc.,534 F.3d 76 (1st Cir. 2008)..................................................................... 36, 37, 39
Ashcroft v. Iqbal,556 U.S. 662 (2009)............................................................................................15
Bank of Marin v. England,385 U.S. 99 (1966)..............................................................................................24
In re Barton Indus., Inc.,104 F.3d 1241 (10th Cir. 1997) ....................................................................25, 27
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.,429 U.S. 477 (1977)............................................................................................42
In re Chateaugay Corp.,944 F.2d 997 (2d Cir. 1991) ...............................................................................26
In re Circuit City Stores, Inc.,No. 08-35653, 2010 WL 2208014 (Bankr. E.D. Va. May 28, 2010)................. 32
City of New York v. New York, New Haven & Hartford R.R. Co.,344 U.S. 293 (1953).....................................................................................24, 45,
Covey v. Town of Somers,351 U.S. 141 (1956)............................................................................................ 23
In re Emons Indus., Inc.,220 B.R. 182 (Bankr. S.D.N.Y. 1998) .........................................................51, 52
In re Envirodyne Indus.,214 B.R. 338 (N.D. Ill. 1997).............................................................................33
-iv-
Grogan v. Garner,498 U.S. 279 (1991)......................................................................................30, 51
Halebian v. Berv,644 F.3d 122 (2d Cir. 2011) .................................................................................6
In re Harbor Tank Storage Co.,385 F.2d 111 (3d Cir. 1967) ...............................................................................45
In re Hexcel Corp.,239 B.R. 564 (N.D. Cal. 1999).....................................................................26, 28
In re High Fructose Corn Syrup Antitrust Litig.,295 F.3d 651 (7th Cir. 2002) ........................................................................13, 42
Hoffman v. Hoffman,157 B.R. 580 (E.D.N.C. 1992) .....................................................................25, 27
In re Intaco Puerto Rico, Inc.,494 F.2d 94 (1st Cir. 1974).................................................................................45
In re J.A. Jones, Inc.,492 F.3d 242 (4th Cir. 2007) ..................................................................36, 37, 39
In re Johns-Manville Corp.,600 F.3d 135 (2d Cir. 2010) ...............................................................................27
Jones v. Flowers,547 U.S. 220 (2006)......................................................................................24, 31
In re Kendavis Holding Co.,249 F.3d 383 (5th Cir. 2001) ..............................................................................25
In re Kewanee Boiler Corp.,198 B.R. 519 (Bankr. N.D. Ill. 1996) .................................................................25
LaFlamme v. Societe Air France,702 F. Supp. 2d 136 (E.D.N.Y. 2010)..................................................................7
In re Lowery,398 B.R. 512 (Bankr. E.D.N.Y. 2008) ...............................................................35
-v-
Lujan v. G & G Fire Sprinklers, Inc.,532 U.S. 189 (2001)............................................................................................23
Marks v. Comm’r,947 F.2d 983 (D.C. Cir. 1991)..............................................................................2
In re Massa,187 F.3d 292 (2d Cir. 1999) .........................................................................34, 44
In re Medaglia,52 F.3d 451 (2d Cir. 1995) .................................................................................45
Mennonite Bd. of Missions v. Adams,462 U.S. 791 (1983)............................................................................................36
In re Miracle Mart,396 F.2d 62 (2d Cir. 1968) .................................................................................51
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,473 U.S. 614 (1985)............................................................................................ 41
In re Morgan,197 B.R. 892 (N.D. Cal. 1996)........................................................................... 50
Mullane v. Cent. Hanover Bank & Trust Co.,339 U.S. 306 (1950).................................................................................22, 28, 46
Nat’l Soc. of Prof’l Eng’rs v. United States,435 U. S. 679 (1978)...........................................................................................41
In re Ne. Software, Inc.,111 B.R. 387 (Bankr. D. Conn. 1990)................................................................39
In re Nortel Networks Corp. Sec. Litig.,539 F.3d 129 (2d Cir. 2008) ...............................................................................43
N. Pac. Ry. v. United States,356 U.S. 1 (1958)................................................................................................41
In re Penn Central Transp. Co.,771 F.2d 762 (3d Cir. 1985) .........................................................................31, 32
-vi-
Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship,507 U.S. 380 (1993)............................................................................................48
In re Prod. Plating, Inc.,90 B.R. 277 (E.D. Mich. 1988) ..........................................................................32
Redmond v. Fifth Third Bank,624 F.3d 793 (7th Cir. 2010) ..............................................................................48
Reliable Elec. Co., Inc. v. Olson Constr. Co.,726 F.2d 620 (10th Cir. 1984) ......................................................................43, 44
Robinson v. Hanrahan,409 U.S. 38 (1972)..............................................................................................23
In re Ruffalo,390 U.S. 544 (1968)......................................................................................16, 23
In re Savage Indus., Inc.,43 F.3d 714 (1st Cir. 1994).................................................................................24
In re Shattuc Cable Corp.,138 B.R. 557 (Bankr. N.D. Ill. 1992) ................................................................. 48
In re Shondel,950 F.2d 1301 (7th Cir. 1991) ............................................................................ 48
In re Spring Valley Farms, Inc.,85 B.R. 593 (N.D. Ala. 1988), aff’d., 863 F.2d 832 (11th Cir. 1989)..........44, 45
In re St. James Mech., Inc.,434 B.R. 54 (Bankr. E.D.N.Y. 2010) ...........................................................44, 45
Starr v. Sony BMG Music Entm’t,592 F.3d 314 (2d Cir. 2010) ...............................................................................13
Texas Indus., Inc. v. Radcliff Materials, Inc.,451 U.S. 630 (1981)............................................................................................27
In re Tully,818 F.2d 106 (1st Cir. 1987)...............................................................................35
-vii-
Tulsa Prof’l Collection Servs., Inc. v. Pope,485 U.S. 478 (1988)........................................................................................2, 23
United States v. Topco Assocs., Inc.,405 U.S. 596 (1972)............................................................................................41
In re UNR Indus., Inc.,224 B.R. 664 (Bankr. N.D. Ill. 1998) .................................................................27
United States v. Gallerani,68 F.3d 611 (2d Cir. 1995) .................................................................................49
Vietnam Ass’n for Victims of Agent Orange v. Dow Chem. Co.,517 F.3d 104 (2d Cir. 2008) ...................................................................16, 21, 33
Walker v. City of Hutchinson,352 U.S. 112 (1956)............................................................................................23
In re Waterman Steamship Corp.,141 B.R. 552 (Bankr. S.D.N.Y. 1992), vacated on other grounds, 157 B.R. 220 (S.D.N.Y. 1993)............................................................................................29, 30
In re WorldCom, Inc.,546 F.3d 211 (2d Cir. 2008) ...............................................................................49
Wright v. Owens Corning,679 F.3d 101 (3rd Cir. 2012)........................................................................25, 44
Federal Statutes
11 U.S.C. § 101(5)(A) .............................................................................................37
11 U.S.C. § 102(1) ...................................................................................................24
11 U.S.C. § 102(1)(A) .............................................................................................25
11 U.S.C. § 503(b)(1)(A).........................................................................................53
11 U.S.C. § 524(a)(2)...............................................................................................34
11 U.S.C. § 1128(a) .................................................................................................24
11 U.S.C. § 1144......................................................................................................18
-viii-
15 U.S.C. § 1....................................................................................................4, 5, 15
15 U.S.C. § 15 (1982) ..........................................................................................4, 42
15 U.S.C. § 26............................................................................................................4
28 U.S.C. § 1292(b) ...........................................................................................4, 5, 6
28 U.S.C. § 1331........................................................................................................4
28 U.S.C. § 1337........................................................................................................4
Federal Rules
Fed. R. Bankr. P. 9006(b)(1) ...................................................................................48
Fed. R. Bankr. P. 9024.............................................................................................18
Fed. R. Civ. P. 12(b)(6) ...................................................................................5, 6, 21
Fed. R. Civ. P. 60(b) ................................................................................................18
Other Authorities
1B Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application ¶ 273c1 (3d ed. 2006) ....................41
Laura B. Bartell, Due Process for the Unknown Future Claim in Bankruptcy—Is this Notice Really Necessary?, 78 Am. Bankr. L. J. 339 (2004)..................28, 43
Offical Bankrupcy Form B 6F.................................................................................36
-1-
PRELIMINARY STATEMENT
Plaintiff DPWN Holdings (USA), Inc. (more commonly known as “DHL”)
sued one of its major business partners, United Airlines, Inc. (“United”) for
violations of the federal antitrust laws. DHL did not commence the action lightly.
While United does its best to try to portray this suit as baseless, in reality it is well
supported and documented. Notably, United does not dispute that DHL has
adequately stated a claim that United participated in a price-fixing conspiracy—a
conspiracy that United continued and concealed throughout its bankruptcy
proceeding and beyond. United’s price-fixing caused DHL to overpay United by
at least $56.1 million in fuel and security surcharges on flights to and from the
United States.
Now, United wants to escape with its ill-gotten gains. Having successfully
concealed its wrongdoing for years, and having failed to provide DHL with any
notice of its price-fixing claim during the bankruptcy proceeding, United seeks to
be rewarded for its concealment, contending that it would be “fundamentally
unfair” to give DHL its day in court.
It is quite audacious for a company to perpetrate an ongoing price-fixing
conspiracy during its bankruptcy proceeding, conceal this illegal conduct from
DHL and the bankruptcy court, and then cry how inequitable it all is for DHL to
seek recovery when United’s conspiracy is revealed post-bankruptcy. United’s
-2
argument brings to mind the D.C. Circuit’s “chutzpah doctrine.” See Marks v.
Comm’r, 947 F.2d 983, 986 (D.C. Cir. 1991) (noting that fugitives’ argument that
inadequate efforts had been made to notify them of tax delinquency “runs afoul of
this court’s developing ‘chutzpah’ doctrine”).
Effectively, United’s argument is that a corporation should be allowed to
engage in an ongoing price-fixing conspiracy before and during its bankruptcy,
conceal its illegal behavior from its largest customer and from the bankruptcy court
until after the confirmation of its reorganization plan, and then be rewarded for its
abuse of the bankruptcy process with an automatic discharge of the concealed
claim. Nothing could be more antithetical to the spirit of the Bankruptcy Code or
the requirements of due process. Bankruptcy laws are intended to be a shield, not a
license to steal.
Permitting DHL to have its day in court is fully consistent with both
bankruptcy and due process jurisprudence. Under the Constitution’s Due Process
Clause, a person has a right to meaningful notice before his or her legal rights are
terminated. Accordingly, it is a bedrock principle of constitutional and bankruptcy
law that inadequate notice precludes discharge of a claim in bankruptcy.
“[W]hether a particular method of notice is reasonable [for the requirements
of constitutional due process] depends on the particular circumstances.” Tulsa
Prof’l Collection Servs., Inc. v. Pope, 485 U.S. 478, 483 (1988). Here, the district
-3
court correctly held that under these particular circumstances—where United was
aware of DHL’s antitrust claim against it, and where DHL did not know of the
claim, and could not have diligently discovered it—DHL’s price-fixing claim was
not extinguished by the confirmation of United’s bankruptcy plan.
United contends that the district court’s ruling is contrary to bankruptcy
practice and will impose massive new burdens on debtors. But this contention
ignores the district court’s actual holding. In fact, the district court’s limited
holding is both legally sound and consistent with bankruptcy practice.
Finally, United asserts that, even assuming that the notice it provided DHL
was constitutionally inadequate, DHL was not deprived of due process because,
according to United, DHL had a meaningful opportunity to be heard in the
bankruptcy court after it discovered its claim. The district court, however,
correctly adhered to the legal rule, especially applicable in cases like this one, that
where constitutionally sufficient notice is not provided, there is no discharge of the
claim, and the creditor is free to pursue its claim outside of bankruptcy. And
United’s appeal to equity and fairness is not well taken. Despite United’s efforts to
portray itself as the victim, DHL is the real victim in this case, and preventing
DHL from pursuing its antitrust claim would allow United to retain its ill-gotten
gains.
-4
Due process and fundamental fairness require that DHL have its day in
court, and Judge Gleeson’s sound ruling denying United’s motion to dismiss
should be affirmed.
JURISDICTIONAL STATEMENT
This action was brought pursuant to §§ 4 and 16 of the Clayton Act, 15
U.S.C. §§ 15 and 26, seeking redress for defendant United’s violations of § 1 of the
Sherman Act, 15 U.S.C. § 1. The district court had jurisdiction over this matter
pursuant to 28 U.S.C. §§ 1331 and 1337, and §§ 4 and 16 of the Clayton Act, 15
U.S.C. §§ 15, 26.
The district court denied United’s motion to dismiss on May 18, 2012. The
court then certified the matter for interlocutory appeal. On December 12, 2012,
this Court granted United’s petition for interlocutory review. This Court has
jurisdiction pursuant to 28 U.S.C. § 1292(b).
STATEMENT OF THE ISSUES
Under the Due Process Clause of our Constitution, a person is entitled to
reasonable notice and an opportunity to be heard before his legal rights are
terminated. Here, United had actual knowledge of DHL’s antitrust claim against it,
and DHL could not have discovered the claim prior to confirmation of United’s
bankruptcy plan. Yet United did nothing to notify DHL of the claim.
-5
The question presented is, in that context, did the district court correctly hold
that DHL’s antitrust claim was not discharged?
STATEMENT OF THE CASE
DHL filed this action, asserting that United conspired to fix the price of air
cargo shipments in violation of § 1 of the Sherman Act, 15 U.S.C. § 1. DHL then
filed a First Amended Complaint (“FAC,” “Amended Complaint,” or
“Complaint”). United moved to dismiss the Amended Complaint pursuant to
Federal Rule of Civil Procedure 12(b)(6), asserting that: (1) DHL did not plausibly
allege that United participated in an illegal price-fixing conspiracy; (2) DHL’s
claims were discharged when United emerged from bankruptcy; and (3) DHL’s
claims were barred by the statute of limitations.
On May 18, 2012, the district court denied United’s motion to dismiss. The
court concluded that: (1) DHL plausibly alleged United’s participation in a price-
fixing conspiracy; (2) DHL’s claim was not discharged by United’s bankruptcy;
and (3) DHL’s claim was timely. A107-37.
On June 1, 2012, United filed a motion for reconsideration or, in the
alternative, certification for immediate appeal under 28 U.S.C. § 1292(b). On July
31, 2012, the district court denied the motion for reconsideration and certified its
May 18th order for immediate appeal. This court granted United’s motion for
leave to appeal.
-6
STATEMENT OF FACTS
These facts are taken from DHL’s First Amended Complaint and documents
referenced therein, some of which are attached as exhibits to the Complaint.1 The
Complaint sets out detailed allegations of how United, together with other air
carriers, planned and carried out a secret price-fixing conspiracy. This conspiracy
is no fiction. To the contrary, it is well pleaded and documented, and it has led to
numerous criminal convictions and more than $1.7 billion in criminal fines levied
against twenty of United’s coconspirators. A6-7, A66-68, ¶¶ 3, 152.
United Participated in a Conspiracy to Fix Fuel Surcharges
On February 14, 2006, law enforcement officials conducted “dawn raids” on
the offices of several airlines involved in a multi-year conspiracy to fix the price of
air cargo shipments. A41, ¶¶ 88-89. To date, twenty airlines have pled guilty and
paid criminal fines ranging from $13.2 million to $350 million. A66-68, ¶ 152. In
addition, airline executives from British Airways, Martinair, Qantas and SAS have
pled guilty and agreed to pay criminal fines and serve time in prison. Id. The
corporate plea agreements all admit that “defendants, through their officers and
employees, including high-level personnel … participated in a conspiracy with one
1 See Halebian v. Berv, 644 F.3d 122, 133 n.7 (2d Cir. 2011) (“[O]n a
motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6), the court may … rely upon documents attached to the complaint as exhibits[ ] and documents incorporated by reference in the complaint.” (internal quotation marks omitted)).
-7
or more providers of air cargo services … to suppress and eliminate competition by
fixing one or more components of the cargo rates charged to customers.” A78,
¶ 177d. This case is about United’s involvement in that conspiracy.
A bit of background is necessary. In 1997, the Cargo Steering Group of the
International Air Transport Association (IATA), of which United was a member,
recommended that IATA adopt a resolution fixing fuel surcharge rates to be
charged by participating airlines. A17, ¶ 35. IATA’s legal director informed
IATA members, including United, that the antitrust laws prohibited setting prices
pursuant to such a resolution:
Antitrust laws prohibit competitors reaching any form of agreement, understanding or arrangement which is likely to have an impact on price…. In other words … any airline which moves to charge the rate which is agreed at this conference before government approval, and therefore antitrust immunity, is obtained, would face a very strong evidential presumption that the rate being charged had been agreed between competitors and without antitrust immunity.
A18, ¶ 36 (emphasis omitted).2
Despite this warning, attendee airlines, including United, developed
Resolution 116ss, under which member airlines would introduce a fuel surcharge
tied to changes in the spot price of aviation fuel as tracked by the IATA Fuel Price
2 “[A]ttendance at and participation in … IATA trade association meetings
enjoys limited antitrust immunity under federal law so long as the defendants submitted any proposed resolutions and agreements to DOT for approval and received approval prior to implementation.” LaFlamme v. Societe Air France, 702 F. Supp. 2d 136, 149 (E.D.N.Y. 2010) (emphasis added).
-8
Index (FPI). A18-19, ¶ 37. United voted in favor of Resolution 116ss, which was
adopted on August 7, 1997. A20, ¶ 40. The Resolution provided that if the FPI
equaled or exceeded 130 on or after October 7, 1997, the airlines would implement
a fuel surcharge of $0.10 per kilogram, regardless of distance shipped. A20, ¶ 41.
If the FPI exceeded 150 for two consecutive weeks, IATA would convene a
meeting to discuss increasing the surcharge. Id. If the FPI fell below 110 for two
consecutive weeks, the surcharge would be suspended. Id.
In late 1999, prior to submitting Resolution 116ss to DOT for approval (i.e.,
without antitrust immunity), the cartel members, including United, collectively
decided to impose Resolution 116ss beginning on February 1, 2000. A22, ¶ 47.
On January 28, 2000, the FPI first exceeded 130 and IATA submitted Resolution
116ss to DOT for approval. A23, ¶ 50. Without waiting for a response from DOT,
United, its alliance partners,3 and other airlines outside of its alliance, including Air
France, British Airways, Cargolux, KLM and Korean Air, started charging DHL a
fuel surcharge of $0.10 per kilogram. A23-24, ¶ 51. On March 14, 2000, DOT
3 In 1996, United entered into a coordination agreement with Lufthansa and
Scandinavian Airlines System (SAS). DOT granted this alliance limited antitrust immunity. A16, ¶¶ 31-32. By its own terms, the immunity extends only to (1) United, Lufthansa and SAS; (2) conduct specified in the Alliance agreement; and (3) conduct “not adverse to competition or the public interest.” See DOT Order 96-11-1, at 10-18, 23-24 (Nov. 1, 1996) (cited in A8, ¶ 7 n.1, A16, ¶ 32 n.13) (available at http://docketsinfo.dot.gov/general/orders/19964qtr/961101.pdf). Here, SAS pleaded guilty to participation in the air cargo cartel, and Lufthansa entered DOJ’s corporate leniency program after disclosing its central role in the conspiracy. A65, A66-68, ¶¶ 149, 152.
-9
rejected IATA’s application for approval of Resolution 116ss: “We have …
decided to disapprove Resolution 116ss. The uniform, industry-wide index
mechanism proposed here appears fundamentally flawed and unfair to shippers and
other users of cargo air transportation.” A24, ¶ 53 (emphasis omitted).
IATA circulated DOT’s rejection to its members, along with a statement
advising that airlines that implemented surcharges pursuant to Resolution 116ss
would be guilty of illegal price-fixing: “If [members] were to coordinate pricing by
reference to the Index, whether pursuant to this disapproved Resolution or simply
through de facto parallel pricing actions, that could be regarded as an illegal
conspiracy in violation of applicable Competition laws . . . .” A25-26, ¶ 55.
Notwithstanding DOT’s refusal to grant Resolution 116ss antitrust immunity
and the warning from IATA, United and other cartel members continued charging
fuel surcharges as prescribed by Resolution 116ss. A25-26, ¶¶ 54, 56-58.
Although the purported justification for imposing the surcharges was to recoup fuel
costs, the charges increased at a much faster rate than the price of aviation fuel.
A12-13, ¶ 20. Moreover, because the surcharges were not tied to distance shipped,
they were not correlated with fuel usage or fuel costs. A78, ¶ 177c.
In late 2001, the FPI fell to a level that, under Resolution 116ss, required
suspending the surcharge. A United employee sent an email to two Lufthansa
employees stating: “across the industry we have successfully implemented
-10
surcharges”; “although the surcharge was introduced to offset ‘real’ fuel costs, that
revenue has contributed significantly to our falling revenues”; “bottom line … we
are not prepared to lose it.” A27-28, ¶ 61 (emphasis added). Therefore, airlines
including United, Lufthansa, SAS, Air France, KLM and Singapore Air
recalibrated the surcharge to preserve it and the supracompetitive profits it yielded.
A27, A28-29, ¶¶ 60, 62. They ultimately agreed to the following:
FPI above 115 for 2 consecutive weeks: Surcharge implemented at $0.05/kg FPI above 135 for 2 consecutive weeks: Surcharge adjusted to $0.10/kg FPI above 165 for 2 consecutive weeks: Surcharge adjusted to $0.15/kg FPI above 190 for 2 consecutive weeks: Surcharge adjusted to $0.20/kg
A29, ¶ 62. The airlines began charging DHL a $0.05 per kilogram fuel surcharge
pursuant to this altered formula effective late April to early May 2002. A30, ¶ 64.
Lufthansa, with United’s knowledge, was the leader of the cartel. United
knew that Lufthansa discussed surcharges with airlines outside of their alliance,
and those other airlines knew that Lufthansa communicated information about their
pricing to United, since all were copied on the same emails. In other words,
United knew that Lufthansa was administering and coordinating a cartel that went
beyond their alliance. A9, ¶ 8; see also A13, 29, 32-33, 45, 48-49, 58-59, 75-77,
¶¶ 22, 63, 70, 100, 110, 133, 172-176 (evidencing United’s knowledge of
Lufthansa’s role).
Throughout the existence of the cartel, United regularly received emails
from Lufthansa addressed jointly to United and other carriers outside of the
-11
alliance. See A29, 31-33, 34-35, 75-76, ¶¶ 63, 68, 70, 75, 173 n.271; SA16-23.
United responded to these emails not only by changing its prices, A26-30, 31-33,
34-37, 42-43, ¶¶ 57-65, 68-70, 74-79, 91, 92, but also by expressly confirming its
future pricing intentions both to Lufthansa, A32-36, ¶¶ 69, 73, 74, 76, 77, and to
non-alliance carriers, A30, ¶ 65 n.80 (email from the Vice President for Central,
Southern & Eastern Europe at Swiss WorldCargo noting that United had confirmed
that it would implement fuel surcharge increase as of September 23, 2001). United
also attended meetings at which surcharges were discussed with numerous non-
alliance carriers that subsequently pled guilty to criminal price fixing (including
Air France, Asiana Airlines, British Airways, Cargolux, Cathay Pacific, China
Airlines, El Al Israel Airlines, EVA Airways, Japan Airlines, KLM, Korean Air
Lines, Martinair, Nippon Cargo Airlines, Northwest Airlines, Qantas Airways and
Singapore Airlines). See, e.g., A21-24, 26-27, 44, 50-52, 59-60, ¶¶ 45, 48, 49, 52,
57, 59, 98, 116, 119, 136.
On December 9, 2002, in the midst of the cartel’s price-fixing activities,
United filed a petition for relief under Chapter 11 of the U.S. Bankruptcy Code.
A68, ¶ 154. Bankruptcy, however, did not alter United’s illegal activity, and
throughout its bankruptcy, United’s existing management—i.e., the individuals
who agreed to fix prices—continued to operate the company and participate in the
cartel. A68, ¶ 155. Between 2002 and 2006, while United’s bankruptcy was
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pending, United and its coconspirators continued to coordinate fuel surcharges and
adjust their fuel surcharges in concert. A29, 30, 32-33, 37-39, ¶¶ 63, 65, 70, 81-82;
A75-76, ¶¶ 172-73. For example, in a February 12, 2003 email, a Lufthansa
employee summarized Lufthansa’s coordination with British Airways, KLM,
United and SAS. See SA6-10; see also A32, ¶ 69; SA11-15. In December 2003,
Lufthansa’s General Manager for Pricing noted that he had coordinated an increase
with United, American Airlines, British Airways, Cargolux, Japan Airlines, KLM
and SAS. A34, ¶ 74; see also SA1-5 (email from December 4, 2003 noting
coordination with seven airlines). The carriers’ coordination directly resulted in
changes in fuel surcharge rates. See, e.g., A34, ¶ 74.4
In December of 2005, Lufthansa, after disclosing its role in the conspiracy to
federal authorities, entered the U.S. Department of Justice’s corporate leniency
program. A65, ¶ 149. On February 14, 2006, law enforcement officials conducted
“dawn raids” on the offices of several airlines involved in the conspiracy; United’s
office was not raided. A41, ¶¶ 88-89. Even after the raids, on May 1, 2006, an
employee of United met in Las Vegas, Nevada with Qantas Airway’s Vice
President of Freight for the Americas to discuss rates. The Qantas VP
4 DHL’s Amended Complaint also contains well-pleaded allegations that
United agreed with its competitors to fix security surcharges, customs surcharges, and base freight rates. See A43-60, ¶¶ 96-136.
-13
subsequently pled guilty to criminal antitrust violations and paid a $20,000 fine for
his participation in the cartel. A42, ¶ 91.
In June 2006, United received a subpoena from the U.S. Department of
Justice (“DOJ”). A43, ¶ 93. Although the Justice Department has not indicted
United, inaction in the face of United’s bankruptcy is not dispositive of the merits
of this civil proceeding.5 Moreover, United was named as a defendant in over
ninety class action lawsuits, eventually settling with the majority of the private
plaintiffs in return for an agreement to cooperate with the plaintiffs’ investigation.
A84, ¶ 193.
Rather than Inform its Creditors, United Concealed its Role in the Price-Fixing Conspiracy During and After its Bankruptcy Case
Throughout its bankruptcy proceeding, United concealed its participation in
the cartel by representing to DHL that its fuel surcharge was necessary to cover
increasing fuel costs. A68, A83, ¶¶ 156, 190. It also issued public statements that
portrayed to DHL and the public that the surcharge had been set unilaterally. A68,
5 Inaction by the DOJ does not lead to an inference that United did not
participate in the cartel, as the DOJ has limited resources, brings few cases, and the criminal standard of proof—beyond a reasonable doubt—is higher than the civil standard. See Starr v. Sony BMG Music Entm’t, 592 F.3d 314, 325 (2d Cir. 2010) (rejecting defendants’ argument that “inferring a conspiracy from the facts alleged is unreasonable because plaintiffs’ allegations are the very same claims that were thoroughly investigated and rejected by [DOJ]”); see also In re High Fructose Corn Syrup Antitrust Litig., 295 F.3d 651, 664-65 (7th Cir. 2002). Therefore, United’s assertion that the Antitrust Division “determined that United is not guilty of price fixing,” UA Opening Br. 25, is incorrect. Inaction is not a finding of innocence.
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A83-85, ¶¶ 156, 191-94. And although United listed various environmental claims
as contingent, unliquidated, disputed claims held by DHL on its Schedule F, it did
not list DHL’s antitrust claim. A141-44.
The bankruptcy court, which had no knowledge of United’s concealed price-
fixing conspiracy or DHL’s antitrust claim, approved United’s plan of
reorganization on January 20, 2006, approximately a month before the Justice
Department raids.6 A68, ¶ 154. Following confirmation of the reorganization
plan, United continued participating in the cartel, increasing its fuel surcharge
along with other airlines and continuing to meet with coconspirators—one such
meeting preceded United’s announcement of a fuel surcharge increase by only a
few days. A42-43, 72-73, ¶¶ 91-92, 94-95, 165.
Due to United’s concealment, DHL did not and could not have discovered
United’s involvement in the cartel until July 5, 2010, when, as a result of a
settlement with a cartel member, DHL obtained access to documents disclosing
United’s participation. A8, 69, ¶¶ 6, 161. United’s bankruptcy case was closed on
December 8, 2009, and the assets allocated to pay creditors were fully distributed
before that date. See SA26-27, Final Decree Closing Case, 02-48191 (Bankr. N.D.
Ill. Dec. 8, 2009).
6 After the dawn raids, United continued to make public statements
suggesting that it had not participated in the cartel. A83-85, ¶¶ 190-94.
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The District Court Proceedings
On February 4, 2011, approximately seven months after learning of its
claim, DHL sued United, asserting that United conspired to fix the price of air
cargo shipments in violation of § 1 of the Sherman Act, 15 U.S.C. § 1. United
moved to dismiss the Amended Complaint on the grounds that: (1) DHL’s
amended complaint did not plausibly allege that United participated in a price-
fixing conspiracy; (2) DHL’s claims were discharged when United emerged from
bankruptcy; and (3) DHL’s claims were barred by the statute of limitations. See
Dkt. # 20-1.
The district court (Gleeson, J.) denied the motion to dismiss. As an initial
matter, the court held that the claim was timely. A115. The court also held that
DHL plausibly alleged, under Ashcroft v. Iqbal, 556 U.S. 662 (2009), that United
participated in the price-fixing conspiracy. A134. Rejecting United’s contention
that the complaint alleged only bilateral communications between United and
Lufthansa, which United had argued were immune from antitrust scrutiny, the
district court held: “whatever immunity United had … through its alliance with
Lufthansa could not possibly extend to a conspiracy to fix fuel surcharges that
involved dozens of other carriers.” A135. According to the district court, the
complaint alleged that United coordinated its fuel surcharges with Lufthansa
“while knowing that Lufthansa was then coordinating those surcharges with other
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airlines.” A136. Therefore, “even assuming that United is immune from antitrust
liability for its agreements with Lufthansa, it is not immune from liability for
agreeing to fix prices with other airlines merely because it used Lufthansa as an
intermediary.” Id.7
Importantly here, the court held that DHL’s claim was not discharged in
United’s bankruptcy. Judge Gleeson first noted that even if a claim is otherwise
subject to discharge under the Bankruptcy Code, a court must consider “whether
the discharge would comport with due process.” A121. The court then explained:
“[a]s a general matter, due process requires notice not just that there is a pending
case or hearing, but of the nature of the charges or claims that will be adjudicated.”
A122 (citing In re Ruffalo, 390 U.S. 544, 551 (1968)). Applying these principles
to bankruptcy, the court observed:
7 Although United could have appealed the district court’s ruling that DHL’s
allegations were sufficient to state a plausible claim, it chose not to. See UA Opening Br. 11, n. 3. Yet its brief still ignores, contradicts, and misrepresents the allegations in DHL’s Amended Complaint in an effort to make its involvement in the price-fixing conspiracy seem implausible. For example, while United asserts that the Complaint alleges only protected bilateral communications between United and Lufthansa, UA Opening Br. 9-10, the Complaint actually alleges that United communicated with at least twenty other airlines that have since pled guilty to price fixing. See supra, at 10-11. And while United argues that “DHL’s allegations against United are entirely implausible,” UA Opening Br. 35, n.6, the plausibility of the allegations is simply not at issue on appeal. In any case, for purposes of a motion to dismiss, all of the well-pleaded facts in a complaint must be accepted as true, and all reasonable inferences must be drawn in favor of the non-moving party: DHL. Vietnam Ass’n for Victims of Agent Orange v. Dow Chem. Co., 517 F.3d 104, 115 (2d Cir. 2008).
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The due process rights of an unknowing victim of a debtor’s secret unlawful conduct are not protected by the victim’s receipt of notice of the debtor’s bankruptcy proceedings. Absent any practicable means of identifying what claim he might have, such a victim is no more able to become a claimant in the bankruptcy proceeding than if he had not received notice at all. Notice of the proceedings would be “a mere gesture,” not due process.
A123 (citations omitted).
The district court thoroughly examined the concerns United raised below
and repeats in its appellate brief: i.e., that discharge of all debts is vital to a Chapter
11 bankruptcy reorganization, lest bankrupt entities prefer liquidation over
reorganization, and that failing to discharge all debts could disadvantage creditors
who asserted claims in bankruptcy and received “just pennies on the dollar.”
A123-24. The court then crafted a rule to balance the competing interests of
fairness to claimants with “the fresh start offered by Chapter 11”: A debtor is not
required to give notice of a claim where (a) the claimant knows of its claim at the
time of bankruptcy or could uncover it with reasonable investigation (i.e., all “run-
of-the-mill” claims) or (b) where the claim that is unknown to the creditor is also
unknown to the debtor. A125-26. However, where, as here, “[the] debtor is aware
of certain claims against it due to information uniquely within its purview,” and the
creditor does not know of its claim, and could not have discovered it through the
exercise of reasonable diligence, discharge of the claim will satisfy “due process
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only if the debtor notified the claimant not only of the pending bankruptcy
proceedings, but also … of the nature of the claim to be discharged.” A126, 129.8
Finally, the court rejected United’s contention that DHL’s only remedy was
to move in the bankruptcy court either to revoke confirmation of the reorganization
plan, see 11 U.S.C. § 1144, or for relief from the final judgment, see Fed. R. Civ.
P. 60(b); Fed. R. Bankr. P. 9024—both of which were then “according to United,
no longer available” to DHL. A130.
The district court certified its ruling for interlocutory appeal, A203-05, and
this Court granted review. A206.
SUMMARY OF ARGUMENT
The right to reasonable notice before a person’s legal rights are terminated is
a fundamental right reflected in both the Due Process Clause of our Constitution
and bankruptcy law. Accordingly, it is a fundamental principle of constitutional
and bankruptcy law that inadequate notice precludes discharge of a claim in
8 United insists that the district court held that due process required United to
notify DHL of any claims “about which United may have, but DHL may not have, known.” UA Opening Br. 16-17. This is false. The district court held only that United was required to notify DHL of its antitrust claim where United knew of the claim and DHL did not know of it. A126-27. The court specifically noted that it had assumed the truth of these facts for purposes of United’s motion to dismiss, as it was required to do, and would revisit the issue after discovery. A130. For practical purposes then, the district court’s holding means that DHL is not cut off at the motion to dismiss stage. If United wishes to contest these issues of knowledge, the district court’s ruling contemplates that it will have a chance to do so.
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bankruptcy. Here, the district court correctly held that where, for purposes of this
motion, United was aware of DHL’s antitrust claim against it, and where DHL did
not know of the claim, and could not have diligently discovered it, DHL’s price-
fixing claim was not automatically discharged by the confirmation of United’s
bankruptcy plan.
A. What notice is constitutionally required depends on the facts and
circumstances of the particular case. For claims that are known to the debtor, but
unknown and unknowable to the creditor, informing the creditor of the bankruptcy
proceeding but failing to inform the creditor of his claim will not be sufficient to
allow the creditor to protect his interests. Therefore, in such a case, allowing
notice of the bankruptcy, standing alone, to discharge the creditor’s claim is
contrary to core concepts of bankruptcy law and to fundamental due process.
B. United ignores the narrowness of the district court’s ruling. United cites
cases involving claims that were either known to the creditor or unknown to the
debtor. But, of course, what is reasonable notice there is different from what is
reasonable notice here, where United knew of DHL’s antitrust claim and DHL did
not know of its claim and had no way to learn of it through the exercise of
reasonable diligence. Moreover, the district court’s ruling is consistent with
bankruptcy practice and will not impose impractical new burdens on debtors. A
debtor’s complete and honest disclosure is crucial to the functioning of the
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bankruptcy system. Debtors are already required to list all known claims on their
schedules. Here, the complaint alleges, and it must be accepted as true for
purposes of this appeal, that United’s management knew that the company was
engaging in a price-fixing conspiracy and overcharging DHL, and thus knew of
DHL’s antitrust claim against it. Therefore, under normal bankruptcy practice,
United should have included DHL’s antitrust claim on its bankruptcy schedules.
C. Finally, the district court did not err in holding that DHL was not
required to assert its antitrust claim in United’s bankruptcy when DHL discovered
the claim in July, 2010. The general rule is that where adequate notice is not
provided, the creditor’s claim is not discharged and the creditor can pursue its
claim outside of the bankruptcy process. Even were the rule otherwise, here DHL
had no meaningful opportunity to be heard in United’s bankruptcy case because by
the time DHL learned of its claim, United’s bankruptcy plan had been confirmed
and all of the assets allocated to pay United’s creditors had been fully distributed.
Indeed, United argued below that DHL no longer had the ability to reopen the
bankruptcy proceeding.
United’s assertion that it would be “fundamentally unfair” to allow DHL to
raise its claim outside of bankruptcy is outrageous. Despite United’s efforts to
portray itself as the victim, the real victim in this case is DHL. As to United’s
other creditors, they are not harmed by DHL’s antitrust claim. In fact, as we
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explain below, they have benefited from United’s concealment. Now that United
has deprived DHL of the opportunity to meaningfully participate in the bankruptcy
process by failing to inform DHL of its antitrust claim, it would truly be unfair to
deprive DHL of its right to raise the claim outside of bankruptcy.
STANDARD OF REVIEW
This court reviews a district court’s ruling on a motion to dismiss pursuant to
Federal Rule Civil Procedure 12(b)(6) de novo, accepting the factual allegations in
the complaint as true and drawing all reasonable inferences in favor of the non-
moving party. Vietnam Ass’n for Victims of Agent Orange v. Dow Chem. Co., 517
F.3d 104, 115 (2d Cir. 2008).
ARGUMENT
I. THE DISTRICT COURT PROPERLY HELD THAT WHERE UNITED KNEW OF DHL’S ANTITRUST CLAIM AGAINST IT, CONCEALED THE CLAIM, AND DHL COULD NOT HAVE DISCOVERED THE CLAIM PRIOR TO CONFIRMATION OF UNITED’S BANKRUPTCY PLAN, DHL’S ANTITRUST CLAIM WAS NOT DISCHARGED.
The right to reasonable notice before a person’s legal rights are extinguished
is a fundamental right reflected in both the Due Process Clause of our Constitution
and in bankruptcy law. What notice is reasonable is, of course, context dependant.
Here, the district court correctly held that where United was aware of, and
concealed, DHL’s antitrust claim against it, and where DHL did not know of its
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claim, and could not have diligently discovered it, DHL’s price-fixing claim was
not extinguished by the confirmation of United’s bankruptcy plan.
A. The Due Process Clause Mandates Meaningful Notice.
The Due Process Clause of the Fifth Amendment of the U.S. Constitution
provides, “[n]o person shall … be deprived of life, liberty, or property, without due
process of law.” The clause requires that deprivation of property be preceded by
notice and an opportunity to be heard. Mullane v. Cent. Hanover Bank & Trust
Co., 339 U.S. 306, 313 (1950).
In Mullane, the Supreme Court held: “An elementary and fundamental
requirement of due process in any proceeding which is to be accorded finality is
notice reasonably calculated, under all the circumstances, to apprise interested
parties of the pendency of the action and afford them an opportunity to present
their objections.” Id. at 314. Acknowledging that “the right to be heard has little
reality or worth unless one is informed that the matter is pending and can choose
… whether to appear or default, acquiesce or contest,” the Court required notice
“of such nature as reasonably to convey the required information.” Id. Notice
must be more than a “mere gesture.” Id. at 315. Instead, it must be what “one
desirous of actually informing” the person would do under the circumstances. Id.
The nature and extent of constitutionally required notice turns upon “the
practicalities and peculiarities of the case,” id. at 314, and “will vary with
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circumstances and conditions.” Walker v. City of Hutchinson, 352 U.S. 112, 115
(1956); see also Tulsa Prof’l Collection Servs., 485 U.S. 478, 484 (1988)
(“Whether a particular method of notice is reasonable depends on the particular
circumstances.”); Lujan v. G & G Fire Sprinklers, Inc., 532 U.S. 189, 196 (2001)
(“The very nature of due process negates any concept of inflexible procedures
universally applicable to every imaginable situation.”).
As the district court correctly noted, “[a]s a general matter, due process
requires notice not just that there is a pending case or hearing, but of the nature of
the charges or claims that will be adjudicated.” A122 (citing In re Ruffalo, 390
U.S. 544, 551 (1968)). This makes perfect sense: if due process only required
notice of a court date, without any explanation of the matter to be adjudicated, it
would hardly present the interested party with an opportunity to present his
objections.
Moreover, notice that is sufficient in one context may be deemed insufficient
in another, such as where the sender knows that the notice is inadequate or
defective under the facts of the particular case. See Robinson v. Hanrahan, 409
U.S. 38, 40 (1972) (holding that notice of a forfeiture proceeding sent to a vehicle
owner’s home address was inadequate where the State knew that the person was in
prison); Covey v. Town of Somers, 351 U.S. 141 (1956) (holding that a foreclosure
notice was constitutionally inadequate because town officials knew that the
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property owner was incompetent and was not represented by a guardian). In these
cases, “the [sender’s] knowledge that notice pursuant to the normal procedure was
ineffective trigger[s] an obligation on the [sender’s] part to take additional steps to
effect notice.” Jones v. Flowers, 547 U.S. 220, 230 (2006).
1. Due Process Requirements Apply in Bankruptcy and Preclude Discharge of a Claim Where Notice Is Inadequate.
Courts have long held that these fundamental due process principles are
applicable to the bankruptcy context. See, e.g., Bank of Marin v. England, 385
U.S. 99, 102 (1966) (applying Mullane to bankruptcy proceeding and holding that
without proper notice, “the contract between the bank and the drawer remains
unaffected by the bankruptcy”); City of New York v. New York, New Haven &
Hartford R.R. Co., 344 U.S. 293, 296 (1953) (applying Mullane to bankruptcy
proceeding).
Indeed, constitutionally adequate notice “is the cornerstone underpinning
Bankruptcy Code procedure.” In re Savage Indus., Inc., 43 F.3d 714, 720 (1st Cir.
1994). The Bankruptcy Code contains numerous notice requirements and provides
that a court can only confirm a reorganization plan after notice that “is appropriate
in the particular circumstances.” See 11 U.S.C. §§ 102(1), 1128(a). These
provisions, and the Code as a whole, are “founded in fundamental notions of
procedural due process.” Savage Indus., 43 F.3d at 721.
Accordingly, it is a bedrock constitutional and bankruptcy law principle that
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inadequate notice “precludes discharge of a claim in bankruptcy.” Wright v.
Owens Corning, 679 F.3d 101, 107 (3d Cir. 2012) (internal quotation marks
omitted); see also In re Barton Indus., Inc., 104 F.3d 1241, 1245 (10th Cir. 1997)
(“[A] creditor’s claim is not subject to a confirmed bankruptcy plan when the
creditor is denied due process because of inadequate notice.”); In re Kewanee
Boiler Corp., 198 B.R. 519, 534 (Bankr. N.D. Ill. 1996) (“Procedural due process
and requirements of meaningful notice are indeed a limitation on what possible
‘claims’ may be controlled by a confirmed plan in bankruptcy.”). As we discuss
below, what is considered adequate notice as a matter of both constitutional and
bankruptcy law is context dependent.
2. Knowledge of the Debtor and Creditor Is Key in Determining Whether Notice Is Adequate in a Particular Case.
“The burden of showing sufficient notice is on the debtor” seeking to
extinguish another party’s property rights. Hoffman v. Hoffman, 157 B.R. 580, 584
(E.D.N.C. 1992), aff’d, 998 F.2d 1009 (4th Cir. 1993). In determining whether the
debtor has met that burden, courts “assess the [constitutional] sufficiency of notice
against the backdrop of the factual circumstances in each case.” In re Kendavis
Holding Co., 249 F.3d 383, 387 (5th Cir. 2001). Notably, the Bankruptcy Code
itself defines notice as “such notice as is appropriate in the particular
circumstances.” 11 U.S.C. § 102(1)(A).
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As in other contexts, one of the key factors in determining the adequacy of
notice for due process purposes in a bankruptcy proceeding is knowledge—the
debtor’s knowledge of the creditor, the debtor’s knowledge of the claim, the
creditor’s knowledge of the claim, and the creditor’s knowledge of the bankruptcy.
For run-of-the-mill, transaction-based claims, for example where the debtor buys
$500 worth of books from the creditor on credit and does not pay for the books
before entering bankruptcy, informing the creditor of the bankruptcy proceeding
will generally be sufficient to allow him an opportunity to protect his interests.
This is so because the creditor knows about, or can easily discover, the outstanding
debt.
However, for claims that are unknown and unknowable to the creditor, a
different standard applies. Cf. In re Chateaugay Corp., 944 F.2d 997, 1003 (2d
Cir. 1991) (discussing the potential due process issues that would arise from
discharging claims of potential claimants who are not only unidentified, but
unidentifiable).9 Many courts have held that where the creditor has no reason to
9 Chateaugay questioned whether it is proper to include such claims within
the Bankruptcy Code’s statutory definition of “claims” in the first place. 944 F.2d at 1003. Based on the same reasoning, some courts have overlaid judicial limitations on the statutory definition of “claim” to address due process concerns. See, e.g., In re Hexcel Corp., 239 B.R. 564, 570-72 (N.D. Cal. 1999) (adopting “fair contemplation” test based in part on due process concerns). Recently, though, courts have tended to adhere more closely to the plain language of the statutory definition of “claim” and address due process issues directly, as the district court did here.
-27
know that his interests will be impacted by the bankruptcy proceeding, notice of
the bankruptcy itself is insufficient to discharge his claim. See In re Johns-
Manville Corp., 600 F.3d 135, 158 (2d Cir. 2010) (finding that notice was
constitutionally deficient where, “even if [the creditor] received the Notice
document, it could not have anticipated from the way the proceedings unfolded
that its contribution and indemnity claims—which were abstract, ‘unimaginable,’
and inchoate at the time—would be enjoined.”); In re Barton, 104 F.3d at 1245-46
(holding that although the creditors received notice of the bankruptcy proceeding
and the relevant dates, “[c]onsidering all the circumstances of this specific case,”
the notices did not allow them to make an informed judgment about the debtor’s
bankruptcy plan, and thus, the confirmed plan did not affect the creditors’ claims);
Hoffman, 157 B.R. at 584 (concluding that where the creditor had notice of the
bankruptcy proceeding, but did not have notice that her marital claims were at
issue, she was not bound by the confirmed Chapter 11 plan).
Likewise, most cases have held that tort claims about which a claimant does
not know, and cannot discover with reasonable diligence pre-confirmation, shall
not be discharged unless the rights of the claimants are raised by the debtor and
addressed and protected during the bankruptcy.10 See In re UNR Indus., Inc., 224
10 Antitrust claims under the Clayton and Sherman Acts sound in tort. SeeTexas Indus., Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 634 (1981) (“[C]ourts
-28
B.R. 664, 672 (Bankr. N.D. Ill. 1998) (surveying cases involving unknown tort
claims and finding that “virtually all … conclude that unknown tort claims cannot
be discharged … unless [the claimants’] interests have been adequately represented
within the bankruptcy proceeding”).
These cases recognize that, consistent with Mullane, notice of the
bankruptcy itself when dealing with claimants who have no knowledge of their
claims, and who cannot diligently discover them, cannot extinguish a creditor’s
claim. Notice is intended to provide those notified with a meaningful opportunity
to be heard. 339 U.S. at 314. However, a claimant who cannot possibly know of
his claims, even if he is notified of the bankruptcy, will not have an opportunity to
be heard, i.e., an opportunity to “choose for himself whether to appear or default,
acquiesce or contest.” Id. For example, where the creditor was exposed to a
carcinogen while working for the debtor, but has not yet developed cancer,
informing the creditor of the bankruptcy proceeding will not be sufficient to allow
him to protect his interests. See Laura B. Bartell, Due Process for the Unknown
Future Claim in Bankruptcy—Is this Notice Really Necessary?, 78 Am. Bankr. L.
J. 339, 354 & n.76 (2004) (Because such claimants cannot “recognize themselves
as affected in any way by the bankruptcy case,” they will “take no action to ensure
their interests are represented.”); In re Hexcel Corp., 239 B.R. 564, 571 (N.D. Cal.
generally have acknowledged that treble-damages actions under the antitrust laws are analogous to common-law actions sounding in tort.”).
-29
1999) (“[The debtor] confuses the requirement that creditors be given notice of the
bankruptcy proceeding (which it satisfied) with the requirement that parties must
have some notice of potential claims they might have against the bankruptcy
petitioner before those claims are discharged.”).
In In re Waterman Steamship Corp., 141 B.R. 552 (Bankr. S.D.N.Y. 1992),
vacated on other grounds, 157 B.R. 220 (S.D.N.Y. 1993), the bankruptcy court
held, on due-process grounds, that former employees’ asbestos claims were not
discharged by confirmation of the debtor’s bankruptcy plan because the debtor
failed to adequately notify the employees. Id. at 559. The court observed that
employees who had been exposed to asbestos but had not yet manifested injury
“would have remained completely unaware that their substantial rights were
affected,” even had they read the notice of the bankruptcy proceeding. Id.
Because the debtor knew that many former employees had been exposed to
asbestos, the court held, due process required that the debtor notify the employees
of the nature of their claims or appoint a representative to receive notice on their
behalf and represent their interests in the bankruptcy. Id. at 558-59 (citing Acevedo
v. Van Dorn Plastic Mach. Co., 68 B.R. 495, 499 (Bankr. E.D.N.Y. 1986) (“[D]ue
process should also require that a debtor notify a creditor of his claim when the
creditor is unlikely to know about the claim otherwise. A creditor who is notified
of the bankruptcy but not of his claim is in the same position as a creditor who has
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notice of his claim, but not of the bankruptcy.”)).
The above-mentioned cases finding inadequate notice typically involved
claims that were unknown to the creditor and claims and/or claimants that were
also unknown to the debtor. The rule that a debtor must notify a creditor of his
claim is even more appropriate where the debtor has concealed the claim from the
creditor. This is so because when the debtor conceals the creditor’s claim, the
debtor knows that notice of its bankruptcy proceeding is ineffective, “trigger[ing]
an obligation on the [debtor’s] part to take additional steps to effect” meaningful
notice on the creditor. Jones, 547 U.S. at 231.
On the other hand, rewarding a debtor for concealing a claim, by allowing
the debtor to provide notice of only the bankruptcy proceeding and allowing this
non-disclosing notice to discharge the creditor’s claim, is contrary to core concepts
of bankruptcy law and to fundamental due process. As the Supreme Court has
noted, the “fresh start” promise by the Bankruptcy Code is limited to the “honest
but unfortunate debtor.” Grogan v. Garner, 498 U.S. 279, 286-87 (1991) (internal
quotation marks omitted).
B. The District Court Correctly Held that Notice of the Antitrust Claim Was Required Under the Particular Facts of this Case.
Here, the district court correctly held that where United was aware of the
antirust claim against it “due to information uniquely within its purview,” and
where DHL did not know of its claim, and could not have diligently discovered it,
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United was constitutionally required to notify DHL of the claim to be discharged.
A126, A129.
The Amended Complaint alleged, and this Court must accept as true for
purposes of this appeal, that:
United “was well aware of its involvement in a conspiracy to fix surcharges, and thus, of the antitrust claim against it.” A126; see alsoA18, 25-28, 75-76, ¶¶ 36, 55-56, 61, 173.
United knew that it was overcharging DHL, one of its largest customers, because of the cartel. A7-8, 24-25, 27-28, ¶¶ 5, 53, 61.
During the bankruptcy proceeding, while United was operated by the same people who agreed to fix prices, United “continued to participate in the cartel and engaged in overt acts that concealed its involvement.” A12, 68, ¶¶ 18, 156.
United did not list the antitrust claim on its Schedule F and did nothing to notify DHL of the claim. A69, ¶¶ 158-59; A141-44; see also A129 n.12.
“DHL was not and could not have been on notice that it had a claim against [United] until after July 5, 2010, when DHL obtained access to documents that evidenced [United’s] participation in the cartel.” A8, ¶ 6.
Given this particular set of facts, the district court held that DHL’s antitrust claim
was not automatically discharged by United’s bankruptcy. That ruling is correct,
fully consistent with the cases discussed above, and should be affirmed.
1. The Cases Cited by United Offer No Basis to Question the District Court’s Holding.
None of the cases cited by United is contrary to the district court’s ruling
here. All involve claims that were either known to the creditor or unknown to the
debtor. In In re Penn Central Transportation Co., plaintiffs conceded, after
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extensive discovery, and the court found as a matter of law, that the trustees who
managed the corporation during the reorganization knew absolutely nothing about
the corporation’s alleged antitrust conspiracy. 771 F.2d 762, 767-69 & n.7 (3d Cir.
1985). United incorrectly claims that this fact was “irrelevant” to the Third
Circuit’s decision and “not essential to the … due process holding.” UA Opening
Br. 29-30. But in the language of that court, it was vital to its holding that the
notice plaintiffs received was sufficient: “[Plaintiffs] further admit that the trustees
did not know any facts about the alleged conspiracy. Under these circumstances,
we agree with the district court that … [plaintiffs] received all the notice that they
were due under the Constitution.” Id. at 769 (emphasis added).
Similarly, in In re Production Plating, Inc., the bankruptcy court
acknowledged that the debtor “had an obligation to list unliquidated contingent
claims if he knew about them,” but found that, as a matter of fact, the debtor had
no knowledge of the creditor’s potential claims. 90 B.R. 277, 279-80, 284 (E.D.
Mich. 1988). In re Circuit City Stores, Inc. is even further off the mark. In that
case, former employees filed a class action against Circuit City alleging California
labor law violations. No. 08-35653, 2010 WL 2208014, at *1-2 (Bankr. E.D. Va.
May 28, 2010). The employees neither asserted that they were unable to discover
the labor law violations prior to the bankruptcy discharge nor that Circuit City had
in any way concealed the violations. Thus, not surprisingly, the district court held,
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on summary judgment, that because “[n]either the identities nor claims of th[e]
[employees] were known or reasonably ascertainable by [Circuit City] at the time
they provided notice of the Bar Date,” “[n]either due process nor the Bankruptcy
Rules require[d] [Circuit City] to specifically inform [the employees] of the
existence or nature of their potential claims.” Id. at *8; see also In re Envirodyne
Indus., 214 B.R. 338, 350-51 & n.3 (N.D. Ill. 1997) (finding, on cross-motions for
summary judgment, that the creditors “could have and should have discovered
their antitrust claims prior to the Confirmation order,” and pointed to no facts
demonstrating that the debtor concealed their claims).
Here the facts are the opposite: as the Amended Complaint details, United
knew of DHL’s antitrust claim, DHL did not know of its claim and could not have
diligently discovered it, and United concealed from DHL its participation in the
cartel. United’s contention that the district court “[got] matters backwards,” by
presuming, for purposes of this motion, the truth of these well pleaded facts, is
nonsense. UA Opening Br. 24. On a motion to dismiss, both this Court and the
district court are required to accept all well-pleaded factual allegations as true, and
to draw all reasonable factual inferences in favor of the non-moving party: here,
DHL. Vietnam Ass’n for Victims of Agent Orange, 517 F.3d at 115. United’s
assertion that this requirement is somehow reversed in bankruptcy, where the
confirmation of a plan of reorganization applies as an “immunity from suit,” UA
-34
Opening Br. 24, is simply false.
The plain language of § 524(a)(2) of the Bankruptcy Code provides that only
a discharge of a debt “operates as an injunction against the commencement” of
suit. See 11 U.S.C. § 524(a)(2); In re Massa, 187 F.3d 292, 298 (2d Cir. 1999)
(denying former debtor’s motion to enforce the discharge injunction against a state
court action because the underlying debt was not discharged). Here, DHL’s
complaint alleges facts which, taken as true for purposes of this motion, compel the
conclusion that DHL’s antitrust claim was not discharged because United failed to
provide constitutionally sufficient notice of the claim. Therefore, the injunction
provision, and the claimed immunity from suit, simply does not apply. And United
provides no support for its position that a former debtor can simply declare that a
claim was discharged—even where the facts plead do not support that assertion—
and that the claim holder and district court must treat the former debtor’s assertion
as conclusive. In United’s view, once it simply asserts a claim was discharged, the
district court must stand down. It cannot inquire into the pleadings or facts
regarding adequacy of notice, and it cannot even afford a plaintiff discovery as to
whether its claim was, in fact, constitutionally discharged. Neither § 524(a)(2) nor
common sense support this view where one party simply declares victory over the
key fact that is the predicate for the immunity from suit.
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2. The District Court’s Ruling Is Consistent with Bankruptcy Practice and Does Not Impose Impractical New Burdens on Debtors.
United loudly asserts that the district court’s ruling is “out of step with long-
standing bankruptcy practice,” and will impose “massive new investigative
burdens on debtors like United.” UA Opening Br. 13-14. This ignores and distorts
the narrowness of the district court’s holding. The district court held only that
where, as here: (a) “[the] debtor is aware of certain claims against it due to
information uniquely within its purview” and (b) the creditor does not know of its
claim, and could not have diligently discovered it, discharge of the claim will
satisfy due process only if the debtor notifies the creditor not only of the
bankruptcy proceedings, but also of the claim to be discharged. A126, 129. That
holding is consistent with bankruptcy practice.
First, a debtor’s “[f]ull and honest disclosure … is crucial to the effective
functioning of the bankruptcy system.” In re Lowery, 398 B.R. 512, 515 (Bankr.
E.D.N.Y. 2008); see also id. (“Because the bankruptcy court, trustees, and
creditors rely on the information disclosed by a debtor, the importance of full
disclosure cannot be overemphasized.”); In re Tully, 818 F.2d 106, 112 (1st Cir.
1987) (“In bankruptcy administration, the system will collapse if debtors are not
forthcoming.”).
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Second, bankruptcy rules require the debtor to list all “known” claims in its
bankruptcy schedule and to identify whether the claim is liquidated, contingent
and/or disputed. See Official Bankruptcy Form B 6F. A claim is “known” if the
debtor “ha[s] in his possession … some specific information that reasonably
suggests both the claim for which the debtor may be liable and the entity to whom
he would be liable.” In re Arch Wireless, Inc., 534 F.3d 76, 81 (1st Cir. 2008)
(internal quotation marks omitted).
As United points out, see UA Opening Br. 18, and as the district court
acknowledged, debtors are not required to undertake “vast, open-ended
investigation[s]” to discover potential claimants or potential claims. In re J.A.
Jones, Inc., 492 F.3d 242, 250 (4th Cir. 2007) (internal quotation marks omitted);
A125-26 (“[Debtors] should not have to engage in inefficient, exhaustive
investigations in an attempt to identify and catalog every conceivable claim against
them, and then invite claimants to assert them.”). Instead, only “‘reasonably
diligent efforts’” are required—generally, a careful examination of the debtor’s
own books and records. J.A. Jones, 492 F.3d at 251 (quoting Mennonite Bd. of
Missions v. Adams, 462 U.S. 791, 798 n.4 (1983)).
But contrary to United’s contention, see UA Opening Br. 34, a claim can be
“known” from a debtor’s own records even if a cause of action has not yet been
filed, threatened, or listed in the debtor’s account ledgers. The Bankruptcy Code
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defines “claim” to include matters that are “unliquidated,” “contingent,”
“unmatured,” or “disputed.” 11 U.S.C. §101(5)(A). Plainly, a claim that is
“unmatured,” is not one where a cause of action has already been asserted or
threatened. Yet, it is a claim. And if the debtor’s management knows of the
unmatured claim and of the identity of the claimant, it has an obligation to provide
adequate notice if the claim is to be discharged.
Thus, in J.A. Jones, for example, the Fourth Circuit held that the estate of a
woman who had died in an automobile accident, which had not filed a wrongful
death suit or threatened to bring such a suit, was “known” from the debtor’s own
records. 492 F.3d at 245. It therefore held that the debtor should have listed the
wrongful death claim on its schedules. Id. at 251-52. The court’s review of the
debtor’s “own records” included newspaper articles that one of the debtor’s former
employees had read and contributed to, conversations among the debtor’s
employees about the accident, an investigation undertaken by the debtor’s liability
insurer, and a 250-page file on the accident maintained by one of the debtor’s
former employees and given to the debtor’s claims department. 492 F.3d at 251-
53; see also Arch Wireless, 534 F.3d at 81-82 (affirming the bankruptcy court’s
holding that a creditor was known, based on the debtor’s own records, because of
emails sent to one of the debtor’s employees).
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United’s contention that DHL’s price-fixing claim was “unknown” to it
cannot be squared with either the well pleaded facts or the relevant case law. The
Amended Complaint alleges that United’s management11 knew that it was
engaging in a price-fixing conspiracy and overcharging DHL and was aware of
DHL’s antitrust claim against it. A18, 25-26, 75-76, ¶¶ 36, 55-56, 173. Indeed,
the Amended Complaint details the long course of conduct of the conspiracy and
United’s participation therein, including an email from a United official (not
identified, due to United’s request) to two Lufthansa officials stating: “across the
industry we have successfully implemented [fuel] surcharges.” A27-28, ¶ 61
(emphasis added).
As the district court properly concluded, for purposes of this motion the
detailed complaint showed that United “was well aware of its involvement in a
conspiracy to fix surcharges and, thus, of the antitrust claim against it.” A126.
Indeed, it is inconceivable to think that a multimillion dollar airline could engage
in a seven-year price-fixing conspiracy with twenty competitor airlines without
11 As counsel for United well knows, the original complaint in this case,
filed under seal, identified by name the high-level United officers involved in carrying out the price-fixing conspiracy. The names were removed as a courtesy,at the request of United’s counsel. Now, exhibiting that same “chutzpah” that underlies United’s entire legal theory, United’s counsel cites the omission (which they requested) of the names as a flaw. DHL stands ready to add back that more specific information, if necessary, to a Second Amended Complaint.
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evidence of the conspiracy showing up in the company’s records and without the
company’s top management knowing about and directing it.
Under normal bankruptcy practice, United therefore should have included
DHL’s antitrust claim on its schedule as an unliquidated, disputed, contingent
litigation claim. See Official Bankruptcy Form 6F; see also J.A. Jones, 492 F.3d at
252 (“[A] disputed claim, if known, must be listed as a known claim in the
appropriate schedule accompanying a debtor’s initial petition for bankruptcy
relief.”); In re Ne. Software, Inc., 111 B.R. 387, 391 (Bankr. D. Conn. 1990)
(“[W]hen a debtor knows that the elements of a potential cause of action against it
exist, it should list that cause of action as an unliquidated, contingent claim.”).
Third, United’s contention that it was required to interview more than “one
hundred thousand employees,” UA Opening Br. 20, to uncover DHL’s antitrust
claim is nonsense. The same is true for United’s assertion that, under the district
court’s order, large corporations will be required to undertake “sprawling and
protracted investigations” in order to uncover what the company (i.e., its
supervisory employees) “is deemed already to know.” UA Opening Br. 20. Under
J. A. Jones, 492 F.3d at 251-53, and Arch Wireless, 534 F.3d at 81-82, both cited
by United, corporations are already required to examine their employees’ emails
and files to determine what the corporation knows, and to include all known claims
on their schedules. Therefore, it is not clear what “unprecedented costs,” UA
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Opening Br. 22, United believes that the district court’s opinion will impose. In
any event, none of those costs are applicable here, where DHL’s Complaint alleges
facts which, taken as true for purposes of this motion, compel the conclusion that
United’s top management knew of and participated in the cartel. A18, 25-28, 75-
76, ¶¶ 36, 55-56, 61, 173.
Fourth, United’s wrongly contends that the district court’s ruling will
encourage creditors to sit on their claims during the bankruptcy. But the court’s
holding applies only to a creditor who does not know of, and cannot discover, his
claim. A creditor who does not know of a claim cannot sit on it. For the same
reason, United’s allegation that the district court’s holding will open the door to
post-discharge “claim[s] such as wrongful termination claims, discrimination and
harassment suits [etc.],” UA Opening Br. 20, is wholly without merit. It is highly
improbable that an employee claiming sexual harassment would be able to show
that he or she was unaware of the harassment and unable to diligently discover it.
3. The District Court’s Ruling Is Consistent with Important Public Policy Underlying the Antitrust Laws.
Permitting United to engage in long-term price-fixing and to escape liability
by concealing its illegal activities would not only be inconsistent with due process
and bankruptcy law, but would also undermine important public policies protected
by the Sherman Act. Those policies are at least as important as the “fresh start”
policy that underlies the bankruptcy laws. The Sherman Act is “a comprehensive
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charter of economic liberty,” N. Pac. Ry. v. United States, 356 U.S. 1, 4 (1958),
and is “as important to the preservation of economic freedom and our free-
enterprise system as the Bill of Rights is to the protection of our fundamental
personal freedoms,” United States v. Topco Assocs., Inc., 405 U.S. 596, 610
(1972); see also 1B Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: An
Analysis of Antitrust Principles and Their Application ¶ 273c1 (3d ed. 2006)
(“[T]he federal antitrust laws represent the public economic policy of the United
States” (emphasis omitted)).
Intentional price-fixing, in particular, is anathema to a free market economy.
It is “plainly anticompetitive,” Nat’l Soc. of Prof’l Eng’rs v. United States, 435
U.S. 679, 692 (1978), and lacks “any redeeming virtue,” N. Pac. Ry., 356 U.S. at 5.
Accordingly, Congress has recognized that entering into and carrying out a price-
fixing agreement is a felony punishable by fine and three years in prison. Further,
Congress has provided that those injured as a result of such violations may sue and
recover treble damages. See 15 U.S.C. § 15 (1982); Mitsubishi Motors Corp. v.
Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 635 (1985) (“The treble-damages
provision wielded by the private litigant is a chief tool in the antitrust enforcement
scheme, posing a crucial deterrent to potential violators.”); In re Am. Express
Merchs.’ Litig., 667 F.3d 204, 214-15 (2d Cir. 2012). Private damage actions
“play an important role in penalizing wrongdoers and deterring wrongdoing,”
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Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 485 (1977),
particularly when government resources are constrained. As the Seventh Circuit
noted in In re High Fructose Corn Syrup Antitrust Litigation, 295 F.3d 651, 664
(7th Cir. 2002), the Antitrust Division has “limited resources” and brings few
cases. When no government case is brought, private suits are the only mechanism
to hold violators of the Sherman Act accountable.
For the foregoing reasons, the district court correctly held that in this
particular case, DHL’s antitrust claim was not discharged.
C. Where the Notice Provided to DHL Was Constitutionally Insufficient, DHL Is Not Now Required to Seek to Reopen the Bankruptcy Proceeding and File a Late Proof of Claim.
United argues that even assuming that the notice provided to DHL was
constitutionally inadequate, “DHL’s right to file a late proof of claim … provided
DHL with an adequate opportunity to be heard,” so DHL’s due process rights were
not violated. UA Opening Br. 36. This argument is without merit. First, it is
waived, because United did not raise it to the district court. Second, it ignores the
rule that where sufficient notice is not provided, creditors can pursue their claims
outside of bankruptcy. Third, DHL would not have had a meaningful opportunity
to be heard in United’s bankruptcy after it discovered its claim on July 5, 2010.
Fourth, forcing DHL to proceed in the bankruptcy court would lead to duplicative
litigation. Finally, United’s incessant refrain that allowing DHL to pursue its claim
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outside of bankruptcy would be “fundamentally unfair” is nonsense.
1. United Waived Its Argument by Failing to Present it to the District Court.
In the district court, United did not contend that even if notice to DHL had
been constitutionally inadequate, DHL received all of the process it was due under
the Constitution because DHL had an absolute right to reopen the bankruptcy case
and file a late proof of claim. In fact, United maintained the opposite: that any
attempt by DHL “to lift the bankruptcy discharge would be untimely.” See SA25.
Thus, this argument is waived. See In re Nortel Networks Corp. Sec. Litig., 539
F.3d 129, 132 (2d Cir. 2008) (appellant waives “argument by failing to present it
below”).
2. Where Notice Is Constitutionally Inadequate, the Creditor’s Claim Is Not Discharged and the Creditor Can Pursue the Claim Outside of Bankruptcy.
As explained above, it is well established that where constitutionally
sufficient notice is not provided, there is no discharge of the claim. In such a
situation, the creditor is generally free to pursue the claim outside of bankruptcy:
“the claim remains a legal and enforceable obligation of the debtor even after the
bankruptcy case is concluded, and the holder may sue the debtor to collect on it.”
Bartell, supra, at 346-47.
Numerous cases have so held. In Reliable Electric Co., Inc. v. Olson
Construction Co., the Tenth Circuit explicitly rejected the argument that the only
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remedy for a creditor who does not receive proper notice is to file a late proof of
claim. 726 F.2d 620, 623 (10th Cir. 1984). Instead, the court held that the creditor
could pursue its claim in full outside the bankruptcy court. The court reasoned that
it would be fundamentally unfair to “require [the creditor] to submit its claim to a
confirmed reorganization plan that it had no opportunity to dispute.” Id.; see also
In re Massa, 187 F.3d 292 (2d Cir. 1999) (where notice was not sufficient and
claim was not discharged, plaintiffs were free to pursue state-court fraud and false
representation action).
Similarly, in In re St. James Mechanical, Inc., the court held: “the fact that a
creditor does not receive proper notice … does not give the creditor the right to file
a claim post-confirmation.” 434 B.R. 54, 62 (Bankr. E.D.N.Y. 2010). Instead,
“[t]he correct remedy … is to treat the discharge as having no effect against the
creditor’s claim,” and allow the creditor to “exercise his rights in a non-bankruptcy
forum.” Id. at 62-63. This is so because once the plan, to which the creditor is not
a party, has been confirmed, filing a late claim cannot undo the confirmation and
allow the creditor to participate fully in the plan. Id. at 63.
In Wright, the Third Circuit held that plaintiffs were not afforded
constitutionally sufficient notice and therefore “retained” their non-bankruptcy
cause of action seeking damages from the debtor in a court of general jurisdiction.
679 F.3d at 102, 109. And in In re Spring Valley Farms, Inc., 85 B.R. 593, 594
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(N.D. Ala. 1988), the court held that where plaintiffs did not receive adequate
notice, they were free to pursue their state-law nuisance actions in state court. The
Eleventh Circuit affirmed in full. 863 F.2d 832 (11th Cir. 1989).
None of the cases cited by United are to the contrary. In re Intaco Puerto
Rico, Inc., 494 F.2d 94 (1st Cir. 1974), and In re Harbor Tank Storage Co., 385
F.2d 111 (3d Cir. 1967), both relied on City of New York v. New York, New Haven
& Hartford R.R., 344 U.S. 293 (1953), in holding that where a known creditor
who moved to file a late proof of claim in bankruptcy court had not been provided
formal notice, even where he had actual knowledge of the bankruptcy proceeding,
he was entitled to present his claim. In re Intaco Puerto Rico, Inc., 494 F.2d at 98-
100 (citing City of New York); In re Harbor Tank Storage Co., 385 F.2d at 114-16
(same). But the Second Circuit appears to reject the First and Third Circuits’
application of City of New York, holding that City of New York was a statutory
interpretation case that construed § 77 of the Bankruptcy Act of 1898, not the
Constitution. See In re Medaglia, 52 F.3d 451, 455-56 (2d Cir. 1995). Moreover,
neither Intaco nor Harbor Tank holds that a plaintiff who does not receive
adequate notice is forbidden from pursuing his claim in a non-bankruptcy forum.
3. DHL Had No Meaningful Opportunity to Be Heard in United’s Bankruptcy After it Discovered its Antitrust Claim in 2010.
Even if, contrary to fact, the general rule were that creditors who do not
receive adequate notice may proceed only in the bankruptcy court, that rule would
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be inapplicable here. United concedes that “[d]ue process ensures the opportunity
to be heard at a meaningful time and in a meaningful manner.” UA Opening Br.
14. And DHL had no meaningful opportunity to be heard in United’s bankruptcy
case after it discovered its claim on July 5, 2010.
As already noted, DHL did not and could not have discovered United’s
involvement in the cartel until July 5, 2010, when, as a result of a settlement with a
cartel member, DHL obtained access to documents disclosing United’s
participation in the cartel. A8, 69, ¶¶ 6, 161. That fact must be accepted as true for
purposes of this appeal.12 In order to obtain relief from the bankruptcy court at that
point, DHL would have had to move to reopen United’s bankruptcy case and then,
had the court granted that motion, moved to file a late claim.
Yet, even assuming the bankruptcy court would have allowed DHL to file a
late claim in 2010, that still would not have provided DHL an opportunity to
meaningfully “present [its] objections” in the bankruptcy case. Mullane, 339 U.S.
at 314. By 2010, United’s bankruptcy plan had been confirmed, and all of the
assets allocated to pay creditors had been fully distributed. See SA26-27. United
does not explain how “require[ing] [DHL] to subject its claim to a confirmed
reorganization plan that it had no opportunity to dispute,” and that had already
12 In the district court, United asserted that DHL should have known of its
claim against United after the Justice Department conducted dawn raids on some air carriers—not United—on February 14, 2006. If anything, this raises a question of fact that cannot be resolved on a motion to dismiss.
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been fully administered, in any way constitutes a meaningful opportunity to be
heard. See Reliable Electric, 726 F.2d at 623. Therefore, United is flat wrong to
assert that allowing DHL to file a late proof of claim would have, “place[d] [DHL]
in the same position that it would have been in had [sic] received the required
notice at the outset.” UA Opening Br. 14; see also id. at 36 (same).
Indeed, United’s contention is egregiously disingenuous, as it recently
opposed the attempt of a creditor whose claim was never adjudicated to reopen its
bankruptcy case. United’s opposition brief argued, inter alia, that even if the
creditor could prove his claim, there would be no relief available to him because all
of its stock had already been distributed. See SA28-39, Reorganized Debtors’
Objection to Motion, No. 02-48191, ¶ 21 (Bankr. N.D. Ill. Feb. 15, 2013).
United’s citation, see UA Opening Br. 40, n.9, to the two instances in which its
bankruptcy case has been reopened is misleading, as both times United itself
moved to reopen the case for its own advantage.13
Finally, even if DHL succeeded in convincing the bankruptcy court to
13 In 2011, United moved to reopen its case to enforce the bankruptcy
discharge injunction, see 11 U.S.C. 524(a)(2), against plaintiffs who had asserted claims United believed had been discharged. See SA40-53, Motion to Reopen, No. 02-48191 (Bankr. N.D. Ill. June 7, 2011). And in 2012, United moved to reopen its case as a precursor to asking the bankruptcy court to approve the termination of an escrow agreement so that the funds could be released to United. See SA54-61, Motion for an Order Reopening Chapter 11 Case, No. 02-48191 (Bankr. N.D. Ill. July 9, 2012).
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reopen United’s bankruptcy,14 DHL still would be required to move for permission
to file a late proof of claim pursuant to Rule 9006(b)(1) of the Federal Rules of
Bankruptcy Procedure (allowing parties to request an extension of a deadline that
has already expired “where the failure to act was the result of excusable neglect.”).
As the Supreme Court has noted, Rule 9006(b)(1) does not require a court to allow
a late proof claim. Instead, it allows a bankruptcy court, “in its discretion,” to
permit such a filing after considering “the danger of prejudice to the debtor, the
length of the delay and its potential impact on judicial proceedings, the reason for
the delay, including whether it was within the reasonable control of the movant,
and whether the movant acted in good faith.” See Pioneer Inv. Servs. Co. v.
Brunswick Assocs. Ltd. P’ship, 507 U.S. 380, 395 (1993).
4. Requiring DHL to Now Proceed in the Bankruptcy Court Would Lead to Duplicative Litigation.
Requiring DHL to assert its claim in bankruptcy court would also lead to the
absurd result of the same claim being litigated in two federal courts between the
same parties at the same time. DHL has alleged that the price-fixing conspiracy
14 The decision to reopen a bankruptcy case is generally discretionary, see
Redmond v. Fifth Third Bank, 624 F.3d 793, 798 (7th Cir. 2010), and the bankruptcy court has “broad discretion to weigh the equitable factors in each case.” In re Shondel, 950 F.2d 1301, 1034 (7th Cir. 1991) (internal quotation omitted). (United’s bankruptcy case was administered by the Bankruptcy Court for the Northern District of Illinois, which is required to follow the law of the Seventh Circuit. See In re Shattuc Cable Corp., 138 B.R. 557, 565 (Bankr. N.D. Ill. 1992) (“[B]ankruptcy courts in a particular circuit are bound by decisions of the court of appeals in that circuit.”)).
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continued after confirmation of United’s bankruptcy. See supra, at 14. Thus, even
if barred from pursuing its antitrust claim in the district court with regard to
conduct that took place before and during United’s bankruptcy, DHL still has a
right to pursue its claim for post-conformation conduct there. In both cases, the
evidence will be the same, as pre-discharge evidence would be relevant to the issue
of whether United continued its participation in or rejoined the conspiracy after its
bankruptcy discharge. See In re WorldCom, Inc., 546 F.3d 211, 221 (2d Cir. 2008)
(citing with approval cases “in which courts have rejected defendants’ efforts to
insulate themselves from post-confirmation liability by linking the alleged
violation to pre-petition conduct”). Further, United is jointly and severally liable
for all damages that the cartel caused DHL. See United States v. Gallerani, 68
F.3d 611, 620 (2d Cir. 1995) (“Once a conspiracy has been established, the
criminal liability of its members extends to all acts of wrongdoing occurring during
the course of and in furtherance of the conspiracy.” (internal quotation marks
omitted)).
5. United’s Appeal to Equity and Fairness Is Misplaced.
Over and over again in its brief, United declares that it would be
fundamentally unfair to United and its other creditors to allow DHL to advance its
claim outside of bankruptcy. UA Opening Br. 7; see also id. at 13 (allowing DHL
to raise its claim outside of bankruptcy “will be fundamentally unfair to those
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creditors who play by the rules and see their claims discharged for pennies on the
dollar.”); id. at 14 (“[A]llow[ing] creditors like DHL to file suit outside the
bankruptcy system, seeking 100 cents on the dollar … would be fundamentally
unfair both to United’s other creditors, whose claims were discharged in
bankruptcy (and many of whom are now stockholders in the company), and to
United itself, whose efforts to obtain a fresh start would be frustrated.”); id. at 25
(same); id. at 27 (same).
But the undeniable implication of United’s argument is that a corporation
should be allowed to engage in an ongoing price-fixing conspiracy before and
during its bankruptcy, conceal its illegal behavior from its largest customer and
from the bankruptcy court until after the confirmation of its reorganization plan,
and then be rewarded for its outrageous behavior.
Nothing could be more antithetical to the spirit of the Bankruptcy Code than
to have a debtor, while in bankruptcy, participating in and concealing illegal
business practices that intentionally harm third parties. Bankruptcy laws are
intended to be a shield, not a license to steal. See In re Morgan, 197 B.R. 892, 898
(N.D. Cal. 1996) (recognizing importance of “prevent[ing] bankruptcy from being
used as a shield for fraud by allowing fraud claims to go forward against debtors
who concealed their fraud prior to discharge”). As the district court recognized,
“[d]ischarge is a privilege granted the honest debtor and not a right accorded to all
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bankrupts.” A127; see also Grogan, 498 U.S. at 286-87 (stating that the fresh start
promised by bankruptcy law is not absolute and is limited to the “honest but
unfortunate debtor” (internal quotation marks omitted)).
It is therefore not surprising that United cannot cite a single case to actually
support its vacuous “fundamental fairness” position. United bases its entire
argument on In re Emons Indus., Inc., 220 B.R. 182 (Bankr. S.D.N.Y. 1998), but
its reliance is misplaced.15 In Emons, the debtor had disclosed to the bankruptcy
court that it would face future tort claims from unknown women who had been
exposed to DES but who had not yet sued, and the bankruptcy court specifically
crafted the bar date order not to bar any claims from such future DES claimants.
Id. at 185-86. Even though their claims were timely, the future DES claimants
urged that because they had not received notice of the bar date, they were entitled
to “pursue the Reorganized Debtor [outside of bankruptcy] and seek to recover
100% of their claims.” Id. at 192. The debtor did not dispute the validity of that
proposition in general, but denied its application to its particular case because the
DES claims were still timely under the bar order. Id. The court agreed: “It is only
logical in this court’s view that a creditor as to whom no bar date has been set has
15 Despite United’s selective quotations, In re Miracle Mart, 396 F.2d 62 (2d
Cir. 1968), is irrelevant to this case. There, the question was whether, under the Bankruptcy Act Amendment of 1963, the bankruptcy court had the power to treat the creditor’s executory contracts, which were rejected after the six-month period for filing a claim, as general unsecured claims instead of administrative expenses entitled to priority. Id. at 63-64.
-52
the right to file a timely claim post-confirmation.” Id. (emphasis added). After
acknowledging the “unique features” of the case, the court held that the equities
supported treating the new DES claimants as entitled to the same distribution as the
identical original DES claimants, who had been injured earlier and who were
therefore required to submit their claims in bankruptcy. Id. 192-94.
The facts and reasoning of Emons could not be more different from this
case. United did not disclose to the bankruptcy court that it was engaged in a
multi-year price fixing conspiracy. It did not inform the court that it would face an
antitrust claim from DHL when its price-fixing conspiracy finally came to light.
The bankruptcy court did not explicitly craft the bar order so as not to bar DHL’s
antitrust claim. And it was not happenstance that DHL did not discover its
antitrust claim until after United’s bankruptcy: United concealed the claim.
As to United’s other creditors, they are not harmed in any way by DHL’s
antitrust claim. Indeed, they benefited from United’s failure to disclose DHL’s
claim in two ways. First, had DHL received notice of its antitrust claim and
participated in United’s bankruptcy case, DHL would have been entitled to share in
the bankruptcy estate, thus diluting the recovery available to other creditors.
Second, the bankruptcy estate from which United’s other creditors recovered was
artificially inflated by the at least $56 million of illegal surcharges United collected
from DHL during the cartel period, to which the other creditors had no legitimate
-53
claim.
Having deprived DHL of the opportunity to meaningfully participate in the
bankruptcy process, United would have this Court visit the only remaining
unfairness on DHL by precluding DHL from pursuing this case. Indeed,
preventing DHL from pursuing its claim would be doubly unfair because it would
allow United to retain the ill-gotten gains from its price-fixing conspiracy.
CONCLUSION
For the foregoing reasons, the district court’s denial of United’s motion to
dismiss should be affirmed.
Respectfully Submitted,
/s/ Garret G. Rasmussen /s/ J. Peter Coll, Jr.Garret G. RasmussenRobert M. LoebRachel Wainer ApterAntony P. KimRyan K. QuillianOrrick, Herrington & Sutcliffe LLP1152 15th Street, N.W.Washington, D.C. 20005Tel: (202) 339-8400
J. Peter Coll, Jr.Orrick, Herrington & Sutcliffe LLP51 West 52nd StreetNew York, New York 10019-6142Tel: (212) 506-5000
Counsel for Plaintiff – Counter-
Defendant – Appellee, – DPWNHOLDINGS (USA), INC.
Dated: June 12, 2013
CERTIFICATE OF COMPLIANCE
I hereby certify that the brief contained herein has a proportionally spaced
14-point typeface and contains 13,219 words, based on the “Word Count” feature
of Microsoft Word, including footnotes and endnotes. Pursuant to Federal Rule of
Appellate Procedure 32(a)(7)(iii) and Local Rule 32(a)(7), this word count does
not include the words contained in the Corporate Disclosure Statement, Table of
Contents, Table of Authorities, and Certificate of Service.
Dated June 12, 2013
Respectfully Submitted,
/s/ J. Peter Coll, Jr.
J. Peter Coll, Jr.Counsel for Plaintiff – Counter-Defendant – Appellee, – DPWNHOLDINGS (USA), INC.
SUPPLEMENTAL APPENDIX
i
TABLE OF CONTENTS
Page
E-mail from General Manager of Pricing, Lufthansa Cargo, to SeniorVice President of Marketing, Lufthansa Cargo (Dec. 4, 2003)Exhibit B to Amended Complaint (Dist. Ct. Dkt. 9) .......................................... SA1
E-mail from General Manager of Pricing, Lufthansa Cargo, to SeniorVice President of Marketing, Lufthansa Cargo (Feb. 12, 2003)Exhibit C to Amended Complaint (Dist. Ct. Dkt. 9) .......................................... SA6
E-mail from General Manager of Pricing, Lufthansa Cargo, to SeniorVice President of Marketing, Lufthansa Cargo (Feb. 12, 2003)Exhibit D to Amended Complaint (Dist. Ct. Dkt. 9)........................................SA11
E-mail from Regional Sales Director for Germany, Lufthansa Cargo,to representatives of United Airlines, Air China, Air France,Cathay Pacific, Cargolux, Japan Airlines, Korean Air, Singapore Air,South African Airways, Thai Airways, and VARIG (Jan. 22, 2002)Exhibit G to Amended Complaint (Dist. Ct. Dkt. 9)........................................SA16
E-mail from a Lufthansa Cargo Employee to an Employee of United Airlines,and Representatives of Aerolinhas Brasileiras, Air France, American Airlines,Iberia, Japan Airlines, KLM, TAM Cargo and VARIG (Oct. 13, 2005)Exhibit H to Amended Complaint (Dist. Ct. Dkt. 9)........................................SA19
Excerpt from Reply Memorandum of Law in Support of Defendants’Motion to Dismiss the First Amended Complaint (Dec. 1, 2011)(Dist Ct. Dkt. 26) ..............................................................................................SA24
Final Decree Closing Case of UAL Corporation (Bankr. N.D. Ill. No. 02 B 48191, Dec. 8, 2009)(Bankr. Ct. Dkt. 17425) ....................................................................................SA26
Reorganized Debtors’ Objection to Motion of Jeffrey Glen Brownto Reopen Chapter 11 Cases of UAL Corporation, et. al(Bankr. N.D. Ill. No. 02 B 48191, Feb. 15, 2013)(Bankr. Ct. Dkt. 17484) ....................................................................................SA28
ii
Notice and Motion to Reopen Chapter 11 Cases of UAL Corporationand UAL Loyalty Services, Inc. for the Limited Purpose of EnforcingThis Court’s Prior Orders, Including the Confirmed Plan, ConfirmationOrder and Discharge Injunction (Bankr. N.D. Ill. No. 02 B 48191, June 7, 2011)(Bankr. Ct. Dkt. 17435) ....................................................................................SA40
Notice and Motion for an Order Reopening Chapter 11 Case of UnitedAir Lines, Inc. (“United”) for the Limited Purpose of Considering the Agreement to Terminate Escrow Agreements and Release RemainingFunds to United Between United, HSBA Bank USA, U.S. Bank NationalAssociation, and Bank of America, N.A. (Bankr. N.D. Ill. No. 02 B 48191, July 9, 2012)(Bankr. Ct. Dkt. 17470) ....................................................................................SA54
ease 1:11-CV-UUbb4-Jti-VVP Document 9 Hiea Ub/U9/11 P ge is or bZ Pageiu #: ibi
Exhibit
SA1
uase 1:11-CV-OUbb4-JLi-VVP uocument 9 Fnea Ub/09/11 P ge 9 of bZ Pagetu #: ib
From: aiLESEMI CARGO Sent Thursday, December 04, 2003 246 PM To: IIIMICEEMMEME
...," Subject: AW: Vorstandsinfo HMIs 10/03 - &helium der Fuel Surcharge auf €0.15 As riberarbeilete Version
Follow Up Flag: Follow up Flag Status: Red
Hallo,
habe dies entsprechend angestollen. Wind in den nachslen Minuten rausgeschickt.
BA kommt haute ouch raus. „IL hal beslatigt AA and UA sind dabei SAS no problem KL tribe ich angestollen. (strong consideration. confirmation haute WOO Mit CV (habe auch selbstaus Meetings mittlerweile Kontakt) will offensichtlich auch folgen.
Grutl.
Ptah4101.— Vern Cesondat RMTIIII0atirbev 2003 13515 Ar 111.1111=28111111111 Carat: WG: Vogstardsirgo Fpit 10/03 • Edv5Oung 4a Fwd Sumhors. duff 0,1S /kg, axvorbeacte *Con
fyi - want kommt die Presse??.?
—11.s.pningAdie Yort IIIMMEMENIMMI Gcsrode4 Ocra • e.g. 4. Dezember 2003 1345 AreCc
11.11111=11111.1
Oetreff: AW: %WM:boar70 f/141,10/03 - Erb0hung Or Fad Sun:ang 0uf ( 0,15 Pcg, abadtkottle Vcsbn
Ok
1111111MEE11101
Van, IIMMEM911.111 • Cosset:dal DonnArstag, 1. Dezember 2003 00:57
C Am
Detroff: . Vorstaottlatt F/M1. 10/03 - Eth0NA19 der Fuel Stanarge our E 0,15 A% aberatelete V5-SiOn
Lieber MEM, Lieber , rebefirMin
anbei die iiberarbeiteta Vorslandsirdormation FfML10/03 zit Anhebung dcr Fuel Sur dem aktualisierten Fuel Price Index der vergangenen Woche (KW 48). Zusammengefasst zweiten.Woche den Schwellemert Oberschritten and rniismen der Regel folgend dm -Surcharge publizieren. (i 0,15 / kg)
Mdiesern Zusammenhartg trier ein Wettbewertaiberbliek. Europa:
zum 19.12.03 mit V. in der
e Stufe der Fuel
LH_CIV_0000042 Highly Confidential
- Protected By Court Order-06-MD-1775 (EDNY)
Highly Confidential -- Protected by Court Order -- 06-MD-1775 (EDNY) LH CIV 0000042
SA2
uase 1:11-CV-UUbb4-JU-VVP Document 9 i-nea Ub/U9/11 P ge 1U 01" b2 Pagem #: 15:3
Air France wind aufgrund ihrer Elerechnungsmethode rich t mit drier hiihung reagieren. • hal sea zwei wpetteri eve Internetseite nicht aktuaris,iert, was datauf schriefien 'lass sic auf ein von Wettbewerbem wartet. Der Index des BA befindet sick am Schwellenwert und mit einer lung der Feet Surcharge ist zu rechnen. Da SAS der Melhodat und dem Fuel Price Index der WAG care t folyl. ist davon auszugehen, lass der Sleigerung gefolot wird.
AIK Ameraw:
und UA hsben am 03,12.03 Ihre Michste Stute der Fuel Surcharge mil Wirkung vom 1 .12.03 veraffentrachl. Asierc Mit einem Folgen der JAL let ebenfalls zu rechnen, Kier soil eine Anhebung der Fuel Sure arge zum 01.02. ex Japan (aufgrund der dad gelteriden gesetzilthen Bestimmungen) erfolgen.
Die pubazierte Regel besagt, das vele die Fuel Surcharge mit Witting arm 10.12. erki werden. Anerdings ist aus heutl9er Sicht nida sicker, win der Markt in G5nze reagieren wird. Unser V. ist dcnnoch, die Systernatat beizirbehalton und enIsprechend zu erho.Then. < Oatet Yoln Fig_ 0322.doc komprimiert) < Date!: Anlage Vetn F L_12 03.ppt (komprirniert)»
Zur trommunacation am 05.12.03 linden Sic Such aribei eine von FICIvocbereilete Pr •-e 'eating ma der Sate urn Freigabe.
< Doteit Fuel Price_Dez.2003 _Aden (komprimiert) »
Wid freundlichen Grallen
®ON=
LI-I_CIV_0000043 Highly Confidential
- Protected By Court Order-O5-MD-1775 (EDNY)
Highly Confidential -- Protected by Court Order -- 06-14D-1775 (EDNY) LH CIV 0000043
SA3
From: Sent: Thursday, December 4,2003 9:57 AM To: Redacted
Redacted
ease 1:11-CV-UUbb4-Jti-VVP Document 9 F-itea Ub/U9/11 Page 13. Ot bZ Pageiu m 154
Unofficial Translation
From: Redacted
Sent: Thursday, December 04, 2003 2:46 PM To: Redacted
Subject: RE: Board Information Fil\4L 10/03 — Increase Fuel Surchar revised version Follow Up Flag: Follow up Flag Status: Red
•Hello,
up E 0.15/kg,
Have initiated this accordingly. Will be sent out in the next minutes.
BA is announcing today. JL has confirmed AA and UA are on it SAS no problem KL: I initiated it, (strong consideration, confirmation tonight) CV (have contacts in the meanwhile from meetings) is apparently abo it to follow.
Regards,
Redacted
From: Redacted
Sent: Thursday, December 4, 2003 1:58 PM To: Redacted
Subject: FW: Board Information F/ML 10/03 — increase Fuel Surcharge up € 0,15/kg, revised version
fyi — when are the press [releases] going to come?
From:11111111111==.11 Sent: Thursday, December 4, 2003 1:55 PM To:111111=1111111 Cc: Redacted
Subject: RE: Board Information MIL 10/03 — Increase Fuel Surcharge up € 0.15/kg, revised version
Ok
Redacted
LH_CIV_0000044 Highly Confidential — Protected By Court Order —
00i-MD-1775 (EDNY)
LH CIV 0000044 Highly Confidential -- Protected by Court Order -- 06-MD-1775 (EDNY)
SA4
uase 1:11-CV-UUbb4-dLi-VVP Document 9 Hlea ub/u9na P ge 1L or b2 Pageiu #: ibb
Unofficial Translation
Cc:
Redacted
Subject: Board. Information F/ML 10/03 — Increase Fuel Surcharge up version
(/ 5/kg, revised
Dear Redacted ear Redacted dear Redacted
Attached is the revised Board Information F/ML 10/03 regarding the surcharge with effect of 19.12.03 following the updated fuel price (KW 48) [KW = Kalenderwoche / calendar week]. In sum, we threshold in the second week and must, according to the rule, publish fuel surcharge. (€ 0.15/kg)
In this context an overview of competitors is provided below.
increase of the fuel index of last week ave exceeded the
he next level of the
Europe: Air France will not follow the increase due to its calculation me updated its website for two weeks, which indicates that it waits competitors. The index of BA is at the threshold and an increase of expected. Given that SAS follows the mechanism and fuel price inde it is assumed that they will follow the increase. America: AA and UA have announced on 3.12.03 the next level of the fuel sure 16.12.2003. Asia: JAL is also expected to follow with an increase of the fuel surcharge Japan (due to the applicable legal regulations there). According to the published rule, the fuel surcharge is to be increased However, in the light of the current situation, it is not entirely clear will react in its entirety. Nonetheless, our proposal is to stick to the accordingly.
For the communication on December 5, 2003 find attached a press F/CI with the request for clearance.
Kind regards,
Redacted
od. KLM has not for a signal from e fuel surcharge is of LCAG directly,
harge with effect of
as of February 1 ex
ith effect of 19.12. to how the market
•ystem and increase
elease prepared by
LI-I_CIV_0000045
Highly Confidential — Protected By Court Order —
06-M0-1775 (EDNY)
LIICIV 0000045 Highly Confidential -- Protected by Court Order -- 06-HD-1775 (EDNY) SA5
ease 1:11-CV-OUbb4-JU-VVP uocument 9 1-fiea ubtouru P ge OT b2 Pagetu #: ibb
Exhibit
SA6
rartwoca, tL mortar [w1 0:28 MIRPeamm
ited:ictcd
ease 1:11-CV-UUbb4-Ai-VVP Document 9 Fnea 0bi09i1'1 I-)ge 14 01- b PagelD #: '15(1
From: Sent:
2} • Subject:
Hallo
11.1111.3=111111111 Wednesday, February 12, zon 0:56 PM W :Mar
wie besprochen hole ich noch weitere Erkundigungen in Sachen War Risk Surcharge ein.
ilabe haute auch milder Passage geSprOchen, die erarbeiten auch verschiedene Szena sind wie bei tins. Existierende both oder extra Surcharge oder Ratenanpassung. Favorit ist nosh keine Entscheidung.
Hahen Ste eine Favarilen for die Namenswahl. Joh hake die Crisis Surcharge kir gut. (Bess War Surcharge)
Gnill
1111011211111
aus, Gedanken xtra Charge, aber
als War RN oder
sell dem habeich mit mehreren Carriers Kontakt gehabi
, FuelSurcharge: BA wilt zum 02.03.03 erhtihen. Konurnmikation toll don schon morgen raus. (zu Agenten)
) Kt_ wig auch hock, am 01.03.03 oder 03.03.03 UA geht auch in die Richtung. Implementation 03.03.03 SAS will oral zum 10.03.03 ertiohen. (Rig! sich in das zurticktialtende Bad der SAS)
War Surcharge: BA noch zunickhakend, momentan geplant flu' auf den Routen die impact haben, (Haben nicht den Mut dies weitweit zu argumenderen.) Woken nicht als Kriegsgewinnler dastehen. KBrinte allerdings se n, Bass BA mit geht wenn wir vorangehen. UA ouch zurOckhattend. Welton nur dutch Fuctsurchzuge und Ratenerhohung Kosten abted n. KL keine Aufkrung, werde zu gegebener Zeit nochmal nachlassen.
Rateriertiohung BA nosh_ keine Meinung dazu. UA sieht inbound US (aus Europa und Asien) Potential Q hat nurser Signal wehrger lc/m.0m und sich gewundert, dass wir diesen Schtitt zum Sam r machen, wed tow season etc (Haben auch nicht den richligen Mut dazu, wie mir schien)
Fazit LCAG geht mit den gri50.ten Meitensliefeln voran. Maine Einschatzung: nnissen wir such, darn sonst bowegen die anderen sick keinen lentimeter.
We're gut, wenn Sie diese Mail nichi welter verbreiten.....
LH_CIV_0000101 Highly Confidential
- Protected By Court Order-06-MD-1775 (EDNY)
LIICIV 0000101 Highly Confidential -- Protected by Court Order -- 06-MD-1775 (SONY)
SA7
uase 1:11-CV-UUbb4-JU-VVP Document 9 1-ilea mu9/31 page lb OT b2 Pagetu #:
Grua
2
LH_CIV_0000102
Highly Confidential - Protected By Court Order-
06-MD-1776 (EDNY)
Highly Confidential -- Protected by Court Order -- 06-MD-1775 (EDNY) LH CIV 0000102 SA8
uase 1:11-CV-005b4-JU-VVH uocument 9 Hiea Ub/U9/11 Page lb of 5Z Pageu #: 159
Unofficial Translation
From: Sent: Wednesda Febn 12, 2003 8:56 PM To:
Subject: FW: Info OAL
Hello
As discussed I will seek further information in respect of the war risk surcharge.
Today I have also spoken with Passage, which also works on various scenarios; their thoughts are the same as ours. Existing high or extra surcharge or rate adjustment. Favorite is extra charge, but no decision yet.
Do you have a favorite for a name? i think crisis surcharge is good, (better than war risk or war surcharge)
Regards,
Redacted
From: Redacted Sent: N. nesday, February 12, 2003 7:28 PM To:
Hello
Redacted
Since the:MI:have had contacts with several carriers.
Fuel Surcharge: BA wants to increase as of 02.03.03. Communication is to go out tomorrow, (to agents) KL wants also to increase on 01.0103 or 03.0103 UA is also going in this direction. Implementation 03.03.03 SAS wants to increase only as of 10.03.03. (Fits in the reserved picture of SAS)
War Surcharge: BA still reserved, currently only planned on routes which have an impact (don't have the courage to argue for worldwide introduction.) Do not want to be seen as winners of the war. But it could be that B A joins if we start. UA also reserved. Only want to compensate costs with fuel surcharge and rate increase. KT, no comment, will contact again at an appropriate time.
Rate increase: BA no opinion on this. UA sees potential for US inbound (from Europe and Asia) KL is aware of our signal arid is surprised that we take this step in the summer during low season etc ... (don't have the courage in this respect in my opinion)
Lli_CIV_00001 03 Highly confidential
—Protected By Court Order — 06-MD-1775 (EDNY)
Redacted
Highly Confidential -- Protected by Court Order -- 06-14D-1.775 (HWY)
LH CIV 0000103 SA9
ease 1:11-CV-UUbb4-JCi-VVP Document 9 Hi ea Ub/U9/11 Hage Ot 52 Pagetu #:
Unofficial Translation
Result: LCAG is making the biggest advances. My assessment: we need to because otherwise the others would not move a centimeter.
Would be good if you do not forward this mail...
Regards,
Redacted
LH_CIV_0000104 Highly Confidential
— Protected By Court Order — 064104 775 (EDNY)
Highly Confidential -- Protected by Court Order -- 06-240-1775 (EDNY) LH CIV 0000104 SA10
ease 1:13.-CV-UUbb4-JU-VVP uocument 9 1-1tea Uti/U9/11 page it3 Or bZ Pageiu
Exhibit D
SA11
--tescrtrorne eachncht--yore cesendet WBRE2003 16:30 An
Redacted
ease 1:11-CV-UUbb4-JU-VVP Document 9 Hiea mown Page 19 of 5Z Pageiu ibZ
From: Sant To: Subject:
e riff! txuary 12.2003 1:24 PM Redacted
• AW: FPI 07 Feb 03
Dann blue jetzt VOVO Vorbereiten and wie gerade tele(onisch besprochen vorgehen.
Gruff r
Ursvcingilthe Nachricht-- . Vora Gssaxlet Arc lietr•ff:
II_!___roarIMIL 12:55
Guten Morgenammmg,
wenn es uns gelingen softie am 17.02.03 die Pressemitteitung rauszuschicken (vorausgesetzl wir bekommen die Oaten aus den USA am mo • en) ware auch der 3.Marz 03 als Einfahrungstormin denkbar. Habe gerade mit KLM gesprochen. Redacted annte mir die Kontaktperson dart). Die beabsichligen auctr rauszugehen am 01. oder 03.Marz. n war slab in Amsterdam nicht ganz sicker. SAS +United kommen twat mit.
Wie schatzen Sie das ein? Moines Erachtens ist 03.03.03 °twits zu schnell geschossen.
Zu Ihrer Info. Pressemitteilung habe ich Montag schon angeschoben. (Far die Schublade) In der Vergangenheit (das latzte Mal im September 2002) bei Erhahung von 0.05 auf 0,10 Euro hatten wir eine Vorstandsvodage (keine Info) geschrieben. (Vorstandsvoriage F/ML 11/02)
Gru(,
1111111121121M
Gasendet: rivtvf9011111111TM11021 1213 An actrefit ' trt 41 tea 43
Liebe Kollegon,
zur Info. Ich gehe dawn aus, das bei dieser hohen 08erschreitung Sid) auch in der nachsten Woche ein Wert Clber 185 ergeben wird and wir dann mit 2 Wochen Vonauf in die &tie Stufe gehen werden. Des we're dean In effect ab 4.3., wenn wir am 18.2. oder 19.2. an die Offent5chkeit gehen.
Pressemitteilung bereilen wir vor.
GruS,
Redacted
LH_CIV_0001168 Highly Confidential
- Protected By Court Order-06-MD-1775 (EDNY)
Highly Confidential -- Protected by Court Order -- 06-MD-1775 (EDNT) LH CIV 0001168 SA12
ease 1:11-CV-UUbb4-JU-VVP uocument 9 F-nea Ub/U9/11 page zu 0t bz Pageiu #: :LbJ
Bernet?: FPI 07 Feb 03
Dear co/leagues,
here is the latest Fuel Price Index:
07. Feb 2003 174 92,77 US cents / gallon
Herewith the FPI has exceeded the 3rd threshold for the fir week.
The Intranet (http://1ww.lcag.fra.d1h.de/frafy/tvp/p/) has been updated, the Internet (httPV/www.lhcargo.com) will be updated until tomorrow latest.
L.H_CIV_0001169 Highly Confidential Protected By Court Order-
06-MD-1775 (EDNY)
Highly Confidential -- Protected by Court Order -- 06-MO-1775 (EDNY) 0001169 SA13
Original Message--
From: IMESSIMM. Sent: Wednesday, February 12, 2003 at 12.27pm To: Subject: FW: FPI 07 Feb 03
Redacted
ease "1::1:1-cv-uubb4-Jci-vvP Document 9 Hiea Uti/U9/11 Page 21 OT 52 PageIu #: 1b4
Unofficial Translation
From: Sent: Wednesday, February 12, 2003 at 1.24pm To: Subject: RE: FPI 07 Feb 03
Redacted
Redacted
Now please prepare the Executive Board proposal and proceed as just discussed on the telephone.
Regards, aim=
--Original Message--
From: INIMEMINE Scat: Wednesday, February 12, 2003 at 12.56pm To: Subject: RE: FPI 07 Feb 03
Good morning
Redacted
If we manage to send out the press release on February 17, 2003 (provided that we receive the data from the US in the morning), March 03, 2003, would also be a possible introduction date, (I] have just spoken to KLM. ®supplied me with the name of the contact person there). They also intend to [announce] on March 01 or 03. The people in Amsterdam were not entirely sure. SAS and United arc also doing so.
What is your opinion of this? In my view, March 03, 2003 is somewhat too hasty,
For your information. 1 already started the press release on Monday. (For the drawer) In the past (the last time being September 2002), where there was an increase from 0.05 to 0.10 EUR, we wrote an Executive Board proposal (no info). (Executive Board proposal F/ML 11/02)
Regards
Redacted
Dear colleagues,
For your information. I expect that, given the considerable extent by which the amount has been exceeded, a level above 165 will also arise next week and that we will enter the third stage with 2 weeks advance notice. This would then be in effect from March 04, if we go public on February 18 or 19.
We arc preparing a press release.
LHCIV 0001170
Flighty Confidential - Protected By Court Order-
06-MD-1775 (EDNY)
Highly Confidential -- Protected by Court Order -- 06—MO-1775 (EDNY) LH CIV 0001170 SA14
ease 1:11-CV-UUbb4-Jti-VVI-1 uocument 9 Hiea Ub/U9/11 Page zz or b Pageiu ltib
Unofficial Translation
Regardsanmir
--Original Message.---- From:ailleMiit Sent: Tuesday, February 11, 2003 at 430pm To'
Subject: FPI 07 Feb 03
[Email tent in English]
LH CIV 0001171 Highly Confidential
- Protected By Court Order-06-MD-1775 EDNY)
Highly Confidential -- Protected by Court Order -- 06-MD-1775 (EDNY) LH CIV 0001171 SA15
ease 1:11-CV-UUbti4-JLi-VVP Document 9 Hiea 0b109/11 page zu or 52 Pagetu #:
Exhibit G
SA16
Redacted Redacted
Redacted
OAL: CX Redacted OAL: RG, Redacted
OAL UA. Redacted
case 1:11-CV-UUbb4-JU-VW Document 9 i-iiea Uti/U9/11 ',age 29 OT b'L Pageiu #: 1rz
From: Redacted Sent: Tuesday, Janua To: OAL: AF, Redacted
OAL: JAL Redacted OAL: SA. Redacted
Cc: Subject: Fuel Surcharge
Importance: High
Attachments: Fuel Surcharge_iiberarbeitet_d.doc
22.2002 8:48 AM ; OAL: CA, OAL: JAL,
OAL.: SQ.
OAL: CV, ; OAL:
OAL: TG,
Redacted Redacted
Redacted Redacted
Sehr geehrte Herren,
in der Antage Oberservien wir lhnen vorab zu Ihrer persanlichen Information die Pressemitteilung zur Einfiihrung einer modifizierten Methodik zur Berechnung der Fuel Surcharge. Die Veraffentlichung der Pressemitteilung erfolgt morgen, den 23.01.02.
Fuel hargejiberarbeitet
Anmerkung: Da der aktuelle Fuel Price Index self den letzten 2 Wochen bei 106 steht, wird dementsprechend noch keine Fuel Surcharge berechnet.
Mit freundlichen GrO8en
Redacted
Confidential -- Protected by Court Order -- 06-HD-1775 (EOM) LH CIV 0029865 SA17
Redacted Redacted
Redacted
From: Redacted Sent: Tuesday, Janua To: OAL: AF,
OAL: JAL, OAL: SA,
Cc: Subject:
Importance:
Attachments:
Fuel Surcharge
High
Fuel Surcharge _Oberarbeitet_cl.doc (Fuel Surcharge_reworked_d.doc)
Redacted Redacted
Redacted
OAL: CX , OAL: RG,
OAL: UA.
22, 2002 8:48 AM OAL: CA
OAL: JAL OAL.: SO,
RedactedRedacted
OAL: CV, ; OAL: KE,
OAL: TG.
Redacted Redacted
Redacted Redacted
Redacted
ease 1:11-CV-OUbb4-Jti-VVP uocument 9 F-1tea Ub/U9/11 page 30 or b2 Pagetu #: 1(3
Gentlemen,
Enclosed we are sending you in advance, for your personal information, the press release regarding the introduction of a modified method for calculating the fuel surcharge. The press release will be published tomorrow morning, on January 23, 02.
ru8 rftigktberaitatat,
Note: Since the current Fuel Price Index has been at 106 for the past two weeks, no fuel surcharge is correspondingly to be calculated yet.
Greetings,
Redacted
COrrYdentia -- Protected by =act :rdr, ot-mp-1175 (MUT)
LH CIV 0029865
SA18
ease 1:11-CV-UUbb4-JU-VVP Document 9 -Ilea Ob/09/11 Hage Ot b Pagel') #: 1(4
Exhibit H
SA19
Original Message From: Muted
Sent: Tuesday, October 04, 2005 8:11 PM To:
Redacted
Redacted - SAOQS; [email protected]; FRANCE; Redacted @absacargo.com;
Redacted Redacted
Redacted Redacted
(ABSA/VCP); @variglog.com;
Redacted
Redacted - A
UA Redacted
Lase 1:11-cv-UUbb4-Jti-VVP Document 9 I-Ilea Ub/09/11 Page SZ of bZ PagelD #: 11t
From: Sent: To: Cc: Subject:
Redacted
Thursday, October 13, 2005 12:59 PM
FW: Taxa de combustive!
Greetings
as stated bellow (unfortunatelly in portuguese), LH will increase fuel surcharge in Brazil to USD 0,60 next 240CT. rgds
Redacted
Original Message, From: Redacted @d1h.de (mailto:[email protected]] Sent: quinta-feira, 13 de outubro de 2005 12:21 To: Redacted @dlh.de; Redacted Oklmcargo.com; Redacted @aa.ccm;
9airfr nce.fr; Muted @absacargo.com;
@ual.com; @iberia.com.br; <tam.com.br Redacted
@variglog.com; @absacargo.com;
@jal.com; Co: Redacted @d1h.de Subject: RE: Taxa de combustivel
Redacted
Redacted
Redacted
Redacted
Redacted Redacted
Prezados colegas,
Novo aumento, a partir de 24 de outubro subiremos para US 0,60/k, mantendo-nos alinhado com nossa politica mundial. Mercado esta sendo notificado hoje
Redacted
Redacted
Redacted
@tam.com.br
Subject: RE: Taxa de combustivel
Prezados Colegas,
Como mencionado no e-mail abaixo, nos ajustamos a nesse politica munidal.
Seguindo a tabela indexatoria da taxa de combustivel aprovada pelo DAC reajustaremcs nossa taxa de combistivel para US 0,55/k a partir de 17 de outubro.
dd encaminhamos eats comunicac5o ao mercado, contamos com o apoio de todos
Atenciosamente,
Confidential -- Protected by Court Order -- 05—MD-1775 (BONY) SIA CIV 0000230
Cc:
SA20
Redacted
rM Redacted Redacted
Redacted Redacted
Thursday, September 08, 2005 7:23 - SAOQS';
@absacargo.com Redacted
de combustivel
-----Original Message - From: Sent: To: ' - AIRFRANCE; Cc: Subject: Taxa
@aa.com; Redacted @variglog.com;
Lase 1:11-CV-UUbb4-JU-VVP vocument 9 Htea Ub/U9/11 page OT b Pagetu #: ltb
Redacted
Prezados Colegas,
Apos a aprovagdo pelo DAC de nossa tabela indexatoria para o fuel surcharge (em anexo o oficio do DAC), decidimos aguardar um pouco o incremento pars c ajuste de acordo com a tabela, devido ao recente incremento na taxa em US 0,10/k em urns Unica vez...
Como já conseguimos superar este aumento, a LH Cargo planeja iniciar a cobranga de US 0,50/k a partir de 01 de outubro, comunicando o mercado na prOxiMa seginda-feira, dia 12 de setembro.
Esperamos poder contar com o apoio de todos para este ajuste, afinal a "briga" para a aprovacao da tabela foi longa!!!!
Informamos tambem qua, a partir de agora a LH Cargo sempre seguira a politica mundial da empress ncs ajustes fiesta taxa.
sds
Redacted Original Message From: Redacted SAOQS (mailto: Redacted @klmcargo.com] Sent: Thursday, August 04, 2005 5:29 PM To: Redacted Redacted @aa.com; Redacted @variglog.com; Redacted - AIRFRANcE;
Redacted @absacargo.com Subject: P.E: Of DAC
Prezados colegas,
A. AT Cargo e a KLM Cargo vSo aderir a cobranca de USD 0,45 p/Kg demo autorizado pale DAC. Temos como data para implementacao deste ajuste o dia 01 de Setembro corn previa comunicagao aos nossos clientes a fim de que tenharn tempo habil de se ajustarem junto aos exportadores.
Abracos,
Redacted 2
Confidential -- Protected by Court Order -- 06—MD-1775 (EDNY) SIA CIV 0000231 SA21
Redacted Redacted
Redacted Redacted
AF CARGO; AA
AF ABSA
Redac et Redacted thbax
uase 1:11-CV-UUbb4-JU-VW Document 9 Fnea Ub/U9/11 Hage :i4 oT bZ Hagen, #: I
Redacted
Original Message From: Redacted @d1h.de Sent: Monday, August 01, 2005 6:57 PM To: ROta0ed @aa.COM; Redacted @variglog. com; 11 — SAOQS; Redacted @absacargo.com Subject: FW: Of DAC Importance: High
Redacted
— A1RFRANCE; Redacted •
Frezados colegas,
saiu hoje a autorizagSo do DAC para o incremento do Fuel Surcharge. Creio que podemos alinhar tuna data pare a implementacSo do ajuste da taxa afim de evtiar confusao no mercado. Para existir tempo habil pare a notificacAo aos nossos clientes, sugiro o dia 15 de agosto.
Aguardo vossos comentarios.
Atenciosamente,
Redacted
[mailto: Redacted @terra.com.brI August 01, 2005 5:46 PM
TAAG PRICING; TAAG ; SURINAM; SK RG ; POLAR CARGO; PLUNA ; MEXICAN
; KE; JK IBERIA CARGO
; CO allESEINIS; BA 111111111EMEMI BA 1111.132291111C AZ
AEROSUR; AEROM. ; AC CARGO; Redacted
Redacted
From: Redacted Sent: Monday, To: UA Redacted
RG LX/ LX CARGA;
; XL Redacted XLM interline.00mercialetam.com.br; IB
Redacted ; TACA u„ as
RG- 2ccluto Redacted
Redacted
Redacted
Redacted
Redacted
UA ; UA TAPIIIMMOMIll TAP Redacted Redacted
Redacted _ Redacted
Redacted
REP/BRASIL; DL DL Redacted
Redacted
Redacted Redacted edacted AR R ; AR ; AR • AINIPP Redacted Redacted
AA CARGO Cc: DAC mac DAC Subject: 2%4: Of DAC
Redacted Redacted AA
ASSESSOR
Redacted Redacted
AC Redacted
REEL
Redacted ; LA
Redacted
; LA ; JAL
; CO imm; CABO ; AZ 11111EMEME; AV
; GOL ; FEDEX Redacted Redacted
Redacted Redacted Redacted
Redacted
Redacted
PARA CONHECIMENTO DE NOSSAS ASSOCIADAS, FOR OFICIO DA REFERENCIA , 0 DAC APROVOU 0 REAJUSTE NO VALOR DA COBRANCA DO ADICIONAL DE COMBUSTIVEL PARR CARGA AEREA INTERNACIONAL, 0 QUAL LHE ENVIAMOS EM ANEXO. CORDIALMENTE
Redacted PRESIDENTE JURCAIB
3
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ease 1:11-CV-UUbb4-JU-VVP uocument 9 Hiea Ub/U9/11 Page -,3b at 52 Paget° #:
For information, services and offers, please visit our web site: http://www.klm.com. This e-mail and any attachment may contain confidential and privileged material intended for the addressee only. If you are not the addressee, you are notified that no part of the e-mail or any attachment may be disclosed, copied or distributed, and that any other action related to this e-mail or attachment is strictly prohibited, and may be unlawful. If you have received this e-mail by error, please notify the sender immediately by return e-mail, and delete this message. Konicklijke Luchtvaart Maatschappij NV (KLM), its subsidiaries and/or its employees shall not be liable for the incorrect or incomplete transmission of this e-mail or any attachments, nor responsible for any delay in receipt. *********************************k****************k************* **
4
Confidential -- Protected by Court Order -- 06-MD-1775 (sour) SIA CIV 0000233 SA23
ease 1:11-CV-UUbb4-JU-VVP vocument Lb Hrea iziumi page 1 at Pagetu #: tijb
UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK
DPWN HOLDINGS (USA), INC.
I1-CV-0564 (JG/VVP)
Plaintiff,
v.
UNITED AIR LINES, INC. d/b/a UNITED AIRLINES; UNITED CONTINENTAL HOLDINGS, INC., f/k/a UAL CORP.
Defendants.
x
REPLY MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS' MOTION TO DISMISS THE FIRST AMENDED COMPLAINT
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discharge in another jurisdiction, however, is not allowed. See Trulis v. Barton, 107 F.3d 685,
691 (9th Cir. 1995) (when a bankruptcy plan is not challenged on direct appeal, "res judicata
principles preclude collateral attack" through separate litigation). And because DHL made no
such effort to reopen the bankruptcy proceeding in this case even though United's bankruptcy
discharge applies to all claims, whether known or unknown, that principle is dispositive here.
Mem. In Supp. of United's Mot. to Dismiss ("Mem.") at 18-19.
Any attempt at this point to lift the bankruptcy discharge would be untimely. A claimant
must seek the bankruptcy court's revocation of confirmation of a reorganization plan under 11
U.S.C. § 1144 within 180 days of the confirmation date, and actions for relief under Fed. R. Civ.
P. 60(b) generally must be brought "within a reasonable time"; motions under Fed. R. Civ. P.
60(b)(1)—(3) must be brought within a year of entry of the order. See Fed. R. Civ. P. 60(c)(1).
Waiting nearly five years cannot be deemed "reasonable" when DELL was surely aware of its
potential claims no later than February 14, 2006, two weeks after the Effective Date of United's
Plan of Reorganization. It should also be noted that the Order confirming United's
Reorganization Plan set an Administrative Claims bar date of March 3, 20062—a date nearly
three weeks after the highly publicized raids and dozens of lawsuits had already been filed.
Again, DHL chose to sit on its rights, and instead filed the instant suit nearly five years later.
The contrary rule that DHL espouses—that an antitrust court is free to disregard a
bankruptcy discharge order if a plaintiff alleges fraudulent concealment of the antitrust claim
(Opp. 23-25)—has never been adopted by any court. The decisions upon which DHL relies most
heavily for its rule were brought in bankruptcy court pursuant to Rule 60(b). See In re
Envirodyne Indus., Inc., 214 B.R. 338, 343, 347 (N.D. Ill. 1997); In re Penn Cent. Transp. Co.,
2 See Ex. A at 5 to Dupre Decl., Ex. 5 (Order Confirming Debtors' Second Amended Joint Plan of Reorganization, In re UAL Corp., No. 02-B-48191 (Bankr. N.D. III. Jan. 20, 2006)).
5
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IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In re:
Chapter 11
UAL CORPORATION, et al., Case No. 02 B 48191
Reorganized Debtors. (Jointly Administered)
Honorable Eugene R. Wedoff
FINAL DECREE CLOSING CASE OF UAL CORPORATION
Upon the above-captioned reorganized debtors' (collectively, the "Reorganized
Debtors") Motion for Entry of a Final Decree Closing Cases of UAL Corporation, et al. and for
Relief From Local Bankruptcy Rule 3022-1 (the "Motion")1 seeking entry of a final decree
closing the bankruptcy cases of UAL Corporation and its affiliated Reorganized Debtors; and no
previous application for such relief having been made; and it appearing that this Court has
jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334 and the Plan; and it
appearing that this proceeding is a core proceeding pursuant to 28 U.S.C. §§ 157; and upon
consideration of the Reorganized Debtors' Motion; and the Court being satisfied that the estate
of UAL Corporation has been fully administered within the meaning of section 350 of the
Bankruptcy Code; and due and proper notice of the Reorganized Debtors' Motion having been
given; and it appearing that no other notice need be given; and after due deliberation and
sufficient cause appearing therefore; it is HEREBY ORDERED:
1. The bankruptcy case of UAL Corporation, Case No. 02-48191, shall be
closed as provided for in Bankruptcy Rule 3022, effective as of the date of this order.
All capitalized terms not defined herein shall have the meaning ascribed to them in the Motion,
K&E I 5970746. I SA26
Eugene Wedoff United S ates Bankruptcy Judge
casp U2-48191 DOC 11425 Hiea 12/U8/U9 Entered 12/Uti/U9 uesc main Document Page 2 of 2
2. Notice of the Motion as provided therein shall be deemed good and
sufficient notice of such Motion and the requirements of Rule 3022-1 of the Local Rules of the
Untied States Bankruptcy Court Northern District of Illinois are satisfied by such notice.
3. This Court retains jurisdiction with respect to all matters arising from or
related to the implementation of this order.
4. Notwithstanding the possible applicability of Bankruptcy Rules 6004(g),
7062, 9014, or otherwise, the terms and conditions of this order shall be immediately effective
and enforceable upon its entry.
5. All time periods set forth in this order shall be calculated in accordance
with Bankruptcy Rule 9006(a).
Chicago, Illinois Dated: Der_eve \ve, , 2009
2
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IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In re:
) Chapter 11
UAL CORPORATION, et al., Case No. 02 B 48191
Reorganized Debtors. (Jointly Administered)
Honorable Eugene R. Wedoff
REORGANIZED DEBTORS' OBJECTION TO MOTION OF JEFFREY GLEN BROWN TO REOPEN CHAPTER 11 CASES OF UAL CORPORATION, ET. AL
"Trustees, creditors, debtors, and even bankruptcy judges are entitled to some
measure of finality in bankruptcy proceedings." Matter of Evanston Motor Co., 26 B.R. 998,
1005 (N.D. Ill. 1983), aff'd 735 F.2d 1029 (7th Cir. 1984). Here, twelve years after his
termination from United, and seven years after the confirmation of UAL Corporation and its
affiliated reorganized debtors' (collectively, "United") chapter 11 plan of reorganization (the
"Plan"), former flight attendant Jeffrey Glen Brown seeks to reopen United's chapter 11 cases to
pursue a baseless, prepetition claim dressed up as an adversary proceeding.
Mr. Brown's motion should be denied. The Bankruptcy Code allows closed
chapter 11 cases to be reopened to administer assets, grant relief to the debtor, or for "other
cause." 11 U.S.C. § 350(b). Mr. Brown does not identify any particular "cause" for reopening
United's chapter 11 case other than many years of his own inaction. Regardless, as described in
more detail below, Mr. Brown has received all of the process to which he was entitled, as his
filed proof of claim was treated in United's Plan and the arbitral forum to which this Court
directed Mr. Brown in 2004 rejected his claims. A dozen years after Mr. Brown's termination,
there is no "cause" for reopening United's chapter 11 case merely so that the company can
deal—yet again—with Mr. Brown's frivolous allegations.
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Background
1. Mr. Brown was employed by United as a flight attendant from 1991 until
his termination effective May 31, 2001. United terminated Mr. Brown after a series of absences
resulting in progressively more severe disciplinary warnings until he was terminated based on
improper behavior on a flight. Mr. Brown filed six grievances against United relating to its
disciplinary actions and his termination, all pre-petition, and all of which were resolved by the
United-Association of Flight Attendants System Board of Adjustment (the "System Board").
2. As this Court is well aware, on December 9, 2002 (the "Petition Date"),
United and its then-debtor affiliates filed voluntary petitions for relief under chapter 11 of title 11
of the United States Code. Within the confines of the chapter 11 case, this Court set a bar date
for the filing of proofs of claim.
3. On May 6, 2003, Mr. Brown filed proof of claim no. 36671 related to a
pending grievance challenging his termination. Mr. Brown sought the amount of $79,044.55, of
which $4,650 was classified as a priority claim.
4. On December 18, 2003, the System Board issued a comprehensive, 59-
page report denying the vast majority of Mr. Brown's grievances against United. See Exhibit A,
12/18/03 System Board Opinion and Order. The System Board sustained the disciplinary actions
preceding Mr. Brown's termination but determined that because of Mr. Brown's bipolar
disorder, Mr. Brown should be permitted to return to work if certain conditions were met.' Id.;
see also Exhibit B, 3/21/05 System Board Opinion and Order, at 2-3.
The System Board evaluated and rejected Mr. Brown's allegations that he was unfairly targeted and discriminated against because of his sexual orientation. Specifically, the report states: "we find the record quite persuasive that Mr. Brown's sexuality had no impact on Captain Kirsch's reaction to the Grievant's cockpit behavior or on the decision to write him up." See Exhibit A, at p. 48.
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5. One of the System Board's conditions for Mr. Brown to return to work
was for him to present himself to United's medical department with a clinical narrative report
completed by his health care provider. A physician at LAX Medical would then review the
report and determine, based on an examination, if he or she agreed with its determination
regarding Mr. Brown's ability to return to work. United gave Mr. Brown a pass to travel from
his home in New York to LAX Medical for the exam. See Exhibit B at 3.
6. On January 22, 2004, Mr. Brown appeared at LAX Medical for an
examination with one of United's physicians. Id. at 3-4. As part of the exam, the physician told
Mr. Brown that he would have to take a urine drug test. Mr. Brown became hostile and argued
with the physician over his authority to drug test; Mr. Brown then fled the scene. Id. at 4. A
United employee located Mr. Brown at LAX walking toward a flight departing for New York
City. Id. at 5. The employee told Mr. Brown that he had to complete the exam to comply with
the arbitration award. Mr. Brown refused, decided to return to New York, and did not seek to
schedule another exam with United's doctors. On February 4, 2004, United notified Mr. Brown
that he failed to meet the System Board's conditions for returning to work. See Exhibit B at 5.
7. On March 15, 2004, Mr. Brown filed a complaint with the Superior Court
of the State of California alleging discrimination based on disability and sexual orientation,
retaliation, and termination in violation of public policy. United removed the case to federal
court and then sought to transfer it to the U.S. District Court for the Northern District of Illinois.
8. Mr. Brown then filed a motion before this Court seeking modification of
the automatic stay to allow him to pursue his litigation against United. See Docket No. 7030.
United objected, arguing that while it would consent to Mr. Brown continuing to pursue his
grievance before the System Board, civil litigation against United for a pre-petition termination
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was totally inappropriate. At a hearing on June 18, 2004, this Court agreed with United. See
Exhibit C, 6/18/04 Hearing Transcript. During the hearing, this Court expressly told Mr. Brown
(through his counsel) that he had no right to a jury trial on an issue that was clearly a prepetition
claim and would not survive the operation of the Bankruptcy Code. Id. at 51-53. Thus, the
Court authorized Mr. Brown to pursue relief before the System Board on the question of whether
he complied with its December 18, 2003 conditions for reinstatement, but declined any further
relief. To further assist Mr. Brown, this Court also described for his counsel what would happen
to any monetary award imposed by the System Board—specifically, that the Debtors would
propose a plan which would describe how his claim would be treated. Id. at 56.
9. Mr. Brown apparently did not understand this Court's initial instructions,
and sought to insert into the order resolving his motion a proviso stating that he could enforce
any monetary award by the System Board in court. United objected to that request, and this
Court held another hearing on June 24, 2004. The Court disabused Mr. Brown of his theory that
he could get money damages for a pre-petition termination, which was "completely contrary to
the bankruptcy system." See Exhibit D, 6/24/04 Hearing Transcript, at 4. Instead, the Court
described for Mr. Brown that if he had a claim, it was a pre-petition claim that would be treated
in United's ultimate plan of reorganization. Id. The Court then entered an order clarifying the
path forward for Mr. Brown. See Docket No. 7232.
10. Mr. Brown then, as instructed, returned to the System Board. In October
2004, the System Board held a hearing in which Mr. Brown was represented by counsel and had
the opportunity to make an opening statement, call witnesses, submit documentary evidence, and
argue his case. On March 21, 2005, the System Board agreed with United on all fronts,
confirming that Mr. Brown had not complied with the System Board's conditions to return to
4 SA31
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work at United. See Exhibit B, at 12 (Mr. Brown's "behavior did not comply with a condition
established by this Board that was intended to allow a UAL doctor to form a medical judgment as to
whether the Grievant was able to return to work in a safety sensitive position"). Among other things,
the System Board was critical of Mr. Brown's failure to testify truthfully under oath, writing that
"Mr. Brown's manner of testifying was unpersuasive and his assertions were totally
implausible." See Exhibit B at 8.2
11. Almost a year after the arbitration concluded, on January 17, 2006, the
U.S. Bankruptcy Court for the Central District of California issued an order transferring venue of
the civil complaint to the U.S. District Court for the Northern District of Illinois. Once the
matter was docketed, United requested that the matter be automatically referred to this Court
through the internal operating procedures of the Northern District of Illinois Courts. On April
18, 2006, the matter was referred to this Court as related to Case No. 02-48191 and the civil case
was terminated. A copy of the docket for the Northern District of Illinois Court is attached as
Exhibit E. It appears that the adversary proceeding was never docketed with the Bankruptcy
Court.
12. Mr. Brown received notice of all applicable deadlines, including United's
Plan and confirmation hearing. His proof of claim was expunged pursuant to Article VII.F of the
Plan, which disallowed all claims filed by union-represented employees related to rights in
collective bargaining agreements, including grievances and any claims relating to reinstatement.
Claimants were not entitled to notice of disallowance under the Plan because such claims could
2
The System Board consists of 5 members: one neutral, two appointees of United, and two appointees of the Association of Flight Attendants (the "AFA"). It is telling to note that the decision rejecting Mr. Brown's grievance, affirming the decision not to let him return to work, and calling him out for making false statements under oath, was unanimous. It is truly rare for even the flight attendant representatives to reject the allegations being made by one of their members.
5 SA32
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be satisfied in the ordinary course, and because Mr. Brown's proof of claim had been satisfied
through the System Board's hearing and ruling on March 21, 2005.
13. United has no record of receiving any communication from Mr. Brown
between April 2006 and January 21, 2013, when Mr. Brown filed the pending motion to reopen.3
Argument
14. The decision on whether to reopen a closed bankruptcy case is left to the
broad discretion of this Court. See Redmond v. Fifth Third Bank, 624 F.3d 793, 798 (7th Cir.
2010); Matter of Bianucci, 4 F.3d 526, 528 (7th Cir. 1993). In general, however, the power to
reopen under Section 350 of the Bankruptcy Code "is reserved for matters such as the correction
of errors, amendments necessitated by unanticipated events that frustrate a plan's
implementation, and the need to enforce the plan and discharge." In re Zurn, 290 F.3d 861, 864
(7th Cir. 2002); see Redmond, 624 F.3d at 798.
15. Mr. Brown bears the burden of demonstrating "cause" to reopen a closed
chapter 11 case. See In re Redmond, 360 B.R. 179, 186 (Bankr. N.D. III. 2007). Respectfully,
Mr. Brown has not done so. His motion is inconsistent with the governing standards for
reopening settled chapter 11 cases, and would do nothing but require United to spend still more
money on legal fees related to a flight attendant who was terminated in 2001 and has already
subjected the company to substantial unnecessary costs. Reopening United's case now-12
years after Mr. Brown's termination, 9 years after Mr. Brown's final UAL-based medical exam,
In his motion to reopen, Mr. Brown mentioned filing lawsuits in Arizona against United between 2006 and 2013. United's counsel located those lawsuits prior to filing this response from a search of the electronic docket. Mr. Brown apparently filed two separate lawsuits in 2007 in Arizona against United and the AFA. See Exhibit F. Both of Mr. Brown's lawsuits were dismissed—see Exhibit G—but United was never served with those suits and does not appear to have been given notice of them at any time.
6 SA33
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and 7 years after confirmation—would substantially prejudice United and ultimately lead to
nothing more than the costly dismissal of a frivolous claim.
16. As the Seventh Circuit recently held, "Nile passage of time weighs
heavily against reopening. The longer a party waits to file a motion to reopen a closed
bankruptcy case, the more compelling the reason to reopen must be." Redmond, 624 F.3d at 799
(citing cases). "In assessing whether a motion is timely, courts may consider the lack of
diligence of the party seeking to reopen and the prejudice to the nonmoving party caused by the
delay." Id.; see also Bianucci, 4 F.3d at 528 (two year delay in seeking reopening of a case
combined with actions taken in the interim prohibits reopening).
17. As in Redmond, of course, the delay here "dwarfs the two-year delay in
Bianucci." Redmond, 624 F.3d at 799. United's Plan was confirmed in 2006 and its chapter 11
cases were initially closed in 2009. It is now 2013. Mr. Brown's provides no real explanation
for his lengthy delay in bringing this issue to the attention of either United or the Bankruptcy
Court until 2013, four years after the chapter 11 cases were closed. Instead, as Mr. Brown
mentions in his motion, Mr. Brown apparently filed two separate, discrete lawsuits against
United in the U.S. District Court for the District of Arizona, on both July 23, 2007, and
September 18, 2007, both alleging disability discrimination. See Exhibit F. Mr. Brown never
served United with either complaint, and both were dismissed due to Mr. Brown's failure to
follow court rules. See Exhibit G. Mr. Brown simply ignored the closed chapter 11 cases for
years even though, his lawyer having appeared in the case multiple times, and his having
received notice of every relevant bankruptcy deadline, he clearly knew about it.
18. In the meantime, United: (1) resolved approximately 45,000 claims filed
against its estate; (2) treated and paid tens of thousands of legitimate claims against the company
7
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in pro rata amounts stock in reorganized UAL pursuant to the Plan; and (3) expended significant
sums of money closing its chapter 11 cases. Since then, of course, United has merged with
Continental, and the combined entity has spent years creating a new organization on (among
others) both the legal and labor relations sides, meaning that personnel have changed—
sometimes several times over—in the 12 years since Mr. Brown was terminated from United and
the 9 years since the System Board met to consider whether Mr. Brown had complied with its
mandate.
19. When a debtor seeks to reopen a bankruptcy case, the Seventh Circuit has
analogized timeliness-based objections to "an equitable defense akin to latches." Bianucci, 4
F.3d at 528. Laches, in turn, is a doctrine that bars a plaintiff from prosecuting an action when
the plaintiff's delay is unreasonable and the defendant is prejudiced by the delay. See, e.a.,
Smith v. Caterpillar, Inc., 338 F.3d 730, 733 (7th Cir. 2003) (laches "protect[s] defendants from
prejudice caused by stale evidence, prolonged uncertainty about legal rights and status, and
unlimited exposure to liability damages"). Laches applies where (1) plaintiff has shown a lack of
diligence in prosecuting a claim and (2) defendant has been prejudiced as a result of the delay.
Id. Here, seven years have passed since Mr. Brown's civil action was terminated, nine years
have passed since the System Board evaluated Mr. Brown's compliance with its mandates, and
twelve years have passed since Mr. Brown's last day of work with United. Instead of bringing
this matter to United's or this Court's attention promptly, Mr. Brown sat on his rights until
January 2013. During that time period, United reconciled more than 45,000 proofs of claim filed
against it within the confines of its chapter 11 cases, and either the Court expunged or allowed
such claims. On December 8, 2009, at substantial expense to United, this Court entered a final
decree closing United's chapter 11 cases.
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20. The Seventh Circuit has held that whether laches applies in a particular
case is a "question of degree" with lengthier delays requiring less proof of prejudice to the
defendant. Hot Wax, Inc. v. Turtle Wax, Inc., 191 F.3d 813, 824 (7th Cir. 1999). If Mr. Brown
is allowed to pursue his claims at this late juncture, United surely will be prejudiced. First, the
chapter 11 cases are closed, all filed claims have been resolved (and all valid claims paid in stock
of reorganized UAL pursuant to the Plan), and all adversary proceedings have been completed.
Reopening the chapter 11 cases now to adjudicate this matter will cause United to incur costly
fees on multiple fronts, and to spend still more legal fees defending a termination that the System
Board decided long ago to be wholly appropriate.
21. Second, this is—at best—a prepetition claim. Mr. Brown was terminated
in 2001. Even if Mr. Brown ever had a legitimate claim at the time (and he didn't), the claim
would have been treated as an unsecured, pre-petition claim in the Plan and paid in a pro rata
share of stock in reorganized UAL. That can no longer happen, as the stock has been issued and
United's chapter 11 cases have been closed.
22. Third, Mr. Brown's claims derive from his employment as a flight
attendant prior to his termination on May 31, 2001. Even if witnesses to the events in question
could be located, their memories will have faded over time. The incidents on the flight that
ultimately led to Mr. Brown's termination took place more than twelve years ago and some of
the events at issue occurred even earlier. Mr. Brown's medical exam in Los Angeles took place
in 2004.
23. Bankruptcy Courts in similar circumstances have denied requests to
reopen where a matter is as stale as Mr. Brown's termination. See Bianucci, 4 F.3d at 528;
Redmond, 624 F.3d at 798; In re Kean, 207 B.R. 118, 123 (Bankr. D.S.C. 1996) ("The amount of
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time that elapsed between the filing of the various Complaints against the Debtor and the filing
of the motion to reopen is an important factor. The consensus of authority holds that the most
important consideration in deciding whether to reopen the case is the timeliness of the motion.");
In re Nylon Net Co., 225 B.R. 404, 405 (Bankr. W.D. Tenn. 1998) ("It is well settled that the
greater the elapse of time between the closing of the bankruptcy case and the request to reopen,
the more compelling the reason for reopening the case should be.") (citing cases); Matter of
Pagan, 59 B.R. 394, 397 (D. P.R. 1986) ("Given the size of appellants' claim, the length of time
which has transpired since the original filing of the bankruptcy proceedings and the closing of
the case in that forum, together with their knowledge that debtors were in the process of
reorganization, appellants' efforts were clearly insufficient. We find that having delayed so long,
their claim is barred by lathes.").
24. Moreover, there is no reason to believe that Mr. Brown has any chance of
success. Mr. Brown has been provided with two full hearings before the System Board, a panel
comprised of five individuals, including two appointed by the AFA. The System Board hearings
included the presentation of witnesses and documentary evidence, and Mr. Brown was
represented by counsel. The System Board found no evidence that discrimination played any
role in his discipline. Additionally, the System Board gave Mr. Brown a second chance to work
as a flight attendant if he could meet certain conditions for returning to employment in a safety
sensitive position. Mr. Brown did not meet those conditions, the board found his termination to
be entirely appropriate, and he does not deserve another chance now.
Conclusion
25. For the above reasons, United asks this Court to deny the motion to
reopen its chapter 11 cases.
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Dated: February 15, 2013 Respectfully submitted,
UAL CORPORATION
Isl Michael B. Slade
Michael B. Slade Sienna R. Singer KIRKLAND & ELLIS LLP 300 N. LaSalle Chicago, IL 60654 (312) 862-3348 (tel) (312) 862-2200 (fax) [email protected] [email protected]
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CERTIFICATE OF SERVICE
I, Michael B. Slade, an attorney, hereby certify that on February 15, 2013 I caused a true
and correct copy of the foregoing Reorganized Debtors' Objection to Motion of Jeffrey Glen
Brown to Reopen Chapter 11 Cases of UAL Corporation, et al., to be served via the CWECF
system, electronic mail and overnight mail on the following counsel:
Dean W. O'Connor, Esq. Dean W. O'Connor, P.L.L.C. 2850 East Camelback Road, Suite 200 Phoenix, Arizona, 85016 [email protected]
Office of the United States Trustee, Region Il 219 S. Dearborn St., Suite 873 Chicago, IL 60604 [email protected]
Is! Michael B. Slade Michael B. Slade
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UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In re
UAL CORPORATION, et al,
Reorganized Debtor.
Chapter 11
Case No. 02 B 48191 (Jointly Administered) Honorable Eugene R. Wedoff
NOTICE OF MOTION
To: Daniel E. Cohen Paul D. Cullen, Sr. David A. Cohen The Cullen Law Firm, PLLC 1101 30th Street NW, Suite 300 Washington, DC 20007
Kevin McBride McBride Law, PC 609 Deep Valley Drive, Suite 300 Rolling Hills Estates, CA 90274
PLEASE TAKE NOTICE that on June 21, 2011, at 9:30 a.m., or as soon thereafter as
counsel may be heard, we shall appear before the Honorable Eugene R. Wedoff or any Judge
sitting in his stead, in Courtroom 744, 219 South Dearborn Street, Chicago, Illinois, and shall
then and there present the attached Motion to Reopen Chapter 11 Cases of UAL Corporation
and UAL Loyalty Services, Inc, for the Limited Purpose of Enforcing this Court's Prior
Orders, Including the Confirmed Plan, Confirmation Order and Discharge Injunction, a
copy of which is hereby served upon you.
K&E 19134909 SA40
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Dated: June 7, 2011 UAL CORPORATION AND UAL LOYALTY SERVICES, INC.
Is! Michael Slade James H.M. Sprayregen David R. Seligman Michael B. Slade KIRKLAND & ELLIS LLP 300 North LaSalle Street Chicago, Illinois 60654 (312) 862-2000 (telephone) (312) 862-2200 (facsimile)
Counsel for the Reorganized Debtors
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IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
In re:
UAL CORPORATION, et al.,
Reorganized Debtors. )
Chapter 11
Case No. 02 B 48191 (Jointly Administered) Honorable Eugene R. Wedoff
MOTION TO REOPEN CHAPTER 11 CASES OF UAL CORPORATION AND UAL LOYALTY SERVICES, INC. FOR THE LIMITED PURPOSE
OF ENFORCING THIS COURT'S PRIOR ORDERS, INCLUDING THE CONFIRMED PLAN, CONFIRMATION ORDER AND DISCHARGE INJUNCTION
UAL Corporation and UAL Loyalty Services (collectively, "United" or the "Reorganized
Debtors") hereby move to reopen the chapter 11 cases of UAL Corporation and UAL Loyalty
Services for the limited purpose of enforcing the Reorganized Debtors' confirmed Plan of
Reorganization (the "Plan"), this Court's Order confirming it (the "Confirmation Order"), and
the discharge injunction provided by the Plan, Confirmation Order, and 11 U.S.C. § 1141.
United's emergence from Chapter 11 protection was a seminal event in the company's
history—it completed a four-year process of restructuring the company's operations and balance
sheet, resolving billions of dollars in legacy liabilities, and ultimately achieving a largely
consensual plan covering the rights and obligations of United and tens of thousands of creditors.
Accordingly, Untied does not take lightly its request to reopen these cases, and is only doing so
out of necessity. More than seven hundred former creditors (many of whom who actively
participated in United's Chapter 11 cases) have filed a lawsuit in the United States District Court
for the District of Columbia that is—in addition to being factually and legally baseless—clearly
discharged and contrary to multiple orders entered during the course of these Chapter 11 cases.
More importantly, the lawsuit would (if successful) fundamentally alter the deal struck between
United and its many thousands of creditors in the confirmed Plan.
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In support of this motion, the Reorganized Debtors respectfully state as follows:
Jurisdiction
1. This Court has jurisdiction over this motion under 28 U.S.C. §§ 157 and 1334.
This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2).
2. The statutory predicates for the relief requested herein are section 350 of title 11
of the United States Code, 11 U.S.C. §§ 101-1532 (the "Bankruptcy Code") and Rules 3022 and
5010 of the Federal Rules of Bankruptcy Procedures (the "Bankruptcy Rules").
Background
3. On December 9, 2002, UAL Corporation, United Air Lines, Inc., and 26 other
direct or indirect wholly-owned subsidiaries (including United Loyalty Services, LLC) filed
voluntary petitions for relief under chapter 11 of the Bankruptcy Code. The chapter 11 cases
were administratively consolidated as case no. 02-48191 in the United States Bankruptcy Court
for the Northern District of Illinois, Eastern Division (the "Court").
4. As the Court undoubtedly recalls, many of United's legacy liabilities were
addressed, hotly litigated, and ultimately resolved during the course of these Chapter 11 cases.
One of those liabilities was a series of pre-petition defined benefit pension plans covering
United's unionized employees. Indeed, as the Seventh Circuit accurately remarked, "[a] major
impediment to United exit from bankruptcy [was] its pension liability, which total[ed] $4.5
billion for the next four years." In re UAL Corp., 428 F.3d 677, 679 (7th Cir. 2005). Ultimately,
all of United's defined benefit pension plans were terminated by the Pension Benefit Guarantee
Board ("PBGC"), in proceedings that were appealed and affirmed by the Seventh Circuit)
See, e.g., In re UAL Corp., 468 F. 3d 444, 449 (7th Cir. 2006); Pension Benefit Guaranty Corporation v. United Air Lines, Inc., 436 F. Stipp. 2d 909, 910 (N.D. Ill. 2006).
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5. In addition to issuing findings of fact and conclusions of law that led to the final
order confirming PBGC's pension termination, this Court also approved several settlement
agreements bearing directly on the defined benefit pension plans. First, over fierce opposition
from (among others) many retired pilots, this Court approved a settlement agreement between
United and the Air Line Pilots Association ("ALPA"), in which ALPA agreed (among other
things) not to challenge the termination of the defined benefit pension plan covering United
pilots (the "Pilot Plan"). Case No, 02-48191, Docket No. 9933. Among other things, the ALPA
Settlement Agreement provided that if the Pilot Plan was terminated by the PBGC, United would
propose in its Plan of Reorganization that ALPA receive $550 million in unsecured notes for
distribution to its members. The ALPA-United agreement was appealed, but this Court's Order
approving the agreement was affirmed by the district court and the Seventh Circuit. See In re
UAL Corp., 443 F.3d 565, 572 (7th Cir. 2006)
6. Second, this Court approved a settlement between United and the PBGC. Case
No. 02-B-48191, Docket No. 11229. The PBGC Settlement Agreement contemplated the
termination of United's defined benefit pension plans. Id. In exchange, PBGC received a $10.3
billion pre-petition claim against United's estate based on the termination of all of United's
pension plans. In addition, the agreement required United as part of the Plan of Reorganization
to provide the PBGC with $500 million in senior notes, $500 million in contingent notes, and
$500 million of preferred stock, in addition to whatever new UAL common stock PBGC would
receive under United's Plan of Reorganization. Id. The PBGC Settlement Agreement released
United—on behalf of the PBGC and the pension plans—from any and all liability having to do
with United's pension plans. And the PBGC Settlement Agreement was approved by this Court,
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the District Court, and the Seventh Circuit. See Ass'n of Flight Attendants v. United Air Lines,
Inc., 333 B.R. 436 (N.D. III. 2005), aff'd 428 F.3d 677 (7th Cir. 2005).
7. On January 20, 2006, the Court entered the Confirmation Order, confirming the
Plan effective February 1, 2006. See Case No. 02-B-1219I, Docket No. 14829. United's Plan
explicitly incorporated the settlement agreements on which it was based, including the PBGC
Settlement Agreement and the ALPA Settlement Agreement. United served notice of the
occurrence of the Effective Date on all of their creditors, including all of their current and former
employees, each of their unions (including the Air Line Pilots Association), and all of the retired
pilots, including those who had challenged the termination of the Pilot Plan in multiple ways as
part of the United Retired Pilots Benefits Protection Association (also known as "URPBPA").
On the Effective Date, United made the payments required by the Plan, releasing billions of
dollars in notes and stock based on the termination of the Pilot Plan and the other transactions on
which the Plan was based.
The Plan Discharged All Pre-Confirmation Claims Against United
8. The Plan discharged all claims against United that arose before the entry of the
Confirmation Order. In elevant part, the Plan provides as follows:
Pursuant to Section 1141(d) of the Bankruptcy Code . . . the distributions, rights, and treatment that are provided in the Plan shall be in complete satisfaction, discharge, and release . . . of Claims and Causes of Action of any nature whatsoever, including any interest accrued on Claims from and after the Petition Date, whether known or unknown, against, liabilities of, liens on, obligations of, rights against, and Interests in, the Debtors or any of their assets or properties, regardless of whether any property shall have been distributed or retained pursuant to the Plan on account of such Claims, rights, and Interests, including, without limitation, demands, liabilities, and Causes of Action that arose before the Confirmation Date . . . and all debts of the kind specified in Sections 502(g), 502(h), or 502(i) of the Bankruptcy Code, in each case whether or not (i) a Proof of Claim or Interest based upon such debt, right, or Interest is Filed or deemed Filed pursuant to Section 501 of the Bankruptcy Code, (ii) a Claim or Interest based upon such debt, right, or Interest is allowed pursuant to Section 502 of the
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Bankruptcy Code, or (iii) the Holder of such a Claim, right, or Interest has accepted the Plan . . .. Plan, Art. X.B.
9. The Plan also specifically enjoined any action against the Reorganized Debtors on
account of claims that were released or settled under the Plan. The Plan provides that:
Except as otherwise expressly provided in the Plan or for obligations issued pursuant to the Plan, all Entities who have held, hold, or may hold Claims against or Interests in the Debtors or against the Released Parties and Exculpated Parties are permanently enjoined, from and after the Effective Date, from: (i) commencing or continuing in any manner any action or other proceeding of any kind on account of or in connection with or with respect to any such Claim against or Interest in the Reorganized Debtors, the Exculpated Parties, the Released Parties, any statutory committee or members thereof, and the employees, agents, and professionals of each of the foregoing (acting in such capacity); . . . and (v) commencing or continuing in any manner any action or other proceeding of any kind on account of or in connection with or with respect to any such Claim against or Interest in the Reorganized Debtors, the Released Parties, the Exculpated Parties, any statutory committee or members thereof, and the employees, agents, and professionals of each of the foregoing (acting in such capacity) released or settled pursuant to the Plan. Plan, Art. X.J.
10. All entities are barred from commencing actions against United relating to any
claim that was covered by the Plan's discharge. See Confirmation Order. In addition, the
Bankruptcy Code permanently enjoins all entities from collecting from a reorganized debtor any
debt discharged pursuant to a chapter 11 plan. See 11 U.S.C. § 524(a)(2) ("A discharge in a case
under this title operates as an injunction against the commencement or continuation of an action,
the employment of process, or an act, to collect, recover or offset any such debt as a personal
liability of the debtor, whether or not discharge of such debt is waived."). Thus, upon the
Effective Date, the discharge injunction absolutely and completely protects United against any
actions against it to recover claims based on conduct that pre-dated February 1, 2006. The
termination of the Pilot Plan pre-dated Plan confirmation, and United did not provide any
information to the PBGC post-confirmation; thus, there is no good faith argument to circumvent
United's discharge with any "new" claims based on the termination of the Pilot Plan.
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11. Pursuant to the Plan, this Court maintained jurisdiction to resolve matters relating
to the chapter 11 proceedings. In particular, the Court retained jurisdiction to:
Resolve any cases, controversies, suits, disputes, or Causes of Action with respect to the releases, injunction, and other provisions contained in Article IX of the Plan and enter such orders as may be necessary or appropriate to implement such releases, injunction, and other provisions;
Hear and determine matters arising out of, related to, or concerning the Section 1113 Restructuring Agreements and any related documents, the distributions and consideration called for in the Section 1113 Restructuring Agreements and any related documents, or the Debtors' restructuring of their labor and pension costs.
Plan, Art. XIV.
Plaintiffs' Asserts Pre-Confirmation Claims Against The Reorganized Debtors.
12. On December 29, 2010, 466 members of the Pilot Plan and their representative,
United Pilots for Justice, Inc. (collectively, the "Plaintiffs"), filed an action (the "Complaint")
against UAL Corporation, United Loyalty Services, LLC, the board of directors of UAL
Corporation, for alleged violations of §§ 4062, 4069 and 4042 of the Employment Retirement
Income Security Act of 1974 ("ERISA") relating to the termination of the Pilot Plan. The
Plaintiffs have since amended the Complaint twice, and have added approximately 250
additional plaintiffs (to a total of more than 700). United is currently analyzing the most recent
list of Plaintiffs, but it appears that the majority (approximately 60%) were members of
URPBPA during United's Chapter 11 cases. Others were likely members of ALPA during that
time period?
Attached as Exhibit B is a copy of Plaintiffs' Original Complaint. Attached as Exhibit C is a copy of Plaintiffs' Second Amended Complaint. United can provide the Court with a copy of its Motion to Dismiss and its Motion to Transfer if the Court either at the hearing on this motion or after the D.C. District Court rules on United's Motion to Transfer.
6
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13. The thrust of the Plaintiffs' Complaint is that the PBGC's decision to enter into
the PBGC Settlement Agreement and to terminate the Pilot Plan was the result of fraud during
United's Chapter 11 reorganization. Plaintiffs' theory is that United somehow tricked all of its
creditors, lenders, unions, the PBGC, the Bankruptcy Court, the District Court, and the Seventh
Circuit about the value of its assets. Plaintiffs claim that United "hid" from all of these
sophisticated entities the value of its Mileage Plus® program, and assert that had United
informed PBGC of the "true" value of Mileage Plus®, either United somehow could have
emerged from Chapter 11 with the Pilot Plan intact, or the PBGC would have achieved a better
recovery in the PBGC Settlement Agreement on account of Pilot Plan termination.
14. On June 7, 2011, United filed motions with the United States District Court for
the District of Columbia: (1) to dismiss; and (2) to transfer of the Complaint to the United States
District Court for the Northern District of Illinois. Once transferred to the Northern District of
Illinois, the Complaint would be automatically referred to this Court as part of the District's
Internal Operating Procedures.
Relief Requested
15. United seeks entry of an order reopening the chapter 11 cases of UAL
Corporation and UAL Loyalty Services, Inc. for the limited purpose of enforcing the discharge
injunction in the Plan, the Confirmation Order and the Bankruptcy Code in connection with the
Complaint. Reopening these chapter 11 cases would permit the Plaintiffs' complaint, upon its
transfer to the Northern District of Illinois, to be referred to this Court pursuant to 28 U.S.C. §
157(a) and. Internal Operating Procedure 15(a) of the U.S. District Court for the Northern District
of Illinois. United would then ask this Court to rule on its Motion to Dismiss, and for any other
applicable relief.
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Argument
16. The Bankruptcy Code provides that "[a] case may be reopened in the court in
which such case was closed to administer assets, to accord relief to the debtor, or for other
cause." 11 U.S.C. §350(b). One of the "other causes" recognized for reopening a bankruptcy is
the need to enforce a confirmed plan, confirmation order, or associated discharge injunction.
See, e.g., Redmond v. Fifth Third Bank, 624 F.3d 793, 798 (7th Cir. 2010) ("A bankruptcy court
may, for example, reopen a case for the correction of errors, amendments necessitated by
unanticipated events that frustrate a plan's implementation, and the need to enforce the plan and
discharge.") (citing In re Zurn, 290 F.3d 861, 864 (7th Cir. 2002)).
17. This Court has discretion, and may consider a number of factors in determining
whether to reopen, including: (1) the length of time that the case has been closed; (2) whether the
debtor would be entitled to relief if the case were reopened; and (3) the availability of other
courts, such as state courts, to entertain the claims. Redmond, 624 F.3d at 798. All of these
factors soundly favor reopening the United cases at this time.
18. First, a final decree was entered in United's Chapter 11 cases in December 2009.
These Chapter 11 cases lasted seven years and they have only been closed for 18 months. If
Plaintiffs had any viable claims against the Defendants (and they do not), those claims accrued
well prior to the entry of a final decree by this Court. The Plaintiffs should not be able to avoid
this Court merely by waiting so long to pursue their discharged claims that a final decree in one
of the largest Chapter 11 cases in history had been entered in the interim. Moreover, United
sought reopening promptly after learning of the need to enforce the Plan's discharge injunction.
Indeed, United sought to reopen this case as part of filing its responsive pleading to the
Plaintiffs' Complaint.
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19. Second, while United's motion to dismiss will describe in more detail the bases
for dismissal, the Reorganized Debtors are clearly entitled to enforce the discharge injunction set
forth in the Plan, in the Confirmation Order and afforded to them under sections 524(a) and
1141(d) of the Bankruptcy Code. Case law soundly supports reopening a chapter 11 case to
enforce a discharge under section 524 of the Bankruptcy Code. For instance, in Texaco Inc. v.
Sanders, the bankruptcy court reopened a similarly large chapter 11 case—of Texaco Inc.—to
exercise jurisdiction over Texaco's motion asserting that certain respondents were in violation of
the discharge injunction in the confirmation order and the Bankruptcy Code. In re Texaco, 182
B.R. 937, 944 (Bankr. S.D.N.Y. 1995); see also In re Kiker, 98 B.R. 103, 103-04 (Bankr. N.D.
Ga. 1988) (a debtor's motion to reopen a chapter 13 case to enforce the discharge provided by
section 524 is a core proceeding).
20. In any event, it is appropriate for the Court to hear the Complaint because it
relates closely to the Court-approved ALPA and PBGC Settlement Agreements and to the Plan
and the Confirmation Order. See Texaco, 182 B.R. at 947 ("[a] bankruptcy court is undoubtedly
the best qualified to interpret and enforce its own orders including those providing for discharge
and injunction and, therefore, should not abstain from doing so."); In re Chicago, Milwaukee, St.
Paul & Pacific Railroad Co., 6 F.3d 1184, 1194 (7th Cir. 1993) ("the reorganization court should
not abstain from interpreting its own consummation order absent extraordinary circumstances").
Indeed, Plaintiffs' Original and Second Amended Complaints explicitly refer to the ALPA and
PBGC Settlement Agreements and to multiple orders entered during the course of United's
Chapter 11 cases, including the Confirmation Order. Ex. A, Compl. IN 8, 31-32; Ex. B, Second
Amended Compl. Tr 48-51, 54-55, 58, 65. Because the Complaint implicates this Court's
jurisdiction to interpret the Plan and its orders, this Court should reopen the chapter 11 cases.
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21. Third, while Plaintiffs' Complaint should be dismissed regardless of where it is
heard, this is by far the most efficient and effective forum in which this suit should be litigated
and Plaintiffs' claims deemed discharged. United intends to seek sanctions against the Plaintiffs
for violations of the discharge injunction. Such claims could only be brought to this Court upon
reopening of these Chapter 11 cases. See Cox v. Zale Delaware, Inc., 239 F.3d 910, 917 (7th
Cir. 2001) ("[A]ffirrnative relief can be sought only in the bankruptcy court that issued the
discharge. In such a case the proper procedure would indeed be to reopen the bankruptcy
proceeding, since the debtor would be seeking to enforce the order of discharge issued in that
proceeding. A court retains jurisdiction to enforce its injunctions.").
Notice
22. Notice of this motion has been given to: (a) the Office of the United States
Trustee for the Northern District of Illinois; and (b) the Plaintiffs, through their counsel. The
Reorganized Debtors submit that such notice is appropriate under the circumstances and that no
other or further notice is required.
WHEREFORE, United respectfully requests that the Court enter an order, substantially in
the form of Exhibit A hereto, reopening the cases of UAL Corporation and UAL Loyalty
Services, and granting such other and further relief as the Court deems appropriate.
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Dated: June 7, 2011 UAL CORPORATION AND UAL LOYALTY SERVICES, INC.
/s/ Michael Slade James H.M. Sprayregen David R. Seligman Michael B. Slade KIRKLAND & ELLIS LLP 300 North LaSalle Street Chicago, Illinois 60654 (312) 862-2000 (telephone) (312) 862-2200 (facsimile)
Counsel for the Reorganized Debtors
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CERTIFICATE OF SERVICE
I, Michael B. Slade, an attorney, hereby certify that on June 7, 2011, I caused a true and
correct copy of the foregoing Motion to Reopen Chapter 11 Cases of UAL Corporation and
UAL Loyalty Services, Inc. for the Limited Purpose of Enforcing this Court's Prior
Orders, Including the Confirmed Plan, Confirmation Order and Discharge Injunction to be
served via the CM/ECF system on the following counsel:
Daniel E. Cohen Paul D. Cullen, Sr. David A. Cohen The Cullen Law Firm, PLLC 1101 30th Street NW, Suite 300 Washington, DC 20007
Kevin McBride McBride Law, PC 609 Deep Valley Drive, Suite 300 Rolling Hills Estates, CA 90274
Is Michael B. Slade Michael B. Slade
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UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In re: ) Chapter 11
UAL CORPORATION, et al., ) Case No. 02 B 48191 ) (Jointly Administered)
Reorganized Debtors. ) Honorable Eugene R. Wedoff
NOTICE OF MOTION
TO: ALL PARTIES ON THE ATTACHED SERVICE LIST
PLEASE TAKE NOTICE that on August 21, 2012, at 9:30 a.m., or as soon thereafter as
counsel may be heard, we shall appear before the Honorable Eugene R. Wedoff or any Judge
sitting in his stead, in Courtroom 744, 219 South Dearborn Street, Chicago, Illinois, and shall
then and there present the attached Motion for an Order Reopening Chapter 11 Case of
United Air Lines, Inc. ("United") for the Limited Purpose of Considering the Agreement to
Terminate Escrow Agreements and Release Remaining Funds to United Between United,
HSBC Bank USA, U.S. Bank National Association, and Bank of America, N.A., a copy of
which is hereby served upon you.
Dated: July 9, 2011 UNITED AIR LINES, INC.
/s/ Michael Slade Michael B. Slade Sienna R. Singer KIRKLAND & ELLIS LLP 300 North LaSalle Street Chicago, Illinois 60654 (312) 862-2000 (telephone) (312) 862-2200 (facsimile)
Counsel for United Air Lines, Inc.
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IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In re:
UAL CORPORATION, et al.,
Reorganized Debtors.
)
Chapter 11
Case No. 02 B 48191 (Jointly Administered) Honorable Eugene R. Wedoff
MOTION FOR AN ORDER REOPENING CHAPTER 11 CASE OF UNITED AIR LINES, INC. ("UNITED") FOR THE LIMITED PURPOSE OF CONSIDERING THE
AGREEMENT TO TERMINATE ESCROW AGREEMENTS AND RELEASE REMAINING FUNDS TO UNITED BETWEEN UNITED, HSBC BANK USA, U.S. BANK
NATIONAL ASSOCIATION, AND BANK OF AMERICA, N.A.
United Air Lines, Inc. ("United") requests that this Court enter an order reopening
United's chapter 11 case, No. 02-48210 (the "Bankruptcy Case"), pursuant to section 350(b) of
title 11 of the United States Code (the "Bankruptcy Code") and Rule 5010 of the Federal Rules
of Bankruptcy Procedure (the "Bankruptcy Rules") for the limited purpose of considering a
motion for approval of the Agreement to Terminate Escrow Agreements and Release Remaining
Funds to United Air Lines, Inc. (the "Termination Agreement") between United, HSBC Bank
USA, National Association, f/k/a HSBC Bank USA ("HSBC"), as indenture trustee for the Series
2001A-2 Bonds, U.S. Bank National Association ("U.S. Bank" and together with HSBC, the
"Trustees"), as indenture trustee for the Series 2000A Bonds and U.S. Bank as Trustee for the
Series 2001A-1 Bonds, and Bank of America, N.A., as successor escrow agent ("Escrow
Agent"). In support, United respectfully states as follows:
Jurisdiction
1 This Court has jurisdiction over this motion under 28 U.S.C. §§ 157 and 1334 and
Article XIV of the Reorganized Debtors' Second Amended Joint Plan of Reorganization
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Pursuant to Chapter 11 of the United States Bankruptcy Code (the "Plan"). This matter is a core
proceeding within the meaning of 28 U.S.C. § 157(b)(2).
2. The statutory predicates for the relief requested herein are section 350 of the
Bankruptcy Code and Rule 5010 of the Bankruptcy Rules.
Background
3. On December 9, 2002, United and its affiliated reorganized debtors filed
voluntary petitions for relief under chapter 11 of the Bankruptcy Code. The chapter 11 cases
were administratively consolidated as case no. 02-48191 in the United States Bankruptcy Court
for the Northern District of Illinois, Eastern Division (the "Court").
4. Prepetition, United's lease of premises at Chicago O'Hare International Airport
("O'Hare") was financed by seven issues of tax-exempt special facilities revenue bonds issued
on United's behalf, including Series 2000A Bonds, Series 2001A-I Bonds, and Series 2001A-2
Bonds (collectively, the "Chicago Municipal Bonds"). Under the financing agreements, United
had to fund amounts sufficient to cover semi-annual interest payments, premium, and principal
payable at maturity. During the chapter 11 cases, United did not make any of the payments
owed with respect to the Chicago Municipal Bonds, despite a cross-default provision in the
"Airport Use Agreement" between United and the City of Chicago that arguably required such
payments as a condition to United's occupancy of certain premises at O'Hare.
5. On September 18, 2003, United initiated litigation against the indenture trustees
for the Chicago Municipal Bonds and the City of Chicago, seeking a ruling that the cross-default
provision in the Airport Use Agreement was unenforceable as a matter of law. That litigation
was titled United Air Lines, Inc. v. US. Bank Trust National Association as Trustee, SunTrust
Bank as Trustee, BNY Midwest Trust Company as Trustee, HSBC Bank USA as Trustee, and the
City of Chicago, Adversary Proceeding No. 03-A-03927 (the "Adversary Proceeding").
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6. In August 2003, the Trustees and SunTrust Bank1 ("SunTrust") each filed motions
to lift the automatic stay to enable disbursements of money held in certain "construction fund
accounts" established under the financing agreements. On October 24, 2003, the Court granted
the motions to lift the stay, but provided that the automatic stay would continue with respect to
the accounts for the Series 2000A Bonds, the Series 2001A-1 Bonds, and the Series 2001A-2
Bonds, so long as United escrowed the payments that would otherwise be due with respect to
such bonds. United, LaSalle Bank National Association, as predecessor to the Escrow Agent, the
Trustees, and SunTrust then entered into escrow agreements for each of these three bond series
(the "Escrow Agreements"). The Escrow Agreements provided that the escrowed funds would be
released to United upon a written demand from United or the applicable Trustee and presentment
to the Escrow Agent of either (a) a ruling by the Bankruptcy Court granting relief in United's
favor in the Adversary Proceeding and a certification that such ruling has not been stayed
pending appeal, or (b) an order by the Bankruptcy Court directing the release of the escrowed
funds to United. The Escrow Agreements were to terminate after release of the escrowed funds
to United.
7. On December 14, 2004, United entered into a settlement with the Trustees,
SunTrust, and certain designated holders of bonds, under which the parties settled and
compromised pending claims and controversies against one another relating to various bonds,
including the Series 2000A Bonds, the Series 2001 A-1 Bonds, and the Series 2001A-2 Bonds,
and the Adversary Proceeding (the "Chicago Municipal Bond Settlement"). As part of the
settlement, United agreed to propose a chapter 11 plan in which certain "Settlement
1 In July 2006, U.S. Bank succeeded SunTrust as Trustee for the Series 2001A-I Bonds.
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Consideration" would be distributed to the Trustees and SunTrust. The Court approved the
Chicago Municipal Bond Settlement on February 15, 2005. The Court's order directed the
Escrow Agent to return the remaining escrowed funds to United after payment of the Settlement
Consideration and payment of the fees and expenses of the designated holders, the Trustees, and
"ad hoc counsel."
8. On January 20, 2006, this Court entered an order confirming United's Plan, and
the effective date of the Plan occurred on February 1, 2006. The Plan incorporated the
distributions proposed in the Chicago Municipal Bond Settlement and provided for the Trustees
and SunTrust to receive the Settlement Consideration. As this Court is aware, since the effective
date, United has made all distributions required by the Plan, including paying in full the
Settlement Consideration to the Trustees.
9. The Escrow Agent continues to hold the funds escrowed under the Escrow
Agreements. United asked the Trustees and the Escrow Agent to return the remaining fees to
United, as United believes they are obligated to do under the parties' existing agreements. The
Trustees and Escrow Agent requested a more specific settlement agreement and a court order
approving it. Rather than initiating litigation against the Trustees and Escrow Agent to enforce
the prior agreements, United believed it more productive to simply seek Court approval of a
specific agreement that met with the approval of the Trustees and Escrow Agent. Accordingly,
United seeks the relief requested herein to allow United to present a motion seeking approval of
the Termination Agreement.
10. On December 8, 2009, the Court entered an order of final decree closing the
Bankruptcy Case. [Docket No. 12]. Pursuant to the Plan, the Court maintained jurisdiction to
resolve matters relating to the chapter 11 proceedings and to enforce all orders previously
4
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entered by the Court. Assuming the Bankruptcy Case is reopened, United expects to submit a
motion seeking Court approval of the Termination Agreement.
Relief Requested
11 United seeks entry of an order reopening the Bankruptcy Case for the limited
purpose of considering a motion for approval of the Termination Agreement
Argument
12. This Court should reopen the Bankruptcy Case to allow United to present the
motion seeking Court approval of the Termination Agreement. The Termination Agreement is in
the best interest of United and its estate, and will benefit United by returning to United the vast
majority of funds escrowed under the Escrow Agreements. Moreover, the Termination
Agreement is consistent with the Chicago Municipal Bond Settlement and this Court's February
15, 2005 order, which directed the Escrow Agent to disburse the escrowed funds to United after
payment of the Settlement Consideration.
13. Section 350(b) of the Bankruptcy Code provides that "[a] case may be reopened
in the court in which such case was closed to administer assets, to accord relief to the debtor, or
for other cause." 11 U.S.C. §350(b). The Plan expressly provides that this Court retains
jurisdiction over matters relating to the chapter 11 proceedings and to enforce all orders
previously entered by the Court.
14. The decision to reopen the Bankruptcy Case rests within this Court's discretion.
Redmond v. Fifth Third Bank, 624 F.3d 793, 798 (7th Cir. 2010) (citing In re Bianucei, 4 F.3d
526, 528 (7th Cir. 1993)); Matter of Shondel, 950 F.2d 1301, 1304 (7th Cir. 1991) ("A decision
to reopen a case for 'other cause' lies within the discretion of the bankruptcy court and will be
reversed only for an abuse of that discretion."). Courts have exercised their discretion to reopen
bankruptcy cases to enforce orders that they have entered during the bankruptcy cases. See In re
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Kewanee Boiler Corp., 270 B.R. 912, 917 (Bankr. N.D. III. 2002) (bankruptcy courts may
interpret and enforce their orders). Accordingly, United requests that the Court exercise its
discretion and reopen the Bankruptcy Case for the limited purpose of considering a motion for
approval of the Termination Agreement.
Notice
15. Notice of this motion has been given to: (a) the Office of the United States
Trustee for the Northern District of Illinois; (b) HSBC; (c) U.S. Bank; (d) Escrow Agent; and
(e) those persons who have requested notice pursuant to Bankruptcy Rule 2002 at the last known
address for such persons. United submits that such notice is appropriate under the circumstances
and that no other or further notice is required.
WHEREFORE, United respectfully requests that this Court enter an order, substantially
in the form attached hereto as Exhibit A, reopening the Bankruptcy Case, and granting such
other and further relief as the Court deems appropriate.
Dated: July 9, 2012 UNITED AIR LINES, INC.
/s/ Michael B. Slade Michael B. Slade Sienna R. Singer KIRKLAND & ELLIS LLP 300 North LaSalle Street Chicago, Illinois 60654 (312) 862-2000 (telephone) (312) 862-2200 (facsimile)
Counsel for United Air Lines, Inc.
6
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CERTIFICATE OF SERVICE
I, Michael B. Slade, an attorney, hereby certify that on July 9, 2012, I caused a true and
correct copy of the foregoing Motion for an Order Reopening Chapter 11 Case of United Air
Lines, Inc. ("United") for the Limited Purpose of Considering the Agreement to Terminate
Escrow Agreements and Release Remaining Funds to United between United, HSBC Bank
USA, U.S. Bank National Association, and Bank of America, N.A. to be served via First
Class U.S. Mail on the parties on the attached service list:
/s/ Michael B. Slade Michael B. Slade
SA61
CERTIFICATE OF SERVICE
I hereby certify that I electronically filed the foregoing with the Clerk of the
Court for the United States Court of Appeals for the Second Circuit by using the
appellate CM/ECF system on June 12, 2013.
I certify that all participants in this case are registered CM/ECF users and
that service will be accomplished by the appellate CM/ECF system.
Respectfully Submitted,
/s/ J. Peter Coll, Jr.
J. Peter Coll, Jr.Counsel for Plaintiff – Counter-Defendant – Appellee, – DPWNHOLDINGS (USA), INC.