American Airlines & US Airways File Motion For Speedy-ish Trial; Poking Belly Of Bear?
American Airlines and US Airways filed a m0tion for a speedy trial today (or what amounts to speedy, I guess for DOJ). You can read the full motion here. The government wants 6 months to prepare for trial. American/US Airways think it’s reasonable to start in 90 days. Before getting into the document in detail, I ‘ve got to say I’m surprised American and US Airways would be willing to wait 90 days for a trial to commence. I’m not saying that it’s unworkable but I did think this would be more of a short-term negotiation/abandonment type strategy. Here are some excerpts from the document and my thoughts:
American’s ongoing bankruptcy proceedings compound the costs and uncertainties associated with the delays caused by the government’s lawsuit, including approximately $500,000 in bankruptcy-related professional fees alone every day that the bankruptcy continues.
Holy schnikeys, Batman. That means roughly $45 million in bankruptcy related fees just for a 90-day wait to go to trial? If that figure is a true figure for the entire BK proceeding (which would stretch to 2 years if the trial concludes in November) that’s over a quarter billion (with a B) in BK fees? Those are just hard numbers to wrap my head around.
The suit also references the other DOJ merger cases over the past 13 years to illustrate how quickly the government usually goes to trial:
I’m taking this information at face value. If these really are the actual timelines for DOJ objections to trial timelines this decade, they don’t seem particularly unreasonable. DOJ asking for 180 days to prepare does seem unreasonable. It’s seems especially arduous when you consider, as the lawsuit outlines:
Plaintiffs’ claim that they need six months to prepare for this case is hollow. They have been investigating the merger for over 16 months already.
The motion goes on to layout some of the damages delaying/blocking the merger will produce:
The prospective employees of New American also await final resolution because, for many, their jobs are in a holding pattern and their new compensation and benefits, worth collectively an additional $400 million annually, and which have already been negotiated and are contingent upon the merger, are being delayed. So too is American employees’ receipt of an equity stake that was worth approximately $2 billion before the DOJ suite was filed.
Until this lawsuit was filed, many American and US Airways’ employees were on the cusp of new roles, new assignments, and new locations with a new and improved airline. Simultaneously, other key employees who had announced their departures prepared for new jobs elsewhere. This lawsuit has changed that and is having considerable negative effect on employee energy and morale, two important and perishable assets.
If there’s anyone I feel truly bad for, it’s the middle and upper management folks who have made real life decisions based on what American and US Airways has told them about their future with the company. Some have elected to leave, some asked to leave. Others are considering relocating. We’re getting ready to start the school year, so those with young kids may be trying to make decisions on where their kids will go to school yesterday. I don’t really blame DOJ for that. In my opinion, that blame rests firmly on the shoulders of American and US Airways management. It was a calculated gamble to move forward with these decisions and announcements prior to more TLC for the “i”s and “t”s, one I would normally expect them to win. They obviously didn’t.
I was initially surprised to see the DOJ lawsuit. While DOJ may ultimately be correct that a merger is too damaging, it didn’t appear from the text of the complaint that they had really nailed this one down. It seemed sloppy. And, if the information about timeframes referenced in the New American motion are correct, the DOJ continues to appear sloppy, heavy-handed (we’ll start the trial when we’re darn good and ready) and out of sync with the reality that they may actually have to go to court to win this one.
The motion also brought to light a new data point for me, that both American and US Airways can walk away in mid-December if the merger has not cleared all the hurdles. If the DOJ does get its way with a 6-month trial prep, one of the two airlines could walk away with no penalty, though I don’t see a likely scenario where US Airways does so. They truly believe the merger with American is their best shot at a level playing field with their legacy competitors.
The whole process still seems a bit out of step to me. I could see a settlement, though one with more serious concessions than slots at DCA. I could see American walking away and trying to emerge from BK as a stand-alone entity (or not walking away and still trying to emerge now on its own).
Related articles
- American Airlines Bankruptcy Judge Neglects To Rule On AMR Exit Plan
- The First Words From American/US Airways On The DOJ Lawsuit
Please, leave the editorializing to topics you know something about. 90 days from filing to trial is unheard of in civil litigation. A) there are tons of cases ahead of you B) a discovery motion can take 60 days to be ruled on.
Repeating AA/US’s argument that it 6 months between filing and trial is something the government would be “getting away with” is absurd.
Completely with Adam here. Even ignoring things like discovery, pre-trial motions or court ordered mediation (which could easily take a year), US/AA is essentially asking the Court to clear it’s schedule 90 days from now for a few weeks to hear their trial. Court days that are already full with hearings and trials for other matters booked months, if not a year, ago. It’s cocky, it’s stupid, and I expect both the DOJ and Court to take them to task for it.
If US/AA didn’t want this suit, perhaps they shouldn’t have brushed off the DOJ. Poking the bear seems less smart when it eats you.
Ryan, I still think it’s fair to ask then if the data about previous trial length/lead-up is factually correct. And, if it is, then US/AA should be reasonably entitled to the same expediency as DOJ might proffer to any case.
Fair comments, but I didn’t repeat AA/US’s arguments. What I did say is that if the chart they display in the motion is factually correct, then 180 days is far longer than the amount of time DOJ has taken between complaint and trial from the historical data represented. If 90 days from filing to trial is unheard of, are the facts in AA/US’s brief factually incorrect?
My general understanding (which is not a legal one) is that the DOJ hammer when it comes to merger discussions is so hefty because of the time DOJ takes to prepare for court. None of the timeframes in the motion are what I would consider arduous, so maybe AA/US lawyers are misrepresenting how far along in the process this investigation is compared to others.
And, FWIW, I took a peek at your blog post on this subject. Not only have I never taken a free flight from AA, but I’m actually against the merger (though not vehemently so) and have written as such in the past. So, folding me in with a group of folks you consider shills for the merger probably isn’t the best fit.
I didn’t say you were a shill for the merger. I said you are taking everything that a self-interested party is saying to be true, with an extremely negative tone towards the government.
DOJ will not get into the pr battle that AA/US are trying to wage here. This is a motion that a judge’s chambers will look at and go “Oh, that’s cute.”
It would have been nice if you called out the BS that the only employees on the “cusp” of having their jobs moved were top executives, rather than just give a block quote from a puff piece.
Adam, all due respect but you’re absolutely wrong about DOJ not engaging in a PR battle. They’ve already granted multiple interviews to members of the press, something they have no legal obligation to do. Just a couple snippets:
“We don’t file lawsuits unless we’re prepared vigorously to defend them, and that’s what we’re doing right now.”
About the actual filing of the lawsuit and AA/US being aware, “I don’t think it was a surprise to the parties.”
As far as your definition of top executives, there are multiple levels of management, quite a few of which I would not consider to be top executives or people who had any say in the merger discussions. Because of the AA/US decision (a bad one, IMO, when you’re messing with people’s lives) those people are in various states of limbo right now. That’s not DOJ’s fault. As I laid out in my post, that responsibility lies solely with the reorg committee of the two airlines making those decisions public before they were in the clear to do so. That’s something they took a calculated gamble on and they were wrong. That’s completely their fault. So, I’m not sure how criticizing my comments about that label me as taking everything they say to be true with a negative tone towards the government.
And, that still leaves the question you haven’t answered. I did say in my post that I took the dates referenced for DOJ’s last dozen or so trials at face value. Do you believe that information is factually incorrect? If not, then it’s fair to question why the DOJ is asking for more time than it normally does to go to trial. They may legitimately need the time, but it’s still a reasonable question to ask here unless you believe AA/US falsified the data for their motion.
Link below for quote attribution above.
http://skift.com/2013/08/14/doj-does-not-want-concessions-on-american-us-merger-it-really-wants-to-block-it/
if you want to compare DOJ’s response to calls from media and a few press releases to AA/US, who probably have a multimillion dollar budget dedicated to PR around the merger, that’s great. what the government’s goal in any said PR would be beats me, especially if DOJ just wants to block the merger, not obtain a settlement.
Adam, we agree that the press position from DOJ doesn’t make much sense. They’re the 8-trillion pound gorilla in the room. If they go about their business like they always do, they’ll win. I can’t even fathom a scenario where AA and US could muster enough congressional support to influence the DOJ, so unless they are actively trying to negotiate with DOJ right now, I think the rest of this is a waste of AA/US money.
As a guide, I manage our corporate litigation and I’ve never had a case even have a motion day within 6 months of filing (short of a motion to compel a filing).
Ryan, fair enough on your comment regarding corporate litigation timeframes. In those cases, is it normal that you’ve had well over a year to subpoena records and prepare your objection as well? My guess here is that the other examples listed in AA/US’ motion had considerable negotiation with DOJ prior to the DOJ ultimately filing to block the mergers. That’s really just a guess.
Ultimately, though, if the DOJ never has to prepare for a speedy trial in any instance, then they really have a very low burden of proof to file a motion. If they don’t ultimately think it will ever make it to court, they have a massive amount of leverage. In this case, I can’t tell whether AA/US blew them off or not. There are reports supporting both positions there. I’m sorry, though, this thing still doesn’t feel fully baked by the DOJ.
There’s no way that AA/US is going to win this in the court of public opinion. Their only hope is a settlement with DOJ or beating them in court. I certainly don’t see Eric Holder running to hide under his desk based on any of the people representing the airlines.
It is also a bit insulting to keep referring to this as a “speedy trial.” The right to a speedy trial only applies to criminal defendants. And in those cases, where there is investigation prior to grand jury indictment, and very limited pre-trial discovery, the Speedy Trial Act ends up allowing for years-long delays before trial in many cases.
And, I also think it’s worth noting that I’m really not in the pro merger camp. I did believe it was inevitable and now it looks like I may be wrong about that. I enjoy discussions like this where intelligent people lay out arguments on both sides. In this case, I believe Dougie’s hubris helped lead this down a bad path. But, I don’t believe the DOJ is virtuous and without fault in the current state of discussion. Talking to the press, IMO, did absolutely nothing but continue the discussion in the media.
Yeah, how dare DOJ have one conference call to respond to massive corporate mistruths.
Hey, I don’t care if DOJ has a press conference. But, they’re not really staying out of the press fray if they do. DOJ may ultimately be right in their position but that doesn’t mean everything they said and done in relation to this matter is virtuous and without reproach.