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Bondurant v. Air Line Pilots Ass'n, Int'l - Airline Chapter 11 Left Much to Sort Out

June 8, 2012

Orange County Bankruptcy Lawyer Vincent Howard knows that even with the help of a skilled attorney, businesses filing for a Chapter 11 bankruptcy in Orange County should be prepared to cope with what may be a lengthy process. pilotfly.jpg

This was illustrated recently in a case out of the Sixth Circuit in Utah, called Bondurant v. Air Line Pilots Ass'n, Int'l.

By definition, a Chapter 11 is a process by which a business can re-organize so that the company may stay operational without being bound to crippling debt. This can be a valuable option for floundering businesses, both big and small. The whole point is to adjust the company's legal debt obligations so that it can continue to run.

However, it can be complicated, particularly when you are dealing with a large organization. You may see a fair amount of disagreement among the ranks about how certain aspects should be handled. A bankruptcy attorney like Vincent Howard should work to deftly address these concerns, while still looking out for the viability of the business in the long-term.

In this case, it involved former pilots who had been employed at Northwest Airlines.

Back in 2005, Northwest Airlines filed for Chapter 11 bankruptcy. This was around the same time as other airlines were taking similar measures (Delta, United, etc.).

The idea was that a Chapter 11 reorganization bankruptcy could help the struggling airline reduce costs and maintain operations. As part of this reorganization, the union that represented the pilots agreed to a roughly 40 percent wage cut for the pilots. Pilots who agreed to stay on for the seven-year restructuring would be paid a portion of $888 million in Northwest stock allocated by the airline. Their portion would be based on years of service and other factors. The decision was made formal in an agreement signed between the union and the airline back in 2004, though it was not actually in effect until 2006.

Additionally, the union offered early retirement benefits for pilots who retired prior to the date of the agreement. The federally mandated retirement age for pilots is 60, though the early retirement program offered benefits to pilots who were age 50 and above.

Those who retired early were under the assumption that they would still be eligible to receive a portion of that $888 million in stock. In fact, they were not.

Those pilots argued then that the allocation of that money was both arbitrary and discriminatory.

The court decided that while it wasn't going to argue about whether the method for allocation was the best possible option, the union did try to distribute the shares both fairly and quickly.

In Chapter 11 bankruptcy, such difficult decisiveness is required of company leaders (or in this case, union leaders). Not everyone is going to be on the same page when it comes to these difficult decisions. A skilled bankruptcy attorney can't call all the shots, but he or she can help you determine whether, at the least, you are on solid legal ground.

Orange County Bankruptcy Attorney Vincent Howard at HOWARD LAW can help. You can reach us toll-free at 1-800-872-5925 or send us a message online.

Additional Resources:
Bondurant, et al. v. Air Line Pilots Ass'n, Int'l, et al.

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Wyoming Supreme Court Rules Borrowers Must Continue Paying Loan After Collateral Sold - Wallace v. Pinnacle Bank, March 17, 2012, Orange County Bankruptcy Lawyers Blog