As United Airlines continues to flounder in its nearly two and a half year old chapter 11 case amidst union strike threats and troubling pension obligations, an even bigger problem is emerging — that is, keeping its jetliners.
As noted in this earlier post from last November, the Bankruptcy Court in the United Airlines chapter 11 case made a clearly erroneous ruling regarding the rights of airplane lessors to repossess their planes because of UAL’s failure to make timely payments under the leases covering those planes. In this strongly-worded Judge Easterbrook opinion issued this past Friday, the Seventh Circuit Court of Appeals reversed the earlier Bankruptcy Court order barring repossessions of 14 of United’s 460 jetliners and ruled that the repossessions can proceed unless United makes the full rental payments as required under section 1110 of the Bankruptcy Code. The ruling raises the distinct possibility that lessors will repossess a number of United’s jetliners, which would be an unprecedented occurrence for a major American airline.
Over the weekend, United attempted to play down the Seventh Circuit’s ruling by disclosing that the number of planes in the dispute is now down to eight because the airline previously rejected leases on the other six. However, the ruling means that United still must negotiate terms on all of its 175 leased planes, and the ruling does not exactly provide United much leverage in those negotiations.
Meanwhile, other aspects of the United chapter 11 case are just as messy. The Bankruptcy Judge in the case is expected to rule later this week on a proposed settlement between United and the Pension Benefit Guaranty Corp., the federal pension insurer, that would allow United to turnover to the PBGC its four underfunded pension plans in the largest corporate-pension default in U.S. history. The proposed settlement is essentially a debt for equity swap between United and the PGBC in which the PBGC would receive up to $1.5 billion in notes and convertible stock in the reorganized United. Unions representing flight attendants, mechanics and other ground workers have objected to the deal, although the United pilot’s union previously approved the proposed settlement.
Also this week, a trial in the United chapter 11 case commences on whether United can establish that the labor contracts of the flight attendants, mechanics and other ground workers should be annulled so the airline can impose new terms on the workers. For its part, the flight attendants have already announced that they will implement a series of work stoppages that target specific flights or routes without warning if United goes through with its action to annul the union’s labor contract.
What a first class mess.

Professor Podgor over at the White Collar Crime Prof Blog points us to this Securities and Exchange Commission press release that describes the SEC’s lawsuit against some Houston-area telemarketers who are taking a rather creative approach to soliciting purchases of six microcap stocks.
Turns out that the stock promoters left hundreds of thousands of fraudulent “wrong number” stock tip messages in which a woman by the name of “Debbie” would leave a hot stock tip message on the phone recipient’s voice mail and would leave it in such a way to make the recipient believe that “Debbie” had dialed the number by mistake and had really meant to call a friend to pass along the hot stock tip.
The SEC complaint alleges that the messages were part of a larger scheme enabling the Houston-based stock promoters (Peter S. Cahill of Houston and Cahill’s Clearlake Venture Group) to sell approximately $4.5 million of one of the touted stocks through a Tampa, Fla.-based broker-dealer. The SEC alleges that the scheme drove up the price of each of the touted stocks, temporarily inflating their combined market capitalization by approximately $180 million.
Gosh, what is the world coming to? You can’t even trust those hot stock tips mistakenly left on your voicemail anymore? ;^)

A big part of my law practice is writing briefs, so lawyers often ask my advice on how to write a good brief. I always pass along three key rules:

1. Read the court’s rules for brief writing and then follow them.
2. Tell a good story in your brief.
3. Don’t use footnotes.

If you violate rules 1 and 3, then this is what could happen.
Hat tip to Appellate Law and Practice blog for the link.

Former Tyco International CEO, Dennis Kozlowski, is on trial for a second time in New York City for allegedly looting Tyco. Mr. Kozlowski’s first trial, in which he did not testify, ended in a hung jury.
In the second trial, Mr. Kozlowski has decided to testify. According to this NY Times article, the following is a part of the cross-examination of Mr. Kozlowski about conversations he had with a now-deceased former director whom Mr. Kozlowski said approved a $25 million bonus that was missing from his 1999 tax returns:

“You did not notice $25 million was missing from your W-2?” asked [prosecutor] Ms. [Ann] Donnelly in an incredulous manner.
“That is absolutely correct,” Mr. Kozlowski replied. “I did not.”