) -- The Department of Justice on Tuesday, Aug. 27, urged a federal judge to ground the request of
( AAMRQ) for a quick trial to decide the federal government's attempt to stop the air carriers' $11 billion merger.
The DOJ, joined by attorneys general from six states and the District of Columbia, urged Judge Colleen Kollar-Kotelly of the U.S. District Court in Washington to begin the trial on March 3, 2014, rather than Nov. 12 as the airlines requested last week.
"Defendants' attempt to rush this matter to a trial on the merits in fewer than 75 days following the initial scheduling conference creates the very real risk that ... one of the largest merger challenges ever adjudicated will be resolved on less than an appropriate record," the government said in court papers.
The airlines must respond to the DOJ's proposed timeline by the end of the day Wednesday. Judge Kollar-Kotelly will hold a scheduling conference to set the trial date and briefing schedule Friday morning.
The DOJ's trial team, led by antitrust division litigation director Mark Ryan, dismissed the airlines' contention that a quick trial is necessary in order to provide clarity to the ongoing effort to bring American's parent, AMR Corp., out of bankruptcy. AMR's current reorganization plan is based on being acquired by US Air.
"American's ongoing bankruptcy proceedings do not justify trying this case on an incomplete record," the DOJ said. Government attorneys noted that AMR is capable of emerging from Chapter 11 in solid financial shape without being acquired. "American's restructuring efforts have been extraordinarily successful and have positioned the company to compete as a strong and vibrant standalone firm," the DOJ said. The government stressed that American reported record profits in the second quarter of this year and on Monday announced that July 2013 was AMR's most profitable month in company history.
The government also disputed the companies' contention that beginning the trial well into the first quarter of 2014 would constitute an unprecedented delay in bringing a merger case to trial.
Last week the airlines said the suggested start date was well within the bounds of court practice for merger cases. Their filing included an exhibit showing that most other merger cases go to trial quicker than the roughly six months requested by the DOJ. Anticipating the government's proposed schedule, they derided it as "literally, off the chart."
But the DOJ said the companies' exhibit was "highly selective" and omits a number of merger challenges brought within the last 15 years, including the successful 2011 challenge to AT&T Inc.'s plan to buy T-Mobile USA, which came to trial 166 days after the government's complaint was filed. Two challenges, including a suit against Northwest Airlines Corp.'s 1998 attempt to buy a controlling stake in Continental Airlines Inc., took more than a year to come to trial after the original complaint was filed, the DOJ said.
The government also criticized the air carriers' assertion that the government's merger investigation provided sufficient time to gather the information necessary for trial. "The government's pre-filing investigation is no substitute for full discovery on both the allegations in the complaint and the airlines' defenses," the DOJ said. Post-complaint discovery is particularly necessary as the complaint and defendants' answer frame the issues to be litigated. More time is necessary to conduct economic analysis on efficiency claims, depose witnesses and conduct document discovery, the DOJ said.
The demands of the legal system favor a quick path to trial for the Department of Justice's attempt to block the proposed merger, a fact that could put the government at a disadvantage in the case.
Lawyers for the air carriers have requested to begin the trial on Nov. 12, more than three months earlier than the date the government chose. The lawyers said they expect the trial to require 10 court days. If the earlier date is picked, antitrust experts said it will be difficult for the Justice Department to prepare adequately.
Which is exactly what the airlines want, antitrust experts said, as they use their huge legal team to try to outgun the constrained staff numbers of the DOJ.
But there are other reasons why Judge Colleen Kollar-Kotelly of the U.S. District Court in Washington might have little choice but to pick a date on the earlier side.
The DOJ's lawsuit has halted a U.S. bankruptcy court's efforts to rule on the reorganization plan for AMR, which calls for the company to be acquired by US Airways. The DOJ's lawsuit against the merger came just two days before AMR presented U.S. Bankruptcy Judge Sean Lane with its reorganization plan. Because of the merger challenge, Lane has asked involved parties to brief him on whether or not the plan should go ahead. He will hold a hearing on the question on Thursday in Manhattan.
Kollar-Kotelly's calendar also favors a trial date sooner rather than later. She has warned the parties that a criminal trial is set to begin Jan. 14 and last eight weeks. If she schedules the merger trial to begin after the New Year it's unlikely that she would feel comfortable with a date any earlier than March 11, eight weeks after the criminal trial's start. A 2014 start would make it difficult to hold the bankruptcy reorganization plan together, however.
Written by Bill McConnell