The Deal: Early Airline Trial Might Work Against Strapped DOJ

NEW YORK ( The Deal) -- The demands of the legal system favor a quick path to trial for the Department of Justice's attempt to block the proposed merger of US Airways Group ( LCC) and American Airlines, 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, three months earlier than the Feb. 10 start the DOJ is said to prefer. 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 say, as the airlines 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 American's parent, AMR Corp. ( AAMRQ), which currently calls for the company to be acquired by US Airways. The DOJ's lawsuit against the merger came two days before American 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 Aug. 29, 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.

"The parties' urgency to complete their transaction is far greater here than in ordinary merger cases," the air carriers' lawyers wrote in their brief filed with Kollar-Kotelly Thursday. "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. Both Airlines face additional burdens until this uncertainty is resolved, including uncertainties in winning customers and retaining people when no one knows for sure what the future holds."

If Kollar-Kotelly goes with the airlines' date, antitrust sources said the DOJ will have a hard time getting ready for a trial in three months. Indeed, DOJ Antitrust Chief Bill Baer recently told American Bar Association members that he was worried that cuts mandated by the federal budget sequester will hinder the division's ability to keep up with its workload.

For their part, the airlines said their suggested start date is well within the bounds of court practice for merger cases. Noting an exhibit they filed showing that most other merger cases go to trial quicker than the 180-days requested by DOJ, they said the government's proposed schedule "is, literally, off the chart."

However, the DOJ in a filing to the bankruptcy court Friday said that its proposed schedule is similar to one imposed in the 2012 trial over AT&T's ( T) attempt to buy T-Mobile USA ( TMUS).

The air carriers have enlisted five law firms to assist with the trial, three of which are taking leading roles in the litigation. Overseeing the whole of the airlines' litigation is O'Melveny & Myers LLP partner Richard Parker, a former director of the Federal Trade Commission's competition bureau and senior deputy director at the FTC. As head of the competition bureau, he led the investigations into the mergers of Exxon-Mobil Corp., BP Amoco-ARCO, and AOL-Time Warner. As senior deputy director he was co-lead counsel for the FTC's successful bid for a federal court injunction against the merger of Cardinal Health Inc. ( CAH) and Bergen Brunswig and the combination of McKesson ( MCK) with AmeriSource Health. After his return to private practice at OMM, Parker successfully defended the Arch Coal-Triton Coal merger against an FTC suit to block the deal.

He is being assisted by OMM partners Kenneth O'Rourke, who heads the firm's Los Angeles litigation practice, and Henry Thumann and counsel Courtney Dyer. The OMM litigation team represented T-Mobile in an unsuccessful bid against the DOJ's 2011 suit to stop the company's takeover by AT&T.

Dechert LLP Partner Paul Denis, who represented US Air in the DOJ's merger investigation is also helping run the litigation and is joined by Dechert partner Steve Bradbury. Denis and his Dechert team's prominent cases include the 2007 court fight against the FTC over Whole Foods Market Inc.'s purchase of Wild Oats Markets Inc. and last year's successful resolution of Express Scripts Inc.'s bid to acquire rival pharmacy benefits manager Medco Health Solutions Inc. They also represented Polypore International Inc. in its unsuccessful appeal to the Supreme Court seeking to overturn the FTC's order to unwind the company's 2008 acquisition of Microporous Products LP.

Representing AMR in the litigation is Jones Day partner John Majoras, who is best known for representing corporate clients in antitrust class actions and non-merger competition cases. In 2008 he defended Sirius XM Radio Inc. ( SIRI) against a treble damages class action filed by satellite radio subscribers who claimed that the merger of Sirius and XM violated the antitrust laws and that the merged company subsequently imposed certain allegedly anticompetitive price increases. He is the husband of former FTC Chairwoman Deborah Majoras.

Playing an advisory role to the litigators are Charles "Rick" Rule, head of the antitrust practice at Cadwalader, Wickersham & Taft LLP, and Paul Hastings LLP partner Mary Jean Moltenbrey. Rule is a former assistant attorney general in charge of the DOJ's antitrust division. He represented US Airways in a federal civil antitrust lawsuit against Sabre Holdings Corp., to halt what the airline said were anticompetitive and anti-consumer practices. Moltenbrey is a former director of civil non-merger enforcement in the DOJ's antitrust division and, during her 17-year DOJ career, also was trial attorney in the division's transportation section. She represented American Airlines in the litigation against Sabre and represented Continental Airlines in connection with DOJ's review of its joint venture with Northwest and Delta.

Leading the fight for the DOJ will be Mark Ryan, the agency's director of litigation. He joined the DOJ in 2012 after 30 years as a litigator in the Washington office of Mayer Brown LLP and rising to become partner in charge of the office.

In private practice he successfully defended Solvay Pharmaceuticals Inc. in 2010 against Federal Trade Commission charges that the company illegally paid generic drugs makers to delay introduction of competing testosterone treatments. He also represented CBOT Holdings Inc. in its 2007 acquisition by Chicago Mercantile Exchange Holdings Inc. He will be backed up by the staff of the division's transportation, energy and agriculture staff, which is led by chief William H. Stallings and assistant chief Kathleen S. O'Neill.

Written by Bill McConnell.