As predicted here, Judge Posner sealed the fate of UAL’s retired pilots by rejecting their challenge to UAL’s confirmed plan (and thanks to How Appealing’s Howard Bashman for his post declaring this blog’s prediction "correct" following issuance of the opinion). In re UAL Corp., No. 06-2780 (7^th Cir. 10/25/06) (pdf / WL). 

Along the way, Judge Posner made the following observations that bankruptcy practitioners should find of interest:

• In rejecting the retired pilots’ assertion that their claims were entitled to treatment comparable to those of the active pilots, Judge Posner reiterated that the active pilots’ threat of a strike and offer of substantial concessions justified treating the plan’s differing treatment of their claims compared to the treatment of the retired pilots’ claims under the plan. Also, he again noted, the retired pilots had no specific right to anything in connection with the issues surrounding the dispute over assumption or rejection of the active pilots’ collective bargaining agreement. As such, he concluded:

[I]t [was] wholly unrealistic to remand the case to [Bankruptcy Judge Wedoff] for him to determine what he would have insisted that the retired pilots receive in the agreement as a condition of his approving it. There would be no objective basis for calculating what the retired pilots might have received in a hypothetical negotiation for giving up their opposition and what, therefore, the bankruptcy judge might reasonably have insisted that they receive as a condition of his approval…. The retired pilots, alas, did not have any leverage at all, or at least so little that, as we said in our previous opinion, no objective quantification was possible. We said that more than six months ago, and if we were wrong the retired pilots have had plenty of time in which to generate some plausible, and at least minimally objective, estimate of what they might have obtained in the way of replacement benefits had they been admitted to the negotiations. In the present state of the record the best answer is zero.

• Judge Posner faulted the parties for their “failure to tell the panel what the retired pilots’ unsecured claims are really worth."  In a warning all trial lawyers should take to heart, he called this failure one “illustrating lawyers’ typical insouciance about quantification.”

• Echoing Judge Easterbrook’s more harshly worded concurrently issued opinion (WL), Judge Posner stressed that there is no doctrine of appellate "ripeness," and thus the district court erred in summarily dismissing the appeal as “unripe.” Rather, Judge Posner advised (while reaching a judicially expedient result that would surely trouble procedural purists):

Finality, not ripeness, is the doctrine governing appeals from district court to court of appeals…. The appellate court can, if need be, stay appellate proceedings; that is common. But it would be chaos if the filing of the appeal could be delayed indefinitely by "ripeness" considerations; it would lead to endless disputes over the timeliness of appeals. But rather than send the case back to the district court for review on the merits, we shall skip that stage and resolve the merits, which have been fully briefed by the parties, ourselves. (Citations omitted.)

• In commenting on what it takes to sustain a challenge to a plan confirmation order as to which no stay pending appeal has been taken, particularly where confirmation was dependent upon a third party lender’s willingness to provide “exit” financing to support the plan’s feasibility, Judge Posner stated:

[I]nstitutions that engage in the inherently risky practice of "exit" financing of Chapter 11 bankrupts should have reasonable assurance that once approved the plan of reorganization will not, unless stayed, be rescinded or modified in order to accommodate a very large, very late-appearing [creditor], as the retired pilots would be if they succeeded in this appeal. Although the plan of reorganization is based in part on a business model in which United emerges from bankruptcy with a $1.35 billion equity cushion (that is, a value $1.35 billion greater than the aggregate value of the securities issued to its creditors), the company remains fragile and a $1 billion hit could send it spinning, to the detriment of the creditors who consented to the plan.

No exact rule can be laid down to govern challenges to an approved plan of reorganization. A sensible result depends on the strength of the late-appearing [creditor]’s claim, its size relative to the debtor’s assets, the reason a stay was denied or not sought, how far the plan of reorganization has been executed, and whether the claim can be satisfied by reducing the claim of creditors who had not provided exit financing. Despite the size of the retired pilots’ claim, they have made no effort to explore and perhaps dispel the obvious difficulties with granting relief at this stage. (Citations omitted.)

[NB:  The wings featured above are 1970’s vintage United Airlines Gold Captains Service Award Wings with Laurels that were obtained from a retired pilot’s estate.  They represent a 0-9 year management pilot (the pewter laurels beneath the wing apparently signify that the pilot was in management).  The wings are available through Ebay until November 1.]

© Steve Jakubowski 2006