(Updates with antitrust lawyer’s appointment in eighth paragraph.)
Aug. 23 (Bloomberg) -- AMR Corp.’s American Airlines and US Airways Group Inc. are seeking a trial of the government’s lawsuit to block their $12.1 billion merger as early as Nov. 12, while the Justice Department is pushing for a February date.
A February trial would “cause serious harm and cannot be justified,” the airlines said in a joint filing yesterday. The carriers and the department asked U.S. District Judge Colleen Kollar-Kotelly in Washington for a hearing to resolve the dispute over timing.
“The parties’ urgency to complete their transaction is far greater here than in ordinary merger cases,” the airlines said. “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.”
The suit is an obstacle to American’s plans to exit bankruptcy through a deal that would create the world’s biggest airline. The government’s challenge to the transaction, which surprised industry executives and analysts, marks a break with the past policy. The Justice Department allowed six airlines to merge during the past five years as they sought to cut costs and end losses.
The planned merger, the Justice Department said in its lawsuit filed Aug. 13, would hurt competition in the airline industry and remove the incentive for US Airways to offer lower prices.
“The request for a November trial date also reflects our strong, unwavering belief in our merger with US Airways and our legal case,” American Chief Executive Officer Tom Horton said in an e-mail to employees. “It’s time to remove the uncertainty for our customers, people and owners.”
The airlines aren’t engaged in talks to settle the lawsuit, a person familiar with the situation said yesterday.
As the proceedings heat up, the Justice Department today named David Gelfand, a partner at Cleary, Gottlieb, Steen & Hamilton LLP in Washington, as head of litigation for the antitrust division.
Gelfand has represented clients including Henkel AG, ArcelorMittal SA and Sanofi in antitrust litigation, according to the firm’s website. He was also the lawyer for Google Inc. in dealing with regulators on it its acquisitions of AdMob Inc. and DoubleClick Inc. and was involved in transactions including Hertz Global Holdings Inc.’s purchase of Dollar Thrifty Automotive Group Inc., and Molson Coors Brewing Co.’s merger with SABMiller Plc, according to his firm biography.
Gelfand, 54, will replace Joseph Wayland, who stepped down in November after two years at the division. Wayland led the department’s successful litigation to stop AT&T Inc.’s takeover of T-Mobile US Inc. and H&R Block Inc.’s attempt to buy a smaller competitor, acting as the government’s lead courtroom lawyer in both cases.
Kollar-Kotelly set a hearing Aug. 30 to address the trial schedule and asked both sides to file a joint report by Aug. 28.
Gina Talamona, a Justice Department spokeswoman, said by e- mail that “the timing proposed by the department is typical in a merger transaction of this magnitude, which affects so many consumers.”
In their filing, the airlines said US Airways first notified the Justice Department of a possible merger with American in May 2012, giving the government sufficient time to investigate the deal.
The Allied Pilots Association, the Transport Union of America and two associations representing flight attendants filed a brief today with Kollar-Kotelly supporting the airlines’ position for a November trial.
The airlines announced their plans in February and initially said they expected to complete the transaction in the third quarter.
“This merger is the foundation of American’s plan to exit bankruptcy,” the airlines said in yesterday’s filing.
Jack Butler, an attorney for the creditors’ committee in American’s bankruptcy, said the Justice Department’s proposal for a trial next year “seems to me to be a strategy to try to kill the merger by fiat instead of them having to prove their case.”
“From the creditors’ perspective, we thought from the beginning they got it wrong,” he said.
The airlines, seeking a 10-day trial, provided Kollar- Kotelly with a list of all government merger challenges that went to trial since 2000. Almost all of the 16 cases brought by the Justice Department and the Federal Trade Commission were tried within 81 days of the complaint’s filing, according to the list.
The longest wait was 106 days in the department’s lawsuit to block a proposed transaction involving H&R Block Inc., according to the filing.
A Nov. 12 trial would be 91 days since the government sued the airlines.
Talamona said the Justice Department’s proposed schedule is similar to the one set by the court in the government’s 2011 lawsuit to block AT&T Inc.’s acquisition of T-Mobile US Inc.
AT&T abandoned the deal before the trial was held.
Bill Baer, the head of the Justice Department’s antitrust division, said during a news conference on Aug. 13 after the complaint was filed that the government is “always prepared” to hold settlement talks. He said the department hasn’t mapped out any potential remedies that could salvage the deal.
The antitrust case is U.S. v. US Airways Group Inc., 13-cv- 01236, U.S. District Court, District of Columbia (Washington). The bankruptcy case is In re AMR Corp., 11-bk-15463, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
--With assistance from Mary Schlangenstein in Dallas. Editors: Fred Strasser, Andrew Dunn