Oct. 29 (Bloomberg) -- American Airlines, US Airways Group Inc. and the U.S. Justice Department agreed to go to a mediator to possibly resolve the government’s lawsuit seeking to block the proposed merger of the airlines.
Both sides said in a filing yesterday in federal court in Washington that they agreed to a mediator “suggested by the court” without providing further details. The filing provides an update about the status of the case.
The airlines will probably put “a fairly substantial offer on the table showing their seriousness,” said Allen Grunes, a lawyer at GeyerGorey LLP in Washington and a former attorney with the Justice Department’s antitrust division.
“If the Justice Department says nothing short of abandonment is going to satisfy us, it will be a very short mediation,” he said. “But if they make a demand that’s short of abandonment, there may be prospects for a settlement.”
The Justice Department sued American parent AMR Corp. and US Airways in August, claiming the planned merger, which would create the world’s largest airline, would reduce competition and lead to higher prices. A trial is set to begin Nov. 25, and a status conference is scheduled for tomorrow.
US Airways rose 1 percent to $22.23 at 10:48 a.m. in New York. AMR rose 4 percent to $6.81.
AMR and US Airways declined to comment on the mediator. Gina Talamona, a Justice Department spokeswoman, also declined to comment.
Both sides said in their filing yesterday to U.S. District Judge Colleen Kollar-Kotelly that the case is “proceeding apace and is on-track to commence trial” as scheduled. The U.S. and state attorneys general have taken depositions of 19 employees of the two airlines, according to the report. Executives of other airlines have also been deposed. More than 2 million documents have been exchanged.
The appointment of a mediator in complex lawsuits isn’t unusual, said Seth Bloom, a former trial attorney with the Justice Department’s antitrust division. In most federal civil litigation, courts require parties to engage in settlement talks before trial, he said.
“The nature of the complaint makes it a difficult one to settle, which isn’t to say these won’t be good-faith talks, but it’s nothing shocking,” said Bloom, president of Bloom Strategic Counsel in Washington. “They were always going to engage in these talks.”
American, which has been in bankruptcy since November 2011, was set to exit court protection by merging with Tempe, Arizona-based US Airways when the Justice Department and a group of states sued to block the deal.
AMR, based in Fort Worth, Texas, would have to start over in its reorganization if the U.S. wins a court order stopping the tie-up, the committee representing the carrier’s unsecured creditors said in a court filing yesterday.
“An injunction here would return the AMR bankruptcy to square one with likely disruption and disarray among numerous, financially unaligned stakeholders,” the committee said.
Kollar-Kotelly signed an order in August saying she “encourages the use of alternative dispute resolution.” Both sides said in a filing on Aug. 28 that the case “would not likely benefit” from that process.
“The question in a settlement is always who makes the first step, and that’s where the mediator can be helpful with formulating hypothetical solutions,” said Robert Mann, president of aviation consultant R.W. Mann & Co. in Port Washington, New York.
The case is U.S. v. US Airways Group Inc., 13-cv-01236, U.S. District Court, District of Columbia (Washington).
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