Delaware Business Bankruptcy Report: Morris James LLP Lawyers and Attorneys

Cont’l Airlines, Inc. v. Eastern Pilots Merger Comm. (In re Cont’l Airlines, Inc.), 484 F.3d 173 (3d Cir. 2007) (Circuit Judge Julio M. Fuentes)

In their third visit to the United States Court of Appeals for the Third Circuit, a group of former pilots of Eastern Airlines appealed from a decision of the United States District Court for the District of Delaware enjoining them from proceeding to arbitration with debtor Continental Airlines and its pilots. Because the Eastern pilots sought arbitration under their former collective bargaining agreement (the “CBA”) with Eastern Airlines (which became an obligation of Continental Airlines when it merged with Eastern), and the debtors’ obligations under the CBA had been discharged, the debtors would not be compelled to appear at an arbitration in which no award against them would be possible. The Continental pilots were not a party to the CBA, and could not be bound by its arbitration provision.

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In re Machne Menachem, Inc., 233 Fed. Appx. 119 (3d. Cir. Apr. 19, 2007) (Circuit Judge Julio M. Fuentes)

An insider of debtor Machne Menachem, Inc. purchased the claims of four unsecured creditors to alter the composition of the class of non-insider unsecured claimants. When the debtor’s plan or reorganization was then approved by voters and confirmed by the United States Bankruptcy Court for the Middle District of Pennsylvania, a former director of the debtor, who also was the proponent of a competing plan, appealed the confirmation order to the district court, arguing that the plan violated the good faith requirement of the plan confirmation provisions of the Bankruptcy Code. The district court reversed the bankruptcy court, and the Third Circuit affirmed the reversal, finding that the debtor impermissibly gerrymandered the classes to secure the necessary votes in favor of the plan.

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