Case Information
*1 In the
Unitеd States Court of Appeals For the Seventh Circuit ____________________ U nited A irlines , I nc ., and T he O fficial C ommittee of U nse- cured C reditors ,
Plaintiffs-Respondents-Appellees , v.
U.S. B ank N.A. and T he B ank of N ew Y ork , as Indenture Trus- tees,
Defendants-Petitioners-Appellants . ____________________
Petition for a Writ of Mandamus to, and Appeal from, the United States District Court for the Northern District of Illinois, Eastern Division. Nos. 04 C 8304 & 05 C 289 (04 A 4149) — John W. Darrah , Judge . ____________________ S ubmitted A pril 27, 2005 — D ecided M ay 6, 2005 † ____________________
Before C offey , E asterbrook , and W illiams , Circuit Judges . E asterbrook , Circuit Judge
. When United Airlines entered bankruptcy in , it operated about airplanes. Some of these had been acquired via financing leases subject to 11 U.S.C. §1110, which provides that to retain leased planes a debtor must pay the whole rent. The statute contains an exception for consensual workouts, see §1110(b), and United’s lessors initially agreed to ac- cept less than the contractual payments. As the reorganization dragged on, however, some of the lessors concluded that United † This opinion is being issued in typescript. A printed copy will follow. *2 would not be reorganized successfully and demanded their planes back. When United entered bankruptcy in 2002 , and negotiated the current reduced rental payments, it projected that reorganization would be accomplished in six mоnths. Two and a half years later, United is losing more than $1 billion annually and is not promising to propose a plan of reorganization any time soon. Some creditors are bound to have second thoughts. In November 2004 the banks serving as indenture trustees for three of the leases demanded that United immediately return of the aircraft unless it cured all de- faults and resumed thе full rental payments promised by contract.
United neither paid nor returned the planes. Instead it filed an
adversary action accusing the indenture trustees of violating the
Sherman Act, 15 U.S.C. §1, by coordinating their efforts to pre-
serve the lenders’ collateral and collect the promised payments. The
trustees violate the antitrust laws, according to United, by insisting
thаt the debtor deal with them collectively about all leased air-
planes. One might suppose that coordination is a normal function
of indenture trustees, which exist under the Trust Indenture Act of
precisely because individual lenders may be too diffuse to pro-
tect their own interests. See 15 U.S.C. §77bbb(a)(1). Coordination
is especially common in bankruptcy, which often is dеscribed as a
collective proceeding among lenders. See, e.g.,
In re American Re-
serve Corp
.,
Competition comes at the time loans are made; cooperation in
an effort to collect as much as possible of the amounts due under
compеtitively determined contracts is not the sort of activity with
which the antitrust laws are concerned. Moreover, businesses are
entitled under the
Noerr–Pennington
doctrine to act jointly when
presenting requests to courts and agencies. See
Eastern Railroad
*3
Presidents Conference v. Noerr Motor Freight, Inc
., 365 U.S. 127
(1961);
United Mine Workers v. Pennington
, 381 U.S. 657 (1965).
Collective renegotiation succeeds only if the court approves. See
California Motor Transport Co. v. Trucking Unlimited
,
On top of all this comes §1110(a)(1), which provides that the right … of a lessor or conditional vendor of [airplanes], to take pos- session of such equipment in compliance with a security agreement, lease, or conditional sale contract, and to enforce any of its other rights or remedies, under such security agreеment, lease, or conditional sale con- tract, to sell, lease, or otherwise retain or dispose of such equipment, is not limited or otherwise affected by any other provision of this title or by any power of the court.
This takes aircraft out of the automatic stay, see 11 U.S.C. §362, and entitles secured lenders and financing lessors to repossess their сollateral. There are only two exceptions. Section 1110(b), which we have mentioned, says that the creditor or lessor may agree to al- low the debtor to continue using the equipment. This is how United has retained the aircraft so far. Section 1110(a)(2), the other exception, gives the debtor days after the bankruptcy begins to come current on its payments and provides that, if the debtor thereafter makes all payments called for by the contracts, it may retain the airplanes. United is not paying the full amount required by these leases, so §1110(a)(2) does not assist it.
Given the breadth of §1110(a)(1), United’s demand for an in-
junction might have been denied out of hand. Instead, however,
Bankruptcy Judge Wedoff entered a temporаry restraining order
forbidding the trustees to repossess the airplanes. He stated that de-
spite its reference to “any power of the court” §1110(a)(1) does not
affect the court’s ability to award injunctive relief under non-
bankruptcy law, such as the Sherman Act. This is hard to reconcile
with the statute’s text. Cf.
Norfolk & Western Ry. v. American Train
Dispatchers Association
,
Temporary retraining orders are at least brief—they last for 20 days at most, including the -day extension allowed by Fed. R. Civ. P. 65(b), incorporated by Fed. R. Bankr. P. . Bankruptcy Judge Wedoff promised to explore the subject more fully at a hearing in Decеmber on United’s motion for a preliminary injunction. United then sought discovery into all of the indenture trustees’ communications, not only with other trustees and lenders but also with their lawyers. Needless to say this led to protests that the mat- ters United wants are covered by the attorney-client and work- product privileges. The bankruptcy judge held, however, that United’s antitrust theory is strong еnough to override these privi- leges—for they cannot be used to shield ongoing crimes, and a vio- lation of the Sherman Act is a felony. So the bankruptcy judge de- manded that the materials be produced, either directly to United or to the court for an in camera inspection (which, the judge noted, might reveal that no crime was in process and thus that the privi- leges continue). Seeking to set up an opportunity for appellate re- view, the trustees respectfully declined to comply. The bankruptcy judge might have drawn an adverse inference and entered a pre- liminary injunction, from which the trustees could have appealed. Or he might have held them in criminal contempt, again setting up an appeal. Instead, however, the judge declared them “in contempt” but did not impose any sanction, even a daily fine. Nor did the judge proceed to the scheduled hearing; he put it off until the trus- tees disclosed the privileged materials.
The trustees appealed to the district judge, who has authority to review interlocutory as well as final decisions of bankruptcy judges. 28 U.S.C. §158(a). They filed one аppeal from the TRO issued on *5 November 26, 2004 , and another from the declaration of contempt on December 9, 2004 . The district judge dismissed both appeals, ruling that neither of the bankruptcy judge’s orders is “final” and declining to exercise jurisdiction to review the interlocutory orders. The upshot is that the lessors are enjoined from repossessing the air- craft, without еither review by an Article III judge or any prospect of such review—for the bankruptcy judge will not hold a hearing on the motion for injunctive relief until the trustees cough up the privi- leged documents, which they do not plan to do until they obtain the appellate review that has been denied to them.
For obvious reasons, the prospect of stasis is delightful to United
and its unsecured creditors but unsatisfactory to the lessors. They
ask this court to issue a writ of mandamus that will lift the injunc-
tion, or at least get the proceedings back on track by resolving the
privilege debate. They also ask us to treat their papers as a notice of
appeal, should appellate jurisdiction be available. (The petition for
mandamus contains the information required by Fed. R. App. P. 3.
See
Smith v. Barry
, 502 U.S. 244 (1992).) We conclude that the
TRO became an injunction when it extended past days, so the
district court had jurisdiction and we have appellate jurisdiction un-
der 28 U.S.C. §1292(a)(1). See
Connecticut National Bank v. Ger-
main
, 503 U.S. 249 (1992). The debate about privilege, however,
cannot now be resolved, because a bare declaration of contempt,
withоut consequences, is neither a final order nor within the scope
of the mandamus power. See
Kerr v. United States District Court
,
Temporary restraining orders that extend past days are re- viewable as preliminary injunctions, no matter what the rendering judge may have called them. See Sampson v. Murray , 415 U.S. 61, 86–88 (1974); Granny Goose Foods, Inc. v. Teamsters Union , 415 U.S. 423 (1974). The district cоurt thought this principle inapplica- ble because the trustees consented to the maintenance of the status quo until the hearing on preliminary injunctive relief. An order supported by consent is not appealable. See Geneva Assurance Syn- dicate, Inc. v. Medical Emergency Services Associates , 964 F.2d 599 *6 (7th Cir. 1992). The problem with this view of matters is that the trustees did not consent to indefinite, non-appealable relief.
The trustees’ statement to which the district judge referred was an agreement on December , while the bankruptcy judge had the privilege dispute under advisement, to extend the TRO “pending further order of the court.” Such an order came the next day, when the bankruptcy judge declared the trustees in сontempt, anticipat- ing (though incorrectly) that this would facilitate review by the dis- trict judge and this court. We do not understand the trustees to have consented to a procedure that would prevent any other “order of the court” from being entered. It would not be sensible to under- stand their consent as permission to cancel the hearing and keep the TRO in force fоrever. Yet that is exactly what has happened. The bankruptcy judge called off the hearing, and United now contends that as a result it may keep the collateral without paying the agreed price and without any review by an Article III judge. The trustees did not (and do not) consent to that state of affairs. The order thus must be treated as a preliminary injunction, oрen to appellate re- view. Because the issues are legal, we can supply that review ourselves without remanding to the district judge.
Section 1110(a)(1) gives the trustees a right to the return of air- craft unless United pays the full rental or the lessors agree to accept a lower price. Those conditions are not satisfied, so the bankruptcy judge must dissolve the injunction and allow the lessors to repossess their collateral. It does not matter whether, as United suspects, the lessors are engaged in strategic behavior. The statute gives them that entitlement, treating aircraft different from other assets. A credible threat to repossess the aircraft changes the terms on which post- bankruptcy bargains сan be struck; it is exactly this prospect that makes credit available on better terms when air carriers shop for fi- nancing in the first place. United obtained the sort of terms that were available from creditors secure in their ability to repossess the collateral; it must live with those terms now, just as it must pay the current market price for jet fuel.
The final clаuse of §1110(a)(1) prevents bankruptcy judges from using any source of law, including antitrust, as the basis of an in- junction against repossession. United protests this understanding, observing that “power of the court” is the caption of the Code’s §105, 11 U.S.C. §105, and contending that the language “any *7 power of the court” thus must refer back to §105. Yet that would drain all meaning from the phrase “any power of the court” in §1110(a)(1), for the preceding language already blocks reliance on any other part of the Bankruptcy Code. Unless it is to be empty, the phrase “any power of the court” must deal with sources of law out- side the Bankruptcy Code. It is not as if “power of the court” were a phrase limited to bankruptcy practice. It is generic languagе, logi- cally read to mean exactly what it says: “ any power of the court.” This does not “repeal” the antitrust laws, as United would have it; instead, like the Anti-Injunction Act and the Norris-LaGuardia Act, it curtails a particular remedy without affecting any substantive rule. Section 1110(a)(1) leaves open the possibility of damages (not to mention actions by the FTC or criminal prosеcutions by the United States); all it says is that courts can not prevent aircraft lessors or secured lenders from repossessing their collateral.
What is more, the antitrust claim is thin to the point of invisi- bility. United concedes that creditors are entitled to negotiate jointly in bankruptcy, as Sharon Steel holds. But it contends that the lessors have “colluded with one another with respeсt to the fu- ture terms and prices on which they would make aircraft available to United.” (Emphasis in original.) If United means by this that would-be lessors are conspiring to set the price to be charged for new planes, then it has a good antitrust theory—but enjoining the repossession of old planes would not be a sensible means of vindi- cating the rule against cartelizing the sale of new planes. As best we can make out, however, what United means by “future terms and prices on which they … make aircraft available” is how much less than the contract price the lessors and lenders are willing to accept to forbear from repossessing planes now in United’s hands.
Negotiating discounts on products already sold at competitive prices is not a form of monopolizatiоn. Negotiations on reductions to be taken in bankruptcy, when the buyer cannot pay all of its debts, are common and lawful, under the Noerr-Pennington doc- trine if nothing else. True, the Noerr-Pennington doctrine cannot be used to shelter joint activity that creates monopoly prices independ- ent of any decision by a court or agency. See In re Brand Name Pre- scription Drugs Antitrust Litigation , 186 F.3d 781, 789 (7th Cir. 1999). But collaboration amоng creditors to formulate a position about how much of a haircut to accept has no effect unless the *8 court approves the restructuring. By United’s lights a prepackaged bankruptcy, in which all creditors negotiate to reach unanimous agreement before presenting a plan to a court, would be nothing but a colossal cartel, unlawful per se . What United really is com- plaining about is not the joint conduct of the lessors—which origi- nally led to forbearance even though United stopped paying the agreed rentals—but the decision of some lenders to withdraw from that package deal and start acting on their own in order to get bet- ter prices from United (or, if that fails, lease the planes to someone else). That decision has the protection of both §1110(a)(1) and the Noerr-Pennington doctrine.
If an antitrust problem lurks in the post-bankruptcy dealings,
United is as much an offender as the lessors are. The lenders want
to shop the planes, selling future months of their remaining useful
lives to the high bidders. United, by contrast, wants to limit these
lessors to a single bidder (United itself) and deny them the benefit
of competition, even though United is unwilling to pay the price
agreed at the end of the competitive financing process, and even
while United itself remains free to shop for better terms and return
these planes if it finds such terms. In other words, United fancies
the position of monopsonist, which the antitrust laws forbid on
equal terms with monopoly. See
Mandeville Island Farms, Inc. v.
American Crystal Sugar Co
.,
The competitive solution is for both sides to have access to mar- kets—and that outcome is achieved by allowing repossession. The lessors will get the current market price for airframes of the type and age involved. United, too, will enjoy a competitive price: it can buy or rent equivalent planes on going terms. If, as United and the Committee of Unsecured Creditоrs contend, the spot-market price is below not only the original rental terms but also the modified terms set when United filed for bankruptcy in , then United will be better off as a result. Its problem arises if, as the lessors are betting, the price of used airplanes is higher than what United is now paying for these aircraft. But if, as United contends, the highest and best use of these planes is with United, аnd the current competitive price is less than what United is paying in bankruptcy, then the threat to repossess is not credible, and United will keep the planes without judicial intervention (though tough bargaining may lie ahead to set the extent of the haircut from the old rental price). *9 Only if potential sellers and lenders conspire to set the price at which United can acquire replacement aircraft would there be a genuine antitrust problem, and United does not contend that such a cartel is in prospect.
With respect to equitable relief, the judgment of the district court is reversed, and the case is remanded with instructions to va- cate the preliminary injunction and permit the repossessions to proceed unless United immediately cures its defaults and pays the full rentals under §1110(a)(2)(B)(iii). The mandate will issue today. With respect to the contempt citation, the petition for mandamus is denied.