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U.S. Bank Trust Nat'l Ass'n v. AMR Corp. (In re AMR Corp.)

United States Court of Appeals for the Second Circuit

June 20, 2013, Argued; September 12, 2013, Decided

Docket Nos. 13-1204-cv, 13-1207-cv, 13-1208-cv

Opinion

 [*91]  Debra Ann Livingston, Circuit Judge:

This case requires us to address two questions of law important to the workings of the Bankruptcy Code: (1) whether indenture clauses declaring a debtor's default upon the filing of a voluntary bankruptcy  [**3] petition and providing for automatic debt acceleration are unenforceable ipso facto provisions1 under § 365(e)(1) of the Bankruptcy Code, [*92]  11 U.S.C. § 365(e)(1), or other Code provisions cited by U.S. Bank; and (2) the requirements and consequences of an 11 U.S.C. § 1110(a) election when the only outstanding default is an ipso facto default that triggered automatic acceleration of the debt.

Appellant U.S. Bank National Trust Association ("U.S. Bank") appeals from an order entered February 1, 2013 and two judgments entered February 11, 2013 by the United States Bankruptcy Court for the Southern District of New York ("USBC-SDNY") (Lane, B.J.), which: (1) authorized AMR Corporation and American Airlines, Inc. (collectively "American" or "Debtors") to obtain postpetition financing; (2) authorized American to repay certain prepetition notes held by U.S. Bank and secured by aircraft; and (3) denied U.S. Bank's request  [**4] to lift the automatic stay. On February 28, 2013, the bankruptcy court granted U.S. Bank's motion for direct appeal to our Court in light of the public importance of the matter and the lack of controlling Second Circuit law in relation to questions it presents; we granted U.S. Bank's petition for direct appeal on April 2, 2013.

We determine that: (1) per the language of the notes' Indenture Agreements (the "Indentures"), American's voluntary petition for bankruptcy triggered a default that accelerated the debt but required no Make-Whole Amount payment in connection with debt repayment; (2) the pertinent clauses, contained in nonexecutory contracts, are not within the scope of 11 U.S.C. § 365(e)(1) and are not rendered unenforceable by any other Bankruptcy Code provision identified by U.S. Bank; (3) American complied with its § 1110(a) elections to perform its obligations under the Indentures and cure any non-exempt defaults by making regularly scheduled principal and interest payments, and it was not required to cure its bankruptcy default; and (4) the bankruptcy court did not err in denying U.S. Bank's motion to lift the automatic stay. Accordingly, we affirm the relevant order and  [**5] judgments of the bankruptcy court.

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730 F.3d 88 *; 2013 U.S. App. LEXIS 18900 **; 58 Bankr. Ct. Dec. 122; 2013 WL 4840474

IN RE: AMR CORPORATION ET AL., Debtors, U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee and Security Agent under the Indenture and Aircraft Security Agreement for American Airlines 2009-2 Senior Secured Notes Due 2016, as Loan Trustee and Pass Through Trustee under those certain Indenture and Security Agreements with respect to the AMR 2009-1 EETC and AMR 2011-2 EETC Transactions, Appellant, -v.- AMR CORPORATION, AMERICAN AIRLINES, INC., Appellees.

Subsequent History: As Amended September 17, 2013.

US Supreme Court certiorari denied by U.S. Bank Trust N.A. v. AMR Corp., 134 S. Ct. 1888, 188 L. Ed. 2d 913, 2014 U.S. LEXIS 2588 (U.S., Apr. 21, 2014)

Prior History:  [**1] U.S. Bank Trust National Association ("U.S. Bank") appeals from the decision of the United States Bankruptcy Court for the Southern District of New York (Lane, B.J.), authorizing Debtors AMR Corporation and American Airlines (collectively "Debtors" or "American") to obtain postpetition secured financing and to repay existing prepetition debt owed to U.S. Bank, and denying U.S. Bank's request for relief from the automatic stay. We granted U.S. Bank's petition for authorization of direct appeal under 28 U.S.C. § 158(d)(2)(A). On appeal, U.S. Bank argues that American is voluntarily attempting to repay the debt owed on its Notes and therefore must pay a Make-Whole Amount under the terms of the Indentures and pursuant to its 11 U.S.C. § 1110(a) elections. We disagree and therefore AFFIRM the bankruptcy court's order and judgments authorizing American to seek postpetition financing and to repay outstanding principal and interest (but no Make-Whole Amount) to U.S. Bank and declining to lift the automatic stay.

U.S. Bank Trust Nat'l Ass'n v. Am. Airlines, Inc. (In re AMR Corp.), 485 B.R. 279, 2013 Bankr. LEXIS 239 (Bankr. S.D.N.Y., Jan. 17, 2013)

CORE TERMS

acceleration, Default, automatic, Indentures, Make-Whole, elections, facto, ipso, redemption, cure, aircraft, triggered, lease, financing, maturity, lift, regularly, repay, waive, decelerate, Noteholders, contractual, rescind, notice, unenforceable, outstanding, modify, executory, repayment, unpaid

Bankruptcy Law, Administrative Powers, Executory Contracts & Unexpired Leases, Termination Clauses, Contracts Law, Contract Conditions & Provisions, General Overview, Scope of Stay, Exceptions to Stay, Transportation Equipment, Judicial Review, Standards of Review, De Novo Standard of Review, Procedural Matters, Jurisdiction, Abuse of Discretion, Automatic Stay, Relief From Stay, Procedural Matters, Contract Interpretation, Ambiguities & Contra Proferentem, Parol Evidence, Business & Corporate Compliance, Contracts Law, Standards of Performance, Creditors & Debtors, Claims Against Estate Property, Bankruptcy, Estate Property, Contractual Rights, Contents of Estate, Types of Contracts, Executory Contracts, Estate Property Lease, Sale & Use, Conflicting Contract & Law Provisions, Existing Defaults