NWA AFA Flight Attendants Win Bankruptcy Claim for Series C Stock
May 3, 2007
AFA-CWA prevailed in bankruptcy court yesterday, securing a claim for roughly $65 million based on payment for Series C Preferred Stock that had been the subject of an earlier lawsuit.
"This is a bright spot for our members in what has been a long and difficult battle through bankruptcy," said Jay Hong, AFA-CWA president at Northwest. "The court upheld our claim and the members who still held that Series C stock will now be compensated."
A bankruptcy claim had been filed based on the court judgment won by the unions in connection with the Series C Preferred Stock. Northwest Airlines issued the Series C Preferred Stock as part of an agreement with the International Brotherhood of Teamsters ("IBT") in 1993. At that time the IBT was the bargaining representative of the Northwest flight attendants. The Series C Preferred Stock was deposited into a Trust for which the IBT appointed a Trustee (the "IBT Trust"). Northwest agreed to redeem the stock in cash in June 2003, but subsequently refused to do so. The IBT and the Trustee sued Northwest to compel compliance with the agreement and in August 2005, a state court in New York rendered a judgment against Northwest in the amount of $64,770,000.
Northwest filed for bankruptcy protection a few weeks after the judgment had been entered, and has not paid it. In addition Northwest had by that time filed an appeal of the state court's judgment. However, because of the bankruptcy, all pending litigation pending was stayed and as a result no action has been taken to move the appeal forward.
Once AFA-CWA became the bargaining representative of the Northwest flight attendants last July, AFA-CWA attorneys and the IBT pursued a general unsecured claim for the $64,770,000 judgment and filed a proof of claim in that amount, leading to today's legal victory. "We made this issue a priority because our members who held the stock were treated unfairly when the Company refused to pay," said Hong. "This is the second court to rule in favor of the flight attendants on this issue."
Judge Alan Gropper of the U.S. Bankruptcy Court in New York today rejected the arguments of the Ad Hoc Committee of Creditors and determined that the claim should be allowed. As a result the flight attendants and other employees of Northwest will finally receive what they bargained for fourteen years ago. Like all other unsecured creditors they will participate in the recovery set forth in the Plan of Reorganization. The Plan provides that creditors will receive common stock that Northwest will issue shortly after its exit from bankruptcy. The current estimate is that the stock distributed to creditors will equate to approximately 79% of the full value of their claims. The new stock can be sold for cash after it is issued. No appeals are anticipated from today's ruling.
More than 55,000 flight attendants, including the 8,100 flight attendants at Northwest, join together to form AFA, the world's largest Flight Attendant union. AFA is part of the 700,000 member strong Communications Workers of America, AFL-CIO. Visit us at www.nwaafa.org