ALLENSON v MIDWAY AIRLINES - Legal Case Documents


\|

ALLENSON v MIDWAY AIRLINES

Keywords & Phrases

CaseNo: C.A. No. 15,734, CourtCode: CC, CourtName: TESTIFY) AND THUS WE WILL NOT ASK THE COURT TO DECIDE THE ISSUE AT THIS TIME., Plaintiff: ALLENSON, State: DE Delaware, UniqueCaseRef: DE>CC>00015734, Midway, Merger, Concessions, Petitioners, Parties, Z/c, Speculative Elements, Projections, Key Creditors, Goodaero, Deferrals, Statutory, Facts, Perelman Plan, Amr, Respondent, Investment, Midway Airlines Corporation, Puglisi, Appraisal Proceeding, Chancellor, Testimony, Cede, Accomplishment, Expectation, Airlines, Delaware, Comparable Companies, Recapitalization, Cash Flow, Connection, Donald, Post-merger, Stockholder, Agreement, Supplemental Report, Debis, Operating, Aircraft , ContentID: 120241044

Case Documents

MEMORANDUM OPINION
[ see first page and extracted highlights below ] ItemID: 114932

STIPULAITONS OF FACT
[ see first page and extracted highlights below ] ItemID: 103303

LETTER
[ see first page and extracted highlights below ] ItemID: 103304

DEFENDANTS OPENING BRIEF IN SUPPORT OF MOTION IN LIMINE (REDACTED
[ see first page and extracted highlights below ] ItemID: 103305

Total Documents: 4 documents , 86 pages

Price: $ 34.95

IVESLCD01 KGI0001

1 . MEMORANDUM OPINION

EXTRACTED KEY WORDS

MIDWAY
COURT
PETITIONERS
CONCESSIONS
STATUTORY
PARTIES
FACTS
Z/C
APPRAISAL PROCEEDING
CEDE
PERELMAN PLAN
RESPONDENT
CHANCELLOR
KEY CREDITORS
GOODAERO
DEFERRALS
STOCKHOLDER
AMR
MAJORITY STOCKHOLDER
OPERATIVE REALITY
SPECULATION
AGREEMENT
CASH FLOW
BUSINESS PLAN
ATTORNEYS
TECHNICOLOR
SUPREME COURT
MAF
NEGOTIATIONS

    IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

               IN AND FOR NEW CASTLE COUNTY

JIM ALLENSON; B&W INVESTMENT;         )
H. BARRY BAKER, M.D.; MICHAEL         )
BLONSTEIN; EDWARD M. BURKE;           1
HOWARD W. CARROLL TRUST;  IRA         )
CARROLL; EARL CARROLL; MICHAEL )
CAVANAUGH; CHICAGO AIR                >
PARTNERS;JEFF FINE; SUE GIN;          >          CA. No.  15734-NC
JEROME GOLD;MICHAEL H. GOLD;        )
ROBERT J. GOLD;FRANCES GOLDBERG;  )
GARY GREENBAUM; HOUSTON AIR           )
PARTNERS; NATHAN JACOBSON;          >
STUART KAUFMAN; JAMES  KRAINSON;   )
MARK KUGLER; RICHARD LEVINE;        )
MELVIN LEVINSON; MICHAEL            >
LEVINSON; BRIAN OLDS; DONALD        )
RUTZ; KENNETH SAIN; KENNETH         1
SAIN, JR.;MARK SUMMERS; DEBRA       )
SUSSKIND; TSP PARTNERSHIP; WALLY )
WEBER; and HARVEY WEINDENFELD;      )
                                    )
                    Petitioners,    11
     V.                             >
                                    >
MIDWAY AIRLINES CORPORATION,        )
                                    1
                    Respondent.     1




             Date Submitted: February 15,2001
             D a t e d ..                  July 6, 2001



David J. Margules and Joanne P. Pinckney , Esquires, of BOUCHARD,
MARGULES  & FRIEDLANDER,  Wihnington, Delaware; and Steven H. Cohen and
Robin L. Wolkoff, Esquires of PATZIK,  FRANK & SAMOTNY, LTD., Chicago,
Illinois; Attorneys for Petitioners

Gregory V. Varallo, C..  Malcolm Co&ran, IV and Dominic T. Gattuso, Esquires of
RICHARDS, LAYTON & FINGER, P.A., Wilmington, Delaware; Attorneys for
Respondent

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

Petitioners, 11

Malcolm Co&ran, IV and Dominic T. Gattuso, Esquires of RICHARDS, LAYTON & FINGER, P.A.,

JACOBS, VICE CHANCELLOR

This is the decision of the Court, after a trial based on stipulated facts,

adjudicating the merits of this statutory appraisal proceeding.

satisfactory to the outside investor ("the Concessions").

corporation's majority stockholder must also agree to invest new capital,

The majority stockholder, the corporation's key creditors, and the

outside investor reached an agreement that would accomplish those conditions.

of a merger of the corporation into a new entity.

determining the corporation's statutory fair value on the date of the merger.

What follows is a summary of the relevant facts to which the parties

Delaware corporation ("Midway" or "the Company"),

with the result that Z/C owned 96.6% of Midway's

Deferrals With Its Key Creditors

After months of intense negotiations,

As a condition to participating in the 1996 Spring Deferrals, AMR

Only later did a third entity -- GoodAero -- emerge.

During this period, a cash flow

Inc. 7 ("Cede W'J--to the facts of this case.

Cede W was the latest Supreme Court decision in an appraisal

proceeding that arose out of a 1983 cash-out merger of Technicolor Incorporated and

The merger was the second step of a two-step, arms-length-negotiated acquisition of

That business plan

The Perelman Plan contemplated a sale of all of,what MAF regarded

not the `product of speculation, it must be considered in determining

merger date the Concessions were part of Midway's "operative reality.

2 . STIPULAITONS OF FACT

EXTRACTED KEY WORDS

INVESTMENT
CONCESSIONS
AIRLINES
Z/C
AMR
KEY CREDITORS
GOODAERO
PARTIES
DEFERRALS
CONNECTION
MERGER
DEBIS
PETITIONERS
OPERATING
AIRCRAFT
RECAPITALIZATION
PROJECTIONS
CAPITAL INFUSION
CASH FLOW
COST REDUCTION
FIRST BOSTON
AGREEMENT
NEGOTIATE
NEGOTIATIONS
SUBORDINATED NOTES
STIPULATED FACTS
GENERAL CORPORATION LAW
LEGAL SIGNIFICANCE
AIR SERVICE

                  JN THE CHANCERY COURT OF THE STATE OF DELAWARE

                               IN AND FOR NEW CASTLE COUNTY


JIM ALLENSON; B&W INVESTMENT; H.
BARRY BAKER M.D.; MICHAEL                                                                   :  j
BLONSTEIN; EDWARD M. BURKE; HOWARD                         )                                L
W. CARROLL TRUST; IRA CARROLL; EARL                        )
CARROLL; MICHAEL CAVANAUGH;                                1       CA. No. 15734NC  1.:.
CHICAGO AIR PARTNERS; JEFF FINE; SUE                                                        e f
GIN; JEROME GOLD; MICHAEL H. GOLD;                         i                 I              r.7
                                                                                  ,-.       cs
ROBERT J. GOLD; FRANCES GOLDB.ERG;
GARY GREENBAUM; HOUSTON AIR                                1
PARTNERS; NATHAN JACOBSON; STUART                          )
KAUFMAN; JAMES KRAINSON; MARK
KUGLER; RICHARD LEVINE; MELVIN                             ;
LEVTNSON;  MICHAEL LEVINSON; BRIAN
OLDS; DONALD RUTZ; KENNETH SAE$                            1
KENNETH SAIN, JR.; MARK SUMMERS;
DEBRA  SUSSKIND; TSP PARTNERSHIP;                          ;
WALLY WEBER; and HARVEY
WEINDENFELD;
                                                           I
                         Petitioners,
                                                           ;
          V.

MIDWAY AIRLINES CORPORATION,                               I

                         Respondent.

                                         STIPULATIONS OF FACT

          The parties hereby stipulate and agree to the following findings of fact in connection

Petitioners' claim for relief pursuant to Section 262(h) of the General Corporation Law of the

State of Delaware.'


          `The parties reserve the right to submit live expert testimony upon receipt of the Court's
ruling on the parties' joint request for a ruling  as to the legal significance of these stipulated
facts.

RLFI-2184915-l

JIM ALLENSON; B&W INVESTMENT; H.

Petitioners' claim for relief pursuant to Section 262of the General Corporation Law of the

`The parties reserve the right to submit live expert testimony upon receipt of the Court's

Midway Airlines Corporation

began providing air service from a base at Midway Airport in Chicago, Illinois, focusing on

Midway also agreed to lease a fifth A320 aircraft from Kawasaki Aircraft Leasing

exchange for subordinated notes with a face value of $6 million due in April 2002.

Petitioners also invested their pro rata share of the capital infusion in exchange for their

the Company had exhausted its operating cash.

Midway's key creditors and vendors, including American Airlines, Inc., debis

AirFinance B.V. and Airbus (collectively, the "Key Creditors") to defer amounts owed

The deferral negotiations ran through early 1996, culminating in deferrals from

of $6 million until September 30, 1996 (the "AMR Deferral").

`The parties agree that the headings in this document are inserted solely for convenience and

In connection with the 1996 Spring Deferrals, Z/C agreed to

Midway leadership also implemented a cost reduction

contingent upon the merger and recapitalization.

lessors with cash flow projections showing negative $7 million in cash flow for third quarter

Obtaining debt and operational cost reductions (the "Concessions") from the Key

A third entity, GoodAero, also subsequently emerged.

part of the ultimate merger and recapitalization.

Company sufficient time to negotiate a merger and recapitalization with GoodAero.

During this time Midway's negotiators prepared working projections intended to

One of AMU's advisors on the Midway restructuring was CS First Boston ("First

EXTRACTED KEY WORDS

CONCESSIONS
TESTIMONY
MIDWAY
PUGLISI
PRIOR
PETITIONERS
JACOBS
COURT
HONORABLE JACK
DEPOSITION
CREDITORS
CHANCELLOR
PARTIES
OPERATIVE REALITY
CONTROL
INFUSION
AERO
GRIMES
DEL
ABILITY
PROJECTIONS
PEARLMAN PLAN
HAND DELIVERY
MOTION
PROFESSOR PUGLISI
FINANCES
FACTS
LEGAL PRECEDENTS
ARGUE

                                 R I C H A R D S ,   L A Y T O N   &   F I N G E R
                                           A PROFESSIONAL  As50CIATION
                                              O N E R ODNEY   SQUARE

                                                   P.O.  BOX 551

                                     W I L M I N G T O N .   D E L A W A R E   19666

                                         T ELEPHONE :  (302)   6565541
                                         TELECOPIER:  (30.2)   6565546
                                            WEBSITE:   WWW.RLF.COM


                                              Wwrm'~  E-M AIL  A DDRESS
                                                VARALLO@RLF.COM
                                            WR~R'S   DIRECT   DIAL   N UMBER
                                                 (302)   65  I-7772

                                                  July 17, 2000                         REDACTED
                                          FJLED  UNDER SEAL




VIA HAND DELIVERY

Honorable Jack B. Jacobs
Vice Chancellor
Court of Chancery
1020 North Ring Street
Wilmington, DE 19801

                  Re:    Allenson. et al. v. Midwav  Airlines Corp., C.A. No. 15734

Dear Vice Chancellor Jacobs:

                  In light of the short time remaining before trial in this matter, Midway has
to file a reply brief in support of its pending Motion in Limine to preclude the trial testimony of
petitioner's expert, Professor Donald Puglisi, but instead to submit its reply in this letter. We
that a reply in this format will be helpful to the Court.

                  There are several issues which are raised in connection with Midway's motion, and
the petitioner's response to all of them is that they are properly directed to the weight of their
expert's testimony and not its admissibility. After consideration, we agree that the issue
whether Puglisi's reliance on a universe of only two comparable companies in his analysis is
appropriate, does go to the weight to be accorded his testimony (in the event that he is permitted
testify), and thus we will not ask the Court to decide the issue at this time.

Honorable Jack B. Jacobs

Vice Chancellor Court of Chancery

Dear Vice Chancellor Jacobs:

In light of the short time remaining before trial in this matter, Midway has opted not to

We trust that a reply in this format will be helpful to the Court.

The remaining issue, whether the creditor concessions which were valued by Professor Puglisi

Indeed, Puglisi also admitted at deposition that he viewed Midway as "insolvent" prior to the

Recognizing the central nature of this issue, petitioners attempt to obfuscate the facts and

They argue that because the testimony shows that the concessions were largely agreed to prior

Midway could survive ifan infusion of capital was made.

For its part, Good Aero, the capital provider, was willing to provide the necessam infusion

2The record at trial will show that Midway's key creditors made several rounds of deferrals

These are not the concessions which are at issue in this case, but only short term deferrals

Petitioner attempts to refute this otherwise clear record, or otherwise assert the existence

They were neither "in place" nor were they the "operative reality" of the Company at the

Petitioners also distort the controlling legal precedent in order to survive Midway's motion,

tExhibit E), Midway had no legal power to cause its creditors to make concessions prior to

the Supreme Court held that the "Pearlman Plan" was the "operative reality" and should be

In short, these were matters which were entirely out of the control of Midway, and to focus

It was entirely at the mercy of these third parties, and its financial projections as to what

Register in Chancery (via hand delivery)

4 . DEFENDANTS OPENING BRIEF IN SUPPORT OF MOTION IN LIMINE (REDACTED)

EXTRACTED KEY WORDS

MIDWAY
CONCESSIONS
SPECULATIVE ELEMENTS
COURT
PETITIONERS
PROJECTIONS
MIDWAY AIRLINES CORPORATION
ACCOMPLISHMENT
EXPECTATION
DELAWARE
PUGLISI
COMPARABLE COMPANIES
DONALD
TESTIMONY
POST-MERGER
SUPPLEMENTAL REPORT
COMPANIES ANALYSIS
PERELMAN PLAN
MICHAEL
PARTNERS
RESPONDENT
BANKRUPTCY
CARROLL
GOLD
PRECLUDE TESTIMONY
RECAPITALIZATION
MIDWAY DISCLOSURE
CREDITORS
TECHNICOLOR

           IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
                            IN AND FOR NEW CASTLE COUNTY

JIM ALLENSON; B&W INVESTMENT;
H. BARRY BAKER M.D.; MICHAEL
BLONSTEIN; EDWARD M. BURKE;
HOWARD W. CARROLL TRUST; IRA
CARROLL; EARL CARROLL; MICHAEL
CAVANAUGH;  CHICAGO AIR
PARTNERS; JEFF FINE; SUE GIN,
JEROME GOLD; MICHAEL H. GOLD;
ROBERT J. GOLD; FRANCES
GOLDBERG; GARY  GREENBAUM;
HOUSTON AIR PARTNERS; NATHAN
JACOBSON; STUART KAUFMAN;
JAMES KRAlNSON; MARK KUGLER;
RICHARD LEVINE; MELVIN
LEVINSON;  MICHAEL LEVINSON;
BRIAN OLD!;; DONALD RUTZ;
KENNETH  SAIN, KENNETH  SAIN, JR.;
MARK SUMMERS; DEBRA SUSSKIND;
TSP PARTNERSHIP; WALLY WEBER;
and H ARVEY WEINDENFELD;

                      Petitioners,



MIDWAY AIRLINES CORPORATION,

                      Respondent.


                      DEFENDANT'S OPENING BRIEF IN SUPPORT
  OF MOTION IN LIMINE TO PRECLUDE TESTIMONY OF DONALD J F'UGLISI
                                                              -     -----z.-


                                            Gregory V. Varallo
                                            Dominick T. Gattuso
                                            Richards, Layton & Finger, P.A.
                                            One Rodney Square
                                            P.O. Box 551
                                            Wilmington, Delaware 19899
                                            (302) 658-6541
                                             Attorneys for Respondent Midway Airlines
Dated: May 3, 2000                           Corporation

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

DEFENDANT'S OPENING BRIEF IN SUPPORT OF MOTION IN LIMINE TO PRECLUDE TESTIMONY OF DONALD J

UNRELIABLE AND, THEREFORE, PETITIONERS' SHOULD BE:BmED

The Concessions Are Speculative Elements Of Post-Merger Value

Arising From The Accomplishment Or Expectation Of The Merger

The Projections Were Not The Operative Realit:y At The: Time Of

Mr. Puglisi Employed Only Two Companies In His Comparable

Companies Analysis, Further Evidencing The Unreliability Of His Expert

Respondent Midway Airlines Corporation submits this brief

a supplemental report On April 6, 2000, respondent filed a motion to compel discovery of

weather caused Midway to exceed its financial resources (Midway Disclosure at 2).

Midway had only two choices - file bankruptcy or find a merger partner.

constant liquidity crise:s,;and by negotiating with Midway's key vendors and creditors.

conditioned upon completion of the Merger and Recapitalization.

F. Puglisi Elmplloyed Only Two Companies In His Comparable Companies

111 Delaware, the admission of expert testimony is governed by Delaware Rules of Evidence

In Cede & Co. v. Technicolor, Inc., Del.

its business plan (the "Perelman Plan") and began dismembering Technicolor,


\|