US Airways 2003 Annual Report Download - page 17

Table of Contents
Item 3. Legal Proceedings
Under the Plan of Reorganization, all claims that arose or accrued prior to the Effective Date against the Filing Entities are subject to the terms of the
Plan of Reorganization and any attempt to collect, secure or enforce remedies with respect to such claims against the Company outside of the claims
administration process set forth in the Plan of Reorganization are, with few exceptions, enjoined under the terms of the Plan of Reorganization and applicable
law. The Chapter 11 case is discussed in greater detail in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."
On February 26, 2004, a company called I.A.P. Intermodal, LLC filed suit against US Airways Group and its wholly owned airline subsidiaries alleging
that the defendants infringed upon three patents held by plaintiffs, all of which patents are entitled "Method to Schedule a Vehicle in Real-Time to Transport
Freight and Passengers." Plaintiff seeks various injunctive relief as well as costs, fees and treble damages. US Airways Group has not yet been formally
served but has received a courtesy copy of the complaint. US Airways Group is unable to ascertain at this time the likelihood or potential scale of liability. It
should be noted that on the same date, the same plaintiff filed what we believe to be substantially similar cases against nine other major airlines, including
British Airways, Northwest Airlines Corp., Korean Air Lines Co. Ltd., Deutsche Lufthansa AG, Air France, Air Canada, Singapore Airlines Limited, Delta
Airlines and Continental Airlines, and had filed a suit against the parent company of American Airlines in December, 2003.
The Port Authority of New York and New Jersey filed a proof of claim against US Airways in the bankruptcy proceeding. The claim was in the amount
of $8.5 million and it alleged environmental contamination and building deficiencies at LaGuardia Airport. US Airways' liability and defenses to such liability
were unaffected by its bankruptcy. US Airways has received no notice, inquiry or other communication from the Port Authority other than in connection with
the proof of claim, and therefore is unable to evaluate at this time the validity of the underlying claim, the degree to which US Airways might share
responsibility with other parties, or the cost of cleanup or correction of the alleged building deficiencies.
On January 7, 2003, the Internal Revenue Service (IRS) issued a notice of proposed adjustment to US Airways Group proposing to disallow $573
million of capital losses US Airways Group sustained in the tax year 1999 on the sale of stock of USLM Corporation (USLM). On February 5, 2003, the IRS
filed a proof of claim with the Bankruptcy Court asserting the following claims with respect to USLM: (1) secured claims for U.S. federal income tax and
interest of $0.7 million; (2) unsecured priority claims for U.S. federal income tax of $68 million and interest of $14 million; and (3) an unsecured general
claim for penalties of $25 million. On May 8, 2003, US Airways Group reached a tentative agreement with the IRS on the amount of U.S. federal income
taxes, interest, and penalties due subject to final approval from the Joint Committee on Taxation. By letter dated September 11, 2003, US Airways Group was
notified that the Joint Committee on Taxation had accepted the tentative agreement with the IRS, including a settlement of all federal income taxes through
the end of 2002.
On January 30, 2003, the Filing Entities filed a motion requesting (i) a determination from the Bankruptcy Court that the Filing Entities satisfy the
financial requirements for a "distress termination" of the defined benefit Retirement Income Plan for Pilots of US Airways, Inc. (Pilots Retirement Plan) under
section 4041(c)(2)(B)(ii)(IV) of the Employee Retirement Income Security Act of 1974, as amended (ERISA), and approval of such pension plan's
termination and (ii) authorization to implement a defined contribution retirement plan for its pilots (Distress Termination Motion). On March 2, 2003, the
Bankruptcy Court entered an order (March 2 Order) finding that the financial requirements under section 4041(c)(2)(B)(ii)(IV) of ERISA for a distress
termination of the Pilots Retirement Plan had been met and approving termination of the Pilots Retirement Plan subject to a determination, under the
arbitration procedures established by
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