US Airways 2005 Annual Report Download - page 261

Table of Contents
US Airways, Inc.
Notes to the Financial Statements — (Continued)
the 2004 Bankruptcy in the amount of approximately $31 million, and on August 2, 2005 the IRS filed a motion for relief from the automatic stay seeking to
setoff against approximately $4 million of tax refunds due to the Debtors. On October 20, 2005, the IRS filed an amended proof of claim reducing its claim in
the USLM matter to $11 million. On November 3, 2005, the IRS filed an amended motion continuing to seek relief for the $4 million setoff. A hearing was
set for December 15, 2005 on this matter, but was continued to March 16, 2006 for a status hearing. The Debtors are in the process of analyzing the IRS'
amended motion.
Williard, Inc. and the joint venture of Williard, Inc. and Len Parker Associates, was awarded construction contracts with US Airways for work to be
performed at the Philadelphia International Airport. On May 29, 2002, US Airways terminated the largest contracts between the parties. Williard, Inc. and the
joint venture sued US Airways in Pennsylvania state court for over $14 million in damages representing termination costs and lost profits, along with other
alleged contractual damage claims. Subsequently, Limbach Company, LLC alleged that it purchased the claims of Williard, Inc. After a trial, the Bankruptcy
Court in the 2002 Bankruptcy, on June 7, 2004, determined the value of the Limbach Company and the joint venture claims to be approximately $2.5 million.
Limbach Company and the joint venture are challenging on appeal various rulings of the Bankruptcy Court, including the amount of the claim and its status as
an unsecured claim. US Airways has also filed an appeal regarding the denial of its right to offset the claims with asserted backcharges.
Limbach Company and the joint venture have filed an action in state court against the City of Philadelphia and the Philadelphia Authority for Industrial
Development, as well as US Airways, but did not assert any claims against US Airways in that action. In the lawsuit against the City of Philadelphia and the
Philadelphia Authority for Industrial Development, Limbach Company and the joint venture are seeking the same sums as in their earlier lawsuit and proofs
of claim against US Airways, but this time under the equitable theories of third-party beneficiary, quantum meruit and constructive trust. On a pre-answer
motion to dismiss, the court in the Philadelphia action dismissed US Airways from the lawsuit and dismissed the third-party beneficiary claims against the
City of Philadelphia and the Philadelphia Authority for Industrial Development.
On May 21, 2004, the City of Philadelphia and the Philadelphia Authority for Industrial Development filed a Motion for Summary Judgment seeking
dismissal of the remaining claims for constructive trust and quantum meruit. On October 18, 2004, the City of Philadelphia and the Philadelphia Authority for
Industrial Development also filed an alternative Motion for Partial Summary Judgment that the damages claimed by Limbach Company and the joint venture,
if any, are capped at the amount determined by the Bankruptcy Court on the prior trial of its claims. On June 29, 2005, the court granted the Motion for
Summary Judgment and dismissed the alternative Motion for Partial Summary Judgment as moot. Limbach Company and the joint venture have appealed the
dismissal of these claims, as well as the prior dismissal of its third party beneficiary claim, but have not appealed the dismissal of US Airways from the
lawsuit.
Should the Philadelphia court's rulings be reversed on appeal and Limbach Company and/or the joint venture subsequently recover in the Philadelphia
action against the City of Philadelphia and the Philadelphia Authority for Industrial Development, that award would be paid by them at 100 cents on the
dollar. Although US Airways' agreements with the City of Philadelphia and the Philadelphia Authority for Industrial Development related to the airport
development have neither been assumed nor rejected as part of the 2004 Bankruptcy, if assumed, US Airways may have an obligation, under those
agreements, to indemnify the City of Philadelphia and the Philadelphia Authority for Industrial Development, at full value, for any recovery against them by
Limbach Company and/or the joint venture. Proceedings in the Bankruptcy Court related to the claims in the 2002 Bankruptcy remain stayed by the 2004
Bankruptcy filing. 255