US Airways 2006 Annual Report Download - page 120

Table of Contents
US Airways Group, Inc.
Notes to Consolidated Financial Statements — (Continued)
dismissal of US Airways from the litigation, and on November 27, 2006, US Airways filed a notice withdrawing its motion for sanctions.
On December 29, 2006, the district court entered an order dismissing US Airways from the litigation.
On October 12, 2005, Bank of America, N.A., which is one of the issuing banks of the US Airways frequent flyer program credit
card and which also acts as the processing bank for most airline ticket purchases paid for with credit cards, filed suit in the Delaware
Chancery Court in New Castle County against US Airways, US Airways Group and AWA, alleging that US Airways breached its
frequent flyer credit card contract with Bank of America by entering into a similar, competing agreement with Juniper and allowing
Juniper to issue a US Airways frequent flyer credit card. Bank of America also alleges that US Airways Group and AWA induced these
breaches. Bank of America seeks an order requiring US Airways to market the Bank of America card and prohibit Juniper from issuing a
US Airways credit card, as well as unspecified damages. On October 27, 2005, Juniper, which was not originally a party to the lawsuit,
sought and later received court permission to intervene as a defendant in the case and has made counterclaims against Bank of America.
Juniper seeks an order declaring the validity of its new agreement to issue a US Airways frequent flyer credit card. On November 3,
2005, Bank of America filed a motion for partial summary judgment on the breach of contract claim against US Airways. After a series
of procedural steps, Bank of America's motion, along with a cross-motion for summary judgment filed by Juniper, was heard in the
Bankruptcy Court, where the case is now pending as an adversary proceeding. On January 30, 2006, the Bankruptcy Court ruled that
Bank of America was equitably estopped from pursuing its claims that US Airways breached its agreement with Bank of America by
negotiating and entering into the agreement with Juniper. The Bankruptcy Court ruled in the alternative that US Airways did not breach
its agreement with Bank of America to be the exclusive card issuer, but that US Airways had breached the "no shop" provision of the
Bank of America agreement when US Airways negotiated with Juniper prior to reaching the Juniper agreement. Bank of America sought
appeal of that ruling while it has continued to pursue certain administrative claims against US Airways in the Bankruptcy Court. The
resolution of the final two claims that Bank of America made in the lawsuit, which are (i) that AWA tortiously interfered with the
contractual relationship between US Airways and Bank of America and (ii) that US Airways Group and AWA tortiously interfered with
Bank of America's right to future economic benefit under its agreement with US Airways, are dependent on the outcome of the pending
appeal. Bank of America will pursue those two claims only if its appeal of the January 30, 2006 order is ultimately successful. On
July 19, 2006, the Eastern District of Virginia affirmed the Bankruptcy Court's order in part, ruling that US Airways did not breach the
exclusivity provisions of the contract. However, the Eastern District of Virginia reversed the Bankruptcy Court's decision on equitable
estoppel and remanded the remainder of the case to the Bankruptcy Court to take further evidence. Bank of America and US Airways
have each appealed the July 19, 2006 ruling. On January 16, 2007, Bank of America amended its complaint to add additional breach of
contract and tortious interference claims against US Airways and AWA, as well as claims against Juniper.
On February 9, 2007, passengers Daphne Renard and Todd Robins filed a class action suit against US Airways in San Francisco
Superior Court. The complaint alleges that US Airways breached its contract of carriage by charging additional fares and fees, after the
purchase of tickets on the usairways.com website, for passengers under two years of age who travel as "lap children," meaning that the
child does not occupy his or her own seat but travels instead on the lap of an accompanying adult. The named plaintiffs allege that they
purchased international tickets through the website for themselves and a lap child. Plaintiffs allege that after initially receiving an
electronic confirmation that there would be no charge for the lap child, they were later charged an additional $242.50. The complaint
alleges a class period from February 9, 2002 to the present. The Company has not yet been served with the lawsuit.
The Company is unable to estimate at this time the amount of loss or probable losses, if any, that might result from an adverse
resolution of the proceedings discussed above, and currently is unable to predict whether the outcome of these proceedings will have a
material adverse effect on its results of operations or financial condition. The Company intends, however, to vigorously pursue all
available defenses and claims in these matters.
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