US Airways 2006 Annual Report Download - page 207

Table of Contents
US Airways, Inc.
Notes to the Financial Statements — (Continued)
On February 26, 2004, a company called I.A.P. Intermodal, LLC filed suit against US Airways Group and its wholly owned airline
subsidiaries in the United States District Court for the Eastern District of Texas alleging that the defendants' computer scheduling system
infringes 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 and its
subsidiaries were formally served with the complaint on June 21, 2004. On the same date, the same plaintiff filed what US Airways
Group believes to be substantially similar cases against nine other major airlines, including British Airways, Northwest Airlines
Corporation, Korean Airlines Co., Ltd., Deutsche Lufthansa AG, Air France, Air Canada, Singapore Airlines Ltd., Delta Air Lines and
Continental Airlines, Inc., and had filed a suit against AMR Group, Inc., the parent company of American Airlines, along with its airline
subsidiaries, in December 2003. This action has been stayed as to US Airways Group and its wholly owned subsidiaries as a result of the
2004 Bankruptcy. In the meantime, several foreign airline defendants were dismissed from the case for reasons unique to their status as
foreign operators, and the remaining defendants in September 2005 obtained a ruling that there had been no infringement of any of
I.A.P.'s patents. In October 2005, I.A.P. entered into consent judgments with several defendants. I.A.P. appealed the judgment in favor of
Continental Airlines and the AMR Group defendants, but the trial court's ruling was affirmed on November 13, 2006. No further appeals
have been taken. I.A.P. did not file any claims against US Airways Group or any of its subsidiaries in the 2004 Bankruptcy.
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 that US Airways Group sustained in the tax year 1999 on the sale of stock of USLM
Corporation (the "USLM matter"). On February 5, 2003, the IRS filed a proof of claim with the Bankruptcy Court in connection with the
bankruptcy case filed on August 11, 2002 (the "2002 Bankruptcy") asserting the following claims against US Airways with respect to the
USLM matter: (1) secured claims for U.S. federal income tax and interest of $1 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. Due to the 2004 Bankruptcy filing, which suspended payment of prepetition liabilities, final payment terms
under the agreement have not been submitted to the Bankruptcy Court for approval. The IRS has submitted a proof of claim relating to
the USLM matter in 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 Reorganized 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. US Airways and the IRS have reached an agreement
to settle the USLM matter whereby the IRS would setoff approximately $4.5 million of tax refunds and the IRS would be allowed an
unsecured priority claim in the amount of approximately $6.5 million, payable within 30 days after the agreement is filed with the
Bankruptcy Court. The agreement was filed with the Bankruptcy Court on February 18, 2007 and the matter is now closed.
On February 8, 2006, 103 flight attendants employed by the former MidAtlantic division of US Airways filed a complaint against
the Association of Flight Attendants ("AFA"), AFA's international president Pat Friend and US Airways, alleging that defendants
conspired to deceive plaintiffs into believing that MidAtlantic was a separate entity from US Airways in order to deprive them of the
benefits they are due as US Airways flight attendants pursuant to the US Airways collective bargaining agreement. Plaintiffs' claims
against US Airways include breach of collective bargaining agreement, violation of the Railway Labor Act and racketeering under RICO.
Plaintiffs' complaint requests $400 million in damages from US Airways and injunctive relief. The complaint was served on US Airways
on July 7, 2006. On November 24, 2006, Plaintiffs filed with the district court a notice of voluntary dismissal of US Airways from the
litigation, and on November 27, 2006, US Airways filed a notice withdrawing its
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