In the

United States Court of Appeals

For the Seventh Circuit

____________

No. 05-1871

UNITED AIRLINES, INC., and

THE OFFICIAL COMMITTEE OF

UNSECURED CREDITORS,

Plaintiffs-Respondents-Appellees,

v.

U.S. BANK N.A. and THE

BANK OF NEW YORK, as

Indenture Trustees,

Defendants-Petitioners-Appellants.

____________

Petition for a Writ of Mandamus to, and Appeal from, the

United States District Court for the Northern District

of Illinois, Eastern Division. Nos. 04 C 8304

& 05 C 289 (04 A 4149)—John W. Darrah, Judge.

____________

SUBMITTED APRIL 27, 2005—DECIDED MAY 6, 2005

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Before COFFEY, EASTERBROOK, and WILLIAMS, Circuit

Judges.

EASTERBROOK, Circuit Judge. When United Airlines

entered bankruptcy in 2002, it operated about 460 air-
2 No. 05-1871

planes. Some 175 of these had been acquired via financing

leases subject to 11 U.S.C. §1110, which provides that to

retain leased planes a debtor must pay the whole rent. The

statute contains an exception for consensual workouts, see

§1110(b), and United’s lessors initially agreed to accept less

than the contractual payments. As the reorganization dragged

on, however, some of the lessors concluded that United

would not be reorganized successfully and demanded their

planes back. When United entered bankruptcy in 2002, and

negotiated the current reduced rental payments, it projected that reorganization would be accomplished in six

months. Two and a half years later, United is losing more

than $1 billion annually and is not promising to propose a

plan of reorganization any time soon. Some creditors are

bound to have second thoughts. In November 2004 the

banks serving as indenture trustees for three of the leases

demanded that United immediately return 14 of the aircraft

unless it cured all defaults and resumed the full rental payments promised by contract.

United neither paid nor returned the planes. Instead it

filed an adversary action accusing the indenture trustees of

violating the Sherman Act, 15 U.S.C. §1, by coordinating

their efforts to preserve the lenders’ collateral and collect

the promised payments. The trustees violate the antitrust

laws, according to United, by insisting that the debtor deal

with them collectively about all 175 leased airplanes. One

might suppose that coordination is a normal function of

indenture trustees, which exist under the Trust Indenture

Act of 1939 precisely because individual lenders may be too

diffuse to protect their own interests. See 15 U.S.C.

§77bbb(a)(1). Coordination is especially common in bankruptcy, which often is described as a collective proceeding

among lenders. See, e.g., In re American Reserve Corp., 840

F.2d 487, 489 (7th Cir. 1988); Douglas G. Baird & Thomas

H. Jackson, Corporate Reorganizations and the Treatment

of Diverse Ownership Interests: A Comment on Adequate
No. 05-1871 3

Protection of Secured Creditors in Bankruptcy, 51 U. Chi. L.

Rev. 97, 105-09 (1984). The name of an entity that intervened to support United’s contention—“The Official Committee of Unsecured Creditors”—demonstrates as much. No

wonder that the second circuit has described as “bordering

on the frivolous” a contention that the antitrust laws forbid

creditors to coordinate their positions in bankruptcy.

Sharon Steel Corp. v. Chase Manhattan Bank, N.A., 691

F.2d 1039, 1052-53 (2d Cir. 1982).

Competition comes at the time loans are made; cooperation in an effort to collect as much as possible of the

amounts due under competitively determined contracts is

not the sort of activity with which the antitrust laws are

concerned. Moreover, businesses are entitled under the

Noerr-Pennington doctrine to act jointly when presenting

requests to courts and agencies. See Eastern Railroad

Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S.

127 (1961); United Mine Workers v. Pennington, 381 U.S.

657 (1965). Collective renegotiation succeeds only if the

court approves. See California Motor Transport Co. v.

Trucking Unlimited, 404 U.S. 508 (1972) (holding that the

Noerr-Pennington doctrine applies to collective presentations in litigation).

On top of all this comes §1110(a)(1), which provides that

the right . . . of a lessor or conditional vendor of

[airplanes], to take possession of such equipment in

compliance with a security agreement, lease, or

conditional sale contract, and to enforce any of its

other rights or remedies, under such security agreement, lease, or conditional sale contract, to sell, lease,

or otherwise retain or dispose of such equipment, is

not limited or otherwise affected by any other provision of this title or by any power of the court.

This takes aircraft out of the automatic stay, see 11 U.S.C.

§362, and entitles secured lenders and financing lessors to
4 No. 05-1871

repossess their collateral. There are only two exceptions.

Section 1110(b), which we have mentioned, says that the

creditor or lessor may agree to allow the debtor to continue

using the equipment. This is how United has retained the

aircraft so far. Section 1110(a)(2), the other exception, gives

the debtor 60 days after the bankruptcy begins to come current on its payments and provides that, if the debtor

thereafter makes all payments called for by the contracts,

it may retain the airplanes. United is not paying the full

amount required by these leases, so §1110(a)(2) does not

assist it.

Given the breadth of §1110(a)(1), United’s demand for an

injunction might have been denied out of hand. Instead,

however, Bankruptcy Judge Wedoff entered a temporary

restraining order forbidding the trustees to repossess the

airplanes. He stated that despite its reference to “any power

of the court” §1110(a)(1) does not affect the court’s ability to

award injunctive relief under non-bankruptcy law, such as

the Sherman Act. This is hard to reconcile with the statute’s text. Cf. Norfolk & Western Ry. v. American Train

Dispatchers Association, 499 U.S. 117 (1991) (a statute

applicable to rail consolidations and similar in structure to

§1110 blocks resort to all other sources of law). Moreover,

the judge did not explain why United’s antitrust contention

is strong enough to support injunctive relief in the teeth of

a statute that curtails remedies. Section 1110(a)(1) does not

bar a damages action for wrongful repossession; if the

indenture trustees have indeed violated the antitrust laws

they face treble damages and criminal prosecution. Cf.

Vendo Co. v. Lektro-Vend Corp., 433 U.S. 623 (1977) (antitrust

laws do not create exception to the Anti-Injunction Act). But

this statute does give them their collateral, and by assuring

them a self-help remedy it makes aircraft credit available

on better terms. See Jason J. Kilborn, Thou Canst Not Fly

High With Borrowed Wings: Airline Finance and Bankruptcy Code Section 1110, 8 Geo. Mason L. Rev. 41, 62-63

(1999); cf. Gregory P. Ripple, Special Protection in the
No. 05-1871 5

Air(line Industry): The Historical Development of Section

1110 of the Bankruptcy Code, 78 Notre Dame L. Rev. 281

(2002).

Temporary retraining orders are at least brief—they last

for 20 days at most, including the 10-day extension allowed

by Fed. R. Civ. P. 65(b), incorporated by Fed. R. Bankr. P.

7065. Bankruptcy Judge Wedoff promised to explore the

subject more fully at a hearing in December 2004 on

United’s motion for a preliminary injunction. United then

sought discovery into all of the indenture trustees’ communications, not only with other trustees and lenders but also

with their lawyers. Needless to say this led to protests that

the matters United wants are covered by the attorneyclient and work-product privileges. The bankruptcy judge

held, however, that United’s antitrust theory is strong

enough to override these privileges—for they cannot be used

to shield ongoing crimes, and a violation of the Sherman Act

is a felony. So the bankruptcy judge demanded that the

materials be produced, either directly to United or to the

court for an in camera inspection (which, the judge noted,

might reveal that no crime was in process and thus that the

privileges continue). Seeking to set up an opportunity for

appellate review, the trustees respectfully declined to

comply. The bankruptcy judge might have drawn an

adverse inference and entered a preliminary injunction,

from which the trustees could have appealed. Or he might

have held them in criminal contempt, again setting up an

appeal. Instead, however, the judge declared them “in contempt” but did not impose any sanction, even a daily fine.

Nor did the judge proceed to the scheduled hearing; he put

it off until the trustees disclosed the privileged materials.

The trustees appealed to the district judge, who has authority to review interlocutory as well as final decisions of

bankruptcy judges. 28 U.S.C. §158(a). They filed one appeal

from the TRO issued on November 26, 2004, and another

from the declaration of contempt on December 9, 2004. The
6 No. 05-1871

district judge dismissed both appeals, ruling that neither of

the bankruptcy judge’s orders is “final” and declining to

exercise jurisdiction to review the interlocutory orders. The

upshot is that the lessors are enjoined from repossessing

the aircraft, without either review by an Article III judge or

any prospect of such review—for the bankruptcy judge will

not hold a hearing on the motion for injunctive relief until

the trustees cough up the privileged documents, which they

do not plan to do until they obtain the appellate review that

has been denied to them.

For obvious reasons, the prospect of stasis is delightful to

United and its unsecured creditors but unsatisfactory to the

lessors. They ask this court to issue a writ of mandamus

that will lift the injunction, or at least get the proceedings

back on track by resolving the privilege debate. They also

ask us to treat their papers as a notice of appeal, should

appellate jurisdiction be available. (The petition for mandamus contains the information required by Fed. R. App. P. 3.

See Smith v. Barry, 502 U.S. 244 (1992).) We conclude that

the TRO became an injunction when it extended past 20

days, so the district court had jurisdiction and we have

appellate jurisdiction under 28 U.S.C. §1292(a)(1). See

Connecticut National Bank v. Germain, 503 U.S. 249 (1992).

The debate about privilege, however, cannot now be

resolved, because a bare declaration of contempt, without

consequences, is neither a final order nor within the scope

of the mandamus power. See Kerr v. United States District

Court, 426 U.S. 394 (1976); Powers v. Chicago Transit

Authority, 846 F.2d 1139 (7th Cir. 1988); In re Lewis, 212

F.3d 980, 983 (7th Cir. 2000). Given our view of the merits,

however, the privilege dispute has no continuing significance.

Temporary restraining orders that extend past 20 days

are reviewable as preliminary injunctions, no matter what

the rendering judge may have called them. See Sampson v.

Murray, 415 U.S. 61, 86-88 (1974); Granny Goose Foods,
No. 05-1871 7

Inc. v. Teamsters Union, 415 U.S. 423 (1974). The district

court thought this principle inapplicable because the trustees

consented to the maintenance of the status quo until the

hearing on preliminary injunctive relief. An order supported

by consent is not appealable. See Geneva Assurance Syndicate, Inc. v. Medical Emergency Services Associates, 964

F.2d 599 (7th Cir. 1992). The problem with this view of

matters is that the trustees did not consent to indefinite,

non-appealable relief.

The trustees’ statement to which the district judge referred

was an agreement on December 8, while the bankruptcy

judge had the privilege dispute under advisement, to extend

the TRO “pending further order of the court.” Such an order

came the next day, when the bankruptcy judge declared the

trustees in contempt, anticipating (though incorrectly) that

this would facilitate review by the district judge and this

court. We do not understand the trustees to have consented

to a procedure that would prevent any other “order of the

court” from being entered. It would not be sensible to

understand their consent as permission to cancel the

hearing and keep the TRO in force forever. Yet that is

exactly what has happened. The bankruptcy judge called off

the hearing, and United now contends that as a result it

may keep the collateral without paying the agreed price and

without any review by an Article III judge. The trustees did

not (and do not) consent to that state of affairs. The order

thus must be treated as a preliminary injunction, open to

appellate review. Because the issues are legal, we can

supply that review ourselves without remanding to the

district judge.

Section 1110(a)(1) gives the trustees a right to the return

of aircraft unless United pays the full rental or the lessors

agree to accept a lower price. Those conditions are not satisfied, so the bankruptcy judge must dissolve the injunction

and allow the lessors to repossess their collateral. It does

not matter whether, as United suspects, the lessors are
8 No. 05-1871

engaged in strategic behavior. The statute gives them that

entitlement, treating aircraft different from other assets. A

credible threat to repossess the aircraft changes the terms

on which post-bankruptcy bargains can be struck; it is

exactly this prospect that makes credit available on better

terms when air carriers shop for financing in the first place.

United obtained the sort of terms that were available from

creditors secure in their ability to repossess the collateral;

it must live with those terms now, just as it must pay the

current market price for jet fuel.

The final clause of §1110(a)(1) prevents bankruptcy judges

from using any source of law, including antitrust, as the basis

of an injunction against repossession. United protests this

understanding, observing that “power of the court” is the

caption of the Code’s §105, 11 U.S.C. §105, and contending

that the language “any power of the court” thus must refer

back to §105. Yet that would drain all meaning from the

phrase “any power of the court” in §1110(a)(1), for the preceding language already blocks reliance on any other part

of the Bankruptcy Code. Unless it is to be empty, the phrase

“any power of the court” must deal with sources of law

outside the Bankruptcy Code. It is not as if “power of the

court” were a phrase limited to bankruptcy practice. It is

generic language, logically read to mean exactly what it

says: “any power of the court.” This does not “repeal” the

antitrust laws, as United would have it; instead, like the

Anti-Injunction Act and the Norris-LaGuardia Act, it

curtails a particular remedy without affecting any substantive rule. Section 1110(a)(1) leaves open the possibility of

damages (not to mention actions by the FTC or criminal

prosecutions by the United States); all it says is that courts

can not prevent aircraft lessors or secured lenders from

repossessing their collateral.

What is more, the antitrust claim is thin to the point of

invisibility. United concedes that creditors are entitled to

negotiate jointly in bankruptcy, as Sharon Steel holds. But
No. 05-1871 9

it contends that the lessors have “colluded with one another

with respect to the future terms and prices on which they

would make aircraft available to United.” (Emphasis in

original.) If United means by this that would-be lessors are

conspiring to set the price to be charged for new planes,

then it has a good antitrust theory—but enjoining the repossession of old planes would not be a sensible means of

vindicating the rule against cartelizing the sale of new

planes. As best we can make out, however, what United

means by “future terms and prices on which they . . . make

aircraft available” is how much less than the contract price

the lessors and lenders are willing to accept to forbear from

repossessing planes now in United’s hands.

Negotiating discounts on products already sold at competitive prices is not a form of monopolization. Negotiations

on reductions to be taken in bankruptcy, when the buyer

cannot pay all of its debts, are common and lawful, under

the Noerr-Pennington doctrine if nothing else. True, the

Noerr-Pennington doctrine cannot be used to shelter joint

activity that creates monopoly prices independent of any

decision by a court or agency. See In re Brand Name

Prescription Drugs Antitrust Litigation, 186 F.3d 781, 789 (7th

Cir. 1999). But collaboration among creditors to formulate

a position about how much of a haircut to accept has no

effect unless the court approves the restructuring. By United’s

lights a prepackaged bankruptcy, in which all creditors

negotiate to reach unanimous agreement before presenting

a plan to a court, would be nothing but a colossal cartel,

unlawful per se. What United really is complaining about is

not the joint conduct of the lessors—which originally led to

forbearance even though United stopped paying the agreed

rentals—but the decision of some lenders to withdraw from

that package deal and start acting on their own in order to

get better prices from United (or, if that fails, lease the

planes to someone else). That decision has the protection of

both §1110(a)(1) and the Noerr-Pennington doctrine.
10 No. 05-1871

If an antitrust problem lurks in the post-bankruptcy

dealings, United is as much an offender as the lessors are.

The lenders want to shop the planes, selling future months

of their remaining useful lives to the high bidders. United,

by contrast, wants to limit these lessors to a single bidder

(United itself) and deny them the benefit of competition,

even though United is unwilling to pay the price agreed at

the end of the competitive financing process, and even while

United itself remains free to shop for better terms and

return these 14 planes if it finds such terms. In other

words, United fancies the position of monopsonist, which

the antitrust laws forbid on equal terms with monopoly. See

Mandeville Island Farms, Inc. v. American Crystal Sugar

Co., 334 U.S. 219 (1948).

The competitive solution is for both sides to have access

to markets—and that outcome is achieved by allowing

repossession. The lessors will get the current market price

for airframes of the type and age involved. United, too, will

enjoy a competitive price: it can buy or rent equivalent

planes on going terms. If, as United and the Committee of

Unsecured Creditors contend, the spot-market price is below not only the original rental terms but also the modified

terms set when United filed for bankruptcy in 2002, then

United will be better off as a result. Its problem arises if, as

the lessors are betting, the price of used airplanes is higher

than what United is now paying for these 14 aircraft. But

if, as United contends, the highest and best use of these

planes is with United, and the current competitive price is

less than what United is paying in bankruptcy, then the

threat to repossess is not credible, and United will keep the

planes without judicial intervention (though tough bargaining may lie ahead to set the extent of the haircut from the

old rental price). Only if potential sellers and lenders

conspire to set the price at which United can acquire

replacement aircraft would there be a genuine antitrust

problem, and United does not contend that such a cartel is

in prospect.
No. 05-1871 11

With respect to equitable relief, the judgment of the

district court is reversed, and the case is remanded with

instructions to vacate the preliminary injunction and permit

the repossessions to proceed unless United immediately

cures its defaults and pays the full rentals under §1110(a)(2)-

(B)(iii). The mandate will issue today. With respect to the

contempt citation, the petition for mandamus is denied.

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—5-16-05