bankruptcy court’s February 7th order should be partially vacated to allow the Debtors to nullify the
1110(a) agreements with respect to the Subject Aircraft,

On September 25, 2003, the bankruptcy court entered an order granting the Debtors’
Conditional Motion and denying U.S. Bank’s Administrative Claims Motions. The ‘bankruptcy court
ruled that it had the power to, and would, nullify the Debtors’ 1110(a) agreements by vacating its
prior approval of those agreements of February 7th. The bankruptcy court also awarded U.S. Bank
its attorney’s fees incurred in the litigation of the Section 1110(a) issue.

Subsequently, U.S. Bank filed a Motion for Reconsideration, seeking reconsideration of the
bankruptcy court’s September 25th order. On December 19, 2003, the bankruptcy court denied U.S.
Bank’s Motion to Reconsider as to the court's withdrawing certain findings and “finalized” the
September 25th order by awarding the attorney’s fees.

On December 24, 2003, U.S. Bank filed its appeal of the September 25, 2003 order; and on
January 2, 2004, Debtors filed their cross-appeal of the same order.

Before addressing the merits of the parties’ appeals, the Court must first determine whether
it has jurisdiction over the appeals. Debtors contend that the Court does not have jurisdiction
because the September 25" order was not a final order.

Section 158 of Title 28 provides that “{t]he district courts of the United States shall have
jurisdiction to hear appeals from final judgments, orders and decrees.” 28 U.S.C. § 158(a\(1). An
order is final if it “ends the litigation on the merits and leaves nothing for the court to do but execute
the judgment.” Carsion v. Brandt, 1997 WL 5354500 (N.D. Ill. Aug. 22, 1997) (Carlson). In
bankruptcy proceedings, the reviewing court looks at the finality of an order with a “relaxed eye” and

interprets the finality requirement more liberally under Section 158 than under 28 U.S.C, § 1291.

4


Lore

materially advance the ultimate termination of the litigation. In fact, U.S. Bank concedes that it may
have other claims against the Debtors with respect to the same leases. A prompt decision by this
Court would not save the parties much time and expense and would not prevent “some irreparable
harm” to U.S, Bank. See BA Leasing, 2003 WL 22176068 at *5; Jn re Huff, 61 B.R. 678, 683 (N.D.
Hl. 1986).

For the foregoing reasons, the September 25, 2003 order of the bankruptcy court is not

appealable; and, therefore, the appeals are dismissed.

Date:

John W. Darrah, Judge
ited States District Court

-7-



In May 2003, the Debtors failed to make the regularly scheduled rental payments under the
terms of the leases for each of the Subject Aircraft. On May 23, 2003, the Debtors and U.S. Bank
entered into agreements denominated Interim Adequate Protection Stipulations with respect to the
Subject Aircraft. Through the Interim Adequate Protection Stipulations, the Debtors agreed, in part,
to make monthly payments to U.S. Bank in exchange for the right to retain possession of the Subject
Aircraft. U.S. Bank also reserved all of its rights to seek full payment of all rents and other amounts
due under each of the Subject Aircraft leases.

In May and June 2003, U.S. Bank filed motions (the “Administrative Claims Motions”)

requesting payment of the pre-petition and post-petition rental payments due under the terms of the

- leases for the Subject Aircraft. On July 2, 2003, the Debtors filed a consolidated supplemental brief

and objection to U.S. Bank’s motions. In objection to the motions, the Debtors argued that the sole
remedy available to U.S. Bank under Section 1110 was the right to retake possession of the Subject
Aircraft and that the 1110(a) agreements were never valid agreements because the Debtors failed to
cure the existing defaults under the leases as provided in Section 1110(a).

On July 2, 2003, the Debtors filed a “Conditional Motion” and affidavit seeking Federal Rule
of Civil Procedure 60(b) relief if the Debtors’ objections to U.S. Bank’s Administrative Claims
Motions were overruled. In their Consolidated Motion, the Debtors asserted that they entered into
the 1110(a) agreements with respect to the Subject Aircraft in the mistaken belief that no defaults
existed with respect to the Subject Aircraft as of February 23, 2003. The Debtors further stated that
had they realized that there were defaults with respect to the Subject Aircraft, they would not have
entered into the 1110(a) agreements. Accordingly, the Debtors argued that their entry into the

Section 1110(a) agreements constituted excusable neglect under Rule 60(b); and, therefore, the

3.



See In re Forty-Eight Insulations, Inc., 115 F.3d 1294, 1298 (7th Cir. 1997).
Even without a formal termination of the case, a bankruptcy court’s
order is final and appealable if it (1) “resolves all contested issues on
the merits and leaves only the distribution of the estate assets to be
completed,” In re Wade, 991 F.2d 402, 406 (7" Cir. 1992) .. .; (2)
“ultimately determine[s] a creditor's position in the bankruptcy
proceeding, even though the administration of the debtor’s estate
continues,” Jn re Forty-Eight Insulations, 115 F.3d [at 1298] . . .; or
(3) “mark{s] the conclusion of what, but for the bankruptcy, would be
the equivalent of a stand-alone suit” by or against the trustee. Inre
Klein, 940 F.2d 1075, 1077 (7* Cir. 1991).

Carlson, 1997 WL 5354500 at * 3.

Based on the above standard, the September 25th order is not final and appealable. The order
fails to meet the elements of the above standard: (1) it does not resolve all contested issues on the
merits and will not lead to a final distribution of assets; (2) the order does not ultimately determine
U.S. Bank’s position in the bankruptcy proceeding — the order does not dispose of the leases; and,
as conceded by U.S Bank, U.S. Bank may have other claims against the Debtors with respect to the
leases — and (3) the order does not mark the conclusion of the equivalent of a stand-alone suit, See
In re Jartran, Inc., 886 F.2d 859, 862-63 (7th Cir. 1989) (denial of administrative request not a final,
appealable order in light ofnumber of potential disputes between the parties that remain unresolved);
see also, In re Weinschneider, 2000 WL 28269 (N.D. Ill. Jan. 10, 2000) (order of bankruptcy court
not final and appealable because further proceedings could make the contested order moot).

The district courts also have discretion to hear appeals from interlocutory orders and decrees
of the bankruptcy court. 28 U.S.C. § 158(a)(3). Generally, courts use the standards set forth in
28 U.S.C. § 1292(b) in determining whether to exercise their discretion under Section 158(a)(3).

See In re Brand Name Prescription Drugs Antitrust Litig., 878 F. Supp. 1078, 1081 (N.D. Ill. 1995)

5.



Minute Order Form (0697,

Nae lo United States District Court, Northern District of Illinois

Name of ened Ja John W. Darrah Sang ule te

CASE NUMBER 04 C 442 DATE 6/2/2004
CASE UAL Corp vs. US Bank Nat! Assoc.
TITLE

{In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
of the motion being presented.)

MOTION:
DOCKET ENTRY:

(1) Oo Filed motion of [ use listing in “Motion” box above.]

(2) Oo Brief in support of motion due.

Bg) :a Answer brief to motion due___. Reply to answer briefdue__.

(4) oO Ruling/Hearingon___setfor__at

(5) o Status hearing{held/continued to] [set for/re-set for}on___setfor___—__at

) oO Pretrial conference[held/continued to] [set for/re-set for)on__——ssetfor_—sat_
(7) Qa Trial[set for/re-set for]on__—at

(8) a [Bench/Jury trial] [Hearing] held/continuedto_—at__

(9) oO This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

COFRCP4(m) ClLocal Rule 41.1 CFRCP41(a\(1) OO FRCP41(a)(2).

qo) [Other docket entry] For the reasons stated in the attached memorandum opinion and order, the
9/25/03 order of the bankruptcy court is not appealable, and therefore the appeals are dismissed. Enter
Memorandum Opinion and Order.

(11) [For further detail see order attached to the original minute order.]
| A [| No notices required, advised in open court.

No notices required.

Notices mailed by judge's staff.
Notified counsel by telephone,

Docketing to mail notices,

| Mail.AO 450 form. unos Loraisid on
Copy to judge/magistrate judge. veya io
courtroom. Phin & at 4002
MF deputy's aes
initials

Date/time received in
central Clerk’s Office



(in re Brand Name); BA Leasing Parties v. UAL Corp., 2003 WL 22176068 (N.D. Ill.

Sept. 15, 2003) (BA Leasing). Section 1292(b) provides for appellate review of non-final orders
when: (1) the order appealed involves a controlling question of law, (2) there is a substantial ground
for difference of opinion on that question of law, and (3) an immediate appeal from the order may
materially advance the ultimate termination of the litigation. See In re Brand Name, 878 F. Supp.
at 1081.

Leave to appeal an interlocutory order should not be granted absent exceptional circumstances, and
granting such an appeal should be done sparingly. See Jn re Brand Name, 878 F. Supp. at 1081; BA
Leasing, 2003 WL 22176068 at *5S.

In the instant case, U.S. Bank, in a footnote, argues that this Court should assume jurisdiction
under Section 158(a)(3) because an immediate appeal will materially advance the Debtors’ case.
U.S. Bank does not address, or even mention, the other elements to be reviewed by this Court as set
forth above.

U.S. Bank fails to show that there exists a difficult central question of law which is not
settled in the Seventh Circuit. See Jn re Brand Names, 878 F. Supp. at 1081 (in determining whether
there are substantial grounds for a difference of opinion with respect to the issue before the court,
the court must determine whether there is a difficult central question of law which is not settled by
controlling authority of the sitting court); see also,Kirkland & Ellis v. CMI Corp., 1996 WL 674072
(N.D. IL. Nov. 19, 1996) (denying interlocutory appeal, in part, because the appellant failed to
demonstrate that substantial grounds for a difference of opinion on the issue existed).

Furthermore, U.S. Bank has not identified any “exceptional circumstances” that would justify

an exercise of jurisdiction over the bankruptcy court’s order or that an exercise of jurisdiction would

-6-


“ee

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION DO C KETED
In re: ) JUN 0 8 2004
UAL CORPORATION, et al., )
)
Debtors/Appellees. )
)
) Case No. 04 C 0067
U.S. BANK NATIONAL ASSOCIATION, ) 04.C 0442,“
)
Appellant/Cross-Appellee, ) Honorable John W. Darrah
)
ve )
)
UAL CORPORATION, et al, )
)
Appellee/Cross-Appellant, )
MEMORANDUM OPINION AND ORDER

This matter comes before the Court on the appeal of an order of the bankruptcy court of
September 25, 2003, by U.S. Bank National Association. The debtors, UAL Corporation, et al., also
filed a cross-appeal. For the reasons that follow, the appeal is dismissed for lack of jurisdiction.

In 1991, United Airlines, Inc., a debtor, entered into an agreement with respect to the
financing of an aircraft bearing the registration number N643UA. In May 1998, United also entered
into leveraged lease transactions with respect to aircraft bearing the registration numbers N321UA
and N322UA (together with the aircraft bearing the registration number N643UA, the “Subject
Aircraft”). U.S. Bank acts as the indenture trustees in connection with each of the Subject Aircraft.

On December 9, 2002, the Debtors each filed a voluntary petition for relief under Chapter
11 of title 11 of the United States Code. At the time of the bankruptcy filing, the Debtors operated

a fleet of approximately 460 aircraft subject to the provisions of Section 1110 of the Bankruptcy


ae

Code. As the February 7, 2003 expiration of the Debtor’s 60-day period under Section 1110
approached, the Debtors had not reached agreements under Section 1110(b) to extend the automatic
stay for numerous aircraft in their fleet. With respect to these aircraft not covered by a Section
1110(b) stipulation, the Debtors had two options: (a) make an election under Section 1110(a) to
extend the automatic stay; or (2) decline to make an election, allowing the termination of the
automatic stay and rendering the aircraft subject to immediate repossession to the extent authorized
under the applicable lease or financing agreement.

On January 29, 2003, the Debtors filed a motion (the “Section 1110 Motion”) seeking entry
ofan order: (1) approving the Debtors’ agreement to perform their obligations with respect to aircraft
for which they made a Section 1110(a) election; (2) authorizing the Debtors to make such payments
as were necessary to cure defaults and retain protection of the automatic stay pursuant to the Section
1110(a) elections; and (3) authorizing the Debtors to enter into stipulations extending the 60-day
period under Section 1110(b).

On February 6, 2003, the day before the expiration of the 60-day period provided for in
Section 1110(a)(2), the bankruptcy court held a hearing on the Debtors’ Section 1110 Motion. On
February 7, 2003, the bankruptcy court entered an order granting the Section 1110 Motion. That
same day, the Debtors served on U.S. Bank Notices of Election Pursuant to Section 1110(a) of the
Bankruptcy Code with respect to each of the Subject Aircraft. The Debtors did not cure defaults
owed to U.S. Bank. Debtors allege that when they entered into the 1110(a) agreements with U.S.
Bank, they were unaware that payments of over $1 million had become due on the Subject Aircraft

on November 27, 2002. The Debtors did not, and have not, cured these defaults.