Seventh Circuit Issues Decision in favor of Denver in United Airlines Lease-vs-Loan Dispute
On July 6, the U.S.
Court of Appeals for the Seventh Circuit issued its opinion in United
Airlines, Inc., v. HSBC Bank USA, an appeal from decisions of a
bankruptcy court and a federal district court, both of which found that
United's "Special Facilities and Ground Lease" with the City and County
of Denver was a lease as opposed to a financing arrangement. The
Seventh Circuit agreed with the decisions of the lower courts, holding
that the agreement was a true lease. In two other cases involving
United Airlines (at San Francisco and Los Angeles) the arrangements in
question had been held to be secured loans. This case differed in
several respects; most significant was the fact that the ground lease
and facilities arrangements were memorialized in a single document. In
response to United's argument that the financing provisions should be
considered a separate agreement, the Seventh Circuit looked to Colorado
law (as specified in the choice of laws section of the UA-Denver
agreement) and determined that the provisions were not severable.
For more information, contact ACI-NA's Patty Hahn or James Briggs.