KLM Royal Dutch Airlines and Northwest Airlines both claim small victories in the legal battle between the two alliance partners which suggest the simmering dispute is no nearer a settlement.
The New York supreme court made an interim decision upholding only two of six KLM arguments in a case brought by KLM against the original lead shareholders in the Northwest buy-out, co-chairmen Al Checchi and Gary Wilson. But a Delaware court has given the Dutch carrier the go-ahead to proceed in a separate case against Northwest, despite a protest by the US carrier.
KLM is considering an appeal against the New York ruling that four of its points are inadmissible. But the airline has the go-ahead to argue that the original Northwest shareholders cannot annul its rights as outlined in the shareholders' agreement. 'Repeatedly, this group has attempted to alter existing agreements sufficiently to weaken the position of KLM,' says KLM.
The court has also ruled as admissible KLM's contention that Checchi and Wilson failed to place the option shares which KLM is to receive in 1998. KLM says it feels 'supported' in these decisions, but is disappointed that its other points, regarding possible mergers and the sale of shares by Checchi and Wilson, will not be examined further in this court action.
Northwest's view is that the court has come down in its favour, both numerically and substantively. 'Four out of six of their points were dismissed and the heart of the complaint was dismissed. That's a fairly telling point,' says Northwest.
The tables are turned, however, in Delaware where KLM is challenging Northwest's adoption of a shareholder rights plan.
The Dutch carrier claims the poison pill interferes with an option it holds to acquire additional common stock in August 1998. The court has not accepted Northwest's motion that this complaint is premature and that it should be pursued, if at all, nearer to the exercise date, leaving KLM free to pursue the case.
Northwest's senior vice president and general counsel, Doug Steenland, is swift to point out the ruling does not affect the substance of the lawsuit, which he describes as 'wholly without merit'. Northwest, he adds, will 'vigorously defend' itself.
Source: Airline Business
