Del. court dismisses stockholder's lawsuit against United Airlines; Case stems from agreement to reinstate Newark-Columbia route

By Gabriel Neves | Feb 20, 2019

WILMINGTON, Del. (Legal Newsline) – A lawsuit filed by a United Airlines stockholder who sued the company and its executives over a separation agreement for a former CEO who approved an unprofitable route has been dismissed.

Vice Chancellor Kathaleen McCormick, on the bench of the Delaware Court of Chancery, issued a 32-page ruling on Feb. 12 dismissing claims in the lawsuit filed by the city of Tamarac Firefighters' Pension Trust Fund against United Continental Holdings Inc., Carolyn Corvi, Jane Garvey, et al.

The court dismissed counts of unjust enrichment, wrongful demand refusal and waste against United and the executives that were in amended complaint.

As stated in the ruling, in September 2011, David Samson "was chairman of the Port Authority of New York and New Jersey. (Jeffery) Smisek was United’s CEO. Over dinner in Manhattan, Samson asked Smisek to revive United Airlines’ discontinued Newark-to-Columbia route, which would ease Samson’s commute to his South Carolina vacation home. 

"After Smisek agreed to reinstate the route, the Port Authority approved United’s projects at Newark International Airport. United operated the Newark-to-Columbia route twice a week for 19 months. It generated losses for United of approximately $945,000."

A federal investigation regarding an unrelated scandal at the Port Authority in 2013 led to an uncovering of the interactions between Samson and Smisek, the ruling states.

After an investigation from the Securities Exchange Commission and from United's Board of Directors led to a separation agreement between the company and Smisek, who received $4.87 million in separation pay, but the amended complaint stated that the total amount of benefits was estimated at $37 million.

Other executives also had separation agreements.

United settled the case with SEC and paid a penalty of $2.4 million. The plaintiff then sued United and its executives over allegations of unjust enrichment, waste and wrongful demand refusal.

In her ruling, chancellor McCormick stated that "the amended complaint reflects that plaintiff bases its waste and unjust enrichment claims on the separation agreements," and that "plaintiff’s waste and unjust enrichment claims merely repackage complaints concerning the Separation Agreements under different legal theories."

Delaware Court of Chancery case number 2017-0341-KSJM

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