shl Doc 2808 Filed 05/16/12 Entered 05/16/12 15:55:15 Main Document Pg 1 of 7

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1 shl Doc 2808 Filed 05/16/12 Entered 05/16/12 15:55:15 Main Document Pg 1 of 7 LATHAM & WATKINS LLP 885 Third Avenue New York, NY (212) Adam J. Goldberg -and- 233 S. Wacker Drive, Suite 5800 Chicago, IL (312) Douglas Bacon Attorneys for GE UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re ) Chapter 11 ) AMR CORPORATION, et al., ) Case No (SHL) ) Debtors. ) (Jointly Administered) OBJECTION OF GENERAL ELECTRIC COMPANY AND CERTAIN OF ITS SUBSIDIARIES AND AFFILIATES TO DEBTORS RECLAMATION NOTICE General Electric Company, CFM International, Inc., GE Aviation Service Operation LLP, GE Aviation Systems LLC, GE Engine Services, LLC, GE Engine Services-Dallas, Inc., GE Engine Services Distribution, LLC, and MRA Systems, Inc. (collectively, GE ) hereby submit this Objection (the Objection ) to the Debtors Reclamation Notice Under Order Pursuant to 11 U.S.C. 105 and 546(c) Establishing and Implementing Exclusive and Global Procedures for Treatment of Reclamation Clams, filed April 12, 2012 (Docket No. 2250) (the Reclamation Notice ). In support of this Objection, GE respectfully represents as follows:

2 shl Doc 2808 Filed 05/16/12 Entered 05/16/12 15:55:15 Main Document Pg 2 of 7 Background 1. On November 29, 2011 (the Petition Date ), AMR Corporation and its affiliated debtors (the Debtors ) each filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code 101, et. seq. (the Bankruptcy Code ) in the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court ). On December 14, 2011, the Bankruptcy Court entered the Order Pursuant to 11 U.S.C. 105 and 546(c) Establishing and Implementing Exclusive and Global Procedures for Treatment of Reclamation Claims (Docket No. 283) (the Reclamation Procedures Order ). 2. In accordance with the Reclamation Procedures Order, on December 16, 2011, GE issued its timely reclamation demand to the Debtors (with a copy to Debtors counsel) asserting GE s right to reclaim goods valued at an aggregate of $8,131,907.92, which were received by the Debtors in the 45 days preceding the Petition Date (the GE Reclamation Demand ). The GE Reclamation Demand provides the information and documentation necessary to substantiate the GE Reclamation Demand, including without limitation, copies of the relevant invoices as well as additional supporting documentation, including purchase orders, shipping receipts and other documents. 3. The Debtors and their counsel received the GE Reclamation Demand on December 19, A copy of the GE Reclamation Demand is attached hereto as Exhibit A. 1 Documentation proving receipt of the GE Reclamation Demand is attached hereto as Exhibit B. 4. On April 12, 2012, the Debtors filed the Reclamation Notice in which they set forth the Debtors position that: (a) $2,612, of the GE Reclamation Demand was a valid 1 The Exhibits to the GE Reclamation Demand are several hundred pages and contain confidential information. In light of the voluminous and confidential nature of the exhibits, they have been omitted from this Objection pending ongoing negotiations with the Debtors. In the event this matter comes before the Bankruptcy Court for decision, GE will provide all relevant documentation subject to appropriate confidentiality. 2

3 shl Doc 2808 Filed 05/16/12 Entered 05/16/12 15:55:15 Main Document Pg 3 of 7 reclamation claim, (b) $2,372, of the GE Reclamation Demand would be allowed as a valid section 503(b)(9) claim, 2 and (c) the remaining $3,147, of the GE Reclamation Demand was invalid for one of four reasons. A summary of the Debtors position with respect to the GE Reclamation Demand is as follows: 5. On May 1, 2012, the Bankruptcy Court entered a stipulation and agreed order between the Debtors and GE extending the deadline for GE to file its Reclamation Notice Objection to 5:00 p.m. (Eastern Time) on May 16, GE has sought to engage with the 2 The Debtors stated that the amounts on Exhibit A to the Reclamation Notice that were listed in a column titled Amount to be Allowed as a 503(b)(9) Claim would be reflected in the 503(b)(9) Report that was to be filed by the Debtors on or before April 30, Although the Reclamation Notice stated that the Debtors would allow $2,372, of the GE Reclamation Demand as a valid section 503(b)(9) claim, the report appended to the Debtors actual objection to GE s section 503(b)(9) claims provided a section 503(b)(9) claim of only $1,984, GE has requested an explanation of this disparity and explicitly reserves all of its rights with respect to its section 503(b)(9) claims. 3

4 shl Doc 2808 Filed 05/16/12 Entered 05/16/12 15:55:15 Main Document Pg 4 of 7 Debtors to understand the detail behind the Debtors position set forth in the Reclamation Notice but has been unable to reach resolution with the Debtors at this time. GE has filed this Objection in accordance with the procedures set forth in the Reclamation Procedures Order to reserve all of its rights while continuing negotiations with the Debtors with the goal of consensually resolving the outstanding issues between the parties with respect to the GE Reclamation Demand. Objection 6. GE objects to the Debtors Reclamation Notice to the extent that it seeks to invalidate portions of the GE Reclamation Demand. As part of the Reclamation Notice, the Debtors assert that elements of the GE Reclamation Demand are invalid for the following reasons: (a) $2,340, of the GE Reclamation Demand is attributable to services, (b) $8, of the GE Reclamation Demand did not contain sufficient data for evaluation, (c) $753, of the GE Reclamation Demand was outside the relevant reclamation period and (d) $44, of the GE Reclamation Demand asserted amounts that differed from those in the Debtors books and records. GE objects to each and every basis asserted by the Debtors for disallowing any portion of the GE Reclamation Claim and reserves its right to supplement this Objection if necessary and in the event that an agreement between GE and the Debtors cannot be reached. 7. Without limiting the generality of the foregoing, GE further states as follows regarding certain of the specific bases asserted by the Debtors: Amounts Attributable to Services 8. GE objects to the Debtors characterization of over $2.3 million of the GE Reclamation Demand as being for services rather than goods. Although GE acknowledges that in light of the mixed nature of its contracts with the Debtors, certain invoices included in the GE 4

5 shl Doc 2808 Filed 05/16/12 Entered 05/16/12 15:55:15 Main Document Pg 5 of 7 Reclamation Demand may contain amounts partially attributable to services, GE objects to the Debtors blanket and unsubstantiated assertion that the claims of four of GE s legal entities are claims purely for services. In fact, each of the relevant entities provided goods to the Debtors during the reclamation period that are reflected in the invoices attached to the GE Reclamation Demand. GE has sought to engage with the Debtors to come to an agreement regarding the appropriate apportionment of goods and services for each relevant invoice. Until such agreement is reached, GE objects to the Debtors allocation of certain of GE s claims as attributable solely to services. Lack of Sufficient Data 9. The Reclamation Notice states that there is insufficient information or documentation for the Debtors to evaluate $8, of the GE Reclamation Demand but does not specify what information is missing. Upon request, the Debtors supplied a list of the relevant invoice numbers but have not provided any further explanation for why the invoices and additional supporting documentation already submitted by GE is insufficient for the Debtors evaluation of this portion of the GE Reclamation Demand. 3 Thus, to preserve its rights while waiting for the Debtors response, GE objects to the denial of these claims. Outside the Reclamation Period 10. GE objects to the Debtors assertion that $753, of the GE Reclamation Demand was for claims received outside the Reclamation Period. The Debtors have not explained any rationale for disallowing the entire amounts attributable to such invoices. Until GE and the Debtors reach resolution of this issue, GE objects to the denial of these claims. 3 GE notes that the spreadsheet forwarded by the Debtors contains disparate information with respect to the amount for which the Debtors allegedly have insufficient information. Although GE has requested an explanation for this disparity, the Debtors have not yet responded. GE reserves its rights to supplement this Objection if resolution of this matter cannot be consensually achieved. 5

6 shl Doc 2808 Filed 05/16/12 Entered 05/16/12 15:55:15 Main Document Pg 6 of 7 Books and Records Dispute 11. The Debtors assert that $44, of the GE Reclamation Demand is invalid because the asserted amount does not match the Debtors books and records. The Debtors do not claim that they did not receive the items in the relevant period or that they were unidentifiable nor do the Debtors provide any information regarding the amounts actually reflected on the Debtors book and records. Instead, with no evidentiary support, the Debtors seek to invalidate a portion of the GE Reclamation Demand because allegedly the Debtors records conflict. Unless the Debtors provide specific information and evidence substantiating the Debtors contention that their books and records are accurate and should control, GE objects to the Debtors unsupported assertions and submits that this portion of GE s claim should be allowed in its entirety. 6

7 shl Doc 2808 Filed 05/16/12 Entered 05/16/12 15:55:15 Main Document Pg 7 of 7 Conclusion WHEREFORE, for the foregoing reasons, GE objects to the Reclamation Notice, submits that the Debtors have not provided ample justification for disallowing any part of the GE Reclamation Demand, reserves all of its rights with respect to the Debtors Reclamation Notice and the GE Reclamation Demand and reserves the right to supplement this Objection following the outcome of ongoing settlement discussions with the Debtors. GE further reserves any and all rights with respect to its administrative expense claims pursuant to section 503(b)(9) of the Bankruptcy Code. Dated: New York, New York May 16, 2012 LATHAM & WATKINS LLP Respectfully Submitted, By: /s/ Adam J. Goldberg Douglas Bacon LATHAM & WATKINS 233 S. Wacker Drive, Suite 5800 Chicago, IL (312) douglas.bacon@lw.com - and - Adam J. Goldberg LATHAM & WATKINS 885 Third Avenue New York, NY (212) adam.goldberg@lw.com Counsel for GE 7

8 Pg 1 of 8 EXHIBIT A GE RECLAMATION DEMAND

9 Pg 2 of 8 GE Aviation Allison K. Verderber Herriott, Counsel Commercial Engines, Services & Global Sales One Neumann Way, MD F125 Cincinnati, Ohio December 16, 2011 T: F: allison.herriott@ge.com AMR Corporation 4333 Amon Carter Blvd., MD 8250 Fort Worth, TX Att n: Miguel Carrasco Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY Att n: Victoria Vron, Esq. Via Overnight Mail Re: GE Reclamation Demand Dear Mr. Carrasco and Ms. Vron: General Electric Company, CFM International, Inc., GE Aviation Service Operation LLP, GE Aviation Systems LLC, GE Engine Services, LLC, GE Engine Services-Dallas, Inc., GE Engine Services Distribution, LLC, and MRA Systems, Inc. (collectively, GE ) hereby make this reclamation demand and request for the purpose of (i) providing written notice to AMR Corporation and its affiliated debtors (collectively, the Debtors ) of GE s rights and (ii) perfecting GE s rights under section 546(c) of title 11 of the United States Code (the Bankruptcy Code ), relevant provisions of the Uniform Commercial Code as enacted in applicable jurisdictions, including section 2-702, and any other applicable state or federal law. GE hereby demands the return of all goods of any kind or character (the Goods ) received by American Airlines, Inc., or any of the other Debtors, from GE in the 45 days prior to the commencement of the Debtors chapter 11 cases on November 29, 2011 (the Petition Date ) in the Bankruptcy Court for the Southern District of New York (the Bankruptcy Court ). The Goods include, without limitation, those Goods shipped, delivered and received by the Debtors under particular Debtor purchase orders as set forth on Exhibit A. The Goods were sold to American Airlines, Inc. and/or one or more of the other Debtors in the ordinary course of GE s business and, upon information and belief, were received by one or more of the Debtors within 45 days prior to the Petition Date and while the Debtors were insolvent. The information provided on the Exhibit A schedule, which includes shipping dates, GE invoice numbers, Debtor purchase order numbers, the related cost of such items, and the relevant Debtor recipient (as determined to the best of GE s ability) is sufficient to enable the Debtors to determine the relevant Goods subject to this reclamation demand. Among other

10 Pg 3 of 8 GE Reclamation Demand Page 2 things, the Goods consist of spare engine parts supplied by GE and delivered to the Debtors for maintenance of the engines in the Debtors aircraft fleet including, without limitation, bearings, blades, bolts, brackets, filters, gaskets, gears, platforms, switches, and seals. The Goods that are the subject of this reclamation demand have an aggregate invoice balance of $ 8,131, It is possible, however, that the Debtors received additional Goods from GE during the reclamation period in excess of this amount. GE reserves its right to increase the reclamation amount and may obtain the necessary documentation and information to support this statement through formal discovery in court proceedings or otherwise. Conversely, if any of the Goods with invoices listed on Exhibit A are proven to have been delivered to the Debtors outside of the statutory reclamation period, GE will adjust its reclamation demand accordingly. Nonetheless, this demand shall be deemed to be for the appropriate statutory period. Supporting documentation, including copies of all invoices and certain other shipping-related documentation, is annexed hereto as Exhibit B. GE hereby demands that the Debtors segregate the Goods and refrain from the resale, co-mingling and/or use of the Goods in any manner whatsoever. The invoices and related documentation constitute confidential, proprietary GE business information. As such, GE is providing the information to the Debtors and their professionals in their capacity as representatives of the Debtors and note that both the Debtors and their professionals must maintain the confidentiality of the information set forth therein. This reclamation demand is made without prejudice to GE s rights to recover from, or otherwise exercise any remedy against, any of the Debtors that is in possession, custody or control of, and/or is responsible for payment of the Goods to the extent permissible under the law and prior orders of the Bankruptcy Court. This letter and the rights and remedies asserted herein are also without prejudice to other rights and remedies of GE under applicable law, all of which are expressly reserved. This demand letter shall not constitute a waiver of any rights, claims, causes of action, and/or interests under any agreement, at common law, by statute, or in equity, to which GE may be entitled. GE expressly reserves the right to supplement this reclamation demand at a later date, including providing additional supporting documentation. Please be advised that GE intends to timely file an administrative claim under section 503(b)(9) of the Bankruptcy Code and in accordance with the relevant procedures ordered by the Bankruptcy Court on December 14, In addition, to preserve all of its rights, GE intends to timely file a proof of claim, which will include the claims set forth in this demand, among others. Please direct any questions, notices and/or other communication regarding this reclamation demand to GE Aviation, One Neumann Way, MD F125, Cincinnati, Ohio 45215, Att n: Kellan Grant, Esq. and Allison Verderber Herriott, Esq. Sincerely, Allison K. Verderber Herriott GE Aviation Counsel, Commercial Engines, Services & Global Sales

11 Pg 4 of 8 EXHIBIT B PROOF OF RECEIPT

12 Pg 5 of 8 Herriott, Allison (GE Aviation, US) From: Sent: To: Subject: trackingupdates@fedex.com Monday, December 19, :01 AM Herriott, Allison (GE Aviation, US) FedEx Shipment Delivered This tracking update has been requested by: Company Name: Name: GE Aviation Joan Walker joan.walker@ge.com Our records indicate that the following shipment has been delivered: Ship (P/U) date: Dec 16, 2011 Delivery date: Dec 19, :55 AM Sign for by: M.ROGERS Delivery location: FORT WORTH, TX Delivered to: Shipping/Receiving Service type: FedEx Priority Overnight Packaging type: FedEx Box Number of pieces: 1 Weight: lb. Special handling/services: Deliver Weekday Tracking number: Shipper Information Joan Walker GE Aviation Legal Operation One Neumann Way, F104 Cincinnati OH US Recipient Information Attn: Miguel Carrasco AMR Corporation 4333 AMON CARTER BLVD MD 8250 FORT WORTH TX US Please do not respond to this message. This was sent from an unattended mailbox. This report was generated at approximately 10:00 AM CST on 12/19/2011. To learn more about FedEx Express, please visit our website at fedex.com. All weights are estimated. To track the latest status of your shipment, click on the tracking number 1

13 Pg 6 of 8 above, or visit us at fedex.com. This tracking update has been sent to you by FedEx on the behalf of the Requestor noted above. FedEx does not validate the authenticity of the requestor and does not validate, guarantee or warrant the authenticity of the request, the requestor's message, or the accuracy of this tracking update. For tracking results and fedex.com's terms of use, go to fedex.com. Thank you for your business. 2

14 Pg 7 of 8 Herriott, Allison (GE Aviation, US) From: Sent: To: Subject: trackingupdates@fedex.com Monday, December 19, :30 AM Herriott, Allison (GE Aviation, US) FedEx Shipment Delivered This tracking update has been requested by: Company Name: Name: GE Aviation Joan Walker joan.walker@ge.com Our records indicate that the following shipment has been delivered: Ship (P/U) date: Dec 16, 2011 Delivery date: Dec 19, :14 AM Sign for by: O.ASAOLU Delivery location: NEW YORK, NY Delivered to: Mailroom Service type: FedEx Priority Overnight Packaging type: FedEx Box Number of pieces: 1 Weight: lb. Special handling/services: Deliver Weekday Tracking number: Shipper Information Joan Walker GE Aviation Legal Operation One Neumann Way, F104 Cincinnati OH US Recipient Information Attn: Victoria Vron, Esq. Weil Gotshal & Manges LLP 767 5TH AVE NEW YORK NY US Please do not respond to this message. This was sent from an unattended mailbox. This report was generated at approximately 10:30 AM CST on 12/19/2011. To learn more about FedEx Express, please visit our website at fedex.com. All weights are estimated. To track the latest status of your shipment, click on the tracking number 1

15 Pg 8 of 8 above, or visit us at fedex.com. This tracking update has been sent to you by FedEx on the behalf of the Requestor noted above. FedEx does not validate the authenticity of the requestor and does not validate, guarantee or warrant the authenticity of the request, the requestor's message, or the accuracy of this tracking update. For tracking results and fedex.com's terms of use, go to fedex.com. Thank you for your business. 2