What will Pinnacle Airlines' bankruptcy filing mean for 3407 lawsuits? (With Video)

Pinnacle Airlines, the parent company of Colgan Air, has filed for Chapter 11 Bankruptcy. Colgan operated Continental Flight 3407, which crashed in Clarence in February, 2009, killing 50 people. YNN's Katie Morse tells us what impact Pinnacle's bankruptcy filing could have on lawsuits filed by Flight 3407 family members.


BUFFALO -- Pages of information detail Pinnacle Airlines' reasons for filing for Chapter 11 bankruptcy protection. The company says, it plans to use the process to reorganize, and implement a turnaround plan to address financial challenges.

But what does this mean for families of Flight 3407 victims who have pending lawsuits against Pinnacle, the company that owned and operated Colgan Air?

"Certainly the bankruptcy could involve some delay, while the debtor tends to its bankruptcy so to speak," said Garry Graber, a Partner with Hodgson Russ LLP.

The bankruptcy proceedings put a "stay" on the airline's business, but even while that's in place, attorneys for family members say, the lawsuits can be separated.

"With respect to litigation it's very specific, that we now have an opportunity to seek a lifting of that stay by the bankruptcy court. That lifting of the stay as long as the insurance company is in place, will then allow us to proceed," explained Terry Connors, an attorney for family members.

Bankruptcy papers indicate Pinnacle is getting about $75 million in financing, which attorneys say could be a good sign.

"That's an indication that the company will be reorganizing. Generally speaking, a company that's going to fail is not able to get financing," said Graber.

Pinnacle says it plans to wind down some of its operations in the next seven months, including a number of Colgan flights. Attorneys for the families say, the bankruptcy filing wasn't entirely out of the blue, and they're prepared to handle what comes next.

"We had some inkling this might occur, and we have taken some precautions and preparations to try to prevent this from stopping the litigation, and as I said, merely slowing us down temporarily," said Connors.

In a statement Monday evening, a spokesman for Pinnacle Air said, quote:

"When a company files for Chapter 11, all pending litigation is suspended by the “automatic stay” provision of the federal bankruptcy code. We expect that litigation related to flight 3407 will be addressed in the course of our Chapter 11 proceedings."

Watch Video:   http://jamestown.ynn.com