Owner of Colgan may file for bankruptcy

CLARENCE CENTER, N.Y. (WIVB) - The company that owns Colgan Air says it's on the brink of bankruptcy. What will that mean to lawsuits over the Flight 3407 tragedy that claimed 50 lives in Clarence Center?

Pinnacle is a defendant in many of the lawsuits stemming from the crash of Flight 3407. The company owns Colgan Air, which operated the doomed 2009 Continental connection flight.

Bankruptcy attorney Garry Graber said, "As a matter of law, the prosecution of the lawsuits would be stayed for a period of time, meaning they would have to be put in a stand-still mode."

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And while Pinnacle has not yet filed for bankruptcy protection, it may need to unless cost-cutting agreements can be reached with labor, vendors and other partners, company officials say. Graber tells News 4 bankruptcy court would have the discretion to allow lawsuits to go forward, and for the litigation to be concluded.

"It is conceivable that they could exit bankruptcy without the obligation to pay necessarily the full amount that's owing, but to the extent that there's insurance coverage, that insurance coverage would still be there regardless of who goes bankrupt," he explained.

The last few years have been difficult for Pinnacle's Colgan Air unit. Federal investigators say pilot error was one of the chief causes of the crash that killed 50 people. And while some of the families have settled, others have not.

Graber noted, "The only talk that's out there right now is the possibility of Pinnacle filing, not of Colgan filing. And if Colgan doesn't file, the lawsuits could go forward against Colgan."

In a letter to employees, Pinnacle's Chief Executive Officer stated that the company cannot continue to operate businesses that are losing money and that the cash is not there to sustain it.