The U.S. Trustee in AMR Corp.'s Chapter 11 bankruptcy case filed an objection on Friday to chief executive Tom Horton's severance payment.
The trustee has made this objection two other times during the bankruptcy process and each time, the judge has not ruled on the issue.
"The United States Trustee respectfully submits that the Court deny the Debtors' attempt to pay the Debtors' CEO a $20 million severance," the filing said, arguing that the payment does not conform to restrictions placed on compensation arrangements by the U.S. Bankruptcy Code.
A hearing is set for August 15 for U.S. bankruptcy judge Sean Lane to confirm or deny AMR's restructuring plan, which includes a merger with US Airways. AMR's creditors have voted in favor of the plan.
AMR does not agree with the trustee's objection and has said previously that the newly merged company is making the payment to Horton, not AMR.
"The Chairman Letter Agreement is not in any way prohibited by the terms and provisions of the Bankruptcy Code," said AMR spokesman Michael Trevino. "Furthermore, AMR's creditors and shareholders have voted overwhelmingly to accept the Plan which includes the Chairman Letter Agreement."
Horton is expected to stay on with the new company, which will be called American Airlines, as non-executive chairman and then exiting the position sometime next year.