Delta Wins Suit Brought by Failed Pan Am : Airlines: Federal judge finds the surviving carrier not liable for the demise of Pan Am, which sought $2.5 billion in damages.

Delta Air Lines Inc. won a major court battle Friday when a federal judge ruled it was not liable for Pan Am Corp.’s demise and said the bankrupt airline’s estate must repay Delta for emergency financing.

U.S. District Judge Robert Patterson ruled that Pan Am has 10 days to repay Delta a $115-million loan plus interest. That means a total of about $150 million, a Delta lawyer said.

The ruling lifted a cloud of uncertainty that had been hovering over Delta and its stock leaped on the news, gaining $3.875 to $49.625 at the close on the New York Stock Exchange.

“This is consistent with our view all along that Delta was on strong legal ground, but it certainly is as nice a Christmas present as Delta could ask for,” Samuel Buttrick of PaineWebber said of the ruling.

Pan Am filed for Chapter 11 bankruptcy protection in January, 1991. It stopped flying in December of that year after Delta unexpectedly pulled out of a financing agreement.

Pan Am and its creditors then sued Delta in bankruptcy court for $2.5 billion in damages, alleging Delta had agreed to finance a reorganization plan that would have allowed Pan Am to emerge from bankruptcy as a smaller carrier.

Delta maintained there was no signed agreement between the two airlines and that it had given Pan Am emergency financial support that allowed the troubled airline to operate longer than it would have otherwise.

Judge Patterson agreed, ruling there was no “clear and unambiguous promise” by Delta that it would provide funding to the reorganized Pan Am without certain conditions being met.

Those conditions had not been satisfied, he said, noting the company’s reorganization plan had not been confirmed and Pan Am had not obtained new contracts with all of its unions.

“Pan Am was not ready, willing and able to satisfy those conditions. Delta therefore cannot be held liable for breach of such an obligation,” Patterson wrote.

David Brodsky, a lawyer representing Pan Am, said he obviously was disappointed but had not had a chance to read the entire ruling. He said he would not know until next week whether Pan Am would appeal.

Atlanta-based Delta said its victory validated its longstanding position.

“This is great news. Delta’s position has always been clear. We fulfilled all our obligations to Pan Am and even went the proverbial extra mile in providing assistance in their reorganization efforts,” said spokesman Todd Clay.