March 10, 2017 Articles

Recent Developments in Aviation Litigation: Antitrust

By Erika Maurice and Vincent Lesch

In re Domestic Airlines Travel Antitrust Litigation
In July 2015, the U.S. Department of Justice (DOJ) announced that it would initiate an investigation to determine whether four of the United States’ largest domestic air carriers engaged in coordinated efforts to limit seat capacity as a way to increase ticket prices and recognize record profits. Shortly after the DOJ’s announcement, dozens of separate class action suits were filed throughout the country, accusing the air carriers of conspiring to fix airline ticket prices in violation of section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1. On October 13, 2015, the U.S. Judicial Panel on Multidistrict Litigation consolidated the class actions in the U.S. District Court for the District of Columbia. See In re Domestic Airlines Travel Antitrust Litig., No. 15-MC-01404 (D.D.C. 2015). In total, there are 105 cases consolidated in the litigation.

In October 2016, the defendant air carriers jointly moved to dismiss the putative class action complaint on the ground that the plaintiffs failed to plead allegations of a price-fixing conspiracy pursuant to section 1 of the Sherman Act. Specifically, the defendant carriers contended that, to plead a cause of action under section 1 of the Sherman Act, the plaintiffs were required to allege facts containing direct evidence that the airlines had an agreement or a “conscious commitment” to fix airline prices, which, the defendants argued, the plaintiffs failed to do.

The court disagreed with the defendants’ argument and held that direct evidence was not required to plead a cause of action under section 1 of the Sherman Act. See In re Domestic Airlines Travel Antitrust Litig., No. 15-MC-01404, 2016 WL 6426366 (D.D.C. Oct. 28, 2016). Relying on precedent set by the Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007), the court opined that circumstantial evidence of an agreement between the carriers to enforce a common scheme is sufficient to plead a valid cause of action under section 1 of the Sherman Act. The court defined circumstantial facts as evidence that tends to exclude the possibility of independent business action or, in other words, evidence showing parallel business conduct in a context that raises a suggestion of a preceding agreement, not merely parallel conduct that could just as well be independent action. Based on this standard, the court found that the plaintiffs pled circumstantial facts showing that the defendants all engaged in similar conduct to limit seating capacity as a method to control prices and limit consumers’ ability to compare fares. The parties have commenced discovery in the litigation.

In re Transpacific Passenger Air Transportation Antitrust Litigation
In the Ninth Circuit, several carriers remain in the In re Transpacific Passenger Air Transportation Antitrust Litigation, No. C07-05634 (N.D. Cal. 2007), a putative passenger class action originally filed in the U.S. District Court for the Northern District Court of California, arising from an alleged price-fixing conspiracy between various carriers in international air transportation. See Wortman v. Philippine Airlines, Inc.; Air New Zealand Ltd.; China Airlines, Ltd. & EVA Airways Corp., No. 15-15364 (9th Cir. 2015), and companion case Wortman v. All Nippon Airways Co., Ltd., No. 15-15362 (9th Cir. 2015).

The plaintiffs allege that foreign and domestic carriers engaged in a 10-year conspiracy to fix the prices of transpacific air passenger travel, specifically by colluding to set fuel surcharges, in violation of section 1 of the Sherman Act. The defendants filed a motion for summary judgment in the District Court for the Northern District of California, arguing that the filed-rate doctrine barred the plaintiffs’ claims for damages arising from the airlines’ fares and surcharges because those fares and surcharges were filed with and approved by the U.S. Department of Transportation (DOT), which had exclusive jurisdiction to regulate those charges. The district court granted part of the defendants’ motion, finding that the DOT did have regulatory authority over the fares and surcharges that were filed with the DOT, and, therefore, the filed-rate doctrine applied in those limited circumstances. However, the court also found that the DOT “effectively abdicated” its regulatory authority over unfiled market-based rates and surcharges, and the court denied the defendants’ motion insofar as it sought to dismiss those claims. In re Transpacific Passenger Air Transp. Antitrust Litig., 69 F. Supp. 3d 940 (N.D. Cal. 2014).

The defendants filed an appeal with the U.S. Court of Appeals for the Ninth Circuit, seeking to overturn the district court’s determination that the plaintiff’s claims related to fares and surcharges that were not filed with the DOT. The defendants contend that the district court’s decision should be reversed because there is no evidence to indicate that the DOT regulates filed or unfiled fares and surcharges differently. Moreover, the defendants argue that the district court erred in its unprecedented holding that the DOT abdicated its authority over unfiled air fares.

The issue on appeal is one of first impression involving international air transportation and the “filed rate doctrine,” which provides that any entity that is required to file tariffs governing the rates, terms, and conditions of service must adhere strictly to those terms. Prior to 2000, the DOT required all carriers to file passenger tariffs on flights departing from the United States to ensure that the rates and fares provided for in the tariffs were reasonable and nondiscriminatory. The DOT’s ability to impose this obligation was authorized by Congress. See 49 U.S.C. § 41507(a). If the DOT permitted a tariff to go into effect, the airline’s rates and fares were considered lawful for all purposes. The Ninth Circuit heard oral argument from the parties on January 13, 2017, but it is not clear when a decision will be rendered.

Keywords: litigation, mass torts, class action, antitrust, price-fixing conspiracy, filed rate doctrine

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