Friday, August 27, 2010

Court Unseals Documents Related to Lawsuit on Behalf of Consumers Seeking Recovery of First Checked Bag Fees Paid to Delta and AirTran

On August 20, 2010, the Court overseeing In re Delta / AirTran Baggage Fee Antitrust Litigation, MDL 2089 (N.D. Ga.) unsealed a number of documents that had been produced by defendants in discovery in the lawsuit but had been designated as confidential by the defendants.

Plaintiffs requested that the Court “unseal” certain documents to ensure that the millions of proposed class members who have paid a first bag fee to either Delta or AirTran have access to additional information related to the claims in the case. The lawsuit alleges that Delta Air Lines and AirTran Airways violated the antitrust laws by conspiring to impose a first checked bag fee.

Plaintiffs seek to represent a class of plaintiffs defined as follows:
All persons or entities in the United States and its territories that directly paid Delta and/or AirTran one or more first bag fees on domestic flights from December 5, 2008 through the present (and continuing until the effects of Delta’s and AirTran’s anticompetitive conspiracy ceases).
A summary of Plaintiffs’ factual allegations is available in Plaintiffs’ Memorandum of Law in Support of Class Certification at pages 6 to 16, linked below. Other documents now available for review are identified and can be linked below, including several court filings, several internal Delta and AirTran e-mails, and internal analyses prepared by Delta regarding the first bag fee.
  1. Consolidated Amended Complaint
  2. Plaintiffs’ Opposition to Defendants’ Motions to Dismiss (redacted)
  3. Court Order Partially Denying Motion to Dismiss
  4. Plaintiffs’ Memorandum of Law in Support of Class Certification (“Class Cert Brief”)
  • Ex. 2 to Pl.’s Class Cert Brief, Delta Antitrust Compliance Manual
  • Ex. 3, May 2008 e-mail from Delta CEO R. Anderson
  • Ex. 4, Deposition Transcript Excerpts of Ed Bastian
  • Ex. 5, July 31, 2008 internal AirTran e-mail exchange
  • Ex. 6, July 31, 2008 internal AirTran e-mail exchange
  • Ex. 7, July 31, 2008 e-mail from S. Fasano to A. Burman
  • Ex. 8, May 22, 2008 e-mail from A. Burman
  • Ex. 9, Aug. 5, 2008 e-mail from S. Fasano
  • Ex. 10, Aug. 8, 2008 e-mail from R. Fornaro
  • Ex. 11, July 20, 2008 e-mail from S. Fasano
  • Ex. 12, July 18, 2008 e-mail to J. Graham-Weaver
  • Ex. 13, July 31, 2008 internal AirTran e-mail exchange
  • Ex. 14, July 31, 2008 e-mail from T. Hutcheson
  • Ex. 15, July 14, 2008 e-mail from J. Graham-Weaver
  • Ex. 16, Oct. 14, 2008 Delta “Value Proposition” powerpoint
  • Ex. 17, Oct. 16, 2008 Delta “Value Proposition” powerpoint
  • Ex. 18, Oct. 22, 2008 Delta “Value Proposition” powerpoint
  • Ex. 19, Oct. 24, 2008 Delta “Value Proposition” powerpoint
  • Ex. 20, Deposition Transcript Excerpts of E. Phillips
  • Ex. 21, Nov. 5, 2008 Delta Press Release
  • Ex. 22, July 16, 2008 Delta Earnings Call Transcript
  • Ex. 23, Oct. 2, 2008 e-mail from E. Phillips
  • Ex. 24, Nov. 6, 2008 Article re: Delta to start charging fee for checked luggage
  • Ex. 25, Nov. 11, 2008 e-mail from M. Klein
  • Ex. 26, Nov. 6, 2008 e-mail from M. Klein
  • Ex. 27, Deposition Transcript Excerpts of R. Fornaro
  • Ex. 28, Deposition Transcript Excerpts of K. Healy
5. Order Granting Motion to Lift Confidentiality Designations

Sunday, August 22, 2010

California Grocery Chains’ Profit-Sharing Agreement During 2003 Strike Violated Antitrust Laws

On August 17, the Ninth Circuit Court of Appeals held that a profit-sharing agreement between Vons, Albertson's, Ralphs, and Food 4 Less violated Section 1 of the Sherman Act as an unreasonable restraint of trade.

In 2003, defendant grocery chains were engaged in labor negotiations, and entered into a Mutual Strike Assistance Agreement that required them to share profits with each other in an effort to maintain each defendant's pre-labor dispute market share. The unions selectively picketed the grocery chains, and the stores responded by locking out their union employees and exchanging approximately $146 million under the profit-sharing agreement.

The State of California filed suit against the defendants, and moved for a summary judgment ruling that the profit sharing agreement violated § 1 of the Sherman Act. The trial court denied the motion, but the Ninth Circuit reversed. Using a "quick look" review, the Ninth Circuit determined that an observer with even a rudimentary understanding of economics could conclude that the agreement would have an anticompetitive effect on customers and markets that was not neutralized or outweighed by any procompetitive justifications:

Profit pooling or profit sharing arrangements eliminate incentives to compete for customers along every dimension: there is little purpose in attempting to attract another firm's customers by lowering prices, improving quality or taking any other measure if the profits earned from those new customers would be placed in a common pool in which the other firm is a participant, and the proceeds distributed in the same way no matter which participant in the profit pool generated the underlying sales, or if transfer payments are made between firms to achieve the same effect.

The Court rejected defendants' argument that the agreement was not anticompetitive because it was limited in duration and limited to only some of the supermarket chains in the relevant market, as such circumstances could only reduce the anticompetitive effects. The court also found that the purported pro-competitive benefit suggested by defendants – driving down compensation to workers – was not a cognizable procompetitive benefit under the Sherman Act.

California v. Safeway, Inc., __ F.3d __ (9th Cir. 2010).

Monday, August 2, 2010

Court Allows Plaintiffs to Carry On With Lawsuit Alleging Collusion on First Bag Fees

The Federal District Court in Atlanta issued an order today denying a request by Delta Air Lines and AirTran Airways to dismiss a proposed class action lawsuit accusing the two airlines of conspiring to impose first checked baggage fees. The Court ruled that Plaintiffs’ allegations plausibly suggest a conspiracy between the airlines, and that the case should move forward.

Plaintiffs allege that Defendants colluded through communications with each other, for example, on quarterly earnings calls and in speeches and other communications at industry conferences. Beginning in April 2008, Defendants allegedly signaled to each other a willingness to collude in order to decrease capacity and increase prices to consumers without losing market share. Both airlines reduced capacity after April 2008, and in October 2008, AirTran allegedly invited Delta to collude to impose first checked bag fees.

Specifically, AirTran’s CEO stated on an investor conference call that AirTran had put the technological capability in place to implement the fee, that it was constrained from implementing the fee by competition with Delta, and that AirTran would likely follow suit if Delta enacted a first bag fee:

We have the programming in place to initiate a first bag fee. And at this point, we have elected not to do it, primarily because our largest competitor in Atlanta [i.e., Delta], where we have 60% of our flights, hasn't done it. . . . I think we prefer to be a follower in a situation rather than a leader right now.

Robert Fornaro, AirTran Investor Call (Oct. 23, 2008).

Delta, which monitors AirTran’s quarterly calls, announced just over a week later, on November 5, 2008, that it would begin charging passengers a $15 first bag fee, which Plaintiffs allege was an acceptance of AirTran’s invitation to collude. As promised in the conference call, AirTran followed Delta’s lead, and announced the following week that it would impose the same $15 fee, effective the same date as Delta’s fee.

Defendants sought to dismiss Plaintiffs’ complaint, arguing that Plaintiffs’ allegations were insufficient to plausibly demonstrate the existence of an agreement to restrain trade. Defendants argued that Plaintiffs were required to demonstrate the existence of an “actual, manifest agreement,” and argued that Plaintiffs were required to prove that “the defendants got together and exchanged assurances of common action or otherwise adopted a common plan.”

The Court rejected Defendants’ argument, pointing out that “it is only in rare cases that a plaintiff can establish the existence of a conspiracy by showing an explicit agreement; most conspiracies are inferred from the behavior of the alleged conspirators. . . . [C]ollusive communications can be based upon circumstantial evidence and can occur in speeches at industry conferences, announcements of future prices, statements on earnings calls, and in other public ways.” “Courts have also found that unlawful conspiracies may be inferred when collusive communications among competitors precede changed/responsive business practices, such as new pricing practices.”

The Court recognized that Plaintiffs Complaint “is not lacking in detail,” and alleges collusive communications, alignment of business practices following those communications, and implementation of business practices that would be contrary to independent self-interest after those communications. In light of the foregoing, the Court found that “it would be both improper and imprudent to dismiss a case of this magnitude, where the interests of consumers are at stake, on the mere hunch that [Delta and AirTran’s] defenses . . . may prove valid.”

In concluding that the case should proceed, the Court found that it was “noteworthy” that “Defendants’ conduct is currently being investigated by the Antitrust Division of the United States Department of Justice.”

In light of the Court’s ruling, Plaintiffs will proceed on their claims that Defendants conspired to restrain trade in violation of Section 1 of the Sherman Act, and will seek damages equal to three times the amount of first bag fees that have been charged by Delta and AirTran after they were first imposed in December 2008.

The Court granted dismissal, however, of Plaintiffs’ claim that each defendant attempted to monopolize a relevant market by inviting the other to collude in violation of Section 2 of the Sherman Act. According to the Court, Plaintiffs relied on “a rather novel theory” of liability under Section 2, which was insufficiently supported by applicable law. Plaintiffs sought only injunctive relief for violation of Section 2.

The law firm of Kotchen & Low LLP filed the original lawsuit against Delta and AirTran in May 2009, and the court appointed Kotchen & Low LLP as primary interim co-lead class counsel on January 5, 2010. Trial is expected to take place next year. Anyone with information regarding the alleged conspiracy is encouraged to contact Kotchen & Low LLP at

The case is captioned In re Delta/ AirTran Baggage Fee Antitrust Litigation, No. 1:09-md-2089-TCB (N.D. Ga.). The Court’s August 2, 2010 Order is available here, and a redacted copy of Plaintiffs’ brief opposing Defendants’ motion to dismiss is available here.

Related media coverage: Bloomberg; Reuters; AJC; CompLaw360.


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