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A federal judge in North Carolina has dismissed a class action price-fixing suit brought against the world’s leading airline companies by a group of travel agents. The summary judgment issued late last month by Senior U.S. District Judge W. Earl Britt in Raleigh was a victory for Philadelphia attorneys at the Schnader Harrison Segal & Lewis and Dechert law firms. Dennis R. Suplee at Schnader Harrison was lead counsel for Air France and Robert Heim at Dechert was lead counsel for Delta Air Lines — two of 21 airlines named in the class action. “It’s a pretty significant decision because of the money involved and the implications of what an adverse decision for the defendants would have meant,” Suplee said. An “adverse decision” in the antitrust case could have meant bankruptcy for the airlines. The group of travel agents demanded about $17 billion in compensation for lost commissions that the agents would have received, “had the airlines not conspired to slash commissions,” said Dan Shulman, one of the lead attorneys for the plaintiffs. After accounting for the standard tripling of damages in antitrust verdicts, the plaintiffs could have received up to $50 billion if they had prevailed at trial. Efforts to settle the issue with the airlines were unfruitful, said Shulman, an attorney at Gray, Plant, Mooty, Mooty & Bennett in Minneapolis. He said his clients plan to appeal. In Britt’s order, he noted that the plaintiff travel agents presented no direct evidence of antitrust activity, and the defendant airlines provided a “list of potential non-conspiratorial reasons” for their reduction and elimination of agents’ base commissions, around which the suit was based. Britt ruled there was no evidence the airlines had violated antitrust law. In Hall v. United Airlines Inc., Sarah Futch Hall, owner of Travel Specialists in Wilmington, N.C., led a group of more than 25,000 travel agents from around the country. The group alleged the airlines had conspired to reduce the base commissions the agencies receive from the airlines in an attempt to put them out of business, according to the opinion. Base commissions are the payments airlines make to travel agencies that constitute a percentage of the ticket price the customer paid. Since the deregulation of the airline industry in 1980, the airlines have set the base commissions without individual negotiations with the travel agency, according to the opinion. In their complaint, the plaintiffs alleged that the airlines violated the Sherman Antitrust Act by cutting, capping or eliminating the commissions, beginning in 1995. For example, the plaintiffs claimed, starting in March 2002, Delta, American, Continental, United, Northwest airlines and US Airways cut base commissions paid to travel agents for their sales of domestic and international tickets, according to the opinion. “They argued that what was happening was a signaling between the defendants — an ‘offer and acceptance’ of a signal to do this together,” Suplee said. The plaintiffs contended that when, for example, “Airline A” decided to reduce its commission rate, and then “Airline B” reduced its commission rate, this was evidence of a conspiracy, Suplee said. “But if you don’t have any evidence of an agreement, then you have nothing more than what you’d expect to see in an oligopolistic market,” Suplee said. The airlines argued that they were responding to the market as independent companies and making business judgments that were economical and rational, Suplee said. The plaintiffs also allege that the five airlines’ creation of the popular Orbitz travel Web site was a plot to further divert commissions from agents, according to the opinion (Air France was not involved in the Orbitz meetings where plaintiffs alleged the communication among the airlines to cut commission rates took place, Suplee said). The Dechert attorneys representing Delta declined to comment on the Oct. 30 decision. To prove a conspiracy or trust prohibited by Section one of the Sherman Antitrust Act, a plaintiff must show that at least two entities were acting together to pose an unreasonable restraint on interstate trade or commerce, Britt explained. And any inferences drawn from underlying facts on summary judgment must be viewed in a light most favorable to antitrust plaintiffs, Britt wrote, citing Merck-Medco Managed Care LLC v. Rite Aid Corp., an unpublished 4th U.S. Circuit Court of Appeals opinion. The 4th Circuit has also established that plaintiffs in antitrust cases must show that each defendant had a “conscious commitment to a common scheme designed to achieve an unlawful objective” and present evidence that “excludes the possibility that the alleged co-conspirators acted independently or based on legitimate business purposes,” Britt wrote. The judge evaluated the evidence submitted against each defendant, or group of defendants, separately and dismissed all 21. “The defendants offer overwhelmingly compelling evidence that the commission cuts and caps that are the subject of this litigation were just as likely the result of competitive conduct and natural changes in the market as of the illegal conspiracy alleged by the plaintiffs,” Britt wrote. Delta made a joint motion for summary judgment with a number of other airlines. Air France filed a separate motion for summary judgment, according to the opinion. “There is evidence that at least some of the defendants considering initiating or matching base commission cuts were concerned about losing market share if the contemplated cut was not matched by competitors; evidence that at least some of the defendants assumed the contemplated cut would not be sustainable without competitor matching; and evidence that at least some of the defendants assumed that when a competitor initiated a base commission cut, it hoped that others would match the cut,” Britt wrote. “However,” he continued, “it is clear that none of the joint defendants (and indeed none of the defendants in this action) discussed possible commission cuts with its competitors prior to implementing those cuts.” Britt added that Delta actually made the employees who worked on designing the commission caps sign nondisclosure agreements. “Various defendants analyzed possible competitor responses to commission cuts, which the court finds to be a strong indicator that there was no actual agreement among the airlines, as it shows that airlines considering base commission cuts were uncertain of their rivals’ potential reactions.” Britt noted that the most compelling evidence offered by the defendants to explain their decisions to make or match base commission cuts was the economic ruin of the airline industry, pointing out that four of the defendants are currently in bankruptcy proceedings. “At the time Delta implemented the first commission caps in 1995, it was in such bad shape financially that it had implemented the first employee layoff in its history, terminating approximately 20,000 employees, and it therefore chose to take a significant risk in an area that would not impact the rest of its workforce,” Britt wrote. Other airlines were in similarly dire financial situations, he explained. “The airline industry is particularly oligopolistic; its competitive nature requires airlines to respond quickly to rivals’ initiatives,” Britt wrote. Shulman said Britt had ignored evidence he should have considered and improperly weighed the evidence that he did consider. “He says the airlines never talked about the commissions. But we presented evidence that, during meetings that led to the formation of Orbitz, representatives for the airlines discussed what would happen to the commissions,” Shulman said. Shulman also said that testimony from plaintiff’s expert economist had explained that fluctuation in the airlines’ profits over the years in question had no impact on what the airlines were or were not paying out in base commissions to travel agencies. “The judge did not follow the law as he should have,” Shulman said. The class action was stayed against the defendants who had filed notices of bankruptcy: US Airways, TWA, United Airlines and Air Canada, according to the opinion. Defendants Midway Airlines Corp., Delta Airlines Global Services and Deutsche Lufthansa AG were dismissed or settled with the class before Britt’s judgment. Nicole Reimann, Sherry A. Swirsky, Ira Tiger, Chad Cooper and Gregory W. Buhler at Schnader Harrison also represented Air France with Suplee. Jennifer R. Clarke and Carolyn H. Feeney at Dechert represented Delta Air Lines with Heim.

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