In U.S. Federal Court in Atlanta on Wednesday, Judge Timothy Batten ruled to grant class-action certification to a six-year long collusion lawsuit against Delta and AirTran airlines. The lawsuit was filed in 2009 by over a dozen Delta and AirTran customers, accusing the companies of using a series of earnings conference calls, as well as negotiations over Atlanta’s Hartsfield airport gate-leases in 2008 to discuss the price of baggage fees which were introduced by several airlines that year. The lawsuit also accuses executives of the two companies of using email backchannels to communicate strategy. The introduction of baggage fees began in the summer of 2008, when American airlines became the first carrier to introduce the fees for the first checked-bag, which was customarily free, largely in response to the escalating price of jet fuel. Delta and AirTran compete vigorously for passengers at Atlanta’s airport, the busiest in the world. Shortly after American announced the baggage fee, AirTran’s CEO publicly stated that he would “prefer to be a follower” wishing to see what the fellow Atlanta-based airline would do. When Delta announced it was implementing the fee, AirTran did as well, with both airlines beginning the fees on the same date, December 5th, 2008.
Photo courtesy of Daily Report
Several factors have complicated the litigation, causing it to drag on for years. The original complaints were consolidated in federal court in Atlanta, with information sharing set to begin in 2010; however several disputes and mistakes occurred during the discovery process. Plaintiffs’ attorneys accused Delta of withholding documentation vital to the case, as well as citing technical errors with Delta’s email system, causing loss of crucial data. Not all of the mistakes could be blamed on technology, however. Amid the discovery proceedings in 2011, the Department of Justice (DOJ) was investigating Delta on a separate matter, requesting documents from the company that it had claimed to have had lost during the baggage fee litigation. After furnishing the evidence to the DOJ, the airline was fined $3.49 million for its failure to furnish the documents in the baggage fee lawsuit. A similar “mishap” occurred in 2013, causing the court to appoint a Special Master to run a four-day hearing on Delta’s handling of evidence, recommending another $1.86 million penalty and calling the errors “colossal blunders.” Delta was able to maneuver in order to delay that penalty until just recently. On August 3rd, Judge Batten ruled in favor of the Special Master’s recommendation, adding legal fees and court expenses for a total of $2.7 million. The latest penalty is the fifth handed down to the company by Batten, amounting to $8.4 million in total.
The penalties for Delta being less than forthcoming are miniscule in the bigger picture, however. Baggage fees are big business. Delta earned over $400 million from the fees from January 2014 through September 2014, with AirTran, now owned by Southwest, earning roughly equal to that during that period. The delay in litigation, and the penalties that Delta has acquired, appear to be a sound investment against a ruling against the fees. Both companies have made repeated attempts to dismiss the case, also contributing to the six-year delay in certification. In seeking to dismiss the case, Delta’s attorneys have cited the rise in fuel prices and the need to perform for investors, stating that the antitrust allegations rest “on entirely conclusory characterizations of statements made by Delta and AirTran to the investment community about a matter of vital interest to investors.” Ultimately, Judge Batten rationalized the case for class action, writing that individual passenger’s claims would be “so small that the cost of individual litigation would be far greater than the value of those claims.” Delta is likely to appeal the class certification, thus delaying the case even longer.
Sources:
Atlanta Business Chronicle – Carla Caldwell
Consumerist – Chris Morran
Daily Report – R. Robin McDonald
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