Antitrust Law Daily Wrap Up, ANTITRUST—Bankr. S.D.N.Y.: No basis for treble damages in AMR-US Airways merger suit, (Apr 2, 2015)

By Greg Hammond, J.D.

In a suit challenging the now-consummated merger between American Airlines and US Airways, air traveler and travel agent private plaintiffs were denied—for a second time—a motion to amend their complaint to add a new claim for treble money damages and a demand for a jury trial. Denying the plaintiffs’ motion to amend, the federal bankruptcy court in New York City determined that the plaintiffs failed to define a relevant market and personal harm to the majority of the plaintiffs and lacked antitrust standing to the extent they seek damages as travel agents, rather than consumers (In re AMR Corp., March 31, 2015, Lane, S.).

Background. In July 2013, before the merger was completed, the plaintiffs—direct purchasers of airline tickets from the defendants—filed suit in the federal district court in San Francisco, seeking injunctive relief, costs of suit, and attorney fees. As the merger agreement between US Airways and American Airlines served as “the centerpiece” of American’s bankruptcy reorganization, the plaintiffs objected to the bankruptcy court’s confirmation of the reorganization plan. The plaintiffs brought Clayton Act claims in their adversary proceeding in bankruptcy court and sought to amend their complaint to add a claim for treble damages under Section 4 of the Clayton Act and a demand for a jury trial. The court denied the plaintiffs’ request to amend in March 2014. The plaintiffs have now moved to amend and supplement the complaint for a second time, once again seeking to add a claim for treble damages and a demand for a jury trial.

Relevant market. The court first concluded that the plaintiffs failed to allege a relevant market, which is fatal to the motion to amend. The proposed second amended complaint (PSAC) alleged that the relevant product and geographic markets are “the transportation of airline passengers in the United States,” and that within the relevant market, “well-defined submarkets exists which, in themselves, constitute geographic and/or product markets for antitrust purposes and include what are known as ‘city pairs.’”

The relevant market definition did not contain any allegations concerning interchangeability and cross-elasticity, which is fatal to any market definition and valid grounds for dismissal. The court further noted that the national market definition is also problematic, because it would require a conclusion that all flights compete with each other. In addition, although the complaint makes references to city-pairs, the plaintiffs failed to explain how these “submarkets” are relevant to their proposed national market, and the plaintiffs failed to identify what city-pairs are actually at issue in this case.

The court further determined that, even assuming the relevant market was properly defined, the complaint fails to allege a plausible chain of causation for many of the alleged harms supposedly arising out of the merger. Specifically, the PSAC failed to allege: (1) that anyone purchased a ticket, in support of complaints of fare increases; (2) higher prices for the same product; and (3) harm to any named plaintiff.

Efficient enforcers. Finally, the court concluded that the plaintiffs failed to show they are efficient enforcers of the antitrust laws for many of their alleged harms, because airline passengers were found to be the more efficient enforcers, rather than travel agents. Specifically, the directness of injury to airline passengers, existence of an identifiable class motivated to vindicate the public interest, speculativeness of the injury to the travel agents, and difficulty apportioning damages to avoid duplicative recoveries, did not weigh in favor of the travel agent plaintiffs. The travel agents were therefore not efficient enforcers and could not sustain a private action for lack of antitrust standing. The motion to amend was therefore denied.

The case number is 11-15463 (SHL).

Attorneys: Joseph M. Alioto (Alioto Law Firm) and Gil D. Messina (Messina Law Firm, P.C.) for plaintiffs. Daniel M. Wall (Latham & Watkins LLP) for defendants.

Companies: AMR Corp.; American Airlines; American Group, Inc.; American, Inc.

Cases: Antitrust NewYorkNews