Antitrust Law Daily Wrap Up, ANTITRUST—E.D.N.Y.: Class certification recommended in air cargo price fixing case, (Oct 16, 2014)

By Greg Hammond, J.D.

A class of persons or entities who purchased airfreight shipping services in the United States directly from domestic and foreign airlines received a recommendation for class certification in their price fixing conspiracy action. In makings its recommendation, the magistrate judge for the federal district court in Brooklyn determined that the six named freight forwarder plaintiffs met the numerosity, commonality, typicality, adequacy, predominance, and superiority requirements for class certification (In re Air Cargo Shipping Services Antitrust Litigation, October 15, 2014, Pohorelsky, V.).

Background. Six freight forwarders that purchased air freight services from one or more domestic and foreign airlines filed suit, alleging that the airline defendants conspired to develop and implement an industry-wide index for calculating fuel and security surcharges at supra-competitive rates that were applied to thousands of routes flown worldwide by the defendants, including flights to and from the United States. According to the plaintiffs, the airlines’ purported conspiracy to fix prices violated Section 1 of the Sherman Act. The plaintiffs subsequently moved to certify a class of “all persons or entities…who purchased airfreight shipping services for shipments to or from the United States directly from any of the Defendants…at any time during the period January 1, 2000 up to and including September 30, 2006.”

Rule 23(a) considerations. To determine whether class certification would be appropriate, the court considered whether the plaintiffs met the four requirements outlined in Rule 23(a) of the Federal Rules of Civil Procedure: numerosity, commonality, typicality, and adequacy. First, the court determined that the proposed putative class consists of at least “tens of thousands of individuals and entities that purchased air freight services from the defendants during the class period.” This proposed class is so numerous that joinder of all members would be impracticable.

Second, the court found that there were numerous essential questions of law and fact that are common to the class, including: (1) whether the defendants conspired to fix prices; (2) what impact the defendants’ alleged conspiracy had on the price of airfreight shipping services; (3) whether the conspiracy caused injury to the plaintiffs; (4) what constitutes an appropriate measure of damages; and (5) whether the alleged conspiracy violated antitrust laws.

Third, the typicality requirement was met because the plaintiffs will attempt to prove that they were harmed by the same overall course of conduct and in the same way as the remainder of the class. Fourth, and finally, the court found that the adequacy of representation requirement was met, because the named plaintiffs share the common goals of establishing defendants’ liability and securing the maximum possible recovery, and the proposed class counsel is undoubtedly qualified to maintain the action.

Rule 23(b)(3) considerations. Next, the court was required to determine: (1) whether the questions of law or fact common to the class members predominate over any questions affecting only individual class members, and (2) whether class action is superior to other available methods for fairly and efficiently adjudicating the controversy.

First, the court determined that the plaintiffs produced substantial common evidence supporting their argument that the defendant airlines conspired to violate antitrust laws by fixing prices, which “is a compelling reason to find that predominance is satisfied.” Specifically, the plaintiffs were able to produce evidence “tracing the entire life of the alleged conspiracy,” including the conspiracy’s inception as a fuel surcharge under an International Air Transport Association resolution, of which the defendants were members; industry-wide implementation, maintenance, and adjustment; the U.S. Department of Transportation’s refusal to approve of the index on unfair competition grounds; the defendants’ choice to ignore the Department’s decision and continue to expand the conspiracy to include a security surcharge; the conspiracy’s unravelling, due to raids conducted by the U.S. Department of Justice and other international enforcement agencies; and subsequent plea agreements that multiple defendants entered into. Nevertheless, the court also considered injury and damages in its predominance analysis.

With regard to injury, the court concluded that there is common evidence of class-wide injury or “impact.” Specifically, it was found that the legal question of injury is common to the class, weighing in favor of finding predominance, because only one type of injury—the supracompetitive prices the proposed class members paid due to the illegal conspiracy to raise, maintain, and/or stabilize prices—was asserted. The plaintiffs’ showing of injury-in-fact was also deemed sufficient through common proof, including record evidence of conspiracy, as well as two experts’ market structure analysis and regression model of approximate impact and damages.

Lastly, with regard to the court’s predominance analysis, it concluded that the plaintiffs presented a viable damages model for the class, and that the court further has the tools to accommodate any individualized damages inquiries that might be required. The plaintiffs asserted that they would calculate damages by multiplying the prices charged for each class member’s inbound and outbound shipments by the corresponding average overcharge calculated by the expert’s model. Because the damages model was deemed amenable to common proof, the predominance standard was satisfied.

The superiority requirement of Rule 23(b)(3) also was satisfied, as “a class action is undoubtedly the superior vehicle for resolving these claims,” the court stated. Specifically, the court found that: (1) a single action would promote the efficient adjudication of the many plaintiffs’ claims; (2) many class members have likely suffered relatively small damages that could not be remedied efficiently in an individual action; (3) allowing the vindication of the smaller plaintiffs’ rights is compelling in the antitrust context because of the public interest at stake; and (4) any difficulties are certainly manageable.

Consequently, the magistrate judge recommended certification of the following class: “All persons or entities (but excluding Defendants, their parents, predecessors, successors, subsidiaries, affiliates, as well as government entities) who purchased airfreight shipping services for shipments to or from the United States directly from any of the Defendants or from any of their parents, predecessors, successors, subsidiaries, or affiliates, at any time during the period from January 1, 2000 up to and including September 30, 2006.”

The case is number 06-MD-1175 (JG)(VVP).

Attorneys: Gary L. Specks (Kaplan Fox & Kilsheimer, LLP) and Jason A. Zweig (Hagens Berman Sobol Shapiro LLP) for Spraying Systems Co. Barbara J. Hart (Labaton Sucharow) for Fleurchem, Inc. David Jaroslawicz (Jaroslawicz & Jaros) for Zucker's Gifts, Inc. Eric J. Belfi (Labaton Sucharow & Rudoff LLP), Gary B. Friedman (Friedman Law Group LLP), and Jeffrey J. Corrigan (Spector, Roseman & Kodroff, PC) for Animal Land, Inc. Tracey L. Kitzman (Friedman Law Group, LLP) for Helen's Wooden Crafting Co., Air Canada, Air France-KLM, Atlas Air Worldwide Holdings, Inc., AMR Corp., Asiana Airlines, Inc., American Airlines, Inc., Plc British Airways, Cargolux Airlines International SA, Cathay Pacific Airways Ltd., Deutsche Lufthansa AG, and Japan Airlines Co. Gary A. MacDonald (Skadden, Arps, Slate, Meagher & Flom LLP) for KLM Royal Dutch Airlines, Korean Air Lines Co., Ltd., and Lan Airlines SA. John R. Fornaciari (Baker & Hostetler LLP), and Robert M. Disch (Sheppard Mullin Richter & Hampton) for Nippon Cargo Airlines Co., Ltd., All Nippon Airways Co., Ltd., Polar Air Cargo, Inc., SAS AB, SAS Cargo Group A/S, Singapore Airlines, Ltd., UAL Corp., and United Airlines.

Companies: Spraying Systems Co.; Fleurchem, Inc.; Zucker's Gifts, Inc.; Animal Land, Inc.; Helen's Wooden Crafting Co.; Air Canada; Air France-KLM; Atlas Air Worldwide Holdings, Inc.; AMR Corp.; Asiana Airlines, Inc.; American Airlines, Inc.; Plc British Airways; Cargolux Airlines International SA; Cathay Pacific Airways Ltd.; Deutsche Lufthansa AG; Japan Airlines Co.; KLM Royal Dutch Airlines; Korean Air Lines Co., Ltd.; Lan Airlines SA; Nippon Cargo Airlines Co., Ltd.; All Nippon Airways Co., Ltd.; Polar Air Cargo, Inc.; SAS AB, SAS Cargo Group A/S; Singapore Airlines, Ltd.; UAL Corp.; United Airlines.

Cases: Antitrust NewYorkNews