Antitrust Law Daily Wrap Up, ANTITRUST—S.D. N.Y.: US Air can amend pleadings to restore waived damages claims, (Dec 9, 2015)

By Linda O’Brien, J.D., LL.M.

Airline US Airways should be allowed to amend its complaint against travel network provider Sabre Holdings for unlawfully charging inflated airline booking fees and conspiring with other travel network providers to restrain trade in order to restore previously waived damages claims, the federal district court in New York City has held (US Airways, Inc. LLC v. Sabre Holdings Corp., December 8, 2015, Schofield, L.).

In April 2011, US Airways filed suit, claiming that Sabre engaged in anticompetitive conduct in the market for flight and reservation information. Sabre operates a Global Distribution System (GDS)—a computerized system that helps airlines distribute tickets to travel agents and travelers. US Airways challenged two contracts with Sabre, signed in 2006 and 2011. These contracts contained the same basic terms—including challenged “full content” provisions. US Airways alleged that the full content and related terms in its contracts with Sabre were an “unreasonable restraint of trade” in violation of Section 1 of the Sherman Act and that Sabre conspired with other GDS competitors to limit competition for content.

In January 2015, the court granted Sabre’s motions for summary judgment, ruling that US Airways’ claims before February 2011 were barred by the statute of limitations and that claims after October 2012 were barred by a settlement agreement between Sabre and AMR Corp., the parent company of American Airlines. US Airways merged with AMR and was therefore bound by the settlement. The summary judgment also limited US Airways’ claims to declaratory relief, damages, and costs.

In April 2015, US Airways requested a bench trial in its suit against Sabre and indicated that it was prepared to forego its stake in millions of dollars in overcharge damages arising under a 2011 contract with Sabre and seek only nominal damages and declaratory relief. In September 2015, the court dismissed as moot US Airways’ request for declaratory judgment. Before the court was US Airways’ motion for leave to amend its second amended complaint to restore damages claims that were previously waived.

Good cause. The court found that US Airways acted diligently and demonstrated good cause to file the proposed third amended complaint. Sabre’s argument that the good cause standard was not met because US Airways made a tactical decision to abandon its request for damages was rejected. The court noted that the damages claims had previously been asserted, US Airways timely moved to restore the claims, and the proposed amended complaint would not fundamentally change the factual allegations against the defendant.

Sabre’s argument that US Airways’ motion amounts to bad faith and dilatory tactics, since it was an attempt to manipulate the procedure rules and delay final resolution of the case, was also rejected. According to the court, US Airways’ procedural tactics of requesting a bench trial instead of having a jury as the fact finder did not rise to the level of bad faith or dilatory tactics that warranted precluding having its claims heard on the merits. Moreover, the interest of justice was best served by granting the proposed amendment, since the case involves claims of illegal restraints on trade that allegedly harmed consumers through higher prices, lower quantity, and reduced innovation.

Finally, Sabre was not unduly prejudiced when it relied on US Airways’ waiver of damages in disclosing its settlement position or preparation for the bench trial. The court concluded that it was not unexpected that Sabre was willing to settle for a relatively nominal amount and its strategies for a bench trial could change for a presentation to a jury.

The case is No. 1:11-cv-02725-LGS.

Attorneys: Alicia K. Hancock (O'Melveny & Myers LLP), David Gregg Trachtenberg (Trachtenberg Rodes & Friedberg LLP) and Derek Winston Moore (Cadwalader, Wickersham & Taft, LLP) for US Airways, Inc. Lev Louis Dassin (Cleary Gottlieb Steen & Hamilton LLP), Andrew C. MacNally, (Bartlit Beck Herman Palenchar & Scott LLP) and Joseph Kattan (Gibson, Dunn & Crutcher, LLP) for Sabre Holdings Corp., Sabre Travel International Ltd., and Sabre GLBL Inc.

Companies: US Airways, Inc.; Sabre Holdings Corp.; Sabre Travel International Ltd.; Sabre GLBL Inc.

Cases: Antitrust NewYorkNews