This report summarizes a series of reported antitrust decisions in 2002 that involved transportation companies. It updates the TLA Antitrust and Unfair Practices Committee report issued in July 2002 that included antitrust related transportation decisions for 2001.

In re Delta Air Lines, 310 F.3d 953 (No. 02-0105; 6th Cir. 2002).

On November 21, 2002, the Sixth Circuit upheld a decision by the Eastern District of Michigan that an antitrust case against Delta, two other major U.S. airlines, and the Airline Reporting Corporation could proceed as a class action. The plaintiffs alleged that they were overcharged for air travel due to airline prohibitions on "hidden-city ticketing," in violation of §§ 1 - 2 of the Sherman Act (15 U.S.C. §§ 1 - 2). Hidden-city ticketing occurs when a consumer purchases a ticket for travel from City A to City C, changing planes at City B, but the consumer leaves the plane at City B, his true destination, and discards the remainder of the ticket. This travel pattern can be cheaper than simply buying a ticket for travel from City A to City B. The Sixth Circuit held that because the issues raised in the airlines’ challenge to the class certification were intertwined with the substance of the case, the case should be allowed to continue to trial as a class action, reserving any consideration of the issue until any appeal on the merits was filed. (In the underlying decision, 208 F.R.D. 174 (E.D.Mich. 2002), the Eastern District of Michigan also had dismissed a motion for summary judgment by the airlines, holding that the plaintiffs stated a cause of action under §§ 1 - 2 of the Sherman Act.) A petition for en banc rehearing is pending.

In re: Airline Ticket Commission Antitrust Litigation, 307 F.3d 679 (No. 02-1639; 8th Cir. 2002).

On October 4, 2002, the Eighth Circuit reversed a decision by the District of Minnesota as to how unclaimed funds from the settlement of a class action antitrust case against the six largest U.S. airlines should be distributed. In 1996, the airlines had settled a claim that they had colluded, in violation of §§ 1 - 2 of the Sherman Act (15 U.S.C. §§ 1 - 2), to cap commissions paid to travel agents. In 2001, the trial court had ordered that $600,000 in unclaimed funds be distributed to the National Association for Public Interest Law. The Eighth Circuit held that this distribution was not tailored to the nature of the underlying lawsuit, and that the first recipients should be travel agents in Puerto Rico and the U.S. Virgin Islands, which had not been members of the plaintiff class.

Turicentro, S.A. v. American Airlines, Inc., 303 F.3d 293 (No. 01-3135; 3rd Cir. 2002).

On September 9, 2002, the Third Circuit affirmed a decision in American’s favor by the Eastern District of Pennsylvania. The trial court had held that travel agents in Latin America and the Caribbean could not sue American, three other major U.S. airlines, and the International Air Transport Association under § 1 of the Sherman Act (15 U.S.C. § 1). The plaintiffs alleged that the defendants had conspired to lower the commission rates paid to travel agents. But the court held that, pursuant to the Foreign Trade Antitrust Improvement Act (15 U.S.C. § 6a), the Sherman Act did not apply to conduct affecting a foreign market unless it also had a direct, substantial, and reasonably foreseeable effect on a U.S. domestic or export market. The court held that there had been no showing that the commission rates had any effects in the U.S.

Continental Airlines, Inc. v. United Air Lines, Inc., 277 F.3d 499 (4th Cir. 2002).

On January 15, 2002, the Fourth Circuit reversed a decision in Continental’s favor by the Eastern District of Virginia. The trial court had enjoined the use of sizing templates to restrict the size of the carry-on bags allowed to pass through security checkpoints – operated by United on behalf of a coalition of airlines – at Washington Dulles Airport. The trial court had held that, pursuant to § 1 of the Sherman Act (15 U.S.C. § 1) and its Virginia counterpart (Va. Code § 59.1-9.5), the restriction was a per se unreasonable restraint on competition, and also imposed an unreasonable restraint on competition if evaluated under a rule of reason analysis. The Fourth Circuit, however, held that the trial court had not sufficiently reviewed the competitive effects of the templates, and had not sufficiently considered the effects of the airport’s unique architectural configuration. Subsequently, the parties agreed to dismiss the case.

Cheryl Terry Enterprises, Ltd. v. City of Hartford, 811 A.2d 1272 (No. 16638; Conn. 2002)

On December 31, 2002, the Connecticut Supreme Court dismissed the appeal of the trial court’s decision to set aside a jury verdict of $500,000 in damages for Cheryl Terry Enterprises pursuant to the Connecticut Antitrust Act (Conn G.S. § 3254, et seq.). Cheryl Terry Enterprises, which had submitted the lowest bid for a contract to operate school buses, had sued the City after the contract was instead awarded to another bidder. The trial court set aside the jury’s verdict on the grounds that an unsuccessful lowest bidder in a municipal bidding process lacked standing to bring an antitrust claim against the City. The Supreme Court dismissed the appeal as preemature, because additional issues were still awaiting resolution in the trial court.

Fare Deals, Ltd. v. Baltimore Travel Center, Inc., 217 F. Supp. 2d 670 (No. 02-315; D.Md. 2002).

On August 19, 2002, the District of Maryland held that a travel agent’s conspiracy claim against another travel agent and a supplier under § 1 of the Sherman Act (15 U.S.C. § 1) would be allowed to proceed, even though the complaint had serious deficiencies. The court explained that the complaint was sufficient to state a claim under the liberal pleading requirements of the federal rules of procedure, even though case law cited by the defendants’ motion to dismiss suggested that they possessed strong defenses, such as the intra-enterprise immunity doctrine. Subsequently, the parties agreed to dismiss the case.

The Hertz Corp. v. The City of New York, 212 F. Supp. 2d 275 (No. 92-2192; S.D.N.Y. 2002).

On July 30, 2002, the Southern District of New York held that a New York City local law that prohibited car rental companies from charging extra fees based on a renter’s home address was preempted by § 1 of the Sherman Act (15 U.S.C. § 1). Hertz increased it rates for rentals to residents of different New York City boroughs based on historic liability losses by such renters. The court held that, under a rule of reason analysis, the City’s articulated justification for the law - to prevent discrimination against minorities and the poor - did not justify the antitrust harm that it would cause. In particular, the court noted that Hertz’s policy had been in effect for ten years, and while Hertz had shown that its liability losses had declined, the City had not shown that the policy had any discriminatory effects. The case has been appealed to the Second Circuit.

Martin v. Stites, 203 F. Supp. 2d 1237 (No. 98-2226; D.Kan. 2002).