In re Delta / AirTran Baggage Fee Antitrust Litigation, MDL 2089 (N.D. Ga.)

In re Delta / AirTran Baggage Fee Antitrust Litigation, MDL 2089 (N.D. Ga.)

Kotchen & Low LLP is the primary co-lead counsel for Plaintiffs in In re Delta / AirTran Baggage Fee Antitrust Litigation, a Multi-District Litigation (“MDL”) currently pending before Judge Batten in the Northern District of Georgia.  Plaintiffs’ allegations are summarized below, followed by links to key filings and orders.

Plaintiffs allege that Delta Air Lines and AirTran Airways conspired to impose first checked bag fees.  According to Plaintiffs’ filings:

Defendants were each other’s main competitors, and each airline knew that imposing a first bag fee (“FBF”) unilaterally would cause a loss in profits, as the airline that imposed FBF would lose customers and revenue to the airline that did not.  In an effort to break the FBF impasse, Defendants engaged in a variety of collusive communications. For example, according to a July 31, 2008 AirTran e-mail, AirTran’s CEO Robert Fornaro and other top executives learned through AirTran Director of Customer Service Scott Fasano’s “internal D[elta] grapevine” that “[w]e are in a stand-off.  D[elta] is carefully watching us and waiting for a move on first bag.”  AirTran CEO Fornaro responded by instructing top executives that Delta “should hear through the grapevine that we are doing the programming to launch this [FBF] effort.” AirTran executive Jack Smith assured Mr. Fornaro that “[i]t will be communicated today.”

On July 31, 2008, internal e-mails reflect that in response to Mr. Fornaro’s instructions, Mr. Fasano: spoke to multiple people at Delta about FBF, including two Delta station managers; spoke to two more people over there” at Delta; and went “another route” to plant[] the seed regarding [AirTran’s] functionality.”  And on August 5, 2008, Mr. Fasano met with a former colleague at Delta who was “connected on the high level operational and planning side.”  Delta stated that its FBF “functionality is ready,” but asked AirTran to jump first,” and to do so “soon” because initiating the fee would not be justifiable if oil prices continued dropping, and stated that Delta would then follow.  Mr. Fasano responded that AirTran would soon have the technology to impose a bag fee, but that its implementation of FBF was dependent on Delta announcing first.

While Delta’s President stated on July 9, 2008 that there was no way, no how that Delta would impose FBF, this position changed after the collusive communications with AirTran.  By September 5, a Delta executive expressed that Delta was “still . . . hold[ing] until airtran moves.”

Defendants also engaged in public collusive communications.  In response to CEO Fornaro’s July 31 directive that Delta should hear about AirTran’s FBF efforts, AirTran executive Kevin Healy stated  that he had been hoping we’d be asked on the [July quarterly investor earnings] call” about FBF, and that AirTran would “push it out there.”  Mr. Healy was trying to “float the idea of a 1st bag fee” and suggested that a question be planted about FBF, stating to Corporate Communications that it wouldn’t be bad for . . . somebody to ask us if we plan or contemplate matching just to see the reaction.”  Mr. Healy had prepared an answer to an anticipated question about FBF, which was discussed with CEO Fornaro.

On AirTran’s next quarterly earnings call, on October 23, 2008, the first question asked was about AirTran’s FBF plans.  AirTran’s CEO responded by inviting Delta to collude, stating that “we have elected not to [charge a first bag fee], primarily because [Delta] hasn’t done it. . . . [W]e prefer to be a follower . . . rather than a leader right now.  [If Delta charged] [w]e would strongly consider it, yes.”

Shortly before AirTran’s October 23 earnings call, the Delta executive responsible for making the FBF recommendation to Delta’s decision-making Corporate Leadership Team (“CLT”) had recognized that Delta would not implement 1st bag fee based on a Value Proposition analysis in which Delta assumed that AirTran only had a 50% chance of following Delta’s lead on FBF, and the expected market share shift to AirTran would render Delta’s FBF unprofitable.

Shortly after AirTran’s October 23 call, Delta’s top executives learned of AirTran’s earnings call statements.  Delta executives recognized that the statements were “inappropriate” and not “wise” because they were inconsistent with Delta’s “antitrust compliance,” and that the statements committed that AirTran “would put a first-bag fee in if Delta were to have one.” After hearing AirTran’s improper invitation to collude, Delta Executive VP Glen Hauenstein changed the Value Proposition to reflect AirTran’s likelihood of matching Delta to 90%.  Delta concedes that this change was made as a result of AirTran’s invitation.  This change to AirTran’s “matching probability” meant that there would be little risk of market share loss from Delta to AirTran. As a result of this change, a Delta FBF was projected to be profitable.

Delta’s CLT met on October 27, 2008 to decide whether to implement FBF.  Most CLT members initially opposed the fee, but after discussing AirTran’s October 23 statements and the revised Value Proposition analysis reflecting that the fee would be profitable, the CLT decided to adopt the fee. According to Delta’s own internal Value Proposition analysis – the only written document Delta executives considered when deciding whether to impose FBF – each Defendant’s imposition of FBF was contrary to its economic interests, until they illegally reached a common understanding that both would impose FBF.

After the litigation was delayed several years because of discovery misconduct by Delta that resulted in multiple sanctions awards, the trial court granted class certification, and subsequently granted Defendants’ motions for summary judgment.  Both class certification and summary judgment were appealed to the Eleventh Circuit. Key filings and Orders in the case include:


Motion to Dismiss Filings

Summary Judgment (granted)

Class Certification (granted)

Discovery Misconduct and Spoliation