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In re Domestic Airline Travel Antitrust Litigation

United States District Court, District of Columbia

October 30, 2016

IN RE DOMESTIC AIRLINE TRAVEL ANTITRUST LITIGATION This Document Relates To: ALL CASES Misc. No. 15-1404 (CKK)

          MEMORANDUM OPINION

          COLLEEN KOLLAR-KOTELLY UNITED STATES DISTRICT JUDGE.

         Presently before the Court is Defendants' [106] Motion to Dismiss Plaintiffs' Consolidated Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6). Defendants allege that the Consolidated Amended Complaint should be dismissed because Plaintiffs failed to plead facts sufficient to demonstrate that Plaintiffs suffered injury-in-fact and because Plaintiffs failed to plead factual allegations of a plausible price-fixing conspiracy in violation of federal antitrust laws. Upon consideration of the pleadings, [1] the relevant legal authorities, and the record as a whole, the Court DENIES Defendants' [106] Motion to Dismiss Plaintiffs' Consolidated Amended Complaint for the reasons described herein.

         I. BACKGROUND

         A. Procedural Background

         The United States Judicial Panel on Multidistrict Litigation (“the Panel”) consolidated 23 actions pending in seven districts involving claims that four major airlines fixed prices for domestic airline tickets by keeping capacity artificially low. The Panel transferred these consolidated actions to this Court on October 13, 2015. The Panel subsequently transferred additional related actions to be consolidated into the instant litigation. There are presently a total of 105 cases consolidated in this action.

         On October 30, 2015, the Court entered an Initial Practice and Procedure Order Upon Transfer Pursuant to 28 U.S.C. § 1407, in which the Court set out a general outline of how it intends to proceed in this matter. Initial Practice & Procedure Order Upon Transfer Pursuant to 28 U.S.C. § 1407, ECF No. [4]. On February 4, 2016, the Court entered an Order Appointing Plaintiffs' Interim Class Counsel and, on February 26, 2016, set a schedule for Plaintiffs to file their Consolidated Amended Complaint and for Defendants to file any responsive pleadings or motions. Order Appointing Pls.' Interim Class Counsel (Feb. 4, 2016), ECF No. [76]; Order (Feb. 26, 2016), ECF No. [83]. On March 24, 2016, at the parties' joint request, the Court held a telephonic conference call on the record to discuss Plaintiffs' request to lift the discovery stay for the limited purpose of obtaining the material that Defendants provided to the Government in response to the Government's subpoenas. On March 30, 2016, the Court entered a Memorandum Opinion and Order denying Plaintiffs' request to lift the discovery stay. Mem. Op. & Order (Mar. 30, 2016), ECF No. [96]. On March 25, 2016, Plaintiffs filed their Consolidated Amended Class Action Complaint (“Complaint”). On May 11, 2016, Defendants filed their Motion to Dismiss Plaintiffs' Consolidated Amended Complaint, which is now fully briefed.

         B. Factual Background

         For the purposes of the motion before the Court, the Court accepts as true the allegations in the Complaint. See generally Compl., ECF No. [91]. The Court does “not accept as true, however, the plaintiff's legal conclusions or inferences that are unsupported by the facts alleged.” Ralls Corp. v. Comm. on Foreign Inv. in United States., 758 F.3d 296, 315 (D.C. Cir. 2014). The Court recites the principal facts pertaining to the issues raised in the pending motion relying on the Complaint and undisputed and/or uncontroverted facts.

         Defendants, American Airlines, Inc. (“American”), Delta Air Lines, Inc. (“Delta”), Southwest Airlines Co. (“Southwest”), and United Airlines, Inc. (“United”), are the four largest commercial air passenger carriers in the United States. Compl. ¶¶ 1, 23-26. In addition to the four named Defendants, Plaintiffs allege that U.S. Airways prior to its merger with American, Air Canada, and the International Air Transport Association (“IATA”) willingly conspired with Defendants to unlawfully restrain trade. Id. ¶ 27.

         Plaintiffs are purchasers of air passenger transportation for domestic travel directly from Defendants or their predecessors and/or through websites including Travelocity.com, Orbitz.com, Priceline.com, Expedia.com, and Flyfar.ca. Id. ¶¶ 11-22. Plaintiffs named in the Complaint include individuals who are residents of various states and the District of Columbia, a non-profit corporation, and a corporation. Plaintiffs seek classwide recovery, defining the putative class, with certain exceptions, as: “All persons and entities that purchased air passenger transportation services for flights within the United States and its territories and the District of Columbia from Defendants or any predecessor, subsidiary or affiliate thereof, at any time between July 1, 2011 and the present.” Id. ¶ 142. Plaintiffs assert that they do not know the exact number of members in the putative class because such information is in control of Defendants but Plaintiffs believe that the number of Class members is in the millions and that Class members “are sufficiently numerous and geographically dispersed throughout the United States so that joinder of all Class members is impracticable.” Id. ¶ 143.

         Plaintiffs allege that Defendants colluded to limit capacity on their respective airlines in a conspiracy to fix, raise, maintain, and/or stabilize prices for air passenger transportation services within the United States, its territories, and the District of Columbia in violation of Sections 1 and 3 of the Sherman Antitrust Act (15 U.S.C. §§ 1, 3), and that Plaintiffs suffered pecuniary injury by paying artificially inflated ticket prices as a result of this purported antitrust violation. Id. ¶¶ 1, 11-22. Plaintiffs allege that the conspiracy commenced in the first quarter of 2009 and continues until the present, and seek to recover treble damages for the period of July 1, 2011, to the present (“Class Period”). Id. ¶ 1. Defendants now move the Court to dismiss all of Plaintiffs' claims pursuant to Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6).

         II. LEGAL STANDARD

         A. Federal Rule of Civil Procedure 12(b)(1)

         To survive a motion to dismiss pursuant to Rule 12(b)(1), the plaintiff bears the burden of establishing that the court has subject matter jurisdiction over its claim. Moms Against Mercury v. FDA, 483 F.3d 824, 828 (D.C. Cir. 2007). In determining whether there is jurisdiction, the Court may “consider the complaint supplemented by undisputed facts evidenced in the record, or the complaint supplemented by undisputed facts plus the court's resolution of disputed facts.” Coal. for Underground Expansion v. Mineta, 333 F.3d 193, 198 (D.C. Cir. 2003) (citations omitted). “At the motion to dismiss stage, counseled complaints, as well as pro se complaints, are to be construed with sufficient liberality to afford all possible inferences favorable to the pleader on allegations of fact.” Settles v. U.S. Parole Comm'n, 429 F.3d 1098, 1106 (D.C. Cir. 2005). “Although a court must accept as true all factual allegations contained in the complaint when reviewing a motion to dismiss pursuant to Rule 12(b)(1), ” the factual allegations in the complaint “will bear closer scrutiny in resolving a 12(b)(1) motion than in resolving a 12(b)(6) motion for failure to state a claim.” Wright v. Foreign Serv. Grievance Bd., 503 F.Supp.2d 163, 170 (D.D.C. 2007) (citations omitted).

         B. Federal Rule of Civil Procedure 12(b)(6)

         Pursuant to Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss a complaint on the grounds that it “fail[s] to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). The Federal Rules of Civil Procedure require that a complaint contain “‘a short and plain statement of the claim showing that the pleader is entitled to relief, ' in order to ‘give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)); accord Erickson v. Pardus, 551 U.S. 89, 93 (2007) (per curiam). “[A] complaint [does not] suffice if it tenders ‘naked assertion[s]' devoid of ‘further factual enhancement.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 557). Rather, a complaint must contain sufficient factual allegations that, if accepted as true, “state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570. “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

         In evaluating a Rule 12(b)(6) motion to dismiss for failure to state a claim, a court must construe the complaint in the light most favorable to the plaintiff and must accept as true all reasonable factual inferences drawn from well-pleaded factual allegations. In re United Mine Workers of Am. Empl. Benefit Plans Litig., 854 F.Supp. 914, 915 (D.D.C. 1994). Further, in deciding a Rule 12(b)(6) motion, a court may consider “the facts alleged in the complaint, documents attached as exhibits or incorporated by reference in the complaint, ” or “documents upon which the plaintiff's complaint necessarily relies even if the document is produced not by the plaintiff in the complaint but by the defendant in a motion to dismiss.” Ward v. D.C. Dep't of Youth Rehab. Servs., 768 F.Supp.2d 117, 119 (D.D.C. 2011) (citations omitted).

         III. DISCUSSION

         A. Plaintiffs Established Standing Under Article III of the U.S. Constitution

         Pursuant to Article III of the Constitution, Defendants move to dismiss this action on the basis that this Court has no jurisdiction because Plaintiffs lack standing. “Article III of the Constitution limits the jurisdiction of federal courts to ‘actual cases or controversies between proper litigants.'” Mendoza v. Perez, 754 F.3d 1002, 1010 (D.C. Cir. 2014) (quoting Fla. Audubon Soc'y v. Bentsen, 94 F.3d 658, 661 (D.C. Cir. 1996)). Because standing is a “threshold jurisdictional requirement, ” a court may not assume that Plaintiff has standing in order to proceed to evaluate a case on the merits. Bauer v. Marmara, 774 F.3d 1026, 1031 (D.C. Cir. 2014). A plaintiff “bears the burden of showing that he has standing for each type of relief sought.” Summers v. Earth Island Inst., 555 U.S. 488, 493 (2009). “To establish constitutional standing, plaintiffs ‘must have suffered or be imminently threatened with a concrete and particularized injury in fact that is fairly traceable to the challenged action of the defendant and likely to be redressed by a favorable judicial decision.'” Mendoza, 754 F.3d at 1010 (quoting Lexmark Int'l, Inc. v. Static Control Components, Inc., ___ U.S. ___, 134 S.Ct. 1377, 1386 (2014); see also Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992).

         “The ‘irreducible constitutional minimum of standing contains three elements': injury in fact, causation, and redressability.” Arpaio v. Obama, 797 F.3d 11, 19 (D.C. Cir. 2015) (quoting Lujan, 504 U.S.at 560-61). “Injury in fact is the ‘invasion of a legally protected interest which is (a) concrete and particularized . . . and (b) actual or imminent, not conjectural or hypothetical.” Id. (quoting Lujan, 504 U.S. at 560) (alterations in original). “The ‘causal connection between the injury and the conduct complained of' must be ‘fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court.'” Id. (quoting Lujan, 504 U.S. at 561). Finally, “it must be ‘likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.'” Id. (quoting Lujan, 504 U.S. at 561).

         Here, Plaintiffs allege that they purchased air passenger transportation for domestic travel directly from Defendants or their predecessors and/or through websites during the alleged conspiracy, that the fares were affected by the alleged conspiracy, and, as a result, that they paid artificially inflated ticket prices. Defendants argue that Plaintiffs have not established standing because they have failed to establish injury in fact. Specifically, Defendants argue that Plaintiffs must identify specific routes that were affected by the alleged conspiracy and plead that they purchased tickets on those specific routes, rather than simply pleading that they purchased tickets from Defendants during the alleged conspiracy. For the reasons described herein, the Court concludes that Plaintiffs sufficiently established their standing to bring this action.

         Defendants assert that Plaintiffs acknowledge in their Complaint that: (1) the capacity of some routes increased during the class period; and (2) fares for some routes decreased during the class period. Def.'s Mot. at 42-43. In support of this assertion, Defendants cite to the following information in the Complaint: (1) Defendant Southwest's announcement in May 2015, that it increased available seat miles (“ASM”)[2] by 7 to 8 percent in 2015, the majority of which was related to the acquisition of two gates at Dallas Love Field and plans to expand service at Houston Hobby airport, Compl. ¶ 116; (2) fares on certain routes where Defendants faced competition from discount carriers declined after the Department of Justice commenced an investigation into a number of airlines on June 30, 2015, id. ¶¶ 133-34; and (3) charts included with the caption “Average Airfares and The Lack of Competitive Pricing on Various Routes” that Plaintiffs claim demonstrate a divergence in fares starting in 2009 on routes where one of the Defendants was the largest carrier as opposed to routes where a non-Defendant airline was the largest carrier, id. ¶¶ 64-65. Defendants assert that these facts demonstrate an acknowledgement by Plaintiffs that only some routes were allegedly affected by the conspiracy.[3]

         The Court rejects this narrow reading of the Complaint. Indeed, Plaintiffs point to two actions undertaken by Defendants in 2015, and generally present evidence that fares on routes starting in 2009 grew at different rates when a Defendant rather than a non-Defendant airline was the major carrier on the route. It is clear that Defendants misstate the gravamen of the Complaint by focusing on its inclusion of a subsection looking at “various” routes, while ignoring the Complaint's broader allegation of a national conspiracy. Plaintiffs' discussion of fares on some routes does not preclude its argument that the conspiracy affected the fares more generally within the market. While Defendants read the Complaint to indicate that these specific routes or fares were unaffected by the conspiracy, that is a mischaracterization of Plaintiffs' claim.

         Here, Plaintiffs allege that Defendants violated § 1 of the Sherman Act by participating in a conspiracy affecting air passenger transportation services within the United States. Specifically, Plaintiffs' allegation is that Defendants conspired “to fix, raise, maintain, and/or stabilize prices for air passenger transportation services within the United States, its territories and the District of Columbia . . . by, inter alia, colluding to limit capacity on their respective airlines.” Id. ¶ 1. The crux of Plaintiffs' claim is that Defendants colluded to restrict capacity growth and, as a result, airfares were artificially inflated. This claim is not limited to certain routes or city-pairs, as Defendants contend, nor as discussed further below are Plaintiffs required to plead specific routes or city-pairs allegedly affected by the conspiracy. Plaintiffs' allegation is that they suffered a pecuniary injury by paying artificially inflated ticket prices as a result of the conspiracy. This is sufficient to establish injury in fact for purposes of standing.[4] See Osborn v. Visa, Inc., 797 F.3d 1057 (D.C. Cir. 2015), cert. granted ___ U.S. ___, 136 S.Ct. 2543 (2016) (quoting Danvers Motor Co. v. Ford Motor Co., 432 F.3d 286, 293 (3d Cir. 2005)) (“Economic harm, such as that alleged here, ‘is a classic form of injury-in-fact.'”); Oxbow II, 81 F.Supp.3d at 7 (“[P]laintiffs need only allege, as they have in the amended complaint, that they suffered damages as a result of the conspiracy in which defendants participated.”).

         The Court notes that in order to establish causation, Plaintiffs' conspiracy allegations rely on certain economic principles which Defendants seek to undercut in their motion. However, as the United States Court of Appeals for the District of Columbia Circuit recently explained, “A Rule 12(b)(1) motion . . . is not the occasion for evaluating the empirical accuracy of an economic theory.” Osborn, 797 F.3d at 1065-66. Where, as here, “the economic facts alleged by the Plaintiffs are specific, plausible, and susceptible to proof at trial, they pass muster for standing purposes at the pleadings stage.” Id. at 1066.

         B. Plaintiffs Sufficiently Pled a Plausible Claim Pursuant to § 1 of the Sherman Act

         The parties dispute whether Plaintiffs pled a plausible claim pursuant to § 1 of the Sherman Act. The Sherman Act prohibits any “contract, combination, . . . or conspiracy, in restraint of trade or commerce . . . .” 15 U.S.C. § 1. “Section 1 [of the Sherman Act] applies only to concerted action that restrains trade.” Am. Needle, Inc. v. Nat'l Football League, 560 U.S. 183, 190 (2010). As such, “[t]o make out a Section 1 claim, ‘plaintiffs must allege: (1) that the defendants entered into some agreement, contract, combination, conspiracy, or other concerted activity; (2) that at least one defendant committed an overt act in furtherance of the conspiracy; and (3) that the agreement constituted an unreasonable restraint of trade in the relevant market in a manner that had an impact on interstate commerce.'” Oxbow Carbon & Minerals LLC v. Union Pac. R.R. Co. (“Oxbow I”), 926 F.Supp.2d 36, 42 (D.D.C. 2013) (quoting Jung v. Ass'n Am. Med. Colls., 300 F.Supp.2d 119, 157-58 (D.D.C. 2004)).

         The Supreme Court of the United States in Bell Atlantic Corporation v. Twombly, 550 U.S. 544, 554 (2007), set forth the pleading requirements for a Section 1 claim under Federal Rule of Civil Procedure 8(a)(2). The Court explained, “Because § 1 of the Sherman Act ‘does not prohibit [all] unreasonable restraints of trade . . . but only restraints effected by a contract, combination, or conspiracy, ' ‘[t]he crucial question' is whether the challenged anticompetitive conduct ‘stem[s] from independent decision or from an agreement, tacit or express . . . .” Twombly, 550 U.S. at 553 (internal citation omitted). Accordingly, “a claim [pursuant to § 1] requires a complaint with enough factual matter (taken as true) to suggest that [such] an agreement was made.” Id. at 556.

         An antitrust plaintiff may plead the existence of a conspiracy through direct and/or circumstantial evidence that reasonably tends to prove that the defendants “‘had a conscious commitment to a common scheme designed to achieve an unlawful objective.'” Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 764 (1984) (quoting Edward J. Sweeney & Sons, Inc. v. Texaco, Inc., 637 F.2d 105, 111 (3d Cir. 1980), cert. denied, 451 U.S. 911 (1981)). “[D]irect evidence of concerted action . . . [includes] ‘a document or conversation explicitly manifesting the existence of the agreement in question . . . .'” Havens v. Mobex Network Servs., LLC, 820 F.3d 80, 91 (3d Cir. 2016). “[D]irect evidence in . . . [the antitrust] context is ‘explicit and requires no inferences to establish the proposition or conclusion being asserted.'” Am. Chiropractic Ass'n v. Trigon Healthcare, Inc., 367 F.3d 212, 226 (4th Cir. 2004) (quoting InterVest, Inc. v. Bloomberg, L.P., 340 F.3d 144, 159 (3d Cir. 2003)). As such, “[d]irect evidence is extremely rare in antitrust cases and is usually referred to as the ‘smoking gun.'” Id.

         Circumstantial evidence in the antitrust context is evidence that “tends to exclude the possibility of independent action.” Monsanto Co., 465 U.S. at 768. In Twombly, the Court recognized that parallel business behavior is admissible circumstantial evidence from which a factfinder may infer an agreement. 550 U.S. at 553-54. However, evidence of parallel conduct without more is insufficient at the pleading stage to demonstrate an agreement as required under the Sherman Act. Id. at 554 (“The inadequacy of showing parallel conduct or interdependence, without more, mirrors the ambiguity of the behavior: consistent with conspiracy, but just as much in line with a wide swath of rational and competitive business strategy unilaterally prompted by common perceptions of the market.”). Rather, “when allegations of parallel conduct are set out in order to make a § 1 claim, they must be placed in a context that raises a suggestion of a preceding agreement, not merely parallel conduct that could just as well be independent action.” Id. at 557. “To show conspiracy, therefore, plaintiffs must plead ‘plus factors' that suggest collusion, in addition to merely alleging parallel conduct.” Oxbow I, 926 F.Supp.2d at 46-47. “The term ‘plus factors' refers to circumstances demonstrating that the wrongful conduct ‘was conscious and not the result of independent business ...


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