Hall Suit Tests Law on Antitrust

Class-action attorneys argue 'conscious parallelism' is proof of airline collusion.

By: Kevin Brass

In attempting to prove airlines illegally conspired to eliminate commissions, attorneys representing travel agent Sarah Hall utilized a standard legal argument that recognizes there is rarely a smoking gun available to prove a conspiracy.

In antitrust law, the theory is known as “conscious parallelism.” Using the concept, Hall’s attorneys in the class-action suit argued that the carriers’ simultaneous moves to lower commissions were proof of collusion.

But it wasn’t enough to convince Judge W. Earl Britt who, on Oct. 30, dismissed the suit saying the agents’ arguments were nothing more than “sinister insinuations” and “untenable inferences.”

Last week attorneys representing Hall filed notice that they will appeal the decision to the Fourth Circuit Court of Appeals. They will likely have until December to file a formal argument.

“The decision is bad and it’s contrary to the law,” said Hall co-counsel Daniel Shulman, the anti-trust expert on the plaintiff team.

Hall’s attorneys were surprised by the summary judgment, primarily because Britt had appeared sympathetic to their arguments.

He had allowed them to introduce historical evidence from older cases and rejected earlier calls from the airline defendants for a dismissal.

In September, Britt approved a settlement in the suit between agents and Lufthansa that calls for the carrier to establish a “bonus program” for agents in January. That settlement won’t be affected.

The Lufthansa deal, which calls for an upfront payment of more than $1 million to Hall’s attorneys, will help finance the continued legal battle, which is sure to focus on the intricacies of conscious parallelism.

According to the law, circumstantial evidence, inference and the appearance of a conspiracy can be enough to prove a case, or at least get a case to trial.

“You don’t need a smoking gun” to prove a conspiracy, said antitrust expert Lino Graglia, professor of law at the University of Texas in Austin. “You don’t need a signed contract.”

But in recent years courts have grown increasingly skeptical of conspiracy claims.

The simple appearance of a conspiracy under the terms of conscious parallelism is “probably not enough anymore” to convince courts of a conspiracy, Graglia said.

In his review, which was requested by the airlines, Britt appeared to focus on the requirement that the plaintiffs show evidence that “excludes the possibility” the airlines may have acted independently or for a “legitimate business purpose.”

Britt concluded that it is “perfectly legitimate for an airline to consider publicly available information about what a competitor is paying travel agents in setting one’s own commissions.”

Britt was particularly critical of the claim that meetings of Passenger Tariff Coordinating Conferences and the International Air Transport Association (IATA) represented evidence of collusion, which plaintiff attorneys have referred to as the “smoking gun.”

“The absurdity of the argument speaks for itself,” Britt wrote, calling it “ludicrous.”

But Shulman says that minutes from the meetings prove commissions were discussed.

“The judge ignored our evidence,” Shulman said. “And he failed to draw inferences in our favor, as the law required.”

In addition to evidence suggesting the airlines have a long history of working in tandem, Hall’s attorneys presented economic experts who concluded it was against the carriers’ best interests to cut commissions, unless there was a general agreement among all the airlines.

But Britt said the decision could have been the result of “competitive conduct and natural changes in the market.”

“That’s a judge trying to act like an economist,” Shulman said. “He knows nothing about economics.”

Shulman called Britt’s conclusions “flights of economic fantasy.” Either way, Hall’s attorneys say, the judge should have let a jury decide the issues.

“If there are any questions of fact, you’re abusing your discretion by not letting it go to a jury,” said Alexander Anolik, attorney for the Association of Retail Travel Agents.

In the expected appeals process, the court now won’t judge if the agents’ case is right or wrong, but will only rule on whether it believes Britt made a mistake by not letting the case go forward.

“If you are able to convince the appeals court that there is a material issue generally in dispute, then you’ve got a good chance of getting reversed,” said Warren Grimes, professor of law at Southwestern University School of Law in Los Angeles.

While Hall’s attorneys are confident the appeals court will allow the case to go forward, it’s no slam dunk.

“In the recent past the Fourth Circuit has not been all that friendly to antitrust cases,” Grimes said.