A class action lawsuit against Southwest and Delta over checked bag fees has been certified.
The suit stems from Delta and Airtran both beginning to charge checked bag fees within weeks of each other. Those airlines were the two biggest in the Atlanta market, and of course Southwest subsequently acquired Airtran.
So even though Southwest has never charged checked baggage fees, they find themselves defending a lawsuit over collusion in how those fees were introduced and set.
It will be difficult to show collusion. American had already introduced checked baggage fees. Airtran was on record saying they could follow suit, but didn’t want to leading the way. So once their biggest competitor in Atlanta implemented these fees, they jumped on the bandwagon. It’s highly unlikely that Delta and Airtran colluded with each other, in my opinion.
Nevertheless, Delta has so far been fined millions of dollars over their failure to comply with discovery requirements in the case.
In 2011, it was learned that the airline had, among other problems, continued to overwrite old backups of e-mails on a server dedicated to preserving communications in the event of litigation. This resulted in the loss of some data from the months leading up to the launch of the baggage fees.
What’s more, even though Delta claimed to have turned over all relevant materials, the Department of Justice found relevant documents that hadn’t been produced while pursuing an unrelated investigation.
A review of these tapes turned up 60,000 pages of documents that should have been turned over to the plaintiffs. As a result, the court issued its first sanction against the airline, for nearly $1.3 million.
The ultimate fine is now over two and a half million dollars for willful violations, which doesn’t help make the case that they aren’t hiding anything.
I heard Delta kept their emails on Hillary’s in-home email server, could that be the problem? Both appear to have serious transparency issues…
I like that comment!!
So those 2+mil in fines that Delta paid, where exactly does that money go?
What could happen next is that the judge could issue an instruction to the jury in the class action specifically telling them that they may infer that any missing documents would prove the plaintiffs’ contentions. The ultimate sanction (not very likely unless the judge finds the discovery omission was willful) is to strike Delta’s defense and find for the plaintiffs. The real problem for Delta here is that their counsel has completely blown their credibility before the judge.
@Ken: The money, if upheld, will go to the plaintiffs’ lawyers as part of their fees. It’s designed to compensate for the added work to uncover and bring to the court’s attention Delta’s errors.
@Gary: It’s almost inconceivable that Southwest did not know about the existence of the suit before the merger occurred. This would have been part of the pre-deal due diligence. They bought the lawsuit along with the airline. But a successor company is liable for any claims against its predecessor after a merger, so this isn’t unusual.
What surprises me is that DOJ notified plaintiffs of the omission of documents.
It wouldn’t surprise me if DOJ found the trove of emails as part of its collusion probe. If you read the lede from the WaPo article that broke the story, it seems that the investigation has been going on for some time:
“The Justice Department is investigating whether some of America’s biggest airlines have colluded to keep airfares high, striking at an industry that has posted record profits recently while limiting routes and affordable seats, officials familiar with the matter said Wednesday.
“Justice Department spokeswoman Emily Pierce confirmed the probe, saying investigators are looking into “possible unlawful coordination by some airlines,” but she would not name the carriers.
“Representatives from Delta Air Lines, Southwest Airlines, American Airlines and United Airlines confirmed they were among those being investigated and said they were complying with Justice Department requests.”
http://www.washingtonpost.com/business/economy/doj-investigating-potential-airline-collusion/2015/07/01/42d99102-201c-11e5-aeb9-a411a84c9d55_story.html
Is this is chicken-egg deal? Did the lawyers in the class action case find something and slip it to DOJ? Did the lawyers let DOJ know about DL’s discovery shenanigans? If so, did DOJ’s higher-ups authorize their investigators to release the SIXTY-THOUSAND pages of emails that DOJ had in its possession but DL claims they couldn’t find as part of sending a message to DL on the Federal investigation? You never know who worked where before they went to private practice, or who knows who among the bar.
Additionally, it’s one thing to play fast and loose with discovery in a civil case because you’ll typically be fined – the $1.3 million is nothing for DL compared to what they’re making just quarterly on bag fees. Of course, DL’s lawyers could get sanctioned, too, which might impact their law license but their defense would be that they can produce only what their client gives them.
It’s altogether something else when DOJ serves an IT department with a subpoena in a what could be a criminal anti-trust investigation (collusion is covered under the Sherman Anti-Trust Act, 15 USC Sec. 1, ). When the FBI serves a subpoena, they don’t make an appointment with the VP for IT. It’s possible that if DOJ got wind of DL’s failure to comply with discovery in the civil case, the FBI or whoever served the subpoenas may well have just sat there while the respective IT departments worked to comply.
Finally, while I was reading through DOJ”s “An Anti-Trust Primer for Federal Law Enforcement Personnel” (available here: http://www.justice.gov/atr/antitrust-primer-federal-law-enforcement-personnel-revised-april-2005), it struck me that US government employees travel quite a bit on domestic airlines. If DOJ finds evidence that the airlines colluded, DOJ might be able to claim that it resulted in the airlines ripping-off Uncle Sam in addition to the general public. Remember, to prove conspiracy a prosecutor doesn’t have to show that the left hand knew what the right was doing. From the Primer: “Agreement Is Key. Agreement is the essence of a Section 1 violation, and attempts to fix prices, rig bids or allocate markets are not prosecutable under this statute. The Antitrust Division, however, has used the mail and wire fraud statutes to prosecute attempts to fix prices or rig bids where the U.S. mails or interstate phone lines were used in the attempt.”
We shall see…..