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Challenge to Airline Monopoly Settlement Ruled Premature

A federal judge approved a deal in which Southwest and American Airlines will together pony up $60 million, but the D.C. Circuit says that order is not appealable with claims still pending against Delta and United.

WASHINGTON (CN) — Two class members out of 100 million lost their appeal Friday to ensure that it is them and not a charity that get paid out of settlement funds in a massive airline antitrust lawsuit.

The litigation has been underway for six years, eventually consolidated in Washington from 105 federal lawsuits that travelers brought in courts throughout the United States against the airlines American, Delta, Southwest and United.

All of the airlines deny the principal allegations — that they conspired to limit capacity and drive up the price of flights — but Southwest and American reached settlements to avoid costly litigation. Provoking an objection from two class members, however, the airlines left the terms of the settlements open as to how the funds should be allocated and distributed.

A federal judge approved the settlement, Southwest for $15 million and American for $45 million, with distribution to be decided only after conclusion of the entire lawsuit still pending against Delta and United.

As it stands now, the millions of travelers eligible to participate in the class would receive less than 5 cents per flight from Southwest and American's settlements. 

Theodore Frank and Frank Bednarz challenged the settlement's approval, saying it would be unfair if the case were resolved through what’s known as a cy pres settlement — where the sum is donated to charity because the class is so large that it would be impractical to give each member a minuscule amount of money. 

Those objections were swept away Friday, however, with the D.C. Circuit noting that pending litigation against Delta and United means that the lower court's approval of the settlement is not final and appealable.

“The order dismissed only two of the four defendant airlines,” U.S. Circuit Judge Justin R. Walker wrote for a three-judge panel. “Because that order did not dispose of the consolidated action or any of the individual cases in their entirety, Bednarz and Frank may not appeal the court’s settlement approval at this time.”

Earlier this year in oral arguments, the panel noted that there might not even be a cy pres order, and that the two class members should wait to see if the court was even considering a cy pres award.  

“Why can’t you just object to a cy pres order when there is a cy pres order?” the Trump-appointed Walker had asked.

Anna St. John, the attorney representing Bednarz and Frank, said that the notice of a cy pres order doesn’t guarantee that the class members could object to it, or that the court would agree with their objection.

Frank wrote in a brief to the D.C. Circuit that, rather than a cy pres settlement, distribution by lottery could be a fair solution to equitable distribution.

“As arbitrary as that sounds, it is less arbitrary to distribute $40 million of settlement money to 400,000 or 4,000,000 class members than nothing to class members and $40 million to third-party charities affiliated with class counsel, and no more arbitrary than the typical claims-made settlement that leaves over 99% of the class uncompensated,” he wrote. 

Friday's ruling notes that the settling parties left open the question of distribution to avoid inefficient and piecemeal payments. Plus, travelers might receive significantly more after the Delta and United litigation concludes. 

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