Court Unlikely to Ground Airline Antitrust Settlement Over Distribution Fears

Two airlines have agreed to amounts that will give mere pennies to passengers, but claims against others remain pending — leaving the final class award up in the air, so to speak.

Security at work at John F. Kennedy International Airport in New York on Sept. 26, 2020. (Courthouse News photo/Barbara Leonard)

WASHINGTON (CN) — The D.C. Circuit offered little hope Wednesday to travelers worried that airlines will see little actual punishment, or worse wind up benefitting, from the settlement of a massive antitrust suit.

The challenge stems from multidistrict litigation alleging a conspiracy by the country’s leading airlines to limit capacity and drive up the price of flights between 2011 and 2018. In 2018, American Airlines settled the claims against it for $45 million, and Southwest settled for $15 million. Nevertheless the litigation with Delta and United remains ongoing.

Because an enormous number of travelers would be eligible for money from these settlements, however, even multimillion-dollar awards would amount to less than 5 cents per flight during the time period. The funds could increase significantly, moreover, should Delta and United come to the bargaining table.

In approving the settlements by American and Southwest, the District Court found that “it would be inefficient to distribute and process claims until the entire case has been resolved.”

“The court is waiting to determine whether there are additional settlements or there is a judgment in this case,” Jeannine Kenney, an attorney for members of the class who are happy with the settlement, told the D.C. Circuit on Wednesday, “at which point it will be the appropriate time to distribute the settlement funds.” 

Kenney, who is with the Philadelphia firm Hausfeld, wants the court to throw out objections from two members of the class, Theodore Frank and Frank Bednarz, who take issue with the lack of clarity in the settlement agreement about how class members will be compensated.

Represented by the Center for Class Action Fairness, Frank and Bednarz say it would be unfair if the case is 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. 

“Some of the biggest abuses in cy pres settlements is that funds go to organizations that the defendant is already donating to, or an organization where they are sitting on the board of directors,” Anna St. John, counsel for Frank and Bednarz, said during oral arguments Wednesday.

St. John says an amendment to class action rules ensures this cannot happen by requiring a proposed plan of allocation. The argument held little sway, however, for the three-judge appellate panel.

“But didn’t the court say if there’s going to be a cy pres award, there would be additional notice?” asked U.S. Circuit Judge David Tatel, a Clinton appointee. “So doesn’t that protect you?” 

U.S. Circuit Judge Justin R. Walker also jumped in. “Why can’t you just object to a cy pres order when there is a cy pres order?” the Trump appointee asked. 

St. John said the notice doesn’t guarantee a right to opt out of the settlement or a right to object, and even if the class member could object, that doesn’t mean the court is going to agree with the objection.

“They still may be stuck having their money going to causes they don’t want their money going to,” St. John said. 

St. John asked the court to either allow class members to appeal later or hold that the settlement was in error because there wasn’t a proposed plan of allocation. 

Kenney meanwhile emphasized that her clients are not looking for a cy pres settlement either. 

“We’ve made it very clear to the court that we don’t expect a cy pres distribution here, but we can’t with 100% certainty rule it out,” Kenney told judges. “We’ve told the class that they will have the opportunity to object at the appropriate time.” 

Judge Tatel appeared to share similar views.

“I mean this may never happen,” Tatel said. “It’s conceivable that there may never be a cy pres award.”

For their part, American and South deny any wrongdoing. They say they settled to avoid the burden and cost of the litigation. 

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