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LaFlamme v. France

April 5, 2010


The opinion of the court was delivered by: Matsumoto, United States District Judge


In their Second Amended Complaint ("Complaint"), plaintiffs Eugene M. LaFlamme and World Wide Tours of Mission Valley, Inc. (collectively, "plaintiffs"), individually and on behalf of all others similarly situated, allege that Société Air France ("Air France"), Koninklijke Luchtvaart Maatschappij N.V. ("KLM"), Deutsche Lufthansa AG ("Lufthansa"), and United Air Lines, Inc. ("United"), all international air carriers (collectively, "defendants"),*fn1 of conspiring to fix prices for air passenger fares and passenger fuel surcharges*fn2 on transatlantic flights between the United States, Germany, and various other transatlantic destinations within the European Union, during the period between August 2004 and June 2006 in violation of the Sherman Antitrust Act ("Sherman Act"), 15 U.S.C. § 1 ("Section 1"). Through their Complaint, plaintiffs plead a single count of Sherman Act Section 1 liability against all defendants and claim that because of defendants' unlawful conduct, plaintiffs and other members of a putative class paid artificially inflated fares and surcharges for transatlantic flights and are therefore entitled to, inter alia, injunctive relief and treble damages. All defendants move to dismiss the Complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) ("Rule 12(b)(6)"), and alternatively to dismiss certain claims for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1) ("Rule 12(b)(1)").*fn3 Additionally, United moves separately to dismiss the claims against it on the grounds that the Complaint asserts a claim that was discharged by United's 2006 emergence from bankruptcy.*fn4

For the reasons that follow, defendants' Rule 12(b)(6) motions are granted and this case is dismissed because plaintiffs' Complaint fails to state a claim. The court thus finds it unnecessary to address either defendants' alternative motion to dismiss under Rule 12(b)(1) or United's alternative motion to dismiss based on its bankruptcy.


A court considering a motion to dismiss pursuant to Rule 12(b)(6) must accept all factual allegations of a complaint as true, but need not give any effect to legal conclusions couched as factual allegations. Starr v. Sony BMG Music Entm't, 592 F.3d 314, 321 (2d Cir. 2010). The well-pleaded factual allegations of the Complaint are as follows.

According to the Complaint, plaintiffs represent a putative class numbering "at least in the hundreds-of-thousands," consisting of "all persons and entities . . . who purchased [p]assenger [a]ir [t]ransportation and paid passenger surcharges that included at least one direct flight segment between the United States, Germany, and other transatlantic European Union destinations directly from Defendants" in the period between August 2004 and June 2006 (the "class period"). (Compl. ¶¶ 23, 24.) Both named plaintiffs, Eugene M. LaFlamme, a Wisconsin resident, and World Wide Tours of Mission Valley, Inc., a travel agency incorporated and doing business in California, claim to have purchased air passenger fares directly from one or more defendants and paid the related surcharges on airfare between the United States and certain transatlantic destinations during the class period. (Id. ¶¶ 10-11.)

Defendants are international airline carriers. (Id. ¶¶ 12-16.) Each defendant is also a member of the International Air Transport Association ("IATA"), a trade organization that includes most of the world's international airlines and which was "established to enable members to discuss and agree upon international rates and fares for scheduled cargo and passenger transportation services." (See id. ¶ 32; see also Scoville Decl. Ex. 8 (DOT Order 2006-7-3) at 1, 3.)*fn5 Defendants are also each members of various Global Alliances with other domestic and foreign airlines. (Compl. ¶¶ 42-48.)

A. Immunized IATA and Global Alliance Activity

As part of its mission to coordinate international airline service, the IATA conducts tariff conferences where competing airline members discuss the passenger fares and surcharges they wish to charge for international markets and establish proposed fares and rates by passing resolutions. (Compl. ¶¶ 32-34; Scoville Decl. Ex. 8 at 1, 3.) During the putative class period, IATA and its member airlines received limited U.S. antitrust immunity from the United States Department of Transportation ("DOT") to conduct tariff conferences. (Compl. ¶¶ 33, 37, 43; Scoville. Decl. Ex. 8 at 1.) The various Global Alliances to which defendants belong also received limited antitrust immunity from DOT. (Compl. ¶¶ 42-48.) The limited immunity for both IATA tariff conferences and the airlines' Global Alliances applied under certain conditions. (See id. ¶¶ 33, 37, 44.)

Among other things, in order to maintain the tariff conference antitrust immunity, the IATA or the member airlines were required to submit all tariff conference resolutions and other agreements to DOT for approval and to withhold implementation of any such resolution or agreement until DOT approval was granted. (Id. ¶ 37; Scoville Decl. Ex. 8 at 15.) However, by order dated March 30, 2007 and effective June 30, 2007, DOT prospectively terminated this limited antitrust immunity for fare coordination on transatlantic routes without altering the immunity existing prior to the effective date. (See Harlow Decl. Ex. B (DOT Order 2007-3-23) at 2-3; see also Compl. ¶ 44 (citing DOT Order 2007-3-23).) Additionally, to preserve both IATA and Global Alliance antitrust immunity, the airline carriers were required to refrain from participating in IATA tariff conference discussions involving routes between the United States and the home countries of their Global Alliance partner airlines. (Compl. ¶¶ 33, 43-44.)

B. Alleged Agreement Regarding Resolution 001w and Surcharge Adjustments

Plaintiffs allege that defendants and others unlawfully conspired in July 2003 to fix fuel surcharges on transatlantic air passenger flights by agreeing, without DOT approval, to implement an IATA resolution known as "Resolution 001w."*fn6 (Id. ¶¶ 70, 88.) According to the Complaint, Resolution 001w was introduced in July 2003 at an IATA tariff conference in Geneva, Switzerland ("July 2003 IATA Tariff Conference"), and had an intended effective date of April 2004. (Compl. ¶¶ 58, 62, 63.) Resolution 001w proposed an air passenger surcharge facility that would include "fuel insurance and security applied by components to be prorated by all participating air carriers." (Id. ¶¶ 58, 60, 62.)

According to its publicly filed DOT Application, Resolution 001w was designed not as a "limitation" on airlines, but as a means to facilitate "the application of interline fares worldwide [by] applying surcharges that have been adopted by individual airlines." (See Harlow Decl. Ex. E (2003 IATA Application, Docket OST-2003-_) ("DOT Resolution 001w Application").) Specifically, the terms of Resolution 001w: (i) proposed a procedure by which carriers could make a filing with IATA to change existing surcharges or introduce new surcharges; (ii) identified the required contents for such a proposed filing; (iii) permitted proposed surcharges in the form of "a percentage of the fare, tiered, capped or flat rate"; and (iv) placed the onus on the filing carrier to obtain any necessary government approvals. (See id.)

At the July 2003 IATA Tariff Conference, Resolution 001w was adopted by the IATA pending government approvals and later submitted to DOT for approval of antitrust immunity. (Id. ¶¶ 58, 62, 67; see also DOT Resolution 001w Application.) Defendants Air France, KLM and Lufthansa voted in principle to support Resolution 001w. (Compl. ¶ 64.) United expressed opposition to Resolution 001w on grounds that it was concerned the resolution would not be able to obtain DOT approval and would not fulfill carrier needs, but it ultimately indicated that it would abstain from voting on the Resolution. (Id. ¶ 65.) The request for DOT approval of Resolution 001w was withdrawn in 2007 prior to any DOT determination on the issue. (Id. ¶¶ 67-71.)

The Complaint alleges that despite the lack of DOT approval, "[i]t appears that Defendants and others decided to adopt the terms of Resolution 001w during May and August 2004."*fn7

(Id. ¶ 70.) The Complaint does not contain any specific allegations about which defendants or which other parties "decided" to adopt the terms of Resolution 001w absent DOT approval, or when, where, how, or whether this decision was collectively agreed to.*fn8 (See id.)

The Complaint then alleges that IATA convened another tariff conference on May 28, 2004 ("May 2004 IATA Tariff Conference"), and at that meeting "additional proposals to adopt coordinate and/or adjust air passenger surcharges on a worldwide basis . . . were discussed." (Id. ¶ 75.) According to the Complaint, during that discussion various IATA members, including defendants Lufthansa and United, asserted conflicting views regarding the amounts and methods of deriving proposed air passenger surcharges. (Id.) Although illustrating the disagreement between the various IATA members about possible passenger fuel surcharge adjustments, the Complaint does not allege that the IATA members or defendants reached any agreement on the issue at the May 28, 2004 tariff conference.*fn9 (Id.)

The Complaint later refers to the defendants' implementation of "planned" adjustments to transatlantic passenger surcharges without identifying when, where, and by whom such adjustments were "planned." (Id. ¶ 80.) Presumably, the Complaint intends to imply that the adjustments were "planned" at the May 2004 IATA Tariff Conference. (See id.; see also Pls. Mem. at 7-8.)

Finally, the Complaint alleges that "[c]ertain IATA carrier members also appear to have agreed to cancel passenger surcharges if the market price for oil dropped below a collar for a fixed amount of time." (Compl. ¶ 81.)

C. Subsequent Alleged Parallel Conduct and Alleged Further Discussion

The Complaint alleges that despite the absence of DOT approval for Resolution 001w, in May 2004, shortly after the Resolution's proposed effective date, Air France, KLM, United, and other non-parties began to implement fuel surcharges or surcharge adjustments. (Id. ¶ 73.) Specifically, the Complaint alleges that on May 16, 2004, Air France implemented a surcharge of 3 Euros ($3.56); and on May 18, 2004, KLM implemented a surcharge of 5 Euros ($6.01); while on May 27, 2004, United increased its existing surcharge by upwards of $10 U.S. (Id.; see also Defs. Mem. at 5.)*fn10 The Complaint also alleges that sometime after May 28, 2004, American and other members of the OneWorld Alliance re-introduced passenger fuel surcharges in unspecified amounts. (Compl. ¶ 77.)

Additionally, the Complaint alleges that non-parties British Airways and Virgin Atlantic, as well as certain defendants made "planned adjustments" to transatlantic passenger surcharges in August and September 2004. (See id. ¶ 80.) Specifically, the Complaint alleges that in August and September 2004, defendants and other non-parties such as TAP Air, Czech Air CSA, and Olympic Air adopted or adjusted passenger surcharges in varying amounts ranging from 5 to 15 Euros ($6.09 to $18.21 USD).*fn11 (Id. ¶¶ 73, 80; see also Defs. Mem. at 5.)

Additionally, the Complaint alleges that other co-conspirators, who are not parties to this action, also implemented surcharges and adjustments of varying amounts during the period between May 13 and September 4, 2004. (Compl. ¶¶ 73, 80.) The Complaint contains no allegations that defendants or others implemented any fuel surcharge facility or that the surcharges imposed by defendants adhered to any sort of fuel index.*fn12 (See generally Compl.)

The Complaint alleges that in May 2004, a single airline, United, implemented fare increases for long-haul passenger fares and blamed higher jet fuel costs for the increases. (Id. ¶ 74.) Additionally, citing media reports dated June 7, 2004, the Complaint alleges that following the May 28, 2004 IATA tariff conference Lufthansa announced a 3% upward adjustment of fares as of July 1, 2004 along with two other unidentified airlines announcing adjustments between 3-7%. (Id. ¶ 77.)

Finally, the Complaint alleges that defendants Air France, KLM and Lufthansa reduced their passenger surcharges in unspecified amounts during the fourth quarter of 2006 when fuel prices had fallen for thirty ...

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