DPWN Holdings (USA), Inc. v. United Air Lines, Inc.

246 F.Supp.3d 680

DPWN HOLDINGS (USA), INC., Plaintiff,

v.UNITED AIR LINES, INC. d/b/a United Airlines; United Continental Holdings, Inc. f/k/a UAL Corp, Defendants.

11 Civ. 0564 (BMC) (PK)

United States District Court, E.D. New York.

Signed March 30, 2017

Antony P. Kim, Garrett G. Rasmussen, Jonathan A. Direnfeld, Robert M. Loeb, Orrick, Herrington & Sutcliffe LLP, Washington, DC, Rachel Wainer–Apter, Orrick Herrington & Sutcliffe, New York, NY, J. Peter Coll, Jr., New York, NY, for Plaintiff.

John Roberti, Providence E. Napoleon, Allen & Overy LLP, Washington, DC, Charles Rothfeld, Michael Kimberly, Reginald Goeke, Richard J. Favretto, Mayer Browne LLP, Washington, DC, M. Elaine Johnston, Allen & Overy LLP, New York, NY, for Defendants.

MEMORANDUM DECISION AND ORDER

COGAN, District Judge.

Before the Court is a motion for partial summary judgment by defendant United Airlines, Inc. ("United"), seeking dismissal of most of the antitrust claim that plaintiff DPWN Holdings (USA), Inc. ("DHL") has brought against it, on the basis that the challenged portion of the claim was discharged upon confirmation of United's Chapter 11 plan of reorganization.¹ For the reasons discussed below, United's motion for partial summary judgment is granted.

BACKGROUND

The following undisputed facts are taken from the parties' Local Rule 56.1 Statements.

I. United's Bankruptcy

On December 9, 2002, United filed its petition for relief under Chapter 11 of the Bankruptcy Code in the Northern District of Illinois. After filing its petition, United identified and sent notices and claim forms to more than 300,000 potential creditors. The bar date for the submission of pre-petition proofs of claim was May 12, 2003 (the "Pre–Petition Claim Bar Date"). United received more than 44,000 proofs of claim against its estate. United scheduled DHL as a disputed unsecured creditor because, at the time, DHL was holding more than twenty disputed claims, including claims related to two pending environmental lawsuits (the "Disputed Claims"). DHL received actual notice of United's bankruptcy filing, and the notice identified the relevant deadlines.² Sixteen separate DHL entities filed proofs of claim by the Pre–Petition Claim Bar Date. Among the dates also provided in the notice was March 3, 2006, the bar date for filing "administrative claims" (the "Administrative Bar Date").

On January 20, 2006 (the "Confirmation Date"), the Bankruptcy Court confirmed United's reorganization plan by means of a Confirmation Order, which became effective February 1, 2006 (the "Effective Date"). The reorganization plan discharged all "Claims and Causes of Action of any nature whatsoever, ... whether known or unknown," including all "Causes of Action that arose before the Confirmation Date." The Bankruptcy Court continued to adjudicate disputed claims for several years until United's bankruptcy ultimately closed on December 8, 2009.

II. The Alleged Anticompetitive Conduct

The International Air Transport Association ("IATA") is an organization of air carriers whose goal is "to represent, lead and serve the airline industry." Mission & Vision, IATA, http://www.iata.org/about/Pages/mission.aspx (last visited Mar. 30, 2017). IATA presently has 265 airline members in 117 countries. United was a member throughout the relevant period and continues to be a member. Two DHL affiliates, DHL Air and DHL Aviation, were also members of IATA during the relevant period. IATA permits any active member to participate in the IATA Tariff Coordinating Conference, which negotiates cargo rates and fares for freight shipping.

In August 1997, IATA members, as part of the Tariff Coordinating Conference, adopted Resolution 116ss. This resolution allowed carriers to impose a fuel surcharge that varied depending on the changes in the price of fuel. In January 2000, IATA publicly filed Resolution 116ss as a fuel surcharge index proposal with the U.S. Department of Transportation ("DOT"). Resolution 116ss provided that it would not go into effect without an affirmative grant of antitrust immunity from DOT. In March 2000, DOT publicly rejected Resolution 116ss. Nonetheless, at least as early as February 2000, several of the air carriers, United included, implemented fuel surcharges. Moreover, several air carriers, United included, published their own fuel surcharge indices, some pegged to IATA's Resolution 116ss.

DHL was aware that several air carriers had implemented Resolution 116ss despite DOT's rejection. This knowledge is reflected in several emails. In one email, dated October 25, 2001, DHL recognized that "[i]t also appears that [Air Canada] use[s] the IATA index." Another email, dated November 28, 2001, shows that a DHL predecessor company, Exel plc,³ had written almost identical letters to dozens of air carriers, including United, asking the carriers to lower their fuel surcharges because "the IATA index being followed by most carriers" warranted a reduction in the fuel surcharge. In another email a few months later in January 2002, Exel wrote to United, urging United to reduce its fuel surcharge because it felt United's surcharge was higher than market levels, explaining: "With 0,17/kg [sic] already being out of market, several airlines are now taking steps to remove the FSC [fuel surcharge] 100%, especially those following the historic IATA index."

Other carriers were also aware of air carrier reliance on IATA's Resolution 116ss and notified DHL of that fact. For example, in January 2003, airfreight carrier VARIG LOG, in explaining its own fuel surcharge increase, informed DHL: "We must point out that most carriers have been collecting this surcharge abroad since February 2000 according to IATA (International Air Transport Association) 116ss resolution." And in June 2004, Saudi Arabian Airlines sent DHL its announcement of a fuel surcharge increase, explaining that "the surcharge is based on IATA fuel price index guidelines."

United imposed its first fuel surcharge on February 15, 2000, two weeks after other major carriers had done so and before DOT's rejection of Resolution 116ss. United published its own index in 2002. From approximately February 2000 through at least the end of 2005, United and several carriers, acting within relatively short time frames of each other, effected fuel surcharge changes. The Court need not recount every fuel surcharge change, but, as an example, from approximately October 2004 to November 2005, United announced nine surcharge changes, which are illustrative of the timing and amount of the surcharge movements that occurred. For each of those nine changes, United changed surcharges (1) +$.05 along with 24 carriers, all occurring within a 19–day period; (2) +$.05 along with 9 carriers, all occurring within a 16–day period; (3) -$.05 along with 16 carriers, all occurring within a 12–day period; (4) +$.05 along with 26 carriers, all occurring within a 16–day period; (5) +$.05 along with 41 carriers, all occurring within a 15–day period; (6) +$.05 along with 17 carriers, all occurring within an 11–day period; (7) +$.05 along with 26 carriers, all occurring within a 10–day period; (8) +$.05 along with 19 carriers, all occurring within a 9–day period; and (9) -$.05 along with 45 carriers, all occurring within a 13–day period.

These surcharge changes did not go unnoticed, either within DHL or by DHL's customers. First, starting in 2000, DHL tracked the surcharge level changes and dates of implementation, maintaining them on an internal report. DHL regularly distributed summaries of these internal reports. These internal reports showed, among other things, the information recounted in the previous paragraph, as well as the surcharge changes for other time periods.

Second, DHL's customers believed the surcharges to be suspicious. In addition to demanding that DHL obtain information regarding the basis for the surcharge changes and "the math on how they arrive at the actual rate per kilo,"⁴ customers also complained about alleged cartel activity by the air carriers. As early as 2002, some customers were complaining. For example, in April 2002, 3M asked DHL, "Have the airlines decided on some kind of trigger point for re-introducing Fuel Surcharges? They appear to be working as a cartel as they can't all have had the same idea at the same time." In May 2005, Xerox complained to DHL "that the airlines are acting as a cartel and there is a lack of transparency about the [fuel surcharges]." In August 2005, Nokia told DHL, "I find the [fuel surcharge] mechanism as a cartel within the industry, which cannot be acceptable anymore." One DHL employee testified in his deposition that NCR also complained to DHL because "they felt there was cartel activity." Another DHL employee, testifying as DHL's Rule 30(b)(6) witness, stated that he recalled GlaxoSmithKline had sent an email to DHL stating in sum and substance that the air carriers were acting in collusion.

In response to these complaints, DHL executives admitted to being suspicious and inquiring about carrier conduct. One DHL executive testified, "It made me suspicious in the fact that ... [w]hat I didn't understand is ‘Are you, in fact, covering your cost, or are you making money?’ ... But there was never anything that they could show me or willing [sic] to show me that ‘This is what our cost is and this is why we're doing this.’ " Another DHL executive testified he was suspicious of the parallel increases: "[I]t raised a suspicion, yes, and I—I accused the airline of ... following suit, you know, somebody signals that they're increasing, and—and they followed to the same level."

III. The Law Enforcement Raids

In the early hours of February 14, 2006, authorities in Europe, with support from the U.S. Department of Justice ("DOJ") and other government bodies from Europe and Asia, conducted raids, or "surprise inspections," on numerous air cargo offices, including one of United's offices in Europe (the "Dawn Raids"). The Dawn Raids were part of an...