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

• Citation: 747 F.3d 145
• Decision Date: 27 March 2014
• Docket Number: Docket No. 12–4867–cv.
• Parties: DPWN HOLDINGS (USA), INCORPORATED, Plaintiff–Counter–Defendant–Appellee, v. UNITED AIR LINES, INC., dba United Airlines, United Continental Holdings, Incorporated, fka UAL Corporation, Defendants–Counter–Claimants–Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

747 F.3d 145

DPWN HOLDINGS (USA), INCORPORATED, Plaintiff–Counter–Defendant–Appellee,

v.UNITED AIR LINES, INC., dba United Airlines, United Continental Holdings, Incorporated, fka UAL Corporation, Defendants–Counter–Claimants–Appellants.

Docket No. 12–4867–cv.

United States Court of Appeals,Second Circuit.

Heard: Sept. 30, 2013.

Decided: March 27, 2014.

Charles A. Rothfeld, Mayer Brown, LLP, Washington, DC (Richard J. Favretto, John Roberti, Michael B. Kimberly, Mayer Brown LLP, Washington, DC, on the brief), for Appellants.

J. Peter Coll, Jr., Orrick, Herrington & Sutcliffe LLP, New York, N.Y. (Garret G. Rasmussen, Robert M. Loeb, Rachel Wainer Apter, Antony P. Kim, Ryan K. Quillian, Orrick, Herrington & Sutcliffe LLP, Washington, DC, on the brief), for Appellee.

Before: NEWMAN, POOLER, and LIVINGSTON, Circuit Judges.

JON O. NEWMAN, Circuit Judge.

The issue on this interlocutory appeal from an order denying a motion to dismiss an antitrust price-fixing claim is whether the plaintiff had sufficient notice of the availability of the claim against a Chapter 11 debtor to satisfy due process requirements and render the claim discharged. This issue arises on an appeal by Defendants–Appellants United Air Lines, Inc., DBA United Airlines, and United Continental Holdings, Inc., FKA UAL Corp. (collectively “United”), from the May 18, 2012, order of the United States District Court for the Eastern District of New York (John Gleeson, District Judge), denying United's motion to dismiss an antitrust complaint brought against it by Plaintiff–Appellee DPWN Holdings (“DHL”). See DPWN Holdings (USA), Inc. v. United Air Lines, Inc. (“ Dist.Ct.Op.”), 871 F.Supp.2d 143 (E.D.N.Y.2012).

We conclude that, in the circumstances of this case, the District Court applied an incorrect standard in accepting as true DHL's allegation that it was not aware of, or with due diligence could not have become aware of, sufficient facts to plead an antitrust claim that would survive a motion to dismiss in the context of a bankruptcy proceeding. We therefore remand for further development of the facts concerning (a) what DHL knew or reasonably should have known in time to present an antitrust claim in the bankruptcy proceeding, or to file a late proof of claim or move to amend the reorganization plan and (b) what United knew or reasonably should have known concerning DHL's claim.

Background

Facts concerning the alleged price-fixing conspiracy. Because this appeal is from the denial of a motion to dismiss, the facts regarding United's alleged involvement in the price-fixing conspiracy are taken from DHL's complaint and are assumed to be true. See Bryant v. N.Y. State Education Department, 692 F.3d 202, 210 (2d Cir.2012). United was a member of the International Air Transport Association (“IATA”) at all times relevant to this appeal. IATA enjoyed limited antitrust immunity in the European Union through a “block exemption.” In 1993, the European Union's Directorate General for Competition (“DGC”) sent a letter to an official at IATA specifying that the block exemption did not cover the coordinated implementation of surcharges. This letter was shared with IATA members. The United States Department of Transportation (“DOT”) communicated a similar conclusion to IATA. Nevertheless, in 1993 IATA adopted a surcharge “upon the pretext of recouping increased costs.” As a result, the DGC withdrew IATA's block exemption and subsequently denied an application for an individual exemption for the surcharge.

On August 9, 1996, United and two other airlines, Lufthansa and Scandinavian Airlines (“SAS”) entered into an agreement to provide “globally integrated air transportation services in competition with other carriers and carrier alliances while remaining independent companies.” On November 1, 1996, DOT issued an order permitting the alliance and providing it limited antitrust immunity. However, the agreement prohibited the airlines from “exchang[ing] information, discuss[ing], agree [ing] upon, or coordinat[ing] ... on any subject or in any manner that would cause any Party to contravene (i) any law....”

In early 1997, members of IATA considered joint strategies to manage increases in the price of aviation fuel, including implementing fuel surcharges. At that time, members of IATA considered the antitrust risks of coordinated surcharging. Minutes from an IATA conference on the topic, quoting Andrew Charlton, director of the IATA legal department, stated:

Antitrust laws prohibit competitors reaching any form of agreement, understandingor arrangement which is likely to have an impact on price.... [A] relevant exception is where immunity has been granted by the relevant authority for rates reached pursuant to a particular procedure and within the strict confines of the terms of the approval itself.

...

Without any immunity, authorities regard with great suspicion any situation where competitors charge the same rate. In the event that there is any evidence whatsoever that competitors have had an opportunity to communicate in any way, and charge the same rate, there is a very strong assumption that they do so having colluded.

Until the particular approval is granted for any rate agreed at this conference, that situation would apply. In other words, in my opinion, any airline which moves to charge the rate which is agreed at this conference before government approval, and therefore antitrust immunity, is obtained, would face a very strong evidential presumption that the rate being charged had been agreed between competitors and without antitrust immunity.

On August 7, 1997, IATA approved Resolution 116ss, under which member airlines would introduce a fuel surcharge tied to changes in the spot price of aviation fuel as tracked by the IATA Fuel Price Index (“FPI”). IATA officials were later advised that DOT refused to give approval to the resolution, which would confer antitrust immunity, “unless accompanied by economic justification based on current prices,” which the airlines were unable to provide. As a result, IATA's Board of Governors declined to make the resolution effective.

In late 1999 to early 2000, for the first time since approval of Resolution 116ss, fuel spot prices increased enough to trigger a fuel surcharge. On January 28, 2000, IATA submitted Resolution 116ss for approval by DOT, hoping to secure antitrust immunity and put the resolution into effect. United informed its competitors that it planned to impose a fuel surcharge effective February 1, 2000. Then, before receiving a response from DOT, United and a number of other airlines started charging DHL and other customers a fuel surcharge “pursuant to the terms of Resolution 116ss.”

On March 14, 2000, DOT rejected the airlines' application for approval, stating, “The uniform, industry-wide index mechanism proposed here appears fundamentally flawed and unfair to shippers and other users of cargo air transportation.” On March 21, 2000, IATA members circulated a statement advising its airlines that implementing surcharges pursuant to the resolution might be illegal price-fixing. The statement advised:

If [members] were to coordinate pricing by reference to the Index, whether pursuant to this disapproved Resolution or simply through de facto parallel pricing actions, that could be regarded as an illegal conspiracy in violation of applicable Competition laws.... Because any further pricing actions linked to the now tainted Index could expose the carriers engaging in such pricing actions to serious antitrust liability, we must advise that carriers not engage in any pricing actions tied to the Index.

IATA also announced that it would stop publishing the FPI, because “The Index has now become tainted by the DOT order finding Resolution 116ss, to which the Index was linked, to be adverse to the public interest and in violation of law.”

DHL alleges that after the DOT's rejection of Resolution 116ss, United and other airlines continued charging fuel surcharges “as if Resolution 116ss had been approved.”For example, DHL alleges that in late 2000, United “and other cartel members—in a coordinated, largely parallel fashion—increased the Fuel Surcharge to DHL ... in accordance with Resolution 116ss.”

Over the next few years, the airlines strayed from the methodology set forth in Resolution 116ss. Despite these deviations, United and the other airlines continued to fix fuel charges in the same anticompetitive and illegal manner. For example, in late 2001, the airlines recalibrated the fuel surcharge formula in a coordinated manner. DHL's complaint alleges that the airlines did so “to preserve the supracompetitive profits generated by the Fuel Surcharge” despite lower fuel prices. Then, in July 2002, United began using its own “Jet Fuel Index.” DHL's complaint alleges that this index was “a façade to help [United] maintain the appearance of acting unilaterally.” DHL alleges many other actions in furtherance of a conspiracy to fix fuel surcharges until at least mid-October 2006.

The Chapter 11 proceeding. On December 9, 2002, United filed a petition for relief under Chapter 11 of the Bankruptcy Code. As part of its claims notification procedures, United identified DHL as a potential creditor holding more than twenty disputed claims. An antitrust price-fixing claim was not mentioned. DHL received actual notice of United's bankruptcy and all relevant deadlines.

On January 20, 2006, the bankruptcy court confirmed United's reorganization plan, which became effective on February 1, 2006. Pursuant to 11 U.S.C. § 1141(d), the plan provided for a blanket discharge of all claims and causes of action, “known or unknown,” “of any nature whatsoever” against United “that arose before the Confirmation Date.” Also on February 1, distribution of shares of stock in the reorganized United began and was 80 percent complete by March 21, 2006.

On December 8, 2009, a final decree was entered in United's bankruptcy. All...