No. 17-11733-E IN THE UNITED STATES COURT OF...

No. 17-11733-E

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT _____________________________

AVERY INSURANCE GROUP, INC., ET AL.,

Plaintiffs-Appellants-Cross Appellees,

v.

DELTA AIR LINES, INC., ET AL., Defendants-Appellees-Cross Appellants.

_____________________________

Appeal from the United States District Court for the Northern District of Georgia, Atlanta Division, Civil Action No. 1:09-MD-2089-TCB

_____________________________

BRIEF OF PLAINTIFFS-APPELLANTS _____________________________

Daniel A. Kotchen Kevin K. Russell Daniel L. Low Eric Citron KOTCHEN & LOW LLP GOLDSTEIN & RUSSELL, P.C. 1745 Kalorama Rd. NW 7475 Wisconsin Ave. Suite 101 Suite 850 Washington, DC 20009 Bethesda, MD 20814 (202) 471-1995 (202) 362-0636 R. Bryant McCulley Robert S. Wood MCCULLEY MCCLUER PLLC RICHARDSON, PATRICK, WESTBROOK 1022 Carolina Blvd. & BRICKMAN, LLC Suite 300 1037 Chuck Dawley Blvd., Bldg. A Isle of Palms, SC 29451 Mt. Pleasant, SC 29464 (205) 238-6757 (843) 727-6500

Counsel for Plaintiffs-Appellants

Case: 17-11733 Date Filed: 09/01/2017 Page: 1 of 79

No. 17-11733-E, Avery Insurance Group, Inc. v. Delta Air Lines, Inc.

C-1 of 5

CERTIFICATE OF INTERESTED PERSONS

Pursuant to Federal Rule of Appellate Procedure 26.1 and Eleventh Circuit

Rule 26.1, Appellees Avery Insurance Group, Inc., et al., provide the following

Certificate of Interested Persons and Corporate Disclosure Statement:

Abraham Fruchter & Twersky LLP (Counsel for Plaintiff Martin Siegel)

Abraham, Jeffrey (Counsel for Plaintiff Martin Siegel)

AirTran Airways, Inc. (Defendant)

Allen, Randall (Counsel for Defendant Delta Air Lines, Inc.)

Alston & Bird LLP (Counsel for Defendant Delta Air Lines, Inc.)

Arenson, Gregory (Counsel for Plaintiff Martin Siegel)

Atkins, Alden (Counsel for AirTran Airways, Inc.)

Avery Insurance Group, Inc. (Plaintiff)

Bain, David (Counsel for Plaintiff Carla Dahl)

Batten, Hon. Timothy C. (District Court Judge)

Berger & Montague, P.C. (Counsel for Plaintiffs)

Blanchfield, Garret (Counsel for Plaintiff Carla Dahl)

Boies, Schiller & Flexner LLP (Counsel for Defendant Delta Air Lines, Inc.)

Brualdi Law Firm (Counsel for Plaintiff Stephen Powell)

Brualdi, Richard (Counsel for Plaintiff Stephen Powell)

Chitwood Harley Harnes LLP (Counsel for Plaintiff Martin Siegel)



C-2 of 5

Chitwood, Martin (Counsel for Plaintiff Martin Siegel)

Citron, Eric (Counsel for Plaintiffs)

Conley, Cale (Counsel for Plaintiffs)

Conley, Griggs & Partin LLP (Counsel for Plaintiffs)

Cramer, Eric (Counsel for Plaintiffs)

Dahl, Carla (Plaintiff)

Delta Air Lines, Inc. (ticker symbol: DAL)

Denvir, James (Counsel for Defendant Delta Air Lines, Inc.)

Flint, David (Counsel for Plaintiffs)

Fones, Roger (Counsel for AirTran Airways, Inc.)

Gale, Laura (Plaintiff)

Gant, Scott (Counsel for Defendant Delta Air Lines, Inc.)

Goldman, Mark (Counsel for Plaintiff Laura Gale)

Goldman Scarlato & Penny, P.C. (Counsel for Plaintiff Laura Gale)

Goldstein & Russell, P.C. (Counsel for Plaintiffs)

Griggs, Richard (Counsel for Plaintiffs)

Gustafson, Daniel (Counsel for Plaintiff Carla Dahl)

Gustafson Gluek PLLC (Counsel for Plaintiff Carla Dahl)

Harley, Craig (Counsel for Plaintiff Martin Siegel)

Hedlund, Daniel (Counsel for Plaintiff Carla Dahl)



C-3 of 5

Jachimowicz, Henryk (Plaintiff)

Kaplan Fox & Kilsheimer LLP (Counsel for Plaintiff Martin Siegel)

Kaplan, Robert (Counsel for Plaintiff Martin Siegel)

Kitchenoff, Robert (Counsel for Plaintiff Henryk Jachimowicz)

Kotchen, Dan (Counsel for Plaintiffs)

Kotchen & Low LLP (Counsel for Plaintiffs)

Lavoie, Andrew (Counsel for Plaintiffs)

Law Office of Jeremy Spiegel (Counsel for Plaintiff Henryk Jachimowicz)

Low, Daniel (Counsel for Plaintiffs)

McCluer, Stuart (Counsel for Plaintiffs)

McCulley McCluer PLLC (Counsel for Plaintiffs)

McCulley, R. Bryant (Counsel for Plaintiffs)

Mitchell, Michael (Counsel for Defendant Delta Air Lines, Inc.)

Morrison & Foerster LLP (Counsel for AirTran Airways, Inc.)

Penney, Brant (Counsel for Plaintiff Carla Dahl)

Powell, Stephen (Plaintiff)

PRIMECAP Management Company (asset manager of funds holding

Southwest Airline shares)

PRIMECAP Odyssey Stock Fund (ticker symbol: POSKX)

PRIMECAP Odyssey Growth Fund (ticker symbol: POGRX)



C-4 of 5

PRIMECAP Odyssey Aggressive Growth Fund (ticker symbol: POAGX)

Rein, Bert (Counsel for AirTran Airways, Inc.)

Reinhardt, Mark (Counsel for Plaintiff Carla Dahl)

Reinhardt Wendorf & Blanchfield (Counsel for Plaintiff Carla Dahl)

Richardson, Patrick Westbrook & Brickman LLC

Rhodes, Thomas (Counsel for AirTran Airways, Inc.)

Rowell, Andrew (Counsel for Plaintiffs)

Russell, Kevin (Counsel for Plaintiffs)

Rutherford, Samuel (Counsel for Defendant Delta Air Lines, Inc.)

Sanders, William Parker (Counsel for AirTran Airways, Inc.)

Schreeder Wheeler & Flint, LLP (Counsel for Plaintiffs)

Siegel, Martin (Plaintiff)

Smith, Gambrell & Russell, LLP (Counsel for AirTran Airways, Inc.)

Southwest Airlines Co. (ticker symbol: LUV)

Spiegel, Jeremy (Counsel for Plaintiff Henryk Jachimowicz)

Terry, David (Plaintiff)

van Panhuys, Vincent (Counsel for AirTran Airways, Inc.)

Vinson & Elkins L.L.P. (Counsel for AirTran Airways, Inc.)

Ward, James (Counsel for Plaintiffs)

Weinstein, David (Counsel for Plaintiff Henryk Jachimowicz)



C-5 of 5

Weinstein, Kitchenoff & Asher, LLC (Counsel for Henryk Jachimowicz)

Wendorf, Mark (Counsel for Plaintiff Carla Dahl)

Wiley Rein LLP (Counsel for AirTran Airways, Inc.)

Wood, Robert (Counsel for Plaintiffs)


i

STATEMENT REGARDING ORAL ARGUMENT

Appellants respectfully suggest that oral argument would materially assist the

Court in its determination of the issues in this appeal.


ii

TABLE OF CONTENTS

STATEMENT REGARDING ORAL ARGUMENT ............................................... i

TABLE OF AUTHORITIES ..................................................................................... v

STATEMENT OF SUBJECT-MATTER AND APPELLATE JURISDICTION .... 1

STATEMENT OF THE ISSUE ................................................................................. 1

STATEMENT OF THE CASE .................................................................................. 2

I. Introduction ...................................................................................................... 2

II. Statement Of The Facts ................................................................................... 5

A. In 2008, Delta And AirTran Reached A Competitive Impasse, Each Unwilling To Impose A First Bag Fee Independently. ................ 5

B. Defendants Communicate Through Back Channels And A Public Earnings Call. ...................................................................................... 11

C. Delta Promptly Accepts AirTran’s Invitation To Collude. ................. 16

D. The Department Of Justice Opens An Antitrust Investigation. .......... 19

III. Procedural History ......................................................................................... 20

SUMMARY OF THE ARGUMENT ...................................................................... 22

STANDARD OF REVIEW ..................................................................................... 23

ARGUMENT ........................................................................................................... 23

I. At Summary Judgment, Plaintiffs Need Only Provide Sufficient Evidence To Allow A Reasonable Jury To Find Tacit Acceptance Of An Invitation To Collude. .............................................................................. 24

A. Section 1 Prohibits Tacit Agreements Formed When One Defendant Accepts Another’s Invitation To Collude By Imposing A Fee It Would Not Have Imposed Absent The Invitation. ............................................................................................ 24


iii

B. At Summary Judgment, Plaintiffs Need Only Establish Parallel Conduct Accompanied By Appropriate “Plus Factors” Giving Rise To A Permissible Inference Of Collusion. .................................. 26

II. Plaintiffs Provided Ample Evidence From Which A Jury Could Reasonably Infer A Tacit Agreement To Jointly Impose First Bag Fees. ............................................................................................................... 28

A. Break From Established Competitive Equilibrium In A Manner Inconsistent With Either Airline’s Self-Interest Absent Collusion ............................................................................................. 30

B. Collusive Communications, Including A Public Invitation To Collude ................................................................................................ 33

C. Evidence Invitation To Collude Was Accepted .................................. 38

D. Other Context Strengthening The Inference Of Collusion ................. 41

III. Defendants Failed To Rebut The Inference Of A Price-Fixing Conspiracy. .................................................................................................... 43

A. A Jury Could Easily Reject Defendants’ Claim That The Bag Fee Decision Was Made By Delta CEO Richard Anderson Before AirTran’s Earnings Call. ..................................................................... 43

B. Anderson’s Professed Belief That Imposing A New Fee Would Not Affect Market Share Is Implausible And Contradicted By The Evidence. ...................................................................................... 45

C. Delta’s Claim That It Was Just Following The Industry And Not Worried About AirTran Is Contradicted By The Evidence. ............... 48

D. Defendants’ Key Witnesses Are Not Credible. .................................. 50

IV. The District Court’s Contrary Reasoning Is Unpersuasive. .......................... 53

A. The District Court Erred In Dismissing The Evidence That Defendants Were Acting In Conflict With Their Unilateral Economic Self-Interest. ....................................................................... 54

B. An Invitation To Collude Followed By Parallel Conduct Is A Plus Factor, With No Exception For Public Earnings Calls. .............. 55


iv

C. The Evidence Of Back-Channel Communications Was Sufficient To Permit A Jury To Decide That Defendants Secretly Colluded. ............................................................................................. 59

D. There Was Ample Evidence To Allow A Jury To Conclude Delta Accepted AirTran’s Invitation To Collude. ........................................ 60

E. The Record Must Be Viewed In Light Of Delta’s Failure To Preserve And Turn Over Relevant Evidence. ..................................... 63

CONCLUSION ........................................................................................................ 64


v

TABLE OF AUTHORITIES

Cases

Am. Tobacco Co. v. United States, 328 U.S. 781 (1946) ............................................................................................. 24

Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ............................................................................................. 25

In re Blood Reagents Antitrust Litig., 756 F. Supp. 2d 623 (E.D. Pa. 2010) ................................................................... 42

Bolt v. Halifax Hosp. Med. Ctr., 891 F.2d 810 (11th Cir. 1990) ...................................................................... 33, 38

Brown v. Pro Football, Inc., 518 U.S. 231 (1996) ............................................................................................. 33

City of Tuscaloosa v. Harcros Chems., Inc., 158 F.3d 548 (11th Cir. 1998) ...................................................................... 23, 27

In re Coordinated Pretrial Proceedings in Petro. Prods. Antitrust Litig., 906 F.2d 432 (9th Cir. 1990)................................................................................ 58

DeLong Equip. Co. v. Wash. Mills Abrasive Co., 887 F.2d 1499 (11th Cir. 1989) ........................................................ 26, 27, 42, 62

Esco Corp. v. United States, 340 F.2d 1000 (9th Cir. 1965) ...................................................................... 25, 38

In re Flat Glass Antitrust Litig., 385 F.3d 350 (3d Cir. 2004) .......................................................................... 38, 42

Gainesville Utils. Dep’t v. Fla. Power & Light Co., 573 F.2d 292 (5th Cir. 1978)............................................................. 24, 39, 42, 55

Helicopter Support Sys., Inc. v. Hughes Helicopter, Inc., 818 F.2d 1530 (11th Cir. 1987) ........................................................................... 27

In re High Fructose Corn Syrup Antitrust Litig., 295 F.3d 651 (7th Cir. 2002)................................................................................ 42

Interstate Circuit, Inc. v. United States, 306 U.S. 208 (1939) ................................................................................ 25, 39, 41

Jacobs v. Tempur-Pedic Int’l, Inc., 626 F.3d 1327 (11th Cir. 2010) ........................................................................... 34


vi

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986). ..................................................................................... 27, 33

Moore v. Jas. H. Matthews & Co., 473 F.2d 328 (9th Cir. 1972)......................................................................... 26, 39

Petruzzi’s IGA Supermarkets, Inc. v. Darling-Del. Co., 998 F.2d 1224 (3d Cir. 1993) ........................................................................ 34, 55

In re Publ’n Paper Antitrust Litig., 690 F.3d 51 (2d Cir. 2012) ................................................................................... 42

Todorov v. DCH Healthcare Auth., 921 F.2d 1438 (11th Cir. 1991) .............................................................. 24, 26, 57

United States v. Am. Airlines, Inc., 743 F.2d 1114 (5th Cir. 1984) ............................................................................. 57

United States v. Foley, 598 F.2d 1323 (4th Cir. 1979) ................................................................ 26, 35, 56

Vodusek v. Bayliner Marine Corp., 71 F.3d 148 (4th Cir. 1995).................................................................................. 63

Wilk v. Am. Med. Ass’n, 735 F.2d 217 (7th Cir. 1983)................................................................................ 26

Williamson Oil Co. v. Philip Morris USA, 346 F.3d 1287 (11th Cir. 2003) ................................................................... passim

Statutes

Federal Trade Commission Act, 15 U.S.C. § 41 et seq.

Section 5, 15 U.S.C. § 45 ..................................................................................... 56

Sherman Act, 15 U.S.C. § 1 et seq.

Section 1, 15 U.S.C. § 1 ............................................................................... passim

Section 2, 15 U.S.C. § 2 ....................................................................................... 56

28 U.S.C. § 1291 ........................................................................................................ 1

28 U.S.C. § 1331 ........................................................................................................ 1


vii

Other Authorities

PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW: AN ANALYSIS OF ANTITRUST PRINCIPLES AND THEIR APPLICATION (3d ed. 2010) ................................................................................................ passim

WILLIAM C. HOLMES, 1992 ANTITRUST LAW HANDBOOK ....................................... 34

RESTATEMENT (SECOND) CONTRACTS § 22 cmt. b .................................................. 25


1

STATEMENT OF SUBJECT-MATTER AND APPELLATE JURISDICTION

The district court had subject matter jurisdiction over this federal antitrust

action pursuant to 28 U.S.C. § 1331. On April 13, 2017, Plaintiffs timely appealed

the district court’s March 28, 2017 entry of summary judgment in Defendants’

favor.1 This Court has jurisdiction to review that final judgment pursuant to 28

U.S.C. § 1291.

STATEMENT OF THE ISSUE

Whether the district court erred in granting Defendants summary judgment.

1 R:678, 680. Citations “R:__” are to the district court docket. “PX__” refers

to the exhibits attached to Plaintiffs’ summary judgment pleadings.


2

STATEMENT OF THE CASE

I. Introduction

In the spring and summer of 2008, major airlines began charging customers

for their first checked bag. Defendants Delta Airlines and AirTran, however, found

themselves in a competitive standoff, unique in the industry, that prevented them

from following suit. Each was the other’s principal competitor, particularly in

Atlanta, the most important hub and revenue source for both airlines. AirTran,

which markets itself as a low-cost carrier (LCC), could not plausibly impose such a

fee if Delta, the quintessential legacy carrier from which it sought to distinguish

itself, allowed customers to check a first bag for free. And Delta, which faced far

greater competition from LCCs than other legacy airlines, worried about losing

market share to AirTran if it imposed a first bag fee but AirTran did not.

In the fall of 2008, Delta conducted a study to determine whether imposing a

first bag fee would be profitable on net. The study initially concluded that if Delta

charged a first-checked-bag fee but AirTran didn’t (the “Worst Case” scenario),

Delta could lose $243 million annually. 2 Even assuming a “50% Probability”

AirTran would match, the expected net return was a $46 million loss.3 On the other

2 R:556 at PX213 at 15.

3 Id.


3

hand, if AirTran jointly imposed the fee, the results would be wildly profitable for

both companies, making Delta an estimated $126 million and AirTran $70 million

per year.4

Defendants thus found themselves in a classic prisoner’s dilemma – while

both would be better off if they imposed the fee together, each would be worse off

if it imposed the fee and the other didn’t, with the result that neither imposed the fee.

See R:556-1 at PX398 § II.A (Amended Merits Report of Plaintiffs’ Expert Hal J.

Singer, Ph.D.) (“Singer Report”). Uncertainty about their competitor’s response left

the two airlines in a competitive equilibrium, constrained from imposing higher costs

on consumers by the competition antitrust law aims to preserve. See id.

The impasse was broken through back-channel communications and a public

earnings call in which AirTran assured Delta that if Delta imposed the fee, AirTran

would follow. That promise changed Delta’s cost-benefit analysis, making

imposition of the fee clearly profitable. Days after the earnings call, Delta

announced it was imposing the fee, and a few days after that, AirTran announced it

was adopting the same fee, in the same amount, effective the same date.

4 See id. at 14-15.


4

Plaintiffs filed this class action suit alleging, among other things, a price-

fixing conspiracy in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1.5 On

March 28, 2017, the district court granted Defendants summary judgment,

concluding that there was insufficient evidence to allow a jury to conclude that the

parallel price increases were collusive. R:678 (“Order”).

That holding was in error. There is no question that Defendants would have

violated Section 1 if AirTran’s CEO had called Delta’s CEO and said, “If you impose

a first bag fee, we will follow,” Delta had said, “Agreed,” and then both airlines

imposed identical fees in quick succession. See, e.g., VI PHILLIP E. AREEDA &

HERBERT HOVENKAMP, ANTITRUST LAW: AN ANALYSIS OF ANTITRUST PRINCIPLES

AND THEIR APPLICATION ¶ 1410 (3d ed. 2010) (“AREEDA”). This case is different in

only two material respects: (1) in addition to communicating privately through back

channels, AirTran repeated its offer of collusion publicly, in the course of an

earnings call; and (2) instead of saying “Agreed” then imposing the fee, Delta simply

imposed the fee. But neither feature of the case immunizes Defendants’ conduct.

An agreement to collude is no less an illegal conspiracy when negotiated in the open.

And it is black-letter law that a defendant can agree, as Delta did here, to an

invitation to collude through its conduct. To be sure, Plaintiffs must convince a jury

5 R:53.


5

that Delta adopted the first bag fee in acceptance of the offer, rather than, as

Defendants claim, for unrelated reasons. But Plaintiffs have provided ample

evidence that AirTran’s promise directly led Delta to adopt the fee.

II. Statement Of The Facts

A. In 2008, Delta And AirTran Reached A Competitive Impasse, Each Unwilling To Impose A First Bag Fee Independently.

In 2008, Delta and AirTran each considered the other its principal competitor,

particularly in Atlanta where each held its primary hub. See, e.g., Singer Report

¶¶ 97-105.6 Imposing a first bag fee independently from Delta was untenable for

AirTran, which positioned itself as a low-cost alternative to legacy carriers like

Delta.7 Accordingly, AirTran’s CEO, Robert Fornaro, told investors at a June 2008

conference that AirTran had abstained from imposing a first bag fee because “it

would be ‘pretty uncomfortable’ competing in Atlanta with Delta, which doesn’t

charge the fee.”8 In August, Fornaro reaffirmed internally, “We are not going to do

1st bag unless Delta does.”9

6 See also R:556 at PX195 at 2 (internal Delta analysis noting that “Delta’s

main competitor, AirTran, does not have this [first bag] fee”); R:362 at 45:15-21 (AirTran CEO stating Delta was “our No. 1 competitor.”).

7 R:362 at 44:21-45:14.

8 R:556 at PX50 at AIRTRAN64398.

9 R:556 at PX128.


6

Likewise, Delta abstained from imposing the fee due, in significant part, to its

fear of a backlash from its customers and loss of market share to AirTran. By early

July 2008, every major legacy carrier except Delta, Continental, and Alaska had

adopted a first bag fee.10 This included Northwest, whose acquisition by Delta was

awaiting federal approval.11 Yet, on a July 16, 2008, earnings call, Delta informed

investors that it “had no plans to implement [a first bag fee] at this point.”12 That

announcement was consistent with internal documents reflecting Delta’s repeated

determination through the spring and summer not to follow the emerging industry

trend. See Order at 8-13; see also, e.g., R:556 at PX34 (May 28, 2008, email from

Delta CEO Richard Anderson: “No $15.00 fee. Issue closed.”); R:557 at PX43 (June

13, 2008, email from Chief Operating Officer Steve Gorman on “Bag Fee,” stating

“My recommendation to CLT [the Corporate Leadership Team] is [that] we not take

this action at this time”); R:556 at PX63 (Email reporting that in early July 2008,

Delta President Ed Bastian’s statement on “1st bag fee” was “we’re not doing it. No

way, no how.”).

10 Order 5-6.

11 Order 6 & n.7.

12 Order 10 (citation and internal quotation marks omitted).


7

This wasn’t because Delta didn’t need the money. To the contrary, Delta had

suffered massive losses in the first half of the year due to dramatic increases in fuel

costs, followed by steep declines in consumer demand as the Great Recession began

to take hold.13

Instead, an internal “Value Proposition” study written in September and

October of 2008 shows why Delta held back from charging the first-bag fee: Delta’s

“main competitor, AirTran, [did] not have this fee,” Delta figured it could lose

hundreds of millions of dollars in business to AirTran if Delta imposed the fee but

AirTran did not, and Delta was substantially uncertain about what AirTran would

do.14 The report meticulously documented those conclusions. After noting that “all

legacy carriers except DL [Delta] have a first bag fee in place,”15 the report asked

the obvious question: “Why has Delta waited?”16 It then provided the answer:

“Delta [is] much more exposed to LCCs,” many of which did not have first bag

fees.17 That was “Why Bag Fee Works for Northwest” but was “uncertain for

13 R:366 at 59:17-19, 71:17-72:1; R:556 at PX234 at 19.

14 See, e.g., R:556 at PX195 at 2, PX213 at 15.

15 R:556 at PX234 at 7.

16 Id. at 4.

17 Id.


8

Delta”18 – Delta was the legacy “network with [the] most LCC overlap” while

Northwest was the “least exposed network.”19

The report then recognized that any rational fee decision had to account not

only for the increased potential revenue (estimated at $265 million per year), but

also for its competitive consequences given Delta’s special exposure to LCCs.20 A

prior internal study in September had confirmed what basic economics predicts: that

customers confronted by bag fees shop for a better deal on other airlines.21 The

Value Proposition concluded that Delta stood to lose up to $399 million worth of

business in Atlanta alone if AirTran did not match Delta’s bag fee.22

After estimating much smaller potential shifts to JetBlue and Southwest, the

report gave a “Best Case,” Mid-Range,” and “Worst Case” estimate for the net value

of the bag fee to Delta. Although the numbers changed in different iterations of the

Value Proposition (discussed below), every version concluded that the profitability

of a first bag fee turned entirely on whether AirTran also adopted the fee.23 For

18 Id.

19 Id. at 18.

20 Id. at 8-9.

21 Order 11; R:557-1 at PX181 at DLBAG10956, DLBAG10966.

22 R:556 at PX234 at 11.

23 E.g., R:556 at PX195, PX213, PX234.


9

example, the October 22 iteration of the report concluded that if AirTran failed to

follow Delta’s lead (the “Worst Case” scenario), the loss in business to AirTran

alone ($300 million) would exceed the expected revenues ($265 million), and

contribute to a $243 million net loss for Delta:

R:556 at PX213 at 15.24

24 “FL” is an industry abbreviation for AirTran, while “DL” means Delta,

“B6” means JetBlue, and “WN” means Southwest. See R:556 at PX213 at 11-13.


10

At the same time, Delta was deeply uncertain about what AirTran would do.

As of October 22, the Value Proposition’s “Mid-Range Estimate” discounted the

expected loss to AirTran by 50% – the estimated likelihood that chance AirTran

would follow Delta’s lead – resulting in an expected net loss of $46 million.25

Given this uncertainty, it is no surprise that Delta officials had planned not

only to abstain from imposing a first bag fee, but to force Northwest to abandon its

fee when the two companies merged.26 On September 2, 2008, Delta CEO Richard

Anderson directed Senior Vice President of Revenue Management Gail Grimmett

and Senior Vice President of Airport Customer Service (ACS) Gil West to

recommend a joint ancillary fee structure for the combined Delta/Northwest

airline.27 West recommended retaining Delta’s present fee structure, including the

no-fee rule for first bags, and Grimmett agreed.28 That conclusion was memorialized

in a document29 created by a cross-division “Fee Team” responsible for coordinating

25 See R:556 at PX213 at 15.

26 Because Delta was acquiring Northwest, Delta was empowered to make the fee decisions unilaterally. See R:556 at PX149.

27 R:556 at PX149; R:556 at PX143 at DLBF82417.

28 R:556 at PX149; R:566 at 307:2-6.

29 See R:557-1 at PX169 at DLBF36434.


11

fees more generally. 30 The recommendation remained unchanged until after

AirTran’s October 23 earnings call.31

B. Defendants Communicate Through Back Channels And A Public Earnings Call.

In the summer of 2008, AirTran desperately wanted a first bag fee, having

also suffered dramatic losses from the spike in fuel prices and slumping demand in

the first half of the year.32 By mid-July, the first bag fee had become AirTran’s “new

number one revenue priority,” 33 with Delta “being the holdup.” 34 AirTran

accordingly began to communicate privately and publicly to Delta that it would

follow Delta’s lead, if Delta would take the first step.

1. In July, AirTran executives decided to publicly “float the idea of a 1st bag

fee,” telling Corporate Communications that “it wouldn’t be bad for the [press] to

ask us if we plan or contemplate matching just to see the reaction.”35 They also

30 See R:367 at 42:13-44:22, 81:10-83:21.

31 Compare R:557-1 at PX169 at DLBF36433-34, R:557-1 at PX184 at DLBAG11006-07, R:557-1 at PX201 at DLBAG8939-40, and R:556 at PX228 at DLBAG11075-76, with R:557-1 at PX243 at DLBF35567-68.

32 Order 13-14; R:577 at 80:16-81:6.

33 R:557 at PX74.

34 R:557 at PX96; see also Order 13-14.

35 R:557 at PX76.


12

prepared an answer, in consultation with CEO Fornaro.36 AirTran hoped Fornaro

would have a chance to give the answer during the company’s second quarter

earnings call, on July 29, but no one asked about the fee.37

However, around the same time, Delta and AirTran began a back-channel

dialogue about the fees, using AirTran’s Director of Customer Service, Scott Fasano,

as a go-between. Fasano had previously worked at Delta for more than a decade and

maintained multiple contacts at his former airline.38 In late July, Delta conveyed to

Fasano that Delta was unwilling to impose the fee independently. Fasano reported

to his immediate supervisor, Jack Smith, that “We are in a stand-off. DL [Delta] is

carefully watching us waiting for a move on 1st bag.”39 Smith forwarded the email

to CEO Fornaro. Fornaro asked Smith “How do we know?” to which Smith replied

“Scott’s internal DL grapevine.”40

36 R:361-2 at 216:14-217:2; R:560 at 91:16-92:25.

37 Order 16 & n.11; R:554 at 9.

38 See, e.g., Order 15-16; R:554 at 10; R:554-3 at 5-6; R:582 at 11:3-7, 14:10-15:3.

39 R:556 at PX109.

40 Id.


13

AirTran understood from this communication that Delta required concrete

assurance that AirTran would impose the fee jointly. Unwilling to provide that

security by imposing the fee first, AirTran sought to assure Delta that it would follow

Delta’s lead. Fornaro thus instructed Smith that Delta “should hear through the

grapevine that we are doing the programming to launch this effort.” 41 Smith

responded that “[i]t will be communicated today.”42

Fasano then spoke to multiple people at Delta.43 He reported, “I spoke with

two more people over there” who reaffirmed that Delta was waiting for AirTran to

act: “They are holding and our name has been included in every conversation.”44 On

August 5, 2008, he summarized another discussion with “one of my former

colleagues” who “is very connected on the high level operational and planning side

of the house.”45 The former colleague explained that Delta continued to be unwilling

41 Id.

42 R:556 at PX108.

43 R:556 at PX106; R:557 at PX107.

44 R:556 at PX106.

45 R:556 at PX126. Fasano clarified in deposition that the former colleague was a Delta employee embedded with Northwest prior to the merger. R:582 at 145:6-14.


14

to take any risk that AirTran might not follow Delta’s lead. Fasano reported that his

contact “claims that their functionality is ready to go live with 1st bag” but that

“[t]hey want us to jump first. (we need it more than they do).”46 Fasano then

explained that he told Delta that AirTran was not willing to jump first, but tried to

assure his contact that AirTran could be counted on to follow suit, letting “him know

that we have a confirmed delivery date for our automation that will give us the

versatility we need” to implement the fee.47 He emphasized, however, that “our

changes are dependent on moves by our competitors.”48

2. Perhaps reluctant to act first on the basis of back-channel promises from

an AirTran official, Delta maintained its no-fee rule throughout the summer and

early fall of 2008. That changed, however, after AirTran’s top executive repeated

the assurances in a public earnings call, effectively promising not only Delta but also

AirTran’s own investors that AirTran would impose the fee if Delta adopted one

first.

46 R:556 at PX126.

47 Id.

48 Id.


15

On the morning of October 23, 2008, AirTran held its third quarter earnings

call.49 The first question was about AirTran’s first bag fee plans. Prepared for the

question, CEO Fornaro responded:

Let me tell you what we’ve done on the first bag fee. We have the programming in place to initiate a first bag fee. And at this point, we have elected not to do it, primarily because our largest competitor in Atlanta where we have 60% of our flights hasn’t done it. [W]e don’t think we want to be in a position to be out there alone with a competitor who we compete on, has two-thirds of our nonstop flights and probably 80 to 90% of our revenue is not doing the same thing. So I’m not saying we won’t do it. But at this point, I think we prefer to be a follower in a situation rather than a leader right now.

[Q.] But if they were, you’d consider it? It’s not a matter of practice?

[A.] We would strongly consider it, yes.

556 at PX223 at DLTAPE3264 (emphasis added).

49 See R:556 at PX223 at DLTAPE3259.


16

C. Delta Promptly Accepts AirTran’s Invitation To Collude.

The day before AirTran’s earnings call, Delta had updated the Value

Proposition analysis, concluding again that imposing the fee would likely lose the

company money given the assumption of a 50/50 chance AirTran would follow

suit.50 The next morning, just before the earnings call, Gil West, head of ACS,

reviewed the analysis and told a colleague that he believed Delta “would not

implement [a] 1st bag fee.”51

Everything changed after AirTran’s public invitation to collude. The day after

the call, Glen Hauenstein, head of Revenue Management, reported to Delta CEO

Anderson “They clearly want the first bag fees.”52 He then said, “Will look forward

to our discussions on Monday,”53 referring to the next scheduled meeting of Delta’s

CLT, which was responsible for approving any first bag fee.54 Hauenstein then

ordered that the Value Proposition be changed to increase the likelihood that AirTran

would follow Delta’s lead to 90% based on his understanding of AirTran’s

50 R:556 at PX213 at 15.

51 R:557-1 at PX215 at DLBAG11053.

52 R:556 at PX223 at DLTAPE3257.

53 Id.

54 See Order 22.


17

statements.55 With this change, the Worst Case Scenario – in which AirTran refused

to impose the fee and took hundreds of millions of dollars in business from Delta –

was effectively taken off the table. The question now was how much profit Delta

would make from the fee:

55 Order 21; R:557-2 at PX371 at 124:14-125:15.


18

R:556 at PX234 at 16. After the AirTran earnings call, the Delta team responsible

for setting fees for the post-merger airline likewise changed its recommendation on

first bag fees from no fee to “TBD.”56

Delta’s CLT met four days later to decide whether to charge a first bag fee.57

No transcript or other contemporaneous records reflect what happened at the CLT

meeting, and participants’ testimony regarding the decisionmaking process conflicts

in several respects. We do know, however, that the only formal, and certainly the

only quantitative, analysis presented at the meeting was the Value Proposition.58

Several witnesses testified that although most members initially opposed the fee,59

the group changed its mind after discussing the Value Proposition analysis,

AirTran’s earnings call statements, and the likelihood of AirTran matching.60

56 R:557-1 at PX243 at DLBF35567-68.

57 R:557-1 at PX231.

58 See R:557-2 at PX367 at 55:2-60:13.

59 R:367-2 at 276:17-281:2, 287:10-14; R:369-1 at 178:18-180:10; R:566 at 314:5-15; R:597 at 29:18-19, 88:11-14.

60 R:367-2 at 276:17-281:2, 287:10-288:20; R:369-1 at 178:18-180:10, 186:5-188:6; R:366 at 49:10-20, 74:3-6, 75:13-17, 76:13-77:10, 77:16-78:5; R:557-2 at PX371 at 121:23-122:12, 128:13-15, 131:19-133:7; R:556-1 at PX407 at 4-6; R:557-2 at PX367 at 102:7-12, 103:6-14, 104:24-105:4; R:557-2 at PX393 at 30:24-31:5, 34:4-6; R:568 at 40:21-41:8; R:557-2 at PX370 at 200:10-19, 217:12-21; R:598 at 51:11-21; R:556 at PX239; R:557-2 at PX404 at DLBF107892-93.


19

On November 5, 2008, Delta announced that it would charge a $15 first bag

fee effective December 5, 2008.61 One week later, AirTran announced that it would

adopt the same first bag fee, effective the same date.62

D. The Department Of Justice Opens An Antitrust Investigation.

The U.S. Department of Justice (DOJ) subsequently opened an antitrust

investigation into Defendants’ simultaneous imposition of first bag fees. In the

course of the investigation, Delta represented to the Government that its decision to

adopt a first bag fee was initially made by Delta’s CLT on October 27, 2008 and

then finalized in early November.63 When Delta changed its story in the course of

this litigation – claiming that the decision was in fact made by CEO Richard

Anderson (not the CLT) before AirTran’s October 23 earnings call – Government

attorneys wrote Delta, “we have difficulty crediting Mr. Anderson’s emphatic

testimony on May 3, 2012 to the effect that he had made a decision prior to the

AirTran earnings call given his failure to offer this version of events at his deposition

on October 6, 2010.”64 “Additionally,” the Government wrote, “we note that other

61 Order 23.

62 R:146 ¶¶ 56-57.

63 R:557-2 at PX404 at DLBF107891; R:557-2 at PX372 at 66:25-67:1.

64 R:557-2 at PX422 at 3.


20

recently produced documents support an inference that the AirTran earnings call

impacted Delta’s decision.”65 The investigation remains open.

III. Procedural History

1. While the Government investigation was pending, consumers filed

multiple antitrust actions against Defendants, which were eventually consolidated

into this multidistrict litigation.66 The district court denied Defendant’s motion to

dismiss in 2010, and the parties began discovery.67

2. During discovery, Delta repeatedly withheld and failed to preserve relevant

evidence. The district court found Delta made “colossal blunders,” “wildly

inaccurate” representations, “unfounded and unreasonable” denials, and

“mystifying” non-disclosures that caused “the parties and their experts [to] waste[]

an enormous amount of time and money,” delaying the case for several years and

resulting in multiple sanctions orders.68 For example, the court found that “crucial

early mistakes” led to Delta’s “failure to suspend automatic deletion of active emails

and overwriting of backup tapes” until after documents from the key July-November

65 Id. at 4.

66 R:665 at 2.

67 R:137.

68 R:520 at 12, 25, 26, 32, 42; R:548 at 6-20; R:302; R:375.


21

2008 time period had been destroyed.69 Delta was repeatedly forced to belatedly

produce additional documents from a number of sources, including documents from

key custodians’ hard drives and from dozens of email backup tapes from Delta’s

evidence locker, the existence of which Delta had initially not disclosed.70 A Delta

IT employee who headed the group tasked with collecting and preserving evidence

testified that she believed that Delta had destroyed and withheld evidence

intentionally. 71 The court, however, denied Plaintiffs’ request for evidentiary

sanctions 72 and refused to consider Delta’s discovery failures in evaluating

Defendants’ summary judgment motions.

3. In July 2016, the district court granted Plaintiffs’ motion to certify a class.73

This Court accepted Defendants’ Rule 23(f) appeals on October 6, 2016 (Case No.

16-16401).

4. After the briefing in the class certification appeal was completed, the

district court granted Defendants’ motion for summary judgment. Order 94.

69 R:520 at 6-8.

70 R:548 at 12-14.

71 R:520 at 84-85.

72 R:548 at 40-42, 47.

73 R:665.


22

Plaintiffs timely appealed the final judgment (Case No. 17-11733), and Defendants

filed conditional cross-appeals, raising the same class certification issues as their

interlocutory appeal. On July 19, 2017, this Court ordered all appeals consolidated.

SUMMARY OF THE ARGUMENT

To survive summary judgment, Plaintiffs were required to produce evidence

that, if credited, would allow a reasonable jury to conclude that Defendants’

simultaneous imposition of identical fees for first checked bags was the result of

collusion rather than independent action. Plaintiffs did so, establishing multiple

“plus factors” that tend to exclude Defendants’ claim that Delta decided to impose

the fee for reasons unrelated to any promise by AirTran to follow suit.

To start, Plaintiffs showed through Defendants’ own statements and

documents that when the rest of the industry was adopting the bag fee, Delta and

AirTran had reached an impasse: each was prevented from imposing the fee by

uncertainty whether the other would do so as well. In that context, adopting the fee

was in neither party’s interest, absent a tacit agreement for joint action. It is well-

established that in such circumstances, a jury may reasonably infer that the impasse

was eventually broken by a collusive agreement. See, e.g., Williamson Oil Co. v.

Philip Morris USA, 346 F.3d 1287, 1310 (11th Cir. 2003).

In this case, however, Plaintiffs went further. They showed Defendants

initially communicated regarding their standoff through back channels, culminating


23

in AirTran’s public invitation to collude in its earnings call. Even more, Plaintiffs

presented powerful circumstantial evidence from Delta’s own files that Delta

accepted the offer by deciding to impose the fee only because AirTran had offered

to follow suit. And all of this occurred in a context – e.g., when Defendants

desperately needed new revenue – that makes the inference of collusion even more

plausible.

To be sure, Defendants have their own story to tell. They claim, for example,

that Delta’s decision was made solely by CEO Richard Anderson before the AirTran

earnings call, and that Anderson did not believe his own experts’ conclusions that

acting without AirTran could lead Delta to lose market share. But Delta told the

DOJ a different story – that the decision was made by the CLT after the AirTran

earnings call. And a jury would have ample reason to reject Anderson’s professed

disbelief in market forces. Deciding which side is telling the truth is for a jury.

STANDARD OF REVIEW

This Court reviews orders granting summary judgment de novo. City of

Tuscaloosa v. Harcros Chems., Inc., 158 F.3d 548, 556 (11th Cir. 1998).

ARGUMENT

What happened in this case is precisely what antitrust law is designed to

prevent. In an oligopoly, the one thing standing between consumers and monopoly

prices is a potential price leader’s uncertainty about whether its lead will be


24

followed. In this case, that uncertainty prevented Defendants from imposing a new

first bag fee on their customers, until the competitive impasse was broken through

an exchange of back-channel and public assurances. Eliminating competition-

preserving uncertainty through such communications violates the core restrictions

of the Sherman Act, creating exactly the harm the statute was enacted to prevent.

I. At Summary Judgment, Plaintiffs Need Only Provide Sufficient Evidence To Allow A Reasonable Jury To Find Tacit Acceptance Of An Invitation To Collude.

Section 1 of the Sherman Act prohibits “[e]very contract, combination in the

form of trust or otherwise, or conspiracy, in restraint of trade or commerce.” 15

U.S.C. § 1. At summary judgment, Plaintiffs were required only to provide a

reasonable basis for a jury to infer that Delta tacitly agreed to AirTran’s invitation

to collude when it adopted its first bag fee.

A. Section 1 Prohibits Tacit Agreements Formed When One Defendant Accepts Another’s Invitation To Collude By Imposing A Fee It Would Not Have Imposed Absent The Invitation.

An illegal price-fixing conspiracy “does not require the existence of an

express agreement.” Gainesville Utils. Dep’t v. Fla. Power & Light Co., 573 F.2d

292, 300 (5th Cir. 1978). It is enough that the parties have “‘a unity of purpose or a

common design and understanding, or a meeting of minds in an unlawful

arrangement.’” Todorov v. DCH Healthcare Auth., 921 F.2d 1438, 1455-56 (11th

Cir. 1991) (quoting Am. Tobacco Co. v. United States, 328 U.S. 781, 810 (1946)).


25

In other words, Section 1 prohibits all conspiratorial agreements, “tacit or express.”

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 553 (2007) (emphasis added, citation and

internal quotation marks omitted).

Accordingly, just as an offer to contract may be accepted through conduct,74

a Section 1 conspiracy can arise from an invitation to collude followed by conduct

evincing a commitment to the proposed common scheme. See, e.g., Interstate

Circuit, Inc. v. United States, 306 U.S. 208, 226 (1939) (“It [is] enough that, knowing

that concerted action was contemplated and invited, the [invitees] gave their

adherence to the scheme and participated in it.”); AREEDA ¶ 1410c. One court gave

this example of facts sufficient to find each competitor guilty of participating in a

price-fixing conspiracy:

Let us suppose five competitors meet on several occasions, discuss their problems, and one finally states – ‘I won’t fix prices with any of you, but here is what I am going to do – put the price of my gidget at X dollars; now you all do what you want.’ He then leaves the meeting. Competitor number two says – ‘I don’t care whether number one does what he says he’s going to do or not; nor do I care what the rest of you do, but I am going to price my gidget at X dollars.’ Number three makes a similar statement – ‘My price is X dollars.’ Number four says not one word. All leave and fix ‘their’ prices at ‘X’ dollars.

Esco Corp. v. United States, 340 F.2d 1000, 1007 (9th Cir. 1965). Other courts have

found sufficient proof of conspiracy through similar conduct evincing acceptance of

74 See, e.g., RESTATEMENT (SECOND) CONTRACTS § 22 cmt. b.


26

a proposal to collude. See, e.g., Wilk v. Am. Med. Ass’n, 735 F.2d 217, 219-20 (7th

Cir. 1983); United States v. Foley, 598 F.2d 1323, 1331-32 (4th Cir. 1979); Moore

v. Jas. H. Matthews & Co., 473 F.2d 328, 329-32 (9th Cir. 1972).

When plaintiffs allege agreement through conduct, they must present

sufficient evidence to permit a jury to conclude that the defendant engaged in the

conduct in order to accept the offer, rather than for independent reasons unrelated to

the offer to collude. See AREEDA ¶ 1419b. But a jury need not believe a defendant’s

bare assertion that it would have engaged in the same conduct even absent the

invitation. See, e.g., DeLong Equip. Co. v. Wash. Mills Abrasive Co., 887 F.2d 1499,

1515 (11th Cir. 1989) (“This court must look beyond the defendants’ bald denial of

concerted action . . . .”). Depending on the surrounding circumstances, “an

addressee of a proposal for common action who behaves in accordance with the

proposal may find it difficult, to say the least, to persuade [a jury] that it acted

unilaterally and without regard to the proposal.” AREEDA ¶ 1404.

B. At Summary Judgment, Plaintiffs Need Only Establish Parallel Conduct Accompanied By Appropriate “Plus Factors” Giving Rise To A Permissible Inference Of Collusion.

It is “only in rare cases” that “a plaintiff [can] establish the existence of a

[S]ection 1 conspiracy by showing an explicit agreement; most conspiracies are

proved by inferences drawn from the behavior of the alleged conspirators.”

Todorov, 921 F.2d at 1456. However, “antitrust law limits the range of permissible


27

inferences from ambiguous evidence in a § 1 case.” Matsushita Elec. Indus. Co. v.

Zenith Radio Corp., 475 U.S. 574, 588 (1986). In particular, parallel conduct

standing alone is insufficient to permit an inference of conspiracy because parallel

pricing also can occur in concentrated markets through the phenomenon of

“interdependence” or “conscious parallelism” without resort to illegal collusion.

See, e.g., City of Tuscaloosa, 158 F.3d at 570. For example, one member of an

oligopoly may act as a “price leader,” unilaterally enacting a price increase that

others then follow. AREEDA ¶ 1410b.

Accordingly, at summary judgment, plaintiffs must present “evidence ‘that

tends to exclude the possibility’ that the alleged conspirators acted independently.”

Matsushita, 475 U.S. at 588 (citation omitted). “This evidence need not be such that

only an inference of conspiracy may be derived from it.” Helicopter Support Sys.,

Inc. v. Hughes Helicopter, Inc., 818 F.2d 1530, 1534 n.4 (11th Cir. 1987); see also

DeLong, 887 F.2d at 1509 (same); City of Tuscaloosa, 158 F.3d at 571 n.35 (same).

Instead, plaintiffs need only “show that the inference of conspiracy is reasonable in

light of the competing inferences of independent action.” Matsushita, 475 U.S. at

588.

This Court has established a three-step process for applying these principles.

“First, the court must determine whether the plaintiff has established a pattern of


28

parallel behavior.” Williamson Oil Co. v. Philip Morris USA, 346 F.3d 1287, 1301

(11th Cir. 2003).

“Second, it must decide whether the plaintiff has demonstrated the existence

of one or more plus factors that ‘tends to exclude the possibility that the alleged

conspirators acted independently.’” Id. (citation omitted). “[A]ny showing by

[plaintiffs] that ‘tend[s] to exclude the possibility of independent action’ can qualify

as a ‘plus factor.’” Id. (citation omitted). “The existence of such a plus factor

generates an inference of illegal price fixing.” Id.

“Third, if the first two steps are satisfied, the defendants may rebut the

inference of collusion by presenting evidence establishing that no reasonable

factfinder could conclude that they entered into a price fixing conspiracy.” Id.

“In undertaking this analysis, the district court is obligated to give the price

fixing plaintiff(s) ‘the full benefit of their proof without tightly compartmentalizing

the various factual components and wiping the slate clean of scrutiny of each.’” Id.

(citation omitted). At the same time, the court must take the evidence in the light

most favorable to the nonmoving party, avoiding credibility determinations. Id. at

1301-02.

II. Plaintiffs Provided Ample Evidence From Which A Jury Could Reasonably Infer A Tacit Agreement To Jointly Impose First Bag Fees.

The district court recognized that “the undisputed record evidence plainly

shows” that Plaintiffs satisfied the first step of the Williamson Oil analysis, given


29

that Defendants “simultaneously imposed first-bag fees of $15 effective on

December 5, 2008.” Order 63-64. The court held, however, the Plaintiffs failed to

adduce additional “plus factors” beyond that parallel conduct. Order 93.

That holding was wrong. Plaintiffs showed that joint adoption of the fee

followed a sustained period in which AirTran and Delta were at a competitive

impasse, each convinced it could not profitably impose the fee independently

because of uncertainty about whether the other would follow suit. The breaking of

that impasse is reason enough for a jury to conclude the uncertainty was removed by

collusion, but Plaintiffs showed far more. They presented evidence of a chain of

initial back-channel communications, in which each Defendant indicated a

willingness to follow the other’s lead in imposing the fee. And they provided direct

evidence that AirTran extended an invitation to collude publicly, by promising in its

October earnings call to follow Delta in adopting the fee. Moreover, Plaintiffs

presented compelling evidence from internal Delta documents that Delta accepted

the offer, adopting the fee only because AirTran had promised to act jointly with it.

And all this happened in a context in which imposing a new fee independently would

be unusual (i.e., when costs and demand were declining) but both airlines had an

extraordinarily strong motive to conspire (i.e., because both were suffering massive

losses).


30

A. Break From Established Competitive Equilibrium In A Manner Inconsistent With Either Airline’s Self-Interest Absent Collusion

Initially, Plaintiffs presented evidence that prior to AirTran’s offer to collude,

the parties were settled in a competitive equilibrium under which it was in neither

party’s interest to impose the fee absent agreement, tacit or express, that the other

would do so as well. See Singer Report § II.B; Williamson Oil, 346 F.3d at 1310

(“It is firmly established that [such] actions that are contrary to an actor’s economic

interest constitute a plus factor that is sufficient to satisfy [the plaintiffs’] burden in

opposing a summary judgment motion.”) (collecting citations).

Defendants’ principal defense has been that their parallel imposition of first

bag fees was the result of typical interdependent pricing. That story, however,

depends on convincing a jury that Delta was willing to take the lead in imposing the

fee without at least a tacit agreement that AirTran would follow. That crucial fact

cannot simply be assumed. Even in oligopolies, price leading is risky. AREEDA

¶ 1430c. In this case, for example, Delta calculated that it stood to lose hundreds of

millions of dollars if it imposed a first bag fee but AirTran did not.75 And prior to

75 This was true even taking into account the revenue generated by

Northwest’s first bag fee. See R:556 at PX234 at 16 (estimating $343 million loss for Delta under “Worst Case” scenario in which AirTran declined to impose fee); id. at 17 (estimating $200 million in gross fee revenue for Northwest, but noting that figure did not account for probable share-shift, e.g., to Southwest in Northwest’s Detroit hub).


31

AirTran’s overtures, Delta had substantial reason to question whether AirTran would

follow any imposition of a first bag fee, given that AirTran’s business model is to

portray itself as a low-cost alternative to Delta, its main rival. Thus, prior to

AirTran’s earnings call, the Value Proposition’s “Mid-Range Estimate” assumed a

50/50 chance AirTran would follow Delta’s lead.76

That Delta was held back by competitive uncertainty is further confirmed by

other Delta documents. In a September 5, 2008, email prompted by Continental’s

announcement of its adoption of a first bag fee, Senior Vice President of ACS Gil

West said to Delta’s Chief Operating Officer Steve Gorman, “I assume we still want

to hold until airtran moves?”77 West similarly told another employee that there was

“[n]o need” to review the free first bag policy after Continental’s announcement

because “Airtran and jetblue don’t charge and they are our key competitors in our

main hubs.”78 After meeting with top executives about the bag fee at the end of

76 R:556 at PX213 at 15. The 50/50 estimate was higher than the estimates

for other LCCs, see id., presumably because of the back-channel communications.

77 R:557 at PX148 at DLBF187470.

78 R:557 at PX146 at DLBAG9724 (Email from G. West to N. Shah, et al. (Sept. 5, 2008)).


32

September, one account of the meeting stated that a “key consideration is the risk

when we are up against AirTran, JetBlue, Southwest.”79

In theory, an oligopolist could attempt to overcome such uncertainty by trying

out a price increase and withdrawing it if competitors do not follow. See Williamson

Oil, 346 F.3d at 1299. But Defendants have never claimed that is what happened

here. See infra § III. Nor would any such claim have been credible. Imposing an

entirely new bag fee was costly and disruptive, requiring new programming for

airlines’ computers, training for employees, modifications to basic operating

procedures at the ticket counter and gates, and planning for consumer reactions (e.g.,

an increase in carry-ons).80 See AREEDA ¶ 1430c (explaining the risk of price leading

“depends upon th[e] combination of knowledge about rivals’ behavior and the ability

effectively to alter one’s own behavior ‘before it is too late.’”).

79 R:557-1 at PX172 (Email from P. Elledge to C. Phillips, et al. (Sept. 29,

2008)); see also R:557 at PX89 at DLBAG1067 (Email from G. Hauenstein to G. West (July 18, 2008)) (“For the same reason that we do not charge for the first bag domestically (do not want to create preference to AirTran/JetBlue/Continental) . . . .”); R:557 at PX142 at DLTAPE3404 (Email from S. Gorman to H. Halter (Aug. 22, 2008)) (“[W]e are concerned competitively with CO, Jet Blue and AirTran domestically on the 1st bag fee . . . .”); R:557-1 at PX157 (Email from G. Hauenstein to S. Gorman (Sept. 18, 2008)) (“If we did not have the lcc exposure I would be all over this [first bag fee].”).

80 Order 10; R:554-3 at 23, 61.


33

At “some point the business risks of leading will be so great that no rational

firm will take the first step without advance assurance that rivals will follow.”

AREEDA ¶ 1425d; see also id. ¶ 1435a. A jury could reasonably decide that Delta

had reached that conclusion here. Given the genuine uncertainty about what AirTran

would do, and the prospect of losing tens – perhaps hundreds – of millions of dollars

if AirTran did not play along, Delta “would have acted unreasonably in a business

sense if it had [imposed the fee] unless [it] had received assurances from the other

defendant[] that [it] would take the same action.” Bolt v. Halifax Hosp. Med. Ctr.,

891 F.2d 810, 826-27 (11th Cir. 1990); see Singer Report § II.C. Proof that Delta

nonetheless imposed the fee is “evidence ‘that tends to exclude the possibility’ that

the alleged conspirators acted independently.” Matsushita, 475 U.S. at 588 (citation

omitted).

B. Collusive Communications, Including A Public Invitation To Collude

Here, a jury is not left to simply infer that Defendants must have engaged in

collusive communications to overcome their competitive impasse – Plaintiffs have

adduced substantial evidence of those communications. Those communications,

including AirTran’s express, public offer to collude, constitute an additional plus

factor precluding summary judgment. See, e.g., Brown v. Pro Football, Inc., 518

U.S. 231, 241 (1996) (“Antitrust law also sometimes permits judges or juries to

premise antitrust liability upon little more than uniform behavior among


34

competitors, preceded by conversations implying that later uniformity might prove

desirable.”); Jacobs v. Tempur-Pedic Int’l, Inc., 626 F.3d 1327, 1343 (11th Cir.

2010) (plus factor may be established through evidence defendants “signaled each

other on how and when to maintain or adjust prices”); Petruzzi’s IGA Supermarkets,

Inc. v. Darling-Del. Co., 998 F.2d 1224, 1242 (3d Cir. 1993) (plus factors include

when “at least one participant expressly invited common action by the other”

(quoting WILLIAM C. HOLMES, 1992 ANTITRUST LAW HANDBOOK § 1.03[3], at

154)).

1. In the summer of 2008, Defendants communicated about the first bag

through back channels. Those communications were undertaken at the direction of

AirTran’s CEO, through Scott Fasano, a trusted AirTran employee who had

previously worked at Delta for more than a decade and maintained multiple contacts

there. Fasano reported back that he had communicated with multiple contacts at

Delta. This included an in-person meeting with a former colleague, still at Delta,

who was “very connected on the high level operational and planning side of the

house.” 81 Through those communications, each Defendant informed the other that

it was unwilling to lead, but prepared to follow, in adopting a first bag fee. See supra

pp. 11-14. AirTran sought to break the impasse by providing Delta special assurance

81 R:556 at PX126.


35

that it was serious about following, reporting that it had invested in the programming

to allow it to impose the fee “BUT our changes are dependent on moves by our

competitors.”82

2. When Delta could not be convinced to move first by informal, back-

channel promises, AirTran’s CEO repeated the invitation to collude in a public

earnings call AirTran knew Delta would monitor.83 In the call, Fornaro made clear

that the “‘primar[y]’” reason AirTran had not imposed the fee was because

“‘our largest competitor in Atlanta’” – which everyone understood to mean Delta84

– had not imposed the fee. He said that AirTran would “prefer to be a follower,”

and then clarified, in response to a question, that this meant AirTran would “strongly

consider” following Delta’s lead in imposing the fee.85

A reasonable jury could easily conclude these statements constituted an

invitation to collude. See, e.g., Foley, 598 F.2d at 1331-32 (criminal antitrust

conspiracy adequately proven where realtor stated at a dinner with competitors that

his firm was raising its commission rate and “did not care what the others did” and

82 R:556 at PX126.

83 R:362-2 at 162:22-163:8.

84 Order 20 (quoting R:353-16 at 7).



36

others followed suit); see also AREEDA ¶ 1410c (“[R]eciprocal assurances . . .

remain ‘agreements’ even though vague, incomplete, and riddled with qualifications

and exceptions.”).

First, there is precious little difference between what AirTran said and “Delta,

if you impose a bag fee, we will follow.” AREEDA ¶ 1410c (“An illegal conspiracy

between competitors A and B would be found in the [following] illustrations . . . .

B: ‘I will follow your price increases whenever it is in my interest to do so, as it has

often proved to be in the past.’”). The only reason Fornaro gave in the earnings call

for not imposing the fee was Delta’s failure to do so first. He never mentioned, for

example, any concern about how customers would react, or competition from other

airlines. He further explained that AirTran had already completed the programming

to implement the fee, a huge waste of time and money unless AirTran was committed

to imposing the fee if Delta acted first. By informing Delta that it had already made

this investment – especially during an earnings call, where it had a legal duty to be

truthful – AirTran provided Delta concrete assurance that it would following Delta’s

lead.

Second, there was substantial evidence that AirTran intended the statement to

convey an assurance to Delta that would break the impasse. See supra pp. 11-14;

R:556 at PX109. The district court noted after Delta announced the fee, AirTran

engaged in some internal deliberations whether to match it. Order 74-75. The court


37

concluded from this that it was “far from clear that AirTran was ready and willing

to coordinate activity” at the time of the earnings call. Order 75 (citation and internal

quotation marks omitted). In fact, the evidence showed that there was no serious

question Fornaro would follow through on the invitation, having made his views

clear in the earnings call, in multiple prior emails, and through his decision to invest

in the programming necessary to effect the promise. See R:556-1 at PX278 at

AIRTRAN64716 (email in advance of AirTran meeting, stating “I think we have

already decided this”); supra pp. 11-15. But even if this evidence provided some

counterweight to the mountain of evidence showing AirTran was committed to

follow Delta’s lead, that would simply mean that there is a disputed issue of fact for

a jury to resolve.

Third, there is ample evidence that Delta understood the statement as an

assurance that if Delta led, AirTran would follow. See supra pp. 16-18. For

example, the day after the call Delta’s head of Revenue Management Glen

Hauenstein emailed Delta CEO Anderson to note, “They clearly want the first bag

fees.”86 Hauenstein then ordered the Value Proposition to be changed to reflect a

90% likelihood of AirTran imposing a first bag fee if Delta led the way.87


87 Order 21; R:557-2 at PX371 at 124:14-125:15.


38

Fourth, Defendants had been using earnings calls and other public

mechanisms to send and receive competitive signals on other issues.88 Indeed, in

response to Fornaro’s late-July 2008 instruction that AirTran should privately

communicate to Delta its first bag fee intentions, an AirTran executive lamented that

Fornaro had not been asked on AirTran’s July earnings call about its first bag fee

intentions.89

C. Evidence Invitation To Collude Was Accepted

Plaintiffs have also presented substantial evidence that Delta accepted the

offer. See, e.g., In re Flat Glass Antitrust Litig., 385 F.3d 350, 369 (3d Cir. 2004)

(holding that “evidence that . . . exchanges of information had an impact on pricing

decisions” constitutes a plus factor) (citation and internal quotation marks omitted).

1. As discussed, a Section 1 conspiracy does not require a verbal response to

an offer to collude. Instead, plaintiffs need only “adduce[] evidence that reasonably

tends to prove a ‘conscious commitment’ on the part of the alleged co-conspirators

to enter into a scheme” to fix prices. Bolt, 891 F.2d at 820 (citation omitted). In

other words, “conformance to . . . [a] contemplated pattern of conduct will warrant

an inference of conspiracy.” Esco, 340 F.2d at 1008; see also id. (it is “sufficient

88 See R:554-3 at 17-35 (collecting record cites).

89 R:556 at PX109.


39

that a concert of action be contemplated and that defendants conform to the

arrangement”); Interstate Circuit, 306 U.S. at 226 (same); Gainesville, 573 F.2d at

300 (same); Moore, 473 F.2d at 330 (“[A]n agreement may be implied from

conformity to a contemplated pattern of conduct.”).

Thus, in Interstate Circuit, the Supreme Court found sufficient proof of a

horizontal conspiracy among film distributors when Interstate, the owner of a chain

of movie theaters, wrote to each distributor demanding that the distributors adopt

certain uniform polices that would disadvantage Interstate’s rivals. 306 U.S. at 216-

17. Each letter listed all of the distributors as addressees, so it was clear that all were

being invited to act together. Id. at 216. Although there was no evidence of any

communication between the distributors, the Supreme Court found sufficient proof

of a conspiracy among them when each imposed the policies demanded in the letter.

Id. at 221-27. “It [is] enough,” the Court explained, “that knowing that concerted

action was contemplated and invited, the distributors gave their adherence to the

scheme and participated in it.” Id. at 226; see also, e.g., Moore, 473 F.2d at 330

(summary judgment denied on proof that one defendant sent others a handbook

suggesting exclusionary practices, which the recipients put into effect).

2. In this case, Plaintiffs provided far more evidence of Delta’s acceptance of

AirTran’s offer than just conduct consistent with agreement. They presented

evidence from which a jury could conclude that: (a) prior to AirTran’s invitation,


40

Defendants were at a competitive impasse; (b) Delta had quantified the downside

risk of imposing a fee if AirTran did not follow and concluded it was catastrophic;

(c) with a “Mid-Range Estimate” assuming a 50% chance AirTran would follow, the

fee was expected to result in a $47 million loss; (d) but AirTran’s public proposal to

jointly impose the fees removed the uncertainty that was holding Delta back by

ensuring that the fee would be profitable.

Certainly, there can be no reasonable dispute that the earnings call

dramatically changed the Value Proposition’s assessment of the fee’s risks and

benefits. See supra pp. 8-10, 16-18. And the revised Value Proposition was the only

quantitative analysis presented or discussed at the CLT meeting on October 27. See

supra p.18. Several witnesses acknowledged that the analysis was seriously

considered and that AirTran’s statement in its earnings call was discussed. Id.

Witnesses further testified that although a majority of the attendees seemed at first

to be against the fee, the group turned around after discussing the Value Proposition.

Id.

3. Defendants argued below that even if they adopted the first bag fee only

because AirTran promised to follow suit, that would be an example of perfectly

lawful interdependent behavior, not acceptance of an offer to collude.90 Not so.

90 R:350-1 § C; R:73-2 at 7-12.


41

This argument comes precariously close to claiming a right to accept an

unsolicited offer to collude. Under this reasoning, if AirTran’s CEO sent Delta’s

CEO a letter that said, “You should raise prices by 10%; if you do, we will follow,”

both would be immune from liability if Delta raised prices by 10% and AirTran

immediately followed, even if Delta admittedly would not have raised prices in the

absence of AirTran’s promise, so long Delta does not first write back to AirTran

verbally accepting the proposal.

That cannot be the law – and it isn’t. Defendants’ position cannot be

reconciled with the well-settled principle that invitations to collude can be accepted

through conduct. The film distributors in Interstate, for example, could equally

claim that they were simply acting interdependently on the basis of uninvited

information they had learned about competitors’ plans. See 306 U.S. at 216-17. But

that did not insulate them from liability. Nor could it, without creating a template

for legal price fixing.

D. Other Context Strengthening The Inference Of Collusion

The inference of a collusive agreement is further strengthened by a context in

which independent imposition of the fee would be unexpected but attempts to

collude would not.

First, Defendants raised prices when costs were falling and demand was

shrinking in the midst of a recession, something unexpected even in an oligopoly.


42

See Singer Report ¶¶ 76-81.91 The district court believed that “evidence of a price

increase disconnected from changes in cost or demand only raises the question of

what motivated the price increase, it does not answer that question.” Order 89

(citation and internal quotation marks omitted). But raising prices when costs are

falling and demand is plummeting is not an action “disconnected” from changes in

cost and demand, id.; it is action that is the exact opposite of what one ordinarily

would expect absent collusion.

Second, Defendants’ dire financial condition gave them an unusually strong

incentive to collude. See, e.g., DeLong, 887 F.2d at 1511 (citing “incentive for joint

action” as supporting inference of collusion); In re Publ’n Paper Antitrust Litig.,

690 F.3d 51, 62 (2d Cir. 2012) (same); Flat Glass, 385 F.3d at 360 (same); In re

Blood Reagents Antitrust Litig., 756 F. Supp. 2d 623, 631 (E.D. Pa. 2010) (same).

Third, Defendants were operating in highly concentrated industry, Order 83-

84, where collusion is more likely to be successful and, therefore, more likely to be

attempted. See Gainesville, 573 F.2d at 303 n.19 (“[W]here a market is dominated

by a small number of sellers collusion is easier, and a court should examine the

market with a more careful eye.”); In re High Fructose Corn Syrup Antitrust Litig.,

295 F.3d 651, 656-58 (7th Cir. 2002) (inference of conspiracy furthered by

91 See also R:556 at PX234 at 19.


43

“evidence that the [relevant] market is one in which secret price fixing might actually

have an effect on price and thus be worth attempting”).

III. Defendants Failed To Rebut The Inference Of A Price-Fixing Conspiracy.

Defendants have also failed to “rebut the inference of collusion by presenting

evidence establishing that no reasonable factfinder could conclude that they entered

into a price fixing conspiracy.” Williamson Oil, 346 F.3d at 1301.

Defendants’ principal defense is that Delta could not have accepted any

invitation to collude, for two reasons. First, they insist that the decision to impose

the fee was made solely by Delta CEO Richard Anderson who, they claim, made up

his mind “prior to . . . September 28[],”92 well before AirTran’s earnings call.93

Second, they claim that, in any event, Delta did not care whether AirTran followed

Delta’s lead.94 A jury would have abundant reasons to reject both claims.

A. A Jury Could Easily Reject Defendants’ Claim That The Bag Fee Decision Was Made By Delta CEO Richard Anderson Before AirTran’s Earnings Call.

To start, the district court rightly concluded that the evidence showed that “the

CLT approved the first-bag fee at the October 27 meeting,” Order 22 (emphasis

92 R:570 at 233:17-20; see also id. at 207:18-20, 227:13-15.

93 See R:554 at 33; R:350-1 at 4.

94 R:350-1 § C.


44

added), not that the decision was made by Anderson, much less that it was made by

Anderson before AirTran’s October 23 earnings call.

Delta represented to the DOJ that the CLT “was responsible for approving

changes in the company’s policies relating to fees charged for checked baggage

during the relevant period.”95 It further represented that “Delta’s decision to adopt

a first bag fee [was] made initially during the CLT’s October 27, 2008 CLT meeting,

and then finalized on November 3, 2008.”96

Moreover, even if a jury were compelled to find that Anderson made Delta’s

decision, it would not be required to accept his claim that he made up his mind before

the earnings call. 97

First, Anderson testified in his first deposition that “we got to the decision in

early November,” after the earnings call.98 Anderson explained that “we were

waiting because Northwest was in a different position than we were and we couldn’t

talk to any of the executives there about what their experience had been” due to

95 R:557-2 at PX332 at DLBF35287.

96 R:557-2 at PX404 at DLBF107891.

97 Even if Anderson reached his decision in late September, a jury could still conclude he had decided to accept AirTran’s back-channel invitation to collude. See supra pp.12-14.

98 R:557-2 at PX372 at 66:25-67:1.


45

antitrust concerns.99 Thus, “ultimately we needed to get past the actual closing of

the merger to be able to really analyze whether we were going to put in a first bag

fee or not.”100 When Delta changed its story the Government was incredulous. See

supra pp. 19-20. A reasonable jury could reach the same conclusion.

Second, Anderson’s claim is implausible on its face. Prior to the October

CLT meeting at which the Value Proposition was reviewed, Anderson had not yet

received any analysis of the bag fee’s potential impact on market share.101 A jury

could reasonably disbelieve Anderson’s claim to have made a hundred-million-

dollar decision based on nothing more than seat-of-the-pants intuition about the

potential effect on Delta’s market share.

B. Anderson’s Professed Belief That Imposing A New Fee Would Not Affect Market Share Is Implausible And Contradicted By The Evidence.

Delta’s argument that it did not care whether AirTran would follow in

adopting a first bag fee is obviously belied by the Value Proposition, which shows

that AirTran’s reaction was the key to whether imposing a fee would be highly

99 Id. at 60:13-16.

100 Id. at 60:17-19; see also id. at 60:25-61:5, 88:5-6, 90:10-11.

101 See R:557-2 at PX367 at 55:2-12, 58:20-60:13; R:557-2 at PX371 at 136:15-17.


46

profitable or lead to catastrophic losses. Delta thus is forced to argue that its ultimate

decisionmakers did not accept the Value Proposition’s central premise that imposing

the fee without AirTran could materially affect market share between the two

airlines.102 But a jury could reasonably conclude that this claim is not credible.

First, the Value Proposition was specifically undertaken to quantify the costs

and benefits of the potential bag fee.103 It was put together by, and with input from,

trusted Delta executives from multiple internal divisions, including Revenue

Management and ACS. 104 This included Gil West and Gail Grimmett, whom

Anderson assigned responsibility for recommending a unified bag fee structure of

the post-merger Delta/Northwest entity. See supra pp. 10-11. And, as noted, it was

the only analysis prepared for the decision or presented at the critical CLT meeting.

Second, Anderson did not simply claim that he thought the Value Proposition

overestimated the degree of potential share-shift. If that was his story, he’d have to

explain why he did not order revisions to the study. After all, AirTran’s reaction

would be unimportant only if the share-shift estimate were off by several hundred

million dollars’ worth of business. See supra p. 17.

102 R:603 at 30.

103 See R:368 at 45:10-19, 52:19-53:1.

104 Order 19; R:557-2 at PX367 at 46:24-47:8; R:368-1 at 113:18-114:16; R:557-1 at PX230.


47

That perhaps is why Anderson insisted instead that he did not believe any

material share-shift would occur because consumers would not make decisions

based on the total cost of travel, including both air fares and bag fees. See R:557-2

at PX372 at 66:14-17 (“[W]e came to the conclusion that there was no share shift

effect and that unbundling of certain of our services from the price of the ticket

wouldn’t have any effect on share.”) (emphasis added); id. at 66:18-67:10 (same).

Delta’s lawyers and litigation experts, however, have told this Court that

Anderson’s professed economic view is nonsense. In challenging class certification,

Delta has argued that “[t]he addition of the bag fee increases the total price charged

to bag checkers (base fare plus bag fee), which in turn causes a reduction in

demand,” 105 because consumers would seek out better deals from Defendants’

competitors – a premise Anderson claims he did not believe.

Likewise, in September 2008, Delta’s in-house Customer Insights &

Analytics team completed a “Baggage Handling Study” based on focus groups

conducted around the country. 106 The study found that “[w]hile customers

understand the necessity of charging for bags, they will actively seek out airlines

105 R:221 at 9; see R:224-1 ¶¶ 14-15.

106 R:557-1 at PX181.


48

that do not pass on such charges.”107 That is, once consumers “identify the airlines

that do charge [bag fees], they avoid those airlines going forward.”108 The Value

Proposition similarly found that Delta had gained market share from other airlines

after they adopted a first bag fee.109

Third, Anderson himself admitted in internal discussions that he recognized

the bag fee could have competitive consequences. Notes from one meeting

described Anderson as stating that “[a]dding a charge for checking the first bag,

could bring us hundreds of millions in additional revenue next year. . . . [B]ut the

flip side of doing so could negatively affect our customers and revenue.”110

C. Delta’s Claim That It Was Just Following The Industry And Not Worried About AirTran Is Contradicted By The Evidence.

Defendants claim that despite the Value Proposition projections, Anderson

and the CLT did not care about AirTran’s bag fees because other carriers with the

fee had reported them profitable.111 But a jury could easily reject that claim.

107 Id. at DLBAG10966.

108 Id. at DLBAG10956; see also generally R:557 at PX137.

109 R:556 at PX234 at 10.

110 R:557-1 at PX182 at 3 (emphasis added).

111 R:350-1 at 25-26; R:353-1 at 4, 10, 17.


49

First, the Value Proposition carefully explained why the experience of other

airlines was not transferrable: it showed that “Delta [was] much more exposed to

LCCs,” which was why, for example, the bag fee “Works for Northwest” but was

“uncertain for Delta.”112 Indeed, Delta had the “network with [the] most LCC

overlap” among all the legacy carriers:

112 R:556 at PX234 at 4.

18

Consideration of LCC Overlap is Key

DL – NW merger combines the network with most LCC overlap with the least exposed network

Carrier Avg # of Carriers

Variance to OA Avg

Avg Pax Share

Avg Rev Share

DL 2.6 19% 43% 44%

UA 2.5 13% 46% 51%

US 2.3 7% 46% 51%

AA 2.1 -4% 59% 57%

NW 1.9 -13% 58% 64%

CO 1.7 -23% 72% 74%

Competitive overlap on Top 50 Domestic O&Ds

Carrier Direct Domestic ASM Overlap(2)

DL 48%

UA 37%

US 27%

AA 16%

NW 12%

CO 12%

(¹) LCC carriers include WN, FL, F9, B6, NK (2) ASM overlap based on 1Q08 Schedule; Network Analysis; Note: Indirect overlap: DL 54%, UA 54%, CO 51%, AA 31%, US 24% and NW 23% with sister city pairs of (BOS

& MHT &PVD), (MDW & ORD), (DAL & DFW), (BWI & IAD & DCA), (HOU & IAH), (JFK & LGA & EWR)

LCC(1) Overlap

Delta maintaining competitiveness with LCCs is imperative


50

R:556 at PX234 at 18.

Second, the claimed indifference to AirTran’s moves is also belied by

multiple internal emails. See Order 12-13, 21. For example, one official describing

a September 29, 2008, quarterly finance meeting attended by Anderson, stated that

“[a] ‘key consideration’ was the risk that Delta’s LCC competition, including but

not limited to AirTran, were promoting the fact that they did not have the fee.” Order

13 (quoting R557-1 at PX172); see also supra p. 32 & n.79 (collecting other emails).

Third, the timing of the decision undermines Delta’s argument. Most of the

cited evidence from other airlines came out in July.113 If Delta was simply following

the trend among legacy carriers, and did not care about any special competitive threat

from AirTran, why did it wait an additional three months to decide to impose the

fee, especially given officials’ belief that losing even “a week of new fees could be

millions” in foregone profits?114

D. Defendants’ Key Witnesses Are Not Credible.

Finally, even if Defendants’ story were more plausible, it comes from

witnesses a jury could easily disregard as not credible, given substantial

inconsistencies in their testimony.

113 See Order 5-6.

114 R:557-1 at PX255 at DBLF35579.


51

First, as already noted, Anderson’s testimony on the timing of the bag fee

decision is self-contradictory and conflicts with Delta’s representations to DOJ as

well as other testimony and evidence from the time period. See supra pp. 43-45.

Second, documents initially withheld from Plaintiffs and the DOJ belie

Anderson’s and others’ initial claims that the CLT was simply following the

recommendation of Delta’s ACS Division, which had been pushing for a first bag

fee well before the AirTran call.115

Anderson testified in his DOJ deposition that in June, “[t]he ACS folks were

of the view that we should introduce [the fee],”116 and that “Gil [West of ACS] was

clearly an advocate toward imposing the bag fee way back at the beginning.”117 He

further testified that at the time of Northwest’s July 9, 2008 announcement of its bag

fee, “the airport customer service group thought we should impose the bag fee.”118

Chief Operating Officer Steve Gorman likewise testified that by mid-July 2008, he

115 R:557-2 at PX372 at 47:16-48:7; R:200 at 29:9-30:2.

116 R:557-2 at PX372 at 47:19-20.

117 Id. at 48:6-8.

118 Id. at 51:10-20.


52

“took a very strong position, as did ACS, that we need to implement the first bag

fee.”119

However, among the thousands of documents omitted from Delta’s initial

discovery responses was evidence showing that until the AirTran earnings call, West

and ACS were in sync with Revenue Management in opposing the fee based on

uncertainty about AirTran’s reaction. In August, a Delta employee emailed West

noting that Continental had begun charging for first checked bags and asking “is it

time for us to review our policy?”120 West responded “Airtran and jetblue don’t

charge and they are our key competitors in our main hubs.”121 In a separate email to

Gorman on September 5, West said “I assume we still want to hold until airtran

moves?”122 On the same date, West proposed that the combined Delta/Northwest

airline charge no first bag fee, a recommendation that was not changed until after

the AirTran earnings call. See supra pp. 10-11. And on October 23, a few hours

before the AirTran call, West emailed a colleague stating that he had reviewed the

119 R:557-2 at PX393 at 40:13-17.

120 R:557 at PX146 at DLBAG9724.

121 Id.

122 R:557 at PX148 at DLBF187470.


53

draft Value Proposition and remarking, “[s]ounds like it[’]s about a was[h] in terms

of net revenue which would mean we would not implement 1st bag fee.”123

Likewise, although Gorman originally testified that he opposed the fee in mid-

July, in an August 22 email, Gorman flatly told a colleague “I still do not recommend

first bag fee” and acknowledged that “we are concerned competitively with CO

[Continental], Jet Blue and AirTran domestically on the 1st bag fee.”124

IV. The District Court’s Contrary Reasoning Is Unpersuasive.

Despite all the foregoing, the district court concluded that “the evidence in

this case simply does not permit a reasonable factfinder to infer the existence of a

conspiracy, as it does not tend[] to exclude the possibility that the alleged

conspirators acted independently.” Order 93 (alteration in original, citation and

internal quotation marks omitted). That conclusion is premised in misapprehensions

of the law, impermissible weighing of the evidence, and improper assessments of

witness credibility.

123 R:557-1 at PX215 at DLBAG11053.

124 R:557 at PX142 at DLTAPE3404.


54

A. The District Court Erred In Dismissing The Evidence That Defendants Were Acting In Conflict With Their Unilateral Economic Self-Interest.

The district court acknowledged that acting in a manner inconsistent with

economic self-interest absent collusion is a plus factor. Order 86. But it held that

no such plus factor was established here because the “overwhelming evidence before

the Court reflects Defendants’ subjective beliefs that there were valid reasons to

impose a first-bag fee, including Defendants’ need for revenue during an economic

downturn.” Order 89. This conclusion is unsupportable.

First, the question was not whether Defendants had “valid reasons to impose

a first-bag fee.” Order 89. It is whether independently imposing the fee was in each

airline’s economic self-interest. Williamson Oil, 346 F.3d at 1310. And, as

discussed, Plaintiffs provided substantial evidence that each airline had concluded

that imposing the first bag fee would only increase net revenue if both acted together.

That being so, the fact that Defendants had a desperate “need for revenue during an

economic downturn,” Order 89, shows that they had an especially strong motive for

collusion, not that collusion was somehow implausible.

Second, the district court’s assertion that other airlines had “introduced first-

bag fees and reported them to be profitable and to have resulted in no significant

share-shift,” Order 88, ignores the substantial evidence that these particular airlines

were differently situated. See supra pp. 49-50. AirTran admitted publicly that


55

independent action was not in its self-interest. And Delta’s own Value Proposition

analysis explained why Delta was far more exposed to competition from LCCs like

AirTran than were the legacy carriers that had adopted the fee.

B. An Invitation To Collude Followed By Parallel Conduct Is A Plus Factor, With No Exception For Public Earnings Calls.

The district court held that AirTran’s earnings call did not count as a plus

factor because it was “made publicly,” “concerned a topic that was of interest to the

airline industry,” and addressed “the type of information companies legitimately

convey to their shareholders.” Order 71-72 (citation and internal quotation marks

omitted). That legal conclusion was wrong.

First, there should be no question that as a general matter, an invitation to

collude, followed by conduct consistent with acceptance of the offer, is a plus factor.

See, e.g., Petruzzi’s, 998 F.2d at 1242; Gainesville, 573 F.2d at 300-01. The

invitation is direct evidence of half of the collusive bargain. When combined with

circumstantial evidence of acceptance through parallel conduct, an invitation is

strong proof of concerted action. To take a general example, suppose the police

overhear one side of a phone conversation in which a suspect provides a broker an

insider stock tip, suggesting that the broker buy the stock and split the profits with

the tipper. Suppose further that the stockbroker later buys the stock. Surely that is

sufficient evidence to go to a jury to decide whether the parties formed an insider

trading conspiracy.


56

The district court expressed concern that viewing invitations as plus factors

would allow a competitor to “immobilize” the invitee. Order 74. That speculation

cannot justify the gaping hole in antitrust coverage the court’s rule creates. See

Foley, 598 F.2d at 1334-35. Under that rule, any company could simply declare to

its stockholders that it will follow a competitor’s price increases. And any

competitor that might be inclined to accept a private offer of collusion can then raise

prices, confident the first firm will uphold its end of the bargain, having promised

its own stockholders it would do so. There is no material difference between that

course of events and the classic price fixing Section 1 prohibits.

At the same time, the prospect of sham offers to collude is fanciful. For one

thing, companies are unlikely to make such offers for the simple reason that they are

independently illegal under Section 5 of the Federal Trade Commission Act, 15

U.S.C. § 45, and (in certain cases) Section 2 of the Sherman Act, 15 U.S.C. § 2.

Order 67-69 (collecting citations). The prospect of a government enforcement action

should be disincentive enough, but why would a competitor want to “immobilize” a

competitor from raising prices anyway? In a competitive market, raising prices

would lose the competitor market share. In an oligopoly, it would provide a potential

opportunity for price following, to everyone’s profit. Unsurprisingly, the district

court cited no evidence of strategic sham offers to collude ever actually occurring.


57

In any event, courts and juries can be trusted to distinguish between fake and

genuine offers to collude. Moreover, treating invitations as plus factors “only

create[s] a rebuttable presumption of a conspiracy which the defendant may defeat

with his own evidence; this further ensures that unilateral or procompetitive conduct

is not punished or deterred.” Todorov, 921 F.2d at 1456 n.30. In this case, for

example, Plaintiffs will prevail only if a jury rejects Defendants’ claim that Delta

adopted the bag fee for reasons independent of AirTran’s offer.

This is not to deny that an uninvited invitation to collude (like an uninvited

insider stock tip) can put the invitee in an uncomfortable position, whether the offer

is genuine or not. But innocent invitees can take steps to protect themselves. If the

company would not have raised prices absent the offer to collude, it can simply

disregard the offer, leaving it no worse off than it would have been if the offer were

never made. If the invitee was intending on increasing prices anyway, it can

minimize the risk of any misunderstanding by expressly and unequivocally rejecting

the offer, reporting the illegal invitation to the authorities,125 and then rigorously

documenting the independent basis for its decision.

Second, the district court held that, even assuming invitations generally are

plus factors, a special exception should be created for public invitations made in

125 See, e.g., United States v. Am. Airlines, Inc., 743 F.2d 1114, 1116 (5th Cir.

1984).


58

earnings calls. Order 69-72. But that exemption cannot be squared with Section 1’s

text or purposes. See In re Coordinated Pretrial Proceedings in Petro. Prods.

Antitrust Litig., 906 F.2d 432, 447 (9th Cir. 1990) (rejecting claim that

communications “cannot support an inference of conspiracy because the information

was ‘publicly available’”).

The statute’s plain terms prohibit every “conspiracy . . . in restraint of trade,”

without limitation. 15 U.S.C. § 1. There is also no reason to think that invitations

made in earnings calls are less dangerous than private solicitations. Quite the

opposite – in this case, for example, the public context made the offer far more

credible because if AirTran failed to follow through on its promise, investors would

want to know why.

The district court’s fear about distorting markets by depriving investors of

important information, Order 71-72, is also misplaced. Plaintiffs are not asking that

the “‘public announcement of a pricing decision . . . be twisted into an invitation or

signal to conspire.’” Order 73 (citation omitted). Plaintiffs are not, for example,

claiming AirTran offered to collude simply by stating it was not planning on

adopting a first bag fee now but might seriously consider adopting one in the future.

It was AirTran’s very specific linking its decision to Delta’s behavior that crossed

the line between legitimately informing investors and unlawfully offering to collude.


59

So the question is whether antitrust law should accommodate investor interest

in knowing what the company would do in response to moves by its competitors.

The answer is that antitrust law has an exceedingly important interest in preserving

such competitive uncertainty. That uncertainty often is all that stands between

consumers and “cartel-like” pricing in concentrated markets like the airline industry.

AREEDA ¶ 1410b; see also id. ¶ 1430c (“[U]ncertainty about rivals’ behavior may

force each oligopolist to act more like a perfect competitor . . . .”).

On the other side of the scale, legitimate investor interest in such information

is limited,126 as illustrated by the fact that such open invitations to collude are already

forbidden by other provisions of federal competition law. See supra p. 56.

Moreover, Delta’s own Antitrust Compliance Manual, and Delta officials’ surprise

at AirTran’s statements, makes clear that such remarks are not commonly offered to

investors.127

C. The Evidence Of Back-Channel Communications Was Sufficient To Permit A Jury To Decide That Defendants Secretly Colluded.

Even setting aside the earnings call, there was sufficient evidence to allow a

jury to conclude that Defendants had secretly agreed to joint action through back-

126 See also R:556-1 at PX400 ¶¶ 43-60 (Plaintiffs’ Expert Amended Merits

Rebuttal Report of Hal J. Singer, Ph.D.).

127 See R:556-1 at PX357 at DLBF39729.


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channel communications. The district court held Fasano’s communications could

not be a plus factor absent “evidence that Fasano ever communicated with anybody

involved in Delta’s first-bag fee decision.” Order 78. But this was no case of idle

“shop talk” among baggage handlers. Order 77 (citation and internal quotation

marks omitted). The entire point of Fasano’s mission – undertaken at the direction

of AirTran’s highest official – was to get a message to Delta decisionmakers in order

to affect their decisionmaking. And, in fact, Fasano represented to his superiors that

he met with someone at Delta “very connected on the high level operational and

planning side of the house.”128 While Defendants are entitled to try to convince the

jury that Fasano was lying, such credibility determinations fall uniquely within the

province of the jury.

D. There Was Ample Evidence To Allow A Jury To Conclude Delta Accepted AirTran’s Invitation To Collude.

The district court also wrongly disregarded the substantial evidence that Delta

accepted AirTran’s offer to collude. Order 79-86.

First, the court concluded that the evidence showed nothing more than

“‘intense efforts’ to monitor competitors’ activity.” Order 83. But Defendants were

not simply monitoring each other’s activity. AirTran overtly offered to follow

Delta’s lead in imposing a first bag fee, and Delta was trying to decide whether to

128 R:556 at PX126.


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accept that proposal for joint action. There is nothing normal about that, even in an

oligopoly.

Second, the court stated that “Delta’s decision not to impose a first-bag fee

during the summer of 2008 does not make any subsequent revisiting of that decision

conspiratorial, especially in light of the fact that every other legacy airline except

Alaska had adopted first-bag fees by the time Delta did so.” Order 84. But that is

completely non-responsive to Plaintiffs’ argument, which is not that Delta’s decision

to revisit the bag fee question was conspiratorial but that its ultimate decision to

adopt the fee was conspiratorial because Delta would not have adopted it absent

AirTran’s promise to act jointly.

Third, the court reasoned that the Value Proposition’s analysis of “possible

competitor responses” was a “strong indicator” that “there was no actual agreement

among the airlines, as it shows that [Delta was] uncertain of [its] rivals’ potential

reaction.” Order 85 (alterations in original, citation and internal quotation marks

omitted). That claim is baffling. The Value Proposition set the likelihood of AirTran

following at 90%. How much more certain could Delta have been? Moreover, a

jury could find that whatever Delta’s intentions were before reviewing the Value

Proposition, Delta agreed to collude after considering the study and AirTran’s

earnings call.


62

Fourth, the court also reasoned that because some Delta employees viewed

AirTran’s public invitation to collude as “inappropriate,” it was “less plausible” that

Delta would have accepted the invitation. Order 85 (internal quotation marks

omitted). But that inference is unfounded – recognizing that an offer is improper,

then engaging in the invited conduct anyway, is hardly strong proof of innocence.

In any case, Anderson – who Defendants insist was the only relevant decisionmaker

– was not among those testifying he found AirTran’s offer inappropriate. Order 21

n.15. And even if these statements provided some support for Defendants’ theory,

they are more than countered by the substantial evidence supporting a contrary

conclusion.

Fifth, the court relied on the purported fact that “Delta’s employees testified

uniformly that AirTran’s comments were simply not discussed as a factor at Delta’s

October 27, 2008 CLT meeting.” Order 85-86. But a jury would not be compelled

to accept such “bald denial of concerted action,” DeLong, 887 F.2d at 1515,

particularly given the lack of contemporaneous documentation supporting the claim,

as well as the participants’ abundant incentive to lie and proven untrustworthiness.

See supra pp. 50-53.

In any event, the district court’s description of the testimony is simply wrong.

Delta President Ed Bastian, for example, acknowledged that the earnings call was

discussed. See R:366 at 76:13-14, 77:6-9 (“Q[.] Going back to the discussion at the


63

[October 27] meeting for a moment . . . . Was there any mention of statements that

Mr. Fornaro had made a few days previously? A[.] I believe somebody indicating

that that had come up on the call.”). In addition, AirTran’s potential reaction was

central to the Value Proposition analysis, which no one disputes was distributed and

discussed at the meeting. See supra pp.16-18; R:369-1 at 188:1-6.

E. The Record Must Be Viewed In Light Of Delta’s Failure To Preserve And Turn Over Relevant Evidence.

Finally, any alleged deficiencies in Plaintiffs’ proof – e.g., the lack of email

documentation regarding how far up Delta’s ranks Fasano’s messages reached –

must be viewed in light of Delta’s abysmal record of preserving evidence and

complying with discovery obligations. Even setting aside whether that conduct

warranted an evidentiary sanction, that context undermines any inference that

Plaintiffs’ failure to produce the documents means that no such communications

took place. Cf. Vodusek v. Bayliner Marine Corp., 71 F.3d 148, 156 (4th Cir. 1995)

(noting that it is generally permissible for a “jury to draw adverse inferences from a

party’s failure to present evidence, the loss of evidence, or the destruction of

evidence”).


64

CONCLUSION

For the foregoing reasons, the Court should reverse the district court’s grant

of summary judgment.

Dated: September 1, 2017 Respectfully submitted,

/s/ Kevin K. Russell

Daniel A. Kotchen Kevin K. Russell Daniel L. Low Eric Citron KOTCHEN & LOW LLP GOLDSTEIN & RUSSELL, P.C. 1745 Kalorama Rd. NW 7475 Wisconsin Ave. Suite 101 Suite 850 Washington, DC 20009 Bethesda, MD 20814 (202) 471-1995 (202) 362-0636 R. Bryant McCulley Robert S. Wood MCCULLEY MCCLUER PLLC RICHARDSON, PATRICK, WESTBROOK 1022 Carolina Blvd. & BRICKMAN, LLC Suite 300 1037 Chuck Dawley Blvd., Bldg. A Isle of Palms, SC 29451 Mt. Pleasant, SC 29464 (205) 238-6757 (843) 727-6500


CERTIFICATE OF COMPLIANCE WITH TYPE-VOLUME LIMIT, TYPEFACE REQUIREMENTS, AND TYPE STYLE REQUIREMENTS

Pursuant to Federal Rules of Appellate Procedure 28(a)(10) and 32(g)(1), the

undersigned hereby certifies that this brief complies with the type-volume, typeface,

and type style requirements of Federal Rule of Appellate Procedure 32(a).

1. This brief complies with the type-volume limitation of Federal Rule of

Appellate Procedure 32(a)(7)(B)(i) because this brief contains 12,938 words,

excluding the parts of the brief exempted by Federal Rule of Appellate

Procedure 32(f) and 11th Cir. R. 32-4.

2. This brief complies with the typeface requirements of Federal Rule of

Appellate Procedure 32(a)(5) and the type style requirements of Federal Rule

of Appellate Procedure 32(a)(6) because this brief has been prepared in a

proportionally spaced typeface using Microsoft Word 2016 in 14-point Times

New Roman Font.

Dated: September 1, 2017



CERTIFICATE OF SERVICE

I, Kevin K. Russell, a member of the Bar of this Court, hereby certify that on

this 1st day of September, 2017, I electronically filed the foregoing brief with the

Court using the CM/ECF system, which will send notice and an electronic copy of

the brief to participating counsel for the parties. I also sent via overnight mail (i)

seven copies to the Clerk of the Court and (ii) a copy to the following counsel for

Defendants:

Randall L. Allen Samuel R. Rutherford ALSTON & BIRD LLP 1201 West Peachtree St. Atlanta, GA 30309 James P. Denvir Scott E. Gant Michael S. Mitchell BOIES, SCHILLER & FLEXNER LLP 5301 Wisconsin Ave. NW Washington, DC 20015 Alden L. Atkins Vincent C. van Panhuys David C. Smith VINSON & ELKINS L.L.P. 2200 Pennsylvania Ave. NW Suite 500 – West Washington, DC 20037

Roger W. Fones MORRISON & FOERSTER LLP 2000 Pennsylvania Ave. NW Suite 6000 Washington, DC 20006 Thomas W. Rhodes Wm. Parker Sanders SMITH, GAMBRELL & RUSSELL, LLP Suite 3100, Promenade II 1230 Peachtree St. NE Atlanta, GA 30309



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