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UK Objections To £73.5M Fuel Surcharge Deal Dropped

Law360, New York (April 15, 2009) -- Three U.K. citizens have agreed to drop their objections to a £73.5 million ($110 million) settlement of price-fixing claims against British Airways PLC and Virgin Atlantic Airways Ltd., clearing the way for U.K. airline passengers to obtain compensation.

Hausfeld LLP, co-counsel to the plaintiffs in the litigation that alleged the two airlines had illegally schemed to fix artificially high fuel surcharge prices, said Wednesday a settlement had been reached with the three objectors, who had been waging a battle in U.S. courts to get the U.K. portion of the multimillion-dollar 2008 settlement canceled.

In February 2008, British Airways PLC and Virgin Atlantic Airways Ltd. agreed to settle claims brought by passengers who sued the airlines for fixing fuel prices on international flights. The airlines agreed to pay $59 million to American passengers and £73.5 million to British passengers who bought long-haul tickets from either BA or Virgin between Aug. 11, 2004, and March 23, 2006.

The deal resolved an antitrust class action filed against the carriers in a U.S. federal court, and marked the first time an action has been settled collectively under both U.S. and U.K. law, plaintiffs' lawyers said.

Hausfeld LLP said Wednesday it was able to reach a settlement with the three UK citizens, whose objections had stalled payments to U.K. victims of the fuel surcharge scheme.

Last fall, Duncan Vere-Hopegood, Dominic Hagger and Tracy Hagger, all members of the U.K. settlement class, raised objections to the U.K. portion of the settlement reached with BA and Virgin, arguing that U.S. courts should not have assumed jurisdiction over U.K. claims.

In an October court filing, the objectors argued that antitrust claims involving U.K. victims properly belonged in U.K. courts, and said the settlement could provide future encouragement for forum shopping, noting that U.S. antitrust laws are typically more generous to plaintiffs than other legal systems.

“Indeed it opens the Pandora's box of antitrust lawsuits throughout the world being resolved by U.S. courts,” the objectors argued. “This case is not just an exceptional case, it is unprecedented. Compelling circumstances clearly exist to decline jurisdiction.”

But Judge Charles R. Breyer of the U.S. District Court for the Northern District of California disagreed, saying in an October order that the U.K. settlement class claims and the U.S. settlement class claims stemmed from the same controversy, allowing the court to exercise supplemental jurisdiction.

“If defendants had objected to jurisdiction, or if the settlement was a traditional opt-out settlement rather than an opt-in, or if there was already a similar case pending in the United Kingdom, the court agrees that the exercise of supplemental jurisdiction might be unwarranted. In the unique circumstances of this case, however, the court finds that the exercise of jurisdiction is appropriate,” the court said. The objectors appealed that decision in November.

Michael D. Hausfeld, chairman of Hausfeld LLP, confirmed Wednesday that the objectors have now dropped their appeal, but declined to comment on the terms of the agreement made with the three objectors. An attorney for the objectors could not immediately be reached for comment Wednesday.

An estimated 5.6 million passengers stand to benefit under the U.K. portion of the settlement, and refunds will be paid to U.K. claimants soon. Passengers have until December 2012 to claim their refunds.

“Since we announced this settlement, over 100,000 individuals and businesses have applied for refunds, which were due to be processed in the last quarter of 2008,” said Michael D. Hausfeld, chairman of Hausfeld LLP. “While it was disappointing that this unprecedented objection was raised in the first place, we are pleased a settlement has now been reached with the objectors – meaning that refunds will now be processed promptly.”

Each ticket purchaser can recover one-third of the fuel levy. BA raised its fuel surcharge price $4 a flight in May 2004 and later raised it numerous times to a level of more than $125 for international flights.

Virgin introduced a fuel surcharge a week after BA. The plaintiffs alleged that the two airlines' surcharges rose in a lockstep pattern, both repeatedly rising within days of each other.

BA revealed in June 2007 that the U.S. Department of Justice and the U.K. Office of Fair Trading were looking into alleged cartel activity related to the pricing of passenger air transportation, including fuel surcharges.

A deluge of class actions followed. More than 90 cases were consolidated into the case in the U.S. District Court for the Northern District of California.

The plaintiffs are represented in this matter by Hausfeld LLP and Cotchett Pitre & McCarthy.

British Airways is represented in this matter by Sullivan & Cromwell LLP, Greenberg Traurig LLP and Wright Robinson Osthimer & Tatum. Virgin is represented by Simpson Thacher & Bartlett LLP, Peabody & Arnold LLP, Cairncross & Hempelmann PS and Richards McGettigan Reilly & West PC.

The case is In Re: International Air Transportation Surcharge Antitrust Litigation, case number M:06-cv-01793, in the U.S. District Court for the Northern District of California.

Practice Areas: Antitrust / Competition