American Airlines 2008 Annual Report Download - page 25

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ITEM 3. LEGAL PROCEEDINGS
Between April 3, 2003 and June 5, 2003, three lawsuits were filed by travel agents, some of whom opted out of a
prior class action (now dismissed) to pursue their claims individually against American, other airline defendants,
and in one case, against certain airline defendants and Orbitz LLC. The cases, Tam Travel et. al., v. Delta Air
Lines et. al., in the United States District Court for the Northern District of California, San Francisco (51 individual
agencies), Paula Fausky d/b/a Timeless Travel v. American Airlines, et. al, in the United States District Court for
the Northern District of Ohio, Eastern Division (29 agencies) and Swope Travel et al. v. Orbitz et. al. in the United
States District Court for the Eastern District of Texas, Beaumont Division (71 agencies) were consolidated for pre-
trial purposes in the United States District Court for the Northern District of Ohio, Eastern Division. Collectively,
these lawsuits seek damages and injunctive relief alleging that the certain airline defendants and Orbitz LLC: (i)
conspired to prevent travel agents from acting as effective competitors in the distribution of airline tickets to
passengers in violation of Section 1 of the Sherman Act; (ii) conspired to monopolize the distribution of common
carrier air travel between airports in the United States in violation of Section 2 of the Sherman Act; and that (iii)
between 1995 and the present, the airline defendants conspired to reduce commissions paid to U.S.-based travel
agents in violation of Section 1 of the Sherman Act. On September 23, 2005, the Fausky plaintiffs dismissed their
claims with prejudice. On September 14, 2006, the court dismissed with prejudice 28 of the Swope plaintiffs. On
October 29, 2007, the court dismissed all actions. The Tam plaintiffs have appealed the court’s decision. The
Swope plaintiffs have moved to have their case remanded to the Eastern District of Texas. American continues to
vigorously defend these lawsuits. A final adverse court decision awarding substantial money damages or placing
material restrictions on the Company’s distribution practices would have a material adverse impact on the
Company.
On July 12, 2004, a consolidated class action complaint that was subsequently amended on November 30, 2004,
was filed against American and the Association of Professional Flight Attendants (APFA), the union which
represents American’s flight attendants (Ann M. Marcoux, et al., v. American Airlines Inc., et al. in the United
States District Court for the Eastern District of New York). While a class has not yet been certified, the lawsuit
seeks on behalf of all of American’s flight attendants or various subclasses to set aside and to obtain damages
allegedly resulting from the April 2003 Collective Bargaining Agreement referred to as the Restructuring
Participation Agreement (RPA). The RPA was one of three labor agreements American successfully reached with
its unions in order to avoid filing for bankruptcy in 2003. In a related case (Sherry Cooper, et al. v. TWA Airlines,
LLC, et al., also in the United States District Court for the Eastern District of New York), the court denied a
preliminary injunction against implementation of the RPA on June 30, 2003. The Marcoux suit alleges various
claims against the APFA and American relating to the RPA and the ratification vote on the RPA by individual APFA
members, including: violation of the Labor Management Reporting and Disclosure Act (LMRDA) and the APFA’s
Constitution and By-laws, violation by the APFA of its duty of fair representation to its members, violation by
American of provisions of the Railway Labor Act (RLA) through improper coercion of flight attendants into voting or
changing their vote for ratification, and violations of the Racketeer Influenced and Corrupt Organizations Act of
1970 (RICO). On March 28, 2006, the district court dismissed all of various state law claims against American, all
but one of the LMRDA claims against the APFA, and the claimed violations of RICO. On July 22, 2008, the district
court granted summary judgment to American and APFA concerning the remaining claimed violations of the RLA
and the duty of fair representation against American and the APFA (as well as one LMRDA claim and one claim
against the APFA of a breach of its constitution). On August 20, 2008, a notice of appeal was filed on behalf of the
purported class of flight attendants. Although the Company believes the case against it is without merit and both
American and the APFA are vigorously defending the lawsuit, a final adverse court decision invalidating the RPA
and awarding substantial money damages would have a material adverse impact on the Company.
On February 14, 2006, the Antitrust Division of the United States Department of Justice (the “DOJ”) served the
Company with a grand jury subpoena as part of an ongoing investigation into possible criminal violations of the
antitrust laws by certain domestic and foreign air cargo carriers. At this time, the Company does not believe it is a
target of the DOJ investigation. The New Zealand Commerce Commission notified the Company on February 17,
2006 that it is also investigating whether the Company and certain other cargo carriers entered into agreements
relating to fuel surcharges, security surcharges, war risk surcharges, and customs clearance surcharges. On
February 22, 2006, the Company received a letter from the Swiss Competition Commission informing the
Company that it too is investigating whether the Company and certain other cargo carriers entered into
agreements relating to fuel surcharges, security surcharges, war risk surcharges, and customs clearance
surcharges. On March 11, 2008, the Company received from the Swiss Competition Commission a request for
information concerning, among other things, the scope and organization of the Company’s activities in
Switzerland. On December 19, 2006 and June 12, 2007, the Company received requests for information from the
European Commission seeking information regarding the Company's corporate structure, and revenue and pricing
announcements for air cargo shipments to and from the European Union. On January 23, 2007, the Brazilian
competition authorities, as part of an ongoing investigation, conducted an unannounced search of the Company’s