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Mystery Files May Be Key in Antitrust Case

By Kevin Brass



Mysterious documents slated for shredding seven years ago may play a key role in travel agents’ current antitrust lawsuits against the major airlines.

The airlines turned over the documents, which included e-mails, memos and phone logs, during the discovery process for the industry’s lawsuit against the airlines in the mid-’90s, which accused the carriers of conspiring to lower agents’ commission caps.

According to attorneys of the agents, the documents provide damaging evidence of collusion among airline executives.

However, at the airlines’ request, the court ordered all the documents destroyed when the commission-cap lawsuit was settled in 1996.

That might have been the end of the evidence, except for an unrelated case brought by a California travel agent a year earlier against American Airlines and its then subsidiary, Sabre Travel Information Network division.

Filed in Texas, the case brought by Steve Sedgwick of First Class International of Foothill Ranch, Calif., charged that American deliberately withheld information about its commission cut before he signed a new commission-reporting deal with Sabre.

Before the commission-cap case was settled, Sedgwick subpoenaed American’s papers, saving them from destruction.

Thanks to that case, all of the documents are currently under a protective order, which prevents their removal or destruction, according to Bradley Coxe of Anderson, Daniel & Coxe of Wrightsville Beach, N.C.

Coxe’s firm is representing Sarah Futch Hall in her class-action antitrust suit against the airlines.

A hearing in the first proposed settlement in that case was held this month in U.S. District Court in Raleigh, N.C. A ruling by the judge is expected in the next several weeks.

The Hall case, scheduled for a February trial, is one of several current lawsuits charging the airlines with improperly working together to cut and eliminate commissions to travel agents.

Last year, attorneys representing Hall traveled to Texas to demand the right to review the documents. The court released some but not all of the papers.

Coxe declined to detail the contents of the documents, only saying that they “complemented some of the information we’ve already obtained.”

American Airlines’ media relations department did not return a call seeking comment.

Although most of the records are more than eight years old, they may still prove damaging to the airlines, according to attorney Alexander Anolik, who was involved in the original commission-cap case and now represents ARTA in the Hall case.

He describes the records as “very important.” The papers “show modus operandi,” Anolik said. “They show a pattern of collusive activities.”

But it remains unclear whether the documents specifically demonstrate a conspiracy among the airlines.

If we had a smoking gun we wouldn’t have settled the cap case, said Paul Ruden, American Society of Travel Agents’ senior vice president for legal and industry affairs.

Sedgwick declined to discuss the contents of the documents, except to note that American has spent “seven years and half a million dollars” fighting release of the documents.

“Their actions illustrate the sensitivity of the evidence,” Sedgwick said.

In 1998, a judge fined Sedgwick almost $20,000 after Sedgwick told a reporter that the documents “indicate American’s senior management was aware that the caps were imminent months before they were imposed in February 1995.”

The judge ruled that Sedgwick had breached American’s confidentiality agreement.

Sedgwick is still seeking to introduce the documents in his own seven-year-old case.

Sedgwick lost his case against American and Sabre in 1998 when a judge ruled that the airline was protected by the Airline Deregulation Act, which gave the airlines broad waivers from state regulations.

In February 2002 the U.S. Court of Appeals for the Fifth Circuit affirmed the decision; Sedgwick appealed to the Supreme Court, which declined to hear the case.

But Sabre is still suing Sedgwick and First Class for breach of contract, alleging First Class still owes Sabre under its original contract, as well as more than $250,000 in attorney fees. A trial is scheduled for October.

American has asked a judge to prevent Sedgwick from using its internal documents, which Sedgwick believes should be reviewed in open court.

“We have always felt it was important for the facts to get to a jury so they can decide what was right and what was wrong,” Sedgwick said.