Wednesday, January 21, 2015

Air Cargo Price Fixing Scandal Takes Another Turn as Carriers Fight Freight Forwarding Outfit

US Lawsuit Faces Opposition from Defendants
Shipping News Feature

GERMANY – US – WORLDWIDE – Some of the airlines named in the air cargo carrier price fixing lawsuit brought by Schenker, the freight forwarding and logistics arm of Deutsche Bahn, have filed motions to dismiss the action, one on the grounds that the statute of limitations had expired and the other arguing that the suit is not for the jurisdiction of the US Court, alleging that the corporation was ‘forum shopping’.

In its complaint filed last August, Schenker alleged that seven air freight carriers: Air France, KLM, Martin Air, Cargolux, Qantas, SAS, and ANA, conspired to fix surcharge rates for various air cargo routes to, from and within the United States. This suit is just the latest in a series of investigations and claims concerning anticompetitive behaviour in the air cargo industry, which began in 2006 when various competition regulators the world over organised raids of the offices of numerous carriers. Airlines have paid billions of dollars in fines to competition agencies throughout the world and nearly a billion more dollars in settlements to direct purchaser plaintiffs in a multi-district litigation in US federal court.

All Nippon Airways and Cargolux moved the district court to dismiss the action on the grounds of forum non conveniens under the Second Circuit’s precedent in Capital Currency Exch., N.V. v. Nat’l Westminster Bank PLC. According to these defendants, Schenker’s choice of forum should be afforded little deference because Schenker is a foreign corporation that was forum shopping, choosing the US for its treble damages whereas Germany is a more adequate alternative forum, especially given that Schenker is owned by the German government and that many of the witnesses and documents are located in Europe. In December 2013, Schenker filed a lawsuit in a German court against Deutsche Lufthansa, British Airways, Singapore Airlines, Swiss Airlines, Cargolux, SAS, Air Canada, Cathay Pacific, Japan Airlines, LAN Airlines, and Qantas.

Qantas filed a separate motion to dismiss on the basis that Schenker filed its claims after the Clayton Act’s four year statute of limitations had run. Qantas argues that if Schenker had performed the requisite due diligence, then it would have been aware of its claims on February 15, 2006, the day after which it was reported that the DOJ organised the raids of the airlines. Even considering that the statute of limitations was tolled until May 2011 when Schenker opted out of the middle-district class action against the airlines, Qantas contended that Schenker had to file its complaint before June 1, 2014, which the German firm failed to do.

Schenker is seeking damages estimated at $2.5 billion, approximately $370 million in the US and $2.19 billion in Germany including interest, from the cargo carriers found guilty by the DOJ, the European Commission and other international authorities for operating a global price-fixing cartel. The US portion could increase to an estimated $1.1 billion if the court awards treble damages in the case.

One interesting facet of this case is one which nobody has yet seemed to voice. Although Schenker are claiming that it is the victim of this scandal, one might assume that any increase in transport costs at the time would naturally be passed on to the shippers and therefore they, not the forwarder, would be the aggrieved party. Should Schenker win the case will they have to evidence to what extent the loss was theirs, as opposed to their clients, and then pass on any surplus to those who actually footed the bill?

Schenker AG v. Societe Air France, et al., case number 1:14-cv-04711.