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From Antitrust Law Daily, September 17, 2014

Discovery needed to gauge DHL's knowledge of antitrust claim prior to United’s bankruptcy

By Jeffrey May, J.D.

Delivery service DHL might not have known that it had a potential antitrust claim against United Air Lines for conspiring to fix prices prior to confirmation of the defending airline’s bankruptcy reorganization plan in 2006, the federal district court in Brooklyn, New York, has decided. United failed to convince the court on a motion to dismiss that the 2011 claim was discharged in bankruptcy because DHL knew or should have known of its claim in time to present it in the bankruptcy proceeding (DPWN Holdings (USA), Inc. v. United Air Lines, Inc., September 16, 2014, Gleeson, J.).

The matter is on remand from the Second Circuit. In 2011, DHL filed its suit, alleging that United was involved in a conspiracy with other airlines providing freight shipping services to fix fuel surcharges. In 2012, the district court denied United’s motion to dismiss based on its discharge in bankruptcy but certified its ruling for interlocutory appeal. On March 27, 2014, the U.S. Court of Appeals in New York City remanded the case, noting its skepticism of DHL's contentions regarding its knowledge of the claim. The appellate court concluded that the district court applied an incorrect standard in accepting as true DHL’s allegation that it was not aware of, or with due diligence could not have become aware of, sufficient facts to plead an antitrust claim in the context of a bankruptcy proceeding.

The district court has now, once again, denied United’s motion to dismiss. The court could not conclude, as a matter of law, that DHL did know (or reasonably should have known) of its antitrust claim in time for it to be discharged in bankruptcy. The plaintiff claimed that it did not have any direct evidence of United’s participation in the alleged conspiracy until July 5, 2010, when DHL received evidence through settlement with another airfreight carrier. While DHL was aware of other facts that suggested a conspiracy, and that United might have participated, the court refused to weigh competing allegations to determine what DHL knew and when. Discovery was needed before DHL’s professed ignorance could properly be assessed.

The court predicted that the “question of what DHL knew and when will no doubt be front and center at the summary judgment stage.” It also suggested in a footnote, that “Rule 11 sanctions would certainly attach” if, following discovery, the complaint were found to be dishonest.

The case is 11-CV-564 (JG).

Attorneys: Garret G. Rasmussen (Orrick, Herrington & Sutcliffe LLP) for DPWN Holdings USA, Inc. Charles A. Rothfeld (Mayer Brown LLP) for United Air Lines, Inc.

Companies: DPWH Holdings USA, Inc.; United Air Lines, Inc.

MainStory: TopStory Antitrust NewYorkNews

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