American Airlines 2002 Annual Report Download - page 20

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ITEM 3. LEGAL PROCEEDINGS
On July 26, 1999, a class action lawsuit was filed, and in November 1999 an amended complaint was filed,
against AMR Corporation, American Airlines, Inc., AMR Eagle Holding Corporation, Airlines Reporting Corporation,
and the Sabre Group Holdings, Inc. in the United States District Court for the Central District of California, Western
Division (Westways World Travel, Inc. v. AMR Corp., et al.). The lawsuit alleges that requiring travel agencies to
pay debit memos to American for violations of American’s fare rules (by customers of the agencies): (1) breaches
the Agent Reporting Agreement between American and AMR Eagle and the plaintiffs; (2) constitutes unjust
enrichment; and (3) violates the Racketeer Influenced and Corrupt Organizations Act of 1970 (RICO). The as yet
uncertified class includes all travel agencies who have been or will be required to pay money to American for debit
memos for fare rules violations from July 26, 1995 to the present. The plaintiffs seek to enjoin American from
enforcing the pricing rules in question and to recover the amounts paid for debit memos, plus treble damages,
attorneys’ fees, and costs. The Company intends to vigorously defend the lawsuit. A final adverse court decision
could impose restrictions on the Company’s relationships with travel agencies which, restrictions could have an
adverse impact on the Company.
On May 13, 1999, the United States (through the Antitrust Division of the Department of Justice) sued
AMR Corporation, American Airlines, Inc., and AMR Eagle Holding Corporation in federal court in Wichita, Kansas
(United States v. AMR Corporation, et al, No. 99-1180-JTM, United States District Court for the District of Kansas).
The lawsuit alleges that American unlawfully monopolized or attempted to monopolize airline passenger service to
and from Dallas/Fort Worth International Airport (DFW) by increasing service when new competitors began flying
to DFW, and by matching these new competitors’ fares. The Department of Justice seeks to enjoin American from
engaging in the alleged improper conduct and to impose restraints on American to remedy the alleged effects of its
past conduct. On April 27, 2001, the U.S. District Court for the District of Kansas granted American’s motion for
summary judgment. On June 26, 2001, the U.S. Department of Justice appealed the granting of American’s
motion for summary judgment (United States v. AMR Corporation, et al, No. 01-3203, United States District Court
of Appeals for the Tenth Circuit), and on September 23, 2002, the parties presented oral arguments to the 10th
Circuit Court of Appeals, which has not yet issued its decision. The Company intends to defend the lawsuit
vigorously. A final adverse court decision imposing restrictions on the Company’s ability to respond to competitors
would have an adverse impact on the Company.
Between May 14, 1999 and June 7, 1999, seven class action lawsuits were filed against AMR Corporation,
American Airlines, Inc., and AMR Eagle Holding Corporation in the United States District Court in Wichita, Kansas
seeking treble damages under federal and state antitrust laws, as well as injunctive relief and attorneys’ fees (King
v. AMR Corp., et al.; Smith v. AMR Corp., et al.; Team Electric v. AMR Corp., et al.; Warren v. AMR Corp., et al.;
Whittier v. AMR Corp., et al.; Wright v. AMR Corp., et al.; and Youngdahl v. AMR Corp., et al.). Collectively, these
lawsuits allege that American unlawfully monopolized or attempted to monopolize airline passenger service to and
from DFW by increasing service when new competitors began flying to DFW, and by matching these new
competitors’ fares. Two of the suits (Smith and Wright) also allege that American unlawfully monopolized or
attempted to monopolize airline passenger service to and from DFW by offering discounted fares to corporate
purchasers, by offering a frequent flyer program, by imposing certain conditions on the use and availability of
certain fares, and by offering override commissions to travel agents. The suits propose to certify several classes of
consumers, the broadest of which is all persons who purchased tickets for air travel on American into or out of
DFW from 1995 to the present. On November 10, 1999, the District Court stayed all of these actions pending
developments in the case brought by the Department of Justice (see above description). As a result, to date no
class has been certified. The Company intends to defend these lawsuits vigorously. One or more final adverse
court decisions imposing restrictions on the Company’s ability to respond to competitors or awarding substantial
money damages would have an adverse impact on the Company.