United Airlines 2010 Annual Report Download - page 33

ITEM 3. LEGAL PROCEEDINGS.
Air Cargo/Passenger Surcharge Investigations
In February 2006, the European Commission (the “Commission”) and the United States Department of
Justice (the “DOJ”) commenced an international investigation into what government officials described as a
possible price fixing conspiracy relating to certain surcharges included in tariffs for carrying air cargo. The DOJ
issued a grand jury subpoena to United and the Commission conducted an inspection at the Company’s offices in
Frankfurt. United is considered a source of information for the DOJ investigation, not a target.
On December 18, 2007, the Commission issued a Statement of Objections to 26 companies, including
United. The Statement of Objections presented evidence related to the utilization of fuel and security surcharges
and the exchange of pricing information that the Commission views as supporting the conclusion that an illegal
price-fixing cartel had been in operation in the air cargo transportation industry. After United provided written
and oral responses disputing the Commission’s allegations against it, the Commission dismissed United from its
case on November 12, 2010. On July 31, 2008, state prosecutors in Sao Paulo, Brazil, commenced criminal
proceedings against eight individuals, including United’s cargo manager, for allegedly participating in cartel
activity. United is actively participating in the defense of those allegations. On January 4, 2010, the Economic
Law Secretariat of Brazil issued its opinion recommending that civil penalties be assessed against all parties
being investigated, including United, to the Administrative Counsel of Economic Defense (“CADE”), which will
make a determination on the matter. United will vigorously defend itself before the CADE. On December 15,
2008, the New Zealand Commerce Commission issued Notices of Proceeding and Statements of Claim to 13
airlines, including United. United is vigorously defending these proceedings.
In addition to the government investigations, United was initially named as a defendant, along with other air
cargo carriers, in over ninety class action lawsuits alleging civil damages as a result of the purported air cargo
pricing conspiracy. Those lawsuits were consolidated for pretrial activities in the United States Federal Court for
the Eastern District of New York on June 20, 2006. United entered into an agreement with the majority of the
private plaintiffs to dismiss United from the class action lawsuits in return for an agreement to cooperate with the
plaintiffs’ factual investigation. United is no longer a defendant in the consolidated civil lawsuit.
United is currently cooperating with all ongoing investigations and continues to analyze whether any
potential liability may result from any of the investigating bodies. Based on its evaluation of all information
currently available, United has determined that no reserve for potential liability is required and will continue to
defend itself against all allegations that it was aware of or participated in cartel activities. However, penalties for
violation of competition laws can be substantial and an ultimate finding that United engaged in improper activity
could have a material adverse impact on the Company’s consolidated financial position and results of operations.
United Injunction Against ALPA and Four Individual Defendants for Unlawful Slowdown Activity under the
Railway Labor Act
On July 30, 2008, United filed a lawsuit in the United States Federal Court for the Northern District of
Illinois seeking a preliminary injunction against ALPA and four individual pilot employees for unlawful
concerted activity that was disrupting the Company’s operations. The court granted the preliminary injunction to
United in November 2008, which was upheld by the U.S. Court of Appeals for the Seventh Circuit. ALPA and
United reached an agreement to discontinue the ongoing litigation over United’s motion for a permanent
injunction and, instead, the preliminary injunction will remain in effect until the conclusion of the ongoing
bargaining process for an amended collective bargaining agreement that began on April 9, 2009. By reaching this
agreement, the parties are able to focus their efforts on the negotiations for the collective bargaining agreement.
Nothing in this agreement precludes either party from reopening the permanent injunction litigation upon a
30 day notice or from seeking enforcement of the preliminary injunction itself.
31