A move to salvage a big antitrust case
on Jul 31, 2006 at 2:00 pm
A newly filed antitrust appeal to the Supreme Court, a significant test of the proof needed to show below-cost pricing to try to drive out a competitor, has been taken off the Court’s docket because it was not filed before a deadline. The appeal by Northwest Airlines, besides raising key antitrust law questions, also had the potential for providing some basic legal rules for competition between large, mainline airlines and small, low-cost and no-frills rivals who seek to move into their markets. The case was Northwest Airlines v. Spirit Airlines, docketed as 06-77 on July 17 but removed from the docket on July 20.
Attorneys for Northwest are trying to salvage the appeal: they have asked the Court to allow the case to go forward despite its tardiness. That maneuver has raised some basic questions about how binding the Supreme Court’s appeal-filing deadlines are. The airline’s attorneys are making an argument that they actually were not too late in filing the case, at least as a matter of what federal law requires or permits. (The motion to file the case anew is scheduled for consideration by the Court at its Sept. 25 Conference, according to the Court’s electronic docket.)
The Supreme Court’s rules specify (Rule 13.2) that “the Clerk will not file any petition for a writ of certiorari that is jurisdictionally out of time. See, e.g., 28 U.S.C. sec. 2101(c).” And Rule 13.1 gives attorneys 90 days after a lower court has completed a case to file such a petition. A separate provision (Rule 13.5) allows any Justice to extend the time to file for up to 60 days, but only if that is requested at least 10 days before the 90-day period would be up.
In the Northwest Airlines case, the 90 days started running on April 13, 2006, when the Sixth Circuit Court denied rehearing en banc of a Dec. 15 decision that ran against the major carrier and in favor of its small rival, Spirit Airlines. But, according to a motion filed in the Supreme Court July 21 by Northwest’s Supreme Court counsel, the attorneys had thought — “mistakenly,” they now concede — that the Circuit Court’s order was dated April 17. That was the day they learned of it. They thus calculated that they had until July 17 to file their petition in the Supreme Court. They did file on that date, “unaware of the error,” according to the motion.
The Court’s Clerk’s office, also apparently not realizing the error, put it on the docket. But on July 20, that office notified counsel that the correct Circuit Court date was April 13, and that the case thus would be taken off the docket.
Acknowledging that the Court ordinarily treats its deadlines as mandatory, the airline motion contends that, by statute, the actual maximum time lapse allowed is not 90 days, but 90 days plus the potential additional 60 that a Justice may allow. “There can be no doubt, then, of this Court’s power to accept a petition tendered more than 90 days, but less than 150 days, after the denial of rehearing,” the motion argues. “The question is one of a Justice’s exercise of discretion.” Thus, saying that counsel error “was made innocently and in good faith,” the airline lawyers asked the Court to accept the petition even though filed five days late or, in the alternative, treat it as an application to Justice John Paul Stevens, the Circuit Justice for the Sixth Circuit, as a request for a five-day extension of the 90-day filing deadline (even though such a request was not made prior to the filing deadline as required).
The underlying antitrust case grows out of complaints by Spirit Airlines that it entered, and then was forced by Northwest to abandon, the market for air passenger travel between Detroit and Boston and between Detroit and Philadelphia in the mid-1990s.
Spirit’s lawsuit contends that Northwest, the dominant carrier in the Detroit “hub,” cut its passenger fares to match the extremely low fares charged by Spirit and offered added service, and then, after killing off Spirit as a competitor on those markets, hiked its prices back up. The basic antitrust complaint is of “predatory pricing,” an allegation that Northwest in cutting its prices to match Spirit’s was charging less than its costs for providing the service.
Spirit lost on summary judgment in District Court, but the Sixth Circuit overturned that ruling, and, accepting most of Spirit’s legal arguments, returned the case to District Court for a new look. In its petition to the Supreme Court, Northwest suggests that the antitrust complaint is one of comparing “apples and oranges” — the two airlines’ operations are so different in nature and scope that they cannot properly be compared to each other.
The appeal relies primarily upon the Supreme Court’s 1993 ruling in Brooke Group Ltd. v. Brown & Williamson Tobacco, requiring that the suing party in a predatory pricing case must prove that the sued party cut its costs below an “appropriate measure of costs” and underwent short-term losses in order to gain a longer-term competitive advantage.
The petition raises three questions, the most significant of which is whether a jury, rather than the court, is to decide what the “appropriate measure of costs” is. Northwest contends that it an issue of law for the judge, not a factual question for the jury.
Here are the three questions posed:
“1. Whether a plaintiff satisfies that [Brooke Group] requirement by proving that the defendant charged prices to one group of customers that were lower than its costs to serve a different group of customers.
“2. Whether a jury, rather than the court, should determine the appropriate measure of costs to be used to satisfy that requirement.
“3. Whether a plaintiff is excused from that requirement when it claims that the defendant expanded its capacity, in addition to reducing its prices.”
Spirit’s response to the petition had been due on Aug. 18, but with the case off the docket, at least temporarily, it need not respond. Its lawyers have been served with the motion to accept the petition, but it is unclear whether the Court’s rules provide for a response.
