The US Airways antitrust lawsuit against Sabre could have been the trial of the century, at least for distribution nerds.
But the bench trial, scheduled for October, has been taken off the schedule by the presiding judge.
The two sides have begun to discuss a possible monetary settlement. This is the first time they have talked with each other about a settlement in more than a year-and-a-half, they have told the judge.
Details remain private. But the total compensation would almost certainly be below the range of between $70 million and $210 million that US Airways had sought before the judge trimmed its claim in last winter.
A procedural setback
As of yesterday, US Airways insisted that a settlement was not enough. It said it wants a legal ruling to prove that Sabre broke antitrust law.
It had said it had hoped that Judge Lorna Schofield of the US Southern District Court would make a critical declaration that would help it toward that goal.
Instead, earlier this month the judge did nearly the opposite.
Judge Schofield ruled that, first, she didn't think her court had jurisdiction on the matter US Airways wanted her to weigh in on.
She added that, even if she did have the authority to weigh in on the matter, she would be inclined to not side with US Airways's position.
Critically, in her view, there is not enough of a live case or legal controversy to merit the bench trial that the airline had requested. In her written order, she described the contractual provisions as expired.
Here's the backstory: US Airways' parent company American Airlines had settled out of court with Sabre on a similar lawsuit a few years ago. The terms of that settlement included an antitrust litigation bar through December 2019. US Airways' current contract with Sabre will end in about twenty-eight months -- two years before. As the judge wrote:
"A declaratory judgment would not impact the parties’ current legal relationship and would be academic."
The airline holds a different view. It argues, to paraphrase, that, without a court ruling, market pressures will not be enough to discourage the GDSs from continuing to write contracts that have provisions similar to the ones the airline calls illegal.
The judge has a narrower view of what her responsibility is in the case. She also is of the view that it's too speculative to know what kind of contract Sabre might offer in 2019.
Righteous or cautious?
Today the main question facing US Airways is how much financial risk it is willing to accept to try to get a court to rule that Sabre broke the law, as it alleges.
As of today, Sabre is offering a financial settlement without admitting liability.
If events unfold as they usually do in such cases, say legal experts, US Airways may face the following situation: If US Airways refuses Sabre's settlement offer, and then takes the company to trial, it will have to get a compensation result from the trial that is better than (not equal to, or less than) the original offer -- or else it will have to pay Sabre's trial expenses.
In a case as complex as “US Airways v. Sabre”, $1 million per side in legal fees over a few weeks would not be unthinkable. The parties to the case estimated that a trial could last between two-and-a-half weeks and as long as six weeks.
Up until now, US Airways has appeared to believe that it has been at low financial risk. It has seemed to be banking that, in most of the probable outcomes, it would at least have its attorney's fees covered by Sabre in some sort of settlement.
Now the worst-case scenario is, well, worse. If the airline spurns the settlement and pursues Sabre in court, it risks incurring legal expenses it may never recover at a later date, namely, Sabre's attorney bills for a trial -- according to one scenario played out by two legal experts who have been following the case.
This week US Airways has filed with the court that it is exploring seeking a jury trial after all. Sabre argues that that would be highly unusual for a plaintiff to be allowed to switch to a jury trial after having made a strategic decision for a bench trial.
The judge's initial response to the proposal does not sound broadly welcoming of the idea, but she has not yet ruled on the request.
In the meantime, the airline faces a context of having lost more motions than Sabre has during the case's four years.
Higher stakes
US Airways originally sued for damages because it said that it had paid unnecessarily high fees to Sabre -- one of the three main global distribution systems (GDSs) that act as middlemen for ticket sales -- because Sabre's contract provisions, and the company's actions in concert with the other GDSs and other industry players, squelched competitors from appearing.
It alleges that the lack of competition kept fees unnecessarily high.
More than 100 people have been deposed in the case. In a celebrity touch, two of US Airways' expert witnesses are winners of the Nobel prize.
But the airline's case doesn't give the appearance of being a slam dunk. For instance, in one pre-trial transcript, a Sabre lawyer said to the judge that the airlines' main economist experts, including the Nobel prize winners, "could not identify a single competitor foreclosed from this market due to the complained of contract provisions."
In the next month or two, the judge is expected to rule on procedural matters which will affect the paths the plaintiff and defendant can take.
For example, if the judge forces US Airways to accept Sabre's official settlement (or offer of judgment without admission of guilt), the airline might seek redress for the judge's decision from an appellate court, in the hopes that a higher court would be inclined to send the case back to the lower court with clearer instructions on what its jurisdiction is, says one legal expert.
Then again, an appellate case could add another half-million dollars to US Airways' legal bills, say experts.
To be clear, a trial of some kind has not been ruled out. Yet years of lawsuits between the airlines and GDSs like Sabre have ended in back room settlements -- including one between parent company American Airlines and Sabre in a similar case a few years ago. In the words of Judge Schofield:
"98 percent of the cases that are filed in this country that are civil cases settle, basically no matter what the judge does. In my experience, most cases settle regardless of what I do."
Attorneys and critics hoping for a trial of the century shouldn't despair, though. Elsewhere in the same district court system, there's a class action suit being pressed by other law firms on similar grounds against the GDSs.
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