Airlines Pay Hundreds of Millions to Settle Suit Launched by Former Sausalito Retailer

source: Mercury News   Jan 19, 2011

A now defunct Sausalito-based importer of women’s clothing, Paradiso Inc., helped launch a class action lawsuit against 19 airlines for price fixing cargo shipments that so far has resulted in settlements with eight airlines totaling about $275 million.

The suit alleges that the air carriers engaged in a global conspiracy to fix surcharges for fuel costs and security that were imposed after the Sept. 11, 2001, terrorist attacks and the beginning of the war in Iraq in 2003.

Paradiso’s name figured prominently in a Bloomberg story on Friday reporting on the latest settlement, with Qantas Airways Ltd. for $26.5 million.

Castillo said lawyers procecuting the case hadn’t notified her of the settlements. Attorneys litigating the case said courts are still reviewing the settlements for fairness.

One of those lawyers, Philadelpia attorney Brent Landau, said, “There were actually dozens of separate complaints that were filed as early as February 2006. All of those cases were consolidated and transferred to the same court in Brooklyn.”

The suit alleges that the conspiracy was facilitated by the Air Transport Association, which detailed on its website opportunities for collusion outside of formal trade conferences, and other airline trade groups. The suit states that on Feb. 13, 2006, antitrust investigators from four continents — including the European Commision, the U.S. Department of Justice and the U.S. Federal Bureau of Investigation — raided or initiated investigations of the 19 air carriers.

Following a $85 million settlement with Deutsche Lufthansa AG, the court ruled that plaintiffs such as Paradiso, who dealt with the airlines indirectly, through freight forwarders, lack legal standing, said Landau, who represents the freight forwarders. That means that Castillo and others who paid higher shipping costs due to the alleged price fixing will not share in the subsequent settlements totaling $190 million, Landau said.

San Francisco lawyer Craig Corbitt, who represents Paradiso and the other indirect purchasers, said, “We think that ruling is incorrect, and we have appealed it to the U.S. Court of Appeals for the Second Circuit in New York. But there has been no decision on that.”

Corbitt said Paradiso will participate in the Lufthansa settlement along with “many thousands of companies.”

Landau said freight forwarders will get the bulk of the Lufthansa settlement, 82 percent, while Paradiso and other companies who dealt with airlines indirectly, will get just 18 percent.

If Corbitt’s appeal is successful, the indirect plantiffs will have to negotiate their own new agreements with the airlines that have already settled, Landau said.

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