n that great crapshoot we call the
federal court system, it is possible to win and lose at the same
time. It just happened in New York. The bad news is that travel
agents were the losers. The good news is that so were the other
guys.
We refer to the class-action lawsuit against the airlines filed
last year by Power Travel of Plainview, N.Y. Power's attorneys
argued that by eliminating commissions with no reasonable advance
notice, the airlines breached ARC's Agent Reporting Agreement and
their implied covenant of good faith and fair dealing.
U.S. District Court Judge Robert Sweet agreed.
Under the ARC contract, he said, the commission on airline
tickets "cannot be set at $0."
But he dismissed the case anyway.
We guess that means the airlines won, but in some respects they
lost.
Judge Sweet may have dismissed the case, but he didn't slam the
door. He closed it gently and granted "leave to replead," while
peppering his ruling with findings that are bound to make the
airlines squirm.
For example, the airlines and ARC have long maintained that the
Agent Reporting Agreement has nothing to do with commission levels
and does not require the payment of a base commission.
But Judge Sweet said the payment of a commission -- even if it
is a nominal amount -- is an implicit requirement of the ARC
regime. By deciding not to pay a base commission, the airlines, he
said, "are not in good faith compliance."
Even if nothing else happens in this case, this statement by a
federal judge might give ARC and the airlines an incentive to
rethink some aspects of the regime.
He also explained that to prove an airline acted in bad faith by
going to zero commissions, the plaintiffs must show that the
carrier "acted in furtherance of its own interest, with intentional
disregard" of the plaintiff's financial interest. "This is the case
here," he said.
It can't be a good thing for the airlines to have a statement
like that on the record from a federal judge, even if he's
dismissing the case.
Judge Sweet went on to note that the airlines' duty of good
faith and fair dealing stems in part from their "unequal bargaining
power" over agents because "the airlines maintain control of the
systems through which tickets are issued."
Even if Power Travel's attorneys refile the case as Judge Sweet
suggested, we're still in a crapshoot. There's no certainty that
the views of this or any judge will pave the way for a damage award
to Power Travel and other members of the class action.
But some of this judge's statements should be raising alarms
among the airlines. If nothing else, we hope they focus attention
on the words "good faith and fair dealing." In our view, the
airline-agency relationship could use a bit more of that.