Another agency sues airlines: Travel Weekly

Another agency sues airlines

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NEW YORK -- A New York travel agency filed suit against five airlines to recover commissions and other financial losses incurred when the carriers abruptly went to a zero commission rate in March.

The agency, Power Travel International in Plainview, N.Y., said it would seek certification of the case as a class action.

The complaint names American, Continental, Delta, Northwest and United.

It charges that the airlines breached their contracts with Power Travel and other ARC agencies by failing to give "good-faith notice" about the move to zero commissions in order to avoid disrupting the agents' businesses.

Power Travel also charged that the airlines breached an implied covenant of good faith and fair dealing.

The complaint said the airlines' "improper unilateral actions have driven some agencies out of business and have severely damaged others, all of [which] were given no reasonable window of opportunity to adjust to the new, commissionless environment."

Ira Schochet, an attorney for Power Travel, said the carriers had an implied obligation to give agencies reasonable notice, especially given the investments that travel agents made in complying with ARC rules "with the enticement of commissions."

The court papers also questioned the carriers' rights to drop commissions to zero, saying that the ARC Agreement "expressly contemplates" that agencies will receive commissions.

The court filing said that while the ARC pact states that remuneration shall be established by carriers or by agent-carrier mutual agreement, "nowhere in the agent reporting agreement is there any provision permitting the airlines to eliminate remuneration."

Schochet said it is reasonable to argue that the carriers had no right to terminate commissions unilaterally, and because of that it would be possible to gain a remedy in court.

However, he said, the immediate objective of the Power Travel case is reimbursement for losses associated with the carriers' failure to give adequate notice when they eliminated agency commissions.

An earlier lawsuit, brought by Sarah Hall, owner of Travel Specialists, Wilmington, N.C., also seeks damages in the wake of carrier commission reductions, and it was recently certified as a class action.

Hall's case is principally an antitrust action.

When asked why the New York agency would launch another class action against U.S. carriers over commissions, Schochet said, "The damages may be different in the two cases, and one case may succeed and the other may not."

He also held out the possibility that the cases could be combined at some point.

In its original filing, made in a New York state court, the agency had named JetBlue as the sixth defendant, but soon after the agency removed JetBlue from the case, saying the new entrant airline had "inadvertently and erroneously" been named.

Meanwhile, the other defendants successfully moved the case into U.S. District Court, Southern District of New York. The five carrier defendants filed motions to dismiss in November.

Asked for a comment, Delta said, "This case has no merit, and we are vigorously defending. There is nothing in the ARC Agent Reporting Agreement that imposes any requirement of advance notice when a carrier decides to change its published commission policy. The agreement does not govern commissions at all."

American, Northwest and United declined to comment on the case, and Continental did not respond.

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