Federal jury clears American Airlines Carrier was accused of predatory pricing

August 11, 1993|By New York Times News Service

GALVESTON, Texas -- After an intense four-week trial, jurors decided in less than four hours yesterday that American Airlines did not try to drive weaker competitors out of business with "predatory" prices during the air fare war last summer.

Lawyers for Continental Airlines and Northwest Airlines, which brought the suit, said they might appeal the verdict. But the swiftness of the decision and the fact that the jury did not believe that American Airlines intended to monopolize markets with its revamped fares could make a successful appeal difficult, they said.

"From the beginning, it was a difficult case," said Joseph D. Jamail, the spirited Houston lawyer who led the team representing Northwest. "No one even thought we'd get this far. American's lawyers pooh-poohed it. But we took it to the limit."

Robert L. Crandall, the outspoken chief executive of American Airlines whose personal credibility came under attack during the trial, said his airline did nothing improper except try to compete. He said Continental and Northwest were "hoping to accomplish in the courtroom what they couldn't accomplish in the marketplace."

Mr. Crandall added that he did not like the attacks on his character by Mr. Jamail and David Boies, the lead lawyer for Continental. They had attempted to portray Mr. Crandall as a "bully" and link him to memorandums and meetings to show that he wanted employees to "cook the books" and make value pricing appear to generate profits instead of lose hundreds of millions of dollars.

Lawyers for American Airlines seemed confident all along that the airline would be found not guilty. But they were surprised that the jury reached a verdict so quickly and said it demonstrated that the claims were baseless.

"This is like a hole in one," said Robert Cooper, a key member of the team of lawyers for American Airlines.

Wall Street apparently agreed. Shares of AMR Corp., the parent of American Airlines, rose $1.625, to $66.25, on the New York Stock Exchange yesterday.

The verdict came at 1:35 p.m. Central time, only hours after jurors left the U.S. District Court at 10:14 a.m. to begin their deliberations. The judge, Samuel B. Kent, gave the jury a list of questions to answer in reaching its verdict. The questions were progressive, meaning that answering "no" to one of them would stop the process.

The jury never got past the first question: Whether American Airlines intended to monopolize certain markets in April 1992, either with its so-called "value plan" that revamped a multitude of fares into four classes and cut unrestricted full-coach fares by 38 percent, or with a half-price "summer sale" a month later.

The reasons the jury reached that verdict will not be known for a while. Judge Kent said he planned to impose a 45-day gag order on jurors after they had completed their deliberations.

Continental and Northwest, which sued American Airlines, the industry leader, last June under the Sherman Antitrust Act, had claimed that American tried to eliminate them. The strategy, as they saw it, was to force them to match the deep fare cuts, incurring heavy losses and possibly failing; then American could raise prices and recoup its losses.

They claimed $1 billion in damages, which could have been automatically tripled under the antitrust law. A maximum damage award could have forced American Airlines into bankruptcy, its executives said.

American Airlines' lawyers said yesterday that Continental and Northwest had tried to entice other airlines, including Trans World Airlines and America West Airlines, to join them in the suit, and that Continental and Northwest had tried to settle the case soon after it was filed.

The trial, which began on July 12 in U.S. District Court in Galveston, has been one of the most watched corporate clashes in years.

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