DPWNHoldings (USA), Inc v. United Airlines, Inc.
MEMORANDUM DECISION AND ORDER dated 3/30/17 granting United's 119 Motion for partial Summary Judgment. All that remains of DHLs complaint against United are the allegations related to Uniteds alleged post-Confirmation Date conduct. ( Ordered by Judge Brian M. Cogan on 3/30/2017 ) (Guzzi, Roseann)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
DPWN HOLDINGS (USA), INC.,
- against :
UNITED AIR LINES, INC. d/b/a UNITED
AIRLINES; UNITED CONTINENTAL
HOLDINGS, INC. f/k/a UAL CORP,
DECISION AND ORDER
11 Civ. 0564 (BMC) (PK)
COGAN, District Judge.
Before the Court is a motion for partial summary judgment by defendant United Airlines,
Inc. (“United”), seeking dismissal of most of the antitrust claim that plaintiff DPWN Holdings
(USA), Inc. (“DHL”) has brought against it, on the basis that the challenged portion of the claim
was discharged upon confirmation of United’s Chapter 11 plan of reorganization.1 For the
reasons discussed below, United’s motion for partial summary judgment is granted.
The following undisputed facts are taken from the parties’ Local Rule 56.1 Statements.
On December 9, 2002, United filed its petition for relief under Chapter 11 of the
Bankruptcy Code in the Northern District of Illinois. After filing its petition, United identified
and sent notices and claim forms to more than 300,000 potential creditors. The bar date for the
United acknowledges that to the extent it engaged in illegal antitrust conduct after the confirmation date of its plan
of reorganization, any claim by DHL arising from that conduct is not discharged. Accordingly, the Court has
construed the motion as one for partial summary judgment. See Fed. R. Civ. P. 56(a) (recognizing that summary
judgment is available to dismiss “part” of a claim).
submission of pre-petition proofs of claim was May 12, 2003 (the “Pre-Petition Claim Bar
Date”). United received more than 44,000 proofs of claim against its estate. United scheduled
DHL as a disputed unsecured creditor because, at the time, DHL was holding more than twenty
disputed claims, including claims related to two pending environmental lawsuits (the “Disputed
Claims”). DHL received actual notice of United’s bankruptcy filing, and the notice identified the
relevant deadlines.2 Sixteen separate DHL entities filed proofs of claim by the Pre-Petition
Claim Bar Date. Among the dates also provided in the notice was March 3, 2006, the bar date
for filing “administrative claims” (the “Administrative Bar Date”).
On January 20, 2006 (the “Confirmation Date”), the Bankruptcy Court confirmed
United’s reorganization plan by means of a Confirmation Order, which became effective
February 1, 2006 (the “Effective Date”). The reorganization plan discharged all “Claims and
Causes of Action of any nature whatsoever, . . . whether known or unknown,” including all
“Causes of Action that arose before the Confirmation Date.” The Bankruptcy Court continued to
adjudicate disputed claims for several years until United’s bankruptcy ultimately closed on
December 8, 2009.
The Alleged Anticompetitive Conduct
The International Air Transport Association (“IATA”) is an organization of air carriers
whose goal is “to represent, lead and serve the airline industry.” Mission & Vision, IATA,
http://www.iata.org/about/Pages/mission.aspx (last visited Mar. 30, 2017). IATA presently has
265 airline members in 117 countries. United was a member throughout the relevant period and
continues to be a member. Two DHL affiliates, DHL Air and DHL Aviation, were also
DHL notes that not all of its affiliates received notice, but that is immaterial. There is no genuine dispute that the
entities holding Disputed Claims received notice. Moreover, DHL had previously acknowledged at a hearing before
Judge Gleeson that “[t]here is clearly, we don’t dispute, there is notice that they were bankrupt.”
members of IATA during the relevant period. IATA permits any active member to participate in
the IATA Tariff Coordinating Conference, which negotiates cargo rates and fares for freight
In August 1997, IATA members, as part of the Tariff Coordinating Conference, adopted
Resolution 116ss. This resolution allowed carriers to impose a fuel surcharge that varied
depending on the changes in the price of fuel. In January 2000, IATA publicly filed Resolution
116ss as a fuel surcharge index proposal with the U.S. Department of Transportation (“DOT”).
Resolution 116ss provided that it would not go into effect without an affirmative grant of
antitrust immunity from DOT. In March 2000, DOT publicly rejected Resolution 116ss.
Nonetheless, at least as early as February 2000, several of the air carriers, United included,
implemented fuel surcharges. Moreover, several air carriers, United included, published their
own fuel surcharge indices, some pegged to IATA’s Resolution 116ss.
DHL was aware that several air carriers had implemented Resolution 116ss despite
DOT’s rejection. This knowledge is reflected in several emails. In one email, dated October 25,
2001, DHL recognized that “[i]t also appears that [Air Canada] use[s] the IATA index.” Another
email, dated November 28, 2001, shows that a DHL predecessor company, Exel plc,3 had written
almost identical letters to dozens of air carriers, including United, asking the carriers to lower
their fuel surcharges because “the IATA index being followed by most carriers” warranted a
reduction in the fuel surcharge. In another email a few months later in January 2002, Exel wrote
to United, urging United to reduce its fuel surcharge because it felt United’s surcharge was
higher than market levels, explaining: “With 0,17/kg [sic] already being out of market, several
DPWN acquired Exel plc in 2005. DPWN then merged DHL Logistics and Exel to create DHL Supply Chain.
airlines are now taking steps to remove the FSC [fuel surcharge] 100%, especially those
following the historic IATA index.”
Other carriers were also aware of air carrier reliance on IATA’s Resolution 116ss and
notified DHL of that fact. For example, in January 2003, airfreight carrier VARIG LOG, in
explaining its own fuel surcharge increase, informed DHL: “We must point out that most carriers
have been collecting this surcharge abroad since February 2000 according to IATA (International
Air Transport Association) 116ss resolution.” And in June 2004, Saudi Arabian Airlines sent
DHL its announcement of a fuel surcharge increase, explaining that “the surcharge is based on
IATA fuel price index guidelines.”
United imposed its first fuel surcharge on February 15, 2000, two weeks after other major
carriers had done so and before DOT’s rejection of Resolution 116ss. United published its own
index in 2002. From approximately February 2000 through at least the end of 2005, United and
several carriers, acting within relatively short time frames of each other, effected fuel surcharge
changes. The Court need not recount every fuel surcharge change, but, as an example, from
approximately October 2004 to November 2005, United announced nine surcharge changes,
which are illustrative of the timing and amount of the surcharge movements that occurred. For
each of those nine changes, United changed surcharges (1) +$.05 along with 24 carriers, all
occurring within a 19-day period; (2) +$.05 along with 9 carriers, all occurring within a 16-day
period; (3) -$.05 along with 16 carriers, all occurring within a 12-day period; (4) +$.05 along
with 26 carriers, all occurring within a 16-day period; (5) +$.05 along with 41 carriers, all
occurring within a 15-day period; (6) +$.05 along with 17 carriers, all occurring within an 11day period; (7) +$.05 along with 26 carriers, all occurring within a 10-day period; (8) +$.05
along with 19 carriers, all occurring within a 9-day period; and (9) -$.05 along with 45 carriers,
all occurring within a 13-day period.
These surcharge changes did not go unnoticed, either within DHL or by DHL’s
customers. First, starting in 2000, DHL tracked the surcharge level changes and dates of
implementation, maintaining them on an internal report. DHL regularly distributed summaries
of these internal reports. These internal reports showed, among other things, the information
recounted in the previous paragraph, as well as the surcharge changes for other time periods.
Second, DHL’s customers believed the surcharges to be suspicious. In addition to
demanding that DHL obtain information regarding the basis for the surcharge changes and “the
math on how they arrive at the actual rate per kilo,”4 customers also complained about alleged
cartel activity by the air carriers. As early as 2002, some customers were complaining. For
example, in April 2002, 3M asked DHL, “Have the airlines decided on some kind of trigger
point for re-introducing Fuel Surcharges? They appear to be working as a cartel as they can’t all
have had the same idea at the same time.” In May 2005, Xerox complained to DHL “that the
airlines are acting as a cartel and there is a lack of transparency about the [fuel surcharges].” In
August 2005, Nokia told DHL, “I find the [fuel surcharge] mechanism as a cartel within the
industry, which cannot be acceptable anymore.” One DHL employee testified in his deposition
that NCR also complained to DHL because “they felt there was cartel activity.” Another DHL
employee, testifying as DHL’s Rule 30(b)(6) witness, stated that he recalled GlaxoSmithKline
had sent an email to DHL stating in sum and substance that the air carriers were acting in
DHL’s employees also had their own questions about the calculations behind the surcharges. In fact, DHL
employees suspected that United’s fuel surcharge was greater than its actual fuel costs.
In response to these complaints, DHL executives admitted to being suspicious and
inquiring about carrier conduct. One DHL executive testified, “It made me suspicious in the fact
that . . . [w]hat I didn’t understand is ‘Are you, in fact, covering your cost, or are you making
money?’ . . . But there was never anything that they could show me or willing [sic] to show me
that ‘This is what our cost is and this is why we’re doing this.’” Another DHL executive
testified he was suspicious of the parallel increases: “[I]t raised a suspicion, yes, and I – I
accused the airline of . . . following suit, you know, somebody signals that they’re increasing,
and – and they followed to the same level.”
The Law Enforcement Raids
In the early hours of February 14, 2006, authorities in Europe, with support from the U.S.
Department of Justice (“DOJ”) and other government bodies from Europe and Asia, conducted
raids, or “surprise inspections,” on numerous air cargo offices, including one of United’s offices
in Europe (the “Dawn Raids”). The Dawn Raids were part of an ongoing investigation into an
alleged anticompetitive, price-fixing conspiracy by numerous air cargo companies and airlines.
There was widespread publicity of the Dawn Raids, and DHL became aware that United had
been raided in Europe.
DHL received several articles and news reports regarding the Dawn Raids. Among them
were articles reporting that investigators had contacted United in connection with the Dawn
Raids. However, United’s public statements indicated that it was not a target of the
investigations. For example, United’s Form 10-Q for the quarterly period ending March 31,
2006, stated that United was not a “target” of either the DOJ’s or the European Commission’s
Three days after the Dawn Raids, on February 17, 2006, private plaintiffs filed the first of
several class actions in the United States, alleging a price-fixing conspiracy in the air industry
by, among other actors, United. DHL knew that the plaintiffs had named United as a defendant
in several of the civil suits filed after the Dawn Raids, including the first action filed on February
After the Dawn Raids and the filing of the class actions, DHL retained counsel to monitor
the developments in the DOJ investigation and class actions. DHL did this so that it could
independently assess its legal options as the investigation and lawsuits progressed, including
whether DHL had any claims of its own. DHL made the decision to let DOJ and the class action
lawyers act, in its own words, as DHL’s “eyes and ears,” which is to say that DHL would not
independently investigate its claims, but would await progress in the DOJ investigation and class
actions before pursuing its claims. In that way, DHL planned, again in its own words, to
“shadow the class action itself,” opting not to pursue settlement until a class action defendant
settled with the class. When a defendant settled with the class, DHL would then contact the
defendant to negotiate and determine whether it could receive more money if it opted out of the
class settlement and settled directly.
DHL relied on this modus operandi with all of the air carriers. As the former General
Counsel for DHL’s parent company, Deutsche Post AG, averred:
DHL did not believe it would be efficient to negotiate settlements against a carrier
prior to evaluating the class settlement with the carrier since [DHL] had the
option of opting out of individual settlements and since, if any claim were deemed
to have existed at the time, the statute of limitations would have been tolled
during the pendency of the class action.
Further, when a carrier pleaded guilty in connection with the DOJ investigation, DHL would
then seek information from that carrier.
In June 2006, four months after the Dawn Raids, DHL received its own Grand Jury
subpoena from DOJ related to the price-fixing conspiracy investigation. DHL retained separate
counsel to conduct an internal investigation into DHL’s conduct and potential exposure. DHL
ultimately sought and obtained amnesty from DOJ and other regulators related to its own
anticompetitive conduct, which included membership in a downstream cartel in which freight
forwarders, like DHL, had agreed to pass on certain fees and surcharges to customers rather than
In September 2006, class counsel declined to seek damages from United in connection
with the antitrust class action. In February 2007, class counsel filed an amended complaint,
omitting United as a defendant, pursuant to a non-monetary agreement reached between the class
and United. The record does not disclose why class counsel dropped United, but one fair
inference is that plaintiff’s counsel realized that the pursuit of money damages would raise
bankruptcy discharge issues that were not worth pursuing.
DOJ’s investigation continued through at least 2010. As part of this investigation, DOJ
indicted 21 companies and 19 individuals and imposed criminal fines of more than $1.8 billion.
United was not indicted. Foreign authorities also assessed fines in connection with the alleged
cartel. United was similarly not targeted by the European Commission authorities.
In July 2010, DHL learned that Lufthansa was settling with the class. Thereafter, DHL,
in furtherance of its strategy, instructed its private counsel to contact Lufthansa and determine if
DHL could receive more money if it opted out of the class settlement and settled directly with
Lufthansa. As a result of these inquiries, Lufthansa provided DHL with access to internal
Lufthansa documents that suggested United’s complicity in the alleged cartel. Worth noting is
that DHL learned that Lufthansa was seeking amnesty from DOJ in approximately September
2006, but it did not contact Lufthansa until 2010, after DHL learned of the Lufthansa settlement
with the class.
On February 4, 2011, DHL commenced this antitrust action against United. DHL’s
stated impetus for bringing the action was the information it discovered in the Lufthansa
documents it received in July 2010, which reflected alleged cartel conduct by United. In May
2011, United moved to dismiss DHL’s complaint, arguing that the complaint failed to state a
claim, was barred by the applicable statute of limitations, and that conduct prior to the
Confirmation Date was discharged by the confirmation of United’s reorganization plan.
Judge Gleeson, who had previously presided over this matter, denied the motion,
accepting as true DHL’s allegation that “DHL could not have discovered its antitrust claim
against United” in time to raise it in United’s bankruptcy. Judge Gleeson further held that to
treat DHL’s claim as discharged by United’s bankruptcy would violate DHL’s due process
United filed an interlocutory appeal, and the Second Circuit reversed Judge Gleeson’s
Order. See DPWN Holdings (USA), Inc. v. United Air Lines, Inc., 747 F.3d 145 (2d Cir. 2014).
The Second Circuit remanded three issues for reconsideration: “ what aspects of United’s
alleged price-fixing conduct were known by DHL, or reasonably ascertainable, prior to plan
confirmation[;]  whether the allegations of the class action complaint were sufficient to alert
DHL to its antitrust claim, and whether a post-confirmation claim would have been
entertained[;]” and “ “[i]f DHL lacked such knowledge, . . . whether United knew or should
have known of its potential antitrust liability such that due process required it to notify DHL of
the potential claim.” DPWN, 747 F.3d at 153.
On remand, DHL filed an amended complaint, and United renewed its motion to dismiss.
Judge Gleeson denied the motion to dismiss and ordered limited discovery to resolve the
question of DHL’s knowledge regarding its potential claim. With discovery complete on this
issue, United now moves for partial summary judgment, arguing that DHL’s pre-petition
antitrust claim and post-petition, pre-confirmation antitrust claim were discharged in United’s
“[S]ummary judgment may be granted only if there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.” Marvel Characters, Inc.
v. Kirby, 726 F.3d 119, 135 (2d Cir. 2013) (internal quotation marks omitted). “In determining
whether there is a genuine dispute as to a material fact, [the court] must resolve all ambiguities
and draw all inferences against the moving party.” Id. In ruling on a motion for summary
judgment, a district court “may rely on any material that would be admissible at a trial.” Lyons
v. Lancer Ins. Co., 681 F.3d 50, 57 (2d Cir. 2012) (internal quotation marks omitted); see also
Call Ctr. Techs., Inc. v. Grand Adventures Tour & Travel Publ’g Corp., 635 F.3d 48, 52 (2d Cir.
2011) (“[T]he nonmoving party must come forward with admissible evidence sufficient to raise a
genuine issue of fact for trial in order to avoid summary judgment.” (internal quotation marks
omitted)). A dispute is not “genuine” if no reasonable jury “could return a verdict for the
nonmoving party.” Nabisco, Inc. v. Warner-Lambert Co., 220 F.3d 43, 45 (2d Cir. 2000)
(quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).
“A party opposing summary judgment does not show the existence of a genuine issue of
fact to be tried merely by making assertions that are conclusory or based on speculation.” Major
League Baseball Props., Inc. v. Salvino, Inc., 542 F.3d 290, 310 (2d Cir. 2008) (citations
omitted). Moreover, the Second Circuit “has observed that [b]y avoiding wasteful trials and
preventing lengthy litigation that may have a chilling effect on pro-competitive market forces,
summary judgment serves a vital function in the area of antitrust law.” In re Publ’n Paper
Antitrust Litig., 690 F.3d 51, 61 (2d Cir. 2012) (internal quotation marks omitted).
Under the Bankruptcy Code, confirmation of a Chapter 11 reorganization plan
“discharges the debtor from any debt that arose before the date of . . . confirmation.” 11 U.S.C.
§ 1141(d)(1)(A). The word “debt” is defined to mean liability on a claim, and the term “claim”
means “right to payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured, or unsecured.” 11 U.S.C. § 101(5)(A). Congress intended to give the term “claim” the
broadest possible scope in order to facilitate comprehensive proceedings dealing with all of a
debtor’s obligations in bankruptcy. See In re Mazzeo, 131 F.3d 295, 302 (2d Cir. 1997).
The discharge of claims, which occurs when the debtor emerges from bankruptcy,
“operates as an injunction against the commencement or continuation of an action.” 11 U.S.C.
§ 524(a)(2). “However, a claim cannot be discharged if the claimant is denied due process
because of lack of adequate notice.” DPWN, 747 F.3d at 150. Whether adequate notice
complies with due process requirements turns on the reasonableness of the notice, see Mullane v.
Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950), which itself is a “flexible standard
that often turns on what the debtor or the claimant knew about the claim or, with reasonable
diligence, should have known,” DPWN, 747 F.3d at 150 (citing Chemetron Corp. v. Jones, 72
F.3d 341, 345-46 (3d Cir. 1995)).
A potential claimant is on notice of its claim when available facts “would have prompted
a reasonably diligent plaintiff to begin investigating” and thereby discover the facts underlying
its claim, “irrespective of whether the actual [potential creditor] undertook a reasonably diligent
investigation.” Merck & Co. v. Reynolds, 559 U.S. 633, 653 (2010). And importantly, in this
context, “claim” does not have to rise to the level of facts that would establish a “sufficient
antitrust” cause of action in federal court; instead, the inquiry centers on whether there is a set of
facts that would allow for “exploration and adjudication” in the bankruptcy court. DPWN, 747
F.3d. at 152.
Like many issues where the reasonableness of a party’s conduct is based on undisputed
facts, whether a party is on actual or inquiry notice of its claims can be either a question of law
or a question of fact. Inquiry notice is a question of law if “no reasonable fact finder[,] analyzing
the circumstances as presented, could determine that inquiry notice did not exist.” In re
Executive Telecard, Ltd. Sec. Litig., 913 F. Supp. 280, 283 (S.D.N.Y. 1996) (citing Dodds v.
Cigna Sec., Inc., 12 F.3d 346 (2d Cir. 1993); Menowitz v. Brown, 991 F.2d 36 (2d Cir. 1993));
see also In re Merrill Lynch Ltd. P’ships Litig., 154 F.3d 56, 60 (2d Cir. 1998); Johnson v.
NYFIX, Inc., 399 F. Supp. 2d 105, 120 (D. Conn. 2005). “Where the only issues remaining
concern the legal consequences of undisputed facts, summary judgment is appropriate.” S.E.C.
v. Credit Bancorp, Ltd., 738 F. Supp. 2d 376, 392 (S.D.N.Y. 2010). Here, the material facts are
undisputed, and what is left are the legal implications of those facts.
The Second Circuit was clear when it remanded the matter back to this Court: The
inquiry as to whether DHL, as a claimant, knew or should have known that it had an antitrust
claim against United is the first inquiry. Only if this Court were to find that DHL did not have
such knowledge nor, with reasonable diligence, the ability to gain such knowledge, would the
inquiry “shift to whether United knew or should have known of its potential antitrust liability
such that due process required it to notify DHL of the potential claim.” DPWN, 747 F.3d at 153.
It is also worth noting that the Second Circuit was “skeptical” of DHL’s position that it
did not know or could not have known about its antitrust claim to assert it in the bankruptcy
court. With the benefit of discovery on the facts available to DHL, it is clear that the Circuit’s
skepticism was well-founded. Here, DHL had a litany of facts that should have excited its
suspicion – and, in fact, did excite the suspicion of some of its executives – but no one followed
up with a diligent investigation into those suspicions.
Based on the undisputed facts and the applicable law, I hold that (i) DHL could have filed
its antitrust claim in the bankruptcy court, either as a timely proof of claim before the PrePetition Claim Bar Date, as a late proof of claim, or as a timely administrative claim before the
Administrative Bar Date, and (ii) United’s knowledge or lack of knowledge regarding its
antitrust liability is therefore irrelevant.
DHL Had Inquiry Notice of Its Antitrust Claim to Assert It as a Timely Proof of
Claim by the Pre-Petition Claim Bar Date.
DHL had actual knowledge of sufficient facts to put it on inquiry notice prior to the Pre-
Petition Claim Bar Date. By May 12, 2003, DHL knew that IATA, of which some of its
affiliates were members, had publicly filed with DOT its Resolution 116ss, which stated that it
would not go into effect unless DOT granted the carriers antitrust immunity. Before the PrePetition Claim Bar Date, DHL also knew that DOT had rejected Resolution 116ss in its entirety.
And DHL knew that, notwithstanding the rejection, air carriers, including United, began to
increase their fuel surcharges and publish their own fuel surcharge indices, several of which bore
a striking resemblance to Resolution 116ss. For its part, United began imposing its own fuel
surcharges on February 15, 2000, and filed its own fuel surcharge index later in 2002.
DHL also knew that many air carriers, United included, were announcing fuel surcharge
changes, sometimes the same surcharge, within brief windows of a few weeks. And DHL,
undoubtedly prompted by the parallel conduct of the air carriers, began an internal spreadsheet to
track the surcharge changes – including when, who, and how much. DHL internally circulated
reports of these changes, or at least the information contained in them. If this activity was not
suspicious to DHL, it should have been – at least one of its customers, 3M, complained to DHL
in April 2002 that the air carriers “appear to be working as a cartel as they can’t all have had the
same idea at the same time.”
DHL does not dispute that it knew of these facts. Instead, DHL points to other air
carriers that announced their changes first in time and last in time, thus attempting to extend the
timeframe spread, and to the high-end and low-end of the announced surcharges, thus attempting
to create a larger monetary spread. However, the actions of other airlines are irrelevant because
DHL’s claims are against United. DHL also argues that it reasonably construed the parallel
conduct as permissible follow-the-leader behavior, but I see no reason why DHL was entitled to
give United the benefit of the doubt as a means of excusing itself from inquiry notice.
One of the most probative facts, of course, was that DHL had actual knowledge of
United’s bankruptcy, which was no small event in the air cargo industry. That, in itself, is of
great significance, yet DHL’s current opposition to United’s motion ignores the monumental
importance of one of its major air transportation providers having sought bankruptcy protection.
The filing of a significant bankruptcy and the setting of a Pre-Petition Claim Bar Date should
have acted as a “red flag” to customers and vendors of United. A diligent creditor would have
undertaken a thorough inquiry to see what claims to file, knowing that if it omitted anything, it
might have a substantial burden to overcome in filing a late claim.
DHL not only had an important relationship with United that the Chapter 11 filing could
have affected, but DHL also had over twenty Disputed Claims that United had scheduled. Under
those circumstances, it would have been rather absurd for a company with the resources of DHL
to not do a thorough investigation of other potential claims with the Pre-Petition Claim Bar Date
Thus, DHL had plenty of information to file a proof of claim before the Pre-Petition
Claim Bar Date, and the fact that it did not was either the product of a deliberate decision or an
approach so recklessly carefree that the law considers it the equivalent of a deliberate decision.
Once a debtor notifies its creditor of a Chapter 11 filing, it is incumbent on the creditor to pursue
its rights if it has a reasonable basis to do so. It cannot rely on the debtor to protect it from an
unasserted claim. See generally Eisenberg Bros., Inc. v. Clear Shield Nat’l, Inc. (In re
Envirodyne Indus., Inc.), 214 B.R. 338, 350 (N.D. Ill. 1997) (“[A]ppellants’ antitrust allegations
against appellee Clear Shield were capable of detection prior to their being discharged by the
DHL’s attempt to escape its inquiry notice and its responsibility to file a proof of claim is
unpersuasive. It argues that, notwithstanding the facts showing the high level of knowledge of a
potential antitrust claim, it could not have met the pleading standards for filing a proof of claim
under the standard set forth in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). Putting
aside the fact that Bell Atlantic was decided over four years after the Pre-Petition Claim Bar
Date, and that the pleading standard for a complaint at the time consisted of a prohibition against
dismissing a case “unless it appears beyond doubt that the plaintiff can prove no set of facts in
support of his claim which would entitle him to relief,” Conley v. Gibson, 355 U.S. 41, 45-46
(1957), it is important to note that we are talking about a proof of claim, not a complaint.
Although in the few situations in which a creditor must commence an adversary
proceeding in the bankruptcy court, see Fed. R. Bankr. P. 7001, the Bankruptcy Rules do
incorporate the pleading standards of Federal Rules of Civil Procedure 8 and 9, see Fed. R.
Bankr. P. 7008, 7009, these rules would not have applied to DHL’s antitrust proof of claim.
Rather, Bankruptcy Rule 3001(a) defines the requirements for a proof of claim in the following
way: “Form and Content. A proof of claim is a written statement setting forth a creditor’s claim.
A proof of claim shall conform substantially to the appropriate Official Form.” Fed. R. Bankr. P.
3001(a). The official form for a proof of claim, Official Form 410, is a checkbox list of
questions that is similar in design to the complaint templates that this Court offers to pro se
litigants seeking to commence a case – one just fills in the blanks. And while Bankruptcy Rule
3001(c) does impose particularity requirements as to some kinds of claims, DHL’s antitrust
claim would not have triggered these particularity requirements. See Fed. R. Bankr. P. 3001(c).
To be sure, in some instances, the requirements for a proof of claim can be more exacting
than a complaint in a civil litigation because the former is intended to serve both as the statement
of the claim and its evidentiary support. Comparing the requirements for each pleading is
therefore somewhat of an apples-and-oranges exercise. However, because the definition of a
“claim” in bankruptcy is so much broader than a “claim upon which relief may be granted” under
Federal Rule of Civil Procedure 12(b)(6) – with the bankruptcy claim encompassing, for
example, contingent and unmatured claims that would be dismissed in civil litigation on ripeness
or case-or-controversy grounds – the amount of detail required in a proof of claim as a
procedural matter is actually quite low, as Official Form 410 suggests.5 As Judge Gleeson noted
I recognize that DHL’s claim was not contingent or unmatured. However, the point is that since a creditor is
expected to assert claims that may never come into being because of contingencies, it is not too much to ask a
creditor like DHL, which has knowledge of facts suggesting a presently actionable claim, to file a claim as well.
previously, “a claim may have arisen for purposes of a bankruptcy discharge even if it could not
yet be asserted as a viable claim in a non-bankruptcy proceeding.” DPWN Holdings (USA), Inc.
v. United Air Lines, Inc., 871 F. Supp. 2d 143, 151 (E.D.N.Y. 2012), remanded on other
grounds, DPWN, 747 F.3d 145.
If a debtor disputes a proof of claim, its objection will generally not challenge the
adequacy of the allegations, but rather the substance of the claim. And if the facts that would
support the claim are particularly within the knowledge of the debtor, then the creditor can obtain
discovery against the debtor or third parties pursuant to Bankruptcy Rules 2004, 9002(1), and
9014(c).6 This is consistent with the well-established practice in bankruptcy of filing a
“protective” claim, where a creditor thinks it might have a claim but is unsure. “Creditors with
reason to believe they may have a claim but do not yet know the amount of that claim may file a
protective proof of claim.” In re Trocom Constr. Corp., No. 1-15-42145, 2016 WL 4575546, at
*2 (Bankr. E.D.N.Y. Sept. 1, 2016); see also Sec. Inv’r Prot. Corp v. Bernard Madoff Inv. Sec.
LLC, No. 08 Civ. 1789, 2009 WL 458769, at *2 (Bankr. S.D.N.Y. Feb. 24, 2009) (“Bar dates
apply to creditors who have reason to believe they have a claim, even if the claim has not yet
It is no response for DHL to argue, as it does in opposing this motion, that the airlines’
parallel behavior could have had an innocent explanation. It was for United to defend the claim,
not for DHL to give United the benefit of the doubt. The facts that DHL knew before the PrePetition Claim Bar Date essentially ensured that any antitrust proof of claim that it filed would
Because of the distinction between a claim in bankruptcy and a claim upon which relief can be granted, DHL’s
reliance on In re Copper Antitrust Litigation, 436 F.3d 782 (7th Cir. 2006), is misplaced. As a practical matter, In re
Copper Antitrust was not a bankruptcy case. Thus, the Seventh Circuit’s statement that “it is not enough . . . to point
to facts which might have caused a plaintiff to inquire, or could have led to evidence supporting his claim,” 436 F.3d
at 792, is not the standard in determining whether to allow a proof of claim.
not be subject to objection for lack of sufficient detail. United’s bankruptcy court would have
permitted DHL to proceed with discovery as only United had much of the evidence that could
have proven (or refuted) DHL’s antitrust claim.
DHL Had Inquiry Notice of Its Antitrust Claim to Assert It as a Late Proof of
Even if we assume for the sake of argument that the analysis set forth above is wrong,
i.e., that DHL did not have sufficient inquiry notice by the Pre-Petition Claim Bar Date to file a
proof of claim, DHL would certainly have been able to file a late proof of claim. By the end of
2005, or eighteen months after the Pre-Petition Claim Bar Date, months before United emerged
from bankruptcy, and four years before United’s bankruptcy closed, the record before me shows
that not only had the airlines continued and intensified the parallel price increases, but also that
both DHL customers and executives were aflame with suspicion of antitrust conduct. Yet DHL
continued to sit on its rights and refused to put two and two together.
It is also at this point, at the latest, that DHL came to believe that the surcharges, whether
pegged to Resolution 116ss or outlined in the air carriers’ own indices, reflected increases at a
greater rate than the actual increases in the price of fuel. Further, as explained above, DHL’s
own customers, including 3M, Xerox, Nokia, NCR, and GlaxoSmithKline, were complaining to
DHL about the increased costs and calling the behavior collusive or cartelized. DHL did not
dismiss these complaints, but rather, DHL did actually inquire about carrier conduct: One DHL
executive testified that even though he inquired, United would never give him information as to
what its costs were relative to the surcharges, while another executive even expressed suspicion
regarding the parallel increases in surcharges. But DHL never followed up on what an objective
industry player should have seen as potentially illegal conduct; it asked a few questions, received
incomplete answers, and decided not to investigate further.
A basic piece of advice relating to antitrust claims is this: If the dominant participants in
an industry raise prices in near-unison and there is no market explanation for those price
increases, then those paying the price increases might want to consider whether an antitrust
violation has occurred. DHL strains credibility by arguing that, even though its own customers
were on inquiry notice, DHL, on which the surcharges were actually imposed and which
occupied the only level in the supply chain with standing to bring an antitrust action, see Illinois
Brick Co. v. Illinois, 431 U.S. 720 (1977), was not. DHL’s bare assertions that it did not have
any knowledge or that the facts available were not sufficient to trigger an investigation are
objectively unreasonable. See Miner v. Clinton Cty., 541 F.3d 464, 472 (2d Cir. 2008) (holding
“that a District Court is required to examine whether a defendant’s belief was objectively
reasonable under the circumstances.”).
All of these events provided more than enough notice for DHL to have investigated its
claim and to have sought leave from the bankruptcy court to file a late proof of claim. Federal
Rule of Bankruptcy Procedure 9006(b) provides a mechanism permitting a late proof of claim.
Rule 9006(b) states that
when an act is required to be done at or within a specified period . . . the court for
cause shown may at any time in its discretion . . . on motion made after the
expiration of the specified period permit the act to be done where the failure to act
was the result of excusable neglect.
Fed R. Bankr. P. 9006(b)(1). The Supreme Court has made it clear that “excusable neglect” in
this context includes not only carelessness by a party, or intervening circumstances beyond a
party’s control, but also a “faultless omission to act.” Pioneer Inv. Servs. Co. v. Brunswick
Assocs. Ltd. P’ship, 507 U.S. 380, 388 (1993). The standard is flexible – “the determination is at
bottom an equitable one, taking account of all relevant circumstances surrounding the party’s
omission.” Id. at 395. I cannot think of any scenario more suited to characterization as a
“faultless omission to act,” where equity would dictate leave to file a late proof of claim, than
one involving a creditor who lacked sufficient facts to constitute inquiry notice to file a timely
proof of claim and only acquired such notice after the pre-petition bar date. See In re Pettibone
Corp., 162 B.R. 791, 814 (Bankr. N.D. Ill. 1994) (“[I]ntervening circumstances beyond [the
claimant’s] control” permitted a late proof of claim because the claimant “had no claim capable
of timely assertion when the bar date passed.”).
The excusable neglect analysis turns on four factors: “ the danger of prejudice to the
debtor,  the length of the delay and its potential impact on judicial proceedings,  the reason
for the delay, including whether it was within the reasonable control of the movant, and
 whether the movant acted in good faith.” Pioneer, 507 U.S. at 395. Here, and in any
situation where inquiry notice was triggered after the pre-petition bar date, the inquiry will
virtually always be subsumed by the third factor, i.e., when inquiry notice came to exist. This is
because to prohibit a late proof of claim when the creditor does not have inquiry notice would
deprive the creditor of due process of law. See Williams v. KFC Nat’l Mgmt. Co., 391 F.3d 411,
415-16 (2d Cir. 2004) (holding that the third factor “predominates and the other three are
significant only in close cases”); In re KMart Corp., 381 F.3d 709, 715 (7th Cir. 2004) (finding
that the third factor can be “immensely persuasive”).
And that, essentially, is what DHL argues in opposing this motion. It portrays itself as
caught between Scylla and Charybdis, lacking inquiry notice before the Pre-Petition Claim Bar
Date and then unable to file a late proof of claim after the Pre-Petition Claim Bar Date.
However, there is no Catch-22 under the Bankruptcy Code. If DHL was not on inquiry notice at
the time of the Pre-Petition Claim Bar Date (putting aside the earlier discussion that it was), then
it had good cause to file a late proof of claim. Conversely, if it was on inquiry notice when the
Pre-Petition Claim Bar Date passed, then there would be no good cause for approving a late
proof of claim. I am not going to presume, in the former scenario, that United’s bankruptcy
judge would have denied due process to DHL, or that the Seventh Circuit would have affirmed
such an errant ruling if the judge had done so. DHL had clear grounds to file a late proof of
claim (again, assuming that it lacked inquiry notice prior to the Pre-Petition Claim Bar Date).
The last point I will make as to a late proof of claim is to address DHL’s contention that
the ability to file a late proof of claim would not have satisfied due process. Without any legal
support, DHL contends that, by the time it filed the claim, it would not have had the opportunity
to participate in the bankruptcy, for example, by joining the creditors’ committee, replacing
United’s management, or objecting to the reorganization plan.
Even if I accepted DHL’s argument that there is a constitutional dimension to the
collateral opportunities that DHL lost, the answer is no different. For purposes of analyzing this
argument, I will suspend disbelief that a trade creditor with the hide-and-seek strategy of DHL
would want to take on the fiduciary and leadership responsibilities attendant to being a member
of a creditors’ committee or would move the bankruptcy court to remove the debtor’s
management. It takes some resolve on my part to do that, especially given that a DHL executive
testified that he would have been “laughed out of court by DHL” if he had internally requested
that DHL remove the management of any of the admitted cartelists.
But even with this suspension of disbelief, the fact is that these “missed” opportunities do
not raise any due process concerns. First, the language of 11 U.S.C. § 1102(b)(1), authorizing
the formation of a creditors’ committee, “is precatory and nonbinding and affords no right of
membership.” In re Park W. Circle Realty, LLC, No. BKR. 10-12965, 2010 WL 3219531, at *1
(Bankr. S.D.N.Y. Aug. 11, 2010) (internal quotation marks omitted) (citing In re Drexel
Burnham Lambert Group, Inc., 118 B.R. 209, 212 (Bankr. S.D.N.Y. 1990) (citing H.R. Rep. No.
95-595, at 401 (1977))). Second, the removal of management is not an absolute right afforded
by the Bankruptcy Code. Under § 1104(a), the removal of management and the appointment of a
trustee is determined by the bankruptcy judge “after notice and hearing” where there has been a
demonstration of “cause, including fraud, dishonesty, incompetence, or gross mismanagement of
the affairs of the debtor by current management.” 11 U.S.C. § 1104(a). Moreover, none of the
44,000 United creditors were successful in removing management, and DHL gives no reason
why it would have achieved a different result. Indeed, DHL has not even identified the factual
basis that would have supported such a request for relief.
Similarly, regarding DHL’s ability to object to the confirmation of United’s plan of
reorganization, DHL provides no argument or even speculation regarding the basis on which it
would have objected. Even assuming arguendo that the right to object to a plan of
reorganization triggers due process concerns, cf. Mullane, 339 U.S. at 314 (holding that the
settlement of a trust proceeding required more than publication notice to known beneficiaries and
that notice had to be “reasonably calculated, under all the circumstances, to apprise interested
parties of the pendency of the action and afford them an opportunity to present their objections”),
DHL’s purely speculative statement that it could have objected is insufficient. There is no due
process issue because, in fact, DHL had actual notice of the bankruptcy and, through its
scheduled affiliates, the plan of reorganization. It was DHL’s decision not to move for leave to
file a late proof of claim, not a lack of notice from United regarding its claim, that caused the
loss of any right to object to the plan of reorganization.7
Moreover, even if I accepted DHL’s position that it lacked inquiry notice before the Confirmation Date, the
Bankruptcy Code provides for a motion to modify the confirmation plan if DHL had any late objections to it. See
11 U.S.C. § 1329; In re McBride, 337 B.R. 451, 455 (Bankr. N.D.N.Y. 2006).
Because DHL failed to file its proof of claim, its pre-petition antitrust claim has been
discharged. See LTV Steel Co. v. Shalala (In re Chateaugay Corp.), 53 F.3d 478 (2d Cir. 1995).
DHL Had Inquiry Notice of Its Antitrust Claim to Assert It as an Administrative
Expense by the Administrative Bar Date.
The facts discussed previously should not only have triggered DHL’s inquiry notice as to
its pre-petition claim, but they also should have triggered DHL’s inquiry notice as its
administrative claim for post-petition, pre-confirmation conduct. Allowable administrative
expenses include “the actual, necessary costs and expenses of preserving the estate, including
wages, salaries, or commissions for services rendered after the commencement of the case.” 11
U.S.C. § 503(b)(1)(A). The Supreme Court has held that tort claims arising during a
reorganization period may be actual and necessary expenses of the reorganization and therefore
entitled to the priority status of administrative expenses. See Reading Co. v. Brown, 391 U.S.
471, 483-85 (1968) (finding that the fire damage resulting from the negligence of the receiver
was an “actual and necessary” expense of reorganization).
As a result, based on Reading, bankruptcy courts have permitted post-petition “tort
claims arising from the continued operation of the bankrupt business.” In re Res. Tech. Corp.,
662 F.3d 472, 476 (7th Cir. 2011).8 Reading has also prompted courts to modify the traditional
test for determining whether an expense is an allowable administrative expense; pursuant to
Reading’s modified torts approach, a claimed tort debt is administrative where the debt “(1)
arise[s] from a transaction with the debtor-in-possession” and (2) is “ordinarily incident to
operation of a business” and fairness dictates that the claim receive administrative priority. In re
Old Carco LLC, No. 09-50002, 2010 WL 4455648, at *4 (S.D.N.Y. Nov. 2, 2010) (quoting
Antitrust claims are considered tort claims. See Texas Indus., Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 634
Reading, 391 U.S. at 483); see also In re Kmart Corp., No. 08 C 2101, 2008 WL 5070306, at *3
(N.D. Ill. Nov. 20, 2008).
Here, United’s alleged conduct arose from a transaction with DHL and would be an
expense incident to the operation of United’s business, i.e., the provision of air cargo services,
and fairness would dictate that a claimant damaged by a debtor-in-possession’s post-petition,
pre-confirmation antitrust violations be allowed to file an administrative claim for those
It should seem obvious that any creditor would prefer to have an administrative claim
over a pre-petition unsecured claim covering the same conduct. This is because administrative
claims have priority under the Bankruptcy Code, and generally the debtor must pay them in full
before it can distribute any remaining value to pre-petition unsecured creditors. See 11 U.S.C.
§ 507(a)(2). Thus, administrative claimants stand to recover 100% of their allowed claims, while
pre-petition creditors will receive, for example, ten cents on the dollar, or whatever pro-rata
distribution the reorganization plan provides.
To the extent United continued its illegal anticompetitive conduct in the post-petition,
pre-confirmation time period, those injured by it, including DHL, enjoyed the right to file an
administrative claim. There can simply be no question that by the time of the Administrative Bar
Date, DHL had inquiry notice of such a claim in spades. Not only did the previously-known
facts continue to inform the potential of an administrative claim, but by the time of the
Administrative Bar Date, the Dawn Raids had occurred. In fact, the date of the Dawn Raids is
precisely the point in time when, as DHL admitted during a deposition in this matter, DHL
thought it might have claims against air cargo carriers.
Anyone familiar with class action litigation would have known that class action
complaints would follow promptly on the heels of the Dawn Raids, and they did. By February
17, 2006, a mere three days after the Dawn Raids, plaintiffs’ attorneys began to file class actions
against air cargo carriers, including United. Moreover, a DHL representative testified that by
mid-February 2006, DHL believed it had claims against “airlines that had been raided” and
“airlines that had been included in the first [class action] complaint.” It is undisputed that
United’s offices in Europe had been raided, that United was named in the first complaint, and
that DHL knew about both facts.9
And if there remains any doubt about the viability of an administrative claim, it is
dispelled by the fact that one day before the Administrative Bar Date on March 2, 2006, another
United creditor, Independence Airway, filed an administrative claim for antitrust damages it
allegedly suffered as a result of United’s post-petition antitrust violations.10 The bankruptcy
court allowed this claim as an administrative expense.
Rather than file its administrative claim, DHL continued its wait-and-see approach. DHL
made the calculated, strategic decision to leverage the work being done by the class plaintiffs and
DOJ in the hopes of getting more money by opting out of the class and settling directly with a
carrier whenever a class settlement was announced. DHL’s decision was with full knowledge of
For this reason, DHL’s reliance on Morton’s Market, Inc. v. Gustafson’s Dairy, Inc., 198 F.3d 823 (11th Cir.
1999), is misplaced – it is simply an example of one set of facts where the issue of reasonableness was not clear as a
matter of law. Here, as explained, the issue is clear. Indeed, it is significant that the Morton’s Market court, by way
of contrast to its own facts, highlighted a situation where there are “widely publicized earlier investigations of
exactly the same antitrust violations,” as an example of when investigations are “held to constitute adequate notice
to others of their possible claims.” Id. at 833. As the background facts demonstrate, a widely publicized
investigation was exactly DHL’s situation with respect to its antitrust claim.
Independence Airway’s antitrust claim arose from a different set of alleged anticompetitive conduct than the
conduct alleged by DHL. This distinction is of no moment; the important fact is that the bankruptcy court permitted
Independence Airway’s antitrust claim as an administrative expense.
United’s bankruptcy and the deadlines it presented. A DHL representative even testified that
DHL “assumed that the DOJ and the class also knew about the bankruptcy, so if there was
anything to be filed or anything to be done with respect to the bankruptcy they would have been
on that as much as we were on it.” In other words, DHL would have acted on its antitrust claim
in the bankruptcy court had either the class plaintiffs or DOJ acted on their antitrust claims in the
DHL’s response to this is to suggest that antitrust claims never succeed in Chapter 11
cases, citing In re Aspen Limousine Service, Inc., 193 B.R. 325 (D. Colo. 1996), where such an
antitrust claim failed. Putting aside the Independence Airway claim in United’s case, which
defeats DHL’s argument, I see nothing in the Bankruptcy Code that excludes antitrust claims,
and the fact that another court twenty years ago may have refused to allow an antitrust claim as
an administrative claim has no relevance to this case.
In its Mandate, the Second Circuit did not direct me to ascertain whether DHL would
prevail on its antitrust claim had it filed the claim in bankruptcy court. That would be a daunting
and speculative endeavor. Rather, it directed me to determine whether the bankruptcy court
would have “entertained” the antitrust claim. DPWN, 747 F.3d at 153. I interpret “entertained”
to mean would the bankruptcy court have considered the claim on the merits or for purposes of
estimation under 11 U.S.C. § 502(c), and not disallowed it for timeliness or other procedural
reasons. For the reasons set forth above, I see no procedural impediments to the consideration of
DHL’s administrative claim except that DHL never filed it.
Given DHL’s failure to file its administrative claim, that claim was discharged as of the
Confirmation Date. See, e.g., In re Globe Metallurgical, Inc., 312 B.R. 34, 42 (Bankr. S.D.N.Y.
2004); In re Manville Forest Prods. Corp., 89 B.R. 358, 374 (Bankr. S.D.N.Y. 1988) (holding
that “bar-dates are likened to statutes of limitations which must be strictly observed” (internal
quotation marks omitted)).
Finally, I recognize that I have said little in this decision about the argument on which
DHL spent most of its effort – that United’s failure to schedule the claim deprived it of due
process of law. The bulk of DHL’s opposition was geared towards cataloguing internal United
emails that suggest cartel activity and arguing that United had a due process obligation to
provide DHL with notice of its antitrust claim. But this is not the issue before me, and the
Second Circuit was clear that this issue never arises if I determine that DHL was on inquiry
notice but failed to pursue its claim: “If DHL lacked such knowledge, the inquiry will then shift
to whether United knew or should have known of its potential antitrust liability such that due
process required it to notify DHL of the potential claim.” DPWN, 747 F.3d at 153. The Second
Circuit’s structuring of the issues is logical – DHL cannot complain about due process when it
was on inquiry notice and failed to assert its rights.11
In sum, the record before me shows that until it commenced the instant lawsuit, DHL had
decided to pursue a rather passive approach in addressing the alleged conduct of the cartel, only
inserting itself in private negotiations when it had a chance of outperforming other class
members. That was its right, but it cannot use that strategy as an excuse to maintain this
litigation now, years after United’s bankruptcy has concluded.
DHL relies on In re Motors Liquidation Co., 829 F.3d 135 (2d Cir. 2016), but that case discusses the notice
obligations of a debtor without regard to the inquiry notice of a particular creditor, and thus fits easily within the
Second Circuit’s ranking of the issues in the instant case.
United’s motion for partial summary judgment is granted. All that remains of DHL’s
complaint against United are the allegations related to United’s alleged post-Confirmation Date
Digitally signed by Brian
Dated: Brooklyn, New York
March 30, 2017
This Memorandum Decision and Order does not determine the length of time that encompasses DHL’s surviving
post-Confirmation Date antitrust claim, as the parties have not adequately briefed it. The Court reserves decision on
that issue pending further proceedings.
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