US District Court blows full time on cartel proceedings against Florida West
The District Court has made the rare decision to accept a plea of no contest from airline Florida West, ending the cartel prosecution of the airline. By pleading no contest Florida West avoids having to enter a guilty plea or facing a trial – which in the US could have been before a judge or jury.
Florida West argued its plea should be accepted because it was under financial constraints. The US Department of Justice (DOJ) and other regulators generally oppose such pleas, and in this case the DOJ argued that the plea could undermine its leniency program by providing another means of avoiding civil penalties. The Court was however careful to emphasise that the unusual nature of the facts in the case mean it will not act as precedent.
The decision follows on from a judgment at the end of last year, when the District Court decided that a Florida West executive prosecuted by the DOJ should have benefited from the immunity agreement negotiated by airline LAN.
LAN executed a plea agreement with the DOJ under which it paid a fine and agreed to assist with the ongoing investigation in exchange for the government declining to prosecute its past and present employees, and subsidiary airlines. However, Florida West was only 25% owned by LAN, although the executive argued that he was working for Florida West and working secretly for LAN as well. The Court accepted the individual’s evidence that he was a “clandestine LAN employee” and that LAN directly controlled Florida West as it made almost all major and minor business decisions at Florida West. This was not however sufficient for Florida West to be a direct subsidiary of LAN, hence the continuing prosecution leading to the recent plea of no contest.
This string of decisions emphasises the importance of setting out clearly in any plea agreement precisely which entities and individuals are to benefit from immunity.