Robert's Waikiki U-Drive, Inc. v. Budget Rent-a-Car Systems, Inc.

Decision Date08 May 1984
Docket NumberINC,RENT-A-CAR,No. 83-2251,U-DRIV,83-2251
Citation732 F.2d 1403
Parties1984-1 Trade Cases 65,981, 15 Fed. R. Evid. Serv. 1293 ROBERT'S WAIKIKI, et al., Plaintiffs-Appellants, v. BUDGETSYSTEMS, INC., Defendant-Appellee.
CourtU.S. Court of Appeals — Ninth Circuit

Martin Anderson, David J. Reber, Ronald K.K. Sakimura, Honolulu, Hawaii, for plaintiffs-appellants.

Robert R. Salman, Martin Stein, Janet P. Kane, Phillips, Nizer, Benjamin, Krim & Ballon New York City, for defendant-appellee.

On Appeal from the United States District Court for the District of Hawaii.

Before ANDERSON, SCHROEDER, and ALARCON, Circuit Judges.

J. BLAINE ANDERSON, Circuit Judge:

Robert's Waikiki U-Drive, Inc. (Roberts) brought suit against Budget Rent-A-Car Systems, Inc. (Budget), alleging that Budget violated federal antitrust and Hawaii unfair competition laws. The district court granted Budget's summary judgment motion on the antitrust claims. After trial and a special verdict returned by the jury, the court entered judgment for Budget on the unfair competition claims. We affirm.

I. BACKGROUND

The district court presented a detailed description of the facts in its decision on the summary judgment motions. 491 F.Supp. 1199 (D.Hawaii 1980). We offer only a summary of the facts here.

In 1971, Budget and Aloha Airlines entered into an agreement to develop a "fly-drive" program. Under this agreement, Aloha passengers received a special $7.00 first-day rental rate for Budget cars. The regular rate was $14.00. Aloha rebated $7.00 to Budget per car rented, and this rebate was supposed to reflect Aloha's share of the fly-drive advertising costs paid for by Budget. The $7.00 fly-drive remained in effect through September, 1973. At that time, a new program was developed in which Aloha did not pay Budget on a per car basis, but instead a lump sum purportedly for its share of advertising costs. The post-$7.00 fly-drive agreement lasted until 1975.

In April, 1972, Budget and Pan American World Airways began a similar program. In it, Pan Am paid Budget $5.00 per rental.

In June, 1972, the Civil Aeronautics Board (CAB) began investigating the Budget-Pan Am agreement. The CAB was concerned that the scheme permitted Pan Am to circumvent Sec. 403(b) of the Federal Aviation Act, 49 U.S.C. Sec. 1373(b) (1976), which required air lines to charge customers pursuant to prescribed tariffs. The CAB closed its investigation of the Budget-Pan Am agreement without determining the legality of the arrangement. Roberts contends that the CAB ceased its investigation because Pan Am submitted falsified documents which stated that Pan Am reimbursed Budget solely on its share of advertising costs rather than on a per car basis.

In 1973, the CAB began a similar investigation of the Aloha-Budget fly-drive agreement, culminating in a 1975 order requiring Aloha to cease and desist participation in the program. On review, the Court of Appeals for the District of Columbia Circuit upheld the CAB insofar as it found that the $7.00 fly-drive program constituted illegal rebating. It did not, however, find substantial evidence to support the CAB's holding that the post-$7.00 agreement was illegal. Aloha Airlines, Inc. v. CAB, 598 F.2d 250 (D.C.Cir.1979).

In January, 1977, Roberts commenced this action, claiming that through the fly-drive agreements Budget violated: (1) Section 1 of the Sherman Act, 15 U.S.C. Sec. 1 (1976) (tying arrangement); (2) Section 2 of the Sherman Act, 15 U.S.C. Sec. 2 (1976) (attempt to monopolize); (3) Section 7 of the Clayton Act, 15 U.S.C. Sec. 18 (1976) (illegal merger); and (4) Hawaii statutory and unfair competition laws.

In January, 1980, each side filed motions for summary judgment. The district court, Judge Samuel P. King presiding, granted Budget's motion on the antitrust claims, and determined that Roberts may proceed to trial on the unfair competition claims. 491 F.Supp. 1199.

In 1982, Judge King became ill and Judge Marion J. Callister of the District of Idaho, sitting by designation, assumed control of the action. Judge Callister denied Budget's renewal of its motion for summary judgment on the unfair competition claims. The action was tried in June of 1982, with the court entering judgment in favor of Budget after the jury returned special verdicts. Roberts' motion for new trial was denied.

II. ANALYSIS

On appeal, Roberts does not pursue its claims that the fly-drive agreements constituted violations of Sec. 2 of the Sherman Act and Sec. 7 of the Clayton Act. Instead, Roberts argues that the court erred in granting summary judgment on its claim that the fly-drive agreements constituted an unlawful tying arrangement under Sherman Act Sec. 1 and that the district court should have granted it a new trial on the unfair competition claims.

A. Sherman Act Sec. 1

On summary judgment, the district court rejected Roberts' claim that the fly-drives violated Sec. 1 of the Sherman Act either as per se illegal tying arrangements or under the rule of reason. We agree with and adopt the district court's reasoning in its opinion reported at 491 F.Supp. 1206-10, 1212-17, and add the following observations.

Notwithstanding Roberts' assertions to the contrary, summary judgment may be appropriate in antitrust actions when there is no "significant probative evidence tending to support the complaint." First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 290, 88 S.Ct. 1575, 1593, 20 L.Ed.2d 569 (1968); see Ron Tonkin Gran Turismo, Inc. v. Fiat Distributors, Inc., 637 F.2d 1376, 1381 (9th Cir.), cert. denied, 454 U.S. 831, 102 S.Ct. 128, 70 L.Ed.2d 109 (1981). Especially in cases where motive and intent are not determinative, summary judgment may be used in antitrust actions. Roberts v. Elaine Powers Figure Salons, Inc., 708 F.2d 1476, 1478 (9th Cir.1983). Our review, which is de novo, id., convinces us that summary judgment was called for in this case.

1. Per Se Illegal Tying Arrangement

Simply stated, a tying arrangement is when "a seller refuses to sell one product (the tying product) unless the buyer also purchases another (the tied product)." Elaine Powers, 708 F.2d at 1478-79. Three primary elements establish a per se illegal tying arrangement: (1) a tie-in between two distinct products or services; (2) sufficient economic power in the tying product market to impose significant restrictions in the tied product market; and (3) an effect on a not-insubstantial volume of commerce in the tied product market. Id. Roberts argues, and we assume, that it had adequate support for the first and third elements. It is the second element which concerned the district court. Another concern of the court involved the related requirement that there must be some modicum of coercion exerted upon the purchaser of the tied product by the seller of the tying product. Id. The court also found another element missing, which is the seller of the tying product must have an economic interest in the tied product for there to be per se illegality. Id.

In effect, Roberts reverses the ostensible nature of the fly-drive agreements to fit them into the scheme of per se illegality. Although the fly-drives appear to involve discounted car fare, Roberts states that because the airlines rebated some or all of the rental discount to Budget, the fly-drives actually involved discounted air fare. Roberts then argues that discount air fare is the tying or desired product, and regular car rental rates are the tied product. As did the district court, we accept Roberts' recharacterization of the fly-drives for the sake of argument. Nonetheless, as the court found, Roberts' claims do not meet the requirements of per se illegality.

The Supreme Court recently discussed per se illegal tying arrangements in the case of Jefferson Parish Hospital District No. 2 v. Hyde, --- U.S. ----, 104 S.Ct. 1551, 80 L.Ed.2d 2 (1984). In Hyde, the court emphasized the importance of the coercion element, stating, "the essential characteristic of an invalid tying arrangement lies in the seller's exploitation of its control over the tying product to force the buyer into the purchase of a tied product that the buyer either did not want at all, or might have preferred to purchase elsewhere on different terms." --- U.S. at ----, 104 S.Ct. at 1558. The Court went on to state that "[p]er se condemnation ... is only appropriate if the existence of forcing is probable. --- U.S. at ----, 104 S.Ct. at 1560-61 (footnote omitted). In turn, forcing (or coercion) is likely if the seller has power in the tying product market. Id. For example, if the seller has a patent on the tying product, or has a high market share, or if the tying product is so unique that competitors are unable to offer it, the court will assume adequate market power exists. Id.

The district court correctly rejected Roberts' claim that discounted air fare is so unique that market power, and therefore coercion of buyers in the car rental market, were sufficiently shown to support a per se claim. All Roberts' claims show is the existence of a lower price for two items bought as a package. Rental cars and air fare can be purchased separately. Even accepting Roberts' claim that discounted air fare is illegal and therefore "unique," consumers were not forced into purchasing either it, or a Budget rental car. "[W]here the buyer is free to take either product by itself there is no tying problem even though the seller may also offer the two items as a unit at a single price." Hyde, --- U.S. at ---- n. 17, 104 S.Ct. at 1558 n. 17 (quoting Northern Pacific Railway Co. v. United States, 356 U.S. 1, 6 n. 4, 78 S.Ct. 514, 518 n. 4, 2 L.Ed.2d 545 (1958)); see Levicoff v. General Motors Corp., 551 F.Supp. 98, 102 (W.D.Pa.1982), aff'd 722 F.2d 732 (3d Cir.1983).

The district court also correctly recognized that the airlines did not have a sufficient economic interest in the tied product...

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