Adams v. Pan American World Airways, Inc., s. 86-5468

• Decision Date: 01 October 1987
• Docket Number: Nos. 86-5468,86-5538 and 86-5540,86-5469,s. 86-5468
• Parties: , 1987-2 Trade Cases 67,686 David Weaver ADAMS, et al., Appellants, v. PAN AMERICAN WORLD AIRWAYS, INC., a domestic corporation, et al. John Eric CLIFTON, et al., Appellants, v. PAN AMERICAN WORLD AIRWAYS, INC., a domestic corporation, et al. John Eric CLIFTON, et al. v. PAN AMERICAN WORLD AIRWAYS, INC., a domestic corporation, et al. Appeal of UNION DE TRANSPORTS AERIENS. (Two Cases) David Weaver ADAMS, et al. v. PAN AMERICAN WORLD AIRWAYS, INC., a domestic corporation, et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 24

828 F.2d 24

264 U.S.App.D.C. 174, 1987-2 Trade Cases 67,686

David Weaver ADAMS, et al., Appellants, v. PAN AMERICAN WORLD AIRWAYS, INC., a domestic corporation, et al.

John Eric CLIFTON, et al., Appellants, v. PAN AMERICAN WORLD AIRWAYS, INC., a domestic corporation, et al.

John Eric CLIFTON, et al. v. PAN AMERICAN WORLD AIRWAYS, INC., a domestic corporation, et al.

Appeal of UNION DE TRANSPORTS AERIENS. (Two Cases)

David Weaver ADAMS, et al. v. PAN AMERICAN WORLD AIRWAYS, INC., a domestic corporation, et al.

Nos. 86-5468, 86-5469, 86-5538 and 86-5540.

United States Court of Appeals District of Columbia Circuit.

Argued March 20, 1987.

Decided Sept. 1, 1987.

As Amended Oct. 1, 1987.

Appeals from the United States District Court for the District of Columbia (Civil Action Nos. 86-00304 and 86-00629).

Jacob A. Stein, Washington, D.C., with whom Patrick A. Malone was on the brief for cross-appellee, Robert Beckman, in Nos. 86-5540 and 86-5538.

Robert M. Beckman, with whom David M. Kirstein was on the brief for appellants, David Weaver Adams, Washington, D.C., et al. in Nos. 86-5468 and 86-5469.

Sidney S. Rosdeitcher, New York City, with whom Leonard N. Bebchick, Gary D. Wilson, Carol Lee, Robert B. von Mehren, Robert J. Geniesse, Fred D. Turnage, Michael W. Dolan, Douglas Rosenthal, Willard K. Tom, James J. Murphy, David G. Feher, Lawrence A. Short, William Karas, David H. Coburn, Robert J. Higgins, James van R. Springer, Eugene M. Goott, Washington, D.C., John W. Dickey, Mark McCall, Veselin M. Scekic, Robert Fabrikant, Celestino Pina, George T. Manning and Charles P. Murdter, New York City, were on the brief for appellees, Pan American, et al. in Nos. 86-5468 and 86-5469.

Sanford C. Miller, New York City, with whom Maurice J. Noyer and John McConnell were on the brief for Union de Transports Aeriens, cross-appellant in Nos. 86-5548 and 86-5540 and appellee in Nos. 86-5468 and 86-5469.

Before RUTH B. GINSBURG and WILLIAMS, Circuit Judges, and McGOWAN, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge WILLIAMS.

WILLIAMS, Circuit Judge:

This action is the fourth in a series of antitrust suits spawned by the collapse of Laker Airways Limited. The core allegation in each suit is that a group of airlines, an aircraft manufacturer and the latter's subsidiary conspired to drive Laker out of business, in violation of Secs. 1 and 2 of the Sherman Act, 15 U.S.C. Secs. 1 and 2 (1982 & Supp. III 1985). ¹ The first set of actions, Laker I, ² was brought by Laker itself and culminated in a settlement requiring defendants to pay substantial sums to Laker's stockholders, creditors, and attorneys. See Adams v. Pan American World Airways, Inc., 640 F.Supp. 683, 684 (D.D.C.1986). The second, Laker II, was initiated by a class of transatlantic travelers asserting that the destruction of Laker forced them travel on more expensive airlines. This too was settled, with the defendants establishing a fund to provide plaintiffs reduced airfares for a five-year period. In re Atlantic Air Travel Antitrust Litigation, No. 84-1013, mem. order (March 18, 1986 D.D.C.) (approving settlement). The third, Laker III, was brought by a travel agent claiming that the demise of Laker caused it to lose business. This action was dismissed for want of standing. Brian Clewer, Inc. v. Pan American World Airways, Inc., No. 86-119 (C.D.Cal. May 21, 1986), aff'd, 811 F.2d 1507 (9th Cir.1987).

Plaintiffs in the present action, a group of 313 former Laker employees, ³ allege that the illegal conspiracy cost them their jobs. As recompense they seek treble damages under Sec. 4 of the Clayton Act, 15 U.S.C. Sec. 15 (1982). The District Court concluded that plaintiffs lacked standing to bring an antitrust action and granted defendants' motion to dismiss. Adams v Pan American World Airways, Inc., 640 F.Supp. at 684-86. We affirm.

I.

Section 4 of the Clayton Act permits "any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws" to bring a treble-damages action. 15 U.S.C. Sec. 15(a). This language, however, has never been read literally to allow suit by every party affected by an antitrust violation's "ripples of harm." Blue Shield of Virginia v. McCready, 457 U.S. 465, 476-77, 102 S.Ct. 2540, 2547, 73 L.Ed.2d 149 (1982).

The first prerequisite to maintaining a Sec. 4 action is that the plaintiff have suffered the kind of injury the antitrust laws were designed to prevent. "The antitrust laws ... were enacted for 'the protection of competition, not competitors.' " Brunswick Corp. v. Pueblo Bowl-0-Mat. Inc., 429 U.S. 477, 488, 97 S.Ct. 690, 697, 50 L.Ed.2d 701 (1977) (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320, 82 S.Ct. 1502, 1521, 8 L.Ed.2d 510 (1962)) (emphasis in original). Thus, only harm stemming from a reduction in competition qualifies as injury cognizable under the antitrust laws. E.g., id.; see also Cargill, Inc. v. Monfort of Colorado, Inc., --- U.S. ----, 107 S.Ct. 484, 93 L.Ed.2d 427 (1986) (extending Brunswick to claim for injunctive relief under Sec. 16 of the Clayton Act, 15 U.S.C. Sec. 26 (1982)).

In addition to alleging "antitrust injury," the would-be claimant must show that it is a "proper plaintiff." See Cargill, 107 S.Ct. at 489 n. 5; Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 535-46, 103 S.Ct. 897, 907-13, 74 L.Ed.2d 723 (1983). The Court's guiding principle has been to exclude as plaintiffs those whose suits might "undermine[ ] the effectiveness of treble-damages suits." Associated General, 459 U.S. at 545, 103 S.Ct. at 912 (citing Illinois Brick Co. v. Illinois, 431 U.S. 720, 745, 97 S.Ct. 2061, 2074, 52 L.Ed.2d 707 (1977)). Claims of remote victims could severely complicate an action by more direct ones, raising the latters' costs of suit. Further, the interest in avoiding multiple recoveries may force courts to reduce awards to the direct victims. These impairments of direct victims' incentive to sue could jeopardize the effectiveness of the treble-damage claim. Associated General, 459 U.S. at 544-46, 103 S.Ct. at 911-13; Blue Shield of Virginia v. McCready, 457 U.S. at 475 n. 11, 102 S.Ct. at 2546 n. 11; Illinois Brick, 431 U.S. at 745, 97 S.Ct. at 2074; cf. Cargill, 107 S.Ct. at 489-90 nn. 5, 6 (such concerns less relevant to suit for injunctive relief under Sec. 16 of the Clayton Act, as duplicative lawsuits and multiple recoveries not involved). See generally Page, The Scope of Liability for Antitrust Violations, 37 Stan.L.Rev. 1445, 1483-98 (1985); Landes & Posner, Should Indirect Purchasers Have Standing to Sue Under the Antitrust Laws? An Economic Analysis of the Rule of Illinois Brick, 46 U.Chi.L.Rev. 602, 608-25 (1979).

Accordingly, once plaintiff has crossed the threshold by alleging a genuine antitrust injury (one deriving from a decrease in competition), the Court directs us to consider such factors as whether the injury is direct (compared to that of other victims), whether the claim for damages is "speculative," and whether the case presents "the potential for duplicative recovery or complex apportionment of damages." Associated General, 459 U.S. at 545, 103 S.Ct. at 912; see also id. at 538-45, 103 S.Ct. at 908-12. ⁴

While plaintiffs allege an antitrust injury, we find that the other factors controlling under Associated General preclude accepting them as proper plaintiffs.

II.

A. Antitrust Injury

The only market where an illegal restraint is alleged to have taken place is the transatlantic air transportation market. Amended Adams Complaint p 46, Joint Appendix ("J.A.") at 217-18. Plaintiffs supply services (their labor) to competitors selling in that market. While decreased competition will almost invariably harm consumers, its effects on suppliers such as plaintiffs are quite complex. Output is greater at competitive levels than in a cartelized market; everything else being equal, a competitive industry will require more employees, increasing job opportunities for persons such as plaintiffs. Indeed, plaintiffs represented at oral argument that none among them had managed to obtain employment comparable to that previously held with Laker. This suggests a direct loss from the contraction of output.

The effects do not stop there, however. Competition might conceivably raise wages. The more workers demanded (to handle higher output), the more lucrative the alternative occupations from which workers must be attracted, and the higher the wages needed to attract them. But competition also generates strong pressure to cut costs, including wages. Associated General, 459 U.S. at 539, 103 S.Ct. at 909; cf. S. MORRISON & C. WINSTON, THE ECONOMIC EFFECTS OF AIRLINE DEREGULATION 43-46 (1986). ⁵ Workers as a group thus may well expect to do better in a cartelized industry, and may even seek to bring about cartelization. ⁶ See Associated General, 459 U.S. at 539-40, 103 S.Ct. at 909.

We cannot now determine (and probably could not even after trial) whether plaintiffs' gains from reduced competition predominate over their losses. An accurate assessment of the alleged cartelization's effect would require computation of the present discounted value of the net change in their expected income streams. ⁷ Even a Laker employee who has not yet obtained similar employment may do so tomorrow; if cartelization in fact raises wages, it may do so sufficiently to offset the present value of his losses (both those incurred before suit and expected to be incurred thereafter). On the other hand, it may not.

We believe that plaintiffs can properly be said to have alleged an antitrust injury--the failure to secure employment comparable to their Laker jobs from the date of Laker's folding to the filing of the complaint. Thus they have crossed the Brunswick threshold. But the ambiguity of cartelization's effects on their welfare fatally affects their case under the remaining...