Continental Airlines, Inc. v. United Air Lines

Decision Date22 March 2001
Docket NumberNo. CIV.A. 00-684-A.,CIV.A. 00-684-A.
Citation136 F.Supp.2d 542
PartiesCONTINENTAL AIRLINES, INC., and Continental Express, Inc., Plaintiffs, v. UNITED AIR LINES, INC., and Dulles Airport Airline Management Council, Defendants.
CourtU.S. District Court — Eastern District of Virginia

Vanessa Y. Chandler, Vinson & Elkins, Washington, DC, for Plaintiffs.

Andrew Abbott Nicely, Robert Lawrence Bronston, Mayer, Brown & Platt, Washington, DC, for Defendants.

MEMORANDUM OPINION

ELLIS, District Judge.

In this private antitrust suit, an agreement by defendants United Air Lines, Inc. ("United"), and Dulles Airport Airline Management Council ("AMC") to restrict the size of carry-on bags at Washington Dulles International Airport ("Dulles") was found to be an unreasonable restraint of trade under Section 1 of the Sherman Act, 15 U.S.C. § 1. See Continental Airlines, Inc. v. United Air Lines, Inc., 126 F.Supp.2d 962, 981-82 (E.D.Va.2001). At issue now are (i) the amount of damages, if any, to be awarded to plaintiffs Continental Airlines, Inc., and Continental Express, Inc. (collectively "Continental"), and (ii) the scope of appropriate injunctive relief.

I.

The facts underlying this private antitrust suit are more fully set forth in an earlier memorandum opinion resolving the parties' cross-motions for summary judgment.1 Only a brief recapitulation of the facts and proceedings is necessary here.

Continental and United are well-known air carriers that operate at Dulles. The AMC is an association of air carriers that serve Dulles. In April 2000, defendants agreed, over Continental's objections, to install baggage "templates" to prevent bags larger than approximately ten inches high and fifteen inches wide from passing through the x-ray machines at Dulles's two main security checkpoints. Because all passengers departing from Dulles must pass through one of these two checkpoints, defendants' agreement effectively imposed the carry-on bag size restriction on all Dulles carriers, including Continental. Within one week of the installation of the carry-on baggage templates at Dulles, Continental filed suit against defendants for, inter alia, violation of Sherman Act Section 1, 15 U.S.C. § 1. Continental complained that it suffered injury as a result of defendants' agreement, as the agreement eliminated the competitive advantage Continental enjoys from its expanded aircraft baggage storage bins and its flexible "passenger friendly" carry-on baggage policies and practices.

The anticompetitive tendencies of defendants' agreement are manifest. Because a carrier's output has both quantitative and qualitative components, including carry-on baggage policies, defendants' agreement "restricts output ... [by] standardiz[ing], and thereby eliminat[ing] open competition on, an element of the bargain between carriers and passengers" and was, in effect, "an agreement to provide a lower quality product." Continental Airlines, 126 F.Supp.2d at 975. And, because there is no procompetitive justification for the agreement, the carry-on baggage size restriction is properly condemned as an unreasonable, and therefore illegal, restraint of trade under an abbreviated application of the Rule of Reason. See id. at 978-82. At issue now are the parties' cross-motions for summary judgment as to Continental's damages and the form of an injunction appropriate to remedy defendants' antitrust violation.

II.

Continental's entitlement to damages in this case is governed by Section 4 of the Clayton Act, which provides that "any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue ... and shall recover threefold damages by him sustained," in addition to costs and reasonable attorneys' fees. 15 U.S.C. § 15(a). In this regard, Continental must establish "an antitrust violation, the fact of damage or injury, a causal relationship between the violation and the injury, and the amount of damages." Rosebrough Monument Co. v. Memorial Park Cemetery Assoc., 666 F.2d 1130, 1146 (8th Cir. 1981). Where the fact of damage is proven to a reasonable certainty, however, a plaintiff's failure similarly to prove the precise amount of damages does not entitle the defendant to summary judgment, for "[t]he plaintiff's burden of proving the fact of damages under section 4 of the Clayton Act is satisfied by the showing of some damage arising from a given antitrust violation; further proof is relevant only to the amount, and not the fact of damage." Advance Bus. Sys. & Supply Co. v. SCM Corp., 415 F.2d 55, 63 (4th Cir.1969); see also Zenith Radio Corp. v. Hazeltine Res., Inc., 395 U.S. 100, 114 n. 9, 89 S.Ct. 1562, 23 L.Ed.2d 129 (1969); Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 562, 51 S.Ct. 248, 75 L.Ed. 544 (1931).

As discussed in the earlier memorandum opinion, there is no material dispute of fact that Continental has suffered two distinct types of damages as a result of defendants' illegal agreement. First, "insofar [as] it is clear on this record that, absent defendants' restrictive agreement, Continental would have been able to attract low-yield passengers from other airlines — and thereby gain market share in this consumer group — Continental suffered injury to its business and property in the form of lost profits." Continental, 126 F.Supp.2d at 983 (footnote omitted).2 Second, "[t]he fact that plaintiffs employed template-lifters at the Dulles baggage screening checkpoints in order to avoid the carry-on restriction" qualifies as a [recoverable] "`cost[] incurred in mitigating the anticompetitive effects of defendants' antitrust violation.'" Id. (quoting Lee-Moore Oil Co. v. Union Oil Co. of Cal., 599 F.2d 1299, 1303 (4th Cir.1979)). Accordingly, the task at hand is not to determine whether Continental in fact has suffered damages, but rather to determine from the record whether there is a triable issue of fact as to the amount of damages to which Continental is entitled.

Defendants correctly point out that Continental offered no proof on the amount of profits lost as a result of defendants' illegal agreement to restrict the size of carry-on bags at Dulles. Continental has not estimated the number of passengers it was threatened with losing and has otherwise not submitted quantitative evidence as to lost profits. Indeed, Continental admits that it "has not tried to quantify them or the lost revenues."3 Thus, a damage award based on lost revenues or profits would be speculative and, therefore, inappropriate here. See, e.g., Rosebrough, 666 F.2d at 1147 ("An award of damages may not be based on speculation.").

Yet, this does not end the damages analysis, for Continental may recover the proven costs incurred in mitigating the anticompetitive effects of defendants' antitrust violation. In this regard, Continental grounds its damages claim on its decision to employ a third-party contractor—at a cost of approximately $10,000 per month— to assist Continental customers in bypassing the carry-on templates at Dulles security check points. Continental argues that there is no genuine issue of material fact as to the amount of Continental's mitigation expenses of $84,808.95, and that it should be awarded damages treble that amount pursuant to Clayton Act Section 4, 15 U.S.C. § 15. Defendants respond that Continental has not met its burden of demonstrating that its chosen methods of mitigation were reasonably necessary to ameliorate its threatened loss, or that the cost of those methods were commensurate with the potential injury. More specifically, defendants argue that Continental could have mitigated the alleged effects of defendants' restrictive agreement by other, less expensive, more cost-effective means—namely, by providing its passengers Medallions that would have enabled them to bypass the templates.4 In addition, defendants contend that, by failing to quantify the amount of profits it would have lost in the absence of mitigation, Continental is unable to show that its mitigation expenditures were equal to or less than its potential injury. Defendants' arguments are unpersuasive.

First, defendants have not offered persuasive, admissible evidence showing that the Medallion program allows all Continental passengers to bypass the templates at Dulles security checkpoints. Rather, the record reflects that the Medallion program was intended to be — and in fact was — implemented in a limited fashion, applying only to high-yield and VIP passengers. See Continental Airlines, 126 F.Supp.2d at 968-69, 982-83. The Medallion program, in short, was not an effective or reasonable way for Continental to avoid the anticompetitive effects of defendants' agreement. Given this, it is clear that it was reasonable and necessary for Continental to post employees at the security checkpoints to allow all Continental passengers to bypass the templates.

Second, defendants' focus on lost profits as the proper measure of the reasonableness of mitigation efforts is misguided. As noted in the earlier memorandum opinion, "while defendants' agreement to restrict the size of carry-on bags may have little impact on the total number of flights offered or tickets sold, it does amount to an agreement to provide a lower quality product and hence counts as an output reduction." Continental Airlines, 126 F.Supp.2d at 975. Put differently, the primary anticompetitive effect of defendants' agreement to restrict the size of carry-on bags is not a reduction in the total number of tickets sold by Continental or any other carrier at Dulles, but rather a reduction in output quality among all airlines at Dulles. Indeed, the very illegality that infects defendants' agreement is the fact that "it standardizes, and thereby eliminates open competition on, an element of the bargain between carriers and passengers." Id. Thus, defendants' agreement seeks at once to maintain the status quo ante on number of tickets...

To continue reading

Request your trial
1 cases
  • Continental Airlines v. United Airlines
    • United States
    • U.S. Court of Appeals — Fourth Circuit
    • September 27, 2001
    ...Inc., 126 F. Supp. 2d 962 (E.D. Va. 2001) (granting summary judgment) (hereafter Continental); Continental Airlines, Inc. v. United Air Lines, Inc., 136 F. Supp. 2d 542 (E.D. Va. 2001) (granting treble damages and an injunction) (hereafter Continental II). Because issues of material fact re......
1 books & journal articles
  • Chapter § 2.01 INTRODUCTION
    • United States
    • Full Court Press Travel Law
    • Invalid date
    ...damages but not preempted regarding compensatory damages).[108] See, e.g., Continental Airlines, Inc. v. United Air Lines, Inc., 136 F. Supp. 2d 542 (E.D. Va. 2001), and 126 F. Supp. 2d 962 (E.D. Va. 2000), rev'd 277 F.3d 499 (4th Cir. 2002) (competing airlines claim that airline and airpor......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT