Flying J Inc. v. Comdata Network, Inc.

• Decision Date: 13 April 2005
• Docket Number: No. 03-4262.,03-4262.
• Parties: FLYING J INC., a Utah corporation; CFJ Properties, a Utah partnership; Ton Services, a Utah corporation; TFJ, a Utah partnership; NCR; TCH, a Utah corporation, Plaintiffs-Appellees, v. COMDATA NETWORK, INC., a Maryland corporation, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

405 F.3d 821

FLYING J INC., a Utah corporation; CFJ Properties, a Utah partnership; Ton Services, a Utah corporation; TFJ, a Utah partnership; NCR; TCH, a Utah corporation, Plaintiffs-Appellees, v. COMDATA NETWORK, INC., a Maryland corporation, Defendant-Appellant.

No. 03-4262.

United States Court of Appeals, Tenth Circuit.

April 13, 2005.

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Gregory J. Kerwin, Gibson, Dunn & Crutcher LLP, Denver, CO (F. Joseph Warin and Melanie L. Katsur, Gibson, Dunn & Crutcher, LLP, Washington, D.C., and Casey K. McGarvey, Berman, Tomsic & Savage, Salt Lake City, UT, with him on the brief), for Plaintiffs-Appellees Flying J, Inc., et al.

J. Gordon Cooney, Jr., Morgan, Lewis & Bockius LLP, Philadelphia, PA (Gary F. Bendinger and John H. Bogart, Bendinger, Crockett, Peterson & Casey, Salt Lake City, UT, with him on the briefs), for Defendant-Appellant Comdata Network, Inc.

Before McCONNELL and McKAY, Circuit Judges, and FRIOT, District Judge.^*

McCONNELL, Circuit Judge.

This appeal is the latest episode in a lengthy antitrust suit brought by Plaintiffs Flying J, Inc., TCH, L.L.C., CFJ Properties, TON Services, Inc., and CFJ (collectively "Flying J") against Defendant Comdata Network, Inc. ("Comdata"). The underlying lawsuit, filed in 1996, arose out of Comdata's alleged monopolization of two product markets related to the U.S. truck stop industry. In May 2001, after nearly five years of discovery and pretrial motions, the parties entered into a settlement agreement. Comdata agreed to pay $49 million in damages and grant Flying J two licenses intended to open the markets at issue. Conflict soon resumed, however, when the parties could not agree about the meaning of one of the two licenses. Aggrieved by what it interpreted as Comdata's refusal to honor one of the licenses, Flying J filed a motion to enforce the settlement agreement in May 2002. The district court determined that Comdata had breached the settlement agreement and ordered Comdata to implement the license as interpreted by Flying J. Exercising jurisdiction under 28 U.S.C. § 1292(a), we REVERSE. In so doing, we emphasize that it is not our task to determine what would best remedy the underlying antitrust violation, but solely to interpret the agreement reached between the parties, in light of its plain language and the intent of the parties.

I.

Plaintiff Flying J, Inc. owns and operates a nationwide chain of approximately 160 truck stops. Flying J estimates that there are approximately 4000 truck stops in the United States, roughly 1000 of which offer services comparable to its own truck stops. This appeal involves two markets closely related to the trucking industry: point-of-sale systems and trucker fuel cards.

Comdata provides transaction-processing services to the trucking industry. Among other things, it sells the Trendar System, a PC-based point-of-sale system that allows merchants to process customers' card transactions. When the customer's payment card is swiped through the Trendar card reader, Trendar software sends the transaction data to a third-party financial institution for authorization and settlement. Flying J presented evidence in the underlying litigation that Comdata had secured approximately 90% of the point-of-sale systems market by 2001. Virtually every major U.S. truck stop other than Flying J used the Trendar System.

Comdata also issues fuel cards to trucking companies, including a proprietary payment card ("the Comdata Card") and a Comdata MasterCard, referred to as the Comdata Fleet Card. According to Flying J, Comdata cards have dominated the trucker fuel card market for many years, securing a 70% share by 2001.

Proprietary payment cards offer two features relevant to this litigation. The first, called data capture, requires the truck driver to enter certain data at the time of the fuel purchase, typically including driver identification and odometer readings. The data is relayed in real time to the trucking company, allowing it to monitor the driver's location and activities. The second feature, called purchase control allows trucking companies to restrict the type and quantity of items that the driver can purchase with the fuel card. A trucking company might, for example, allow its drivers to purchase motor oil and a certain amount of diesel fuel each day but prevent them from purchasing alcoholic beverages, a truck stereo, or enormous bags of pork rinds. Each trucking company can tailor purchase controls to suit its preferences. According to Flying J, data capture and purchase controls are essential to effective management of a long-haul trucking fleet, and they provide the principal incentive for trucking companies to give trucker fuel cards to their drivers rather than ordinary credit cards. Ordinary MasterCards do not have these features.

Comdata and Flying J (through its subsidiaries, TAB and TCH) issue proprietary cards with no logo other than their own, as well as MasterCards. The Flying J propriety card is called the TCH Fuel Card; its MasterCard is called the TCH Mastercard. Comdata MasterCards are called the Comdata MasterCard or Comdata Fleet Card, which mean the same thing. The Comdata and TCH MasterCards can be used either as ordinary MasterCards or as proprietary cards, depending on the arrangements reached with the particular merchant. These are called "dual function" cards.

As a condition of participating in the MasterCard network, MasterCard requires merchants to accept all MasterCards, regardless of the issuer. It is up to the particular merchant to decide whether to accept proprietary cards. In the discretion of the merchant, MasterCard regulations permit use of a "dual function" MasterCard as a proprietary card for a "proprietary account," defined as "an account ... that is separate from a MasterCard account and is maintained by a company or organization other than the MasterCard member." MasterCard Bylaws and Rules, October 2002, Rule 6.6, JA 546. The proprietary account rules require a preexisting account, established according to a separate agreement, with each merchant.

Comdata MasterCards and TCH MasterCards therefore must be accepted by all merchants in the MasterCard network. But only if the merchants have an agreement with the issuer do the merchants treat these cards as proprietary cards (meaning that they effectuate the data capture and purchase control features of these cards). If the particular merchant is part of the MasterCard network but has not made any agreement with Comdata or THC, Trendar must process the transaction through the MasterCard network as an ordinary MasterCard transaction, without the data capture or purchase control features. If the merchant has agreed to accept the issuer's proprietary card, the merchant processes the issuer's MasterCard transaction as a proprietary card transaction, meaning that the transaction will be authorized and settled over a private network as opposed to the MasterCard network.

In an ordinary MasterCard transaction, Trendar sends transaction data to the merchant's chosen third-party financial institution, known as the acquirer. The acquirer, through its own system, sends the transaction data through the MasterCard network for authorization by the card issuer's bank and settlement through the MasterCard network. When a dual function card, such as the TCH MasterCard or the Comdata Fleet Card, is processed as an ordinary MasterCard, it does not provide trucking companies with real-time data capture or purchase control because the MasterCard network does not relay data quickly enough.

When Flying J entered the trucker fuel card market in the mid-1990s, it faced two significant barriers to entry. First, the Trendar System did not accept the TCH Fuel Card. Merchants using Trendar could not process TCH Fuel Card transactions; therefore, Flying J customers could not use the TCH Fuel Card at Trendar locations. Given the ubiquity of the Trendar System, this was a big problem for Flying J.¹ Second, the record shows that Comdata engaged in a campaign to pressure truck stops not to accept the TCH Fuel Card. Prior to the 2001 settlement, Comdata placed over four hundred telephone calls to truck stops and threatened to raise transaction fees on Comdata cards if they agreed to accept the TCH Fuel Card.

In 1996, Flying J filed suit, charging Comdata with violation of the Sherman Act, 15 U.S.C. §§ 1-7, through monopolization of the trucker fuel card market and the point-of-sale systems market. The parties settled in 2001. Comdata agreed to pay $49 million in damages and grant Flying J two licenses: the Comdata License and the Trendar License. In accordance with the parties' request, the district court reserved jurisdiction to enforce the terms of the settlement agreement. See Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). This appeal concerns only the Trendar License as it pertains to processing the TCH MasterCard at unaffiliated merchants; that is, merchants who have not agreed to accept the proprietary TCH Fuel Card.

The Trendar License grants to TCH a "nonexclusive license... to access and use the Trendar System solely for the Permitted Uses." Trendar License Art. 4.1 Permitted uses include "access and use of the Trendar System by TCH and its cardholder customers." Id. Art. 1. In short, the Trendar License provides TCH access to the Trendar System, and it enables TCH to effect data capture and purchase controls in transactions involving the TCH MasterCard. Pursuant to the Trendar License, Comdata and Flying J configured the Trendar System to accept the TCH Fuel Card. They also configured Trendar to process TCH MasterCards as proprietary transactions if the merchant had agreed to accept the TCH Fuel Card.

This cooperative endeavor soon reached an impasse when Comdata refused to configure Trendar to process TCH MasterCards as proprietary transactions at...