Gordon v. Amadeus It Grp., S.A., 15 Civ. 5457 (KPF)

• Decision Date: 06 July 2016
• Docket Number: 15 Civ. 5457 (KPF)
• Citation: 194 F.Supp.3d 236
• Parties: Daniel GORDON, et al., Plaintiffs, v. AMADEUS IT GROUP, S.A., et al., Defendants.
• Court: U.S. District Court — Southern District of New York

194 F.Supp.3d 236

Daniel GORDON, et al., Plaintiffs,

v.AMADEUS IT GROUP, S.A., et al., Defendants.

15 Civ. 5457 (KPF)

United States District Court, S.D. New York.

Signed July 6, 2016

Ian F. McFarland, James W. Anderson, Renae Diane Steiner, Vincent J. Esades, Heins Mills & Olson, P.L.C., Anna Purna Prakash, Eleanor E. Frisch, Nichols Kaster, PLLP, Eleanor Michelle Drake, Berger & Montague P.C., Bryan L. Bleichner, Chestnut Cambronne PA, Minneapolis, MN, Anthony D. Shapiro, Ronnie Spiegel, Hagens Berman Sobol Shapiro LLP, Seattle, WA, Christina H. C. Sharp, Daniel Charles Girard, Girard Gibbs LLP, Joseph Richard Saveri, Joshua Davis, Ryan McEwan, Joseph Saveri Law Firm, Inc., San Francisco, CA, Daniel Richard Karon, Karon

LLC, Cleveland, OH, Douglas A. Millen, Freed Kanner London & Millen LLC, Bannockburn, IL, Jeffrey B. Gittleman, Barrack, Rodos & Bacine, Mindee Jill Reuben, Steven Joesph Greenfogel, Lite DePalma Greenberg, LLC, Philadelphia, PA, Joseph J. DePalma, Mayra Velez Tarantino, Lite, DePalma, Greenberg & Rivas, L.L.C., Newark, NJ, Peter Anthony Barile, III, Grant & Eisenhofer P.A., New York, NY, Robert Gerard Eisler, Grant & Eisenhofer, PA, Wilmington, DE, Garrett D. Blanchfield, Jr., Reinhardt, Wendorf & Blanchfield, St. Paul, MN, for Plaintiffs.

David L. Meyer, Morrison & Foerster L.L.P., David H. Coburn, Edward B. Schwartz, M. Roy Goldberg, Steptoe & Johnson LLP, George S. Cary, Steven J. Kaiser, Carl Lawrence Malm, Cleary Gottlieb Steen & Hamilton LLP, Washington, DC, Michael Bruce Miller, Morrison & Foerster LLP, Evan Glassman, Steptoe & Johnson, LLP, Lev Louis Dassin, Cleary Gottlieb, Richard S. Taffet, Stacey Anne Mahoney, Morgan Lewis & Bockius LLP, New York, NY, Adam L. Hoeflich, Christopher J. Lind, Rebecca T. Horwitz, Andrew C. MacNally, Bartlit Beck Herman Palenchar & Scott LLP, Chicago, IL, Karma M. Giulianelli, Sean C. Grimsley, Bartlit Beck Herman Palenchar & Scott LLP, Denver, CO, R. Brendan Fee, Morgan Lewis & Bockius, LLP, Philadelphia, PA, for Defendants.

OPINION AND ORDER

KATHERINE POLK FAILLA, District Judge:

Plaintiffs filed the instant class action on behalf of consumers who have purchased airline tickets from nine major air carriers during the past ten years. The Amended Complaint alleges that Defendants, a group of global distribution systems through which airlines provide fare and schedule information to travel agents, conspired to restrain competition in violation of various federal and state antitrust and state consumer protection laws. Defendants now move to dismiss on the grounds that Plaintiffs' state-law causes of action are preempted; Plaintiffs lack standing; and Plaintiffs' claims either fall outside the applicable statute of limitations periods or are equitably barred. For the reasons stated in this Opinion, Defendants' motion is granted in part: Defendants' motion to dismiss Plaintiffs' claims for violations of state antitrust and consumer protections laws is granted, while their motion to dismiss Plaintiffs' claim under federal antitrust law is denied.

BACKGROUND¹

A. Factual Background

Defendants Amadeus IT Group, S.A., Amadeus North America, Inc., and Amadeus Americas, Inc. (together, "Amadeus"); Sabre Corporation, Sabre Holdings Corporation, Sabre GLBL Inc., and Sabre Travel International Limited (together, "Sabre"); and Travelport Worldwide Limited and Travelport LP (together, "Travelport," and together with Amadeus and Sabre, "Defendants"), are technology providers known as global distribution systems ("GDS"). GDSs serve as a conduit between travel service providers—such as airlines—and travel agencies, through which travel providers distribute information about available services and fares. (Am. Compl. ¶ 1). Each time a consumer books a flight segment from a travel agent using a GDS, the airline supplying the flight must pay a fee to the GDS. (Id. at ¶ 3). The major American airlines rely heavily on GDSs to disseminate information to travel agents; Defendants collectively control nearly the entire American market for GDS services, receiving approximately $2.4 billion in fees from airlines annually. (Id. at ¶¶ 2-3).

1. The Development of the GDS Market and Federal Regulation

In the 1960s, airlines began developing their own in-house computerized reservation systems ("CRS") for aggregating and supplying flight and fare information to consumers. (Am. Compl. ¶¶ 139-40).² Eventually, airlines allowed travel agents to access these systems directly, and additionally began sharing content with each other, such that travel agents could search flight information for multiple carriers from a single airline's CRS. (Id. at ¶¶ 140-41).

In 1984, the Department of Transportation (the "DOT") began regulating the GDS market, requiring GDSs to charge the same fees to each airline and requiring airlines to offer the same content to all GDSs. (Am. Compl. ¶ 143). Consequently, airlines and GDSs could not negotiate over fees or content to gain a competitive advantage in the market. (Id. ). Airlines were, however, able to withhold portions of their content from GDSs and offer withheld fares through alternative platforms, at whatever price point the airlines chose, so long as the content that was provided to a given GDS was the same as that provided to any other GDS. (Id. at ¶ 146). Shortly after the implementation of DOT regulations, airlines began divesting themselves of their GDS ownership, such that by the end of 2003 no GDS remained affiliated with an airline. (Id. at ¶ 145).

During the early 2000s, web-based fare information providers and online travel agencies ("OTA") gained increased market presence and began to pose serious competition to GDSs. (Am. Compl. ¶ 151). During this same period, the DOT allowed its GDS regulations to expire, on the theory that deregulation would "enable each system and each airline to bargain over the terms on which [GDS] services should be provided," and that "vigorous enforcement of antitrust policy"—as opposed to direct regulation — was the preferred means of ensuring a healthy market. (Id. at ¶¶ 154, 160).

2. Competition in the Travel Information Distribution Market

During the time period immediately following deregulation, consumers had a number of choices for finding flight and airfare information. In addition to employing traditional travel agencies, which used GDS services, consumers could acquire information from airlines' own websites, saving airlines significant cost when those consumers booked flights directly. (Am. Compl. ¶ 170). Further competition with the GDSs came from the so-called GDS New Entrants ("GNE"), which developed internet-based software to connect airlines with travel agents more efficiently and at a fraction of the price charged by GDSs. (Id. at ¶¶ 171-73). Other new competitors included OTAs; meta-search engines that aggregated links to airlines' websites; and new direct-connection platforms developed by traditional travel agencies. (Id. at ¶¶ 181-83). According to the Amended Complaint, "in the wake of deregulation, Defendants perceived the Airlines' content leverage and the new booking platforms and resulting market fragmentation as a clear and present danger" to Defendants' market dominance. (Id. at ¶ 196).

3. The Alleged Conspiracy Among Defendants

Plaintiffs allege that as the GDSs became more concerned about new market entrants, and particularly about airlines' "content and service concession[s] to favor low cost channels" such as GNEs, the GDSs began working together to stifle the growing competition. (Am. Compl. ¶¶ 197-201). Defendants realized that the success of platforms such as GNEs depended on airlines agreeing to offer them exclusive content or preferred status, and that the best strategy for the GDSs would be to prevent airlines from offering differentiated content to alternative platforms. (Id. at ¶¶ 203-04). Accordingly, beginning in 2006, the GDSs entered into a multi-part plan to strangle airlines' ability to negotiate fees and offer differentiated content. (Id. at ¶¶ 19-25, 218, 228, 240). The first step in Defendants' scheme consisted of the "Backstop Agreement": Sabre and Amadeus promised to supply each other with any content that airlines provided to only one of them. (Id. at ¶ 220). Plaintiffs contend that the "purpose of the Backstop Agreement was to make sure the GDSs stood as one against the Airlines." (Id. at ¶ 224).

For the second step of Defendants' plan, Defendants "jointly demanded substantively identical terms on a take-it-or-leave-it basis during their 2006 contract[ ] negotiations" with the airlines. (Am. Compl. ¶ 228). Specifically, Defendants each required airlines to accept a "nearly identical" contract provision (the "Contractual Restraint") prohibiting the airlines from offering different content or lower prices through other distribution channels. (Id. at ¶¶ 228, 242). Plaintiffs allege that this "sudden lockstep" was an "abrupt and radical departure from [Defendants] previous approach to negotiations with the Airlines." (Id. at ¶ 234). Plaintiffs allege that the Contractual Restraint prevented airlines from passing on to consumers the "savings realized from using less costly channels of distribution," as a "traveler who does not use a GDS must nevertheless pay ticket prices that include the GDS fees." (Id. at ¶ 241). As airlines' contracts with GDSs came up for renewal in 2009, 2010, and 2011, Defendants allegedly continued to pursue their collusive strategy. (Id. at ¶¶ 251-88). Both the Backstop Agreement and the Contractual Restraint were publicly announced by Defendants at the time of their inception. (Id. at ¶¶ 236, 242).

Plaintiffs claim that, "[f]reed from external competition and agreeing amongst themselves that they would not compete for content, the Defendants charged inflated GDS fees. These supracompetitive fees increase airline distribution costs, which in turn raises fares for all travelers." (Am. Compl. ¶ 322). Defendants purportedly maintained their scheme in part through...