In re Travel Agent Com'n Antitrust Litigation, No. 07-4464.

• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)
• Writing for the Court: Griffin
• Citation: 583 F.3d 896
• Parties: In re TRAVEL AGENT COMMISSION ANTITRUST LITIGATION. Tam Travel, Inc., et al., Plaintiffs-Appellants, v. Delta Airlines, Inc., et al., Defendants-Appellees.
• Docket Number: No. 07-4464.
• Decision Date: 02 October 2009

583 F.3d 896 In re TRAVEL AGENT COMMISSION ANTITRUST LITIGATION.
Tam Travel, Inc., et al., Plaintiffs-Appellants,
v.
Delta Airlines, Inc., et al., Defendants-Appellees. No. 07-4464. United States Court of Appeals, Sixth Circuit. Argued: October 24, 2008. Decided and Filed: October 2, 2009.

[583 F.3d 898]

ARGUED: Joseph M. Alioto, Jr., Thomas Paul Pier, Alioto Law Firm, San Francisco, California, for Appellants. Peter K. Huston, Latham & Watkins, San Francisco, California, James A. Reeder, Jr., Vinson & Elkins L.L.P., Houston, Texas, Lee H. Simowitz, Baker & Hostetler, Washington, D.C., for Appellees. ON BRIEF: Joseph M. Alioto, Jr., Thomas Paul Pier, Joseph Alioto, Sr., Alioto Law Firm, San Francisco, California, for Appellants. James A. Reeder, Jr., Lauren J. Harrison, Elizabeth A. Pannill, Vinson & Elkins L.L.P., Houston, Texas, for Appellees.

Before: MERRITT, BOGGS, and GRIFFIN, Circuit Judges.

GRIFFIN, J., delivered the opinion of the court, in which BOGGS, J., joined. MERRITT, J. (pp. 911-16), delivered a separate dissenting opinion.

OPINION

GRIFFIN, Circuit Judge.

Plaintiff travel agencies appeal the district court's dismissal of their Amended Complaint for failure to state a claim under § 1 of the Sherman Antitrust Act. Plaintiffs allege that defendants conspired to reduce, cap, and eventually eliminate the payment of base commissions in a concerted effort to drive plaintiffs out of business in violation of 15 U.S.C. § 1. We affirm. In doing so, we hold that plaintiffs' claims against United Airlines were discharged in bankruptcy and that plaintiffs' claims against the remaining defendants failed to allege sufficient facts to plausibly suggest a prior illegal agreement.

I. A.

Plaintiffs are the owners of forty-nine travel agencies engaged in the business of

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selling defendants' airline services.¹ When a plaintiff sold an airline ticket before 2002, it received a sales commission from the servicing airline that equaled a percentage of the purchased ticket price. This practice, commonly referred to as the payment of "base commissions," was industry-wide.

Plaintiffs allege a § 1 conspiracy based on a series of uniform base commission cuts adopted by defendants over a seven-year period. According to plaintiffs, each defendant's decision to match its competitors' base commission cut was the product of defendants' prior illegal agreement to eliminate the practice of paying all base commissions — a result achieved in March 2002.

Plaintiffs assert the conspiracy began in 1995, when Delta, American, Northwest, United, and Continental each announced a $25 cap on base commissions for one-way domestic tickets and a $50 cap for round-trip domestic tickets. Plaintiffs further contend that United's decision to cut its base commission rate on September 18, 1997, from 10% of the purchased ticket price to 8% is further evidence of the alleged illegal agreement because American, Delta, Northwest, U.S. Airways, Continental, and America West each matched United's commission cut on or before September 29, 1997. On March 31, 1998, Frontier Airlines announced that it, too, would reduce its base commission rate from 10% to 8%, as did Alaska Airlines on September 30, 1997.

Plaintiffs allege that defendants' conspiracy continued into mid-November 1998, when United imposed base commission caps of $50 and $100 for one-way and round-trip international airfare, respectively. By December 2, 1998, American, Delta, Continental, Northwest, and U.S. Airways each adopted United's $50 and $100 base commission caps.

Almost one year later, on October 7, 1999, United instituted its third commission cut, reducing its base commission rate from 8% to 5% on all domestic and international flights. American, Delta, Northwest, Continental, and U.S. Airways each adopted United's 5% commission cut by the following week. America West and Alaska each matched United's 5% commission cut on October 18, 1999, as did Frontier in November 1999.

On August 17, 2001, American implemented base commission caps of $10 for one-way tickets and $20 for round-trip tickets, effective the following day. Within ten days, United, Delta, Northwest, Continental, U.S. Airways, and America West each adopted American's $10 and $20 caps. Frontier and Alaska followed suit on September 4, 2001, and November 1, 2001, respectively.

Finally, on March 14, 2002, Delta announced that it would eliminate its practice of paying base commissions to travel agencies for both domestic and international airfare, effective immediately. Within ten days, American, United, Northwest, Continental, U.S. Airways, and America West likewise eliminated the payment of base commissions. Frontier and Alaska followed suit in late May 2002.

Plaintiffs allege that each defendant's decision to cut, cap, and eventually eliminate its practice of paying travel agencies

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a base commission would not have occurred without collusion because such action, if taken independently, was contrary to the individual defendant's economic self-interest. Plaintiffs point to United's unsuccessful attempt to cut base commission rates in 1981 and American's similar failed attempt in 1983 as evidence of collusion in the present case. In addition, plaintiffs' Amended Complaint refers to the deposition of a former American Airlines executive, Michael Gunn, who testified that "industry consensus" was necessary for industry-wide commission cuts to hold. Gunn also testified that "he had to match commission cuts exactly or he would undercut the movement." Plaintiffs assert that Gunn's statements are persuasive evidence of defendants' common motive to conspire.

As additional support for the alleged conspiracy, plaintiffs point to several meetings where defendants had an opportunity to conspire, including committee meetings of the International Air Transport Association in 1997 and 1998, as well as industry meetings such as the "Conquistadores Del Cielo" (Conquerors of the Sky), the Air Transport Association, the Japan Air Summit, the British Air Summit, the Paris Air Show, the Alex Brown Transportation Conference, the International Aviation Symposium, and the Merrill Lynch conference. Plaintiffs do not identify defendants' attendees by name or title.

More specifically, the Amended Complaint asserts that "in mid-1999 an Executive Vice-President of Marketing & Distribution for Northwest Airlines, a Senior Vice President of Planning for U.S. Airways, and a Senior Vice President of Marketing for American met for three hours in a Dallas hotel conference room." Plaintiffs further allege that "[i]n 2001, a Delta senior executive met for a weekend of golf and socializing at the home of an American executive responsible for setting American's commission levels."

By May 31, 2002, each defendant had eliminated its practice of paying travel agencies a base commission. In addition, several defendants filed for and have emerged from Chapter 11 bankruptcy, including Delta, Northwest, and United.²

B.

On April 9, 2003, plaintiff Tam Travel, Inc. and forty-eight other travel agencies filed a complaint against defendants for illegally agreeing to cap, cut, and eliminate base commissions in violation of § 1 of the Sherman Antitrust Act. 15 U.S.C. § 1.³ On September 13, 2007, plaintiffs had dismissed defendants U.S. Airways and U.S. Airways Group from the suit without prejudice. On September 14, 2007, the district court determined that the Supreme Court's decision in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), could impact the present case and allowed plaintiffs to file an Amended Complaint. On September 28, 2007, several defendants filed a joint motion to dismiss the Amended Complaint under FED.R.CIV.P. 12(b)(6).

On October 29, 2007, the district court granted defendants' motion to dismiss, ruling that: (1) plaintiffs failed to allege any conduct other than sporadic parallel conduct regarding America West, Alaska, Frontier, and Horizon; (2) plaintiffs failed to allege any parallel conduct as to KLM;

583 F.3d 901

(3) the emergence of Northwest, United, and Delta from bankruptcy discharged plaintiffs' claims; (4) with regard to Continental and United, plaintiffs failed to aver sufficient facts to plausibly suggest an illegal agreement under Twombly;⁴ and (5) with regard to AAG, a holding company that does not itself pay commissions, plaintiffs failed to allege any facts.

Plaintiffs filed a timely motion for reconsideration, which the district court denied on March 13, 2008. This appeal followed.⁵

II.

Plaintiffs first contend that the district court erred when it ruled that their § 1 claims against United were discharged by the bankruptcy court. By operation of the Bankruptcy Code, confirmation of a reorganization plan "discharges the debtor from any debt that arose before the date of ... confirmation." 11 U.S.C. § 1141(d). Section 101(12) of the Bankruptcy Code defines a "debt" as "liability on a claim." Pursuant to 11 U.S.C. § 101(5), a "claim" includes a "right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, [or] unmatured."

The district court ruled that because United filed for bankruptcy in December 2002 and its reorganization plan was not confirmed until January 2006, United's emergence from bankruptcy discharged any liability on claims that arose before its reorganization. Because plaintiffs alleged that United made its last commission cut in March 2002, the district court dismissed plaintiffs' claims against United as discharged debt under 11 U.S.C. § 101(5).

As a preliminary matter, plaintiffs' brief does not challenge the district court's decision to dismiss United under 11 U.S.C. § 101(5), other than to mention in a single sentence that "[e]ach of these airlines emerged from bankruptcy before Travel Agents filed their complaint." Moreover, the record and the Amended Complaint refute this...