International Travel Arrangers v. NWA, Inc.

• Decision Date: 26 May 1993
• Docket Number: 92-1039,Nos. 92-1037,s. 92-1037
• Citation: 991 F.2d 1389
• Parties: , 1993-1 Trade Cases P 70,190 INTERNATIONAL TRAVEL ARRANGERS, a corporation, Plaintiff-Appellee, v. NWA, INC.; Northwest Airlines, Inc.; Republic Airlines, Inc.; Mainline Travel, Inc., Defendants-Appellants. INTERNATIONAL TRAVEL ARRANGERS, a corporation, Plaintiff-Appellant, v. NWA, INC.; Northwest Airlines, Inc.; Republic Airlines, Inc.; Mainline Travel, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1389

991 F.2d 1389

61 USLW 2690, 1993-1 Trade Cases P 70,190

INTERNATIONAL TRAVEL ARRANGERS, a corporation, Plaintiff-Appellee, v. NWA, INC.; Northwest Airlines, Inc.; Republic Airlines, Inc.; Mainline Travel, Inc., Defendants-Appellants.

INTERNATIONAL TRAVEL ARRANGERS, a corporation, Plaintiff-Appellant, v. NWA, INC.; Northwest Airlines, Inc.; Republic Airlines, Inc.; Mainline Travel, Inc., Defendants-Appellees.

Nos. 92-1037, 92-1039.

United States Court of Appeals Eighth Circuit.

Submitted Nov. 11, 1992.

Decided April 16, 1993.

Rehearing and Rehearing En Banc

Denied May 26, 1993.

Donald L. Flexner, Washington, DC, argued (Clifton S. Elgarten, Luther Zeigler and David F. Williams, Washington, DC, Paul B. Klaas, Michael A. Lindsay and Scott A. Benson, Minneapolis, MN, on the briefs), for defendants-appellants.

Harold J. Tomin, Los Angeles, CA, argued (Michael R. Cunningham, David M. Coyne and Gina B. Sauer, Minneapolis, MN, on the briefs), for plaintiff-appellee.

Before McMILLIAN, Circuit Judge, FRIEDMAN, ^* Senior Circuit Judge, and MORRIS SHEPPARD ARNOLD, Circuit Judge.

FRIEDMAN, Senior Circuit Judge.

This appeal and cross-appeal grow out of consolidated suits by a wholesale tour operator against an airline and its affiliated companies charging that they (1) violated sections 1 and 2 of the Sherman Anti-Trust Act, 15 U.S.C. §§ 1 and 2 (1988), and section 7 of the Clayton Act, 15 U.S.C. § 18 (1988), and (2) breached their contractual and other obligations toward, and defrauded, the plaintiff. The alleged violations related to the dealings between the airline and the tour operator involving chartered aircraft and aircraft seats the airline provided to the tour operator.

After the district court granted summary judgment dismissing some of the claims, the balance of the case was tried to a jury. The jury found for the defendants on all but two of the claims. The jury ruled for the plaintiff on its claims that the defendants (1) had monopolized and attempted to monopolize through predatory pricing and (2) had fraudulently made a promise to the tour operator that they did not perform, and the jury awarded damages on those claims.

Each side has appealed from the portions of the judgment against it. We reverse the portions of the judgment in favor of the plaintiff, and affirm the remainder of the judgment.

I.

The appellee and cross-appellant, International Travel Arrangers (International), operates air tours out of and sells airline seats for travel from Minneapolis-St. Paul (Minneapolis) to various places in the United States. International is the second largest firm in that business in Minneapolis. International either charters aircraft or purchases blocks of seats from air carriers. It then either incorporates these seats in package tours (which also include hotel accommodations, food, etc.) that it sells, or sells the seats separately. Those sales are made largely through travel agents.

The appellants and cross-appellees are: Northwest Airlines, Inc., an airline that is a major carrier serving Minneapolis; NWA, Inc., its parent holding company; Republic Airlines, Inc. (Republic), an air carrier; and Mainline Travel, Inc. (Mainline), a tour operator. Mainline is the largest tour operator in Minneapolis.

Prior to 1985, Mainline and Republic were independent entities. In 1985, NWA acquired Mainline after obtaining from the Department of Transportation an exemption from the requirement in the Federal Aviation Act that such an acquisition receive formal approval by the Department. In granting the exemption, the Department "concluded that the acquisition was 'not likely to have anticompetitive effects or to be otherwise inconsistent with the public interest.' Application of NWA, Inc., DOT Order 85-7-70 at 3 (July 30, 1985). The DOT noted, however, that 'NWA has not requested, and will not receive, antitrust immunity for this transaction. The antitrust laws will, therefore, remain available as a remedy if NWA's acquisition later presents a threat to competition.' Id." International Travel Arrangers v. NWA, Inc., 723 F.Supp. 141, 144 (D.Minn.1989).

The next year, NWA acquired Republic, following the Department's formal approval of that acquisition in a contested proceeding. Id. In granting approval, the Department did not provide antitrust immunity, as it could have done under the governing statute.

International's supplemental complaint contained seven claims. Claims one and two alleged that NWA's acquisitions of Mainline and Republic violated section 7 of the Clayton Act. Claim three alleged that the defendants had combined and conspired to restrain and monopolize trade, in violation of sections 1 and 2 of the Sherman Act and had monopolized and attempted to monopolize trade, in violation of section 2 of that Act. Claims 4 through 7 asserted state law claims: "[t]ortious breach of the duty of good faith and fair dealing" (claim four), "fraud" (claim five), "breach of contract" (claim six), and "interference with On cross-motions for summary judgment, the district court ^** denied International's motion and granted Northwest's motion with respect to two of the claims. The court denied Northwest's motion with respect to the five other claims, holding that there were disputed issues of material fact regarding those claims. Id. at 141.

contractual relations and prospective economic advantage" (claim seven).

The court held that International's Clayton Act challenge to NWA's acquisition of Republic was barred by the Department of Transportation's approval of the acquisition. Id. at 146-48. Noting that the exclusive forum for review of such determinations was the Court of Appeals for the District of Columbia Circuit, the district court ruled that the Department's decision upholding the merger must be given "finality," id. at 148, but that International retained the right "to challenge [under the antitrust laws] post-merger anticompetitive conduct." Id. at 147-48.

The court also dismissed the fourth claim, holding that under the "relevant [Minnesota] case law," International "has no independent cause of action for breach of the duty of good faith and fair dealing." Id. at 153.

The remainder of the case was then tried to a jury. The commerce involved in International's antitrust claim was air transportation between Minneapolis and eleven cities in the United States and abroad. As the case developed at trial, however, the focus was on transportation between Minneapolis and seven cities in the United States.

International contended, among other things, that Northwest had monopolized and attempted to monopolize air transportation between those cities in the summer of 1988 by predatory pricing. In support of this theory--the only antitrust claim on which International prevailed before the jury (see below)--International introduced evidence purporting to show that Northwest had sold seats for such transportation below cost.

International also contended that Northwest had defrauded it and breached contractual commitments with respect to supplying air transportation to it in the winter of 1986. International introduced evidence intended to show that prior to its acquisition of Mainline, Northwest had undertaken to treat International as favorably as it would treat Mainline with respect to both chartering of aircraft and supplying of seats on scheduled flights, but that Northwest had failed to do so.

In a special verdict, the jury found that before Northwest's acquisition of Mainline, the defendants had not conspired or combined to restrain trade, that before or during 1986, Northwest did not possess monopoly power in any relevant market and did not acquire or maintain such power through anticompetitive acts, had no specific intent to acquire monopoly power or had not engaged in anticompetitive conduct to obtain such power, and that the defendant had not conspired to gain monopoly power.

The jury also rejected International's claims (1) that NWA's acquisition of Mainline violated section 7 of the Clayton Act, the jury finding that the acquisition had not substantially lessened competition or tended to create a monopoly, and (2) that Northwest had breached a contract with International or interfered with International's contractual relationships.

The jury found, however, that in the 1988 summer season, Northwest had monopolized and attempted to monopolize trade, and awarded International damages of $235,000 for that violation, which the district court trebled. The jury also upheld International's fraud claim, finding that Northwest knowingly had made false representations to International, upon which it intended International to act, and that International justifiably relied upon those misrepresentations. The jury awarded International damages of $850,000 and punitive The court entered judgment for International for $2,408,000, costs and a reasonable attorney's fee. It denied Northwest's motions for judgment n.o.v. and for a new trial and International's motion for a new trial.

damages of another $850,000 on the fraud claim.

International sought under section 4 of the Clayton Act $2,885,607 for attorney's fees and costs and expenses on its antitrust claim. The district court awarded $125,000, noting that "[t]he overall relief obtained by the plaintiff was relatively small compared to the number of hours expended on the litigation."

II. The Antitrust Claims

A. Northwest's Appeal: The Predatory Pricing Claim

The jury's finding that Northwest monopolized and attempted to monopolize for the 1988 summer season was based upon International's contention that in that period Northwest engaged in predatory pricing by selling seats for less than its cost of providing the transportation. "Predatory pricing may be defined as pricing below an appropriate measure of cost for the purpose of eliminating competitors in the short run and reducing competition in the long run." Cargill, Inc. v. Monfort of Colo., Inc....