Midwestern Machinery Co., Inc. v. Northwest Airlines, Inc., Civ. 97-1438 (DSD/JMM).
| Decision Date | 12 January 1998 |
| Docket Number | No. Civ. 97-1438 (DSD/JMM).,Civ. 97-1438 (DSD/JMM). |
| Citation | 990 F.Supp. 1128 |
| Parties | MIDWESTERN MACHINERY CO., INC., Brian F. Gagan, Sharon Tolbert Glover, Charles M. Koosmann, Laurie I. Laner, Jack Reuler, Michael W. McNabb and Nigel Linden, Plaintiffs, v. NORTHWEST AIRLINES, INC., Defendant. |
| Court | U.S. District Court — District of Minnesota |
Richard Ihrig, Lindquist & Vennum, Minneapolis, MN, Seymour J. Mansfield, Richard J. Fuller, Mansfield & Tanick, Minneapolis, MN, Lewis A. Remele, Jr., Bassford, Lockhart, Truesdell & Briggs, Minneapolis, MN, James William Rude, Frommelt & Eide, Minneapolis, MN, Christopher W. Madel, Winthrop & Weinstine, St. Paul, MN, Rodney Austin Wilson, Wilson Law Office, Minneapolis, MN, Karl Craig Wildfang, Winthrop & Weinstein, Minneapolis, MN, for plaintiffs.
Thomas W. Tinkham, Carol Alice Peterson, Dorsey & Whitney, Minneapolis, MN, James P. Denvir, Donald L. Flexner, Crowell & Moring, Washington, DC, Parker C. Folse, III, Susman Godfrey, Seattle, WA, for defendant.
This matter is before the court on the motion of defendant to dismiss the plaintiffs' complaint. Based on a review of the file, record and proceedings herein, the court grants defendant's motion.
Plaintiffs are consumers who, since 1987, have regularly traveled at company or personal expense for business or pleasure with defendant Northwest Airlines, Inc. ("Northwest").1 Northwest is a Delaware corporation with its principal place of business in Eagan, Minnesota. Northwest is wholly owned by Northwest Airlines Corporation, its parent holding corporation. Northwest provides scheduled commercial air transportation passenger services from its hub at the Minneapolis-St. Paul International Airport ("MSP"), and to and from other airports in the United States.
In January 1986, the parent company of Northwest and Republic Airlines, Inc. ("Republic"), a Wisconsin corporation and air carrier, announced that they had reached an agreement pursuant to which Northwest would acquire Republic. Northwest and Republic jointly filed an application for an exemption from the requirements of the Federal Aviation Act and the Department of Transportation's regulations to the extent necessary to allow Northwest to acquire control of Republic. In the alternative, Northwest and Republic requested approval of the transaction under section 408 of the Federal Aviation Act, 49 U.S.C. § 1378. From January 1, 1985 until December 31, 1988, the DOT was the sole federal agency responsible for deciding whether to permit proposed airline mergers.2 Pursuant to section 408, the DOT was to reject the transaction:
(A) if it would result in a monopoly or would be in furtherance of any combination or conspiracy to monopolize or to attempt to monopolize the business of air transportation in any region of the United States; or
(B) the effect of which in any region of the United States may be substantially to lessen competition, or to tend to create a monopoly, or which in any other manner would be in restraint of trade, unless the Board finds that the anticompetitive effects of the proposed transaction are outweighed in the public interest by the probable effect of the transaction in meeting significant transportation conveniences and needs of the public, and unless it finds that such significant transportation conveniences and needs may not be satisfied by a reasonably available alternative having materially less anticompetitive effects.
See 49 U.S.C.App. § 1378(b)(1). The United States Court of Appeals for the District of Columbia was given exclusive jurisdiction to review DOT determinations. See 49 U.S.C.App. § 1486(d). Northwest and Republic did not seek antitrust immunity for the transaction. The DOT conducted an expedited show-cause proceeding and approved the acquisition of Republic by Northwest. In permitting the merger to be consummated, the DOT did not grant antitrust immunity to the transaction.
On June 17, 1997, plaintiffs filed a complaint against Northwest, challenging that the merger in January 1986 between Northwest and Republic has had, and continues to have, the effect of substantially lessening competition in the relevant markets, in violation of section 7 of the Clayton Act, 15 U.S.C. § 18. Specifically, plaintiffs challenge the acquisition and holding by Northwest of the stock and assets of Republic. Plaintiffs seek injunctive relief and treble damages. Plaintiffs allege that Northwest has exercised its market power, allegedly gained as a result of its unlawful acquisition of Republic, by significantly raising its prices. In support of its claim, plaintiffs cite to studies which have documented the substantially higher-than-average fares charged to passengers flying to or from MSP. Plaintiffs assert post-merger anticompetitive conduct on the part of Northwest:
Numerous studies have documented the ability of airlines with dominant market shares at "fortress hubs" to discourage and defeat new entry by the use of exclusionary marketing and pricing policies. Northwest has pursued exclusionary pricing and marketing strategies that are unremunerative for Northwest but for their effect of defeating and deterring new entry. Northwest has communicated to new entrants, by public statements and by its conduct, that Northwest will pursue vigorously its announced strategy with respect to new entrants at MSP. This strategy has succeeded in deterring and defeating new entry by raising the nonrecoverable costs of entry.
Plaintiffs allege harm to competition, injury and damages:
The merger substantially lessened competition in the Relevant Markets. Actual and potential competition between Northwest and Republic, the two strongest and most significant competitors in the Relevant Markets, was eliminated by the Merger. Absent the Merger, Northwest and Republic would have continued to compete vigorously for passengers in the Relevant Markets, and this competition would have led to lower prices and higher quality service than has been the case since the Merger. Absent the Merger, barriers to entry at MSP would have been much lower, and new entrants would have exerted additional competitive pressure on Northwest and Republic, resulting in lower prices and better service in the Relevant Markets.
Complaint at ¶ 43. Plaintiffs claim that the market power acquired by Northwest resulted "both immediately and over the entire post-Merger period, in a substantial lessening of competition and substantially higher fares and reductions in output." Complaint at ¶ 3.
Defendant moves to dismiss plaintiffs' complaint for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure and for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure. The court must determine, as a threshold issue in every federal case, whether it has subject matter jurisdiction over an action. "Jurisdictional issues, whether they involve questions of law or of fact, are for the court to decide." Osborn v. United States, 918 F.2d 724, 729 (8th Cir.1990) (citation omitted). If the court is without jurisdiction, it must dismiss the action under Rule 12(b)(1). A motion to dismiss for failure to state a claim tests the sufficiency of the complaint. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). When analyzing a motion to dismiss, the court looks to the complaint as pleaded. The complaint must be liberally construed and viewed in the light most favorable to the plaintiff. The court will dismiss a complaint only when it appears the plaintiff cannot prove any set of facts that support the claim. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).
Defendant asserts that the court lacks jurisdiction over plaintiffs' claim because section 7 of the Clayton Act expressly removes from its reach all mergers and acquisitions approved by the DOT pursuant to its antitrust enforcement authority. Defendant claims that because DOT explicitly approved the Republic merger on section 7 grounds, the statute cannot form the independent basis for a separate judicial challenge. In addition, defendant argues that the Federal Aviation Act, as amended by the Airline Deregulation Act of 1978 ("ADA"), vested exclusive jurisdiction over airline mergers and acquisitions in the DOT. Thus, even if a claim under section 7 of the Clayton Act remained applicable to the Republic merger, the court would lack jurisdiction over plaintiffs' claim. Defendant also asserts that cases previously decided in this district are dispositive of plaintiffs' claim and prohibit a collateral attack. In addition, defendant argues that even if the action were properly before the court, the plaintiffs' claim is stale under the applicable statute of limitations.
Section 7 of the Clayton Act provides that:
No person engaged in commerce or in any activity affecting commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no person subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another person engaged also in commerce or in any activity affecting commerce, where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.
No person shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no person subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of one or more persons engaged in commerce or in any activity affecting commerce, where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition, of such stocks or assets, or of the use of such stock by...
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Midwestern Machinery, Inc. v. Northwest Airlines, Inc.
...ceased to exist effective of the merger and all Republic stock was turned in and extinguished." Midwestern Machinery Co. v. Northwest Airlines, Inc., 990 F.Supp. 1128, 1138 (D.Minn.1998). II. We review the district court's 12(b)(6) dismissal de novo. See Springdale Educ. Ass'n v. Springdale......