Midwestern Machinery, Inc. v. Northwest Airlines, Inc., No. 98-1487
| Court | United States Courts of Appeals. United States Court of Appeals (8th Circuit) |
| Writing for the Court | Before McMILLIAN, FAGG, and BEAM; BEAM |
| Citation | 167 F.3d 439 |
| Parties | 1999-1 Trade Cases P 72,422 MIDWESTERN MACHINERY, INC.; Brian F. Gagan; Sharon Tolbert Glover; Charles M. Koosman; Laurie I. Laner; Jack Reuler; Michael W. McNabb; Nigel Linden, Appellants, v. NORTHWEST AIRLINES, INC., Appellee. State of Delaware; State of Hawaii; State of Iowa; State of Michigan; State of New York; State of North Dakota; State of Ohio; State of South Dakota; State of Utah; State of West Virginia; State of Wisconsin, Amici on behalf of Appellants. |
| Docket Number | No. 98-1487 |
| Decision Date | 15 April 1999 |
Page 439
Glover; Charles M. Koosman; Laurie I. Laner;
Jack Reuler; Michael W. McNabb; Nigel
Linden, Appellants,
v.
NORTHWEST AIRLINES, INC., Appellee.
State of Delaware; State of Hawaii; State of Iowa; State
of Michigan; State of New York; State of North Dakota;
State of Ohio; State of South Dakota; State of Utah;
State of West Virginia; State of Wisconsin, Amici on behalf
of Appellants.
Eighth Circuit.
Decided Feb. 2, 1999.
Rehearing Denied April 15, 1999.
Page 440
K. Craig Wildfang, Minneapolis, MN, argued (Christopher W. Madel, Edward M. Glennon, Richard Ihrig, Michael D. Olafson, Mark A. Jacobson, Lewis A. Remele, Jr., Christopher Morris, James W. Rude, Seymour J. Mansfield, Richard J. Fuller and Rodney A. Wilson, on the brief), for Appellants.
Thomas W. Tinkham, Minneapolis, MN, argued (Carol A. Peterson, Donald L. Flexner, James P. Denvir, Luther Zeigler and Parker C. Flose III, on the brief), for Appellee.
Before McMILLIAN, FAGG, and BEAM, Circuit Judges.
BEAM, Circuit Judge.
Midwestern Machinery, Inc., Brian F. Gagan, Sharon Tolbert Glover, Charles M. Koosman, Laurie I. Laner, Jack Reuler, Michael W. McNabb, and Nigel Linden appeal the dismissal of their complaint alleging a violation of section 7 of the Clayton Act. The district court dismissed their complaint under Federal Rule of Civil Procedure 12(b)(6) because it found that a claim under section 7 of the Clayton Act, which prohibits acquisitions of stock or assets that substantially lessen competition, expires when one corporation merges with another and its stock is turned in and extinguished. We disagree and reverse.
I. BACKGROUND
In January 1986, Northwest Airlines (Northwest) reached an agreement with Republic Airlines (Republic) whereby the two airlines would merge. At the time of merger, Northwest and Republic were respectively the nation's eighth and ninth largest airlines and the two largest operators at the Minneapolis-St. Paul International Airport. The merger was approved by the Department of Transportation, the reviewing agency at the time, but no antitrust immunity was granted for the transaction. After the merger was completed in August 1986, all of Republic's stock was turned in and extinguished, and Republic ceased to exist as a separate entity.
The plaintiffs, Midwestern Machinery, Inc., Brian F. Gagan, Sharon Tolbert Glover, Charles M. Koosman, Laurie I. Laner, Jack Reuler, Michael W. McNabb, Nigel Linden (hereinafter Midwestern), all frequent travelers on Northwest since the merger, brought this action in June 1997, alleging a violation of section 7 of the Clayton Act (hereinafter section 7). 15 U.S.C. § 18. Midwestern's
Page 441
complaint alleges that the merger resulted in Northwest holding and using Republic's stock and assets 1 in violation of the section 7 prohibition against acquisitions which substantially lessen competition. Midwestern alleges that Northwest's disproportionate increases in fares, market dominance, and use of entry barriers for new competitors illustrate the substantial lessening of competition following the merger.Northwest moved to dismiss Midwestern's complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). The district court found that, although a post-acquisition claim can exist for holding and using stock and assets in violation of section 7, a completed merger precludes such a claim.
In order to make out a section 7 claim for post-acquisition holding and use, Midwestern must allege an anti-competitive use of Republic's stock or assets. The district court dismissed Midwestern's complaint because it could not "conceive of a post-acquisition use when Republic 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. DISCUSSION
We review the district court's 12(b)(6) dismissal de novo. See Springdale Educ. Ass'n v. Springdale Sch. Dist., 133 F.3d 649, 651 (8th Cir.1998). When ruling on a motion to dismiss, courts are required to accept the complaint's factual allegations as true and to construe them in the light most favorable to the plaintiff. In essence, this mandates that a complaint should not be dismissed "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim that would demonstrate an entitlement to relief." Id. As indicated, Midwestern alleges a substantial lessening of competition shown by Northwest's disproportionate increases in fares, market dominance, and use of entry barriers for new competitors following the merger. Accepting these factual allegations as true, we are left with the issue of whether a completed merger, where all the stock of one corporation is turned in and extinguished, can violate section 7.
Northwest argues, consistent with the district court opinion, that when the two airlines became fully merged, no section 7 claim is possible since all of Republic's stock is turned in and extinguished. In essence, Northwest argues that no Republic stock or assets are left to substantially lessen competition. We hold that a section 7 cause of action can exist even though a merger occurs and two corporations effectively become one. We...
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Overview of the Applicable U.S. Antitrust Laws
...applies to acquisitions in which the stock of the acquired firm is turned in and extinguished. See Midwestern Mach. v. Northwest Airlines, 167 F.3d 439 (8th Cir. 1999). 13 . See United States v. Columbia Steel Co., 334 U.S. 495, 507 n.7 (1948) (citations omitted); Philadelphia Nat’l Bank , ......
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Judicial Relief and Remedies
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Table of Cases
...Litig., In re , 127 F. Supp. 2d 702 (D. Md. 2001), 428 Midcon Corp., 107 F.T.C. 48 (1986), 291 Midwestern Mach. v. Northwest Airlines, 167 F.3d 439 (8th Cir. 1999), 3, 479 Millicom Int’l Cellular v. Republic of Costa Rica, 995 F. Supp. 14 (D.D.C. 1998), 469 Minn-Chem v. Agrium Inc., 683 F.3......