Pacific Exp., Inc. v. United Airlines, Inc.

• Decision Date: 25 March 1992
• Docket Number: No. 91-55208,91-55208
• Parties: 1992-1 Trade Cases P 69,770 PACIFIC EXPRESS, INC., Plaintiff-Appellant, v. UNITED AIRLINES, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 814

959 F.2d 814

1992-1 Trade Cases P 69,770

PACIFIC EXPRESS, INC., Plaintiff-Appellant, v. UNITED AIRLINES, INC., Defendant-Appellee.

No. 91-55208.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Feb. 6, 1992.

Decided March 25, 1992.

Maxwell M. Blecher, Blecher & Collins, Los Angeles, Cal., for plaintiff-appellant.

S. William Livingston, Covington & Burling, Washington, D.C., for defendant-appellee.

Appeal from the United States District Court for the Central District of California.

Before ALARCON, BEEZER and RYMER, Circuit Judges.

ALARCON, Circuit Judge:

In this action, Pacific Express, Inc. (Pacific Express) alleges that United Airlines, Inc. (United) monopolized, or attempted to monopolize, various airline routes in the western part of the United States, in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2, and that its conduct tortiously interfered with Pacific Express' prospective economic advantage, contrary to California law. The district court granted Pacific Express began operating as an airline on January 27, 1982. At the outset, it concentrated on the route between Los Angeles and San Francisco. After sustaining losses in this market, Pacific Express restructured its business to serve routes connecting western cities with San Francisco and Los Angeles. In the spring of 1983, United entered into negotiations with Pacific Express to provide it with passengers from the western region of the United States so that United could concentrate on its longer routes. These negotiations were terminated in June of that year.

summary judgment in favor of United Airlines on each claim.

In the summer months of 1983, Pacific Express began showing a profit. On July 27, 1983, United announced that it would expand its service to cities in the western region of the United States which were previously served solely by Pacific Express. United also increased its service on routes where it had previously competed with Pacific Express. By early 1984, Pacific Express was unable to continue business operations. Pacific Express sought protection under Chapter 11 of the Bankruptcy Code on February 4, 1984.

On May 1, 1984, United entered into an agreement with Westair to provide passengers for United's longer flights by serving some of the routes previously maintained by Pacific Express.

Pacific Express argues that reversal of the order granting summary judgment is compelled because genuine issues of material fact exist regarding whether United's expansion of its service had an anti-competitive effect and interfered with Pacific Express' prospective economic advantage.

We affirm because we conclude that Pacific Express failed to present facts showing that its injury resulted from anticompetitive conduct, or that United's sole purpose in expanding its service was anticompetitive. We discuss each of Pacific Express' contentions and the facts pertinent thereto under separate headings.

DISCUSSION

I. Antitrust Injury

Pacific Express contends that summary judgment was improperly granted because the facts in this record support a reasonable inference that United's purpose in expanding its service was to reduce competition and that its conduct was exclusionary or predatory. We review a grant of summary judgment de novo. In re Bullion Reserve of N. Am., 922 F.2d 544, 546 (9th Cir.1991). In reviewing an order granting summary judgment, we must determine, viewing the evidence in the light most favorable to the nonmoving party, whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law. Id. at 546. The inferences to be drawn from the underlying facts must be viewed in the light most favorable to the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 2513, 91 L.Ed.2d 202 (1986). "[T]here is no genuine issue if the evidence presented in the opposing affidavits is of insufficient caliber or quantity to allow a rational finder of fact to find.... that the plaintiff proved his case by the quality and quantity of evidence required by the governing law." Id. at 254, 106 S.Ct. at 2513. In Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986), the Supreme Court noted, in the context of a Section 1 violation, that "antitrust law limits the range of permissible inferences from ambiguous evidence." Id. at 588, 106 S.Ct. at 1356. In ruling on a motion for summary judgment, the court must apply "the substantive evidentiary standard of proof that would apply at the trial on the merits." Anderson, 477 U.S. at 252, 106 S.Ct. at 2512. The plaintiff bears the burden of proving a Section 2 claim by a preponderance of the evidence. Shoppin' Bag of Pueblo, Inc. v. Dillon Companies, Inc., 783 F.2d 159, 161 (10th Cir.1986); Deauville Corp. v. Federated Dep't Stores, Inc., 756 F.2d 1183, 1188 (5th Cir.1985).

In order to state a claim for monopolization under Section 2 of the Sherman Act, a plaintiff must prove:

(1) Possession of monopoly power in the relevant market;

(2) willful acquisition or maintenance of that power; and

(3) causal antitrust injury.

Movie 1 & 2 v. United Artists Communications' Inc., 909 F.2d 1245, 1254 (9th Cir.1990), cert. denied, --- U.S. ----, 111 S.Ct. 2852, 115 L.Ed.2d 1020 (1991).

The following facts must be proved to establish an attempt to monopolize claim:

(1) specific intent to control prices or destroy competition;

(2) predatory or anticompetitive conduct to accomplish the monopolization;

(3) dangerous probability of success; and

(4) causal antitrust injury.

Id. at 1254.

To support its contention that its expansion of service did not constitute predatory conduct, United offered the declaration of Judy Bishop, United's Regional Manager for Passenger Sales. Bishop declared that United's expansion of service was preceded by extensive planning that began before the airlines began negotiations concerning a possible feeder arrangement. Bishop further stated that United expected that the expanded service would produce more passengers to connect with existing San Francisco flights.

United also introduced the declaration of Gary Dorman, a consulting economist. Dorman testified that United continued to serve the western region routes for at least four years after it expanded its services in 1983. During the time that Pacific Express and United were competing on the same routes, Pacific Express' fares were lower than those charged by United.

Pacific Express relies on the following circumstances to support its claim that United's purpose in expanding its service was anticompetitive. Pacific Express presented evidence that United made it difficult and costly for automated travel agencies who used United's computerized reservations system to find and book Pacific Express' competing flights. Pacific Express also introduced evidence that during this same period United prevented Pacific Express from gaining access to gates at the San Francisco Airport. These events occurred prior to the date United expanded its service to compete with Pacific Express in cities outside the Los Angeles-San Francisco corridor.

Pacific Express also introduced the declaration of Frederick Davis, Pacific Express' marketing vice-president. Davis stated that Bill Andres of United told him that United was concerned that Pacific Express and United "would get into each other's pockets." Pacific Express also cites portions of the deposition of Donald C. Moonjian, a United employee who participated in the failed negotiations with Pacific Express, in an attempt to prove United's anticompetitive intent. Moonjian testified that United "did not ask Pacific Express to serve Los Angeles to San Francisco." He further stated that he did not "think we would have wished them to do so because we fly [the Los Angeles to San Francisco route], nor would we wish anyone else to fly [that route]. We would like to have [that route] all to ourselves."

Even assuming that an inference of anti-competitive intent can be drawn from these facts, they do not demonstrate that United's expansion of its service to compete with Pacific Express was predatory or anticompetitive conduct. "Direct evidence of intent to vanquish a rival in an honest competitive struggle cannot help to establish an antitrust violation." William Inglis & Sons Baking Co. v. ITT Continental Baking Co., Inc., 668 F.2d 1014, 1028 (9th Cir.1981), cert. denied, 459 U.S. 825, 103 S.Ct. 57, 74 L.Ed.2d 61 (1982); See Universal Analytics, Inc. v. MacNeal-Schwendler Corp., 914 F.2d 1256, 1259 (9th Cir.1990) (even assuming that a secondary motivation of hiring a competitor's employee was to "wound" the competitor, no genuine issue of material fact existed with regards to predatory conduct because legitimate business reasons for the hiring existed).

In order to demonstrate that it suffered an antitrust injury, Pacific Express must show that its injury was caused by anticompetitive or predatory aspects of United's conduct, not by competition. In Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 110 S.Ct. 1884, 109 L.Ed.2d 333 (1990), the Supreme Court held that a private plaintiff seeking to recover damages under Section 4 of the Clayton Act must prove the existence of an injury "of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful." Id. at 334, 110 S.Ct. at 1889 (quoting Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489, 97 S.Ct. 690, 697, 50 L.Ed.2d 701 (1977). The injury must be "attributable to an anti-competitive aspect of the practice under scrutiny, 'since "[i]t is inimical to [the antitrust] laws to award damages" for losses stemming from continued competition.' " Id. (quoting Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 109-10, 107 S.Ct. 484, 488-89, 93 L.Ed.2d 427 (1986)). "The antitrust injury requirement ensures...