Travel Committee, Inc. v. Pan American World Airways, Inc.

Decision Date01 September 1991
Docket NumberNo. 848,848
Citation91 Md.App. 123,603 A.2d 1301
PartiesThe TRAVEL COMMITTEE, INC., et al., v. PAN AMERICAN WORLD AIRWAYS, INC. ,
CourtCourt of Special Appeals of Maryland

Shale D. Stiller (Evelyn W. Pasquire, William L. Reynolds, Robert A. Weber and Frank, Bernstein, Conaway & Goldman, on the brief) Baltimore, for appellants.

Thomas C. Valkenet and John P. Sarbanes (George F. Pappas and Venable, Baetjer and Howard, on the brief) Baltimore, (Lawrence N. Chanen, New York City, of counsel), for appellee.

Argued before MOYLAN, ALPERT and DAVIS, JJ.

ALPERT, Judge.

From Daedalus and Icarus, to Orville and Wilbur Wright, mortals have dared to dream of flying. It is the realization of that dream that brought us the airline travel industry. A conflict between participants in that industry brings us this appeal.

We face the task of untangling this case's factual context and procedural background with no small amount of trepidation, and caution the reader that we have pursued clarity at the expense of brevity.

The dispute evolved from a series of business transactions between one of the best known airlines, here and abroad, and a large-volume travel agency. Eventually, the parties took their differences to court, litigating a fifteen-count complaint, and a fourteen-count counterclaim. Judgment eventually was entered against the travel agency, which now appeals. Additionally, the appellees noted a cross appeal.

PROCEDURAL HISTORY

Pan American World Airways, Inc. (Pan Am) filed a fifteen-count Fifth Amended Complaint against Travel Committee, Inc. (TCI), Travel Destinations Unlimited, Inc. (TDU), Travel Destinations, Inc. (TDI), and their principals, Ira Weiner and Stanley Levin. 1 TCI and TDU filed a fourteen-count Amended Counterclaim.

A three week trial was held in the Circuit Court for Baltimore County, Murphy, J., presiding, and on August 20, 1990, and August 24, 1990, the court entered certain judgments on the plaintiff's Fifth Amended Complaint and on the defendant's Counterclaim. On October, 11, 1990, the court ruled upon certain motions, and entered judgments in the amounts of $404,726.77 against TCI, and $1,570,083.26 against TDU, TCI, Weiner, and Levin. No judgment was entered on several of the claims and counterclaims, and, by virtue of a clerical error, no judgment was entered for or against TDI. On October 1, 1991, this court ordered the trial court to enter an Order, which it did on October 7, 1991, directing the clerk of the Circuit Court to enter a judgment of $1,974,810.03, the sum total of the monetary judgments, against TDI on count fourteen of Pan Am's Fifth Amended Complaint. The defendants appealed on

November 9, 1990; Pan Am filed a cross appeal on November 16, 1990.

FACTS
a. Travel Industry Background Information

Retail agencies sell airline seats to the public at published airline prices, then pay the airline those prices minus a commission. Wholesalers, who market air tours that include rooms and land travel, and consolidators, who deal only in high-volume air travel, sell bulk blocks of tickets to retail agencies. Wholesalers and consolidators buy "net tickets" in bulk from the airlines at reduced prices, and sell them through retail agencies that book reservations for their customers. The wholesaler/consolidator and the airline enter "net ticketing agreements" that set net prices and restrictions for tickets bought in bulk.

The Airlines Reporting Commission (ARC), an organization owned by 130 airlines, accredits travel agencies and furnishes them standard ticket stock to use in writing tickets for any of the airlines in the ARC system. An airline that appoints an ARC-accredited travel agency to act as its agent gives the agency an "ARC plate," 2 to use in validating tickets the agency writes. These tickets are valid for any airline in the ARC system.

An ARC agency must file with ARC a weekly report of tickets it wrote during the previous week. Ten days after the end of each reporting period, ARC gives the airlines a draft on the agency's bank account for the net remittance, minus the agency's commission: this means that member agencies make only one payment for tickets sold. Agencies must make full payment of all amounts owed to airlines. Agents hold ticket sale proceeds, minus the agent's commission, in trust for the carrier. ARC does not require agencies to segregate into separate accounts the money an agency collects from passengers, and ARC does not segregate If an agent defaults on its payments to ARC, ARC or the airlines may repossess the agent's ARC plates for writing tickets. Alternatively, an airline may agree to a "direct form of payment" for a particular weekly report, in which case, the agent and the airline settle collection issues between themselves, and the agent pays the airline directly for tickets written through ARC.

the funds it collects that are destined for the individual airlines.

The airlines and the agents each audit ARC's reports. If an airline has been underpaid, the airline issues a debit memo showing the additional amount due. An agency that makes an overpayment submits a sales summary adjustment showing the refund the carrier owes the agency. If an agent writes a new ticket to replace a lost ticket, the agent submits to the airline a "lost ticket advice" to obtain reimbursement for the duplicate payment.

According to the appellants, wholesalers routinely "batch" reservations by booking the reservations into the airline's reservation system and collecting the fares in advance of a tour, but they write and deliver the tickets to passengers just two or three weeks before the tour departs. This practice exposes the passengers or the agency to the risk that in the interim, the airline will raise its rates. According to Pan Am, "in the airline industry, the ticketing is what guarantees the fare."

b. The Case

Stanley Levin and Ira Weiner, the appellants/counter-appellees, began a travel business in 1968, and in 1970 incorporated Travel Destinations Unlimited, Inc. (TDU), 3 a retail travel agency, and Travel Committee, Inc. (TCI), a wholesaler/consolidator travel agency. TCI is a wholly owned subsidiary of TDU. TDU was ARC-accredited, and had ARC plates for every major airline. ARC viewed TCI TCI began selling Pan Am charter flights in 1975 or 1976, but as the charter business dissipated in the mid-1980s, airlines began to offer surplus seats on regularly scheduled flights at prices the airlines classified as "B class" fares. TCI began selling "B class" seats; Pan Am was TCI's major carrier.

as a "branch office" of TDU, and permitted it to use TDU's plates.

After June, 1986, TCI's consolidator business improved, and during the summer and fall of 1986, Pan Am urged TCI to sell as many of the new "B class" fares as it could.

In December 1986 or January 1987, Pan Am gave TCI its 1987 summer schedule of net ticket prices for "B class" fares. TCI used this information to produce its summer brochure, and began marketing "B class" seats for the summer, and taking reservations at the prices Pan Am set in the summer schedule. TCI alleges that it did this with Pan Am's blessing, and that Pan Am urged TCI to sell as many "B class" seats as possible. We note, however, testimony acknowledging that Pan Am indicated to TCI that it was "thinking about, but ... hadn't at that time, put in some form of different class air service...."

In March, 1987, Pan Am informed TCI that it had created a new "H-class," and that it would give TCI blocks of these seats on its 1987 flights. Pan Am also told TCI that reservations at the fares contained in its summer schedule were to be booked in the new blocks of "H-class" seats, instead of in "B class" seats, including the reservations TCI already had booked. This change limited the number of seats TCI could sell at its net ticket prices, forcing TCI to cancel previously booked reservations and re-book them in "H-class" seats in order to honor the fares quoted to passengers with "B class" reservations. Fewer "H-class" seats were available than the number of reservations TCI had already sold, and no "H-class" seats were available to certain destinations.

Weiner complained to John (Jerry) Murphy, Pan Am's Vice President and General Sales Manager. Murphy told Weiner that TCI could continue to book passengers in "B class" seats, but that these seats would cost $120 more than originally quoted and charged to passengers who already had reserved seats. TCI paid that extra cost from its own pocket to protect customers for whom reservations already had been made.

On June 3, 1987, Pan Am told TCI that each "H-class" ticket that had not been written by June 6 would cost an additional $60. TCI already had booked 25,000 reservations on Pan Am flights scheduled to depart during the summer and early fall. Following its normal practice, TCI had "batched" these reservations so that tickets would be written two to three weeks before departure. We note, however, that Pan Am indicates that other wholesalers writing "H-class" tickets did not "batch" their tickets. TCI complained to Pan Am that it was impossible for the agency to write 25,000 tickets in three days, and Pan Am extended its deadline to July 3. By then, TCI, with Pan Am's assistance, had written and paid for 19,000 tickets. TCI paid the $60 per ticket increase for the remaining 6,000 tickets because it could not pass on the increase to passengers who already had paid for their tickets. 4

TCI experienced a cash shortage in the fall of 1987, and failed to remit Pan Am $329,726.77 for tickets it sold, and passed along $75,000 in worthless checks. That October, Weiner and Levin met with Murphy and other Pan Am personnel to discuss TCI's financial problems. Pan Am agreed to allow TCI to pay it directly for several ARC reports, so that TCI could avoid defaulting with ARC, and sent in auditors to check TCI's books.

Pan Am also sent Steven Glasberg to review TCI's...

To continue reading

Request your trial
67 cases
  • McGraw v. Loyola Ford
    • United States
    • Court of Special Appeals of Maryland
    • January 28, 1999
    ...of the offer ... or that a building will withstand earthquakes. Id. at 755-56. (citations omitted). Travel Committee, Inc. v. Pan American World Airways, Inc., 91 Md.App. 123, 603 A.2d 1301, cert. denied, 327 Md. 525, 610 A.2d 797 (1992), is noteworthy. In that case, a travel agency claimed......
  • Hartford Acc. and Indem. Co. v. Sherwood Brands, Inc.
    • United States
    • Court of Special Appeals of Maryland
    • September 1, 1995
    ...were lost profits, which are, by definition, estimates), cert. denied, 296 Md. 112 (1983). We held in Travel Comm., Inc. v. Pan Am. World Airways, Inc., 91 Md.App. 123, 603 A.2d 1301, cert. denied, 327 Md. 525, 610 A.2d 797 (1992), that a dispute over the actual amount owed between the part......
  • Allfirst Bank v. DEPT. OF HEALTH AND MENTAL HYGIENE
    • United States
    • Court of Special Appeals of Maryland
    • September 7, 2001
    ...Qualified Builders, Inc. v. Equitable Trust Co., 273 Md. 579, 584, 331 A.2d 293 (1975); Travel Comm., Inc. v. Pan American World Airways, Inc., 91 Md.App. 123, 190, 603 A.2d 1301,cert. denied, 327 Md. 525, 610 A.2d 797 (1992). On the other hand, the right of parties to contract freely, in a......
  • Baltimore Line Handling Co. v. Brophy
    • United States
    • U.S. District Court — District of Massachusetts
    • February 2, 2011
    ...of the veil for reasons other than fraud have failed in Maryland Courts.”) ( citing Travel Committee, Inc. v. Pan American World Airways, Inc., 91 Md.App. 123, 156, 603 A.2d 1301, 1317 (1992)). Indeed, the Maryland Court of Appeals has yet to define what constitutes a paramount equity or to......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT