Westways World Travel v. Amr Corp.

• Decision Date: 10 September 2001
• Docket Number: No. 99-CV-0386.,99-CV-0386.
• Court: U.S. District Court — Central District of California
• Parties: WESTWAYS WORLD TRAVEL, et al., v. AMR CORP et al.

182 F.Supp.2d 952

WESTWAYS WORLD TRAVEL, et al., v. AMR CORP et al.

No. 99-CV-0386.

United States District Court, C.D. California.

September 10, 2001.

COPYRIGHT MATERIAL OMITTED

Dean Browning Webb, Dean B. Webb Law Offices, Vancouver, WA, Linda S. Platisha, Linda S. Platisha Law Offices, Yorba Linda, CA, for plaintiffs.

Chad S. Hummel, Robert E. Cooper, William A. Wargo, Gibson, Dunn & Crutcher, Los Angeles, CA, for AMR Corporation, American, Airlines Inc. and AMR Eagle Holding Corporation.

Chad S. Hummel, Robert E. Cooper, William A. Wargo, Gibson, Dunn & Crutcher, Los Angeles, CA, for Sabre Group Holdings Inc.

William A. Wargo, Jeffrey A. LeVee, Jones, Day, Reavis & Pogue, Los Angeles, CA, Joshua S. Goodman, Farley J. Neuman, Jenkins, Goodman & Neuman, San Francisco, CA, Kevin D. McDonald, Sarah Mackey Mathias, Anthony P. Lalla, Jones, Day, Reavis & Pogue, Washington, DC, for Airlines Reporting Corporation.

PROCEEDINGS: ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTIONS TO DISMISS PLAINTIFFS' FIRST AMENDED COMPLAINT FOR FAILURE TO STATE A CLAIM PURSUANT TO FED. R.CIV.P. 12(b)(6).

TIMLIN, District Judge.

The Court, the Honorable Robert J. Timlin, has read and considered Defendants AMR Corporation ("AMR"), American Airlines, Inc. ("American"), American Eagle Holding Corporation ("American Eagle"), and Sabre Holdings Corporation ("Sabre") (collectively, "Defendants")'s motion to dismiss Plaintiffs Westways World Travel and Sundance Travel Service ("Plaintiffs")'s first amended complaint ("FAC") for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6) ("Rule 12(b)(6)"), Plaintiffs' opposition, and Defendants' reply.

The Court has also read and considered Defendant Airlines Reporting Corporation ("ARC")'s motion to dismiss Plaintiffs' FAC, Plaintiffs' opposition and ARC's reply. Based on such consideration, the Court concludes as follows:

I.

BACKGROUND

On November 12, 1999 Plaintiffs filed a class action FAC against Defendants and ARC alleging that they violated the Racketeering Influenced and Corrupt Organization Act, 18 U.S.C. §§ 1961 et seq. ("RICO") and that American, American Eagle and ARC breached a contract with Plaintiffs. Plaintiffs are travel agencies, and allege that Defendants and ARC have conspired to collect money from Plaintiffs by forcing them to pay large penalties for purported "tariff" violations by passengers who purchased airline tickets from Plaintiffs. The purported tariff violations stem from the passengers' use of "back to back supersaver tickets," "hidden city tickets" and round trip tickets used for one-way travel. These types of tickets purchased and used by passengers on American and American Eagle to save money on airline tickets were sold by Plaintiffs to those passengers. Allegedly, American, with the assistance of the other defendants, collected or attempted to collect these passenger savings from Plaintiffs through the issuance of "Debit Memos" (demands for money) by threatening to terminate the contractual right of Plaintiffs to issue airline tickets on American and American Eagle if Plaintiffs did not pay the Debit Memos.

Plaintiffs state the following claims in their FAC: 1) against American for violation of 18 U.S.C. § 1962(a) ("Section 1962(a)"), 2) against American for violation of 18 U.S.C. § 1962(c) ("Section 1962(c)"), 3) against all defendants for violation of 18 U.S.C. § 2 and Sections 1962(a) and (c) under aiding and abetting liability ("third claim"), 4) against all defendants for violation of Sections 1962(a) and (c) under respondeat superior liability ("fourth claim"), 5) against all defendants for violation of 18 U.S.C. § 1962(d) ("Section 1962(d)") for conspiracy to violate Sections 1962(a) and (c) ("fifth claim"), 6) against American, American Eagle, and ARC for breach of contract, 7) against all defendants for unjust enrichment, and 8) against all defendants for declaratory and injunctive relief.

Defendants filed a motion to dismiss Plaintiffs' FAC for failure to state a claim pursuant to Rule 12(b)(6). ARC moved separately to dismiss Plaintiffs' FAC pursuant to Rule 12(b)(6).

II.

ANALYSIS

A. Standard for Analyzing A Motion to Dismiss for Failure to State a Claim

A Rule 12(b)(6) motion to dismiss for failure to state a claim is a disfavored one, see Hall v. City of Santa Barbara, 833 F.2d 1270, 1274 (9th Cir.1986), which may only be granted in extraordinary circumstances. See United States v. City of Redwood City, 640 F.2d 963, 966 (9th Cir. 1981). Essentially, a motion to dismiss for failure to state a claim tests plaintiff's compliance with the liberal requirements of Rule 8(a)(2) of the Federal Rules of Civil Procedure ("Rule 8(a)(2)"). See 5A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1356, at 294-96 (1990).

The burden imposed by Rule 8(a)(2) is a minimal one. Rule 8(a)(2) requires parties seeking relief in federal court by way of complaint, counterclaim, cross-claim, or third party complaint, to include "a short and plain statement of the claim showing that the pleader is entitled to relief". In meeting this requirement, a plaintiff need not set forth the legal basis for his claim, only the facts underlying it. See McCalden v. California Library Assoc., 955 F.2d 1214, 1223 (9th Cir.1990).¹ It is the burden of the party bringing a motion to dismiss for failure to state a claim to demonstrate that the requirements of Rule 8(a)(2) have not been met. See Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1409 (3d Cir.1991) ("[U]nder Rule 12(b)(6) the defendant has the burden of showing no claim has been stated.").

As the Supreme Court has noted, when evaluating a complaint for failure to state a claim, the question is not whether the facts stated in the complaint, if proven, would entitle the plaintiff to any relief. Instead, the question is whether there is any set of "facts that could be proved consistent with the allegations of the complaint" which would entitle the plaintiff to some relief. See Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984).² This is true even where plaintiff identifies and relies upon a legal theory in his complaint that would not afford him any relief. See Haddock v. Board of Dental Examiners of Cal., 777 F.2d 462, 464 (9th Cir.1985) ("A complaint should not be dismissed if it states a claim under any theory, even if the plaintiff erroneously relies on a different legal theory.").

B. Plaintiffs' RICO Claims

The substantive provision of RICO, 18 U.S.C. § 1962, describes the prohibited activities and provides for four different causes of action. Section 1962(a) prohibits "any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity ... to use or invest, directly or indirectly, any part of such income, or the proceeds of such income, in acquisition of any interest in, or the establishment or operation of, any enterprise ...." Section 1962(b) prohibits the acquiring or maintaining of an interest in, or control of, any enterprise engaged in interstate commerce using funds from racketeering activity. See 18 U.S.C. § 1962(b). Section 1962(c) prohibits "any person employed by or associated with any enterprise ... to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt." Section 1962(d) provides a cause of action for conspiring to violate any of the provisions in subsections (a), (b), or (c).

1. Plaintiffs' Section 1962(c) Claim

To state a claim under Section 1962(c), a plaintiff must allege the following four elements: "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." See Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496, 105 S.Ct. 3275, 3285, 87 L.Ed.2d 346 (1985) "Racketeering activity" under RICO is defined as any act "chargeable" or "indictable" under a number of enumerated state and federal offenses ("predicate" offenses), including extortion and mail fraud. See 18 U.S.C. § 1961(1). A "pattern" of racketeering activity requires at least two predicate acts. See Brady v. Dairy Fresh Products Co., 974 F.2d 1149, 1152 (9th Cir.1992); see also 18 U.S.C. § 1961(5).

a. Predicate Acts Under Section 1962(c)

i. Extortion

Defendants contend that Plaintiff failed to state facts in claim two of the FAC which alleges extortion under the Hobbs Act because Plaintiffs merely allege a contract dispute. Extortion, as defined by 18 U.S.C. § 1951(b)(2), is the "obtaining of property from another, with his consent, induced by the wrongful use of actual or threatened force, violence, or fear, or under color of official right." Some courts have held that mere contractual disputes cannot constitute extortion. See, e.g. Toms v. Pizzo., 4 F.Supp.2d 178, 184 (W.D.N.Y.1998) ("Allegations concerning the scope of [plaintiffs'] contractual obligations cannot suffice as predicate acts under RICO because they involve only what appears to be a disagreement concerning what [plaintiffs'] obligations were."). Other courts have disagreed with this proposition. See, e.g. Arabian American Oil Co. v. Scarfone, 939 F.2d 1472, (11th Cir.1991) ("[M]any RICO cases involve contract disputes.").

However, this Court need not decide whether disputes regarding contractual obligations may constitute extortion because Plaintiffs allege in their FAC that "American has no enforceable contract or other legal basis that entitles it to collect enormous penalties from plaintiff and the Class members for a passenger's alleged tariff violations." Because Plaintiffs allege that Defendants have no contractual or other legal basis to collect money from them, Plaintiffs have sufficiently alleged facts which constitute multiple acts of extortion by Defendants inducing fear that if Plaintiffs do not pay the Debit Memos Defendants will terminate their contractual entitlement to sell tickets...