The Sixth Circuit Court of Appeals affirmed on October 2 the dismissal of a price-fixing conspiracy complaint brought by approximately 85 travel agents against virtually all the major U.S. airlines, as well as several smaller airlines. TAM Travel, Inc. v. Delta Airlines, Inc, 2009 U.S. App. LEXIS 21638 (October 2, 2009).
The travel agents alleged that the airlines had conspired to reduce travel agent commissions on domestic U.S. flights, in a series of seven incremental steps, from 10 percent in 1995 to zero in 2002. In each step, a major airline announced a reduction in, or cap on, commissions, and the other major airlines (American, United, Delta, Northwest, US Airways, and Continental) matched the reduction within days, while a number of smaller airlines (Frontier, Alaska, Horizon, and America West) matched some of the reductions at a later time, after monitoring the market impact of the majors' reduction.
Major Airlines Alleged to Have Conspired
In addition to the allegations of "conscious parallelism," the major airlines were alleged to have actually conspired with each other. Each of the commission reductions was preceded by meetings attended by representatives of the major airlines—including trade organization meetings and meetings of the antitrust-exempt International Air Transportation Association, where travel agent commissions on foreign flights were agreed to under international treaties.
Similar claims by a class of U.S. travel agents were dismissed on summary judgment by the U.S. District Court in North Carolina in Hall v. United Air Lines, Inc., 296 F. Supp. 2d 652 (E.D.N.C. 2003), and that decision was upheld by the Fourth Circuit in Hall v. American Airlines, U.S. App. LEXIS 25432 (4th Cir. 2004). The most recent plaintiffs had opted out of the Hall action. The opt-out plaintiffs' lawsuit was dismissed on a Rule 12 motion for failure to state a claim by the U.S. District Court for the Northern District of Ohio. TAM Travel, Inc. v. Delta Airlines, Inc., 2007 U.S. Dist. LEXIS 79918. The Sixth Circuit panel upheld this dismissal.
Sixth Circuit Panel: No Plausible Inference of Illegal Conspiracy
The majority of the Sixth Circuit panel held that the complaint did not meet the antitrust pleading requirement established by the U.S. Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). There, the Supreme Court held that a mere allegation of parallel conduct was not sufficient to state a claim for conspiracy unless the complaint also pleaded facts that plausibly suggested an agreement that was incompatible with lawful market behavior.
The majority of the Sixth Circuit panel held that the travel agents' allegations of parallel conduct in Tam Travel described only legal market moves, which competitors would logically make without discussion or agreement, and that no plausible inference of illegal conspiracy was raised. The presence of major airline representatives at legitimate IATA meetings on the subject of travel agent commissions for foreign flights, and the timing of those meetings—without more—was dismissed as allegations of "only an opportunity to conspire, which does not necessarily support and inference of illegal agreement."
The majority also held that no conspiracy claim was stated against the smaller airlines, which were not alleged to have engaged in the parallel conduct of the major airlines and did not attend the IATA meetings. The allegations against these airlines were held to be "precisely the type of naked conspiratorial allegations rejected by the Supreme Court in Twombly."
Dissenting Judge Says Decision Promotes Laissez Faire Marketplace
Judge Merritt filed a strong dissent to the majority's decision, arguing that Twombly did not effect as significant a change in pleading standards as the majority held, and that the complaint did plead facts sufficient to support a conspiracy claim. He accused the majority of using Twombly to promote a "preference for an unregulated laissez faire market place . . . so strong that they would eliminate market regulation through private antitrust enforcement." He urged the Supreme Court to make clear that Twombly should not be used "as a cover for repealing" private antitrust actions.
Faegre & Benson represented Frontier Airlines in this
litigation before the Eastern District of North Carolina, the
Fourth Circuit, and the Northern District of Ohio, and argued the
Tam Travel motion to dismiss for the group of small
airline defendants in the District Court.
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