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July 11, 2011 Articles

Travel Agents Appeal Airline Price-Fixing Decision to Supreme Court

If the U.S. Supreme Court grants certiorari, it will revisit the precedent-setting pleading standard set in Bell Atlantic Corp. v. Twombly.

By Rebecca Thai

If the U.S. Supreme Court grants certiorari in In re Travel Agent Commission Antitrust Litigation, the Court will revisit the precedent-setting pleading standard set in Bell Atlantic Corp. v. Twombly. Recently, the Sixth Circuit Court of Appeals upheld a district court’s decision to dismiss numerous travel agents’ claims that major airlines, such as Continental Airlines Inc., United Airlines, and American Airlines Inc., conspired to reduce, cap, and eventually eliminate the payment of base commissions in violation of 15 U.S.C. § 1. The airlines filed a motion to dismiss for failure to state a claim under section 1 of the Sherman Act. Late last month, after the travel agents’ motion for rehearing was denied, the travel agents submitted a petition for writ of certiorari to the U.S. Supreme Court.

The Supreme Court in Twombly held:

[S]tating such a claim requires a complaint with enough factual matter (taken as true) to suggest that an agreement was made. . . . [A]n allegation of parallel conduct and a bare assertion of conspiracy will not suffice. . . . Hence, when allegations of parallel conduct are set out in order to make a §1 claim, they must be placed in a context that raises a suggestion of a preceding agreement, not merely parallel conduct that could just as well be independent action.

The Sixth Circuit held that the complaint alleged “only an opportunity to conspire, which does not necessarily support an inference of illegal agreement.” The circuit court found that every airline that was the first to announce and implement a commission cut made the announcement publicly. The court reasoned that such public announcements undercut the travel agents’ allegations that the airlines agreed to the cuts, prior to the announcements, at social events and industry trade meetings.

Circuit Judge Merritt wrote a vigorous dissent accusing his fellow Sixth Circuit Judges of seriously misapplying the Twombly pleading standard. “My colleagues are requiring the plaintiff to offer detailed facts that if true would create a clear and convincing case of antitrust liability at trial without allowing the plaintiff the . . . right to conduct discovery . . . ,” Judge Merritt said. In support of his dissent, Judge Merritt pointed to the allegations in the complaint that the airlines had, on five separate occasions, “acted affirmatively, aggressively and publicly in unison to cut, fix and hold the price the airlines would pay the travel agents.” Judge Merritt concluded his dissent stating that the U.S. Supreme Court must step in “to make it clear that Twombly may not be used . . . as a cover for repealing regulation of the marketplace through private antitrust enforcement.”

Rebecca Thai

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