American Airlines Inc v. Travelport Limited et al

Filing 77

MOTION to Dismiss Plaintiff American Airlines, Inc.'s First Amended Complaint filed by Orbitz Worldwide, LLC with Brief/Memorandum in Support. (Attachments: #1 Brief in Support) (Yates, Christopher)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
FORT WORTH DIVISION

AMERICAN AIRLINES, INC.,
a Delaware corporation,
Plaintiff,
vs.
SABRE, INC., a Delaware corporation;
SABRE HOLDINGS CORPORATION, a
Delaware corporation and SABRE
TRAVEL INTERNATIONAL LTD., a
foreign corporation, d/b/a SABRE TRAVEL
NETWORK;
TRAVELPORT LIMITED, a foreign
corporation, and TRAVELPORT, LP,
a Delaware limited partnership, d/b/a
TRAVELPORT;
and
ORBITZ WORLDWIDE, LLC, a Delaware
limited liability company, d/b/a ORBITZ,
Defendants.

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Civil Action No. 4:11-cv-00244-Y

DEFENDANT ORBITZ WORLDWIDE, LLC’S BRIEF IN SUPPORT
OF ITS MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT

TABLE OF CONTENTS
Page(s)
I.

INTRODUCTION ...............................................................................................................1

II.

SUMMARY OF ALLEGATIONS ......................................................................................3
A.
B.
C.

III.

Airlines and Travel Agents Alike Choose Global Distribution Systems to
Sell Airlines Tickets to Consumers..........................................................................4
Commercial Realities in the Travel Industry Have Required Orbitz, as
Well as Other Travel Agencies, To Align With GDS Providers. ............................5
The FAC’s Narrow Allegations Against Orbitz Are Centered On Orbitz’s
Subscriber Services Agreement With Travelport. ...................................................7

ARGUMENT.......................................................................................................................8
A.
B.

A Motion to Dismiss Should Be Granted Where The Complaint Fails to
Plead Facts Sufficient to Demonstrate the Plaintiff’s Entitlement to Relief. ..........8
The “Exclusive Dealing” Allegations Cannot Support a Sherman Act
Violation. ...............................................................................................................10
1.
2.

C.

The Sherman Act Claims Against Orbitz Also Fail Because It is Incapable
of Conspiring With Travelport as a Matter of Law. ..............................................16
1.

2.
D.

2.

3.

IV.

Orbitz Was Owned By Travelport When It Executed the
Subscriber Services Agreement and Was Thus Legally Incapable
of Conspiring With Travelport...................................................................17
Orbitz and Travelport Have Remained Affiliates of the Same
Company At all Times During the SSA. ...................................................18

The FAC’s Efforts to Include Orbitz in Some Vast “Conspiracy” to
Monopolize the Distribution of Airline Tickets Fails Under Twombly. ................19
1.

E.

American Admits that the SSA Does Not Result in a Substantial
Foreclosure in the Alleged Relevant Market. ............................................11
The FAC’s Inability to Plead Substantial Foreclosure is Also Fatal
to Its Section 2 Claim Against Orbitz. .......................................................14

Twombly Requires Factual Allegations Against Each Defendant to
Support a Plausible Claim of Conspiracy. .................................................20
Allegations With Generalities About the GDS Industry and
Allegedly Anti-Competitive Conduct by Sabre and Travelport
Cannot Support a Conspiracy Claim Against Orbitz.................................20
The FAC’s Ancillary Allegations Are Also Insufficient to
Plausibly Support Orbitz’s Involvement in the Pleaded Conspiracy.........22

Dismissal Without Leave to Amend is Appropriate Because Amendment
Is Futile Where Plaintiff’s Claims Are Foreclosed as a Matter of Law.................23

CONCLUSION..................................................................................................................24

i

TABLE OF AUTHORITIES
Page(s)
CASES
Abecassis v. Wyatt,
2011 U.S. Dist. LEXIS 37047 (S.D. Tex. Mar. 31, 2011) ........................................................ 23
Apani Southwest, Inc. v. Coca-Cola Enterprises, Inc.,
300 F.3d 620 (5th Cir. 2002) ........................................................................................... 2, 10, 11
Ashcroft v. Iqbal,
129 S. Ct. 1937 (2009) ................................................................................................................ 8
Ayers v. Johnson, 247 Fed. Appx.
534 (5th Cir. 2007) .................................................................................................................... 23
Bell Atl. Corp. v. Twombly,
550 U.S. 544 (2007) ................................................................................................................ 3, 8
Bepco, Inc. v. Allied-Signal, Inc.,
106 F. Supp. 2d 814 (M.D. N.C. 2000) ..................................................................................... 12
Bob Maxfield, Inc. v. Am. Motors Corp.,
637 F.2d 1033 (5th Cir. 1981) ................................................................................................... 11
Borne v. River Parishes Hosp.,
2011 U.S. Dist. LEXIS 28089 (E.D. La. Mar. 18, 2011) ............................................................ 4
Century Oil Tool, Inc. v. Production Specialties, Inc.,
737 F.2d 1316 (5th Cir. 1984) ................................................................................................... 19
Collins v. Morgan Stanley Dean Witter,
224 F.3d 496 (5th Cir. 2000) ....................................................................................................... 4
Copperweld Corp. v. Independence Tube Corp.,
467 U.S. 752 (1984) ............................................................................................ 2, 16, 17, 18, 19
Cuviller v. Taylor,
503 F.3d 397 (5th Cir. 2007) ....................................................................................................... 9
Denison Mattress Factory v. Spring-Air Co.,
308 F.2d 403 (5th Cir. 1962) ..................................................................................................... 11
Dickson v. Microsoft Corp.,
309 F.3d 193 (4th Cir. 2002) ............................................................................................... 13, 15
Doctor’s Hosp. v. Southeast Medical Alliance,
123 F.3d 301 (5th Cir. 1997) ..................................................................................................... 13
Fin. Inst. Track Litig. v. Heartland Bank (In re Heartland Payment Sys.),
2011 U.S. Dist. LEXIS 34953 (S.D. Tex. Mar. 31, 2011) .......................................................... 4
Funk v. Stryker Corp.,
631 F.3d 777 (5th Cir. 2011) ....................................................................................................... 6

ii

Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co.,
313 F.3d 305 (5th Cir. 2002) ..................................................................................................... 23
Greenwood Utils. Com v. Miss. Power Co.,
751 F.2d 1484 (5th Cir. 1985) ................................................................................................... 19
Hood v. Tenneco Texas Life Ins. Co.,
739 F.2d 1012 (5th Cir. 1984) ............................................................................................... 2, 19
In re Elevator Antitrust Litig.,
502 F.3d 47 (2d Cir. 2007) ........................................................................................................ 21
Insignia Sys., Inc. v. News Corp., Ltd.,
2005 U.S. Dist. LEXIS 42851 (D. Minn. Aug. 25, 2005) ......................................................... 12
Jefferson Parish Hosp. Dist. No. 2 v. Hyde,
466 U.S. 2 (1984) ............................................................................................................ 2, 11, 12
Kidd v. Bass Hotels & Resorts, Inc.,
136 F. Supp. 2d 965 (E.D. Ark. 2000) ...................................................................................... 12
Lautenberg Found. v. Madoff,
2009 U.S. Dist. LEXIS 82084 (D.N.J. Sept. 9, 2009) ................................................................. 6
Lovelace v. Software Spectrum,
78 F.3d 1015 (5th Cir. 1996) ....................................................................................................... 4
Maxwell v. Chase Home Fin. LLC,
2011 U.S. Dist. LEXIS 4797 (S.D. Tex. Jan. 19, 2011).............................................................. 4
Nasious v. Two Unknown B.I.C.E. Agents,
492 F.3d 1158 (10th Cir. 2007) ................................................................................................. 21
Norris v. The Hearst Trust,
500 F.3d 454 (5th Cir. 2007) ..................................................................................................... 17
Nynex Corp. v. Discon,
525 U.S. 128 (1998) .................................................................................................................. 15
Omega Envtl. v. Gilbarco, Inc.,
127 F.3d 1157 (9th Cir. 1997) ................................................................................................... 12
PSKS, Inc. v. Leegin Creative Leather Prods., Inc.,
615 F.3d 412 (5th Cir. 2010) ........................................................................................... 9, 22, 23
Pugh v. Tribune Co.,
521 F.3d 686 (7th Cir. 2008) ....................................................................................................... 6
R.J. Reynolds Tobacco Co. v. Philip Morris Inc.,
199 F. Supp. 2d 362 (M.D.N.C. 2002) ...................................................................................... 15
R2 Investments LDC v. Phillips,
401 F.3d 638 (5th Cir. 2005) ....................................................................................................... 4
Rio Grande Royalty Co. v. Energy Transfer Ptnrs., L.P.,
2009 U.S. Dist. LEXIS 126696 (S.D. Tex. Mar. 25, 2009) ..................................................... 18

iii

Shipper v. AAA, Inc.,
1997 U.S. Dist. LEXIS 23887 (N.D. Tex. Mar. 12, 1997)........................................................ 14
Star Tobacco, Inc. v. Darilek,
298 F. Supp. 2d 436 (E.D. Tex. 2003) .............................................................................. 2, 9, 12
Stewart Glass & Mirror, Inc. v. U.S. Auto Glass Discount Ctrs., Inc.,
200 F.3d 307 (5th Cir. 2000) ............................................................................................... 14, 16
Tampa Electric Co. v. Nashville Coal Co.,
365 U.S. 320 (1961) .............................................................................................. 2, 9, 10, 11, 14
Texas Grain Storage, Inc. v. Monsanto Co.,
2008 U.S. Dist. LEXIS 53513 (W.D. Tex. June 26, 2008) ......................................................... 9
Ticketmaster Corp. v. Tickets.com Inc.,
127 Fed. App’x. 346 (9th Cir. 2005) ......................................................................................... 15
Total Benefits Planning Agency, Inc. v. Anthem Blue Cross & Blue Shield,
552 F.3d 430 (6th Cir. 2008) ..................................................................................................... 21
U.S. Healthcare, Inc. v. Healthsource, Inc.,
986 F.2d 589 (1st Cir. 1993) ..................................................................................................... 10
United Air Lines, Inc. v. Austin Travel Corp.,
681 F. Supp. 176 (S.D.N.Y. 1988) ............................................................................................ 13
Va. Vermiculite Ltd. v. Historic Green Springs, Inc.,
307 F.3d 277 (4th Cir. 2002) ..................................................................................................... 17
Vaughn Med. Equip. Repair Service, L.L.C. v. Jordan Reses Supply Co.,
2010 U.S. Dist. LEXIS 88958 (E.D. La. Aug. 26, 2010) .......................................................... 11
Wampler v. Sw. Bell Tele. Co.,
597 F.3d 741 (5th Cir. 2010) ..................................................................................................... 16
Wellnx Life Sciences, Inc. v. Iovate Health Sciences Research, Inc.,
516 F. Supp. 2d 270 (S.D.N.Y. 2007) ......................................................................................... 9
STATUTE
The Sherman Antitrust Act (“Sherman Act”) 15 U.S.C. ....................................................... passim

iv

Defendant Orbitz Worldwide, LLC is the direct or indirect parent company of multiple
online travel companies which through their websites provide travel reservation services,
including Orbitz.com, which is owned and operated by Orbitz, LLC (“Orbitz”). Orbitz submits
this brief in support of its motion to dismiss plaintiff American Airlines, Inc.’s (“American”)
First Amended Complaint (“FAC”) pursuant to Federal Rule of Civil Procedure 12(b)(6).
I.

INTRODUCTION

This antitrust case is primarily directed at Sabre and Travelport, two operators of
competing global distribution systems, which American claims are each trying to monopolize
separate, implausible markets for “[t]he provision of airline booking services to [their respective]
subscribers.” Orbitz, an online travel agency (or “OTA”), is one such Travelport “subscriber”
and—alone among all travel agents, including OTAs—has been named as a defendant.
According to American, Orbitz is named because it entered into an agreement with Travelport
which restricted Orbitz from expanding its direct-booking relationship with American.1
This is a strange theory because American chose to terminate its contractual relationship
with Orbitz, (FAC ¶ 93), and then opposed an effort to enjoin that termination by claiming that
the termination would cause no irreparable harm. (Notice of Other Litigation, Dkt. No. 3, filed
Apr. 12, 2011.) Until June 1st, when an Illinois state court enjoined its termination of Orbitz,
American ran advertisements telling the world that its flights could not be booked through
Orbitz. That does not sound like a set of facts that gives American a right to sue Orbitz for a
conspiracy to monopolize or restrain trade by cutting American off from potential customers, and
it is not. Even on the pleadings, American’s case against Orbitz fails for multiple reasons.
First, the basis for American’s antitrust claims against Orbitz is an allegedly unlawful
exclusive dealing contract, the Subscriber Services Agreement, between Orbitz and one of the
GDS defendants, Travelport. (FAC ¶¶ 69-73, 135, 138.) American asserts that the Subscriber

1

Orbitz is not alleged to have any relationship, contractual or otherwise, with Sabre, the subject of
American’s amendment to its original complaint.

1

Services Agreement is unlawful because it prevents Orbitz from entering into a new contractual
relationship with American that would permit American to sell tickets directly through Orbitz,
thereby bypassing Travelport. (FAC ¶¶ 69-73.) However, an exclusive dealing contract only
can violate the Sherman Act if it locks-up or “forecloses” a “substantial” portion of the market—
which under the case law is on the order of 30% or more. Tampa Electric Co. v. Nashville Coal
Co., 365 U.S. 320 (1961); Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2 (1984); Apani
Southwest, Inc. v. Coca-Cola Enterprises, Inc., 300 F.3d 620, 625 (5th Cir. 2002); Star Tobacco,
Inc. v. Darilek, 298 F. Supp. 2d 436 (E.D. Tex. 2003). Here, American’s SEC filings state that
only 3% of American’s revenue was attributable to bookings that consumers made through
Orbitz, which means that American has no basis whatsoever to claim that the Subscriber
Services Agreement is unlawful. Indeed, American alleges that all OTAs (of which Orbitz is but
one and the “third largest”) constitute just 10-15% of American’s revenues. (FAC ¶¶ 29, 89.)
So even if one assumed, incorrectly, that Travelport locked-up not just Orbitz but all OTAs,
American is still left far below the 30% market foreclosure threshold that the Supreme Court has
recognized is necessary to sustain such a claim. See Jefferson Parish, 466 U.S. at 45; ABA
Section of Antitrust Law, Antitrust Law Developments 217 (6th. ed. 2010).
Second, companies within a single corporate family are legally incapable of conspiring
with one another for purposes of Sections 1 and 2 of the Sherman Act. Copperweld Corp. v.
Independence Tube Corp., 467 U.S. 752 (1984); Hood v. Tenneco Texas Life Ins. Co., 739 F.2d
1012, 1015 (5th Cir. 1984) (a company cannot conspire with its parent or sibling companies).
American has long known that the Subscriber Services Agreement it claims is the “concerted
action” in restraint of trade was executed when Orbitz was a wholly owned subsidiary of
Travelport. In fact, the Subscriber Services Agreement was attached to Orbitz’s SEC filings in
2007 and American has thus known about it—and when it was executed—for years. The
Subscriber Services Agreement does not, and cannot as a matter of law, establish concerted

2

action under the Sherman Act. There is no need for any further proceedings to conclude that the
Subscriber Services Agreement provides no basis for suing Orbitz in a conspiracy case.
Finally, Orbitz is not meaningfully present in the balance of the FAC about American’s
alleged efforts to achieve better economic terms for distribution of airline tickets, and Sabre and
Travelport’s alleged efforts to thwart that. Indeed, none of the “new allegations” in the FAC—
which relate almost exclusively to conduct attributed to Sabre—concern Orbitz, which is not
alleged to have any business dealings with Sabre. Instead, the only well-pleaded averments
concerning Orbitz relate to the Subscriber Services Agreement. Because that agreement cannot
support a claim under the Sherman Act, dismissal is warranted because the remaining conclusory
allegations about actions supposedly taken by “industry participants” fail to meet the pleading
standard set by the Supreme Court in Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
American amended its complaint after Orbitz filed its motion to dismiss. Although it
added a new defendant, Sabre, it did not change any material averments about Orbitz.
Accordingly, Orbitz’s motion to dismiss the FAC should be granted with prejudice.
II.

SUMMARY OF ALLEGATIONS

This lawsuit concerns the ways in which American sells tickets for its flights. American,
like other airlines, sells tickets through two channels: (1) direct sales (e.g., via its own website,
call centers and ticket offices); and (2) indirect sales through travel agencies, which includes
traditional brick-and-mortar agencies and online travel agencies, such as Orbitz. (FAC ¶ 29.)
According to the FAC, “[a]pproximately 51% of American’s revenue is generated by brick and
mortar travel agencies,” which include “major agencies such as American Express and Carlson
Wagonlit Travel.” (Id.) American alleges that only “10-15% [of its revenue] is generated by
online agencies.” (Id.) Implicit from these averments, the remaining 35-40% of American’s
ticketing revenues are attributable to its own direct sales to customers. And with respect to
Orbitz, specifically, prior to its termination, “approximately 3% of American’s passenger

3

revenue, on an annualized basis, was generated from bookings made via Orbitz,” which the FAC
describes as the “third largest online travel agency in the U.S.” (Id. ¶ 89.)2
A.

Airlines and Travel Agents Alike Choose Global Distribution Systems to Sell
Airlines Tickets to Consumers.
Defendants Sabre, Inc. (“Sabre”) and Travelport Limited and Travelport, LP

(collectively, “Travelport”) operate global distribution systems (“GDSs”). (Id. ¶ 2.) GDSs
distribute airline fare, flight, and availability information provided by American and other
airlines to travel agents, and “enable travel agents to search for flights, fares and seat availability
on airlines that participate in the GDS, and to make reservations and issue tickets for airline
travel.” (Id. ¶¶ 2, 32.) GDSs were originally created and owned by airlines, and then regulated
by the U.S. Department of Transportation (“DOT”) beginning in the early 1980s. (Id. ¶ 33)
Around 2004, the DOT decided to deregulate GDSs, which were no longer owned by airlines,
enabling them to operate as independently owned businesses. (Id.)
Airlines and travel agents alike choose GDSs to sell airline tickets. In order to reach as
many travel agencies as possible, American has contracts with multiple GDSs, including Sabre
and Travelport, through which it supplies content regarding its flights, seat availability and fares.
(Id. ¶¶ 24, 50-54.) GDSs, in turn, hold contracts with various travel agencies—including both
brick-and-mortar and online agencies, such as Orbitz—to provide aggregated flight information

2

In its SEC Form 10-Q, filed April 20, 2011, American stated: “On December 21, 2010,
American terminated its agreement with Orbitz. Prior to termination of such agreement,
approximately 3% of American’s passenger revenue, on an annualized basis, was generated from
bookings made via Orbitz.” [OWW APX 5-6.] District courts may take judicial notice of SEC
filings and other public documents when ruling on a motion to dismiss. See R2 Investments LDC
v. Phillips, 401 F.3d 638, 640 n.2 (5th Cir. 2005) (citing Lovelace v. Software Spectrum, 78 F.3d
1015, 1017-18 (5th Cir. 1996)); see also Borne v. River Parishes Hosp., 2011 U.S. Dist. LEXIS
28089, *7-8 (E.D. La. Mar. 18, 2011). Courts may also properly consider documents supplied by
the defendant “if they are referred to in the plaintiff’s complaint and are central to her claim.”
Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 499 (5th Cir. 2000); see also Maxwell v.
Chase Home Fin. LLC, 2011 U.S. Dist. LEXIS 4797, *7-8 (S.D. Tex. Jan. 19, 2011); Fin. Inst.
Track Litig. v. Heartland Bank (In re Heartland Payment Sys.), 2011 U.S. Dist. LEXIS 34953,
*53-55 (S.D. Tex. Mar. 31, 2011).

4

from multiple airlines. In terms of economics, the GDS charges participating airlines a booking
fee for each “segment” (each point-to-point flight in a traveler’s itinerary) booked through the
GDS. (Id. ¶¶ 6, 35.) Then, pursuant to a separate agreement between a travel agency and its
Subscriber GDS, the GDS passes on a share of the booking fee collected from the airline to the
travel agent who made the reservation for its customer using the GDS. (Id.)
Airlines also hold direct contractual relationships with travel agencies. Indeed, American
holds a contractual relationship directly with Orbitz. Beginning in 2001, “Orbitz was established
as a direct-connect-centered agency by its then airline owners, using a system called ‘Subscriber
Link’ to search for and make bookings without using a GDS.” (Id. ¶¶ 89-90.) Later, in 2004,
American and Orbitz entered into a set of agreements through which “Orbitz could book eligible
[American] tickets through the Subscriber Link interface.” (Id.)
B.

Commercial Realities in the Travel Industry Have Required Orbitz, as Well as
Other Travel Agencies, To Align With GDS Providers.
In order to compete effectively, Orbitz, as well as other travel agencies, often choose to

align with a GDS provider. American alleges that “[t]ravel agents have no commercially
reasonable alternatives to using a GDS to sell air travel. Even a travel agent that elects to use
AA Direct Connect is still dependent upon a GDS to obtain information and make bookings on
other airlines’ flights.” (Id. ¶ 34.) “Second, GDSs enable travel agents to conduct a single
search for flights, fares and availability on multiple airlines and to review the search results in a
single integrated display.” (Id. ¶ 36.) Finally, “[a]lthough some travel agencies subscribe to
more than one GDS, most rely on a single GDS in any particular location or for any given
corporate customer. Using multiple GDSs imposes additional costs on the travel agent because
of the additional time, effort and expense” related to search, training, accounting, billing and
recordkeeping costs. (Id. ¶ 38; see also id. ¶ 44.) Orbitz is not alleged to have a contractual
relationship with Sabre and, in fact, is only alleged to (and only has) a contractual relationship
with Travelport.

5

In 2007, Orbitz entered into the Subscriber Services Agreement with Travelport, its thencorporate parent, in order to use Travelport’s GDSs. (Id. ¶ 91.) During the period of that
agreement, Orbitz continued booking flights for its customers through both Travelport’s GDSs
and American’s direct-connect Subscriber-Link. (Id. ¶¶ 90-92.) Then, in mid-2010, American
sought to expand the scope of its relationship with Orbitz to establish a new “AA Direct
Connect” link. (Id. ¶ 93.)3 When these negotiations stalled, American terminated its contractual
relationship with Orbitz via a notice served on November 1, 2010. (Id. ¶¶ 93-94.) Days later,
Travelport filed suit against American in the Circuit Court of Cook County, Illinois, seeking to
preliminarily enjoin American’s termination of Orbitz. (See Notice of Other Litigation, Dkt. No.
3, filed Apr. 12, 2011.) Travelport’s motion for preliminary injunction was initially denied. (See
id.) American then initiated this lawsuit.
Although outside the pleadings, following its termination of Orbitz, American ran
advertisements touting the fact that passengers could not book flights on American using Orbitz
and encouraging passengers to book directly through its own website:4

3

American’s AA Direct Connect initiative is an effort by American to bypass GDSs, such as Sabre
and Travelport, and instead distribute ticket information directly to travel agents such as Orbitz.
(FAC ¶ 8.)

4

The Court “may take judicial notice of documents in the public record,” such as advertising,
“without converting a motion to dismiss into a motion for summary judgment.” Pugh v. Tribune
Co., 521 F.3d 686, 691 n.2 (7th Cir. 2008); Funk v. Stryker Corp., 631 F.3d 777, 783 (5th Cir.
2011); Lautenberg Found. v. Madoff, 2009 U.S. Dist. LEXIS 82084, *3-4 (D.N.J. Sept. 9, 2009)
(taking judicial of certain facts in ruling on a motion to dismiss “because as matters of public
record extensively and globally covered in news, legal, financial and other media, it seems to the
Court that not to take notice of them would be to isolate this Complaint from reality.”). Because
Orbitz need not rely on American’s advertising campaign to prevail on this motion, we point this
out simply to put American’s allegations in context.

6

This would be most peculiar behavior if the loss of Orbitz crippled American’s ability to
distribute tickets, as the FAC alleges.
On June 1, 2011, the Circuit Court of Cook County, Illinois entered an Order
reconsidering its earlier ruling, granting Travelport’s motion for preliminary injunction and
directing American to “reinstate Orbitz Worldwide’s ability to ticket American Airlines flights.”
(Prelim. Inj. Order, Travelport v. American, No. 10-CH-48028 (Ill. Chancery, June 1, 2011)
[OWW APX 1-4].) American subsequently ended its advertising campaign.
C.

The FAC’s Narrow Allegations Against Orbitz Are Centered On Orbitz’s
Subscriber Services Agreement With Travelport.
American’s FAC names Sabre, Travelport and Orbitz as defendants. Notably, there is no

mention of Orbitz in most of the FAC’s 165 paragraphs. The few allegations specific to Orbitz
focus almost entirely on Orbitz’s Subscriber Services Agreement (“SSA”) with Travelport.
Under that agreement, American avers, Orbitz is required “to use Travelport ‘exclusively’ as its
GDS provider for North American air travel bookings through 2014,” and “[i]n exchange for this
exclusivity commitment, Travelport provides Orbitz with a ‘segment incentive’ rebate per
booking ….” (Id. ¶ 69.) It also alleges that the SSA provides financial incentives to Orbitz for
booking a certain minimum number of flight segments through its GDSs and that, “[i]n addition
to the use of powerful financial incentives to discourage Orbitz from using alternatives to the

7

Travelport GDS, the SSA prohibits Orbitz from entering into new direct connect relationships
with any airline and from expanding or renewing any existing direct connect agreement with any
airline, including American, that would bypass the Travelport GDS.” (Id. ¶¶ 70-71.) In essence,
American’s complaint is that the SSA prevented Orbitz from entering into a Direct Connect
agreement with American that would bypass Travelport and permit American to distribute
ticketing information directly to Orbitz and thus the 3% of American customers who bought
tickets through Orbitz.
The FAC asserts six claims for relief, of which only two are against Orbitz: (1) the Third
Claim for Relief, for conspiracy to monopolize the distribution of airline tickets through travel
agents in violation of Section 2 of the Sherman Act, based upon “Orbitz, Travelport and other
unnamed industry participants” having entered into “agreements with one another … intended to
punish and retaliate against American for its direct connect initiative” (id. ¶¶ 134-136); and (2)
the Fourth Claim for Relief, for violation of Section 1 of the Sherman Act, based on “restrictive
provisions in Travelport’s contracts with travel agency subscribers, including provisions in its
agreements with Orbitz ….” (Id. ¶¶ 137-138, 140, 142.)
Consistent with the focus of American’s claims, the “Relief Requested” by American’s
FAC does not seek anything from Orbitz. (Id. ¶¶ 158-165.)
III.
A.

ARGUMENT

A Motion to Dismiss Should Be Granted Where The Complaint Fails to Plead Facts
Sufficient to Demonstrate the Plaintiff’s Entitlement to Relief.
Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss a complaint

if it fails to state a claim upon which relief can be granted. To survive a motion to dismiss, the
plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007); Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009).
The complaint “must provide the plaintiff’s grounds for entitlement to relief above the
speculative level. Conversely, ‘when the allegations in a complaint, however true, could not

8

raise a claim of entitlement to relief, “this basic deficiency should … be exposed at the point of
minimum expenditure of time and money by the parties and the court.” Cuviller v. Taylor, 503
F.3d 397, 401 (5th Cir. 2007) (quoting Twombly); Texas Grain Storage, Inc. v. Monsanto Co.,
2008 U.S. Dist. LEXIS 53513 (W.D. Tex. June 26, 2008) (same).
Courts in this Circuit dismiss antitrust claims on the pleadings when they fail to raise a
right to relief, or when the theory under which they proceed is foreclosed as a matter of law. See
PSKS, Inc. v. Leegin Creative Leather Prods., Inc., 615 F.3d 412, 419 (5th Cir. 2010) (affirming
district court’s dismissal of complaint where facts pleaded were “legally insufficient” to support
a violation under the Sherman Act, because “[n]o rule of reason can require defendants to litigate
antitrust claims that do not state an antitrust injury beyond motion to dismiss”); see also Star
Tobacco, Inc. v. Darilek, 298 F. Supp. 2d 436 (E.D. Tex. 2003). In Star Tobacco, the court
dismissed the defendant’s exclusive dealing and monopolization counter-claims for failure to
allege facts which, even accepted as true, could support a violation of the antitrust laws. Id. at
447 (holding that the counterclaims “failed to allege that the competition foreclosed by
Plaintiff’s alleged agreements constitutes a substantial share of the relevant market, which is
necessary under the Supreme Court’s three-part test in Tampa Electric Co.”); accord Wellnx Life
Sciences, Inc. v. Iovate Health Sciences Research, Inc., 516 F. Supp. 2d 270, 293 (S.D.N.Y.
2007) (granting motion to dismiss Sherman Act claim where the challenged exclusive
distribution agreement could not “freeze out a significant fraction” of the market).
The only well-pleaded facts concerning Orbitz are based on an allegedly unlawful
exclusive dealing contract, the Subscriber Services Agreement (or SSA), between Orbitz and
Travelport. (FAC ¶¶ 69-73, 135, 138.) This theory of liability fails as a matter of law for two
independent reasons: first, the SSA does not foreclose a “substantial” portion of the relevant
market (even as pleaded); and second, because the SSA was entered into at a time when Orbitz
was wholly owned by Travelport, there can be no conspiracy within the meaning of Sections 1

9

and 2 of the Sherman Act. Finally, to the extent the FAC purports to include Orbitz in some
grand conspiracy to monopolize some “GDS market,” it fails under Twombly.
B.

The “Exclusive Dealing” Allegations Cannot Support a Sherman Act Violation.
American contends that Orbitz violated Sections 1 and 2 of the Sherman Act by entering

into the SSA, which required it to use Travelport “exclusively” as its GDS provider for North
America air travel bookings, and provided “powerful financial incentives” to restrict Orbitz from
entering into any new “direct connect” contractual relationships with an airline. (FAC ¶¶ 69-71.)
In other words, American complains that the agreement between Orbitz and Travelport
prevented American from selling tickets directly through Orbitz and, instead, required that
American work through Travelport in order to reach those customers who purchased American
tickets using Orbitz. These allegations purport to challenge an alleged “exclusive dealing”
arrangement between Orbitz and Travelport. See Apani Southwest, Inc. v. Coca-Cola
Enterprises, Inc., 300 F.3d 620, 625 (5th Cir. 2002) (“Exclusive dealing … occurs when a seller
agrees to sell its output of a commodity to a particular buyer, or when a buyer agrees to purchase
its requirements of a commodity exclusively from a particular seller”).5
The antitrust concern with exclusive dealing is foreclosure, i.e., that by “locking-up”
scarce supplies or distribution outlets, one competitor can impair “the ability of competitors … to
reach the market.” ABA Section of Antitrust Law, Antitrust Law Developments 217 (6th. ed.
2010); Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 327 (1961); U.S. Healthcare, Inc.
v. Healthsource, Inc., 986 F.2d 589, 596 (1st Cir. 1993) (the “ultimate issue in exclusivity cases

5

“In the Fifth Circuit, to allege a violation of § 1 of the Sherman Act, a plaintiff must plead that
(1) the defendants engaged in a conspiracy, (2) the conspiracy restrained trade, and (3) trade was
restrained in the relevant market.” Vaughn Med. Equip., 2010 U.S. Dist. LEXIS 88958 at *23
(citing Wampler v. Sw. Bell Tele. Co., 597 F.3d 741, 744 (5th Cir. 2010)). For purposes of a
Section 2 claim, “[a] conspiracy to monopolize can be established only by proof of (1) the
existence of specific intent to monopolize; (2) the existence of a combination or conspiracy to
achieve that end; (3) overt acts in furtherance of the combination or conspiracy; and (4) an effect
upon a substantial amount of interstate commerce.” Stewart Glass & Mirror v. Auto Discount
Ctrs., Inc., 200 F.3d 307, 316 (5th Cir. 2000).

10

remains the issue of foreclosure and its consequences”). For that reason, an exclusive-dealing
arrangement does not violate the antitrust laws “unless the probable effect of the agreement ‘will
foreclose competition in a substantial share of the line of commerce affected.’” Apani, 300 F.3d
at 625 (citing Bob Maxfield, Inc. v. Am. Motors Corp., 637 F.2d 1033, 1036 (5th Cir. 1981),
quoting Tampa Elec., 365 U.S. at 327-328). Thus, “[t]o properly allege that an exclusive dealing
agreement violates the Sherman Act, a plaintiff must first define the relevant market in terms of
its product and geography. [] A plaintiff must then plead facts to demonstrate that the
‘competition foreclosed by the arrangement constitutes ‘a substantial share’ of the relevant
market.’” Vaughn Med. Equip. Repair Service, L.L.C. v. Jordan Reses Supply Co., 2010 U.S.
Dist. LEXIS 88958 at *52 (E.D. La. Aug. 26, 2010) (citing Apani, 300 F.3d at 625-626).
Accordingly, for purposes of this motion, “the focus of the analysis remains on market effect.”
Id. at *51; see also Denison Mattress Factory v. Spring-Air Co., 308 F.2d 403, 410 (5th Cir.
1962) (“the question to be decided in this type of case is, ‘… whether the contract forecloses
competition in a substantial share of the line of commerce involved …’” citing Tampa Elec.).
Even accepting as true the alleged “relevant market” for purposes of this motion, the
FAC fails as a matter of law because it does not—and cannot—allege that a “substantial share of
the relevant market” is foreclosed as a result of the SSA.6
1.

American Admits that the SSA Does Not Result in a Substantial Foreclosure in
the Alleged Relevant Market.

As a general principle, market foreclosures of less than 30% are not considered
“substantial” as a matter of law. See Jefferson Parish, 466 U.S. at 45 (O’Connor, J. concurring)
6

The FAC purports to define the relevant market as follows: “[t]he distribution of airline fare,
flight, and availability information and the provision of reservations and ticketing capability to
travel agents” is the relevant product market; “[t]he provision of airline booking services to
[Sabre and Travelport] subscribers is a relevant product submarket”; and “[e]ach country served
by American in which Travelport accounts for a substantial percentage of airline bookings is a
relevant geographic market, including the United States, the United Kingdom, Belgium and
Switzerland.” (FAC ¶¶ 136-140.) There are issues, to be sure, with American’s product and
geographic market definitions—especially the contention that there is a proper market limited to
Sabre subscribers or Travelport subscribers—but Orbitz accepts them for purposes of its motion.

11

(explaining that “[e]xclusive dealing is an unreasonable restraint on trade only when a significant
fraction of buyers or sellers are frozen out of a market by the exclusive deal,” and then noting
that a 30% market foreclosure was insufficient); see also Omega Envtl. v. Gilbarco, Inc., 127
F.3d 1157, 1162-64 (9th Cir. 1997) (concluding that a series of exclusive dealing agreements
which, collectively, foreclosed 38% of a market was insufficient to support an antitrust claim);
Bepco, Inc. v. Allied-Signal, Inc., 106 F. Supp. 2d 814, 828 (M.D. N.C. 2000) (21.5% and 18%
“fall short of any value presumed to be substantial and lie on the margin of what is considered to
be significant”).
The FAC does not meet this threshold requirement, because American does not allege
foreclosure of (and the SSA does not foreclose) anywhere near a sufficient portion of the pleaded
markets. Initially, the FAC does not directly allege any foreclosure resulting from the SSA and
thus fails. Insignia Sys., Inc. v. News Corp., Ltd., 2005 U.S. Dist. LEXIS 42851 at *10-11 (D.
Minn. Aug. 25, 2005) (dismissing complaint for failure to allege “some indication of the
percentage of the local, regional, or national markets … allegedly under exclusive contract”
because without such allegations “it is impossible to evaluate the percentage of the market with
which [plaintiff] and other competitors are prevented from doing business.”); Star Tobacco, Inc.
v. Darilek, 298 F. Supp. 2d at 447. However, what the FAC does allege, more generally,
confirms that the SSA does not foreclose a substantial portion of any market. Indeed, according
to the FAC, online travel agencies taken together (of which Orbitz is just one and the “third
largest” (FAC ¶ 89)) constitute only 10-15% of American’s passenger ticketing revenues. (See
id. ¶ 23 (“Approximately 51% of American’s revenue is generated by brick and mortar travel
agencies, and another 10-15% is generated by online agencies”).) Accordingly, the SSA
between one of several online agencies, Orbitz, and Travelport falls far short of meeting the
“substantial foreclosure” requirement under Jefferson Parish. See Kidd v. Bass Hotels &
Resorts, Inc., 136 F. Supp. 2d 965, 969 (E.D. Ark. 2000) (“Since the early 1970’s, ‘judicial

12

decisions have established a virtual safe harbor for market foreclosure of 20% or less,’” quoting
ABA Section of Antitrust Law, Antitrust Law Developments 214 (4th. ed. 1997)).
It is also improper to consider any cumulative foreclosure of Travelport’s agreements
with multiple OTAs or travel agencies in general. American has alleged a supposed conspiracy
between Travelport and one OTA, Orbitz. As a result, this Court’s analysis is limited to the
foreclosure effects of the individual agreement alleged to be in restraint of trade; here, the SSA.
See Dickson v. Microsoft Corp., 309 F.3d 193, 210 (4th Cir. 2002), which affirmed a Rule
12(b)(6) dismissal of Sherman Act claims against Microsoft and two PC manufacturers which
entered into supposedly anticompetitive agreements with Microsoft: “the district court correctly
determined that it could not consider the cumulative harm of Microsoft’s agreements with all
OEMs but instead was required to consider – individually – Microsoft’s agreements with
Compaq and Dell to evaluate each agreement’s potential for anticompetitive effects.”
Orbitz is the only travel agency (online or otherwise) that is a party to the SSA, (see FAC
¶¶ 69-70), and American admits that Orbitz made up only 3% of its passenger revenues.
(4/20/2011 American SEC Form 10-Q [OWW APX 5-6].) Even if the SSA resulted in a
complete foreclosure of American’s effort to sell tickets directly to Orbitz and thus its customers,
the Sherman Act claims against Orbitz fail as a matter of law. See Doctor’s Hosp. v. Southeast
Medical Alliance, 123 F.3d 301, 311 (5th Cir. 1997) (affirming judgment in favor of PPO and
hospital defendants where evidence showed that the agreement underlying the plaintiff’s Section
1 claim foreclosed a customer that constituted 6% of plaintiff’s total revenues); Bass Hotels, 136
F. Supp. 2d at 965 (granting summary judgment in favor of defendant furniture manufacturer
against Sherman Act claims, where the alleged exclusive agreement with a hotel chain foreclosed
the plaintiff, a competing furniture manufacturer, from only 9% of all U.S. hotel rooms).
A previous district court ruling from the travel services industry is instructive. In United
Air Lines, Inc. v. Austin Travel Corp., a defendant travel agency counter-claimed against United
Airlines alleging that the airline had engaged in unlawful exclusive dealing and anticompetitive

13

practices based on United’s contracts with certain travel agents for subscriptions to United’s
“computerized reservation systems” and related services. 681 F. Supp. 176, 180-181 (S.D.N.Y.
1988). In rejecting the exclusive dealing counterclaim, the court held that United’s “share of the
only relevant market, 3% of the [travel] agencies and 8% of the revenues from CRSs, was
insubstantial and was not sufficient to foreclose competition in that area. That dictates a finding
that United’s Apollo contracts were not a clog on competition required to be removed by the
application of antitrust legislation.” Id. at 184 (citing Tampa Elec., 365 U.S. at 328); accord,
Shipper v. AAA, Inc., 1997 U.S. Dist. LEXIS 23887 at *17-18 (N.D. Tex. Mar. 12, 1997)
(rejecting an exclusive dealing claim because “[defendant] controls less than three percent of the
market. Therefore, any anticompetitive effect the AAA/Auto Plan agreement may have is trivial,
definitely not legally sufficient to prove an antitrust violation”).
No matter how the allegations are analyzed, the SSA’s alleged foreclosure of American’s
efforts to sell directly to customers of a single online travel agency which made up just 3% of
American’s revenues cannot constitute a substantial foreclosure of any market—even the most
narrow market pleaded by American. This conclusion is only underscored by American’s
unilateral termination of Orbitz’s ability to sell any tickets on American flights, either directly or
through the Travelport GDS. (FAC ¶¶ 93-94.) While that termination was ultimately enjoined,
American plainly was not foreclosed from pursuing Orbitz customers, let alone a substantial
portion of any market, and its Section 1 claim thus fails as a matter of law.
2.

The FAC’s Inability to Plead Substantial Foreclosure is Also Fatal to Its Section 2
Claim Against Orbitz.

The FAC’s overlapping allegations against Orbitz for allegedly conspiring to monopolize
the distribution of airline tickets in violation of Section 2 of the Sherman Act also fail because
there is no substantial foreclosure of any pleaded market.
A conspiracy to monopolize can only be established by showing, among other things, that
the conspiracy had “an effect upon a substantial amount of interstate commerce.” Stewart Glass

14

& Mirror, Inc. v. U.S. Auto Glass Discount Ctrs., Inc., 200 F.3d 307, 316 (5th Cir. 2000).7 Here,
again, the only well-pleaded allegations concerning Orbitz are based on the SSA. (FAC ¶¶ 6971.) Where contracts are the alleged anticompetitive conduct in a Section 2 claim, a district
court must look to the substantiality of foreclosure, just as it does in evaluating a claim in the
context of Section 1 of the Sherman Act. See Tampa Elec., 365 U.S. at 327 (disposing of
Sherman Act claims under both Sections 1 and 2 because there was inadequate market
foreclosure); see also Ticketmaster Corp. v. Tickets.com Inc., 127 Fed. App’x. 346 (9th Cir.
2005) (where market foreclosure did not rise to the level of exclusionary conduct in support of
Section 1 claim, Section 2 claim based on the same conduct failed “[b]ecause an attempt claim
under section 2 similarly requires ‘predatory or anticompetitive conduct”); R.J. Reynolds
Tobacco Co. v. Philip Morris Inc., 199 F. Supp. 2d 362, 394-95 (M.D. N.C. 2002) (dismissing
Section 2 claims because challenged contracts did not foreclose a sufficient portion of the market
to constitute exclusionary conduct under Section 1).
Because the SSA does not substantially foreclose the market within the meaning of
Section 1, the Section 2 claim also fails. See Nynex Corp. v. Discon, 525 U.S. 128, 138-140
(1998) (“The Court of Appeals also upheld the complaint’s charge of a conspiracy to monopolize
in violation of § 2 of the Sherman Act. It did so, however, on the understanding that the
conspiracy in question consisted of the very same purchasing practices that we have previously
discussed. Unless those agreements harmed the competitive process, they did not amount to a
conspiracy to monopolize. We do not see, on the basis of the facts alleged, how Discon could
succeed on this claim without prevailing on its § 1 claim”); see also Dickson, 309 F.3d at 211213 (affirming Rule 12(b)(6) dismissal and holding that a complaint which failed to plead

7

“A conspiracy to monopolize can be established only by proof of (1) the existence of specific
intent to monopolize; (2) the existence of a combination or conspiracy to achieve that end; (3)
overt acts in furtherance of the combination or conspiracy; and (4) an effect upon a substantial
amount of interstate commerce.” Stewart Glass, 200 F.3d at 316.

15

sufficient foreclosure to support a Section 1 claim, was also insufficient to plead facts showing
anticompetitive effects under Section 2).
C.

The Sherman Act Claims Against Orbitz Also Fail Because It is Incapable of
Conspiring With Travelport as a Matter of Law.
Dismissal of the Sherman Act claims against Orbitz is warranted for the independent

reason that Orbitz and Travelport were not separate economic actors when the SSA was formed,
and are incapable of conspiring as a matter of law under Copperweld Corp. v. Independence
Tube Corp., 467 U.S. 752 (1984); see also Phillip E. Areeda & Herbert Hovenkamp, Antitrust
Law ¶ 1464g (3rd ed. 2010) (“Affiliated corporations that constitute a single entity so as to be
incapable of conspiring for purposes of Sherman Act § 1 are equally incapable of conspiring to
monopolize under Sherman Act § 2.”).
In Copperweld, the Supreme Court held that parent and subsidiary entities are legally
“incapable of conspiring with each other for purposes of § 1 of the Sherman Act.” 467 U.S. at
777. The Court explained that the requisite “contract, combination … or conspiracy” in that
situation could not be met because coordinated activity between a parent and subsidiary “must be
viewed as that of a single enterprise for purposes of § 1 of the Sherman Act.” Id. at 771. This is
because a parent and its subsidiary “always have a unity of purpose or a common design. They
share a common purpose whether or not the parent keeps a tight rein over the subsidiary; the
parent may assert full control at any moment if the subsidiary fails to act in the parent’s best
interests.” Id. at 771-72 (internal quotes omitted).
Here, both Sherman Act claims against Orbitz require an agreement, combination or
conspiracy with Travelport. See Wampler v. Sw. Bell Tele. Co., 597 F.3d 741, 744 (5th Cir.
2010); Stewart Glass, 200 F.3d at 316. The only well-pleaded allegations specific to Orbitz
relate to its having been a party to the SSA with Travelport. (FAC ¶¶ 69-73, 135, 138.)
However, because Orbitz was wholly owned by Travelport at the time the SSA was formed, and
is still majority owned by Travelport or its owners, the two entities could not have entered into

16

an unlawful restraint of trade or otherwise have conspired to monopolize within the meaning of
the Sherman Act.
1.

Orbitz Was Owned By Travelport When It Executed the Subscriber Services
Agreement and Was Thus Legally Incapable of Conspiring With Travelport.

“In 2006, a Travelport affiliate acquired a controlling interest in Orbitz.” (FAC ¶ 91.) In
fact, Orbitz was wholly owned by Travelport. (5/10/2007 Orbitz SEC Form S-1) (prior to stock
offering, Orbitz and its affiliates were “wholly owned subsidiaries of Travelport”) [OWW APX
7-8].) While it still owned Orbitz, Travelport entered into the SSA with Orbitz on July 23, 2007.
(7/27/07 Orbitz SEC Form 8-K, Ex. 10.7 [OWW APX 9-37].) Travelport’s “subsequent partial
divestiture” of its holdings in Orbitz, referenced in the FAC (see FAC ¶ 91), did not take place
until later that month—and after execution of the SSA. (8/13/2007 Orbitz SEC Form 8-K, Ex.
99.1) (“On July 25, 2007, Orbitz Worldwide, Inc. completed its initial public offering…”)
[OWW APX 38-39].) Accordingly, for purposes of the Sherman Act, the SSA was effectively
executed by a “single enterprise” given that Travelport could “assert full control at any moment
if [Orbitz] fail[ed] to act in [Travelport’s] best interests.” Copperweld, 467 U.S. at 771-72; see
also Va. Vermiculite Ltd. v. Historic Green Springs, Inc., 307 F.3d 277, 282 (4th Cir. 2002)
(“We reaffirm what was made clear by Copperweld, that concerted activity susceptible to
sanction by Section 1 is activity in which multiple parties join their resources, rights, or
economic power together in order to achieve an outcome that, but for the concert, would
naturally be frustrated by their competing interests by way of profit maximizing choices.”).8

8

The FAC’s conclusory assertion that, “[f]or purposes of the antitrust laws, Orbitz is a separate
legal and economic entity” is not entitled to any weight. (FAC ¶ 91.) It is well established that
courts need not treat as true such “legal conclusions,” unsupported by facts, for purposes of a
motion to dismiss. See Norris v. The Hearst Trust, 500 F.3d 454, 464 (5th Cir. 2007) (when
deciding motions to dismiss, “courts ‘are not bound to accept as true a legal conclusion couched
as a factual allegation.’”). Indeed, American’s conclusory allegation is particularly inappropriate
since American has long been aware that the SSA was executed when Orbitz was wholly owned
by Travelport; in addition, Orbitz brought the issue to American’s attention again in its motion to
dismiss American’s original complaint but American chose to continue to rely on its improper
conclusory allegation.

17

A recent Southern District case illuminates this principle. In Rio Grande Royalty Co. v.
Energy Transfer Ptnrs., L.P., the plaintiff, Rio Grande Royalty Co., brought suit against Energy
Transfer Partners and others claiming violations of Sections 1 and 2 of the Sherman Act based on
allegedly unlawful contracts for the sale of natural gas. 2009 U.S. Dist. LEXIS 126696 at *2123 (S.D. Tex. Mar. 25, 2009). The court analyzed the various defendants’ corporate
relationships, including through Energy Transfer Partners’ public filings with the SEC, and
found that, with the exception of one company which became affiliated at a later date, each of
the alleged conspirators were part of a single corporate family during execution of the challenged
contracts. Id. As a result, the court dismissed the plaintiff’s claims, finding that “internally
coordinated conduct of a corporation and its divisions or its subsidiaries cannot give rise to a
claim under Section 1.” Id. at *22 (citing Copperweld, among other cases).
As was the case in Rio Grande, American’s claims against Orbitz, based entirely on the
allegedly anticompetitive provisions in the SSA, are legally foreclosed because Orbitz was
wholly owned by Travelport when the agreement was formed.
2.

Orbitz and Travelport Have Remained Affiliates of the Same Company At all
Times During the SSA.

Even after Travelport partially divested some of its shares of Orbitz following execution
of the SSA, the two entities have remained affiliates. In fact, Travelport and investment funds
that own and/or control Travelport still own more than half of Orbitz’s stock. (3/01/2011 Orbitz
SEC Form 10-K) (“At December 31, 2010 and December 31, 2009, there were 102,342,860 and
83,831,561 shares of our common stock outstanding, respectively, of which approximately 56%
and 57% were beneficially owned by Travelport and investment funds that own and/or control
Travelport’s ultimate parent company, respectively”) [OWW APX 40-41].) This also precludes
a legally cognizable “contract, combination … or conspiracy” sufficient to support a Sherman
Act claim.

18

Courts applying Copperweld have held that, like parents and subsidiaries, sibling
companies are equally incapable of conspiring with one another for purposes of the Sherman
Act. See, e.g., Hood v. Tenneco Texas Life Ins. Co., 739 F.2d 1012, 1015 (5th Cir. 1984)
(finding that, consistent with Copperweld’s teachings, a company cannot conspire with its parent
or sibling companies under the Sherman Act); Century Oil Tool, Inc. v. Production Specialties,
Inc., 737 F.2d 1316, 1317 (5th Cir. 1984) (“A contract between [members of a corporate family]
does not join formerly distinct economic units. In reality, they have always had ‘a unity of
purpose or a common design’”); Greenwood Utils. Com v. Miss. Power Co., 751 F.2d 1484,
1496-1497 (5th Cir. 1985) (“Mississippi Power and its sister companies must be viewed as one
economic enterprise. We therefore disregard the allegations that Mississippi Power violated
Section 1 by conspiracy or agreements with its parent, the Southern Company, and its sister
companies, Alabama, Georgia and Gulf Power”).
D.

The FAC’s Efforts to Include Orbitz in Some Vast “Conspiracy” to Monopolize the
Distribution of Airline Tickets Fails Under Twombly.
The overwhelming majority of the FAC is directed at American’s business dispute with

Sabre and Travelport, and highlights American’s frustration with the terms of its own agreements
with GDS providers. Orbitz appears to have been named only as an afterthought—or even
worse, to attempt to increase American’s leverage as it tries to renegotiate its contracts with
Travelport. The only well-pleaded averments involving Orbitz concern the SSA, which cannot
support American’s claims against Orbitz as a matter of law. Equally plain, American cannot
simply infer that Orbitz, because it entered into a supply agreement with Travelport, was
involved in some vast conspiracy supposedly seeking to monopolize the distribution of airline
tickets. Each of the FAC’s allegations about the GDS industry, American’s contracts with Sabre
and Travelport, and the anticompetitive actions allegedly undertaken by those GDSs fail to
provide the required facts to plausibly plead a conspiracy, let alone Orbitz’s involvement in any
conspiracy, to monopolize the distribution of airline tickets.

19

1.

Twombly Requires Factual Allegations Against Each Defendant to Support a
Plausible Claim of Conspiracy.

In Twombly, the Supreme Court held that a complaint asserting a violation of the
Sherman Act cannot survive a Rule 12(b)(6) motion by simply alleging an unlawful agreement in
conclusory terms without specific facts to demonstrate that the allegation is more than just
conjecture. 550 U.S. at 555 (“Factual allegations must be enough to raise a right to relief above
the speculative level”). Because concerted action through a supposed conspiracy among Orbitz
and Travelport lies at the heart of its Sherman Act claims, American must include enough factual
allegations, rather than mere speculation or conjecture, to “nudge[]” their conspiracy claim
“across the line from conceivable to plausible.” Id. at 570. Indeed, without some level of
“factual enhancement,” a “naked assertion of conspiracy” does not plausibly suggest a preceding
agreement to conspire. Id. at 557. Legal conclusions also “must be supported by factual
allegations” under Twombly, because Rule 8 “does not unlock the doors of discovery for a
plaintiff armed with nothing more than conclusions.” Iqbal, 129 S. Ct. at 1950.
2.

Allegations With Generalities About the GDS Industry and Allegedly AntiCompetitive Conduct by Sabre and Travelport Cannot Support a Conspiracy
Claim Against Orbitz.

The bulk of the FAC makes general “market power” allegations about GDS providers,
and then points to the terms of American’s own contracts with Sabre and Travelport as being
indicative of GDS providers’ supposed “monopoly power.” (See, e.g., FAC ¶¶ 1-4, 6-7, 10, 16,
29-52, 54-55, 57-60.) Neither set of allegations implicates Orbitz in any unlawful restraint of
trade.
The “market power” allegations claim that “[t]ravel agents have no commercially
reasonable alternatives to using a GDS to sell air travel,” that “[e]ven a travel agent that elects to
use AA Direct Connect is still dependent upon a GDS to obtain information and make bookings
on other airlines’ flights,” and that “most [travel agencies] rely on a single GDS in any particular
location or for any given corporate customer.” (Id. ¶¶ 34-38.) These allegations do not suggest
Orbitz conspired to do anything; rather, if anything, they describe the commercial reasonableness

20

of entering into the SSA with Travelport. For the same reasons, the FAC’s allegations about
“anticompetitive” terms in American’s contracts with Sabre and Travelport, (see id. ¶¶ 49-52,
54-55, 57-60), have nothing to do with Orbitz—which is not a party to those agreements, nor is it
alleged to have participated or otherwise influenced the negotiations incidental to those
agreements.
Simply claiming that Orbitz “benefits from Travelport’s monopoly” does not lend these
empty allegations any sufficiency. (FAC ¶ 1.) Vague averments, such as these, do not provide
Orbitz notice of the claims against it (i.e., to show how Orbitz joined, agreed or participated in an
alleged conspiracy), and fail under Twombly. 550 U.S. at 565; see also, e.g., Total Benefits
Planning Agency, Inc. v. Anthem Blue Cross & Blue Shield, 552 F.3d 430, 436 (6th Cir. 2008)
(“Generic pleading, alleging misconduct against defendants without specifics as to the role each
played in the alleged conspiracy, was specifically rejected by Twombly.”); In re Elevator
Antitrust Litig., 502 F.3d 47, 50 (2d Cir. 2007) (concurring with the district court’s conclusion
that the averments in that case were “in entirely general terms without any specification of any
particular activities by any particular defendant”); Nasious v. Two Unknown B.I.C.E. Agents, 492
F.3d 1158, 1163 (10th Cir. 2007) (“to state a claim in federal court, a complaint must explain
what each defendant did to him or her; when the defendant did it; how the defendant’s action
harmed him or her; and, what specific legal right the plaintiff believes the defendant violated” for
purposes of “permitting the defendant sufficient notice to begin preparing its defense”)
(emphases added).
The allegations of “retaliatory” conduct fare no better. The FAC purports to describe
various acts of “retaliation” in response to American’s efforts to market the “AA Direct
Connect” initiative, but none of the actions identified involve Orbitz. First, American claims that
Travelport doubled American’s booking fees for reservations made outside the United States (see
id. ¶¶ 96-97); it also claims that Travelport “misrepresented” American’s fares to make them
appear more expensive to consumers outside the United States (see id. ¶¶ 98-99); and, finally, it

21

contends that “Travelport caused American’s flights to be displayed less frequently relative to
other airlines’ flights.” (See id. ¶¶ 12, 98-99.) There is not a single factual allegation linking
Orbitz to any of these actions.
Similarly, each of the “new allegations” related to Sabre, including averments about
“biasing the display of American information,” (FAC ¶¶ 104-108), say nothing about Orbitz’s
participation in any alleged conspiracy. Orbitz and Sabre have no contractual relationship and
there is not a single allegation which links Orbitz to any alleged anticompetitive actions taken by
Sabre. Simply put, this is a lawsuit challenging the relationships between airlines and GDSs—
and Orbitz, alone as a defendant among numerous travel agencies, is not a proper party.
3.

The FAC’s Ancillary Allegations Are Also Insufficient to Plausibly Support
Orbitz’s Involvement in the Pleaded Conspiracy.

The remaining allegations in the FAC also fail under Twombly. American claims that
“Travelport and Orbitz agree[d] to stand together against American,” by contending that,
following American’s termination of Orbitz’s ticketing authority, Travelport agreed to offset any
resulting lost revenues which Orbitz suffered. (FAC ¶ 101.) This allegation does not support a
conspiracy: first, this conduct does not foreclose any portion of American’s business, insofar as
American had already terminated Orbitz; and, more fundamentally, these facts do not plausibly
suggest that Orbitz was part of an alleged conspiracy to monopolize the distribution of airline
tickets. If true, it shows only that Orbitz received money from its GDS partner (and sister
company) to offset losses caused by American’s wrongful termination of its business relationship
with Orbitz. Allegations which are as consistent with “rational and competitive business
strategy” or that have “obvious alternative explanation[s],” are insufficient to plead a conspiracy
claim under the antitrust laws. Twombly, 550 U.S. at 554, 567; see also PSKS, Inc. v. Leegin
Creative Leather Prods., Inc., 615 F.3d 412, 417 (5th Cir. 2010) (“Where a complaint pleads
facts that are ‘merely consistent with’ a defendant’s liability, it ‘stops short of the line between

22

possibility and plausibility of entitlement to relief’”); Iqbal, 129 S. Ct. at 1950 (noting that on a
motion to dismiss, conclusory allegations “are not entitled to the assumption of truth”).9
E.

Dismissal Without Leave to Amend is Appropriate Because Amendment Is Futile
Where Plaintiff’s Claims Are Foreclosed as a Matter of Law.
The FAC is American’s second chance to plead a claim against Orbitz in this Court.

Orbitz moved to dismiss American’s original complaint and demonstrated, as a matter of law,
why the SSA was insufficient to support a Sherman Act claim and why the remaining conspiracy
allegations failed under Twombly. Rather than joining the legal arguments raised by Orbitz,
American opted to file an amended complaint that only restates the same insufficient allegations
vis-à-vis Orbitz. Its failure to plead any factual allegations against Orbitz, aside from repeating
the legally insufficient claim that Orbitz was a party to the SSA, is not something which further
amendment would cure. See Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313
F.3d 305, 329 (5th Cir. 2002) (noting that courts need not allow a plaintiff an opportunity to
amend when “it is clear that the defects are uncurable or the plaintiffs advise the court that they
are unwilling or unable to amend in a manner that will avoid dismissal”); PSKS, 615 F.3d at 418
(5th Cir. 2010) (affirming district court’s dismissal with prejudice); see also Abecassis v. Wyatt,
2011 U.S. Dist. LEXIS 37047 at *31-33 (S.D. Tex. Mar. 31, 2011) (“[A] plaintiff should be
denied leave to amend a complaint if the court determines that ‘the proposed change clearly is
frivolous or advances a claim or defense that is legally insufficient on its face” quoting 6 Wright,
Miller & Kane, Federal Practice & Procedure, § 1487 (2d ed. 1990)); Ayers v. Johnson, 247
Fed. Appx. 534, 535 (5th Cir. 2007) (unpublished) (per curiam) (“‘[A] district court acts within
its discretion when dismissing a motion to amend that is frivolous or futile’”) (citation omitted).

9

The FAC’s allegations about “contemporaneous actions by Sabre,” a separate GDS, also say
nothing about Orbitz’s participation in any alleged conspiracy. (FAC ¶¶ 103-107, 109.)

23

IV.

CONCLUSION

There simply is no basis for Orbitz, a company with which American tried to stop doing
business, to remain a party in this lawsuit. American’s FAC against Orbitz is insufficient to
establish a violation of either Sections 1 or 2 of the Sherman Act, and Orbitz respectfully
requests that the FAC be dismissed with prejudice.
DATED:

June 15, 2011

Respectfully submitted,
s/ Christopher S. Yates
Christopher S. Yates (admitted Pro Hac Vice)
California State Bar No. 161273
Email: [e-mail]
Daniel M. Wall (admitted Pro Hac Vice)
California State Bar No. 102580
Email: [e-mail]
LATHAM & WATKINS LLP
505 Montgomery Street, Suite 2000
San Francisco, CA 94111-6538
Telephone: [phone]
Facsimile: [phone]
and
John J. Little
Texas State Bar No. 12424230
Email: [e-mail]
Stephen G. Gleboff
Texas State Bar No. 08024500
Email: [e-mail]
Megan K. Dredla
Texas State Bar No. 24050530
Email: [e-mail]
LITTLE PEDERSEN FANKHAUSER LLP
901 Main Street, Suite 4110
Dallas, TX 75202-3714
Telephone: [phone]
Facsimile: [phone]
ATTORNEYS FOR DEFENDANT
ORBITZ WORLDWIDE, LLC

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CERTIFICATE OF SERVICE
On June 15, 2011, I electronically submitted the foregoing document with the clerk of the
court for the U.S. District Court, Northern District of Texas, Fort Worth Division, using the
electronic case filing system of the court. The electronic case filing system sent a “Notice of
Electronic Filing” to the attorneys of record who have consented in writing to accept this Notice
as service of this document by electronic means.

s/ Christopher S. Yates
Christopher S. Yates
SF\857406

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