American Airlines Inc v. Travelport Limited et al

Filing 93

RESPONSE filed by American Airlines Inc re: #77 MOTION to Dismiss Plaintiff American Airlines, Inc.'s First Amended Complaint (Garcia, Yolanda)

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-0244-Y

AMERICAN AIRLINES INC.’S RESPONSE IN OPPOSITION
TO DEFENDANT ORBITZ WORLDWIDE, LLC’S
MOTION TO DISMISS THE FIRST AMENDED COMPLAINT

TABLE OF CONTENTS
Page
INTRODUCTION ......................................................................................................................... 1
LEGAL STANDARD.................................................................................................................... 3
ARGUMENT................................................................................................................................. 4
I. The Exclusionary Agreements Between TVP And Orbitz Are Not Shielded From
The Antitrust Laws By Copperweld .................................................................................. 4
II. AA’s Complaint Alleges A Plausible Conspiracy Among TVP, Orbitz, Other
Travel Agencies, And Other Industry Participants ............................................................ 8
III. The Complaint Alleges Substantial Foreclosure Of The Relevant Markets
Sufficient To Support A Claim Under Section 1 Of The Sherman Act........................... 11
IV. If The Court Dismisses Any Claims, Leave To Amend Is Appropriate Here ................. 14
CONCLUSION............................................................................................................................ 15

i

TABLE OF AUTHORITIES
Page(s)
CASES
Am. Needle, Inc. v. Nat’l Football League,
130 S. Ct. 2201 (2010)...........................................................................................................5, 6
Bell Atl. v. Twombly,
550 U.S. 544 (2007).........................................................................................................3, 8, 10
Century Oil Tool, Inc. v. Prod. Specialties, Inc.,
737 F.2d 1316 (5th Cir. 1984) ...................................................................................................4
Copperweld Corp. v. Independence Tube Corp.,
467 U.S. 752 (1984)...............................................................................................................4, 6
In re Delta/Airtran Baggage Fee Antitrust Litig.,
733 F. Supp. 2d 1348 (N.D. Ga. 2010) ....................................................................................11
Dickson v. Microsoft Corp.,
309 F.3d 193 (4th Cir. 2002) ...................................................................................................13
Doctor’s Hosp. v. Se. Med. Alliance,
123 F.3d 301 (5th Cir. 1997) ...................................................................................................13
Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co.,
313 F.3d 305 (5th Cir. 2002) ...................................................................................................14
Greenwood Utils. Comm’n v. Miss. Power Co.,
751 F.2d 1484 (5th Cir. 1985) ...................................................................................................4
Hood v. Tenneco Tex. Life Ins. Co.,
739 F.2d 1012 (5th Cir. 1984) ...................................................................................................4
Insignia Sys., Inc. v. News Corp.,
No. 04-4213, 2005 WL 2063890 (D. Minn. Aug. 25, 2005) ...................................................14
Jefferson Parish Hosp. Dist. No. 2 v. Hyde,
466 U.S. 2 (1984).....................................................................................................................12
Kaiser Aluminum & Chem. Sales v. Avondale Shipyards, Inc.,
677 F.2d 1045 (5th Cir. 1982) .............................................................................................3, 14
Kidd v. Bass Hotels & Resorts, Inc.,
136 F. Supp. 2d 965 (E.D. Ark. 2000).....................................................................................13
Lovelace v. Software Spectrum,
78 F.3d 1015 (5th Cir. 1986) .....................................................................................................6
ii

New York ex rel. Abrams v. Anheuser-Busch, Inc.,
811 F. Supp. 848 (E.D.N.Y. 1993) ..........................................................................................10
Null v. Easley,
No. 4:09-CV-296-Y, 2009 WL 3853765 (N.D. Tex. Nov. 18, 2009) ...........................3, 11, 14
Omega Envt’l v. Gilbarco, Inc.,
127 F.3d 1157 (9th Cir. 1997) .................................................................................................13
PSKS. Inc. v. Leegin Creative Leather Prods., Inc.,
615 F.3d 412 (5th Cir. 2010) ...............................................................................................3, 14
R.J. Reynolds Tobacco Co. v. Philip Morris Inc.,
199 F. Supp. 2d 362 (M.D.N.C. 2002) ....................................................................................13
R2 Invs. LCD v. Phillips,
401 F.3d 638 (5th Cir. 2005) .....................................................................................................6
Rio Grande Royalty Co. v. Energy Transfer Partners, L.P.,
No. H-08-cv-0857, 2009 WL 7830311 (S.D. Tex. Mar. 25, 2009) ...........................................7
Shipper v. Am. Auto. Ass’n,
No. 3-94-CV-2558-R, 1997 WL 135672 (N.D. Tex. Mar. 12, 1997)......................................14
Star Tobacco, Inc. v. Darilek,
289 F. Supp. 2d 436 (E.D. Tex. 2003).....................................................................................14
Starr v. Sony BMG Music Entm’t,
592 F.3d 314 (2d Cir. 2010).....................................................................................................11
Stewart Glass & Mirror v. Auto Disc. Ctrs., Inc.,
200 F.3d 307 (5th Cir. 2000) .....................................................................................................4
Tampa Elec. Co. v. Nashville Coal Co.,
365 U.S. 320 (1961).................................................................................................................12
United Air Lines, Inc. v. Austin Travel Corp.,
681 F. Supp. 176 (S.D.N.Y. 1998), aff’d, 867 F.2d 737 (2d Cir. 1989) ............................13, 14
RULES
Fed. R. Civ. P. 8...............................................................................................................................8
Fed. R. Civ. P. 12(b)(6)........................................................................................................2, 11, 15

iii

INTRODUCTION
This lawsuit challenges various types of exclusionary behavior and anticompetitive
conduct designed to foreclose competition in the distribution of airline tickets. Plaintiff
American Airlines, Inc. (“AA”) has developed an alternative channel for distributing its flight
and fare content information directly to travel agents – called AA Direct Connect – based on
modern and less costly technology than the global distribution systems (“GDSs”) offer. AA’s
165-paragraph First Amended Complaint (“Complaint”) details the unlawful behavior, including
by Orbitz, designed to foreclose AA Direct Connect from the market for the provision of airline
booking services to the detriment of AA and air travelers.
Despite Orbitz’s attempts to disparage AA’s reasons for naming it as a defendant, AA did
so because Orbitz is a knowing and willing participant in the misconduct challenged here.
Moreover, Orbitz is a great example of how the GDS monopolists stifle innovation by sharing
monopoly profits reaped from the outdated airline ticket distribution system with travel agents in
order to co-opt them into preserving the status quo. Specifically, the Complaint details 1)
Orbitz’s decision to switch from booking flights on AA through a predecessor of AA Direct
Connect to a Travelport (“TVP”) GDS due to the anticompetitive agreements between the two
parties, and 2) TVP’s subsequent financial assistance to Orbitz in its dispute with AA. (See
Compl. ¶¶ 71-73, 89-93, 101.) The Complaint contains admittedly well-pled allegations
concerning two agreements between TVP and Orbitz to foreclose Orbitz from using AA Direct
Connect. In 2007, Orbitz entered into the Subscriber Services Agreement (“SSA”) that requires
Orbitz to make all of its North American air travel bookings through 2014 through one of TVP’s
GDSs and to boycott AA Direct Connect in return for sharing the supracompetitive booking fees
that TVP charges AA for bookings made by TVP travel agent subscribers. (Id. ¶¶ 69-72.) And,

AMERICAN AIRLINES INC.’S RESPONSE IN OPPOSITION
TO ORBITZ’S RULE 12(b)(6) MOTION TO DISMISS
US_ACTIVE:\43735526\05\14013.0135

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within the past year, during Orbitz’s dispute with AA, TVP and Orbitz entered into another
agreement whereby TVP will compensate Orbitz for losses due to its inability to offer AA flight
and fare content so long as Orbitz protects the GDS monopoly ticket distribution system and
continues to refuse to adopt AA Direct Connect. (Id. ¶¶ 73, 101.)
Unable to deny the sufficiency of these allegations, Orbitz seeks immunity from scrutiny
under the antitrust laws because it claims to reside in a single corporate family with TVP. That
argument is groundless. As a matter of law, Orbitz seeks to extend the scope of a narrow
exception to the antitrust laws far beyond the wholly-owned subsidiary context in which it arose
to separate corporate entities merely affiliated through an unknown conglomeration of vaguelystated minority shareholder interests. Moreover, because this is the pleading stage, AA has not
had an opportunity to conduct discovery regarding the complex corporate relationship between
Orbitz and TVP to determine whether Orbitz and TVP are in fact under common control.
Orbitz’s reliance on numerous extra-pleading materials to prove the truth of its argument
confirms that this is an improper Rule 12(b)(6) argument. If anything, it is clear from the public
record that TVP and Orbitz are in fact separate economic entities for purposes of the agreements
at issue. Thus, AA has sufficiently alleged a conspiracy to monopolize between TVP and Orbitz
and its justifications for these agreements – which AA disagrees with – are not appropriate for
resolution at the pleading stage.
Orbitz’s remaining challenge to the Complaint is that AA has not alleged substantial
foreclosure of AA Direct Connect in any relevant market. Orbitz’s argument ignores the wellpled allegations that TVP has locked up all of its travel agent subscribers, including, but not
limited to, Orbitz. (Id. ¶¶ 63-73.) Thus, although Orbitz would like to restrict this Court’s
analysis to the foreclosure of AA Direct Connect by AA not being able to sell tickets directly

AMERICAN AIRLINES INC.’S RESPONSE IN OPPOSITION
TO ORBITZ’S RULE 12(b)(6) MOTION TO DISMISS

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through Orbitz, AA has alleged that AA Direct Connect has been foreclosed from all of TVP’s
travel agency subscribers. Even in the broadest relevant market alleged by AA, TVP has over a
30% share, which is the market share test for stating an unlawful restraint of trade claim. (See id.
¶ 3.)
LEGAL STANDARD
As this Court has stated, “[a] motion to dismiss for failure to state a claim is viewed with
disfavor and is rarely granted.” Null v. Easley, No. 4:09-CV-296-Y, 2009 WL 3853765 (N.D.
Tex. Nov. 18, 2009) (quoting Kaiser Aluminum & Chem. Sales v. Avondale Shipyards, Inc., 677
F.2d 1045, 1050 (5th Cir. 1982)). Under Bell Atlantic v. Twombly, 550 U.S. 544, 555, 570
(2007), a plaintiff must plead “enough facts to state a claim to relief that is plausible on its face”
and his “factual allegations must be enough to raise a right to relief above the speculative level.”
“The complaint need not contain ‘detailed factual allegations’ but must state ‘more than labels
and conclusions, and a formulaic recitation of the elements of a cause of action will not do.’”
PSKS, Inc. v. Leegin Creative Leather Prods., Inc., 615 F.3d 412, 417-18 (5th Cir. 2010), cert.
denied, 131 S. Ct. 1476 (U.S. 2011) (quoting Twombly, 550 U.S. at 555). The plaintiff is aided
by the requirement that, in reviewing the sufficiency of his pleadings, a court must indulge “the
assumption that all the [factual] allegations in the complaint are true (even if doubtful in fact).”
Null, 2009 WL 3853765, at *2. “That is, the Court must accept as true all well pleaded, nonconclusory allegations in the complaint and liberally construe the complaint in favor of the
plaintiff.” Id. (citing Kaiser, 677 F.2d at 1050).

AMERICAN AIRLINES INC.’S RESPONSE IN OPPOSITION
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ARGUMENT
I.

The Exclusionary Agreements Between TVP And Orbitz Are Not Shielded From
The Antitrust Laws By Copperweld
Orbitz contends, wrongly, that under Copperweld Corp. v. Independence Tube Corp., 467

U.S. 752 (1984), it is legally incapable of conspiring with TVP for purposes of the antitrust
laws.1 Orbitz’s reliance on Copperweld to defend its exclusionary behavior is both legally and
factually flawed.2 In its narrowly-worded Copperweld holding, the Supreme Court said: “We
limit our inquiry to the narrow issue squarely presented: whether a parent and its wholly owned
subsidiary are capable of conspiring in violation of § 1 of the Sherman Act. We do not consider
under what circumstances, if any, a parent may be liable for conspiring with an affiliated
corporation it does not completely own.” 467 U.S. at 767.
Orbitz is not a wholly-owned subsidiary of TVP. The Complaint alleges that TVP owns
48% of Orbitz, and that Orbtiz and TVP are separate legal and economic actors. (Compl. ¶ 91.)
Nevertheless, each and every case cited by Orbitz in support of its Copperweld defense involves
an alleged agreement between a parent and a wholly-owned subsidiary or between two whollyowned “sibling” subsidiaries.3 As such, the cases cited by Orbitz are not applicable here.

1

Count Three of the Complaint alleges that TVP, Orbitz, and other industry participants entered into agreements
with one another and engaged in concerted activities intended to punish and retaliate against AA for its Direct
Connect initiative with the specific intent of preserving TVP’s monopoly in violation of Section 2 of the Sherman
Act. (Compl. ¶¶ 134-36.) The conspiracy element of a Section 2 claim is analyzed like the conspiracy element of
claim under Section 1 of the Sherman Act. See Stewart Glass & Mirror v. Auto Disc. Ctrs., Inc., 200 F.3d 307, 316
(5th Cir. 2000).
2

In Copperweld, the Supreme Court established that a parent and its wholly-owned subsidiary are not capable of
entering into a contract, combination or conspiracy in violation of Section 1 of the Sherman Act.
3

See, e.g., Hood v. Tenneco Tex. Life Ins. Co., 739 F.2d 1012, 1015 (5th Cir. 1984) (“Each of these companies . . . is
a wholly owned subsidiary of a common parent corporation . . .”) (emphasis added); Century Oil Tool, Inc. v. Prod.
Specialties, Inc., 737 F.2d 1316, 1317 (5th Cir. 1984) (“we see no relevant difference between . . . two corporations
wholly owned by three persons who together manage all affairs of two corporations”) (emphasis added); Greenwood
Utils. Comm’n v. Miss. Power Co., 751 F.2d 1484, 1488 (5th Cir. 1985) (“[defendant] and its affiliates are all wholly
owned subsidiaries of the Southern Company”) (emphasis added).

AMERICAN AIRLINES INC.’S RESPONSE IN OPPOSITION
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Surprisingly, Orbitz completely ignores the Supreme Court’s recent decision in American
Needle, Inc. v. National Football League, 130 S. Ct. 2201 (2010), which lays out the principles
to be considered in determining whether two entities are capable of conspiring under the antitrust
laws. There, the Court held that the relevant inquiry to determine whether there is concerted
action is one of substance and not form:
The relevant inquiry, therefore, is whether there is a contract, combination . . . or
conspiracy amongst separate economic actors pursuing separate economic
interests, such that the agreement deprives the marketplace of independent centers
of decision-making, and therefore of diversity of entrepreneurial interests, and
thus of actual or potential competition.
Id. at 2212.
Apparently recognizing the weakness of its position under American Needle, Orbitz
makes numerous vague factual assertions concerning its affiliation with TVP. First, Orbitz
contends: “Orbitz and [TVP] have remained affiliates of the same company at all times during
the SSA.” (Defendant Orbitz Worldwide, LLC’s Brief in Support of Its Motion to Dismiss
Plaintiff’s First Amended Complaint [Docket No. 77-1] (“Orbitz MTD”) at 18.) Orbitz goes on
to say that “[TVP] and [unnamed] investment funds that own and/or control [TVP] still own
more than half of Orbitz’s stock.” (Id.) Yet, Orbitz never identifies which “same company”
Orbitz and TVP are affiliated within, nor does it specify the shareholdings of TVP or the
unnamed investment funds that allegedly control TVP. Whether the stock ownership of these
investment funds in fact results in common control of TVP and Orbitz is a question of fact.
Orbitz’s vague assertions are not sufficient to demonstrate that TVP and Orbitz are under
common control.
In any event, the point is irrelevant. As discussed above, the Supreme Court has recently
stated that outside the context of wholly-owned subsidiaries, the applicability of the Sherman Act
is not determined by whether “two legally distinct entities have organized themselves under a
AMERICAN AIRLINES INC.’S RESPONSE IN OPPOSITION
TO ORBITZ’S RULE 12(b)(6) MOTION TO DISMISS

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single umbrella.” Am. Needle, 130 S. Ct. at 2212. Rather, the relevant inquiry is one of
“competitive reality” or “whether the agreement joins together independent centers of decisionmaking.” Id. Accordingly, the specific ownership shares of various affiliates of TVP and Orbitz
is not determinative.
Rather, Orbitz’s own Articles of Incorporation demonstrate that Orbitz and TVP are
independent centers of decision-making, in particular with respect to any agreements they might
enter into with one another. Article Eight of Orbitz’s Articles of Incorporation mandates that
agreements between Orbitz and TVP be 1) approved by a majority of disinterested board
members (i.e., non-TVP affiliated directors), 2) approved by a majority of common stock holders
(excluding common stock owned by TVP's affiliates), or (3) deemed independently
fair. (Orbitz’s Amended and Restated Certificate of Incorporation at 13-15 (App. at 2-4 (Ex.
1)).)4 If Orbitz and TVP were to enter any agreement without first satisfying these requirements,
Orbitz’s board members would potentially face legal action from Orbitz’s shareholders for
breach of fiduciary obligations. Accordingly, the agreements challenged in the Complaint are
precisely the type of agreements with respect to which Orbitz’s corporate charter limits TVP’s
ability to control or influence Orbitz. Thus, TVP and Orbitz are in fact separate economic
entities for purposes of this case.
In addition to its general assertions that Copperweld bars recovery in this case, Orbitz
makes a separate argument based on the assertion that it “was owned by [TVP] when it executed
the [SSA] and was legally incapable of conspiring with TVP.” (Orbitz MTD at 17.) Orbitz
4

AA cites this and other SEC filings in its Complaint to show that its allegations are plausible and sufficient to state
a claim. By contrast, TVP’s reliance on SEC filings to prove – at the pleading stage – that it should be immune from
the antitrust laws, as a matter of law, goes far beyond what can properly be taken judicial notice of on a motion to
dismiss. For example, in R2 Invs. LCD v. Phillips, 401 F.3d 638, 640 n.2 (5th Cir. 2005), cited by Orbitz (see Orbitz
MTD at 4 n.2), the Fifth Circuit stated that SEC filings “should be considered only for their content and not for the
truth of the statements contained therein.” Id. (citing and discussing Lovelace v. Software Spectrum, 78 F.3d 1015,
1017-18 (5th Cir. 1986)) (emphasis added).

AMERICAN AIRLINES INC.’S RESPONSE IN OPPOSITION
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appears to be asserting the incredible proposition that exclusionary agreements between even
wholly unaffiliated entities are immune from challenge if the agreements were put in place at a
time when the companies were affiliated. In support of its argument, Orbitz relies on Rio
Grande Royalty Co. v. Energy Transfer Partners, L.P., No. H-08-cv-0857, 2009 WL 7830311
(S.D. Tex. Mar. 25, 2009). But, Rio Grande merely involved two currently wholly-owned
subsidiaries. Id. at *1. Orbitz’s argument goes well beyond the narrow confines of this holding
to immunize the current agreements of separate entities on the basis of a past corporate
relationship; it suggests that firms can agree with impunity to fix prices, allocate markets, and
refuse to deal with competitors for the sole purpose of affecting trade after corporate separation.
In fact, that is exactly what happened here. Forty-eight hours before divesting Orbitz, TVP
sought to impede Orbitz’s ability to deal with TVP’s competitors by entering the SSA.
Tellingly, TVP did this because it recognized that after divestiture:
Our agreements with Orbitz Worldwide may not be renewed at their expiration or
may be renewed on terms less favorable to us. In the event Orbitz Worldwide
terminates its relationships with us … our business and results of operations
would be adversely affected.
(Travelport Limited 2010 Form 10-K, filed March 31, 2011 at 34 (App. at 6 (Ex. 2)).)
In any event, the SSA is only one of the agreements between Orbitz and TVP that are
challenged in the Complaint. AA clearly alleges in its Complaint that in response to AA’s
removal of its flight and fare information from Orbitz in November 2010:
TVP also entered into an express agreement to ensure that Orbitz would stand
firm in its refusal to work with AA Direct Connect. TVP agreed to pay Orbitz
significant monetary consideration to offset any lost profits that resulted from
AA’s termination of Orbitz’ ticketing authority — conditioned only on Orbitz’
continued refusal to adopt AA Direct Connect.

AMERICAN AIRLINES INC.’S RESPONSE IN OPPOSITION
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(Compl. ¶ 101) (emphasis added.) Orbitz conveniently ignores these allegations, which involve
agreements entered into within the past year, well after TVP divested its controlling interest in
Orbitz in 2007.
II.

AA’s Complaint Alleges A Plausible Conspiracy Among TVP, Orbitz, Other Travel
Agencies, And Other Industry Participants
Orbitz makes the now almost obligatory motion to dismiss based on Bell Atlantic v.

Twombly, 550 U.S. 544, 549 (2007), asserting that the Complaint fails to allege sufficient facts to
demonstrate that Orbitz participated in a conspiracy to monopolize the distribution of airline
tickets through TVP’s travel agency subscribers. Orbitz’s attack on the conspiracy allegations
against it in the Complaint rests on two primary grounds. First, that the allegations do not
provide Orbitz with fair notice of AA’s claims under Rule 8. (Orbitz MTD at 21.) Second, that
the allegations against Orbitz are consistent with lawful behavior, and thus, conspiracy is an
implausible inference from the allegations. (Id. at 22-23.) Orbitz’s arguments fail for several
reasons.
The detailed factual allegations in the Complaint are more than sufficient to meet the
standards of Rule 8 and Twombly. First, the Complaint describes why GDSs and their travel
agency subscribers, including Orbitz, share a common economic interest in preserving the GDSs’
monopoly positions. Travel agencies that subscribe to a TVP GDS share in the monopoly
booking fees that TVP charges AA and other network airlines. Specifically, the Complaint
alleges:
•

. . . TVP enter(s) into long term contracts with travel agents, typically three years but
sometimes longer. Most of these contracts include some type of provision that either
requires or provides financial incentives for the travel agents to use one GDS exclusively,
or nearly exclusively. (Compl. ¶ 63) (emphasis added.)

•

Some agreements between GDSs and their subscribers contain an express provision that
requires the travel agent to use one GDS exclusively . . . . Other subscriber agreements
reward travel agents that meet certain booking volume targets with rebates, sometimes

AMERICAN AIRLINES INC.’S RESPONSE IN OPPOSITION
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called “incentive payments.” With these payments, . . . TVP effectively share(s) with the
travel agents some of the supracompetitive booking fees they receive from the airline.
(Id. ¶ 65.)
•

The SSA requires Orbitz “to use TVP “exclusively” as its GDS provider . . . . In
exchange for this exclusivity commitment TVP provides Orbitz with a “segment
incentive” rebate per booking, which is a substantial portion of the booking fee that AA
provides to TVP” (Id. ¶ 69.)

•

TVP’s exclusionary acts and practices include . . . entering into long-term restrictive
agreements with travel agent subscribers that require or incentive travel agents to use
TVP’s GDSs exclusively, or nearly exclusively, [and] that give those agents a shared
financial interest in maintaining the TVP GDSs’ market power vis-a-vis American
Airlines and other airlines.” (Id. ¶ 10) (emphasis added.)
Second, the Complaint describes provisions contained in written contractual agreements

between TVP and its travel agency subscribers that have the purpose and effect of excluding
alternative distribution channels such as AA Direct Connect. (Id. ¶¶ 63-73.) The specific
contractual agreements between TVP and Orbitz that are described in the Complaint, including
but not limited to the SSA, are simply representative examples of the agreements that TVP and
its subscribers have entered into in furtherance of their greater common objective of protecting
the flow of supracompetitive booking fees from the airlines to TVP, Orbitz, and their coconspirators. Third, the Complaint describes a series of parallel and retaliatory actions
undertaken by TVP, Orbitz and Sabre, intended to punish AA for its Direct Connect initiative.
(Id. ¶¶ 88-111.) In particular, it alleges that TVP and Orbitz entered into an express agreement
pursuant to which TVP paid Orbitz significant sums of money to boycott AA Direct Connect.
(Id. ¶¶ 73, 101.)
Recognizing that it cannot dispute that the agreements between TVP and Orbitz exist,5
Orbitz argues that allegations concerning its agreements are insufficient to establish a conspiracy

5

Orbitz has included copies of both the SSA and its agreement to boycott AA Direct Connect as attachments to
filings it made with the SEC. (See Orbitz Form 8-K/A, filed Feb. 27, 2008, at Ex. 10.7 (App. at 7-31 (Ex. 3));
Orbitz Q1 2010 Form 10-Q, filed May 6, 2010, at Ex. 10.2 (App. at 32-35 (Ex. 4)).)

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if entering into the agreements was a “rational and competitive business strategy.” (Orbitz MTD
at 22.) It states that the allegations with respect to the SSA “do not suggest Orbitz conspired to
do anything; rather, if anything, they describe the commercial reasonableness of entering into the
SSA.” (Id. at 20-21.) This argument is specious in two respects.
First, Orbitz’s assertion that it had good reasons for entering into agreements with TVP
do not in any way refute that those agreements exist. There is no question that an express written
agreement between two parties satisfies the combination or conspiracy requirement of section 2
of the Sherman Act. See New York ex rel. Abrams v. Anheuser-Busch, Inc., 811 F. Supp. 848,
869 (E.D.N.Y. 1993) (“It is axiomatic that [the challenged] contract will satisfy the [combination
or conspiracy] requirement of an antitrust action.”). Where, as here, allegations of a conspiracy
are based in part on written contracts among the conspirators, not inferences of agreement from
parallel conduct, Twombly is simply inapplicable.
Second, the Complaint contains specific factual allegations – including based on Orbitz’s
own SEC filings – showing that Orbitz’s agreements with TVP were not in fact rational or part
of a competitive business strategy. Orbitz publicly admits in its most recent 10-K:
[O]ur GDS service agreement with TVP limits our ability to modify the terms of our
agreements with existing suppliers or to pursue direct connections with new or existing
suppliers…these contractual commitments may reduce our flexibility to implement
changes to our business in response to changing economic conditions, industry trends, or
technological developments. As a result, the limitations imposed by the GDS service
agreement could place us at a competitive disadvantage and negatively impact our
business and results of operation, particularly in the current economic environment
where our suppliers are under increased pressure to reduce their overall distribution costs.
(Compl. ¶ 72) (emphasis added).
The Complaint more than adequately pleads additional facts that show that TVP and its
travel agent subscribers, including Orbitz, conspired to preserve TVP’s monopoly over the
provision of airline booking services to its travel agency subscribers. (Id. ¶¶ 10, 63-73.) Courts
have rejected similar attempts by antitrust defendants to justify their challenged conduct at the
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pleading stage. See, e.g., Starr v. Sony BMG Music Entm’t, 592 F.3d 314, 321-22 (2d Cir. 2010),
cert. denied, 131 S. Ct. 901 (2011) (reversing Rule 12(b)(6) dismissal of antitrust complaint and
rejecting defendants’ “incorrect” argument that at the pleading stage “a plaintiff seeking damages
under Section 1 of the Sherman act must allege facts that ‘tend[ ] to exclude independent selfinterested conduct as an explanation for defendants’ parallel behavior’”); In re Delta/Airtran
Baggage Fee Antitrust Litig., 733 F. Supp. 2d 1348, 1362-63 (N.D. Ga. 2010) (denying motion
to dismiss conspiracy claim to fix baggage fees in violation of Section 1 of the Sherman Act
where, inter alia, defendants offered potential justifications for the challenged conduct and the
court stated that “it would be both improper and imprudent to dismiss a case of this magnitude,
where the interests of consumers are at stake, on the mere hunch that Defendants’ conscious
parallelism defense (and their other defenses for that matter) may prove valid”); cf. Null v.
Easley, No. 4:09-CV-296-Y, 2009 WL 3853765, at *3 (N.D. Tex. Nov. 18, 2009) (denying
motion to dismiss civil conspiracy claim and holding that unexplained transfers of funds among
defendants over a period of several years were more than parallel conduct and were “not more
likely explained by lawful, free-market conduct”).
III.

The Complaint Alleges Substantial Foreclosure Of The Relevant Markets Sufficient
To Support A Claim Under Section 1 Of The Sherman Act
Orbitz, focusing solely on the exclusive dealing agreement in the SSA, contends that that

agreement with TVP does not foreclose a sufficient proportion of the relevant markets to violate
the antitrust laws, and that the Complaint therefore fails to allege a violation of the Sherman
Act.6 This argument is wrong both as to the facts and the law. First, Orbitz again
mischaracterizes the allegations in the Complaint. The Complaint’s allegations that Orbitz has

6

Count Four of the Complaint alleges that TVP’s agreements with its travel agent subscribers, including Orbitz,
unreasonably restrain competition in violation of Section 1 of the Sherman Act. (Compl. ¶¶ 137-42.)

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violated sections 1 and 2 of the Sherman Act are not based solely on the exclusive dealing
provisions of the SSA, although they are certainly examples of exclusionary agreements. For
example, in early 2011, TVP and Orbitz entered into an express written agreement pursuant to
which TVP paid Orbitz significant sums of money in exchange for Orbitz continuing to refuse to
adopt AA Direct Connect. And AA does not contend that those provisions violate the Sherman
Act because, viewed in isolation, those agreements foreclose competition from alternatives to
TVP’s GDSs. Rather, the Complaint alleges that the SSA and the subsequent agreement
between Orbitz and TVP that Orbitz will boycott AA Direct Connect are part of a much broader
web of agreements between TVP and virtually all of its subscribers. (Compl. ¶¶ 63-73.) The
Complaint alleges that the majority of TVP’s contracts with subscribers contain exclusionary
provisions, including not only exclusive dealing requirements but also prohibitions on the travel
agent combining GDS flight and fare content with flight and fare content obtained from other
sources, such as AA Direct Connect. (Id.) The Complaint further alleges that these restrictions
have seriously impeded the development of new competing methods of distribution. (Id.)
The Complaint thus alleges that TVP and its subscribers, including Orbitz, have entered
into agreements that have effectively foreclosed virtually all of the market for the provision of
airline booking services to TVP subscribers. The Complaint also alleges that TVP controls
GDSs that together account for over 30% of all airline ticket sales made by U.S.-based travel
agencies.” (Id. ¶ 3 (emphasis added).) Thus, TVP’s exclusionary agreements with Orbitz and
other TVP travel agency subscribers foreclose over 30% of the broader market for the provision
of airline booking services to travel agents in the United States, which is more than sufficient to
state a claim under Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320 (1961), and
Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2 (1984).

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Relying entirely on a single Fourth Circuit case, Dickson v. Microsoft Corp., 309 F.3d
193, 210 (4th Cir. 2002), Orbitz argues that the Court cannot consider the cumulative foreclosure
effects of TVP’s agreements with virtually all of its travel agency subscribers. Dickson involved
a challenge to certain exclusionary agreements between Microsoft and just two of Microsoft’s
OEM customers. Orbitz quotes selectively from that decision by the Fourth Circuit, where it
stated: “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 agreements potential for
anticompetitive effects.” (Orbitz MTD at 13 (quoting Dickson, 309 F.3d at 210).) However,
Orbitz carefully omits from its quote the immediately preceding sentence, which considerably
changes its significance. The complete reasoning of the Dickson Court was as follows:
“The [Complaint], however, did not allege a conspiracy among Microsoft and all
OEMs; it alleged discrete conspiracies between Microsoft and Compaq and
Microsoft and Dell. Consequently, 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 agreements potential for
anticompetitive effects.” (Emphasis added).
Where, as here, individual contracts are elements of a broader conspiracy among industry
participants, the cumulative foreclosure of TVP’s restrictive agreements with its travel agency
subscribers, as pled by AA in the Complaint, is the proper inquiry. See also Omega Envt’l v.
Gilbarco, Inc., 127 F.3d 1157, 1162-64 (9th Cir. 1997), in which the Ninth Circuit analyzed the
collective foreclosure in the relevant market of the defendant’s exclusive contracts with its
distributors.7 Thus, AA has stated claims under Sections 1 and 2 of the Sherman Act based on

7

The other cases relied on by Orbitz (see Orbitz MTD at 11-14) are inapposite. For example, Doctor’s Hosp. v. Se.
Med. Alliance, 123 F.3d 301 (5th Cir. 1997), United Air Lines, Inc. v. Austin Travel Corp., 681 F. Supp. 176
(S.D.N.Y. 1998), aff’d, 867 F.2d 737 (2d Cir. 1989), R.J. Reynolds Tobacco Co. v. Philip Morris Inc., 199 F. Supp.
2d 362, 394-95 (M.D.N.C. 2002), Kidd v. Bass Hotels & Resorts, Inc., 136 F. Supp. 2d 965, 969 (E.D. Ark. 2000),
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TVP’s unlawful exclusive dealing arrangements with Orbitz and its other travel agency
subscribers.
IV.

If The Court Dismisses Any Claims, Leave To Amend Is Appropriate Here
Orbitz asserts that dismissal without leave to amend is appropriate in an antitrust case of

this magnitude prior to any ruling by this Court on the sufficiency of the allegations against it
solely because the First Amended Complaint contained the same allegations against it in the
original Complaint. (Orbitz MTD at 23.) Orbitz’s position is without merit for several reasons.
First, in the Fifth Circuit, leave to amend is the rule, not the exception.8 That makes
sense because, as this Court has noted, “[a] motion to dismiss for failure to state a claim is
viewed with disfavor and is rarely granted.” Null, 2009 WL 3853765, at *2 (quoting Kaiser
Aluminum, 677 F.2d at 1050). Second, AA amended its pleading to add new allegations only
against Sabre, not Orbitz. This point is not disputed by Orbitz. (Orbitz MTD at 3.) Thus, there

Shipper v. Am. Auto. Ass’n, No. 3-94-CV-2558-R, 1997 WL 135672 (N.D. Tex. Mar. 12, 1997), were all summary
judgment rulings after discovery. Moreover, in Austin Travel, the plaintiffs were travel agents, not an airline,
alleging different geographic and product markets than the ones alleged by AA here. Compare Austin Travel, 681 F.
Supp. at 182-84 (CRS [or GDS] services in Long Island purchased by travel agents), with Compl. ¶¶ 117, 11920 (provision of airline booking services to TVP [travel agent] subscribers in the United States and elsewhere
purchased by AA). And, in Shipper, the court found that there was no substantial foreclosure after rejecting
plaintiff’s relevant market that failed to include “reasonable economic alternatives available” for distribution of
plaintiff’s services, including outlets that the plaintiff had, in fact, distributed its serves too. 1997 WL 135672, at *4.
Unlike in Shipper, AA has explained in detail why the relevant markets alleged in this industry are plausible and
why alternative distribution mechanisms (e.g., an airline website) are not “reasonable economic alternatives
available” for AA to distribute flight and fare information to business travelers upon which AA is dependent. (See,
e.g., Compl. ¶¶ 30-31, 117-20.) Finally, in Star Tobacco, Inc. v. Darilek, 289 F. Supp. 2d 436, 447 (E.D. Tex.
2003), the counterclaimaints failed to even define the relevant market, and in Insignia Sys., Inc. v. News Corp., No.
04-4213, 2005 WL 2063890, at *3 (D. Minn. Aug. 25, 2005), the complaint conceded that the plaintiff still had
access to a 25% share of the relevant market. Here, by contrast, AA has alleged a plausible relevant market and that
AA Direct Connect has been foreclosed from virtually all of Travelport’s travel agency subscribers, including
Orbitz.
8

The cases relied on by Orbitz belie its position that a dismissal without a single post-dismissal opportunity for
amendment is appropriate. (Orbitz MTD at 22.) In Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co.,
313 F.3d 305, 329 (5th Cir. 2002), the Fifth Circuit stated that “district courts often afford plaintiffs at least one
opportunity to cure pleading deficiencies before dismissing a case.” Also, in PSKS. Inc. v. Leegin Creative Leather
Products, Inc., 615 F.3d 412 (5th Cir. 2010), dismissal with prejudice was appropriate where the complaint had been
amended several times, and the plaintiff failed to amend its complaint consistent with the Supreme Court’s 2009
decision – reversing over 100 years of antitrust law condemning minimum resale price agreements – in those same
proceedings.

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has been no determination that the allegations against Orbitz are insufficient in any respect.
Finally, DOJ’s formal civil investigation of the GDSs makes clear that AA’s Complaint is
neither frivolous nor legally insufficient on its face, the two narrow exceptions to the rule. Thus,
if the Court were to dismiss any of the claims here against Orbitz, leave to amend is appropriate.
CONCLUSION
AA respectfully requests that the Court deny Orbitz’s Rule 12(b)(6) motion.

DATED: July 6, 2011
Respectfully submitted,
/s/ Yolanda Garcia
Yolanda Garcia
R. Paul Yetter
State Bar No. 22154200
[e-mail]
Anna Rotman
State Bar No. 24046761
[e-mail]
YETTER COLEMAN LLP
909 Fannin, Suite 3600
Houston, Texas 77010
713.632.8000
713.632.8002 (fax)
Yolanda Garcia
State Bar No. 24012457
[e-mail]
Michelle Hartmann
State Bar No. 24032401
[e-mail]
WEIL, GOTSHAL & MANGES LLP
200 Crescent Court, Suite 300
Dallas, Texas 75201-6950
214.746.7700
214.746.7777 (fax)

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Bill Bogle
State Bar No. 025661000
[e-mail]
Roland K. Johnson
State Bar No. 00000084
[e-mail]
HARRIS, FINLEY & BOGLE, P.C.
777 Main Street, Suite 3600
Fort Worth, Texas 76102
817.870.8700
817.332.6121 (fax)
Attorneys for Plaintiff American Airlines, Inc.
Of counsel to Plaintiff:
Richard A. Rothman
[e-mail]
James W. Quinn
[e-mail]
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, New York 10153
212.310.8426
212.310.8285 (fax)
M.J. Moltenbrey
[e-mail]
DEWEY & LEBOEUF LLP
1101 New York Avenue, N.W.
Washington, D.C. 20005
202.346.8738
202.346.8102 (fax)

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CERTIFICATE OF SERVICE
I hereby certify that all counsel of record who are deemed to have consented to electronic
service are being served with a copy of the foregoing document via the Court’s CM/ECF system
pursuant to the Court’s Local Rule 5.1(d) this 6th day of July, 2011.
/s/ Benjamin L. Stewart
Benjamin L. Stewart

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