105 F. Supp. 3d 265
S.D.N.Y.2015Background
- Sabre (largest U.S. GDS) and U.S. Airways entered successive distribution agreements (2006 Agreement; 2011 Agreement effective Feb 23, 2011) containing Full Content, No Direct Connections, Parity and No Surcharge provisions (the "Contractual Restraints").
- US Airways alleges the Contractual Restraints enabled Sabre to charge supracompetitive booking fees and to resist airline-originated innovations (e.g., Choice Seats), causing hundreds of millions in overcharges and lost profits for the period April 21, 2007–March 31, 2014.
- Sabre is one of three GDSs; travel agencies commonly single-home and Sabre paid large incentive payments to key agencies. No new GDS entrant has persisted since 1984; potential entrants (G2 SwitchWorks, ITA) failed.
- Sabre and AMR (American Airlines) executed a Settlement Agreement on Oct 30, 2012 (effective Dec 19, 2012) containing a covenant not to sue and non-contestability provisions, and binding successors; U.S. Airways later merged with AMR.
- Experts: Stiglitz opined Contractual Restraints suppress price competition and permit supracompetitive Sabre fees; McFadden calculated overcharge damages under a but-for competitive fee, yielding estimates limited by contractual and temporal issues.
Issues
| Issue | US Airways' Argument | Sabre's Argument | Held |
|---|---|---|---|
| Statute of limitations for 2006 Agreement damages | Claims accrue when overcharges paid; Berkey rule supports recovery for payments within 4 years | Accrual occurred when contract took effect (2006); damages were ascertainable then; claims older than 4 years time-barred | Court: 2006-Agreement claims barred; damages permitted only for conduct on/after Feb 23, 2011 (2011 Agreement effective date) |
| Effect of AMR–Sabre Settlement (Oct 30, 2012) | U.S. Airways urges caution; asks to defer public-policy challenge | Settlement bars post-Oct 30, 2012 claims and binds successors; enforceable | Court: Settlement valid and enforceable; damages/injunctive relief for conduct after Oct 30, 2012 barred |
| Vertical restraints (Contractual Restraints) — Rule of reason | Restraints eliminate steering, preserve Sabre market power, produce overcharges; experts provide but-for competitive fee and quantification | Procompetitive justifications: full content aids search/consumer welfare; parity/no-surcharge prevent free-riding; accepted in exchange for lower fees | Court: Plaintiff met initial burden (market power, adverse effect); Sabre offered procompetitive justifications; genuine issues of fact remain — summary judgment denied as to overcharge claim (limited to Feb 23, 2011–Oct 30, 2012) |
| Horizontal conspiracy among GDSs & standing for damages categories | GDSs coordinated (meetings, Project Nike, parallel contract terms); plus-factors (motive, interfirm communications); seeks overcharges, Travelocity fees, Choice Seats lost profits | Parallel conduct alone insufficient; Travelocity fees are in OTA market (separate); Choice Seats lost profits are not antitrust injury; some damages speculative/indirect | Court: Horizontal-conspiracy claim survives summary judgment (sufficient plus-factors). Standing: overcharge claim stands; Travelocity damages and Choice Seats lost-profit claims dismissed for lack of causation/antitrust injury or undue attenuation/speculativeness |
Key Cases Cited
- Zenith Radio Corp. v. Hazeltine Research, 401 U.S. 321 (accrual rule for antitrust causes of action)
- Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263 (2d Cir.) (purchaser-overcharge accrual rule discussed)
- Hanover Shoe, Inc. v. United Shoe Mach. Corp., 392 U.S. 481 (overcharge damages principle)
- Associated Gen. Contractors v. Cal. State Council of Carpenters, 459 U.S. 519 (antitrust standing and speculative damages considerations)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (parallel conduct and need for plus factors)
- Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752 (evidence required to infer a conscious commitment to a common scheme)
- Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2 (discussion of foreclosure/tying contexts)
- Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (restrictions on discounting and free-riding rationale)