United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 03-1664

___________

Midwestern Machinery Co., Inc.; Brian *

F. Gagan; Sharon Tolbert Glover; *

Charles M. Koosmann; Laurie I. *

Laner; Jack Reuler; Nigel Linden; *

Daniel L. Jongeling; Industrial Rubber *

Products, Inc.; Daniel O. Burkes, * Appeal from the United States

* District Court for the District of

Appellants, * Minnesota.

* 

v. *

* 

Northwest Airlines, Inc., * 

*

Appellee. *

___________

Submitted: February 13, 2004

Filed: December 7, 2004

___________

Before MORRIS SHEPPARD ARNOLD, JOHN R. GIBSON, and RILEY, Circuit

Judges.

___________
1

The Honorable Donovan W. Frank, United States District Judge for the

District of Minnesota.

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MORRIS SHEPPARD ARNOLD, Circuit Judge.

The plaintiffs (referred to collectively as Midwestern) appeal from a summary

judgment entered against them in their action against Northwest Airlines under § 7

of the Clayton Act, see 15 U.S.C. § 18. For the reasons stated below, we affirm the

judgment of the district court.1

 

I.

Northwest Airlines merged with Republic Airlines in 1986. Before the merger,

Northwest was the eighth largest airline in the United States, and Republic was the

ninth largest. Both had a significant presence at the Minneapolis-St. Paul Airport

(MSP). The merger was sanctioned by the Department of Transportation but was not

granted antitrust immunity. 

In 1997, eleven years after the merger, Midwestern filed suit claiming that the

merger violated § 7 of the Clayton Act. The district court dismissed the complaint,

holding that the merger could not be the subject of a § 7 claim because the acquired

entity's stock had ceased to exist. We reversed that dismissal in Midwestern

Machinery, Inc. v. Northwest Airlines, Inc., 167 F.3d 439 (8th Cir. 1999). On

remand, the district court allowed Midwestern to certify a class of plaintiffs, but

notification of the class was postponed while the district court considered Northwest's

motion for summary judgment on the ground that the statute of limitations had run.

When the district court granted the motion, Midwestern appealed. 

Section 7 of the Clayton Act prohibits acquisitions that serve "substantially to

lessen competition, or to tend to create a monopoly," 15 U.S.C. § 18, and contains a

four-year statute of limitations for private actions, 15 U.S.C. § 15b. Section 7 exists

primarily to arrest, at their incipiency, mergers that could produce anti-competitive
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results. Concord Boat Corp. v. Brunswick Corp., 207 F.3d 1039, 1050 (8th Cir.

2000), cert. denied, 531 U.S. 979 (2000). Generally, a "Section 7 action challenging

the initial acquisition of another company's stocks or assets accrues at the time of the

merger or acquisition." Id. Midwestern maintains, however, that there are three

reasons why its suit, though it was filed eleven years after the merger, nevertheless

survives Northwest's motion for summary judgment on limitations grounds.

Midwestern also argues that its action is not barred by laches.

II.

Midwestern asserts first that Northwest's "continuing violations" of the Clayton

Act will allow it to avoid the bar of the statute of limitations. Specifically, it points

to Northwest's "hub premium" for flights through its MSP hub and Northwest's

actions to prevent successful entry into MSP by low-cost carriers as overt acts that

restart the statute. 

Under the so-called continuing-violation theory " 'each overt act that is part of

the violation and that injures the plaintiff ... starts the statutory period running again,

regardless of the plaintiff's knowledge of the alleged illegality at much earlier

times.' " Klehr v. A. O. Smith Corp., 521 U.S. 179, 189 (1997) (quoting 2 P. Areeda

& H. Hovenkamp, Antitrust Law ¶ 338b (rev. ed. 1995)). Midwestern, however, cites

no appellate decisions applying this principle to § 7 claims. Rather, it attempts to

analogize this case to other areas of antitrust law where such a theory has in fact been

recognized. 

The typical antitrust continuing violation occurs in a price-fixing conspiracy,

actionable under § 1 of the Sherman Act, see 15 U.S.C. § 1, when conspirators

continue to meet to fine-tune their cartel agreement. See Pennsylvania Dental Ass'n

v. Medical Serv. Ass'n of Pa., 815 F.2d 270, 278 (3d Cir. 1987), cert. denied, 484 U.S.

851 (1987). These meetings are overt acts that begin a new statute of limitations
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because they serve to further the objectives of the conspiracy. Cf. Zenith Radio Corp.

v. Hazeltine Research, 401 U.S. 321, 338 (1971). 

But "[c]ontinuing violations have not been found outside the RICO or Sherman

Act conspiracy context ... because acts that 'simply reflect or implement a prior

refusal to deal or acts that are merely unabated inertial consequences (of a single act)

do not restart the statute of limitations.' " Concord Boat, 207 F.3d at 1052 (quoting

DXS, Inc. v. Siemens Med. Sys., Inc., 100 F.3d 462, 467-68 (6th Cir. 1996) (citations

and internal quotations omitted)). In other words, to apply the continuing violation

theory to non-conspiratorial conduct, new overt acts must be more than the unabated

inertial consequences of the initial violation. 

Looking at how courts have applied the continuing violation theory to claims

brought under § 2 of the Sherman Act sheds light on why that theory does not apply

to Clayton Act claims. In Hanover Shoe, Inc. v. United Shoe Mach. Corp., 392 U.S.

481, 483-84 (1968), United, a manufacturer and distributor of shoe machinery, was

sued by one of its customers, Hanover, for monopolizing the shoe machinery industry

in violation of § 2 of the Sherman Act. United leased but refused to sell its machinery

to Hanover, causing Hanover to pay more for use of the machines over time. United's

lease-only policy first adversely affected Hanover in 1912, but suit was not filed until

1955. The Court held that United's continued adherence to the policy was part of its

maintenance of its monopoly. The Court stated: 

We are not dealing with a violation which, if it occurs at all, must occur

within some specific and limited time span. ... Rather, we are dealing

with conduct which constituted a continuing violation of the Sherman

Act and which inflicted continuing and accumulating harm on Hanover.

Although Hanover could have sued in 1912 for the injury then being

inflicted, it was equally entitled to sue in 1955.
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392 U.S. at 502 n.15. The Court thus endorsed the Third Circuit's reasoning that

United's conduct "went beyond a mere continuation of the refusal to sell; it collected

rentals on leases and entered into new leases when old machinery was no longer in

working condition and required replacement." Hanover Shoe, Inc. v. United Shoe

Machinery Corp., 377 F.2d 776, 794 (3d Cir. 1967), aff'd in part and rev'd in part,

392 U.S. 481 (1968).

While United engaged in a continuing violation by actively using the leaseonly policy to maintain its monopoly, cf. National Souvenir Ctr., Inc. v. Historic

Figures, Inc., 728 F.2d 503, 513-14 (D.C. Cir. 1984), cert. denied, 469 U.S. 825

(1984), the statute of limitations begins to run from the initial violation where

defendants are accused of attempting to monopolize by passively implementing anticompetitive policies, such as a refusal to deal, see Garelick v. Goerlich's, Inc.,

323 F.2d 854, 856 (6th Cir. 1963) (per curiam), or maintaining an action to enforce

a restrictive covenant, see Pace Indus. v. Three Phoenix Co., 813 F.2d 234, 236-37

(9th Cir. 1987). Existing competitors must act when a rival initiates anti-competitive

policies that do not require additional anti-competitive action to implement. See 2 P.

Areeda & H. Hovenkamp, Antitrust Law ¶ 320c4 (2d ed. 2000). In such

circumstances, implementation is only a reaffirmation of the policy's adoption, and

the statute begins to run as soon as the competitor suffers injury. DXS, 100 F.3d at

467-68; see also Concord Boat, 207 F.3d at 1051 (citing Klehr, 521 U.S. at 190-91).

Only where the monopolist actively reinitiates the anti-competitive policy and

enjoys benefits from that action can the continuing violation theory apply. This

distinction between "new and independent act[s] [that] inflict new and accumulating

injury on the plaintiff" (which restart the statute of limitations), Pace, 813 F.2d at

238, and unabated inertial consequences of previous acts (which do not) allows the

statute of limitations to have effect and discourages private parties from sleeping on

their rights. 
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Applying this rationale to mergers makes no sense. If the initial violation was

the merger itself, none of the "continuing violations" Midwestern alleges can justify

restarting the statute of limitations because these acts were not undertaken to further

an illegal policy of merger or to maintain the merger. Otherwise, every business

decision could qualify as a continuing violation to restart the statute of limitations as

long as the firm continued to desire to be merged. Once the merger is completed, the

plan to merge is completed and no overt acts can be undertaken to further that plan.

Unlike a conspiracy or the maintaining of a monopoly, a merger is a discrete

act, not an ongoing scheme. A continuing violation theory based on overt acts that

further the objectives of an antitrust conspiracy in violation of § 1 of the Sherman Act

or that are designed to promote a monopoly in violation of § 2 of that act cannot apply

to mergers under § 7 of the Clayton Act. Even if the initial merger violated § 7, it

makes little sense to hold that policies were pursued to effectuate the illegal merger

as we might in a case involving a conspiracy violating § 1 (e.g., cartel meetings

occurred to effectuate a price-fixing agreement) or a case violating § 2 (e.g., ongoing

policy of predatory pricing undertaken to effectuate monopolization). Once a merger

is completed, there is no continuing violation possible under § 7 that would justify

extending the statute of limitations beyond four years. 

Midwestern alleges that Northwest increased the hub premium for MSP and

prevented entry by low-cost carriers into MSP by changing prices and schedules and

offering rewards to passengers and travel agents. A continuing violation theory based

on these alleged overt acts, however, could not justify extending the statute even if

we believed that such a theory could ever apply to § 7. That is because, even if the

initial merger violated § 7, these allegations are not acts furthering the objectives of

the merger. They may be acts that violate other antitrust laws, but they are not

continuing violations of the Clayton Act sufficient to restart the statute of limitations.
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Even if the merger itself was unlawful, the continued existence of the merged

entity is not a continuing violation: It is simply the natural unabated inertial

consequence of the merger. Conducting business is presupposed by the merger itself.

Selling goods and services and responding to potential competition by lowering

prices (aside from predatory pricing practices that may violate § 2 of the Sherman

Act) or increasing product quality are the very things that competitive firms, merged

or not, are encouraged to do to provide consumers with high quality products at the

lowest prices. 

Midwestern's theory would expose merged firms to potential liability in private

suits as long as the firm remained merged because, assuming that the initial merger

violated the Clayton Act, every subsequent action by the merged firm would be a

continuing violation designed to maintain the merged firm's viability. Merged

companies do face a higher susceptibility to private suits than non-merged firms, but

only for the four years following the merger, absent some other justification for

tolling the statute of limitations. 

Congress did not prohibit all mergers in the Clayton Act because to do so

would preclude the consumer benefits that mergers can generate. Admittedly, a procompetitive merger and an anti-competitive one are hard to discern from each other,

but exposing a firm to perpetual liability under the Clayton Act simply because its

business history includes a merger would chill pro-competitive business

combinations. Finding that a continuing violation theory does not apply to § 7 does

not give a "green light" to monopolists, as Midwestern claims, because merged firms,

like all firms, are still subject to the Sherman Act's prohibitions on monopolization

or attempts to monopolize. 

Finally, it is worth noting that because private suits under the antitrust laws are

allowed to correct public wrongs, it is appropriate to encourage suits as soon as

possible to stop (or at least compensate) harm to the public. Mergers occur in the
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public eye and at a reasonably certain date. It is undisputed that Midwestern was well

aware of its potential injury when Northwest and Republic merged. While a plaintiff

need not be unaware of an initial act's illegality for the continuing violation theory to

be available to extend the statute of limitations in a Sherman Act claim, it is worth

noting that, unlike mergers (including the Northwest-Republic merger), initial

violations of the Sherman Act usually occur in secret. In practice, where the plaintiff

had actual knowledge of the initial violation and suffered sufficient injury, courts

generally do not toll the statute of limitations based on a continuing violation theory.

2 P. Areeda & H. Hovenkamp, Antitrust Law ¶ 320c1 at 210-11 (2d ed. 2000). 

III.

Midwestern's holding-and-use theory is more firmly rooted in precedent.

"Clayton Act claims are not limited to challenging the initial acquisition of stocks or

assets ... since 'holding as well as obtaining assets' is potentially violative of

section 7." Concord Boat, 207 F.3d at 1050 (quoting United States v. ITT Cont'l

Baking Co., 420 U.S. 223, 240 (1975)). But since holding and using assets acquired

in a merger in the same manner as they were used at the time of the merger is merely

an unabated inertial consequence of the merger, Concord Boat, 207 F.3d at 1052,

only different uses of assets can justify restarting the statute of limitations.

Midwestern relies on United States v. du Pont de Nemours & Co., 353 U.S. 586

(1957), and ITT to support its application of the holding-and-use theory in the present

circumstances.

In du Pont, 353 U.S. at 588, 598-99, although the defendants had acquired a

twenty-three percent stock interest in General Motors by 1919, it was not until

decades later that du Pont's status as GM's supplier of automotive finishes and fabrics

threatened competition. There was no realistic threat of anti-competitive behavior at

the time of the acquisition. Id. at 598-99. Since the government (unlike private

individuals) did not face a statute of limitations when it initiated action under the

Clayton Act, du Pont did not concern a statute of limitations issue; the case was about
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whether an acquisition that did not violate § 7 at the time that it occurred could be the

basis for a later suit. Id. at 597-98. The Supreme Court held that the acquisition need

violate § 7 only at the time of the suit for the government to sue; it may bring an

"action at any time when a threat of the prohibited effects is evident." See id. The

Court in du Pont did not address the question of whether a merger that violated § 7

at the time that it occurred could be the basis of a private suit more than four years

after that merger based on the holding and use of acquired assets. The Court held

only that the theory could be sufficient for a government-initiated suit at the time that

competition was threatened. Id.

Midwestern has presented no evidence tending to show why it would not have

perceived Northwest's acquisition of Republic as anti-competitive in 1986. Nor has

it produced evidence that the anti-competitive threat appeared only after July 1993

(four years before it filed this suit). Unlike du Pont, it was clear at the time of the

merger here that the combination of Northwest and Republic could lessen

competition. In du Pont, there was no violation until decades later when GM became

a successful and dominant firm and du Pont's supply relationship with GM became

one based on stock ownership rather than competition among suppliers. That was not

the case here. Popular press accounts from 1986 show that it was well understood

that the merger of Northwest and Republic would produce increased concentration

at MSP.

ITT is not useful to Midwestern because it, too, did not concern a statute of

limitations. In that case, ITT and the Federal Trade Commission had entered into a

consent order for ITT's alleged violations of the Clayton Act and the Federal Trade

Commission Act. 420 U.S. at 227. The order prohibited ITT from acquiring any

other bakeries for ten years, and ITT violated the order. Id. at 228-29. The case

before the Supreme Court concerned the amount of damages ITT owed for violating

the order. The Court interpreted "acquiring" as used in the consent order as

prohibiting ITT's continued holding of the bakeries acquired in violation of the order,
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and thus held that ITT was continually violating the order until the bakeries were

divested. In dicta, the Supreme Court stated that " 'acquisition' as used in § 7 of the

[Clayton] Act means holding as well as obtaining assets. ... [T]he framers of the Act

did not regard the terms 'acquire' and 'acquisition' as unambiguously banning only the

initial transaction of acquisition; rather they read the ban against 'acquisition' to

include a ban against holding certain assets." Id. at 240-41. ITT, however, was not

about the statute of limitations but about penalties. ITT also concerned the authority

of the FTC, not private parties. Id. This case can only assuredly be said to stand for

the proposition that, with respect to penalties for violations of consent orders, holding

prohibited assets (and not just obtaining them) continues to trigger penalties until the

violations of the consent order are corrected. 2 P. Areeda & H. Hovenkamp, Antitrust

Law ¶ 320c5 (2d ed. 2000). 

Even reading these cases broadly to support the applicability of the holdingand-use theory to private § 7 claims, as Midwestern urges, the statute of limitations

must begin to run at some point in order for the time bar to have any effect and to

give repose to merged firms. If assets are used in a different manner from the way

that they were used when the initial acquisition occurred, and that new use injures the

plaintiff, he or she has four years from the time that the injury occurs to sue, see

Klehr, 521 U.S. at 188; Zenith Radio, 401 U.S. at 338. 

Even assuming that the holding and use of assets can be a valid justification for

extending the statute of limitations in a private Clayton Act suit, Midwestern's

arguments fail because its assertion that market power acquired by Northwest via the

merger is such an asset is logically flawed.

First, market power cannot be an asset for purposes of the Clayton Act if the

statute of limitations is to have any effect. Otherwise, the holding-and-use theory

would swallow the time bar. Market power is defined as "the ability of a firm ... to

raise price above the competitive level without losing so many sales so rapidly that
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the price increase is unprofitable and must be rescinded." William A. Landes &

Richard A. Posner, Market Power in Antitrust Cases, 94 Harv. L. Rev. 937, 937

(1981). All horizontal mergers lead to increased market share and, with that,

increased market power: Post-merger sales, even those made through market

domination, are not independent acts. They are merely reaffirmations of the original

merger. Horizontal mergers, by definition, increase the size and enhance the market

power of the resulting firm. "Section 7 of the Clayton Act ... requires proof of market

power; in fact, the main purpose of section 7 is to limit mergers that increase market

power." Id. (footnote omitted). If market power could be considered an asset the

retention of which violated the Clayton Act and required extending the statute of

limitations until the market power asset was disgorged (ignoring the impossibility of

divesting a firm of only its market power), the statute of limitations would have no

effect. By definition, any merger that created market power would violate the

Clayton Act forever as long as the firm maintained its market position. Additionally,

market power, unlike other assets under the Clayton Act, cannot be traded, sold, or

bought absent the trade, sale, or purchase of other assets. Market power is not itself

an asset, but is the result of combinations of other assets that the firm holds. 

Second, even if market power could be considered an asset, it was not

exchanged in the merger; rather, the merger created the market power. The holdingand-use theory allows a statute of limitations to be tolled only when an asset is used

differently after a merger from the way that it was being used before a merger. If the

asset did not exist before the merger, logic requires that this theory cannot apply. If

market power could be an acquired asset for Clayton Act purposes, so would

economies of scale and other size efficiencies gained from the combination of two

firms in a merger. To hold that the holding-and-use theory operated for these

"assets," however, would subject even the most pro-competitive mergers to perpetual

liability. This cannot be.
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Even if we consider market power to be an asset that was exchanged in the

merger, rather than being created by it, there is no evidence in this case that it is being

used differently. Midwestern asserts that Northwest's business strategy changed

significantly in the last half of 1993. The evidence presented and the experts' reports,

however, do not support that assertion. Some of the experts looked only at

Northwest's activity after the suit was filed in 1993, and others did not show any

difference between Northwest's use of market power before the merger and beginning

in 1993. In order to toll the statute of limitations based on holding and using market

power, Midwestern must demonstrate at what point it was first injured by Northwest's

differing use of market power. It is at that point that the statute of limitations begins

to run. It has not done that; it merely asserts a change. 

It is clear law that a nonmovant cannot survive a summary judgment motion

merely by resting on its pleadings as Midwestern attempts to do here. Discovery in

this case was sufficient for Midwestern to provide evidence, if it exists, that

Northwest's use of market power changed. Three time periods are of relevance here:

the pre-merger period; 1986 (the year of the merger) to 1993 (four years before suit

was filed); and 1993 to the present. To prevail against Northwest's summary

judgment motion on the basis of the holding-and-use theory, Midwestern must show

that Northwest's use of market power during the first two periods was the same while

only during the third period was the market power used in a new fashion.

Midwestern, however, has provided no information about Northwest's use of market

power before the merger. Without this information, we cannot know whether its post1993 use of market power differed significantly from its pre-merger use. 

Midwestern also suggests that market innovations such as the pricing program

that Northwest employed after 1993 exemplify its different use of market power.

Such a theory, however, would preclude merged firms from responding to changes

in market conditions and opportunities. This makes scant sense.
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Midwestern's briefs note that the holding-and-use theory is related to their

continuing violation theory, while Northwest's briefs argue that the two theories are

the same. While both theories, if accepted for § 7 actions, would allow a private

litigant to sue more than four years after the initial acquisition, we suggest that both

parties are incorrect. Under the holding-and-use theory, the claim must arise from an

injury different from the injury caused by the initial acquisition. Where the injury was

sustained at the time of the acquisition, "the limitations period ... cannot be extended

on the basis of the holding and use of the acquisitions." Concord Boat, 207 F.3d at

1051. In contrast, a continuing violation theory is based on an initial action that

violates the antitrust laws followed by injuries caused by illegal actions designed to

implement and effectuate the initial violation. Holding and using assets restarts the

statute of limitations only when the use of the assets differs after the merger, while

continuing violations restart the statute of limitations when there is an ongoing

scheme, such as a price-fixing conspiracy or an attempt to monopolize. 

IV.

"The limitations period ... starts to run at 'the point the act first causes injury.' "

Concord Boat, 207 F.3d at 1051 (quoting Klehr, 521 U.S. at 190-91). "The statute

can be tolled under certain circumstances, such as ... where a plaintiff's damages are

only speculative during the limitations period." Concord Boat, 207 F.3d at 1051.

Midwestern argues that the statute of limitations should be tolled here because

the plaintiffs' future damages were speculative during the initial limitations period

ending in 1990. In Zenith Radio, 401 U.S. at 338-42, the Supreme Court tolled the

statute of limitations in a Sherman Act case because if suit had been filed during the

limitations period the existence of the claimant's future damages would have been

speculative because they would have been based on a hypothetically free market and

on the market share that the claimant would have enjoyed were it not for a conspiracy

among its competitors. The Court stated that "refusal to award future profits as too

speculative is equivalent to holding that no cause of action has yet accrued ... In these
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instances, the cause of action for future damages, if they ever occur, will accrue only

on the date they are suffered." Id. at 339. The plaintiffs in Zenith Radio could not

have avoided incurring the future damages even if they had filed suit during the

limitations period. 

Midwestern does not claim that if it had filed suit within the four-year statute

of limitations period it could not have calculated any of the damages that it had

suffered. Instead, it argues that it should be allowed to restart the statute of

limitations because it could not forecast future damages at that time. In 1990,

Midwestern could have established its injury but could not have precisely calculated

the scope and extent of the future damages it would suffer due to the NorthwestRepublic merger. If it had filed suit by 1990 and won equitable relief on the merits,

however, it would have incurred no future damages. Unlike the plaintiffs in Zenith

Radio, Midwestern could have precluded future damages from occurring by obtaining

within four years of the merger the injunctive relief that it now seeks or possibly

divestiture.

Injuries caused by a merger, of course, might not materialize until after the

four-year limitation period has expired. In that case, the plaintiff has not been injured

yet, and the statute of limitations does not begin to run until the plaintiff suffers

injury. See Concord Boat, 207 F.3d at 1051. But where the plaintiff's injury is

immediate (as Midwestern's was according to the class representatives) the statute of

limitations begins to run at that time. The limitations period begins when "present or

future damages became definite enough to support a recovery." 2 P. Areeda &

H. Hovenkamp, Antitrust Law ¶ 320d (2d ed. 2000). The total extent of the alleged

damages, including future damages, was unknown at that time, but damages that

could be claimed existed. Midwestern, had it filed suit during the four years

following the merger, would have been able to recover the damages it had already

suffered if the court found that Northwest's merger with Republic violated the

Clayton Act. The scope and extent of Midwestern's future damages may have been
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speculative, but the fact that it had suffered a quantifiable injury was not. See Pace,

813 F.2d at 240 (analyzing Zenith Radio). 

Refusing to extend the statute of limitations in this case ensures that the statute

continues to have meaning. We cannot imagine a Clayton Act claim (which means,

by definition, that the plaintiffs allege that an acquisition has lessened competition

and injured them) that could not be filed more than four years after the acquisition

were we to hold that the unascertainable scope and extent of future damages was

sufficient to warrant tolling the statute. In merger cases where monopolization by the

merged firm is intimated, as it was here, future damages to be borne by consumers

will always be speculative as long as the merged firm exists.

This holding does not mean, however, that Midwestern was without recourse

for damages that it suffered after 1990. If, in an action filed within the statute of

limitations period, Midwestern had proved antitrust injury stemming from the alleged

Clayton Act violation, the court could have provided Midwestern with equitable relief

that would have precluded the post-1990 damages, including the damages that it now

seeks. And if Northwest's actions constituted violations of other antitrust laws, such

as § 2 of the Sherman Act, Midwestern would have had a new and separate cause of

action with a four-year statute of limitations from the time that the allegedly illegal

activity occurred.

V.

In addition to seeking damages, Midwestern sought injunctive relief. See

15 U.S.C. § 26. It asked the court to order changes in Northwest's policies at MSP,

including limiting the number of gates leased by Northwest, requiring Northwest to

provide equipment and services to low-cost carriers, requiring Northwest to establish

or allow interline or "code sharing" relationships with low-cost carriers (allowing

low-cost carriers to sell seats on Northwest's regional feeder airlines), limiting the

extent to which Northwest could engage in short-term profit-sacrificing activities,
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requiring Northwest to adjust its frequent flyer program, and requiring Northwest to

adjust its travel agent compensation program. 

Northwest, as part of its summary judgment motion, asserted that the equitable

relief sought was barred by the doctrine of laches, which requires a showing that the

plaintiff was "guilty of unreasonable and inexcusable delay that has resulted in

prejudice to the defendant." Goodman v. McDonnell Douglas, Corp., 606 F.2d 800,

804 (8th Cir. 1979); cf. IT&T v. General Tel. & Elec. Corp., 518 F.2d 913, 926-27

(9th Cir. 1975), overruled on other grounds, California v. American Stores Co., 495

U.S. 271 (1990). "The doctrine of laches is premised upon the same principles that

underlie statutes of limitations: the desire to avoid unfairness that can result from the

prosecution of stale claims." Goodman, 606 F.2d at 805. Whether a statute of

limitations would bar a comparable action at law is one consideration in "determining

whether the length of delay was unreasonable and whether the potential for prejudice

was great," id., and we have already held, of course, that Midwestern's damages

claims are barred by the four-year statute of limitations. 

In addition, Midwestern produced no reasonable justification for the elevenyear delay in filing suit. Northwest did nothing to conceal the merger from

Midwestern or to dissuade it from filing suit in a timely manner. Class

representatives stated that, during the four years following the much-publicized

merger, they did not file suit because they were too busy, too concerned about the

costs of litigation, or ignorant about their cause of action. If these reasons were

sufficient to justify denying a laches defense when the comparable statute of

limitations time period has run more than twice over, the notion of laches would be

rendered meaningless. 

Beyond the long-since expired statute of limitations in this case and the lack

of a justification from Midwestern to explain the delay, Northwest would be

substantially prejudiced were equitable relief to be granted at this late date. In 1989,
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Northwest's corporate parent ceased to be a public corporation and became a

privately-held company. In 1994 (after the four-year statute of limitations on the

merger had run), the corporation again became publicly traded. The current

shareholders of Northwest who invested in 1994 or after had no reason to believe that

a merger occurring more than seven years earlier could be the basis for suit.

Northwest's shareholders would be unduly prejudiced were this claim for equitable

relief allowed to proceed. 

Midwestern slumbered on its rights, and its equitable claims are now barred.

As stated before, however, if Northwest is violating other antitrust statutes through

its current practices, Midwestern could seek the same injunctive relief to remedy

those violations as it seeks here. In fact, the equitable relief sought here would find

a more hospitable home in a suit for a violation of § 2 of the Sherman Act than in an

action for a violation of § 7 of the Clayton Act, in which the usual remedy is the

divestiture of acquired stock or assets.

VI.

If, following its merger with Republic Airlines, Northwest has acted in a

predatory manner, it could be liable under the Sherman Act. We are loath, however,

to expose merged companies forever to private litigation under the Clayton Act,

which, as Midwestern admits, presents a lower threshold for liability than does the

Sherman Act. Non-merged competitors would not be susceptible to these suits. And

given that Congress has implicitly sanctioned merger activities where merged firms

are believed to promote economic efficiency, opening up the statute of limitations for

merged firms forever based solely on the potential effects that they may have on

competition would overly burden these firms. The four-year statute of limitations is

designed to allow private parties to assess whether the new merged firm is actually

enhancing efficiency or lessening competition. After that period, without some other

evidence of a different use of assets acquired from the merger, the Clayton Act's

statute of limitations has run, and the only private antitrust actions that remain will
-18-

lie under the Sherman Act, the same vehicle open to potential suits against all firms,

merged or not.

We therefore affirm the judgment of the district court.

JOHN R. GIBSON, Circuit Judge, dissenting.

Midwestern Machinery contends that, beginning in the second half of 1993,

Northwest deliberately and dramatically changed its use of a key asset (or bundle of

assets) it obtained from Republic–its Minneapolis hub–and began to exploit that asset

to lessen competition in a way that injured Midwestern Machinery. Both the district

court and this Court have disposed of a factual issue, supported by expert reports,

independent studies, and statistical evidence, on summary judgment. Neither court

fulfills the duty to judge a summary judgment motion “viewing the evidence and

drawing all inferences in the light most favorable to the party opposing the motion.”

See Viking Supply v. Nat'l Cart Co., 310 F.3d 1092, 1096 (8th Cir. 2002).

Accordingly, I respectfully dissent. 

The district court disposed of Midwestern Machinery’s hub exploitation

argument in one sentence: “Specifically, Plaintiffs assert that the 1993 spike in

Northwest’s hub fare premium constitutes a new overt act of anti-competition;

however, Plaintiff’s own experts point to a number of factors that might have

contributed to the increase in hub fare premiums, none of which involves new or

different uses of the merger assets.” Slip op. at 5 (emphasis added). The Court today

devotes three sentences to the hub exploitation argument: “Midwestern also suggests

that market innovations such as the pricing program that Northwest employed after

1993 exemplify its different use of market power. Such a theory, however, would

preclude merged firms from responding to changes in market conditions and

opportunities. This makes scant sense.” Supra at 12. 
2

The expert report of John C. Beyer concerning statute of limitations issues

stated:

Before their merger, Northwest and Republic were, respectively, the

eighth and ninth largest airlines in the United States. Both firms had

substantial operations at the Minneapolis/ St. Paul airport (“MSP”) and

were, by far, the largest airlines serving MSP. The firms competed with

one another for passengers on the routes in which they overlapped.

And, each firm constrained the ability of the other to charge

supracompetitive prices on the routes in which they did not overlap

because each could readily adjust their flight schedules and operations

to take advantage of a profit opportunity on city-pair routes they were

not serving at the time.

App. 20. 

-19-

Both the district court and this Court thus resolved the hub exploitation

argument without addressing the considerable body of evidence supporting

Midwestern Machinery's assertions. The district court did so by requiring the

plaintiff’s evidence to rule out the existence of influences which might have

contributed to the change in prices that experts and independent scholars say resulted

from Northwest’s exploitation of the “fortress hub” it acquired in the merger. Our

Court does so by a naked policy judgment–that punishing firms for responding to

changes in market conditions and opportunities is intolerable–apparently without

regard to whether such responses violate the Clayton Act. 

Midwestern Machinery's experts arrayed evidence that would allow a finder of

fact to arrive at the following conclusions:

(1) Before the merger with Republic, Northwest did not have dominance over

the Minneapolis airport, but competed with Republic.2
3

At the time of the merger, the financial press reported that the merger would

result in Northwest controlling 75-80% of the gates at Minneapolis. Lee A. Ohanian

Report, App. 157. See also General Accounting Office, Airline Deregulation:

Barriers to Entry Continue to Limit Competition in Several Key Domestic Markets

10 (Oct. 18, 1996) (showing 49 out of 65 gates at Minneapolis had been leased to

Northwest).

4

Minnesota Planning, Flight Plan: Airline Competition in Minnesota 3 (1999).

5

Ohanian Report, App. 156-57 (quoting Dep't of Justice Report: “In 19 of [the

26 markets out of Minneapolis where Northwest and Republic provided most of the

service] the merger would consolidate the only two airlines providing nonstop

service, thereby eliminating all present competition.”).

6

Beyer Report, App. 22 (“Where a concentrated market is coupled with barriers

to entry . . . one can infer the possession of market power by the dominant firm.”);

Ohanian Report, App. 152 (“Market power requires a high market share and barriers

to entry into the market.”).

7

Beyer Report, App. 22; General Accounting Office, Airline Deregulation:

Barriers to Entry, supra, at 9-11 (senior management at many start-up airlines said

long-term, exclusive gate leases are barrier to entry at Minneapolis; showing 49 out

of 65 gates at Minneapolis had been leased to Northwest; “The airports in Detroit,

Newark, and Minneapolis were most frequently cited by the airlines that started after

deregulation as having competition limited by constraints in gaining access to gates”;

requirement of subleasing gates to gain entry to Minneapolis was “key factor” in

Southwest's decision not to serve Minneapolis); Ohanian Report, App. 153 (“A key

barrier to entry in the airline market is access to gates.”). A General Accounting

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(2) After the merger, the new Northwest controlled around 75% of the gates

at the Minneapolis airport,3

 carried 79% of Minneapolis passengers,4 and became the

only carrier serving 19 routes out of Minneapolis.5

(3) Market power results from a highly concentrated market or high market

share, combined with barriers to entry of that market by competitors.6

(4) Control of airport gates is an important entry barrier to new entrants at

some airports, and in particular, at the Minneapolis airport.7
Office report from 1999 stated that all gates at Minneapolis were subject to exclusiveuse leases and that Northwest leased 54 of the 70 gates; airport officials stated that

there were “no gates available” to new entrants. General Accounting Office, Airline

Dergulation: Changes in Airfares, Service Quality, and Barriers to Entry 17 (March

4, 1999). See also Minnesota Planning, supra, at 3 (“The U.S. General Accounting

Office found in 1996 that long-term, exclusive-use gate leases seriously inhibit

competition at Minneapolis-St. Paul. At airports where most gates are tied up in such

leases, new entrants are often forced to sublease gates, which usually results in gate

access at less desirable times and higher cost.”)

8

The term “fortress hub” is used in the airline industry to describe hubs in

which one carrier has a dominant share of flights or services. John S. Strong Report,

App. 202 n.8.

9

“[S]tudies have shown that a carrier with a frequency advantage in a market

gains a disparate share of local traffic, which compounds the competitive problem for

other carriers that compete at the network hub. When carriers with similar cost

characteristics do not have access to the same traffic flows, they are unable to

compete.” Department of Transportation, Office of Aviation and International

Economics, The Low Cost Airline Service Revolution 27 (April 1996).

10Severin Borenstein, Hub Dominance and Pricing 4-5 (1999).

11Ohanian Report, App. 170-71; Ohanian Rebuttal Report, App. 194-95.

-21-

(5) Possession of a “fortress hub” dominated by one carrier8

 can create an entry

barrier by giving the dominant carrier a frequency-of-flights advantage that puts new

entrants at a competitive disadvantage9

 and by locking in customers and travel agents

through frequent flyer and “frequent booker” programs.10

(6) General economic conditions and Northwest's own financial situation

prevented it from effectively exploiting its market power until 1993.11

(7) Beginning in the second half of 1993, there was a great leap in Northwest's

exploitation of its market power at Minneapolis, as demonstrated by its greatly
12Beyer Report, App. 26-27 (“The increase in Northwest's [Minneapolis] hub

premium from 21 percent in 1993 to 46 percent in 1994 is substantial. . . . The

substantial increase in Northwest's [Minneapolis] hub premium between 1993 and

1994 indicates that Northwest changed the way in which it was exercising its

monopoly power. . . . Northwest's [Minneapolis] hub premium increased so

significantly because Northwest appears to have changed the way in which seats on

its airplanes were allocated amongst the various fare classes.”); Ohanian Report, App.

166 (contrasting fare premium charged by Northwest on Minneapolis flights in 1993

(21%) with that charged in 1994-97 (40.3%)).; Dep't of Transportation, Low Cost

Airline Revolution, supra, at 29 (comparing hub fare premiums at Minneapolis for

1988 (23%) and for 1995 (40.8%)); Ohanian Report, App. 169 (showing that

Northwest's profit margin for twenty major Minneapolis markets went from 0.9% in

the first quarter of 1993 to 15.5% in 1994-97); “[B]y the third quarter of 1998,

travelers using [the Minneapolis] airport were paying the third highest fares in the

nation.” Paul Stephen Dempsey, Predatory Practices and Monopolization in the

Airline Industry: A Case Study of Minneapolis/ St. Paul, 29 Transp. L. J. 129, 131

(2000). But cf. Minnesota Planning, supra, at 7 (“Borenstein's analysis shows that

fare premiums paid by Northwest customers in Minneapolis-St. Paul increased

dramatically between 1989 and 1990, and have remained high since then.”).

13See discussion infra at 8-9.

14Strong Report, App. 201-38, discussed in detail, infra, at n.25.

-22-

increased supra-competitive profit margins or “hub premiums.”12 This increase in

premiums corresponded with a new strategy by Northwest to reduce the sphere in

which it competed and concentrate on its fortress hubs.13

(8) Also beginning in 1993, Northwest responded to a new problem–the

upsurge of low-fare new entrant airlines–by various strategies that involved

exploitation of its fortress hub at Minneapolis.14 

These propositions, which are supported by expert opinions backed up by data

and academic and governmental studies, suffice to show that beginning within the

four-year limitations period, Northwest made a new use of assets gained in the merger

to stifle competition and reap monopoly profits. Midwestern Machinery's claim
15Compare II Phillip Areeda, Herbert Hovencamp, & Roger Blair, Antitrust

Law § 320c5 (2d ed. 2000) (“[A] continuing violation occurs when the defendant uses

the merger in a way that is not inherent in the acquisition itself. For example,

suppose that a merger gave a firm the structural power to engage in predatory pricing.

A damages action challenging such a merger would fail as long as predation were

merely possible or even likely. As a result, the statute of limitation would not run on

such a damage claim. However, once unlawful predation began and the plaintiff

could show the merger facilitated the predation, then the statute of limitation would

not bar a challenge to the merger itself . . .”). Whether the distinctive use is referred

to as a continuing violation or different holding and use, the idea is the same.

-23-

should survive summary judgment under the Clayton Act standards articulated in an

earlier stage of this case, Midwestern Machinery, Inc. v. Northwest Airlines, Inc., 167

F.3d 439, 442-43 (8th Cir. 1999), and in Concord Boat Corp. v. Brunswick Corp., 207

F.3d 1039, 1050-51 (8th Cir. 2000). 

The Court today does not repudiate or gainsay the legal standards set out in

Midwestern Machinery and Concord Boat, that a cause of action for holding and use

of merger assets accrues when the threat of restraint or monopoly first becomes

evident and the plaintiff suffers injury thereby. Midwestern Machinery, 167 F.3d at

443; Concord Boat, 207 F.3d at 1051. The Court states, “[O]nly different uses of

assets can justify restarting the statute of limitations.” Supra at 8.15 Accordingly, I

have no need to argue about legal standards. Instead, my concern is with the Court's

treatment of the facts. The Court says that plaintiffs did not adduce evidence of the

facts alleged. In particular, the Court says that the plaintiffs did not show that they

used assets gained in the merger to threaten competition and that they did not show

they used the assets differently during the limitations period (1993 and after) than

they did during the preceding, time-barred period. The Court can only reach these

conclusions by ignoring a great deal of evidence to the contrary.
16Ohanian Report, App. 152-55; Strong Report, App. 237 (“The hub dominance

and corresponding market power was firmly established by 1994 . . . .”).

17See footnote 1, supra.

-24-

First, the Court says that market power is not an asset, but the result of

possession of other assets. Supra at 11. Northwest's experts did opine that Northwest

gained market power as a result of the merger, but they made it clear that the market

power came from assets acquired in the merger, such as Republic's gate leases at the

Minneapolis airport.16 When the plaintiffs' economists use the term “market power”

in this case, they use it as a proxy for the constellation of assets such as gate leases

that make up a “fortress hub.” Therefore, we need not worry about whether market

power is itself an asset, since it results from control of property and rights that are

indubitably assets. The Court's point goes only to the words used, not to the

substance of what the plaintiffs' evidence showed.

Second, the Court says that the plaintiffs did not show that they made a

distinctive use of the assets during the limitations period that differed from their use

of the assets during the time-barred period. But the plaintiffs did show this. The

plaintiffs introduced evidence that Northwest's use of the Minneapolis hub varied in

three time periods. Because this case was decided on summary judgment, I will

recount the evidence in the light most favorable to the plaintiffs. 

Before the merger, Northwest did not control a majority of the gates at

Minneapolis or the flights arriving and departing from there. Before the merger,

Northwest was not able to charge a premium above the competitive price for

Minneapolis flights, because it had to compete with Republic.17
18Northwest Airlines, as a result of its acquisition of Republic Airlines in 1986,

was able to establish and sustain a service network that includes dominant hub

airports at Minneapolis-St. Paul (MSP), Detroit Metro Wayne County (DTW), and

Memphis (MEM).” Strong Report, App. 200.

19Ohanian Report, App. 166-67 (citing two reports: one comparing 21%

premium in 1993 to 40.3% premium in 1994-97; and the other comparing premium

of 23% in 1988 to figures of 41% and 44% in 1995 and 1997, respectively).

20hanian Report, App. 170.

21Dempsey, supra, at 139-40 (“The DOT's highly permissive policies with

respect to mergers led to an explosion of such activity. . . . Many of these mergers

-25-

Upon acquiring Republic, Northwest gained a dominant position at the

Minneapolis airport.18 In the period between the merger and 1994, Northwest did

charge a premium (above the weighted national average price) for Minneapolis

flights, but it was a relatively small premium.19 A plaintiff's expert explained that

factors such as the 1991-1992 recession and Northwest's own financial difficulties

prevented Northwest from making effective use of its control of the Minneapolis hub

to extract a large monopoly premium there.20 

Beginning in June 1993, Northwest responded to new developments, in part by

using the Minneapolis hub it gained in the merger. Several conditions combined to

allow this new use of the Minneapolis hub. 

First, it took some time after airline deregulation for experience to accrue

demonstrating the competitive advantages for an airline of dominating a hub airport.

The Northwest-Republic merger was part of a wave of airline mergers in the 1980's.

The Northwest-Republic merger was allowed by the Department of Transportation,

over Department of Justice protest, because the DOT believed in the theory of

“contestability”–that new carriers could easily enter new markets and therefore the

specter of competition would discipline dominant carriers.21 As history unfolded, the
were approved under the then-prevailing (and since discredited) neo-classical

economics view that 'contestability' of markets would arrest any anticompetitive

conduct. The Northwest-Republic and TWA-Ozark mergers were vigorously

opposed by the U.S. Department of Justice [DOJ] on grounds that they would create

hub monopolies at Minneapolis and St. Louis, respectively.”).

22Proponents of deregulation believed that airline markets were

“contestable,” that is, new carriers could easily enter markets because

airlines' key resources–airplanes–are highly mobile. As it turns out,

however, other equipment and facilities needed to serve a

route–especially gate space–can be difficult and costly to obtain.

Facilities may also be limited for ticketing, baggage handling, operations

and maintenance.

Minnesota Planning, supra, at 13.

-26-

theory was disproved.22 Michael E. Levine, of the Yale School of Management,

wrote an influential article in 1987 concluding that hubs were important sources of

competitive advantage for airlines and describing means by which airlines with strong

hubs exploited that advantage. See Michael E. Levine, “Airline Competition in

Deregulated Markets: Theory, Firm Strategy, and Public Policy,” 4 Yale Journal of

Regulation 393 (1987). Northwest hired Levine in 1992 as Executive Vice President

for Marketing. Levine determined that Northwest should abandon its previous

strategy of competing with the three biggest airlines on their own turf and concentrate

on reaping the advantages of Northwest's existing strong hubs. Davis Dyer and Len

Schlesinger, “Northwest Airlines: Coping with Change," Harvard Business School,

No. 9-897-027 at 10 (1997).

Second, the industry developed new yield management systems that allowed

airlines to monitor ticket sales and instantly respond to exploit particular market

opportunities. In 1994, Northwest put in place newly developed yield management

computer systems which allowed Northwest to manipulate pricing on threatened
23Strong Report, App. 208-10, 218. Cf. Levine, supra, at 477 (“The complex

fare structures with computerized capacity controls which have come to dominate the

industry play an important role in these competitive tactics.”).

24Strong Report, App. 201; Dep't of Transportation, Office of Aviation and

International Affairs, The Low Cost Airline Service Revolution 3 (April 1996)

(“[S]ince early1993, the pace of this major evolutionary development [the “advent of

low-cost carriers”] has dramatically quickened.”).

25Strong Report, App. 216-17.

26A specific pattern of anticompetitive behavior began to be apparent in

1993-94 and continued thereafter. These practices include capacity

“dumping” of low fare seats and flight frequencies, “bracketing” of

flights, restrictive controls over gates at its fortress hub airports, targeted

frequent flyer and travel agent incentive programs. These practices

serve to make sustained competition much more difficult for low-fare

carriers, especially new entrants who do not have the size or network

operations of Northwest or the financial resources to withstand

prolonged periods of such anticompetitive behavior.

-27-

routes by offering more seats at already-established low fares, thus responding to new

entrants without sparking a general price war.23

Third, a new type of airline entered the picture. “In the wake of the economic

recovery from the Gulf War recession, the U.S. airline industry in 1993-94

experienced a significant upsurge in applications and entry by low-fare new entrant

airlines, typically operating with lower costs and offering service at significantly

lower fares than the major network airlines.”24 Where such airlines were able to

establish routes at a hub, hub premiums collected by the dominant carrier declined.25

In response to this new threat, Northwest used its control of the Minneapolis

hub to chase out low-fare entrants by price cuts focused on the entrant's routes and

by swamping the challenged routes with flights and seats.26 Northwest's size
Strong Report, App. 203 (footnote omitted). Strong's list of Northwest's techniques

to drive new entrants out of the market included some actions that were directly

dependent on controlling facilities at Minneapolis (“Restrictions on gates or facilities

(e.g., counters, operations offices) that prevent a new entrant from being able to

launch competing service”) and others that capitalize on Northwest's ability to offer

more flights (“Scheduling departures in close proximity to the new entrant's flights,

known as 'bracketing.'”). This technique was described in an article by Michael

Levine: “Add frequency where possible, to 'sandwich' the new entrant's departures

between one's own departures.” Levine, supra, at 476.

27Strong Report, App. 218-20 (“As a major airline, Northwest's ability to

sustain such revenue losses is likely to be much greater than a smaller entering

carrier.”). Cf. Levine, supra, at 477 (“The object is to reduce trial and to subject the

new entrant to a prolonged period of operation at low load factors. This strategy saps

the entrant's working capital . . . .”).

28Strong Report, App. 218.

29E.g., Strong Report, App. 223-24 (during time Vanguard Airlines competed

on Minneapolis-Des Moines route, Northwest charged prices below variable cost).

30Although Midwest has not pointed to much specific evidence of what

particular Republic assets were used, the record does contain evidence that would

allow a finder of fact to conclude that, for instance, Northwest implemented its new

strategies using Republic's DC-9's and gates gained in the merger. Beyer Report,

App. 22 (Northwest controlled approximately 75% of gates at Minneapolis after

merger); Richard Ihrig Affidavit, App. 7-9 (summarizing evidence that DC-9 aircraft

-28-

advantage over the entrants, which obviously resulted in part from the merger, gave

Northwest the financial staying power to engage in targeted price cuts so that the new

entrants could not sustain a pricing advantage or even price parity.27 Using the

sophisticated yield management systems now available, Northwest could focus price

responses on the particular routes challenged without sparking an industry-wide price

war.28 In at least one case, Northwest cut fares on the challenged routes below

variable cost until the new entrant gave up the route.29 Facilities and equipment

gained during the merger30 gave Northwest the capacity to swamp the market with
gained in merger were used to add flights on challenged routes). 

31Strong Report, App. 221-22 (generally), 225 (when Vanguard entered Kansas

City-Minneapolis market, Northwest increased number of flights on the route by 48%

and number of seats by 53%); 230-31 (when Sun Country Airlines entered

Minneapolis market, Northwest added 33% to seat capacity of challenged routes in

two years, whereas rate of growth for previous five years was 1%; increase was

almost five times the number of seats offered by Sun Country on route); cf. Levine,

supra, at 477 (“If circumstances (including the financial condition of the new entrant)

warrant, the incumbent can flood the market with low-priced seats, withdrawing them

almost invisibly at peak times or as competitive conditions allow.”).

32Strong Report, App. 223-24 (Vanguard airlines); 232 (after Kiwi International

was forced from Minneapolis-Detroit market, Northwest changed fare from $69 to

$467).

-29-

flights and seats,31 so that the new entrants could not offer any scheduling advantage

to travelers. Once the new entrant had been chased out of town, Northwest cut back

its flights and raised its fares above the level where they had been before the new

entrant's challenge.32

The plaintiffs came forward with evidence that only within the limitations

period did Northwest gain the knowledge, the technology, and the market conditions

that allowed it to exploit the market power the Republic merger placed in its grasp.

I cannot concur in affirming summary judgment on such a record.

______________________________