Source: http://openjurist.org/967/f2d/410
Timestamp: 2017-08-17 15:42:44
Document Index: 411864738

Matched Legal Cases: ['§ 1292', '§ 1', '§ 45', '§ 13', '§ 76', '§ 1', '§ 45', '§ 13', '§ 17', '§ 18', '§ 873', '§ 1292', '§ 517']

967 F2d 410 American Airlines v. Christensen | OpenJurist
967 F. 2d 410 - American Airlines v. Christensen
967 F2d 410 American Airlines v. Christensen
967 F.2d 410
AMERICAN AIRLINES, Plaintiff/Counter-Defendant-Appellee,
Randall CHRISTENSEN, Coupon Connection, Ernest W. Carlson,
This appeal raises three issues. First, did the district court err by holding that the Plaintiff's "no-sale" rule was enforceable as a matter of law without undertaking an analysis of its "reasonableness"? Second, did the Plaintiff demonstrate an injury sufficient to warrant a partial summary judgment as to liability and the issuance of a permanent injunction? And third, was there sufficient proof to hold each of the individual Defendants liable? We answer the first question in the negative and the second and third questions in the affirmative. Accordingly, we affirm the district court's grant of partial summary judgment and injunctive relief for the Plaintiff, 769 F.Supp. 1203.
American sued the Defendants on several theories, including tortious interference with contract and unfair competition.2 American moved for and was granted summary judgment as to liability on these two claims. Based upon the summary judgment ruling, the district court granted American a permanent injunction prohibiting the Defendants from buying, selling, or brokering AAdvantage awards. The Defendants appeal from the injunction and the grant of summary judgment upon which the injunction is based under 28 U.S.C. § 1292(a)(1).3
The Defendants cite 15 U.S.C. § 1 of the Sherman Act, 15 U.S.C. § 45(a)(1) of the Federal Trade Commission Act, Utah Code Ann. § 13-5-2.5(1) of the Utah Unfair Practices Act, id. § 76-10-914 of the Utah Antitrust Act, and the Utah Constitution's Property Clause, Utah Const. art. I, § 1, as embodiments of the public policy against restraining trade. However, none of these enactments apply to the "no-sale" rule.
"Section 1 of the Sherman Act requires that there be a 'contract, combination ... or conspiracy' ... in order to establish a violation.... Independent action is not proscribed." Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 761, 104 S.Ct. 1464, 1469, 79 L.Ed.2d 775 (1984) (citation omitted); accord Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 768, 104 S.Ct. 2731, 2740, 81 L.Ed.2d 628 (1984). However, the Defendants have alleged no concerted action by American. No evidence in the record suggests that American did not independently set the terms under which it would offer its travel awards, and the mere fact that its members accepted those terms does not generate the kind of concerted action needed to violate Section 1. See Monsanto, 465 U.S. at 761, 104 S.Ct. at 1469.
The Federal Trade Commission Act specifically excludes air carriers from its purview. 15 U.S.C. § 45(a)(2). Additionally, as conceded by the Defendants below, there is no private right of action under this statute. Baum v. Great Western Cities, Inc., of New Mexico, 703 F.2d 1197, 1209 (10th Cir.1983). Similarly, the Utah Unfair Practices Act specifically excludes common carriers. Utah Code Ann. § 13-5-2.5(2).
In addition to the above asserted sources of public policy, the Defendants point to the Texas Deceptive Trade Practices and Consumer Protection Act, Tex.Bus. & Com.Code Ann. § 17.46, as an embodiment of the alleged public policy against restraint of trade. We are not persuaded that Texas law applies in this case. In any event, the statute cited, which prohibits "[f]alse, misleading, or deceptive acts or practices," does not reflect a public policy against American's "no-sale" rule.
Bitterman v. Louisville & Nashville R.R., 207 U.S. 205, 221, 28 S.Ct. 91, 96, 52 L.Ed. 171 (1907); see also Transworld Airlines, Inc. v. American Coupon Exchange, Inc., 913 F.2d 676, 685-88 (9th Cir.1990) ("TWA ") (holding that frequent flyer coupon rights are rights of contract rather than property rights and concluding that "an explicit contractual provision forbidding assignment of a right created by [the] contract is ordinarily enforceable according to its terms"); Kirby v. Union Pac. Ry., 51 Colo. 509, 119 P. 1042, 1046 (1911) (citing Bitterman ); John D. Calamari & Joseph M. Perillo, The Law of Contracts § 18-16, at 740 (3d ed. 1987) (If a provision against assignment of rights under a contract "expressly states that any assignment shall be void, ... the courts have generally held that [a] purported assignment is ineffective....") (footnote omitted); Arthur L. Corbin, Corbin on Contracts § 873, at 492-93 (1951) ("No one doubts that railway passenger tickets can be made non-assignable....") (footnote omitted).7 Accordingly, we hold that the "no-sale" rule is enforceable as a matter of law.8
American's first argument with respect to damages is that the Defendants, through their actions, caused American's services to be misappropriated. The district court found as a matter of law that the Defendants had misappropriated American's services, and we agree. As noted above, the "no-sale" rule was an enforceable term of the contract under which the awards were granted. That term rendered the brokered awards void. Thus, those whom the Defendants encouraged to buy and travel on the void awards were essentially stowaways, passengers without valid tickets. See Harmon v. Jensen, 176 F. 519, 524 (6th Cir.1909) (equating ticket transferred in violation of prohibition on transfer to counterfeit ticket); Broyles v. Central of Ga. Ry., 166 Ala. 616, 52 So. 81, 83 (1909) (declaring that passenger wrongfully using nontransferable ticket is trespasser). As the Colorado Supreme Court said in a similar case involving brokers of nontransferable railroad tickets,
It is well settled that "if an officer or agent of a corporation directs or participates actively in the commission of a tortious act or an act from which a tort necessarily follows or may reasonably be expected to follow, he is personally liable to a third person for injuries proximately resulting therefrom." Lobato v. Pay Less Drug Stores, Inc., 261 F.2d 406, 408-09 (10th Cir.1958).12 "Specific direction or sanction of, or active participation or cooperation in, a positively wrongful act of commission or omission which operates to the injury or prejudice of the complaining party" will subject an officer or agent of a corporation to liability for the tort of the corporation. Id. at 409.
Although the Defendants admit to engaging in these deceptive practices generally, they argue that there is no evidence that these practices were utilized with respect to the thirty-two transactions in the record. However, the district court found that "[t]he defendants developed and utilized an elaborate system of deception to prevent American from identifying defendants' wrongful transactions." II Appellant App., Ex. 30, at 12. The record supports this finding
Although the Defendants' appeal is from the interlocutory order, which is necessary to confer jurisdiction pursuant to 28 U.S.C. § 1292(a)(1), they do not attack the propriety of the injunction except in conjunction with their attack on the summary judgment. Accordingly, our review is de novo. Applied Genetics Int'l, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241 (10th Cir.1990)
Although the Defendants have cited no authority indicating that Utah has adopted these sections of the Second Restatement, Utah does appear to have at least endorsed the principles underlying these sections. In Zion's Service Corp. v. Danielson, 12 Utah 2d 369, 366 P.2d 982 (1961), the Utah Supreme Court stated: "[A] contract which is, by its terms, an unreasonable restraint of trade is invalid as against public policy. With [this] there can be no argument." Id. at 985 (citing, among other authorities, Restatement of Contracts § 517, a predecessor to the sections of the Second Restatement cited by the Defendants). Thus, for purposes of this opinion, we will assume that Utah has adopted the principles underlying the Second Restatement, if not the Restatement itself
The Defendants contend that Bitterman and the other railroad ticket cases are inapposite. First, they argue that the tickets involved in those cases permitted no transfer, while American's award tickets permit transfer so long as it is uncompensated. Thus, the Defendants argue, the railroad ticket transferability restrictions were more reasonable than American's "no-sale" rule. To the contrary, if Bitterman affirmed a complete ban on non-transferability, we think that American's more limited restrictions here would also pass muster. Moreover, to the extent that the Defendants' argument is that a partial restriction on transferability is less reasonable than a total restriction, as discussed above, reasonableness is generally irrelevant to the enforceability of restrictions on the alienation of contract rights. Second, the Defendants argue, the power to issue non-transferable reduced rate railroad tickets derived from a railroad statute that does not apply to American. However, Bitterman expressly noted that the cases which controlled the question were decided prior to the passage of that statute. 207 U.S. at 221, 28 S.Ct. at 96-97. Thus, the right of a rail carrier to issue such tickets does not appear to derive from the railroad statute
The Defendants state, in a footnote to their brief, that their other affirmative defenses, justification and unclean hands, "are based upon some of the same conduct of American of which the defendants sought discovery relevant to the issue of the reasonableness of the No-Sale Rule" and are "inextricably intertwined with" that issue. Appellant Br. at 20 n. 14. However, the Defendants declined to address these affirmative defenses separately in their brief on appeal. Because the Defendants fail to show how these defenses are connected with their argument for discovery geared toward a "rule of reason" analysis, much less "inextricably intertwined" with that argument, we do not consider these affirmative defenses to have been raised on appeal. It is insufficient merely to state in one's brief that one is appealing an adverse ruling below without advancing reasoned argument as to the grounds for the appeal. See Fed.R.App.P. 28(a)(4) ("The brief of the appellant shall contain ... [a]n argument.... The argument shall contain the contentions of the appellant with respect to the issues presented, and the reasons therefor, with citations to the authorities, statutes and parts of the record relied on."). Accordingly, we do not consider the Defendants' affirmative defenses of justification and unclean hands
Moreover, American would prevail under at least one of the theories analyzed in TWA. That case indicated that if an airline could prove an increase in the number of awards redeemed, the airline would be entitled to damages. TWA, 913 F.2d at 692. The Defendants at bar admitted that their conduct resulted in the redemption of "miles" which would otherwise go unused. "[I]f the coupon brokerages were eliminated American Airlines would not have to provide some of the benefits promised and earned by frequent flyers in part because the mileage accumulated in frequent flyer accounts would go unredeemed." I Appellant App.Ex. 6, at 26-27. Thus, by increasing the number of "miles" used, brokers such as the Defendants effectively increase the cost of the AAdvantage program to American
As we discussed above, such conduct satisfies the elements of the tort of interference with an existing or prospective contract. This conduct also satisfies the elements of the tort of unfair competition. See Budget System, Inc. v. Budget Loan & Finance Plan, 12 Utah 2d 18, 361 P.2d 512, 514 (Utah 1961) (deception for purposes of misappropriating good will of another business is unfair competition); Dubuque Products, Inc. v. Lemco Corp., 227 F.Supp. 108, 122 (D.Utah 1963) (deception for purposes of misappropriation of know-how and good will from another business is unfair competition). The Defendants argued below that the tort of unfair competition is limited to deception of consumers--i.e., where a defendant misappropriates elements of a competitor's business that would deceive a consumer into believing that its products or services were those of its competitor. Because the thrust of the deception by the Defendants is directed at American, they argued, they could not be liable for unfair competition. The district court disagreed with this argument by the Defendants and held them liable for unfair competition. Because the Defendants do not take issue on appeal with this holding, we will assume for purposes of this appeal that the tort of unfair competition is not limited to deceptive misappropriation directed at consumers