Court Opinion

ID: 998247
Source: CourtListenerOpinion
Date Created: 2013-07-04 17:08:15.230069+00
Date Added: 2024-06-11T15:11:06.528973
License: Public Domain

Filed: March 23, 1999

                    UNITED STATES COURT OF APPEALS

                        FOR THE FOURTH CIRCUIT

                             No. 98-1033
                            (CA-96-201-A)

Omega World Travel, Incorporated,

                                                Plaintiff - Appellant,

           versus

Airlines Reporting Corporation,

                                                 Defendant - Appellee.

                              O R D E R

     The court amends its opinion filed February 3, 1999, as

follows:

     On the cover sheet, section 2 -- the caption is amended to

read “Omega World Travel, Incorporated/Plaintiff-Appellant, versus

Airlines Reporting Corporation/Defendant-Appellee, and Trans World

Airlines/Defendant.”

                                          For the Court - By Direction

                                          /s/ Patricia S. Connor
                                                   Clerk
UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

OMEGA WORLD TRAVEL,
INCORPORATED,
Plaintiff-Appellant,

v.                                                                  No. 98-1033

AIRLINES REPORTING CORPORATION,
Defendants-Appellees,

and

TRANS WORLD AIRLINES,

Defendant.

Appeal from the United States District Court
for the Eastern District of Virginia, at Alexandria.
James C. Cacheris, Senior District Judge.
(CA-96-201-A)

Argued: October 30, 1998

Decided: February 3, 1999

Before LUTTIG, Circuit Judge, BUTZNER, Senior Circuit Judge,
and THORNBURG, United States District Judge for the
Western District of North Carolina, sitting by designation.

_________________________________________________________________

Affirmed by unpublished per curiam opinion.

_________________________________________________________________

COUNSEL

ARGUED: Barry Roberts, ROBERTS & HUNDERTMARK, L.L.P.,
Chevy Chase, Maryland, for Appellant. Thomas Francis Cullen, Jr.,
JONES, DAY, REAVIS & POGUE, Washington, D.C., for Appel-
lees. ON BRIEF: Mark Pestronk, Fairfax, Virginia, for Appellant.
Kevin D. McDonald, Edwin L. Fountain, Sarah D. Mackey, JONES,
DAY, REAVIS & POGUE, Washington, D.C., for Appellee Airlines
Reporting. Charles E. Bachman, O'SULLIVAN, GRAEV & KARA-
BELL, L.L.P., New York, New York; R. Hewitt Pate, Sarah C. John-
son, HUNTON & WILLIAMS, Richmond, Virginia, for Appellee
TWA.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

Omega World Travel, Inc. (Omega) appeals the district court's
grant of summary judgment to Airlines Reporting Corporation
(ARC).

After the deregulation of air fares by the Civil Aeronautics Board
in 1978, use of travel agencies significantly increased. As airline fare
structures became more complex, travel agents became more useful.
Agency growth was spurred by an increase in commissions. ARC was
formed and continues to be owned by the major airlines in the United
States. Its purpose is to act as a clearinghouse through which airlines
and travel agents deal with each other. It provides three services to its
members: agency accreditation, the provision of common ticket stock,
and a centralized reporting system through which the agencies report
and settle their accounts with the airlines.

Omega, which has over 200 locations, is one of the largest travel
agencies in the United States. In 1996, Omega sued ARC claiming it
had entered into a conspiracy with the airlines to control the market
for the sale of airline tickets in violation of federal antitrust laws. The
district court found Omega had failed to produce sufficient evidence
to show the existence of a conspiracy and granted ARC's motion for
summary judgment. We review a district court's grant of summary

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judgment de novo. Egbuna v. Time-Life Libraries, Inc., 153 F.3d 184
(4th Cir. 1998).

"[O]n summary judgment motions in antitrust cases, the Supreme
Court has instructed that when there is evidence of conduct that is
consistent with both legitimate competition and an illegal conspiracy,
courts may not infer that an illegal conspiracy has occurred without
other evidence." Thompson Everett, Inc. v. National Cable
Advertising, 57 F.3d 1317, 1323 (4th Cir. 1995) (citing Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986)).
Section 1 of the Sherman Antitrust Act provides that"[e]very contract
... or conspiracy, in restraint of trade or commerce among the several
states ... is declared to be illegal." 15 U.S.C. § 1. To prove a violation
of this statute, appellant must establish, first, that there are at least two
persons acting in concert and second, that the restraint complained of
constitutes an unreasonable restraint on interstate trade or commerce.
Estate Construction Co. v. Miller & Smith Holding Co., Inc., 14 F.3d
213, 220 (4th Cir. 1994). Considering the first element, "[p]roof of
concerted action requires evidence of a relationship between at least
two legally distinct persons or entities." Oksanen v. Page Memorial
Hospital, 945 F.2d 696, 702 (4th Cir. 1991), cert. denied, 502 U.S.
1074 (1992). "[I]t is not enough merely to state that a conspiracy has
taken place." Estate Construction, 14 F.3d at 221. The appellant must
show details of the time, place and effect of the conspiracy. Id.

In support of summary judgment, ARC produced substantial evi-
dence that travel agencies elect to use the ARC system, instead of
dealing individually with the airlines, because it is more efficient and
financially advantageous.* For example, ARC accreditation is pro-
vided when an agency has met a common set of standards for all par-
ticipating airlines. This eliminates the need for an agency to obtain
accreditation from each airline, a process requiring the agency to meet
each airline's unique standards. Travel agents testified this accredita-
tion makes it easier to open agencies and to remain in business. It also
provides each agent member with enhanced information concerning
rates and routes. As part of the accreditation process, each agency
posts a bond with ARC insuring the traveler is protected in the event
_________________________________________________________________

* The relationship between ARC and its member agencies is reduced
to contract form in the ARC Agent Reporting Agreement.

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of the agency's bankruptcy. This has increased consumer confidence
in the use of travel agencies. And, while any travel agency may apply
for ARC accreditation, no agency must be ARC accredited to do busi-
ness with the airlines. Omega is ARC accredited but also has a con-
tract outside the ARC system with Southwest Airlines.

Accredited agencies receive blank ticket stock used to write tickets
for travel on member airlines. This stock is uniform throughout the
member agencies and airlines, thus enhancing security. In addition,
the use of common stock allows an agent to sell and write an airline
ticket for an airline with which it does not normally deal, eliminating
a separate negotiation process. And, because common stock is in
essence the currency used by ARC and airlines, small agencies are
better able to compete with larger ones.

When an accredited agency issues a ticket, it collects either cash
or credit for payment and holds the money for the carrier until it sub-
mits its sales report and remits the proceeds, less its commissions.
Under the terms of the ARC Agent Reporting Agreement, every ten
days the agency must file a sales report and remit the proceeds. The
advantage to the ARC member agency is that, regardless of the num-
ber of airlines to whom tickets have been sold, only one report need
be filed. Nonetheless, an accredited agency has the right under the
Agent Reporting Agreement to negotiate an alternate remittance plan
with ARC. For example, Omega contracted with United Airlines for
an alternate remittance plan of eight days.

In opposition to the motion, Omega argued that the ARC Agent
Reporting Agreement is the product of joint action by ARC and the
airlines to suppress competition. Omega claimed there is an industry-
wide agreement to use ARC and, thus, a conspiracy to restrain com-
petition. Moreover, according to Omega, the airlines control the con-
tractual relationship between ARC and its members; the travel
agencies have no choice if they want to do business. Omega argues
on appeal without citing any evidence that in order to issue airline
tickets in the United States, a travel agency must be ARC accredited,
and that ARC's rules restricting the use of ticketing machines to spec-
ified locations impedes competition. The contractual requirement for
the payment of annual fees to ARC for its services and the posting of
bonds are also cited as restraints on competition. And, if an agency

                    4
fails to remit its proceeds in a timely manner, it is subject to sanc-
tions. However, none of these examples shows the details, time and
place of a conspiracy. These arguments go to the second element nec-
essary to show Section 1 violations, i.e., whether there is an unreason-
able restraint on trade. Without the existence of a conspiracy, these
factors show nothing more than the agencies' determinations to enter
into yearly contractual relationships with ARC.

To support its theory, Omega presented the testimony of Michael
Premo, Chief Executive Officer of SatoTravel, an organization in
existence since 1985 which also operates as a clearinghouse for air-
lines and travel agents. In fact, like ARC, its stock is owned by
"shareholder airlines." Premo testified that SatoTravel operates in
much the same manner as ARC, even using the same processing cen-
ter as ARC. Omega's argument is that SatoTravel does not act as an
"enforcer" as does ARC and claims, again without citing any evidence
of record, that this allows each member agency to deal directly with
the airline. The fact that SatoTravel is a competing clearinghouse
organization operating virtually identically to ARC is not evidence of
a conspiracy but indeed evidence to the contrary.

Omega also argues that although the ARC Agent Report Agree-
ment contains a provision for alternate remittance plans, no agent has
been able to negotiate such an arrangement with a carrier. The agree-
ment between Southwest and Omega is described as an arrangement
for ticket-less transactions which does not require any remittance to
the carrier because the traveler picks up the ticket at the airport. As
aptly noted by the court below, "[w]hile Omega hypothetically might
be able to produce some evidence that the airlines and ARC conspire
to foreclose alternatives to the ARC, they have not done so."

Omega has presented only argument and speculation, most often
directed at the existence of an unreasonable restraint on trade. No
details of the time, place and effect of the conspiracy have been pre-
sented. No evidence has been presented showing communications,
meetings or other methods through which a knowing participation in
a scheme might be inferred. Estate Const. Co., 14 F.3d at 221. In
short, Appellant's case is based on hypotheticals and inference. And,
although permissible inferences from the facts should be drawn in the
light most favorable to the non-moving party, those inferences must

                    5
"fall within the range of reasonable probability and may not be so ten-
uous as to amount to speculation or conjecture." Thompson Everett,
Inc., 57 F.3d at 1323. Omega has failed to present any evidence other
than that the agents elect to become ARC members because of mutu-
ally beneficial results. "That the challenged conduct ... is consistent
with legitimate activities also weighs against inferring a conspiracy."
Oksanen, 945 F.2d at 706.

Although Omega raises other issues on appeal, they need not be
addressed since it has failed to show the first element necessary for
a violation of § 1 of the Sherman Act.

The judgment of the district court is

AFFIRMED.

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