Fischer v. NWA, Inc.

883 F.2d 594, 1989 WL 91785

• Court: Court of Appeals for the Eighth Circuit
• Decided: August 17, 1989
• Docket: No. 88-5258
• Status: Published

Opinions

MAGILL, Circuit Judge.

Appellants William R. Fischer, et al., are former stockholders in Fischer Bros. Aviation (Fischer), an airline that provided regional connecting flight service for Northwest Airlines, Inc. (Northwest) at Detroit. In the district court,¹ Fischer asserted antitrust and common-law claims against Northwest and Simmons Airlines, Inc. (Simmons). The allegedly unlawful conduct by Northwest and Simmons stemmed from Northwest’s 1987 acquisition of Republic Airlines, Inc. (Republic). Under a contract much like the Northwest/Fischer agreement, Simmons had provided connecting flight service for Republic at Detroit. Northwest and Simmons moved for, and the district court granted, summary judgment on all issues. On appeal, Fischer argues that the court erred in concluding that:

(1) Fischer could not challenge the Northwest/Republic combination because the U.S. Department of Transportation, by approving the acquisition, immunized it against future antitrust challenges;

(2) Fischer failed to present sufficient evidence of a Northwest/Simmons conspiracy to terminate Fischer; and

(3) because Fischer failed to seek redress under the mandatory arbitration clause in the Northwest/Fischer contract, all of Fischer’s common-law claims are time-barred.

Having considered the district court’s summary judgment order and the record on appeal, we affirm.

I.

On December 23, 1985, one month before the Northwest/Republic merger, Northwest and Fischer signed a regional airline service agreement.² The agreement provided that:

(1) Beginning February 1, 1986, Fischer would provide regional connecting flights from Detroit as a Northwest airlink. In other words, Northwest, a national airline, would provide flights between Detroit and other major cities. Then, Fischer, under the Northwest name, logo, etc., would provide connecting flights to smaller cities surrounding the Detroit metropolitan area.

(2) Fischer would act as Northwest’s exclusive regional airline for all flights originating in Detroit unless Fischer declined to serve a particular route.

(3) Northwest would partially subsidize Fischer’s operation, in accordance with a prorated formula.

(4) Either party could terminate the agreement unilaterally, with or without cause, after providing six months notice.

(5) The sole mechanism for resolving disputes arising from the agreement would be arbitration.

The Northwest/Fischer agreement remained in effect for only thirteen months (February 1986-March 1987). It was terminated because of ramifications of Northwest’s acquisition of Republic.

Northwest began to consider acquiring Republic in 1985. On January 23, 1986, one month after the Northwest/Fischer agreement was signed, Northwest and Republic announced publicly that Northwest intended to acquire Republic, if the transaction were approved by the U.S. Department of Transportation.

The planned acquisition created considerable friction in the Northwest/Fischer relationship because Republic also had an ongoing exclusive regional airline service contract for flights originating in Detroit. Republic and Simmons had an agreement, executed on December 26, 1984, similar to that between Northwest and Fischer. Inter alia, it provided that Simmons would be Republic’s exclusive regional airline at Detroit unless Simmons declined to serve a particular route. Unlike the Northwest/Fischer agreement, however, the Republic/Simmons agreement had no subsidization arrangement and was not terminable at will with six months notice; rather, it stipulated that neither party could terminate it until October 1988. The two regional service contracts gave rise to a dilemma for the newly-created Northwest/Republic combination. The combination was saddled with two unequivocal, ongoing regional service contracts granting overlapping “exclusive” status to Fischer and Simmons for the Detroit regional market.³

On August 12, 1986, the Department of Transportation approved Northwest’s acquisition of Republic. Although the acquisition patently created a conflict between the Fischer and Simmons regional service agreements, Northwest confidently predicted that a compromise would be reached, accommodating the contractual rights of both regional carriers and permitting them to share the Detroit market. However, shortly after the acquisition received government approval, both of the regional airlines wrote to Northwest, indicating that they intended to enforce the exclusive rights provisions in their contracts.

In August 1986, Northwest convened Fischer and Simmons for a meeting in Minneapolis. Northwest encouraged them to carve out a mutually acceptable division of the Detroit market, stressing that although it wished to encourage negotiations leading to an acceptable compromise, it would limit itself to indirect involvement, leaving substantive negotiations to the two regional carriers.

The meeting was a failure. No agreement concerning division of the market was reached. Simmons then insisted that Northwest “write a check” for any routes Simmons was forced to surrender to Fischer. When Northwest refused to make such payments, Simmons asked Northwest if it would object if Simmons acquired Fischer. Northwest did not object, but efforts to create a Simmons/Fischer combination also failed.

Pursuant to its December 23, 1985 regional service contract with Fischer, Northwest sent notice of termination to Fischer on September 24, 1986. Prior to that date, numerous efforts to resolve the Fischer/Simmons conflict had failed. After the August meeting in Minneapolis, the parties’ principals had several meetings and telephone conversations, and exchanged assorted correspondence. When Northwest sent notice of termination to Fischer, Simmons revoked its offer to purchase Fischer. Northwest then informed Fischer that Simmons was the permanent Northwest regional service airline in Detroit and therefore it would have the right of first refusal for all regional Northwest flights from Detroit. Simmons began to serve as Northwest’s regional airlink in Detroit on October 1,1986. Until February 4,1987, Northwest continued to negotiate toward a new agreement that would accommodate Fischer.⁴ On that date, negotiations ended as Northwest learned that Fischer had retained an attorney and was preparing to sue Northwest for violating their 1985 agreement. On March 24,1987, six months after Northwest provided Fischer’s notice of termination, Fischer was terminated by Northwest. Later that year, Fischer (which, ironically, had enjoyed a 30% increase in passengers since Northwest’s acquisition of Republic) was sold to Midway Airlines.

Although the 1985 Northwest/Fischer agreement, see supra, provided for arbitration of all disputes, controversies and claims arising from or related to the agreement, Fischer never sought arbitration of its grievances stemming from Northwest’s acquisition of Republic. Instead, Fischer filed a lawsuit in the district court, asserting nine antitrust and common-law claims against Northwest, Simmons, or both. In its antitrust claims under the Sherman Act, Fischer asserted that:

(1) the acquisition of Republic was an unlawful contract or combination restraining trade in violation of Section 1;

(2) the acquisition of Republic attempted to or did create a monopoly in violation of Section 2;

(3) Northwest and Simmons conspired to restrain trade in violation of Section 1; and

(4) Northwest and Simmons conspired to monopolize or attempt to monopolize the Detroit regional connecting service airline market in violation of Section 2.

In its common-law claims, Fischer argued that:

(1) Simmons tortiously interfered with the Fischer/Northwest contract;

(2) Simmons and Northwest conspired to interfere with Fischer’s “prospective advantage;”

(3) Northwest fraudulently misrepresented its intention to perform its obligations under the Fischer/Northwest contract;

(4) Northwest breached its contract with Fischer by failing to comply with the exclusivity clause; and

(5) Northwest breached the covenant of good faith and fair dealing implied in the contract.

Northwest and Simmons moved for summary judgment on all claims. The court granted the motion and dismissed the entire action, holding that (1) Fischer’s antitrust challenge to the acquisition of Republic was barred by the Department of Transportation’s approval of the transaction; (2) Fischer failed to present sufficient evidence of a conspiracy to support allegations of an antitrust violation; and (3) Fischer’s common-law claims were subject to the arbitration provision, and since no request for arbitration was made by Fischer within 120 days of the alleged breach of contract, the claims were time-barred.

We affirm the district court’s granting of the defendants’ motion for summary judgment. However, we find in favor of the defendants on partially different grounds.⁵ We hold that:

(1) Summary judgment dismissing Fischer’s antitrust claims was properly granted because Fischer failed to establish that it suffered an antitrust injury; and

(2) Summary judgment dismissing Fischer’s common-law claims was properly granted because Fischer failed to seek arbitration.

II.

As the district court noted, the Supreme Court has recently “refined [the] application” of the standard for summary judgment under Rule 56 of the Federal Rules of Civil Procedure.⁶ See Fischer v. NWA, No. 3-87-CIV-106, slip op. at 6 (D.Minn. June 9, 1988). In Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986), the Court presented a thorough restatement of the summary judgment standard. Anderson emphasizes that “[o]nly disputes over facts that might affect the outcome of the suit * * * will properly preclude the entry of summary judgment.” Id. at 248, 106 S.Ct. at 2510. Further, it held that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Id. at 247-48, 106 S.Ct. at 2509-10. The Court then goes on to point out that the Rule 56 standard “mirrors the standard for a directed verdict under Federal Rule of Civil Procedure 50(a), which is that the trial judge must direct a verdict if, under the governing law, there can be but one reasonable conclusion as to the verdict.” Id. at 250, 106 S.Ct. at 2511 (citing Brady v. Southern R. Co., 320 U.S. 476, 479-80, 64 S.Ct. 232, 234, 88 L.Ed. 239 (1943)). In this circuit, we have held that a district court must give the nonmoving party the benefit of all the reasonable inferences that can be drawn from the underlying facts. Trnka v. Elanco Products, 709 F.2d 1223 (8th Cir.1983).

III.

Moving to the substantive issues in this ease, we begin with Fischer’s antitrust claims. Fischer contends that Northwest’s acquisition of Republic and the course of dealings between Northwest and Republic since the acquisition have violated Sections 1 and 2 of the Sherman Act. Specifically, Fischer alleges that since the acquisition, the appellees, together or separately, have conspired to restrain trade, conspired to monopolize the Detroit regional airline market, entered into an unlawful contract or combination in restraint of trade, and attempted to create a monopoly. The district court, stressing the government’s approval of the acquisition and Fischer’s failure to present sufficient evidence of conspiratorial action to raise a genuine fact issue, granted summary judgment in favor of Northwest and Simmons. We affirm the district court. However, we do so on different grounds: the failure of Fischer to establish that it suffered an antitrust injury as a result of Northwest’s acquisition of Republic.

In order to prevail under the Sherman and Clayton Acts, plaintiffs must carry a heavy burden of proof. In Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 97 S.Ct. 690, 50 L.Ed.2d 701 (1977), the Supreme Court stated that antitrust plaintiffs:

must prove more than injury causally linked to an illegal presence in the market. Plaintiffs must prove an antitrust injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants’ acts unlawful. The injury should reflect the anticompetitive effect either of the violation or of anti-competitive acts made possible by the violation.

Id. at 489, 97 S.Ct. at 697.

In McDonald v. Johnson & Johnson, 722 F.2d 1370 (8th Cir.1983), this court offered the following explanation of the antitrust injury requirement: “it is insufficient for plaintiffs to simply assert that plaintiffs’ damages would not have been incurred without [the alleged anticompetitive conduct].” Id. at 1374. Rather, the plaintiff must establish that “there was * * * proximate causation between plaintiff’s harm and the alleged illegal market restraint.” Id. Unless it can establish that its alleged injury was caused by conduct that violates the antitrust laws, a plaintiff lacks standing, under Section 4 of the Clayton Act, to bring an antitrust lawsuit.⁷ The threshold requirement of an antitrust injury reflects the Supreme Court’s frequently stated maxim that Congress enacted the antitrust laws to protect competition, not competitors. See Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. at 488, 97 S.Ct. at 697 (1977) (citing Brown Shoe Co. v. United States, 370 U.S. 294, 320, 82 S.Ct. 1502, 1521, 8 L.Ed.2d 510 (1962)).

Our review of the record convinces us that Fischer failed to prove that it has suffered an antitrust injury. Fischer does not contend that it was a customer of Northwest forced to pay increased prices. Nor was Fischer a competitor injured by Northwest’s acquisition of monopoly power (roughly 75% of the Detroit market). Rather, Fischer asserts that it suffered damage when it was terminated as Northwest’s exclusive regional carrier in Detroit. We conclude that Fischer’s termination was not caused by anticompetitive conduct or an anticompetitive effect of such conduct; rather, it was caused by Northwest’s need to avoid employing two regional airlines where only one was required. We are convinced that even in a city in which Northwest had far less than monopoly power, it would have been reluctant to waste resources on overlapping contractual agreements providing twice the regional connecting flight service required.

Furthermore, it is not disputed that the original Northwest/Fischer agreement, see supra p. 597, gave both sides power to terminate the agreement at will with six months notice. Northwest did not act in an anticompetitive manner when it chose to exercise that termination power. Indeed, Northwest’s termination power was in no way enhanced by the acquisition of Republic or any anticompetitive effects it may have engendered. Therefore, we hold that because Fischer suffered no antitrust injury, it lacked standing as an antitrust plaintiff under Section 4 of the Clayton Act. Hence, the district court did not err in granting summary judgment for Northwest on all of Fischer’s antitrust claims.

IV.

Finally, we move to Fischer’s common-law claims.⁸ Northwest gave Fischer six months notice of termination on September 24, 1986. Therefore, Fischer apparently was entitled to retain its status as Northwest’s exclusive regional airlink in Detroit until the termination date: March 24, 1987. However, Simmons began to provide connecting service as a Northwest airlink on October 1, 1986. Fischer’s objections to Northwest’s and Simmons’ apparent violation of Fischer’s contractual right to remain Northwest’s exclusive regional airlink in Detroit through the entire termination notice period gave rise to Fischer’s common-law claims in the district court. The court dismissed three of Fischer’s common-law claims (fraud, tortious interference with contract, and tortious interference with prospective advantage) on substantive grounds. The court also dismissed all of the common-law claims on the grounds that they were time-barred by the arbitration clause in the 1985 agreement between Fischer and Northwest.

Fischer never sought arbitration of its grievances against Northwest and Simmons. It ignored the arbitration clause, choosing instead to file the instant lawsuit.⁹ Nevertheless, Fischer contends on appeal that despite its failure to seek arbitration, the district court was incorrect to conclude that its common-law claims are barred by the mandatory arbitration clause. We disagree and affirm the district court’s holding concerning Fischer’s common-law claims.

The disputed arbitration clause provided that:

Any dispute, controversy or claim between the Parties, as to which there are no other necessary or indispensable parties, arising out of or relating to this Agreement, including its breach, or the transactions contemplated by this Agreement, which cannot be resolved amicably by the Parties, shall be referred to arbitration within 120 days of the date the alleged breach occurred. [Emphasis added].

Fischer concedes that the arbitration clause is mandatory. It also concedes that the clause is not too narrow in scope to encompass its claims against Northwest and Simmons. Instead of challenging the validity or scope of the clause, Fischer submits three arguments suggesting that the clause is inapplicable to its common-law claims because of factual circumstances surrounding its dealings with Northwest and Simmons. First, Fischer argues that by continuing to negotiate with Fischer for more than 120 days after its breach of the 1985 agreement, Northwest enticed Fischer into forfeiting its ability to act under the mandatory arbitration clause. In essence, Fischer argues that compliance with the terms of the arbitration clause became impossible because of Northwest’s actions. We find this argument meritless. After the alleged breach of contract, Northwest continued to negotiate toward a new agreement with Fischer, not to salvage the 1985 agreement. Northwest had no power to prevent Fischer from seeking arbitration to settle the dispute over the alleged breach of the original agreement. Further, it strikes us as disingenuous for Fischer, after maneuvering as though it were not bound by a mandatory arbitration clause (Fischer has never sought arbitration of its grievances under the 1985 agreement), to rely on a post hoc argument that the appel-lees prevented it from seeking arbitration.

Fischer also argues that the arbitration clause is inapplicable because Simmons was a necessary or indispensable party. Again, we disagree. In Helzberg’s Diamond Shops, Inc. v. Valley West Des Moines Shopping Center, Inc., 564 F.2d 816, 820 (8th Cir.1977), the Eighth Circuit held that “a person does not become indispensable to an action to determine rights under a contract simply because that person’s rights or obligations under an entirely separate contract will be affected by the result of the action.” We agree with the district court that the reasoning in Helzberg directly applies to this case. The contract at issue involves only Northwest and Fischer, not Simmons.

Third, Fischer contends that because of its conduct, Northwest waived its right to enforce the arbitration clause. However, since Northwest is not the aggrieved party in this case, it had no duty to enforce the mandatory arbitration clause. The clause plainly states that “[a]ny dispute, controversy or claim between the parties * * * arising out of or relating to this Agreement, including its breach, * * * shall be referred to arbitration within 120 days of the date the alleged breach occurred.” Fischer believed that a breach had occurred, yet it failed to seek arbitration, opting instead to litigate its claims. The arbitration clause in the 1985 Northwest/Fischer agreement clearly makes arbitration the sole dispute resolution mechanism agreed upon by the parties. Since Fischer failed to seek arbitration at any time, we affirm the district court’s holding that Fischer’s common-law claims are time-barred.

For all the foregoing reasons, we affirm the district court’s summary judgment order.

1 . The Honorable Donald D. Alsop, Chief Judge, United States District Court for the District of Minnesota.

2 . Prior to its relationship with Northwest, Fischer had provided regional service for USAir in Detroit.

3 . The acquisition of Republic also gave the new Northwest/Republic combination overlapping regional service contracts for the Twin Cities area, but the regional carriers there, Express I and Mesaba, reached a mutual agreement, without incident, to divide routes and share the market.

4 . Such an agreement would provide Fischer with routes that Simmons, after being granted the right of first refusal, had declined to serve.

5 . The Supreme Court has held that "[i]t is well accepted * * * that without filing a cross-appeal or cross-petition, an appellee may rely upon any matter appearing in the record in support of the judgment below." Schweiker v. Hogan, 457 U.S. 569, 585 n. 24, 102 S.Ct. 2597, 2607 n. 24, 73 L.Ed.2d 227 (1982) (citing Blum v. Bacon, 457 U.S. 132, 137 n. 5, 102 S.Ct. 2355, 2359 n. 5, 72 L.Ed.2d 728 (1982)). Therefore, in this appeal, Northwest and Simmons may properly rely on the issue of antitrust injury (which the district court chose not to decide) in seeking affirmance of the district court’s summary judgment order. We affirm the order as it relates to Fischer’s antitrust claims on antitrust injury grounds alone. We are able to do so because antitrust injury is a threshold issue that plaintiffs must establish in order to have standing to sue under the antitrust laws. See Midwest Communications v. Minnesota Twins, 779 F.2d 444 (8th Cir.1985), cert. denied, 476 U.S. 1163, 106 S.Ct. 2289, 90 L.Ed.2d 730 (1986) (where plaintiff fails to show antitrust injury, it lacks standing to sue under the antitrust laws and the court need not reach the merits of its antitrust claims). See generally L.A. Sullivan, Antitrust, 770, 774. In light of Midwest Communications, we affirm the dismissal of Fischer’s antitrust claims on grounds of lack of standing, so we need not examine the merits of the claims; specifically, whether Northwest and Simmons conspired to monopolize the Detroit market or to terminate Fischer, or whether the Republic acquisition was barred by the approval of the Department of Transportation.

6 . Rule 56(c) provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.”

In Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986), the Supreme Court stated that "[o]ne of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses * * *.’’ 477 U.S. at 323-24, 106 S.Ct. at 2553. Therefore, ”[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole * * *.” Id. at 327, 106 S.Ct. at 2555.

Rule 56 must be construed with due regard not only for the rights of persons asserting claims and defenses that are adequately based in fact to have those claims and defenses tried to a jury, but also for the rights of persons opposing such claims and defenses to demonstrate in the manner provided by the Rule, prior to trial, that the claims and defenses have no factual basis.

Id.

The Court in Celotex then held that summary judgment must be granted where a party fails to make a sufficient factual showing regarding an essential element of its case:

In our view, the plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. In such a situation, there can be "no genuine issue as to any material fact,” since a complete failure of proof concerning an essential element of the nonmov-ing party's case necessarily renders all other facts immaterial. The moving party is “entitled to a judgment as a matter of law" because the nonmoving party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof.

477 U.S. at 322-23, 106 S.Ct. at 2552.

7 . Section 4 states that ‘‘[a]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor * * *.”

We note the Second Circuit’s recent observation that the United States Supreme Court has indicated that although a showing of antitrust injury is required from plaintiffs in both injunction and damages cases, "standing analysis under § 16 will not always be identical to standing analysis under § 4." See Consolidated Gold Fields PLC v. Minorco, S.A., 871 F.2d 252, 259 n. 6 (2d Cir.1989) (quoting Cargill v. Monfort of Colorado, Inc., 479 U.S. 104, 111 n. 6, 107 S.Ct. 484, 490 n. 6, 93 L.Ed.2d 427 (1986)).

The court in Gold Fields explains that:

Since section 4 allows for treble-damage recovery, courts will generally be more circumspect about granting relief: “In order to protect against multiple lawsuits and duplica-tive recoveries, courts should examine other factors in addition to antitrust injury, such as the potential for duplicative recovery, the complexity of apportioning damages, and the existence of other parties that have been more directly harmed, to determine whether a party is a proper plaintiff under § 4.”

Id.; see also Associated General Contractors of California, Inc. v. Carpenters, 459 U.S. 519, 544-45, 103 S.Ct. 897, 911-12, 74 L.Ed.2d 723 (1983).

In other words, the court in Gold Fields observes, "Cargill supports the proposition that standing analysis under section 16 is * * * less rigorous than that under section 4.” Consolidated Gold Fields, 871 F.2d at 259 n. 6. We need not apply the extra-rigorous Cargill standing analysis to Fischer’s antitrust claims since Fischer has failed to cross the initial threshold of proving that it suffered an antitrust injury. However, we note that even if it had done so, Fischer would still have had further obstacles to pass before it could establish that it was entitled to damages under section 4.

8 . We note that two of Fischer’s common-law claims cite Simmons as a defendant or co-defendant. Therefore, they are arguably not covered by the mandatory arbitration clause in the 1985 Northwest/Fischer agreement. We take no position on that question, as Fischer has briefed and argued the five common-law claims as though they were either all covered by the clause or not covered at all. During oral argument, counsel for Fischer stated that the common-law claims against Simmons "rise and fall depending on whether there is concerted action” found between Northwest and Simmons. In addition, Argument III in Fischer’s brief reads, "The Trial Court Erred in Holding That the Arbitration Clause of the Fischer Bros.-Northwest Agreement Barred All Common Law Claims" (emphasis added). Appellant's brief at i. In the district court, Judge Alsop dismissed the common-law claims against Simmons on substantive grounds, concluding that both claims were predicated on an alleged agreement between Northwest and Simmons to terminate Fischer and that Fischer "simply failed to create a factual issue regarding the existence of an agreement to terminate [Fischer].” Fischer v. NWA, slip op. at 21.

9 . It is clear that Fischer chose quite early in the development of its claims to ignore the arbitration clause. On October 14, 1986, well within any measurement of the 120-day time period, Fischer, instead of seeking arbitration, sent a notice of default to Northwest. The notice alleged that Northwest had breached the 1985 agreement and threatened Northwest with legal action.