Tam Travel v. Delta Airlines: Application of the Twombly Pleading Standard

The majority opinion and dissent in Tam Travel v. Delta Airlines encapsulate a divergence of opinion that has emerged over the application of Twombly. Comparing the majority's and dissent's analysis in Tam Travel suggests that the difference of opinion may be attributable to factors other than a clear reading of Twombly. This Commentary is excerpted from LexisNexis' quarterly antitrust publication the Antitrust Report.

Excerpt:

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On April 9, 2003 Tam Travel, Inc. and forty-eight other travel agencies ("Plaintiffs") filed a complaint in the United States District Court for the Northern District of Ohio, alleging that Air Canada, Alaska Airlines ("Alaska"), Alaska Air Group, ATA Airlines ("ATA"), American Airlines ("American"), America West Airlines ("AWA"), Continental Airlines ("Continental"), Delta Air Lines ("Delta"), Hawaiian Airlines ("Hawaiian"), Horizon Air Industries ("Horizon"), Frontier Airlines ("Frontier"), KLM Royal Dutch Airlines ("KLM"), Northwest Airlines ("Northwest"), United Airlines ("United"), US Airways, and US Airways Group ("Defendants") illegally agreed to cap, cut, and ultimately eliminate base commissions in violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1 ("Section 1").

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Judge Richard A. Griffin, joined by Judge Danny J. Boggs, delivered the majority opinion, affirming the district court's dismissal of the case for failure to state a claim under Section 1.

The Sixth Circuit first addressed the issue of whether United's emergence from bankruptcy discharged Plaintiffs' Section 1 claims against United. As Plaintiffs alleged that United made its last commission cut in March 2002, the Sixth Circuit held Plaintiffs' claims against United qualified as discharged debt under the Bankruptcy Code. Further, except for making a factually incorrect assertion that the airlines emerged from bankruptcy before Plaintiffs' complaint was filed, Plaintiffs failed to challenge the district court's ruling on the issue. Accordingly, the Sixth Circuit found that Plaintiffs waived the argument.

The Sixth Circuit rejected Plaintiffs' argument that United was guilty of a "continuing violation" by rejoining the alleged conspiracy by utilizing the 0 percent "conspiracy commission rate" after emerging from bankruptcy. The Sixth Circuit found that although a successfully reorganized debtor under Chapter 11 is liable for independent conduct that arises after confirmation of its bankruptcy plan, United's post-2006, 0 percent base commission rate did not qualify as an overt act-and it is the overt act itself that determines the timing of an injury, not the effects of the overt act. Accordingly, the court held that United's alleged overt act to effectuate the conspiracy occurred in 2002, prior to United's emergence from bankruptcy in 2006.

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