Opinion
No. 09 Civ. 8007 (LTS)(MHD)
03-28-2011
SKYLINE TRAVEL, INC. (NJ)., SKYLINE TRAVEL, INC. (TX), and ABY GEORGE, Plaintiffs, v. EMIRATES, Defendant.
MEMORANDUM ORDER
Plaintiffs Skyline Travel, Inc. (NJ), Skyline Travel, Inc. (TX), and Aby George (collectively, "Plaintiffs"), bring this action asserting negligence, antitrust, breach of duty of good faith and fair dealing, and tortious interference with contract claims against Emirates ("Defendant") in connection with airline ticket transactions. The Court has jurisdiction of this action pursuant to 28 U.S.C. § 1332. Defendant moves, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, to dismiss the amended complaint (the "Amended Complaint") for failure to state a claim. The Court has considered thoroughly the parties' submissions. For the following reasons, Defendant's motion to dismiss the Amended Complaint is granted.
BACKGROUND
The following facts are derived from the allegations in the Amended Complaint, which are construed as true for purposes of the instant motion practice. Plaintiffs sell travel services, products, and packages including air transportation to retail customers. (Am. Compl. ¶ 3.) Defendant owns and operates a fleet of jets that provides air transportation to and from numerous international locations, including New York City. (Id. ¶ 4.) In 2003, Plaintiffs began purchasing Emirates airline tickets from Defendant pursuant a consolidator contract, for sale to individual customers. (Id. ¶¶ 7-8.) Plaintiffs also purchased Emirates airline tickets as Airline Reporting Corporation ("ARC") agents through an airline reservation system called the Global Distribution System ("GDS"). (Id. ¶ 8.) The consolidator contract between Plaintiffs and Defendant expired on March 31, 2007. (Id. ¶ 16.) Thereafter, Plaintiffs continued to purchase Emirates tickets through ARC and GDS.
The extent to which claims are asserted directly by the individual plaintiff, Aby George, who is alleged to be the "owner/operator" of Skyline Travel, is unclear. The Court uses the collective term "Plaintiffs" here, as it is used frequently in the Amended Complaint.
On or about June 6, 2007, another travel agency, Skylink Travel, Inc. ("Skylink"), wrote a letter to Defendant requesting reimbursement for seven cancelled Emirates airline tickets. (Id. ¶ 18.) In the letter, Skylink claimed that Plaintiffs ordered the seven tickets from Skylink but failed to pay for them. (Id. ¶ 20.) Plaintiffs claim that the statements in Skylink's letter were false; Plaintiffs allege that they had already paid for four of the seven passenger tickets and that payment for the other three tickets was not yet due to Skylink. (Id. ¶ 22.) On or about June 7, 2007, Defendant blocked Plaintiffs from purchasing Emirates airline tickets as ARC agents through GDS, and Plaintiffs have not sold any Emirates tickets to customers since then. (Id. ¶¶ 17, 38.) Plaintiffs claim that, "as a direct result of being blocked [by Defendant], [P]laintiffs lost sales and commissions on Emirates flights," and Plaintiffs claim that they sustained damages, including hundreds of thousands of dollars in lost commissions. (Id. ¶¶ 37-38.)
DISCUSSION
In adjudicating a motion to dismiss a complaint for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, the Court accepts the factual allegations in the complaint as true and draws all reasonable inferences in the plaintiff's favor. See Roth v. Jennings, 489 F.3d 499, 501 (2d Cir. 2007). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). This standard applies to all civil actions. Iqbal, 129 S. Ct. at 1953.
Negligence Claim
In order to state a claim for negligence, a plaintiff must demonstrate "(1) a duty owed by the defendant to the plaintiff, (2) a breach thereof, and (3) injury proximately resulting therefrom." Solomon v. City of New York, 66 N.Y.2d 1026, 1027 (1985). The concept of "duty" has been defined in this context as "'a relationship between . . . two parties such that society imposes an obligation on one to protect the other from an unreasonable risk of harm.'" Colorado Capital v. Owens, 227 F.R.D. 181, 188 (E.D.N.Y. 2005) (quoting Stanford v. Kuwait Airways Corp., 89 F.3d 117, 123 (2d Cir. 1996)). The determination as to the existence and scope of a duty with respect to a negligence claim is a legal issue for resolution by the court. See Palka v. Servicemaster Management Services Corp., 83 N.Y.2d 579, 585 (1994).
Both parties rely on New York law.
Plaintiffs claim that Defendant acted negligently by "failing to determine the truth and accuracy of the statements made . . . by Skylink" in its June 6, 2007, letter regarding the unpaid Emirates airline tickets before blocking Plaintiffs' ARC access to Emirates tickets. (Id. ¶ 44.) Plaintiffs cite no legal precedent for their contention that Emirates had a duty to investigate Skylinks' representations before blocking Plaintiffs from ARC. Rather, they base their argument on the prior four-year contractual relationship. The consolidator sales contract had, however, expired months before the actions at issue here. Plaintiffs identify no contractual constraint on Emirates' ability to determine who could obtain its tickets through ARC, and tort law imposes none. Indeed, "it generally has been held that 'fundamental assumptions in free business enterprise,' including the belief that 'each business enterprise must be free to select its business relations in its own interest,' may justify or excuse the act of one who causes harm to another as a collateral consequence of his refusal to continue a business relationship terminable at will," such that even intentional infliction of such injury cannot support a cause of action in prima facie tort. House of Materials, Inc. v. Simplicity Pattern Co., 298 F.2d 867, 872 (2d Cir. 1962); see Turner Constr. Co. v. Seaboard Surety Co., 98 A.D. 2d 88, 89 (N.Y. App. Div. 1983) (business had absolute right to refuse to accept bonds with or without reason). Under these circumstances, Plaintiffs' contention that Emirates breached a duty of care in reacting to the information from Skylink is unsustainable.
Accordingly, the Amended Complaint fails to state a cause of action in negligence, and Defendant's motion will be granted with respect to Count One.
Antitrust Claim
In Count Two of the Amended Complaint, Plaintiffs assert an "anti-trust" claim, contending that Defendant's non-renewal of Plaintiffs' consolidator contract, blockage of Plaintiffs from ARC in response to Skylink's letter, and possible involvement in "kick-back" schemes with Skylink constituted "a willful acquisition of monopoly power, an illegal restraint of trade, a violation of the antitrust laws of the United States of America, including, but not limited to, the Sherman Act and the Clayton Act, and the state of New York, including the General Business Law, Article 22." (Am. Compl. ¶ 84.) An antitrust plaintiff's complaint must proffer more than "'conclusory allegations which merely recite the litany of antitrust.'" Global Discount Travel Servs. v. Trans World Airlines, Inc., 960 F. Supp. 701, 704 (S.D.N.Y. 1997) (quoting John's Insulation, Inc. v. Siska Construction Co., 774 F. Supp. 156, 163 (S.D.N.Y. 1991)). A complaint must adequately define the product market in which trade was allegedly monopolized or restrained illegally. Id. at 704.
A relevant product market is comprised of "'products that have reasonable interchangeability for the purposes for which they are produced—price, use and qualities considered.'" Pepsico, Inc. v. Coca-Cola Co., 315 F.3d 101, 105 (2d Cir. 2002) (quoting United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 404 (1956)). Products are treated as reasonably interchangeable if consumers deem them to be acceptable substitutes. Id. An antitrust claim should be dismissed if the complaint "limit[s] a product market to a single brand, franchise, institution, or comparable entity that competes with potential substitutes" or fails to provide a "plausible explanation as to why a market should be limited in a particular way." Todd v. Exxon Corp., 275 F.3d 191, 200 (2d Cir. 2001). See also Global Discount Travel Servs., 960 F. Supp. at 705 (failure to adequately define a relevant market according to the rule of reasonable interchangeability may be valid grounds for dismissal).
Plaintiffs allege that the relevant market in the instant case is "Passenger air transportation and related services for New Jersey residents of Indian or Pakistani ethnicity who desired to fly on Emirates between JFK airport in New York, New York, and various cities in India and Pakistan, especially in one-stop flights." (Am. Compl. ¶ 47.) Plaintiffs allege that Defendant "had and has monopoly power and control" of this "market" (id. ¶ 48) but also that Plaintiffs were "significant competitors" of Defendant from 2003 until "approximately June 2007, selling the same products to the same customers in the relevant market," and that Skylink "was a competitor of [P]laintiffs'." (Am. Compl. ¶¶ 49-51.) Plaintiffs' market definition is fatally narrow, consisting only of the one-stop flights of a single airline from a single airport in a busy metropolitan area served by countless airlines and several airports, and taking into account only two ethnicities and one state of residence of passengers. The Amended Complaint proffers no facts plausibly explaining why the market should be limited in this particular way; in their brief in opposition to the motion, Plaintiffs merely assert that it is justified by passenger "preference for luxury and/or one-stop flights." (Pls. Opp. at 10.) "A preference of this kind is not, however, necessarily probative of significant market power." Jefferson Parish Hosp. v. Hyde, 466 U.S. 2, 26 (1984). "Every manufacturer is the sole producer of the particular commodity it makes but its control [of price and competition in the market for purposes of antitrust analysis] . . . depends upon the availability of alternative commodities for buyers, i.e., whether there is a cross-elasticity of demand." United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 380 (1956). Plaintiffs fail to demonstrate why other airlines' flights from the New York metropolitan area are not acceptable substitutes and thus reasonably interchangeable from the consumer point of view. Cf. Pepsico, 315 F.3d at 105-107 (reviewing facts relevant to determination of interchangeability of soda fountain syrups). Plaintiffs' papers are also devoid of any explanation as to why the consumer side of the relevant market could properly be defined for antitrust purposes to exclude all but Indian and Pakistani passengers from New Jersey. An attempt, similar to Plaintiffs', to define the discounted tickets of a single carrier between certain city pairs as the relevant market for an antitrust claim was rejected in Global Discount Travel Services, where a travel agency claimed that discounted TWA airline tickets between certain city pairs constituted a relevant market for antitrust purposes. 960 F. Supp. at 705. The district court held that "tickets on TWA are reasonably interchangeable with tickets on other airlines—all tickets between city pairs get passengers to and from desired locations." Global Discount Travel Services, 960 F. Supp. at 705. The court added that flight times, dates, mileage, and other features particular to one airline simply enhance customer enjoyment of the product and do not constitute a separate relevant market. Id. The complaint in that case which, like the Amended Complaint here, "fail[ed] to discuss reasonably interchangeable products and the relevant differences," was dismissed for failure to state an antitrust law claim. Id.
Plaintiffs' reliance on Eastman Kodak Co. v. Image Technical Services, Inc., for the proposition that a single brand such as Emirates airline tickets may establish a relevant market is unavailing. 504 U.S. 451 (1992). In that case, the claim was that Kodak's equipment replacement parts and sendees constituted a relevant market because no other manufacturer's parts or services could be used on a Kodak machine. The Court held that "[t]he relevant market for antitrust purposes is determined by the choices available to Kodak equipment owners." Id. at 481-82. Since Kodak equipment owners could only use Kodak replacement parts and services and no other brand was compatible, the Court agreed that a single brand constituted a relevant market.
Plaintiffs make no such proffer here, nor could they. There is nothing to prevent Plaintiffs' customers from purchasing tickets on any airline that flies between the New York metropolitan area and India or Pakistan. Plaintiffs' failure adequately to define a relevant market warrants dismissal of their antitrust claim. Therefore, Defendant's motion will be granted as to Count Two of the Amended Complaint.
Breach of Duty of Good Faith and Fair Dealing Claim
Under New York law, a duty of good faith and fair dealing is implied in every contract. Nat'l Market Share, Inc. v. Sterling Nat'l Bank, 392 F.3d 520, 525 (2d Cir. 2004). The implied duty "comprises 'any promises which a reasonable person in the position of the promisee would be justified in understanding were included [in the contract].'" Id. (quoting Dalton v. Educational Testing Serv., 87 N.Y.2d 384, 389 (1995)). A breach of the implied duty of good faith and fair dealing "'is merely a breach of the underlying contract.'" Id. (quoting Fasolino Foods Co. v. Banca Nazionale del Lavoro, 961 F.2d 1052, 1056 (2d Cir. 1992)). In order to establish a breach of contract in New York, a plaintiff must plead and prove the following elements: (1) the existence of a contract between plaintiff and defendant; (2) a breach of that contract by the defendant; and (3) damages that result from the breach. Id.
Here, Plaintiffs claim that Defendant breached the implied duty of good faith and fair dealing by blocking Plaintiffs from purchasing and selling tickets through ARC and failing to renew the expired annual consolidator contract. (Am. Compl. ¶ 88.) The consolidator contract between Plaintiffs and Defendant expired on March 31, 2007, approximately four months prior to Defendant's request that ARC block Plaintiffs from Emirates ticket purchases and sales. (Am. Compl. ¶¶ 16-17.) There is no allegation that the non-renewal of the contract constituted a breach of any of its terms, nor is there any allegation in the Amended Complaint that the blockage of Plaintiffs' access to Emirates tickets through ARC violated the provisions of any contract between Plaintiffs and Defendant. Because Plaintiffs have failed to plead the existence and breach of a contract, their claim for breach of the implied covenant of good faith and fair dealing must be dismissed. Defendant's motion will, accordingly, be granted with respect to Count Three of the Amended Complaint.
Tortious Interference with Contract Claim
To establish tortious interference with an existing contract under New York law, a plaintiff must plead "(1) the existence of a valid contract between the plaintiff and a third party; (2) the defendant's knowledge of the contract; (3) the defendant's intentional procurement of the third-party's breach of the contract without justification; (4) actual breach of the contract; and (5) damages resulting therefrom." Kirch v. Liberty Media Corp., 449 F.3d 388, 401-02 (2d Cir. 2006) (quoting Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413, 424 (1996) (internal quotation marks omitted)).
Plaintiffs allege that Defendant interfered tortiously with the contract between Plaintiffs and ARC. (Am. Compl. ¶ 98.) Plaintiffs do not, however, plead any facts concerning the terms of their ARC contract, nor do they allege that ARC breached the contract in any way by denying Plaintiffs' access to Emirates tickets. Rather, Plaintiffs simply assert that "there were breaches, interferences . . . [and] total failures of performance of contractual duties." (Am. Comp. ¶ 97.) Plaintiffs' conclusory language is insufficient to plead the actual breach of the ARC contract, which is an essential element of the tortious interference with contract claim. See Leadsinger, Inc. v. Cole, No. 05 Civ. 5606 (HBP), 2006 WL 2320544, at *12 (S.D.N.Y. Aug. 10, 2006) (holding that plaintiff's failure to allege the relevant terms of the breached contract warranted dismissal of the tortious interference with contract claim). Count Four of the Amended Complaint will therefore be dismissed.
CONCLUSION
For the foregoing reasons, Defendant's motion to dismiss the Amended Complaint is granted in its entirety. The Clerk of Court is respectfully requested to enter judgment accordingly and close this case. This Memorandum Order resolves docket entry no. 21.
SO ORDERED. Dated: New York, New York
March 28, 2011
/s/_________
LAURA TAYLOR SWAIN
United States District Judge