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SANDERS v. AIR INDIA

August 10, 1978

EMIL SANDERS and GLORIA SANDERS, d/b/a ABC TRAVEL CONSULTANTS, Plaintiffs,
v.
AIR INDIA, Defendant.



The opinion of the court was delivered by: WARD

Defendant moves under Rule 12(b)(6), Fed. R. Civ. P., to dismiss an amended complaint which was served and filed after a trial which ended in a jury deadlock on the legal claim being re-asserted in the amended complaint. *fn1" The basis of the motion is that there is no private right of action for the injury which these plaintiffs assert under § 404(b) of the Federal Aviation Act, 49 U.S.C. § 1374(b), and that, even if there is, plaintiffs fail to allege facts to state a claim upon which relief can be granted. For the reasons hereinafter stated, the motion is granted on the ground that no private right of action should be implied. *fn2"

 The Original Complaint and Pre-Trial Order

 Plaintiffs Emil B. Sanders and Gloria Sanders, travel agents, doing business as ABC Travel Consultants ("ABC"), sued Air India, alleging that the defendant airline discriminated against ABC insofar as Air India did not make available to ABC certain cumulative commissions which were made available to "ethnic Indian" travel agents who met a threshold level of sales in 1976. Specifically, the original complaint, filed July 23, 1976, and pre-trial order, filed February 8, 1978, alleged that prior to January 1, 1976, Air India paid an 11% commission to all of its travel agents. In early 1976, Air India assertedly commenced a program of paying to its agents of Indian origin or descent an extra 4% commission plus an extra 2% commission at the end of each year if such agents equalled or exceeded $ 300,000 in sales for such period. The complaint alleged that Air India did not publicize this program in any way to travel agents generally. Plaintiffs also alleged that ABC asked Air India to pay such additional commissions to it, but Air India did not accede to this request. According to plaintiffs, the failure to accede to his request for equal commissions placed ABC in a position where it could not successfully compete in the sale of transatlantic airplane tickets to India and various other places with agents of Air India who are of Indian origin or descent. Consequently, plaintiffs allegedly suffered or will suffer damages in excess of $ 100,000 in lost commissions. Plaintiffs contended that the foregoing constitutes a violation of (1) § 1 of the Sherman Act, 15 U.S.C. § 1; (2) § 2 of the Sherman Act, 15 U.S.C. § 2; (3) § 2 of the Robinson-Patman Act, 15 U.S.C. § 13; (4) the fifth amendment to the United States Constitution and the Civil Rights Act, 42 U.S.C. § 2000d; (5) § 296 of the New York Executive Law (McKinney 1972 & Supp. Pamph. 1972-77) (the Human Rights Law). The complaint seeks $ 100,000 in compensatory damages, $ 500,000 in punitive damages, costs and attorney fees.

 The Pre-Trial Brief

 On the day of trial, February 27, 1978, plaintiffs submitted a pre-trial brief containing a statement of facts which elaborated on the factual basis of plaintiffs' claim. However, it also varied materially the facts alleged in the complaint and pre-trial order as to the particulars of the cumulative commission structure and the period in which it was in effect. According to the pre-trial brief, cumulative commissions were paid "during the period from April 1, 1975, to May 1, 1977, . . . to certain agents [in the amount of] 4% on sales of $ 150,000 or more during a fiscal year commencing April 1, and a further 2% on all sales if $ 300,000 in sales of Air India tickets were achieved in that year." *fn3" Plaintiffs' Pre-Trial Brief at 1.

 In addition to varying the facts, the pre-trial brief varied the legal theories. The Robinson-Patman and Civil Rights Act claims were abandoned and a claim under § 404(b) of the Federal Aviation Act was added. The Federal Aviation Act claim was similar to the New York Executive (Human Rights) Law claim, except that the latter outlaws discrimination on the basis of race or national origin, while the former broadly forbids "any undue or unreasonable preference or advantage . . . or any unjust discrimination or any undue or unreasonable prejudice or disadvantage in any respect whatsoever." Thus, under the Federal Aviation Act, plaintiffs would not necessarily have to prove that Air India discriminated in favor of "ethnic Indians," so long as they could prove that the manner in which the commission plans were publicized subjected them to any undue or unreasonable preference or disadvantage.

 Because it was surprised by the eleventh hour inclusion of an unpleaded cause of action under § 404(b) of the Federal Aviation Act, Air India objected strenuously that it would be prejudiced by the Court's permitting plaintiffs to proceed on this new theory. The Court, while reserving decision on whether or not to ultimately permit the amendment, permitted plaintiffs to pursue the Aviation Act claim on the representation of plaintiffs' counsel that their proof would not be affected by the assertion of this new claim; therefore, defendant would not have to meet an additional proof, although, of course, defendant would have to be prepared to meet the additional argument that this proof sustains a violation of the broader, less stringent elements of the Federal Aviation Act claim.

 During the course of the trial, plaintiffs withdrew their Sherman Act claims. The case, therefore, went to the jury on only two claims: (1) that the cumulative commission scheme discriminated against plaintiffs on the basis of race or national origin, in violation of § 296 of the New York Executive Law (McKinney 1972 & Supp. Pamph. 1972-77); and (2) that the cumulative commission scheme unjustly discriminated against plaintiffs "in any respect whatsoever" in violation of § 404(b) of the Federal Aviation Act, 49 U.S.C. § 1374(b).

 The Proof at Trial

 The proof at trial indicated that between 1975 and 1977 Air India had numerous incentive commission schemes. For example, from October 1975 to April 1976 it paid a 5% bonus on total sales if they exceeded $ 150,000 and an extra 2% if they exceeded $ 300,000. From May 1976 to March 1977 the plan was changed to 4% and 2% on $ 150,000 and $ 300,000 respectively. In April 1977 Air India switched to a straight 6% bonus on sales exceeding $ 25,000. These cumulative commissions (or at least the 4% and 2%) were not payable on group sales because those were compensated by a separate "override" bonus commission.

 The proof confirmed plaintiffs' allegation that ABC was not individually notified of such commission plans; nor was such information distributed generally in an organized fashion. Nonetheless, the disorganized, or even selective, method of communicating this information worked in such a way that members of the trade, including Mr. Sanders, learned that some type of cumulative commission structure existed. Mr. Sanders testified that he learned of a cumulative commission plan around February or March 1976, which prompted him to write Air India on or about June 9, 1976 to ask that the commissions afforded the "ethnic agents" be made available to ABC.

 Air India did not respond to this letter, perhaps because ABC did not appear to have the potential to reach the threshold levels of sales. ABC had not sold any Air India tickets up to that point in 1976. In fact, ABC had never earned a single commission from Air India. *fn4" In any event, Mr. Sanders did not follow-up on his June 9th inquiry. Instead he filed suit on July 23rd.

 Plaintiffs contend that ABC lost approximately $ 156,000 in commissions as a result of the selective -- discriminatory -- manner in which the cumulative commissions were made available. This figure purportedly represents the commissions ABC was unable to earn because of the sales it lost by virtue of its inability to pass on to its salesmen a percentage of the cumulative commissions. Mr. Sanders testified that one of the reasons for the lost sales was that his own salesmen took the Indian business to other agencies to get higher commissions for themselves. Rashim Paleja, one of Sanders' salesmen, testified that in December of 1976 he had customers for India but he did not place them through ABC. He booked these passengers through other travel agents on Air India and other airlines, including Air France.

 Lastly, by federal regulation, as of September 29, 1976 all commission structures had to be filed with the CAB and carriers had to make the filed commission schedule available to any person requesting it. 14 C.F.R. §§ 253.3, 253.4(b) (1977). Therefore, as of that time, all of Air India's commission structures were available to ABC. However, Mr. Sanders testified that he was unaware of this means of obtaining commission information, even though he was ...


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