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LIAMUIGA TOURS v. TRAVEL IMPRESSIONS

September 18, 1985

LIAMUIGA TOURS, a division of CARIBBEAN TOURISM CONSULTANTS, LTD., Plaintiffs, against TRAVEL IMPRESSIONS, LTD., Defendant


The opinion of the court was delivered by: WEXLER

MEMORANDUM AND ORDER

WEXLER, District Judge

 Plaintiff Liamuiga Tours, a division of Caribbean Tourism Consultants, Ltd., (Liamuga Tours) is incorporated under the laws of St. Kitts and is locates solely on St. Kitts. Defendant Travel Impressions, Ltd. (Travel Impressions) is a New York corporation with its principal place of business in New York. Plaintiff is in the travel and tourist business, providing local charters, travel services and tourist information, and tour packages locally on St. Kitts. Defendant is a bulk wholesale tour operator for the Caribbean, including St. Kitts, providing travel and tour packages. Defendant books or charters planes, contracts for ground transport and activities, and books blocks of hotel rooms. These travel packages are sold through retail travel agents. For a period from 1981 to 1983 plaintiff was a "Destination Service Operator" (DSO), or local representative, for defendant on St. Kitts. A third player, not a party to this action, is the Royal St. Kitts Hotel (Hotel), the largest and most modern hotel with the best facilities and amenities on the island. It has over twenty-five percent of the approximatey 500 hotel rooms on St. Kitts.

 St. Kitts, or St. Christopher, is a Caribbean island formerly part of the British colony of St. Kitts-Nevis-Anguila, and now part of the federation of St. Christopher and Nevis. It is a small island and not one of the most popular Caribbean vacation spots. The "season" for St. Kitts, which is to say the heavy tourist trade period, is from December to the following April, also known as the winter season. Under the terms of a contract entered into on December 29, 1981, plaintiff became defendant's representative, or DSO, on St. Kitts for the 1981-1982 season. Defendant continued to engage plaintiff's services either by an amendment that expired at the end of the next season in April 1983 or by a superseding contract that was terminated by defendant in October and November 1983. Plaintiff sues defendant for anti-trust violations (first cause of action), breach of contract (second cause of action), and interference with business relationships (third cause of action), alleging total damages of $1,650,000.00, including treble damages for anti-trust. Defendant now moves to dismiss the anti-trust cause of action for failure to state a claim on which relief can be granted, Rule 12(b) (6), and for summary judgment on the other two causes of action, Rule 56(b), Fed.R.Civ.P. Defendant further contends that the amount in controversy necessary for diversity jurisdiction 28 U.S.C. § 1332(a), over the state law claims is less than $10,000.00 and asks for dismissal for lack of subject matter jurisdiction. Rule 12(h), Fed.R.Civ.P. Alternatively, defendant asks for dismissal of the entire action based on forum non conveniens.

 I.

 In December 1981 Travel impressions engaged Liamuiga Tours as its DSO on St. Kitts for the 1981- 1982 season. Liamuiga Tours was to meet and greet the Travel Impressions clients, arrange transport, arrange activities, and generally be an available and helpful source of information and services. This specifically included running hospitality desks for Travel Impressions customers in the Royal St. Kitts Hotel and several other hotels. It is undisputed that Travel Impressions lodged eighty percent of its clients at the Royal St. Kitts Hotel and that it brings in about eighty percent of the U.S. "package tour passengers" coming to St. Kitts. In addition, plaintiff was allowed to sell local tour packages to defendant's patrons and retain all profits.

 Defendant continued plaintiff's services for the 1982-1983 season, either by one-season term amendment to the original one-season contract by superseding contract with no set expiration, a factual issue disputed by the parties. In December 1982, however, the Hotel refused to allow plaintiff to operate a hospitality desk on its premises. The reasons are uncertain. Either the Hotel wanted compensation for the use of its premises, did not want tour representatives operating there, took a dislike to the head of Liamuiga Tours, Makeda Mikael, or found Ms. Mikael to be rude and arrogant to both Travel Impressions customers and other guest. In any event, the reasons are not relevent at this point. Another Liamuiga Tours representative was allowed to be of service to Travel Impressions clients without the use of a hospitality desk, and defendant and plaintiff continued to negotiate with the Hotel for reinstatement of the desk.

 IN February 1983 relations with the Hotel were further strained when a snowstorm in the United States closed airports and stranded departing tourists in St. Kitts for two days. A dispute arose as to whether the vacationers or Travel Impressions would pay for the extra stay at the Hotel, with confusion as to what representations Liamuiga Tours had made. At the end of February a fire at the Hotel caused it to close down until September 1983, thereby suspending the hospitality desk controversy.

 During the off-season of 1983 plaintiff apparently continued to perform full DSO duties for Travel Impressions. According to the plaintiff, in November 1983 the Hotel informed Travel Impressions that it wanted nothing more to do with plaintiff and threatened to cancel Travel Impressions' bookings if it continued plaintiff as its representative (Affidavit of Makeda Mikael P 20 (x)). In any event, by letter of October 12, 1983 and telex of November 9, 1983 defendant declared that it was ending or not renewing its DSO relationship with plaintiff. Liamuiga Tours instituted a suit against the Hotel in St. Kitts and commenced the action against Travel Impressions in this Court.

 II.

 Plaintiff's first and third causes of action allege violations of the Sherman Act, 15 U.S.C. §§ 1,2, and ask damages under the Clayton Act, 15 U.S.C. § 15.

 As a first cause of action plaintiff alleges restraint of trade by defendant and an anti-competitive conspiracy with a non-party co-conspirator to monopolize the tourist business in St. Kitts and between the United States and St. Kitts (Complaint PP 22-24). Plaintiff asks for treble damages under § 4 of the Clayton Act. 15 U.S.C. § 15. Defendant moves to dismiss the anti-trust claim for failure to state a claim on which relief can be granted. Rule 12(b) (6), Fed.R.Civ.P. In view of the affidavits and exhibits presented the motion may properly be converted to one for summary judgment. Rules 12(b) (7), 56(b), Fed.R.Civ.P.

 Travel Impressions contends that the anti-trust laws are inapplicable as there is no anti-competitive effect on a United States market. Defendant is correct that a domestic market must be affected in either interstate commerce or commerce between the United States and a foreign country.

 The effects test was first articulated in United States v. Aluminum Company of America, 148 F.2d 416 (2d Cir. 1945). In that seminal case Judge Learned Hand concluded that Congress did not intend for the Sherman Act "to punish all whom its courts can catch for conduct which has no consequences within the United States." Id. at 443 (citations omitted). Judge Hand discussed the ramifications of an anti-competitive agreement in international commerce and concluded that whatever the intent, such an agreement is not covered by our anti-trust laws "unless its performance is shown actually to have had some effect: on American imports and exports. Id. at 444.

 The federal courts have differed in their application of the effects test. Plaintiff would have this court use the test outlined by the Ninth Circuit in Timberlane Lumber Co. v. Bank of America, N.T. & S.A., 549 F.2d 597 (9th Cir. 1977). Nevertheless, the controlling case in this Circuit is National Bank of Canada v. Interbank CArd Association, 666 F.2d 6 (2d Cir. 1981). In that case the Second Circuit Court of Appeals held that there must be an appreciable anti-competitive effect on this country's commerce of a type sufficient to justify assertion of jurisdiction. Id. at 9. The Second Circuit explicitly rejected the Ninth Circuit's tripartite test in Timberlane Lumber Co., 549 F.2d at 613. National Bank of Canada, 666 F.2d at 8. Specifically, the Second Circuit asserted that the first two elements of the test, intended or actual effect on United States foreign trade and cognizable injury to a plaintiff, allowed an unwarranted extension ofjurisdiction to cases where the anti-competitive effect was limited to a foreign market. Id. Under the Second Circuit's standard, anti-competitive agreements formed within or without the United States must cause actual injury to domestic commerce to confer jurisdiction.

 Long discussion of the case law, while enlightening, is not necessary. In 1982, the year after the Second Circuits decision in National Bank of Canada, Congress addressed the issue of extraterritorial application of the Sherman Act. The resulting legislation amended the Act to provide:

 
§ 6a. Conduct involving trade or commerce with foreign nations.
 
Sections 1 to 7 of this title shall not apply to conduct involving trade or commerce (other than import trade or import commerce) with foreign nations unless-
 
(1) such conduct has a direct, substantial, and reasonably foreseeable effect -
 
(A) on trade or commerce which is not trade or commerce with foreign nations, or on import trade or import commerce with a foreign nations; or
 
(B) on export trade or export commerce with foreign nations, of a person engaged in such trade or commerce in the United States; and
 
(2) such effect give rise to a claim under the provisions of sections 1 to 7 of this title, ...

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