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AIRLINES REPORTING CORP. v. S & N TRAVEL

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK


July 26, 1994

AIRLINES REPORTING CORPORATION, Plaintiff,
v.
S and N TRAVEL, INC., d/b/a SUPERIOR TRAVEL, EPHRAIM SCHWARTZ, and WALTER NEWMARK, Defendants.

The opinion of the court was delivered by: JACK B. WEINSTEIN

MEMORANDUM AND ORDER

 Weinstein, J.:

 Defendants move to dismiss for lack of subject matter jurisdiction on the grounds that diversity of citizenship is lacking and that the amount in controversy does not exceed $ 50,000. The motion must be granted. Airlines Reporting Corporation ("ARC") was not the real party in interest until assignments were collusively made for the purpose of obtaining federal jurisdiction in violation of 28 U.S.C. ยง 1359. The citizenship of the assignors of the claims will be considered for the purpose of determining diversity of citizenship. In addition, the claims cannot be aggregated for the purpose of determining the amount in controversy.

 The result is unfortunate since ARC serves a useful purpose in reducing litigation costs and in facilitating a sound relationship between travel agencies and airlines in the public interest. Restructuring of ARC's operations or legislation to permit the kind of representative suit brought here might be useful, but such changes are beyond the court's power.

 I. Facts

 ARC is a Delaware, not-for-profit corporation with its principal place of business in Arlington, Virginia. It was organized in 1984 by members of the Air Transport Association of America, the trade association of domestic air carriers to act as a clearinghouse and collection agent for transactions between air carriers and travel agents who issue airline tickets. Its shareholders are major domestic air carriers. One hundred and forty three domestic air carriers have entered into a "Carrier Services Agreement" with ARC granting ARC the power of attorney to enter into contracts with travel agents on behalf of the carriers. Pursuant to that power, ARC enters into "Agent Reporting Agreements" with travel agents on behalf of the air carriers.

 As part of its role as an intermediary between the airlines and travel agents, ARC distributes standard ticket stock, performs credit checks on travel agents, and administers a claims procedure; agents remit to ARC money owed to the carriers for airline tickets issued by the agents. The Carrier Services Agreement gives ARC the power of attorney to collect money owed to the carriers by the travel agents and to pursue joint legal action against a travel agent on behalf of the carriers as part of the collection process.

 Defendant S and N Travel ("S & N") is a New York corporation with its principal place of business in New York. Defendants Ephraim Schwartz and Walter Newmark are both New York residents.

 On October 16, 1989, ARC entered into an Agent Reporting Agreement with S & N. ARC and S & N are the sole signatories to the agreement. The Agent Reporting Agreement, however, explicitly states that ARC is contracting with the agent on behalf of the carriers. See Agent Reporting Agreement, Section XXVIII(B). The complaint alleges that from December 1988 through September 1990, S & N, doing business as Superior Travel, issued airline tickets worth $ 374,711.68, for which it never paid ARC or the carriers. ARC claims that the following amounts are owed to each of the carriers: Carrier Amount Claimed American $ 13,219.23 Continental 28,385.49 Delta 6,377.77 Eastern 20,838.76 Northwest 16,141.50 TWA 13,837.13 United 27,652.69 Pan Am 90,475.85 USAir 9,473.19 Lan Chile 4,150.34 Air Portugal 1,496.94 Olympic 11,800.58 Alitalia 15,101.59 Air France 13,235.62 KLM 15,315.42 Iberia 6,465.12 Quantas 1,795.70 Swiss Air 7,907.24 El Al Israel 858.52 Scandinavian 5,235.12 British Airways 19,444.11 Aeromexico 700.79 UTA 4,053.84 Cathay Pacific 11,890.04 Thai Airways 2,796.42 Lufthansa 2,716.06 Austrian Air 5,882.80 America West 6,464.51 MGM Grand Air 10,999.31 Total $ 374,711.68

19940726

© 1992-2004 VersusLaw Inc.



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