brand market set out in Kodak does not exist in the single brand market plaintiff alleges here.
Because Global cannot define a relevant product market in a single brand product, it is impossible to assess the anticompetitive effects of the challenged practices. See Re-Alco, 812 F. Supp. at 392. Plaintiff has made no reasonable showing why TWA airline tickets for travel between certain cities should be considered a market unto itself, as distinguished from the market consisting of all airline tickets for travel between the paired cities. Accordingly, plaintiff's Amended Complaint fails to discuss reasonably interchangeable products and the relevant differences, and therefore fails to state a claim for violation of sections 1 and 2 of the Sherman Act.
III. The Lanham Act Claim
Section 43(a)(1)(B) of the Lanham Act imposes liability on "any person who ... uses in commerce any ... false or misleading description of fact, or false or misleading representation of fact, which ... in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services or commercial activities." 15 U.S.C. § 1125(a)(1)(B) (1994).
Global's Lanham Act claim is based on its contention that TWA has been engaged in "a commercial promotion of the sale of its tickets through Independent Travel Agents by intentionally and falsely claiming ... that its competitor, Global, does not have the right under the Ticket Agreement to sell System Tickets to any person who actually uses the ticket, i.e., an "End User." (Am. Compl. P 57). It alleges that "by making these intentional, false representations to Independent Travel Agents, TWA has succeeded in disseminating its false claims to the relevant purchasing public." (Id.).
In examining Global's claim, I find the analytical approach of the D.C. Circuit in Dial A Car, Inc. v. Transportation, Inc., 317 U.S. App. D.C. 240, 82 F.3d 484 (1996), to be useful. In Dial A Car, a limousine service brought a Lanham Act false advertising action against a taxicab company that allegedly provided corporate account transportation services outside its counties of licensure. The limousine service contended that the taxicab company misrepresented to customers that its cars were authorized to provide the same corporate account services as the limousine service. The limousine service relied on its interpretation of a D.C. Taxicab Commission Order and argued that any interpretation contrary to the Order was a false statement of fact. The D.C. Circuit Court concluded that because the D.C. Taxicab Commission had not addressed whether the taxicab company's actions violated its Order, the limousine company could not be fined under the Lanham Act for making a false statement about a law when the law was unclear at the time of the statement. See id. at 489 ("The proper inquiry is whether the law was ambiguous at the time appellees' alleged statements were made.") (emphasis in original). The D.C. Court observed that the Lanham Act should not be transfixed into "a handy device to reach and decide all sorts of local law questions." Id. at 490; see also Sandoz Pharmaceuticals Corp. v. Richardson-Vicks, Inc., 902 F.2d 222, 230-32 (3d Cir. 1990) (dismissing plaintiff's claims under Lanham Act where interpretation of FDA regulations at issue was in doubt).
Here, a court has not ruled on the contractual provisions of the Ticket Agreement, and a genuine issue of fact exists as to the meaning of the Ticket Agreement. Cf. Triad Systems Corp. v. Southeastern Express Co., 1994 U.S. Dist. LEXIS 5390, 1994 WL 446049, *18 (N.D. Cal. 1994) (finding movant "not likely to succeed on the merits of its Lanham Act claim" where opposing party's statements "constituted good faith opinions regarding the state of law" with respect to opposing party's underlying copyright action). In this context, Global's attempt to characterize TWA's assertions as "false statements of fact" is "simply using the Lanham Act to try and enforce its preferred interpretation" of the Ticket Agreement. See Dial A Car, 82 F.3d at 489. In the absence of a clear and unambiguous determination
of the contractual rights and liabilities of the parties under the Ticket Agreement, at worst, defendant's statements simply expressed an opinion -- not a false statement -- about the legal effect of its contracts. Until the legal question regarding the interpretation of the Ticket Agreement is resolved, TWA's statements are incapable of being proved false. Cf. Mr. Chow of New York v. Ste. Jour Azur S.A., 759 F.2d 219, 226 (2d Cir. 1985) (in libel context, holding that statements must be examined to see "if they are objectively capable of being proved true or false."); Gillette Co. v. Norelco Consumer Products Co., 946 F. Supp. 115, 137 (D. Mass. 1996) (in defamation context, discussing Supreme Court precedent regarding whether a statement is one of fact or opinion and concluding that "the lesson to be drawn from [Supreme Court precedent] is that capacity for verification is the most important question in determining whether a statement is one of fact.").
The Lanham Act should not be used to transform a contractual dispute between parties into a federal cause of action, particularly where a party expresses an opinion about a contractual right. See Truck Components, Inc. v. K-H Corp., 776 F. Supp. 405, 410-11 (E.D. Ill. 1991) (where defendant's press release discussed its manufacture of goods which a covenant not to compete with plaintiff purportedly prohibited defendant from manufacturing, court held that Lanham Act was not violated because "the Lanham Act is limited to misrepresentations about a product or service [while the present action was] essentially a breach of contract case."); id. at 411 (providing that "this Court is unwilling to expand the bounds of the Lanham Act, and thus federal jurisdiction, to every breach of a covenant not to compete."). Therefore, I find that Global has failed to state a cause of action under the Lanham Act.
IV. Motion to Dismiss for Absence of an Indispensable Party
In order to dismiss a claim or action for failure to join an indispensable party, the Court must undertake a two-step inquiry. First, the Court must determine whether the absent party is "necessary" under Fed. R. Civ. P. 19(a).
If the Court determines that the party is necessary, and for any reason that the party cannot be joined, then the Court must proceed to the second step and determine whether "under the circumstances of the particular case, the court could, in equity and good conscience, proceed in the party's absence." Ente Nazionale Idrocarburi v. Prudential Securities Group, Inc., 744 F. Supp. 450, 456 (S.D.N.Y. 1990); see also 5A Wright & Miller, Fed. Pract. and Proc. § 1359 at 425 (1990) ("if the absentee cannot be joined, the court then must determine, by balancing the guiding factors set forth in Rule 19(b), whether to proceed without him [or her] or to dismiss the action").
A. Karabu as a Necessary Party
As a direct party to the contract which is under dispute, Karabu is a necessary party to this litigation for at least three reasons articulated under Fed. R. Civ. P.(a). First, because the contract in dispute is an agreement between Karabu and TWA, and the Joinder Agreement limits the rights given to Global to the same rights as Karabu under the Ticket Agreement (see Am. Compl. PP 8-13), Karabu is a person in "whose absence complete relief cannot be accorded among those already parties." Fed. R. Civ. P. 19(a)(1). The Advisory Committee's note to this provision provides that the complete relief clause of Rule 19(a) was designed to "stress the desirability of joining those persons in whose absence the court would be obliged to grant partial or 'hollow' rather than complete relief to the parties before the court." Fed. R. Civ. P. 19(a) advisory committee's note. "The interests that are being furthered here," the Committee wrote, "are not only those of the parties, but also that of the public in avoiding repeated lawsuits on the same essential subject matter." Id; see also E.I. DuPont De Nemours & Co. v. Fine Arts Reproduction Co., Inc., 1995 U.S. Dist. LEXIS 7040 1995 WL 312505, *3 (S.D.N.Y. 1995). It is uncontestable that Global's rights under the contract arise from the "same essential subject matter" as Karabu's rights under the exact same contract. Therefore, at the very least, the public's interest in "avoiding repeated lawsuits on the same essential subject matter" necessitates a finding that Karabu is a necessary party.
Moreover, the second clause of Rule 19(a) compels a finding that Karabu is a necessary party, in that Karabu is an interested party in this action and "is so situated that the disposition of the action [Karabu's] absence may (i) as a practical matter impair or impede [Karabu's] ability to protect [its] interest . . ." Fed. R. Civ. P. 19(a)(2). Although Global correctly points out that Karabu may have waived its rights to complain by dismissing its action against TWA, (see Pl.'s Mem. at 22), Karabu's attempts to protect its interest nevertheless may be practically impaired or impeded by proceeding with this action in its absence. See Ente Nazionale Idrocarburi, 744 F. Supp. at 458 (holding that absent party is necessary party with "real interests that are clearly at stake in this action" where absent party "has clear rights and affirmative obligations under the contract which [the court] must construe"); Ragan Henry Broadcast Group, Inc. v. Hughes, 1992 U.S. Dist. LEXIS 9718, 1992 WL 151308, *2 (E.D. Pa. 1992) ("Generally, where rights sued upon arise from a contract, all parties thereto must be joined.") (citing cases); Travelers Indem. Co. v. Household Int'l, Inc., 775 F. Supp. 518, 527 (D. Conn. 1991) (providing that "a contracting party is the paradigm of an indispensable party.") (citing cases).
This Court's necessary interpretation of the Karabu Ticket Agreement while it would only be persuasive authority for another court's interpretation of the contract will undoubtedly have a practical effect on any subsequent action brought by Karabu concerning the Ticket Agreement. Citing precedent from this district and other Circuits, Global argues that the fact that "a TWA victory here would be 'persuasive precedent' against Karabu in another litigation," is insufficient to establish Karabu as a necessary party. (See Pl.'s Mem. at 22). I disagree. Rule 19(a) does not require that this Court's finding on the meaning of the contract literally bind all other courts that might give attention to the matter. Rather, Rule 19(a)(2) "recognizes the importance of protecting the person whose joinder is in question against the practical prejudice to him which may arise through a disposition of the action in his absence." Fed. R. Civ. P. 19(a) advisory committee's note (emphasis added). Therefore, as a practical matter, Karabu's interests could be impaired or impeded by this Court's resolution of a contract to which it is the primary signatory.
Finally, and perhaps most persuasively, Karabu is a necessary party under Rule 19(a) because its absence may "leave [one of] the persons already [a] party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of the claimed interest." Fed. R. Civ. P. 19(a)(2)(ii). On this question, Global somewhat inadvertently concedes TWA's argument. (See Pl.'s Mem. at 22; Def.'s Reply at 9). Because res judicata will not bind any subsequent court to this Court's interpretation of the contract, as Global previously argued, TWA is at risk of having another court re-decide its rights and obligations under the Agreement. This situation is precisely what Rule 19 seeks to avoid, and for this reason, as well as for the other reasons discussed, I conclude that Karabu is a necessary party under Rule 19(a). See Avon Cosmetics (Febo) Ltd. v. New York Hampton, Inc., 1991 U.S. Dist. LEXIS 6869, 1991 WL 90808, *4 (S.D.N.Y. 1991) (providing that "the facts and circumstances of this case are such that a judgment rendered in Avon's absence exposes [defendant] to a substantial risk of double liability, or at the very least, a substantial risk of double litigation over the same subject matter. Due to basic principles of res judicata and collateral estoppel the Court cannot shape the relief to reduce or eliminate this risk without Avon as a party to this action.").
B. Karabu as an Indispensable Party
According to Rule 19(b), the factors to be considered in determining whether a necessary party under Rule 19(a) is an indispensable party under Rule 19(b) are as follows:
First, to what extent a judgment rendered in the person's absence might be prejudicial to the person or those already parties; second, the extent to which, by protective provisions in the judgment, by shaping relief, or other measures, the prejudice can be lessened or avoided; third, whether a judgment rendered in the person's absence will be adequate; fourth, whether the plaintiff will have an adequate remedy if the action is dismissed for nonjoinder.
Fed. R. Civ. P. 19(b). This determination is an equitable one and is left to a court's discretion. See Envirotech Corp. v. Bethlehem Steel Corp., 729 F.2d 70, 75 (2d Cir. 1984).
"The decision whether to dismiss (i.e., the decision whether the person missing is 'indispensable') must be based on factors varying with the different cases, some such factors being substantive, some procedural, some compelling by themselves, and some subject to balancing against opposing interests." Provident Tradesman Bank & Trust Co. v. Patterson, 390 U.S. 102, 119, 19 L. Ed. 2d 936, 88 S. Ct. 733 (1968). In Felix Cinematografica v. Penthouse International Limited, 99 F.R.D. 167 (S.D.N.Y. 1983), Judge Weinfeld further explained the Supreme Court's analysis by observing that:
Mr. Justice Harlan [in Provident Tradesman Bank & Trust Co. ] particularized four 'interests' to be evaluated in deciding a claim of indispensability. First, the interest of the plaintiff in having a forum, with the strength of this interest dependent upon 'whether a satisfactory alternative exists.' Second, the defendants' interest in avoiding multiple litigation and inconsistent relief. Third, the interests of a non-party whom it could have been desirable to join even though in his absence a judgment is not res judicata as to, or legally enforceable against him. Finally, the interest of the courts and the public in complete, consistent and efficient settlement of controversies."
Id. at 169.
Applying these factors, I find that Karabu is an indispensable party to this action. First, Global has an alternative forum to litigate its breach of contract claim against TWA. There is currently an action pending in the Circuit Court of the State of Missouri between TWA and the Icahn Companies (including Global and Karabu). Indeed, there is a strong suggestion that Karabu and Icahn were dropped as parties to this action when Global amended its complaint because their presence in this case would destroy diversity. Such an act would amount to a blatant attempt at forum shopping.
Second, TWA clearly has a strong interest in avoiding multiple litigation and potentially inconsistent relief if this action was to proceed without Karabu as a party.
Under the Ticket Agreement, Karabu has the right to seek liquidated damages of $ 10 million if TWA is found to have materially breached the contract. (See Ticket Agreement § 12(b)(iii)). Moreover, a judgment in this action in TWA's favor would not bar identical claims by Karabu.
Third, the public's interest in efficient settlement of controversies supports a finding that Karabu is an indispensable party to this action. The absence of Karabu will lead to a risk of further litigation over the breach of contract dispute. All parties to this action are also involved in a state court action in Missouri, and an efficient settlement of controversies dictates that discovery for and resolution of the breach of contract claim proceed in that forum.
As the Second Circuit has stated,
"Equity and good conscience would seem to require that under circumstances such as those present here, parties should present their claims in a state court rather than attempt to manipulate jurisdiction by dropping plaintiffs with a substantial interest in the claim solely for the purpose of retaining jurisdiction in the federal forum."
Envirotech, 729 F.2d at 76 (quoting Potomac Elec. Power Co. v. Babcock & Wilcox Co., 54 F.R.D. 486, 492-93 (D. Md. 1972)).
In sum, I find in equity and good conscience that Karabu is an indispensable party, and grant Global's Rule 12(b)(7) motion to dismiss the state law claims for failure to join an indispensable party. See Prescription Plan Serv. Corp. v. Franco, 552 F.2d 493, 496 (2d Cir. 1977) (a court must take a flexible approach to the issue of whether a party is indispensable, as a "mechanical determination of who is an indispensable party is clearly inappropriate in light of Rule 19(b)'s reference to 'equity and good conscience'").
V. Declaratory Judgment Claim
The Second Circuit has held that "the Declaratory Judgment Act, 28 U.S.C. § 2201, does not expand the jurisdiction of the federal courts." See Cable Television Ass'n of N.Y., Inc. v. Finneran, 954 F.2d 91, 94 (2d Cir. 1992). "A declaratory judgment plaintiff must have an independent basis for federal jurisdiction." Albradco, Inc. v. Bevona, 982 F.2d 82, 85 (2d Cir. 1992). Because I have dismissed the breach of contract claim, there is no independent basis for federal jurisdiction in this case, and the declaratory judgment action must be dismissed as well.
For the reasons set forth above, I GRANT the defendant's motion to dismiss the Sherman and Lanham Act claims for failure to state a claim and the remaining claims for failure to join an indispensable party or for lack of federal jurisdiction. The Clerk of the Court is directed to enter judgment in accordance with this Opinion and Order dismissing the Complaint in its entirety.
Dated : March 24, 1997
New York, New York