The opinion of the court was delivered by: CEDARBAUM
This is an action brought by USAirways Group, Inc. and USAirways, Inc. (collectively "USAir") against British Airways Plc and Britair Acquisition Corp. Inc. (collectively "BA"), and AMR Corporation and American Airlines, Inc. (collectively "AA"). The dispute arises out of an alliance between USAir and BA that began in 1992 and BA's subsequent decision in 1995 to pursue an alliance with AA instead. USAir sues BA for breach of contract, breach of fiduciary duty, and under a respondeat superior theory for acts of the BA directors who are also directors of USAir. USAir also asserts antitrust claims against both BA and AA under Sections 1 and 2 of the Sherman Act and against BA alone under Section 7 of the Clayton Act.
BA and AA move to dismiss the amended complaint (hereafter simply "the complaint") pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6). For the reasons discussed below, AA's motion to dismiss is granted, and BA's motion to dismiss is granted in part and denied in part.
Allegations of the Complaint
I. The Nature of the U.S.-U.K. Airline Industry
Passenger airline service between the United States and the United Kingdom is governed by a bilateral air services agreement known as Bermuda II. Pursuant to Bermuda II, non-stop service to London is permitted from twenty-six gateway cities in the United States. (Am. Compl. P 13.) Under Bermuda II, only two U.S. airlines provide such service to Heathrow Airport in London, AA and United Airlines. (Id. P 15.) Demand for slots by air carriers wishing to expand or enter service to Heathrow far exceeds supply. (Id. P 19(b).) Bermuda II does not, however, restrict U.S. carriers from applying for route authority to service London's Gatwick Airport. (Id. P 16.) The regulatory restrictions of Bermuda II would be removed if the United States and the United Kingdom entered a liberalized air services agreement ("open skies agreement"). The United States already has open skies agreements with several other foreign counties. (Id. P 17.)
II. The Investment Agreement and the USAir-BA Relationship
On January 21, 1993, USAir entered into an investment agreement with BA (the "Investment Agreement") which contemplated a series of three investments by BA in USAir totaling $ 750 million as part of a general plan to integrate and coordinate their operations. (Id. P 23.) Section 2.6(c) of the Investment Agreement requires USAir and BA to use their "best efforts" to obtain Department of Transportation ("DoT") approval of all transactions as promptly as practicable. (Id. P 31.) BA allegedly understood that the key to obtaining DoT approval of Phases Two and Three would be obtaining the British government's consent to liberalization of Bermuda II. (Id. P 33.) Section 6.1(vii) of the Investment Agreement prohibited BA from entering "into any discussion, negotiations, arrangements or understandings with any third party with respect to . . . an extraordinary corporate transaction involving [USAir]." (Id. P 35.) Section 10.1(a) of the Investment Agreement requires USAir and BA to use "reasonable efforts" to consummate all contemplated transactions as soon as practicable. (Id. P 32.)
Pursuant to Phase One, BA paid $ 300 million for a 20 percent voting interest in USAir, and USAir increased its Board of Directors to sixteen by adding three BA appointed board members. (Id. PP 27, 38(a).) On March 15, 1993, DoT issued an order stating that BA's initial investment of $ 300 million did not impair USAir's citizenship under applicable law and approved the proposed code sharing agreement and the wet leases. (Id. P 36.) In connection with the Investment Agreement, USAir relinquished its three U.S.-U.K. routes from Charlotte, Baltimore, and Pittsburgh to Gatwick Airport in London. (Id. P 25.) That relinquishment is embodied in a consent decree filed with the United States District Court for the District of Columbia dated September 30, 1993. (Id. P 37.) USAir alleges that it entered into the consent decree while the Department of Justice was considering whether the relinquishment was necessary, because USAir had already acquiesced in BA's insistence that it relinquish those routes. (Id.) All three of USAir's relinquished routes to Gatwick were subsequently awarded to AA. (Id. P 38(d).) In a separate wet lease agreement, for a share of the profits, USAir leased its aircrafts and crew used on these U.S.-U.K. routes to BA to service BA's flights to the U.S. (Id. P 26.)
In connection with Phase One, USAir and BA entered into a code sharing agreement on January 21, 1993, pursuant to which BA placed its code on many USAir flights. However, the code sharing agreement did not permit USAir to place its code on BA flights. (Id. P 38(b).) A coordination team named the Alliance Leadership Group was formed to finalize and implement projects furthering the alliance. (Id. P 39.) In furtherance of the alliance, BA and USAir entered into several collaborative projects including, among other things, a linked frequent flyer program, joint sales and marketing in the United States, consolidated sales and marketing in Canada, joint ground handling arrangements in New York and Frankfurt, integrated fuel purchasing in the United States, and joint marketing of maintenance services. (Id. PP 38(c), 39.)
Phase Two of the Investment Agreement gave BA an option to invest an additional $ 200 million in USAir. (Id. P 28.) Phase Two involved a comprehensive plan of further integration and cooperation between USAir and BA. Phase Three of the Investment Agreement, which expires on January 21, 1998, gives BA an option to invest an additional $ 250 million in USAir in exchange for preferred stock. (Id. P 29.) The Investment Agreement also provides that in the event that DoT approval for Phases Two and Three occurs before January 21, 1998, USAir and BA may elect to cause BA to complete Phases Two and Three. (Id. P 30.)
Efforts by USAir during 1994 and 1995 to further strengthen the alliance were unsuccessful. USAir alleges that BA did not take any steps to seek liberalization of Bermuda II during the three-year USAir-BA alliance, although both parties understood that such an agreement was a prerequisite for Phases Two and Three. (Id. P 44.) Moreover, USAir's requests to make the code sharing arrangement reciprocal were rejected by BA, and BA also refused to support USAir's efforts to apply independently for routes between the United States and London. (Id. P 50.) BA had allegedly realized by mid-1994 that further cooperation with USAir was not profitable for BA. According to the complaint, BA realized that Phase One had already provided most of the benefits that BA could enjoy from the BA-USAir alliance. (Id. PP 42-46.)
For that reason, according to the complaint, BA did not exercise its best efforts to obtain DoT approval even though there was a window of opportunity to do so during the summer of 1994. (Id. P 45.) USAir alleges that BA actually discouraged British regulators from making concessions to the United States. (Id. P 48.) BA, however, did not disclose its intention not to pursue the BA-USAir alliance and continued to mislead USAir. (Id. P 49.)
III. The BA-AA Relationship
In the fall of 1995, USAir and United Airlines began discussions concerning United Airlines' possible acquisition of USAir. (Id. P 64.) In September of 1995, BA and AA allegedly agreed to undermine United Airline's acquisition of USAir. (Id. P 65.) The strategy of BA and AA was to have AA engage in sham negotiations for acquisition of USAir. (Id. P 67.) AA allegedly forced United Airlines to back away from any plans to acquire USAir by informing United Airlines that it would respond to any bid by United Airlines or would protect AA's competitive position "by other means as necessary." (Id. P 71.) On November 13, 1995, United Airlines announced that it would not seek to acquire USAir. (Id.)
BA and AA allegedly conspired in other ways to prevent USAir from competing in the U.S.-U.K. market. BA allegedly agreed with AA not to seek liberalization of Bermuda II so that USAir would not be able to obtain DoT approval for Phases Two and Three of the Investment Agreement. (Id. P 76.) BA allegedly used its influence to delay ongoing negotiations between the United States and the United Kingdom so that any "open skies" agreement would benefit the BA-AA alliance and not the BA-USAir alliance. (Id.)
On November 19, 1995, BA informed USAir that BA and AA's proposed alliance included a frequent flyer relationship with terms more favorable than the BA-USAir alliance and a reciprocal code sharing agreement. (Id. P 77.) On January 19, 1996, BA announced that it would not exercise its option under Phase Two of the Investment Agreement. (Id. P 78.) However, BA allegedly continued to reassure USAir that any relationship with AA would be "competitive" and that USAir would benefit from such an agreement. BA allegedly misled USAir about the true nature and scope of the proposed alliance with AA until June 11, 1996, when AA publicly announced the BA-AA alliance. (Id. PP 81-85.) The alliance contemplates the pooling of revenues, profit sharing, coordination of flight schedules, integration of passenger and cargo handling between the U.S. ...