United States District Court, S.D. New York
OPINION AND ORDER
G. SCHOFIELD UNITED STATES DISTRICT JUDGE.
Airways, Inc. (“US Airways”) brought antitrust
claims against Sabre Holdings Corporation, Sabre Travel
International Ltd., and Sabre GLBL Inc. (collectively,
“Sabre”), under the Sherman Act, 15 U.S.C. §
1 et seq., which were tried before a jury between October 24
and December 20, 2016. The jury found in U.S. Airways'
favor on one of the two claims tried. That claim alleges that
Sabre unreasonably restrained trade by imposing on U.S.
Airways anticompetitive and unlawful contractual provisions
that harmed competition and enabled Sabre to charge U.S.
Airways higher booking fees than it would have been able to
charge in a competitive market. The jury awarded U.S. Airways
$5, 098, 142, or $15, 294, 426 after trebling. Sabre has
filed a motion for judgment as a matter of law under Federal
Rule of Civil Procedure 50(b) on this claim or, in the
alternative, for a new trial under Rules 50 and 59 of the
Federal Rules of Civil Procedure. For the reasons that
follow, the motion is denied.
The Parties and the Claim
Sabre operates a global distribution system, and Sabre itself
is referred to as a “GDS.” Sabre is one of three
GDSs in the United States. The GDSs provide computer services
that allow participating airlines and other travel providers
to distribute schedule, fare and booking information to
travel agents. The GDSs also provide a means for travel
agents to search for, book and manage travel reservations.
U.S. Airways is one of the airlines that participates
in the Sabre distribution system. U.S. Airways and Sabre
entered into successive contracts whereby Sabre distributed
U.S. Airways' flight and fare information to travel
agents through the Sabre distribution system, and U.S.
Airways paid Sabre a booking fee for its services whenever a
U.S. Airways ticket was sold through Sabre. At issue is the
parties' contract that became effective on February 23,
2011 (the “2011 Contract”).
Summary of Relevant Pre-Trial Procedural History
Airways commenced this action against Sabre on April 21,
2011, alleging four antitrust violations under the Sherman
Act. After a motion to dismiss, two of these claims survived:
(1) Count I, alleging vertical restraints of trade through
contractual agreements with airlines and travel agents
containing anticompetitive provisions and (2) Count IV,
alleging a horizontal agreement among Sabre and its GDS
competitors to limit competition among the GDSs. Fact and
expert discovery proceeded until 2014.
January 2015, after the case was reassigned to me,
Sabre's motion for summary judgment was granted in part.
Among other limitations, U.S. Airways' damages were
limited to those suffered between February 23, 2011 -- when
the 2011 Contract was signed -- and October 30, 2012 -- when
a settlement agreement between the AMR Corporation and Sabre
became effective, barring American and any future merged
parties (like U.S. Airways) from suing for harm suffered
after that date.
effort to obtain a bench trial rather than a jury trial, U.S.
Airways filed an amended complaint in July 2015, in effect
waiving its estimated damages of $210 million after trebling
and seeking only declaratory relief and nominal damages not
to exceed $20. Sabre made a timely offer of judgment under
Rule 68, agreeing to pay $20 in damages plus reasonable costs
and attorneys' fees, and agreeing to entry of judgment
without any admission of liability. U.S. Airways rejected the
offer. Sabre then sought entry of judgment, arguing that its
Rule 68 offer of judgment provided U.S. Airways with complete
relief and that the outstanding demand for declaratory
judgment was moot. In September 2015, Sabre's motion to
dismiss the declaratory judgment demand was granted, but
Sabre's motion to enter judgment was denied without
prejudice to renewal for technical reasons explained in the
with the loss of its declaratory judgment claim and the
likely recovery of only $20 in damages, U.S. Airways filed a
motion to restore the damages it had waived. The motion was
granted in December 2015, with the proviso that U.S. Airways
reimburse Sabre for its costs, including attorneys' fees,
incurred in connection with U.S. Airways' efforts to
obtain a bench trial. U.S. Airways fulfilled the condition,
paying Sabre over $6 million, and filed its Third Amended
Complaint in March 2016.
was set to commence on October 24, 2016. The parties filed
seven Daubert motions seeking to disqualify or limit
the testimony of eight experts, and eleven motions in
limine. The motions were adjudicated between July and
September 22, 2016, with the exception of one motion that was
reserved for trial.
September 26, 2016, the Second Circuit issued its opinion in
United States v. Am. Express Co., 838 F.3d 179 (2d
Cir. 2016) (“Amex”), the Second
Circuit's first decision addressing two-sided markets in
an antitrust case. Whether the market was two-sided or
onesided was also a key issue in this action. Sabre moved for
reconsideration of the summary judgment denial in light of
Amex, arguing that U.S. Airways' claims should
be dismissed. On October 10, 2016, Sabre's motion for
reconsideration was denied. On October 11, 2016, Sabre sought
an adjournment of the trial and the opportunity to re-brief
the Daubert motions in light of Amex. US
Airways opposed the adjournment, even though U.S. Airways had
prepared its case before Amex. Sabre's
application was denied.
trial commenced on October 24, 2016, on the two surviving
claims. The first claim was that certain provisions of the
parties' 2011 Contract harmed competition and caused U.S.
Airways to pay Sabre a supracompetitive booking fee, in
violation of Section 1 of the Sherman Act, 15 U.S.C. §
1. The second claim was that Sabre conspired with its two GDS
competitors to limit competition among them for airlines'
distribution business, in violation of Section 2 of the
Sherman Act, 15 U.S.C. § 2.
nine weeks of trial, the jury returned a verdict. On Count I,
the contract restraints claim, the jury found that the
relevant market was one-sided, that Sabre had unreasonably
restrained trade and that U.S. Airways had been injured as a
result. The jury awarded U.S. Airways $5, 098, 142 in
damages, before trebling. On Count IV, the conspiracy claim,
the jury found for Sabre. In response to hypothetical
questions on the verdict form, the jury also found that, even
assuming that the market were two-sided, Sabre unreasonably
restrained trade, U.S. Airways was injured as a result and
U.S. Airways suffered the same damages of $5, 098, 142.
Standards for Judgment as a Matter of Law and for a New
moves for judgment as a matter of law on Count I under Rule
50(b), Fed.R.Civ.P. Judgment as a matter of law is
appropriate “only if the court, viewing the evidence in
the light most favorable to the non-movant, concludes that a
reasonable juror would have been compelled to accept
the view of the moving party.” MacDermid Printing
Sols. LLC v. Cortron Corp., 833 F.3d 172, 180 (2d Cir.
2016) (citation omitted). “The court cannot assess the
weight of conflicting evidence, pass on the credibility of
witnesses, or substitute its judgment for that of the
jury.” Wiercinski v. Mangia 57, Inc., 787 F.3d
106, 113 (2d Cir. 2015) (internal quotation marks omitted). A
Rule 50 motion may be granted only if “there exists
such a complete absence of evidence supporting the verdict
that the jury's findings could only have been the result
of sheer surmise and conjecture, or the evidence in favor of
the movant is so overwhelming that reasonable and fair minded
[persons] could not arrive at a verdict against [it].”
Warren v. Pataki, 823 F.3d 125, 139 (2d Cir. 2016)
(quoting S.E.C. v. Ginder, 752 F.3d 569, 574 (2d
Cir. 2014) (alteration in original), cert. denied sub
nom. Brooks v. Pataki, 137 S.Ct. 380 (2016).
moves in the alternative for a new trial under Rules 50 and
59(a). A court may grant a new trial only where “the
court determines, in its independent judgment, that the jury
has reached a seriously erroneous result or [if] its verdict
is a miscarriage of justice.” Crawford v. Tribeca
Lending Corp., 815 F.3d 121, 128 (2d Cir. 2016)
(internal quotation marks omitted). A district court may
grant a new trial “even if some evidence supports the
verdict, ” id., but “precedent counsels
that trial judges must exercise their ability to weigh
credibility with caution and great restraint, as a judge
should rarely disturb a jury's evaluation of a
witness's credibility.” Raedle v. Credit
Agricole Indosuez, 670 F.3d 411, 418 (2d Cir. 2012);
accord In re Joint E. & S. Dist. Asbestos
Litig., 52 F.3d 1124, 1135 (2d Cir. 1995) (it is for the
jury to decide between conflicting expert testimony).
The Legal Framework Governing U.S. Airways' Antitrust
protect competition in the marketplace, Section 1 of the
Sherman Act prohibits “[e]very contract, combination in
the form of trust or otherwise, or conspiracy, in restraint
of trade or commerce.” 15 U.S.C. § 1. “To
prove a § 1 violation, a plaintiff must demonstrate: (1)
a combination or some form of concerted action between at
least two legally distinct economic entities that (2)
unreasonably restrains trade.” Amex, 838 F.3d
at 193 (quoting Geneva Pharms. Tech. Corp. v. Barr Labs.
Inc., 386 F.3d 485, 606 (2d Cir. 2004)).
Airways does not allege that Sabre's conduct challenged
in Count I was illegal per se, the claim is
appropriately analyzed under the rule of reason. Id.
at 193-94. Under the rule of reason's three-step
burden-shifting framework, a plaintiff must show first that a
defendant's actions had an adverse effect on competition
in the relevant market. A plaintiff can satisfy this first
step by showing that the challenged restraints “had an
actual adverse effect on competition as a whole in
the relevant market.” Id. at 194 (quoting
Capital Imaging Assocs., P.C. v. Mohawk Valley Med.
Assocs., Inc., 996 F.2d 537, 546 (2d Cir. 1993)).
Alternatively, a plaintiff can establish anticompetitive
effects indirectly by showing that the defendant has
“sufficient market power to cause an adverse effect on
competition.” Id. (quoting Tops Mkts.,
Inc. v. Quality Mkts., Inc., 142 F.3d 90, 96 (2d Cir.
1998)). “A plaintiff seeking to use market power as a
proxy for adverse effect must show market power, plus some
other ground for believing that the challenged behavior could
harm competition in the market . . . .” Id. at
195 (quoting Tops Mkts., 142 F.3d at 97). Under
either inquiry, the boundaries of the relevant product market
and geographic market are critical aspects of proving harm.
Here, the parties agreed that the relevant geographic market
is the United States.
second step, the burden shifts to the defendant “to
offer evidence of any procompetitive effects of the restraint
at issue.” Id. At the third step, “the
burden shifts back to the plaintiff to prove that any
legitimate competitive benefits offered by defendant could
have been achieved through less restrictive means.”
Id. (quoting Geneva Pharms., 386 F.3d at
507) (alteration in original). Ultimately, “[t]he
overarching standard is whether defendants' actions
diminish overall competition, and hence consumer
welfare.” Id. at 195 (quoting K.M.B.
Warehouse Distribs., Inc. v. Walker Mfg. Co., 61 F.3d
123, 128 (2d Cir. 1995)).
addition to showing that a defendant's behavior
unreasonably restrained trade, a plaintiff also must prove
that a defendant's violation of the antitrust laws caused
the plaintiff to suffer injury to its business or property.
15 U.S.C. § 15; Gelboim v. Bank of Am. Corp.,
823 F.3d 759, 772-74 (2d Cir. 2016), cert. denied,
137 S.Ct. 814 (2017). If a defendant is found to have
violated the antitrust laws, the jury must then determine the
amount of plaintiff's damages, if any.
was sufficient evidence introduced at trial from which the
jury could reasonably have found as follows:
The History of the GDS Business
GDSs use computerized reservation systems that evolved out of
those developed by the airlines for their own use beginning
in the 1960s. (Tr. 964:23-965:1; 968:13-21.) These systems
were first made available to travel agents in the mid-1970s.
(Id.) The airlines' systems offered not only
their own fights and fares, but also those of other carriers
in order to attract users to their platform. (Tr.
977:21-978:2.) As the systems became more established, the
airlines began to charge other airlines booking fees for
bookings made through their platform. (Tr. 978:16-979:11.) In
1984, the Department of Justice and the Civil Aeronautics
Board concluded that the airlines had engaged in
discriminatory pricing and began to regulate the reservation
systems. (Tr. 981:3; 979:7-11; PX-521.)
1992, the U.S. Department of Transportation
(“DOT”) enacted a “mandatory
participation” rule, which required the airlines to
offer the same flights and fares on other airline reservation
systems that they made available on their own systems. (Tr.
987:2-989:18.) This rule was the genesis of some of the
contractual provisions at issue in this case. The regulations
standardized the information available, thereby encouraging
travel agents to search and book through a single
airline's reservation system, a practice known as
“single homing” that persists today. (Tr.
989:21-990:9; 995:3-8; 995:23-996:5; 2117:4-2119:17.)
the same time as the 1992 rules were issued, airlines began
divesting themselves of the reservation systems business,
creating GDSs that were independent of the airlines. (Tr.
990:15-991:4.) GDSs were also consolidating and the internet
was beginning to change the way that airline tickets were
bought and sold. (Tr. 991:5-22.) In 2004, after 20 years of
regulation, the DOT deregulated the GDS industry. (Tr.
1006:3-8; PX-007.) The DOT found that each of the GDSs had
market power over most airlines because travel agents
generally “single-homed” and the airlines were
dependent upon the GDSs to reach traditional travel agents.
(PX-007.0013-.0015.) However, the DOT expected that new
technologies would create sufficient competition in the
airline ticket distribution market to erode the GDSs market
power over time. (Tr. 997:6-1002:23; 1006:3-8, PX-007.003.)
The GDS Business
is one of only three GDSs in the United States, with Amadeus
and Travelport. (Tr. 448:6-12.) Sabre is the largest and
controls over 50% of the market. (Tr. 1365:14-1366:1.) Since
deregulation, the number of GDS competitors has dropped from
four to three. (Tr. 1004:1-8.) No new GDS has entered the
market since the 1980s. (Tr. 962:24-963:1, 1006:9-10.) U.S.
Airways estimated that 40% percent of its revenues were
booked through Sabre, and another 25% through the other GDSs.
(Tr. 202:15-203:6; PX 1178.0001.)
and mortar” travel agencies book almost exclusively
through the GDSs. (Tr. 2034:1-16; 2039:25-2041:4; 2049:3-14.)
These travel agencies' clients are primarily corporate
travelers, who are higher value customers for airlines. (Tr.
202:4-14.) Travel agencies frequently
“single-home” with one GDS. In 2011, 94% of
travel agency locations (i.e. travel agency offices,
sometimes within a large multi-office travel agency) used a
single GDS. (PX-1181.) Because of single-homing, U.S. Airways
must participate in each of the GDSs to reach the corporate
travelers whose travel agents book through that GDS. (Tr.
1254:1-20; 2031:2-21; 2059:5-2060:7.)
earn revenues through booking fees paid by the airlines and
other travel providers. (See Tr. 443:3-7; 452:21-23;
529:2-530:7; 978:16-19.) The GDSs do not charge travel agents
for GDS services. Instead, travel agencies receive
incentive payments from GDSs, as well as commission payments
from airlines. (Tr. 1864:18-25; 2054:17-2057:6.) From 2006
through 2012, Sabre paid more than $1.2 billion in incentive
fees to travel agents. (Tr. 1272:17-1273:7; 2057:17-2058:25;
PX-766.) U.S. Airways' expert, Professor Joseph Stiglitz,
opined that these “incentive payments” serve to
keep the travel agents loyal to its chosen GDS, but do not
benefit the airlines. (Tr. 1379:17-23; 1905:17-19;
The Challenged Contractual Provisions
in 2006, the U.S. Airways' contract with Sabre included
the same or similar provisions at issue here. Claims based on
those provisions in the 2006 contract were dismissed as time
barred. The challenged restraints, collectively referred to
as the “full content” provisions (Tr.
5261:15-5262:25), as they appear in the parties' 2011
Contract (PX-006) are:
• A “No Discounts” provision, also referred
to as a “parity” provision, prohibiting U.S.
Airways from providing lower fares through other, non-Sabre,
channels. The contract specifically required that “in
no case will the Fares provided through the Sabre GDS for
Bookings in the Sabre GDS . . . be more expensive or less
comprehensive than the Fares offered by [US Airways] via any
Reservation Outlet.” (PX-006.0013.)
• A “No Surcharge” provision, preventing
U.S. Airways from charging or collecting from travel agents a
fee or higher prices for booking through Sabre. The contract
stated that U.S. Airways “shall not charge to or
collect from any Sabre Subscriber a service fee or any
similar charge.” (PX-006.0027.)
• A “No Better Benefits” provision,
requiring U.S. Airways to provide Sabre GDS service
subscribers access to “the same types, amounts and
levels of products, services, functionality, enhancements,
promotional opportunities, . . . incentives, commissions, . .
. benefits and rights” that U.S. Airways offered to
users of any other booking channel. (PX-006.0003.)
• A “No Direct Connects” provision,
preventing U.S. Airways from inducing travel agents, or their
customers, from directly connecting their reservation system
with the airlines'. The contract provided, “[US
Airways] shall not require or induce any Sabre Subscriber to
book on any Participating Carrier Internet Site.” The
contract further stated, “[US Airways] will not . . .
in any other manner whatsoever require or provide
commissions, compensation or other benefits or rights . . .
or otherwise encourage, promote or induce . . . Sabre
Subscribers (or their customers) to circumvent the Sabre
U.S. Airways merged with America West Airlines in 2005, the
airline tried unsuccessfully to avoid the challenged
restraints. (Tr. 186:21-189:4.) Ultimately, U.S. Airways had
no choice but to accept them in the U.S. Airways-Sabre 2006
contract for fear of being removed from the Sabre GDS or
being retaliated against, for example, through “display
biasing, ” which means reordering search results as
they appear in the system to disadvantage a particular
airline. (Tr. 190:19-193:3.) When the contract ...