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July 24, 2001


The opinion of the court was delivered by: J. Curtis Joyner, J.


This antitrust class action suit has been brought before the Court on motion of the defendants to dismiss for lack of subject matter jurisdiction and for failure to state a claim upon which relief may be granted pursuant to Fed.R.Civ.P.Nos. 12(b)(1) and 12(b)(6). For the reasons set forth below, the motion to dismiss for lack of subject matter jurisdiction shall be granted.

History of the Case

This action arises out of the decision of the International Air Transport Association ("IATA")*fn1 at the July 19-23, 1999 meeting of its Passenger Tariff Coordinating Conference in Montreal, Canada to lower the commission paid to IATA-accredited travel agents in Central America and Panama to a flat rate of 7%. Prior to this time, the commission rates paid to travel agents in Latin America and the Carribean varied, depending upon the country. In the case of Peru, Panama, Bolivia and Nicaragua, the commission rate was as high as 10-11%.

Plaintiffs aver that, despite the reflection in the meeting's minutes that the "U.S.-based TC [Tariff Commission] Members were prohibited by their authorities from participating in such discussions [concerning the proposal to lower the commission rates in Latin America and the Caribbean] and . . . were therefore not present for this part of the Agenda," the four defendant airlines were, in fact, ". . . aware of and endorsed and encouraged IATA to adopt and implement this change in commission structure" and "assisted in planning this agenda, were aware this vote would be taken, and endorsed the Tariff Conference's lowering the commission rates." (Complaint, ¶¶ 37, 38, 40). Plaintiffs allege that the defendants thus acted in concert to lower the commission rates, in violation of United States antitrust laws with devastating effects upon plaintiffs' businesses and the businesses of the members of the proposed class*fn2 whom they seek to represent. (Complaint, ¶ s47-49).

Defendants now move to dismiss the plaintiffs' complaint in its entirety on the grounds that Plaintiffs lack antitrust standing and this court lacks subject matter jurisdiction as the American antitrust laws do not regulate competitive conditions in foreign countries. In addition to these arguments, Defendant IATA further seeks dismissal of the complaint against it because (1) all of the alleged conduct of IATA and the conference members was expressly approved and granted antitrust immunity under Sections 413 and 414 of the Federal Aviation Act, 49 U.S.C. § 41308-41309; and (2) it lacks the requisite "minimum contacts" with this forum such as would justify this Court's exercise of personal jurisdiction over it. Because we find that we do not have subject matter jurisdiction to hear this matter, we do not address the defendants' alternative arguments.

Standards Governing Rule 12(b)(1) and 12(b)(6) Motions

When defendants move to dismiss a complaint under Rule 12(b)(1) for failure to allege subject matter jurisdiction, the allegations of the complaint must be treated as true and the plaintiff afforded the favorable inferences to be drawn from the complaint. N.E. Hub Partners, L.P. v. CNG Transmission Corp., 239 F.3d 333, 341 (3rd Cir. 2001), citing Mortensen v. First Federal Savings & Loan Ass'n., 549 F.2d 884, 891 (3rd Cir. 1977); Fed.R.Civ.P. 8(f). A challenge to a complaint for failure to allege subject matter jurisdiction is known as a "facial" challenge, and must not be confused with a "factual" challenge contending that the court in fact lacks subject matter jurisdiction, no matter what the complaint alleges, as factual challenges are subject to different standards. Id., at n. 7. See Also: 5A Wright & Miller, Federal Practice & Procedure Civil 2d § 1350, at 212-18 (1990). Thus, a Rule 12(b)(1) motion may be treated as either a facial or factual challenge to the court's subject matter jurisdiction. Gould Electronics, Inc. v. United States, 220 F.3d 169, 176 (3rd Cir. 2000). In reviewing a facial attack, the court must only consider the allegations of the complaint and documents referenced therein and attached thereto, in the light most favorable to the plaintiff. Id, citing PBGC v. White, 998 F.2d 1192, 1196 (3rd Cir. 1993). In reviewing a factual attack, the court may consider evidence outside the pleadings. Id., citing Gotha v. United States, 115 F.3d 176, 178-79 (3rd Cir. 1997). In any event, on a motion to dismiss for lack of subject matter jurisdiction it is the plaintiff who has the burden of persuading the court that it has jurisdiction. Gould, 220 F.3d at 178.

In contrast, a motion to dismiss pursuant to Rule 12(b)(6) may be granted only if, accepting all well pleaded allegations in the complaint as true, and viewing them in the light most favorable to plaintiff, plaintiff is not entitled to relief. In re Burlington Coat Factory Securities Litigation, 114 F.3d 1410, 1420 (3d Cir. 1996); Bartholomew v. Fischl, 782 F.2d 1148, 1152 (3d Cir. 1986). "The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Id. quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 40 L.Ed.2d 90, 94 S.Ct. 1683 (1974).


As noted, Defendants first seek to have the plaintiffs' complaint dismissed because it fails to allege any anticompetitive effect on United States domestic commerce thus depriving this Court of subject matter jurisdiction. In light of the current state of the record, Defendants thus appear to be raising a facial challenge to subject matter jurisdiction as well as to the plaintiffs' statement of a claim upon which relief can be granted.

Plaintiffs' complaint seeks monetary damages and an adjudication that by conspiring and enacting the agreement to lower their commission rates, the defendants' conduct violated the Sherman Act, 15 U.S.C. § 1. Under that Act,

Every contract, combination in the form of trust or otherwise, or conspiracy or restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court.

Generally speaking, American antitrust laws do not regulate the competitive conditions of other nations' economies. Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 582, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); United States v. Aluminum Co. of America, 148 F.2d 416, 443 (2nd Cir. 1945). The Sherman Act does reach conduct outside our borders, but only when the conduct has an effect on American commerce. Matsushita, ...

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