The air in a taxicab company’s Sherman Act Section 1 challenge to an exclusive operating agreement between an airport authority and a competing taxicab company went flat when the U.S. District court for the Middle District of Pennsylvania held the company failed to state a claim.  Capital City Cab Service, Inc. v. Susquehanna Area Regional Airport Authority, No. 1:06-CV-671 (M.D. Pa. filed Apr. 18, 2007).

Plaintiff filed its complaint after a competitor, American Taxi, and defendant, Susquehanna Area Regional Airport Authority (SARAA), entered into an exclusive operating contract at Harrisburg International Airport after a competitive bidding process.  The court dismissed plaintiff’s first amended complaint and allowed plaintiff to file a second amended complaint.  Plaintiff’s proposed second amended complaint included the Section 1 cause of action and a cause of action for violation of the Fourteenth Amendment.

For its Section 1 cause of action, plaintiff alleged that the exclusive operating agreement gave American Taxi exclusive access to garage facilities and the taxi queue at Harrisburg International Airport, thereby limiting plaintiff’s ability to compete.  Plaintiff also alleged that SARAA’s Director of Aviation and American Taxi colluded to ensure that American Taxi would win the contract by manipulating insurance requirements during the bidding process.

In hearing plaintiff’s motion for leave, the court first laid out the appropriate standard of review.  That is that leave must generally be granted unless equitable considerations such as undue delay, bad faith, dilatory motive, prejudice or futility, render it otherwise unjust.  No. 1:06-cv-00671-YK at 3, citing Arthur v. Maersk, Inc., 434 F.3d 196,204 (3d Cir. 2006) and In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1434 (3d Cir. 1997).  If, under any reasonable reading of the complaint, the plaintiff may be entitled to relief, the court should permit a party to amend its pleading.

Plaintiff did not meet this standard.  Section 1 provides that every contract, combination or conspiracy in restraint of trade is illegal.  To state a cause of action for a nonprice restraint such as exclusive dealing, a party must allege that the conduct unreasonably restrained competition in the relevant antitrust market.  However, throughout its briefs, Plaintiff’s arguments missed the mark by focusing on a different issue, whether Pennsylvania state law allowed SARAA to enter into the exclusive contract.  The court noted that it had already decided that it does.  A necessary step to alleging that an exclusive agreement unreasonably restrains trade is to define the relevant product and geographic markets in which the restraint occurred.  Plaintiff did not do so.  In its reply to defendant’s opposition brief, it claimed that its proposed second amended complaint identified Harrisburg International Airport as the relevant market.  Plaintiff did not allege how competition in its alleged relevant market would be affected and its allegations did not refer to other markers of a relevant antitrust market such as reasonable interchangeability of substitute products and cross-elasticity of demand.  Thus, the court found, plaintiff did not meet the minimum requirements to alleging that the exclusive agreement violated Section 1.

Moreover, even if Harrisburg International Airport constituted a cognizable relevant market, the court continued, plaintiff did not allege that the exclusive agreement between American Taxi and SARAA was unreasonable.  Plaintiff merely alleged that the agreement substantially limited its ability to compete for outbound fares from Harrisburg International Airport.  Plaintiff thus alleged injury to a competitor, not to competition in a properly defined relevant market.  The court therefore found plaintiff’s Section 1 claim insufficient as a matter of law and that amendment of plaintiff’s antitrust cause of action would be futile.

The court did grant plaintiff leave to amend its remaining cause of action, violation of the Fourteenth Amendment.  Plaintiffs company is owned by a Muslim and its drivers are Muslim.  Plaintiff’s proposed amendments to this cause of action include allegations that American Taxi was the only Caucasian-owned taxicab company in the metropolitan market, that SARAA’s director discriminated against it by not allowing its drivers to conduct prayer rituals at Harrisburg International Airport, and that the director said "he wanted no Arabs at his airport".  The court found these allegations sufficient to state a claim of intentional discrimination proscribed by the Fourteenth Amendment.

Authored By:

Heather M. Cooper

(213) 617-5457