a district court need not consider “[f]rivolous, conclusive, or general objections”
How later courts described this case
- a district court need not consider “[f]rivolous, conclusive, or general objections”
Written by the judges who cited it.
The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
TEXARKANA DIVISION
TRAVELPASS GROUP LLC, PARTNER §
FUSION INC, RESERVATION §
COUNTER LLC, § CIVIL ACTION NO. 5:18-CV-00153-
§ RWS-CMC
§
Plaintiffs,
§
§
v.
§
§
CAESARS ENTERTAINMENT
§
CORPORATION, CHOICE HOTELS
§
INTERNATIONAL INC, HILTON
§
DOMESTIC OPERATING COMPANY
§
INC., MARRIOTT INTERNATIONAL
§
INC, RED ROOF INNS INC, SIX
§
CONTINENTS HOTELS INC,
§
WYNDHAM HOTEL GROUP LLC,
§
HYATT CORPORATION,
§
§
Defendants. §
ORDER
The above-entitled and numbered civil action was referred to United States Magistrate
Judge Caroline M. Craven pursuant to 28 U.S.C. § 636. On August 29, 2019, the Magistrate Judge
issued a Report and Recommendation (Docket No. 183) (“R&R”), recommending the following
motions be denied:
• Joint Motion to Dismiss on Behalf of Defendants Hilton Domestic Operating
Company Inc., Hyatt Hotels Corporation, Marriott International, Inc., Red Roof
Inns, Inc., Six Continents Hotels, Inc. and Wyndham Hotel Group, LLC (Docket
No. 53);
• Defendant Caesars Entertainment Corporation’s Motion to Dismiss for Failure
to State a Claim (Docket No. 55) and supplement thereto (Docket No. 159) and
• Defendant Choice Hotels International, Inc.’s Motion to Dismiss for Failure to
State a Claim (Docket No. 56).
Only Caesars Entertainment Corporation filed objections to the R&R’s findings regarding
its individual motion to dismiss. Docket No. 187. Plaintiffs responded to Caesars’ objections.
Docket No. 190. The Court conducts a de novo review of only the objected to portions of the
Magistrate Judge’s findings and conclusions. 28 U.S.C. § 636(b)(1)(C).
BACKGROUND
Plaintiffs are downstream online travel agencies (“OTAs”) that sell hotel rooms from
different chains to consumers in the United States. Docket No. 1 ¶ 45. According to Plaintiffs,
there are two types of OTAs: (1) Gatekeeper OTAs, including Expedia and Priceline, that maintain
direct relationships with major hotel chains to market hotel inventory online and (2) Downstream
OTAs, like Plaintiffs, that have affiliate agreements with Gatekeeper OTAs for access to hotel
inventory. Id. ¶ 46. Plaintiffs’ business model includes bidding on branded keyword search results
to attract hotel consumers to the hotel inventory on its websites. Id. ¶ 48.
To use branded keyword advertising, Plaintiffs and other advertisers bid with search
engines, like Google, to place their ads at the top of a search engine’s results page when certain
keywords are searched. Id. ¶ 5. Higher bids receive better placement. Id. Historically, according
to Plaintiffs, an individual searching for a particular hotel chain would see results for that brand,
competing hotel brands, Gatekeeper OTAs and Downstream OTAs, all of which submitted high
bids on that keyword. Id. ¶¶ 6, 67.
Plaintiffs filed this antitrust case against several hotel chains: (1) Caesars Entertainment
Corporation (“Caesars”); (2) Choice Hotels International, Inc.; (3) Hilton Domestic Operating
Company, Inc.; (4) Hyatt Corporation; (5) Marriott International, Inc.; (6) Red Roof Inns, Inc.; (7)
Six Continents Hotels, Inc. and (8) Wyndham Hotel Group, LLC. Id. Plaintiffs allege these hotel
chains and others conspired to eliminate interbrand competition on keyword searches. Id. ¶ 1.
Specifically, Plaintiffs assert that the defendants conspired horizontally with each other not to
engage in branded keyword advertising for a competitors’ search term. Id. Plaintiffs also argue
“the Defendant Hotels implemented a series of additional, or secondary, horizontal conspiracies
under which Gatekeeper OTAs (1) agreed to stop bidding on branded search keywords and (2)
also agreed to force Downstream OTAs to follow suit.” Id. ¶ 9. According to Plaintiffs, the
Gatekeeper OTAs, at the instruction of the defendant hotels, removed the Downstream OTAs
access to hotel inventory if the Downstream OTAs did not stop branded keyword search
advertising. Id. ¶ 149. Plaintiffs allege these conspiracies harmed consumers as well as Plaintiffs’
business. Id. ¶ 152; see also id. ¶¶ 151, 157, 160, 162–63.
Plaintiffs asserted the following claims against all defendants: (1) a violation of the
Sherman Act, 15 U.S.C. § 1 (per se bid rigging/group boycott/market division); (2) a violation of
the Sherman Act, 15 U.S.C. § 1 (unreasonable restraint of trade); (3) a violation of related Utah
Antitrust Act § 1 and (4) tortious interference with prospective business relations. Id. ¶ 164–94.
Caesars moved to dismiss under Federal Rule of Civil Procedure 12(B)(6), arguing Plaintiffs failed
to include specific factual allegations that Caesars engaged in an antitrust conspiracy.1 Docket No.
55. According to Caesars, Plaintiffs alleged only that Caesars joined an industry group with other
hotel defendants and that Plaintiffs received word from a Gatekeeper OTA that Caesars was cutting
off Plaintiffs’ access to Caesars’ room list. Id. at 5. Caesars asserts Plaintiffs failed to point to
any agreement between itself and any other horizontal competitor to deny access to its hotel rooms.
Id. at 8. Caesars argues that Plaintiffs were required to plead some factual allegation sufficient to
1 Defendants Hilton, Hyatt, Marriott, Red Roof, Six Continents and Wyndham filed a joint motion to dismiss for
failure to state a claim, which Caesars and Choice incorporated by reference. Docket No. 53. Like Caesars, Choice
also filed a separate motion to dismiss for failure to state a claim (Docket No. 56). These motions to dismiss were
discussed in the R&R. However, none of the defendants filed objections to those findings pertaining to the joint
motion to dismiss or Choice’s motion to dismiss. The Court is of the opinion the findings and conclusions contained
in the R&R as to these defendants are correct.
show a conspiracy between it and the other horizontal competitors, and the facts included in the
Complaint fail to rise to the pleading standards mandated in Ashcroft v. Iqbal, 556 U.S. 662 (2009),
and Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007).
REPORT AND RECOMMENDATION
The Magistrate Judge, in her R&R, found that Plaintiffs allege sufficient facts to state a
plausible claim for antitrust conspiracy against all the defendants collectively. See R&R at 79.
Regarding Caesars’ motion to dismiss, the Magistrate Judge viewed the facts in the light most
favorable to Plaintiffs and concluded that Plaintiffs sufficiently state an antitrust conspiracy claim
against Caesars at this stage of the litigation. Id. at 71. The R&R recommended denying Caesars’
individual motion to dismiss. Id.
OBJECTIONS
Caesars objected to the Magistrate Judge’s findings on its individual motion to dismiss.
Docket No. 187 at 2–3. Caesars objects to the R&R’s finding that the complaint sufficiently stated
a claim under Iqbal and Twombly. Id. at 2. According to Caesars, the R&R improperly found
Plaintiffs’ allegations—that Caesars joined an industry trade association with alleged co-
conspirators around the same time that it asked Plaintiffs to stop bidding on Caesars-related
keywords—sufficiently state an antitrust conspiracy claim. Id. Caesars asserts these two
allegations form the only facts against Caesars and are “precisely the speculative and conclusory
allegations that are no longer permitted under Iqbal and Twombly.” Id. at 3. Caesars urges the
Court to decline to adopt the R&R, arguing the Magistrate Judge’s conclusion violates
longstanding Fifth Circuit precedent. Id.
STANDARD OF REVIEW
Under Federal Rule of Civil Procedure 12(b)(6), the Court utilizes a “two-pronged
approach” in considering a motion to dismiss. Iqbal, 556 U.S. at 679. First, the Court identifies
and excludes legal conclusions that “are not entitled to the assumption of truth.” Id. Second, the
Court considers the remaining “well-pleaded factual allegations.” Id. All allegations must be
accepted as true and viewed in the light most favorable to a plaintiff. In re Katrina Canal Breaches
Litig., 495 F.3d 191, 205 (5th Cir. 2007). A plaintiff’s complaint survives a defendant’s Rule
12(b)(6) motion to dismiss if it includes facts sufficient “to raise a right to relief above the
speculative level.” Id. (quotations and citations omitted).
“Antitrust claims do not necessitate a higher pleading standard.” Marucci Sports, L.L.C.
v. Nat’l Collegiate Athletic Ass’n, 751 F.3d 368, 373 (5th Cir. 2014). The inquiry considers
whether a plaintiff has pleaded “enough facts to state a claim to relief that is plausible on its face.”
Twombly, 550 U.S. at 570. “ ‘[D]etailed factual allegations’ ” are not required. Iqbal, 556 U.S. at
678 (quoting Twombly, 550 U.S. at 555). However, a complaint must allege “sufficient factual
matter, accepted as true, to ‘state a claim that is plausible on its face.’ ” Id. (quoting Twombly, 550
U.S. at 570). “A claim has facial plausibility when the pleaded factual content allows the court to
draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing
Twombly, 550 U.S. at 556). This determination is a “context-specific task that requires the
reviewing court to draw on its judicial experience and common sense.” Id. at 679. The Court may
consider “the complaint, any documents attached to the complaint, and any documents attached to
the motion to dismiss that are central to the claim and referenced by the complaint.” Lone Star
Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010).
DE NOVO REVIEW
The R&R thoroughly reviews the allegations in the complaint. R&R at 70–71. Prior to
late 2016, Caesars never actively or aggressively attempted to restrain Plaintiffs’ branded keyword
bidding. Docket No. 1 ¶ 142. In November 2016, senior executives from Caesars joined the
American Hotel and Lodging Association (“AHLA”) board of directors. Id. at ¶ 141. After joining
the AHLA board, Caesars actively enforced branded keyword restriction provisions, including
cutting off Plaintiffs’ access to Caesars’ hotel inventory by March 2017. Id. at ¶ 144. The
Magistrate Judge concluded these facts, taken as true and viewed in the light most favorable to
Plaintiff, state a claim for antitrust conspiracy against Caesars. R&R at 71. The Court agrees—
Caesars’ objections are without merit.
Caesars contends two cases demand the opposite conclusion: In re Online Travel Co.
(OTC) Hotel Booking Antitrust Litig., 997 F. Supp. 2d 526, 541 (N.D. Tex. 2014), and Marucci,
751 F.3d at 375. The R&R relies on both cases and includes a very thorough review of In re OTC.
See R&R passim. Caesars fails to explain how the Magistrate Judge allegedly erred in her analysis
of either case. See Battle v. U.S. Parole Comm’n, 834 F.2d 419, 421 (5th Cir. 1987) (a district
court need not consider “[f]rivolous, conclusive, or general objections”). The Magistrate Judge’s
analysis is correct, but nonetheless, the Court will briefly address both cases.
Caesars highlights In re OTC’s observation that “just because [a defendant] belonged to
the same trade guild [or association] as one of [its] competitors when the parallel behavior occurs
does not, without more, suggest a conspiracy formed. Put differently, the fact that defendants’
decision-makers had [t]he opportunity to meet and conspire at trade shows, standing alone, isn’t
suspicious.” 997 F. Supp. 2d at 541 (quotations omitted).
Caesars’ analysis omits a crucial failure in the In re OTC pleading: “since the
communications at these conferences took place no earlier than 2004, and the conspiracy allegedly
formed in 2003, it is not clear these facts are even relevant to the issue at hand.” Id. Plaintiffs
here allege that Caesars never restrained trade before joining the AHLA, but immediately after
joining the group, Caesars joined the alleged conspiracy. Docket No. 1 ¶ 141–144. These
allegations, coupled with the preceding allegations about the larger conspiracy, are more than
“enough factual matter (taken as true) to suggest that an agreement was made.” Twombly, 550
U.S. at 556.
As for Marucci, the plaintiff’s complaint only “posit[ed], without further detail, that [two
defendants] ‘have engaged in a conspiracy’ which ‘consist[ed] of an understanding and concert of
action among the defendants to enforce [an industry standard] with the purpose and effect of
excluding new entrants and insulating [the alleged coconspirators] from competition in a relevant
market.’ ” 751 F.3d at 375 (quoting the plaintiff’s Second Amended Complaint). Caesars points
to the Fifth Circuit’s conclusion that these allegations failed to “allege any specific facts
demonstrating an intention on the part of the [defendants], or any other party to engage in a
conspiracy.” 751 F.3d at 375 (emphasis in original). According to Caesars, Plaintiffs’ complaint
likewise “impermissibly replaces specific facts demonstrating an intention on the part of [the
defendants] to engage in a conspiracy with conclusory allegations that support one of many
inferential possibilities.” Docket No. 187 at 4 (quotations omitted).
Again, Caesars’ objection misses the mark. The Marucci complaint failed to allege any
facts that any defendant engaged in a conspiracy. 751 F.3d at 375. Here, Plaintiffs’ complaint
lays out how the defendants formed a conspiracy that Caesars later joined Indeed, the allegations
against Caesars fall squarely within Marucci’s “factual enhancement” categories including: (1)
Caesars’ economically irrational unilateral keyword bidding restrictions; (2) the Defendants’
opportunity to exchange information relative to the alleged conspiracy when Caesars joined the
AHLA and (3) direct evidence that the AHLA routinely suggested the Defendants undertake
actions bordering on collusion. See Docket No. | at {| 87-91, 124-31, 142-44. The Magistrate
Judge correctly concluded that these allegations are not insufficient—a conclusion the other
defendants did not object to.
CONCLUSION
The findings and conclusions of the Magistrate Judge are correct, and the objections are
without merit as to the ultimate findings of the Magistrate Judge. The Court hereby ADOPTS the
Report of the United States Magistrate Judge (Docket No. 183) as the findings and conclusions of
this Court. Accordingly, it is hereby
ORDERED that Defendant Caesars Entertainment Corporation’s Motion to Dismiss for
Failure to State a Claim (Docket No. 55) and the supplement thereto (Docket No. 159) are
DENIED and Caesars’ objections ace OVERRULED. It is further
ORDERED that the Joint Motion to Dismiss on Behalf of Defendants Hilton Domestic
Operating Company Inc., Hyatt Hotels Corporation, Marriott International, Inc., Red Roof Inns,
Inc., Six Continents Hotels, Inc. and Wyndham Hotel Group, LLC (Docket No. 53) is DENIED.
It is further
ORDERED that Defendant Choice Hotels International, Inc.’s Motion to Dismiss for
Failure to State a Claim (Docket No. 56) is DENIED.
So ORDERED and SIGNED this 27th day of September, 2019.
foehert LU brrnects. G2.
ROBERT W. SCHROEDER III
Page 8 of 8 UNITED STATES DISTRICT JUDGE