Petition for Writ of Certiorari — E. A. McQuade Tours, Inc. v. Consolidated Air Tour Manual Committee

FILE COPY

NOV 9 1972

preme Court of the Unit ed S} ——

OCTOBER TERM, 1972

No. 7 Q= 706

E. A. MCQUADE TOURS, INC.,

Petitioner,

CONSOLIDATED AIR TOUR MANUAL COMMITTEE, et al,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

MORRIS J. LEVIN

1620 Eye Street, N.W.

Washington, D.C. 20006

THOMAS M. COKER, JR.

2803 East Commercial Blvd.

Fort Lauderdale, Florida 33308

Attorneys for Petitioner

Of Counsel

COKER & CARLON

_ 2803 East Commercial Blvd.

. Fort Lauderdale, Florida 33308

(i)

TABLE OF CONTENTS

Page

al a ne we 8

ais ites hs a whee bo oooh halk 0 ee & 2

WESTIONS PRESENTED ............ccccccccecs 3

ONSTITUTIONAL PROVISION AND STATUTES

ENE iw a 5st SS 'bane SOUS @ 6 0b'0.0'S oie cee as 4

a eS ods cuss 6 0 ba bee 60 0's 5

1. Background to the Proceeding ................. 5

2. Proceedings at the District Court ............... 8

3. Decision of the Court of Appeals ............... 9

EASONS FOR GRANTING THE WRIT ............. 10

ie aia a a a bind edo meseue 6 ne 18

EEE IES SRE oh ee la

EE ikkwwn ens see id SaE de ps oe We xa 1b

TABLE OF AUTHORITIES

es:

ipha Distributing Co. v. Jack Daniel Distillery, 454

ee ed CO. 1972). go onic ccccecccciscscce 11,12

antic & Gulf Stevedores, Inc. v. Ellerman Lines,

Lid., 369 U.S. 355, 82 S.Ct. 780, 7 L.Ed.2d 798

(1962), rehearing denied 369 U.S. 882, motion

Te eek ws 6 cee ee 15

acon Theatres, Inc. v. Westover, 359 U.S. 500, 79

S.Ct. 948, 3 L.Ed.2d 988 (1959) ................. 15

plow v. RKO Radio Pictures, 327 U.S. 251, 66

S.Ct. 574, 90 L.Ed. 652 (1946) .................. 15

(ii)

Deesen v. Professional Golfers’ Association, 358 F.2d

165 (9th Cir. 1966), certiorari denied 385 US.

846 (1966), rehearing denied 385 U.S. 1032

Fashion Originators’ Guild v. Federal Trade

Commission, 312 U.S. 457, 61 S.Ct. 703, 85 L.Ed.

949 (1941)

Fleitmann v. Welsbach Street Lighting Co., 240 U.S.

27, 36 S.Ct. 233, 60 L.Ed. 505 (1916)

Gamco, Inc. v. Providence Trust & Produce Bldg.,

194 F.2d 484 (lst Cir. 1952), certiorari denied

344 US. 817 (1952)

Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke &

Liquors, Ltd., 416 F.2d 71 (9th Cir. 1969),

certiorari denied 396 U.S. 1062 (1970), rehearing

denied 397 U.S. 1003

Klor’s v. Broadway-Hale Stores, 359 U.S. 207, 79

S.Ct. 705, 3 L.Ed.2d 741 (1959)

Lavender v. Kurn, 327 U.S. 645, 66 S.Ct. 740, 90

L.Ed. 916 (1946)

Northern Pacific R. Co. v. United States, 356 U.S. 1,

78 S.Ct. 514, 2 L.Ed.2d 545 (1958)

Parsons v. Bedford, 28 U.S. 433, 3 Pet. 433, 7 L.Ed.

732 (1830)

Radiant Burners v. Peoples Gas L. & Coke Co., 364

US. 656, 81 S.C+. 365, 5 L.Ed.2d 358 (1961) ...

Silver v. New York Stock Exchange, 373 U.S. 341, 83

S.Ct. 1246, 10 L.Ed.2d 389 (1963), rehearing

denied 375 U.S. 870

Slocum v. New York Life Ins. Co., 228 U.S. 364, 33

S.Ct. 523, 57 L.Ed. 879 (1913)

United States v. Arnold, Schwinn & Co., 388 US.

365, 87 S.Ct. 1856, 18 L.Ed.2d 1249 (1967)

11, 13, 14

10, 11, 13

(iii)

Young v. Central R. Co., 232 U.S. 602, 34 S.Ct. 451,

58 L.Ed. PP ONMONDE ds aids Gide ssbb cbs Seo bs 15

nstitution and Statutes:

seventh Amendment to the Constitution of the

ees ew ee ek Cos eo Sa 6 2, 14,17,18 .

herman Act (15 U.S.C. 1 et seg.) ........... 3, 8, 13, 14

layton Act, Section 4 (15 U.S.C. DRGs dWine eew wean 3,8

ederal Aviation Act:

Section 412 (49 US.C. 1382) ..............000. 4

Section 414 (49 U.S.C. 1384) ................. 9,15

urber, Refusals to Deal Under the Federal Antitrust

Laws, 103 U. Pa. L. Rev. 847 (1955) .............. 11

fon Kalinowski, The Per Se Doctrine—An Emerging

Philosophy of Antitrust Law, 11 U.C.L.A. L. Rev.

eoeeeereee ee eeeeeeeeee eee eeeeeenene

Supreme Court of the United States

OCTOBER TERM, 1972

No.

E. A. MCQUADE TOURS, INC.,

Petitioner,

CONSOLIDATED AIR TOUR MANUAL COMMITTEE, et al,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

E.A. McQuade Tours, Inc. (McQuade), petitions for a

writ of certiorari to review the judgment of the United

States Court of Appeals for the Fifth Circuit entered in

the above-entitled case on August 21, 1972.

OPINION BELOW

. The opinion of the Court of Appeals for the Fifth

Circuit (Appendix A, infra, pp. la-22a) is not yet

reported. The judgment of the United States District

2

Court for the Southern District of Florida followed a jury

verdict, and was issued without opinion (Appendix B,

infra, pp. 1b-3b).

JURISDICTION

The judgment of the Court of Appeals was entered on

August 21, 1972 (p. 1a, infra), and petition for rehearing

and for rehearing en banc was denied on October 10,

1972 (p. 23a, infra). The jurisdiction of this Court js

invoked under 28 U.S.C. 1254(1).

QUESTIONS PRESENTED

1. Having found a collective refusal to deal with a

deleterious effect upon competition, may the Court of

Appeals thereafter inquire into the motive or purpose of

the combination acting in restraint to trade, or must it

apply the per se rule based upon the exIcusionary effect

of the restraint of trade?

2. May the Court of Appeals determine questions of

fact in a case where the plaintiff has a right to a jury

trial— |

(a) By reexamining the. jury’s decision. as to the

reasonableness of a collective refusal to deal?

(b) By itself determining that a restraint of trade

was reasonable, and not arbitrary or discriminatory?

CONSTITUTIONAL PROVISION AND

STATUTES INVOLVED

Seventh Amendment to the Constitution of the United

States:

-In ‘suits at common law, where the value in

controversy shall exceed twenty dollars, the right of

|

|

3

. «trial by jury shall be preserved, and no fact tried by

:-q jury, shall be otherwise reexamined in any Court

-of the United States than according to the rules of

the common law.

_ The Sherman Act (15 U.S.C. 1 et seq.) provides, inter

alia, as follows:

».. Sec. 1. Every contract, combination in the form

, of trust or otherwise, or conspiracy, in restraint of

__ trade or commerce among the several States, or with

_ foreign nations, is declared to be illegal . . .

_ Sec. 2. Every person who shall monopolize, or

combine or. conspire with any other person or

persons, to monopolize any part of the trade or

_. commerce among the several States, or with foreign

_ Nations, shall be deemed guilty of a misdemeanor

. The Clayton Act, Section 4 (15 U.S.C. 15), provides

-as follows:

_. Any person who shall be injured in his business or

\ property by reason of anything forbidden in the

+ antitrust laws may sue therefor in any district court

-of the United States in the district in which the

defendant resides or is found or has an agent,

without respect tc the amount in controversy, and

_ Shall. recover threefold the damages by him

. sustained, and the cost of suit, including a

reasonable attorney’s fee.

: STATEMENT

1. Background to the Proceeding

“MeQuade is engaged in the sale of tour packages at

Wholesale for Florida, the Caribbean and the Bahamas. Its

tour packages are sold through retail travel agents and

individual airlines in conjunction with air transportation,

Ri

<

and include hotel accommodations, meals, surface

transportation and sightseeing trips. (J.A. 83-92).'

The Consolidated Air Tour Manual Committee

(CATM

a -_— Oe

im the Manual (infra, p.7a; J.A. 816-17, 878-81,

1311-15). CATM never submitted its special rules for the

Florida section of the Manual to the CAB, and the CAB

has never approved these rules.

McQuade had been in business as a tour operator prior

to’the inception of CATM, and has participated in the

Manual since its origin, beginning with a program for

g@veral Fort Lauderdale hotels (J.A. 91-94). In 1964,

When the Fort Lauderdale Sheraton Hotel was first

opened, McQuade represented it, along with other Fort

Lauderdale hotels, in the Winter Manual for 1964-1965

@A. 104-105). McQuade again submitted a program for

the Sheraton for the 1965 Summer Manual, providing

fate sheets and a tour operator agreement with the hotel

to the Florida area chairman of CATM (J.A. 110-12,

724-26, 1294-96). Another tour operator, American

Express Company, submitted a program for the same

hotel (J A. 710). The Sheraton had indicated a desire to

more than one tour operator to represent it in

the Manual (J.A. 1295). The CATM area chairman,

' , treated the dual submission as conflicting

tions, based on the CATM rule then allowing

one tour operator to represent each Florida hotel in

the Manual, and asked the hotel to make a determination

asto which tour operator was to represent the Sheraton

Manual (J.A. 719, 720, 726-27, 730, 757).

| the hotel did not terminate McQuade’s right to

@ntinue to represent it in the Manual, it did advise

CATM that: “Per your request for information you are

aithorized to insert American Express in Consolidated

Manual” (J.A. 1295, 1298). CATM then excluded

"s representation of the Fort Lauderdale

Sheraton from the Summer Manual for 1965 (J.A. 1296).

This exclusion was not based upon any question of

McQuade’s fitness or authority to represent the hotel as a

6

tour operator (J.A. 726-731). The exclusion was no

appealable (J.A. 941-47).

in 1967, after CATM had received requests fron

several tour operators that CATM change its one tou

operator per Florida hotel rule, CATM responded that

“contrary to popular belief,” there was no CATM rule x

limiting representation for Florida hotels, and that it wa

up to the hotels and the tour operators to determine th

representation (infra, p. 6a; J.A. 117, 812-16, 878)

McQuade, which was then offering programs in th

Manual for Fort Lauderdale, the Bahamas, and th

Caribbean area, assumed that CATM would thereafte

accept multiple tour operators for Miami Beach hotel

and solicited a number of such hotels to enter into tou

operator agreements authorizing McQuade to represen

them as a tour operator (J.A. 118-122). Eleven Mian

Beach hotels entered such agreements, conferring upo

McQuade the status of “officially approved wholesak

subject to all rights, privileges, and commission structur

” extended to any and all other tour operators s

recognized by Hotel.” (J.A. 1362-72). The managemer

of seven other hotels amended the agreement |

specifically preclude McQuade from representing the:

properties in the Manual (J.A. 121-22, 1307).

CATM, realizing that there would be multip

representations submitted by tour operators for Flori

for the next Manual, called an airline meeting to devi

new rules to cover only the Florida situation (infra, p

7a; J.A. 816-17, 878-81, 1311-12). Those at the meetis

agreed to certain rules, which were approved by CAT!

by a mail vote. letter.? Thereafter, the Florida an

_— *The rules agreed to provided, inter alia:

Q) sa Tae Opeeness must geneide weliton suthertly

represent in the CATM.

ee,

3

chairmanof ‘CATM prepared a letter to be sent to all

interested airlines, tour operators, and hotels, spelling out

the “rules of the road” to be used for the Florida section

of CATM.*

McQuade submitted its Miami Beach program to

ATM; including the eleven tour operator agreements

guthorizing petitioner to represent the hotels as a tour

operator, but without specifically certifying that it was

githorized to represent them in the Manual (J.A.

1262-72). McQuade received a notification from CATM

that its Miami Beach program had been accepted at about

the same time that it received like notifications regarding

its Fort Lauderdale, Bahamas, and Caribbean programs

(LA. 144-46, 260, 1395). McQuade was later requested

ty the Florida chairman of CATM to submit express

eertifications of authority from each hotel to represent

them in the Manual and, failing to do so, its Miami Beach

program was excluded from the Summer Manual for

1968. (J.A. 148-59, 908-09, 941-42). There is no appeal

from a CATM decision to exclude a program (J.A,

941-47).

The decision to exclude the Miami Beach program was

based solely on the failure of the tour operator

agreements to provide “specific mention of the

Consolidated Manual for the summer of °68”, and not

because of any question of McQuade’s authority or

ability to represent these hotels. (J.A. 953-54).

2. Proceedings at the District Court

McQuade filed the instant action at the District Court,

pursuant to Sections 1 and 2 of the Sherman Act (15

U.S.C. 1, 2), and Section 4 of the Clayton Act (15 U.S.C.

15), based upon the unlawful exclusion of its program

from the 1965 and 1968 Manuals, and demanded a jury

trial.

In its instructions to the jury, the District Court

stated:

If you find from a preponderance of the evidence

that the rules adopted by the defendants were

unnecessary, you must find for the plaintiff.

If you find from a preponderance of the evidence

that the rules adopted by the defendants were

necessary, but that the rules were applied in an

unreasonable or arbitrary manner to the plaintiff's

requests for tour program, you must find for the

plaintiff.

If you find from a preponderance of the evidence

that the rules adopted by the defendants were

necessary and that the rules were applied fairly to

the plaintiff, then you must find for the defendants.

(J.A. 1206-07).

pees tert es eee tk eee |”

9

* The “rules” referred to the rule of one tour operator

per Florida hotel in effect when the Fort Lauderdale

Sheraton program was excluded, and the rules used to

exclude petitioner’s Miami Beach program (J.A.

1204-06). The question as to whether the rules were

“necessary” was based upon CATM’s contention that

CAB authority to publish a Manual provided the airlines

with antitrust immunity for all actions taken in

publishing the Manual, pursuant to Section 414 of the

Federal Aviation Act (49 U.S.C. 1384). (J.A. 1205-06).

A jury verdict was returned in McQuade’s favor, in the

amount of $500 for the exclusion of the Fort Lauderdale

Sheraton in 1965, and in the amount of $27,000 for the

exclusion of the Miami Beach program in 1968. (J.A.

1217-18). Judgment was entered for treble the damages

found, plus costs of $2,325.06 and attorney’s fees of

$47,000, for a total of $131,825.06 (infra, pp. 1b-3b).

3. Decision of the Court of Appeals

The Court of Appeals found that the District Court

etred in applying the per se rule to CATM’s collective

refusal to deal, holding that the rule of reason should

have been employed. The Court noted McQuade’s

agument that: “A combination of airlines (CATM)

controls a resource (listing in the Manual) that is essential

to McQuade’s ability to compete in the wholesale tour

market. The airlines’ collective refusal to list him in the

Manual has impaired his ability to compete ...”. The

Court then stated: “While we agree with McQuade that

the airlines collectively refused to deal with it, we do not

agree that CATM’s conduct is to be governed by the per

— o. p. 16a).

10

The Court of Appeals held that “the touchstone of per

se illegality has been the purpose and effect of the

arrangement in question.” (/nfra, p. 18a). Ignoring the

negative effect of the restraint upon competition, the

Court found that there was no evidence of an

exclusionary or coercive motive on CATM’s part. The

Court further found that CATM’s rules were not applied

to McQuade in a discriminatory fashion. Absent improper

motive and discrimination against petitioner, the Court

held the per se instruction to be erroneous. (/nfra, pp.

19a-20a).

Stating that “a new trial of this case would be costly

and unproductive,” the Court went on to consider

“whether McQuade’s exclusion from the Manual was an

unreasonable restraint of trade.” (/nfra, p. 20a). Without

considering that the jury may have found, pursuant to

the District Court’s instructions, that “the rules were

applied in an unreasonable or arbitrary manner to the

plaintiff's requests for tour program” (J.A. 1206), the

Court of Appeals determined that the exclusion of its

programs from the Manual was not an unreasonabie

restraint of trade. Reexamining the facts, the Court

specifically found that the rules were not applied to

McQuade “arbitrarily or discriminatorily” and, holding

that “the facts in this case do not present a violation of

the Sherman Act by CATM”, the Court reversed with

directions to dismiss. (/nfra, pp. 20a-22a).

REASONS FOR GRANTING THE WRIT

1. The decision of the Court of Appeals rejecting the

per se rule, after finding a collective refusal to deal which

adversely affected competition, is in conflict with the

applicable decisions of this Court. Silver v. New York

Stock Exchange, 373 U.S. 341, 83 S.Ct. 1246, 10

a

il

4Ed.2d 389 (1963), rehearing denied 375 U.S. 870;

Radiant Burners v. Peoples Gas L. & Coke Co., 364 U.S.

656. 81 S.Ct. 365, 5 L.Ed.2d 358 (1961); Kior’s ».

Broadway-Hale Stores, 359 U.S. 207, 79 S.Ct. 705, 3

LEd.2d 741 (1959). There is no precedent, in this Court

or in any court of appeals, for use of the rule of reason to

test such a restraint of trade.

Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke &

Ltd., 416 F.2d 71 (9th Cir. 1969), certiorari

denied 396 U.S. 1062 (1970), rehearing denied 397 U.S.

1003, the case cited by the court below (infra, p. 18a),

involved suppliers terminating a distributor’s exclusive

franchise arrangements. The facts disclosed no proof of a

combination or conspiracy, and no collective refusal to

deal. “The exclusion of plaintiff was merely the

incidental result of appellants’ agreement to transfer their

lines to Portside. In such a case the group boycott cases

ate not controlling.” (416 F.2d at 80). The rule of reason

test is properly applied to supplier/exclusive distributor

cases,5 while the per se rule is applicable to collective

refusals to deal or group boycott cases.®

~ Similarly, the instant proceeding does not fall within

the class of cases where members of a trade group or

association refused to deal with an applicant for

5 Alpha Distributing Co. v. Jack Daniel Distillery, 454 F.2d 442,

oo eth Ce. 1972); and cases cited in Hawaiian Oke, supra, 416

"See, Von Kalinowski, The Per Se Doctrine-An Emerging

Pillosophy of Antitrust Law, 11 U.C.L.A. L. Rev. 569 (1964), and

‘Barber, Refusals to Deal Under the Federal Antitrust Laws, 103 U.

Pa. L. Rev. 847 (1955), cited by the court below (infra, p. 19a). It

‘should be noted that Barber’s article preceeded this Court's

decisions in Silver, Radiant Burners, and Klor’s, supra.

12

membership, and where the rule of reason has been

employed to test the restraint of trade. F.g., Deesen v.

Professional Golfers Association, 358 F.2d 165 (9th Cir.

1966), certiorari denied 385 U.S. 846 (1966), rehearing

denied 385 U.S. 1032 (1967); Gamco, Inc. v. Providence

Trust & Produce Bidg., 194 F.2d 484 (ist Cir. 1952),

certiorari denied 344 U.S. 817 (1952). McQuade did not

seek to join CATM, but to pay the price for and advertise

in the Manual, in competition with other tour operators

(infra, p. 12a).”

CATM’s collective refusal to deal with McQuade,

impairing its ability to compete, is a per se violation of

the Sherman Act based upon its impact in the

marketplace, ie. its pernicious effect on competition.

The motives, purpose, and self-interest of CATM do not

invoke the rule of reason and thereby immunize these

unlawful actions. United States v. Arnold, Schwinn &

Co., 388 U.S. 365, 375, 87 S.Ct. 1856, 18 L.Ed.2d 1249

(1967).

The alleged reasonableness in the circumstances

involved of the actions taken by CATM in rejecting

McQuade’s tour programs for the Fort Launderdale

Sheraton in 1965 and for Miami Beach in 1968° cannot

71f McQuade had been dealing with only one airline, and as the

only tour operator in its manual, then that airline's rejection of

McQuade’s programs in favor of another tour operator would fall

within the Hawaiian Oke and Alpha Distributing rule. (Supra, fn.

5)

8tThe Court below improperly ascribed the 1965 rejection to

CATM’s carelessness without. considering the unlawful rule of one

tour operator per hotel, and the 1968 exclusion to CATM being

overly cautious, but, again, without considering the restraint

created by the “rules of the road.” (/nfra, p. 20a)

13

save these concerted refusals to deal from the application

of the per se rule. Klor’s v. Broadway-Hale Stores, 359

iS. at 212; Fashion Originators’ Guild v. Federal Trade

Commission, 312 U.S. 457, at 466-468, 61 S.Ct. 703, 85

L.Bd. 949 (1941).

“Here, as in Radiant Burners v. Peoples Gas L. & Coke

Co., supra, the petitioner cannot sell its product (tours)

because Of the concerted refusal of the members of the

sombination (CATM) to deal with it. The rejection of

McQuade’s tour programs, and their exclusion from the

Manual, therefore falls within a class of restraint which

from its nature is unduly restrictive, and forbidden by the

Sherman Act as well as the common law. (364 U.S. at

559-560).

Here, as in Silver v. New York Stock Exchange, supra,

there may not have been a significant anticompetitive

motive in the collective refusal to deal, but it nevertheless

deprived McQuade of a valuable business service which it

needed to compete effectively in its own market. In the

absence of protection or justification derived from

mother statute (here the Federal Aviation Act), the

sombination’s refusal to deal is in violation of the

Sherman Act (373 U.S. at 347-349). Moreover, as in

Silver, there is no right or opportunity to appeal an

sdverse ruling which results in a restraint of trade. (J.A.

41-47, 373 U.S. at 361-64). The combination “is in

ity an extra-governmental agency, which prescribes

niles for the regulation and restraint of interstate

commerce. and provides extra-judicial tribunals for

determination and punishment of violation .. .” Fashion

Originators’ Guild v. Federal Trade Commission, 312 U.S.

5

~The reasonableness of the motives or the methods

mployed by a combination is not relevant where the

14

result is to exclude a trader from a substantial market i;

interstate commerce. Such an exclusion is unreasonabk

per se.. Klor's v..Broadway-Hale Stores, supra; Radian

Burners. v.. Peoples Gas L. & Coke Co., supra; Fashion

Originators’ Guild v, Federal Trade Commission, supra.

In Northern Pacific R. Co. v. United States, 356 US

1, at 5-6, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958), this Cour

referred to certain “practices which because of thei

pernicious effect on competition and lack of any

redeeming virtue are conclusively presumed to be

unreasonable and therefore illegal without elaborat:

inquiry as to the precise harm they have caused or the

business excuse for their use. This principle of per s.

unreasonableness not only makes the type of restraint;

which are proscribed by the Sherman Act more certain tc

the benefit of everyone concerned,” it also avoid:

unnecessary and complicated investigations. In this case

the per se violation is clear beyond peradventure.

This Court should grant certiorari in order to maintair

the certainty of the law as it is applied to collective

refusals to deal, and to countermand the confusion and

needless speculation which would emanate from the

decision of the court below, which improperly interpret:

and limits applicable decisions of this Court.

2. The decision by the Court of Appeals, whict

reexamined the facts determined by the jury below, anc

thereafter made determinations as to the reasonablenes:

of the restraints in trade excluding McQuade’s tow

programs, violates the Seventh Amendment to _ the

Constitution of the United States and is in conflict with

the applicable decisions of this Court.

In an action for damages for restraint of trade undet

the Sherman Act the plaintiff is entitled to a jury verdict

15

‘on all questions of fact. Fleitmann v. Welsbach Street

Lighting Co.,; 240 U.S. 27, 36 S.Ct. 233, 60 L.Ed. 505

(1916); Beacon Theatres, Inc. v. Westover, 359 U.S. 500,

79 S.Ct. 948, 3 L.Ed.2d 988 (1959). In the instant case

the jury found for the plaintiff, either on the basis that

-the airlines’ rules were not necessary, and therefore the

collective refusal to deal was not provided immunity

under the Federal Aviation Act, or that rules were

necessary, but “applied in an unreasonable or range

manner to the plaintiff's requests for tour program .

(Supra, p. 8). The Court of Appeals gave no

eonsideration to the latter alternative, but simply

reversed the District Court because of its use of the per se

tule (infra, pp. 13a-22a). Rather than attempt to

reconcile the jury’s verdict to the instructions by the

District Court, as supported by the evidence of record,

the Court of Appeals erroneously reexamined and

redetermined facts found by the jury. Atlantic & Gulf

Stevedores, Inc. v. Ellerman Lines, Ltd., 369 U.S. 355, 82

$.Ct.. 780, 7 L.Ed.2d 798 (1962), rehearing denied 369

US, 882, motion denied 371 U.S. 803; Parsons y.

gala 28 U.S. 433, 3 Pet. 433, 7 L.Ed. 732 (1830).

The Court of Appeals further erred in reversing the

tement of the District Court with directions to dismiss

the action (infra, p. 22a), rather than remanding for a

‘new trial. Slocum v. New York Life Ins. Co., 228 U.S.

364, 33 S.Ct. 523, 57 L.Ed. 879 (1913); Young vy.

Central R. Co., 232 U.S. 602, 34 S.Ct. 451, 58 L.Ed. 750

(1914).

The Court of Appeals did not reexamine the record to

determine if the jury determinations were adequately

fpevorted by the facts. See, Bigelow v. RKO Radio

16

Pictures, 327 U.S... 251, 66 S.Ct. 574, 90 L.Ed. 652

(1946). To the contrary, the Court of Appeals made its

own determinations as to the reasonableness of CATM’s

restraints of trade, and whether CATM’s actions were

arbitrary or discriminatory against McQuade (infra, pp.

20a-22a). Clearly, questions of reasonableness are issues

of fact to be decided by a jury, and not by an appellate

court.

Moreover, the Court of Appeals did not hold that there

was no basis on which the jury could have found that the

rules had been unreasonably applied to McQuade. As to

the 1965 Manual, the Court found that the telegram of

the Fort Lauderdale Sheraton, “while ambiguous, could

nevertheless reasonably be interpreted” as a desire to

eliminate McQuade (infra, p. 20a). Could not such an

“ambiguous” statement as reasonably be interpreted as

indicating a desire to have more than one tour Operator in

the Manual? (J.A. 1295). Similarly, with regard to the

1968 Manual, the Court below concluded that “the rules

were reasonable on their face” (infra, p. 21a), but

without distinguishing between the rules adopted by

CATM mail vote letter and the “rules of the road” (supra,

p. 6-7), and without ever considering if such special rules

limited to Florida were themselves reasonably necessary

since no like rules were required in any other area

covered by the Manual. (/nfra, p. 4a). The Court below,

without discussion of the substantial evidence to the

contrary, opined that the rules were not applied to

®For example, CATM had sent telegrams to eight tour operator

competitors of McQuade on February | and 2, 1968, confirming

telephone conversations with each of them, requiring submission of

their authorizations by February 2nd, but such authorizations were

received and accepted after February 9th. No such telegram was

sent to McQuade. However, a telegram was received by McQuade

17

McQuade “arbitrarily or discriminatorily” (infra, p. 21a),

and that McQuade’s tour operator agreement “cannot

reasonably be construed” as giving it the right . to

represent the contracting hotels in the Manual (infra, p.

22a). Finally, the reasonableness of excluding McQuade’s

Miami Beach program solely because its authorizations

did not provide “specific mention of the Consolidated

Manual for the summer of ’68”, and not because of any

question or doubt as to McQuade’s authority to represent

these Miami Beach hotels, was never considered by the

Court of Appeals. (J.A. 953-54).

In sum, there is substantial evidence of record which

disputes each of the Court of Appeal’s findings of fact,

and such evidence is sufficient to sustain directly

opposite findings by a jury. Lavender v. Kurn, 327 US.

645, 66 S.Ct. 740, 90 L.Ed. 916 (1946). Assuming that

the jury had found, pursuant to the instructions, that the

rules were “applied in an unreasonable or arbitrary

manner” to McQuade’s programs, the Court of Appeals

erroneously reexamined and redetermined the facts in

reversing the judgment below. If, however, the jury had

not reached the question of reasonableness, the Court of

Appeals nonetheless erred by supplanting its deter-

mination of questions of fact for that assigned to the jury

by the Seventh Amendment.

after business hours on Thursday, February 15th, requiring

submission of new authorizations no later than February 19th, and

its program was excluded from the Manual on February 16 or 19,

1968 (J.A. 155-57, 896, 908-09, 925-34, 1383-85, 1396-1401); the

Management of seven Miami Beach hotels construed the tour

Operator agreements as giving authority to represent the hotels in

the Manual, and amended its agreement to specifically preclude

such representation (J.A. 1307).

Certiorari should be granted to

court below has wrought upon

Amendment rights in conflict with

CONCL

For the reasons stated, this petition for a writ of

certiorari should be granted.

MORRIS J. LEVIN

1620 Eye Street, N.W.

Washington, D.C. 20006

THOMAS M. COKER, JR.

2803 East Commercial Bivd.

Fort Lauderdale, Florida 33308

Attorneys for Petitioner

COKER & CARLON

2803 East Commercial Blvd.

Fort Lauderdale, Florida 33308

Of Counsel

APPENDIX A

er)

‘United States Court of Appeals

Neo. 71-2487

(August 21, 1972)

Before PHILLIPS,* THORNBERRY and RONEY,

Circuit Judges.

THORNBERRY, Circuit Judge: This is an appeal

from a judgment of the district court entered on May

10, 1971, pursuant to a jury finding that the Consolidat-

ed Air Tour Manual Committee (CATM) and its mem-

*Hon. Orie L. Phillips, Of the Tenth Circuit, sitting by designation.

2a

ber airlines had engaged in unlawful restraints of

trade. As a result of that finding, E. A McQuade Tours,

Incorporated (McQuade), was awarded three-fold the

damages found by the jury, plus costs and attorney's

fees, in the sum of $131,825.06. Both parties have ap-

pealed on numerous grounds. The facts are important

to our disposition of this appeal, so we must state

in some detail.

McQuade is engaged in the business of wholesaling

tour packages in Florida, the Caribbean, and the Ba-

hamas. Its tour packages are sold through retail travel

agents and the defendant airlines in conjunction with

air transportation, and :nclude hotel accommodations,

meals, surface transportation, and sightseeing trips.

CATM, a committee composed of representatives of the

member air carriers, publishes a consolidated listing _

of available tour programs (hereinafter referred to as

the Manual) under authority granted by the Civil Aero- |

nautics Board (CAB), pursuant to Section 412 of the

Federal Aviation Act, 49 U.S.C. § 1382." CATM’s refus-

3a

al, on two occasions, to list McQuade tours in the

Manual is at the heart of this dispute.

_CATM was formed for the express purpose of con-

solidating into one manual a listing of air tour pro-

grams available through tour operators. The Com-

mittee functions through a general chairman, area

chairmen, and the carrier representatives who transact

CATM business at periodic meetings. All programs

which a tour wholesaler (operator) desires to be in-

eluded in the Manual are submitted to the appropriate

area chairman and are approved or disapproved by the

Committee. The Manual is published twice annually,

one issue covering the eight-month spring/summer/

fall period (Summer Manual) and one issue covering

the four-month winter period (Winter Manual), and is

divided into several geographic areas — e.g, Alaska,

Bermuda, P-:erto Rico, Fort Lauderdale, and Miami.

When « customer, desiring to purchase an air tour,

contacts a retail travel agent, the agent often selects

a suitable tour from the Manual and either (1) con-

tacts the air carrier over whose route the transportation

will be sold, who in turn requests booking from the

tour operator offering the program in the Manual, or

(2) contacts the tour operator directly and requests

booking. The tour operator’s agreement with the hotels

generally specifies that the tour operator will receive a

fifteen percent commission on the hotel accommoda-

interest, or in violation of this Act, and shal! by order

approve any such contract or agreement, or any modi-

fication or cancellation thereof, that it does not find

to be adverse to the public interest, or in violation .

of this Act... .

4a

tions sold through the operator. The retail travel agent

involved receives two-thirds of the operator’s com-

mission. If the customer bypasses the retail travel a-

gent and goes instead directly to the airlines, the

process remains unchanged except that the tour opera-

tor retains the full fifteen percent commission.

Prior to publication of the Summer Manual of 1968,

hotels in the Florida area, including those in Fort

Lauderdale and Miami, had always been represented _

in the Manual on the basis of only one tour operator

for each hotel. Since its inception, CATM has listed

multiple tour operators as representatives for the in-

’ dividual hotels in all other areas except Nevada.*

CATM contends that the Florida practice arose many

years prior to CATM’s formation and represented a

policy of the hotels and tour operators in that area in

which it had no authority or interest. It is fairly clear,

however, that CATM by its attitude and procedures

perpetuated the practice to the extent that many in

the tour business came to look upon the historic

one tour operator per hotel relationship in Florida as

a CATM rule.* Prior to 1968, a tour operator’s presenta-

tion of a program and the room rates for a hotel was

accepted by CATM as evidence of authority from a

Florida hotel for the operator to represent that hotel

in the Manual, and no specific evidence of authority

was required.

SNevada hotels act as their own wholesalers and are not repre-

sented in the Manual by tour operators.

sBrief for Cross-Appellant at 11.

\

'

;

COPY BOUND CLOSE IN CENTER "|

Sa

McQuade had been in business as a tour operator

prior to CATM’s first publication and has participated

in the Manual since its origin. As of the time of trial,

McQuade had submitted over 2,000 tour programs

for publication in the Manual. All but the twelve pro-

grams involved in the instant case were approved by

CATM and published.

CATM first refused to publish a McQuade program

in 1965. In 1964, after the Fort Lauderdale Sheraton

Hotel was first opened, McQuade had represented it,

along with other hotels in the area, in the 1964-65

Winter Manual. In early 1965, McQuade again sub-

mitted a program for the Sheraton for the 1965 Sum-

mer Manual, providing rate sheets and a tour operator

agreement with the hotel to the Florida area chair-

man of CATM. Simultaneously, American Express, an-

other tour operator, submitted a program for the same

hotel. There was some indication at the time that the

Sheraton desired to appoint several tour operators as

its representatives in the Manual. The CATM area

chairman, however, treated the dual submission as a

_ conflicting representation and asked the Sheraton to

clarify which tour operator was to represent it in the

Manual. In an ambiguous reply, the hotel advised

CATM that it was “authorized to insert American Ex-

press in Consolidated Manual.” The area chairman in-

terpreted this as an instruction to exclude McQuade,

and accordingly rejected McQuade’s submission.

The second instance of CATM’s refusal to publish

McQuade tours occurred roughly three years later.

In 1967, CATM received requests from many tour opera-

tors that multiple tour operators be allowed to repre-

sent individual hotels in Florida. CATM responded by

advising all parties concerned that, contrary to popu-

lar belief, there was no CATM policy or rule limiting

Florida hotels to representation by one tour operator

and that it was up to the hotels and the operators to

determine their representative status. McQuade

never before having submitted programs for Miami

Beach and assuming that the Manual would there-

after provide multiple tour operator listings, solicited

a number of hotels in Miami Beach to enter contracts

authorizing McQuade to represent them as a tour

operator. The contracts conferred upon McQuade the

status of “officially approved wholesaler subject to

all rights, privileges, and commission structure ex-

tended to any and all other tour operators so recogniz-

ed by Hotel.” Seven of the hotels contacted amended

the authorization contract specifically to prohibit Mc-

Quade from representing them in the Manual. Eleven

hotels entered into the contracts without alteration in

the latter part of 1967.

The Committee in 1967, anticipating multiple tour

operator submissions for some Florida hotels in the

upcoming Manual, devised new rules to govern the

operators’ requests for listing in the Manual. These

socalled “rules of the road” required, among other

things, each tour operator to provide written authority

from each hotel or motel expressly certifying that he

was authorized to represent it in the Florida Manual.

After these rules had been approved by a majority of

the members of the Committee, the Florida area

chairman sent copies and explanations of the rules to

7a

member airlines, hotels, and tour operators who had

expressed a desire to participate in the Manual. By

their terms the rules of the road were clearly limited

in application to the Florida section of the Manual and

were never applied to any other section.

Although subsequent events are in much dispute, the

following facts seem clear. McQuade submitted its

tour programs for the eleven Miami Beach hotels, as

well as the coc‘racis he had earlier completed with

them. The Committee accepted McQuade’s programs,

along with Miami Beach programs submitted by eight

other operators, on the condition that the operators

furnish express written authorization to represent the

hotels in the Manual. The other eight operators furn-

ished the requested proof of authorization. McQuade

did not, and was ultimately excluded from the Miami

section of the Manual by reason of his failure to furn-

ish the specific authorization required by the rules of

the road.

McQuade filed the instant action in the court below

contending that it was entitled to treble damages pur-

suant to Sections 1 and 2 of the Sherman Act, 15

US.C.A. §§ 1, 2,4 and Section 4 of the Clayton Act, 15

“Section 1 of the Sherman Act provides in part as follows:

Every contract, combination in the form of trust or

otherwise, or conspiracy, in restraint of trade

or commerce among the several States, or with

8a

U.S.C.A: § 15," for CATM’s improper exclusion of its

programs from the 1965 and 1968 Manuals. After a

jury verdict was returned in McQuade’s favor in the

amount of $27,500, judgment was entered for treble

that amount, plus costs of $2,325.06 and attorney’s fees

of $47,000, for a total of $131,825.06.

L

Among the numerous grounds for reversal asserted

by CATM, it argues that McQuade lacked standing to

bring this suit. To have standing to sue under Section

4 of the Clayton Act, plaintiff must prove injury to |

his business or property resulting from defendant’s _

conduct. E.g., Keogh v. Chicago & N.W. Ry. Co., 260

US. 156, 43 S.Ct. 47 (1922); Martin v. Phillips Petroleum

Co., Sth Cir. 1966, 365 F.2d 629, cert. denied, 385 US.

990, 87 S.Ct. 600. The injury referred to implies the vio-

lation of some legal right vested in the plaintiff. E.g.,

Okefenokee Rural Electric Membership Corp. v. Flori-

da Power & Light Co., 5th Cir. 1954, 214 F.2d 413.

8Section 4 of the Clayton Act is as follows:

That any person who shall be injured in his business

or property by reason of anything forbidden in the

may sue therefor in any district court

of the United States in the district in de-

an

ey

9a

-ACATM contends that McQuade has no such status

as an injured party because this suit is based on a

non-existent right to represent certain hotels in the

Manual. CATM thus focuses our attention on the con-

struction of the contracts between McQuade and the

subject hotels. The record indicates that in 1965, Mc-

Quade held a contract with the Fort Lauderdale Shera-

ton for exclusive rights to representation in the Manu-

al. American Express, however, held the same “ex-

clusive” right, a situation giving rise to the Sheraton’s

ambiguous directive to “insert American Express

in Consolidated Manual.” In 1968, McQuade held con-

tracts with eleven Miami Beach hotels for representa-

tion as a wholesale tour operator subject to the rights

of other tour operators. It was established that, at the

time, two of these eleven hotels were bound by a prior

agreement of exclusive representation in the Manual

with another tour operator. The contracts submitted

by McQuade to the Miami Beach hotels were accom-

panied by a letter which read as follows:

I would bring to your attention that this con-

tract and proposed arrangement intends in

no way to supersede, nullify or alter in any way

any existing arrangements or contracts cur-

rently existing between your motel and any

other tour operator or operators, but is pro-

posed for the sole purpose of enabling our com-

pany to merchandise and promote package

tour sales for you through the retail travel

trade.

10a

As the quoted passage reveals, no right of representa-

tion in the Manual was referred to in McQuade’s let-

ters. Moreover, its tour operator agreements with the

eleven hotels: were silent concerning his right to rep-

resent them in the Manual, and management per-

sonnel of each of the hotels testified that the contracts

with McQuade were in no sense intended to grant it

such rights. CATM argues that these surrounding

circumstances indicate clearly that McQuade had no

contract right to represent the hotels in the Manual.

McQuade urges us to construe the contracts on

their face, without regard to the circumstances, and

in effect claims that its actua] authority to represent

the hotels in the Manual was of no concern to CATM,

whose only legitimate interest was in ensuring that

McQuade was an approved wholesaler. We find, how-

ever, that McQuade had a property right in its con-

tracts with the subject hotels, even assuming that they

gave it rights only as an approved wholesaler. Even

if it had no right to represent the hotels in the Manual,

it nonetheless had the right to conduct tours through

the hotels on a profitable basis. There is little doubt

that this right was made virtually worthless by

CATM’s refusal to include the tours in the Manual.

This court has held that a valid contract is property

within the meaning of Section 4 of the Clayton Act.

North Texas Producers Assoc. v. Young, 5th Cir. 1962,

308 F.2d 235, cert. denied, 372 U.S. 929, 83 S.Ct. 894

(1963). One who alleges impairment of rights under

such a contract thus establishes the requisite “injury

to property.”

“In so holding, we recognize that Okefenokee Rural

Electric Membership Corp. v. Florida Power & Light

Co., 5th Cir. 1954, 214 F.2d 413, arguably might be taken

to mean that the proper focus is McQuade’s supposed

right vis-a-vis CATM to represent the hotels in the

Manual, not its rights to conduct tours through the

hotels. The alleged restraint of trade in Okefenokee

resulted from the joint efforts of two power companies

in preventing the Florida State Road Department

from granting plaintiff, a competitor of the two com-

panies, a permit to build a new line. In affirming the

district court’s dismissal of the suit, this court rea-

soned that, because plaintiff had no right to build its

line over the proposed route without prior approval

of the Road Department, denial of the permit did not

impair a right vested in the plaintiff. Following this

reasoning, one might argue that, if McQuade had no

right to a listing in the Manual, then CATM’s refusal

to list it does not meet the “legal injury” test. We be-

lieve, however, that Okefenokee should be limited

to its precise facts. First, there was no indication that

plaintiff in that case had third-party contract rights

that were impaired by the alleged antitrust violation.

Here, of course, the value of McQuade’s contracts with

the hotels was greatly diminished by CATM’s exclud-

ing its programs from the Manual. Secondly, the alleg-

ed violation in Okenfenokee arose from action by a

governmental agency, the Road Department, and from

efforts by two public utilities to influence that agency.

Okefenokee is thus more closely akin to cases involv-

ing the notion of “valid governmental action,” see

Woods Exploration & Producing Co. v. Aluminum Co.

12a

of America, Sth Cir. 1971, 438 F.2d 1286, cert. denied,

404 U.S. 871, 92 S.Ct. 701 (1972), than to cases examining

the requirement of legal injury in a context of private

action. Accordingly, we decline to apply Okefenokee

to the facts of this case, and conclude that injury to

McQuade’s contract rights with the hotels is sufficient

to confer upon McQuade standing to sue under Section

4 of the Clayton Act.

Moreover, even assuming that CATM’s contention

with regard to the contracts with the hotels were to

be accepted, we would nevertheless be compelled to

allow McQuade to continue. Section 4 is phrased in the

disjunctive; an injury to either business or property

will suffice, and McQuade has clearly shown the form-

er. In most cases finding such injury, plaintiff was

directly engaged in the sale of products or services

in the line of commerce restrained. See, e.g., Waldron

v. British Petroleum Co., Ltd, SD.N.Y. 1964, 231

F.Supp. 72. In the instant case McQuade was in busi-

ness as a tour operator at all pertinent times. The rec-

ord establishes that inclusion in the Manual is virtual-

ly an absolute necessity for success in the tour in-

dustry. It thus cannot be questioned that CATM’s ex-

cluding McQuade injured it in its business. CATM

would contend that it had no choice but to exclude

McQuade because it did not have authority from the

hotels to be included in the Manual. This argument,

however, goes not to whether McQuade has standing

to sue, but rather to whether CATM violated the anti-

trust laws, i.e., whether its conduct constituted an un-

reasonable restraint of trade. We find, therefore, that

McQuade was clearly injured in its business or proper-

13a

ty. by CATM’s rejection of his tour programs in both

1965 and 1968 and thus has standing to assert what-

ever rights it might have under the antitrust laws.

Il.

This brings us to the most significant issue in the

case — whether, and to what extent, McQuade has any

rights under the antitrust laws. With regard to Mc-

Quade’s claim that CATM’s refusal to list its tours in

the 1965 and 1968 Manual resulted from a “contract,

combination, or conspiracy in restraint of trade,” the

trial court instructed the jury as follows:

If you find from a preponderance of the evi-

dence that the rules adopted by the defendants

were unnecessary, you must find for the plain-

tiff.©

Inquiry into the “necessity” of the rules was prompted

by CATM’s argument that the Civil Aeronautics Board

had approved publication of the Manual and that all

rules necessary to accomplish that end were accord-

ingly immune to antitrust prohibitions under Section

414 of the Federal Aviation Act, 49 U.S.C.A. § 1384.7 By

eR. 1206.

This instruction refers to McQuade’s claim under Section 1.

. Aside from a brief reference to the Section 2 claim, the trial

court did not clearly instruct the jury as to McQuade’s con-

tention that CATM’s excluding its tours was monopolization

or an attempt to monopolize. The party’s briefs do not touch

on the Section 2 claim as such.

7This statute provides that

{aJny person affected by any order made under sec-

tions 408, 409, or 412 of this Act shall be, and is

hereby, relieved from the operations of the “anti-

14a

means of the quoted instruction, the trial court in effect

told the jury that, if CATM's conduct was not clad

in antitrust immunity, then McQuade's exclusion would

be illegal per se, without regard to the reasonableness

of CATM's standards or of their application to Mc-

Quade.* CATM contends that the trial court erred in

failing to apply the rule of reason, thus erroneously

@ reasonable means of accomplishing the joint, econ-

omically productive effort of publishing a reliable

manual.

The fundamenta) principle for determining the le-

gality of conduct under the Sherman Act was announc-

ed in Standard Oil Co. of New Jersey v. United States,

221 US. 1, 31 SCt. S02 (1911), where the Court held

that Section 1 reached only “undue” or “unreason-

able” restraints. This so-called “rule of reason” was

later explained by Justice Brandeis in Chicago Board

This Circuit is likewise firmly committed to the rule

of reason. E.g.. Harrison v. Prather, Sth Cir. 1970, 435

F.2d 1168, cert. denied, 404 US. 829, 92 S.Ct. 67 (1971);

North Texas Producers Assoc. v. Young, Sth Cir. 1962,

908 F.2d 235, 240, cert. denied, 372 US. 929, 63 S.Ct. 874

United States, 356 US. 1, 5, 78 S.Ct. 514, 518, (1958). Once

the existence of such an arrangement has been estab-

lished, no evidence of actual public injury is required,

Radiant Burners, Inc. v. Peoples Gas Light & Coke Co.,

34 US. 656, 81 S.Ct. 365 (1961), and no evidence of the

reasonableness of defendant's conduct will be con-

sidered in justification. See Northern Pacific, supra.

This rule of per se illegality has been applied thus

division of markets between competitors,"® tying ar-

rangements,"' and certain collective refusals to deal,

or “group boycotts.""*

McQuade would have us cheracterize CATM's ex-

clusion of its tour as a group boycott to which the

per se rule was properly applied) McQuade’s argu-

ment is deceptively simple: A combination of airlines

(CATM) controls « resource (listing in the Manual)

thet is essential to McQuade’s ability to compete in

the wholesale tour market. The airlines’ collective

refusal to list him in the Manual has impaired his a-

bility to compete, and thus is a per se violation of the

Sherman Act While we agree with McQuade that the

airlines collectively refused to deal with it, we do not

agree that CATM's conduct is to be governed by the

per ee rule.

Cases applying per se illegality to collective refusals

Dealers Assoc. 0. United States, 4 US 0, 4% SCL

951 (1914), have involved horizonta] combinations a-

mong traders at one level of distribution, whose pur-

pose was to exclude direct competitors from the mar-

US. 341, 83 S.Ct. 1246 (1963); and Thill Securities Corp.

©. New York Stock Exchange, Tth Cir. 1970, 433 F.2d

M4, cert. denied, 401 US. 994, S.Ct. 1232 (1971).

Klor’s, Inc. o. Broadway-Hale Stores, 359 US. 207,

purchasing power to induce defendant manufacturers

and wholesalers to sel] only at discriminatory prices to

plaintiff, a competing appliance dealer. Since the ef-

fect of the agreement was to drive Klor’s out of com-

petition with Broadway, the Court found the three-

cornered agreement illegal per se, notwithstanding

the fact that the manufacturers and wholesalers, not

in competition with Klor’s probably had no such anti-

competitive motive. See also Radiant Burners, Inc.

t. Peoples Gas Light & Coke Co.,, 344 US 656, 81 S.Ct.

385 (1961); Six Twenty-Nine Productions, Inc. v. Rol-

lms Telecasting, Inc., Sth Cir. 1966, 365 F.2d 478.

Unlike these first two categories, the third group

of cases has concerned combinations designed to in-

fluence coercively the trade practices of boycott vic-

tims, rather than to eliminate them as competitors.

18a

The leading case in the area is Fashion Originators

Guild of America v. Federal Trade Comm'n, 312 US.

457, G1 S.Ct 703 (1941), in which a group of “original”

designers refused to sell their creations to retailers

who purchased and sold copies of the original designs.

In holding this refusal to deal illegal per se, the Court

declared that even though the object of the boycott

was to prevent the retailers from dealing with manu-

facturers of the copies and thereby eliminate “style

piracy,” the coercion practiced indirectly on a rival

method of competition precluded application of the

rule of reason. See also Kiefer-Stewart Co. v. Joseph

E. Seagram & Sons, Inc., 340 US. 211. 71 S.Ct. 259

(1951) (liquor manufacturers’ collective refusal to

sell to price-cutting wholesalers).

In all of these cases, the touchstone of per se il-

legality has been the purpose and effect of the ar-

rangement in question. Where exclusionary or coer-

cive conduct has been present, the arrangements have

been viewed as “naked restraints of trade,” and have

fallen victim to the per se rule. On the other hand,

where these elements have been missing, the per se

rule has not been applied to collective refusals to deal.

See, e.g., Joseph E. Seagram & Sons, Inc. v. Hawaiian

Oke & Liquors, Ltd., 9th Cir. 1969, 416 F.2d 71, cert. den-

ted 396 U.S 1062, 90 S.Ct. 752 (1970), holding that a

concerted refusal by two manufacturers to renew

plaintiff's exclusive sales rights was not per se illegal

because the refusal was motivated solely by the manu-

facturers’ concern for the integrity of their distribu-

tion systems. We conclude that resort to the per se

rule is justified only when the presence of exclusionary

19a

or coercive conduct warrants the view that the ar-

rangement in question is a “naked restraint of trade.”

Absent these factors, the rule of reason must be fol-

lowed in determining the legality of the arrangement.

See Yon Kalinowski, The Per Se Doctrine — An E-

merging Philosophy of Antitrust Law, 11 USCA. L.

Rev. 569 (1964); Barber, Refusals to Deal Under the

Federal Antitrust Laws, 103 U. Pa. L. Rev. 47 (1955).

The proper inquiry in the case at hand is therefore

whether CATM’s refusal to list McQuade tours in the

Manual displays the exclusionary or coercive ele-

ment necessary for invoking the per se rule. The rec-

ord is barren of any such indication. First, McQuade

neither alleged nor proved that CATM’s conduct was

motivated by a desire to exclude McQuade from the

wholesale tour market; indeed, it is difficult to imag-

ine such a motive on CATM’s part, because neither

CATM nor its member airlines are in direct competi-

tion with McQuade in the wholesale tour market, and

no proof was offered to indicate that CATM or the

airlines were monopolizing or attempting to monopo-

lize that market. Nor is there the slightest hint that the

refusal to list McQuade tours was an attempt to some-

how influence McQuade’s business practices and there-

by achieve some anticompetitive goal of CATM.

Secondly, there is no suggestion anywhere in the

record that CATM combined or conspired with Mc-

Quade’s natural competitive enemies, the other tour

operators, to deprive McQuade of a vital listing in the

Manual. Finally, there is nothing to suggest that CATM

applied its standards to McQuade in a discriminatory

fashion. At most, the record supports the inference

that CATM was careless in failing to request a clari-

fication of the ambiguous 1965 Sheraton directive, and

was overly cautious in its interpretation of McQuade's

Miami Beach contracts in 1968. In sum, we believe

that the per se rule is not applicable to the case at

hand

The trial court’s per se instruction was therefore er-

roneous. We believe that a new trial of this case would

be costly and unproductive. Thus we consider wheth-

er McQuade’s exclusion from the Manual was an un-

reasonable restraint of trade. We have already suggest-

ed that CATM’s rejection of McQuade’s program for

the Fort Lauderdale Sheraton in 1965 was reasonable

under the circumstances. Faced with apparently con-

flicting submissions for the hotel, the area chairman

sought instructions from the Sheraton. The reply he

received, while ambiguous, could nevertheless reason-

ably be interpreted as a statement that the Sheraton

did not desire McQuade to represent it in the Manual

All the evidence points to the conclusion that CATM

would have accepted either McQuade or American

Express, leaving the choice entirely up to the Shera-

ton. As to the 1965 incident, therefore, any injury that

McQuade might have suffered was attributable to

the Sheraton, not CATM.

As to the 1968 incident, the adoption and enforcement

of the rules of the road must be viewed in light of the

pre-1968 custom of limiting representation of a hotel

to one tour operator. Regardless of whether this limi-

tation was a CATM policy or whether it was simply

2la

@ historical practice of the tour business, CATM in 1967

declared a policy of multiple listings, for each hotel.

This decision called for the adoption of standards to

submissions of tour programs. There was

testimony at trial that the airlines believed that they

impliedly warranted the responsibility and fiscal in-

tegrity of operators listed in the Manual. Moreover,

there was undisputed evidence that responsible tour

operators would not seek listing in the Manual with-

out some assurance that other operators listed were

themselves responsible; and failure to attract responsi-

ble operators would have doomed efforts to publish

the Manual. Finally, since several operators would

be submitting programs for the same hotel, consider-

ations of administrative convenience required proof

that the operators were in fact authorized to represent

a hotel in the Manual.

These interests al] represent legitimate business ob-

jectives of CATM. There is not the slightest suggestion

that the rules of the road were meant to serve any

but the objectives stated. Moreover, there is undisput-

ed evidence that the rules could be complied with

easily and quickly. We conclude that the rules were

reasonable on their face.

Nor were the rules applied to McQuade arbitrarily

or discriminatorily. All interested tour operators, in-

cluding McQuade, were on notice of the rules. The

Miami Beach programs of eight other operators were

accepted, just as McQuade’s were, on the condition

that they provide proof of authority from the hotels.

The other operators furnished express authorization;

22a

McQuade did not, choosing‘te rely on its tour operator

agreement, which cannot reasonably be construed as

giving McQuade: the ,right’to represent the -hotels in

the Mermel.- SO ee ee ee ek ee oe ae

Thus, we hold that the facts in this case do not pre-

sent a violation of the Sherman Act by CATM, Ac-

cordingly, the judgment of the district court is RE-

VERSED with directions to dismiss.

23a

United States Court of Appeals

FOR THE FIFTH CIRCUIT

No. 71-2487

E. A. McQUADE TOURS, INC.,

Plaintiff-Appellee-

Cross Appellant,

CONSOLIDATED AIR TOUR MANUAL COMMITTEE,

ET AL.,

Defendants-Appellants-

Cross Appellees.

Appeals from the United States District Court for the

Southern District of Florida

ON PETITION FOR REHEARING AND PETITION

FOR REHEARING EN BANC

{Opinion Aug. 21, 1972, 5 Cir., 1972, _._. F.2d —_).

(October 10, 1972)

Before PHILLIPS,* THORNBERRY and RONEY,

Circuit Judges.

24a

PER CURIAM: The Petition for Rehearing is DE-

NIED and no member of this panel nor Judge in regu-

lar active service on.the Court having requested that

the’ Court be polléd‘on rehearing en banc, (Rule 35

Federal Rules of Appellate Procedure; Local Fifth

Circuit Rule 12) the Petition for Rehearing En Banc is

DENIED.

*Hon. Orie L. Phillips, Of the Tenth Circuit, sitting by designation.

Ib

APPENDIX B

IN THE UNITED STATES DISTRICT COURT

IN AND FOR THE SOUTHERN DISTRICT OF FLORIDA

MIAMI DIVISION

E.A. MCQUADE TOURS, INC. )

Plaintiff, )

) Case No. 68-609-CIV-PF

)

Vv. )

CONSOLIDATED AIR TOUR

MANUAL COMMITTEE, et. ai.,

Defendant

JUDGMENT

This action came on for trial before the Court and a

jury, Honorable Peter T. Fay, District Judge, presiding;

and

The jury having returned a verdict for the plaintiff on

March 17, 1971, assessing damages against all defendants

in the amount of Twenty-Seven Thousand Dollars

($27,000.00) for their unlawful restraint of trade in

1968, and assessing damages against the Consolidated Air

Tour Manual Committee, Air Canada, Inc., Braniff

Airways, Inc., Continental Air Lines, Inc., Delta Air

Lines, Inc., Eastern Air Lines, Inc., Northeast Airlines,

Inc., Northwest Airlines, Inc., Trans Caribbean Airways,

Trans World Airlines, Inc., United Air Lines, Inc., and

Western Air Lines, Inc., in the amount of Five Hundred

Dollars ($500.00) for their unlawful restraint of trade in

1965; and

2b

This Court having denied, on April 19, 1971,

defendants’ Alternative Motion for Judgment Notwith-

standing the Verdict or for a New Trial, and having also

denied, on April 19, 1971, plaintiff's Motion for Additur

Pursuant to Rule 59; and —

This Court having found that plaintiff should recover

threefold the damages it sustained, its cost of suit in the

amount of Twenty-Three Hundred Twenty-Five and

06/100 Dollars ($2,325.06), and a reasonable attorney’s

fee in the amount of Forty-Seven Thousand Dollars

($47,000.00);

It is ORDERED, ADJUDGED AND DECREED:

1. That judgment be and it hereby is entered for the

plaintiff, and that the plaintiff, E.A. McQuade Tours,

Inc., recover of the defendants, Consolidated Air Tour

Manual Committee, National Airlines, Inc., Braniff

Airways, Inc., Delta Air Lines, Inc., Eastern Air Lines,

Inc., Northeast Airlines, Inc., United Air Lines, Inc.,

Southern Airways, Inc., Trans Caribbean Airways, Inc.,

Northwest Airlines, Inc., Air Canada, Inc., Alaska

Airlines, Inc., American Airlines, Inc., Bonanza Airlines,

Inc., Canadian Pacific Airlines, Ltd., Continental Air

Lines, Inc., Frontier Airlines, Inc., Mohawk Airlines, Inc.,

Western Airlines, Inc., Pacific Airlines, Inc., Pacific

Airlines, Inc., and Trans World Airlines, Inc., jointly and

severally, threefold the Twenty-Seven Thousand Dollars

($27,000.00) of damages, or Eighty-One Thousand

Dollars ($81,000.00), plus Twenty-Three Hundred

Twenty-Five and 06/100 Dollars ($2,325.06) of costs,

plus Forty-Seven Thousand Dollars ($47,000.00) as

attorney’s fee, for the sum of One Hundred Thirty

Thousand Three Hundred Twenty-Five and 06/100

Dollars ($130,325.06), with interest thereon at the rate

of six percent as provided by law.

3b

2. That judgment be and it hereby is entered for the

plaintiff, and that the plaintiff, E.A. McQuade Tours,

Inc., recover of the defendants, Consolidated Air Tour

Manual Committee, Air Canada, Inc., Braniff Airways,

Inc., Continental Airlines, Inc., Delta Air Lines, Inc.,

Eastern Air Lines, Inc., Northeast Airlines, Inc.,

Northwest Airlines, Inc., Trans Caribbean Airways, Inc.,

Trans World Airlines, Inc., United Air Lines, Inc., and

Western Air Lines, Inc., jointly and severally, threefold

the Five Hundred Dollars ($500.00) of damages, or the

sum of Fifteen Hundred Dollars ($1,500.00), with

interest thereon at the rate of six percent as provided by

law.

Dated at Miami, Florida, this 10th day of May, 1971.

/s/ Peter T. Fay

PETER T. FAY

District Judge