Continental Airlines v. United Airlines

Page 499

277 F.3d 499 (4th Cir. 2002)

CONTINENTAL AIRLINES, INC.; CONTINENTAL EXPRESS, INCORPORATED, Plaintiffs-Appellees, v. UNITED AIRLINES, INCORPORATED; DULLES AIRPORT AIRLINE MANAGEMENT COUNCIL, Defendants-Appellants.

ASSOCIATION OF FLIGHT ATTENDANTS, AFL-CIO, Amicus Curiae.

No. 01-1435

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

Argued: September 27, 2001

Decided: January 15, 2002

Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. T. S. Ellis III, District Judge. (CA-00-684-A) [Copyrighted Material Omitted]

[Copyrighted Material Omitted] ARGUED: Richard Joseph Favretto, MAYER, BROWN & PLATT, Washington, D.C., for Appellants. Alden Lewis Atkins, VINSON & ELKINS, L.L.P., Washington, D.C., for Appellees. ON BRIEF: Mark W. Ryan, Lily Fu Swenson, Robert L. Bronston, MAYER, BROWN & PLATT, Washington, D.C.; Stephen M. Shapiro, Jeffrey W. Sarles, Kermit Roosevelt, MAYER, BROWN & PLATT, Chicago, Illinois, for Appellants. Paul L. Yde, Joseph E. Hunsader, Mary N. Lehner, VINSON & ELKINS, L.L.P., Washington, D.C., for Appellees. Edward J. Gilmartin, Associate General Counsel, ASSOCIATION OF FLIGHT ATTENDANTS, AFL-CIO, Washington, D.C., for Amicus Curiae.

Before MOTZ, KING, and GREGORY, Circuit Judges.

Vacated and remanded by published opinion. Judge Motz wrote the opinion, in which Judge King and Judge Gregory joined.

OPINION

DIANA GRIBBON MOTZ, Circuit Judge:

Continental Airlines, Inc. and Continental Express, Inc. (collectively "Continental"), brought this antitrust action in April 2000 to challenge the installation of templates, which limit the size of carryon baggage, at Dulles Airport. Continental alleges that in agreeing to install the templates, United Air Lines, Inc. ("United"), the primary air carrier at Dulles, and the Dulles Airport Airline Management Council ("AMC"), an unincorporated association of all airlines serving Dulles, unreasonably restrained trade in violation of Section 1 of the Sherman Act, 15 U.S.C. S 1 (1997). Applying an abbreviated "quick-look" analysis, the district court granted summary judgment to Continental, awarded Continental $254,426.85 in trebled damages, and permanently enjoined the use of templates at Dulles. See Continental Airlines, Inc. v. United Air Lines, Inc., 126 F. Supp. 2d 962 (E.D. Va. 2001) (granting summary judgment) (hereafter Continental); Continental Airlines, Inc. v. United Air Lines, Inc., 136 F. Supp. 2d 542 (E.D. Va. 2001) (granting treble damages and an injunction) (hereafter Continental II). Because issues of material fact remain disputed and because both the unique architectural configuration of Dulles Airport and the competitive effects of templates require thorough consideration in a less "quick look," we vacate the judgment of the district court and remand for further proceedings.

I.

Before setting forth the factual background giving rise to this case, we take note of the tragic events of September 11, 2001. Those events and their ramifications have not yet mooted any aspect of this case; although the Federal Aviation Administration ("FAA") has now restricted the number of carry-on bags permitted to each passenger, to date it has not limited their size. Yet we recognize that the tragedies of September 11 now affect any discussion of air travel. Their implications for security¹ cannot be overlooked and, on remand, the district court and the parties will undoubtedly have to deal with these issues in considering any prospective relief. Having said that, we turn to the world before September 11, and the facts underlying this case.

A.

In the mid-1990s, an increased volume of air travel and a growing desire to avoid checking luggage meant passengers carried more and more baggage onto commercial flights. "[M]any aircraft did not have sufficient under-seat or overhead bin storage space to stow securely the number and size of bags brought onboard by the increasing number of passengers." Continental, 126 F. Supp. 2d at 965. The Association of Flight Attendants, joined by United and some other airlines, lobbied Congress and the FAA to limit the size of carry-on baggage. Those efforts have failed; instead the FAA simply requires each airline to scan carry-on baggage to "control the size and amount carried on board in accordance with an approved carry-on baggage program in [the airline's] operations specifications." 14 C.F.R. S 121.589(a) (2001). In compliance with this regulation, each airline has published an FAA tariff stating numerical and size limitations on carry-on luggage that it may enforce.

The increased volume of carry-on baggage has been linked to several problems: delays, inconvenience to late boarding passengers from full overhead bins, conflict between airline staff and passengers, and reduced on-board safety if baggage cannot be properly stowed. Carry On Baggage Program, 52 Fed. Reg. 21,472, at 21,475 (June 5, 1987) (codified at 14 C.F.R. pt. 121).² Airlines have explored various ways to respond to the increase in carry-on baggage, including one critical to this lawsuit -the use of baggage templates.

Baggage templates are pieces of plastic or stainless steel, mounted on hinges, that cover the mouths of x-ray baggage screening machines. When the templates are down, they narrow the mouth of the x-ray machine, preventing oversize baggage from passing through. Generally, even when they are down, the templates permit all baggage sized within the published FAA tariff of any airline to pass through. Templates can be flipped upward to allow authorized larger baggage to bypass the templates. Absent this authorization, when baggage does not fit through the template, it must be checked.

In 1997 Continental experimented with templates at its hub in Houston. Frequent fliers in a focus group tested by Continental found the templates annoying, and templates could not be used in at least one of Continental's hubs because another carrier objected. Thus, in 1998 Continental decided not to install templates, opting instead to expand its overhead bins and provide for more equipment and employees to permit passengers to carry on or gate-check as much luggage as they wished.

In May 1999, a Continental customer advisory board urged the airline to "[e]ncourage people to check bags" and complained of early boarding passengers usurping all carry-on baggage space ("People in row 25 are putting bags in overhead bins in row 7."). The majority of the group stated their belief "that a baggage template is a good idea." Similarly, Continental's Senior Vice President for Airport Services agreed in deposition that templates could reduce or eliminate monopolization of space by early-boarding passengers, flight delays caused by the need to find space for carry-on baggage, conflict between airline crew and passengers over carry-ons, and hazards to crew taking excess carry-on baggage down the jetway to the aircraft.

Nevertheless, Continental rejected templates and other ways to reduce carry-on baggage. Instead, it focused on providing more space for carry-on baggage, and on increasing its gate-checking services, so that when space on board had been exhausted, additional carry-on baggage could be checked at the gate (or at the side of smaller planes) without delaying flights. Continental has received press attention as well as a number of awards, which it attributes to its excellent customer service, including its liberal carry-on baggage policy. It also maintains that this policy has attracted many high-revenue customers.

United has also expanded its overhead bins to meet the problems of increased carry-on baggage. (In fact, according to Continental's Manager for Product Marketing, United began a program of bin expansion before "Continental followed as a competitive response.") In addition, however, United has sought to impose a strict limit on carry-on baggage, restricting each passenger to two carry-on bags of limited size. Finding it difficult to enforce the size limitation because of the subjectivity of the process, United looked for a more objective way to measure size and decided to try baggage templates. United expected many benefits from the use of templates, including a smoother boarding process, better on-time performance, increased passenger comfort, and greater on-board safety.

United initially experimented with templates in mid-1998 at its Los Angeles and Chicago hubs, with mixed results. The test reduced delays by up to 65% in Los Angeles and up to 72% in Chicago. However, United received complaints from high-revenue customers, who threatened to move their business, and an internal United study determined that during the 1998 calendar year, while its "template program ha[d] helped improve carry-on perceptions compared to American and US Airways . . . Continental's larger bins ha [d] provided a solution with more customer value." Nevertheless, United management decided to proceed with a plan to address the problems associated with carry-on baggage by consistently enforcing the number and size restrictions of its carry-on policy, educating consumers as to the benefits of the policy combined with larger overhead bins, and deploying templates wherever possible. (Airlines other than United and Continental, including American, Southwest, and Delta, also considered templates, and a number, like United, adopted them.) At present United has installed templates at security checkpoints used by its passengers in at least twenty-five domestic airports.

B.

In late 1998, United sought to install templates at Dulles, a United hub and one of the fastest growing airports in the country. This presented a special problem because the configuration of Dulles is, as Continental's Chief Executive Officer testified, "unique." Most airports have a number of security checkpoints, so that at most only a few airlines share any given security checkpoint. By contrast, at Dulles every non-connecting passenger for every...