Antitrust Law Daily Wrap Up, ANTITRUST—1stCir: Antitrust Claims Fail over Puerto Rican Airplane Refueling Dispute, (Jun 17, 2013)

By Tobias J. Gillett, J.D., LL.M.

An airplane fueling company could not obtain a reversal of a district court judgment that it did not prove its antitrust case against a competitor who allegedly engaged in a conspiracy with the Puerto Rico Ports Authority (PRPA) to drive it out of the airport where the companies competed for refueling business, the U.S. Court of Appeals in Boston has ruled (Diaz Aviation Services, Inc. v. Airport Aviation Services, Inc., June 14, 2013, Torruella, J.). The fueling company failed to show the concerted action and “unreasonable or anticompetitive” actions necessary for a Sherman Act, Section 1 claim, and did not proffer evidence that would demonstrate the monopoly power or dangerous probability of monopoly necessary for a Section2 claim.

Diaz Aviation Corp. formerly sold aviation fuel at the Luis Munoz Marin International Airport (LMMIA) in Carolina, Puerto Rico, primarily to the U.S. military. Diaz alleged that Airport Aviation Services, Inc. (AAS) made bribes that caused the PRPA to discriminate against Diaz. According to Diaz, AAS and PRPA took a number of improper actions against Diaz, including PRPA bringing an eviction action against Diaz that failed because Diaz had paid its rent and PRPA had accepted it; AAS claiming that a nonexclusive contract to supply fuel to the military was an exclusive one; a complaint from an AAS employee to a PRPA employee that led to Diaz’s expulsion from the fueling ramps for approximately two weeks; and PRPA employees removing an airplane Diaz was fueling, claiming it was illegally parked, and then AAS fueling it.

Diaz filed suit against AAS, PRPA, and related individuals, referencing a variety of causes of action, including violations of the Sherman Act. The district court dismissed the case against PRPA and related individuals under the Local Government Antitrust Act, which immunizes local governments and their employees from federal antitrust damages. After a bench trial, the district court granted a motion for judgment by the AAS defendants, concluding that Diaz had failed to meet its burden of proof on all claims. The court denied Diaz’s motion for reconsideration, and Diaz appealed.

The appellate court concluded that Diaz “did not prove the existence of concerted action.” An agreement between AAS and its employees “would not qualify as concerted action under Section 1,” and Diaz’s evidence of an agreement between AAS and PRPA relied on an e-mail exchange between AAS employees and PRPA in which the employees requested PRPA’s intervention to halt an alleged “security risk” caused by Diaz fueling airplanes that “should have been serviced by AAS.” PRPA expelled Diaz’s trucks from the fueling area claiming that its fueling permit had expired, until Diaz obtained a Puerto Rico court injunction permitting it to return on the ground that the permit had become permanent.

However, testimony at trial “plausibly supported the conclusion that AAS and PRPA were taking reasonable security measures rather than engaging in a conspiracy to restrain trade,” according to the court. An AAS employee testified that he sent his e-mail to resolve potential security concerns and that he was not demanding or expecting PRPA to take any specific action. A PRPA employee testified that he ordered the removal of Diaz’s trucks because Diaz’s “interference with fueling operations was causing safety and security issues,” and because he believed that Diaz did not have a valid contract to sell fuel. Their testimony was supported by testimony from two other employees that Diaz’s principal used threatening language toward them.

Moreover, the court found that Diaz “ha[d] not shown that the defendants’ actions were unreasonable or anticompetitive.” Under rule of reason analysis, Diaz did not provide any evidence of “market definition, market share, the effect of pricing or output, or other relevant economic variables.” In addition, the court observed, “the evidence at trial demonstrated a legitimate procompetitive justification for many of the actions taken against Diaz: maintaining safety and security at LMMIA.”

Diaz also did not prove a Section 2 claim, according to the court. Diaz did not provide “evidence of the sort necessary to prove monopoly power or dangerous probability of monopoly, including evidence of market definition, market share, barriers to entry, or any other economic evidence of market power.” To the extent that Diaz’s claim relied on AAS’s military contract, the court observed that “military pilots remained free to purchase fuel from a competitor,” and that the evidence showed that some of them had done so.

Finally, Diaz failed to show that AAS had caused any of the actions taken by PRPA, since it “could not prove that AAS conspired with PRPA to induce PRPA to take these actions.” In addition, Diaz failed to prove its damages at trial, the court concluded.

The court declined to consider Diaz’s appeal as an appeal of the orders dismissing the PRPA defendants from the case because Diaz “ha[d] not indicated a sufficiently clear intent to appeal” those judgments, in the court’s view. Although Diaz’s appellate brief made “occasional glancing arguments related to those judgments, it also assert[ed] that the PRPA defendants [were] ‘not denominated as appellees.’” Moreover, although the amended docketing sheet listed most of the PRPA defendants as appellees, it still only listed the district court’s denial of reconsideration of its judgment as to the AAS defendants as the subject of appeal, not any earlier interlocutory orders. The court saw “no reason to exercise special flexibility in favor of a corporation in a business tort case that is represented by counsel.”

The case is No. 12-1859.

Attorneys: Sixto M. Diaz-Saldana for Diaz Aviation Corp. Guillermo De Guzman-Vendrell for Airport Aviation Services, Inc. Arturo Diaz-Angueira (Cancio, Nadal, Rivera & Diaz, P.S.C.) for Jose Algarin. Margarita Mercado-Echegaray, Office of the Solicitor General, Department of Justice, Commonwealth of Puerto Rico for Fernando Bonilla. Myra M. Velez-Plumey (Fernandez, Collins, Cuyar & Pla) for Puerto Rico Ports Authority.

Companies: Diaz Aviation Corp.; Airport Aviation Services, Inc.; Puerto Rico Ports Authority

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