Ata Airlines, Inc. v. Federal Express Corporation

665 F.3d 882 (7th Cir. 2012)

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Nature of the Case

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Facts

In the event of a national emergency, DOD can use commercial aircraft drawn from what's called the 'Civil Reserve Air Fleet' to augment the Department's own airlift capabilities. The Fleet is divided into separate 'teams' of airlines, each with a 'team leader.' The teams pledge portions of their fleets for use by the Department during an emergency; the leader assembles the team and submits the team's bid to participate in the Civil Reserve Air Fleet. The Department awards the member 'mobilization value points' in proportion to the scale of the commitment. The more points a member has, the more non-emergency air transportation for the Department the member can bid on. The points are transferrable within teams. Smaller carriers want the larger carriers' points and are willing to pay for them, and as a result, end up doing most of the non-emergency flying. A large carrier has a large number of mobilization value points because of its commitment to provide copious emergency service if needed-transfers points to the members of its team in exchange for a commission on their non-emergency military flights. The commission rate is the price term in the contractual arrangements between the team leader and each of the team's smaller carriers. D is the leader of one of the teams, which included D and Omni Air International-small passenger and charter airlines that split between them the team's allotment of non-emergency military passenger service (as distinct from cargo service). The team's annual revenues from the provision of non-emergency services to DOD amount to about $600 million. D's team has three separate contracts, each with a one-year term. The first fixes both the allocation of military business among the team members and the commission rate for the team leader. The second identifies the team members and the aircraft they will commit to the military if the team's bid is accepted. The third defines the liability and insurance obligations of the team members. P and Omni agreed with D that during the following three years the team's passenger business would be divided equally between those two carriers. In 2008 P's allotment was reduced by 10 flights per month to make room for Northwest Airlines, a much bigger carrier, which wanted to start flying for the Civil Reserve Air Fleet. Northwest was a participant in the FedEx team, but for the first time, it would be a flying member of the team. D decided to drop P from the team and, beginning in 2009. P withdrew from the team prematurely, in the middle of 2008. P went into bankruptcy. P sued D for a breach of contract. P got a small verdict and both parties appealed.