Travellers International Ag v. Trans World Airlines, Inc.

722 F.Supp. 1087 (S.D. NY 1989)

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Nature of the Case

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Facts

In 1974, Travellers (P) and TWA (D) entered into an agreement under which D was to provide air transportation for tour packages marketed by P. D was to provide air transportation, market the tours, wholesale the tours to independent travel agents, and accept reservations for the tours directly. P was to develop and operate the land arrangements and to produce promotional brochures for the tours. The logistics of this agreement required the parties to meet annually and to determine in advance what was to be offered for the upcoming year. This was to be done under the agreement before September 1 of the prior year. P and D shared in the revenue paid by the customers who booked the tours. The airfare was not shared with P but the retail price of the tour was split as follows: 14% went to the travel agent who book the tour, 6% was retained by D, and the balance of the 80% was given to P. From its percentage, P was to pay for the costs of operating the tours. D earned substantial amounts from the airfares that it collected from the customers. An internal memo in D showed that the program provided $49,000,000 in revenue that it would have not gotten without the agreement with P. In 1985 Icahn acquired control of D and in late 1986 or early 1987, D began to reexamine its relationship with P. In early 1986, the founder of P sought to sell P and P approached D to see if they were interested. That proposal was refused due in part to the bad travel climate with a recent hijacking, raids on Libya, a nuclear disaster, and a strike by D’s flight attendants. P then reached an understanding with Ebsworth to purchase P. Ebsworth sought written consent to the acquisition from D and got it in writing. However, relations between Ebsworth and Icahn quickly deteriorated culminating in a face to face heated exchange between the parties at dinner on August 5, 1987. In May 1987 D successfully renegotiated a reduction in price paid to P and reduced the number of brochures to be produced by P. In June D’s margin was increased from 6% to 10% of the retail land tour price. In August 1987, D even offered to purchase P from Ebsworth for the same price he had paid a year earlier. When that offer was rejected, D began to look into developing its own in-house tour capacity. In September 16, 1987, a letter was sent to P purporting to terminate the P-D contract. The termination was to be effective December 31, 1988, with respect to tours and as of December 31, 1987, with respect to brochures. P sued D and sought a permanent injunction requiring D to specifically perform the contract.