Tuesday, December 3, 2013

United Air Lines, Inc. v . Austin Travel Corp. case brief

United Air Lines, Inc. v . Austin Travel Corp. case brief summary
867 F.2d 737 (1989)

Appellant travel agency sought review of summary judgment for appellee airline entered in United States District Court for the Southern District of New York in action for breach of leases obligating appellant to use appellee's computer reservation and business accounting systems, challenging the liquidated damages provision and alleging antitrust violations.

Appellee airline entered into leases with appellant travel agency obligating appellant to use appellee's computerized reservation system and business accounting system. The contracts contained a liquidated damages provision allowing appellee to recover eighty percent of its fixed and variable costs upon appellant's breach. Appellee obtained summary judgment.


  • On appeal, appellant argued that the liquidated damages provision was unreasonable because it underestimated the savings realized by appellee in the event of early contract termination, and that appellee violated antitrust laws by exerting monopoly power. 
  • The court affirmed, holding that at the time the contract was entered into, the damages provided for were reasonable, and the fact that the same damage amount applied to every breach did not render the damages a penalty because the clause applied only to substantial breaches. 
  • Appellee did not violate antitrust laws because whether the relevant market was local or national, appellee did not wield monopoly power.

Court affirmed summary judgment for appellee for breach of contract because liquidated damages clause provided for damages that were reasonable at the time the contract was entered into and applied only to substantial breaches, and appellee violated no antitrust laws because it held no monopoly power in the relevant market.

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