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GENERAL AIRCRAFT CORP. v. AIR AMERICA

January 30, 1979

General Aircraft Corp.
v.
Air America, Inc., et al.



The opinion of the court was delivered by: GREEN

MEMORANDUM OPINION

Plaintiff General Aircraft Corporation (GAC), formerly a designer and manufacturer of aircraft having short take-off and landing (STOL) characteristics sold under the trade names "Helio Courier" and "Helio Stallion," filed a seventy-one page complaint on November 8, 1977 seeking treble damages under Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15 and 26, for alleged violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2. *fn1"

 Named as defendants are Air America, Inc. (Air America), Air Asia Company, Ltd. (Air Asia), its wholly-owned subsidiary, and George A. Doole, Jr. (Doole), the Chief Executive Officer of Air America and Air Asia during the 1950's and 1960's until his retirement in 1971. These defendants are alleged to be part of the "CIA Air Proprietary Complex" (complaint, pp. 12, 14, 21). *fn2"

 Other named defendants include Bird & Sons, Inc. (Bird), Continental Air Services, Inc. (Continental), *fn3" private domestic corporations which allegedly flew missions for the CIA using STOL aircraft, and Fairchild Industries, Inc. (Fairchild), a domestic corporation which designed, developed and produced certain commercial and military STOOL aircraft, some of which was accomplished under license from a Swiss company. *fn4" GAC and Fairchild were direct competitors in the light STOL aircraft market.

 Finally, Lawrence R. Houston, General Counsel of the Central Intelligence Agency from 1947 to July 1, 1973, and various unknown CIA agents are also alleged to have engaged in one or more of the conspiratorial acts described in the complaint.

 GAC alleges that all of the named defendants conspired to and did engage in activities designed to restrain trade in domestic and foreign STOL markets in violation of Section 1 of the Sherman Act. GAC also claims that defendants monopolized the STOL aircraft product and service market thereby violating Section 2 of the Sherman Act. Specifically, GAC alleges that the CIA air proprietary complex employees falsely disparaged GAC's STOL aircraft products and services by circulating false and misleading performance reports and its personnel by posing as GAC employees in foreign countries while conducting illegal and immoral covert operations. The complaint also alleges that the CIA air proprietary complex engaged in a "vendetta" designed to drive GAC out of business in response to GAC's refusal to conduct Southeast Asian Helio sales under the auspices of Doole and Air America. In furtherance of this vendetta, Air Asia is alleged to have obtained GAC proprietary data and trade secrets in order to fabricate Helio planes and parts without license at its repair facility in Taiwan from 1962 to January 31, 1975. Finally GAC alleges that the CIA proprietary complex used its extensive power to orchestrate a boycott of GAC's STOL aircraft, parts and services by all of the defendants and to promote the sale of Fairchild's STOL aircraft thereby completing the conspiratorial design to destroy GAC's competitive position in the marketplace.

 GAC is seeking to recover treble damages for lost sales to certain foreign governments and to the United States as well as to various unspecified private domestic and foreign corporations, including Bird and Continental. The matter is presently before the Court on various motions to dismiss or in the alternative for summary judgment and motions for a more definite statement as to some of GAC's claims.

 Claims for Lost Sales to Foreign Governments

 Plaintiff has petitioned the Court to review conspiratorial actions allegedly taken by the CIA and certain domestic and foreign corporations and to assess their impact on procurement decisions reached by foreign governments. The theory of the complaint is not that the alleged combination or conspiracy *fn5" itself damaged plaintiff but that the adverse purchasing determinations made by foreign governments were influenced by certain actions taken in furtherance of the alleged conspiracy and that this resulted in the elimination of a market for GAC's STOL aircraft and other services. Defendants Continental, Air America, Air Asia and Doole have moved to dismiss these claims arguing that the Act of State Doctrine renders GAC's claims nonjusticiable.

 The Court concludes that it has jurisdiction over plaintiff's claims despite their focus on foreign commerce and some actions which took place in foreign countries. Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 82 S. Ct. 1404, 8 L. Ed. 2d 777 (1962). However, the compelling principles embodied in antitrust legislation are at times outweighed by the abstention principle adhered to by the courts in applying the Act of State Doctrine, thus rendering nonjusticiable any claim by GAC requiring this Court to probe and analyze procurement decisions made by foreign governments.

 The so-called Act of State Doctrine is of federal common law origin enunciated by the United States Supreme Court as follows: "in its traditional formulation (the Act of State Doctrine) precludes the courts of this country from inquiring into the validity of the public acts a recognized foreign sovereign power committed within its own territory." Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 401, 84 S. Ct. 923, 926, 11 L. Ed. 2d 804 (1964). *fn6" The Act of State Doctrine focuses on both the competency and desirability of judicial inquiry into either the validity or motivation of actions taken by foreign states on their own soil. Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 96 S. Ct. 1854, 48 L. Ed. 2d 301 (1976); Banco Nacional de Cuba v. Sabbatino, supra; Hunt v. Mobil Oil Corp., 550 F.2d 68 (2d Cir. 1977), Cert. denied, 434 U.S. 984, 98 S. Ct. 608, 54 L. Ed. 2d 477 (1977). Typically, the Act of State Doctrine is invoked where the validity of actions of a foreign nation is being challenged. Less frequently, the doctrine is applied to claims of improper influence of actions taken by foreign governments. However, it has been held by the United States Supreme Court that an antitrust plaintiff cannot recover if the claim is partially based upon the sovereign act of a foreign government even where the act is induced by a non-governmental defendant. American Banana Co. v. United Fruit Co., 213 U.S. 347, 358, 29 S. Ct. 511, 53 L. Ed. 826 (1909); W. Fugate, Foreign Commerce and the Antitrust Laws 75 (2d ed. 1973). Thus, where the injury complained of results directly from the acts or decisions of a foreign sovereign and only indirectly from defendants' allegedly unlawful anticompetitive activities, the Court must dismiss the claims as nonjusticiable. Occidental Petroleum Corp. v. Buttes Gas & Oil Co., 331 F. Supp. 92 (C.D.Cal.1971), Aff'd, 461 F.2d 1261 (9th Cir. 1972), Cert. denied, 409 U.S. 950, 93 S. Ct. 272, 34 L. Ed. 2d 221 (1972).

 GAC's reliance on United States v. Sisal Sales Corp., 274 U.S. 268, 47 S. Ct. 592, 71 L. Ed. 1042 (1927) and Continental Ore Co. v. Union Carbide & Carbon Co., 370 U.S. 690, 82 S. Ct. 1404, 8 L. Ed. 2d 777 (1962), both decided after American Banana, supra, is misplaced. In neither case did the plaintiff's claims require analysis of the reasons underlying sovereign acts. In both cases, the direct cause of the injuries alleged was the actions of private corporations and not the act of the sovereign.

 In the case at bar, plaintiff must demonstrate that its business was injured as a result of anticompetitive conduct on the part of defendants. Radiant Burners Inc. v. Peoples Gas Light & Coke Co., 364 U.S. 656, 81 S. Ct. 365, 5 L. Ed. 2d 358 (1961); Hunt v. Mobil Oil Corp., 550 F.2d 68 (2d Cir. 1977). The motivation underlying purchasing decisions made by foreign governments is an essential issue raised by the pleadings. The serious concerns recognized in prior decisions invoking the Act of State Doctrine are clearly present in this case. Brief for defendant Fairchild Industries, Inc. at 30-32. Accordingly this Court is ...


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