Star Marianas Air, Inc. v. Southern Airways Express, LLC et al

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IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN MARIANA ISLANDS
STAR MARIANAS AIR, INC.,
Plaintiff,
v.
SOUTHERN AIRWAYS EXPRESS,
LLC, et al.
Defendants.
Case No. 1:24-cv-00010
DECISION AND ORDER GRANTING
DEFENDANT SOUTHERN AIRWAYS
EXPRESS, LLC’S
MOTION FOR JUDGMENT
ON THE PLEADINGS
Before the Court is Defendant Southern Airways Express, LLC’s Motion for Judgment on
the Pleadings (ECF No. 80), joined by Defendants Marianas Pacific Express, LLC, and Keith
Stewart (ECF No. 83). Therein, Defendants move for judgment on the entirety of Plaintiff Star
Marianas Air, Inc.’s First Amended Complaint. The Court held a hearing on the Motion on
February 12, 2026. For the reasons set forth below, the Court GRANTS the Motion for Judgment
on the Pleadings and dismisses the First Amended Complaint in its entirety with leave to amend.
I. BACKGROUND
On June 25, 2024, Plaintiff Star Marianas Air, Inc. (“Star Marianas”) filed a six-count
Complaint against Defendant Southern Airways Express, LLC (“Southern Airways”), Marianas
Pacific Express, LLC d/b/a Marianas Southern Airways (“Marianas Southern”), and Marianas
Southern President Keith Stewart. Therein, Plaintiff alleged that Defendants engaged in
anticompetitive conduct violative of the Sherman Antitrust Act through Defendants’ activities
arising from the execution of a sole source contract by Marianas Southern with the Commonwealth
F I L E D
Clerk
District Court
for the Northern Mariana Islands
By________________________
(Deputy Clerk)
MAR 09 2026
Case 1:24-cv-00010 Document 95 Filed 03/09/26 Page 1 of 29

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of the Northern Mariana Islands (“the Commonwealth” or “CNMI”) to provide commercial
passenger flights between Saipan, Tinian, and Rota. (See generally Compl., ECF No. 1.) After
Defendants obtained a partial dismissal of the Complaint (see Mins., ECF No. 33; Mem. Decision
Den. in Part, & Granting in Part S. Airways Express, LLC’s Mot. to Dismiss, ECF No. 53), on
December 5, 2024, Plaintiff filed a First Amended Complaint (“FAC”) (ECF No. 34), again
alleging that Defendants violated the Sherman Antitrust Act across six counts:1
• Counts I and II alleges that Defendant Southern Airways had violated sections 1 and 2 of
the Sherman Antitrust Act, respectively (FAC ¶¶ 44-52, 53-62);
• Counts III and IV alleges that Defendant Marianas Southern had violated sections 1 and 2
of the Sherman Antitrust Act, respectively (id. ¶¶ 63-81, 82-101); and
• Counts V and VI alleges that Defendant Stewart had violated sections 1 and 2 of the
Sherman Antitrust Act, respectively (id. ¶¶ 102-121, 122-141).
Plaintiff seeks actual and treble damages, prejudgment interest, and reasonable costs and fees
against all Defendants jointly and severally. (Id. at 25-26 (prayer for relief).)
Defendants sought to dismiss Plaintiff’s First Amended Complaint for failure to join the
Commonwealth as a necessary and indispensable party, to no avail. (Mins., ECF No. 48; Mem.
Decision Den. S. Airways Express, LLC’s Mot. to Dismiss 1st Am. Compl. Pursuant to FRCP
12(b)(7), 19, ECF No. 55.) As such, on February 27, 2025, Defendant Southern Airways filed its
Answer and Affirmative Defenses (ECF No. 51); Defendants Marianas Southern and Stewart filed
a joint Answer (ECF No. 56) a week later.
1 The Court previously recounted the factual allegations set forth in the First Amended Complaint in its
Memorandum Decision Denying Defendant Southern Airways Express, LLC’s Motion to Dismiss First
Amended Complaint Pursuant to FRCP 12(b)(7), 19. (See Mem. Decision Den. Def. S. Airways Express,
LLC’s Mot. to Dismiss 1st Am. Compl. Pursuant to FRCP 12(b)(7), 19, at 2-5, ECF No. 55.)
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Thereafter, Defendant Southern Airways filed a Motion for Judgment on the Pleadings
(ECF No. 80), which was joined by Defendants Marianas Pacific and Stewart (ECF No. 83).
Plaintiff filed its Response in Opposition (ECF No. 84). Defendant Southern Airways filed a Reply
(ECF No. 85), which Defendants Marianas Southern and Stewart joined (ECF No. 86).
Subsequently, the Court held a hearing on the Motion on February 12, 2026, at which counsel for
all Parties appeared and presented oral arguments; the Court then took the Motion under
advisement. (Mins., ECF No. 93.)
II. LEGAL STANDARD
“After the pleadings are closed—but early enough not to delay trial—a party may move
for judgment on the pleadings.” Fed. R. Civ. P. 12(c). A motion for judgment on the pleadings
pursuant to Rule 12(c) is “functionally identical” to a motion to dismiss for failure to state a claim
pursuant to Rule 12(b)(6), with the “principal difference” between the motions being “the time of
filing.” Dworkin v. Hustler Mag. Inc., 867 F.2d 1188, 1192 (9th Cir. 1989). As such, as with a
Rule 12(b)(6) motion, a Rule 12(c) motion may be based on “the lack of a cognizable legal theory
or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica
Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988). To survive a Rule 12(c) motion, as with a
Rule 12(b)(6) motion, see Chavez v. United States, 683 F.3d 1102, 1108 (9th Cir. 2012), “a
complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face,’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). A claim is plausible on its face where the complaint’s factual
content “allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Id. (rejecting “‘labels and conclusions,’” “‘formulaic recitation of the
elements of a cause of action,’” “‘naked assertions’ devoid of ‘further factual enhancement,’” and
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“unadorned, the-defendant-unlawfully-harmed-me accusation[s]” as insufficient to state a facially
plausible claim (quoting Twombly, 550 U.S. at 555, 557)). A complaint that “pleads facts that are
‘merely consistent with’ a defendant’s liability . . . ‘stops short of the line between possibility and
plausibility of “entitlement to relief.”’” Id. (quoting Twombly, 550 U.S. at 557); see also Starr v.
Baca, 652 F.3d 1202, 1216 (9th Cir. 2011) (explaining that plausibility pleading requirement
ensures that claims are such that “it is not unfair to require the opposing party to be subjected to
the expense of discovery and continued litigation”); Twombly, 550 U.S. at 558-60 (justifying
plausibility pleading standard in need to curb discovery abuse in private antitrust litigation).
“For purposes of the [Rule 12(c)] motion, the allegations of the non-moving party must be
accepted as true, while the allegations of the moving party which have been denied are assumed
to be false.” Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1550 (9th Cir.
1989). The Court must construe factual allegations in the complaint “in the light most favorable
to the non-moving party,” Fleming v. Pickard, 581 F.3d 922, 925 (9th Cir. 2009), but “need not . . .
accept as true allegations that contradict matters properly subject to judicial notice or by
exhibit[2] . . . [or] are merely conclusory, unwarranted deductions of fact, or unreasonable
inferences,” Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). “Judgment on
the pleadings is properly granted when there is no issue of material fact in dispute, and the moving
party is entitled to judgment as a matter of law.” Fleming, 581 F.3d at 925.
2 “Judgment on the pleadings is limited to material included in the pleadings.” Yakima Valley Mem’l Hosp.
v. Wash. State Dep’t of Health, 654 F.3d 919, 925 n.6 (9th Cir. 2011); Fed. R. Civ. P. 12(d) (“If, on a motion
under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court,
the motion must be treated as one for summary judgment under Rule 56.”). The Court “may, however,
consider certain materials—documents attached to the complaint, documents incorporated by reference in
the complaint, or matters of judicial notice—without converting the motion . . . into a motion for summary
judgment.” United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003).
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III. ANALYSIS3
A. The Parties’ Arguments
Defendants contend that judgment on the entirety of Plaintiff’s First Amended Complaint
is appropriate because Plaintiff fails to state a claim against any Defendant. First, Defendants
contend that monopolization and attempted monopolization claims under the Sherman Antitrust
Act require a showing of exclusionary conduct by the alleged monopolist, but that Plaintiff’s
allegations fail to suggest that Defendants engaged in any such conduct. (S. Airways Express’s
Mot. for J. on Pleadings 10-14 (contending allegations do not show “predation” because
Defendants did not set prices below cost, contract subsidizing Defendants was of limited duration,
and Plaintiff monopolized the market prior to Defendants’ entry) [hereinafter “Defs.’ Mot.”], ECF
No. 80.) Second, Defendants contend that Plaintiff’s allegations fail to show that Defendants were
able to “recoup” their losses to the detriment of consumers, another required element of
monopolization and attempted monopolization claims. (Id. at 14-17.) Third, Defendants contend
that Plaintiff relies upon the wrong provisions of the Sherman Antitrust Act (id. at 17 (contending
that 15 U.S.C. §§ 1-2 do not apply to activities in the Commonwealth)) and, in any event, that
Plaintiff’s allegations fail to show that Defendants engaged in “interstate” commerce as required
for applicability of any relevant provision of the Sherman Antitrust Act (id. at 17-19 (noting that
Plaintiff only alleges that Defendants “substantially affected interisland travel in the CNMI” and
contending that 15 U.S.C. § 3, as applied to the Commonwealth, still requires interstate commerce
for liability thereunder (quoting FAC ¶¶ 51, 61))).
In opposition, Plaintiff first contends that its factual allegations “plausibly support an
inference of anticompetitive conduct,” namely, that Defendants entered the Commonwealth’s
3 In citing the Parties’ filings, the Court uses the pagination in the header generated by CM/ECF across all
documents.
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interisland commercial passenger air travel market with the assistance of funds from the sole-
source contract with the Commonwealth, set prices below “economically sustainable levels for
the purpose of eliminating” Plaintiff, and that such conduct “tend[ed] to impair the opportunities
of rivals” without “further[ing] competition on the merits[.]” (Pl. Star Marianas Air, Inc.’s Resp.
in Opp’n to Def. S. Airways Express, LLC’s Mot. for J. on Pleadings 7 [hereinafter “Pl.’s Opp’n”],
ECF No. 84; see also id. at 8-10 (contending that allegations concerning the characteristics of the
market and Defendants’ ability to charge below-market prices support inference that Defendants
engaged in unlawful exclusionary conduct); id. at 13-14 (asserting that contract with the
Commonwealth does not immunize Defendants); id. at 16-18 (asserting that allegations plausibly
show an unlawful conspiracy among Defendants).) Plaintiff next contends that Defendants’
arguments erroneously seek Plaintiff to prove its claims at the pleading stage, as opposed to merely
setting forth factual allegations giving rise to a plausible claim for relief. (Id. at 9-12 (identifying
“[w]hether [Southern Airways’s] pricing was below an appropriate measure of cost,” “whether it
was sustained through subsidy rather than efficiency,” and issues concerning recoupment as factual
issues that cannot be resolved at the pleading stage); see also id. at 18-20 (contending that
Defendants’ arguments improperly seek the Court to accept Defendants’ version of facts, draw
inferences against Plaintiff, and rely upon materials outside of the pleadings).) Plaintiff then
contends that its allegations plausibly establish that Defendants engaged in “interstate” commerce
as required for liability under the Sherman Antitrust Act. (Id. at 14-16 (asserting that prior
decisions and federal regulations deem air transportation activities as inherently “interstate” and,
in any event, “practical and economic realities” indicate that the market is not “purely local”); id.
at 20-21 (asserting that 15 U.S.C. § 3’s “prohibitions . . . are virtually identical to the prohibitions”
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in 15 U.S.C. §§ 1 and 2).) Plaintiff further requests that, should the Court find that judgment is
warranted, that Plaintiff be afforded leave to amend. (Id. at 12-13, 20-21.)
In reply, Defendants first highlight that Plaintiff fails to address their arguments concerning
the short duration of the contract. (S. Airways Express’s Reply in Supp. of Mot. for J. on Pleadings
2-3 [hereinafter “Defs.’ Reply”], ECF No. 85.) Defendants then reiterate their arguments asserting
that Plaintiff’s allegations fail to show predation or recoupment (id. at 3-8), are brought under the
wrong provisions of the Sherman Antitrust Act (id. at 8), and fail to establish that Defendants’
activities had a substantial effect on “interstate” commerce (id. at 8-9).
B. Discussion
The Court first addresses Defendants’ arguments challenging the applicability of the
Sherman Antitrust Act due to their jurisdictional nature.4 The Court then turns to Defendants’
remaining arguments concerning the substantive elements of Plaintiff’s claims under sections 1
through 3 of the Sherman Antitrust Act. The Court concludes that Defendants’ Motion is well
taken.
4 Though Defendants recognize in their Motion that their “interstate commerce” challenge is jurisdictional
(see Defs.’ Mot. 13), Defendants do not cite any rule apart from Rule 12(c) in moving for disposition of
Plaintiff’s First Amended Complaint. Courts have addressed motions asserting a jurisdictional challenge
to the applicability of the Sherman Antitrust Act under Rules 12(b)(1), (b)(6), and 56. Thornhill Publ’g
Co., Inc. v. Gen. Tel. & Elecs. Corp., 594 F.2d 730, 732-33 (9th Cir. 1979).
Here, as Defendants’ challenge rests on the substance and sufficiency of Plaintiff’s allegations in
disputing jurisdiction, Defendants’ challenge at this juncture is appropriately treated as a facial attack on
the Court’s subject-matter jurisdiction under Rule 12(b)(1). Id. at 733; Leite v. Crane Co., 749 F.3d 1117,
1121 (9th Cir. 2014) (“A ‘facial’ attack accepts the truth of the plaintiff’s allegations but asserts that they
‘are insufficient on their face to invoke federal jurisdiction.’ The district court resolves a facial attack as it
would a motion to dismiss under Rule 12(b)(6): Accepting the plaintiff’s allegations as true and drawing
all reasonable inferences in the plaintiff’s favor, the court determines whether the allegations are sufficient
as a legal matter to invoke the court’s jurisdiction.” (citations omitted) (quoting Safe Air for Everyone v.
Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004))). Therefore, engaging in further factual analysis or converting
Defendants’ challenge to a Rule 56 motion at this juncture is unnecessary.
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1. Jurisdiction
a. “Interstate commerce” or “commerce with a foreign nation” is required to
establish subject-matter jurisdiction under sections 1 and 2 of the Sherman
Antitrust Act, while jurisdiction under section 3 over conduct arising in the
Commonwealth requires such conduct to be part of commerce with the District of
Columbia or a territory other than the Commonwealth.
In enacting the Sherman Antitrust Act, ch. 647, §§ 1 et seq., 26 Stat. 209 (1890) (current
version at 15 U.S.C. §§ 1 et seq.), “Congress meant to deal comprehensively and effectively with
the evils resulting from contracts, combinations, and conspiracies in restraint of trade, and to that
end to exercise all the power it possessed.” Atl. Cleaners & Dyers v. United States, 286 U.S. 427,
435 (1932). As relevant here, the first three sections of the Sherman Antitrust Act set forth textually
identical prohibitions against anticompetitive conduct, differing only in the location of, or the
jurisdictional entities engaged in, trade and commerce.5 Compare 15 U.S.C. § 3(a) (prohibiting
“[e]very contract, combination in form of trust or otherwise, or conspiracy, in restraint of trade or
commerce”), with id. § 1 (identical prohibitory text); compare id., § 3(b) (making it unlawful to
“monopolize, or attempt to monopolize, or combine or conspire with any other person or persons,
to monopolize any part of the trade or commerce”), with id. § 2 (identical prohibitory text).
Sections 1 and 2, codified at 15 U.S.C. §§ 1 and 2, respectively, prohibit anticompetitive conduct
involving “trade or commerce among the several States, or with foreign nations[.]” 15 U.S.C.
§§ 1, 2 (emphasis added). In contrast, section 3 applies to “trade or commerce in any Territory of
the United States[,]” “between any such Territory and another,” or “between any such Territory or
Territories and any State or States or the District of Columbia, or with foreign nations[.]” Id.
§ 3(a), (b) (emphasis added). The difference in language concerning location or jurisdictional
5 Though sections 1 to 3 of the Sherman Antitrust Act only provide for a criminal penalty (and thus vest
enforcement authority solely in the United States, see 15 U.S.C. § 4), section 4 of the Clayton Act, ch. 323,
§ 4, 38 Stat. 731 (1914) (current version at 15 U.S.C. § 15), authorizes private parties who are injured “by
reason of anything forbidden in the antitrust laws” to “sue therefor[.]” 15 U.S.C. § 15(a).
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entity reflects two distinct sources of authority for Congress to regulate anticompetitive conduct,
with corresponding ramifications for subject-matter jurisdiction.
On one hand, in enacting sections 1 and 2, Congress relied upon its “broad authority . . .
under the Commerce Clause” to regulate not only “activities in interstate commerce” but also
“other activities, while wholly local in nature, [that] nevertheless substantially affect interstate
commerce.” McLain v. Real Est. Bd. of New Orleans, Inc., 444 U.S. 232, 241 (1980) (“This Court
has often noted the correspondingly broad reach of the Sherman Act.”). Thus, sections 1 and 2
contain a “jurisdictional requirement” that the activities complained of must either be “in
commerce” or have an “effect on commerce.” Id. at 242; Thornhill Publ’g Co., Inc. v. Gen. Tel.
& Elecs. Corp., 594 F.2d 730, 737 (9th Cir. 1979) (quoting Las Vegas Merch. Plumbers Ass’n v.
United States, 210 F.2d 732, 739 n.3 (9th Cir. 1954), in explaining the two bases for jurisdiction
under the Sherman Antitrust Act: “[t]hat the acts complained of, occurred within the flow of
interstate commerce” or “occurred wholly on the state or local level, in intrastate commerce, but
substantially [a]ffected interstate commerce”); see also Atl. Cleaners, 286 U.S. at 434 (observing
that section 1, “having been passed under the specific power to regulate commerce,” is “necessarily
. . . limited by the scope of that power”).
On the other hand, Congress’s enactment of section 3 relied upon its “general power” to
legislate for “all territories to which its powers might extend,” Puerto Rico v. Shell Co., 302 U.S.
253, 259 (1937), regardless of incorporated or unincorporated status, United States v. Standard Oil
Co. of Cal., 404 U.S. 558, 560 (1972); see also Norman’s on the Waterfront, Inc. v. Wheatley, 444
F.2d 1011, 1016-19 (3rd Cir. 1971). As such, section 3 extends to trade and commerce carried out
in the territories without the requirement that the activities at issue must be in, or have a substantial
effect on, interstate commerce. See, e.g., Hennegan v. Pacifico Creative Serv., Inc., 787 F.2d 1299
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(9th Cir. 1986) (reversing summary judgment on Guam souvenir shop owners’ complaint alleging
tour operators and competing souvenir vendors directed tourists visiting Guam to the vendors, and
away from plaintiffs’ shop, in exchange for payments that the vendors paid but plaintiffs refused
to pay); Standard Oil Co., 404 U.S. at 558 (reversing dismissal of complaint for conspiracy to
monopolize distribution and sale of petroleum products in American Samoa); Wheatley, 444 F.2d
at 1016-19 (invalidating alcohol fair-trade scheme enacted by Virgin Islands Legislature); Tribolet
v. United States, 95 P. 85, 88 (Ariz. 1908) (affirming conviction for conspiracy and attempted
monopolization of slaughter and sale of meant in single municipality within then-territory of
Arizona).
Defendants assert, however, that even if Plaintiff’s claims were construed as section 3
claims,6 section 3, as applied to the Commonwealth through the Covenant to Establish a
Commonwealth of the Northern Mariana Islands in Political Union with the United States of
America (“the Covenant”), Pub. L. 94-241, 90 Stat. 263 (1976) (reproduced at 48 U.S.C. § 1801
note), still maintains the requirement that the conduct complained of must occur in, or substantially
affect, interstate commerce. The Court concludes that Defendants are partially correct.
6 Although plaintiffs are well-advised to research and identify the correct legal authority underlying a cause
of action, see McHenry v. Renne, 84 F.3d 1172, 1179-80 (9th Cir. 1996) (detailing “unfair burdens on
litigants and judges” where complaint is “confusing,” including risk of surprise to defendants, “wast[ing]”
the time of judges in determining “what claims are made against whom,” and impact on rights of litigants
in other cases), “[a] complaint should not be dismissed if it states a claim under any legal theory, even if
the plaintiff erroneously relies on a different legal theory,” Haddock v. Bd. of Dental Examiners, 777 F.2d
462, 464 (9th Cir. 1985); see also Fed. R. Civ. P. 8(e) (“Pleadings must be construed so as to do justice.”).
The Court further notes that dismissal based on Plaintiff’s citing sections 1 and 2, instead of section 3,
would be particularly inappropriate here as the conduct prohibited by sections 1 and 2 would also be
prohibited by section 3, the provisions are all immediately adjacent to each other within the Sherman
Antitrust Act and its codified reproduction in the U.S. Code, and Defendants are plainly on notice of the
factual and legal bases for Plaintiff’s claims.
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The Commonwealth is unique among the territories because the relationship between the
United States and the Commonwealth was created in 1976 through the ratification, by both the
United States and the Commonwealth, of a legal document—the Covenant—that
acknowledges Congressional power over territories as provided in
the Constitution’s territorial clause which provides that “Congress
shall have Power to dispose of and make all needful Rules and
Regulations respecting the Territory or other Property belonging to
the United States.” However, although the territorial clause
provides the Constitutional basis for Congress’s legislative authority
in the Commonwealth, it is by the Covenant that we measure the
limits of that power.
Saipan Stevedore Co. Inc. v. Dir., Off. of Workers’ Comp. Programs, 133 F.3d 717, 721 (9th Cir.
1998) (emphasis added) (quoting U.S. Const. art. IV, § 3, cl. 2); see also United States ex rel.
Richards v. De Leon Guerrero, 4 F.3d 749, 754-55 (9th Cir. 1993) (explaining that the Covenant
limits Congress’s authority to pass legislation with respect to the Commonwealth such that “the
United States must have an identifiable federal interest that will be served by the relevant
legislation,” and such federal interest must be balanced “against the degree of intrusion into the
internal affairs of the CNMI” in view of the Covenant’s provisions guaranteeing the right of self-
government and requiring mutual consent of the United States and the Commonwealth to modify
any fundamental provisions of the Covenant). In other words, the Covenant constitutes a
prospective and retrospective statutory limit Congress imposed on its exercise of its constitutional
“general power” under the Territorial Clause, Puerto Rico, 302 U.S. at 259, to legislate with respect
to the Commonwealth. Consequently, whether Congress elected to “exercise all the power it
possessed,” Atl. Cleaners, 286 U.S. at 435, in extending the Sherman Antitrust Act to encompass
the Commonwealth turns on the Covenant’s “certain provisions” providing that “the United States
Constitution and certain United States statutes will apply to the CNMI. For those laws not
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explicitly addressed, the Covenant provides formulae for determining whether a federal law will
apply to the CNMI.” Salas v. United States, 116 F.4th 830, 836 (9th Cir. 2024).
Sections 501 and 502 of the Covenant enumerate specific laws of the United States that are
applicable to the Commonwealth. The Sherman Antitrust Act is not among those enumerated laws.
See Covenant §§ 501, 502(a)(1), 90 Stat. at 267-68. As such, section 502(a) provides the
“formula[] for determining whether a federal law will apply,” Salas, 116 F.4th at 836, as follows:
(a) The following laws of the United States in existence on the
effective date of this Section and subsequent amendments to such
laws will apply to the Northern Mariana Islands, except as
otherwise provided in this Covenant:
(1) those laws which provide federal services and financial
assistance programs and the federal banking laws as they apply
to Guam; Section 228 of Title II and Title XVI of the Social
Security Act as it applies to the several States; the Public Health
Service Act as it applies to the Virgin Islands; and the
Micronesian Claims Act as it applies to the Trust Territory of the
Pacific Islands;
(2) those laws not described in paragraph (1) which are
applicable to Guam and which are of general application to the
several States as they are applicable to the several States; and
(3) those laws not described in paragraph (1) or (2) which
are applicable to the Trust Territory of the Pacific Islands, but
not their subsequent amendments unless specifically made
applicable to the Northern Mariana Islands, as they apply to the
Trust Territory of the Pacific Islands until termination of the
Trusteeship Agreement, and will thereafter be inapplicable.
Covenant § 502(a), 90 Stat. at 268 (emphasis added). “Thus, previously enacted laws which are
of general application to the States and which apply to Guam, apply to the Northern Mariana
Islands.” Saipan Stevedore Co., 133 F.3d at 721.
The Sherman Antitrust Act plainly satisfies both conditions for applicability to the
Commonwealth. First, the Sherman Antitrust Act is applicable to Guam by virtue of the expansive
definition of “commerce” as used therein. See 15 U.S.C. § 12(a) (defining “commerce” to include
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“trade or commerce among the several States and with foreign nations,” “between . . . any Territory
of the United States and any State, Territory, or foreign nation,” “between any insular possessions
or other places under the jurisdiction of the United States,” “between any such possession or place
and any . . . Territory of the United States,” and “within . . . any Territory or insular possession or
other place under the jurisdiction of the United States” but explicitly only excluding the
Philippines); see also Salas, 116 F.4th at 840 (“[A] statute that references the United States and its
territories and possessions is a strong indication that it is meant to apply in the CNMI.”). In
addition, as “[t]he Covenant’s framers considered the term ‘applicable to Guam’ to mean not only
‘applicable with respect to’ Guam, but also to mean ‘applicable within’ Guam,” Northern Mariana
Islands v. United States, 279 F.3d 1070, 1073 (9th Cir. 2002), the Sherman Antitrust Act’s lack of
an exemption for Guam is sufficient: a federal law need not “have a practical effect in Guam for
the law to apply,” Salas, 116 F.4th at 841; Northern Mariana Islands, 279 F.3d at 1073 (“That is,
the amendments, regardless of their treatment of Guam, are law within Guam. Thus, these
amendments are ‘applicable to Guam’ . . . .”).
Second, the Ninth Circuit has explained that the phrases “applicable to” and “application
to” in section 502(a)(2) of the Covenant are to be construed identically: “Because application to
Guam is understood to mean ‘applicable with respect to’ and ‘applicable within’ Guam, it follows
that ‘application to the several States’ likewise means ‘applicable with respect to’ and ‘applicable
within’ the several States.” Salas, 116 F.4th at 841 (citing Northern Mariana Islands, 279 F.3d at
1073). As the Sherman Antitrust Act does not exclude or exempt any States from its provisions,
the Sherman Antitrust Act is generally applicable to the States.
Thus, with both conditions set forth in section 502(a)(2) of the Covenant satisfied, that
same section provides how the Commonwealth is to be treated under the Sherman Antitrust Act:
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the Sherman Antitrust Act “will apply to the Northern Mariana Islands” as it is “applicable to the
several States.” Covenant § 502(a)(2), 90 Stat. at 268. Such language “requires [the Court] to
treat the CNMI as if it were a State for the purposes of the [Sherman Antitrust Act.]” Northern
Mariana Islands, 279 F.3d at 1072; see, e.g., DeNieva v. Reyes, 966 F.2d 480, 483 (9th Cir. 1992)
(holding that section 502(a)(2) of the Covenant rendered the Commonwealth as not a “person”
within the meaning of 42 U.S.C. § 1983 in light of Supreme Court decisions holding that Guam
and the States are not “persons” within the meaning of 42 U.S.C. § 1983). Conduct arising in a
State is not subject to the Sherman Antitrust Act unless it touches upon interstate commerce or
commerce with a foreign nation, 15 U.S.C. §§ 1, 2; McLain, 444 U.S. at 242, or if it involves trade
and commerce with a territory or the District of Columbia, 15 U.S.C. § 3(a), (b). Accordingly,
conduct arising in the Commonwealth is not subject to sections 1 and 2 of the Sherman Antitrust
Act unless it touches upon interstate commerce or commerce with a foreign nation,7 and not subject
to section 3 of the Sherman Antitrust Act unless it involves trade and commerce with the District
of Columbia or a territory other than the Commonwealth.8
7 To be clear, allegations premised on commerce between the Commonwealth and another territory or the
District of Columbia without accompanying allegations describing the impact on commerce with another
State or foreign nation would be insufficient to establish jurisdiction under sections 1 and 2. Such
interterritorial commerce would still be “commerce” between two entities that are not States for
constitutional purposes—and thus not within Congress’s authority under the Commerce Clause.
The Court need not pass on whether the Covenant acts as a later-in-time legislative act that amended
sections 1 and 2 to be premised also on Congress’s authority under the Territorial Clause because the plain
text of sections 1 and 2, combined with the provisions of the Covenant, would still require a showing of
interstate commerce to establish jurisdiction under those sections over conduct arising within the
Commonwealth.
8 The Court’s conclusion here is confirmed by materials produced by the Marianas Political Status
Commission, the Northern Mariana Islands Commission on Federal Laws, and the Department of the
Interior’s Office of the Solicitor, three entities tasked with reviewing the applicability of federal law to the
Commonwealth in differing contexts.
The Marianas Political Status Commission (MPSC) was the body representing the people of the
Northern Marianas in negotiations with the United States concerning the documents that would create the
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current political and legal relationship between the United States and what would become the
Commonwealth. The MPSC produced a “contemporaneous analysis of the Covenant,” De Leon Guerrero,
4 F.3d at 754, that is “authoritative” in “assist[ing the Court] in discerning the meaning of the Covenant[,]”
Northern Mariana Islands, 399 F.3d at 1065. As to section 502(a)(2) of the Covenant, the MPSC explained:
Subsection (a)(2) is the general formula for the application of federal laws.
It contains a two-prong test: applicability to Guam and applicability
generally to the states. This test is employed for two reasons. . . . Second,
it is intended to prevent the application of laws so as to reach
intraterritorial matters within the Northern Mariana Islands where similar
intrastate matters within the states are not reached. To reach such matters
in the Northern Marianas would be inconsistent with the guarantee of local
self-government contained in the Covenant.
Marianas Pol. Status Comm’n, Section by Section Analysis of the Covenant to Establish a Commonwealth
of the Northern Mariana Islands 53 (1975).
The Covenant provided for the establishment of the Northern Mariana Islands Commission on
Federal Laws “to survey the laws of the United States and to make recommendations to the United States
Congress” as to whether federal laws not applicable to the Commonwealth should be made applicable and
whether federal laws applicable to the Commonwealth should be made inapplicable. Covenant § 504, 90
Stat. at 268; Salas, 116 F.4th at 837. In its second interim report, the Commission engaged in a title-by-
title survey of the United States Code. See N. Mar. I. Comm’n on Fed. L., Welcoming America’s Newest
Commonwealth: The Second Interim Report of the Northern Mariana Islands Commission on Federal Laws
to the Congress of the United States 21-22 (1985) (explaining methodology) [hereinafter “2d Interim
Report”]. As to the Sherman Antitrust Act, the Commission observed:
Present applicability.
The Sherman Antitrust Act and the Clayton Act apply to the
Territories and insular possessions as well as the States. . . .
Guam is an insular possession of the United States and well within
the ambit of congressional power. The antitrust laws are consequently
applicable to Guam. By operation of section 502(a)(2) of the Covenant,
those laws also apply to the Northern Mariana Islands.
[. . .]
Discussion.
The residents of the Northern Mariana Islands, few in number and
distant from alternative suppliers, are particularly vulnerable to
anticompetitive practices. The federal antitrust laws should continue to
apply to the Northern Mariana Islands for the protection of those residents.
If the antitrust laws were made inapplicable to the Northern
Mariana Islands, the Northern Mariana Islands could become a haven for
arrangements that would have adverse effects not only on competition and
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//
//
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consumers in the Northern Mariana Islands but also on competition and
consumers in the United States. . . .
2d Interim Report at 314.
The Department of the Interior generally supervises the relations between the Commonwealth and
the United States. Exec. Order No. 12,572, 51 Fed. Reg. 40,401 (Nov. 3, 1986). In 1993, its Office of the
Solicitor published a three-volume work titled The Application of Federal Laws in: American Samoa,
Guam, The Northern Mariana Islands, The U.S. Virgin Islands, also surveying the U.S. Code title-by-title
as it applied to the four territories. See Ruth G. Van Cleve, Dep’t of Interior Off. of Solicitor, The
Application of Federal Laws in: American Samoa, Guam, The Northern Mariana Islands, The U.S. Virgin
Islands xxv-xxx (1993) [hereinafter “Van Cleve”]. As to the Sherman Antitrust Act, the Office observed:
Few legal conclusions in this study are more certain that that the principal
Federal laws pertaining to Monopolies and Combinations in Restraint of
Trade (15 U.S.C. 1-36)—namely, the Sherman Act enacted in 1890 (15
U.S.C. 17 [sic]), and the Clayton Act, in 1914 (15 U.S.C. 12-27)—apply
to the territories of the Virgin Islands, Guam, Samoa, and the Northern
Marianas[.]
The Sherman Act has contained from the outset a provision
concerning its application to the “Territories” of the United States (15
U.S.C. 3), making clear that its constraints apply within each “Territory”,
as well as to commerce between the Territories, a Territory and a State,
and a Territory and a foreign country. . . .
The Puerto Rico and Samoa cases [Puerto Rico v. Shell Co., 302
U.S. 253 (1937); United States v. Standard Oil Co. of Cal., 404 U.S. 558
(1972)] make clear that the Sherman Act applies to the Virgin Islands and
Guam. . . . By operation of section 502(a)(2) of the Covenant, the
Sherman Act also applies to the Northern Marianas, but only to commerce
between the Northern Marianas and a place outside of it, owing to the
language of the section 502(a)(2) of the Covenant. (As has often been
pointed out in this study, section 502(a)(2) operates to extend to the
Northern Marianas those laws, enacted before January 9, 1978, that are
both applicable to Guam and “of general application to the several States”,
but such laws then become applicable to the Northern Marianas “as they
are applicable to the several States”. Because the Congress cannot
regulate intra-State commerce, so section 502(a)(2) results in its not
regulating intra-Northern Marianas commerce.)
Van Cleve at 276-77 (Memorandum No. 15-1, Sept. 1986).
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b. Plaintiff’s allegations plead sufficient factual material to show that Defendants’
activities had a substantial effect on “interstate commerce” for jurisdiction under
sections 1 and 2 of the Sherman Antitrust Act.
Defendants’ challenges to Plaintiff’s reliance on sections 1 and 2 of the Sherman Antitrust
Act turn on whether Plaintiff’s allegations of Defendants’ conduct establishes that Defendants’
conduct was “in” interstate commerce or “substantially affect[ed]” interstate commerce. McLain,
444 U.S. at 242 (emphasis removed). “In determining jurisdiction under the Sherman Act, the
focus of the inquiry is the defendant’s business activities.” Musick v. Burke, 913 F.2d 1390, 1395
(9th Cir. 1990). Plaintiff’s First Amended Complaint repeatedly asserts that Defendants’ activities
“substantially affected interisland travel in the CNMI, directly causing disruption and
unreasonable restraint on trade within the flow of commerce.” (FAC ¶¶ 51, 61, 80, 99, 119, 139.)
Thus, the relevant inquiry is whether Plaintiff’s allegations set forth sufficient factual material to
establish that Defendants’ activities, “local in nature, . . . [have] an effect on some other appreciable
activity demonstrably in interstate commerce.” McLain, 444 U.S. at 242. The Ninth Circuit has
explained:
Whether the defendant’s activities sufficiently affect interstate
commerce to create Sherman Act jurisdiction is a highly fact-based
question calling for common sense judgment. Applying such
common sense judgment means that while no specific dollar amount
need be alleged and a plaintiff may show aggregated effects on
commerce of defendant’s activities, the alleged effect still must be
considered in proportion to the parties’ businesses as a whole.
Musick, 913 F.2d at 1395 (internal quotation marks and citations omitted); see also McLain, 444
U.S. at 242-43 (plaintiff’s burden to demonstrate “substantial effect” does not require the “more
particularized showing” of actual effect caused by the alleged anticompetitive conduct because
“liability may be established by proof of either an unlawful purpose or an anticompetitive effect”).
Here, Plaintiff’s allegations demonstrate that Defendants’ commercial passenger air travel
services were intended to, inter alia, provide passengers with increased opportunities to fly to
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Guam to transit to other destinations, including Honolulu. (FAC ¶¶ 31-32.) Furthermore, the
language of the contract and accompanying documents indicate that Defendants’ services were
part of a bid to “maintain or revive tourism and tourism-related activities” after “the COVID-19
pandemic severely curtailed tourism to the CNMI from outside the CNMI . . . .” (Id., Ex. A, at 3
(contract), ECF No. 34-1; see also id., Ex. E, at 29 (justification letter) (observing that “[t]he
CNMI’s economy . . . is solely reliant on international travel and tourism” and COVID-19
pandemic “halted” the CNMI’s economy and “commercial activities on all three islands have been
detrimentally impacted” (emphasis added)), ECF No. 34-1.) Defendants’ provision of additional
flights to Guam would “allow tourists and potential visitors a secondary accommodation option
and additional flight schedules for travel into the island of Saipan transiting from the island of
Guam” through same-day connectivity with the once-daily Honolulu-Guam flight operated by a
national air carrier. (FAC, Ex. E, at 32; id., Ex. F, at 36 (“Airline Incentive Framework”)
(agreement to provide same-day connectivity with United Airlines’s Honolulu-Guam flight in
exchange for funding from the Commonwealth), ECF No. 34-1.) And Defendants’ alleged
business activities would involve the purchase and relocation of aircraft from the U.S. mainland
(i.e., other States) to the Commonwealth alongside the establishment of facilities to host transient
personnel drawn from Defendant Southern Airways’s activities in other regions of the U.S.
mainland. (FAC, Ex. F, at 40-43 (Defendants’ air services proposal in support of funding request).)
As such, Plaintiff has plausibly alleged that Defendants’ activities fall within the jurisdiction of
sections 1 and 2 of the Sherman Antitrust Act because Defendants’ activities have a substantial
effect on interstate commerce arising from passenger air traffic—namely, increasing passenger
volume and lower consumer costs tied to Guam, Honolulu, and other international routes—and
accompanying logistical and support activities, involving resources and personnel from the U.S.
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mainland, for Defendants’ services. See Summit Health, Ltd. v. Pinhas, 500 U.S. 322, 329-30
(1991) (“necessary interstate nexus” existed where limited services were regularly performed for
out-of-state persons, generated revenues from out-of-state sources, and were “part of the entire
operation” of the enterprise); Musick, 913 F.2d at 1398 (jurisdiction exists where plaintiff provides
sufficient material to “at least support an inference that some quantifiable effect on commerce of
defendant’s intended interference with plaintiff’s business has occurred”); McLain, 444 U.S. at
246 (“not insubstantial effect” on interstate commerce exists where allegations bear on impact to
activities that “necessarily affect both the frequency and the terms” of ultimate interstate
commercial transactions).
Therefore, the Court finds that Plaintiff’s allegations have set forth sufficient factual
material, accepted as true, to establish jurisdiction under sections 1 and 2, i.e., that Defendants’
conduct falls within Congress’s authority to regulate interstate commerce pursuant to the
Commerce Clause.
c. In the alternative, Plaintiff’s allegations plead sufficient factual material to show
that Defendants’ activities involve trade or commerce with a territory other than
the Commonwealth for jurisdiction under section 3 of the Sherman Antitrust Act.
In the alternative, jurisdiction over Plaintiff’s claims under section 3 of the Sherman
Antitrust Act also exists. As discussed supra, Defendants are alleged to have entered into the
contract with the Commonwealth to provide additional flights to Guam and subsequently did
operate such flights. Such allegations are sufficient to establish that Defendants’ conduct touched
upon “trade or commerce . . . between any . . . Territory [i.e., Guam] . . . and any State [i.e., the
Commonwealth].” 15 U.S.C. § 3(a), (b).
Therefore, as the Court finds that it has subject-matter jurisdiction over Plaintiff’s claims,
the Court now turns to the merits of whether Plaintiff states a claim under sections 1, 2, or 3 of the
Sherman Antitrust Act.
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2. Merits9
“The Sherman Act contains two principal prohibitions.” Epic Games, Inc. v. Apple, Inc.,
67 F.4th 946, 973 (9th Cir. 2023). Section 1, “target[ing] concerted action,” id. at 973-74, forbids
“[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade
or commerce among the several States, or with foreign nations,” 15 U.S.C. § 1. Section 2,
“target[ing] independent action,” Epic Games, 67 F.4th at 974, makes it unlawful to “monopolize,
or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize
any part of the trade or commerce among the several States, or with foreign nations,” 15 U.S.C.
§ 2. See also Copperweld Corp. v. Indep. Tube Corp., 467 U.S. 752, 767-69 (1984) (discussing
rationale underlying Congress’s intent to distinguish between concerted and independent action).
a. Section 1 Claims (Counts I, III, V)
To state a claim under section 1, Plaintiff
must plead facts which, if true, will prove “(1) a contract,
combination or conspiracy among two or more persons or distinct
business entities; (2) by which the persons or entities intended to
harm or restrain trade or commerce among the several States, or with
foreign nations; (3) which actually injures competition.” In addition
to these elements, [Plaintiff] must also plead (4) that [it was] harmed
by the [Defendants’] anti-competitive conduct, combination, or
conspiracy, and that this harm flowed from an “anti-competitive
aspect of the practice under scrutiny.”
Brantley v. NBC Universal, Inc., 675 F.3d 1192, 1197 (9th Cir. 2012) (internal citations omitted)
(first quoting Kendall v. Visa U.S.A., Inc., 518 F.3d 1042, 1047 (9th Cir. 2008), then quoting Atl.
Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 334 (1990)). Although the Parties’ arguments
do not expressly address the elements of a section 1 claim, as the Parties recognized at oral
9 Although the Court’s remaining discussion infra is framed under sections 1 and 2, as discussed supra,
section 3 proscribes the same conduct as sections 1 and 2. See supra Part III-B-1-a. As such, failure to
state a claim under section 1 would also constitute a failure to state a claim under section 3(a), and a failure
to state a claim under section 2 would also constitute a failure to state a claim under section 3(b).
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argument, Defendants’ challenge based on the insufficiency of Plaintiff’s allegations as to
predation also bears on the second and third elements of a section 1 claim: whether Defendants
“intended to harm or restrain trade or commerce” and whether Defendants’ alleged anticompetitive
agreement “actually injures competition.” Brantley, 675 F.3d at 1197. (See Defs.’ Mot. 12-14
(contending that contractual language dispels any suggestion that Defendants and the
Commonwealth sought to eliminate competition and citing Plaintiff’s existing monopoly status).)
Based on the allegations set forth in the First Amended Complaint, the Court finds that only the
second element need be addressed, as failure to establish either element is fatal to Plaintiff’s
section 1 claims.
As to the second element, Plaintiff’s allegations fail to provide sufficient factual content to
permit the inference that Defendants had the requisite intent to harm or restrain trade or
commerce.10 Plaintiff relies upon the language of the contract and accompanying justification
letter in asserting that Defendant Marianas Southern “entered into a predatory pricing scheme with
the other Defendants . . . with the goal of running Star Marianas out of its free market business.”
10 The Supreme Court has distinguished between conduct that is per se violative of the Sherman Antitrust
Act and conduct that requires further assessment under a rule of reason, with “no further inquiry into the
practice’s actual effect on the market or the parties’ intentions . . . necessary” if the conduct falls within the
former category. In re Musical Instruments & Equip. Antitrust Litig., 798 F.3d 1186, 1191-92 (9th Cir.
2015). “Classic examples [of per se violative conduct] include agreements among competitors to fix prices,
divide markets, and refuse to deal.” Id. at 1191; see also Am. Ad Mgmt., Inc. v. GTE Corp., 92 F.3d 781,
784 (9th Cir. 1996) (also listing “group boycotts, tying arrangements, and output limitations” among per se
violations but cautioning that “the per se approach is not to be readily expanded to new arrangements or to
business relationships with which the courts are inexperienced”).
Here, Plaintiff’s allegations based on Defendant Marianas Southern’s contract with the
Commonwealth does not establish that Defendants’ conduct is per se violative of the Sherman Antitrust Act
because the agreement is not an “agreement[] among competitors” within the Commonwealth’s passenger
air travel market: the Commonwealth, as the counterparty to the contract fixing ticket prices, was not in
the business of providing passenger air travel. Nor does Plaintiff contend that Defendants’ conduct was a
per se violation. Thus, “[t]he parties do not dispute that the rule of reason applies in this case, and the
pleading requirements for a rule of reason case therefore apply.” Brantley, 675 F.3d at 1197. Plaintiff must
plead facts bearing on Defendants’ intent in executing the contract with the Commonwealth.
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(FAC ¶ 17; see also id. ¶¶ 22-27, 31-33.) But a review of the contract and justification letter, as
attached to Plaintiff’s First Amended Complaint, belies Plaintiff’s allegations as mere “‘naked
assertions’ devoid of ‘further factual enhancement,’” Iqbal, 556 U.S. at 678 (quoting Twombly,
550 U.S. at 557), that are insufficient to establish Defendants’ intent.
First, the only text within the body of the contract that sets forth the substantive basis for
the contract provides:
IV. GENERAL PURPOSE
The purpose of this contract is for the Commonwealth to procedure
from the Contractor the services described in this contract and in the
attached exhibits and to enjoy any warranty or other goods provided
for by this contract. The services being procured are described as
follows:
Tourism is a vital part of the economy of the CNMI[;] however, the
COVID-19 pandemic severely curtailed tourism to the CNMI from
outside the CNMI and also reduced inter-island travel within the
CNMI. The federal government, through the American Rescue Plan
Act (“ARPA”), U.S. P.L. 117-2, subtitle M, section 602(c), provided
funds to the CNMI whereby the CNMI could, in turn, provide
funding to maintain or revive tourism and tourism related activities
in the CNMI.
The purpose of this contract is to establish an incentive framework
between the Commonwealth and the Contractor whereby the
Contractor would be incentivized to provide inter-island passenger
and cargo service in the Marianas Islands. This incentive framework
will take the form of an Initial Incentive Fund, a Flight Incentive
Program, and Government Related Pricing.
(FAC, Ex. A, at 3.) The plain text of the contract does not provide any basis for the inference that
Defendant Marianas Southern and the Commonwealth intended for the contracted-for services to
eliminate Plaintiff to the detriment of consumers. See Manglona v. Baza, 2012 MP 4 ¶ 27 (N. Mar.
I. 2012) (“The intent of contracting parties is generally presumed to be encompassed by the plain
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language of contract terms.” (quoting Riley v. Pub. Sch. Sys., 4 N.M.I. 85, 88 (N. Mar. I. 1994)));11
Am. Ad Mgmt., Inc. v. GTE Corp., 92 F.3d 781 789 (9th Cir. 1996) (although defendants
consolidated payment practices, facially benefitting consumers, defendants were alleged to be
ultimately seeking to increase prices, and record suggested that elimination of certain payment
practices “does appear likely to increase the prices paid by the end consumer”). Instead, the
contract merely indicates that the Commonwealth merely sought Defendant Marianas Southern to
enter the market. The only reference to Plaintiff as a trigger for the agreement appears in the
recitals at the beginning of the document setting forth the “Airline Incentive Framework”:
WHEREAS, the recent temporary closure of the only current
inter-island air carrier demonstrated the vulnerability of the CNMI
economy, including its tourist economy, to only having one air
carrier in the CNMI.
WHEREAS, [Marianas Southern Airways] was formed as a
joint venture between MP Enterprises, LLC and Southern Airways
in order to provide inter-island scheduled and chartered air and cargo
passenger service between the islands of the Marianas Islands
including Saipan, Tinian, Rota, and Guam. However, Marianas
Southern needs economic incentives in order to begin operations in
the CNMI.
WHEREAS, the government of the CNMI has the means and
desire to provide incentive funding to Marianas Southern in order to
promote tourism to and within the CNMI and to provide increased
economic security for the people of the CNMI.
WHEREAS, as part of this incentive agreement, the CNMI
government will provide start-up funding and per flight incentive
funding for a set period of time to Marianas Southern. In turn,
Marianas Southern agrees to operate certain flights at set rates as
well as provide other consideration.
(FAC, Ex F, at 35 (emphasis added).) Such language obliquely identifies Plaintiff as the sole inter-
island air carrier but does not indicate that Defendant Marianas Southern and the Commonwealth
11 Commonwealth law governs the interpretation of the contract. (See 1st Am. Compl., Ex. A, at 10 (“This
contract shall be interpreted under the laws of the Commonwealth of the Northern Mariana Islands.”).)
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intended to displace or eliminate Plaintiff. To the contrary, such language suggests that Defendant
Marianas Southern was being contracted to provide services that Plaintiff would or could not
provide within the market—i.e., increasing competition within a market otherwise monopolized
by Plaintiff.
Second, the justification letter, while critical of Plaintiff’s alleged activities, does not
provide sufficient factual material to conclude that Defendants intended to harm or restrain trade
or commerce. The text of the justification letter expressly notes that (1) Plaintiff is the sole
provider of commercial passenger flight travel within the Northern Mariana Islands; (2) Plaintiff
curbed its services to Tinian and Rota with little to no notice; and (3) Plaintiff previously has
cancelled flights due to “unanticipated airline or aircraft predicaments.” (Id., Ex. E, at 29-30.) But
the remainder of the letter contradicts any suggestion that Defendant Marianas Southern’s
contracted-for services were intended to drive Plaintiff out of the market. Defendants’ services
were to be “a secondary accommodation option and additional flight schedule for travel into the
island of Saipan transiting from the island of Guam,” a solution for providing “immediate and
critical inter-island travel alternatives to safeguard the health and safety of Tinian and Rota,” and
a means of overcoming the “lack of resources, staffing, and capacity” hampering reliable service
to Tinian and Rota after extended, unfruitful discussions with Plaintiff—and not to “duplicate any
previously performed work or services.” (Id. (emphasis added).)
Given such language, without further allegations based on conduct and state of mind
outside of the four corners of the contract and accompanying documents—and Plaintiff alleges
none—Plaintiff’s allegations fall short of setting forth a basis for drawing the plausible inference
that Defendants intended to harm or restrain trade or commerce as required for a section 1 claim.
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Therefore, all of Plaintiff’s section 1 claims against each Defendant (Counts I, III, and V) must be
dismissed for failure to state a claim. Balistreri, 901 F.2d at 699; Fleming, 581 F.3d at 925.
b. Section 2 Claims (Counts II, IV, VI)
Plaintiff’s claims, alleging that Defendants engaged in monopolization and attempted
monopolization, fall under section 2 of the Sherman Antitrust Act. Verizon Commc’ns Inc. v. Law
Offs. of Curtis V. Trinko, LLP, 540 U.S. 398, 407 (2004); see also Alaska Airlines, Inc. v. United
Airlines, Inc., 948 F.2d 536, 541 (9th Cir. 1991) (identifying monopolization and attempted
monopolization claims as “the two traditional grounds for relief” under section 2, with attempted
monopolization “aris[ing] when the danger of monopolization is clear and present, but before a
full-blown monopolization has necessarily been accomplished”). A monopolization claim
“requires, in addition to the possession of monopoly power in the relevant market, ‘the willful
acquisition or maintenance of that power as distinguished from growth or development as a
consequence of a superior product, business acumen, or historic accident.’” Verizon Commc’ns,
540 U.S. at 407 (quoting United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966)); see also
Epic Games, 67 F.4th at 998 (discussing two-step analysis for monopolization claims). As to a
claim for attempted monopolization, there must be allegations establishing “(1) that the defendant
has engaged in predatory or anticompetitive conduct with (2) a specific intent to monopolize and
(3) a dangerous probability of achieving monopoly power.” Spectrum Sports, Inc. v. McQuillan,
506 U.S. 447, 456 (1993). “For both claims, [a plaintiff] must . . . plausibly allege that the
defendant engaged in anticompetitive conduct to achieve (or attempt to achieve) monopoly power
and caused antitrust injury.” CoStar Grp., Inc. v. Com. Real Est. Exch., Inc., 150 F.4th 1056, 1067
(9th Cir. 2025); accord Alaska Airlines, 948 F.2d at 541-42 (“[T]he elements of attempted
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monopolization, like the elements of monopolization, emphasize monopoly power and the
acquisition or perpetuation of this power by illegitimate ‘predatory’ practices.”).
Here, Defendants’ alleged conduct is the setting of ticket prices for inter-island commercial
passenger air travel at artificially low rates, with Defendants able to absorb any losses they would
otherwise suffer on the market by virtue of the federal funding guaranteed under the contract with
the Commonwealth. (FAC ¶¶ 17, 28-33, 41.) For such conduct to constitute predatory pricing—
and thus, anticompetitive conduct—forbidden by section 2 of the Sherman Antitrust Act, Plaintiff’s
allegations must plausibly establish “two prerequisites”: first, that “the prices complained of are
below an appropriate measure of its rival’s costs”; and second, that “the competitor had . . . a
dangerous probability[] of recouping its investment in below-cost prices.” Brooke Grp. Ltd. v.
Brown & Williamson Tobacco Corp., 509 U.S. 209, 222, 224 (1993).
Setting aside the Parties’ dispute concerning what Plaintiff must allege at a minimum to
establish “an appropriate measure of [Defendants’ costs]” (see Defs.’ Mot. 11; Pl.’s Opp’n 8-9;
Defs.’ Reply 5-6), Plaintiff’s allegations fail to set forth any plausible basis for concluding that
Defendants enjoyed “a dangerous probability[] of recouping [their] investment in below-cost
prices.” Brooke Grp., 509 U.S. at 224. The Supreme Court has explained:
“For its investment to be rational, the predator must have a
reasonable expectation of recovering, in the form of later monopoly
profits, more than the losses suffered.” [Matsushita Elec. Indus.
Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 588-89 (1986).]
Recoupment is the ultimate object of an unlawful predatory pricing
scheme; it is the means by which a predator profits from predation.
Without it, predatory pricing produces lower aggregate prices in the
market, and consumer welfare is enhanced. Although unsuccessful
predatory pricing may encourage some inefficient substitution
toward the product being sold at less than its cost, unsuccessful
predation is in general a boon to consumers.
That below-cost pricing may impose painful losses on its
target is of no moment to the antitrust laws if competition is not
injured: It is axiomatic that the antitrust laws were passed for “the
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protection of competition, not competitors.” [Brown Shoe Co. v.
United States, 370 U.S. 294, 320 (1962).]
Brooke Grp., 509 U.S. at 224. Plaintiff’s allegations merely complain of losses to Plaintiff (see
FAC ¶ 42) without any mention of Defendants’ pricing activities beyond what is set forth in the
contract and accompanying documents (see id. ¶¶ 31-33) and a statement by Defendant Stewart
about apparent savings to consumers (id. ¶ 41). None of Plaintiff’s allegations even begin to
suggest that Defendants did or were able to raise their prices above the contract’s alleged below-
cost prices during the period when Defendants “existed as the main competitor to Star Marianas
in the CNMI,” i.e., “[b]eginning August 2022 until April 2023”—a period within the contract’s
effective term. (Id. ¶ 16; id., Ex. A, at 4 (“This contract will remain in effect for a two-year period
beginning on the date the Notice to Proceed was issued.”); id., Ex. B, at 22 (“Notice to Proceed”
dated March 21, 2022), ECF No. 34-1.) And although Plaintiff alleges (once per count) that
“Defendants possessed market power in the CNMI’s air carrier market, and working together
became direct competitors of Star Marianas in the CNMI’s air carrier travel business” (FAC ¶¶ 45,
54, 64, 83, 103, 123), such allegations are unaccompanied by any other factual material elucidating
the extent of Defendants’ market power such that the Court could draw the reasonable, plausible
inference that Defendants “obtain[ed] enough market power to set higher than competitive prices,
and then [could] sustain those prices long enough to earn in excess profits what they earlier gave
up in below-cost prices.” Brooke Grp., 509 U.S. at 225-26 (quoting Matsushita, 475 U.S. at 590-
91). In this case, the contract with the Commonwealth expired in 2024, prior to Plaintiff’s filing
this lawsuit. Yet Plaintiff’s First Amended Complaint fails to allege any facts showing Defendants’
efforts toward recoupment—even though the Supreme Court has unequivocally explained that
“[r]ecoupment is the ultimate object of an unlawful predatory pricing scheme.” Brooke Grp., 509
U.S. at 224.
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Because the First Amended Complaint fails to allege facts to even begin to indicate that
Defendants were able to recoup their losses or otherwise had a dangerous probability of
recoupment, Plaintiff’s allegations fail to state both monopolization and attempted monopolization
claims under section 2 of the Sherman Antitrust Act. Therefore, all of Plaintiff’s section 2 counts
against all Defendants (Counts II, IV, and VI) must be dismissed. Balistreri, 901 F.2d at 699;
Fleming, 581 F.3d at 925.
C. Leave to Amend
“[A] district court should grant leave to amend even if no request to amend the pleading
was made, unless it determines that the pleading could not possibly be cured by the allegation of
other facts.” Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (quoting Doe v. United States,
58 F.3d 494, 497 (9th Cir. 1995)). Here, Plaintiff requests leave to amend its First Amended
Complaint. (Pl.’s Opp’n 12-13 (asserting that Plaintiff is able to set forth additional allegations on
recoupment and attempted recoupment); id. at 20-21 (requesting leave to amend to substitute
sections 1 and 2 with section 3).) This is the first time that Plaintiff’s claims are being dismissed
for failure to state a claim. The Court notes Defendants’ arguments asserting that Plaintiff’s claims
must still fail due to the short duration and nature of the contract underlying this litigation being
insufficient as a matter of law to establish exclusionary conduct (see Defs.’ Mot. 6-7; Defs.’ Reply
2-3); however, at this juncture, it does not appear that Plaintiff would be unable to cure the pleading
defects identified herein with further factual allegations—allegations that may possibly also
address Defendants’ conduct in light of the duration and nature of the contract.12 Therefore, the
Court is bound by precedent to afford Plaintiff leave to amend.
12 Furthermore, it is unclear whether Defendants’ cited cases on contractual length and nature are on all
fours with the facts of this case, as Defendants’ cited cases arise in the context of “exclusive dealing” and
Plaintiff’s claims turn not on the contract unto itself as a means of excluding Plaintiff from the commercial
passenger air travel market, but rather on Defendants’ alleged predatory pricing.
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IV. CONCLUSION
The Court has jurisdiction to adjudicate Plaintiff’s claims under the Sherman Antitrust Act;
however, the First Amended Complaint fails to allege sufficient facts to support Plaintiff’s claims
under sections 1, 2, or 3 of the Act. For the foregoing reasons, Defendant Southern Airways’s
Motion for Judgment on the Pleadings (ECF No. 80), as joined by Defendants Marianas Southern
and Keith Stewart, is GRANTED. Plaintiff’s First Amended Complaint (ECF No. 34) is
DISMISSED in its entirety WITH LEAVE TO AMEND.13 Should Plaintiff desire to file a second
amended complaint, Plaintiff shall file such pleading, curing all deficiencies as identified in this
order, by March 23, 2026. Defendants will file responsive motions or pleadings to Plaintiff’s
second amended complaint in accordance with Rule 15(a)(3) of the Federal Rules of Civil
Procedure.
IT IS SO ORDERED this 9th day of March, 2026.
____________________________________
RAMONA V. MANGLONA
Chief Judge
13 The Parties’ Stipulated Motion to Reset Expert Discovery Deadlines (ECF No. 94) is DENIED AS
MOOT.
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