STAR Marianas Air has refiled its civil complaint in federal court against Marianas Southern Airways and its president, Keith Stewart, alleging violations of the U.S. Sherman Antitrust Act.
On Nov. 21, 2024, Chief Judge Ramona V. Manglona of the NMI District Court denied Marianas Southern Airways’ motion to dismiss the complaint on the basis of Parker immunity.
The Parker immunity doctrine is a legal principle that provides exemption from anti-trust liability for certain actions taken by states and private parties acting under state direction.
But Judge Manglona granted MSA’s motion to dismiss for failing to join a necessary and indispensable party under Rule 19.
She ordered MSA’s attorney, Michael Iasparro, “to submit source of authority for the Department of Finance along with procurement regulation regarding expenditure authority.”
Judge Manglona also directed SMA’s attorney, Mark Scoggins, to file an amended complaint by Dec. 5, stating that she would issue a memorandum decision at a later date. As of Monday, no decision had been issued.
The complaint
In its 26-page first amended complaint, Star Marianas named as defendants Southern Airways Express LLC, Marianas Pacific Express LLC doing business as Marianas Southern Airways, and Stewart.
The complaint alleged six counts of violations of the Sherman Antitrust Act, which aims to increase economic competitiveness by outlawing trusts, monopolies and cartels.
Star Marianas asked the court for damages in an amount to be determined at trial, and other relief the court may find just and proper.
The complaint accused MSA, among others, of anticompetitive conduct and creating unfair competition and conspiracy to monopolize the CNMI airline industry and attempting to remove Star Marianas from the local air carrier market.
“Specifically, Southern Airways Express substantially affected interisland travel in the CNMI, directly causing disruption and unreasonable restraint on trade within the flow of commerce,” the complaint stated.
“Marianas Southern Airways willfully, knowingly, and with specific intent to do so, monopolized the airline industry market through a litany of anticompetitive conduct,” the complaint added.
As to Stewart, SMA’s complaint alleged that in numerous instances “in connection with the advertising, marketing, and promotion of its airline, Stewart misrepresented, expressly or by implication, that the fees and prices charged by Marianas Southern Airways are fair and reasonable…[and that] the money received under the contract [with the CNMI government] was for the sole purpose to enhance local tourism and security to inter-island air travel.”
Star Marianas said it has “suffered substantial injury, because of Stewart’s actions, Marianas Southern Airways’ conspiracy to injure Star Marianas, and Marianas Southern Airways’ violation of the Sherman Antitrust Act through the direct actions of Stewart.”
“Specifically,” the complaint added, “Stewart, working on behalf of Marianas Southern Airways, substantially affected interisland travel in the CNMI, directly causing disruption and unreasonable restraint on trade within the flow of commerce.”
According to the complaint, on March 21, 2022, Marianas Southern Airways executed a sole source contract with the CNMI government for receipt of federal funds through the American Rescue Plan Act in the amount of $8 million.
Marianas Southern Airways accepted a sole-source procurement services contract from then-Secretary of Finance David DLG Atalig.
Beginning August 2022 until April 2023, Marianas Southern Airways existed as the main competitor to Star Marianas in the CNMI. Star Marianas said at the time, it was the primary provider of commercial passenger flight travel between Saipan, Rota and Tinian.
“Marianas Southern Airways, by executing said contract [with the CNMI government], entered into a predatory pricing scheme with the other defendants, to use ARPA funding to fix prices below costs in the markets served by Star Marianas with the intent of causing injury to Star Marianas’s business, and with the goal of running Star Marianas out of its free market business,” SMA stated.
Its amended complaint added that pursuant to the flight incentive program, during the incentive period, Marianas Southern Airways agreed to provide at least 42 weekly departures serving Saipan, Tinian, Rota and Guam.
Under the flight incentive program, Marianas Southern Airways would offer reduced fares, as low as $99, from Saipan to/from Guam, to passengers as “a set-off and attempt to monopolize the CNMI’s airline industry, when the fare from Saipan to/from Guam cost between $229.00-$269.00, following the contract’s termination,” SMA stated.
The contract also allowed Marianas Southern Airways to administer a corporate discount program for official CNMI government travel on any flight operated by the airlines, SMA stated.
As a recipient of ARPA funds, Marianas Southern Airways “is obligated to comply with Congress’ stated purpose, federal rules, and regulations,” SMA stated.
“Because it accepted ARPA funds, Marianas Southern Airways was required to utilize received funds for its intended purpose, not as a means of creating unfair treatment within the several islands in the northwestern Pacific Ocean’s airline and air travel industry,” SMA added.
According to its complaint, “Stewart alleged that the contract would reduce airfare, in turn providing benefits to travelers and help the CNMI economy…and stated that Marianas Southern Airways provided over 10,000 passenger flights and saved nearly $600,000 through reduced airfares.”
As result, the complaint stated, “Star Marianas specifically experienced approximately $100,000 per month reduction in revenue, a significant loss of passengers, with a total loss of revenue estimated between $1.5 million and $2 million.”
SMA’s amended complaint also mentioned the sole-source justification letter for awarding the contract to Marianas Southern Airways.
“The letter alleges that all CNMI Procurement Regulations had been followed in the approval and execution of said sole-source contract with Marianas Southern Airways,” SMA stated.
The letter also opined that “the CNMI’s lone inter-island airline, Star Marianas Air,” was “causing unease and panic, especially for residents of Rota and Tinian,” SMA added.
According to its complaint, the alleged nature of Star Marianas’ temporarily suspended flights between the islands of the CNMI was explained with the claim that “[t]he monopoly airline’s hasty suspension of its inter-island commercial flights within the CNMI caused the utmost concern for the Rota and Tinian medical referral patients reliant on Star Marianas Air’s flight schedule dependability for medical treatments and appointments on Saipan…. So as not to have this situation be repeated, the Commonwealth seeks immediate and critical inter-island travel alternatives to safeguard the health and safety of Tinian and Rota….”
In Feb. 2023, the then-newly sworn in governor, Arnold I. Palacios, announced the termination of the previous administration’s contract with MSA, saying that there was no money for it.
In March 2023, Southern Airways withdrew as MSA’s operating airline, effectively ending its CNMI flight service.
