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Alaska Rent-A-Car, Inc. v. Avis Budget Group, Inc.

United States Court of Appeals, Ninth Circuit

March 6, 2013

ALASKA RENT-A-CAR, INC., Plaintiff-Appellee,
AVIS BUDGET GROUP, INC., FKA Cendant Corporation; Avis Budget Car Rental, LLC, FKA Cendant Car Rental Group, Inc., FKA Cendant Car Rental Group, LLC, Defendants-Appellants. Alaska Rent-a-Car, Inc., Plaintiff-Appellee,
Avis Budget Group, Inc., FKA Cendant Corporation; Avis Budget Car Rental, LLC, FKA Cendant Car Rental Group, Inc., FKA Cendant Car Rental Group, LLC, Defendants-Appellants.

Argued and Submitted July 25, 2011.

Amended June 19, 2013.

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[Copyrighted Material Omitted]

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Christopher Landau (argued), Stephen S. Schwartz, Kirkland & Ellis LLP, Washington, D.C.; Howard S. Trickey, Matthew Singer, Jermain, Dunnagan & Owens, P.C., Anchorage, AK, for Appellants.

Susan Orlansky, Jeffrey M. Feldman, Feldman Orlansky & Sanders, Anchorage, AK, for Appellee.

Appeal from the United States District Court for the District of Alaska, Timothy M. Burgess, District Judge, Presiding. D.C. No. 3:03-cv-00029-TMB.



The opinion filed March 6, 2013, and appearing at 709 F.3d 872 (9th Cir.2013), is hereby amended. The amended opinion is filed concurrently with this Order.

With these amendments, Judges Rawlinson and Callahan have voted to deny the petition for rehearing en banc, and Judge Kleinfeld has so recommended. The full court has been advised of the petition for rehearing en banc and no judge has requested a vote on whether to rehear the matter en banc. Fed. R.App. P. 35.

The petition for rehearing en banc is DENIED. No future petitions for rehearing or petitions for rehearing en banc will be entertained.


KLEINFELD, Senior Circuit Judge:

Several state law questions arise in this appeal, and three federal law questions, whether expert testimony should have been excluded under Daubert, [1] whether disallowance of a peremptory challenge

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was Batson [2] error and if so whether it was harmless, and whether Alaska " English Rule" attorneys fee awards [3] may be awarded in a diversity action where Alaska is the forum state but another state's law governs the dispute.


Alaska Rent-A-Car's predecessor began doing business as an Avis licensee in 1956, three years before Alaska attained statehood. Most other Avis licensees had a defined territory in a locality, not an entire state, within which they had the exclusive right to rent cars on behalf of Avis. Avis reasonably considered Alaska different.

In its 1959 agreement, the Alaska Avis licensee was entitled to operate in the " entire State of Alaska," about 20% of the entire United States, but a negligible percentage of the nation's roads. The license was renewed in 1965, this time giving Alaska Rent-A-Car exclusive rights in specific locations within Alaska. A 1976 amendment added additional locations to the license agreement, and gave Alaska Rent-A-Car a right of first refusal for control of any license Avis planned to grant anywhere in Alaska. It also gave Alaska Rent-A-Car the right to expand into new territory, such as temporary camps during the construction of the oil pipeline from Prudhoe Bay to Valdez during the 1974-1977 period. The 1976 amendment stated:

It is additionally agreed: (a) That Alaska conditions of terrain and weather as well as changing and cyclical economic conditions may result in customer demands for quick service in new and even temporary locations or camps. It is understood that Licensee may utilize his floating fleet to meet such demands, with full reporting of such circumstances to Avis

Avis bought a company called Agency Rent-A-Car in 1995. Some of Avis's licensees claimed that Avis was breaching their license agreements by operating another rental car company in their territories. To protect itself against these claims, Avis sued thirteen of its licensees, and sought class certification, to obtain a judgment that its purchase of Agency Rent-A-Car and its changed operations did not violate licensee rights. Avis and named defendants settled in 1997, without ever litigating to class certification or judgment. Our case arises out of that settlement, which allows Avis to purchase additional rental car companies, but requires that " the sales, marketing and reservation activities, operations and personnel of and for the Avis System will not be utilized to market, provide, and/or make available car rental services" for any additional rental car company purchased by Avis. [5] The settlement agreement protected Avis licensees from the risk of Avis using its personnel to steer customers and potential customers towards another brand. Licensees would typically only rent Avis cars, but Avis might own a competitor operating in the same locality under a different name.

Avis bought Budget Rent-A-Car out of bankruptcy in 2002. It then restructured its central operations, putting the Avis and

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Budget marketing teams under unified management, creating a single team to answer calls to both Avis and Budget reservation lines, and combining the Avis and Budget national corporate sales forces. The obvious threat from these actions to Avis's licensees was that Budget would bleed off some of their customers and potential customers. People typically rent cars online or by telephone from a national site or 800 number, and governments and big corporations typically negotiate with the national entity, because they typically rent cars for use away from home.

Alaska Rent-A-Car sued Avis claiming that Avis had indeed breached the settlement agreement, causing Alaska business to be switched to Budget Rent-A-Car, its local competitor. The district court granted a partial summary judgment, establishing that Alaska Rent-A-Car was a party to the settlement agreement, and that Avis had breached the agreement by using the same personnel to sell and market both Avis and Budget cars. Damages were left for jury trial. The jury returned a verdict in favor of Alaska Rent-A-Car for $16 million. Avis appeals.


I. Was Alaska Rent-A-Car a promisee under the settlement agreement?

The question whether the 1995 settlement agreement included Alaska Rent-A-Car was decided by partial summary judgment, so we review de novo.[6] Avis argues on appeal that Alaska Rent-A-Car was not a party.

First, Avis argues that Alaska Rent-A-Car could not be embraced by the settlement agreement, because the agreement protected only licensees with " exclusive" license agreements, that is, with exclusive territories within which Avis could not promote competitors to the licensee except to the extent the settlement agreement allowed. This argument is entirely without merit. One reason why is that Alaska Rent-A-Car plainly did have exclusive territories, the designated and permitted locations within the State of Alaska. Were Alaska Rent-A-Car to use the Avis brand to open a counter at the Seattle airport, it would violate its licensing agreement, just as any other Avis licensee would if it opened a counter at the Anchorage airport. The other reason is that we can find no language limiting permission to join in the settlement agreement to licensees with exclusive licensing agreements. The settlement agreement was offered to " all Avis System licensees/franchisees," which Alaska Rent-A-Car indisputably was.

Avis also makes the more substantial argument that Alaska Rent-A-Car's joinder was untimely. What color this argument has arises from the fact that Alaska Rent-A-Car did not send in a signed joinder to the settlement agreement until July 2001, almost four years after the settlement and three and a half years ...

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