Since the enactment of the Airline Deregulation Act1 (“ADA”), there has been no shortage of litigation involving federal preemption based on the ADA’s prohibition against states “enact[ing] or enforc[ing] a law, regulation, or other provision having the force and effect of law” relating to an airline’s prices, routes or service. As in years past, a number of federal courts in 2013 were faced with litigation concerning the types of laws that fall within the ADA’s preemption provision. In particular, courts were tasked with determining whether ADA preemption applies to common law claims and foreign regulations. While some of the recent ADA preemption cases attempted to bring clarity to the issue of whether preemption is triggered by the form of a law (e.g., statute versus common law) or the effect that a law has on an airline, there remain contrasting views among circuits as to the types of laws that are preempted and, therefore, more litigation in 2014 can be expected on this important issue.
Common Law Claims are Generally Preempted under the ADA
The leading decision on the ADA preemption issue is American Airlines v. Wolens,2 in which the Supreme Court held that common law breach of contract claims are not subject to preemption because the ADA allows room for court enforcement of contract terms set by the parties themselves. Therefore, as Justice Ginsberg wrote, “[a] remedy confined to a contract’s terms simply holds the parties to their agreements – in this instance, to business judgments an airline made public about its rates and services.”3 Recently, plaintiffs seeking to expand the Wolens exception to ADA preemption have argued that other common law claims also are exempt from preemption because they fall outside of the type of “law” defined under the Act. This year’s decisions show that courts generally have not accepted these arguments and have found that common law claims are preempted by the ADA except in the limited circumstances already outlined by the Supreme Court.
In Brown v. United Airlines, the Court of Appeals for the First Circuit rejected the argument that common law claims are exempt from ADA preemption.4 Brown was a putative class action filed by a group of United Airlines skycaps seeking damages from the airline for unjust enrichment and tortious interference. The skycaps’ common law allegations arose out of lost wages allegedly caused by United’s policy charging its passengers a $2.00 curbside check-in fee. The skycaps argued that the check-in fee interfered with their ability to obtain compensation, which depended largely on tips from passengers who checked their bags curbside. Because United did not inform its passengers that the check-in fee was not gratuity for the skycaps, passengers tipped the skycaps less, causing their compensation to decrease. The district court dismissed the skycaps’ claims on ADA preemption grounds. The skycaps appealed to the First Circuit.
Though the Brown case presented an issue of first impression for the First Circuit, it was not the first time that the court encountered the same set of facts. In Difiore v. American Airlines,5 skycaps employed by American Airlines filed a putative class action under Massachusetts’ “Tips Law,” which prohibits an employer from interfering with a service employee’s tips. The DiFiore court dismissed the skycaps’ statutory claim as preempted under the ADA because the “Tips Law” related to American’s services. Faced with the same facts but with a common law cause of action, the First Circuit reached the same conclusion it had in Brown, holding that the ADA does preempt common law claims.
In reaching its conclusion that common law claims are preempted, the Brown court employed a two-step analysis. First, the court addressed the question of the “linkage” between the claim and the airline’s activity – that is, whether the claim relates to the airline’s prices, routes or service. Having already decided that issue in DiFiore, the court moved on to the second question, and plaintiffs’ main contention, which focused on “the mechanism through which the claim is preferred.” In essence, the court was looking at whether the law sought to be enforced is a “state enactment or enforcement” that would be preempted under ADA. Based on the Supreme Court’s analysis of the word “law” in non-ADA cases, the plaintiffs argued that those laws that fall within the purview of ADA preemption are state “positive laws” (laws enacted by government authority) such as the “Tips Law” in DiFiore. However, the plaintiffs argued, common law is not “positive law” and thus is not a mechanism intended to be preempted under the ADA. The First Circuit disagreed. Relying on the Supreme Court’s dicta in Wolens, the court held that laws that are not a “state enactment or state enforcement” can also be preempted by the ADA’s prohibition of “other provisions having the force and effect of the law.” The court found that the laws “having the force and effect of the law” are the same as positive law because they also impose binding standards of conduct on an airline’s activities. Therefore the court concluded that the proper analysis for preemption is not centered on the form of the law (i.e., common law vs. statutory law), but rather on the effect that the law has on the airline.
Using this pragmatic approach, the court pointed out that common law, like state statutory law, can strongly affect the manner in which an airline conducts business because, like statutory laws and regulations, common law is “backed by the weight of the state judiciary enforcing the law.” As a result, the court concluded that the ADA need not expressly state that common law is preempted because it is included in the catch-all phrase “other provisions having the force and effect of law.” The court further stated that the ADA’s procedural history and clear congressional intent coupled with a “common sense” approach supported its conclusion that common law need not be expressly referred to in the ADA to be preempted.
In a subsequent decision, Bowers v. EgyptAir Airlines Co.,6 the First Circuit expounded on its decision in Brown. The plaintiff in Bowers brought suit against EgyptAir, alleging various common law claims, including tortuous interference with his custodial relations and negligence. Plaintiff alleged that EgyptAir was negligent in failing to detect “red flags” which indicated that his ex-wife was kidnapping their two children. The district court granted summary judgment in favor of EgyptAir on the grounds that the airline owed plaintiff no duty of care and there were no apparent signs of a kidnapping that would have created such a duty.
Applying its analysis in Brown, the First Circuit held that plaintiff’s common law claims for negligence and tortious interference with custodial relations are preempted by the ADA. The court acknowledged, however, that common law claims may survive preemption where the state law or action on which they are based is “too tenuous, remote or peripheral” to an airline’s business (citing Morales v. Trans World Airlines, Inc.7). The court was careful in avoiding any categorical language for determining which types of common laws claims are preempted versus those that are not.
In Benedetto v. Delta Air Lines, Inc.,8 a passenger travelling from Sioux Falls to New York with a firearm filed a negligence suit against Delta for failure to warn him about New York’s gun laws. The plaintiff claimed that when leaving Sioux Falls, he declared the firearm to the ticket agent pursuant to Delta’s rules. Upon arriving at New York’s JFK Airport for his return trip, he was arrested for illegal possession of a firearm. In addition to his common law negligence claim, plaintiff sued for breach of contract and breach of the duty of good faith and fair dealing. After first determining that plaintiff’s claims were centered entirely on the services offered by Delta, the district court in South Dakota moved on to the issue of whether plaintiff’s common law claim was preempted by the ADA. The court found that the plaintiff’s negligence claim could be considered “state law” and reasoned that, if it allowed the plaintiff’s negligence cause of action to proceed, “state negligence law would inevitably guide and police services that Delta and all other airlines offer,” which would contravene the purpose and effect of the ADA.
Based on the Wolens decision, the district court found that the breach of contract claim was not preempted; however, it declined to extend the Wolens exception to plaintiff’s claim for the breach of the duty of the good faith and fair dealing. The court reasoned that plaintiff’s breach of the duty of good faith and fair dealing claim would necessarily require the court to look outside of the contract to determine whether Delta had a reasonable basis or should have known that no reasonable basis existed for allegedly failing to fulfill its contractual obligations. The court therefore determined that such analysis is beyond what is allowed under the Wolens exception to ADA preemption.
In Dover v. British Airways,9 the Eastern District of New York held that breach of contract claims are always exempt from ADA preemption. In Dover, several members of British Airways’ frequent flyer program filed a putative class action against the airline for allegedly violating the provisions of the frequent flyer agreement. The agreement contained terms stating that members’ tickets would be subject to a fuel surcharge which would be calculated based on the fluctuating prices of fuel. Plaintiffs alleged that the fuel surcharge was not based on the price of fuel and, instead, was an arbitrary means employed by the airline to generate income from frequent flyer members who had accumulated enough points to get free flights. By failing to calculate the fuel surcharge in the exact manner specified in the contract, plaintiffs claimed that British Airways breached its frequent flyer contract. British Airways moved to dismiss plaintiffs’ breach of contract claims on the basis of preemption because they related to its ticket prices and, in determining whether a breach occurred, the court would be required to apply state policies or laws that were outside of the ticket contract. The court rejected both arguments. As an initial matter, it held that Wolens provides that contract claims are always exempt from ADA preemption, even if they are related to an airline’s prices, routes, or services. Furthermore, the court found that it did not need to apply state laws or policies to plaintiffs’ breach of contract claims. Holding that plaintiffs’ claims related only to the contractual terms agreed between the airline and its frequent fliers, the court concluded that no analysis other than whether British Airways upheld its bargain under the contract would be required.
Divergent Treatment of Implied Covenant Claims in the Ninth Circuit
Not surprisingly, the Court of Appeals for the Ninth Circuit has been more permissive than other courts in its treatment of common law claims in ADA preemption cases. In Ginsberg v. Northwest Airlines,10 a 2012 Ninth Circuit decision that has been widely criticized, the court held that common law claims for the implied covenant of good faith and fair dealing are categorically exempt from ADA preemption. In Ginsberg, a member of Northwest Airlines’ “WorldPerks” frequent flyer program brought multiple common law causes of action against Northwest for terminating his program benefits. The WorldPerks program provided frequent flyers with certain perks and benefits, but also gave Northwest the discretion to terminate a passenger’s frequent flyer benefits if it determined that the passenger had abused the program. Plaintiff alleged that he was contacted by a Northwest employee and advised that his WorldPerks membership had been revoked because of abuse. As a result of Northwest’s refusal to reinstate his benefits, he filed a putative class action for breach of contract and breach of implied covenant of good faith and fair dealing on behalf of himself and all other Northwest passengers who had had their benefits revoked.
The district court found that all of plaintiff’s common law claims are preempted by the ADA and that plaintiff failed to allege facts sufficient to show a material breach of contract under the Wolens exception. On appeal, plaintiff only sought the Ninth Circuit’s review of the district court’s dismissal of his breach of implied covenant of good faith and fair dealing claim. He argued that the implied covenant of good faith and fair dealing was part of Northwest’s contractual obligations and, thus, could not be preempted by the ADA. The Ninth Circuit agreed. Citing the ADA’s procedural history, the appellate court held that causes of action for breach of implied covenant of good faith and fair dealing are categorically exempt from ADA preemption because, as a general matter, implied covenant claims are too tenuously connected to airlines’ prices, routes or services.
The Supreme Court granted certiorari in Ginsberg and heard oral argument in December 2013. It was noted that the Court’s questions appeared to indicate a reluctance regarding increased frequent flier lawsuits and failed breach of contract claims by allowing implied covenant of good faith and fair dealing claims to bypass ADA preemption. It also was noted by some of the justices that plaintiff and Northwest had a contract which explicitly gave the airline the sole discretion to terminate plaintiff’s frequent flyer benefits.
The Ginsberg holding is a clear departure from the First and Eighth Circuits’ treatment of common law claims and it appears unlikely that the Supreme Court will uphold the categorical exemption of any common law cause of action to ADA preemption. In Wolens the Court set clear parameters for common law contract claims and, in deciding Ginsberg, hopefully will further clarify its position on how common law causes of action should be treated in ADA preemption cases. The Court is expected to issue its decision in early 2014.
Foreign Law and ADA Preemption
Another critical decision regarding the definition of a “law” under the ADA was issued in the Northern District of Illinois and presented an issue of first impression in the United States. In Volodarskiy v. Delta Air Lines,11 a group of passengers filed a putative class action claim against Delta for its alleged violation of Regulation EU 261 (“EU 261”).12 EU 261 is a European Union consumer protection law that provides standardized compensation to passengers experiencing delays and cancellations on flights to and from the European Union. Delta sought dismissal, arguing that the ADA prohibited the court’s enforcement of a regulation related to its prices, routes, or services. Essentially Delta argued that permitting plaintiffs’ claim would be considered “state enforcement” of a foreign regulation which is preempted by the ADA. The district court disagreed, holding that the text of the ADA requires that the law being enforced be a law of a State, not a foreign regulation. Because EU 261 is not a “State law,” the court concluded that it was not preempted by the ADA. The plaintiff’s direct EU 261 cause of action, however, was dismissed on other grounds and the case currently is on appeal.
Although federal court treatment of common law claims in ADA preemption cases for the most part has been consistent, some uncertainty remains regarding whether foreign law and certain common law causes of action arising out of contract will escape ADA preemption. Specifically, it is still unclear what types of claims are too tenuous or remote from an airline’s prices, routes, or services to be preempted by the ADA. While the Supreme Court’s decision in Ginsburg will not address each common law cause of action in the ADA preemption context, its treatment of the implied covenant of good faith cause of action will provide further guidance on this important aspect of the ADA preemption issue.
1 49 U.S.C. § 41713(b) (1) (1978).
2 513 U.S. 219 (1995).
3 513 U.S. at 229.
4 720 F. 3d 60 (1st Cir. 2013).
5 646 F. 3d 81 (1st Cir. 2011).
6 731 F. 3d 85 (2013).
7 504 U.S. 374 374, 390 (1992).
8 917 F.Supp. 2d 976 (2013).
9 1:12-cv-05567 (November 8, 2013).
10 694 F.3d 873 (2012).
11 11 C 00782 (October 16, 2013).
12 Regulation (EC) No 261/2004 of the European Parliament and of the Council of 11 February 2004.