• AIR SCOOP: Wealth
  • April 16, 2004 | Author: Gordon D. McAuley
  • Law Firm: Hanson, Bridgett, Marcus, Vlahos & Rudy, LLP - San Francisco Office
  • Wealth. The word conjures forth in some visions of ease, comfort and luxury. In others, great abundance of prosperity comes to mind. For those of us toiling long hours, we see independence from the daily grind and the freedom to do everything that we would do if we "only had the time". Those who have wealth may use it for personal growth, to help others, or to just be contrary, as our first case suggests.

    "War seldom enters but where wealth allures."
    John Dryden, To the Memory of Mr. Oldham [1684]

    Plaintiff in the Texas Supreme Court matter, Black v. Delta Airlines, 116 S.W.3d 745 (2003) must have had some serious swag to pursue his battle to the Texas Supreme Court. He had his travel agent book two first class seats for himself and his wife on Delta Airlines for a trip from Dallas to Las Vegas. The travel agent confirmed the purchase, but when the happy couple arrived at DFW, Delta said that their computer showed only one confirmed first class seat for Husband, and a coach seat for Wife. Husband demanded a first class seat for his wife, but all were booked. Delta offered several options, including two first class seats on a direct flight later that day, or two first class seats on a connecting flight through Los Angeles. The airline offered free travel vouchers if Husband accepted any of the options. Husband not only refused the accommodations, he drove to nearby Love field and chartered a private jet to fly Wife and himself to Las Vegas at a cost of more than $13,000. He sued Delta, and his travel agent for state law breach of contract, negligence, and intentional tort claims seeking recovery of the costs of the jet charter.

    Delta and the travel agent were successful in the trial court in getting summary judgment dismissals. Husband appealed to the Texas appellate court and won a reversal of the summary judgment. Delta argued in the appellate court that Husband's claims were preempted by the Airline Deregulation Act of 1978 ("ADA"). The ADA provides at 49 U.S.C. Section 41713(b)(1) that a state may not enact or enforce a law that affects an airline's rates, routes, or services. Courts have been inconsistent in identifying which state laws affect rates and services. The Texas appellate court noted that the U.S. Supreme Court decisions in Morales v. TWA, 504 U.S. 374 (1992) [fare advertising], and American Airlines v. Wolens, 513 U.S. 219 (1995) [retroactive changes to frequent flyer program] determined that the scope of ADA preemption of state law was quite broad, but not complete. Wolens held that the ADA does not preempt claims where the airlines breach their "...own, self-imposed undertakings." The court found that certain terms and conditions of carriage undertaken by the airlines are private obligations which are not preempted so long as their enforcement does not require any enlargement or enhancement based on state law external to the agreement.

    Courts diverge on just what is a private agreement between the passenger and the airline that is not related to the carrier's rates, routes or service. The Texas appellate court held, with some federal case authority, that an airline's seating procedures are a private undertaking by the airline, made without reference to state laws or regulations. Under the Texas appellate court's interpretation of Wolens, Husband's claims were related to Delta's own self-imposed contractual obligations, rather than a state-imposed regulation, and therefore were not preempted by the ADA.

    The Texas Supreme Court found that it must undertake a two prong analysis to determine if ADA preemption exists. First, is the subject of the claim related to the airlines' rates, routes or services? If so, does a successful claim require enactment or enforcement of a state law? It held that an airline's passenger seating procedures are an integral part of its service, and is subject to federal regulation concerning overbooking. They are not the same character of "service" as the frequent flyer program discussed in Wolens. The Court found that Husband's claims indeed were related to the airlines' "service," and then turned to the second prong of inquiry: whether the claim required reference to a state law for resolution.

    In perhaps the most important part of the decision, the court noted that the seating procedures are the subject of federal regulation: they are not procedures voluntarily undertaken by the airlines. The contracts of carriage incorporate federal regulations which state that if the airlines offer accommodations to a bumped passenger, the passenger is not eligible for denied boarding compensation. 14 C.F.R. 250.6. Since Plaintiff was not denied boarding, but only precluded from having Wife fly with him in first class, provisions allowing bumped passengers to decline accommodations, and instead to seek remedies in state court, were not applicable.

    The court also dismissed the state court misrepresentation and fraud claims because they are directly related to the preempted ticketing claims. Having lost the final appeal, Plaintiff had to pay for the jet charter, and unknown amounts of attorney fees for an expensive war over a seemingly trivial slight.

    "We have no more right to consume happiness without
    producing it than to consume wealth without producing it."
    Geo. Bernard Shaw Candida [1898]

    A California appellate court, in an unpublished decision, also addressed the issue of ADA preemption of state law claims in the case Waul v. American Airlines, 2003 Cal. App. Unpub. Lexis 10816. Plaintiff, a member of American Airlines' frequent flyer program, purchased nonrefundable tickets for a flight which he did not take. The airline did not credit his frequent flyer account with the miles for the flight not taken, but they did keep the money for the ticket. He sued for restitution and injunctive relief under the state's unfair competition law. He claimed that the airlines breached a covenant of good faith and fair dealing with its frequent flyer program members by keeping the money for canceled tickets, but not giving credit for the mileage of the unused flights. The complaint did not allege a separate breach of contract. The airline demurred, citing ADA preemption of the plaintiff's state law claims. The California appellate court agreed, finding that the Morales and Wolens U.S. Supreme Court cases did not direct a different result.

    Plaintiff could not point to a contract term that required the airline to credit frequent flyer mileage for unused, non-refundable tickets. In Wolens the Supreme Court found that ADA preempted an Illinois consumer protection statute, similar to the California statute at issue in Waul, because it was a state regulation of the airlines, rather than a voluntary obligation undertaken by the airlines in a private contract with its passengers. In this case, the plaintiff could not point to actual contract terms between the airline and its frequent flyers that required the airline to credit frequent flyer mileage for unused tickets. Hence plaintiff's claim was based only on the state-imposed obligations of the consumer protection law, which was preempted under the ADA. To the extent plaintiff asserted an implied in law contract (an equitable concept), the ADA also preempted such claims because equitable remedies rely upon state law for interpretation and enforcement.

    The court also pointed to a clever way for airline attorneys to obtain a preemption finding: assert a federal law defense to the plaintiff's breach of private contract claims. In Smith v. Comair, Inc., 134 F.3d 254 (4th Cir. 1998), the federal appellate court acknowledged ADA preemption of breach of contract claims where the defendant airline raised federal law defenses outside the terms of the contract. These two decisions should bolster the airlines' quest for uniformity in court interpretation of customer tort and contract claims.

    "...to give light to those who were in darkness,
    and to procure wealth which all men desire."
    Bernal Diaz de Castillo [1568]

    Royal & Sun Alliance Ins. v. American Airlines, Inc., 277 F.Supp.2d 265 (S.D.N.Y. 2003) provides a wealth of legal precedent and light for airline attorneys to fight the unfortunate holding of Chubb Ins., v. Asiana Airlines, 214 F.3d 301 (2nd. Cir. 2000). Chubb held that where the U.S. and a foreign country (Korea) have not signed the same version of the Warsaw Convention (i.e., Hague and unamended Warsaw), then the carrier may not rely on any version of the treaty to adjudicate cargo claims, or to limit its liability for such claims. In those cases, the parties presumably must instead look to contract law, perhaps as interpreted by federal common law. In Royal & Sun, the insurance carrier filed a subrogation action against the air carrier for March 2001 loss of four crates of aircraft parts worth $122,000 during air transit from Belgium to Tulsa, OK. The airway bill showed transit with a connecting flight in Chicago. The cargo actually was routed through Dallas, because the weight of the shipment was more than originally stated by the shipper. The airline dispatcher sent the cargo on a different flight, but without changing the routing noted on the airway bill.

    Plaintiff insurer argued that the airline did not comply with the Article 8 requirements of the unamended Warsaw Convention by listing the agreed stopping places for the aircraft. Under cases interpreting Article 8 "particulars" requirements, failure to issue a properly filled out airway bill precludes an air carrier from limiting its liability for cargo loss and damage claims under Article 22 of the Convention. This is a harsh result for such a minor infraction. Regardless, the air carrier here argued that Belgium was a signatory nation to the Hague Protocol, which eliminated the Article 8 particular requirements of the original Warsaw Convention. The insurance carrier claimed that the U.S. did not adopt the Hague Protocol, and was not bound by its requirements, citing the dreaded Chubb decision for authority. The airline successfully argued that when the U.S. adopted Montreal Protocol 4 ("MP4"), effective March 1999, it also adopted the terms of the Hague Protocol. The insurer unsuccessfully claimed that the U.S. did not expressly adopt Hague Protocol, and Belgium, which did not adopt MP4 until 2003, cannot benefit from the terms of MP4. The court determined that the express terms of MP4 establish that a country which previously had not adopted the Hague Protocol, does so when it adopts MP4. The court confirmed summary judgment on the air carrier's limitation of liability per the Hague Convention.

    May your troubles be meager, and your riches abundant.