Opinion

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-99-00089-CV

The Boon Insurance Agency, Inc., Individually and on Behalf of All Others

Similarly Situated, Appellant

v.

American Airlines, Inc.; Continental Airlines, Inc.; Delta Airlines, Inc.; and America

West Airlines, Inc., Appellees

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 345TH JUDICIAL DISTRICT

NO. 98-08724, HONORABLE F. SCOTT MCCOWN, JUDGE PRESIDING

A ppellant The Boon Insurance Agency, Inc. ("Boon") appeals the district court's

summary judgment in favor of appellees, American Airlines, Inc.; Continental Airlines, Inc.;

Delta Airlines, Inc.; and America West Airlines, Inc. (collectively, the "Airlines"). Their dispute

arises from certain restrictions on economy-class airline tickets that Boon purchased from the

Airlines. Boon brought a class-action suit (1) against the Airlines in district court charging that a

reissue fee and other penalties imposed by the Airlines when a holder of an economy-class ticket

fails to travel according to the ticket's original terms constitute illegal forfeitures and penalties

prohibited by state law. The Airlines moved for summary judgment on the sole ground that

Boon's claim is preempted by section 41713(b)(1) of the Airline Deregulation Act of 1978 (the

"Act"). (2) The district court granted the Airlines' motion. Boon complains on appeal that: (1) the

district court erred in requiring Boon to prove its claims were not preempted by the Act; (2)

summary judgment was improper because (a) the Act does not preempt claims that involve

common law breach-of-contract claims, and (b) genuine issues of material fact exist; and (3) the

district court erred by denying Boon's discovery request. Because we find that the district court

did not misplace the burden of proof, federal law preempts Boon's claim, there are no genuine

issues of material fact, and Boon's discovery request was not improperly denied, we will affirm

the district court's summary judgment.

BACKGROUND

The Airlines stipulated that for the purpose of summary judgment, the facts in

Boon's first-amended class-action petition are true. Our facts, therefore, are taken from the

pleadings before the district court.

Between 1996 and 1997, Boon purchased economy-class airline tickets from each

of the Airlines. A ticket constitutes a "contract of carriage" between the passenger and the

airline, whereby the airline agrees to provide transportation between certain locations on specific

dates in return for the purchase price of the ticket and the passenger's agreeing to travel according

to the ticket's terms. An economy-class ticket is available for a lower price because it is subject

to conditions that a full-price, fully refundable ticket is not, including fees associated with

changing the terms of travel. (3)

If a passenger with an economy-class ticket does not fly as ticketed and wishes to

rebook a flight, the passenger may apply the original fare toward a new ticket for travel within

a specified period of time. However, the passenger must also pay a "reissue fee" ranging from

fifty to seventy-five dollars. If the original ticket is not used or reissued, the passenger forfeits

the entire fare. At issue in this case is the potential forfeiture of the full ticket price and the

reissue fee imposed upon a passenger who fails to travel according to the ticket's terms. Boon

claims that the reissue fee and the retention of the fare amount to illegal forfeitures and penalties

and as such are unenforceable under Texas law. See Phillips v. Phillips , 820 S.W.2d 785, 789

(Tex. 1991).

The Airlines moved for summary judgment on the ground that Boon's claims were

preempted by the Act, which specifically prohibits a State from enforcing a law or regulation that

relates to the price, route, or service of an air carrier. See Act § 41713(b)(1). The district court

granted the Airlines' motion, implicitly finding that Boon's claim was related to the Airlines'

prices and therefore preempted by the Act.

DISCUSSION

Boon appeals from a summary judgment in favor of the Airlines. The propriety

of summary judgment is a question of law, and we review the trial court's decision de novo . See

Natividad v. Alexis, Inc. , 875 S.W.2d 695, 699 (Tex. 1994). The standards for reviewing a

motion for summary judgment are well established: (1) the movant for summary judgment has

the burden of showing that no genuine issue of material fact exists and that it is entitled to

judgment as a matter of law; (2) in deciding whether there is a disputed material fact issue

precluding summary judgment, evidence favorable to the nonmovant will be taken as true; and

(3) every reasonable inference must be indulged in favor of the nonmovant and any doubts

resolved in its favor. See Nixon v. Mr. Property Management Co. , 690 S.W.2d 546, 548-49

(Tex. 1985). The function of summary judgment is not to deprive litigants of the right to trial by

jury but to eliminate patently unmeritorious claims and defenses. See Swilley v. Hughes , 488

S.W.2d 64, 68 (Tex. 1972).

Burden

The burden of demonstrating preemption is on the party who asserts it. See

Silkwood v. Kerr-McGee Corp ., 464 U.S. 238, 255 (1984). By its second issue, Boon argues that

the preemption burden and therefore the summary-judgment burden was that of the Airlines, and

the district court erred by improperly shifting these burdens to Boon. Boon's argument is based

solely on a statement in a brief filed by the Airlines in the district court that stated that Boon had

"a difficult burden" in demonstrating that its claims were not related to the price, route, or service

of the air carrier, and that it had "not met this burden." To the extent that this statement urged

the district court to place the burden on Boon, it is an incorrect statement of the law.

Boon correctly states that to prevail on their summary-judgment motion, the

Airlines were required to prove that Boon's claims were preempted by the Act. See id. Stated

another way, we must address whether the Airlines established as a matter of law that section

41713(b)(1) of the Act preempts the claims asserted in Boon's suit. See State v. Foley , 950

S.W.2d 781, 784 (Tex. App.--Austin 1997, no writ). However, we find no evidence in the record

that the district court misplaced the Airlines' burden. The district court's judgment states simply,

"The Court, after examining the pleadings and the summary judgment evidence and hearing the

arguments of counsel, determines that [the Airlines] are entitled to summary judgment on all of

the claims raised by [Boon] in this lawsuit." The Airlines' arguably incorrect statement in their

district-court brief in no way demonstrates an improper action by the district court. We therefore

overrule Boon's second issue.

Preemption

In 1978, Congress enacted the Act, which largely deregulated domestic air

transport. See American Airlines, Inc. v. Wolens , 513 U.S. 219, 222 (1995). At the heart of the

dispute before us is the Act's preemption clause. Congress intended that the Act preempt state

law "to ensure that the States would not undo federal deregulation with regulation of their own."

Morales v. Trans World Airlines, Inc., 504 U.S. 374, 378 (1992). The preemption clause states,

in relevant part, "A State . . . may not enact or enforce a law, regulation, or other provision

having the force and effect of law related to price, route, or service of an air carrier . . . ." Act

§ 41713(b)(1). (4)

In Morales , the United States Supreme Court considered Travel Industry

Enforcement Guidelines, promulgated by the National Association of Attorneys General

("NAAG"). See 504 U.S. at 374 . The NAAG guidelines purported to govern, inter alia , the

content and format of airline-fare advertising. See id. at 393-418 . Several states, including

Texas, attempted to enforce the NAAG guidelines to stop allegedly deceptive airline

advertisements. See id. at 379 . To determine whether the guidelines were preempted by the Act,

the Court was initially faced with delineating the ordinary meaning of the term "related to." See

id. at 383 . The Court adopted the same meaning found in other preemption statutes: "having a

connection with, or reference to, airline 'rates, routes, or services.'" Id. at 384 . (5) The "related

to" language was intended to be broad in order to express an expansive preemptive purpose. See

id. at 383 . The Court concluded that the states' initiative related to airline rates, routes, or

services and therefore found that the fare-advertising provisions of the NAAG guidelines were

preempted by the Act. See id. at 391 . The Court also noted that the Act does not preempt all

enforcement of state law against airlines. The Court recognized that some state actions might

affect airlines in "'too tenuous, remote, or peripheral a manner' to have pre-emptive effect" but

noted that the case before it did not present a "borderline question" and expressed no view about

where it would be appropriate "to draw the line." Id. at 390 (quoting Shaw v. Delta Air Lines,

Inc. , 463 U.S. 85 , 100 n.21 (1983)).

Wolens involved a dispute between American Airlines and persons participating in

its frequent-flyer program. See 513 U.S. at 222 . Individuals enrolled in the program earned

mileage credits when they flew American and could exchange those credits for tickets on

subsequent flights or upgrades to a higher class of service. See id. at 224 . Although American

had reserved the right to change the terms and conditions of the program, when the airline

changed the program, suit was filed challenging the retroactive application of the modifications.

See id. at 225. The program's participants claimed that American's actions violated the Illinois

Consumer Fraud and Deceptive Business Practices Act and constituted a breach of contract. See

id.

The Supreme Court held that while the enforcement of the Illinois Act was

preempted by the Act, the passengers' breach-of-contract claim was not so preempted. See id.

at 228 . The terms and conditions the airlines offered and the passengers accepted were privately

ordered obligations and did not amount to a state's enactment or enforcement of any law, rule,

regulation, standard, or other provision having the effect of law within the meaning of the Act.

See id. at 229 . The Court found that the Act does not prohibit state-court adjudication of routine

breach-of-contract claims, so long as the court confines its decision to the parties' bargain, with

no enlargement or enhancement based on state law or policies external to the agreement. See id.

at 232 . The Court also noted that since contract law is not at its core "diverse, nonuniform, and

confusing" but is similar from jurisdiction to jurisdiction, it is unlikely that there will be a "large

risk of nonuniform adjudication" of what constitutes the "agreement" of the parties to a contract.

See id. at 826.

The Texas Supreme Court discussed Wolens and Morales in Continental Airlines,

Inc. v. Kiefer , 920 S.W.2d 274, 278-84 (Tex. 1996). Kiefer found that not only do common law

breach-of-contract claims fall outside the scope of the Act's preemption, but so do common law

negligence claims. See 920 S.W.2d at 278 -84 . With respect to breach-of-contract claims, Kiefer

adhered to the reasoning in Wolens , observing that the Act will prevent states from imposing their

own substantive standards with respect to rates, routes, or services but will not stop states from

affording relief to a party who claims and proves that an airline dishonored a term to which the

airline itself agreed. See id. at 280 . The court reiterated the language of Wolens , stating that in

breach-of-contract claims, courts are confined to the parties' bargain. See id. The Kiefer court

concluded that the Supreme Court of the United States has placed a "very strict limitation on

permissible contract claims." See id. at 281 .

In this framework, we examine Boon's claim to determine whether it is preempted

by the Act. If the claim relates to the "price, route, or service of an air carrier," it is preempted.

Boon argues that its claim is not related to price, since state actions that have a tenuous, remote,

or peripheral effect on air fares are not preempted. See Morales , 504 U.S. at 390 . While Boon

also points out that the Act's "related to" language should not be stretched to indeterminancy or

"for all practical purposes preemption would never run its course," (6) it is clear from Morales ,

Wolens, and Kiefer that although the "related to" language is broad, it is not overly so and is

meant to encompass claims like Boon's. This Court has recently recognized that by the Act,

Congress sought to ensure effective airline deregulation by enacting "a very broad and sweeping

preemption to eliminate the possibility of any conflicting state regulation." City Public Serv. Bd.

v. Public Util. Comm'n , 9 S.W.3d 868, 876-77 (Tex. App.--Austin 2000, pet. filed). (7) We hold

that Boon's claim is "related to a price . . . of an air carrier" and is thus within the Act's

preemption. (8)

Boon maintains that Kiefer allows any contract-related action under the Act if there

is little risk of nonuniform adjudication among the states. The Kiefer court examined Wolens ,

emphasizing that since contract law is uniform, enforcing contracts is unlikely to lead to

nonuniform adjudication of contract claims based upon state law. See Kiefer , 920 S.W.2d at 280

(citing Wolens , 513 U.S. at 233 n.8). Boon reads Kiefer and Wolens incorrectly. Neither Kiefer

nor Wolens hold that every contract-related claim may be brought; only breach-of-contract claims

concerning the terms of the parties' agreement may be adjudicated in state court since contract law

is not at its core diverse, nonuniform, or confusing. See Wolens, 513 U.S. at 233 n.8; Kiefer ,

920 S.W.2d at 280 . The Wolens court specifically noted that it saw no significant risk of state-to-state nonuniform adjudication of standard airline-prepared agreements. See Wolens , 513 U.S. at

233 n.8. Kiefer does not, and in the face of the Act could not, expand the scope of contract

claims that may be brought before state courts.

Boon argues that under Kiefer and Wolens , its breach-of-contract claim is not

preempted by the Act. It reminds this Court that although the Act is broad, it is not boundless.

See Kiefer, 920 S.W.2d at 279 . We agree that common law breach-of-contract and negligence

claims are not preempted by the statute, but Boon has not brought such a claim.

"A claim for a breach of contract requires proof that (1) a binding contract existed;

(2) defendants breached the contract; and (3) plaintiffs suffered damages caused by the defendants'

alleged breach." East Tex. Med. Cancer Inst. v. Anderson , 991 S.W.2d 55, 62 (Tex. App--Tyler

1998, pet. denied); Ryan v. Superior Oil Co. , 813 S.W.2d 594, 596 (Tex. App.--Houston [14th

Dist.] 1991, writ denied).

It is undisputed that in each instance of an economy-class ticket purchase by Boon

a binding contract, a contract of carriage, was created between Boon and the airline. Each

contract included the authorization of a surcharge if the ticket was changed. Boon does not look

to enforce the contract as written but instead seeks to modify the terms of the contract itself by

relying on state law. This Court "is confined, in breach of contract actions, to the parties'

bargain, with no enlargement or enhancement based on state law or policies external to the

agreement." Wolens , 513 U.S. at 223 . If we were to adjudicate Boon's claim, we would be

applying state policy and law to determine the propriety of the reissue fee. Such application of

state law is preempted by the Act. See id. at 222 . Boon's assertion of its claim as one of breach

of contract is an attempt to avoid the preemption clause and defeat the Act's intent. Boon does

not seek the benefit of its bargain, which calls for a reissue fee, but rather seeks to invalidate its

bargain by having this Court declare that the reissue fee is a penalty clause. The Act prevents us

from doing so. To the extent that Boon complains that its claims are not preempted by the Act,

its first issue is overruled. (9)

Genuine Issue of Material Fact

Boon's first issue also asserts that by providing uncontroverted expert testimony

demonstrating that reissue fees bear no relation to ticket prices and that all states outlaw penalty

clauses, Boon has raised genuine issues of material fact. To support its claim, Boon relies on the

affidavits of David O. Stamey, a former vice-president of Continental Airlines, and Joseph M.

Perillo, a law professor.

As a general rule, summary judgment is improper where an expert's uncontroverted

testimony supports the nonmoving party's case. See Anderson v. Snider , 808 S.W.2d 54, 55

(Tex. 1991). Although both Stamey's and Perillo's affidavits are uncontroverted, they do not

support Boon's proposition that its claim escapes preemption. "[C]ourts are charged with

interpreting deregulation statutes to determine whether Congress intended to preempt whatever

state action is offensive to the plaintiff in a given case." Foley , 950 S.W.2d at 786 (citing New

York Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co. , 514 U.S. 645, 653-54

(1995); Morales , 504 U.S. at 383 ). We therefore determine the existence of federal preemption

as a matter of law. See id. at 784.

Stamey's affidavit states that the reissue fee is unrelated to airline ticket prices since

it does not fluctuate or change according to the ticket price. In other words, the reissue fee is

constant and has no relation to the actual price of the ticket. Boon argues therefore it should be

able to bring its claim. However, even if the reissue fee remains constant, it has the effect of

raising the price of the ticket. Boon's claim relates to that price, i.e. , the Airlines' charges for

an economy-class ticket. Although that price changed when Boon changed its travel itinerary,

Boon's claim remains related to price. See Wolens, 513 U.S. at 226 (finding that plaintiff's claim

involving frequent-filer miles relates to airline's charges in form of mileage credits for free tickets

and upgrades).

Perillo's affidavit states that all jurisdictions in the United States hold that penalty

clauses are illegal and void. As such, if the reissue fee were deemed a penalty, it would be illegal

in any of the states. Boon argues therefore that adjudication of its claim would not involve any

application of state law or policy. Although the states may be uniform in their penalty-clause

jurisprudence, it does not follow that Boon's claims can be adjudicated without applying state law

or policy to the Airlines' economy-class ticket prices.

We overrule the remainder of Boon's first issue.

Discovery

By its third issue, Boon contends that the district court committed error when he

declined "repeated" requests for pretrial discovery. Boon argues that the discovery was needed

to determine whether the "defendant's fare forfeitures and reissue penalties 'relate to' their prices,

routes or services." Specifically, Boon requested information on the development,

implementation, and calculation of the reissue fees; the actual costs of the itinerary changes for

which the reissue fees were assessed; and the total revenue generated from these fees.

The record reflects that the district court quashed one motion for oral deposition.

We review the trial court's actions allowing or denying discovery for an abuse of discretion. See

TransAmerican Natural Gas Corp. v. Powell , 811 S.W.2d 913, 917 (Tex. 1991). A trial court

abuses its discretion when it acts in an unreasonable and arbitrary manner, or without reference

to guiding rules or principles. See Downer v. Aquamarine Operators, Inc. , 701 S.W.2d 238, 241-42 (Tex. 1985). This Court may not reverse for abuse of discretion merely because we disagree

with the decision of the trial court. See Downer , 701 S.W.2d at 242 .

Here, the district court did not improperly deny Boon's request for discovery. The

information Boon sought would not have precluded summary judgment. As such, the denial of

the discovery request by the district court in no way prevented Boon from obtaining evidence that

would have allowed it to defeat summary judgment. The district court did not abuse his

discretion, and therefore, we overrule Boon's third issue.

CONCLUSION

Having overruled all of Boon's issues, we affirm the district court's judgment.

Lee Yeakel, Justice

Before Justices B. A. Smith, Yeakel and Patterson

Affirmed

Filed: March 30, 2000

Publish

1. See Tex. R. Civ. P. 42.

2. Congress enacted the Act in 1978. See Airline Deregulation Act of 1978, Pub. L. No. 95-504, 92 Stat. 1705 (1978). The Act contained a preemption clause that read in relevant part:

"[N]o State . . . shall enact or enforce any law, rule, regulation, standard or other provision

having the force and effect of law relating to rates, routes, or services of any air carrier . . . ."

Pub. L. No. 95-504, § 4 (a), 92 Stat. 1705 , 1707-08 (1978) (codified at 49 U.S.C. App. §

1305(a)(1)) (amended and recodified 1994). Congress recodified and revised many transportation

laws, including the Act, in 1994 and revised the preemption clause to read: "[A] State . . . may

not enforce a law, regulation, or other provision having the force and effect of law related to a

price, route or service of an air carrier . . . ." Act of July 5, 1994, Pub. L. No. 103-272, § 1 (a),

108 Stat. 745 , 1143 (1994) (codified at 49 U.S.C.A. § 41713 (b)(1) (West Supp. 1999)). Congress

intended no substantive change by its 1994 revisions. See id. at 745 .

3. As described in Boon's pleadings to the district court, "Economy-class tickets are subject

to travel restrictions which customarily require: a) tickets to be purchased a specified number of

days prior to departure; b) travel be completed by a specified deadline; c) minimum and maximum

stay requirements; and, d) seat and flight limitations."

4. See supra note 2. We cite the current code here for convenience.

5. Specifically, the Court referred to similar "related to" language in the preemption clause

of the Employee Retirement Income Security Act of 1974 (ERISA). See Morales v. Trans World

Airlines, Inc. , 504 U.S. 374, 383 (1992). Boon argues that since the "relates to" language of

ERISA has been more narrowly construed in recent opinions, see California Div. of Labor

Standards Enforcement v. Dillingham Constr., N.A. , 519 U.S. 316, 323 (1997); Hinterlong v. S.P

Baldwin , 720 N.E.2d 315, 320 (Ill. App. Ct. 1999), the Act language should likewise be more

narrowly interpreted. We will adhere to the Supreme Court's discussion of the Act's preemption

clause and will not extrapolate the later ERISA cases into speculation that the Supreme Court's

holdings in Morales and Wolens would be different today.

6. New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co. , 514

U.S. 645, 655 (1995).

7. In City Public Service Board we contrasted the Act's broad preemption with the relatively

limited preemption of the Texas Public Utility Regulatory Act. See City Public Serv. Bd. v.

Public Util. Comm'n , 9 S.W.3d 868, 876-77 (Tex. App.--Austin 2000, pet. filed).

8. Other state courts have found similar claims also preempted by the Act. See Leonard v.

Northwest Airlines, Inc. , 605 N.W.2d 425, 431-32 (Minn. Ct. App. 2000); Blackner v.

Continental Airlines, Inc. , 709 A.2d. 258, 260 (N.J. Super. Ct. App. Div. 1998), cert. denied ,

525 U.S. 1142 (1999).

9. Boon contends that if this Court finds that the Act preempts its claim, then it will have no

forum in which to seek relief. However, the Department of Transportation retains the authority

to investigate unfair and deceptive practices and unfair methods of competition by airlines. See

American Airlines, Inc. v. Wolens, 513 U.S. 219 , 227 n.4 (1995).

may not reverse for abuse of discretion merely because we disag