Petition for Writ of Certiorari — American Airlines, Inc. v. Wolens

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Supreme Court, U.S.

FILED

OS1I2S6FeB 81994

No. 93-

ee EE

IN THE

Supreme Court of the United States

OCTOBER TERM, 1993

AMERICAN AIRLINES, INC.,

Petitioner,

Vv.

MYRON WOLENS, ALBERT J. GALE, R. CRAIG ZAFIS,

BRET MAXWELL, ROBERT NELSON and P. S. TUCKER,

Respondents.

Petition for a Writ of Certiorari to the

Supreme Court of Illinois

PETITION FOR WRIT OF CERTIORARI

BRUCE J. ENNIS, JR.*

JEROLD S. SOLOVY

MARGUERITE M. TOMPKINS

DONALD B. VERRILLI, JR.

JENNER & BLOCK

601 Thirteenth Street, N.W.

Washington, D.C. 20005

(202) 639-6000

* Counsel of Record

WILSON - Eres PRINTING Co.. INC. - 789-0096 - WASHINGTON, D.C. 20001

QUESTIONS PRESENTED

1. Does the express preemption clause of the Airline

Deregulation Act of 1978, 49 U.S.C. App. § 1305, pre-

empt only those state law claims that relate to “essential”

airline operations?

2. Does the scope of preemption under Section 1305

depend on the form of relief requested?

(i)

RULE 29.1 STATEMENT

Petitioner is wholly owned by AMR Corp., a Delaware

corporation, and owns 49% of DFW Terminal Corp., a

Texas corporation.

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED 0000000... i

I ii

TABLE OF AUTHORITIES 000.0000. -----c-ccsccocsssssseee v

EE 1

Ne etnies 2

CONSTITUTIONAL AND STATUTORY PROVI-

EEE EE 2

STATEMENT OF THE CASE ...................000000000..... wie 2

EE 3

B. The Proceedings Below .......... sdetibhsdematatnniapietsenesesnay: 4

C. The Illinois Supreme Court’s Initial Decision . 6

D. This Court’s Prior Decision a, wars 7

E. The Illinois Supreme Court’s Decision on

ES i cai, 8

REASONS FOR GRANTING THE PETITION |... 11

I. THE ILLINOIS SUPREME COURT DISRE-

GARDED MORALES v. TRANS WORLD AIR-

LINES, INC. ON A MATTER OF CRITICAL

IMPORTANCE TO THE AIRLINE INDUS-

EEE a ae 12

Il. THE DECISION OF THE ILLINOIS SU-

PREME COURT CONFLICTS WITH DECI-

SIONS OF FEDERAL COURTS OF APPEALS,

INCLUDING THE SEVENTH CIRCUIT ........ 18

A. Scope of “relating to rates, routes, or serv-

LE SEE SI 20

CC 24

(iii)

iv v

TABLE OF CONTENTS—Continued TABLE.OF AUTHORITIES

CASES P

III. THE ILLINOIS SUPREME COURT’S RULING nl , ' oy

—— _Divancunt FEDERAL AND — e Raybestos-Manhatton, Inc., 451 U.S. 504 -

QUENT FLYER faptnaain aaaieeeeee Andereon ». US Air, ine, S18 F249 (D.C. Cir.

MENT OF TRANSPORTATIONS ne Baskin v. United Airlines, Ine, No. 98-1214 (Ap-

PRETATION OF SECTI pe rt of Illinois) —........--....----.-.--------0-0e0---- 11

SECTION 1906... 2 Cannava v. U.S. Air, Inc., 1993 U.S. Dist. LEXIS

EE a 29 16726 (D. Mass. Jan. 7, 1998) .......................... 19

anes ee ee Cipollone v. Liggett Group, Inc., 112 S. Ct. 2608

(1608). ........... PEST SSCL ae 15, 24

Continental Airlines, Inc. v. American Airlines,

Inc., 824 F. Supp. 689 (S.D. Tex. 1993) .............. 19

District of Columbia v. Greater Washington Board

of Trade, 113 S. Ct. 580 (1992) ............................ 20 |

FMC Corp. v. Holliday, 498_U.S. 52 (1990) _......... 20

Federal Express Corp. v. California Public Utilities

Comm’n, 936 F.2d 1075 (9th Cir. 1991), cert.

denied, 112 S. Ct. 2956 (1992) .............-..-.-.----.-- 22, 23

Fort Halifax Packing Co. v. Coyne, 482 U.S. 1

(RENT ree ee ew vaupaidoee 20

Healy v. Beer Institute, Inc., 491 US. 324

a ee le ee a a ee 17

Hodges v. Delta Airlines, Inc., 4 F.3d 350 (5th Cir.

os —— + e

Huron Portland Cement Co. v. City of Detroit, :

Michigan, 362 U.S. 440 (1960) 0. 17

Illinois Corporate Travel, Inc. v. American Air-

lines, Inc., 889 F.2d 751 (7th Cir. 1989), cert.

denied, 495 U.S. 919 (1990) _.....-.-2--eeeennne ene 21

Ingersoll-Rand Co. v. McClendon, 498 U.S. 133

Ee On oy ne 20

International Paper Co. v. Ouellette, 479 U.S. 481

SES ER oe ee ee NTE 15, 24

Johnson v. American Airlines, Inc., No. 93-1156

(Appellate Court of Illinois) —................ 11

Lawal v. British Airways, PLC, 812 F. Supp. 713

\ fl ee rere 19

Mackay v. Lanier Collection Agency & Service,

fb 6 fl eae 20

TABLE OF AUTHORITIES—Continued

Page

Massachusetts v. Morash, 490 U.S. 107 -(

’ ; 8. 1989) 21,29

Metropolitan Life Ins. Co. v. Massachusetts, 471

U.S. 724 (1985) PS - 21

Metropolitan Life Ins. Co. v. Taylor, 481 US. 58

ie = tes

Morales v. Trans World Airlines fue 12 | ~

. » 112 8. Ct.

2031 (1992) . —— sedation passim

Northwest Airlines, Inc. v. County of Kent in

S. Ct, (No. 92-97, January 24,1994) __ 27

oo Airlines, Ine. v. West, 112 8. Ct. 2982

O’Carroll v. American Airlines, Inc R63

(5th Cir.1989) - serch hen 2h

tir ' S. 41 (1987

Ryan v. Delta Airlines, Inc. No. 88 CH aoe 15,19

Mh ae Court of Cook County) ae 11

San Diego Building Trades Council v. G rmon |

: “ig Ay acre satan ead rapealaaas 24

haefer v. Delta Air Lines. Inc No 92 :

. vee e -1176- 4

(LSP) (S.D. Cal. 1992) “0 19

Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983) 20

Silver v. United Airlines, Inc., No. 98 CH-11098

(Circuit Court of Cook County) «5s | 11

Southern Pac. Co. v. State of Arizona, 325 U.S. 761

(1945) MORIN wr Sante 17

certiorari pending (Nos. 93-803 93-901) 23

West v. Northwest Airlines, Inc, 98 Pah ea

(8th Cir. 1989) <.. = 6 6

STATUTES

ee ee 2

ORT A aR a 18,15

49U.S.C.App.§1305 passion

Ill. Rev. Stat. ch, 121, sec. 261 et seq... pasgim

In THE

Supreme Court of the Anited States

OcTOBER TERM, 1993

No. 93-

AMERICAN AIRLINES, INC.,

Petitioner,

Vv.

Myron Worens, Acspert J. Gace, R. CraiG ZAPis,

Bret MAXWELL, RoBert NELSON and P. S. TUCKER,

Respondents.

Petition for a Writ of Certiorari to the

Supreme Court of Illinois

PETITION FOR WRIT OF CERTIORARI

Petitioner American Airlines, Inc. (“American”) re-

spectfully prays that a writ of certiorari issue to review

the judgment of the Illinois Supreme Court in this case

entered December 16, 1993."

OPINION BELOW

A prior opinion of the Illinois Supreme Court in this

case is reported at 589 N.E.2d 533, and is reproduced in

the Appendix to this Petition (App.) at 20a. That opin-

ion was vacated by this Court in American Airlines v.

Wolens, 113 S. Ct. 32 (1992), reproduced at App. 19a.

The opinion and judgment of the Illinois Supreme Court

on remand is presently unreported (1993 WL 518593

(Ill.) ) and is reproduced at App. ia.

1 American is an interstate and international air carrier incor-

porated in Delaware with its principal place of business in Fort

Worth, Texas. All parties to the proceeding before the Illinois

Supreme Court are listed in the caption.

JURISDICTION

This petition has been filed within 90 days following

entry of the judgment of the Illinois Supreme Court.

The jurisdiction of this Court is invoked under 28 U.S.C.

§ 1257(a).

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

This case involves the express preemption clause of

the Airline Deregulation Act of 1978, 49 U.S.C. App.

§ 1305(a)(1), which provides in relevant part as follows:

Except as provided in paragraph (2) of this sub-

section, no State or political subdivision thereof and

no interstate agency or other political agency of two

or more States 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 having authority under

subchapter IV of this chapter to provide air trans-

portation.

STATEMENT OF THE CASE

On remand from this Court after Morales v. Trans

World Airlines, Inc., 112 §. Ct. 2031 (1992), the II-

linois Supreme Court held that Section 1305 of the Air-

line Deregulation Act does not preempt state law chal-

lenges to the terms and conditions of airline frequent flyer

programs because such programs.are not “essential ele-

ments” of airline operations, and because the relief re-

, quested, compensatory and punitive damages, would not

directly “establish” the rates, “determine” the routes, or

“dictate” the services offered through those programs.

Review of this decision is urgently needed. In direct

conflict with Morales and with several federal courts

of appeals, the Illinois Supreme Court has approved na-

tionwide class actions raising state law challenges to air-

line rates and services that Congress plainly intended

to preempt under Section 1305, and has thereby jeop-

ardized the objectives of the Airline Deregulation Act.

A. Background. .

Congress passed the Airline Deregulation Act in 1978.

As this Court recognized in Morales, the Act places

“maximum reliance on competitive market forces” to

further “efficiency, viper ay and ¥ Prices” ee a

“variety [and] quality . . . of air trans

me “iI ys 2 2034. To “ensure that the States

would not undo federal deregulation” by imposing burden-

some and potentially conflicting state requirements, id.,

the Act expressly preempts all state laws “relating to

[the] rates, routes, or services” airlines offer. 49 U.S.C.

App. § 1305.

Frequent flyer programs were an important product

of pee hm tn 1981 American introduced the first

such program, the “AAdvantage” program, as a service

for American’s customers and an innovative way of com-

peting with other airlines. American’s competitors quickly

followed suit, and today every major airline has its own

frequent flyer program.

AAdvantage members accrue mileage credits when

they fly on American. They can then use their mileage,

subject to the terms and conditions of the program, to

buy tickets to fly on domestic or international routes,

or to upgrade to a higher level of service.” AAdvantage

members thus purchase airline services by redeeming ac-

crued mileage at rates set by American for such services.

Whether tickets are purchased with cash or with AAd-

vantage awards, the essence of the transaction is that

American is setting the rates for the primary service it

offers—air travel.

2 Mileage credits can be earned in a variety of other ways and

can also be exchanged for services that do not involve air travel.

Those non-flight services were not challenged in this litigation.

AAdvantage program membership has dramatically ex-

panded since 1981 and now includes millions of partici-

pants from al! 50 States and many foreign countries.

As the United States Department of Transportation has

found, air “carriers use their [frequent flyer] programs as

a means of competing for passengers. Since the programs

began, each carrier has greatly expanded the kinds of

awards that members can obtain and the ways in which

members can accumulate award miles in order to make

its program more attractive.” * Over the years, American

has expanded its route system to serve popular but pre-

viously unavailable destinations such as the Caribbean,

Europe and the Far East. AAvantage members can use

mileage credits accumulated before American’s routes were

expanded to purchase flights to those new destinations.*

Like all other airlines, American from time to time

must modify the balance of benefits and restrictions in

its AAdvantage program. The Department of Transpor-

tation has concluded that such changes are “legitimate

methods for controlling the cost of frequent flyer plans.”

Indeed, as DOT has observed, without such cost controls

frequent flyer programs would be too expensive for the

airlines to maintain. See DOT Order, App. 100a.

B. The Proceedings Below.

Respondents are residents of Illinois, California and

“Connecticut. They filed parallel suits, later consolidated,

8 Dep’t of Transportation Order No. 92-5-60 (May 29, 1992)

(“DOT Order’), App. 99a.

4 Frequent flyer programs also directly involve foreign commerce

because American and other airlines now allow mileage to be re-

deemed for flights to foreign destinations, and because partnerships

with airlines of different countries have been negotiated to permit

redemption of mileage for travel on those foreign airlines. Many

foreign governments claim the right to regulate such programs for

the protection of their own national airlines. Accordingly, the

Department of State, in its conduct of bilateral aviation negotia-

tions with other countries, has had to defend the ability of U.S.

airlines to use frequent flyer programs as a marketing tool.

;

in Illinois state court, purporting to represent a nation-

wide class “consisting of approximately four million”

AAdvantage members.° Respondents challenged Ameri-

can’s May 1988 modifications to the AAdvantage pro-

gram." In particular, respondents challenged American's

policies regarding the number of seats on particular flights

set aside for AAdvantage members (capacity controls)

and American’s alleged restrictions on the dates certain

kinds of AAdvantage awards could be used (blackout

dates ).”

i Respondents conceded that American had explicitly

reserved the right to restrict, suspend, or otherwise alter

aspects of the Program,” * but alleged that this express

reservation did not provide adequate notice that Ameri-

can retained the right to alter program terms for pre-

viously accumulated mileage.® Respondents thus directly

challenged American’s right to determine the number of

AAdvantage seats ayailable on any given flight. They

claimed an Illinois state law right to use their AAdvantage

rege eee available seat” on “any avail-

able date” (i.e., airline “services” i -

vantage fares (i.e., “rates”).°~ eid eters ahve:

Respondents alleged that American’s conduct violated

both the Illinois Consumer Fraud and Deceptive Business

Practices Act (“the Consumer Fraud Act”), Ill: Rev.

Stat. ch. 121%, sec. 261 ef seg., and Illinois contract

law. They sought two forms of relief: (i) compensatory

° Tucker Complaint, Count I, 7 5; App. 68a.

* Wolens Complaint, Count I, { 14; App. 52a.

7 Respondents did not complain of the man

y additions to the

AAdvantage program that increased the “value”

cnainenediine ue” of their previously

* Tucker Complaint, Count I, 12; App. 64a.

® Seé Wolens Complaint, Count III, 7 15; App. 56a.

1© See Wolens Complaint, Count I, { 13; App. 52a.

and punitive damages; and (ii) an injunction requiring

American to redeem mileage credits accumulated before

May 1988 for the same fares and unrestricted seating

respondents claim they could have obtained before that

date, and preventing “retroactive application” of any fu-

ture changes in the program.’* The damages and injunc-

tive claims were premised on identical facts and causes

of action.

American moved to dismiss these claims under Section

1305 of the Airline Deregulation Act, on the ground that

the claims related to American’s “rates, routes, or serv-

ices,” and were therefore preempted. The trial court de-

nied American’s motion but certified that ruling for in-

terlocutory appeal. App. 41a.

C. The Illinois Supreme Court’s Initial Decision.

After an intervening appellate court decision (App.

31a), the Illinois Supreme Court held that Section 1305

preempted respondents’ claims for injunctive relief. The

court reasoned that “injunctive relief would involve the

regulation of defendant's services and therefore violate

section 1305.” App. 23a. The court then ruled that

Section 1305 did not preempt respondents’ identi-

cal “claims for damages for breach of contract and

violation of the Consumer Fraud Act.” App. 23a. The

court relied on what it incorrectly characterized as “the

prevailing view, set forth in West v. Northwest Airlines,

Inc., (9th Cir. 1990), 923 F.2d 657, that ‘section

1305(a)(1) pre-empts claims only when the underlying

statute or regulation itself relates to airline services, re-

gardless of whether the claim arises from a factual setting

involving airline services.’” App. 23a. The court frankly

stated that it had “narrowly construed” Section 1305 “to

preempt only those State laws and regulations that spe-

11 Wolens Complaint, Counts I-IV, { B, App. 53a, 55a, 58a, 59a;

Tucker Complaint, Counts I-IV, { B, App. 67a, 68a, 71a, 72a.

12 Tucker Complaint, App. 67a.

Ce ae

cifically relate to . . . an airline’s rates, routes, or ser-

vices.” App. 24a (emphasis added).

_ Chief Justice Miller concurred in the judgment. He

disagreed with the majority's view that preemption de-

pends on “whether the State law at issue is general or

specific.” App. 25a. He contended that Section 1305

did not apply for a different reason: respondents’ dam-

ages Claims were “not regulatory in force or effect” be-

cause they “do not establish the rates airlines must

charge, or determine the routes airlines must fly, or dic-

tate the services airlines must provide.” App. 28a.

D. This Court’s Prior Decision.

After the Illinois Supreme Court's initial judgment, this

Court decided Morales v. Trans World Airlines, Inc.,

112 S. Ct. 2031 (1992). Morales held that state law

“relates to” airline “rates, routes, or services,” and is

therefore preempted by Section 1305, if -it has a “con-

nection with or reference to” rates, routes, or services—

“even if the law is not specifically designed” to regulate

airlines. 112 S. Ct. at 2033, 2038. Morales found it

“utterly irrational” that “state impairment of the federal

scheme ‘should be deemed acceptable so long as it is

effected by the particularized application of a general”

law. Id. at 2035. Applying this sweeping interpretation

of Section 1305, the Court held that deceptive advertis-

ing claims against airlines (based on guidelines promul-

gated by the National Association of Attorneys General

(“NAAG”)) were preempted.

American petitioned for certiorari, arguing that the

Illinois Supreme Court’s decision relied on precisely the

distinction Morales rejected—between general laws and

laws that “specifically” relate to airline rates, routes, or

services.”

18 Shortly after issuing its ruling in Morales, this Court vacated

the Ninth Circuit’s ruling in West v. Northwest Airlines (the

Respondents did not cross-petition for review of the

Illinois Supreme Court’s decision to preempt their injunc-

tive claims. To the contrary, they conceded that this

aspect of the decision was “carefully reasoned” and “fully

consistent” with Morales because injunctive relief “would

require the court to regulate the manner in which Ameri-

can provided its passengers transportation services.” ™

Respondents nonetheless argued that Morales did not re-

quire reconsideration of the Illinois Supreme Court’s

refusal to preempt their damages claims because damages,

unlike an injunction, would not have a direct regulatory

effect on American’s conduct.”*

This Court granted American’s’ petition for certiorari,

vacated the Illinois Supreme Court’s judgment, and re-

manded for reconsideration in light of Morales. Ameri-

can Airlines, Inc. v. Wolens, 113 S. Ct. 32 (1992);

App. 19a.

E. The Illinois Supreme Court’s Decision on Remand.

‘On December 16, 1993, the Illinois Supreme Court

reaffirmed its prior holding in all respects. Writing for

the majority, Justice Bilandic expressly reaffirmed the

court’s prior ruling preempting respondents’ injunctive

claims. App. 2a. The court then held that its “previous

holding that plaintiffs’ claim for money damages was not

preempted because it bears only a tangential relation to

airline rates, routes, and services, comports with the

Morales decision.” App. 6a.

The court gave two new reasons for reaffirming its re-

fusal to preempt respondents’ damage claims. First, the

court concluded that “[a] frequent flyer program is not

ruling on which the Illinois Supreme Court’s initial opinion was

based), and remanded for reconsideration in light of Morales. See

Northwest Airlines, Inc. v. West, 112 S. Ct. 2982 (1992).

14 Brief in Opposition in No. 92-249, at 9.

15 Td. at 9-11.

Ai eet a Ne eS ee 0B a Se

an essential element to the operation of an airline” be-

cause “the airline industry functioned successfully for

decades” without frequent flyer programs. App. 6a.

Therefore, in the court’s view, state law suits challenging

a frequent flyer program would have only a “peripheral”

or “tangential” effect on airline operations. App. 6a.

Second, expressly adopting the test for preemption urged

in Chief Justice Miller’s prior concurrence, the court

concluded that because respondents were seeking “only

money damages,” App. 6a (emphasis added), their claims

did not “ ‘seek to establish the rates airlines must charge,

or determine the routes airlines must fly, or dictate the

services airlines must provide.” App. 6a (quoting prior

opinion ).”*

Justice McMorrow dissented. She noted that “reduced

to their simplest terms, plaintiffs’ claims . . . are based

upon allegations of American’s deceptive advertising,

promotions, and inducements relating to airline fares

(i.e., payment of travel fares with mileage credits and

upgrades in seating classes) and services (i.e., the quan-

tity of seats and flights and the dates of travel to various

destinations).” App. 12a. She also noted that “[p]lain-

tiffs’ allegations virtually mirror the restrictions . . . in the

NAAG Guidelines on frequent flyer programs.” App.

12a. Justice McMorrow stressed that Morales “rejected

a contention essentially the same as that made by Justice

Miller in his special concurrence to this court’s previous

opinion and now adopted by the majority, that plaintiffs’

claims are not preempted because they do not seek to

‘establish the rates airlines must charge, or determine the

routes airlines must fly, or dictate the services airlines

16 Although the Illinois Supreme Court did not explain the rela-

tion between these two grounds of decision, both were necessary

to its result. If the court’s application of Section 1305 depended

entirely on whether the airline conduct at issue was “essential,” the

court would necessarily have declined to preempt the injunctive

claim.

must provide.’” App. 9a (quoting majority opinion; em-

phasis added). In Justice McMorrow’s view, Section

1305 applied equally “whether plaintiffs seek [an in-

junction] to enforce the terms and conditions of the pro-

gram or an award of money damages for American’s

alleged breach of those contractual obligations.” App.

13a.

Unlike the majority, Justice McMorrow recognized

that Morales gave an “expansive and sweeping interpre-

tation of the phrase ‘relating to’” in Section 1305. Jus-

tice McMorrow recognized that the claims at issue in

this case directly paralleled those at issue in Morales. As in

Morales, respondents here invoked state law to create bind-

ing obligations and enforceable duties based on allegedly

insufficient notice, and sought to require American to

“continue to redeem mileage credits earned prior to May

1988 for the same free fares and unrestricted seating and

flight services which the AAdvantage program provided

up until that time,” or pay “money damages for. . .

breach of those contractual obligations.” App. 13a.

Contrasting the majority’s interpretation of Section 1305

with the Seventh Circuit’s interpretation in Statland v.

American Airlines, Inc., 998 F.2d 539 (7th Cir.), cert.

denied, 114 S. Ct. 603 (1993), Justice McMorrow con-

cluded that “under the rationale of Morales and its prog-

eny, plaintiffs’ [compensatory and punitive damages]

claims have a connection with and relation to American’s

rates and services, and are preempted by section 1305

(a)(1) of the Deregulation Act.” App. 14a, 16a.”

17 The Illinois Supreme Court stayed its mandate pending dis-

position of the instant petition for certiorari. App. 17a.

REASONS FOR GRANTING THE PETITION

The Illinois Supreme Court's decision on remand from

this Court conflicts directly with Morales v. Trans World

Airlines, Inc., 112 §S. Ct. 2031 (1992). The: decision

threatens the economic stability of the airline industry

and -undermines the core federal policies of the Airline

Deregulation Act.

Despite Morales’ clear directive that Section 1305

should be given an “expansive sweep,” id. at 2037, the

Illinois Supreme Court has continued to apply Section

1305 extremely narrowly. As a result, Illinois state

courts are the forum of choice for nationwide class ac-

tions challenging frequent flyer programs and a host of

other airline practices that Congress plainly intended to

exempt from regulation by the fifty States. In addition to

the present case, a nationwide class action suit challeng-

ing United Airlines’ frequent flyer program was filed in

Illinois state court in December 1993." A similar action

challenging Delta Airlines’ frequent flyer program, previ-

ously dismissed without prejudice pending the Illinois

Supreme Court’s ruling in this case, will certainly be rein-

stated.” Three additional class actions challenging other

aspects of airline rates and services are also pending in

Illinois state court.” These class actions collectively

18 Silver v. United Airlines, Inc., No. 938 CH-11098 (Circuit Court

of Cook County) (filed December 10, 1993) (Copies of the complaint

have been lodged with the Clerk of this Court). Like the complaint

in this case, Sileer invokes the Illinois Consumer Frauc Act and

Illinois common ‘»w of contract to assert claims on behalf of mil-

lions of members of United’s Mileage Plus program.

1% Ryan v. Delta Airlines, Inc.. No. 88 CH-4846 (Circuit Court

of Cook County). In an order dated October 21, 1992, the court

dismissed the case without prejudice, “pending the decision of the

Illinois Supreme Court in Wolens v. American Airlines,” and

granted plaintiffs the “right to reinstate without costs after said

ruling.”

2° See Johnson v. American Airlines, Inc., No, 93-1156 (Appellaate

Court of Illinois) (cancellation pelicies) ; Baskin v. United Airlines,

threaten the nation’s major airlines with massive liabili-

ties, and will force all national airlines to conform their

nationwide practices to the particular strictures of Illinois

law—a result antithetical to the central objective of the

Airline Deregulation Act. This prospect justifies imme-

diate review whether or not other courts would adopt the

interpretation of Section 1305 that now prevails in

Illinois.

Review is all the more necessary because the Illinois

Supreme Court's decision is illustrative of widespread

conflict and confusion in the lower courts. In particular,

the Illinois Supreme Court's decision conflicts with the

decisions of federal courts of appeals, including the

Seventh Circuit, on two important and recurring questions

that have divided the lower courts even after Morales:

(1) whether a state claim that “relates to rates, routes,

or services” within the meaning of Section 1305 is pre-

empted only if the conduct at issue meets the additional

requirement of being “essential” to an airline’s opera-

tion; and (2) whether preemption under Section 1305

depends on the form of relief requested.

I. THE ILLINOIS SUPREME COURT DISREGARDED

MORALES v. TRANS WORLD AIRLINES, INC. ON

A MATTER OF CRITICAL IMPORTANCE TO THE

AIRLINE INDUSTRY.

The decision of the Illinois Supreme Court conflicts

directly with Morales, which broadly established that

Section 1305 preempts all state claims “having a con-

nection with or reference to airline ‘rates, routes, or

services.” 112 §. Ct. at 2037 (emphasis added ).”

Inc., No. 93-1214 (Appellate Court of Illinois) (cancellation poli-

cies); Quality G&B of Illinois v. Airborne Freight Corp., No. 93-

3895 (Appellate Court of Illinois) (air freight services).

22 As the Court held, Section 1305, like the similarly-worded

ERISA preemption provision, has “an expansive sweep” and is

“conspicuous for its breadth.” 112 S. Ct. at 2037 (quotations

The Illinois Supreme Court acknowledged that respond-

ents’ claims have a connection with American’s rates,

routes, or services, and so held when it preempted their

injunctive claims. App. 2a. The court nevertheless re-

fused to preempt respondents’ compensatory and punitive

damages claims, even though those claims were based on

the same facts and causes of action. Seeking to justify

these contradictory dispositions, the Illinois Supreme

Court seized on Morales’ dictum that some state laws

(like gambling and prostitution laws) may “affect” rates,

routes, or services “in too tenuous, remote or peripheral

a manner” to warrant preemption. App. 6a-7a (quoting

Morales, 112 S. Ct. at 2040). According to the Ilinois

Supreme Court, respondents’ damages claims were “tenu-

ous, remote or peripheral” within the meaning of Morales

because frequent flyer programs—though related to air-

line rates and services—are not “essential” to airline opera-

tions, and because a damages remedy would not “estab-

lish” the rates, “determine” the routes, or “dictate” the

services airlines offer.

That ruling flies in the face of Morales. The Morales

test preempts respondents’ damages claims because those

claims bear an obvious “connection with or reference to”

airline rates and services. Respondents directly seck a

judicial determination that they have a right under Il-

linois state law to purchase the core “service” provided by

American—air travel—at particular AAdvantage “rates,”

and that they may recover compensatory and punitive

damages for an alleged violation of that “right.” The

connection with American's rates and services could

hardly be closer. As in Morales, respondents claim they

omitted). Thus, Section 1305 “ensure{s| that the States would not

undo federal deregulation” through the application of their own

potentially conflicting laws, and leaves protection of consumers

as the responsibility of the United States Department of Trans-

portation under uniform federal standards. /d. at 2034, 2040.

DOT's statutory authority is codified at 49 U.S.C. § 1381.

were injured by allegedly inadequate notice regarding

limits on the availability of rates and services, and seek

to transform that “fail[ure] to include the mandated ex-

planations and disclaimers” into an “enforceable right”

to particular services at particular rates. See Morales,

112 S. Ct. at 2039-40 (emphasis added).

Morales refutes the two reasons offered by the Illinois

Supreme Court for refusing to preempt respondents’ dam-

ages claims. First, the Illinois Supreme Court’s “essential

element” test is antithetical to the expansive “connection

with or reference to” test established in Morales. This

Court repeatedly emphasized that Section 1305 is “con-

spicuous for its breadth,” and must be given an “expansive

sweep.” 112 S. Ct. at 2037. Under the Illinois Supreme

Court's “essential element” test, airline practices postdating

deregulation—including not only frequent flyer programs

but also competitive innovations such as American’s

Ultimate Supersaver deep discount fares—are not “essen-

tial” and therefore can be regulated. Prior to deregulation,

however, the Civil Aeronautics Board strictly regulated

all aspects of airline competition, including the prices

airlines charged and the routes they served. Congress

chose deregulation in 1978 because it believed that vig-

orous competition would produce better results for con-

sumers. By using a historical test to determine what

airline operations are “essential,” the Illinois Supreme

Court has contravened congressional intent, and reversed

the benefits of deregulation, by permitting States to step

in and regulate the very innovations deregulation was in-

tended to encourage. Furthermore, the Illinois Supreme

Court’s test requires state courts to make technical, expert

judgments as to whether the conduct at issue concerns a

part of the airline’s business that is “essential” to its op-

erations. These are precisely the types of determinations

which the Airline Deregulation Act, and Section 1305 in

particular, were designed to preclude.

Second, Morales forecloses any distinction under Sec-

tion 1305 between claims seeking damages and claims

seeking injunctive relief. As Justice McMorrow stressed

in dissent below, Morales squarely rejected the contention

that Section 1305 “only preempts the States from actually

prescribing rates, routes or services,” and held that such

an interpretation “simply reads the words ‘relating to’ out

of the statute. Had the statute been designed to pre-empt

State law in such a limited fashion, it would have for-

bidden the States to ‘regulate rates, routes, and services.’ ”

App. 16a. (quoting Morales, 112 S. Ct. at 2037-38 (em-

phasis in original) ). Adopting the Court’s earlier ERISA

precedents, Morales followed Pilot Life, which “held that

a common-law tort and contract action seeking damages

. . » Was pre-empted by ERISA.” Morales, 112 S. Ct. at

2039 (emphasis added).” Thus, Morales clearly held

that Section 1305 preempts actions seeking damages even

if damages would not actually “establish” rates, “deter-

mine” routes or “dictate” services.”

22 The Court has consistently declined to distinguish between

damage awards and injunctive relief under the identically-worded

ERISA preemption provision. E.g. Pilot Life Ins. Co. v. Dedeauz,

481 U.S. 41 (1987); Ingersoll-Rand Co. v. McClendon, 498 US.

133, 138-39 (1990). In Morales the Court made clear those ERISA

precedents are fully applicable to Section 1305. 112 S. Ct. at 2039.

23 In this respect, the Illinois Supreme Court’s decision also con-

flicts with Cipollone v. Liggett Group, Inc., 112 S. Ct. 2608 (1992),

which confirmed that the form of relief is generally irrelevant to

preemption analysis. Justice Stevens’ opinion (for four Justices)

specifically refused to distinguish between damages and injunctive

claims, because “regulation can be as effectively exerted through an

award of damages as through some form of preventive relief.”

112 S. Ct. at 2620 (quotation omitted); accord id. at 2632, 2634

(Sealia and Thomas, JJ., concurring). See also San Diego Building

Trades Council v. Garmon, 359 U.S. 236, 246-47 (1959); Inter-

national Paper Co. v. Ouellette, 479 U.S. 481, 498 n.19 (1987)

(“We decline .. . to draw a line between the types of relief

sought. . . . [U]nless there is evidence that Congress meant to

‘split’ a particular remedy for pre-emption purposes, it is assumed

that the full cause of action under state law is . . . pre-empted.”).

The Illinois Supreme Court's ruling is such a clear de-

parture from Morales that summary reversal is appropri-

ate. If the decision is not summarily overturned, then

plenary review is urgently needed because of the decision’s

nationwide impact on the airline industry. Under the

Illinois Supreme Court’s decision, respondents can seek

compensatory and punitive damages against American on

behalf of millions of class members residing throughout

the country. In addition, because all airlines adjust their

operations—including frequent flyer programs—as com-

petitive conditions in the volatile airline industry change,

all national airlines now face a risk of similar suits in

Illinois challenging their frequent flyer programs, and

other aspects of their rates and services. Separate class

actions have been filed in Illinois state courts challenging

the frequent flyer programs of United Airlines and Delta

Airlines, as have three additional class actions challenging

other aspects of airline rates and services. See page 11

supra. The pace of such filings will surely quicken if

certiorari is denied in this case.

As a practical matter, the Illinois Supreme Court’s

decision requires all major airlines to conform their na-

tionwide conduct to Illinois’ restrictive standards, irre-

spective of the negative effect on competition and con-

sumer welfare. It is irrelevant that other courts might

interpret Section 1305 properly, and preempt damage

claims involving frequent flyer programs, because litigants

will simply bring their claims in Illinois state courts.”

The Illinois Supreme Court has thus established a de

facto national rule barring the application of Section 1305

to damage claims involving the rates, routes, or services

24 To the extent other States are emboldened to follow the erro-

neous path taken by Illinois and assert sovereignty over air e

frequent flyer programs or other aspects of airline operations, air-

lines will face the need to run their programs in compliance with

the “lowest common denominator” established by any of the 50

States—the very result Congress sought to prevent by enacting

Section 1305.

offered through frequent flyer programs, and has forced

airlines to tailor their frequent flyer programs to Illinois’

regulatory requirements.” Congress surely did not in-

tend this result.

Furthermore, review should be granted in this case

because it directly involves the 1987 NAAG Guidelines,

the advertising portions of which were held to be pre-

empted in Morales. As Justice McMorrow stressed in

dissent, respondents’ allegations “virtually mirror the re-

strictions regarding the advertising of frequent flyer bene-

fits and the institution of capacity controls and other

frequent flyer program modifications without advance

notice .. . in the NAAG Guidelines.” App. 12a. Thus,

the Illinois Supreme Court has effectively held that Sec-

tion 1305 does not preempt the frequent flyer provisions

of the Guidelines, even though Morales holds that Section

1305 does preempt the advertising provisions of those

same Guidelines. The Illinois Supreme Court’s ruling is

25 This aspect of the Illinois Supreme Court’s ruling also violates

the Commerce Clause, both because IIlinois is establishing a de facto

national standard, see Huron Portland Cement Co. v. Detroit, Mich-

igan, 362 U.S. 440, 444 (1960); Southern Pac. Co. v. State of

Arizona, 325 U.S. 761, 767 (1945), and because Illinois is pro-

jecting its “regulatory regime into the jurisdiction of another

state.” Healy v. Beer Institute, Inc., 491 U.S. 324, 387 (1989).

American raised these Commerce Clause arguments in the illinois

Supreme Court. The court never addressed those arguments as they

apply to respondents’ damage claims. The presence of these Com-

merce Clause issues is an additional reason for granting certiorari.

26 Illinois is a signatory to the Guidelines. The Illinois Consumer

Fraud Act will therefore be enforced with respect to frequent

flyer programs in accordance with those Guidelines. See Morales,

112 S. Ct. at 2041 (Appendix) (noting that the Illinois Attorney

General served on a NAAG task force to evaluate the effectiveness

of the Guidelines). Indeed, the Attorney General of Illinois was

a party to Morales. See Trans World Airlines, Inc. v. Mattox, 897

F.2d 773, 784 n.1 (5th Cir. 1989) (identifying Illinois as an

appellee).

a matter of national importance because 34 States are

signatories to the Guidelines. For this reason, the ques-

tion presented in this petition is at least as important as

the question presented in Morales.”

Il. THE DECISION OF THE ILLINOIS SUPREME

COURT CONFLICTS WITH DECISIONS OF FED-

ERAL COURTS OF APPEALS, INCLUDING THE

SEVENTH CIRCUIT.

Plenary review is also warranted because the Illinois

Supreme Court’s decision conflicts with decisions of fed-

eral courts of appeals, and reflects persistent and wide-

spread confusion over the scope of Section 1305 preemp-

tion, in two distinct ways. First, the Illinois Supreme

Court’s ruling that Section 1305 preempts only state laws

that affect “essential elements” of airline operations con-

flicts with other courts regarding what falls within the

definition of “relating to rates, routes, or services” in Sec-

tion 1305. Second, the Illinois Supreme Court's ruling

conflicts with other courts regarding whether Section

1305 preemption depends on the form of relief requested.

Unfortunately, as the present case starkly illustrates,

Morales has not put to rest the recurring disagreements

in the lower courts about the preemptive scope of Sec-

27 The striking similarities between the NAAG fare advertising

provisions held preempted in Morales and the NAAG frequent flyer

provisions at issue here demonstrate that this action “relates to”

airline rates and services. Both provisions prescribe the specific

disclosures airlines must make regarding any restrictions or reser-

vations that might apply. Just as the fare advertising provisions

require “clear and conspicuous” disclosure of restrictions such as

“limited time availability . . . day-of-week restrictions .. . [and]

limits on fare availability,” Morales, 112 S. Ct. at 2038-39, the fre-

quent flyer provisions require “clear and conspicuous” disclosure of

“any reservation of any right to make future changes in the pro-

gram award level,” Morales, 112 S. Ct. at 2039, including in particu-

lar any changes involving “blackout dates” or “capacity controls.”

Id. at 2049. This tawsuit is based on the claim that American’s

reservation of rights was not sufficiently “clear” under Illinois law.

tion 1305. Some courts have correctly followed Morales

and given Section 1305 the broad scope Congress in-

tended. E.g., Hodges v. Delta Airlines, Inc., 4 F.3d 350

(Sth Cir. 1993), petition for rehearing en banc granted,

1994 WL 6232 (Jan. 12, 1994); Statland v. American

Airlines, Inc., 998 F.2d 539 (7th Cir.), cert. denied, 114

S. Ct. 603 (1993); Vail vy. Pan Am Corp., 616 A.2d 523

(N.J. 1992). Indeed, at least one federal district court

in the Ninth Circuit has held that Section 1305 preempts

state consumer fraud and breach of contract claims seek-

ing damages for alleged failure to provide adequate no-

tice of changes in the terms of a frequent flyer program.

Shaefer v. Delta Air Lines, Inc., No. 92-1170-E (LSP)

(S.D. Cal. Sept. 18, 1992).% Other courts, including the

Illinois Supreme Court, have converted Morales’ sugges-

tion that some state laws (such as prostitution or gam-

bling laws) may affect rates, routes, or services in “too

tenuous, remote or peripheral a manner” into a loophole

allowing them to continue to construe Section 1305 nar-

rowly. E.¢. West v. Northwest Airlines, Inc., 995 F.2d

148 (9th Cir. 1993), petition and cross petition for cer-

tiorari pending (Nos. 93-803, 93-901).

As with the similarly worded ERISA preemption pro-

vision, Section 1305’s application to “a wide variety of

State statutory and decisional law” is generating a con-

tinuing need for guidance from this Court. See Pilot Life

Ins. Co. v. Dedeaux, 481 U.S. 41, 47 (1987). The pat-

*8 Justice McMorrow’s dissent noted the conflict between Shaefer

and the majority opinion. See App. 14a. The decision below also

conflicts with several other federal district court decisions involving

other airlines services. E.g., Continental Airlines, Inc. v. American

Airlines, Inc., 824 F. Supp. 689 (S.D. Tex. 1993) (Section 1305

preempts common law damage claims for tortious interference

and unfair competition based on airline prices); Lawal v. British

Airways, PLC, 812 F. Supp. 713 (S.D. Tex. 1992) (Section 1305

preempts damage claim for failure to honor discount ticket) ;

Cannava v. U.S. Air, 1993 U.S. Dist. LEXIS 16726 (D. Mass. Jan. 7,

' 1993) (Section 1305 preempts damage claim for mistreatment

during boarding).

tern of confused and conflicting decisions after Morales

replicates the pattern under ERISA.” Thus, as in the

ERISA context, “it is hardly surprising” that Morales did

not settle all questions regarding the application of Section

1305, and that additional guidance is needed from this

Court. See Pilot Life, 481 U.S. at 47. Indeed, this Court's

opinion in Morales expressly recognized that further de-

velopment of the law would be necessary to determine the

outer boundaries of Section 1305. See Morales, 112 S. Ct.

at 2037-39.

A. Scope of “relating to rates, routes, or services.”

The Illinois Supreme Court concluded that claims

which plainly relate to an airline’s rates and services are

not preempted because -a “frequent flyer program is not

an essential element to the operation of an airline,” and

because “frequent flyer programs are peripheral.” ” This

ruling conflicts with other circuits in an outcome determina-

tive way, and illustrates continuing confusion over a

question on which courts of appeals have affirmatively

requested further guidance from this Court.

1. Conflict With the Seventh Circuit. The Illinois

Supreme Court’s “essential element” test conflicts with

2° See Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504 (1981)

(addressing meaning of “relating to” in ERISA preemption pro-

vision) ; Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983) (same) ;

Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724 (1985)

(same) ; Pilot Life Ins. Co. v. Dedeauz, 481 U.S. 41 (1987) (same) ;

Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58 (1987) (same) ;

Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987) (same) ;

Mackey v. Lanier Collection Agency & Service, Inc., 486 U.S. 825

(1988) (same); Massachusetts v. Morash, 490 U.S. 107 (1989)

(same); FMC Corp. v. Holliday, 498 U.S. 52 (1990) (same) ;

Ingersoll-Rand Co. v. McClendon, 498 U.S. 133 (1990) (same) ;

District of Columbia v. Greater Washington Bd. of Trade, 113

S. Ct. 580 (1992) (same).

% This conclusion, based on no evidence in the record, ignores

the contrary conclusion of the United States Department of Trans-

portation. See pages 26-29 infra.

the test adopted by the Seventh Circuit in Statland v.

American Airlines, Inc., 998 F.2d 539, cert. denied, 114

S. Ct. 603 (1993).

For purposes of Section 1305 preemption, the claims

at issue in Statiand directly parallel the claims at issue

here. In Statland, as in this case, the plaintiff sought

compensatory and punitive damages. In Statland, as in

this case, the plaintiff claimed that insufficient notice

triggered liability under the Illinois Consumer Fraud Act

and the common law of contract. In particular, the plain-

tiff claimed that American’s express reservation of the

right to retain a 10% cancellation penalty was insuffi-

ciently clear as to whether 10% of the tax was included

in the penalty, and that it would therefore violate Illinois

law to permit American to retain 10% of the tax. Thus,

in both Statland and in this case, the issue was whether

damage claims under the Illinois Consumer Fraud Act

and common law of contract, based on allegedly inade-

quate notice of the rights reserved by American, were

preempted by Section 1305.

Applying Morales, the Seventh Circuit held it was

“obvious” these state law claims were related to airline

rates, routes or services. Statland, 998 F.2d at 542. The

conduct challenged in Statland—withholding 10% of the

tax portion of a ticket price as part of a cancellation

penalty—is not “essential” to an airline’s operation, yet

the Seventh Circuit had no difficulty concluding that the

claims were preempted.

The Illinois Supreme Court's decision also conflicts

with the Seventh Circuit’s earlier decision in Illinois Cor-

porate Travel, Inc. v. American Airlines, Inc., 889 F.2d

751 (7th Cir. 1989), cert. denied, 495 U.S. 919 (1990)

—a case cited with approval in Morales. 112 S. Ct. at

2039. Illinois Corporate Travel involved a provision in

American’s contracts with travel agents which prohibited

those agents from advertising that they offered rebates of

the commissions earned on the sale of American’s tickets.

899 F.2d at 752. That provision is not an “essential

element” of airline operations, but the Seventh Circuit

nevertheless ruled that challenges to that provision were

preempted.”

The conflict between the Seventh Circuit and the

Illinois Supreme Court is particularly troubling because

identical statutory and common law claims would not be

preempted in state court under the Illinois Supreme

—__—Court’s test but would be preempted under the Seventh

Circuit’s test. A conflict of this nature is intolerable. It

leaves the preemptive effect of federal law on actions

brought in Illinois dependent solely on the forum in which

the action is brought, thus encouraging forum shopping.

Review is especially warranted because the very issue on

which the Illinois Supreme Court and the Seventh Circuit

have div ided—the scope of preemption under Section 1305

—itself involves the proper relationship between federal

and state regulatory authority. The state court is constru-

ing the congressional command narrowly to preserve state

regulatory power, while the federal courts are construing

it broadly to effectuate the deregulatory goals of Con-

gress. As a practical matter, the availability of nation-

wide class actions means that the Illinois Supreme Court's

decision will thwart federal-policy on a national basis,

and ot merely within Illinois.

2. Other Conflicts. The Illinois Supreme Court’s in-

terpretation of Section 1305 also conflicts with Federal

Express Corp. v. California Public Utilities Comm'n, 936

F.2d 1075 (9th Cir. 1991), cert. denied, 112 S. Ct.

31 In Illinois Corporate Travel, the Seventh Circuit (per Easter-

brook, J.) held that damage claims asserted under the Illinois

Consumer Fraud Act and under a common law eontract theory were

preempted by Section 1305. 889 F.2d at 754. The Court’s decision

in Morales, and in particular its citation with approval of Judge

Easterbrook’s analysis in IJllinois Corporate Travel, makes clear

that the Seventh Circuit’s approach implements congressional intent.

2956 (1992). In Federal Express, the Ninth Circuit held

that Section 1305 preempts state regulation of ground

transportation aspects of an airline’s express delivery

service, Had it applied the Illinois Supreme Court’s “es-

sential element” test, the Ninth Circuit could not have

reached the result it did, because the ground transporta-

tion services of an air express delivery service are not

essential elements of airline operations.”

The Illinois Supreme Court’s decision also conflicts

with Hodges v. Delta Airlines, Inc., 4 F.3d 350, in which

the Fifth Circuit noted that Section 1305 was intended

to “secure by federal preemption the benefits of economic

deregulation of the airline industry,” and thus should pre-

empt all state claims relating to “the contractual arrange-

ment between the airline and the user of the service.”

Id. at 354.% See also O’Carroll v. American Airlines,

Inc., 863 F.2d 11 (Sth Cir.), cert. denied, 490 U.S. 1106

(1989); Anderson v. US Air, Inc., 818 F.2d 49 (D.C.

Cir. 1987).

Further guidance from this Court is plainly needed.

In West, the Ninth Circuit noted that Morales “does not

provide much guidance to courts which must decide which

state laws” are preempted and which are not. 995 F.2d

at 151. The Hodges court expressly acknowledged that

the claims at issue in West “would be pre-empted under

{its} interpretation” of Section 1305. 4 F.3d at 356.

The frequent flyer claims at issue in this case (as well as

the claim at issue in West) would certainly be prempted

*2 This Court’s decision to deny certiorari in Federal Express,

which had been held pending Morales, casts further doubt on the

Illinois Supreme Court’s conclusion that its “essential element” test

is consistent with Morales.

33 At the invitation of the Hodges panel, the Fifth Circuit has

recently granted rehearing en banc in Hodges to consider whether

Section 1305 preemption should extend beyond “contractual arrange-

ments” to preempt state law personal injury claims for accidents

occurring in the course of air travel. 4 F.3d at 356.

under the Fifth Circuit’s Hodges test, as well as the

Seventh Circuit’s analysis in Statland and Illinois Cor-

porate Travel.** Thus, the Illinois Supreme Court and the

Ninth Circuit have adopted an interpretation of Section

1305 that conflicts directly with the governing interpre-

tation in the Seventh Circuit, and the Fifth Circuit’s in-

terpretation in Hodges.

B. Form of Relief.

The illinois Supreme Court held that Section 1305

preempted respondents’ injunctive claims, but not respond-

ents’ compensatory and punitive damage claims, because

the damage claims would not “establish” rates, “deter-

mine” routes or “dictate” services. This aspect of the

court’s decision conflicts directly with this Court’s rul-

ings under other statutory schemes in Cipollone v. Liggett

Group, Inc., 112 S. Ct. 2608 (1992), San Diego Building

Trades Council v. Garmon, 359 U.S. 236, 246-47 (1959),

and International Paper Co. v. Oullette, 479 U.S. 481,

498 n.19 (1987), all of which rejected any distinction

between injunctive and damages relief for preemption

purposes. The Illinois Supreme Court’s decision also con-

flicts with the rulings of two federal courts of appeals.

Thus, despite this Court's rulings under other statutory

schemes, the lower courts remain divided over this ques-

tion with respect to Section 1305.

1. Conflict with the Seventh Circuit in Statland. The

Illinois Supreme Court’s ruling conflicts with Statland

on the forth of relief issue. The plaintiff in Statland

sought compensatory and punitive damages—but not in-

junctive relief—under the Illinois Consumer Fraud Act

and state common law of contract, arising from Ameri-

** The respondents in West acknowledged as much in their Brief

in Response to the Petition for Certiorari, No. 93-803, at 8 (“Stat-

land’s broad reading of Section [1305] suggests that the Seventh

Circuit would find claims such as Mr. West’s preempted.) ; see

also id. (“wherever the Fifth Circuit may draw the line between

preempted and nonpreempted claims, Mr. West’s claims would be

preempted in that Circuit’).

can’s alleged failure to provide adequate notice that its

10% penalty for cancelled tickets would include 10%

of the tax as well as 10% of the ticket’s base price.

Because the notice was inadequate, the plaintiff con-

tended, American was under both a binding contractual

obligation and an enforceable statutory duty to refund the

portion of the cancellation penalty representing 10% of

the tax. The Seventh Circuit held that those damages

claims were preempted, even though they would not “es-

tablish the rates airlines must charge, or determine the

routes airlines must fly, or dictate the services airlines

must provide.”

2. Conflict With West. The Illinois Supreme Court's

ruling that Section 1305 does not preempt punitive dam-

age awards also conflicts with the Ninth Circuit’s ruling

on remand in West v. Northwest Airlines, Inc. In West,

the Ninth Circuit held that Section 1305 did not preempt

compensatory damages for breach of contract claims re-

sulting from a challenge to airline overbooking practices,

but did preempt punitive damages for the same conduct.

Recognizing that punitive damages serve regulatory ends,

the West court held that punitive damages seek to punish

airlines for “accepted forms of price competition,” and

thus “relate to” rates and services within the meaning of

Section 1305. 995 F.2d at 152. In the present case,

the Illinois Supreme Court held that both compensatory

and punitive damages were not sufficiently “related to”

airline rates, routes, or services because they did not have

a regulatory effect. The punitive damages preserved by

the Illinois Supreme Court would plainly be preempted in

the Ninth Circuit.”

%5 Other circuits have held that Section 1305 preempts damage

awards as well as injunctive relief, without specifically considering

whether the preemption analysis should differ depending on the

form of relief requested. E.g. O’Carroll v. American Airlines, Inc.,

863 F.2d 11 (5th Cir.), cert. denied, 490 U.S. 1106 (1989); Ander-

son v. US Air, Inc., 818 F.2d 49 (D.C. Cir. 1987). The Mlinois

Supreme Court's ruling conflicts with those decisions as well.

* * * x *

This case presents a better vehicle than West (petition

and cross petition pending. Nos. 93-803, 93-901) to ad-

dress these issues. The Illinois Supreme Court's ruling

raises the specific questions identified in the petition and

cross-petition for certiorari in West—whether compensa-

tory damages “relate to rates, routes, or services,” and

whether Section 1305 preempts punitive damages even if

compensatory damages are not preempted. But the {!I-

linois Supreme Court's ruling also raises the closely re-

lated, but broader and more important question whether

Section 1305 should applv differently to damage awards

than to injunctive relief. Thus, in this case the Court can

resolve all issues involving the relevance under Section

1305 of the form of relief requested. In addition, the

present case directly raises the question on which the

Fifth and Ninth Circuits are in conflict: whether Section

1305 preempts all claims relating to the contractual re-

lationship between the passenger and the airline, or only

some subset of those claims. Although West may be

resolved by the specific interpretation of a particular fed-

eral regulation unique to overbooking (the conduct at

issue in West), this case involves no such complicating

factor and thus presents the issues cleanly.

Ill. THE ILLINOIS SUPREME COURT'S RULING CRE-

ATES DIVERGENT FEDERAL AND STATE REGU-

LATORY POLICIES FOR FREQUENT FLYER PRO-

GRAMS, AND DEPARTS FROM THE UNITED

STATES DEPARTMENT OF TRANSPORTATION’S

INTERPRETATION OF SECTION 1305.

In 1992 the Department of Transportation issued an

opinion and order that (a) rejected a complaint brought

under Section 411 of the Federal Aviation Act” chal-

lenging certain features of airline frequent flyer programs,

and (b) dismissed a request for rulemaking under Section

% Section 411 of the Act, 49 U.S.C. § 1381, authorizes the De-

partment to prohibit “unfair or deceptive practices” in the provision

of air transportation.

411 relating to the same issues. DOT Order No. 92-5-60

(May 29, 1992); App. 85a. The complaint alleged that

several airlines had engaged in deceptive and unfair trade

practices by failing to provide reasonably adequate notice

that they reserved the right to adjust frequent flyer award

levels and to impose capacity controls and blackout dates.

App. 86a-87a. In support of those claims the complain-

ing parties argued that the airline practices violated the

NAAG Guidelines for frequent flyer programs. App. 88a.

The DOT determined that the claims were unsup-

ported. There was no evidence of “actual or potential

deception” and no showing that “the actual notice given

by any carrier is in fact inadequate.” App. 97a. DOT

noted that “the carriers use their [frequent flyer] programs

as a means of competing for passengers” and that “{s]ince

the programs began, each carrier has greatly expanded

the kinds of awards that members can obtain and the

wavs in which members can accumulate award miles in

order to make its program more attractive.” App. 99a

(emphasis added). DOT specifically found that the chal-

lenged program features—adjusting award levels, and im-

posing capacity controls and blackout dates—are not un-

fair to consumers. To the contrary, these features “ap-

pear to be legitimate methods for controlling the cost of

frequent flyer programs,” without which airlines might be

forced to curtail or eliminate such programs, to the great

detriment of consumers. App. 100a. As this Court has

recently made clear, DOT's views regarding the reason-

ableness of airline competitive practices warrant “substan-

tial deference” because DOT “is equipped, as courts are

not, to survey the field nationwide, and to regulate based

on a full view of the relevant facts and circumstances.”

Northwest Airlines, Inc. v. County of Kent, No. 92-97,

1994 WL 13651, at *6 (January 24, 1994) (Slip Op.

at 9-11) (emphasis added).

The decision of the Illinois Supreme Court, however,

permits state court damages challenges to the same fea-

tures of frequent flyer programs that were endorsed in the

DOT proceedings. Because challenges to an airline’s op-

eration of frequent flyer programs will be resolved dif-

ferently under state consumer fraud statutes (which in-

corporate the NAAG Guidelines) than under the federal

consumer fraud provision applicable to airlines, com-

plaints against frequent flyer practices will certainly be

channelled to state courts, with the result that state and

federal policies will be in direct conflict.

The DOT's 1992 order is powerful additional evidence

that the Illinois Supreme Court has misinterpreted

Section 1305, and seriously undermined the goals of the

Airline Deregulation Act. In Morales this Court recog-

nized that Section 1305 was intended to “ensure that the

States would not undo federal deregulation” through the

application of their own laws. 112 S. Ct. at 2034. Per-

mitting individual States to punish and deter airline con-

duct DOT has viewed with approval strikes at the heart

of the congressional objectives, and threatens to destroy

the interstate “uniformity” for “rates, routes, and services”

that is critical to the congressional plan.

Furthermore, DOT plainly indicated, if it did not hold,

that Section 1305 would preempt the challenges at issue in

that proceeding had they been raised as state law breach

of contract claims. As DOT stated:

state contract laws of general applicability cannot au-

thorize a determination of whether individual terms

and conditions of a carrier’s [frequent flyer] program

are fair and reasonable to the extent they relate to

an airline’s rates, routes or services. Such state reg-

ulation is pre-empted under section 105 [49 U.S.C.

§ 1305] of the Act.

App. 102a.” DOT's interpretation of the preemptive scope

of Section 1305 is entitled to substantial deference. See

*7 DOT adopted this interpretation of Section 1305 in response

to the argument that federal rules for frequent flyer programs

Massachusetts v. Morash, 490 U.S. 107, 116-17 (1989)

(deferring to agency interpretation of ERISA preemption

language). Accordingly, DOT’s order confirms what the

Statutory text and this Court’s ruling in Morales make

plain: the Illinois Supreme Court’s reading of Section

1305 is insupportable and creates an intolerable conflict

with federal policy.

CONCLUSION

The petition for certiorari should be granted, and the

judgment of the Illinois Supreme Court should be sum-

marily reversed. Alternatively, the case should be set

for plenary consideration. :

Respectfully submitted,

Bruce J. ENNIS, JR.*

JEROLD S. SOLOVY

MARGUERITE M. TOMPKINS

DONALD B. VERRILLI, JR.

JENNER & BLOCK

601 Thirteenth Street, N.W.

Washington, D.C. 20005

(202) 639-6000

* Counsel of Record

February 8, 1994

were needed to avoid inconsistent patchwork regulation by the

States through statutory and common law claims. The claimants

argued that absent federal regulation, state courts might “in effect

regulate the [frequent flyer] programs through their adjudication

of individual contract suits,” resulting “in each state having its

own rules.” DOT determined, however, that uniform federal regu-

lation was not necessary because Section 1305 would preempt such

state claims, and would thus prevent the development of a body

of inconsistent and conflicting obligations under state law. App.

102a.

. ee te ed [a es PS a? oer. vare To —. S”.lClUCUG.w ee ~ at —_-"»

—_—

INDEX TO APPENDICES

APPENDIX A Page

Opinion and Judgment of the Illinois Supreme

Court, December 16, 1993

APPENDIX B

Order of the Illinois Supreme Court ‘Staying the

Mandate, December 28, 1993

APPENDIX C

Order of This Court in No. 92-249, Oct. 5, 1992.

APPENDIX D |

- Opinion and Judgment of the Illinois Supreme .

Court, March 12, 1992

APPENDIX E

Opinion of the Illinois Appellate Court, Third

Division, December 12, 1990

_ APPENDIX F

Memorandum Opinion and Order of the Circuit

Court of Cook County Illinois, March 20, 1989 4la

APPENDIX G

Complaint in No. 88 CH 7554, Wolens, et al. v.

American Airlines, Inc.

APPENDIX H

Complaint in No. 89 CH 119, Tucker v. American

APPENDIX I

National Association of Attorneys General, Task |

Force on the Air Travel Industry, Revised Guide-

APPENDIX J

Order Dismissing Complaint and Denying Petition

for Rulemaking, Docket Nos. 46280, 47539, United

States Department of Transportation, May 29,

are Reece P

APPENDIX A

SUPREME COURT OF ILLINOIS

Docket No. 71418—Agenda 9—May 1993

MYRON (MIKE) WOLENS et al.,

Appellees,

AMERICAN AIRLINES, INC.,

Appellant.

JUSTICE BILANDIC delivered the opinion of the

court:

This cause comes to us on remand from the United

States Supreme Court for further consideration in light of

the decision in Morales v. Trans World Airlines, Inc.

(1992), 504 USS. , 119 L. Ed. 2d 157, 112 S. Ct.

2031.

In 1988, plaintiffs filed a class action in the circuit court

of Cook County on behalf of participants in American's

“AAdvantage” frequent flyer program. Under the program,

American awards mileage credits to participating frequent

flyers who receive free or discounted flights and other

travel benefits based upon their accumulated mileage

credits. The complaint alleged that American’s retroactive

modification of the rules of the AAdvantage program con-

stituted a breach of contract with plaintiffs and all others

who joined the program prior to May 1988, and violated

the Illinois Consumer Fraud and Deceptive Business Prac-

tices Act (Consumer Fraud Act) (Ill. Rev. Stat. 1987,

ch. 121%, par. 261 et seq.). Plaintiffs sought money

damages and an injunction preventing retroactive applica-

tion to mileage credits earned prior to the changes.

The trial court denied defendant’s motion to dismiss,

finding that section 1305 did not preempt plaintiffs’ claims;

however, the trial court granted American’s motion for

certification for interlocutory review pursuant to our Rule

308 (184 Ill. 2d R. 308). The appellate court concluded

that plaintiffs’ attempt to enjoin American’s application

of its new AAdvantage program rules would constitute an

attempt to regulate the service of an airline and was there-

fore preempted. (Wolens v. American Airlines (1990),

207 Ill. App. 3d 35, 39.) The court found, however, that

plaintiffs’ damage claims were not barred by section 1305

of the Deregulation Act. Wolens, 207 Ill. App. 3d at 39.

The appellate court issued a certificate of importance to

permit immediate review by this court pursuant to our

Rule 316 (134 Ill. 2d R. 319). This court affirmed the

conclusion of the appellate court that plaintiffs’ claim for

injunctive relief was preempted by section 1305(a)(1)

of the Deregulation Act. (Wolens v. American Airlines,

Inc. (1992), 147 Ill. 2d 367.) Plaintiffs’ claim for dam-

ages for breach of contract and violation of the Consumer

Fraud Act survived, however. Plaintiffs’ claim for money

damages had only a tangential relation to -defendant’s

rates and services: thus, this court found that the claim

was not preempted under section 1305(a)(1).

Following this court’s issuance of its opinion in Wolens,

only American petitioned the United States Supreme Court

for a writ of certiorari. The Court vacated the judgment

of this court, and remanded this cause for further consid-

eration in light of Morales. (American Airlines, Inc. v.

Wolens (1992), US. , 121 L. Ed. 2d 6, 113

S. Ct. 32.) We find this court’s decision addressing plain-

tiffs’ claim for injunctive relief is consistent with the

Morales ruling, thus, we do not disturb that portion of this

court’s previous opinion. Therefore, the only issue before

this court is whether plaintiffs’ claim for money damages

for breach of contract and violation of the Consumer

Fraud Act are preempted by section 1305(a)(1) of the

Deregulation Act. ;

ee net atte

ee Se om A

We begin our analysis with a review of the Morales

decision. In Morales, the Supreme Court considered

whether section 1305(a)(1) preempted the enforcement

of State statutes regulating airline fare advertising based

upon guidelines promulgated by the National Association

of Attorneys General, which included thé Illinois Attorney

General.

Section 1305(a)(1) provides in pertinent part:

“[N]Jo State or political subdivision thereof and no

interstate agency or other political agency of two or

more States 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 * * *.” 49 U.S.C.

§ 1305(a)(1) (1988).

The Morales court noted that the ordinary meaning of

the phrase “relating to” is a broad one, that is, “ ‘to stand

in some relation; to have bearing or concern; to pertain;

refer; to bring into association with or connection with.’ ”

(Morales, 504 U.S. at , 119 L. Ed. 2d at 167, 112

S. Ct. at 2037, quoting Black’s Law Dictionary, 1158

(Sth ed. 1979).) The Court compared the language in

the Deregulation Act to a similarly worded preemption

provision found in the Employee Retirement Income Secu-

rity Act of 1974 (ERISA) (29 U.S.C. § 1144(a)

(1988), which preempts all State laws “ ‘insofar as they

. . . relate to any employee benefit plan.’” (Morales,

504 USS. at , 119 L. Ed. 2d at 167, 112 S. Ct. at

2087, quoting 28 U.S.C. § 1144(a) (1988).) Adopting

the same interpretation employed in the ERISA actions,

the Court held that State enforcement actions having a

“connection with or reference to airline ‘rates, routes, or

services’ are pre-empted under [section] 1305(a)(1).”

(Emphasis added.) Morales, 504 U.S. at , 119 L. Ed.

2d at 167-68, 112 S. Ct. at 2037.

While the Court concluded that fare guidelines are pre-

empted under section 1305(a)(1), it nonetheless held

that, in spite of such a broad interpretation of the “relates

to” language, all State laws would not be preempted. As

stated in Morales:

“In concluding that the * * * fare advertising

guidelines are pre-empted, we do not * * * set out

on a road that leads to pre-emption of state laws

against gambling and prostitution as applied to air-

lines. Nor need we address whether state regulation

of the nonprice aspects of fare advertisng (for exam-

ple, state laws preventing obscene depictions) would

similarly ‘relat{e] to’ rates; the connection would ob-

viously be far more tenuous. To adapt to this case

our language in Shaw, ‘[s]ome state actions may

affect [airline fares] in too tenuous, remote, or

peripheral a manner” to have pre-emptive effect.’ ”

Morales, 504 US. at

112 S. Ct. at 2040, quoting Shaw v. Delta Air Lines,

Inc. (1983), 463 U.S. 85, 100 n.21, 77 L. Ed. 2d

490, 503 n.21, 103 S. Ct. 2890, 2901 n.21.

The Morales Court found the fare guidelines at issue

did not present a borderline question; as such, the Court

expressed no view “ ‘about where it would be appropriate

to draw the line’ as to the types of actions that would be

preempted by section 1305(a)(1). (Morales, 504 U.S. at

, 119 L. Ed. 2d at 172, 112 S. Ct. at 2040, quoting

Shaw v. Delta Air Lines, Inc. (1983), 463 U.S. 85, 100

n.21, 77 L. Ed. 2d 490, 503 n.21, 103 S. Ct. 2890, 2901

n.21.) Moreover, the Court noted, the decision “does not

give the airlines carte blanche to lie to and to deceive

consumers; the [Department of Transportation] retains the

power to prohibit advertisements which in its opinion do

not further competitive pricing.” (Morales, 504 U.S. at

, 119 L. Ed. 2d at 172, 112 S. Ct. at 2040. See also

49 U.S.C. app. § 1381 (1988) (granting the Department

of Transportation authority to investigate unfair trade

practices in the airline industry).

, 119 L. Ed. 2d at 171-72, |

The Morales Court concluded that the guidelines re-

garding airline fare advertising were expressly preempted

by section 1305(a)(1). The Court found that the obliga-

tions imposed by the guidelines would have a significant

impact upon the airlines’ ability to market their product,

and hence a significant impact upon the fares charged.

(Morales, 504 U.S. at ——, 119 L. Ed. 2d at 171, 112

S. Ct. at 2040.) Thus, since the guidelines related directly

to airline rates, the Attorneys General were precluded

from enforcing the guidelines. against the airlines.

Morales instructs that, in order to determine whether

the plaintiffs’ claims for breach of contract and violation

of the Consumer Fraud Act are preempted, we must de-

cide whether those claims have a “ ‘connection with or

reference to airline ‘rates, routes, or services.’” (Morales,

504 US. at , 119 L. Ed. 2d at 167-68, 112 S. Ct. at

2037, quoting 49 U.S.C. app. § 1305(a) (1988).) As

noted, however, the Morales Court expressly stated that

certain State actions may be too tenuously or remotely re-

lated to an airlines’ rates, routes, or services to have a

preemptive effect. (Morales, 504 U.S. at ——, 119 L.

Ed. 2d at 172, 112 S. Ct. at 2040.) It appears, therefore,

that the Morales Court intended to leave open the possi-

bility that certain State law actions that had only a slight

connection to an airlines’ rates, routes, or services, would

not be preempted by section 1305(a)(1).

In their complaint, plaintiffs contend that the AAdvan-

tage frequent flyer program was developed as a marketing

device for the purpose of encouraging greater use of air-

line facilities by the general public and, more particularly,

by frequent travelers. Prior to May 18, 1988, plaintiffs

were entitled to redeem their AAdvantage award certifi-

cates for free air travel on any available date to applica-

ble destinations for any available seat in the class of serv-

ice provided. After that time, American retroactively

altered the terms of its contract with the AAdvantage

program members by instituting various restrictions on

previously earned AAdvantage credits. Plaintiffs do not

challenge American's right to alter or restrict aspects of

the AAdvantage program prospectively; however, they

contend that American never reserved the right to make

such changes retroactive so as to diminish the value of

previously earned AAdvantage credits.

Pursuant to Morales, we find that the claims at issue do

not relate to the rates, routes, or services of an airline. A

frequent flyer program is not an essential clement to the

operation of an airline. Indeed, the airline industry func-

tioned successfully for decades prior to providing incen-

tives to its travelers in the form of frequent flyer programs.

As noted in Chief Justice Miller's special concurrence to

our previous opinion, plaintiffs’ claims do not seek to

“establish the rates airlines must charge, or determine the

routes airlines must fly, or dictate the services airlines

must provide.” (Wolens, 147 Ill. 2d at 377.) Instead,

the plaintiffs here seek only money damages for breach

of contract and violation of the Consumer Fraud Act after

American implemented retroactive changes to the terms of

its frequent flyer program.

When a member earns frequent flyer miles by flying on

American or by doing business with American affiliates, a

contractual relationship is formed which vests the frequent

flyer with the right to earn specific travel awards. Ameri-

can chose to retroactively alter the terms of the frequent

flyer program. This action constituted a breach of con-

tract which entitled plaintiffs to pursue an available rem-

edy. 12A Ill. L. & Prac. Contracts § 391 (1983).

Accordingly, we conclude that our previous holding,

that plaintiffs’ claims for money damages was not pre-

empted because it bears only a tangential relation to air-

line rates, routes, and services, comports with the Morales

decision. As defined, the word “tange:tial” is described

as: “touching lightly or in the most tenuous way: Inci-

dental.” (Emphasis added.) (Webster's Third New In-

Ce te tte

ternational Dictionary 2337 (1986).) In view of our find-

ing that frequent flyer programs are peripheral to the oper-

ation of an airline, it follows that plaintiff's State law

claims for money damages bear only a tangential, or

tenuous, relation to American's rates, routes, and services.

For the foregoing reasons, we find that plaintiffs’ claims

for breach of contract and violation of the Consumer

Fraud Act are not preempted by section 1305(a)(1) of

the Deregulation Act. The claims are excluded by the

exception carved out in Morales for actions only tenuously

connected to the airlines’ rates, routes, and services.

Therefore, the judgment of the appellate court affirming

the circuit court’s denial of American's motion to dismiss

under section 2—615 of the Code of Civil Procedure (lil.

Rev. Stat. 1987, ch. 110, par. 2—615) is affirmed.

Appellate court affirmed.

JUSTICE FREEMAN took no part in the considera-

tion or decision of this case.

JUSTICE McMORROW, dissenting:

I respectfully dissent because, in my view, under the

reasoning and holding of the Morales case, plaintiffs’

claims for damages under the Consumer Fraud Act and

for breach of contract are preempted by section 1305

(a)(1) of the Airline Deregulation Act.

In 1987 and 1988, the National Association of Attor-

neys General (NAAG) drafted detailed standards govern-

ing the advertising and marketing practices of the airline

industry. The purpose of the guidelines, according to the

NAAG, was to “explain in detail how existing state laws

apply to air fare advertising and frequent flyer

(Morales, 504 U.S. at ——, 119 L. Ed. 2d at 175, 112

S. Ct. at 2041 (appendix, NAAG Guidelines, Introduc-

tion (1988).) Notwithstanding objections to the guide-

lines, on preemption and policy grounds, by the Depart-

ment of Transportation and by the Federal Trade Com-

mission, seven members of the NAAG sent memoranda to

the airlines stating that the practice of not disclosing all

surcharges in airlines fare advertisements was a violation

of the members’ respective State laws on deceptive adver-

tising and trade practices. Some months later, the Texas

Attorney General's office sent the airlines notice of its

intent to sue under Texas’ statute prohibiting deceptive

advertising and trade practices for the airlines’ failure to

disclose all surcharges in their advertisements. The air-

lines filed suit in the district court seeking declaratory

judgment and injunctive relief from any action by Texas

in conjunction with the NAAG guidelines on the basis

that section 1305(a)(1) expressly preempted actions to

enforce State deceptive advertising laws.

As noted by the majority, in analyzing the language of

section 1305 prohibiting the States from enacting or en-

forcing “any law relating to the rates, routes, or services

of any air carrier,” the Morales Court imparted a broad

definition to the phrase “relating to.” The Morales Court

additionally observed that ERISA’s similarly worded pre-

emption provision (29 U.S.C. § 1144(a) (1988)) had re-

peatedly been recognized as having a “ ‘broad scope’” and

an “ “expansive sweep’” and being “ ‘conspicuous for its

breadth.’” (Morales, 504 U.S. at , 119 L. Ed. 2d at

167, 112 S. Ct. at 2037, quoting Metropolitan Life Insur-

ance Co. v. Massachusetts (1985), 471 U.S. 724, 739,

85 L. Ed. 2d 728, 739-40, 105 S. Ct. 2380, 2388-89;

Pilot Life Insurance Co. v. Dedeaux (1987), 481 U.S. 41,

47, 95 L. Ed. 2d 39, 48, 107 S. Ct. 1549, 1553: FMC

Corp. v. Holliday (1990), 496 U.S. 52, 58, 112 L. Ed.

2d 356, 364, 111 S. Ct. 405, 407.) The Court noted

that it has been held that a State law “ ‘relates to’” an

employee benefit plan and is preempted by ERISA “ ‘if it

has a connection with or reference to such a plan.’”

(Morales, 504 U.S. at , 119 L. Ed. 2d at 167, 112

S. Ct. at 2037, quoting Shaw v. Delta Air Lines, Inc.

(1983), 463 U.S. 95, 97, 77 L. Ed. 2d 490, 501, 103

S. Ct. 2890, 2900.) The Morales Court determined that

because the relevant language of section 1305 (a) (1) of

the Deregulation Act is identical to the preemption clause

in ERISA, it should be given the same broad interpreta-

tion. The Morales Court thus held that State enforcement

actions having a connection with or reference to airline

rates, routes, or services are preempted under section

1305(a)(1). Morales, 504 U.S. at , 119 L. Ed. 2d

at 167-68, 112 S. Ct. at 2037.

The Court rejected the argument that its ruling should

be limited to State laws expressly addressing the airline

industry (the position taken by this court in the original

Wolens opinion), reasoning that such a limitation would

create “an utterly irrational loophole * * * [which] ignores

the sweep of the ‘relating to’ language.” (Morales, 504

US. at , 119 L. Ed. 2d at 169, 112 S. Ct. at 2035.)

The Court noted that it had consistently rejected the same

argument in ERISA cases, having held that “‘[a] state

law may “relate to” a benefit plan, and thereby be pre-

empted even if the law is not specifically designed to affect

such plans, or the effect [sic] is only indirect.’” Morales,

504 US. at , 119 L. Ed. 2d at 169, 112 S. Ct. at

2038, quoting Ingersoll-Rand Co. v. McClendon (1990),

498 US. 133, 139, 112 L. Ed. 2d 474, 484, 111 S. Ct.

478, 483.

The Morales Court also rejected a contention essentially

the same as that made by Justice Miller in his special

concurrence to this court’s cicree — A od

ado by the majority, that plaintiffs’ claims are no

et Moline they do not seek to “ ‘establish the rates

airlines must charge, or determine the routes airlines must

fly, or dictate the services airlines must provide.’” (Slip

op. at 4, quoting Wolens, 147 Ill. 2d at 377.) The

Morales Court observed that the argument that section

1305(a)(1) only preempts the States from actually pre-

scribing rates, routes, or services “simply reads the words

‘relating to’ out of the statute. Had the statute been de-

signed to pre-empt state law in such a limited fashion, it

would have forbidden the States to ‘regulate rates, routes,

10a

and services.”” (Emphasis in original.) Morales, 504

U.S. at , 119 L. Ed. 2d at 168, 112 S. Ct. at 2037.

The Court then examined the NAAG guidelines on

fare advertising and concluded that they “quite obviously”

related to fares. In addition to requiring that all restric-

tions and surcharges be disclosed clearly and conspicu-

ously, the guidelines also mandated that an advertised fare

be available in sufficient quantities to meet reasonably

foreseeable demand on every flight on every day in every

market in which the fare is advertised or that the adver-

tisement prominently state the extent of the unavailability.

The Court found that cach guideline bore a reference to

air fares, and that under the Texas statute “violations of

these requirements would give consumers a cause of action

(for at least actual damages [citation]) for an airline’s

failure to provide a particular advertised fare—effectively

creating an enforceable right to that fare when the adver-

tisement fails to include the mandated explanations and

disclaimers.” (Morales, 504 U.S. at ———, 119 L. Ed. 2d

at 170, 112 S. Ct. at 2039.) Continuing, the Morales

Court compared the case before it to Pilot Life Insurance

Co., 481 U.S. 41, 95 L. Ed. 2d 39, 107 S. Ct. 1649

which “held that a common-law tort and contract action

secking damages for the failure of an employee benefit

plan to pay benefits ‘relate[d] to’ employee benefit plans

and was preempted by ERISA.” (Morales, 504 U.S. at

——, 119 L. Ed. 2d at 170, 112 S. Ct. at 2039.) Beyond

the guidelines’ express reference to fares, the Morales

Court found that the obligations imposed by the guide-

lines “would have a significant impact upon the airlines’

ability to market their product, and hence a significant

impact upon the fares they charge.” Morales, 504 US.

at ——-, 119 L. Ed. 2d at 171, 112 S. Ct. at 2040.

Although the Morales Court held that the NAAG

guidelines were preempted by section 1305(a)(1), the

Court pointed out that the Department of Transportation

retains the power to prohibit deceptive advertising prac-

tices. (Morales, 504 U.S. at ——, 119 L. Ed. 2d at 172,

Ee ee ee

112 S. Ct. at 2040.) Under section 411 of the Federal

Aviation Act (49 U.S.C. app. § 1381 (1988)), the De-

partment has the authority to investigate and determine

whether any air carrier is or has been engaged in unfair

or deceptive practices and to order the air carrier to cease

and desist from such practices.

In the instant case, plaintiffs’ complaints consist of two

separate claims, one under the Consumer Fraud Act and

one for breach of contract. Illinois’ Consumer Fraud Act

makes unlawful “unfair or deceptive acts or practices, in-

cluding but not limited to the use or employment of any

deception, fraud, false pretense, false promise, misrepre-

sentation or the concealment, suppression or omission of

any material fact, with intent that others rely upon the

concealment, suppression or omission of such material fact

* * * in the conduct of any trade or*°commerce.” (Til.

Rev. Stat. 1987, ch. 121%, par. 262.) The Act author-

izes the Attorney General or a State’s Attorney to bring

an action to restrain by injunction the unfair act or prac-

tices, and to seck civil. penalties against any person found’

by the court to have engaged in an unlawful act or prac-

tice. (Ill. Rev. Stat. 1987, ch. 121%, par. 267.) Like

the Texas consumer protection statute sought to be en-

forced in Morales, the Illinois Consumer Fraud Act also

allows individuals to bring actions for damages for viola-

tions of its provisions. Ill. Rev. Stat. 1987, ch. 121%,

par. 270(a).

Plaintiffs’ consumer fraud claims sought an injunction

and both actual and punitive damages. In their com-

plaints plaintiffs allege that American solicited the use of

its airline by “featuring” its AAdvantage program in mail-

ings and in the distribution of promotional materials

which contained a delineation of the mileage credits re-

quired to obtain specific benefits, and that through these

materials American induced persons to join the AAdvan-

tage program. Plaintiffs further allege that they were

12a

induced by American’s solicitations and promises to be-

lieve that by accumulating mileage credits they would

receive correspondingly greater travel benefits. Plaintiffs

allege that American offered these inducements even

though it knew that it would change the terms of the

program and.institute capacity control restrictions which

would have the effect of substantially reducing the value

of accumulated mileage credits, and that American never

advised plaintiffs that it believed it had reserved the right

to retroactively restrict or otherwise reduce or alter the

benefits available under the program.

When reduced to their simplest terms, plaintiffs’ claims

for damages, including punitive damages, under the Con-

sumer Fraud Act are based upon allegations of Ameri-

can’s deceptive advertising, promotions, and inducements

relating to airline fares (i.e.,. payment of travel fares with

mileage credits and upgrades in seating class) and serv-

ices (i.e., the quantity of seats and flights and the dates

of travel to various destinations) which would be avail-

able to persons who joined and participated in the

AAdvantage program.

Plaintiffs’ allegations virtually mirror the restrictions

regarding the advertising of frequent flyer benefits and the

institution of capacity controls and other frequent flyer

program modifications without advance notice which were

proposed in the NAAG guidelines on frequent flyer pro-

grams. (Morales, 504 US. at , 119 L. Ed. 2d at

173, 112 S. Ct. at 2041 (appendix, NAAG Guidelines ).)

Although Morales involved those of the guidelines relat-

ing to advertisements of discounted fares rather than of

frequent flyer program .benefits; as in Morales, plaintiffs

in the case at bar seek an adjudication that American’s

advertising of and representations concerning frequent

flyer fares and services constituted unfair and deceptive

practices, in violation of State law. Morales held that

actions seeking to enforce State consumer protection stat-

utes referring and relating to fares and services are ex-

~ ee

l3a

pressly preempted by section 1305(a)(1). Cf. Hastalis

v. Human Rights Comm'n (1990), 205 Ill. App. 3d 50

(plaintiff's discrimination complaint under the Illinois Hu-

man Rights Act related to services of the airline and was

preempted by section 1305(a)(1)).

Applying Morales’ expansive and sweeping interpreta-

tion of the phrase “relating to,” I believe that plaintiffs’

claims for compensatory and punitive damages based on

allegations of common law breach of contract are likewise

preempted by section 1305(a)(1). Plaintiffs allege that

prior to May 1988, AAdvantage members, numbering

approximately four million persons, were entitled to re-

deem their award certificates for free air travel on any

available date to applicable destinations for any available

seat in the class of service provided. Although plaintiffs

maintain that they are not attempting to mandate enforce-

ment of the pre-May 1988 terms of the AAdvantage pro-

gram, in order to prevail on their breach of contract

claims plaintiffs must obtain a State-court adjudication

that “merican is contractually obligated to continue to

redeem mileage credits earned prior to May 1988 for the

same free fares and unrestricted seating and flight services

which the AAdvantage program provided up until that

time. Such a finding is necessary whether plaintiffs seek

to enforce the terms and conditions of the program or

an award of money damages for American’s alleged

breach of those contractual obligations.

I find it significant that the Morales Court several times

cited to the decision in Pilot Life Insurance Co., 481 U.S.

41, 95 L. Ed. 2d 39, 107 S. Ct. 1549. In that case, the

plaintiff brought suit seeking damages for common law

tort and breach of contract based upon the insurance com-

pany’s improper processing of his claim for and failure

to pay disability benefits on the group insurance policy

purchased with matching funds of the employer and em-

ployees. The Court held that the common law causes of

action raised in the plaintiff's complaint “undoubtedly meet

14a

the criteria for preemption” under the “relating to” lan-

guage in ERISA’s preemption clause. This court reached

the same conclusion in Arnold v. Babock & Wilcox Co.

(1988), 123 Ill. 2d 67. In Wilcox, the plaintiffs’ em-

ployer sold the plant where they worked and the plant

subsequently closed. Plaintiffs filed an action for breach

of contract to recover severance benefits to which they

claimed entitlement under the terms of their employment

contract. The complaint also alleged that the failure to

pay the benefits constituted a violation of the State statute

governing the payment of wages. The court held that the

plaintiff's State-law causes of action based on breach of

contract and violation of the State wage payment law

came within the broad scope of ERISA’s preemption of

any and all laws which relate to an employee benefit plan.

Wilcox, 123 Ill. 2d at 72-73.

Morales makes clear that the “relating to” language in

section 1305(a)(1) is as expansive in its scope as the

identical language in ERISA. Several decisions rendered

after Morales have applied that broad interpretation in

cases against airlines. In Statland v. American Airlines

(7th Cir. July 16, 1993), No. 92-2062, plaintiff bought

a ticket which carried a 10% cancellation penalty. When

she cancelled the ticket, American retained 10% of the

tax she paid in addition to 10% of the ticket price. Plain-

tiff filed a class action suit that included four State-law

claims alleging breach of fiduciary duty, violations of the

Consumer Fraud Act, conversion and breach of contract,

based upon the airline’s alleged wrongful retention of

10% of the tax she paid. The court found it “obvious

[that] canceled ticket refunds relate to rates” (Statland,

slip op. at 5), and that under Morales, plaintiff's State

statutory and common law claims were preempted by sec-

tion 1305(a)(1).

In Schaeffer v. Delta Air Lines, Inc. (S.D. Cal. Sep-

tember 18, 1992), No. 92-1190-E(LSP), the plaintiff's

complaint alleged consumer fraud and breach of contract

;

{

15a

for the airline’s failure to disclose in mailings to and oral

communications with frequent flyer program members an

increase in mileage requirements necessary to obtain a

free flight. The complaint was found to be legally and

factually deficient. The court stated, however, that even

if the pleading deficiencies could be corrected by amend-

ment, the action could not be sustained under the broad

definition ascribed to the phrase “relates to” in Morales.

The court found that the allegations related to both the

advertisements and services of an airlines, and thus were

preempted under section 1305(a)(1).

In Vail v. Pan Am Corp. (1992), 260 N.J. Super.

292, 616 A.2d 523, plaintiffs brought an action alleging

fraud, consumer fraud, and breach of contract, charging

that the airline falsely advertised that it was initiating

an enhanced security program and charged $5 per ticket

to defray the costs of the program when, in fact, the air-

line did not provide any such program. The complaint

sought, inter alia, a refund of the $5 surcharge. Plaintiff

argued that her claims were merely traditional actions for

fraud and breach of contract which could have only a

remote effect upon the rates and services of the airline.

The Vail co: found the broad interpretation given to

section 1305(4)(1) by Morales was dispositive of plain-

tiffs claims, reasoning that if plaintiff's action were al-

lowed, the State would be permitted to determine whether

an airline’s advertising was false and deceptive and

whether the services advertised were in fact provided, and

to fashion remedies, including proscribing certain advertis-

ing and compelling the airline to repay the surcharge

portion of the rate charged. The court determined that

plaintiff's claims related to the services and rates of the

airlines and were, therefore, preempted under section

1305(a)(1). See also Cannava v. USAIR, Inc. (D.

Mass. January 7, 1993), No. 91-3003-F (passenger’s

claims for intentional infliction of emotional distress, vio-

lations of State unfair practices statute and breach of an

implied contractual obligation to provide courteous service

l6a

were preempted under the interpretation ascribed to sec-

tion 1305(a)(1) in Morales).

I do not agree with the majority that plaintiffs’ claims

bear only a tangential, tenuous, or remote relation to

American’s rates, routes, and service because they do not

seek to establish rates, determine routes or dictate the

services American must provide. Plaintiffs’ actions seek

a State-court determination that American violated the

Consumer Fraud Act through deceptive and unfair ad-

vertising and promotion of the AAdvantage program.

Plaintiff's actions also seek a State-court adjudication that

American has a contractual obligation to provide, and

plaintiffs have an enforceable right to receive, either cer-

tain specific fares, flights and seats in exchange for earned

mileage credits, or monetary compensation in lieu thereof.

Under the rationale of Morales and its progeny, plain-

tiffs claims have a connection with and relation to Amer-

ican’s rates and services, and are preempted by section

1305(a)(1) of the Deregulation Act.

I further dissent from. the majority’s statement that

American’s alteration of the terms of AAdvantage pro-

gram “constituted a breach of contract which entitled

plaintiffs to pursue an available remedy.” (Slip op. at 4.)

This case is before us on the denial of American’s motion

to dismiss. Thus, I believe that it is both premature and

inappropriate to reach or address the merits of plaintiffs’

claims.

ee ee eee

ee pee eee

17a

APPENDIX B

IN THE SUPREME COURT OF ILLINOIS

No. 71418

MyYRON (MIKE) WOLENS et al., ETC..,

Appellees

AMERICAN AIRLINES, INC., ETC.,

Appellant

AC1-89-0918

TR88CH7554

TR89CH119

Hon. Arthur L. Dunne, Judge Presiding

ORDER

[Filed Dec. 28, 1993]

This matter has come for consideration upon the mo-

tion of appellant to stay the mandate of this Court pend-

ing appeal or application for certiorari in the United

States Supreme Court.

{T IS ORDERED that the ma»date of this Court in

the above cause is stayed pending the filing of a notice

of appeal or an application for certiorari or the expiration

of the period within which said application or notice may

be filed. If certiorari is applied for or notice of appeal

filed, the mandate of this Court shall, upon proof of such

filing being made by affidavit filed with the clerk of this

Court, be further stayed pending resolution by the United

18a

States Supreme Court of such application or appeal. If

no such affidavit is filed, the mandate shall, without further

order, issue upon the expiration of the time within which

appeal or certiorari may be sought.

/s’ Michael A. Bilandic

Justice

Supreme Court of Illinois

APPENDIX C

SUPREME COURT OF THE UNITED STATES

No, 92-249

AMERICAN AIRLINES, INC.,

Petitioner,

Vv.

MyYRON WOLENS, ef al.

.ON WRIT OF CERTIORARI to the Supreme Court

‘of Illinois.

THIS CAUSE having been submitted on the petition

for a writ of certiorari and response thereto,

ON CONSIDERATION WHEREOF, it is ordered and

adjudged by this Court that the judgment of the above

court in this cause is vacated with costs, and that this

cause is remanded to the Supreme Court of Illinois for

further consideration in light of Morales v. Trans World

Airlines, Inc., 504 US. —— (1992).

IT IS FURTHER ORDERED that the petitioner,

American Airlines, Inc. recover from Myron Wolens, et

al., Three Hundred Dollars ($300.00) for their costs

hervin -xpended.

October 5, 1992

20a

APPENDIX D

SUPREME COURT OF ILLINOIS

Docket No. 71418—Agenda 31—September 1991

MyRON (MIKE) WOLENS, et al.,

Appellees,

Vv.

AMERICAN AIRLINES, INC.,

Appellant.

{Filed Mar. 12, 1992}

JUSTICE HEIPLE delivered the opinion of the court:

This issue presented by this appeal stems from an

action by plaintiffs against defendant American Airlines

concerning benefits accumulated through defendant's fre-

quent flyer program. Following denial of defendant's mo-

tion to dismiss, the trial court granted defendant's motion

for certification for interlocutory appeal. The appellate

court affirmed the order of dismissal. 207 Ill. App. 3d 35.

Plaintiffs are participants in defendant’s American Air-

lines AAdvantage (AAdvantage) frequent flyer program.

In 1988 they filed a class action against defendant, alleg-

ing that they enrolled in the AAdvantage program pur-

suant to a national membership campaign by defendant.

Once enrolled, plaintiffs received various communications

from defendant setting forth the benefits of the program

and the mileage credits necessary for receipt of those ben-

efits. Plaintiffs used defendant's airline, and used the

facilities of other organizations that participated in the

—

ee ee ee -

2la

AAdvantage program, including other airlines, hotels,

and car rental companies, in order to accumulate mileage

credits for use in the program. According to plaintiffs’

complaint, the value of those credits was substantially and

adversely affected by defendant, who retroactively reduced

and restricted the benefits available, effective May 18,

1988.

Plaintiffs charged that defendant’s action in retroactively

modifying the rules of the AAdvantage program consti-

tuted a breach of defendant's contracts with plaintiffs and

all others who joined the program prior to May 1988.

The complaint also charged that the defendant's action

was in violation of the Illinois Consumer Fraud and

Deceptive Business Practices Act (Consumer Fraud Act)

(Ill. Rev. Stat. 1987, ch. 121%, par. 261 et seq.). Plain-

tiffs sought money damages and an injunction preventing

retroactive application of any changes in the program to

mileage credits earned prior to the changes.

Defendant initially removed the action to the United

States District Court for the Northern District of Illinois,

arguing that the suit raised a Federal question exclusively

committed to the adjudication of the Federal courts pur-

suant to section 1305(a)(1) of the Federal Aviation Act

(49 U.S.C. § 1305(a)(1) (1988)). The district court

remanded the action to the circuit court, concluding

that the complaint raised State law contract and fraud

claims, and that such claims are not converted into Fed-

eral actions by section 1305 or its legislative history.

Wolens v. American Airlines, Inc. (N.D. Ill., Oct. 25,

1988), No. 88-C-8158.

On remand, defendant moved to dismiss plaintiffs’ ac-

tion and a second similar class action complaint which

was filed following the district court decision and consoli-

dated with the original action. Defendant moved to dis-

miss on the ground that plaintiffs’ claims relate to de-

fendant’s rates and services and therefore are expressly

preempted by section 1305 of the Federal Aviation Act.

22a

Defendant moved to dismiss plaintiffs’ Consumer Fraud

Act claims on the ground that they are implicitly pre-

empted by Federal regulation. Finally, defendant moved

to dismiss plaintiffs’ claims in their entirety on the ground

that they are barred by the commerce clause because

subjecting airlines to State consumer fraud and common

law contract claims would impose a burden on intersate

commerce.

The circuit court denied defendant's motion to dismiss

on March 20, 1989, finding that section 1305 did not

preempt plaintiffs’ claims. On March 23, 1989, the cir-

cuit court granted defendant's motion for certification of

the following question for interlocutory review pursuant

to Supreme Court Rule 308 (134 Ill. 2d R. 308):

“whether plaintiffs’ claims are preempted by the

Federal Aviation Act of 1958, as amended, 49 U.S.C.

$$ 1301-1557, and by the federal regulations promul-

gated thereunder, and precluded under the Commerce

Clause of the United States Constitution?”

The appellate court answered the question in the nega-

tive, and affirmed the decision of the trial court with

respect to plaintiffs’ breach of contract and Consumer

Fraud Act claims, holding that their damage claims are

not preempted by section 1305. The Court concluded,

however, that the attempt to enjoin defendant's applica-

tion of its new AAdvantage program rules would be an

attempt to regulate the services of an airline and thus a

violation of section 1305. The appellate court issued a

certificate of importance to permit immediate review by

this court, and this court assumes jurisdiction pursuant to

article VI, section 4(c), of the Illinois Constitution of

1970 (Ill. Const. 1970, art. VI, § 4(c)), and Supreme

Court Rule 316 (134 Ill. 2d R. 316). We affirm.

Section 1305(a) provides in part:

“[N]lo State or political subdivision thereof and

no interstate agency or other political agency of two

or more States shall enact or enforce any law, rule,

23a

regulation, standard, or other provision having the

force and effect of law relating to rates, routes, or

services of any air carrier * * *.” (49 U.S.C. § 1305

(a)(1) (1988).)

Plaintiffs request injunctive relief to halt application of

defendant’s new AAdvantage program rules. As the ap-

pellate court correctly concluded, injunctive relief would

involve the regulation of defendant's services and there-

fore violate section 1305. See Hingson v. Pacific South-

west Airlines (9th Cir. 1984), 743 F.2d 1408.

Plaintiffs’ claims for damages for breach of contract

and violation of the Consumer Fraud Act, however, sur-

vive. We adopt the prevailing view, set forth in West v.

Northwest Airlines, Inc. (9th Cir. 1990), 923 F.2d 657,

that “section 1305(a)(1) preempts claims only when the

underlying statute or regulation itself relates to airline

services, regardless of whether the claim arises from a

factual setting involving airline services.” (923 F.2d at

660. See also Bieneman v. City of Chicago (7th Cir.

1988), 864 F.2d 463.) The instant claims bear only a

tangential relation to defendant’s rates and services and

are not expressly preempted.

Defendant also contends that plaintiffs’ claims are

implicitly preempted under section 1302(a)(7) of the

Federal Aviation Act, which states that the prevention of

unfair, deceptive, predatory, or anticompetitive practices

in air transportation shall be considered in the public

interest and in accordance with the public convenience.

Proof of implied preemption requires defendant to demon-

strate that Congress intended to occupy the field and give

Federal law exclusive authority. (West v. Northwest Air-

lines, Inc., 923 F.2d at 661.) Nothing in the language of

section 1302(a)(7) indicates an intent to foreclose State

damage claims against an airline for engaging in decep-

tive practices. New York v. Trans World Airlines

(S.D.N.Y. 1989), 738 F.Supp. 162.

24a

Additionally, section 1506 of the Federal Aviation Act

provides:

“Nothing contained in this chapter shall in any

way abridge or alter the remedies now existing at

common law or by statute, but the provisions of

this chapter are in addition to such remedies.” (49

U.S.C. app. § 1506 (1988).)

This language indicates that Congress did not intend to

occupy the field, but rather that common law remedies

were intended to survive. (Bieneman v. City of Chicago,

864 F.2d at 471; West v. Northwest Airlines, Inc., 923

F.2d at 66f.) Plaintiffs’ claims are not implicitly pre-

empted.

Finally, defendant argues that plaintiffs’ claims are

barred by the commerce clause. Injunctive relief, defend-

ant contends, will result in State regulation of interstate

commerce. In light of our conclusion that an attempt to

enjoin defendant’s actions regarding the AAdvantage pro-

gram would constitute improper State regulation pre-

empted by section 1305, further discussion of defend-

ant’s commerce clause argument is unnecessary.

Federal and State courts have repeatedly refused to

interpret the Federal Aviation Act so as to preempt all

State laws. Courts have carefully and narrowly construed

the applicable law so as to preempt only those State laws

and regulations that specifically relate to and have more

than a tangential connection with an airline’s rates, routes

or services. These courts have recognized that Congress

did not intend section 1305 to be construed as a blanket

preemption provision, and we join in this conclusion.

While plaintiffs’ claims for injunctive relief are expressly

preempted by the language of section 1305, their damage

claims for breach of contract and violation of the Con-

sumer Fraud Act survive.

Accordingly, the circuit and appellate court decisions

are affirmed.

° Judgments affirmed.

- - OP cae

Che Ge ee ee we

25a

JUSTICES CLARK and FREEMAN took no part in

the consideration or decision of this case.

CHIEF JUSTICE MILLER, specially concurring:

The majority concludes that section 1305(a)(1) of the

Federal Aviation Act (49 U.S.C. § 1305(a)(1) (1988))

does not expressly preempt the plaintiffs’ State-law-based

claims for damages. As the sole support for this holding,

the majority opinion asserts that the Federal statute pre-

empts only State laws that are specifically directed at the

airline industry and does not affect laws of general appli-

cation, like those at issue here. Although I agree with the

majority’s conclusion, I cannot subscribe to its rationale.

Unlike the majority, I am not persuaded that Federal

preemption exciusively turns on a determination of

whether the State law at issue is general or specific in its

focus and operation. Although State laws specifically

addressing activity that is the subject of an express pre-

emption provision will be preempted (see Mackey vy.

Lanier Collections Agency & Service, Inc. (1988), 486 |

U.S. 825, 829-30, 100 L. Ed. 2d 836, 843-44, 108 S. Ct.

2182, 2185), not every State law having general applica-

tion is automatically saved from preemption. Indeed, one

apparent and unsustainable consequence of the majority’s

reasoning would be to shield from preemption all common

law actions and remedies, which by their nature have gen-

eral application. The general nature of a State law can

be a circumstance arguing against preemption, but that

characteristic alone will not be determinative. See /n-

gersoll-Rand Co. v. McClendon (1990), 498 U.S. ,

, 112 L. Ed. 2d 474, 484, 111 S. Ct. 478, 483.

One need not look far to find, in this or other con-

texts, Federal preemption of State or other local laws

having general application. For example, statutes or com-

mon law remedies, even though not aimed directly or

entirely at airlines, may not be used to control the seating

of aircraft passengers. (See O’Carroll v. American Air-

26a

lines, Inc. (Sth Cir. 1989), 863 F.2d 11; Anderson v.

USAir, Inc. (D.C. Cir. 1987), 818 F.2d 49; Hingson v.

Pacific Southwest Airlines (9th Cir. 1984), 743 F.2d

1408; Hastalis v. Human Rig'its Comm'n (1990), 205

Ill. App. 3d 50.) These cases surely demonstrate that not

every law of general application will survive Federal pre-

emption, and thus the majority’s proffered distinction

between laws of general application and laws of specific

application fails to provide a reliable guide for resolving

preemption questions. If this distinction is useful at all,

it is Only because a law's general application supplies a

necessary, though not a sufficient, predicate for a finding

of no preemption.

Federal preemption of State laws may occur in three

ways. First, State law may be expressly preempted, by

an explicit Congressional statement to that effect. (Shaw

v. Delta Air Lines, Inc. (1983), 463 U.S. 85, 95, 77

L. Ed. 2d 490, 500, 103 S. Ct. 2890, 2899). Second,

State law may be implicitly preempted, as when Congress

has occupied a field so extensively that any State regula-

tion would be inconsistent with the comprehensive Fed-

eral scheme. (Rice v. Santa Fe Elevator Corp. (1947),

331 U.S. 218, 230, 91 L. Ed. 1447, 1459, 67 S. Ct 1146,

1152.) Third, State law will be preempted when it actu-

ally conflicts with Federal law. A conflict will be found

when compliance with both Federal and State provisions

is impossible (Florida Lime & Avocado Growers, Inc. v.

Paul (1963), 373 U.S. 132, 142-43, 10 L. Ed. 2d 248,

257, 83.8. Ct. 1210, 1217), or when the State law stands

as an obstacle to the full accomplishment of the Federal

purpose (Hines v. Davidowitz (1941), 312 U.S. 52, 67,

85 L. Ed. 581, 587, 61 S. Ct. 399, 404). Determining

whether State law is preempted by Federal law is solely

a question of Congressional intent. (California Federal

Savings & Loan Association v. Guerra (1987), 479 US.

272, 280, 93 L. Ed. 2d 613, 623, 107 S. Ct. 683, 689.)

In this regard, we may consider the presumption against

a... a

27a

preemption in areas of law traditionally regulated by the

States. (Metropolitan Life Insurance Co. v. Massachu-

setts (1985), 471 U.S. 724, 740, 85 L. Ed. 2d 728, 740-

41, 105 S. Ct. 2380, 2389; Federal Express Corp. v.

California Public Utilities Comm’n (9th Cir. 1991), 936

F.2d 1075, 1078; West v. Northwest Airlines, Inc. (9th

Cir. 1990), 923 F.2d 657, 659.) “But when Congress

has ‘unmistakably . . . ordained’ [citation] that its enact-

ments alone are to regulate a part of commerce, state

laws regulating that aspect of commerce must fall.”

Jones v. Rath Packing Co. (1977), 430 U.S. 519, 525,

51 L. Ed. 24 604, 614, 97 S. Ct. 1305, 1309.

The Federal Aviation Act contains an express pre-

emption provision, and the principal question before us is

whether the challenged State laws and remedies at issue

here fali within its scope. Section 1305(a)(1) of the

Act provides, in pertinent part:

“[N]o State or political subdivision thereof * * *

shall enact or enforce any law, rule, regulation,

standard, or other provision having the force and ef-

fect of law relating to rates, routes, or services of any

air carrier * * *.” (49° US.C. § 1305(a)(1)

(1988).)

As construed by the courts, section 1305(a) (1) does not

preempt every State-law-based claim affecting airlines

and their operations. See Air Transport Association of

America v. Public Utilities Comm'n (9th Cir. 1987), 833

F.2d 200, 207; see also Federal Express Corp. v. Califor-

nia Public Utilities Comm'n (9th Cir. 1991), 936 F.2d

1075, 1078 (“[D]espite the very broad and apparently all-

inclusive language of [section 1305(a)(1)], common

Sense and common practice have forbidden that the stat-

ute be taken literally and have restricted its range”).

The preemption provision was enacted as part of the

Airline Deregulation Act of 1978 (Pub. L. 95-504, 92

Stat. 1708 (1978)) and later codified as section 1305 of

28a

the Federal Aviation Act. In the Airline Deregulation

Act, Congress significantly altered the dynamics of the

airline industry by substantially reducing, though not

completely eliminating, the Federal regulatory apparatus

that had previously limited competition among air car-

riers. It seems clear, then, that a primary purpose of the

preemption provision contained in the 1978 amendatory

act was to prevent the States from attempting to re-

regulate air carriers, by imposing their own potentially

conflicting requirements, after Congress had deregulated

the airline industry. (New England Legal Foundation v.

Massachusetts Port Authority (1st Cir. 1989), 883 F.2d

157, 173; Freeman, State Regulation of Airlines and the

Airline Deregulation Act of 1978, 44 J. Air L. & Com.

747, 755-56 (1979).) This is not to suggest that the

range of State activity preempted by section 1305(a)(1)

is necessarily coextensive with the regulatory apparatus

dismantled in 1978. But Congress, having decided to exit

the business of regulating air carriers’ rates, routes, and

services,—surely—wanted to forbid the States to attempt

to fill that regulatory vacuum, and I would construe the

preemption provision in that light.

If the principal objective of section -1305(a)(1) is to

bar State economic regulation of air carriers (Federal Ex-

press Corp..v. California Public Utilities Comm'n (9th

Cir. 1991), 936 F.2d 1075, 1078-79), then it must be

concluded that the claims raised here fall outside the

intended reach of that provision. The plaintiffs allege

breach of contract and violations of the Consumer Fraud

and Deceptive Business Practices Act (Ill. Rev. Stat.

1989, ch. 121%, pars. 261 through 272). By their com-

plaints, the plaintiffs seek to enforce certain State-

law-based statutory and common law rights. These claims

are not regulatory in force or effect. They do not estab-

lish the rates airlines must charge, or determine the routes

airlines must fly, or dictate the services airlines must pro-

vide. The plaintiffs’ claims do not threaten the defendant

airline with economic regulation, which Congress intended

Ce —r ~~

29a

to prevent the States from imposing on a deregulated

airline industry. The plaintiffs seek only to enforce

their statutory and common law remedies for the de-

fendant airline’s alleged breach of its self-imposed obli-

gations. For these reasons, I would conclude that the

plaintiffs’ damage claims are not expressly preempted by

section 1305(a)(1) of the Federal Aviation Act.

One further consideration that counsels against an

overly expansive reading of the preemption provision is

found in the savings clause of section 1506 of the Fed-

eral Aviation Aet. Section 1506 provides:

“Nothing in this chapter shall in any way abridge

or alter the remedies now existing at common law or

by statute, but the provisions of this chapter are in

addition to such remedies.” (49 US.C. § 1506

(1988).) ;

The Savings clause was part of the Federal Aviation Act

prior to 1978, and the clause was retained by Congress

notwithstanding the adoption of the preemption provi-

sion contained in the Airline Deregulation Act. As the

majority opinion correctly concludes, the savings clause

preserves, against implied preemption, State-law claims

that are not specifically preempted by section 1305(a)(1).

(Trans World Airlines, Inc. v. Mattox (Sth Cir. 1990),

897 F.2d 773, 783, appeal after remand (1991). 924

F.2d. 1055, cert. granted (1991). U.S. , 116

L. Ed. 2d 601, 112 S. Ct. 632: Illinois Corporate Travel,

Inc. v. American Airlines, Inc. (7th Cir. 1989), 889

F.2d 751, 754.) By retaining the Savings clause at the

same time it added the preemption provision, Congress

apparently believed that some statutory and common law

remedies (see, e.¢., Nader vy. Allegheny Airlines, Inc.

(1976), 426 U.S. 290, 48 L. Ed. 2d 643, 96 S. Ct.

1978); Braunswasser v. Trans World Airlines, Inc. (W.D.

Pa. 1982), 541 F. Supp. 1338) would in fact survive the

enactment of section 1305(4)(1).

i A

ie —— rw ™ -

~~ ~

OS Sse a a eee” |

‘ath ——— a

én on

30a

As a final matter, | question the majority’s conclusion

that the plaintiffs’ requests for injunctive relief are pre-

empted even though their claims for money damages are

not. The majority applies the same distinction adopted —

by the appellate court in the present case (207 Ill. App.

3d 35, 39). It is not clear, however, that the two forms

of relief are so readily distinguishable for preemption pur-

poses. See International Paper Co. v. Ouellette (1987),

479 U.S. 481, 498 n.19, 93 L. Ed. 2d 883, 901 n.19, 107

S. Ct. 805, 815 n.19.) In. any event, in the absence of a

finding that the plaintiffs properly allege claims for which

injunctive relief may be awarded, I believe it is prema-

ture to attempt to determine in this interlocutory appeal

whether that form of relief would be preempted by Fed-

eral law. The question whether the plaintiffs may obtain

injunctive relief under the Consumer Fraud and Decep-

tive Business Practices Act has not been raised in this

court and thus is not before us. If, as the appellate court

concluded, private actions for injunctive relief are not

available under the Act (207 Ill. App. 3d at 39), we

would have no occasion to consider in this case the pre-

emptive effect of section 1305(a)(1) on that portion of

the plaintiffs’ action.

For the reasons stated, I concur in the court’s judg-

ment.

2 *

OO i A et AMM" the. tlie yh alla -

ihe.

woe. Tad

3la

APPENDIX E

ILLINOIS APPELLATE COURT

THIRD DIVISION

December 12, 1990

No. 1-89-0918

Myron (MIke) WoLens, ALBERT J. GALe,

R. CRAIG ZAFIS, BRET MAXWELL and RosBert NELSON,

individually and on behalf of others similarly situated,

Plaintiffs-A ppellees,

AMERICAN AIRLINES, a foreign corporation,

Defendant-A ppellant.

P_S. TUCKER, on behalf of herself and

all others similarly situated,

Plaintiff-A ppellee,

AMERICAN AIRLINES, a foreign corporation,

Defendant-A ppellant.

Appeal from the Circuit Court of Cook County

Honorable Arthur L. Dunne, Judge Presiding

JUSTICE WHITE delivered the opinion of the court.

Defendant American Airlines has filed this interlocu-

tory appeal from an order of the circuit court denying

32a

defendant’s motion to dismiss plaintiffs’ complaints. De-

fendant contends that plaintiffs’ claims are preempted by

federal law and barred by the Commerce Clause.

In 1988, plaintiffs Myron Wolens, Albert Gale, R.

Craig Zafis, Bret Maxwell, and Robert Nelson filed a

class action complaint against defendant in the circuit

court of Cook County. The complaint alleged that in

1981 or 1982, defendant created the American Airlines

AAdvantage frequent flyer program and solicited public

membership in the program through advertisement in the

national media and general mailings. Plaintiffs alleged

that this solicitation constituted a unilateral contract offer

which they accepted when they joined the program some-

time prior to 1988.

Plaintiffs alleged that after joining the program and

receiving materials from defendant detailing the avail-

able benefits and the mileage credits required therefor,

they accumulated mileage credits by using the airlines

and facilities of defendant and of those participating with

defendant, even if other less costly or more convenient

services were available. Plaintiffs further alleged that the

value of their credits was substantially and adversely

affected when, on May 18, 1988, defendant unilaterally

instituted a retroactive reduction in the benefits available

in exchange for the credits.

Plaintiffs charged that defendant’s action in unilater-

ally and retroactively reducing program benefits consti-

tuted a breach of defendant’s contracts with plaintiffs

and all others who joined the program prior to May 1988.

Plaintiffs also charged that defendant's action was in

violation of the Illinois Consumer Fraud and Deceptive

Business Practices Act (“Consumer Fraud Act”). (Ill.

Rev, Stat. 1988, ch. 121%, pars. 261 et seq.) Plaintiffs

sought monetary damages and an injunction preventing

retroactive application of any changes in the program to

mileage credits earned prior to such changes.

33a

Defendant removed the action to the United States

District Court for the Northern District of Illinois on

the ground that the complaint raised a federal question

exclusively committed to adjudication in the federal courts

by section 105(a)(1) of the Federal Aviation Act. (49

U.S.C. § 1305{a)(1).) The district court remanded the

action to the circuit court finding that plaintiffs’ com-

plaint was grounded in state law and that nothing in

section 1305 or its legislative history indicated a congres-

sional intent to convert plaintiffs’ state contract and fraud

claims into federal actions removable to federal court.

Wolens v. American Airlines, Inc., No. 88-C-8158

(N.D. LL., Oct. 25, 1988).

Subsequent to the district court's order remanding the

action to the circuit court, a second class action complaint

was filed against defendant by P. S. Tucker. The second

complaint, like the first, alleged that defendant’s action

in retroactively modifying the rules of the frequent flyer

program constituted a breach of contract and violated the

Consumer Fraud Act.

The two actions were consolidated and defendant

moved to dismiss both contending that the causes of

actions were expressly preempted by section 1305(a).

Defendant also argued that plaintiffs’ actions were barred

by the Commerce , Clause because subjecting airlines to

State consumer fraud and common law contract claims

would impose a burden on interstate commerce.

On March 20, 1989, the circuit court enteted a memo-

randum opinion and order denying defendant's motion

to dismiss. The court found that section 1305 did not

preempt plaintiffs’ claims and that nothing in the record

indicated that prosecution of plaintiffs’ claims would bur-

den interstate commerce.

On March 23, the court granted defendant's motion

for certification of a question for interlocutory appeal.

The question certified for appeal was: “Whether plain-

tiffs’ claims are preempted by the Federal Aviation Act

34a

of 1958, as amended, 49 U.S.C. S$§ 1301-1557, and by

the federal regulations promulgated thereunder, and pre-

cluded under the Commerce Clause of the United States

Constitution?” We conclude that this question must be

answered in the negative.

OPINION

The United States Supreme Court acknowledged in

Wardair Canada v. Florida Department of Revenue

(1986), 477 U.S. 1, 106 S.Ct. 2369, 91 L.Ed. 2d 1, that

Congress had regulated aviation extensively. However,

the Court also pointed out that State law is not preempted

whenever there is any federal regulation of an activity

or industry. 477 U.S. at 6.

There are three instances where federal law will be

found to preempt State law: (1) where Congress has

expressly preempted state law; (2) where congressional

intent to preempt may be inferred from the pervasiveness

of the federal regulatory scheme; and (3) when state

law conflicts with federal law or interferes with the

achievement of congressional objectives. (West v. North-

west Airlines, Inc., No. 89-35820 (9th Cir. September 11,

1990; O’Carroll v. American Airlines, Inc. (Sth Cir.

1989), 863 F.2d 11.) In the case before us, defendant

contends that plaintiffs’ claims are expressly preempted

by section 1305. Defendant also contends that section

1305 and its legislative history demonstrate a Congres-

sional intent to occupy the entire field and exercise exclu-

sive federal control over aviation matters. Finally, de-

fendant argues that the Commerce Clause bars plaintiffs’

claims.

I. Express Preemption

Section 1305(a) provides that:

“[N]o State or political subdivision thereof and no

interstate agency or other political agency of two or

more States shall enact or enforce any law, rule,

35a

regulation, standard, or other provision having the

force and effect of law relating to rates, routes or

services of any air carrier * * *.”

Defendant argues that all of plaintiffs’ claims are di-

rectly related to defendant’s rates or services and, there-

fore, are preempted.

Plaintiffs’ breach of contract and Consumer Fraud Act

claims seek to recover damages for the loss in value of

their mileage credits. Plaintiffs also request orders en-

joining defendant from applying any subsequent changes

in the frequent flyer program to plaintiffs.

Initially we note that private actions for injunctive

relief may not be maintained under the Consumer Fraud

Act. Martin v. Eggert (1988), 174 Ill. App. 3d 71,

528 N.E.2d 386.) In addition, we find that any attempt

to enjoin defendant’s application of its new program rules

would be an attempt to regulate the services of an air-

line and thus a violation of section 1305. See Hingson v.

Pacific Southwest Airlines (9th Cir. 1984), 743 F.2d

1408; Anderson yv. USAir, Inc. (D.D.C. 1985), 619

F.Supp. 1191, aff'd 818 F.Supp. 49.

However, we also find that plaintiffs’ claims for dam-

ages for breach of contract and violation of the Con-

sumer Fraud Act are not preempted by section 1305.

See Beineman v. Chicago (7th Cir. 1988), 864 F.2d 463;

Hingson v. Pacific Southwest Airlines; In re Air Crach

Disaster at John F. Kennedy International Airport on

June 24, 1975 (2nd Cir. 1980), 635 F.2d 67; Wolst v.

American Airlines, Inc. (N.D.1M. 1987), 668 F.Supp.

1117; Anderson v. USAir, Inc.; Brunwasser v. Trans

World Airlines, Inc. (W.D.Pa. 1982), 541 F.Supp. 1338.

In Anderson and Hingson, blind plaintiffs brought suit

alleging that the defendant airlines’ policy of excluding

blind persons from occupying certain seats on aircraft

violated local laws providing equal access for and pre-

cluding discrimination against the handicapped. The

court of appeals in Hingson and the federal district court

36a

in Anderson both held that the state laws in question

were preempted by section 1305. The courts stated that

the term “services” as used in section 1305 included the

regulation of air carrier seating policies for handicapped

persons. Hingson, 743 F.2d at 1415-16; Anderson, 619

F.Supp. at 1198.

However, the courts in Hingson and Anderson also

found that the blind plaintiffs’ common law claims for

damages for intentional infliction of emotional distress

were not preempted by section 1305. (Hingson, 743 F.2d

at 1416; Anderson, 619 F.Supp. at 1197.) Several other

courts have also concluded that common law actions for

damages are not preempted by section 1305. See West v.

Northwest Airlines, Inc.; Bieneman v. Chicago, 864 F.2d

at 471; In re Air Crash Disaster at John F. Kennedy

International Airport on June 24, 1975, 635 F.2d at 74;

Holliday v. Bell Helicopters Textron, Inc., No, 88-00904

(D.Hawati, Oct. 12, 1990); New York v. Trans World

Airlines, Inc. (S.D.N.Y. 1989), 728 F.Supp. .162; /ii-

nois Corpordie Travel, Inc. v. American Airlines, Inc.

(ND.IIL 1988), 682 F.Supp. 378, 380 n.1, aff'd 889

F.2d 752; Wolst v. American Airlines, Inc. (N.D.1M.

1987), 668 F.Supp. at 1119; Brunwasser v. Trans World

Airlines, Inc. (W.D.Penn. 1982), 541 F.Supp. at 1345;

Stream Aviation, Inc. v. Anders Production, Inc. (La.

1987), 517 So.2d 1157; People v. Western Airlines, Inc.

(1984), 155 Cal.App.3d 597.

We are aware that some courts have reached an op-

posite conclusion. (See Mattox v. Trans World Airlines,

Inc. (Sth Cir. 1990), 897 F.2d 773; and O'Carroll vy.

American Airlines, Inc., both holding that common law

claims against an airline were preempted by section

1305.) However, we believe that the better reasoned

view is that expressed in West v. Northwest Airlines, Inc.

There, the ninth circuit court of appeals stated:

“We disagree with Northwest and the district court

that ‘law{s] . . . relating to airline services’ encom-

ee eee

* ee ee

—

ee te OA come

37a

passes all state laws that affect airline services, how-

ever tangentially. This interpretation of § 1305

(a)(1) would unduly expand preemption and ignore

our presumption against federal preemption in this

traditional state law area. Instead, we find that Sec-

tion 1305(a)(1) preempts claims only when the

underlying statute or regulation itself relates to air-

line services, regardless of whether the claim arises

from a factual setting involving air services. Thus,

state laws that merely have an effect on airline

services are not preempted (emphasis added).”

The claims for damages in the present case arise out

of plaintiffs’ contracts with defendant. The claims bear

only a tangential relation to defendant's rates and serv-

ices and any effect that an award of damages would hve

on defendant’s rates and services would be remote and

indirect. (New York v. Trans World Airlines, Inc., 728

F.Supp. at 176; and see Nader v. Allegheny Airlines

(1976), 426 U.S. 290, 300, 96 S.Ct. 1978, 48 L.Ed.2d

643 (holding that any impact on rates that may result

from the imposition of common law tort liability or from

Practices adopted by a carrier to avoid such liability

would be incidental); and Beineman v. Chicago, 864

F.2d at 471 (pointing out that State courts award dam-

ages every day in air crash cases notwithstanding the

fact the federal law preempts State regulation of safety

in air travel).) Accordingly, we conclude that section

1305 does not expressly preempt plaintiffs’ actions for

damages for breach of contract and violation of the

Consumer Fraud Act.

I. Implied Preemption

Defendant argues that the extensive regulation of the

field of aviation by Congress and the Department of

Transportation demonstrate congressional intent to oc-

cupy the entire field. Defendant bases its argument on

sections 102(a)(7) and 411 of the Federal Aviation Act

(49 U.S.C. §§ 1302(a)(7), 1381) and the provisions of

38a

the Civil Aeronautics Board Sunset Act of 1984 (“Sun-

set Act”) (P.L. No, 98-443, 98 Stat. 1703). Defendant

argues that these authorities establish that Congress in-

tended that the Department of Transportation have ex-

clusive authority for regulating advertising and prevent-

ing deceptive practices by airlines. We disagree.

Section 1302(a)(7) states only that the prevention of

unfair, deceptive, predatory, or anticompetitive practices

in air transportation shall be considered in the public

interest and in accordance with the public convenience.

Nothing in its language gives rise to an inference that

section 1302(a)(7) was intended to foreclose State dam-

age actions against an airline for engaging in deceptive

practices. See New York v. Trans World Airlines, 728

F.Supp. at 177.

Turning to defendant’s argument that section 1381

indicates a congressional intent to preclude State con-

sumer protection claims, we note that a similar argu-

ment was rejected by the Supreme Court in Nader v.

Allegheny Airlines. There, the Court held that section

1381 did not eliminate state court common law or statu-

tory claims against airlines for fraud; rather, the Court

ruled that such claims were preserved by section 1106 of

the Federal Aviation Act (49 U.S.C. § 1506). Nader,

426 U.S. at 300.

Section 1506 provides that:

“Nothing in this chapter shall in any way abridge

or alter the remedies now existing at common law

or by statute, but the provisions of this chapter are

in addition to such remedies.”

The Supreme Court found that section 1381 was in.

tended, not to preclude, but to supplement the compensa-

tory common law remedies for private parties preserved

under section 1506. Nader, 426 U.S. at 300-1.

Defendant contends that the Nader decision cannot be

considered as controlling because the decision predated

the Sunset Act of 1984. Defendant argues that a state-

Se ee Ps

39a

ment in the legislative history of the Sunset Act, that the

Act preempts State regulation of ‘consumer protection

and unfair competitive practices, indicates that Congress

intended to preempt plaintiffs’ claims.’

As our earlier discussion points out, an award of dam-

ages for breach of contract or violation of the Consumer

Fraud Act does not amount to “State regulation.” Fur-

ther, Congress in passing the Sunset Act in 1984, is pre-

sumed to have been aware of the Supreme Court’s 1976

holding in Nader that section 1506 preserved State com-

mon law claims for fraud. Thus, Congress's retention of

section 1506 following passage of the Sunset Act, indi-

cates its tacit approval of the Supreme Court's decision.

Accordingly, we find that Congress did not intend the

Sunset Act to preempt plaintiffs’ state law damage claims.

Ill. Commerce Clause

Defendant argues that the circuit court erred in hold-

ing that the Commerce Clause did not bar plaintiffs’

claims. Defendant contends that by seeking an injunction

in an Illinois court that will require defendant to provide

specific services to its frequent flyer program members -

nationwide, plaintiffs are attempting to regulate inter-

state commerce. :

In our discussion above, we pointed out that plaintiffs

could not maintain a private action for injunctive relief

under the Consumer Fraud Act and that any attempt to

1 The statements defendant relies on are contained in House

Report 793 (H.R. 793, 98th Cong., 2d Sess. 4, reprinted in 1984

U.S. Code Cong. & Admin. News 2857, 2858.) The House Report

provides that:

“In addition, to protecting consumers, federal regulation in-

sures a uniform system of regulation and preempts regulation

by the states. If there was no Federal regulation, the states

might begin to regulate these areas and the regulations could

vary from state to state. This would be confusing and burden-

some to airline passengers, as well as to the airlines.”

40a

enjoin defendant's action would constitute improper State

regulation of the activities of an airline. In light of the

foregoing, defendant’s arguments that an_ injunction

would violate the Commerce Clause are moot.

In conclusion, we find that although plaintiffs’ claims

for injunctive relief are expressly preempted by section

1305, plaintiffs’ common law and statutory damage claims

are neither expressly or implicitly preempted. Accord-

ingly, the order of the circuit court denying defendant's

motion to dismiss is affirmed.

AFFIRMED.

RIZZI and FREEMAN, * JJ., concurring.

* JUSTICE FREEMAN concurred in thia opinion prior to his

election to the Illinois Supreme Court.

4la

“APPENDIX F

IN THE CIRCUIT COURT

OF COOK COUNTY, ILLINOIS

COUNTY DEPARTMENT, CHANCERY DIVISION

88 CH 7554

consolidated with: 89 CH 119

JupGE ARTHUR L. DUNNE, Presiding

MyYRON (MIKE) WOLENS, et al.,

Plaintiff,

AMERICAN AIRLINES, INC.,

Defendant.

P.S. TUCKER,

Plaintiff,

AMERICAN AIRLINES,

Defendant.

MEMORANDUM OPINION AND ORDER

[Entered Mar. 20, 1989]

The complaints in these consolidated cases in sum al-

lege that changes in American Airline’s (“AA”) frequent

flyer program, “AAdvantage”, constitute a breach of

contract. The plaintiffs seek damages and injunctive

relief on behalf of themselves individually and on behalf

of others similarly situated pursuant to the Illinois Con-

42a

sumer Fraud and Deceptive Business Practice Act, Ill.

Rev.Stat. ch. 121%, para. 261-272 (1987).

In both cases AA has filed identical motions to dis-

miss. Consequently, this opinion and order applies to

both cases. AA’s motions to dismiss contend in summary

that these complaints are preempted by the Federal Avia-

tion Act of 1958, as amended, 49 U.S.C. sec. 1301-1557,

its accompanying federal regulations and by the Com-

merce Clause of the United States Constitution. Specific-

ally, AA contends that 49 U.S.C. sec. 1305(a) expressly

preempts any statutory or common law cause of action

which would afford plaintiff relief and that Congress in-

tended to remove the states from any regulation of air-

lines. In addition, the defendant argues that the Com-

merce Clause bars this action because to subject airlines

to the state consumer fraud and contract law would im-

pose a burden which materially affects interstate com-

merce in an area previously regulated by federal law.

United States Constitution, Article IT, section 8, cl. 3. .

In response, the plaintiffs argue that 49 U.S.C. sec.

1506 allows these state causes of action and that the

AA's reading of sec. 1305 is unduly expansive, i.e., this

action is not a regulation of “rates, routes or services.”

Moreover, Congress did not intend to preempt all state

remedies. The Commerce Clause does not bar prosecu-

tion of these actions.

These motions raise a question of statutory interpre-

tation. What is the affect of the apparent conflict be-

tween 49 U.S.C. sec. 1305(a) and sec. 1506? Sec. 1506,

enacted August 23, 1958, reads as follows: “Nothing in

this chapter (same chapter as section 1305) shall in any

way abridge or alter the remedies now existing at com-

mon law or by statute, but the provisions of this chapter

are in addition to such remedies.” As far as this court

can determine, sec. 1506 has not been explicitly repealed

43a

by any subsequent act of Congress. However, in 1978,

Congress enacted the Airline Deregulation Act, Pub. L.

No, 95-505, 92 Stat. 1705. As part thereof, Congress

enacted 49 U.S.C. sec. 1305(a)(1) which reads in part:

“... no 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 service of

any air carrier...”

Sec. 1506 makes the general statement that the reme-

dies of the Federal Aviation Act are not exclusive. Sec.

1305 apparently contradicts that by preempting state

regulation. However, on closer reading, sec. 1305 pre-

empts only those state enactments or the enforcement of

State laws which “relate to rates, routes and other serv-

ices.” Sec. 1506 is a general rule. Sec. 1305 is a specific

exception to the general rule. Reading sec. 1506 and

section 1305 together it appears that state remedies are

available except to the extent that those laws relate to

rates, routes, or services. The issue is whether the plain-

tiffs enforcement of the Illinois consumer fraud claim

and common law contract claim relate to rates or services.

This court can find no reported case, state or federal,

which has decided this issue. However, AA cites Rivkin

v. Northwest Airlines, No. 88 CH 2637 (Circuit Court of

Cook County, Dec. 8, 1988, as amended Dec. 15, 1988).

As of this date, a motion to reconsider the interlocutory

Rivkin decision pends. There is no collateral estoppel

effect by Rivkin. Colhe v. Chicago Health Club, Inc. 53

Ill.App.3d 1019 (1st Dist. 1977). The analysis of Riv-

kin is persuasive at best. However, this court is unper-

suaded. In Rivkin, Judge Hall determined that the North-

west frequent flyer program related to rates because an

affidavit of Northwest Airlines stated that the cost of the

frequent flyer program was factored into the determi-

nation of rates. There is no such affidavit in the instant

case. Even assuming arguendo the existence of such

affidavit, this Court rejects the Rivkin reasoning. Such

44a

an interpretation wc.ld have the exception swallow the

rule. This court will not apply such a broad reading of

“relating to rates, routes or services.” Assuming AA

passed on the cost of the frequent flyer program, it would

be ludicrous to propose that anything which might con-

tribute to a determination of fare becomes the subject of

preemption. Surely airlines take into account the cost of

tort claims when fixing rates, yet no one would dispute

the state court’s jurisdiction to hear tort cases filed

against an airline. Bieneman v. City of Chicago, 864

F.2d 463 (7th Cir. 1988). To preempt enforcement of

the consumer fraud act or a common law contract would

afford AA an “impenetrable immunity” from enforcement

of its contracts. See Owen v. City of Atlanta, 157 Ga.

App. 354, 277 S.E.2d 338 (1981), aff'd 248 Ga. 299,

282 S.E.2d 906, cert. denied, 456 U.S. 972, 72 L. Ed.2d

846, 102 S.Ct. 2285 (1982).

Il.

AA argues that Congress transferred consumer related

responsibilities from the Civil Aeronautics Board to the

Department of Transportation (“DOT”) citing 49 U.S.C.

sec. 1302(a)(7), sec. 1381(a) and that DOT has exclu-

sive power Over consumer matters. This court finds no

statutory authority for that argument. Sec. 1302(a)(7)

says that the Board shall consider the prevention of un-

fair, deceptive, predatory or anticompetitive practices in

air transportation. This is hardly the type of regulation

that would give rise to implicit preemption. Louisiana

Pub. Serv. Comm'n v. FCC, 476 U.S. 355 (1986). Sec.

1506 specifically states that the remedies in (this act)

are not exclusive. The Illinois Consumer Fraud Act is a

remedy that is not excluded under Sec. 1506.

If.

Finally, AA argues that prosecution of the plaintiffs’

consumer fraud and contract actions constitute state

regulations which materially affect interstate commerce

45a

in a regulated area in violation of the Commerce Clause.

AA's attempt to remove this case to the federal court was

unsuccessful. Wolens v. American Airlines, No. 88°C

8158 (N.D. Ill. Oct. 24, 1988) Judge Nordberg Presid-

ing. This court finds no evidence in the record of any

effect on interstate commerce. AA has submitted no affi-

davit in support of that proposition. In light of Pike v.

Brace Church, Inc., 397 U.S. 137 (1970) and the lack

of evidence of a burden on interstate commerce the court

finds that prosecution of these actions is not precluded

by the Commerce Clause of the United States.

CONCLUSION AND ORDER

The defendant’s motions to dismiss are denied for the

above stated reasons.

IT IS HEREBY CRDERED that the defendant shall

have 10 days to answer or otherwise plead to the con-

solidated complaints. Following this court's hearing in

the pending 2-615 [illegible] motion.

’

/s/ Arthur L. Dunne

JupDGE ARTHUR L. DUNNE

Date: March 20, 1989

46a

IN THE CIRCUIT COURT

OF COOK COUNTY, ILLINOIS

COUNTY DEPARTMENT, CHANCERY DIVISION

88 CH 7554

consolidated with: 89 CH 119

JupGe ARTHUR L. DUNNE, Presiding

Myron (MIKE) WOLENS, et ai.,

Plaintiff,

AMERICAN AIRLINES, INC.,

Defendant.

P.S. TUCKER,

“ Plaintiff,

AMERICAN AIRLINES,

Defendant.

ORDER

[Entered Mar. 21, 1989]

THIS CAUSE COMING ON TO BE HEARD on De-

fendant’s Motion to Dismiss the Complaints, as consoli-

dated, pursuant to Sec. 2-619 of the Illinois Code of Civil

Procedure, the Court having heard arguments of counsel

and having examined Memoranda of Law and otherwise

being fully advised in the premises;

IT IS HEREBY ORDERED

1. Defendant’s Motions to Dismiss pursuant to Sec.

2-619 of the Illinois Code of Civil Procedure are

47a

denied for the reasons set forth in the Court’s Memo-

randum Opinion and Order.

Plaintiffs shall have leave to file a brief in opposition

to Defendant’s 2-615 Motion to Strike, limited to 12

pages, within 14 days hereof.

. Defendant shall have leave to file a Reply brief, lim-

ited to 12 pages, within 14 days thereafter.

Hearing on Defendant’s 2-615 Motion to Strike is set

for May 2, 1989, at 11:00 a.m., without further

notice.

. Defendant shall file an answer to the Complaint

within 10 days thereafter, on or before May 12, 1989.

Atty No. 90513

Name Gilbert W. Gordon

MARKS, MARKS AND KAPLAN, Lp.

Attorney ior Plaintiffs

Address 30N. LaSalle St., #3040

City Chicago, IL 60602

Telephone (312) 332-5200

ENTER:

/s/ Arthur L. Dunne

Judge

48a

APPENDIX G

IN THE CIRCUIT COURT

OF COOK COUNTY ILLINOIS

COUNTY DEPARTMENT—CHANCERY DIVISION

No. 88CH7554

MyYRON (MIKE) WoLeNns, ALBERT J. Gate, R. CRAIG

ZAFIS, BRET MAXWELL and RoBert NELSON, individ-

ually and on behalf of all others similarly situated,

| ; Plaintiffs,

AMERICAN AIRLINES, INC., a foreign corporation,

Defendant.

JURY DEMANDED ON ALL ISSUES AT LAW

CLASS ACTION COMPLAINT

FOR INJUNCTIVE AND OTHER RELIEF

NOW COME the Plaintiffs, MYRON (MIKE) WOL-

ENS, ALBERT J. GALE, R. CRAIG ZAFIS, BRET

MAXWELL and ROBERT NELSON, individually and

on behalf of a class of persons similarly situated, and

complaining of the Defendant, AMERICAN AIRLINES,

INC., a foreign corporation (“AMERICAN”), state as

follows:

COUNT I

(IN CHANCERY)

THE CLASS ACTION

1. Defendant operates a domestic and international

airline which is authorized to do and does business in the

County of Cook and State of Illinois. As a marketing

49a

device for the purpose of encouraging greater use of its

airline facilities by the general public, and more particu-

larly, by frequent airline travelers, it created in 1981 or

1982 a program known as the American AAdvantage

Program (“PROGRAM”). Other companies such as other

airlines, hotels, and car rental companies also partici-

pated with Defendant in the Program. AMERICAN, in

consideration for use of its airline and/or the services or

facilities of other participants with Defendant in the Pro-

gram, awarded mileage credits which the traveler was

both permitted and induced to accumulate and exchange

for a variety of travel and other benefits, the greater the

number of mileage credits earned and accumulated, the

greater the available benefits for which they could be

exchanged.

2. Defendant solicited use of its airline by the general

public and, more particularly, by frequent travelers, by

featuring its Program in diverse national media and by

general mailings and distribution of promotional materials

which included applications for membership in the Pro-

gram, a list of benefits and facilities available, and a

delineation of the mileage credits required to obtain the

specifically listed benefits. To persons who joined the

Program, Defendant sent further explanatory materials

detailing the available benefits and the mileage credits

required therefor. The greater the number of mileage

credits a member accumulated, the greater the benefits he

was entitled to receive.

3. Prior to May 18, 1988, each of the named Plaintiffs

accepted Defendant’s offer, joined the Program, used De-

fendant’s airline, even if more costly or less convenient

than others, and/or used the services and facilities of

others participating with Defendant in the Program, and

received and accumulated mileage credits for the miles so

traveled and services and facilities so used.

4. The class which the named Plaintiffs represent con-

sists of persons of the United States who, like the named

50a

Plaintiffs, also joined the Program prior to May 18, 1988,

traveled upon Defendant's airline and or used the services

and facilities of other participants in the Program and,

as of May 18, 1988, accumulated mileage credits which

they still retain. The value of those credits was substan-

tially and adversely affected by Defendant who, effective

May 18, 1988, retroactively reduced the benefits thereto-

fore available for said credits, by instituting capacity

control restrictions which significantly limit the number

of seats available for passengers that wish to pay for

travel with Program travel awards.

5. The class of persons affected by the foregoing is so

numerous, consisting of millions of persons, that joinder

of all members of said class is impracticable.

6. There are questions of both fact and law common

to the class, which common questions predominate over

any questions affecting only individual members of the

class, to wit: each and every class member as did each

named Plaintiff, prior to May 18, 1988, by accepting

Defendant's aforesaid offer, becoming members of the

Program and traveling upon the Defendant airline and ‘or

using the services of other participants in the Program

for which they were entitled to mileage credits, accumu-

lated substantial mileage credits which they still retain

but the value of which credits, just as was the value of

the mileage credits held by the named Plaintiffs, was

substantial and adversely affected by Defendant's afore-

described conduct. Whether such conduct of the Defend-

ant was a breach of contract and/or a violation of the

Illinois Consumer Fraud and Deceptive Business Practice

Act (Ill. Anno. Stats. Ch. 121% Section 261, et seq.) is

common to the rights of all members of the class.

7. The named Plaintiffs and their attorneys will fairly

and adequately protect the interests of the class in that

the named Plaintiffs like all other members of the class

had substantial mileage credits in the Program accumu-

lated prior to May [8;~t988-which were adversely af-

oe enate Bt.

’

Sla

fected by Defendant’s aforesaid action in a like manner,

though not necessarily to the same extent, as all other

members of the class.

8. A class action is the most fair, just and efficient

manner in which to adjudicate the claims arising out of

the aforesaid conduct of the Defendant. Should individual

actions be brought, or be required to be brought by each

individual Plaintiff, a multiplicity of lawsuits would re-

sult and cause undue hardship and expense for the Court

and the litigants.

9. The prosecu’ion of separate actions by individual

members of the Plaintiff class would also create a risk

of inconsistent or varying adjudications and rulings with

respect to individual members of the class. Additionally,

the prosecution of separate actions against the Defendant

would create a risk of rulings which might be dispositive

of the interests of other class members not parties to the

adjudications or substantially impede their ability to pro-

tect their interests.

STATEMENT OF CLAIM

10. Defendant's aforesaid solicitation constituted a uni-

lateral offer by Defendant to each named Plaintiff and

class member which each said Plaintiff and class member

prior to May 18, 1988, accepted by joining the Program,

traveling on the Defendant’s airline and/or using the fa-

cilities and services of other participants in the Program,

and thereby, earned mileage credits under the Program

which the Defendant, by increasing the available benefits

as the accumulated mileage increased, induced them to

retain, ‘increase and accumulate.

11. As such mileage credits were earned and accumu-

lated by each named Plaintiff and class member, each said

Plaintiff and class member accrued a contractual right to

receive from Defendant and Defendant became contractu-

ally obligated to furnish to each such Plaintiff and class

52a

member, the benefits to which said mileage credits were

entitled under the Program in effect when the mileage

credits were earned, accrued and accumulated. Defend-

ant could not alter program benefits retroactively as to

mileage credits which had theretofore been earned and ac-

cumulated under the Program.

12. As heretofore detailed, each of the named Plain-

tiffs and the class they represent were members of the

Program who, prior to May 18, 1988, did, in the manner

aforedescribed, earn and accumulate substantial mileage

credits which they still retain.

13. Prior to May 18, 1988, each named Plaintiff and

the members of the class were entitled to redeem their

American AAdvantage award certificates for free air

travel on any available date to applicable destinations for

any available seat in the class of service provided ((i.e.,

first class, coach or economy class).

14. Effective May 18, 1988, Defendant unilaterally

altered the benefits available to participants in the Pro-

gram by instituting capacity control restrictions wherein

the Defendant restricted or otherwise limited the oppor-

tunity of Program members to redeem their award levels

for travel or other benefits offered in the Program and/or

limited the opportunity of Program members to earn mile-

age sufficient for specific award levels. Defendant’s im-

plementation of capacity control restrictions included both

blackout dates, during which no free flights were avail-

able, and the limitation of the maximum number of seats

allocated to persons wishing to pay for flights with free

travel awards.

15. Defendant's unilateral reduction of the value of

benefits for mileage credits earned prior to May 18, 1988,

and which each traveler was induced by Defendant as

aforedescribed to increase, retain and accumulate, was

in breach of the contract between the Defendant, on the

one hand, and, on the other hand, the named Plaintiffs

53a

and the class members who accepted Defendant's offer

by traveling upon Defendant’s airline, even if it were

more costly and less convenient than other airlines, and/or

by using the services of others who participated with

Defendant in the Program, and thereby earning and ac-

cumulating mileage credits under the Program prior to

May 18, 1988, for which they were entitled to the bene-

a teed for such mileage credits prior to May 18,

1988.

16. Unless this Court assumes equitable jurisdiction

and otherwise so orders, the Defendant will not only

impose capacity control restrictions as to the benefits of-

fered under the Program applicable retroactively to mile-

age credits earned, accumulated and accrued by each of

the named Plaintiffs and members of the class prior to

May 18, 1988, but will continue to adopt additional

changes which it will similarly retroactively apply and

thereby require additional litigation.

WHEREFORE, PlaintiffSXZXS MYRON (MIKE) WOL-

ENS, ALBERT J. GALE, R. CRAIG ZAFIS, BRET

MAXWELL and ROBERT NELSON, individually and

on behalf of the class of persons similarly situated, re-

spectively pray this Honorable Court:

A. To certify this claim as a class action in order

that the named Plaintiffs and their attorneys

may represent the class of persons similiarly

situated;

B. For judgment against the Defendant for damages

in the amount that the value of the mileage

credits earned and accumulated by the named

Plaintiffs and the members of the class prior

to May 18, 1988, which they still retain was

reduced by reason of the acts of the Defendant

aforedescribed, together with punitive damages

in such sum as shall be deemed fit;

54a

C. A preliminary and permanent injunction enjoin-

ing the Defendant from applying any subsequent

changes in the Program Defendant may here-

after make which reduce the benefits available

under the Program, to the mileage credits earned,

accumulated and accrued prior to any such sub-

sequent changes made by the Defendant;

D. For an award of costs and reasonable attorney's

fees incurred for and on behalf of the named

Plaintiffs and members of the class in connec-

tion with the prosecution of this cause; and

E. For such other and further relief as this Court

may deem fit to grant in fashioning a remedy

for the named Plaintiffs and the class they

represent.

COUNT Il

(AT LAW)

CLASS ACTION

1-9. Paragraphs | thorugh 9, inclusive, of Count I are

hereby re-alleged as Paragraphs 1 through 9, inclusive,

of this Count II hereof as though set out in full in said

Count II.

STATEMENT OF CLAIM

10-15. Paragraphs 10 through 15, inclusive, of Count

I are hereby re-alleged as Paragraphs 10 through 15, in-

clusive, of this Count II hereof as though set out in full

in said Count II.

WHEREFORE, Plaintiffs, MYRON (MIKE) WOL-

ENS, ALBERT J. GALE, R. CRAIG ZAFIS, BRET

MAXWELL and ROBERT NELSON, individually and

on behalf of the class of persons similarly situated, re-

spectively pray the Honorable Court:

A. To determine the class and thereupon certify

this claim as a class action in order that the

S5a

named Plaintiffs and their attorneys may rep-—

resent the class of persons similarly situated.

B. For judgment against the Defendant for damages

in the amount that the value of the mileage cred-

its earned and accumulated by the named Plain-

tiffs and the members of the class prior to May

18, 1988, which they still retain was reduced

by reason of the acts of the Defendant afore-

described, together with punitive damages in

such sum as shall be deemed fit.

C. For an award against the Defendants for costs

and reasonable attorney’s fees incurred for and

on behalf of the named Plaintiffs and members

of the class in connection with the prosecution

of this cause.

D. For such other and further relief as this Court

may deem fit to grant in fashioning a remedy for

the named Plaintiffs and the class they represent.

COUNT Ill

(IN CHANCERY )

CLASS ACTION

1-9. Paragraphs 1 through 9 inclusive of this Com-

plaint entitled “Class Action” are hereby re-alleged as

Paragraphs 1 through 9 inclusive of this Count II hereof

as though set out in full in said Count II.

STATEMENT OF CLAIM

10. The named Plaintiffs and each class member prior

to May 18, 1988, were led to believe by Defendant’s

aforesaid solicitations that each, by joining the Program,

using the Defendant airline and/or the services and fa-

cilities of other participants in the Program, would earn

mileage credits which, if accumulated, would entitle each

to receive in exchange therefor certificates for free air

56a

travel to applicable destinations for any available date

for any available seat in the class of service provided.

Defendant, by making greater benefits available for the

accumulation of greater mileage credits, induced the said

named Plaintiffs and members of the class to increase,

hold and accumulate their mileage credits.

11. Accordingly, and in reliance upon the said solici-

tations, each named Plaintiff and class member, prior to

May 18, 1988, joined the Program, traveled on the De-

fendant’s airline and/or used the facilities and services

of other participants in the Program and thereby earned

mileage credits under the Program, which they accumu-

lated so as to obtain the greater benefits offered therefor.

The named Plaintiffs and some class members still retain

all of their credits so earned and accumulated.

12-13. Paragraphs 13 and 14 of Count I of this Com-

plaint are hereby re-alleged as Paragraphs 12 and 13 of

this Count. III hereof as though set out in full in said

Count III.

14. During the year 1988, in particular, the Defendant

induced each named Plaintiff and class members to fly

even more frequently on the Defendant airline by offering

“Triple Mileage” for each actual mile flown. Defendant

offered “Triple Mileage” even though they knew that they

would institute capacity control restrictions which would

limit the number of seats available and therefore dilute

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