Petition for Writ of Certiorari — American Airlines, Inc. v. Wolens
Supreme Court brief1992
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—
Bupreme Court, U.S.
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92-249 FILED
No. 92--— AUG 7 1992
OFFICE OF THE CLERK
IN THE
Supreme Court of the United States
OCTOBER TERM, 1992
AMERICAN AIRLINES, INC.,
Petitiouer,
V.
MyRON WOLENS, ALBERT J. GALE, R. CRAIG ZAFIS,
BRET MAXWELL, ROBERT NELSON and P. 8. TUCKER,
Respondents.
Petition for Writ of Certiorari to the
Supreme Court of Illinois
PETITION FOR WRIT OF CERTIORARI
BRUCE J. ENNIS, JR.
DONALD B. VERRILLI, JR.
JENNER & BLOCK
601 Thirteenth Street, N.W.
Washington, D.C. 20005
(202) 639-6000
August 7, 1992
JEROLD S. SOLOVY *
MARGUERITE M. TOMPKINS
JENNER & BLOCK
One IBM Plaza
Chicago, Illinois 60611
(312) 222-9350
* Counsel of Record
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QUESTIONS PRESENTED
1. Did the Illinois Supreme Court err when it con-
cluded, in direct conflict with this Court’s subsequent
decision in Morales v. Trans World Airlines, that Section
1305 of the Airline Deregulation Act of 1978 did not
pre-empt state law damage claims relating to the rates
and services offered in an airline’s frequent flyer pro-
gram, on the ground that Section 1305 can never pre-
empt damage claims that are based on state common law
or state statutes of general applicability?
2. Did the [Illinois Supreme Court err when it con-
cluded, in direct conflict with the prior decision of the
U.S. Court of Appeals for the Seventh Cireuit in J/linois
Corporate Travel, inc. v. American Airlines, Inc., that
damage claims under the Illinois Consumer Fraud Act
and under state common law were not pre-empted by
Section 1305, on the ground that Section 1305 can never
pre-empt damage claims that are based on state common
law or state statutes of general applicability?
3. Did the Illinois Supreme Court erroneously conclude
that paramount federal interests in promoting airline
competition and in protecting interstate commerce did not
preclude state common law and statutory damage claims
that relate to the rates and services offered in airline
frequent flyer programs?
ii
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
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CONSTITUTIONAL AND STATUTORY PROVI-
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STATEMENT OF THE CASE ¢..00 ec.
A. Background ........... Rr
B. The Proceedings Below .............2...........22222-ceceeeee-ee
C. The Illinois Supreme Court Ruling —..........0.........
REASONS FOR GRANTING THE PETITION ._..........
I. THE DECISION OF THE ILLINOIS SU-
PREME COURT IS FLATLY INCONSIST-
ENT WITH, AND MUST BE RECONSIDERED
IN LIGHT OF, MORALES v. TRANS WORLD
et nectitsdshickdsemsneesvecnsunsnsaucurans
A. Morales Demonstrates That The Pre-emption
Analysis Adopted By The Illinois Supreme
Court Was Erroneous .......................................
B. West and Cipollone Confirm That The Pre-
emption Analysis Adopted By The Illinois
Supreme Court Was Erroneous ......................
C. Under The Correct Pre-emption Analysis,
The Decision Of The Illinois Supreme Court
ESO...
Il. IN THE ALTERNATIVE, THIS COURT
SHOULD GRANT PLENARY REVIEW TO
RESOLVE A DIRECT CONFLICT BE-
TWEEN THE ILLINOIS SUPREME COURT
AND THE U.S. COURT OF APPEALS FOR
THE SEVENTH CIRCUIT, AND TO CON-
SIDER THE IMPORTANT QUESTIONS
PRESENTED BY THIS CASE ........... ned eae
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10
12
14
17
iv
TABLE OF AUTHORITIES
Cases Page
Anderson v. USAir, Inc., 818 F.2d 49 (D.C. Cir.
OTST ECR EAI LAP Ae AA RD 9
Brown-Forman Distillers v. N.Y. Liquor Auth.,
Se Ws I ED | escent saeco 16
Chevron U.S.A., Inc. v. Natural Resources De-
fense Council, 467 U.S. 837 (1984) 13
Cipollone v. Liggett Group, Inc., 112 S.Ct. 2608
(1968) ............ sinbteanonananertinininae teeta dadaeenia an ee 11
Erie R. Co. v. Tompkins, 304 U.S. 64 (1988) 11
Federal Express Corporation v. California Public
Utilities Commission, 936 F.2d 1075 (9th Cir.
1991), cert. denied, 112 S.Ct. 2956 (1992) 9
Gade v. National Solid Wastes Management Asso-
etation, 112 S.Ct. 23874 (1902) ............................ il
Healy v. Beer Institute, Inc., 491 U.S. 324 (1989) .. 16
Huron Portland Cement Co. v. City of Detroit,
OR | er eee 17
Illinois Corporate Travel, Inc. v. American Air-
lines, Inc., 889 F.2d 751 (7th Cir. 1989), cert.
denied, 495 U.S. 919 (1990) 3, 9, 14-15
Ingersoll-Rand Co. v. McClendon, 111 S.Ct. 478
RADA An To atte, PAR IER LE ES SC 10
Massachusetts v. Morash, 490 U.S. 107 (1989) _.... 13
Morales v. Trans World Airlines, 112 S.Ct. 2031
ER amen Manatee Caine, Biss ciektst passim
Northwest Airlines, Inc. v. West, 112 S.Ct. 2932
SE aati cisichcitsiAbaraksdt Daler 8
O’Carroll v. American Airlines, Inc., 868 F.2d 11
BNE TIED "2s ssrsarsnspiceisonsianatsmsbiesisintainadlobtebess case 9
Southern Pacific Co. v. Arizona, 325 U.S. 761
I el ae vaidetetilidcacsandenirs~—oibaeicabte 17
Trans World Airlines, Inc. v. Mattoz, 897 F.2d
WI I II onsen csicscices accoeuseheninsndamtiesidsace ci 9
West v. Northwest Airlines, Inc., 923 F.2d 657
8 RRC ee nn ne 3,6
Statutes
I rN eM a sins ns ncisccnenctccinceannschitbeeae 1
eee IND ID osc o ncn ssocensenc cen cn dencddnceuccseraccet passim
IP SE UII naan omesscrsdcs Abc iisenisshnstcenneenashibeihucssibeiicnioes 7
IN THE
Siprenve Cowt of the United States
OCTOBER TERM, 1992
No. 92- ——
AMERICAN AIRLINES, INC.,
. Petitioner,
MyYRON WOLENS, ALBERT J. GALE, R. CRAIG ZAFIS,
BRET MAXWELL, ROBERT NELSON and P. S. TUCKER,
Respondents.
Petition for Writ of Certiorari to the
Supreme Court of Illinois
PETITION FOR WRIT OF CERTIORARI
OPINION BELOW
The opinion and judgment of the Illinois Supreme
Court is reported at 598 N.E.2d 538, and is reproduced
in the Appendix to this petition (“App.”) at la-lla.
JURISDICTION
The opinion and judgment of the Illinois Supreme
Court was entered on March 12, 1992. On May 12, 1992,
Justice Stevens extended the time for filing the instant
petition to August 9, 1992, and the petition has been
filed by that date. This Court has jurisdiction pursuant
to 28 U.S.C. § 1257(a).
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~
CONSTITUTIONAL AND STATUTORY
PROVISIONS INVOLVED
This case involves the Commerce Clause, Art. I, Sec. &
of the United States Constitution; the Supremacy Clause,
Art. VI of the United States Constitution: and 49 U.S.C.
§ 1305(a) (1), which provides 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 transpor-
tation.
STATEMENT OF THE CASE
The principal question in this case is whether the pre-
emption clause of the Airline Deregulation Act of 1978,
codified at 49 U.S.C. § 1305(a) (1), pre-empts state com-
mon law and statutory damage claims that relate to the
rates and services offered to participants in an airline’s
frequent flyer program. In the decision below, the Illinois
Supreme Court ruled that Section 1305 does not pre-empt
such damage claims when they arise, as here, under state
common law or state statutes of general applicability.
App. la, 4a.
in Morales v. Trans World Airlines, 112 S.Ct. 2031
(1992), this Court squarely rejected the analysis applied
by the Illinois Supreme Court to decide this case. Finding
“little reason why 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
2038, the Court concluded that Section 1305 pre-empts all
state law having a connection with or reference to an
airline’s rates, routes, or services, “even if the law is not
specifically designed” to regulate airlines. Id. ( quotation
omitted).
3
This Court should thus grant certiorari, vacate, and
remand for reconsideration in light of Morales. That is ~
how the Court disposed of the petition in Northwest Air-
lines, Inc. v. West, 112 S.Ct. 2982 (1992). The Illinois
Supreme Court’s decision in this case, which pre-dated
Morales, was explicitly based on the construction of Section
1305 adopted by the Ninth Circuit in West.’ It follows
a fortiori that the same disposition is required here.
Point I.
Alternatively, if the Court determines that remand is
not appropriate, certiorari should be granted in order to
resolve a direct conflict between the decision below and
the decision of the Seventh Circuit in Jllinois Corporate
Travel, Inc. v. American Airlines, Inc., 889 F. 2d 751
(7th Cir. 1989), cert. denied, 495 U.S. 919 (1990), and
to review the important questions presented by this case.
Point II.
A. Background.
Petitioner American Airlines, Inc. (‘American’) is
an interstate and international air carrier incorporated
in Delaware, with its principal place of business in Texas.
In 1981, American established the first frequent flyer pro-
gram, known as the “AAdvantage” Program, as a service
for American’s customers. AAdvantage members accrue
mileage credits which they can then exchange, subject to
the terms and conditions of the Program, for tickets on
domestic or international flights.2 In effect, members pay
for airline services with mileage credits.
AAdvantage Program membership has dramatically
expanded since 1981 and now includes millions of partici-
pants, including residents of all 50 States and numerous
1 See West v. Northwest Airlines, Inc., 923 F.2d 657 (9th Cir.
1990).
2 Mileage credits can be earned in a variety of ways and can be
exchanged for services that do not involve air travel. Those non-
flight services are not at issue in this litigation.
4
foreign countries. Throughout this period, American has
modified the AAdvantage Program in many respects to
keep pace with its competitors. Over the years, the flights
and airline services available to AAdvantage participants
have vastly increased.*
B. The Proceedings Below.
Respondents are two Illinois residents and one Connecti-
cut resident. They filed parallel suits, later consolidated,
in Illinois state court, purporting to represent a nation-
wide class consisting of all AAdvantage Program partici-
pants. Respondents acknowledged that American explicitly
“reserved the right to restrict, suspend, or otherwise alter
aspects of the Program.” Tucker Complaint, Count I,
12; App. 45a. Nevertheless, they challenged modifica-
tions to the Program that American announced in May,
1988, contending generally that the modifications decreased
the “value” of accumulated mileage credits for Program
participants “wishing to pay for flights with free travel
awards.” Wolens Complaint, Count I, {14; App. 33a.‘
In particular, respondents challenged American’s mod-
ification concerning the number of seats on particular
flights that American allocates to AAdvantage partici-
pants (capacity controls), and its modification of the
specified dates on which certain kinds of AAdvantage
awards cannot be used to purchase seats (blackout dates).
Respondents contended that American’s modifications re-
strict the ability to use AAdvantage award certificates to
obtain ‘free air travel on any available date,” and to
* For example, American has greatly expanded the routes it
serves, particularly to international destinations. In all cases,
AAdvantage participants can use mileage credits accumulated before
those routes were expanded to purchase flights to those new destina-
tions,
* Respondents did not complain of the many modifications to the
Program that have increased the “value” of their previously accu-
mulated mileage credits.
0
reserve “any available seat in the class of service pro-
vided.” Wolens Complaint, Count I, £13; App. 33a.
tespondents claimed that American’s modifications to
the AAdvantage Program violated the Illinois Consumer
Fraud and Deceptive Business Practices Act (“the Con-
sumer Fraud Act”), Ill. Rev. Stat. ch. 121'., see. 261
et seq., because American allegedly did not advise Pro-
gram participants that American “believed it had _ re-
served the right to retroactively restrict, suspend or other-
wise alter or reduce’? the rates and services it would
make available to them. Tucker Complaint, Count III,
"15; App. 51a; Wolens Complaint, Count III, 115; App.
37a. Respondents also claimed that applying the modified
terms to mileage credits accumulated before May 1988
constituted a common law breach of contract, even though
American had expressly reserved the right to modify the
terms of the AAdvantage Program. Tucker Complaint,
Count I, Para. 20; App. 47a; Wolens Complaint, Count
I, Para. 15; App. 33a. Respondents contended that both
their Consumer Fraud Act claim and their contract claim
entitled them to compensatory and punitive damages. Re-
spondents also demanded an injunction requiring Ameri-
can to reinstate its pre-1988 travel award structure for
mileage credits accumulated prior to May 1988, and bar-
ring future program modifications that would affect the
use of those credits.°®
5 Most of the millions of members of the proposed class do not
reside in Illinois, and their claims have no connection whatsoever
with Illinois. Nevertheless, respondents relied on Illinois law to
support their claims. Respondents contended that statements Ameri-
can made outside of Illinois to AAdvantage members who have no
connection with Illinois violated the Illinois Consumer Fraud Act.
Respondents also contended that the relationships between Ameri-
can and Program participants throughout the nation are contractual
relationships under Jllinois common law, and contended that Ameri-
can breached those contracts in viclation of Illinois common law
when it implemented the two Program modifications described above.
'
)
In the trial court, American moved to dismiss all of
respondents’ statutory and common law claims on the
ground that they are pre-empted by the express pre-
emption clause of the Airline Deregulation Act of 1978,
19 U.S.C. $ 1305(ai(1).¢ American also sought dismissal
on the ground of implied pre-emption, and under the
Commerce Clause. The trial court denied American’s
motion to dismiss but certified its ruling for interlocutory
appeal. App. 22a.
C. The Illinois Supreme Court Ruling.
On review, after an intervening appellate court deci-
sion (App. 12a), the Illinois Supreme Court correctly
held that Section 1305 expressly pre-empts respondents’
claims for injunctive relief because “injunctive relief
would involve the regulation of defendant’s services and
therefore violate section 1305.” App. 4a. The court
also ruled, however, that respondents’ “claims for dam-
ages for breach of contract and violation of the Consumer
Fraud Act” are not pre-empted. App. 4a. The princi-
pal basis for that holding was the court’s explicit adop-
tion of what it incorrectly characterized as:
the prevailing view. set forth in West v. Northwest
Airlines, Ine. (9th Cir. 1990), 923 F.2d 657, that
“section J305(a)(1) pre-empts 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 airline services.”
App. 4a.7. The court thus “narrowly construed” § 1305
(a)(1) “to pre-empt only those State laws and regula-
® Section 1305 provides in pertinent part that “no State or political
subdivision thereof ... shall enact or enforce any law, rule, regula-
tion, standard or other provision having the force and effect of law
relating to rates, routes, or services of any air carrier... .” This
pre-emption provision was in effect when American initiated the
AAdvantage Program.
7 The court made no attempt to ascertain, from the text of the
Airline Deregulation Act or otherwise, the intent of Congress in
enacting that Act and its express pre-emption clause.
7
tions that specifically relate to . .. an airline’s rates,
routes or services.” App. 4a (emphasis added).
By construing the statutory language “any law
or other provision having the force and effect of law
relating to rates, routes, or services” to include only laws
that “specifically” relate to rates, routes, or services, the
Illinois Supreme Court effectively preserved all state
common law damage claims and all other state damage
claims based on statutes or regulations that do not spe-
cifically target airlines. The court made no effort to
explain why injunctive relief under laws that are not
directed specifically at airline rates, routes, or services is
pre-empted, but damage relief under those same laws is
not.°
8 The Illinois Supreme Court also rejected American’s implied
pre-emption and Commerce Clause arguments. It ruled that 49
U.S.C. § 1506 preserved respondents’ damage claims from implicit
pre-emption. App. 5a. Noting that it had already held that claims
for injunctive relief would be pre-empted by Section 1305(a)(1), it
ruled that “further discussion of defendant’s commerce clause argu-
ment is unnecessary.”” App. 5a. However, because American’s
Commerce Clause argument was asserted against damage claims as
well, the court’s refusal to dismiss those claims necessarily rejected
that argument. In American’s brief to the Illinois Supreme Court,
American squarely argued that “because Plaintiffs’ money damage
claims have the same impermissible and burdensome effect on inter-
state and international commerce as their injunction claims, the
Appellate Court erred in declining to reach the Commerce Clause
issue.” Brief and Appendix for Defendant-Appellant American Air-
lines, Inc., p. 42, n.18. Thus, it is clear that American properly
preserved its Commerce Clause arguments.
REASONS FOR GRANTING THE PETITION
I. THE DECISION OF THE ILLINOIS SUPREME
COURT IS FLATLY INCONSISTENT WITH, AND
MUST BE RECONSIDERED IN LIGHT OF,
MORALES v. TRANS WORLD AIRLINES.
A. Morales Demonstrates That The Pre-emption Anal-
ysis Adopted By The Illinois Supreme Court Was
Erroneous.
The Illinois Supreme Court’s decision conflicts directly
with this Court’s subsequent ruling in Morales v. Trans
World Airlines, 112 S.Ct. 2031 (1992). Morales set
forth the test for whether Section 1305 pre-empts state
law: “State enforcement actions having a connection with
or reference to airline ‘rates, routes, or services’ are pre-
empted.” 112 S.Ct. at 2037 (emphasis added). The
Court made clear that the language of Section 1305, like
the similarly worded ERISA pre-emption provision, has
‘an expansive sweep” and is “conspicuous for its breadth.”
Id. (quotations omitted).
The Illinois Supreme Court acknowledged that respond-
ents’ claims against American involve airline “rates,
routes or services,” and so held when it pre-empted the
claims for injunctive relief.’ It nevertheless ruled that
respondents’ damage claims were not pre-empted by Sec-
tion 1305. In so ruling, the court ignored the precise
terms of Section 1305 and the congressional purpose in
enacting that provision, and failed to give “expansive
7
sweep” to Section 1305’s “relating to” language.
® That conclusion is inescapable. Respondents claimed a state law
right to purchase any seat on any American flight (7.e., airline
“services”), at particular AAdvantage fares (i.e., “rates’). They
directly challenged American’s right to allocate the number of seats
available on any given flight to passengers who want to purchase
a ticket with AAdvantage travel awards. Nothing could relate more
directly to the services of an airline than the number of flights and
seats a carrier makes available for passengers who want to purchase
a ticket and reserve a seat.
9
Without meaningful analysis, the court adopted what it
incorrectly described as “the prevailing view set forth in
West v. Northwest Airlines,” that:
section 1305(a)(1) pre-empts 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 airline services.
App. 4a (emphasis added).’° As Chief Justice Miller
confirmed in his concurring opinicn, the sole basis for the
Illinois Supreme Court’s conclusion that respondents’
damage claims were not pre-empted was “the majority’s
proffered distinction between laws of general application
and laws of specific application.” App. 7a.
10 The Ninth Circuit’s ruling in West was actually a minority
position. Compare Trans World Airlines, Inc. v. Mattox, 897 F.2d
773 (Sth Cir.) (Section 1305 pre-empts state statutory law of gen-
eral applicabilitv as applied to airfare advertising), cert. denied,
111 S.Ct. 307 (1990): O’Carroll v. American Airlines, Inc., 863
F.2d 11 (5th Cir. 1989) (Section 1305 pre-empts state common law
of general applicability as applied to terms and conditions of air
passenger’s ticket); Illinois Corporate Travel, Inc. v. American
Airlines, Inc., 889 F.2d 751 (7th Cir. 1989) (Section 1305 pre-empts
state statutory and common law of general applicability as applied
to advertising of discount airfares), cert. denied, 495 U.S. 919
(1990); Anderson v. USAir, Inc., 818 F.2d 49 (D.C. Cir. 1987)
(Section 1305 pre-empts state common law claims of general appli-
cability as applied to dispute over airline seating). In fact, the
analysis adopted in West has not uniformly been applied even within
the Ninth Circuit. See Federal Express Corporation v. California
Public Utilities Commission, 936 F.2d 1075 (9th Cir. 1991), cert.
denied, 112 S.Ct. 2956 (1992). This Court’s treatment of Federal
Express is illuminating. The petition for certiorari in that case
was held pending the decision in Morales. After Morales was de-
cided, the petition was denied. In Federal Evrpress, the Ninth Cir-
cuit held that Section 1305 pre-empted certain state tariffs as applied
to the ancillary trucking operations of air courier services, even
though those laws applied to all intrastate trucking operations and
did not specifically target airline services. By letting that decision
stand, while vacating and remanding West, the Court made clear
that the analysis in West was incompatible with Morales.
——————————
10
In Morales, this Court explicitly considered and
flatly rejected precisely the analysis applied by the IIli-
nois Supreme Court to decide this case. Morales held that
reading Section 1305 to pre-empt “only State laws spe-
cifically addressed to the airline industry” would create
“an utterly irrational loophole.” 112 S.Ct. at 2038. The
opinion made plain that “there is little reason why state
impairment of the federal scheme should be deemed ac-
ceptable so long as it is effected by the particularized
application of a general statute.” Jd. The Court con-
cluded that the distinction between laws of specific and
general applicability that is the basis of the decision be-
low “ignores the sweep of the ‘relating to’ language” in
Section 1305. Jd. Drawing on ERISA precedents, the
Court held that a state law can “relate to” airline rates,
routes, or services “even if the law is not specifically
designed” to affect airline rates, routes, or services, “or
the effect is only indirect.” Jd."
B. West and Cipollone Confirm That The Pre-emption
Analysis Adopted By The Illinois Supreme Court
Was Erroneous.
This Court vacated and remanded the Ninth Circuit’s
decision in West v. Northwest Airlines for reconsidera-
tion in light of Morales, presumably because West’s in-
terpretation of Section 1305 rested on the erroneous dis-
tinction between general and specific laws. 112 S.Ct.
2932 (1992). The Illinois Supreme Court’s express reli-
ance on Wesi requires identical treatment here.
Indeed, given the similarities between West and the
ruling below, this Court’s disposition of West precludes
any argument by respondents that certiorari should be
denied in this case. West also involved state common law
11 Quoting from Ingersoll-Rand Co. v. McClendon, 111 S.Ct. 478,
483 (1990) (ERISA “relating to” language pre-empts state law
“even if the law is not specifically designed to affect ... plans, or
the effect is only indirect’).
ee a a
11
compensatory and punitive damage claims.’* The opinion
in Morales makes clear that the Court perceives no dis-
tinction for pre-emption purposes between statutory and
common law claims: ‘This case therefore appears to us
much like Pilot Life, in which we held that a common-law
tort and contract action seeking damages ... was pre-
empted.” Morales, 112 S.Ct. at 2039. And this Court’s
disposition of the petition in West confirms that its ruling
in Morales applies not only to statutory claims, but also
to common law claims."
This Court’s recent decision in Cipollone v. Liggett
Group, Inc., 112 S.Ct. 2608 (1992), also confirms that the
common law claim at issue here should not be treated
differently from the statutory claim for pre-emption pur-
poses. As Justice Stevens’ opinion states, “[sjince Erie
R. Co. v. Tompkins, 304 U.S. 64 (1938), we have recog-
nized the phrase ‘state law’ to include common law as
well as statutes and regulations.” 112 S.Ct. at 2620.
Section 1305 expressly pre-empts all state law. Accord-
ingly, Section 1305 clearly pre-empts common law claims.
Cipollone emphasized that even the statutory phrase “no
requirement or prohibition,” which is much narrower
than the “expansive” statutory phrase at issue here,
“sweeps broadly and suggests no distinction between posi-
tive enactments and common law; to the contrary, those
words easily encompass obligations that take the form
of common law rules.” Jd. (citation omitted). See also
id. at 2632 (Scalia, J., dissenting).
12923 F.2d at 658-59 (“West .. . filed claims in state court for
breach of the covenant of good faith and fair dealing under Montana
law ... seeking both compensatory and punitive damages” ).
13Tn any event, this case, like Morales, also involves a statutory
claim.
14The Court’s recent ruling in Gade v. National Solid Wastes
Management Association, 112 S.Ct. 2374 (1992), makes clear that
pre-emption analysis does not depend upon the purpose for which
a State enacts or enforces a law. Rather, pre-emption analysis must
12
C. Under The Correct Pre-emption Analysis, The De-
cision Of The Illinois Supreme Court Cannot Stand.
The conclusion of the Illinois Supreme Court that re-
spondents’ damage claims survive Section 1305 is clearly
erroneous under the test established in Morales. The state
airfare advertising restrictions at issue there, which were
contained in the Guidelines of the National Association
of Attorneys General (““NAAG Guidelines’), were pre-
empted by Section 1305 because they: “establish binding
requirements as to how tickets are to be marketed,” “cre-
atie] an enforceable right” to a particular fare ‘when
the advertisement fails to include the mandated explana-
tions and disclaimers,” and have a “significant impact
upon the airlines’ ability to market their product, and
hence a significant impact upon the fare they charge.”’
Morales, 112 $.Ct. at 2039-40.
The claims pressed by respondents likewise seek to
create “binding requirements” and “enforceable rights”
between American and millions of AAdvantage members.
The relief respondents seek would require American to
accept pre-1988 mileage credits as payment for “any
available seat in the class of service provided.” Wolens
Complaint, Count I, "138; App. 33a. Moreover, respond-
ents’ claims seek restrictions on an airline’s ability to use
capacity controls and blackout dates that are similar to
the restrictions on capacity controls and blackout dates
contained in the NAAG Guidelines, other portions of
which were at issue in Morales.’ If respondents pre-
also consider the “practical impact” of state enforcement. 112 S.Ct.
at 2387 (‘“‘Whatever the purpose or purposes of the state law, pre-
emption analysis cannot ignore the effect of the challenged state
action on the pre-empted field.’’).
15 See Morales, 112 S.Ct. at 2041, 2048-52 (setting forth NAAG
Guidelines). Excerpts from those Guidelines are reprinted in the
Appendix at App. 55a. The Guidelines specifically provide that an
airline imposing “capacity controls” on the availability of frequent
flyer awards “‘must clearly and conspicuously disclose in its frequent
flyer program solicitations, newsletters, rules and other bulletins the
13
vail, Illinois law will in effect require compliance
with the provisions of the NAAG Guidelines that restrict
carriers’ ability to use capacity controls and blackout
dates to maintain a reasonable balance between the de-
mands of revenue paying passengers and the travel serv-
ices provided to frequent flyer program participants.
Capacity controls and blackout dates are commonplace
features of frequent flyer programs. Indeed, the United
States Department of Transportation has recently en-
dorsed them as “legitimate methods for controlling the
cost of frequent flyer plans” and has noted that, “[w]ith-
out such restrictions, carriers might choose to terminate
or cut back the programs.’’ DOT Order in Nos. 46280,
47539 (May 29, 1992) at 13; App. 8la. DOT concluded
that enforcement of the capacity control and blackout
provisions of the NAAG Guidelines would have a signifi-
cant impact upon airlines’ ability to control the costs of
frequent flyer programs. DOT Order at 4, 4 n.3, and 138;
App. 69a and 81la."®
This Court has ruled that the principles of Chevron
U.S.A., Inc. v. Natural Resources Defense Council, 467
U.S. 837 (1984), compel deference to reasonable agency
interpretations of the pre-emptive scope of federal stat-
utes administered by the agency. F.g., Massachusetts v.
Morash, 109 S.Ct. 1668, 1673-74 (1989) (deferring to
agency interpretation of ERISA pre-emption language) ."’
specific techniques used .. . to control capacity.”” NAAG Guidelines
§ 3, 3.0.1; App. 56a. Likewise, the Guidelines restrict the ability
of airlines to alter the availability of flights for so-called ‘vested
members,” unless the airline has made a previous disclosure in the
precise terms and using the precise method prescribed in the Guide-
lines. Jd. § 3, 3.1.1; App. 57a.
16 Similarly, in Morales, the Court concluded that enforcement of
the portions of the NAAG Guidelines at issue there would have a
“significant effect’ on airline fares. 112 S.Ct. at 2040.
17 The Court noted in Morales that DOT ‘“‘retains the power’ to
prohibit airline practices that do not promote competition, and
14
DOT’s order thus confirms what the statutory text and
this Court’s ruling in Morales make plain: Section 1305
expressly pre-empts the state law claims at issue here.
As DOT stated:
state contract laws of general applicability cannot
authorize a determination of whether individual
terms and conditions of a carrier’s program are fair
and reasonable, to the extent they relate to an airline’s
rates, routes and services. Such state regulation is
preempted under section 105 [49 U.S.C. § 1305] of
the Act.
DOT Order at 15; App. 83a. DOT’s interpretation of
Section 1305 thus controls the present case.'*
For these reasons, the decision of the Illinois Supreme
Court must be vacated and remanded for reconsideration
in light of Morales.
Il. IN THE ALTERNATIVE, THIS COURT SHOULD
GRANT PLENARY REVIEW TO RESOLVE A
DIRECT CONFLICT BETWEEN THE ILLINOIS
SUPREME COURT AND THE U.S. COURT OF
APPEALS FOR THE SEVENTH CIRCUIT, AND
TO CONSIDER THE IMPORTANT QUESTIONS
PRESENTED BY THIS CASE.
If this Court does not vacate and remand for reconsid-
eration in light of Morales, plenary review is imperative
heeause the decision cf the Illinois Supreme Court con-
flicts directly with the Seventh Circuit’s ruling in /Jlinois
Corporate Travel, Inc. v. American Airlines, Inc., 889
indicated that the Court would defer to exercises of that power.
Morales, 112 S.Ct. at 2049. DOT has recognized that flexibility in
the administration of frequent flyer programs promotes competition
because frequent flyer programs are a principal “means of compet-
ing for passengers.’””’ DOT Order at 12; App. 80a.
18 The DOT Order was issued after the Illinois Supreme Court’s
decision. This case should thus be remanded for the additional
reason of giving the Illinois Supreme Court the benefit of the DOT
Order in deciding the issues presented here.
15
F.2d 751 (7th Cir. 1989), cert. denied, 495 U.S. 919
(1990). This direct conflict between courts with concur-
rent geographic jurisdiction would require immediate ac-
tion by this Court irrespective of Morales.
The Illinois Supreme Court held that claims for dam-
ages under the Consumer Fraud Act are not pre-empted
by Section 1305 because that Act does not specifically
relate to rates, routes, or services. App. 4a. However,
in Jllinois Corporate Travel, the Seventh Circuit (per
Easterbrook, J.) held that a damage claim asserted un-
der the same section of the Consumer Fraud Act was
pre-empted by Section 1305, even though the Act was a
law of general applicability. 889 F.2d at 754.
The Illinois Supreme Court also ruled that Section
1305 does not pre-empt any state common law contract
claims for damages, because such claims do not specifically
relate to rates, routes, or services. App. 4a. In Illinois
Corporate Travel, however, the Seventh Circuit held that
the state common law damage claims for “breach of a
contractual duty of good faith and fair dealing’ and for
“tortious interference with contractual relations” at issue
there were pre-empted, even though those common law
claims did not specifically relate to rates, routes, or
services.’®
Thus, a square conflict presently exists between the
Illinois Supreme Court’s decision in Wolens—damage
claims under state statutory and common laws of general
applicability can never be pre-empted by Section 1305—
and the Seventh Circuit’s decision in Jilinois Corporate
Travel—damage claims under state statutory and com-
mon laws of general applicability can be pre-empted by
Section 1305. This conflict is particularly unseemly be-
19 See Illinois Corporate Travel, Inc. v. American Airlines, Inc.,
682 F. Supp. 378, 379 (N.D. Ill. 1988), expressly pre-empting all
of the claims asserted under state common law, but granting leave
to replead one count to allege violations of the federal common law
of contract. That decision was affirmed by the Seventh Circuit.
16
cause identical statutory and common law claims, between
identical parties, would not be pre-empted if brought in
state court in Illinois, but would be pre-empted if brought
in federal court in Illinois.
A conflict of this nature cannot be allowed to stand
because it leaves the pre-emptive effect of federal law on
actions brought in Illinois in confusion, and encourages
blatant forum shopping. The Court’s decision in Morales,
and in particular its citation with approval of Judge
Easterbrook’s analysis in //linois Corporate Travel, see
Morales, 112 S.Ct. at 2039, make clear how this conflict
should be resolved. But if the Court does not vacate and
remand, this ongoing and particularly unseemly conflict
between courts of concurrent geographic jurisdiction will
continue. Thus, if the Court does not vacate and remand,
plenary review must be granted to ensure that this con-
flict will be resolved promptly.
Should the Court grant certiorari to resolve this con-
flict, additional questions presented by this case would
warrant plenary consideration. The Court should con-
sider, for example, whether the Commerce Clause bars
respondents’ claims.” The application of Illinois law to
the myriad transactions at issue in this case—the vast
majority of which occurred wholly outside Illinois—would
effectively constitute “the projection of one state regula-
tory regime into the jurisdiction of another State.” Healy
v. Beer Institute, Inc., 491 U.S. 324, 109 S.Ct. 2491, 2499
(1989) .*?
20In addition, the Court should consider whether respondents’
claims are implicitly pre-empted because they stand as an obstacle
to the federal goals of airline deregulation.
21 See also id. at 2497 (“a state law that has the practical effect
of regulating commerce occurring wholly outside that State’s bor-
ders is invalid under the Commerce Clause”) ; Brown-Forman Dis-
tillers v. N.Y. Liquor Auth., 476 U.S. 573, 586 (1986) (Blackmun,
J.. concurring) (statute that “operates to affect out-of-state trans-
actions . . . violates the Commerce Clause’’).
TT
17
Furthermore, because of the inherently interstate
nature of air travel, and of transactions between pas-
sengers and airlines, the application of Illinois law sought
by respondents presents a real danger that Illinois will
dictate a de facto national standard for frequent flyer
programs. Under the Commerce Clause, establishment
of national standards is the prerogative of the federal
government, not of the States. It is clear that “a state
may not impose a burden which materially affects inter-
State commerce in an area where uniformity of regula-
tion is necessary.” Huron Portland Cement Co. v. City
of “Detroit, 362 U.S. 440, 444 (1960); Southern Pacific
Co. v. Arizona, 325 U.S. 761, 767 (1945). The applica-
tion of Illinois law urged by respondents would have
precisely that effect: to guard against liability in Illi-
nois, American would have to tailor its frequent flyer
practices nationwide to conform to Illinois law. This
Court should grant certiorari to establish that the Com-
merce Clause bars 2 State from enforcing state laws in
a way that would effectively impose a national standard.
CONCLUSION
The petition for certiorari should be granted and the
Opinion and Judgment of the Illinois Supreme Court
should be vacated and remanded for reconsideration in
light of Morales. In the alternative, the petition should
be granted and the case should be set for plenary review.
Respectfully submitted,
BRUCE J. ENNIS, JR. JEROLD S. SOLOVY *
DONALD B. VERRILLI, JR. MARGUERITE M. TOMPKINS
JENNER & BLOCK JENNER & BLOCK
601 Thirteenth Street, N.W. One IBM Plaza
Washington, D.C. 20005 Chicago, Illinois 60611
(202) 639-6000 (312) 222-9350
August 7, 1992 * Counsel of Record
APPENDICES
INDEX TO APPENDICES
APPENDIX A
Opinion and Judgment of the Illinois Supreme
Court, March 12, 1992
APPENDIX B
Opinion of the Illinois Appellate Court, Third
Division, December 12, 1990
APPENDIX C
Memorandum Opinion and Order of the Circuit
Court of Cook Coun%y Illinois, March 20, 1989)
APPENDIX D
Complaint in No. 88 CH 7554, Wolens, et al. v.
American Airlines, Inc.
APPENDIX E
Complaint in No. 89 CH 119, Tucker v. American
Airlines, Inc.
APPENDIX F
National Association of Attorneys General, Task
Force on the Air Travel Industry, Revised Guide-
lines (Excerpts)
APPENDIX G
Order Dismissing Complaint and Denying Petition
for Rulemaking, Dovket Nos. 46280, 47539, United
States Department of Transportation, May 29,
1992
SAIL
Pate & 4.
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APPENDIX A
SUPREME COURT OF ILLINOIS
Docket No. 71418—-Agenda 31—September 1991
MYRON (MIKE) WOLENS et al.,
Appellees,
V.
AMERICAN AIRLINES, INC.,
Appellant.
[Filed Mar. 12, 1992]
JUSTICE HEIPLE delivered the opinion ef 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
motion to dismiss, the trial court granted defendant’s
motion for certification for interlocutory appeal. The
appellate court affirmed the order of dismissal. 207 IIl.
App. 3d 35.
Plaintiffs are participants in defendant’s American
Airlines AAdvantage (AAdvantage) frequent flyer pro-
gram. In 1988 they filed a class action against defend-
ant, alleging that they enrolled in the AAdvantage pro-
gram pursuant to a national membership campaign by
defendant. Once enrolled, plaintiffs received various com-
munications from defendant setting forth the benefits
of the program and the mileage credits necessary for
2a
receipt of those benefits. Plaintiffs used defendant’s air-
line, and used the facilities of other organizations that
participated in the AAdvantage program, including other
airlines, hotels, and car rental companies, in order to
accumulate mileage credits for use in the program. Ac-
cording 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 retro-
actively modifying the rules of the AAdvantage program
constituted a breach of defendant’s contracts with plain-
tiffs and al! 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.).
Plaintiffs sought money damages and an injunction pre-
venting 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 Federai 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 re-
manded 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 Federal
actions by section 1305 or its legislative history. Wolens
v. American Airlines, Inc. (N.D. IIl., Oct. 25, 1988),
No. 88-C-8158.
On remand; defendant moved to dismiss plaintiffs’
action 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-
ee
3a
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.
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 piaintiffs’ 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 interstate
conimerce.
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 circuit
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, how-
ever, that the attempt to enjoin defendant’s application
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 (TIIl.
Const. 1970, art. VI, §4/c)), and Supreme Court Rule
316 (134 Ill. 2d R. 316). We affirm.
4a
Section 1305(a) provides in part:
“|Njo 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).)
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 im-
plicitly preempted under section 1802(a)(7) of the Fed-
eral 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
——————————————
5a
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.
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 661.) 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
program 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
6a
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.
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 13805(a) (1) of the
Federal Aviation Act (49 U.S.C. $ 1805(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
application, 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 exclusively 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 v. 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 application is auto-
matically saved from preemption. Indeed, one apparent
and unsustainable consequence of the majority’s reason-
ing would be to shield from preemption all common law
actions and remedies, which by their nature have general
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-
ne ee
7a
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
ent rely at airlines, may not be used to control the seating
of aircraft passengers. (See O’Carroll v. American Air-
lines, Inc. (5th Cir. 1989), 863 F.2d 11; Anderson v.
USAitr, Ine. (D.C. Cir. 1987), 818 F.2d 49; Hingson v.
Pacific Southwest Airlines (9th Cir. 1984), 743 F.2d
1408; Hastalis v. Human Rights Comm’n (1990), 205 Il.
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 genera! 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), 468 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 regulation
would be inconsistent with the comprehensive Federal
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, Ine. v.
Paul (1963), 373 U.S. 132, 142-43, 10 L. Ed. 2d 248,
257, 88 S. Ct. 1210, 1217), or when the State law stands
8a
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 Federai law is solelv
a question of Congressional intent. (California Federal
Savings & Loan Association v. Guerra (1987), 479 U.S.
272, 280, 93 L. Ed. 2d 618, 623, 107 S. Ct. 683, 107 S. Ct.
683, 689.) In this regard, we may consider the presump-
tion against preemption in areas of law traditionally reg-
ulated by the States. (Metropolitan Life Insurance Co. v.
Massachusetts (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 Con-
gress has ‘unmistakably . . . ordained’ [citation] that its
enactments alone are to regulate a part of commerce, state
laws regulating that aspect of commerce must fall.”’ Jones
v. Rath Packing Co. (1977), 480 U.S. 519, 525, 51 L. Ed.
2d 604, 614, 97 S. Ct. 1805, 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 fall within its scope. Section 1305(a)(1) of the
Act provides, in pertinent part:
“!NJo 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 U.S.C. § 1805(a) (1)
(1988).)
As construed by the courts, section 1805(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), 9386 F.2d
————
9a
1075, 1078 (“|DJespite the very broad and apparently all-
inclusive language of [section 1805(a) (1) ], common sense
and common practice have forbidden that the statute 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
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. Tt seems clear, then, that a primary purpose of the
nreemption provision contained in the 1978 amendatory
act was to prevent the States from attempting to re-reg-
ulate air carriers, by imposing their own potentially con-
flicting requirements, after Congress had deregulated the
airline industry. (New England Legal Foundation v. Mas-
sachusetts Port Authority (1st Cir. 1989), 888 F.2d 157,
173; Freeman, State Regulation of Airlines and the Aitr-
line Deregulation Act of 1978, 44 J. Air L. & Com.
747, 755-55 (1979).) This is not to suggest that the range
of State activity preempted bv section 1805(a) (1) is nee-
essarily coextensive with the regulatory apparatus dis-
mantled 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, 1978-79), then it must be con-
cluded that the claims raised here fall outside the intended
reach of that provision. The plaintiffs allege breach of
eontract and violations of the Consumer Fraud and De-
centive Business Practices Act (Ill. Rev. Stat. 1989, ch.
a
10a
121's pars. 261 through 272). By their complaints, the
plaintiffs seek to enforce certain State-law-based statu-
tory and common law rights. These claims are not regu-
latory in force or effect. They do not establish the rates
airlines must charge, or determine the routes airlines
must fly, or dictate the services airlines must provide.
The plaintiffs’ claims do not threaten the defendant air-
line with economic regulation, which Congress intended
to prevent the States from imposing on a deregulated
aiciine 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 Act. Section 1506 provides:
“Nothing in this chapter shall in any way abridge
or alter the reemdies now existing at comon law or by
statute, but the provisions of this chapter are in addi-
tion to such remedies.” (49 U.S.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 (5th Cir. 1990),
897 F.2d 773, 783, appeal after remand (1991). 924 F.2d
1055, cert. granted (1991), US. . 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
7
lla
added the preemption provision. Congress apparently be-
lieved that some statutory and common law remedies
(see, e.g., Nader v, Allegheny Atrlines, Inc. (1976), 426
U.S. 290, 48 L. Ed. 2d 648, 96 S. Ct. 1978; Brunswasser
v. Trans World Airlines, Inc. (W.D. Pa. 1982), 541 F.
Supp. 15388) would in fact survive the enactment of sec-
tion 1305(a) (1).
As a final matter, I 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
Ss. 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
premature to attempt to determine in this interlocutory
appeal whether that form of relief would be preempted
by Federal law. The question whether the plaintiffs may
obtain injunctive relief under the Consumer Fraud and
Deceptive 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.
APPENDIX
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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 AAdvan-
tage frequent flyer program and solicited public member-
ship in the program through advertisement in the na-
tional 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
susiness 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.
ae
l4a
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.IIl., 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 Com-
merce Clause because subjecting airlines to state con-
sumer fraud and common law contract claims would im-
pose a burden on interstate commerce.
On March 20, 1989, the circuit court entered 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-
1l5a
tiffs’ claims are preempted by the Federal Aviation Act
of 1958, as amended, 49 U.S.C. §§ 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, Ine. (5th 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:
ce
Nilo State or political subdivision thereof and no
interstate agency or other political agency of two
l6a
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 * * *.”
Defendant argues that all of plaintiffs’ claims are
directly related to defendant’s rates or services and,
therefore, 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 v. USAir, Inc. (D.C.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 Crash
Disaster at John F. Kennedy International Atrport on
June 24, 1975 (2nd Cir. 1980), 635 F.2d 67; Wolst v.
American Airlines, Inc. (N.D.Ill. 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-
17a
cluding discrimination against the handicapped. The
court of appeals in Hingson and the federal district court
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; ln re Air Crash Disaster at John F. Ken-
4, 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:
[llinois Corporate Travel, Ine. vs Ame rican Airlines, Ine.
(N.D.II]. 1988), 682 F.Supp. 378, 380 n.1, aff’d 889
F.2d 752; Wolst v. American Airlines, Inc. (N.D.IIl.
1987), 668 F.Supp. at 1119: Brunwasser ». Trans World
Airlines, Inc. (W.D.Penn. 1982), 541 F.Supp. at 12345;
Stream Aviation, Inc. v. Anders Production, Ine. (a.
1987), 517 So.2d 1157; Pe ople v. Western Airlines, Ine.
(1984), 155 Cal.App.3d 597.
nedy International Airport On June y
We are aware that some courts have reached an op-
posite conclusion. (See Mattox v. Trans World Airlines,
Inc. (5th Cir. 1990), 897 F.2d 773; and O’Carroll v.
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:
l&a
“We disagree with Northwest and the district court
that. ‘law\|s| .. . relating to airline services’ en-
compasses all state laws that affect airline serv-
ices, however 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 Section 1305(ai (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 air services.
Thus, state laws that merely have an effect on air-
line services are not preempted (e nphasis 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 have
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.Fed.2d
643 ‘holding that any impact en 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. Chicayo, 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.
II. Implied Preemption
Defendant argues that the extensive regulation of the
field of aviation by Congress and the Department of
Transportation demonstrate congressiona! intent to oc-
19a
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), 1581) and the provisions of
the Civil Aeronautics Board Sunset Act of 1984 (“Sun-
set Act”) (P.L. No. vd-4d , 98 S at. i703). Defendant
argues t 1
tended that the Soca ment of Se atalios have ex-
4 ; +. 1; ‘ “1. ae
lat these auth ties establish that (¢ ongress 1n-
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 aciions against an airline for engaging in deceptive
practices. See New York v. Trans World
F.Supp. at 177.
Airlines, 728
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 *y section 1106 of
the Federal Aviation Act (49 U.S.C. § 1506). Nader,
26 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
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.
20a
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-
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-
‘ates 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.
III. 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.
1The statements defendant relies on are contained in House
Report 793 (H.R. No. 793, 9&th 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.”
|
21a
In our discussion above, we pointed out that plaintiffs
could not maintain a private action for injunctive relief
inder the Consumer Fraud Act and that any attempt to
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 tne (Commerce (‘luuse are moot,
In conclusion, we find that although plaintiffs’ claim
for injunctive relief are expressly preempted by section
1305, plaintiffs’ common law and statutory damage claim
are neither expressly or implicitly preempted Accord
~ ] 4 c ro | “ =a 4 “ . ) 4 ]
ingly, the order of the cireuit cour denying defendan
on to (| ffi} ec
A LT,’ > :
‘Al | [} Vike D.
RIZZI and FREEMAN J.J.. coneurring.
f [T¢ j j 4 i t }
| | (‘ou)
99.
APPENDIX C
IN THE CIRCUIT COURT
OF COOK COUNTY, ILLINOIS
COUNTY DEPARTMENT, CHANCERY DIVISION
MYRON (MIKE) WoLENS, ef al.,
AMERICAN AIRLINES.
De fendant.
MEMORANDUM OPINION AND ORDER
[Entered Mar. 20, 1989]
The complaints in these consolidated cases in sum allege
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-
a
23a
sumer Fraud and Deceptive Business Practice Act, IIl.
REV.STAT. ch. 12114, para. 261-272 (1987).
In both cases AA has filed identical motions to dismiss.
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 Aviation Act of
1958, as amended, 49 U.S.C. see. 1301-1557, its aeccom-
panying federal regulations and by the Commerce Clause
of the United States Constitution. Specifically, AA con-
tends that 49 U.S.C. see. 1305(a) expressly preempts any
statutory or common law cause of action which would
afford plaintiff relief and that Congress intended to re-
move the states from any regulation of airlines. In addi-
tion, the defendant argues that the Commerce Clause bars
this action because to subject airlines to the state con-
sumer fraud and contract law would impose a burden
which materially affects interstate commerce in an area
previously regulated by federal law. United States Con-
stitution, Article I, section 8, cl. 3.
In response, the plaintiffs argue that 49 U.S.C. see.
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.”’ More-
over, Congress did not intend to preempt all state reme-
dies. The Commerce Clause does not bar prosecution of
these actions.
I.
These motions raise a question of statutory interpre-
tation. What is the affect of the apparent conflict between
49 U.S.C. see. 13805(a) and sec. 1506? See. 1506, enacted
August 23, 1958, reads as follows: “‘Nothing in this chap-
ter (same chapter as section 1305) 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.” As far as this court can
determine, sec. 1506 has not been explicitly repealed by
24a
any subsequent act of Congress. However, in 1978, Con-
gress enacted the Airline Deregulation Act, Pub. L. No.
95-505, 92 Stat. 1705. As part thereof, Congress enacted
49 U.S.C. see. 1805(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, see. 1805 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-
tiff’s enforcement of the Ilinois 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 Dee. 15, 1988).
As of this date, a motion to reconsider the interlocutory
Rivkin decision pends. There is no collateral estoppel
effect by Rivkin. Colbe v. Chicago Health Club, Ine. 53
Ill. App.3d 1019 (1st Dist. 1977). The analysis of Rivkin
is persuasive at best. However, this court is unpersuaded.
In Rivkin, Judge Hall determined that the Northwest
frequent flyer program related to rates because an affi-
davit 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
Or
ava
an interpretation would 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 wou!d
ludicrous to propose that anything which might con-
ribute to a determination of fare becomes the subject of
nreemption. 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
i163. (7th Cir. 1988}. To preempt enforcement of the
law contract would afford
AA an “impenetrable immunity” from enforcement of its
contracts. See Owen v. City of Atlanta, 157 Ga. App. 354,
38 (1981), aff'd 248 Ga. 299, 282 S.E.2d
906, cert. dented, 456 U.S. 972, 72 L. Ed.2d 846, 102
oa
consumer fraud act or a common
«4 t < i
—
ww
~~
Il.
AA arcues 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. 13881(a) and that DOT has exclu-
sive power over consumer matters. This court finds no
iority for that argument. Sec. 13802(a) (7)
ays 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). See.
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.
I
ITT.
Finally, AA argues that prosecution of the plaintiffs’
consumer fraud and contract actions constitute state
regulations which materially affect interstate commerce
J iei
aia
IN THE CIRCUIT COURT
OF COOK COUNTY, ILLINOIS
DEPARTMENT, CHANCERY DIVISION
88 CH 7554
consolidated with: 89 CH 119
JUDGE ARTHUR L. DUNNE, Presiding
MYRON (MIKE) WCLENS, et al..
Plaintiff.
AMERICAN AIRLINES, INC.,
De f ¢ ndant.
Pla in f iff,
AMERICAN AIRLINES,
Defendant.
ORDER
(Entered Mar. 21, 1989}
'SE COMING ON TO BE HEARD on De-
to Dismiss the Complaints, as consoli-
2-619 of the illinois Code of Civil
THIS CAT
fendant’s Motion
ta Sec,
having heard arguments of counsel
Memoranda of Law and otherwise
pursuant
Procedure. the Court
and havine examined
ily advised in the premises:
IT IS HEREBY ORDERED
Defendant’s Motions to Dismiss pursuant to Sec. 2-619
of the Illinois Code of Civil Procedure are denied for
the reasons set forth in the Court’s Memorandum
Opinion and Order.
2. 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.
3. Defendant shall have leave to file a Reply brief, limited
to 12 pages, within 14 days thereafter.
1 Hearing on Defendant’s 2-615 Motion to Strike is set
for May 2, 1989, at 11:00 a.m., without further notice
5. Defendant shall file an answer to the Complaint within
10 davs thereafter, on or before May 12, 1989.
Atty No. 90513
Name Gilbert W. Gordon
MARKS. MARKS AND KAPLAN, LTD.
Attorney for Plaintiffs
Address 30N. LaSalle St., #3040
City Chicago, IL 60602
Telephone (312) 332-5200
ICONTER:
s/ Arthur L. Dunne
Judge
2a
APPENDIX D
IN THE CIRCUIT COURT
OF COOK COUNTY, ILLINOIS
COUNTY DEPARTMENT—CHANCERY DIVISION
No. 88CH7554
MYRON (MIKE) WOLENS, ALBERT J. GALE, R. CRAIG
ZAFIS, BRET MAXWELL and ROBERT NELSON, individually
and on behalf of all others similarly situated,
Plaintiffs,
v.
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 sin ‘arly 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
30a
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
Program, 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 cf 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 facilties so used.
4. The class which the named Plaintiffs represent con-
sists of persons of the United States who, like the named
gla
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 effected 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. 12114 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 acecumu-
lated prior to May 18, 1988, which were adversely effected
32a
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 prosecution 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 ereate 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 te May 18, 1988, accepted by joining the Program,
traveling on the Defendant’s airline and or using the
facilities and services of other participants in the Pro-
gram, and thereby, earned mileage credits under the Pro-
gram 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
33a
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
accumulated 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-
giam 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
34a
and the elass 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
accumulating mileage credits under the Program prior
to May 18, 1988, for which they were entitled to the
benefits available 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
offered 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, 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 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 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 aforede-
scribed, together with punitive damages in such
sum as shall be deemed fit;
tea eae eel
35a
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 connection
with the prosecution of this cause; and
EK. For such other and further relief as this Court
may deem fit to grant in fashioning a remedy
for the named Piaintiffs and the class they
represent.
COUNT II
(AT LAW)
CLASS ACTION
1-9. Paragraphs 1 through 9, inclusive, of Count I
are hereby re-alleged as Paragraphs 1 through 9, in-
clusive, 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) WOLENS,
ALBERT J. GALE, R. CRAIG ZAFIS, BRET MAX-
WELL and ROBERT NELSON, individually and on be-
half of the class of persons similarly situated, respectively
pray the Honorable Court:
A. To determine the class and thereupon certify this
claim as a class action in order that the named
36a
Plaintiffs and their attorneys may represent 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 III
(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
37a
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 relianee upon the said solici-
ations, each named Plaintiff and class member, prior to
May 18, 1988, joined the Program, traveled on the De-
fer dant’s airline and/or used the facilities and services
of other participants in the Program and thereby earned
wee 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.
5 i
12-13. Paragraphs 13 and 14 of Count I of this Com-
plaint are hereby re-alleged as Paragraphs 12 and 13
this Count III hereof as though set out in full in said
Count TI.
14. During the year 1988, in particular, the Defendant
induced each named Plaintiff and class members to fly
even more eee ed on the Defendant airline by offering
‘Triple Mileage” for each actual mile fiown. a
offered ‘ Triple Mileage” even though they knew that the
would institute capacity control restrictions which woul ’
limit the number of seats available and therefore dilute
the value of the mileage credits accumulated.
15. At no time either in its aforesaid solicitations or
otherwise, while inducing the named Plaintiffs and the
members of the class to earn and, more particularly, to
accumulate mileage credits and while said mileage credits
were, in fact, being earned and accumulated, did De-
fendant ever advise the said Plaintiffs and members of
the class that Defendant believed that it reserved the
right and would whenever it determined that it was in
its benefit so to do, retroactively restrict, suspend or
otherwise alter or reduce the benefits available under the
38a
Program for mileage credits theretofore earned, accumu-
ated and accrued thereunder, by the implementation of
4
C ACITV CO 1"( estrictions or othe WiIst
16. As a direct and proximate result of Defendant’s
aforesaid acts, the mileage credits earned, accumulated
and still retained by each named Plaintiff and member
of the class prior to Mav 18, 1988, were substantially
reduced in value as were those of members of the class
7
|
who earned mueage credits prior to May 18, 1988.
17. At all times material to this Complaint, there was
in full force and effect, as Sections 261, et seq. of Chap-
ter 121!. of the Illinois Annotated Statutes, an Act en-
titled: “The Consumer Fraud and Deceptive Business
2) 62 ‘9
Practice Act.
18. The aforesaid wrongful acts and omissions of the
Defendant constituted violations of the said Act by which
1 } ] f
each named Plaintiff and other member of the class suf-
fered damages as aforedescribed.
19. Section 10 of the Act authorizes any person who
suffers damages as a result of a violation of the Act
to bring an action against any other person who com-
mitted the act for such relief as the Court deems fit,
including reasonable attorney’s fees and costs.
26. Each named Plaintiff, member of the class and the
Defendant is a “person” as defined by said Act.
21. Paragraph 16 of Count I of this Complaint is re-
alleged as Paragraph 20 !sic] of this Count III hereof as
though set out in full in said Count ITI.
WHEREFORE, Plaintiffs, MYRON (MIKE) WOLENS,
ALBERT J. GALE, R. CRAIG ZAFIS, BRET MAX-
WELL and ROBERT NELSON) individually and on be-
half of the class of persons similarly situated, respectively
pray this Honorable Court:
A. To determine the class and thereupon certify this
+
claim as a class act
ion in order that the named
39a
»] ; SS see « . — — . . .
Plaintiffs and their attorneys may represent the
Ciass OF persons simuarly situated.
B. For judgment against the Defendant for dam
ges 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, was reduced by reason of the acts
f the Defendant aforedescribed, together with
C. A preliminary and permanent injunction enjoin-
ing the Defendant from applying any subsequent
changes in the Program Defendant may here-
‘ter make which reduce the benefits available
under the Program, _to the mileage credits
earned, accumulated and accrued prior to any
such subsequent changes made by the Defendant,
9713 — »r Va 1+o+7 , ant a: , ++} .
cluding any limitation oir seats of Imposition
D. For an award against the Defendants for costs
+
fees incurred for and
: a |
?
i
;
and reasonable attorney’s
E. For such other and further relief as this Court
may deem fit to grant in fashioning a remedy for
he named Plaintiff and the class they represent.
COUNT IV
(AT LAW)
CLASS ACTION
4
‘raphs 1 through 9, inclusive, of Count III
, +h . > . a — . o }} aac on wee —_—, ] 4 : scel
of this Complaint are re-alleged as Paragraphs 1 throug
9, inclusive, of this Count IV as though set out in full
40a
STATEMENT OF CLAIM
1-1 ¥ aphs 10 through 16, inclusive, of Count
] ] )
TT] { omp imi ane i eved a> Parag) iphs 19
‘ough 16, inclusive, of this Count IV as though set
17-2] Paragraphs 17 through 21. inclusive, of Count
III of tl Complaint are re-alleged as Paragraphs 17
t iwh 21. inclusive, of this Count IV as though set out
WHEREFORE, Plaintiffs, MYRON (MIKE) WOLENS,
ALBERT J. GALE, R. CRAIG ZAFIS, BRET MAX-
WELL and ROBERT NELSON, individually and on be-
e 4} = a = ituated. respective
J 1@ GCiaSs OI persons simllariV sltuatled, Yespecrl Ve
I
A. To determine the class and thereupon certify
this claim as a class action in order that the
named Plaintiffs and their attorneys may repre-
7 ]
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sent the class of persons similarly situated.
B. For judgment against the Defendant for dam-
ages 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, was reduced by reason of the acts
f the Defendant aforedescribed, together with
nunitive damages in such sum as shall be deemed
C. For an award against the Defendants for costs
able 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 further relief as this Court may
deem a 7 grant in fashioning a remedy for the
named Plaintiff and the class they represent.
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MyYRON (MIKE) WOLENS, ALBERT J.
GAYLE. R. CRAIG ZAFIS, BRET MAX
WELL and ROBERT NELSON, individu-
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APPENDIX E
IN THE CIRCUIT COURT
ILLINOIS
CHANCERY DIVISION
P, S. Tut on behalf of herself and all othe)
IM ila) la ed,
Plaintiff
VY.
\ ( AIRLINES, IN¢
reign corporatiol
De f ¢ ndant.
R TRIAL DEMANDED ON ALL ISSUES
AT LAW
CLASS ACTION
CTASS ACTION VM
COMPLAINT FOR
INJUNCTIVE AND OTHER R nD
Tucker, on behalf of her-
r 41 Ty?
Now comes the Plaintiff, P. S. Tucker, on
I ind >} ar:iyv sltuat d. complalning avgalnst
a ior-
Ts
defendant American Airlines, Ine. (“American”)
,
eign corporat nN, as 1OiOWS.:
COUNT I
IN CHANCERY)
THE CLASS ACTION
and internationa!
domestic
to do and does business in the
+} +° ]
ni rizead
43a
County of Cook and the State of Illinois. As a marketing
device for the purpose of encouraging greater use of its
airline facilities by the general public and, more particu-
larly, by frequent airline travelers, defendant created
more than 5 years ago a program entitled the “AAdvan-
tage” frequent flyer program (“Program”). Other com-
panies also participated with defendant in the Program,
including other airlines, hotel and rental car companies.
2. In consideration for use of defendant’s airline
and or the services or facilities of other participants with
defendant in the Program, defendant awarded mileage
credits which the traveler was both permitted and in-
duced 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.
3. 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 ma-
terials, including applications for membership in the
Program, a list of benefits and facilities available, and a
delineation of the mileage credits required to obtain the
specifically listed benefits.
4. To induce persons to join the Program and to fly
American and otherwise use 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 accumu-
lated, the greater the benefits he or she was entitled to
receive.
5. Prior to June 1, 1988, the named plaintiff accepted
defendant’s offer to join the Program; used defendant’s
airline, even if more costly or less convenient than others;
used the services and facilities of others participating
with defendant in the Program; and received and accumu-
44a
lated mileage credits for the miles traveled and services
and facilities used. As a result, prior to June 1, 1988,
plaintiff had accumulated and still retains mileage credits
in the Program.
6. Plaintiff brings this action on behalf of herself and
a class of persons who joined the Program prior to June
1, 1988, and who accumulated mileage credits as of such
date, which they either still retain or plan to use in
whole or part after June 1, 1988. The value of those
credits was substantially and adversely affected by de-
fendant who, effective June 1, 1988, announced numerous
changes in the Program retroactively applicable even to
those mileage credits accumulated prior to the changes.
7. The class of persons affected by the foregoing is so
numerous, consisting of approximately four million mem-
bers, that joinder of all memters is impracticable.
8. Questions of fact and law common to the Class
predominate over questions affecting only individual mem-
vers of the Class. Common questions of fact and law in-
1,
elude the following:
(a) whether defendant breached its contractual ob-
ligations when, after plaintiff and each Class member had
accepted defendant’s offer to join the Program and had
travelled upon defendant’s airline or used the services of
other participants in the Program and had accumulated
mileage credits, defendant altered the provisions of the
Program so as to substantially and adversely affect each
class member’s accumulated mileage credits; and
(b) whether defendant violated the Illinois Con-
sumer Fraud and Deceptive Business Practice Act (Ill.
Ann. Stat. ch. 12114, § 261, et seg.) by the conduct com-
plained of herein.
9. The named Plaintiff and her counsel will fairly and
adequately protect the interests of the Class. Plaintiff,
like all other members of the Class, had mileage credits
45a
in the Program accumulated prior to June 1, 1988, which
were adversely affected by defendant’s action in a like
manner, though not necessarily to the same extent, as all
other members of the Class. Plaintiff is represented by
counsel experienced in Class Action litigation.
10. A Class Action is the most fair, just and efficient
manner in which to adjudicate the claims arising out of
defendant’s conduct. Should individual actions be brought,
or be required to be brought by each individual member
of the Class, the resultant multiplicity of lawsuits would
cause undue hardship and expense for the Court and the
litigants. The prosecution of separate actions would also
create a risk of inconsistent rulings which might be dis-
positive of the interests of other Class members not par-
ties to the adjudications or substantially impede their
ability to protect their interests.
STATEMENT OF CLAIM
11. Through the described solicitation of Class mem-
bers, defendant. made a unilateral offer to plaintiff and
each Class member which each accepted by joining the
Program prior to June 1, 1988, and by traveling on
defendant’s airline and/or using the facilities and services
of other participants in the Program. As a result, plain-
tiff and the Class earned mileage credits under the Pro-
gram which the defendant induced them to retain, in-
crease, and accumulate.
12. As such mileage credits were earned and accumu-
lated by plaintiff and each Class member, each acquired a
vested contractual right to receive from defendant, and
defendant became contractually obligated to furnish to
plaintiff and each Class member, the benefits to which said
mileage credits were entitled under the Program in effect
when the mileage credits were earned and accumulated.
Although defendant reserved the right to restrict, sus-
pend, or otherwise alter aspects of the Program, it could
not do so retroactively as to mileage credits which had
46a
theretofore been earned and accumulated under the
Program.
13. Among the benefits to which plaintiff and each
member of the Class were entitled by reason of the mile-
age credits earned and accumulated prior to June 1, 1988,
were the following: (a) for 12,000 mileage credits accumu-
lated, an upgrade from coach to first class on any one
round trip ticket purchased, including discount fare or
otherwise restricted tickets with advance purchase re-
quirements tickets; and (b) for varying amounts of
mileage credits accumulated, various first class and other
class tickets to applicable destinations on available dates
for any of a specified number of seats available in that
class of service and upgrading of tickets from coach to
first class for domestic or international destinations.
14. Effective commencing June 1, 1988, defendant
unilaterally commenced a process pursuant to which it is
altering the benefits available to participants in the Pro-
gram, not only with reference to mileage credits earned
and accrued thereafter, but also retroactively for all
mileage credits which plaintiff and other members of the
Class had earned and accumulated prior to June 1, 1988.
Furthermore, American’s actual and proposed changes
are designed to make it substantially harder to earn
travel benefits subsequent to July 1, 1989. In addition,
American is instituting capacity control restrictions
which will make it substantially more difficult for Pro-
gram members to redeem their mileage credits for the
benefits promised to them. These capacity control re-
strictions include a greater number of blackout dates,
during which no flights are available, and limitation of
the number of seats allocated to Program members seek-
ing to redeem their mileage credits.
15. American’s modified frequent flyer program will
have two award levels. One, called Plan AAhead, has
lower requirements for benefits but greater restrictions
on their use. The other, called AAnytime, requires higher
_—e—”
47a
mileage for benefits but has no blackout dates or other
restrictions.
16. In general, travel at peak hours and days—when
airlines have the least trouble filling seats—will be avail-
able as a frequent flier benefit only in the AAnytime
award program.
17. For instance, under the old award structure, it
took 50,000 miles to earn two free coach tickets to Hawaii.
Under the new structure, it will take 60,000 miles to get
two coach tickets under Plan AAhead awards, and 120,000
miles for two AAnytime award tickets.
18. Under the old rules, there are certain blackout
dates when awards cannot be used, which was the only
major restriction American imposed. In the future, the
restricted Plan AAhead awards will be available on “up
to 50 percent” of all the available American airliner
seats, a substantial reduction for most flights.
19. Another key change reduces the minimum number
of miles credited to a member’s account for each flight
taken, from 750 to 500 or the actual number of miles
flown, whichever is greater.
20. Through this unilateral reduction of benefits for
mileage credits earned prior to the changes being made
and which each traveler was induced by defendant to
increase and accumulate, American breached its contract
with the plaintiff and each Class member by, inter alia,
reducing the number of available seats pursuant to which
earned mileage credits can be used for benefits, thereby
reducing the value of mileage credits accumulated to date
and/or to be accumulated.
21. Unless this Court assumes equitable jurisdiction
and otherwise so ordc 3s, the defendant will not only im-
plement the foregoing changes but will continue to make
additional retroactive changes in the benefits offered un-
der the Program.
48a :
WHEREFORE, plaintiff, individually and on behalf
of the Class of persons similarly situated, asks this Hon-
orable Court:
A. To certify this claim as a Class Action in order
that plaintiff and her attorneys may represent the Class
of persons similarly situated;
B. For judgment against defendant for damages in
the amount that the value of the mileage credits earned
and accumulated by plaintiff and members of the Class
prior to June 1, 1988 was lessened by virtue of the de-
fendant’s conduct, together with such punitive damages
as may be found appropriate;
C. To enter a preliminary and permanent injunction
enjoining defendant from applying retroactively any of
the changes in benefits which it has purported to place
into effect, as well as any subsequent changes in the Pro-
gram which defendant may hereafter make which reduce
the benefits available under the Program to mileage cred-
its already earned and accumulated ;
D. To award costs and reasonable attorneys’ fees in-
curred on behalf of the plaintiff and members of the Class
in connection with the prosecution of this cause; a
E. For such other relief as this Court may deem fit
to grant in fashioning a remedy for plaintiff and mem-
bers of the Class.
COUNT II
(AT LAW)
CLASS ACTION
1-9. Paragraphs 1 through 9, inclusive, of Count I are
hereby realleged as if fully set forth in Count II.
STATEMENT OF CLAIM
10-21. Paragraphs 10 through 21, inclusive, of Count
I are hereby realleged as if fully set forth in Count II.
49a
WHEREFORE, plaintiff, individually and on behalf of
the Class of persons similarly situated, asks this Honor-
able Court:
A. To certify this claim as a Class Action in order
that plaintiff and her attorneys may represent the Class
of persons similarly situated;
B. For judgment against defendant for damages in
the amount that the value of the mileage credits earned
and accumulated by plaintiff and members of the Class
prior to June 1, 1988 was lessened by virtue of the de-
fendant’s conduct, together with such punitive damages
as may be found appropriate;
C. To enter a preliminary and permanent injunction
enjoining defendant from applying retroactively any of
the changes in benefits which it has purported to place
into effect, as well as any subsequent changes in the Pro-
gram which defendant may hereafter make which reduce
the benefits available under the Program to mileage
credits already earned and accumulated:
D. To award costs and reasonable attorney’s fees in-
curred on behalf of the plaintiff and members of the
Class in connection with the prosecution of this cause; and
Kk. For such other relief as this Court may deem fit to
grant in fashioning a remedy for plaintiff and members
of the Class.
COUNT III
(IN CHANCERY )
CLASS ACTION
1-9. Paragraphs 1-9, inclusive, of Count I are hereby
realleged as if fully set forth in Count III.
STATEMENT OF CLAIM
10. Plaintiff and each member of the Class were in-
duced to believe by defendant’s solicitations and promises
50a
that by joining the Program and using defendant’s air-
line and or the services and facilities of other Program
participants, each would earn specified mileage credits
which, if accumulated, could be redeemed for specified
benefits, including air travel tickets and ticket upgrades.
By making greater travel benefits available through re-
demption of correspondingly greater accumulated mileage
credits, defendant induced plaintiff and members of the
Class to increase, hold and accumulate their mileage
11. Consequently, plaintiff and members of the Class
joined the Program and traveled on defendant’s airline
and or used the facilities of other Program participants
in order to accumulate the greater mileage credits neces-
sary to obtain correspondingly greater travel benefits.
12. Prior to June 1, 1988, plaintiff and members of
the Class were entitled to redeem their accumulated mile-
age credits for specified travel benefits, such as airline
tickets and ticket upgrades from coach to first class.
13. Effective commencing June 1, 1988, defendant uni-
laterally commenced a process pursuant to which it is
altering the benefits available to participants in the Pro-
gram, not only with reference to mileage credits earned
and accrued thereafter, but also retroactively for all mile-
age credits which plaintiff and other members of the
Class had earned and accumulated prior to June 1, 1988.
Furthermore, American’s actual and proposed changes
are designed to make it substantially harder to earn
travel benefits subsequent to July 1, 1989. In addition,
American is instituting capacity control restrictions
which will make it substantially more difficult for Pro-
gram members to redeem their mileage credits for the
benefits promised to them. These capacity control restric-
tions include a greater number of blackout dates, during
which no flights are available, and limitation of the num-
ber of seats allocated to Program members seeking to re-
deem their mileage credits.
dla
14. During the year i988, in particular, defendant in-
duced plaintiff and members of the Class to fly even more
frequently on defendant’s airline by offering “Triple Mile-
age” for each actual mile flown. Defendant offered
“Triple Mileage” even though it knew that it would
change the terms of the Program and institute capacity
control restrictions which would have the effect of substan-
tially reducing the value of accumulated mileage credits.
15. At no time did defendant—-while inducing plaintiff
and members of the Class to earn and accumulate mile-
age credits—ever advise plaintiff and members of the
Class that defendant believed it had reserved the right to
retroactively restrict, suspend or otherwise alter or re-
duce the benefits available under the Program and that
defendant would take such action whenever it determined
that it would be benefitted by so doing.
16. As a direct and proximate result of defendant’s
conduct complained of herein, the value of the mileage
credits earned and accumulated by plaintiff and members
of the Class was substantially reduced.
17. At all times relevant and material to this Com-
plaint there was in full force and effect, as Section 261.
et seq., of Chapter 121'. of the Illinois Annotated Stat-
utes, an Act entitled: “The Consumer Fraud and Decep-
tive Business Practices Act” (the “Act’’).
18. The foregoing wrongful acts and omissions of de-
fendant constituted violations of the Act which resulted
in plaintiff and each member of the Class suffering dam-
ALES as described above.
19. Section 10 of the Act authorizes any person who
suffers damages as a result of a violation of the Act to
bring an action against any other person who committed
the violation for such relief as the Court deems fit, in-
cluding reasonable attorneys’ fees and costs.
= . . “~1 1 c 1 ‘7
20. The plaintiff, the members of the Class. and the
defendant are each “a person” as defined by the Act.
i)
VG
°1. Unless this Court assumes equitable jurisdiction
and otherwise so orders, the defendant will not only im-
plement the foregoing changes but will continue to make
additional retroactive changes in the benefits offered un-
der the Program.
WHEREFORE, plaintiff, individually and on behalf of
the Class of persons similarly situated, asks this Honor-
able Court:
A. To certify this claim as a Class Action in order
that plaintiff and her attorneys may represent the Class
of persons similarly situated ;
B. For judgment against defendant for damages in
the amount that the value of the mileage credits earned
and accumulated by plaintiff and members of the Class
prior to June 1, 1988 was lessened by virtue of the de-
fendant’s conduct, together with such punitive damages
as may be found appropriate ;
C. To enter a preliminary and permanent injunction
enjoining defendant from applying retroactively any of
the changes in benefits which it has purported to place
into effect, as well as any subsequent changes in the
Program which defendant may hereafter make which re-
duce the benefits available under the Program to mileage
credits already earned and accumulated ;
D. To award costs and reasonable attorney’s fees in-
curred on behalf of the plaintiff and members of the
Class in connection with the prosecution of this cause;
and
E. For such other relief as this Court may deem fit to
grant in fashioning a remedy for plaintiff and members
of the Class.
58a
COUNT IV
(AT LAW)
CLASS ACTION
1-9. Paragraphs 1 through 9, inclusive, of Count III
are hereby realleged as if fully set forth in Count IV.
STATEMENT OF CLAIM
10-21. Paragraphs 10 through 21, inclusive, of Count
ITl are hereby realleged as if fully set forth in Count IV.
WHEREFORE, plaintiff, individualiy and on behalf
of the Class of persons similarly situated, asks this Hon-
orable Court:
A. To certify this claim as a Class Action in order
that plaintiff and her attorneys may represent the Class
of persons similarly situated;
B. For judgment against defendant for damages in
the amount that the value of the mileage credits earned
and accumulated by plaintiff and members of the Class
prior to June 1, 1988 was lessened by virtue of the de-
fendant’s conduct, together with such punitive damages
as may be found appropriate;
C. To enter a preliminary and permanent injunction
enjoining defendant from applying retroactively any of
the changes in benefits which it has purported to place
into effect, as well as any subsequent changes in the Pro-
gram which defendant may hereafter make which reduce
the benefits available under the Program to mileage cred-
its already earned and accumulated;
D. To award costs and reasonable attorney’s fees in-
curred on behalf of the plaintiff and members of the
Class in connection with the prosecution of this cause:
and
54a
E. For such other relief as this Court may deem fit
to grant in fashioning a remedy for plaintiff and mem-
bers of the Class.
Dated: January 6, 1989.
GREENFIELD &
CHIMICLES
By: s Brenda M. Nelson
RICHARD D, GREENFIELD
BRENDA M. NELSON
One Haverford Centre
Haverford, PA 19041
(215) 642-8500
and
CHERTOW & MILLER
By: ‘s’ Marvin A. Miller
MARVIN A. MILLER
PATRICK FE. CAFFERTY
30 North LaSalle Street
Suite 3630
Chicago, Illinois 60602
(312) 782-4880
Attorneys for Plaintiff
and the Class
5da
APPENDIX F
National Association of Attorneys General, Task Force
on the Air Travel Industry, Revised Guidelines (Excerpts)
‘SECTION 3—Frequent Flyer Programs
General Comments to Section 3
Frequent flyer programs have been widely acknowl-
edged as the most successful marketing programs in air-
line industry history. The bargain struck between cus-
tomers and the airlines has proven to be very costly to
many of the airlines. Customers who have accrued the
necessary mileage are expecting to collect the awards
which led them to join and fly in the programs in the
first place. Some airlines are now disturbed by the cost
of keeping their side of the bargain and the real possibil-
ity that they may lose revenue because passengers flying
on frequent flyer awards may begin displacing paying
customers. The solution contemplated by some carriers
has been to raise award thresholds and implement re-
strictions to decrease the cost to them of the award pro-
gram. The effect of these actual and/or potential changes
is to significantly devalue vested members’ accrued mile-
age or other credits in the program. Although various
frequent flyer program awards materials have contained
some opscure mention of the possibility of future program
changes, these disclosures have been wholly inadequate to
inform program members of the potentially major nega-
tive changes which are contemplated by many airlines.
These Guidelines cover frequent flyer programs includ-
ing any partner airlines or other providers of goods or
services such as rental cars and hotel rooms. They are
intended to protect those consumers who have partici-
pated in these programs in good faith, without adequate
notice that the programs could change, and to advise the
airlines of how they can reserve this right in the future
by adequately providing this information to all members
in a2 nondeceptive manner consistent with state law.
56a
3.0 Capacity controls
1. If an airline or its program partners employ ca-
pacity controls, the airline must clearly and conspicuous-
ly disclose in its frequent flyer program solicitations, :
P newsletters, rules and other bulletins the specific tech-
niques used by the airline or program partner to control
capacity in any solicitation which states a specific award.
This includes blackout dates, limits on percentage of seats
(for example, “the number of seats on any flight allocated
to award recipients is limited”}, maximum number of
seats or rooms allocated or any other mechanism whereby
the airline or program partner limits the opportunities
of program members redeeming frequent flyer award
levels. To meet this Guideline, all blackout dates must be
specifically disclosed.
2. As to awards for vested miles, the airline or pro-
gram partner must provide the award to the vested mem-
ber without capacity controls or provide the award with
capacity controls within a reasonable period of time. A
reasonable period would be within 15 days before or after
the date originally requested. If all seats within this 31-
day period were sold at the time the vested member re-
quested a reservation, so that the member could not be
accommodated without displacing a passenger to whom
a seat has been sold, then a reasonable period would be
the period to the first available date on which every seat
was not sold to the requested destination at the time the
program member requests a reservation.
Comment: All of the airlines that met with the Task
Force stated that they intended to retain the right to im-
pose capacity controls, in the future, to limit the number
of seats available to consumers purchasing tickets with
frequent flyer award certificates. The imposition of ca-
pacity controls, including blackout dates, has the poten-
tial for unreasonably restricting the supply of seats or
other benefits in such a way as to significantly devalue
the awards due vested program members. NAAG found
that this potential limitation has not been adequately dis-
SSS SS OO
57a
closed to program members in the frequent flyer promo-
tional materials we reviewed. This Guideline puts <he
airline on notice as to what information they should pro-
vide to consumers if they want to impose capacity con-
trols on the use of frequent flyer awards at some future
date.
In earlier drafts of the Guidelines the Task Force took
the position that capacity controls could not be applied to
awards based on any mileage or credits accrued by vested
members before they received adequate notice that ca-
pacity controls could be imposed. However, as a compro-
mise, and to permit the airlines reasonable flexibility
around holiday or other peak travel times, the revised
Guideline provides for a reasonable time to accommodate
passengers with award tickets: a 3l-day “time window”
—15 days before and 15 days after the date requested for
ticketing. This “time window” allows the airlines to al-
locate capacity to meet demand over a reasonable, yet de-
fined period of time. In the event all flights to a certain
destination are sold out during the entire 31-day time
window, ticketing on the next available seat would be
reasonable. This approach has the additional benefit of
being simple and straightforward to implement with less
possibility of customer confusion and frustration.
3.1 Program changes affecting vested members
1. Any airline or program partner that has not re-
served the right to make future changes in the manner
required by Sections 3.2 and 3.9 of these Guidelines and
that changes any aspect of its program (for example,
imposition of capacity controls, increases in award levels,
or any other mechanism whereby a vested member’s abil-
ity to redeem any award will be adversely affected) must
protect vested program members. Examples which meet
this Guideline are:
(a) All vested members may not be adversely affected
by that change for a reasonable period [which] would be
one year following mailing of notice of that change.
5&a
(bi The airline or program partner may allow vested
members to lock in any award level which is in effect
immediately preceding any change in the program. That
award level would be guaranteed fora period of one year
after mailing notice of any increase in award levels. A
vested member would also be permitted to change his or
her selection to lock in a different award in existence at
any time prior to an increase in award levels.
(¢) The airline or program partner may credit vested
program members with miles or other units sufficient to
assume that, at the time of any change in the program,
the member will be able to claim the same awards he or
she could have claimed under the old program.
Comment: This Guideline institutes corrective meas-
ures to protect vested members and the mileage they ac-
crued before receiving adequate notice that a program
could change to their detriment at some point in the fu-
ture. The Guideline sets forth three acceptable alterna-
tive approaches to allow airlines to change existing pro-
grams without unreasonably altering the rights and ex-
pectations of vested members. For example, an airline
may wish to create a new program with higher award
levels for persons who join in the future. Guideline
3.1.1/a) grandfathers in vested members for a one-year
period after notice. Guideline 3.1.1/b) grandfathers only
a specified locked-in award for a one-year period after
the effective date of the change and thereby gives the
member an additional year to accrue mileage or units
toward a specific award. Guideline 3.1.1(c) allows the
program to avoid the administrative problems of distin-
guishing between old and new members and old and new
award levels by equitably adjusting the award levels of
the vested members.
These examples are not the only ways in which airlines
can reasonably protect vested members when changing
existing programs. They are intended to delineate mini-
mum acceptable standards.
59a
3.2 Notice of Changes
1. Adequate notice of changes in current frequent flyer
program award levels must be provided to vested program
members by the airline or program partner to allow a
reasonable time for the vested member to obtain and use
an award. For example, a notice no less than one year
prior to the effective date of such change would be reason-
able. Reduction in award levels would not require such
notice. 2. Any airline which has a policy of deleting pro-
gram members from its mailing list for notices and state-
ments must clearly and conspicuously disclose that policy
in plain language in its rules and regulations.
3. To reserve the right to make future changes in the
award levels and program conditions or restrictions in a
manner providing reasonable notice consistent with state
iaw, which notice is less than the notice set forth in Guide-
line 3.2.1, an airline must first clearly and conspicuously
disclose that reservation and the nature of such future
changes, in plain language. This disclosure should in-
clude examples which make clear the outer limits within
which program awards may be changed. For example,
the following is not adequate disclosure:
“Program rules, regulations and mileage levels are
subject to change without notice.”
This example is adequate disclosure:
“( Airline) reserves the right to terminate the program
with six months notice. This means that regardless of
the amount you participate in this program, your right
to accumulate mileage and claim awards can be termi-
nated six months after we give you notice.”
Or:
“(Airline) reserves the right to change the program
rules, regulations. and mileage level. This means that
(Airline) may raise mileage levels, add an unlimited
number of blackout days, or limit the number of seats
60a
available to any or all destinations with notice. Program
members may not be able to use awards to certain desti-
nations, or may not be able to obtain certain types of
awards such as cruises.”
Or, if the airline so intends, the disclosure might also
Say:
“In any case, (Airline) will make award travel avail-
able within—days of a program member’s requested
date, except for blackout dates listed here.”
The airline’s right to make future changes, in a manner
other than that provided in Guideline 3.1, shall apply only
to mileage accrued after members receive the notice re-
quired by this Guideline.
Comment: In the past, airlines have attempted to re-
serve the right to make radical future changes in their
programs by using such vague and uncertain blanket
language as “Subject to additions, deletions, or revisions
at any time.” The consumer outrage that ensued when
several of the major airlines attempted unilaterally to
change their programs in the winter of 1986-87 makes it
clear that consumers were not adequately told, when they
joined and participated in frequent flyer programs, that
they were taking a gamble that the award they were
striving for would still be available, at the mileage level
originally advertised by the time they accrued the neces-
sary miles. To avoid a recurrence of this same problem
in the future, this Guideline provides that the potential
for such extensive program changes must be clearly and
conspicuously disclosed to the public by specific example.
It also puts the airlines on notice that (1) their previous
attempts to disclose this critical information have been
inadequate (2) if they intend to reserve the right to
make such changes in the future, they must give mem-
bers new and different notice, and (3) as to vested mem-
bers, airlines cannot implement any adverse changes until
one year after notice is given. One year is deemed rea-
6la
sonable because many consumers can only travel during
particular periods of the year due to work or family con-
straints, and therefore notice of less than a year may
impact unduly harshly on a particular class of program
members.
If an airline wants to reserve the rights to change the
terms of its program without giving its members one
year’s notice (1) it can do so only after clear and ade-
quate notice has been given to the program members
and (2) this reduced standard can apply only to mileage
accrued after clear and adequate notice has been given.
NAAG discovered that many airlines delete program
members from their mailing lists if they are determined
to be “inactive.” Inactive is defined differently by each
airline, but generally includes some formula requiring
active participation in the program within a six to ten
month period prior to any given mailing. Because crucial
information regarding changes is included in program
mailings, the Guidelines require that any airline with a
policy of deleting program members from its mailing list
clearly and conspicuously disclose that policy in the rules
and regulations distributed to all program members when
they join.
3.3 Fare or passenger class limitations
Any limitation upon the type or class of fare with which
ar upgrade certificate, discount flight coupon, or free
companion coupon may be used must be clearly and con-
spicuously disclosed before the program member claims the
award. Disclosure of the fare by airline terminology (for
example, “Y Class’) is not deemed sufficient.
Comment: Many airlines are encouraging consumers
to use their accrued mileage or credits to obtain upgrade
certificates or free campaign coupons, rather than free
tickets because this is more cost effective for the airlines.
Many of these coupons and certificates can be used only
62a
in conjuction with a regular coach fare ticket. Because
of the high cost of a full coach ticket (often disclosed only
as “Y Class’) many of these coupons and certificates
represent no real savings and therefore are useless to
consumers. This Guideline requires that any such re-
striction be clearly disclosed to consumers before the
award is claimed.
3.4 Certificates issued for vested miles
Certificates, coupons, vouchers, or tickets issued by an
airline for awards redeemed for vested miles must be
valid for a reasonable period of time. One year is deemed
to be reasonable. Any restrictions on use, redeposit, ex-
tension, or re-issuance of certificates must be clearly and
conspicuously disclosed on the certificate and in any
rules, regulations, newsletter or other program materials.
Comment: Again, because many consumers may only
travel during certain periods of the year, fairness re-
quires that awards be valid for at least a full twelve
month cycle.
3.5 Fees
Any airline which charges a fee for enrollment in its
frequent flyer program must fully disclose at airline
ticket counters and in all advertisements, solicitations or
other materials distributed to prospective members prior
to enrollment all terms and conditions of the frequent
flyer program.- Such disclosure must be made prior to
accepting payment for enrollment in the airline’s program.
Comment: Some airlines have required that consumers
fill out a membership application and pay a membership
fee before obtaining a copy of the program rules and
regulations. Because of the serious restrictions that can
apply to a travel reward program, it is essential that all
consumers have an opportunity to review al! of the pro-
gram rules and regulations before paying an enrollment
fee.
63a
3.6 Redemption time
All airlines must disclose clearly and conspicuously the
actual time necessary for processing award redemption
requests where such requesis are not normally processed
promptly. An example of prompt processing would be
within 14 days of processing the request. An example of
a disclosure would be “processing of awards may take
up to 30 days.”
Comment: The airlines indicated that full disclosure
of redemption time will not be a problem.
3.7 Termination of program affecting vested members
In the event a frequent flyer program is terminated,
adequate notice of termination must be sent to all vested
members so that vested members have a reasonable time
to obtain awards and use them. Adequate notice would
be notice at least one year prior to the termination of the
program. Award levels in existence prior to such notice
should remain in effect for one year. _ Program members
should then have one year to use certificates, coupons,
vouchers or tickets. Any applicable capacity controls
should be modified as necessary to meet the demand for
all award benefits due program members.
Comment: The airlines uniformly take the position that
because participation in travel reward programs is “free,”
an airline should be abie to terminate a travel reward
program at any time without notice. NAAG strenuously
disagrees. Consumers pay significant consideration for
the airlines’ promise to award them “free tickets” and
other awards. Program members fly on a_ particular
airline to accrue mileage in a travel reward program
often foregoing a more convenient departure time, a more
direct flight, and even a less expensive ticket. Those con-
sumers who kept their part of the bargain have a right
to expect the airlines to keep theirs, regardless of the
cost. This Guideline affords consumers reasonable pro-
tection against unilateral changes. It gives consumers one
year to accrue the mileage to reach a desired award level
and one year to use the award.
64a
This Guideline is intended to apply to programs that
are terminated due to mergers or for any other reason.
It would be unconscionable to permit airlines, which have
reaped the rewards of these travel incentive programs, to
walk away from their obligations to consumers under any
circumstances.
3.8 Restrictions
All material restrictions on frequent flyer programs
must be clearly and conspicuously disclosed to current
program members and to prospective members at the time
of enrollment.
Comment: This Guideline is intended as a corrective
measure. Any airline that has not clearly and conspicu-
ously disclosed material program restrictions to vested
members should do so now. New members are entitled to
full disclosure at the time of enrollment.
3.9 Method of disclosure
Disclosures referred to in these Guidelines should be
made in frequent flyer program solicitations, newsletters,
rules, and other bulletins in a clear and conspicuous
manner so as to assure that all program members receive
adequate notice. As used in these Guidelines, disclosure
also refers to information on program partners.
Comment: The brochures containing the rules and regu-
lations for airlines’ frequent flyer programs have been
as long as 52 pages. Extremely important restrictions are
often buried under inappropriate topic headings or hidden
on the back of the last inside pages of the brochure. This
Guideline requires that restrictions be discloséd in rea-
sonable print size in a location that will be most helpful
and informative to consumers.
Any reservation of the right to make future changes
in a program is so significant to consumers that it should
be disclosed prominently to insure that the maximum
number of people see and read this restriction. The Guide-
65a
line permits the airlines flexibility to determine when
and how often a disclosure must be made so long as the
airline discloses the information in a manner which gives
meaningful notice to all] affected members.
One airline complained that Guideline 3.9 is unreason-
able because it proposes that all the restrictions be dis-
closed at the beginning of the program brochure. In fact,
the only disclosure the Guidelines Suggested listing at the
beginning of a brochure is the reservation of the right
to change the program prospectively. The: significance of
such a restriction—that the terms and conditions of the
program can change at any moment—is so critical that
potential members should be made aware of it imme-
diately. All other disclosures can be made in the text of
the brochure.
.-
.
66a
APPENDIX G
UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
OFFICE OF THE SECRETARY
WASHINGTON, D.C.
Issued by the Department of Transportation
on the 29th day of May, 1992
Docket 46280
COMPLAINT OF ASSOCIATION OF DISCOUNT TRAVEL BROKERS
against
CONTINENTAL/ EASTERN TARIFF, C.A.B. No. 409
Docket 47539
RULEMAKING PETITION OF ASSOCIATION OF
DISCOUNT TRAVEL BROKERS
on
FREQUENT FLYER PROGRAMS AND AWARDS
ORDER DISMISSING COMPLAINT AND
DENYING PETITION FOR RULEMAKING
On May 8, 1989, the Association of Discount Travel
Brokers (“the Association”) filed a complaint against a
67a
tariff of Continental Airlines, Inc. and Eastern Air
Lines, Inc. that revised their One Pass frequent flyer
program’s rules and awards.' On May 16, on behalf of
itself, Eastern, and One Pass, Continental filed a motion
for leave to file out of time, which we will grant, and an
answer in opposition to the Association’s complaint.
Subsequently, on May 13, 1991, the Association filed a
petition for rulemaking on the use and transfer of fre-
quent flyer program awards. Trans World Airlines, Ine.
(“TWA”) in conjunction with Northwest Airlines, Ine.
(“Northwest”), American Airlines, Ine. (““American’’),
Delta Air Lines, Inc. (“Delta”), and Continental Airline,
Inc. (“Continental”) filed responses to the petition for
rulemaking. The Association then filed a reply to the
responses.
For the reasons stated below, we will dismiss the complaint
and deny the petition for rulemaking.
I. Tariff Complaint
A. The Complaint
The Association challenges the following revisions to the
Continental-Eastern One Pass Tariff:
(a) the revision reserving the right to modify, sus-
spend, restrict, or otherwise alter all or part of
the One Pass program upon 60 days’ notice to
active members;
1Under sections 221.250 and 302.505(b) of the Department’s
regulations (14 CFR 221.250 and 302.505(b)), a complaint request-
ing suspension of a tariff must be filed within ten days after the
tariff’s issuance date. The Association states that the geographically
diverse situation of its members prevented it from meeting this
deadline. We will treat this statement as a request for leave to file
an otherwise unauthorized document (see 14 CFR 302.4(f) ), which
we will grant.
Since the filing of the complaint, Eastern Air Lines, Inc., has
undergone liquidation under Chapter 7 of the bankruptcy laws.
68a
(b) the revision making fraud or abuse concerning
One Pass mileage credit or reward usage subject
to penalties, including termination of participa-
tion in the program and forfeiture of all accrued
mileage, reward certificates, and tickets issued
against reward certificates ;
(c) the revisions banning the sale, barter, or pur-
chase of One Pass rewards, defining the sale,
barter, and transfer of rewards or certificates
other than as expressly permitted as fraud or
abuse, making any rewards obtained by fraud
or abuse void if transferred for cash or other
consideration, and declaring that persons other
than the individuals named on certificates who
attempt to use them will be denied transportation
and the certificates deemed void; and
(d) the revision providing for capacity controls that
limit the availability of seats offered for reward
travel on certain flights and during certain times
of the year.
The Association challenges the tariff as procedurally de-
ficient, restrictive to price competition in air transpor-
tation, and unfair and unreasonable to consumers. First,
it claims that these four provisions make material changes
to the existing tariff “that severely restrict the benefits
and rights of the frequent flyer.” Contending that section
221.165 of the Department’s rules (14 CFR § 221.165)
requires an explanation for such substantive changes to
consumer benefits, the Association argues that Continen-
tal’s and Eastern’s failure to supply such information
violates our rule.
Second, the Association claims that its members conduct
a legitimate business as discount brokers, and it charges
Continental and Eastern (as well as other air carriers
with frequent flyer programs) with improperly attempt-
ing to destroy this business. It is to this end, according
69a
to the Association, that the airlines “started to include
restrictions against transferability in the tariff, together
with capacity controls, blackout dates({,] and the unilateral
right for the airline to do as it desired to any part of its
program.’’*
Third, the Association charges the Department of Trans-
portation with failing to protect consumers by not ade-
quately reviewing frequent flyer rules filed as_ tariffs.
The Association also accuses the Department of granting
Special Tariff Permission to frequent flyer tariffs with-
out a showing of emergency or merit in violation of
section 221.190 of our own rules (14 CFR § 221.190).
It argues that once these tariffs have been approved, if
carriers successfully argue in lawsuits that they have
the force of law, consumers have no recourse.
Fourth, in addition to these general complaints, the
Association states specific grievances against each of the
four revisions listed above. The Association challenges
revision (a) on the grounds that guidelines adopted by
the National Association of Attorneys Generals (““NAAG’”’)
for frequent flyer programs would require notice of at
least one year before an airline could terminate its pro-
gram. The Association challenges revision (b) by claim-
ing that the Department has never considered the reason-
ableness of such restrictive provisions and should do so
“before allowing the consumer to be unreasonably penal-
ized.” It challenges revision (¢c) as a direct and illicit
means of driving discount coupon brokers out of business.
It challenges revision (d) as a tool that allows the airlines
unfairly to “lure the consumer to fly . . . on the promise
that the rider will earn a free trip to an exotie destina-
tion” and then either increase the mileage premium for
that trip or drastically limit its availability.®
* Complaint of Association at 9.
3 Here, as in the case of revision (a), the Association cites the
NAAG guidelines, which would require carriers to provide awards
70a
Based on its allegations, the Association asks the Depart-
ment to investigate the One Pass revisions and suspend
the tariff.
B. The Answer
On behalf of itself, Eastern, and One Pass, Continental
opposes the Association’s complaint. In response to the
contention that the Department has not adequately re-
viewed frequent flyer tariffs, Continental states that in
1988, the Department concluded after an informal in-
vestigation that One Pass’s rules and tarifté on capacity
controls were proper and that there was no evidence of
unfair or deceptive practices within the meaning of sec-
tion 411 of the Federal Aviation Act."
In response to the other allegations, Continental argues
that the Association has misconstrued and misrepresented
the nature of the relationship between frequent flyer pro-
grams and their members. Continental contends that the
bulk of One Pass earnings and travel concern domestic
air transportation, in which the relationship between air
earriers and passengers has been governed since 1983
solely by contract law.* Continental characterizes the re-
visions challenged by the Association as legitimate terms
of the carriers’ unilateral offer and part of their legiti-
mate contract with One Pass members."
either without capacity controls or, if capacity controls apply, within
15 days before or after the date originally requested. If all seats
within this 31-day period were sold at the time the request was
submitted, then the guidelines would require the airline to provide
a seat on a date as close as possible to the date requested.
‘ Response of Continental at 2-3.
5 Continental claims that One Pass gives its members copies of the
program’s rules when they apply for membership and keeps them
apprised of all changes.
6 Continental argues, with many case citations, that a common
carrier may prohibit its customers from selling their rights to travel
at reduced fares and that in particular, an air carrier may prohibit
the sale of its frequent flyer awards.
Tla
Continental denies that the challenged revisions are novel
and asserts instead that they predate the tariff filing
and have the force of contract apart from their inclusion
in the tariff.” Specifically, Continental asserts, these pro-
visions have formed part of the One Pass program since
its inception, and the program’s applicants and members
have always been notified of all applicable terms and con-
ditions, including these provisions.
As for capacity controls, Continental denies that it or
astern engages in misleading advertising, fails to pro-
vide award transportation at the mileage advertised, or
fails to provide adequate capacity for award travel. Con-
tinental asserts that it and Eastern scrupulously adhere
to the capacity provisions in the One Pass terms and con-
ditions, and it repeats its assertion that these provisions
have always been part of the program.*
Il. Rulemaking Petition
A. The Petition
The proposed rulemaking has four principal elements:
(1) elimination of sale and transfer restrictions on
awards, (2) elimination of excessively restrictive capac-
ity controls, (3) elimination of unreasonable blackout
dates, and (4) notice of program changes.” The Associa-
tion claims that the proposed rule is designed to establish
a uniform, nationwide frame of reference for resolution
of the areas of major controversy surrounding the
award, transfer, sale, or use of frequent flyer mileage
7 According to Continental, substantially all of One Pass terms
and conditions now appear in the tariff.
8’ Continenta! asserts that the original One Pass terms and condi-
tions stated as foiiows:
Reward usage is subject to capacity controls which limits [sic]
the availability of seats offered for reward travel on certain
flights and during certain times of the vear.
® Association Petition for Rulemaking at 7-8.
72a
awards. The Association’s arguments in support of its
claims are substantially similar to those in its complaint
and include the promotion of competition among air car-
riers, the protection of consumer interests from allegedly
deceptive ard unfair practices [under § 411 of the Fed-
eral Aviation Act], such as capacity controls, blackout
dates, award structure mileage requirements, and trans-
ferability restrictions, and the prevention of the airlines’
improper attempt to destroy a legitimate business.
The Association analogizes the frequent flyer program
with the “S&H Green Stamps frequent buyer program”
at issue in In re Sperry & Hutchinson Co.,' 73 F.T.C.
1099 (1968). The Federal Trade Commission in that
ease initially found similar acts, such as the transfer-
ability restrictions, to have violated the FTC Act, a
statute the Association argues is substantially the same
as § 411 of the Act.
B. The Responses
The respondents generally oppose the proposed regulations
on the basis that (1) they deal with issues already re-
solved in court or pending in litigation, (2) they are
impracticable, (3) discount brokers conduct illegal activ-
ity by defrauding the airlines, and (4) frequent flyer
program rules are not unfair or discriminatory.
The respondents contend that the proposed regulations
address issues that have already been resolved in the
courts or are subject to pending litigation. American,
in particular, notes that recent court decisions are based
on longstanding precedent and principles confirming that
“(1) a prohibition against purchasing and selling fre-
quent flyer awards is a valid and enforceable contractual
restriction on assignment; and (2) there are no complex
unresolved issues—and never were—regarding the ille-
gality of the brokers’ conduct.” '?® American further notes
10 Response of American at 7.
73a
that virtually every argument that the Association ad-
vances in its petition failed to gain acceptance in fre-
quent flyer litigation, including the premises that fre-
quent flyer members have vested property rights to travel
awards and that airline program rules are unfair trading
practices and violate the Sherman Act. American and
Delta specifically note that, under the final FTC consent
order, S&H was expressly vermitted to continue to restrict
the transferability and exchange of its stamps. Sperry &
Hutchinson Co,, 83 F.T.C. 478 (1973).
According to American and the other respondents, the
Association is in effect asking the Department to legiti-
mize the allegedly illegal activities of the discount
brokers, who engage in systematie fraud and deception
in order to conduct their business. According to the
TWA/Northwest response, these activities may constitute
criminal activity pursuant to 18 U.S.C. § 1343 and 18
U.S.C. § 13841. American alleges that some brokers’ con-
tracts with their customers use indemnification language
that makes the customers liable for the brokers’ unlawful
conduct.'' In fact, American claims that the brokers
often use the same contract transferability restriction
with their own customers that they claim is unfair and
discriminatory on the part of airlines.’ Delta contends
that the brokering operations violate the Lanham Act
and commercial disparagement, false advertising, and
unlawful racketeering activities in violation of the Fed-
eral Racketeer Influenced and Corrupt Organizations Act, |
18 U.S.C. § 1961 et seq.
Furthermore, the respondents contend that it would be
impracticable for the Department to involve itself in what
are essentially business decisions regarding ongoing ad-
vertising and promotional programs. Frequent
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