# Petition for Writ of Certiorari — American Airlines, Inc. v. Wolens > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385017_1111%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1992 - **Citation:** 506 U.S. 803 ## Text — Bupreme Court, U.S. y) 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 RR RB WILSON - EPES PRINTING Co., INC. - 789-0096 - WASHINGTON. D. =. 20001 ; =o en . - 7 7 7 aha rs bes = 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 Oh gy a > iy | cr sas sntinnsicictcndisconsiuvesweneanevenseanatmanes rac ssntckcnonnecenansnnsbanosnasannessennes CONSTITUTIONAL AND STATUTORY PROVI- snc nepacninsnnsascensnanonsonnauinns 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 Teen i ciceeenetsicynacieunnnd-seseesinesesnares ona rr Wh WW 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). >) ~ 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. Page la 12 : ‘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 . 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 ] s . °C : sla wler ++ + } 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. cr Vy \ . CER J. MARKS T \T 4 \ | 4 yA Ss i ) . an Gallas S | 4 { AU4U icago. | ( BOG! +) +) +‘) 5iZ PVA VAL N imbr C)( T T Li J.J , = , IUCH SHEI P ( I AM WwW IT IG] I . " { ] j >7 ) ) ) () +) tla MyYRON (MIKE) WOLENS, ALBERT J. GAYLE. R. CRAIG ZAFIS, BRET MAX WELL and ROBERT NELSON, individu- ind on behalf of all others sim } 1) 4 eq PLAN, LTD YA —T Jive emma Va 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