Amicus Curiae Brief — Mattox v. Trans World Airlines, Inc.

No. 90-221 STLE =

No. 90-232(7 E

—SEP- 21 1999

In The JOSEPH F. SPANIOL, JR,

CLERK

Supreme Court of the United States

October Term, 1990

JIM MATTOX, ATTORNEY GENERAL OF TEXAS,

Petitioner,

V.

TRANS WORLD AIRLINES, INC., et al.,

Respondents.

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er

On Petitions For A Writ Of Certiorari To The

United States Court Of Appeals For The

Fifth Circuit

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4

BRIEF OF THE STATES OF ALABAMA, HAWAITI,

INDIANA, MISSISSIPPI, NEW JERSEY,

PENNSYLVANIA, UTAH AND VIRGINIA AS

AMICI CURIAE IN SUPPORT OF PETITIONERS

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vv

WARREN Price, III*

Attorney General

State of Hawaii

*Counsel of Record

Rosert A. Marks

Dewey H. Kim, Jr.

WINFRED K. T. PONG

GLENN S. GRAYSON

Deputy Attorneys General

State of Hawaii

425 Queen Street

Honolulu, Hawaii 96813

(808) 548-6744

Counsel for the State of Hawaii

[Additional Counsel Listed on Inside Cover]

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

co

Don SIEGELMAN

Attorney General of Alabama

South House, 11 South Union Street

Montgomery, Alabama 36130

LINLEY E. PEARSON

Attorney General of Indiana

219 State House

Indianapolis, Indiana 46204

Mike Moore

Attorney General of Mississippi

P. O. Box 22947

Jackson, Mississippi 39225

Rosert J. Det Turo

Attorney General of New Jersey

Richard J. Hughes Justice Complex

CN080

Trenton, New Jersey 08625

ERNEST D. PREATE, Jr.

Attorney General of Pennsylvania

15th Floor, Strawberry Square

Harrisburg, Pennsylvania 17120

R. Paut VAN Dam

Attorney General of Utah

115 State Capitol

Salt Lake City, Utah 84114

Mary Sue TERRY

Attorney General of Virginia

101 N. 8th Street, 5th Floor

Richmond, Virginia 23219

i

TABLE OF CONTENTS

Page

ee Se Be EI ho oo ded e des cccacccncecnt ii

INTEREST OF THE AMICI CURIAE............... 2

SUMMARY OF ARGUMENT.....................5. 4

i ecu a athe aeeekeseceeeéesoe ae’ 6

I ahs feubia ins tvedeebecccackuess oes 13

ii

TABLE OF AUTHORITIES

Page

Cases:

Automobile Importers of America v. Minnesota, 871

ee ae Ee NS Any cAdacnaduasgncesecedss. 6

Block v. North Dakota, 461 U.S. 273 (1983) ............ 9

Brinkerhoft-Faris Co. v. Hill, 281 U.S. 673 (1930)...... 11

Burnham v. Superior Court of California, 58 L.W.

Se Ps SO i, BONE oni nbn ceca cccctenesdcccees 9

Cactus Pipe & Supply v. M/V Montmartre, 756 F.2d

oS errr rere 9, 10, 11

California v. ARC America Corp., 109 S.Ct. 1661

MD (idk de cinbhiinbeebbenckicas ects ¥Akekhoess <6 «- 6

Chrysler Corp. v. Texas Motor Vehicle Comm., 755

ee CN SI so va sn hee adn shad se sekccdsse 6

Continental Training Services, Inc. v. Cavazos, 893

ee A BOs stsonccnsccssndawesnnneseces 4

Florida Lime & Avocado Growers v. Paul, 373 U.S.

NED Lonkanks Capes Pes sbindsskdesen nesses cdee 6

Honig v. Doe, 484 U.S. 305 (1988)..................05. 4

International Shoe Co. v. Washington, 326 U.S. 310

SRO ahah on haa hekWh CAs eeesee Rice Cnkwme vb seeeseee 9

Nader v. Allegheny Airlines, 426 U.S. 290 (1976) ....... 7

Puerto Rico Department of Consumer Affairs v. Isla

Petroleum Corp., 485 U.S. 495 (1988)................ 6

Shaw v. Delta Airlines, Inc., 463 U.S. 85 (1983)........ 6

Smith v. Illinois Bell Telephone Co., 270 U.S. 587

CR A cS cckwakiwcewdisdtess Can entenet eas wa4¢ ous as 4

iii

TABLE OF AUTHORITIES — Continued

United States v. Local 30, United Slate Tile & Compo-

sition Roofers, 871 F.2d 401 (3d Cir. 1989)........... 4

West v. Northwest Airlines, Inc., 1990 Westlaw

128847, 1990 U.S. App. LEXIS 15793 (9th Cir.

Ri ERE. £270 erbeh6 KAAROE A bak cans eases. 2

Williamson County Planning Commission v. Hamilton

Bank, 473 U.S. 172 (1985) .........eeeeccccecccceeee 5

STATUTES:

Ala. Code § 8-19-1, et seq. (1975) .........----- +e eee 2

Haw. Rev. Stat. § 480-2, et seq. (1985)................ 2

Nel, Ce I ion ncn cccnceccctecaccstsoascens 2

Miss. Code Ann. § 75-24-1, et seq. (Supp. 1990)...... 2

N.J. Stat. Ann. § 56:8-1, et seq. ......--.e secre ee eeees 2

Pa. Stat. Ann. tit. 73, § 201-2, et seq. (Purdon

BO, THE ores cca consouscccncereseepenaceccogces 2

Utah Code Ann. § 13-11-1 et seq. (1988) ............. 2

Va. Code Ann. §§ 59.1-196 to 207............ccceeees 2

yi | rr rrr reer ry Perry rr reriee 11, 12

yh rrr rrrrrrrrrrrr yr TS 6

4D UIBEADO. © FBG. a onc ccc cc scsevccncdesserees 5, 7

49 U.S.C.App. § 1305(a)(1) .... 2... eee ee eee eee eee 6, 8

49 US.C.App. § 1381 ..........cccccccscccccccccccess 8

Rutes OF Court:

DR I od ccdnceatrsndancestaneusuvensasates 11, 12

In The

Supreme Court of the United States

October Term, 1990

+

JIM MATTOX, ATTORNEY GENERAL OF TEXAS,

Petitioner,

Vv.

TRANS WORLD AIRLINES, INC., et al.,

Respondents.

—-

On Petitions For A Writ Of Certiorari To The

United States Court Of Appeals For The

Fifth Circuit

+

BRIEF OF THE STATES OF ALABAMA, HAWAII,

INDIANA, MISSISSIPPI, NEW JERSEY,

PENNSYLVANIA, UTAH AND VIRGINIA AS

AMICI CURIAE IN SUPPORT OF PETITIONERS

+

Pursuant to Rule 37 of the Rules of this Court, the

States of Alabama, Hawaii, Indiana, Mississippi, New

Jersey, Pennsylvania, Utah and Virginia as amici curiae,

respectfully submit this brief in support of the petitions

for writ of certiorari submitted by the State of Texas in

No. 90-221, and the State of California and 32 other states

(hereinafter, “thirty-three states”) in No. 90-232, both

seeking review of the decision of the United States Court

of Appeals for the Fifth Circuit issued April 3, 1990, and

reported at 897 F.2d 773, affirming the order of the United

States District Court for the Western District of Texas,

granting a preliminary injunction to respondents. The

decision of the District Court is reported at 712 F.Supp.

99. The decision of the Circuit Court merits review and

reversal by the Court, since there is a split in the Circuit

Courts of Appeals on the preemption question raised by

these petitions! and since the thirty-three states’ due pro-

cess rights have been violated.

=

INTEREST OF THE AMICI CURIAE

The amici are some of sixteen states not subject to the

injunction appealed from in these petitions.

Pursuant to the police power, each of the amici States

have enacted laws to prevent unfair and deceptive acts

and practices.? These statutes have been broadly applied

to protect not only the consumers of goods and services

residing in the amici States, but also to others within

those States, including the many travellers who, upon

1 The Circuit split is annotated in the thirty-three states’

petition in No. 90-232 at ii. We note that the Ninth Circuit very

recently interpreted the preemptive effect of 49 U.S.C.App.

§ 1305(a)(1) inconsistently with the interpretation given that

statute by the Fifth Circuit in this action. West v. Northwest

Airlines, Inc., 1990 WestLaw 128847, 1990 U.S. App. LEXIS

15793 (9th Cir. Sept. 11, 1990).

2 E.g., Ala. Code § 8-19-1, et seq. (1975): Haw. Rev. Stat.

§ 480-2, et seq., (1985); Ind. Code § 24-5-0.5; Miss. Code Ann.

§ 75-24-1 et seq. (Supp. 1990); N.J. Stat. Ann. § 56:8-1, et seq.; Pa.

Stat. Ann. Tit. 73, § 201-2, et seq. (Purdon Supp. 1990); Utah

Code Ann. § 13-11-1, et seq. (1988); Va. Code §§ 59.1-196 to 207.

arrival in an amici State find that they have been victims

of an unfair or deceptive act involving airline promo-

tional activity.

The air travel industry plays a vital role in the econ-

omies of the amici States by providing transportation to

travellers who will purchase goods and services in the

States. The high cost of air transportation, relative to

many consumer transactions, makes it an area that is ripe

for abuse by the unscrupulous, and hence, the need for

rigorous enforcement of State law guarding against

unfair and deceptive acts and practices is great. Great,

too, is the States’ interest in assuring that consumers have

access to advertising information that is not misleading in

order that they may make informed decisions about their

travel options.

The amici States have a substantial interest in pre-

serving the historic assumption that the enforcement of

consumer protection laws, as an aspect of state police

powers, should not be superseded by a federal statute

except by a clear and manifest expression by Congress.

These vital and substantial interests warrant the sub-

mission of this amici brief in support of petitioners’

efforts to obtain review by this Court of the lower courts’

decision to prevent thirty-four sovereign States from

enforcing their unfair and deceptive practice statutes

against false advertising by airlines.*

A.

_

3 The fact that a permanent injunction has been filed in

this case does not mean that this appeal is moot or is not ripe

for decision. Although courts have dismissed appeals of pre-

liminary injunctions after a permanent injunction has been

(Continued on following page)

SUMMARY OF ARGUMENT

Historically, the States have exercised the power to

protect their citizens from unfair and deceptive business

(Continued from previous page)

filed, Smith v. Illinois Bell Telephone Co., 270 U.S. 587, 588 (1926);

Continental Training Services, Inc. v. Cavazos, 893 F.2d 877, 880

(7th Cir. 1990); United States v. Local 30, United Slate Tile &

Composition Roofers, 871 F.2d 401, 403 (3d Cir. 1989), the facts of

this case are such that the issues presented by the appeal of the

preliminary injunction can be decided at this time.

The permanent injunction filed in this case is almost iden-

tical to the preliminary injunction in its findings, reasoning,

and conclusions. If this appeal was dismissed, and appellants

were required to begin the appeal process anew with an appeal

of the permanent injunction, then the Circuit Court would

certainly reaffirm its earlier ruling in the case and the case

would then be brought before this court in the same posture as

it is now. Requiring appellants to appeal the same order again

to the Circuit Court would be requiring appellants to go

through a futile exercise that wastes the resources of this Court

and the Circuit Court.

In the analogous situation of the requirement in adminis-

trative law that administrative remedies be exhausted prior to

judicial review, the Court has created an exception so that

futile actions by appellants are not required. For example, in

discussing appeals of cases under the Education of the Hand-, _.

icapped Act, the Court stated: |

It is true that judicial review is not normally avail-

able under § 1415(e)(2) until all administrative pro-

ceedings are completed, but as we have previously

noted, parents may bypass the administrative pro-

cess where exhaustion would be futile or inadequate.

Honig v. Doe, 484 U.S. 305, 326-7 (1988).

(Continued on following page)

practices through the police power. The Fifth Circuit

Court of Appeals erroneously held that the federal regu-

latory scheme in the field of commercial air transporta-

tion preempts the States’ right to protect their citizens.

This construction of the applicable federal law, 49

U.S.C.App. § 1305, is incorrect.

The Fifth Circuit also erred in holding that there was

personal jurisdiction over the thirty-three attorneys gen-

eral who were made parties to this litigation against their

will and without notice or an opportunity to be heard.

This holding violates the due process rights of those

thirty-three attorneys general, and ignores the substan-

tive law of intervention.

.

(Continued from previous page)

This case is not similar to Williamson County Planning

Commission v. Hamilton Bank, 473 U.S. 172 (1985), where the

Court held that the appeal was not ripe because administrative

action was not complete. In that case the respondent argued

that its property was taken by the local government as the

result of a land use law, but the court held that because

respondent failed to try to get zoning variances, no final deci-

sion had been made by the local government. In this case,

however, the Circuit Court has considered all of appellants’

claims, and there are no unresolved issues which need to be

addressed by another court or agency.

6

ARGUMENT

I. IT IS A TRADITIONAL POWER OF THE STATES

TO PASS AND ENFORCE LAWS TO PROTECT

CONSUMERS FROM DECEPTIVE ADVERTISING

PRACTICES AND THIS POWER HAS NOT BEEN

PREEMPTED IN THE FIELD OF AIRLINE PROMO-

TIONAL ACTIVITY.

The Fifth Circuit Court of Appeals was wrong in

finding that Congress has specifically preempted the

States’ traditional power to guard against fraudulent

advertising in the field of air transportation. The protec-

tion of consumers from unfair and unlawful practices is

an area traditionally regulated by the States pursuant to

their police powers. See, California v. ARC America Corp.,

109 S.Ct. 1661 (1989); Puerto Rico Department of Consumer

Affairs v. Isla Petroleum Corp., 485 U.S. 495 (1988); Florida

Lime & Avocado Growers v. Paul, 373 U.S. 132 (1963); Auto-

mobile Importers of America v. Minnesota, 871 F.2d 717 (8th

Cir. 1989); and Chrysler Corp. v. Texas Motor Vehicle Comm.,

755 F.2d 1192, 1205 (5th Cir. 1985). The States generally

guard against unfair and deceptive business practices

through statutory provisions which proscribe these activ-

ities.

The courts below ignored the presumption against

finding preemption of state law in areas traditionally

regulated by the States. California v. ARC America, 109

S.Ct. at 1665. The Circuit Court construed the language

“relating to routes, rates and services” contained in 49

U.S.C.App. § 1305(a)(1) as a talisman to preempt all state

regulation relying on Shaw v. Delta Airlines, Inc., 463 U.S.

85 (1983). However, the ERISA preemption upheld in

Shaw based upon the words “relating to” in 29 U.S.C.

O]|]_.PC >

§ 1144(a) was premised upon a statutory scheme that is

more broadly worded to evidence Congressional intent to

preempt state regulation than the one before the Court

here.

In the instant situation, Congress could easily have

preempted all state regulation by stating that the federal

law preempted all state laws “relating to air transporta-

tion”. The specific language used by Congress, however,

deals only with three areas: rates, routes and services.

This is particularly significant. As this Court held in

Nader v. Allegheny Airlines, 426 U.S. 290 (1976), common

law remedies for fraudulent misrepresentation were not

preempted in the airline area. This holding predated the

passage of 49 U.S.C.App. § 1305. If Congress had desired

to specifically eliminate state law remedies, it could have

done so, but did not.

The business of airlines and their agents is not to

falsely advertise or fraudulently misrepresent their prod-

ucts. Deceptive advertising is not a “route, rate, or ser-

vice” of the airlines. It is possible that false advertising

would include a description of a rate, route, or service,

and under the Fifth Circuit’s interpretation, an airline or

other business using such false advertising would, in

effect, be immune from state unfair trade practices stat-

utes. Such a finding would exempt the airlines, ticket

agencies and other air transportation companies from

complying with statutes adopted under traditional state

police power protecting consumers.

The practical immediate effect of the Circuit Court’s

holding is that a business could avoid any type of state

prosecution for fraudulent misrepresentation as long as

there was even the most tenuous relationship between

the misrepresentation and airline rates, routes, or ser-

vices. For example, a ticket agent could engage in “bait

and switch” techniques, advertising a particular low

price and then switching the price of tne actual travel.

Under the Fifth Circuit’s interpretation, since the adver-

tising mentions a rate, this consumer fraud could not be

prosecuted under state law.

If state regulatory powers are preempted, the only

penalty against an airline or related business engaged in

false and deceptive advertising would be a cease and

desist order issued by the Secretary of the United States

Department of Transportation under 49 U.S.C.App.

§ 1381. State regulatory laws typically allow a much

wider range of enforcement options, including treble and

punitive damage actions to prevent deceptive practice

activities. If Congress intended to so profoundly usurp

traditional state police powers, surely a clearer expres-

sion of that intention would have been given than the one

found in 49 U.S.C. § 1305(a)(1).

II. THE FINDING THAT THE TRIAL COURT HAD

PERSONAL JURISDICTION OVER THE THIRTY-

THREE STATES VIOLATES NOTIONS OF FAIR

PLAY AND SUBSTANTIAL JUSTICE, AND

IGNORES THE PROCEDURE FOR INTERVEN-

TION BY STATES SET OUT BY CONGRESS AND

THE FEDERAL RULES OF CIVIL PROCEDURE.

The District Court made the attorneys general repre-

senting thirty-three states parties to litigation in the West-

ern District of Texas without the requisite facts or law to

support a finding of jurisdiction. The Court’s finding of

i

personal jurisdiction over the thirty-three attorneys gen-

eral violates traditional due process requirements,‘ and

ignores federal statutory and rule law.

The Circuit Court recognizes that the thirty-three

states did not appear as parties and had not made any

motion to intervene in the case. Trans World Airlines v.

Mattox, 897 F.2d 773, 786-7 (5th Cir. 1990). Forcing indi-

vidual states to be parties to a lawsuit and applying an

injunction to them after the injunction has issued denies

these states the most fundamental due process rights:

notice and an opportunity to be heard.

The decisions below ignore this Court’s long held

view that personal jurisdiction must not violate “tradi-

tional notions of fair play and substantial justice.” Inter-

national Shoe Co. v. Washington, 326 U.S. 310 at 316 (1945).

Most recently, this Court, in Burnham v. Superior Court of

California, 58 L.W. 4629 (U.S., May 29, 1990) stated that

jurisdiction caselaw makes a distinction between “novel,

nontraditional assertions of jurisdiction,” which are con-

stitutionally suspect, and “traditional,” and hence, consti-

tutional grounds for jurisdiction. Id. at 4633. Surely the

assertion of jurisdiction over the thirty-three states here is

constitutionally suspect.

In its decision finding de facto jurisdiction, the Fifth

Circuit cited Cactus Pipe & Supply v. M/V Montmartre, 756

F.2d 1103 (Sth Cir. 1989) to support the proposition that

the thirty-three attorneys general had effectively waived

the personal jurisdiction issue. Trans World Airlines, Inc. v.

* Clearly, States are entitled to due process protections.

See, e.g, Block v. North Dakota, 461 U.S. 273, 291 (1983).

10

Mattox, 897 F.2d at 786. However, Cactus Pipe indicates

that personal jurisdiction may be found only if a party

enters a case and if certain conditions are met. Ibid. at

1108. Those conditions include failing to object to juris-

diction and requesting that the court take some affirma-

tive action “on its behalf in some substantive way.” Id.

The conditions were not met in the instant case.

First, none of the thirty-three states had entered the

case and only Texas had been made a party to this action

prior to the injunction motion. As the Circuit Court rec-

ognized, there was no question raised about jurisdiction

as neither the airlines (respondents here) nor Texas had

sought to include the thirty-three states in the litigation.

As further recognized by the Circuit Court, the pleading

filed by the thirty-three states included an expression that

they were “specially appearing” before the court. Trans

World Airlines, Inc. v. Mattox, 897 F.2d at 786. There was

no meaningful failure by the states to object to personal

jurisdiction, because there was no clue that jurisdiction

over them had been asserted. Further, at the very least,

the “special appearance” by the thirty-three states can

only be construed to mean that the states objected to any

attempt by the District Court to assert jurisdiction over

them. Thus, the first requirment under Cactus Pipe to find

personal jurisdiction was never met.

Secondly, the brief filed in the District Court by the

thirty-three attorneys general asked that the respondents’

motion for temporary restraining order against Texas be

denied, or that the hearing time be extended, and not that

any particularized, substantive relief be given in their

favor. The Circuit Court noted that the airlines’ motion

sought injunctive relief only against Texas. Id. at 786.

11

Thus, under the facts presented as applied to the test in

Cactus Pipe, the second condition to find personal juris-

| diction is absent as well. Thus, the District Court ignored

’ the clear requirements of controlling circuit precedent set

out in Cactus Pipe and found jurisdiction.

| The point, of course, is not that the Fifth Circuit has

| been disingenuous in its interpretation of its caselaw. It

can interpret its precedent however it pleases, within the

bounds of the Constitution. The point is that here, the

thirty-three states came to the Western District of Texas

without a clue that controlling circuit precedent would be

radically interpreted and applied to them retroactively.

The District Court, in effect, snared thirty-three states

into litigation where the states had no opportunity to

comment on the propriety of their joinder, and no oppor-

tunity to opt out. Surely, this is a deprivation of due

process. Cf., Brinkerhoff-Faris Co. v. Hill, 281 U.S. 673, 679

(1930).

Congress has devised the means by which states may

intervene in federal litigation where the constitutionality

of state law “is drawn into question”. That procedure is

set out in 28 U.S.C. § 2403(b), and it requires that the

federal court certify the constitutional question to the

state attorney general, and afford the state an oppor-

tunity to intervene. Here, the district court acted illegally

in ignoring the requirements of 28 U.S.C. § 2493(b).

In addition, the Circuit Court read Rule 24, F.R.Civ.P.

out of existence. That rule allows intervention both as a

matter of right and with permission of the court. In either

situation, a timely motion must be made indicating the

basis upon which intervention is being requested.

12

F.R.Civ.P. 24(c) requires that the motion be filed with the

court and served upon the parties. Under this procedure,

the intervenor and the other parties have notice of the

motion and an opportunity to comment.

Thus, the lower courts completely ignored the provi-

sions of 28 U.S.C. § 2403(b) and F.R.Civ.P. 24 and the due

process protections inherent in them. There was no certi-

fication of the constitutional question, no motion filed

stating the grounds for intervention and no supporting

documentation. In fact, the parties were only informed of

their “intervention” after the court had ruled on the

injunction motion. This made it impossible for the thirty-

three states to contest the “de facto” intervention, the

finding of jurisdiction and the injunction to which they

were now subject. Clearly the lower court failed to satisfy

this Court’s standard for personal jurisdiction by invent-

ing and applying a “novel” jurisdictional device, “de

facto intervention”, that does great violence to traditional

notions of fair play and substantial justice.

—_—*

al

13

CONCLUSION

For the foregoing reasons, this Court should grant a

writ of certiorari to the United States Court of Appeals

for the Fifth Circuit.

Respectfully submitted,

WARREN Price, III*

Attorney General

State of Hawaii

*Counsel of Record

Rosert A. Marks

Dewey H. Kw, Jr.

Winerrep K. T. Ponc

GLENN S. GRAYSON

Deputy Attorneys General

425 Queen Street

Honolulu, Hawaii 96813

(808) 548-6744

Counsel for the State of Hawaii

[Additional Counsel Listed on Inside Cover]