Petition for Writ of Certiorari — On the House Syndication, Inc. v. Federal Express Corp.

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Supreme Court, U.S

F FILED

031102 NOV 28 2004

No. ____OFFICE OF THE CLUTK

In the

Supreme Court of the Anited States

On Tue House SynpicaTION, INC., and

CAREY BROTHERS, INC., on behalf of themselves

and all others similarly situated,

Petitioners,

FEDERAL Express CORPORATION,

Respondent.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Ninth Circuit

PETITION FOR WRIT OF CERTIORARI

Of Counsel Davip B. ZLOTNICK

Davip C. FREDERICK Counsel of Record

PAuL B. MATEY 1010 SECOND AVENUE

KELLOGG, Huser, HANSEN, SulTE 1750

Topp & Evans, P.L.L.C. - San Digco, CA 92101

1615 M Street, N.W. (619) 232-0331

SuITE 400

WASHINGTON, DC 20036 JAMES C. KRAUSE

(202) 326-7900 RALPH B. KALFAYAN

AGUuSTIN F. Lopez, Il

RICHARD W. COHEN KRAUSE & KALFAYAN

Lowey, DANNENBERG 1010 SEcoND AVENUE

BEMPORAD & SELINGER, P.C. Suite 1750

1 NortH LEXINGTON AVENUE SAN Dieco, CA 92101

White Prains, NY 10601 (619) 232-0331

(914) 997-0500 Counsel for Petitioners

Becker Gallagher Legal Publishing, Inc.

800.890.5001

ee eS eS eee ee

QUESTIONS PRESENTED

1. Whether the Ninth Circuit erred, in following five

other circuits that are in conflict with the Sixth and Seventh

Circuits, by applying principles of federal common law to

exercise subject matter jurisdiction over a contract claim

against an interstate air cargo carrier following the enactment

of the Airline Deregulation Act, 49 U.S.C. § 40120, and this

Court’s decision in American Airlines, Inc. v. Wolens, 513

US. 219 (1995).

2. Whether, contrary to the teachings of Wolens, the

Ninth Circuit erred in refusing to apply core contract

doctrines, such as contra proferentum and futility, in

construing and enforcing an air carrier contract.

PARTIES TO THE PROCEEDINGS BELOW

On the House Syndication, Inc. and Carey Brothers, Inc.,

were the plaintiffs, appellants, and cross-appellees below.

Federal Express Corporation was the defendant, appellee, and

cross-appellant below.

CORPORATE DISCLOSURE STATEMENT

Pursuant to Rule 29.6 of the Rules of this Court,

Petitioners On the House Syndication, Inc., and Carey

Brothers, Inc., state the following:

Petitioners are both privately owned corporations.

- Neither is owned, in whole or in part, by a aie company or

by a public company.

ill

TABLE OF CONTENTS

Page

SPUPMPEUAPOU WOREKDEEUEEEED 66. et ewe eee i

LIST OF PARTIES AND CORPORATE

SPEARS PRALINE 10. i tt ee li

po ea sy Sr ili

pp Pe eis 2g |S vi

PRELAMINARY SIATEMENT ................ 1

EE a ee re 2

RE ee re 2

STATUTORY PROVISIONS INVOLVED ......... 2

erpmeeen SP ERE CCAGE 2k eee 3

REASONS FOR GRANTING THE PETITION ...... 8

I. THERE IS A DEEP AND RECURRING

CONFLICT OVER WHETHER FEDERAL

COURTS. HAVE JURISDICTION AFTER

WOLENS TO ADJUDICATE BREACH OF

CONTRACT CLAIMS AGAINST AIR

EE ee 10

A. Wolens Holds That The ADA Does Not

Preempt State Law Contract Claims ...... 11

TABLE OF CONTENTS—Continued

Page

B. The Ninth Circuit’s Decision Conflicts With

a ea ke ea ee a a ee ees 11

C. Eight Circuit Courts Are Deeply Divided Over

How To Apply Wolens And The ADA To

State Breach Of Contract Claims ........ 14

D. The Circuit Conflict Arising From Wolens Is

Mature And Shows No Sign Of Abating ... 18

Il. THE FEDERAL COURTS ARE DIVIDED

OVER WHETHER THE ADA PREEMPTS

COURT FROM USING CORE STATE LAW

CONTRACT DOCTRINES TO RESOLVE

CONTRACT CLAIMS AGAINST AIRLINES _. 21

A. Different Circuits Selectively Apply State Law

Contract Doctrines In Construing The Terms

of Private Airline Agreements .......... 21

B. The ADA Requires That Consumers And Air

Carriers Retain State Law Remedies To

Enforce Their Agreciiemis...... 2.6455. 23

eee Gx 64k ooh eh ee ee ee 25

APPENDIX

A. Ninth Circuit Order Denying Rehearing ...... la

B. Ninth Circuit September 3, 2003 Opinion ..... 3a

TABLE OF CONTENTS—Continued

Page

. Ninth Circuit Judgment ................ 12a

. District Court Judgment ............... l4a

. District Court Summary Judgment Order .... 21a

District Court Order Denying Rehearing ..... 34a

, BOOED OF TNOVEE 6 ce ewes es 39a

Statutory Provisions Involved ............ 42a

Press Release Approval Form and Press

oo eT ee ee ee ee Pe 45a

EE ve bork a ee ee ee ee eee 49a

. December 23, 2003 Letter Granting Extension to

MCT UPC ree ere fe Sla

TABLE OF AUTHORITIES

Page

CASES

American Airlines, Inc. v. Wolens, 513 U.S. 219

eth ad ae ane ehevauws passim

Arkwright-Boston Manufacturers Mutual

Insurance Co. v. Great Western Airlines,

Inc., 767 F.2d 425 (8th Cir. 1985) ..... 14, 15

Breitling U.S.A., Inc. v. Federal Express Corp..,

45 F. Supp. 2d 1280 (C.D. Cal. 2001) ..... 22

Charas v. Trans World Airlines, Inc., 160 F.3d

1259 (9th Cir. 1998) (en banc) ..... 13, 19, 20

Cipollone v. Liggett Group, Inc., 505 U.S. 504

56.2 ook gs ay AN ore ee 21

Deiro v. Am. Airlines, Inc., 816 F:2d 1360 (9th

ND ks ok see ee ee ee ee 20

Erie R.R. v. Tompkins, 304 U.S. 64 (1938) ..... 18

First Pennsylvania Bank, N.A. v. Eastern

Airlines, Inc., 731 F.2d 1113 (3d Cir. 1984)

LR ae EPA SE OREN CoE ot 14, 15, 20

Greer v. Federal Express Corp., 66 F. Supp. 2d

Bre tw DD. RY. 999) 2 kee cae 14, 16, 18

Howell v. Alaska Airlines, 995 P.2d 901 (Wash.

SO rr ee Pere 23

Imperial News Co., Inc. v. P-I-E Nationwide,

Inc., 905 F.2d 641 (2d Cir. 1990) ........ 22

King Jewelry, Inc. v. Federal Express Corp., 166

F. Supp. 2d 1280 (C.D. Cal. 2001), aff'd,

316 F.3d 961 (9th Cir. 2003) ........... 22

Vii

TABLE OF AUTHORITIES—Continued :

age

Lyn-Lea Travel Corp. v. Am. Airlines, Inc., 283

F.00 cee CU CH. FOR) ww. ek ees caee 9, 22

Mastrobouono v. Shearson Lehman Hutton, Inc.,

ee rr re res 24

McCall-Thomas_ Engineering Co, Inc. v.

Federal Express Corp., 81 F.3d 28 (4th Cir.

Rd oe Nek ON es ee ees 14, 15

Morales v. Trans World Airlines, Inc., 504 U.S.

as i wo aes a ohare any 21

Musson Theatrical, Inc. v. Federal Express

Corp., 89 F.3d 1244 (6th Cir. 1996) .. 14-18, 20

Nippon Fire & Marine Ins. Co. v. Skyway

Freight Sys., Inc., 235 F.3d 53 (2d Cir.

ME a8 ee oe ee 14, 15, 19, 20

Northwest Airlines, Inc. v. Duncan, 531 U.S.

PE 3S oe ae eee 19

Power Travel Int’l, Inc. v. Am. Airlines, Inc.,

257 F. Supp. 2d 701 (S.D.N.Y. 2003) ..... 22

Read-Rite Corp. v. Burlington Air Express, Ltd.,

186 F.3d 1190 (9th Cir. 1999) ........ passim

Sam L. Majors Jewelers v. ABX, Inc., 117 F.3d

922 (Sth Cir. 1997) ....... 14, 16, 17, 19, 20

Steel Co. v. Citizens for a Better Environment,

SE Se SPEED bcc akeeeaee eee 19

Strategic Assets, Inc. v. Federal Express

Corp., 190 F. Supp. 2d ‘1065 (M.D. Tenn.

Vill

TABLE OF AUTHORITIES—Continued .

age

SVT v. Federal Express Corp., No. 94-3057,

1997 WL 285051 (N.D. Cal. May 19, 1997)... . 22

Travel All Over the World, Inc. v. Kingdom of

Saudi Arabia, 73 F.3d 1423 (7th Cir.

IE As Gos mht ee ee oo 14, 16, 18, 19, 20

United Airlines v. Mesa Airlines, 219 F.3d 605

Ses Es so ee eke ee ere ee 9, 22

Williams v. Federal Express Corp., No.

99-06252, 1999 WL 1276558 (C.D. Cal. Oct.

PO Creer Te eee eo Ee oe ee 22

STATUTES, REGULATIONS, AND RULES

Be as SD os oS a hh ee ee 2

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

fo ae rere passim

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

I a ety all Sa ae og eg Jats rn passim

PS. A oo ee eRe cea ews 10

49 U.S.C. Be rere erage. ar 10

49 U.S.C. § 1305(a)(1) . 0... ee ee ee ee eee 10

i ee me ee errr eee re

OTHER MATERIALS _

Restatement (Second) of Contracts § 201 (2003) ... 7

Restatement (Second) of Contracts § 206 (2003) ... 25

13 Williston on Contracts § 39:39 (4th ed. 2000) . . 24

PETITION FOR A WRIT OF CERTIORARI

On the House Syndication, Inc. and Carey Brothers, Inc.,

on their own behalf and on behalf of all others similarly

situated, respectfully petition for a writ of certiorari to review

the judgment of the United States Court of Appeals for the

Ninth Circuit in this case.

PRELIMINARY STATEMENT

This case concerns an unprecedented expansion of federal

jurisdiction over state law contract claims involving interstate

air Carriers subject to the Airline Deregulation Act of 1978, -

49 U.S.C. § 41713 et seq. (the “ADA”). Prior to 1978, the

federal government regulated interstate airfares and the terms

and conditions of the air carriage of goods. Congress enacted

the ADA to deregulate the domestic airline industry and allow

competition and market forces to determine industry practices.

To prevent local interference with these goals, Congress

preempted the states from enacting or enforcing laws related

to airline prices, routes, or services. Congress preserved,

however, all existing legal remedies that did not threaten the

goals of deregulation under the ADA.

This Court has recently explored the reach of the ADA’s

preemption and savings clauses, but that decision has spawned

enormous confusion among eight different circuits. In

American Airlines v. Wolens, 513 U.S. 219 (1995), this Court

explained that the ADA’s preemption clause prohibits states

“from imposing their own substantive standards with respect

to rates, routes, or services, but not from affording relief to

a party who claims and proves that an airline dishonored a

term the airline itself stipulated.” Jd. at 232-33.

Accordingly, this Court held that the ADA does not preempt

state law contract claims that do not allege any violation of a

state-imposed law, rule, regulation, or standard. Jd. at 233.

Notwithstanding that clear direction in Wolens, the Ninth

Circuit below exercised jurisdiction over a_ routine

breach-of-contract dispute that arose solely from the

obligations expressed in the parties’ agreement. The Ninth

Circuit’s assumption that the ADA permits federal question

jurisdiction over air carrier contract disputes transforms the

limited role of federal common law in this field envisioned by

Congress, and cannot be squared with this Court’s consistent

interpretations of the ADA. Significantly, the Ninth Circuit’s

erroneous decision builds upon erroneous decisions of the

Second, Third, Fourth, Fifth, and Eighth Circuits, and

conflicts with holdings of the Sixth and Seventh Circuits.

These divergent judgments necessitate this Court’s guidance

on whether federal common law governs routine

- breach-of-contract claims, and the extent to which the ADA

preempts generally recognized doctrines of state contract law.

Given the widespread and mature conflict among the circuit

courts on these issues, this Court’s review is warranted.

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 12a-13a) is

not reported. The opinion of the district court (Pet. App.

12a-13a) is not reported.

JURISDICTION

The judgment of the court of appeals was entered on

September 3, 2003. On December 23, 2003, Justice

O’Connor extended the time for filing a petition for a writ of

certiorari to and including January 28, 2004. Pet. App. 51a.

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

§ 1254(1).

STATUTORY PROVISIONS INVOLVED

Pertinent sections of the Airline Deregulation Act are

reproduced at Pet. App. 42a.

STATEMENT OF THE CASE

1. Federal Express (“FedEx”) is the world’s largest

express delivery service and is certified by the Federal

Aviation Administration as an all-cargo air carrier. FedEx

offers customers six different tiers of shipping services that

promise delivery by specified dates and times. Pet. App. 56a-

58a. Under this system, FedEx customers are able to request

in advance whether their package will arrive at its destination

within a few days, overnight, or before 10:30 a.m. on the

following business day. Pet. App. 56a - 58a. Costs for each

tier of service correlate to the delivery priority requested by

the customer, with higher charges for expedited deliveries.

Pet. App. 11 1a.

Each FedEx shipment is arranged using an order form

known as a FedEx USA Airbill (“Airbill”) that explains the

basic terms and costs of the delivery services. Pet. App. 85a

- 86a. The Airbill incorporates by reference the FedEx

Service Guide (“Service Guide”), a more than 120 page

document containing additional terms governing the delivery

services. Together, the Airbill and the Service Guide formed

the contract between the parties at issue in this case.

Both the Airbill and the Service Guide undisputedly

promised a full refund for any service failures outside certain

disclaimers and exceptions. Pet. App. 255a et seq. Thus, if

FedEx failed to deliver a priority package by 10:30 a.m. the

next day as requested, FedEx would be contractually

obligated to offer the customer a refund. The FedEx Service

Guide also clearly stated that the terms in the Service

Guide—including the money- back guarantee—could only be

amended by the written authorization of FedEx’s Senior Vice

President of Marketing and Corporate Communications. Pet.

App. 209a.

. +

The United Parcel Service (“UPS”) is a cargo delivery

service and FedEx’s main competitor in the express shipping

business. In August 1997, UPS employees went on strike.

As a result of the UPS strike, FedEx recorded a significant

increase in shipping volume. This record volume, however,

proved too great for FedEx’s distribution network and

resulted in over nine million service failures on customer

contracts during the UPS strike.

FedEx anticipated that it would be unable to absorb the

many UPS customers who would flock to it during the UPS

strike, so it sought obliquely to avoid its contractual

obligations while profiting as much as possible. On July 31,

1997, FedEx issued a press release stating that “[a]s provided

in our Service Guide and until further notice, we will not

_offer money-back guarantees.” Pet. App. 47a - 48a. The

substance of that press release was reported in only one

newspaper on August 1, 1997, the day after it was “released.”

Further, FedEx delayed communicating that position

electronically to its customers until August 6, 1997. The

record also confirms that FedEx’s Senior Vice President of

Worldwide Marketing did not regard the press release as a

revision or change to the Service Guide, as required for a

valid amendment. Subsequently, on August 8, 1997, FedEx

issued an amendment to the Service Guide (the

“Amendment” ) providing that the money-back guarantee was

suspended until further notice, and purporting to make the

Amendment retroactive to July 31, 1997. Pet. App. 49a -

50a.

These after-the-fact alterations to the Service Guide

allowed FedEx to avoid the refunds triggered by its late

deliveries. Throughout the UPS strike, FedEx refused to

honor the money-back guarantee set forth in the Service

Guide. When customers called to request a refund for a late

delivery, a FedEx recording advised them as follows:

Thank you for calling FedEx Customer Account

Services. Due to the recent service disruption at UPS,

we have temporarily suspended our money-back

guarantee on shipments tendered from July 31st until

August 23rd. No refunds, credits or service

downgrades can be permitted during this time frame.

As a result of the UPS strike, FedEx obtained

approximately $150 million dollars in incremental revenues.

Consequently, FedEx posted a record profit for the normally

Slow summer quarter. That profit, though, came at the

expense of its customers, who were required to pay for

services they did not receive, and who were deprived of the

benefits of FedEx’s guarantee at a time when it was still a

contractually binding obligation.

2. Petitioners, On the House Syndication, Inc. and Carey

Brothers, Inc., originally filed this action in the Superior

Court of San Diego County, California. FedEx then timely

removed the action to the district court for the Southern

District of California solely on the basis that the claims arose

under federal common law. Pet. App. 39a - 41a. FedEx’s

removal was predicated on established Ninth Circuit precedent

holding that breach-of-contract claims involving an air

carrier’s duties are governed by federal common law, so

Petitioners did not move to remand. Petitioners then filed an

amended complaint asserting two contract claims: first, that

FedEx breached its delivery contract by charging Petitioners,

and similarly situated persons, for expedited deliveries that it

failed to perform (the “Excess Charges Claim”); and, second,

that FedEx breached its delivery contract by refusing to honor

the money-back guaranty contained in the Service Guide for

service failures occurring between July 31, 1997 and August

8, 1997 (when it actually amended the terms of the Service

Guide) (the “Money-Back Guarantee Claim”). Petitioners

included no additional causes of action or grounds for relief.

3. Both parties then moved for summary judgment on

Petitioners’ contract claims. On April 6, 2000, the district

court granted and denied each of the summary judgment

motions in part, finding in favor of Petitioners on the

Money-Back Guarantee Claim, and in favor of FedEx on the

Excess Charges Claim. The district court first considered

whether Petitioners’ claims were preempted by the ADA.

Relying on this Court’s decision in Wolens and the Ninth

Circuit’s decision in Read-Rite Corp. v. Burlington Air

Express, Ltd., 186 F.3d 1190 (9th Cir. 1999), the district

court concluded that Petitioners’ “routine” “claim for breach

of contract” turned exclusively on the terms of the parties’

agreement with “no need to analyze . . . common law rights

and policies” to resolve the parties’ dispute. Pet. App. 28a.

The district court did not, however, consider whether that

conclusion eliminated the basis for federal question

jurisdiction invoked by FedEx.

Then, on June 28, 2000, the district court denied FedEx’s

motion for reconsideration holding, inter alia, that the

contract’s force majeure provision was irrelevant in the

context of the “third-party strike of UPS in this case” and

expressly finding that Petitioners were excused from making

a claim to FedEx prior to bringing suit because any such

claim “would have been futile.” Pet. App. 36a.

After discovery and further proceedings, the district court

certified a class consisting of persons suffering service

failures during the period between July 31, 1997 and August

7, 1997. Notice of the pending class was then mailed to

approximately 400,000 class members in November 2001.

On June 17, 2002, the district court entered final judgment.

4. On appeal, the Ninth Circuit reversed in part and

affirmed in part. The panel issued three separate opinions: an

unsigned opinion of the court, a concurrence in part

accompanied by a concurrence in the result, and a dissent.

The panel majority opinion expressly confined its analysis

to the “import of the language” in the Amendment and the

Service Guide. Pet. App. 4a. Interpreting the parties’

contract, the majority opinion reversed the grant of summary

judgment in favor of Petitioners on the Money-Back Guaranty

Claim and awarded summary judgment in favor of FedEx.

The majority opinion reasoned that customers who contracted

with FedEx during the class period “were, or should have

been, aware of FedEx’s interpretation of its Service Guide”

as stated in the press release. Pet. App. 4a. The majority

opinion conceded, sub silentio, that the press release could not

properly amend the Service Guide, but, relying solely on the

Restatement (Second) of Contracts § 201, held that “the

contract term shall be interpreted according to the meaning

attached by” FedEx. Pet. App. 5a The majority explained

that, because FedEx did not know that customers interpreted

the press release to retain the money-back promise, “the

contract term shall be interpreted according to the meaning

attached by” FedEx. /d.

The majority also affirmed the grant of summary judgment

in favor of FedEx on the Excess Charges Claim, construing

the Service Guide to require the Petitioners to make a claim

to FedEx before filing suit. Pet. App. 5a-6a. The majority

simply ignored the district court’s express finding that

Petitioners were excused from making such a claim because

it would have been futile given FedEx’s unequivocal position

that it would not honor the Guarantee, and instead relied on

cases holding that the ADA preempted the application of

contract doctrines such as futility

In partial concurrence, Judge Silverman agreed with the

result reached by the majority, but offered a different

interpretation of the agreement. Unlike the majority opinion,

Judge Silverman read the language of the Service Guide to

allow the July 31, 1997 press release issued by FedEx to

amend the parties’ contract, and thereby preclude Petitioners’

Money-Back Claim. Pet. App. 7a-8a. Like the majority

opinion, Judge Silverman’s opinion also rested entirely on the

terms of the parties’ bargain, as he deemed it modified by the

press release.

Judge Rawlinson dissented. She rejected the majority

opinion’s reliance on the Restatement of Contracts, and

instead interpreted the Service Guide to preclude the

suspension of the money-back guarantee contemplated in the

July 31, 1997 press release. Pet. App. 10a. Additionally,

Judge Rawlinson disputed the interpretation of the notice

provision offered by the majority and concurring opinions.

Pet. App. Ila.

REASONS FOR GRANTING THE PETITION

By permitting the exercise of jurisdiction in federal court

of purely state-law contract disputes, the Ninth Circuit

gravely misapplied this Court’s precedents on an issue that

has divided eight different circuits. The court adjudicated a

routine breach-of-contract claim “pursuant to judicially

fashioned federal common law” in clear contradiction of this

Court’s holding in Wolens. 513 U.S. at 232. The Ninth

Circuit’s invocation of federal jurisdiction was an

unwarranted expansion of the ADA that risks channeling “the

range of contract claims relating to airline rates, routes, or

services” into the federal courts. Jd.

The panel’s per curium majority sub silentio applied

settled Ninth Circuit precedent to achieve that result. Despite

this Court’s decision in Wolens, eight circuit courts and

numerous district courts have considered whether federal law

governs contract claims against air carriers, with the Second,

Third, Fourth, Fifth, Eighth, and Ninth Circuits holding that

contract claims against air carriers are governed by federal

common law that preempts state claims, and the Sixth and

Seventh Circuits requiring breach-of-contract claims to be

brought against air carriers in state court. The conflict among

these circuit decisions is thus long-standing and mature,

presenting a compelling justification for this Court’s

immediate review.

In addition, four circuit courts and a host of district courts

have considered whether the ADA preempts ancillary state

law contract doctrines that are important in the construction

of air carrier contracts. Claims or defenses based on core

contract principles such as fraudulent inducement, estoppel,

and waiver arise in nearly every contract case, and dictated

the outcome in this matter. Given the tremendous volume of

contract disputes involving air carriers in both federal and

state courts, the tensions over the use of specific contract

doctrines are certain to increase as demonstrated by United

Airlines v. Mesa Airlines, 219 F.3d 605 (7th Cir. 2000),

Lyn-Lea Travel Corp. v. Am. Airlines, Inc., 283 F.3d 282

(5th Cir. 2002), and the Ninth Circuit’s decision below.

This Court’s guidance is needed on these important

questions. Notwithstanding the court’s per curiam treatments,

the Ninth Circuit position on both questions is now so

well-settled that this Court will likely not get another

opportunity to review the Ninth Circuit’s approach to these

critical issues. Given the number of divergent circuit court

decisions, the significant dollar value represented by private

contracts with airlines, and the importance of the federalism

concerns implicated by the ADA, this Court’s review is

warranted.

I. THERE IS A DEEP AND RECURRING CONFLICT

OVER WHETHER FEDERAL COURTS HAVE

JURISDICTION AFTER WOLENS TO ADJUDICATE

BREACH OF CONTRACT CLAIMS AGAINST AIR

CARRIERS

In Wolens, this Court made clear that Congress did not

intend the ADA to “channel into federal courts the business

of resolving, pursuant to judicially fashioned federal common

law, the range of contract claims relating to airline rates,

routes, or services.” 513 U.S. at 232. Notwithstanding that

unequivocal guidance, six circuit courts have held that federal

common law governs routine breach-of-contract claims

against air cargo carriers. Two circuit courts and several

district courts have held to the contrary. A definitive answer

on the scope and meaning of the ADA’s preemption clause is

thus required from this Court.

A. Wolens Holds That The ADA Does Not Preempt

State Law Contract Claims

In 1978, Congress enacted the ADA, determining that

“maximum reliance on competitive market forces” would best

further growth, innovation, and price competition. Morales

v. Trans World Airlines, Inc., 504 U.S. 374, 378 (1992)

(quoting 49 U.S.C. §§ 1302(a)(4), (a)(9)). Congress sought

to ensure that myriad state laws would not frustrate the goals

of deregulation by including a preemption provision in the

ADA “relating to rates, routes, or services” for air

transportation. Id. at 378-79 (quoting 49 U.S.C.

§ 1305(a)(1)).

While the ADA preempted State regulation of air carriers,

Congress did not similarly preempt state law claims arising

solely from the airline’s “privately ordered obligations.”

Wolens, 513 U.S. at 228. In Wolens, this Court considered

whether the ADA’s preemption clause barred a cause of

action arising from the alleged breach of an airline’s frequent

flyer program. The Court reaffirmed its interpretation of the

ADA in Morales that Congress did not intend to allow the

States to “hobble” federal deregulation through the passage of

a patchwork of inconsistent laws. Id. at 228.

However, this Court distinguished “suits alleging a

violation of state-imposed regulation” from claims “seeking

recovery solely for the airline’s alleged breach of its own,

self-imposed undertakings.” Jd. This Court explained that

the terms and conditions of services offered by an air carrier

to its customers constituted a purely private obligation that

posed no threat to Congress’s deregulatory intent. Jd. at

228-29. The ADA, this Court recognized, was enacted to

promote reliance on the market for air services, and thus

contemplated “effective means to enforce” the resulting

private agreements. Jd. at 230. Accordingly, the Court

construed the ADA to preempt claims based on “what the

State dictates” through its laws and regulations, but not what

the airline undertakes to perform of its own accord. Id. at

232-33.

Applying these principles, Wolens held that the ADA does

not preclude a state law contract claim where 1) the claim

arises from the parties’ bargain “with no enlargement or

enhancement based on state laws or policies external to the

agreement”; and 2) the remedy sought by the plaintiff is

“confined to a contract’s terms.” Jd. at 229, 233.

B. The Ninth Circuit’s Decision Conflicts With Welens

The Ninth Circuit mechanistically adhered to its earlier

decision on the scope of federal common law preserved by the

ADA in Read-Rite Corp. v. Burlington Air Express, Ltd. , 186

F.3d 1190 (9th Cir. 1999).' The court therefore did not

follow this Court’s instruction in Wolens that the ADA

preempts state law claims that “enlarge or enhance” the

contractual obligations voluntarily undertaken by air carriers,

but “permits state-law-based adjudication of routine

breach-of-contract claims.” 513 U.S. at 232-33. The Ninth

Circuit never questioned whether the claims asserted against

FedEx satisfied the jurisdictional requirements outlined in

Wolens. That error is crucial because absent applicable

federal common law, the courts below lacked subject matter

jurisdiction to decide this case.

In Read-Rite, the Ninth Circuit held that federal common

law governed claims relating to “the carriage contract of an

air carrier.” Jd. at 1195. The Ninth Circuit considered

whether a limited-liability provision contained in an air cargo

contract was enforceable. The court held that the “scope and

standard of limited liability” provisions in an air carrier’s

contract “are directly related to the carrier’s rates and

services” and thus “go to the very heart of the ADA.” Jd. at

1198.

Because of the sweeping breadth of Read-Rite’s

explanation, federal common law governs many ordinary

breach-of-contract claims against air carriers in the Ninth

Circuit. Accordingly, the Ninth Circuit did not resolve

whether the claims asserted against FedEx would “enlarge”

or “enhance” the services FedEx agreed to provide in its

contract.

Rather, the majority opinion interpreted the parties’

contract to find that customers who contracted with FedEx

' The author of Read-Rite, Judge Fletcher, was the only

member of the panel below not to write separately, preferring

instead to join the court’s per curiam opinion.

during the class period “were, or should have been, aware of

FedEx’s interpretation of its Service Guide,” and were bound

by that interpretation. Pet. App. 4a. This conclusion—and the

supporting citation to the Restatement of Contracts—confirms

that the Ninth Circuit implicitly held that adjudicating these

questions required no examination of state substantive

standards or policies external to the agreement, but rather was

a matter of federal common law.

In accord with Wolens, Petitioners sought remedies that

were within the four corners of the contract. Under their

Money-Back Guarantee claim, Petitioners simply sought the

benefit of the guarantee expressly provided for in the Service

Guide. Similarly, under their Excess Charges claim,

Petitioners sought merely to recover the incremental premium

amounts that FedEx charged them above the contractually

specified prices for the services they actually received. Thus,

the remedies that Petitioners sought were limited to the terms

of the contract with any damages flowing solely from the four

corners of the parties’ agreement.

The Ninth Circuit’s decision to adjudicate the present case

thus expands on Read-Rite and the court’s earlier view that

the ADA “intended to insulate the industry from state

economic regulation” rather than “immunize” airlines for

obligations of their private commitments. See Charas v.

Trans World Airlines, Inc., 160 F.3d 1259, 1266 (9th Cir.

1998) (en banc).

In conjunction with Read-Rite, the decision below

demonstrates complete disregard for this Court’s holding in

Wolens that effective competition in a deregulated market

mandates that airlines be held to the terms that they

voluntarily undertake. In doing so, the decision below denied

Petitioners any remedy for FedEx’s breach of its own contract

while simultaneously expanding the scope of federal

jurisdiction to encompass routine state law claims.

C. Eight Circuit Courts Are Deeply Divided Over How

To Apply.Wolens And The ADA To State Breach

Of Contract Claims

1. Despite this Court’s decision in Wolens, the Second,

Third, Fourth, Fifth, Eighth, and Ninth Circuits have now

held that federal common law governs breach-of-contract

claims against air carriers. Nippon Fire & Marine Ins. Co. v.

Skyway Freight Sys., Inc., 235 F.3d 53 (2d Cir. 2000);

Read-Rite, 186 F.3d at 1190; Sam L. Majors Jewelers v.

ABX, Inc., 117 F.3d 922 (Sth Cir. 1997); McCall-Thomas

Eng’g Co., Inc. v. Federal Express Corp., 81 F.3d 28 (4th

Cir. 1996); Arkwright Boston Mfgs. Mut. Ins. Co. v. Great

Western Airlines, Inc., 767 F.2d 425 (8th Cir. 1985); First

Pennsylvania Bank, N.A. v. Eastern Airlines, Inc., 731 F.2d

1113 (3d Cir. 1984). In direct conflict, the Sixth and Seventh

Circuits hold that the ADA accommodates state-law contract

claims and thus precludes a federal cause of action. Musson

Theatrical, Inc. v. Federal Express Corp., 89 F.3d 1244 (6th

Cir. 1996); Travel All Over the World, Inc. v. Kingdom of

Saudi Arabia, 73 F.3d 1423-(7th Cir. 1996).

In the aftermath of Wolens, the Fifth Circuit in Sam L.

Majors Jewelers stated that “a cause of action against an

interstate air carrier for claim for property lost or damaged in

shipping arises under federal common law.” 117 F.3d 922,

929 n.16.2, The Second Circuit concurs, “agree[ing] with

? Notably, the Fifth Circuit appeared to acknowledge that its

conclusion conflicted with the decision of the Sixth Circuit in

Musson. Sam L. Majors, 117 F.3d at 927 n.9; see also Greer v.

Federal Express Corp. , 66 F. Supp. 2d 870, 874 (W.D. Ky. 1999)

(noting conflict between the decisions).

those courts . . . that hold that federal common law continues

to control the issue of liability of air carriers for lost or

damaged shipments even after deregulation.” Nippon, 235

F.3d at 59. The Fourth Circuit likewise relied on federal

common law to support federal question jurisdiction over a

case raising “claims involving shipments in interstate

commerce by air carriers.” McCall-Thomas, 81 F.3d at 30

n.*. To these post-Wolens decisions the Third and Eighth

Circuits have never overruled pre-Wolens decisions holding

that federal common law governs such breach-of-contract

claims. Arkwright, 767 F.2d at 427 (citing “Congress’

retention of significant control over air transportation” and

holding that “federal law rather than state law” governs the

enforceability of a limited liability clause in an air cargo

contract); First Pennsylvania Bank, 731 F.2d at 1115 (holding

that “federal law, rather than Pennsylvania law, governs the

enforceability” of a limited liability clause in an air cargo

contract).

2. Two Circuits have reached the exact opposite result.

In Musson, the plaintiff sought damages for the alleged fraud

and negligent misrepresentation of the defendant air carrier by

arguing that both claims arose under federal common law. 89

F.3d at 1247-48. The Sixth Circuit noted that in Wolens, this

Court “expressly rejected the possibility that the ADA leaves

room for a federal common law cause of action against air

carriers, at least in regard to breach of contract claims.” Jd.

at 1251. The Sixth Circuit then applied the reasoning of

Wolens to hold that the ADA does not create a federal cause

of action for breach of contract or fraud against an air carrier,

and that state law continues to govern contract suits against an

airline. Jd. at 1251-52.°

> Several district court opinions have recognized that the Sixth

Circuit’s decision in Musson conflicts with other circuit cases. See,

The Seventh Circuit’s decision in Travel All Over mirrors

the conclusions of the Sixth Circuit. In Travel All Over, the

plaintiff sought damages for the alleged breach of an airline’s

agreement to honor reservations booked by the plaintiff

agency. The airline successfully moved to dismiss the

complaint on the ground that the entire action was preempted

by the ADA. The Seventh Circuit disagreed, holding that the

plaintiff's contract claim alleged no “violation of a

state-imposed obligation[],” as the “terms and conditions in

the contract” between the parties arose from a “privately

ordered” transaction. Travel All Over, 73 F.3d at 1432.

Moreover, the Seventh Circuit expressly rejected the airline’s

argument that certain contracts related to air rates, routes, or

services may not be enforced under state law. Rather, the

court noted that “Wolens did not distinguish between various

types of contracts” arising between airlines and their

customers. /d.

The United States has filed an amicus brief in which it

agrees with the Sixth and Seventh Circuits’ views. In the Sam

L. Majors Jewelers case, the government argued that “the

federal regulatory scheme does not create an express or

implied cause of action for air cargo claims. There is thus no

basis for assuming removal jurisdiction on the theory that

Congress has substituted a federal cause of action for actions

premised on state law.” Br. for the United States as Amicus

e.g., Strategic Assets, Inc. v. Federal Express Corp., 190 F. Supp.

2d 1065, 1069 (M.D. Tenn. 2001) (noting that “to the extent that

other Circuits have concluded that [the ADA] preserved a federal

law cause of action in negligence or contract for delayed shipments,

such a rule is also at odds with Musson”); Greer, 66 F. Supp. 2d

at 873 (concluding that “to the extent the Fifth Circuit found a prior

federal common law cause of action saved by the ADA or its

predecessors, it is at odds with Musson”).

Curiae, Sam L. Majors Jewelers v. ABX Air, Inc., 1997 WL

33560672, at *14 (Apr. 18, 1997).

3. In total, therefore, eight circuit courts have reached

three different conclusions regarding this Court’s

interpretation of the ADA’s preemption clause. The Second,

Third, Fourth, Fifth, and Eighth Circuits hold that any claim

for lost or damaged property against an air carrier arises

under federal common law, while the Sixth and Seventh

Circuits hold that no federal cause of action exists for contract

claims against an airline. The United States has taken the

position that the Sixth and Seventh Circuits are correct. Br.

for the United States as Amicus Curiae, Sam L. Majors

Jewelers, 1997 WL 33560672, at *16 (concluding that the

decision in Musson is “better reasoned and more consistent

with the modern rule tightly circumscribing the judiciary’s

power to fashion a federal common law”). The Ninth

Circuit’s decisions in Read-Rite and in the present case create

a third approach based on a seemingly limitless view of

federal common law post-enactment of the ADA that allows

federal jurisdiction over 1) claims for loss or damage by

interstate common carriers by air; 2) suits seeking

enforcement of a limited liability provision in an air carrier’s

contract; and 3) actions seeking damages for breach of an air

carrier’s contract that require no analysis of common law

rights or policies. Pet App. 28a. The Ninth Circuit’s

interpretation of the ADA alone presents a compelling need

for this Court’s review. When added to the post-Wolens

decisions of the Second, Fourth, Fifth, and Seventh Circuits,

these applications of Wolens threaten to “resurrect[] the

federal courts’ ability to decide cases according to their own

ideas about appropriate commercial law principles.” Musson,

89 F.3d at 1251.

4. The divergent approaches of the circuit courts have

created more than an academic difference of opinion. Instead,

the holdings of Musson and Travel All Over make clear that

Petitioners’ claims in this matter would have been decided

differently had the case arisen within the Sixth or Seventh

Circuits. Musson unequivocally holds that Wolens “rejected

a federal common law cause of action” for

breach-of-contract, meaning the ADA does not permit the

exercise of federal question jurisdiction over

breach-of-contract claims. 89 F.3d at 1251-52. Travel All

Over makes clear that Wolens “did not distinguish between

various types of [airline] contracts,” thus indicating that the

ADA does not preempt contract claims based solely on

privately ordered transactions. 73 F.3d at 1432; see also

Strategic Assets, 190 F. Supp. 2d at 1069 (finding no basis for

federal jurisdiction over ordinary contract claim and

remanding action to state court); Greer, 66 F. Supp. 2d at 873

(same).

Both decisions, therefore, demonstrate that Petitioners’

“routine . . . claim for breach of contract” that “hinge[ed]

upon the interpretation of ‘strike’ and ‘national transportation

network’ within the terms of the contract itself,” Pet. App.

~ 28a, would not have stated a federal claim in the Sixth or

Seventh Circuits, aad hence would have been remanded to

state court for lack of subject matter jurisdiction. See

Musson, 89 F.3d at 1252; Travel All Over, 73 F.3d at 1432.

That result, and the corresponding impact on the doctrines of

federal jurisdiction established since Erie R.R. v. Tompkins,

304 U.S. 64 (1938), requires this Court’s intervention.

D. The Circuit Conflict Arising From Wolens Is

Mature And Shows No Sign Of Abating

As a matter of federal-state comity, it is important for this

Court to clearly define the extent to which Congress has

preempted state law contract claims against airlines. This

Court noted in Wolens that the ADA “contains no hint” of

congressional intent to channel the range of state law contract

claims against air carriers into federal courts. 513 U-S. at

232. Wolens addressed this potential tension between the

roles of state and federal courts by limiting the ADA’s

preemption clause to claims that seek to impose state laws and

regulations related to airline rates, routes, or services. Jd. at

232-33; see also Travel All Over, 73 F.3d at 1432. Despite

this Court’s guidance, that tension remains at the forefront of

suits involving air carrier contracts, as the circuit and district

courts have issued conflicting decisions recognized by three

Justices of this Court. See Northwest Airlines, Inc. v.

Duncan, 531 U.S. 1058 (2000) (O’Connor, J., dissenting

from a denial of certiorari) (joined by Rehnquist, C.J., and

Thomas, J.).

This case presents an ideal vehicle for this Court to

reconcile the circuit conflict over the proper boundaries for

the exercise of federal judicial power and its concomitant

- erosion of the foundations of state contract law. Although the

appropriateness of federal common law and the sufficiency of

federal jurisdiction were not expressly addressed by the Ninth

Circuit below, the court’s position has been fully explained in

its prior opinions in Read-Rite and the en banc decision in

Charas.* The decisions of the Second Circuit in Nippon, and

the Fifth Circuit in Sam L. Majors Jewelers are equally

* Given the Ninth Circuit’s well-established position that

federal common law governs contract claims against air carriers,

Petitioners had no good-faith basis on which to oppose removal, or

to press the issue before the Ninth Circuit. Instead, the question of

whether the Ninth Circuit’s erroneous interpretations of the ADA

in prior decisions precluded the exercise of subject matter

jurisdiction in this action is properly addressed to this Court. Steel

Co. v. Citizens for a Better Environment, 523- U.S. 83, 94-95

(1998); Fed. R. Civ. P. 12(h)(3).

comprehensive,’ as are the conflicting opinions of the Sixth

Circuit in Musson and the Seventh Circuit in Travel All Over.

Each of these decisions fully examined the dispositive legal

issues, including the text and history of the ADA, the

preemption and savings clauses, this Court’s decisions in

Morales and Wolens, and the policy considerations supporting

the application of federal or state law. Nippon, 735 F.3d at

59; Read-Rite, 186 F.3d at 1195-98; Charas, 160 F.3d at

1262-66; Musson, 89 F.3d at 1249-52; Sam L. Majors

Jewelers, 117 F.3d at 928-29; Travel All Over, 73 F.3d at

1430-32.

Moreover, this case arises from opposing motions for

summary judgment and thus presents a record containing

essentially undisputed facts. In addition, the Petitioners ©

raised, only claims for breach-of-contract. Therefore, this

case does not implicate unsettled questions of law regarding

the ADA’s preemption of state tort claims. See Wolens, 513

U.S. at 237 (Stevens, J., concurring in part and dissenting in

part) (stating that the ADA does not “given airlines free rein

to commit negligent acts”); id. at 242-43 (O’Connor, J.,

concurring in the judgment and dissenting in part) (expressing

view that the ADA does not preempt all personal injury

> Notably, the Fifth Circuit cautioned that its decision in Sam

L. Majors was “heavily influence[d]” by the prior decisions of the

Ninth Circuit in Deiro and the Third Circuit in First Pennsylvania

Bank. 117 F.3d at 929 n.16. The Fifth Circuit noted that its

decision to apply federal common law as the rule of decision

stemmed largely from the “policy consideration that circuit splits,

especially in the circumstance of this case in which the national

uniformity of a single rule is of vital importance, are to be

avoided.” Jd. The Fifth Circuit’s candid admission that its

decision was largely the result of prudential concerns, rather than

statutory interpretation, illustrates that only this Court can

effectively resolve the conflicts recognized by the circuit courts.

claims); Morales, 504 U.S. at 390 (suggesting limits to the

ADA’s preemption clause).

Il. THE FEDERAL COURTS ARE DIVIDED OVER

WHETHER THE ADA PREEMPTS COURTS FROM

USING CORE STATE LAW CONTRACT

DOCTRINES TO RESOLVE CONTRACT CLAIMS

AGAINST AIRLINES

Even if the exercise by federal courts of jurisdiction over

contract disputes between air carriers and their customers is

correct in the aftermath of the ADA and Wolens, this case

presents a second issue that has divided the courts: whether

the ADA preempts traditional state contract law principles

needed to resolve those contractual disputes.

A. Different Circuits Selectively Apply State Law

Contract Doctrines In Construing The Terms Of

Private Airline Agreements

The confusion among circuits regarding the proper

application of Wolens further extends to whether the ADA

limits the range of contract principles that may be considered

by a federal court adjudicating claims based on the breach of

an air carrier’s agreement. In Wolens this Court noted

without elaboration that “some state-law principles of contract

law . . . might well be preempted to the extent they seek to

effectuate the State’s public policies, rather than the intent of

the parties.” Wolens, 513 U.S. at 233 n.8. This Court did

not, however, specify how the lower courts should determine

which state-law principles are preempted by the ADA and

noted only that “[b]ecause contract law is not at its core

‘diverse, nonuniform, and confusing,’” the enforcement of air

carrier contracts under state law poses little threat to the

uniform deregulation envisioned by Congress. Jd. (quoting

Cipollone v. Liggett Group, Inc., 505 U.S. 504, 529 (1992)

(plurality opinion)).

A number of lower courts, however, have interpreted that

statement in Wolens to hold that the ADA preempts a broad

range of contract doctrines. For example, in United Airlines

v. Mesa Airlines, Inc., 219 F.3d 605 (7th Cir. 2000), the

Seventh Circuit extended Wolens to preempt not only state

anti-fraud statutes, but also “common law rules against

fraudulent inducement.” Jd. at 609-10. In contrast, the Fifth

Circuit in Lyn-Lea v. Travel Corp. v. American Airlines, Inc..,

283 F.3d 282 (Sth Cir. 2002) held that the common law

defense of fraudulent inducement was not preempted under

Wolens and the ADA. /7d. at 290 (holding that fraudulent

inducement “related to the validity of mutual assent” and

“does not reflect a state policy seeking to expand or enlarge

the parties’ agreement”). See also, Imperial News Co., Inc.

v. P-I-E Nationwide, Inc. , 905 F.2d 641, 645 (2d Cir. 1990)

(pre-Wolens decision finding estoppel doctrine relevant)

Several district court decisions have also held that the

ADA preempts common law contract doctrines. See, e.g.,

King Jewelry, Inc. v. Federal Express Corp., 166 F. Supp. 2d

1280 (C.D. Cal. 2001), aff'd, 316 F.3d 961 (9th Cir. 2003)

(finding doctrines of waiver and estoppel preempted by the

ADA); Breitling U.S.A., Inc. v. Federal Express Corp., 45 F.

Supp. 2d 179 (D. Conn. 1999) (concluding that the doctrine

of waiver is preempted); Williams v. Federal Express Corp.,

No. 99-06252, 1999 WL 1276558 (C.D. Cal. Oct. 6, 1999)

(finding that the doctrine of unclean hands is preempted); SVT

v. Federal Express Corp., No. 94-3057, 1997 WL 285051

(N.D. Cal. May 19, 1997) (state law doctrine entitling shipper

to rescind a contract where the carrier deviated from the

agreed performance is preempted); but see Power Travel Int'l,

Inc. v. Am. Airlines, Inc., 257 F. Supp. 2d 701 (S.D.N.Y.

2003) (finding the implied duty of good faith and fair dealing

is not preempted by the ADA). State appellate courts have

also evinced confusion on the impact of the ADA’s

preemption clause on state contract law. See, e.g., Howell v.

Alaska Airlines, 994 P.2d 901 (Wash. Ct. App. 2000)

(holding that the ADA preempts a host of common law

doctrines including impossibility, frustration, illusory

promises, unconscionability, the duty of good faith and fair

dealing, and unjust enrichment).

These inconsistent applications of core contract doctrines

such as fraudulent inducement, waiver, and estoppel lead to

the very “diverse, nonuniform, and confusing” results that

this Court alluded to in Wolens. 513 U.S. at 233 n.8 (citation

omitted). At present, the application of core contract

doctrines envisioned by this Court through normal state-law

principles has given way to a confusing collection of

outcome-determinative principles, where the meaning (or even

existence) of an air carrier’s contract varies by circuit based

on amorphous “principles” of federal common law that has no

body of fixed and settled foundation. If federal courts are

permitted to select which aspects of contract law govern a

commercial dispute—as with the Ninth Circuit’s unexplained

and selective use of the Restatement of Contracts rather than

applicable state law—parties to air cargo contracts will shop

the federal courts for the set of rules most favorable to their

claim. This Court’s guidance on the role of contract doctrines

in air carrier agreements is thus necessary to fulfill Congress’s

intent to give parties fair notice of which legal principles will

govern such contract disputes.

B. The ADA Requires That Consumers And Air

Carriers Retain State Law Remedies To Enforce

Their Agreements

This case directly raises questions regarding the core

contract doctrines that survive the ADA’s enactment,

including the widely followed principle of contra

proferentum, and the well-established equitable doctrines of

waiver and futility. See generally Mastrobuono v. Shearson

Lehman Hutton, Inc., 514 U.S. 52, 62-63 (1995) (applying

the doctrine of contra proferentum and noting the “rule of

contract interpretation that a court should construe ambiguous

language against the interest” of the drafter). Each of these

concerns has been thoroughly considered by the circuit and

district courts in opposing motions for summary judgment

resolving the Petitioners’ breach-of-contract claims.

Accordingly, this case presents pure questions of law against

largely undisputed facts for this Court’s review.

The uncertainty among courts addressing these issues has

enormous financial consequences for the commercial air

transportation industry. Air customers and carriers alike need

to know what interests will be protected before they enter into

an agreement. In Wolens, this Court explained that the ADA

was designed to promote reliance on market forces and that

“[mJarket efficiency requires effective means to enforce

private agreements.” 513 U.S. at 230. The decision below

not only frustrates the clear intent of Congress to retain state

law remedies for breach-of-contract, it undermines the

effective enforcement of contractual disputes, and thereby

erodes the very confidence in the free market Congress sought

to promote with the ADA. /d. (noting that the “reality” of

efficient contract enforcement “is key to sensible construction

of the ADA”). If permitted to stand, the Ninth Circuit’s

holding will only further the uncertainty surrounding the

rights and responsibilities created by air carrier contracts.

Here, the Ninth Circuit determined that the district court

erred in concluding that Petitioners’ compliance with the

notice requirements (that it found implicit in the contract)

should be excused under the doctrine of futility. But see 13

Williston on Contracts § 39:39 (4th ed. 2000) (defining

futility as the waiver of a condition precedent where “the

promisor is not going to keep his promise in any event”). In

addition, the Ninth Circuit relied exclusively on a selective

reading of the Restatement of Contracts to hold that FedEx’s

Own interpretation of the ambiguous terms in the Service

Agreement governed the parties’ contract, despite the clearly

contrary principle contained in Restatement (Second) of

Contracts § 206 (“In choosing among the reasonable meanings

of a promise or agreement or a term thereof, that meaning is

generally preferred which operates against the party who

supplies the words or from whom a writing otherwise

proceeds.”). The outcome of this case thus turns entirely on

the choice of contract law permissible under the ADA. This

case offers an appropriate context for this Court to make clear

that the ADA does not preempt core principles of state

contract law necessary to the interpretation of agreements

between air carriers and their customers.

CONCLUSION

The petition for a writ of certiorari should be granted.

January 28, 2004 Respectfully submitted,

Of Counsel | DAVID B. ZLOTNICK

DAVID C. FREDERICK Counsel of

Record

PAUL B. MATEY 1010 Second Avenue

KELLOGG, HUBER, HANSEN, Suite 1750

TODD & EVANS, P.L.L.C. San Diego, CA 92101

1615 M Street, N.W. (619) 232-0331

Suite 400

Washington, D.C. 20036

(202) 326-7900

RICHARD W. COHEN

LOWEY, DANNENBERG,

BEMPORAD & SELINGER, P.C.

1 North Lexington Avenue

White Plains, New York 10601

(914) 997-0500

JAMES C. KRAUSE

RALPH B. KALFAYAN

AGUSTIN F. LOPEZ, II

KRAUSE & KALFAYAN

1010 Second Avenue

Suite 1750

San Diego, CA 92101

(619) 232-0331

Counsel for Petitioners

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Case No. 02-56158, No. 02-56234

[Filed September 30, 2003]

ON THE HOUSE SYNDICATION, INC., on behalf of

themselves and all others similarly situated; CAREY BROS

INC., on behalf of themselves and all others similarly

situated,

Plaintiffs - Appellants,

FEDERAL EXPRESS CORPORATION,

Defendant - Appellee.

ON THE HOUSE SYNDICATION, INC., on behalf of

themselves and all others similarly situated; CAREY BROS

INC., on behalf of themselves and all others similarly

situated,

Plaintiffs - Appellees,

¥.

FEDERAL EXPRESS CORPORATION,

Defendant - Appellant.

Before: SILVERMAN, W. FLETCHER, and RAWLINSON,

Circuit Judges.

A majority of the panel has voted to deny Appellants’

petition for rehearing, filed on September 24, 2003. The

petition for rehearing is hereby DENIED.

APPENDIX B

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Case No. 02-56158, No. 02-56234

[Filed September 3, 2003]

ON THE HOUSE SYNDICATION, INC., on behalf of

themselves and all others similarly situated; CAREY BROS

INC., on behalf of themselves and all others similarly

situated,

Plaintiffs - Appellants,

FEDERAL EXPRESS CORPORATION,

Defendant - Appellee.

ON THE HOUSE SYNDICATION, INC., on behalf of

themselves and all others similarly situated; CAREY BROS

INC., on behalf of themselves and all others similarly

situated,

Plaintiffs - Appellees,

¥.

FEDERAL EXPRESS CORPORATION,

Defendant - Appellant.

Appeal from the United States District Court

for the Southern District of California

D.C. No. CV-99-01336-RMB(JFS)

D.C. No. CV-99-01336-RMB

Rudi M. Brewster, District Judge, Presiding

Before: SILVERMAN, W. FLETCHER, and

RAWLINSON, Circuit Judges.

MEMORANDUM’

On July 31, 1997, Defendant Federal Express (“FedEx”)

issued a press release notifying its customers of an impending

strike at United Parcel Service (“UPS”) and detailing the

measures it was taking to avoid disruptions in service. In that

press release, FedEx stated: “As provided in our Service

Guide and until further notice, we will not offer money-back

guarantees.” (Emphasis added.) The above quoted language

did not purport to amend the Service Guide; rather, it

purported to be consistent with it. The clear import of the

language is that FedEx believed that the UPS strike triggered

the force majeure clause in the Service Guide and relieved it

of its obligation to pay the Money-Back Guarantee. Customers

who contracted with FedEx during the Class Period were, or

should have been, aware of FedEx’s interpretation of its

Service Guide. Any shipment after the date of the press

release must be presumed to have been made with knowledge

not only of the Service Guide itself, but also of FedEx’s

interpretation of that Guide in the context of the UPS strike.

* This disposition is not appropriate for publication and may not be

cited to or by the courts of this circuit except as provided by Ninth

Circuit Rule 36-3.

Because of FedEx’s construction of the Service Guide

reflected in the July 31 press release, we hold that FedEx did

not breach its Money-Back Guarantee provision during the

Class Period. Any reasonable person reading FedEx’s press

release of July 31 could come to only one conclusion: Until

further notice, FedEx was not offering money-back

guarantees. See REST. (SECOND) OF CONTRACTS § 201 (2003)

(explaining that where the first party “did not know of any

different meaning attached by the other, and the other knew

the meaning attached by the first party,” the contract term

shall be interpreted according to the meaning attached by the

first party). The judgment in favor of Plaintiffs on the Money-

Back Guarantee claim is therefore reversed.

We affirm the district court’s judgment in favor of

Defendant on the Excess Charges claim. To the extent

Plaintiffs rely on the “Invoice Adjustment” provision in the

Service Guide, they offer no excuse for their failure to comply

with the notice requirements set forth in that provision. The

provision states that requests for invoice adjustment “must be

received within one year after the date of shipment if the

overcharge was caused by [FedEx].” Neither the July 31 press

release nor the telephonic recording purported to suspend or

otherwise affect a customer’s right to request invoice

adjustment. Plaintiffs are therefore barred from recovering on

this theory.

To the extent Plaintiffs cast their Excess Charges Claim as

a traditional common law suit for damages due to breach of

contract, the claim is also barred by Plaintiffs’ failure to

comply with the contractual notice requirements. The Service

Guide expressly states that FedEx “must receive written

notice of claim due to damage [or] delay ... within 15 days

after delivery of the shipment” and “within 90 days after

[FedEx] accept[s] shipment” for all other claims. Nothing in

the July 31 press release or the telephonic recording purported

to suspend a customer’s right to pursue a claim for damage

against the company.

Plaintiffs argue that the Service Guide does not expressly

state that compliance with the internal claims procedures is a

prerequisite to bringing a damages action in court. While this

is true, the Service Guide does use mandatory language and

it expressly states that the “FAILURE TO COMPLY WITH

[THE] [NOTICE] CONDITION[S] MAY RESULT IN THE

DENIAL OF A CLAIM.” Other cases that have addressed the

FedEx Service Guide’s notice of claim provisions have

interpreted them as requiring compliance as a prerequisite to

suit. See, e.g., Williams v. Federal Express Corp., 1999 U.S.

App. LEXIS 33137, 1999 WL 1276558 at * 4 (C.D. Cal.

1999) (“Read together, the airbill and Service Guide require

that written notice of claim be filed within ninety days after

FedEx accepts a package for shipment ... Because Williams

failed to file a claim within ninety days after FedEdx accepted

the shipment, he cannot recover damages.”).

We need not reach the remaining issues raised on appeal.

REVERSED IN PART; AFFIRMED PART. Each side to

bear its own costs on appeal.

CONCURRENCE

SILVERMAN, Circuit Judge, concurring:

I fully concur in the portion of the Memorandum affirming

the judgment in favor of Federal Express on the excess

charges claim. As for the judgment in favor of the plaintiffs

on their claim that FedEx breached its money back guarantee,

I agree that reversal is required but, respectfully, for a

different reason. As I see it, the press release issued on July

31, 1997 plainly amended the Service Guide.

The Service Guide provided for a money-back guarantee

for late delivery. It also stated how FedEx could amend the

Service Guide:

FedEx reserves the right, and only by authorization of

its Senior Vice President of Marketing and Corporate

Communications or successor positions, unilaterally,

and from time to time, in writing, to modify, amend

or supplement the rates, features of service and

Service Conditions in this Service Guide applicable to

all customers without notice, but no other agent or

employee of FedEx, nor any other person or party, is

authorized to do so.

The press release of July 31, 1997 made specific reference

to the Service Guide and clearly stated that money-back

guarantees would not be offered until further notice. The

press release was (1) in writing and (2) authorized by FedEx’s

Senior Vice President of Marketing and Corporate

Communications, the official designated in the Service Guide

to be the only FedEx person empowered to amend the Service

Guide. By the terms of the Service Guide itself, a writing

authorized by the designated official were the only two

prerequisites to amending the Service Guide. FedEx did not

have to say “Simon says” or “Mother, may I.” Perhaps the

press release could have been written better or with more

legalese. Regardless, no reasonable person could have been

left with any doubt whatsoever that FedEx was suspending the

money-back guarantee until further notice. Indeed, in

. invoking the futility doctrine as a defense to their failure to

submit a notice of claim, the plaintiffs themselves freely admit

that FedEx’s suspension of the money-back guarantee was

“widely publicized.”

Nor is an authorized writing disqualified as an amendment

just because it has been widely disseminated or released to the

press. If anything, the law should encourage wide

dissemination of unilateral modifications to contracts such as

those involved here, lest customers be misled.

It is true that eight days after the press release, FedEx’s

Senior Vice President of Marketing and Corporate

Communications, T. Michael Glenn, promulgated a more

formal amendment to the Service Guide. This does not mean

that the July 31 writing did not amend the Service Guide. The

August 8 writing was simply the formal documentation of the

less formal but written action taken by Glenn on July 31. The

formal amendment issued by Glenn on August 8 specifically

purports to be “effective July 31, 1997” and to be “pursuant

to my previous written approval.”

It is not at all unusual for parties to make legally binding

commitments, the formal documentation of which follows in

due course. One example is an insurance agent’s binder,

which is effective immediately to provide coverage even

though the formal insurance policy does not issue until much

later. Another example is an oral stipulation made in open

court to settle a lawsuit on certain terms, which is eventually

followed by a formal settlement agreement containing those

terms plus the customary settlement boilerplate. This is a

commonplace occurrence.

Because FedEx effectively amended its Service Guide on

July 31, 1997 to suspend the money-back guarantee until

further notice, it did not breach its contract by failing to honor

the guarantee after that date. It is for that reason that I would

reverse the district court’s judgment in favor of the plaintiffs.

DISSENT

RAWLINSON, Circuit Judge, dissenting:

I respectfully dissent from the majority disposition,

because Fed Ex’s newly minted argument that its press release

did not purport to amend the Service Guide is simply not

supported by the record in this case, and because Fed Ex’s

notice of claim requirement could not serve to bar Plaintiffs’

action.

In its Answer to the Complaint, Fed Ex admitted that it

“amended its July 1, 1997 Service Guide effective July 31,

1997 to, among other things, suspend its Money-Back

Guarantees.” (Excerpts of Record 37). Fed Ex included this

admission as an “undisputed fact” (ER 861), and argued it

before the district court (ER 333).

Fed Ex continued the amendment theme in its briefs on

appeal (Red Brief at 13 and Gray Brief at 3) and at oral

argument, until a question from one of the panel members

alerted Fed Ex’s counsel that it might be wise to abandon the

amendment argument.

The fact is that the Press Release did not reference the

force majeure clause in the Service Guide or rely upon it. The

Press Release was an ineffective attempt to amend the Service

Guide, as reflected by Fed Ex’s subsequent amendment of the

Service Guide in accordance with its provisions.

10a

The majority disposition cites the Restatement of Contracts

for the proposition that because Fed Ex “did not know of any

different meaning [of the Press Release] attached by [the

Plaintiffs] and [the Plaintiffs] knew the meaning attached by

[Fed Ex],” the Service Guide must be interpreted as Fed Ex

urges. However, the record in this case contains no evidence

that Fed Ex “did not know of any different meaning attached

by” its customers. The record is silent on that point. There is

also nothing in the record reflecting that Fed Ex’s customers

“knew the meaning attached by [Fed Ex to the Press

Release].” To the contrary, one reading the Press Release

could easily be confused as to exactly what Fed Ex intended

to convey. The Press Release statement that “as provided in

our Service Guide and until further notice, we will not offer

money-back guarantees” conflicts directly with the Service

Guide provision offering a money-back guarantee if the

package was not delivered as promised. A customer reading

the Press Release and the Service Guide together would not

inevitably conclude that Fed Ex’s unstated reliance on the

force majeure clause was the basis for its suspension of the

money-back guarantee. As the district court recognized, a

customer could more readily conclude that Fed Ex was bound

by the money-back guarantee as provided in its Service

Guide. Because the portion of the Restatement of Contracts

cited in the majority disposition is not germane to this case,

and no case authority undergirds the conclusion reached by

the majority on this point, I cannot join the majority’s ruling

on the Press Release issue.

There is case authority on the notice-of-claim issue which,

in my view, is contrary to the majority holding that Plaintiffs’

failure to comply with Fed Ex’s internal claims procedures

bars the filing of a damages action in court.

lla

We recently addressed a similar issue in Employers Ins. of

Wausau v. Granite State Ins. Co., 330 F.3d 1214, 1218, n.5

(9th Cir. 2003). We rejected Granite’s argument, similar to

that urged by Fed Ex, that the insurance policy’s claim

requirement imposed a de facto statute of limitations upon the

filing of a subrogation action. We held that “‘claim,’ in the

context of the Granite insurance policy, refer[red] to notice

rather than the filing of a complaint.” Analogous reasoning

applies to the Fed Ex Service Guide notice-of-claim provision.

No principled basis exists to distinguish Fed Ex’s notice-of-

claim provision from Granite’s. Therefore, i read our

precedent as dictating a ruling that Fed Ex’s notice-of-claim

provision merely gives notice to Fed Ex for payment of

claims, rather than imposing limitations upon the Plaintiffs’

ability to bring a damages action.

In summary, I would uphold the district court’s ruling that

Fed Ex’s Press Release did not effectively amend the Service

Guide, and hold that the notice-of-claim provision did not bar

Plaintiffs’ action against Fed Ex. Accordingly, I respectfully

APPENDIX C

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Case No. 02-56158, No. 02-56234

[Filed September 3, 2003]

ON THE HOUSE SYNDICATION, INC., on behalf of

themselves and all others similarly situated; CAREY BROS

INC., on behalf of themselves and all others similarly situated

Plaintiffs - Appellants

¥.

FEDERAL EXPRESS CORPORATION,

Defendant - Appellee

ON THE HOUSE SYNDICATION, INC., on behalf of

themselves and all others similarly situated; CAREY BROS

INC., on behalf of themselves and all others similarly situated

Plaintiffs - Appellees

FEDERAL EXPRESS CORPORATION

Defendant - Appellant

12a

13a

Appeal from the United States District Court

for the Southern District of California

D.C. No. CV-99-01336-RMB(JFS)

D.C. No. CV-99-01336-RMB

Rudi M. Brewster, District Judge, Presiding

THIS CAUSE came on to be heard on the Transcript of

the Record from the United States District Court for the

Southern District of California (San Diego) and was duly

submitted.

ON CONSIDERATION WHEREOF, It is now here

ordered and adjudged by this Court, that the judgment of the

said District Court in this cause be, and hereby is

AFFIRMED in part and REVERSED in part. Each side to

bear its own costs on appeal.

Filed and entered September 3, 2003

APPENDIX D

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

CASE NO. 99CV 1336B JFS

[Filed June 17, 2002]

ON THE HOUSE SYNDICATION, INC., )

CAREY BROS., INC., )

Plaintiffs, )

)

V. )

)

FEDERAL EXPRESS CORPORATION __ )

and DOES 1 through 20, inclusive, )

Defendant. )

ORDER AND JUDGMENT

JUDGE: Hon. Rudi M. Brewster

This matter comes before the Court on Plaintiffs’ Motion

for Partial Summary Judgment and for an Order Directing the

Entry of Final Judgment (the “Motion”). Upon consideration

of the Motion and the memoranda and arguments by the

parties with respect thereto, as well as all other pleadings and

papers in this matter, the Court hereby finds as follows:

A. The above-captioned class action litigation is pending

l4a

15a

on behalf of Plaintiffs and a class previously certified pursuant

to Rule 23(b) (3), Fed. R. Civ. P., consisting of: all

individuals, corporations, or other entities that made one or

more domestic shipments through Defendant Federal Express

Corporation (“Defendant” or “FedEx”) during the period

from July 31, 1997 through August 7, 1997 (the “Class

Period”), which were delivered 60 seconds or more after the

applicable delivery commitment, and whose contract with

FedEx provided a money-back guarantee in the event of such

a late delivery (the “Class”). Excluded from the Class are

FedEx, any person, firm, trust, corporation, officer, director

or other individual or entity in which FedEx has a controlling

interest or which is affiliated with it, and the legal

representatives, heirs, successors-in-interest or assigns of any

such excluded party. Also excluded from the Class are all

federal, state and local government entities, a list of which has

previously been filed with the Court.

B. On April 6, 2000, this Court granted partial summary

adjudication as to liability for breach of contract with respect

to the named Plaintiffs’ claims for a refund of transportation

charges for shipments delivered late that were sent from July

31, 1997 (the date that FedEx ceased honoring its money-back

guarantee) through August 7, 1997 (the day before FedEx

amended its Service Guide to formally suspend its money-

back guarantee). The summary adjudication related only to

late deliveries as to which FedEx did not identify a specific

reason for the delay other than the UPS strike. The Court

granted FedEx’s motion for summary judgment as to named

Plaintiffs’ other claims.

C. Pursuant to a prior Order of the Court, counsel for

Plaintiffs distributed a Notice of Class Action by first class

mail to all persons identified as members of the Class whose

addresses were reasonably available to the parties, and

l6a

published a Summary Notice of Class Action in various

newspapers. The deadline for Class members to opt-out of the

Class has passed, and the record in this action now accurately

reflects the identity of all Class Members who elected to opt-

out of the Class. The Court finds that all Class Members who

signaled their intent to opt-out of the Class through May 31,

2002, including those whose opt-out correspondence was

incomplete or who opted-out after the previously published

deadlines (all of which expired prior to May 31, 2002), the

identity of which is found in previous filings with the Court,

are excluded from the Class.

D. The Court hereby finds and concludes that the notice

to the Class provided in this case constituted the best notice

practicable under the circumstances, and fully satisfied the

requirements of Rule 23(c) (2) of the Federal Rules of Civil

Procedure and of due process.

E. For the reasons previously stated on the record and in

its prior Orders in this action, the Court finds that there are no

genuine issues of material fact and that the Class, and each

member thereof, is entitled to a judgment on liability in its

favor as a matter of law with respect to the claim that FedEx

breached its contracts with Class members when it failed to

honor the money-back guarantee during the Class Period for

shipments whose delay in delivery was attributed by FedEx to

the effects of the UPS strike.

F. For the reasons previously stated on the record, all

Class members shall be required to submit a proof of claim

form to share in the monetary award as hereinafter provided

by this judgment. The precise form and wording of the Notice

to be sent to Class members advising them of such proof of

claim requirement will be determined by the Court at a later

date after this judgment has become final and any appeals

17a

have been decided or the time to appeal has expired (the

“Effective Date”). The proof of claim form will include,

among other things, requirements that Class members consent

to the jurisdiction of this Court and, where applicable, to the

summary dispute resolution procedures set forth below.

G. FedEx’s obligation to pay the portion of the monetary

award in this judgment allocable to any individual Class

member shall be deemed satisfied in full if the Class Member

fails to return the required proof of claim form by the

deadline specified by the Court.

H. For the reasons previously stated on the record,

FedEx’s obligation to pay the portion of the monetary award

in this judgment allocable to any individual class member shall

be deemed satisfied if and to the extent FedEx has a set-off

right against that Class member (because such Class member

is more than sixty (60) days in arrears on its FedEx account).

In the claims administration and distribution process, FedEx

also shall be entitled to a set-off against the portion of the

monetary award in this judgment allocable to any individual

Class member for any previously adjudicated claim on which

FedEx has prevailed against a member of the Class and that

remains unpaid, or for a settlement that compromised a claim

against a member of the Class and that remains unpaid. FedEx

Shall file-and serve a list of any and all such adjudicated or

settled set-off claims and a brief statement of the basis

therefore, within ninety (90) days of the Effective Date. To

the extent payments are subsequently obtained by FedEx with

respect to these accounts, it shall appropriately credit the

account(s) and adjust the amount of any set-offs accordingly.

I. To resolve set-off claims that have not been

adjudicated or compromised, the Court will implement the

18a

following procedures during the claims administration and

distribution process:

1. Prior to any distribution to the Class, FedEx shall

serve and file in electronic form a list of class members as

to whom it asserts a set-off claim, specifying the following

matters : (i) name on the account ; (ii) address on the

account; (iii) account number; (iv) amount claimed; and

(v) a short statement of the basis for the claim (if other

than delinquency in payment of the account for more than

sixty (60) days).

2. Class counsel will send each such Class Member

a Notice, in a form to be approved by the Court, stating

that FedEx has asserted a set-off against all or part of the

Class Member’s share of the monetary award under this

judgment, and that such set-off will be considered

undisputed unless a statement of opposition is submitted

by the Class Member on or before the deadline specified

in the Notice.

3. FedEx’s obligation to pay the portion of the

monetary award under this judgment allocable to any

Class member who receives such Notice of FedEx’s set-

off, but fails to respond within the time provided, shall be

deemed satisfied up to the amount of the set-off claimed

by FedEx, and as adjusted for any subsequent payments

received from such Class Member on the account.

4. Any claims by FedEx for a set-off that remain

unresolved after issuance of the Notice will be decided by

a Special Master to be appointed by the Court. The fees

and expenses of the Special Master shall be approved by

the Court and shall be paid as an expense of this litigation

from the recovery obtained by the Class.

19a

5. Each Class member who returns a statement of

opposition, and thus disputes FedEx’s claim to a set-off,

will be required to assent to a simplified procedure for the

resolution of such disputes by the Special Master based

upon brief written submissions and a waiver of any rights

to appeal. If such a Class member declines to assent to

that procedure, it shall be excluded from the Class,

without prejudice to the rights of FedEx or the Class

member, and shall not be bound by the results of this

action. In addition, the amount of the monetary award

under this judgment allocable to such Class member shall

be reduced accordingly.

6. FedEx shall credit each Class member’s account in the

amount that corresponds to the amount of satisfaction of

the monetary award that it obtained as a result of assertion

of its set-off right.

J. Unless otherwise provided by this judgment, or by

separate Order of the Court, FedEx’s claim to a set-off, and

the amount thereof, shall be determined as of the Effective

Date.

K. Subject to the foregoing, the Court hereby enters

judgment in favor of the Class and against FedEx in the total

amount of $68,402,239.62. That figure consists of

$53,402,581.89, which represents the total amount of

transportation charges assessed by FedEx against Class

members for late deliveries during the Class period where the

delay in delivery was attributed by FedEx to the effects of the

UPS strike, plus prejudgment interest of $14,999,657.73,

computed through June 17, 2002. Payment of an individual

Class member’s share of this monetary award is subject to the

conditions set forth above. The Court finds, pursuant to Fed.

20a

R. Civ. P. 54(b), that there is no just reason for delay and the

Court hereby directs entry of a final judgment.

L. Plaintiffs’ counsel shall submit their bill of taxable

costs within ten days of the date hereof. Plaintiffs’ counsel

shall submit an application for attorneys’ fees and costs that

are requested from the fund within 30 days of the creation of

a Class recovery fund through payment of the judgment after

the Effective Date.

M. The Court reserves jurisdiction over this action and

over any and all further proceedings concerning the

administration and consummation of this matter.

N. This judgment reflects the Court’s resolution of

disputed issues, and all parties retain their rights to appeal any

or all of the provisions hereof and of the Court’s prior rulings

in this matter.

Dated: June 17, 2002

/s/

Rudi M. Brewster

U.S. DISTRICT COURT JUDGE

APPENDIX E

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

CASE NO. 99CV 1336-B (JFS)

[Filed April 6, 2000]

ON THE HOUSE SYNDICATION, INC.

And CAREY BROS., INC.,

Plaintiffs,

FEDERAL EXPRESS CORPORATION

and DOES 1 - 20,

Defendants.

Nee Nee eee eee ee See Ne”

ORDER

(1) GRANTING IN PART AND DENYING IN PART

DEFENDANT’S MOTION FOR SUMMARY

JUDGMENT

(2) GRANTING IN PART AND DENYING IN PART

PLAINTIFFS’ CROSS MOTION FOR SUMMARY

ADJUDICATION

2la

22a

I. Summary

Before this Court are Defendant Federal Express

Corporation’s (“Defendant”) motion for summary judgment

and Plaintiffs On The House Syndication, Inc. and Carey

Bros., Inc.’s (“Plaintiffs”) cross motion for summary

adjudication. After careful consideration, the Court GRANTS

in part and DENIES in part Defendant’s motion for summary

judgment and GRANTS in part and DENIES in part Plaintiffs’

cross motion for summary adjudication.

In summary, the Court makes the following analysis and

findings:

(1) The Court first considers whether a contract between

Plaintiffs and Defendant existed and if there was a breach

of that contract. The Court finds, nor do the parties

dispute, that both Defendant’s Airbill and Service Guide

constituted the contract between Plaintiffs and Defendant.

Also, the Court finds that Defendant breached the

agreement;

(2) The Court then considers whether the Airline

Deregulation Act (“ADA”) preempts Plaintiffs’ breach of

contract action against Defendant thereby precluding

Plaintiffs from pursuing their claim. The Court finds that

Plaintiffs’ claim is “routine” and not preempted by the ~

ADA,

(3) Next the Court considers the applicability of

Defendant’s disclaimer to the case at hand. The Court

finds that Defendant’s disclaimer is inapplicable;

(4) The Court also considers whether Defendant

effectively amended its Service Guide on July 31, 1997,

23a

suspending its money-back guarantee policy. The Court

finds that Defendant did not effectively amend its Service

Guide until August 8, 1997;

(5) Lastly, the Court determines the proper relief to award

Piaintiffs. The Court finds that the proper remedy for

those Plaintiffs that contracted with Defendant after

August 7, 1997 and whose deliveries were untimely are

not entitled to any remedy. Those Plaintiffs that suffered

late delivery between the period of July 31, 1997 and

August 7, 1997 are entitled a full refund.

II. Background

A. Procedural History

On June 25, 1999, Defendant timely removed this action

from San Diego Superior Court pursuant to 28 U.S.C.

§ 1441. Subsequently, on June 30, 1999, Defendant filed its

answer to Plaintiffs’ complaint. On November 10, 1999,

Plaintiffs filed a motion for class certification that is currently

set to be heard in this Court on June 19, 2000. On November

24, 1999, Plaintiffs filed a first amended class action

complaint. On that same day, Defend: at filed its answer to the

first amended class action complaint

Then on December 23, 1999, Defendant filed a motion for

summary judgment. Before filing its opposition, Plaintiffs

filed a cross motion for summary adjudication on January 21,

2000.' Both Plaintiffs and Defendant filed their respective

oppositions to these motions on March 6, 2000. On March 13,

' Plaintiffs’ motion for summary adjudication seeks adjudication of

the first cause of action only and only as to liability.

eee ee

24a

2000, both Plaintiffs and Defendant filed “heir respective reply

papers. On March 16, 2000, Defendant filed an objection to

Plaintiffs’ reply for exceeding the 10 page limitation pursuant

to Local Rule 7. 1(h). Without instruction from the Court,

Plaintiffs then filed on March 31, 2000, an amended reply in

compliance with Local Rule 7.1(h). As such, the Court

disregards Plaintiffs’ previous reply and looks to the amended

reply.

B. Factual Background

Defendant is federally certified by the Federal Aviation

Administration as an all-cargo air carrier. (Def.’s Reply to

Opp. Stmt. of Facts ¢ 1.) From July 31, 1997 to August 25,

1997, employees of United Parcel Service (“UPS”), one of

Defendant’s main competitors, went on strike. (Id. at | 48.)

As a result of the UPS strike, Defendant’s shipping volume

significantly increased and Defendant experienced an increase

in revenue. (Id.)

Throughout this period of time, Plaintiff Carey Bros., Inc.

sent one shipment for delivery through Defendant’s services

while Plaintiff On The House Syndication, Inc. sent 43

shipments through Defendant’s services. (Id. at 4 2.) Each of

these shipments were sent under a FedEx USA Airbill

(“Airbill”). (id. at J 3, 4.) The Airbill incorporated by

reference the then applicable July 1, 1997 FedEx Service

Guide and its amendments and constituted the contract

between Plaintiffs and Defendant. (Id.; Def. Lodgment of

Exhibits No. 4 Airbill.)

The customer’s (“sender”) copy of the Airbill stated that

Defendant will not be liable “for loss, damage, or delay

caused by events [Defendant] cannot control, including but

not limited to acts of God, perils of the air, weather

25a

conditions, acts of public enemies, war, strike, civil

commotions, or acts of public authorities with actual or

apparent authority.” (Id. at { 5; Def. Lodgement of Ex. No.

4 Airbill) (emphasis added.) Additionally, the Service Guide

provided that “... in no event will [Defendant] be liable for

any such ... delay... caused by... [NJational or local

disruptions in air or grouid transportation networks due to

events beyond [Defendamit’s] control, such as weather

phenomena, strikes, or natural disasters ...” (Id. at q 6; Def.

Lodgement of Ex. No. 5 Service Guide, 90) (emphasis

added.) In the event of a conflict between the Airbill and the

Service Guide, the Service Guide controls. (Id. at | 5; Def.

Lodgment of Ex. Nos. 4, 5 Airbill, Service Guide, 81.)

Defendant provided a money-back guarantee policy for

service failures not barred by the disclaimers previously

mentioned pursuant to its Service Guide. (Def. Stmt. of Facts

at ¢ 10; Def. Lodgement of Ex. Nos. 4, 5 Airbill, Service

Guide, 91) (“We offer ... Money-Back Guarantees for

[service failures]... At our option, we will either refund or

credit your transportation charges upon request if we deliver

your shipment 60 seconds or more after our published

delivery commitment.”) For a customer who wishes to seek

a refund or credit due to some type of service failure, the

Service Guide provides various time frames, depending on the

situation, to file a claim with Defendant. (Def.’s Reply to

Opp. Stmt. of Facts at {{ 10-12 Def. Lodgment of Ex. No. 5

Service Guide, 85.) In this case, Plaintiffs never filed an

internal claim with Defendant as required by the contract.”

? Defendant’s primary arguments against Plaintiffs rest on the

merits and not that Plaintiffs are time barred; specifically, that

Plaintiffs did not have any remedy at all because of the suspension

of the money-back guarantee and the disclaimer bar to Defendant’s

liability. This suggests that if Plaintiffs had pursued an internal

i Sha Mn ON TS Ay INI Sue ee Sora mee Vee Se

26a

(Id. at J 11, 13.)

On July 31, 1997, Defendant issued a press release

purporting to suspend its money-back guarantee policy

effective immediately, and for the period of the UPS strike.

(Def. Lodgment of Ex. No. 6 Press Release.) On August 8,

1997, Defendant issued an amendment to the Service Guide

which provided that the money-back guarantee policy has

been suspended until further notice and asserted that the

suspension be effective as of July 31, 1997. (Def. Lodgment

of Ex. No. 7 Amendment.)

During The UPS strike time period of July 31, 1997 to

August 25, 1997, Plaintiffs were victims of deliveries beyond

the specified time. (Def.’s Reply to Opp. Stmt. of Facts at

{ 28.) Plaintiffs allege on behalf of themselves and others who

suffered late deliveries (See id. at {§ 46, 47), breach of

contract, and they seek restitution for unjust enrichment.

lI. Analysis

A. Standard of Law

Fed. R. Civ. P. 56(c) authorizes the granting of summary

judgment “if the pleadings depositions, answers to

interrogatories, and admissions on file, together with the

affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to judgment

claim with Defendants, it would have been futile. Therefore, the

Court agrees with Plaintiffs that the doctrine of futility applies and

Plaintiffs were not required to exhaust their internal contractual

remedies with Defendant as provided by the contract. See Glover

v. St. Louis $.F.R Co, 393 U.S. 324, 331 (1969)

27a

as a matter of law.” The standard for granting a motion for

summary judgment is essentially the same as for the granting

of a directed verdict. Judgment must be entered “if, under

the governing law, there can be but one reasonable conclusion

as to the verdict . . . . If reasonable minds could differ,”

judgment should not be entered in favor of the moving party.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250-51

(1986).

B. The Contract Between Plaintiffs and Defendant

Breach of contract cannot be alleged unless a contract

existed between the parties to the action. Here, Plaintiffs and

Defendant agree that both the Airbill and Service Guide

constituted the governing contract between them. (See Def.’s

Reply to Opp. Stmt. of Facts at 4.) During the period of the

UPS strike from July 31, 1997 to August 25, 1997, Defendant

made 11,169,726 late deliveries. (Id. at¢4 46, 47.) In all these

instances, “time was of the essence” because the terms of the

contract specified the deadline by which Defendant had to

deliver a package. (Id. at { 16.) As a result, Defendant

breached its contract with its customers regarding the late

deliveries unless some other provision of the contract excuses

performance of the promise. See Hoon v. Harmer Steel

Products and Supply Co., 278 F.2d 427, 434 (9th Cir. 1960)

(finding that a contract which specifies that “time is of the

essence” must be performed within the specified time or a

breach is found to occur.)

C. Airline Deregulation Act (“ADA”) Preemption

Congress sought to eliminate a “state’s enact[ment] or

enforce[ment] [of] any law, rule, regulation, standard, or

other provision...” through the enactment of the Airline

_Deregulation Act (“ADA”) American Airlines, Inc. _v.

28a

Wolens, 513 U.S. 219, 228 (1995). Nevertheless, the ADA

does not preempt “... the application of state contract law to

‘routine breach-of-contract claims’...” Read-Rite Corp. v.

Burlington Air Express, Ltd., 186 F.3d 1190, 1197 (9th Cir.

1999). In order for a breach of contract action to be

“routine,” the claim must be narrowly limited to the terms of

the agreement itself without inquiring into the external policies

or common law rights of a party involved in the agreement.

American, 513 U.S. at 222.

From this precedent, Plaintiffs’ claim for breach of

contract is “routine” and not preempted by federal law.

Plaintiffs’ primary argument hinges upon the interpretation of

“strike” and “national transportation network” within the

terms of the contract itself. There is no need to analyze the

common law rights and policies to determine whether Plaintiff

will be successful in this action.

D. Merits of Defendant’s Motion and Plaintiffs’ Cross

Motion’

Although Defendant concedes that, due to the UPS strike,

numerous deliveries were untimely, it relies on the disclaimer

3 The Court agrees with Defendant that its disclaimer is legally

enforceable because it gave ample notice of its limit on liability and

gave Plaintiffs an opportunity to declare higher liability. See Read-

Rite Corp, 186 F.3d at 1199, see also Deiro v. American Airlines

Inc, 816 F.2d 1360, 1366 (9th Cir. 1987); Royal Ins. Co v. Sea-

Land Service Inc., 50 F.3d 723,727 (9th Cir. 1995); Wagman v.

Federal Express Corp, 844 F.Supp. 247, 250-251 (D Md 1994).

(See also Def. Lodgment of Ex. Nos. 4, 5 Airbill, Service Guide,

86.) Thus, in order for Plaintiffs to succeed, it must successfully

argue that the disclaimers are inapplicable to the case at hand.

29a

to shield it from liability. Plaintiffs, on the other hand dispute

the applicability of the disclaimer.

1. There Are No Material Issues of Fact

Surrounding the Interpretation of the

Disclaimer

The determination of whether an ambiguity exists in the

terms of a contract is a question of law. State Farm Mutual

Automobile Insurance Co. v. Fernandez, 767 F.2d 1299,

1301 (9th Cir. 1985) citing U_S. v. Contra Costa County

Water District, 678 F.2d 90, 91 (9th Cir. 1982). After

determining that an ambiguity exists, a question of fact exists

for a jury. Id. citing Marchese v. Shearson Hayden Stone,

Inc., 734 F.2d 414, 417 (9th Cir. 1984). Here, the Court

must first determine whether an ambiguity exists in respect to

the terms “strike” and “disruption to national transportation”

in the agreement. The Court must look at the potential

ambiguity in relation to the context of the contract as a whole.

See U.S. v. Johnson, 43 F.3d 1308, 1310 (9th Cir. 1994).

In the context of both the Airbill and the Service Guide,

this Court finds that the terms “strike” and “national

transportation network” have plain meaning. The UPS strike

did not rise to a “direct, physical barrier” to Defendant’s

efficient operation of business such as an airport closure or

inclement weather. The term “strike” can mean nothing other

than a strike within Defendant’s own workforce as an event

which would undoubtedly directly and physically affect

Defendant’s ability to efficiently run its business.

The Court is similarly unable to apply the contract

‘ provision “disruption to the national and local transportation

network” to the UPS strike. By its plain meaning,

transportation network implies a physical link from one

aaa ean

30a

destination to another. In addition, the words “air” and

“sround” are used to modify the word “network.” They

elucidate whether the physical link from one destination to

another is by air or by ground. The UPS strike did not disrupt

either the local or national transportation network because the

~ strike did not create a physical barrier from one destination to

another as an air traffic, pilot, or runway personnel strike

might.

For these reasons, there is no ambiguity in the plain

meaning of the disclaimer and the disclaimer is inapplicable

to the case at hand.

2. The Amendment to the Service Guide Occurred

on August 8, 1997, Not July 31, 1997

Even if the disclaimer is inapplicable, Defendant further

argues that Plaintiffs are not entitled to any remedy. The

money-back guarantee, argues Defendant, was suspended

during the time in question barring any contractual remedy by

the issuance of its press release on July 31, 1997.

Subsequently, Defendant memorialized the suspension by

issuing the amendment to the Service Guide on August 8,

1997.

The Court agrees with Plaintiffs’ reliance upon Bouton

Corp. v. Wrigley Jr. Co., 902 F.2d 1074 (2nd Cir. 1990).

There, the Second Circuit held that a mailgram summarizing

new terms asserted between the parties of an already existing

contract did not constitute a legally binding amendment

because the mailgram was not a final and conclusive change

to the agreement. Id. at 1076. Similarly, although Defendant

argues the press release issued was a final and conclusive

change to its Service Guide, the press release was not final

and conclusive nor was there any amendment either to the

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Airbill contract form or the Service Guide. The press release

on July 31, 1997 was nothing more than that, a press release,

similar to the mailgram in Bouton Corp. Additionally, the

press release did not even purport to constitute an amendment

to the contract documents. (See Def. Lodgment of Ex. No. 6

Press Release.) If Defendant wished to make its press release

a final and conclusive amended Service Guide amendment, it

Should have immediately issued the amendment into the

Service Guide rather than waiting for over a week.*

Defendant’s own terms buttress the fact that the contract

was not modified on July 31, 1997. In its Service Guide,

Defendant reserved the right to unilaterally modify the terms

of its contract in writing (Def. Lodgment of Ex. No. 5 Service

Guide, 81) (emphasis added.) The issuance of the press

release was not a written modification but rather a notification

that it would not honor any money-back guarantees during the

time in question. The actual written modification to the

Service Guide did not occur until August 8, 1997, the date the

Service Guide amendment was issued. Given these reasons,

the Court finds that the suspension of the money-back

guarantee did not occur until August 8, 1997.

* Moreover, it was perfectly reasonable for those customers

utilizing Defendant’s services between July 31, 1997 and August 7, -

1997 to rely upon the express terms of the contract and rely upon

the money-back guarantee provision since, during this time, neither

_the Airbill nor Service Guide made mention of a suspension of the

money-back guarantee policy See Ambassador Airways, Inc. v

Frank, 124 Cal.App. 56, 63 (1932) (“where there is an express

contract, the terms thereof control”) Also, neither the Service

Guide nor Airbill gave Defendant the authority to give an

amendment retroactive effect.

Zea Se ee er ames

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3. Remedy / Restitution

The money-back guarantee was still in effect from the

period between July 31, 1997 and August 7, 1997. The proper

remedy pursuant to the contract is a full refund for those

Plaintiffs’? who sent a shipment through Defendant between

those dates and were untimely delivered.

Those Plaintiffs that contracted with Defendant after

August 7, 1997, and whose packages were untimely, are not

entitled to any relief at all. Defendant correctly states that the

sole remedy provided on the contract was the money-back

guarantee. Since the amendment which legally occured on

August 8, 1997 unequivocally stated “... until further notice,

we will not offer money-back guarantees,”° (Def. Lodgment

of Ex. No. 7 Amendment) Plaintiffs within this amended time

frame are not entitled to any refund.

Additionally, Plaintiffs’ claim for restitution under a

theory of unjust enrichment during this given time period

fails. A claim for “... unjust enrichment is an action in quasi-

contract, which does not lie when an enforceable, binding

agreement exists defining the rights of the parties.” Paracor

Finance, Inc. v. General Electric Capital Corp., 96 F.3d

1151, 1167 (9th Cir. 1996). Here, the Airbill and Service

Guide constituted a binding and enforceable agreement

° Assuming the class is certified.

° The Court notes that this particular provision in the amendment

gives the erroneous appearance that the pre-amended Service Guide

does not provide for money-back guarantees. Nevertheless,

Plaintiffs cannot escape the reality that Defendant was clearly

asserting that there would be no money-back guarantees during the

time frame the amendment would be in effect

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between Plaintiffs and Defendant. Since the legally binding

August 8, 1997 amendment bars any recovery through the

suspension of the money-back guarantee, Plaintiffs during this

time frame are not entitled to any remedy at all.

III. Conclusion

For the above mentioned reasons, and pending class

certification, the Court ORDERS the following:

(1) Defendant’s Motion for Summary Judgment is

GRANTED in part and DENIED in part;

(2) Plaintiffs’ Cross Motion for Summary Adjudication is

GRANTED in part and DENIED in part;

(3) In effect, only those Plaintiffs that suffered late

delivery under contracts entered into prior to August 8,

1997 are entitled to a full refund pursuant to the money-

back guarantee provided in those contracts.

IT IS SO ORDERED.

DATED:___4-5-00 /s/

UNITED STATES SENIOR

DISTRICT JUDGE

cs; All Parties

Magistrate Judge

APPENDIX F

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

CASE NO. 99CV 1336-B (JFS)

[Filed June 28, 2000]

ON THE HOUSE SYNDICATION, INC.,

And CAREY BROS., INC.,

Plaintiffs,

¥.

FEDERAL EXPRESS CORPORATION

and DOES 1 - 20,

Defendants.

Nw eee ee ee”

ORDER

(1) DENYING DEFENDANT FEDEX’S

MOTION FOR RECONSIDERATION

Docket [63-1]

(2) CERTIFYING COURT?’S APRIL 6, 2000 ORDER

FOR PURPOSES OF INTERLOCUTORY APPEAL

Docket [63-2]

(3) VACATING REMAINING MOTION

HEARING DATES

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35a

Before this Court is Defendant Federal Express

Corporation’s (“FexEx”) Motion to Alter, Amend, or

Reconsider Order under Federal Rule of Civil Procedure

59(e), or in the Alternative, for Certification of Order for

Interlocutory Appeal under 28 § 1292(b). Defendant brings

this motion in response to this Court’s order of April 6, 2000.

In that order, this Court granted in part and denied in part

Defendant’s Motion for Summary Judgment and granted in

part and denied in part Plaintiffs On the House Syndication,

Inc. and Carey Bros., Inc.’s (“Carey Bros.”) (collectively

“Plaintiffs” ) Cross Motion for Summary Adjudication.

For the reasons stated below, this Court DENIES

Defendant’s Motion to Alter, Amend, or Reconsider this

Court’s April 6, 2000 Order. This Court further GRANTS

FedEx’s Motion for Certification of Interlocutory Appeal

under § 1292 (b).

I. Denial of Defendant’s Motion to Alter, Amend, or

Reconsider This Court’s April 6, 2000 Order.

A. Standard of Law

The reconsideration of a court order under Federal Rule

of Civil Procedure 59(e) (motion to alter or amend judgment)

or Federal Rule of Civil Procedure 60(b) (motion for relief

from final judgment or order) is appropriate only if the district

court: (1) is presentcd with newly discovered evidence; (2)

committed clear error or the initial decision was manifestly

unjust; or (3) if there is an intervening change in controlling

law. See School Dist. No. 1J, Multonomah County, Or. V.

AcandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993).

36a

B. Discussion

In bringing its motion, FedEx contends that this court

committed “clear legal error” and presents the following four

arguments. First, FedEx argues that force majeure clauses

apply to third-party strikes. Second, FedEx argues that the

doctrine of futility does not serve to excuse Plaintiffs’ failure

to comply with the notice conditions of their contracts. Third,

FedEx argues that Plaintiffs did not seek summary judgment

on Count III of the Amended Complaint. Last, FedEx argues

that Plaintiff Carey Bros.’ claim is not “viable.”

For the reasons stated in its order, this Court finds no

merit in any of these contentions. First, this Court disagrees

that the force majeure clause in this contract applies to the

third-party strike of UPS in this case. Second, even though

this Court finds that the contract disclaimer is inapplicable in

the instant case, FedEx’s position has always been that it was

shielded from liability by the contract disclaimer. Therefore,

Plaintiffs were excused from serving FedEx with notice since

serving such notice would have been futile. Third, this Court

granted summary adjudication to Plaintiffs with respect to

Count I. Count III is redundant as it is subsumed under Count

I. Additionally, there were no disputed issues of material fact

as to the dates which support Plaintiffs’ summary adjudication

as to a portion of the time contained within Count I.

Fourth, with respect to FedEx’s last argument concerning

Plaintiff Carey Bros.’ claim, the Court would like to make

clear that the April 6, 2000 order does not prevent the

dismissal of Carey Bros.’ claim nor does it dismiss its claim.

The question of whether Carey Bros. is part of the plaintiff

class will be determined by the date of Carey Bros.’ contract

with FedEx and whether that date falls into the relevant cause

of action period as set forth in the April 6, 2000 order.

37a

II. Certification of Court’s April 6, 2000 Interlocutory

Order for Purposes of Appeal under § 1292 (b).

Defendant brings a § 1292 (b) Motion for Interlocutory

Appeal. Title 28 § 1292 (b) states in pertinent part:

When a district judge, in making in a civil action an

order not otherwise appealable under this section, shall

be of the opinion that such order involves a controlling

question of law as to which there is substantial ground

for difference of opinion and that an immediate appeal

from the order may materially advance the ultimate

termination of the litigation, he shall so state in writing |

in such order.

Title 28 § 1292 (b).

With respect to this Court’s order of April 6, 2000, this

- Court finds that a controlling question of law exists and that

an immediate appeal from the order may materially advance

the litigation. Accordingly, this Court finds that certification

of its April 6, 2000 order for purposes of interlocutory appeal

is appropriate.

Court. The Magistrate Judge’s discovery orders, however,

will not be affected by this Order and will remain unchanged.

If Plaintiff does not have its motion for interlocutory appeal

filed within 30 days of this Order, the Court’s certification

shall be automatically withdrawn and the case will be

immediately set for a status hearing within ten days thereafter

in order to return the case to the active motion and trial

calendar. If Plaintiff timely files its Motion for Interlocutory

Appeal, this Court will schedule a status hearing sixty days

thereafter.

Therefore, the Court vacates all motions pending in this

wii ae

SG Ah at: PS ao ee og nis Se ay gi aia noe eee

38a

Ill. Conclusion

For the above mentioned reasons, the Court DENIES

Defendant’s Motion to Alter, Amend, or Reconsider this

Court’s April 6, 2000 order. This Court further GRANTS

FedEx’s Motion for Certification of Interlocutory Appeal

under § 1292 (b) conditional on its being filed within 30 days

of the filing of this Order. All other motion hearing dates are

vacated. A status hearing will be set per this Order: all

counsel will be notified of the date and time.

IT IS SO ORDERED.

DATED:___6-28-00 /s/

UNITED STATES SENIOR

DISTRICT JUDGE

Cc: All Parties

Magistrate Judge

= wr ae

APPENDIX G

HARRY L. CARTER, ESQ./Bar No. 56309

MICHAEL T. QUINN, ESQ./Bar No. 177899

HIGGS, FLETCHER & MACK LLP

401 West “A” Street, Suite 2600

San Diego, California 92101

(619) 236-1551

Attorneys for Defendant

FEDERAL EXPRESS CORPORATION

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

ON THE HOUSE SYNDICATION, INC.

CAREY BROS., INC.,

Plaintiffs,

FEDERAL EXPRESS CORPORATION

and DOES 1 - 20,

Defendants.

)

V. )

)

NOTICE OF REMOVAL

TO THE JUDGES OF THE UNITED STATES DISTRICT

COURT FOR THE SOUTHERN DISTRICT OF

CALIFORNIA, AND TO PLAINTIFFS BY AND

THROUGH PLAINTIFFS’ ATTORNEY OR RECORD:

39a

40a

PLEASE TAKE NOTICE that defendant Federal Express

Corporation (“FedEx”) hereby files its Notice of Removal

under 28 U.S.C. § 1441 to effect removal of this civil action

which was commenced in the Superior Court of the State of

California for the County of San Diego under case number

731137. Removal is proper for the following reasons:

1. On May 26, 1999, plaintiffs filed this action in the

Superior Court of the State of California for the County of

San Diego.

2. FedEx first received notice of this action on May 28,

1999, when the complaint was served on its registered agent,

and thirty days have not yet expired since receipt of said

notice.

3. A review of the complaint indicates that this Court has

jurisdiction over the subject matter of this civil action pursuant

to 28 U.S C. § 1331 because the claim asserted by plaintiff

and the liability of FedEx are governed by federal common

law, as the complaint involves a shipment in interstate

commerce by a federally certificated air carrier. Sam L.

Majors Jewelers v. ABX, Inc., 117 F.3d 922 (Sth Cir. 1997);

McCall-Thomas Eng’g Co. v. Federal Express Corp., 81

F.2d 28, 30 (4th Cir. 1996) (“Claims involving shipments in

interstate commerce by air carriers are governed by federal

law.”); see also Diero v. American Airlines, Inc., 816 F.2d

1360 (9th Cir. 1987); First Pennsvlvania Bank, N.A. v.

Eastern Airlines, Inc., 731 F.2d 1113 (3d Cir. 1984); North

American Phillips Corp. v. Emery Air Freight Corp., 579

F.2d 229 (2d Cir. 1978) (decided under Federal Aviation

Act).

4la

4. A copy of all process, pleadings and orders served

upon FedEx are attached as Exhibit A.

5. A notice of filing of this notice of removal is being

concurrently filed with the Superior Court of the State of

California for the County of San Diego and is being

concurrently served on plaintiffs by and through plaintiffs’

attorney of record.

WHEREFORE, FexEx prays that this civil action be

removed to this Court from the Superior Court of the State of

California for the County of San Diego.

DATED:_ 6/25/99 __ HIGGS, FLETCHER & MACK LLP

By:/s/

HARRY L. CARTER

MICHAEL T. QUINN

2600 First National Bank Building

401 West “A” Street

San Diego, CA 92101

Phone: 619-236-1551

Fax: 619-696-1410

Attorneys for Defendant

FEDERAL EXPRESS CORPORATION

;

a a a a a ce RN ee

- APPENDIX H

STATUTORY PROVISIONS INVOLVED

TITLE 49. TRANSPORTATION

SUBTITLE VII. AVIATION PROGRAMS

PART A. AIR COMMERCE AND SAFETY

SUBPART I. GENERAL

CHAPTER 401. GENERAL PROVISIONS

49 USC § 40120

§ 40120. Relationship to other laws

(a) Nonapplication. Except as provided in the International

Navigational Rules Act of 1977 (33 U.S.C. 1601 et seq.), the

navigation and shipping laws of the United States and the

rules for the prevention of collisions do not apply to aircraft

or to the navigation of vessels related to those aircraft.

(b) Extending application outside United States. The President

may extend (in the way and for periods the President

considers necessary) the application of this part [49 USCS

§ 40101 et seq.] to outside the United States when-

(1) an international arrangement gives the United States

Government authority to make the extension; and

(2) the President decides the extension is in the national

interest.

42a

NWI Se SOE EOD OE ns Soe bs

43a

§ 40101 et seq.] is in addition to any other remedies provided

by law.

UNITED STATES CODE

TITLE 49. TRANSPORTATION

SUBTITLE VII--AVIATION PROGRAMS

PART A--AIR COMMERCE AND SAFETY

SUBPART II--ECONOMIC REGULATION

CHAPTER 417--OPERATIONS OF CARRIERS

SUBCHAPTER I--REQUIREMENTS

49 U.S.C. § 41713

§ 41713. Preemption of authority over prices, routes, and

service

(a) Definition.--In this section, “State” means a State, the

District of Columbia, and a territory or possession of the

United States.

(b) Preemption.--(1) Except as provided in this subsection,

a State, political subdivision of a State, or political authority

of at least 2 States may not enact or enforce a law, regulation,

or other provision having the force and effect of law related

to a price, route, or service of an air carrier that may provide

air transportation under this subpart.

(2) Paragraphs (1) and (4) of this subsection do not apply to

air transportation provided entirely in Alaska unless the

transportation is air transportation (except charter air

transportation) provided under a certificate issued under

section 41102 of this title.

(3) This subsection does not limit a State, political subdivision

of a State, or political authority of at least 2 States that owns

44a

Or operates an airport served by an air carrier holding a

certificate issued by the Secretary of Transportation from

Carrying out its proprietary powers and rights.

(4) Transportation by air carrier or carrier affiliated with

a direct air carrier.--

(A) General rule.--Except as provided in subparagraph (B),

a State, political subdivision of a State, or political authority

of 2 or more States may not enact or enforce a law,

regulation, or other provision having the force and effect of

law related to a price, route, or service of an air carrier or

carrier affiliated with a direct air carrier through common

controlling ownership when such carrier is transporting

property by aircraft or by motor vehicle (whether or not such

property has had or will have a prior or subsequent air

movement).

(B) Matters not covered.--Subparagraph (A)--

(i) shall not restrict the safety regulatory authority of a

State with respect to motor vehicles, the authority of a

State to impose highway route controls or limitations

based on the size or weight of the motor vehicle or the

hazardous nature of the cargo, or the authority of a State

to regulate motor carriers with regard to minimum

amounts of financial responsibility relating to insurance

requirements and self-insurance authorization; and

(ii) does not apply to the transportation of household

goods, as defined in section 13102 of this title.

limit the applicability of paragraph (1).

45a

APPENDIX I

PRESS RELEASE APPROVAL FORM

The attached item is submitted for your approval. We

respectfully request that you review and return at your earliest

opportunity. Thank you.

Please return to: Media Relations/1850Phone:395-3484

Release Date: July 31, 1997

Subject: Statement and Press release on FedEx

service adjustments due to UPS issue.

APPROVALS

Date Without With

Changes Changes

Shirlee Clark

Manager- Media Relations

Greg Rossiter,

Managing Director- PR 7/31 /i/

(Sr. VP of affected

organization)

T. M. Glenn, Sr. V.P.

-WW Mkt/Cust Svc. 7/31 /i/

46a

Chris Richards,

Managing Director- Legal 7/31 /i/

Scott Hansen,

Managing Director - Legal 7/31 /i/

Ken. Masterson, Exec.

V.P. - Legal 7/31 /i/

ABG 7/31 ok

LEGAL DEPARTMENT ONLY:

Requires FWS Approval Yes No

Release Approved For Posting to Internet ___ Yes ___No

For Information Only

W.R. Margaritis, Corporate Communications

R. M. Halvorson, Investor Relations

R. L. Golightly, Employee Communications

| aaa

47a

-DRAFT-

Contact: Media Relations (901) 395-3484

FOR IMMEDIATE RELEASE

FEDEX TAKES STEPS TO MAINTAIN

RELIABLE SERVICE:

Current customers remain top priority

MEMPHIS, Tenn., July 31, 1997-- Federal Express

Corporation today implemented additional measures to

maintain the reliability of the company’s service during the

uncertainty of a potential labor disruption at United Parcel

Service. The company has experienced a dramatic increase in

volume with customers trying to avoid service disruptions

with UPS.

The following temporary measures have been

implemented to help FedEx maintain the excellent service its

customers have come to expect:

@ Current FedEx customers will remain the company’s first

priority. The company is limiting current customers to

their normal shipping volumes to maintain service.

@ FedEx will accept packages from customers who bring

them to FedEx drop-off locations but the company will

limit the quantity of packages it accepts.

earlier than usual. We encourage customers to double-

check the latest drop-off times where they nczmally leave

their packages for any further changes.

48a

@ As provided in our Service Guide and until further notice,

we will not offer money-back guarantees.

@ FedEx will not open new accounts until the UPS situation

is resolved.

@ FedEx will continue to make regularly-scheduled stops,

but will not schedule any new regular pick-up stops.

Customers may visit our website at http://www. fedex.com for

the latest FedEx service updates.

APPENDIX J

Amendment of FedEx Service Guide

Effective July 31, 1997

Amendment to July, 1997

Federal Express Service Guide

In accordance with the provisions of the July, 1997 Federal

Express Service Guide and pursuant to my previous written

approval, I hereby authorize that the Service Conditions set

forth in the Federal Express Service Guide be modified and

amended effective July 31, 1997 as follows:

Current FedEx customers will remain the company’s first

priority. The company is limiting current customers to

their normal shipping volumes to maintain service.

FedEx will accept packages from customers who bring

them to FedEx drop-off locations but the company will

limit the quantity of packages it accepts.

Cut-off times at all drop-off locations are now two hours

earlier than usual. We encourage customers to double-

check the latest drop-off times where they normally leave

their packages for any further changes.

As provided in our Service Guide and until further notice,

we will not offer money-back guarantees.

FedEx will not open new accounts until the UPS situation

is resolved.

49a

50a

@ FedEx will continue to make regularly-scheduled stops,

but will not schedule any new regular pick-up stops.

Except as expressly modified by this Amendment, the

provisions of the July, 1997 Guide and subsequent addendums

remain in force and continue to reflect the currently effective

conditions applicable to Federal Express service.

/s/

T. Michael Glenn

SR. Vice President

Worldwide Marketing,

Customer Service and

Corporate Communications

Dated: August 8, 1997

APPENDIX K

Supreme Court of the United States

Office of the Clerk

Washington, DC 20543-0001

William K. Suter

Clerk of Court

(202) 479-3011

December 23, 2003

Mr. David B. Zlotnick

1010 Second Avenue

Suite 1750

San Diego, CA 92101

Re: On The House Syndications, Inc., et al.

v. Federal Express Corporation

Application No. 03A518

Dear Mr. Zlotnick:

The application for an extension of time within which to

file a petition for writ of certiorari in the above-entitled case

has been presented to Justice O’Connor, who on December

23, 2003 extended the time to and including January 28,

2004.

This letter has been sent to those designated on the

attached notification list.

Sla

52a

Sincerely,

William K. Suter, Clerk

By /s/

Ruth Jones

Case Analyst

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.