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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2004
- **Citation:** 541 U.S. 938

## Text

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,
V.

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.

ii
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

iV

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

C)

H.

Vv

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

vi

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.

y

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.

3

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

6

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.

7

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

8

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

9

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.

10

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

11

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

12

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.

13

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

14

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).

15

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,

16

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”).

17

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,

18

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

19

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).

20

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.

21

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)).

22

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

23

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

24

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

25

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

26

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,

V.

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.

2a

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,

V.

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.

4a

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.

Sa

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

6a

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

7a

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

8a

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

9a

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
register my dissent.

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

V.

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. )
7s
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,

V.

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.

I
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

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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

3la

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

32a

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

33a

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.

ee

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
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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

5
3

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

i
;
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.

(c) Additional remedies. A remedy under this part [49 USCS

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.

(C) Applicability of paragraph (1).--This paragraph shall not
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.

© 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 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

EE

52a

Sincerely,
William K. Suter, Clerk

By /s/

Ruth Jones
Case Analyst

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386001_1035%3A1. Public record. Not legal advice.