AMERICAN AIRLINES, INC. v. WOLENS ET AL.
No. 93-1286
Supreme Court of the United States
Argued November 1, 1994—Decided January 18, 1995
513 U.S. 219
Bruce J. Ennis, Jr., argued the cause for petitioner. With him on the briefs were Jerold S. Solovy, Marguerite M. Tompkins, Donald B. Verrilli, Jr., Richard A. Rothman, Bonnie Garone, and Michael J. Rider.
Gilbert W. Gordon argued the cause for respondents. With him on the brief were Robert Marks, Michael J. Freed, Michael B. Hyman, Nicholas E. Chimicles, Ira Neil Richards, and Steven A. Schwartz.
Cornelia T. L. Pillard argued the cause for the United States as amicus curiae urging reversal. With her on the brief were Solicitor General Days, Assistant Attorney General Hunger, Deputy Solicitor General Kneedler, Robert V. Zener, Jonathan R. Siegel, and Paul M. Geier.*
JUSTICE GINSBURG delivered the opinion of the Court.
The Airline Deregulation Act of 1978 prohibits States from “enact[ing] or enforc[ing] any law . . . relating to
I
A
Until 1978, the Federal Aviation Act of 1958 (FAA), 72 Stat. 731, as amended,
In 1978, Congress enacted the Airline Deregulation Act (ADA), 92 Stat. 1705, which largely deregulated domestic air transport. “To ensure that the States would not undo federal deregulation with regulation of their own,” Morales v. Trans World Airlines, Inc., 504 U. S. 374, 378 (1992), the ADA included a preemption clause which read in relevant part:
“[N]o State . . . shall enact or enforce any law, rule, regulation, standard, or other provision having the force
and effect of law relating to rates, routes, or services of any air carrier....” 49 U. S. C. App. § 1305(a)(1) .1
This case is our second encounter with the ADA‘s preemption clause. In 1992, in Morales, we confronted detailed Travel Industry Enforcement Guidelines, composed by the National Association of Attorneys General (NAAG). The NAAG guidelines purported to govern, inter alia, the content and format of airline fare advertising. See Morales, 504 U. S., at 393–418 (appendix to Court‘s opinion setting out NAAG guidelines on air travel industry advertising and marketing practices). Several States had endeavored to enforce the NAAG guidelines, under the States’ general consumer protection laws, to stop allegedly deceptive airline advertisements. The States’ initiative, we determined, “‘relat[ed] to [airline] rates, routes, or services,‘” id., at 378–379 (quoting
For aid in construing the ADA words “relating to rates, routes, or services of any air carrier,” the Court in Morales referred to the Employee Retirement Income Security Act of 1974 (ERISA), which provides for preemption of state laws “insofar as they . . . relate to any employee benefit plan.”
B
The litigation now before us, two consolidated state-court class actions brought in Illinois, was sub judice when we decided Morales. Plaintiffs in both actions (respondents here) are participants in American Airlines’ frequent flyer program, AAdvantage. AAdvantage enrollees earn mileage credits when they fly on American. They can exchange those credits for flight tickets or class-of-service upgrades. Plaintiffs complained that AAdvantage program modifications, instituted by American in 1988, devalued credits AAd-
In March 1992, several weeks before our decision in Morales, the Illinois Supreme Court rejected plaintiffs’ prayer for an injunction. Such a decree, the Illinois court reasoned, would involve regulation of an airline‘s current rendition of services, a matter preempted by the ADA. That court, however, allowed the breach-of-contract and Consumer Fraud Act monetary relief claims to survive. The ADA‘s preemption clause, the Illinois court said, ruled out “only those State laws and regulations that specifically relate to and have more than a tangential connection with an airline‘s rates, routes or services.” American Airlines, Inc. v. Wolens, 147 Ill. 2d 367, 373, 589 N. E. 2d 533, 536 (1992). After our decision in Morales, American petitioned for certiorari. The airline charged that the Illinois court, in a decision out of sync with Morales, had narrowly construed the ADA‘s broadly preemptive § 1305(a)(1). We granted the petition,
On remand, the Illinois Supreme Court, with one dissent, adhered to its prior judgment. Describing frequent flyer programs as not “essential,” 157 Ill. 2d 466, 472, 626 N. E. 2d 205, 208 (1993), but merely “peripheral to the operation of an airline,” ibid., the Illinois court typed plaintiffs’ state-law claims for money damages as “relat[ed] to American‘s rates, routes, and services” only “tangential[ly]” or “tenuous[ly],” ibid.
We granted American‘s second petition for certiorari, 511 U. S. 1017 (1994), and we now reverse the Illinois Supreme Court‘s judgment to the extent that it allowed survival of plaintiffs’ Consumer Fraud Act claims; we affirm that judgment, however, to the extent that it permits plaintiffs’ breach-of-contract action to proceed. In both respects, we adopt the position of the DOT, as advanced in this Court by the United States.
II
We need not dwell on the question whether plaintiffs’ complaints state claims “relating to [air carrier] rates, routes, or services.” Morales, we are satisfied, does not countenance the Illinois Supreme Court‘s separation of matters “essential” from matters unessential to airline operations. Plaintiffs’ claims relate to “rates,” i. e., American‘s charges in the form of mileage credits for free tickets and upgrades, and to “services,” i. e., access to flights and class-of-service upgrades unlimited by retrospectively applied capacity controls and blackout dates. But the ADA‘s preemption clause contains other words in need of interpretation, specifically, the words “enact or enforce any law” in the instruction: “[N]o State . . . shall enact or enforce any law . . . relating to [air carrier] rates, routes, or services.”
A
The Consumer Fraud Act declares unlawful
“[u]nfair methods of competition and unfair or deceptive acts or practices, including but not limited to the use or employment of any deception, fraud, false pretense, false promise, misrepresentation or the concealment, suppression or omission of any material fact, with intent that others rely upon the concealment, suppression or omission of such material fact, or the use or employment of any practice described in Section 2 of the ‘Uniform Deceptive Trade Practices Act’ . . . in the conduct of any trade or commerce . . . whether any person has in fact been misled, deceived or damaged thereby.”
Ill. Comp. Stat., ch. 815, § 505/2 (1992) (formerly codified at Ill. Rev. Stat., ch. 121½, ¶ 262 (1991)).
The Act is prescriptive; it controls the primary conduct of those falling within its governance. This Illinois law, in fact, is paradigmatic of the consumer protection legislation underpinning the NAAG guidelines. The NAAG Task Force on the Air Travel Industry, on which the Attorneys General of California, Illinois, Texas, and Washington served, see Morales, 504 U. S., at 392, reported that the guidelines created no
“new laws or regulations regarding the advertising practices or other business practices of the airline industry. They merely explain in detail how existing state laws apply to air fare advertising and frequent flyer programs.” Id.
The NAAG guidelines highlight the potential for intrusive regulation of airline business practices inherent in state consumer protection legislation typified by the Con-
As the NAAG guidelines illustrate, the Consumer Fraud Act serves as a means to guide and police the marketing practices of the airlines; the Act does not simply give effect to bargains offered by the airlines and accepted by airline customers. In light of the full text of the preemption clause, and of the ADA‘s purpose to leave largely to the airlines themselves, and not at all to States, the selection and design of marketing mechanisms appropriate to the furnishing of air transportation services,4 we conclude that § 1305(a)(1) preempts plaintiffs’ claims under the Consumer Fraud Act.
B
American maintains, and we agree, that “Congress could hardly have intended to allow the States to hobble [competition for airline passengers] through the application of restrictive state laws.” Brief for Petitioner 27. We do not read the ADA‘s preemption clause, however, to shelter airlines from suits alleging no violation of state-imposed obligations, but seeking recovery solely for the airline‘s alleged breach of its own, self-imposed undertakings. As persuasively argued by the United States, terms and conditions airlines offer and passengers accept are privately ordered obligations
The FAA‘s text, we note, presupposes the vitality of contracts governing transportation by air carriers. Section 411(b),
American does not suggest that its contracts lack legal force. American sees the DOT, however, as the exclusively competent monitor of the airline‘s undertakings. American
Nor is it plausible that Congress meant 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. The ADA contains no hint of such a role for the federal courts. In this regard, the ADA contrasts markedly with the ERISA, which does channel civil actions into federal courts, see ERISA §§ 502(a); (e),
The conclusion that the ADA permits state-law-based court adjudication of routine breach-of-contract claims also makes sense of Congress’ retention of the FAA‘s saving clause, § 1106,
American suggests that plaintiffs’ breach-of-contract and Consumer Fraud Act claims differ only in their labels, so that if Fraud Act claims are preempted, contract claims must be preempted as well. See Reply Brief 6. But a breach of contract, without more, “does not amount to a cause of action cognizable under the [Consumer Fraud] Act and the Act should not apply to simple breach of contract claims.” Golembiewski v. Hallberg Ins. Agency, Inc., 262 Ill. App. 3d 1082, 1093, 635 N. E. 2d 452, 460 (1st Dist. 1994). The basis for a contract action is the parties’ agreement; to succeed under the consumer protection law, one must show not necessarily an agreement, but in all cases, an unfair or deceptive practice.
III
American ultimately argues that even under the position on preemption advanced by the United States—the one we adopt—plaintiffs’ claims must fail because they “inescapably depend on state policies that are independent of the intent of the parties.” Reply Brief 3. “The state court cannot reach the merits,” American contends, “unless it first invalidates or limits [American‘s] express reservation of the right
American‘s argument is unpersuasive, for it assumes the answer to the very contract construction issue on which plaintiffs’ claims turn: Did American, by contract, reserve the right to change the value of already accumulated mileage credits, or only to change the rules governing credits earned from and after the date of the change? See Brief for Respondents 5 (plaintiffs recognize that American “reserved the right to restrict, suspend, or otherwise alter aspects of the Program prospectively,” but maintain that American “never reserved the right to retroactively diminish the value of the credits previously earned by members“). That question of contract interpretation has not yet had a full airing, and we intimate no view on its resolution.
Responding to our colleagues’ diverse opinions dissenting in part, we add a final note. This case presents two issues that run all through the law. First, who decides (here, courts or the DOT, the latter lacking contract dispute resolution resources for the task)? On this question, all agree to this extent: None of the opinions in this case would foist on the DOT work Congress has neither instructed nor funded the Department to do. Second, where is it proper to draw the line (here, between what the ADA preempts, and what it leaves to private ordering, backed by judicial enforcement)? JUSTICE STEVENS reads our Morales decision to demand only minimal preemption; in contrast, JUSTICE O‘CONNOR reads the same case to mandate total preemption.9 The middle course we adopt seems to us best calculated to carry out the congressional design; it also bears the approval of the statute‘s experienced administrator, the DOT. And while we adhere to our holding in Morales, we do not overlook that in our system of adjudication, principles seldom can
*
*
*
For the reasons stated, the judgment of the Illinois Supreme Court is affirmed in part and reversed in part, and the case is remanded for proceedings not inconsistent with this opinion.
It is so ordered.
JUSTICE SCALIA took no part in the decision of the case.
JUSTICE STEVENS, concurring in part and dissenting in part.
Although I agree with the majority that the Airline Deregulation Act of 1978 (ADA) does not pre-empt respondents’ breach-of-contract claims, I do not agree with the Court‘s disposition of their consumer-fraud claims. In my opinion, private tort actions based on common-law negligence or fraud, or on a statutory prohibition against fraud, are not pre-empted. Under the broad (and in my opinion incorrect1) interpretation of the words “law . . . relating to rates, routes, or services” that the Court adopted in Morales v. Trans World Airlines, Inc., 504 U. S. 374 (1992), direct state regulation of airline advertising is pre-empted; but I would not extend the holding of that case to embrace the private claims that respondents assert in this case.
Unlike the National Association of Attorneys General (NAAG) guidelines reviewed in Morales, the Illinois Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act) does not instruct the airlines about how they can market their services. Instead, it merely requires
I see no reason why a state law requiring an airline to honor its contractual commitments is any less a law relating to its rates and services than is a state law imposing a “duty not to make false statements of material fact or to conceal such facts.” Cipollone v. Liggett Group, Inc., 505 U. S. 504, 528 (1992) (finding similar claim not to be pre-empted under Federal Cigarette Labeling and Advertising Act). In this case, the two claims are grounded upon the exact same conduct and would presumably have an identical impact upon American‘s rates, routes, and services. The majority correctly finds that Congress did not intend to pre-empt a claim that an airline breached a private agreement. I see no reason why the ADA should pre-empt a claim that the airline defrauded its customers in the making and performance of that very same agreement.
I would analogize the Consumer Fraud Act to a codification of common-law negligence rules. Under ordinary tort principles, every person has a duty to exercise reasonable care toward all other persons with whom he comes into contact. Presumably, if an airline were negligent in a way that somehow affected its rates, routes, or services,2 and the victim of the airline‘s negligence were to sue in state court, the majority would not hold all common-law negligence rules to be pre-empted by the ADA. See ante, at 231, n. 7. Like contract principles, the standard of ordinary care is a general
The majority‘s extension of Morales is particularly untenable in light of the interpretive presumption against pre-emption. As in Cipollone, I believe there is insufficient evidence of congressional intent to supersede laws of general applicability to justify a finding that the ADA pre-empts either the contract or the fraud claim. Cipollone, 505 U. S., at 525–530; see also Morales, 504 U. S., at 419–421 (STEVENS, J., dissenting) (discussing presumption against pre-emption as an incident of federalism). Indeed, the presumption against pre-emption is especially appropriate to the ADA because Congress retained the “saving clause” preserving state “remedies now existing at common law or by statute.”
Accordingly, while I join the Court‘s disposition of the breach-of-contract claims,3 I would affirm the entire judgment of the Supreme Court of Illinois.
In permitting respondents’ contract action to go forward, the Court arrives at what might be a reasonable policy judgment as to when state law actions against airlines should be pre-empted if we were free to legislate it. It is not, however, consistent with our controlling precedents, and it requires some questionable assumptions about the nature of contract law. I would hold that none of respondents’ actions may proceed.
I
A
The Airline Deregulation Act of 1978 (ADA) says that “no State . . . shall enact or enforce any law, rule, regulation, standard, or other provision having the force and effect of law relating to rates, routes, or services of any air carrier.”
Applying Morales to this case, I agree with the Court that respondents’ consumer fraud and contract claims are “related to” airline “rates” and “services.” See ante, at 226. The Court says, however, that judicial enforcement of a contract‘s
terms, in accordance with state contract law, does not amount to a “State . . . enforc[ing] any law,”I do not understand the Court to say that a State only “enforces” its “law” when some state employee (e. g., an attorney general, or a judge) orders someone to do something. If that were the meaning of “enforce” in this context, then a diversity action brought by a private party under state law in federal court would never be subject to
As I read
The Court concludes, however, that
The Court argues that the words “law, rule, regulation, standard, or other provision” in
As the Court recognizes, ante, at 234, n. 9, my view of Morales does not mean that personal injury claims against airlines are always pre-empted. Many cases decided since Morales have allowed personal injury claims to proceed, even though none has said that a State is not “enforcing” its “law” when it imposes tort liability on an airline. In those cases, courts have found the particular tort claims at issue not to “relate” to airline “services,” much as we suggested in Morales that state laws against gambling and prostitution would be too tenuously related to airline services to be pre-empted, see Morales, supra, at 390. E. g., Hodges v. Delta Airlines, Inc., 4 F. 3d 350, 353-356 (CA5 1993) (arguing that “‘services’ is not coextensive with airline ‘safety,‘” so safety-related tort claim should not be pre-empted; urging en banc review to bring Circuit precedent into conformity with that view), rehearing en banc granted, 12 F. 3d 426 (1994); Public Health Trust v. Lake Aircraft, Inc., 992 F. 2d 291, 294-295 (CA11 1993) (tort claim for defective aircraft design not pre-empted because not related to airline services); Cleveland v. Piper Aircraft Corp., 985 F. 2d 1438, 1443, and n. 11, 1444, n. 13 (CA10), cert. denied, 510 U. S. 908 (1993); Stagl v. Delta Air Lines, Inc., 849 F. Supp. 179, 182 (EDNY 1994) (tort claim against airline for personal injury not pre-empted because not related to airline “services” within the meaning of
Our recent decision in Norfolk & Western R. Co. v. Train Dispatchers, 499 U. S. 117 (1991), is relevant. The question in that case was whether a rail carrier‘s statutory exemption from “all other law,” which we read to mean “all law as necessary to carry out an ICC-approved transaction,” id., at 129, exempted the carrier from contractually imposed obligations. We held that it did. We noted that “[a] contract depends on a regime of common and statutory law for its effectiveness and enforcement,” id., at 129-130, that “[a] contract has no legal force apart from the law that acknowledges its binding character,” id., at 130, and that “[l]aws which subsist at the time and place of the making of a contract, and where it is to be performed, enter into and form a part of it, as fully as if they had been expressly referred to or incorporated in its terms,” ibid. (quoting Farmers and Merchants Bank of Monroe v. Federal Reserve Bank of Richmond, 262 U. S. 649, 660 (1923)). Accordingly, we concluded that “the exemption . . . from ‘all other law’ effects an override of contractual obligations . . . by suspending application of the law that makes the contract binding.” 499 U. S., at 130. In so concluding, we specifically rejected the Court of Appeals’ views that the “all other law” exemption “[n]owhere sa[id] that the ICC may also override contracts,” and that it did not exempt the carrier from “‘all legal obstacles.‘” Brotherhood of R. Carmen v. ICC, 880 F. 2d 562, 567 (CADC 1989); see Norfolk & Western, supra, at 133-134.
The Court does not dispute this reading of Norfolk & Western, which in my view makes clear that a State is enforcing its “law” when it brings its coercive power to bear
As support for its theory, the Court cites only a statement in the plurality opinion in Cipollone v. Liggett Group, Inc., 505 U. S. 504 (1992); see ante, at 229. The Cipollone plurality said that “a common-law remedy for a contractual commitment voluntarily undertaken should not be regarded as a ‘requirement . . . imposed under State law’ within the meaning of § 5(b).” 505 U. S., at 526. But the plurality elaborated on this point in a footnote. In rejecting the argument that specific warranty obligations are “imposed under State law,” the plurality agreed that pre-emption might be required “if the Act pre-empted ‘liability’ imposed under state law . . . ; but instead the Act expressly pre-empts only a ‘requirement or prohibition’ imposed under state law.” Id., at 526, n. 24. It agreed that contractual requirements are “only enforceable under state law,” but argued that those requirements are “‘imposed’ by the contracting party upon itself.” Ibid. The plurality thus distinguished the situation where substantive requirements contained in a contract are enforceable only under state law from the situation where state law itself imposes substantive requirements, and concluded that the statute before it pre-empted only the latter kind of state law. Here, as in Cipollone, the requirements
The Court also concludes that
Without question, Morales gave
Congress has recently revisited
Stare decisis has “special force” in the area of statutory interpretation, see Allied-Bruce Terminix Cos. v. Dobson, post, at 284 (O‘CONNOR, J., concurring) (internal quotation marks omitted). It sometimes requires adherence to a wrongly decided precedent. Post, at 283-284. Here, however, Congress apparently does not think that our decision in Morales was wrong, nor do I. In the absence of any “special justification,” post, at 284 (quoting Arizona v. Rumsey, 467 U. S. 203, 212 (1984)), for departing from Morales, I would recognize the import of Morales and Norfolk & Western here, and render the decision that the language of
II
Our decisions in Morales and Norfolk & Western suffice to decide this case along the lines I have described. In addition, however, I disagree with the Court‘s view that courts can realistically be confined, “in breach-of-contract actions, to the parties’ bargain, with no enlargement or enhancement based on state laws or policies external to the agreement.” Ante, at 233. When they are so confined, the Court says, courts are “simply hold[ing] parties to their agreements,”
The doctrinal underpinnings of the notion that judicial enforcement of the “intent of the parties” can be divorced from a State‘s “public policy” have been in serious question for many years. As one author wrote some time ago:
“A contract, therefore, between two or more individuals cannot be said to be generally devoid of all public interest. If it be of no interest, why enforce it? For note that in enforcing contracts, the government does not merely allow two individuals to do what they have found pleasant in their eyes. Enforcement, in fact, puts the machinery of the law in the service of one party against the other. When that is worthwhile and how that should be done are important questions of public policy. . . . [T]he notion that in enforcing contracts the state is only giving effect to the will of the parties rests upon an . . . untenable theory as to what the enforcement of contracts involves.” Cohen, The Basis of Contract, 46 Harv. L. Rev. 553, 562 (1933).
More recent authors have expressed similar views. See, e. g., Braucher, Contract Versus Contractarianism: The Regulatory Role of Contract Law, 47 Wash. & Lee L. Rev. 697, 699 (1990) (“Mediating between private ordering and social concerns, contract is a socioeconomic institution that requires an array of normative choices. . . . The questions addressed by contract law concern what social norms to use in the enforcement of contracts, not whether social norms will be used at all“). Contract law is a set of policy judgments concerning how to decide the meaning of private agreements, which private agreements should be legally enforceable, and
Thus, the Court‘s allowance that “[s]ome 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,” ante, at 233, n. 8 (quoting Brief for United States as Amicus Curiae 28), threatens to swallow all of contract law. For example, the Court observes that on remand, the state court will be required to decide whether petitioner reserved the right to alter the terms of its frequent flyer program retroactively, or instead only prospectively. Ante, at 234. The court will presumably decide that question by looking to the usual “rules” of contract interpretation to decide what the contract‘s language means. If the court finds the language to be ambiguous, it might invoke the familiar rule that the contract should be construed against its drafter, and thus that respondents should receive the benefit of the doubt. See 2 E. Farnsworth, Farnsworth on Contracts § 7.11, pp. 265-268 (1990) (hereinafter Farnsworth). That rule of contract construction is not essential to a functional contract system. It is a policy choice that our contract system has made. Other such policy choices are that courts should not enforce agreements unsupported by consideration, see 1 Farnsworth § 2.5; but cf. J. Barton, J. Gibbs, V. Li, & J. Merryman, Law in Radically Different Cultures 579 (1983) (other legal systems enforce certain agreements not supported by consideration); that courts should supply “reasonable” terms to fill “gaps” in incomplete contracts, see 2 Farnsworth §§ 7.15-7.17; the method by which courts should decide what terms to supply, see C. Fried, Contract as Promise 60, 69-73 (1981); Charny, Hypothetical Bargains: The Normative Structure of Contract Interpretation, 89 Mich. L. Rev. 1815, 1816, 1820-1823
Even the doctrine of unconscionability, which the United States suggests as an aspect of contract law that “might well be preempted” because it “seek[s] to effectuate the State‘s public policies, rather than the intent of the parties,” Brief for United States as Amicus Curiae 28, cannot be so neatly categorized. On the one hand, refusing to enforce a contract because it is “unfair” seems quintessentially policy oriented. But on the other, “[p]rocedural unconscionability is broadly conceived to encompass not only the employment of sharp practices and the use of fine print and convoluted language, but a lack of understanding and an inequality of bargaining power.” 1 Farnsworth § 4.28, at 506-507 (footnotes omitted). In other words, a determination that a contract is “unconscionable” may in fact be a determination that one party did not intend to agree to the terms of the contract. Thus, the unconscionability doctrine, far from being a purely “policy-oriented” doctrine that courts impose over the will of the parties, instead demonstrates that state public policy cannot easily be separated from the methods by which courts are to decide what the parties “intended.”
“[T]he law itself imposes contractual liability on the basis of a complex of moral, political, and social judgments.” Fried, supra, at 69. The rules laid down by contract law for determining what the parties intended an agreement to
For these reasons, I would reverse the judgment of the Illinois Supreme Court.