Hayley HICKCOX-HUFFMAN, on behalf of herself and all others similarly situated v. US AIRWAYS, INC.; U.S. Airways Group, Inc.
No. 11-16305
United States Court of Appeals, Ninth Circuit
May 3, 2017
Argued and Submitted November 8, 2012. Submission Withdrawn June 6, 2013. Resubmitted April 24, 2017, San Francisco, California
854 F.3d 1057
As a final matter we note that one of Defendants’ principal contentions below was that Friedman‘s claim is barred by the “filed-rate” doctrine, under which “rates duly adopted by a regulatory agency are not subject to collateral attack in court.” MacKay v. Superior Court, 188 Cal. App.4th 1427, 115 Cal.Rptr.3d 893, 910 (2010). Because the district court concluded that the complaint failed to state a claim it saw no need to reach this issue. ER 4-5 n.2. Moreover, neither party addressed the doctrine in its appellate briefing.
In light of our conclusion that the complaint should not have been dismissed, the “filed-rate” issue reemerges. Our general rule is that we do not consider an issue not passed upon below. Dodd v. Hood River Cty., 59 F.3d 852, 863 (9th Cir. 1995). We do not think this case calls for deviation from that rule and we conclude that the proper course is to have the district court address the issue in the first instance.
CONCLUSION
We REVERSE and REMAND for further proceedings consistent with this opinion.
Justin P. Karczag (argued), Roger N. Behle, and Thomas Foley, Foley Bezek Behle & Curtis LLP, Santa Barbara, Cali-
Michael G. McGuinness (argued), Robert A. Siegel, and Jillian R. Weinstein, O‘Melveny & Myers LLP, Los Angeles, Califor-
Jeffrey A. Lamken and Michael G. Pattillo, Jr., MoloLamken LLP, Washington, D.C.; Andrew M. Bernie, MoloLamken LLP, New York, New York; for Amicus Curiae Air Transport Association of America, Inc.
Before: ANDREW J. KLEINFELD and MARSHA S. BERZON, Circuit Judges, and ROGER T. BENITEZ, District Judge.*
OPINION
KLEINFELD, Senior Circuit Judge:
We decide whether the Airline Deregulation Act preempts state law claims arising out of delayed baggage.
Facts.
The district court dismissed this case at the pleading stage under Rule 12(b)(6) for failure to state a claim, so we treat the facts as pleaded in the complaint and attached exhibits as true for the purposes of this appeal.2
According to the first amended complaint, Hayley Hickcox-Huffman bought a ticket on US Airways to fly from Colorado Springs, Colorado, to San Luis Obispo, California. She checked one bag. Airlines have different policies on charging for baggage, and the same airline may change its policy from time to time. Some charge nothing for checking one bag, some charge fees in varying amounts. US Airways charged Hickcox-Huffman $15 to check her bag. Her bag did not show up on the baggage carousel, and US Airways delivered it to her the next day.
Hickcox-Huffman filed a putative class action to get her $15 back.3 Her complaint pleads (1) “breach of self-imposed undertaking,” (2) “breach of express contract,” (3) “breach of implied contract,” (4) “breach of contract—federal common law,” (5) “breach of the covenant of good faith and fair dealing,” (6) “unjust enrichment,” (7) “intentional misrepresentation,” and (8) “negligent misrepresentation.” All the claims are for refunds of what she and other passengers paid as baggage fees, on the theory that US Airways did not do what it promised to do in exchange for the money.
To show the terms of the agreement, Hickcox-Huffman attached US Airways’ “Terms of Transportation” to the complaint. The terms say that “Travel on US Airways shall be deemed acceptance by the customer of US Airways’ terms of transportation.” In boldface, they explain that ”US AIRWAYS SHALL IN NO EVENT BE LIABLE FOR ANY INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES” but makes an exception for baggage: ”EXCEPT BAGGAGE LIABILITY, SECTION 11.” The publication also says that “US Airways has voluntarily established a program setting standards for service levels” regarding baggage, and has “committed to . . . [p]rovide on-time baggage delivery” and “[m]ake prompt refunds.”
Section 11 addresses baggage, and subsection 11.6 addresses “baggage claim limits and procedures.” That subsection limits liability for “loss, delay, or damage” to a dollar ceiling, and requires written notice of a claim for any “delay of checked bag-
The district court dismissed the complaint on the grounds that Hickcox-Huffman‘s claims were preempted by the Airline Deregulation Act.4 The court reasoned that Hickcox-Huffman‘s claims related to an airline “service,” a preempted category under the Act, and that the contract language was not specific enough to avoid preemption.
Analysis.
We review the district court‘s ruling on preemption de novo.5
Airlines used to operate like a public utility, with their rates and terms of service set by the federal government‘s Civil Aeronautics Board (“CAB“). State governments also imposed requirements, such as particular routes. Service was lavish, and fares were much higher than they are now (corrected for inflation).6
Congress deregulated the industry and abolished the CAB in 1978. The Airline Deregulation Act sought to promote “maximum reliance on competitive market forces . . . to provide the needed air transportation system . . . [and] to encourage efficient and well-managed air carriers.”7 The Act said that it was intended “to encourage, develop, and attain an air transportation system which relies on competitive market forces to determine the quality, variety, and price of air services.”8
To prevent the states from undermining this new free market approach, Congress prohibited them from enacting or enforcing any law “related to a price, route, or service of an air carrier.”9 But Congress expressly did not abolish remedies other than those provided in the Airline Deregulation Act. To the contrary, the Act specifies that remedies it provides are “in addition to any other remedies provided by law.”10 This savings clause language used to say more—that nothing in the chapter shall “abridge or alter the remedies now existing at common law or by statute, but the provisions of this chapter are in addition to such remedies.”11 While that change might give rise to an inference that the savings clause was narrowed, “[t]hose additional terms were deleted as part of a wholesale recodification of Title 49 in 1994, [and] Congress made it clear that this recodification did not effect any ‘substantive change.‘”12 The tension between the preemption clause and the savings clause has generated a series of decisions ad-
The Supreme Court read the preemption clause broadly in Morales v. Trans World Airlines, Inc., 504 U.S. 374 (1992), reading its words “related to” in the same fairly broad sense as the same phrase in ERISA.13 An association of state attorneys general had adopted its own enforcement guidelines for policing airline advertisements to protect consumers from deception and nondisclosure.14 The Court held that injunctive and declaratory relief were available to the airlines against the state attorneys general.15 Even though the attorneys general did not propose to tell the airlines whom they must serve for how much and in what way, restrictions on advertising of fares and services would “relate to” fares, such as by making it harder for consumers to discover which airline charged the lowest fare.16
The Court limited the potential breadth of Morales in American Airlines, Inc. v. Wolens, 513 U.S. 219 (1995).17 Passengers claimed breach of contract and violation of an Illinois consumer fraud act because American Airlines had cut back on mileage credits in its frequent flyer program.18 The Court held that the consumer fraud act claim was preempted, but not the breach of contract claim.19 Explaining the distinction, the Court said the state consumer fraud act “does not simply give effect to bargains offered by the airlines and accepted by airline customers,” but also “serves as a means to guide and police the marketing practices of the airlines.”20 Based on that latter function, enforcement of the state law in Wolens was preempted by the Airline Deregulation Act‘s of “leav[ing] largely to the airlines themselves, and not at all to States, the selection and design of marketing mechanisms.”21 But common law breach of contract claims, despite being based on state law, were not preempted, because they are voluntarily assumed obligations, not state impositions:
[T]erms and conditions airlines offer and passengers accept are privately ordered obligations and thus do not amount to a State‘s “enact[ment] or enforce[ment] [of] any law, rule, regulation, standard, or other provision having the force and effect of law” within the meaning of [the Airline Deregulation Act]. . . . A remedy confined to a contract‘s terms simply holds parties to their agreements—in this instance, to business judgments an airline made public about its rates and services. The [Airline Deregulation Act], as we recognized in Morales, was designed to promote “maximum reliance on competitive market forces.” Market efficiency requires effective means to enforce private agreements.22
Wolens controls as to Hickcox-Huffman‘s breach of contract claim. If she adequately pleaded breach of contract, then her claim is not preempted. The Supreme Court‘s subsequent Northwest, Inc. v. Ginsberg, 572 U.S. 273 (2014) decision did not change the Wolens rule that state law breach of contract claims are not preempted.27 The distinction that Ginsberg made was between voluntarily assumed contractual obligations and obligations imposed on contracting parties by state law.28 The Court characterized the central issue in the case as “whether respondent‘s implied covenant claim is based on a state-imposed obligation or simply one that the parties voluntarily undertook.”29 Some states used the “covenant of good faith and fair dealing” doctrine to effectuate the parties’ intentions and reasonable expectations, but others used it to ensure that a party did not violate community standards regardless of what the parties agreed to.30 Since the covenant at issue in that case was of the latter sort, imposing a state obligation that could not be avoided by contract, it was preempted.31 The Court went out of its way to note that “respondent‘s claim of ill treatment by Northwest might have been vindicated if he had pursued his breach-of-contract claim after its dismissal by the District Court,” but he had not appealed that dismissal.32
Thus, even after Ginsberg, if Hickcox-Huffman has adequately pleaded breach of a contract provision that US Airways voluntarily entered into, her claim is not preempted. The essential elements of a breach of contract claim are the existence of an enforceable contract, the defendant‘s breach, and damages to the plaintiff caused by the breach.33 Hickcox-Huffman
Hickcox-Huffman pleaded breach of contract with three verbal formulas, but all amount to the same thing, that the airline made an enforceable promise to her that it did not keep. Her first formulation, “breach of self-imposed undertaking,” appears to be an allusion to the Wolens language excluding self-imposed undertakings from preemption, the second, “breach of express contract” says basically the same thing, as does the third, “breach of implied contract.”
US Airways terms of transportation are a routine offer of a unilateral contract subject to being accepted by flying on US Airways. The airline has contracted to carry the passenger‘s baggage at a rate of $15 for the first bag and $25 for the second. The theory of her claim, as variously stated, is that US Airways promised her timely delivery, that is, delivery of her bag upon arrival, in exchange for $15. US Airways does not dispute that she flew on their airline, paid the $15, and did not get her bag until the day after her arrival. It also does not dispute that its terms of transportation govern.
US Airways uses the word “timely” to mean upon arrival. It expressly commits itself to “on-time baggage delivery.” In its subsection addressing baggage claims for “loss, damage, or delay,”35 it refers the passenger to its policy on “delayed” baggage. And it commits itself to applying this “delayed baggage” policy if it “fails to return checked baggage upon arrival at the destination.”36 These terms establish that US Airways treats timeliness of baggage delivery as delivery when the passenger arrives at the destination, and treats delivery after that time as delivery of “delayed” baggage. Thus, under the terms of transportation, she properly pleaded breach of the promise that delivery of her bag would be “timely.”
As for the $15, US Airways’ terms say that the airline “will assess a $15.00 fee for the first checked bag and a $25.00 fee for the second checked bag” as “baggage fees.” Putting these terms together, the $15 Hickcox-Huffman paid was consideration for delivery upon her arrival at her destination of her checked bag.
The terms of transportation say that if the airline “fails to return baggage upon arrival at the destination, every effort will be made to return the baggage within 24 hours.” The “every effort” phrase means that the airline does not promise to return “delayed” baggage within 24 hours, just to make “every effort” to do so. That might have a bearing on a case where the airline took more than 24 hours to return a delayed bag, causing increased consequential damages (e.g., buying one new shirt might cover a 24 hour delay, but two new shirts might be needed for a 48 hour delay). Hickcox-Huffman alleged her bag was returned “the following day,” without stating that the delivery occurred more than 24 hours after her arrival, so the “every effort” language does not bear on her case.
She has. In its terms of transportation, the airline says “US Airways has committed to . . . [p]rovide on-time baggage delivery.” Unlike the “best efforts” language for finding and delivering delayed baggage, the commitment has no “every effort” or other language limiting the commitment in some way that might arguably make it a mere promise of best efforts or mere aspirations. US Airways assented to be bound to deliver checked baggage on a passenger‘s arrival. It is hard to see what “committed” might mean other than a promise, a contractual obligation.
The terms of transportation use the contract term of art “acceptance,” and say that “[t]ravel on US Airways shall be deemed acceptance by the customer of US Airways’ terms of transportation.” If the terms of transportation were merely aspirational, it would make no sense to “deem” travel as “acceptance.”
Because Hickcox-Huffman‘s claim is for breach of contract of a voluntarily assumed contractual undertaking, and she pleads breach of contract, the claim is not preempted by the Airline Deregulation Act as construed by Wolens.38
US Airways raises several different arguments for why it is not obligated to refund Hickcox-Huffman‘s $15 despite not having delivered her bag on time. The airline says that its contractual cap on consequential damages in the terms of transportation somehow should be read to exclude whatever damages Hickcox-Huffman may claim. The terms of transportation provide that the airline‘s liability for “direct or consequential damages resulting from the loss, delay or damage to baggage” is limited to $3,300 per passenger for domestic travel. The $3,300 limit is of no consequence here, because all Hickcox-Huffman claims is the $15 that she paid. US Airways argues that because the airline does not expressly promise a refund if baggage is delayed, there is no breach of contract and no obligation to refund Hickcox-Huffman. But a contract may be enforceable even if it does not specify a remedy for a breach. Ordinarily common law provides a range of remedies for breach, except where some remedies are contractually limited or excluded. Refunds are among the remedies traditionally rec-
US Airways alternatively would have us read this limitation regarding consequential damages as implying a negative pregnant so that only consequential damages may be sought. The language of the terms of transportation suggests no negative pregnant, just a limit on a specific type of damages that can become very large. As a limit on consequential damages, it appears to be just that and no more. To the extent that the clause bears on Hickcox-Huffman‘s claim for restitution of the $15 paid, the implication of the limit on consequential damages for “delay” of baggage implies that delayed baggage is subject to a contractual remedy.
The airline also argues that our decision in Sanchez v. Aerovias de Mexico, S.A. de C.V., 590 F.3d 1027 (9th Cir. 2010), bars recovery. US Airways would read Sanchez to hold that if the airline does not promise a particular remedy, then it is not bound to provide that remedy, even if it has breached the terms of transportation. That is an incorrect reading of Sanchez. Sanchez held that if the airline had made a contractual commitment to collect the disputed portion of the ticket price due only for those passengers subject to a tourism tax, then the contractual commitment would be enforceable under Wolens.43 But the airline in Sanchez, we held, made no such commitment. It only contracted to fly the passenger for the full ticket price, including what was labeled “tax.”44 We did not hold in Sanchez that absence of a contract for a particular remedy prevented contract formation.
Finally, US Airways warns, “If Hickcox-Huffman were to prevail on her claims, airlines would be required to deliver checked baggage on-time or to provide that service for free.” We do not see why that argument undermines the contract claim. One airline may offer “first bag free,” another may offer “bag delivery within 20 minutes or we will give you a mileage award,” another may charge $50 for the first bag and expressly exclude any responsibility if the bag does not arrive on the carousel when the passenger lands. And another may offer timely delivery of the first bag for $15, which would mean if the bag is not timely delivered, the passenger has not gotten what she paid for and is entitled to a contract remedy, the smallest of which is probably just getting her $15 back. If promises such as the alternative possible baggage deals hypothesized are not enforced, then the competitive market forces sought by Congress cannot operate, because a passenger with any experience
Hickcox-Huffman‘s claim falls on the side of the distinction that Ginsberg and Wolens protect from preemption. No state law made US Airways promise timely delivery of the first bag for $15. The airline could have made any of the promises hypothesized above or none of them. Enforcing its voluntarily undertaken contractual obligation comports with the purpose of the Airline Deregulation Act, which “simply holds parties to their agreements—in this instance, to business judgments an airline made public about its rates and services.”46
Hickcox-Huffman‘s first amended complaint also included a number of alternative claims, but we need not reach any of them because we have determined that she has pleaded an express breach of contract. These alternative claims are all reformulations in the event that her breach of contract claim was deemed preempted. She has alleged a breach of the implied covenant of good faith and fair dealing, but this covenant is merely an aid to interpreting the terms of a contract.47 She has sufficiently alleged that US Airways breached an express provision of terms of transpor-
Hickcox-Huffman has pleaded breach of contract. Her breach of contract claim is not preempted, and her pleading, if true, establishes a breach of contract. We therefore must reverse and vacate the dismissal of her complaint for failure to state a claim upon which relief can be granted. As for whether some genuine issue of material fact may undermine the truth of her averments, or whether a class should be certified, these questions were not reached in district court, so we leave them for determination on remand.
REVERSED. The judgement below is VACATED, and the case is REMANDED for further proceedings consistent with this opinion. Costs are to be taxed against the appellees.