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Hickcox-Huffman v. U.S. Airways, Inc.

United States Court of Appeals, Ninth Circuit

May 3, 2017

Hayley Hickcox-Huffman, on behalf of herself and all others similarly situated, Plaintiff-Appellant,
v.
US Airways, Inc.; U.S. Airways Group, Inc., Defendants-Appellees.

          Argued and Submitted November 8, 2012

          Submission Withdrawn June 6, 2013

          Resubmitted April 24, 2017 [1] San Francisco, California

          Appeal from the United States District Court for the Northern District of California No. 5:10-cv-05193-HRL Howard R. Lloyd, Magistrate Judge, Presiding

          Justin P. Karczag (argued), Roger N. Behle, and Thomas Foley, Foley Bezek Behle & Curtis LLP, Santa Barbara, California; William M. Aron, Law Office of William M. Aron, Santa Barbara, California; for Plaintiff-Appellant.

          Michael G. McGuinness (argued), Robert A. Siegel, and Jillian R. Weinstein, O'Melveny & Myers LLP, Los Angeles, California, for Defendants-Appellees.

          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. [*]

         SUMMARY [**]

         Airline Deregulation Act / Preemption

         The panel reversed the district court's Fed.R.Civ.P. 12(b)(6) dismissal, based on preemption by the Airline Deregulation Act, of a putative class action which alleged claims against U.S. Airways for refunds passengers paid as baggage fees.

         The plaintiff passenger pleaded breach of contract, alleging that U.S. Airways promised her timely delivery of her checked bag upon arrival in exchange for a $15 fee, and the passenger did not get her bag until the day after arrival.

         The panel held that plaintiff sufficiently alleged that the airline promised under the terms of transportation to deliver her bag when she landed. The panel held that because plaintiff's claim was for breach of contract of a voluntarily assumed contractual undertaking, and she pleaded breach of contract, the claim was not preempted by the Airline Deregulation Act as construed by American Airlines v. Wolens, 513 U.S. 219 (1995). The panel remanded for further proceedings.

          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 U.S. 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. U.S. Airways charged Hickcox-Huffman $15 to check her bag. Her bag did not show up on the baggage carousel, and U.S. 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 U.S. Airways did not do what it promised to do in exchange for the money.

         To show the terms of the agreement, Hickcox-Huffman attached U.S. Airways' "Terms of Transportation" to the complaint. The terms say that "Travel on U.S. Airways shall be deemed acceptance by the customer of U.S. 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 baggage" within 45 days of the incident for domestic travel. And it says that if the checked baggage is not returned to the customer "upon arrival, " then the airlines will make "every effort" to return it within 24 hours.

         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 addressing where the boundary lies between preempted claims and preserved claims.

         The Supreme Court read the preemption clause broadly in Morales v. Trans World Airlines, Inc., 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.[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 ...

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