American Airlines, Inc. v. Wolens
1995 U.S. LEXIS 690, 513 U.S. 219, 130 L. Ed. 2d 715 (1995)
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Rule of Law:
The Airline Deregulation Act of 1978 (ADA) preempts state-law claims based on general consumer protection statutes that regulate airline rates, routes, or services, but does not preempt state-law claims for breach of an airline's own, self-imposed contractual undertakings.
Facts:
- Plaintiffs were participants in American Airlines' frequent flyer program, AAdvantage, through which they earned mileage credits.
- AAdvantage members could exchange these credits for flight tickets or class-of-service upgrades.
- In 1988, American Airlines instituted modifications to the AAdvantage program.
- These modifications included new capacity controls, which limited the number of seats available to passengers using credits, and blackout dates, which restricted dates on which credits could be used.
- American Airlines applied these changes retroactively, which devalued the mileage credits that members had already accumulated.
- The plaintiffs did not challenge American's right to alter the program going forward, but they did challenge the retroactive application of these changes to credits they had already earned.
Procedural Posture:
- Participants in American Airlines' frequent flyer program filed class-action lawsuits against the airline in an Illinois state trial court.
- The lawsuits alleged violations of the Illinois Consumer Fraud Act and breach of contract.
- The Illinois Supreme Court, an appellate court of last resort, held that claims for injunctive relief were preempted by the ADA, but allowed the claims for monetary damages under both theories to proceed.
- American Airlines (petitioner) sought a writ of certiorari from the U.S. Supreme Court.
- The U.S. Supreme Court granted certiorari, vacated the state supreme court's judgment, and remanded the case for reconsideration in light of its decision in Morales v. Trans World Airlines.
- On remand, the Illinois Supreme Court adhered to its prior judgment, again permitting the monetary damage claims to proceed.
- American Airlines again petitioned for and was granted a writ of certiorari by the U.S. Supreme Court.
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Issue:
Does the Airline Deregulation Act of 1978 preempt state-law claims against an airline for breach of contract and for violation of a state consumer fraud act, when those claims arise from the airline's retroactive changes to its frequent flyer program?
Opinions:
Majority - Justice Ginsburg
A mixed answer. Yes, the Airline Deregulation Act preempts the claim under the state consumer fraud act, but No, it does not preempt the claim for breach of contract. The ADA's preemption clause bars states from enacting or enforcing laws relating to airline rates, routes, or services. The Illinois Consumer Fraud Act is a prescriptive law that seeks to impose the state's public policy on airline marketing practices, which falls squarely within the ADA's preemption of state regulation, as established in Morales v. Trans World Airlines. However, the ADA does not preempt suits seeking recovery solely for an airline's alleged breach of its own, self-imposed undertakings. Enforcing the terms of a private contract is not the equivalent of a state enacting or enforcing a law; it simply holds parties to their own bargain. This interpretation allows for market efficiency through the enforcement of private agreements while preventing states from undoing federal deregulation with their own regulations.
Concurring-in-part-and-dissenting-in-part - Justice Stevens
No, the Airline Deregulation Act does not preempt the consumer fraud claim. While I agree with the majority that the breach of contract claim survives, the consumer fraud claim should as well. There is no meaningful difference between a state law requiring an airline to honor its contractual commitments and a state law requiring it to refrain from defrauding its customers. Both are general background rules of private conduct applicable to all commercial enterprises, not airline-specific regulations of the type preempted in Morales. The majority's preemption of the fraud claim is an alarming enlargement of precedent, particularly given the interpretive presumption against federal preemption of state law.
Concurring-in-part-and-dissenting-in-part - Justice O'Connor
Yes, the Airline Deregulation Act preempts both the consumer fraud and the breach of contract claims. The majority's distinction between enforcing state law and enforcing a private agreement is untenable because a contract has no legal force apart from the state law that makes it enforceable. Therefore, a state court adjudicating a contract claim is 'enforcing a law' within the meaning of the ADA. As both claims relate to airline rates and services, they are both preempted under the broad interpretation of the ADA established in Morales. Contract law is itself a collection of state public policies, making it impossible to separate the 'parties' bargain' from state law as the majority attempts to do.
Analysis:
This decision significantly clarifies the scope of ADA preemption by creating a crucial distinction between impermissible state regulation and permissible enforcement of private contracts. By allowing breach-of-contract claims to proceed, the Court preserved a key common-law remedy for passengers, preventing airlines from being completely shielded from liability for their own promises. This carve-out for private agreements has become a foundational principle in ADA preemption analysis, ensuring that while states cannot impose their own public policy standards on airlines, consumers can still hold airlines accountable for the bargains they strike. The case defines the line where federal deregulation ends and private contractual accountability begins.
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