Source: https://supreme.justia.com/cases/federal/us/426/290/
Timestamp: 2019-04-19 08:21:54+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 426 › Nader v. Allegheny Airlines, Inc.
Shortly before his scheduled departure from Washington, D.C. to Connecticut, where he was to fulfill speaking engagements, petitioner, who had reserved a seat on one of respondent's Hartford flights arrived at the check-in area, but was advised that he could not be accommodated because all the seats were occupied. After refusing the tender of respondent, which concededly overbooked the flight, of denied boarding compensation, petitioner brought a common law action against respondent based on an alleged fraudulent misrepresentation arising from respondent's failure to apprise petitioner of its deliberate overbooking practices, and a statutory action under § 404(b) of the Federal Aviation Act of 1958, arising from respondent's failure to afford petitioner the boarding priority specified in its rules filed with the Civil Aeronautics Board (CAB). The District Court entered judgment and awarded compensatory and punitive damages on both claims. The Court of Appeals remanded petitioner's statutory claim for further findings and reversed the award of punitive damages on that claim. The question of punitive damages for the common law claim was remanded for further findings on respondent's good faith. None of that court's foregoing rulings was presented in the petition for certiorari. The court also held that the common law fraudulent misrepresentation claim had to be remanded to the District Court, and stayed, under the principles of primary jurisdiction, pending referral to the CAB to determine whether the alleged failure to disclose the practice of deliberate overbooking is a deceptive practice under § 411 of the Act, which provides that the CAB may investigate and determine whether any air carrier has been or is engaged in unfair or deceptive practices, and that practices found to violate the section shall be the subject of a cease and desist order. The court held that a CAB determination that a practice is not deceptive under § 411 would preclude a common law tort action for damages for injuries caused by that practice.
the alleged fraudulent misrepresentation by respondent air carrier should not be stayed pending reference to the CAB for a determination whether the practice is "deceptive" within the meaning of § 411 of the Act. Pp. 426 U. S. 298-308.
"[n]othing contained in this Act shall in any way abridge or alter the remedies now existing at common law or by statute, but the provisions of this Act are in addition to such remedies."
§ 1106. Texas & Pacific R. Co. v. Abilene Cotton Oil Co., 204 U. S. 426, distinguished. Pp. 426 U. S. 298-300.
(b) No power to immunize a carrier from common law liability can be inferred from § 411's language; where Congress has sought to confer such power, it has done so expressly, as in § 414 of the Act. Section 411 is both broader and narrower than common law remedies. A cease and desist order may issue thereunder if the CAB concludes that a carrier is engaged in an unfair or deceptive practice, and no findings that the practice was intentionally deceptive or has caused injury in fact are necessary; on the other hand, a CAB decision that such an order is inappropriate does not manifest the CAB's approval of the practice, but may merely represent the agency's conclusion that a more flexible approach is necessary. Pp. 426 U. S. 300-303.
(c) The doctrine of primary jurisdiction, which has been applied where a claim originally cognizable in the courts requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative agency, is inapplicable here, where petitioner's action for respondent's asserted failure to disclose its overbooking practices implicates no tariff practice or similar technical question of fact uniquely within the CAB's expertise. Pp. 426 U. S. 303-307.
167 U.S.App.D.C. 350, 512 F.2d 527, reversed and remanded.
POWELL, J., delivered the opinion for a unanimous Court. WHITE, J., filed a concurring opinion, post, p. 426 U. S. 308.
In this case, we address the question whether a common law tort action based on alleged fraudulent misrepresentation by an air carrier subject to regulation by the Civil Aeronautics Board (Board) must be stayed pending reference to the Board for determination whether the practice is "deceptive" within the meaning of § 411 of the Federal Aviation Act of 1958, 72 Stat. 769, 49 U.S.C. § 1381. We hold that, under the circumstances of this case, a stay pending reference is inappropriate.
The facts are not contested. Petitioner agreed to make several appearances in Connecticut on April 28, 1972, in support of the fund-raising efforts of the Connecticut Citizen Action Group (CCAG), a nonprofit public interest organization. His two principal appearances were to be a a noon rally in Hartford and a later address at the Storrs campus of the University of Connecticut. On April 25, petitioner reserved a seat on respondent's flight 864 for April 28. The flight was scheduled to leave Washington, D.C. at 10:15 a.m. and to arrive in Hartford at 11:15 a.m. Petitioner's ticket was purchased from a travel agency on the morning of the flight. It indicated, by the standard "OK" notation, that the reservation was confirmed.
time. He was informed that all seats on the flight were occupied, and that he, like several other passengers who had arrived shortly before him, could not be accommodated. Explaining that he had to arrive in Hartford in time for the noon rally, petitioner asked respondent's agent to determine whether any standby passengers had been allowed to board by mistake, or whether anyone already on board would voluntarily give up his or her seat. Both requests were refused. In accordance with respondent's practice, petitioner was offered alternative transportation by air taxi to Philadelphia, where connections could be made with an Allegheny flight scheduled to arrive in Hartford at 12:15 p.m. Fearing that the Philadelphia connection, which allowed only 10 minutes between planes, was too close, petitioner rejected this offer and elected to fly to Boston, where he was met by a CCAG staff member who drove him to Storrs.
law suit for damages suffered as a result of the bumping. Petitioner refused the tender of denied boarding compensation (§ 32.41 in his case) and, with CCAG, filed this suit for compensatory and punitive damages. His suit did not seek compensation for the bumping per se, but asserted two other bases of liability: a common law action based on fraudulent misrepresentation arising from respondent's alleged failure to inform petitioner in advance of its deliberate overbooking practices, and a statutory action under § 404(b) of the Act, 49 U.S.C. § 1374(b), [Footnote 6] arising from respondent's alleged failure to afford petitioner the boarding priority specified in its rules filed with the Board under 14 CFR § 250.3 (1975).
findings. The award of punitive damages to petitioner on the statutory claim was reversed on the ground that respondent's conduct contained no "elements of intentional wrongdoing or conscious disregard for" petitioner's rights. Id. at 373, 512 F.2d at 550. The question of punitive damages for the common law claim was remanded for further findings on respondent's good faith. In particular, the trial court was to consider "whether Allegheny reasonably believed that its policies were completely lawful and in fact carried the approval of the Board." Id. at 374, 512 F.2d at 551. None of these rulings was presented to this Court in the petition for certiorari.
"but another application of the principles of primary jurisdiction, a doctrine whose purpose is the coordination of the workings of agency and court."
167 U.S.App.D.C. at 367, 512 F.2d at 544.
The question before us, then, is whether the Board must be given an opportunity to determine whether respondent's alleged failure to disclose its practice of deliberate overbooking is a deceptive practice under § 411 before petitioner's common law action is allowed to proceed. The decision of the Court of Appeals requires the District Court to stay the action brought by petitioner in order to give the Board an opportunity to resolve the question. If the Board were to find that there had been no violation of § 411, respondent would be immunized from common law liability.
"[n]othing contained in this chapter shall in any way 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."
"unless it be found that the preexisting right is so repugnant to the statute that the survival of such right would, in effect, deprive the subsequent statute of its efficacy; in other words, render its provisions nugatory."
"cannot in reason be construed as continuing in shippers a common law right, the continued existence of which would be absolutely inconsistent with the provisions of the act. In other words, the act cannot be held to destroy itself."
the reasonableness of any carrier practice. There is no Board requirement that air carriers engage in overbooking, or that they fail to disclose that they do so. And any impact on rates that may result from the imposition of tort liability or from practices adopted by a carrier to avoid such liability would be merely incidental. Under the circumstances, the common law action and the statute are not "absolutely inconsistent," and may coexist, as contemplated by § 1106.
Section 411 of the Act allows the Board, where "it considers that such action . . . would be in the interest of the public," "upon its own initiative or upon complaint by any air carrier, foreign air carrier, or ticket agent," to "investigate and determine whether any air carrier . . . has been or is engaged in unfair or deceptive practices or unfair methods of competition. . . ." Practices determined to be in violation of this section "shall" be the subject of a cease and desist order. The Court of Appeals concluded -- and respondent does not challenge the conclusion here -- that this section does not totally preclude petitioner's common law tort action. But the Court of Appeals also held, relying on the nature of the airline industry as "a regulated system of limited competition," American Airlines, Inc. v. North American Airlines, Inc., 351 U. S. 79, 351 U. S. 84 (1956), and the Board's duty to promote "adequate, economical, and efficient service," § 102(c) of the Act, 49 U.S.C. § 1302(c), "at the lowest cost consistent with the furnishing of such service," § 1002(e)(2) of the Act, 49 U.S.C. § 1482(e)(2), that the Board has the power in a § 411 proceeding to approve practices that might otherwise be considered deceptive, and thus to immunize carriers from common law liability. 167 U.S.App.D.C. at 366, 512 F.2d at 543.
"'Unfair or deceptive practices or unfair methods of competition,' as used in § 411, are broader concepts than the common law idea of unfair competition. . . . The section is concerned not with punishment of wrongdoing or protection of injured competitors, but rather with protection of the public interest."
Thus, a violation of § 411, contrary to the Court of Appeals' conclusion, is not coextensive with a breach of duty under the common law. We note that the Board's jurisdiction to initiate an investigation under § 411 is expressly premised on a finding that the "public interest" is involved. The Board "may not employ its powers to vindicate private rights." 351 U.S. at 351 U. S. 83. Indeed, individual consumers are not even entitled to initiate proceedings under § 411, a circumstance that indicates that Congress did not intend to require private litigants to obtain a § 411 determination before they could proceed with the common law remedies preserved by § 1106, Cf. Rosado v. Wyman, 397 U. S. 397, 397 U. S. 406 (1970).
In sum, § 411 confers upon the Board a new and powerful weapon against unfair and deceptive practices that injure the public. But it does not represent the only, or best, response to all challenged carrier actions that result in private wrongs.
"is concerned with promoting proper relationships between the courts and administrative agencies charged with particular regulatory duties."
"the limited functions of review by the judiciary [would be] more rationally exercised, by preliminary resort for ascertaining and interpreting the circumstances underlying legal issues to agencies that are better equipped than courts by specialization, by insight gained through experience, and by more flexible procedure."
Far East Conference v. United States, 342 U.S. at 342 U. S. 574-575. See also United States v. Western Pacific R. Co., supra at 352 U. S. 64.
The doctrine has been applied, for example, when an action otherwise within the jurisdiction of the court raises a question of the validity of a rate or practice included in a tariff filed with an agency, e.g., Danna v. Air France, 463 F.2d 407 (CA2 1972); Southwestern Sugar & Molasses Co. v. River Terminals Corp., 360 U. S. 411, 360 U. S. 417-418 (1959), particularly when the issue involves technical questions of fact uniquely within the expertise and experience of an agency -- such as matters turning on an assessment of industry conditions, e.g., United States v. Western Pacific R. Co., supra, at 352 U. S. 66-67. In this case, however, considerations of uniformity in regulation and of technical expertise do not call for prior reference to the Board.
comparable to those made in Southwestern Sugar & Molasses Co. v. River Terminals Corp., supra, and Lichten v. Eastern Airlines, Inc., 189 F.2d 939 (CA2 1951), to limitations on common law damages imposed through exculpatory clauses included in a tariff.
"liquidated damages for all damages incurred . . . as a result of the carrier's failure to provide the passenger with confirmed reserved space,"
414 U. S. 113 (1973). I seriously doubt that any pending or future § 411 case would reveal anything relevant to this case about the Board's view of the propriety of overbooking and of overselling that is not already apparent from prior proceedings concerning those subjects.
Brief for Civil Aeronautics Board as Amicus Curiae filed in Court of Appeals, App. B, p. 58.
On any given flight, of course, the chance that a passenger will be bumped may be higher or lower than the overall average.
The rulemaking proceedings were initiated in January, 1974. Emergency Reservation Practices Investigation, 39 Fed.Reg. 823 (1974) (CAB Order 73-12-93, EDR-260). An opinion and an order were issued on April 13, 1976. Emergency Reservation Practices Investigation (CAB Order 76-4-55). The Board concluded that the questions raised by the Court of Appeals in this case were "outside the scope of [the] investigation." Id. at 7. It specifically noted that "the question of whether intentional overbooking, in general, or nondisclosure of such practice, in particular, is a deceptive trade practice" was not at issue. Id. at 8.
In April, 1976, the Board announced a proposed rulemaking proceeding with respect to deliberate overbooking and oversales. Priority Rules, Denied-Boarding Compensation Tariffs and Reports of Unaccommodated Passengers: Reexamination of the Board's Policies Concerning Deliberate Overbooking and Oversales, 41 Fed.Reg. 16478 (1976) (CAB Order EDR-296). The Board has decided to reevaluate existing practices in light of a recent "trend toward a higher rate of oversales" and in light of the fact that oversales "continue to be a significant cause of [consumer] complaints." Ibid. Among the options to be considered is a requirement that the practice of deliberate overbooking, if allowed to continue, be disclosed to customers. Id. at 16479.
"That proviso was added at the end of the statute not to nullify other parts of the Act or to defeat rights or remedies given by preceding sections, but to preserve all existing rights which were not inconsistent with those created by the statute. It was also intended to preserve existing remedies, such as those by which a shipper could, in a state court, recover for damages to property while in the hands of the interstate carrier -- damages caused by delay in shipment, damages caused by failure to comply with its common law duties, and the like."
Pennsylvania R. Co. v. Puritan Coal Mining Co., 237 U. S. 121, 237 U. S. 129-130 (1915).
Cf. Federal Trade Comm'n v. Klesner, 280 U. S. 19, 280 U. S. 25-26 (1929); Holloway v. Bristol-Myers Corp., 158 U.S.App.D.C. 207, 212, 485 F.2d 986, 991 (1973) (both opinions discuss § 5 of the Federal Trade Commission Act, 38 Stat. 717, as amended, 15 U.S.C. § 45, which this Court, in American Airlines, Inc. v. North American Airlines, Inc., 351 U.S. at 351 U. S. 82, described as the model for § 411).
In the late 1950's, § 411 investigations were initiated against two carriers charged with deliberate overbooking. One of these investigations was terminated on the ground that the record showed no deliberate overbooking by the carrier. Eastern Air Lines Overbooking Enforcement Proceeding, 30 C.A.B. 862 (1960). The other was terminated, after a finding by the examiner of a § 411 violation, in favor of an industrywide investigation. National Airlines, Inc., Enforcement Proceeding, 31 C.A B. 390 (1960).
See nn. 15-18 and accompanying text infra.
In 1965, the Board proposed a rule requiring carriers to notify individual passengers of overbooked conditions 12 hours prior to the scheduled departure time. Passenger Priorities and Overbooked Flights: Notice of Proposed Rule Making, 30 Fed.Reg. 13236 (1965) (CAB Order EDR-95). This proposal subsequently was abandoned after industry opposition on the ground that it was excessively rigid and unworkable. Priority Rules, Denied Boarding Compensation Tariffs, And Reports of Unaccommodated Passengers: Notice of Proposed Rule Making, 32 Fed.Reg. 459, 460-461 (1967) (CAB Order EDR-109).
The Board's abandonment of this proposal cannot be read as blanket approval of failure to make a public disclosure of overbooking practices. The cost of an individual notification program in terms of expense, public relations, and passenger confusion could be prohibitive. But alternative means of disclosure may be significantly less disruptive. Petitioner suggests, for example, that carrier overbooking practices be included in tariffs, which are required to be available for public inspection. And the Board has approved an innovative approach suggested by Eastern Air Lines, which provides for a system of limited overbooking in which passengers subject to possible denial of boarding are advised at the outset of their status. See Delta Air Lines, Inc. v. CAB, 147 U.S.App.D.C. 272, 455 F.2d 1340 (1971) (aff'g CAB Order 71-6-120).
For example, if respondent's overbooking practices were detailed in its tariff, and therefore available to the public, a court presented with a claim of misrepresentation based on failure to disclose need not make prior reference to the Board, as it should if presented with a suit challenging the reasonableness of practices detailed in a tariff. Rather, the court could, applying settled principles of tort law, determine that the tariff provided sufficient notice to the party who brought the suit -- as, indeed, petitioner suggests it would. Reply Brief for Petitioner 3, n. 3.
Priority Rules, Denied Boarding Compensation Tariffs and Reports of Unaccommodated Passengers, 32 Fed.Reg. 11939 (1967) (CAB Order ER-503). See 14 CFR § 250.1 et seq. (1975).
CAB Order ER-503, supra, 32 Fed.Reg. 11943.
Foreign Air Carriers: Priority Rules, Denied Boarding Compensation Tariffs and Reports of Unaccommodated Passengers, 38 Fed.Reg. 15083, 15084 (1973) (CAB Order EDR-248) (amending existing regulations to include foreign air carriers). See also testimony of Jerome F. Huisentruit, assistant general counsel for the Air Transport Association of America and respondent's witness on Board jurisdiction, App. 72-73.
"[T]o the extent that the proposed tariff provision is designed to restrict a passenger from seeking damages to which he would otherwise be entitled under the common law, we find it to be adverse to the public interest. Accordingly, we shall condition our approval of the agreement to make clear that the prescribed penalty is a minimum obligation of the carrier which, only if accepted by the passenger, would terminate the carrier's obligation."
The Court of Appeals specifically remanded for reconsideration of the award of punitive damages on petitioner's claim of fraudulent misrepresentation. The propriety of that ruling was not challenged in this Court.
As the issues of ultimate liability and damages are not before us, we express no opinion as to their merits. We conclude above that mere compliance with agency regulations is not sufficient, in itself, under the Act to exempt a carrier from common law liability. We make clear, however, that this conclusion is not intended to foreclose the courts on remand from considering, in relation to other issues in the case, evidence that the Board was fully advised of the practice complained of, and that the carrier had cooperated with the Board.

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