Court Opinion

ID: 9525552
Source: CourtListenerOpinion
Date Created: 2023-08-07 03:04:51.519465+00
Date Added: 2024-06-11T13:15:34.388988
License: Public Domain

JUSTICE McMORROW, dissenting: I respectfully dissent because, in my view, under the reasoning and holding of the Morales case, plaintiffs’ claims for damages under the Consumer Fraud Act and for breach of contract are preempted by section 1305(a)(1) of the Airline Deregulation Act. I In 1987 and 1988, the National Association of Attorneys General (NAAG) drafted detailed standards governing the advertising and marketing practices of the airline industry. The purpose of the guidelines, according to the NAAG, was to “explain in detail how existing state laws apply to air fare advertising and frequent flyer programs.” (Morales, 504 U.S. at 392, 119 L. Ed. 2d at 173, 112 S. Ct. at 2041 (appendix, NAAG Guidelines, Introduction (1988)).) Notwithstanding objections to the guidelines, on preemption and policy grounds, by the Department of Transportation and by the Federal Trade Commission, seven members of the NAAG sent memoranda to the airlines stating that the practice of not disclosing all surcharges in airline fare advertisements was a violation of the members’ respective State laws on deceptive advertising and trade practices. Some months later, the Texas Attorney General’s office sent the airlines notice of its intent to sue under Texas’ statute prohibiting deceptive advertising and trade practices for the airlines’ failure to disclose all surcharges in their advertisements. The airlines filed suit in the district court seeking declaratory judgment and injunctive relief from any action by Texas in conjunction with the NAAG guidelines on the basis that section 1305(a)(1) expressly preempted actions to enforce State deceptive advertising laws. As noted by the majority, in analyzing the language of section 1305 prohibiting the States from enacting or enforcing “any law relating to the rates, routes, or services of any air carrier,” the Morales Court imparted a broad definition to the phrase “relating to.” The Morales Court additionally observed that ERISA’s similarly worded preemption provision (29 U.S.C. § 1144(a) (1988)) had repeatedly been recognized as having a “ ‘broad scope’ ” and an “ ‘expansive sweep’ ” and being “ ‘conspicuous for its breadth’ ” (Morales, 504 U.S. at 384, 119 L. Ed. 2d at 167, 112 S. Ct. at 2037, quoting Metropolitan Life Insurance Co. v. Massachusetts (1985), 471 U.S. 724, 739, 85 L. Ed. 2d 728, 739-40, 105 S. Ct. 2380, 2388-89; Pilot Life Insurance Co. v. Dedeaux (1987), 481 U.S. 41, 47, 95 L. Ed. 2d 39, 48, 107 S. Ct. 1549, 1553; FMC Corp. v. Holliday (1990), 498 U.S. 52, 58, 112 L. Ed. 2d 356, 364, 111 S. Ct. 403, 407), and that it has been held that a State law “ ‘relates to’ ” an employee benefit plan and is preempted by ERISA “ ‘if it has a connection with or reference to such a plan.’ ” (Morales, 504 U.S. at 384, 119 L. Ed. 2d at 167, 112 S. Ct. at 2037, quoting Shaw v. Delta Air Lines, Inc. (1983), 463 U.S. 95, 97, 77 L. Ed. 2d 490, 501, 103 S. Ct. 2890, 2900.) The Morales Court determined that because the relevant language of section 1305(aXl) of the Deregulation Act is identical to the preemption clause in ERISA, it should be given the same broad interpretation. The Morales Court thus held that State enforcement actions having a connection with or reference to airline rates, routes, or services are preempted under section 1305(a)(1). Morales, 504 U.S. at 384, 119 L. Ed. 2d at 167-68, 112 S. Ct. at 2037. The Court rejected the argument that its ruling should be limited to State laws expressly addressing the airline industry (the position taken by this court in the original Wolens opinion), reasoning that such a limitation would create “an utterly irrational loophole *** [which] ignores the sweep of the ‘relating to’ language.” (Morales, 504 U.S. at 386, 119 L. Ed. 2d at 169, 112 S. Ct. at 2038.) The Court noted that it had consistently rejected the same argument in ERISA cases, having held that “ ‘[a] state law may “relate to” a benefit plan, and thereby be pre-empted even if the law is not specifically designed to affect such plans, or the effect is only indirect.’ ” Morales, 504 U.S. at 386, 119 L. Ed. 2d at 169, 112 S. Ct. at 2038, quoting Ingersoll-Rand Co. v. Mc-Clendon (1990), 498 U.S. 133, 139, 112 L. Ed. 2d 474, 484, 111 S. Ct. 478, 483. The Morales Court also rejected a contention essentially the same as that made by Justice Miller in his special concurrence to this-court’s previous opinion and now adopted by the majority, that plaintiffs’ claims are not preempted because they do not seek to “ ‘establish the rates airlines must charge, or determine the routes airlines must fly, or dictate the services airlines must provide.’ ” (157 Ill. 2d at 472-73, quoting Wolens, 147 Ill. 2d at 377.) The Morales Court observed that the argument that section 1305(a)(1) only preempts the States from actually prescribing rates, routes, or services “simply reads the words ‘relating to’ out of the statute. Had the statute been designed to pre-empt state law in such a limited fashion, it would have forbidden the States to ‘regulate rates, routes, and services.’ ” (Emphasis in original.) Morales, 504 U.S. at 385, 119 L. Ed. 2d at 168, 112 S. Ct. at 2037. The Court then examined the NAAG guidelines on fare advertising and concluded that they “quite obviously” related to fares. In addition to requiring that all restrictions and surcharges be disclosed clearly and conspicuously, the guidelines also mandated that an advertised fare be available in sufficient quantities to meet reasonably foreseeable demand on every flight on every day in every market in which the fare is advertised or that the advertisement prominently state the extent of the unavailability. The Court found that each guideline bore a reference to air fares, and that under the Texas statute “violations of these requirements would give consumers a cause of action (for at least actual damages [citation]) for an airline’s failure to provide a particular advertised fare — effectively creating an enforceable right to that fare when the advertisement fails to include the mandated explanations and disclaimers.” (Morales, 504 U.S. at 388, 119 L. Ed. 2d at 170, 112 S. Ct. at 2039.) Continuing, the Morales Court compared the case before it to Pilot Life Insurance Co., 481 U.S. 41, 95 L. Ed. 2d 39, 107 S. Ct. 1549, which “held that a common-law tort and contract action seeking damages for the failure of an employee benefit plan to pay benefits ‘relate[d] to’ employee benefit plans and was preempted by ERISA.” (Morales, 504 U.S. at 388, 119 L. Ed. 2d at 170, 112 S. Ct. at 2039.) Beyond the guidelines’ express reference to fares, the Morales Court found that the obligations imposed by the guidelines “would have a significant impact upon the airlines’ ability to market their product, and hence a significant impact upon the fares they charge.” Morales, 504 U.S. at 390, 119 L. Ed. 2d at 171, 112 S. Ct. at 2040. Although the Morales Court held that the NAAG guidelines were preempted by section 1305(aXl), the Court pointed out that the Department of Transportation retains the power to prohibit deceptive advertising practices. (Morales, 504 U.S. at 390, 119 L. Ed. 2d at 172, 112 S. Ct. at 2040.) Under section 411 of the Federal Aviation Act (49 U.S.C. app. §1381 (1988)), the Department has the authority to investigate and determine whether any air carrier is or has been engaged in unfair or deceptive practices and to order the air carrier to cease and desist from such practices. II In the instant case, plaintiffs’ complaints consist of two separate claims, one under the Consumer Fraud Act and one for breach of contract. Illinois’ Consumer Fraud Act makes unlawful “unfair or deceptive acts or deceptive 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 *** in the conduct of any trade or commerce.” (Ill. Rev. Stat. 1987, ch. 121½, par. 262.) The Act authorizes the Attorney General or a State’s Attorney to bring an action to restrain by injunction the unfair act or practice, and to seek civil penalties against any person found by the court to have engaged in an unlawful act or practice. (Ill. Rev. Stat. 1987, ch. 121½, par. 267.) Like the Texas consumer protection statute sought to be enforced in Morales, the Illinois Consumer Fraud Act also allows individuals to bring actions for damages for violations of its provisions. Ill. Rev. Stat. 1987, ch. 121½, par. 270(a). Plaintiffs’ consumer fraud claims sought an injunction and both actual and punitive damages. In their complaints plaintiffs allege that American solicited the use of its airline by “featuring” its AAdvantage program in mailings and in the distribution of promotional materials which contained a delineation of the mileage credits required to obtain specific benefits, and that through these materials American induced persons to join the AAdvantage program. Plaintiffs further allege that they were induced by American’s solicitations and promises to believe that by accumulating mileage credits they would receive correspondingly greater travel benefits. Plaintiffs allege that American offered these inducements even though it knew that it would change the terms of the program and institute capacity control restrictions which would have the effect of substantially reducing the value of accumulated mileage credits, and that American never advised plaintiffs that it believed it had reserved the right to retroactively restrict or otherwise reduce or alter the benefits available under the program. When reduced to their simplest terms, plaintiffs’ claims for damages, including punitive damages, under the Consumer Fraud Act are based upon allegations of American’s deceptive advertising, promotions, and inducements relating to airline fares (i.e., payment of travel fares with mileage credits and upgrades in seating class) and services (i.e., the quantity of seats and flights and the dates of travel to various destinations) which would be available to persons who joined and participated in the AAdvantage program. Plaintiffs’ allegations virtually mirror the restrictions regarding the advertising of frequent flyer benefits and the institution of capacity controls and other frequent flyer program modifications without advance notice which were proposed in the NAAG guidelines on frequent flyer programs. (Morales, 504 U.S. at 391, 119 L. Ed. 2d at 173, 112 S. Ct. at 2041 (appendix, NAAG Guidelines).) Although Morales involved those of the guidelines relating to advertisements of discounted fares rather than of frequent flyer program benefits, as in Morales, plaintiffs in the case at bar seek an adjudication that American’s advertising of and representations concerning frequent flyer fares and services constituted unfair and deceptive practices, in violation of State law. Morales held that actions seeking to enforce state consumer protection statutes referring and relating to fares and services are expressly preempted by section 1305(a)(1). Cf. Hastalis v. Human Rights Comm’n (1990), 205 Ill. App. 3d 50 (plaintiff’s discrimination complaint under the Illinois Human Rights Act related to services of the airline and was preempted by section 1305(a)(1)). Applying Morales’ expansive and sweeping interpretation of the phrase “relating to,” I believe that plaintiffs’ claims for compensatory and punitive damages based on allegations of common law breach of contract are likewise preempted by section 1305(aXl). Plaintiffs allege that prior to May 1988, AAdvantage members, numbering approximately four million persons, were entitled to redeem their award certificates for free air travel on any available date to applicable destinations for any available seat in the class of service provided. Although plaintiffs maintain that they are not attempting to mandate enforcement of the preMay 1988 terms of the AAdvantage program, in order to prevail on their breach of contract claims plaintiffs must obtain a State-court adjudication that American is contractually obligated to continue to redeem mileage credits earned prior to May 1988 for the same free fares and unrestricted seating and flight services which the AAdvantage program provided up until that time. Such a finding is necessary whether plaintiffs seek to enforce the terms and conditions of the program or an award of money damages for American’s alleged breach of those contractual obligations. I find it significant that the Morales Court several times cited to the decision in Pilot Life Insurance Co., 481 U.S. 41, 95 L. Ed. 2d 39, 107 S. Ct. 1549. In that case, the plaintiff brought suit seeking damages for common law tort and breach of contract based upon the insurance company’s improper processing of his claim for and failure to pay disability benefits on the group insurance policy purchased with matching funds of the employer and employees. The Court held that the common law causes of action raised in the plaintiff’s complaint “undoubtedly meet the criteria for preemption” under the “relating to” language in ERISA’s preemption clause. This court reached the same conclusion in Arnold v. Babock & Wilcox Co. (1988), 123 Ill. 2d 67. In Wilcox, the plaintiffs’ employer sold the plant where they worked and the plant subsequently closed. Plaintiffs filed an action for breach of contract to recover severance benefits to which they claimed entitlement under the terms of their employment contract. The complaint also alleged that the failure to pay the benefits constituted a violation of the State statute governing the payment of wages. The court held that the plaintiffs’ State-law causes of action based on breach of contract and violation of the State wage payment law came within the broad scope of ERISA’s preemption of any and all laws which relate to an employee benefit plan. Wilcox, 123 Ill. 2d at 72-73 Morales makes clear that the “relating to” language in section 1305(aXl) is as expansive in its scope as the identical language in ERISA. Several decisions rendered after Morales have applied that broad interpretation in cases against airlines. In Statland v. American Airlines (7th Cir. July 16, 1993), No. 92 — 2062, plaintiff bought a ticket which carried a 10% cancellation penalty. When she can-celled the ticket, American retained 10% of the tax she paid in addition to 10% of the ticket price. Plaintiff filed a class action suit that included four State-law claims alleging breach of fiduciary duty, violations of the Consumer Fraud Act, conversion and breach of contract, based upon the airline’s alleged wrongful retention of 10% of the tax she paid. The court found it “obvious [that] canceled ticket refunds relate to rates” (Statland, slip op. at 5), and that under Morales, plaintiff’s State statutory and common law claims were preempted by section 1305(aXl). In Schaeffer v. Delta Air Lines, Inc. (S.D. Cal. September 18, 1992), No. 92 — 1190—E(LSP), the plaintiff’s complaint alleged consumer fraud and breach of contract for the airline’s failure to disclose in mailings to and oral communications with frequent flyer program members an increase in mileage requirements necessary to obtain a free flight. The complaint was found to be legally and factually deficient. The court stated, however, that even if the pleading deficiencies could be corrected by amendment, the action could not be sustained under the broad definition ascribed to the phrase “relates to” in Morales. The court found that the allegations related to both the advertisements and services of an airlines, and thus were preempted under section 1305(aXl). In Vail v. Pan Am Corp. (1992), 260 N.J. Super. 292, 616 A.2d 523, plaintiffs brought an action alleging fraud, consumer fraud, and breach of contract, charging that the airline falsely advertised that it was initiating an enhanced security program and charged $5 per ticket to defray the costs of the program when, in fact, the airline did not provide any such program. The complaint sought, inter alia, a refund of the $5 surcharge. Plaintiff argued that her claims were merely traditional actions for fraud and breach of contract which could have only a remote effect upon the rates and services of the airline. The Vail court found the broad interpretation given to section 1305(aXl) by Morales was dispositive of plaintiff’s claims, reasoning that if plaintiff’s action were allowed, the State would be permitted to determine whether an airline’s advertising was false and deceptive and whether the services advertised were in fact provided, and to fashion remedies, including proscribing certain advertising and compelling the airline to repay the surcharge portion of the rate charged. The court determined that plaintiff’s claims related to the services and rates of the airline and were, therefore, preempted under section 1305(a)(1). See also Cannava v. USAIR, Inc. (D. Mass. January 7, 1993), No. 91 — 3003—F (passenger’s claims for intentional infliction of emotional distress, violations of State unfair practices statute and breach of an implied contractual obligation to provide courteous service were preempted under the interpretation ascribed to section 1305(aXl) in Morales). I do not agree with the majority that plaintiffs' claims bear only tangential, tenuous, or remote relation to American’s rates, routes, and services because they do not seek to establish rates, determine routes or dictate the services American must provide. Plaintiffs’ actions seek a State-court determination that American violated the Consumer Fraud Act through deceptive and unfair advertising and promotion of the AAdvantage program. Plaintiffs’ actions also seek a State-court adjudication that American has a contractual obligation to provide, and plaintiffs have an enforceable right to receive, either certain specific fares, flights and seats in exchange for earned mileage credits, or monetary compensation in lieu thereof. Under the rationale of Morales and its progeny, plaintiffs’ claims have a connection with and relation to American’s rates and services, and are preempted by section 1305(aXl) of the Deregulation Act. I further dissent from the majority’s statement that American’s alteration of the terms of the AAdvantage program “constituted a breach of contract which entitled plaintiffs to pursue an available remedy.” (157 Ill. 2d at 473.) This case is before us on the denial of American’s motion to dismiss. Thus, I believe that it is both premature and inappropriate to reach or address the merits of plaintiffs’ claims.