Court Opinion

ID: 175464
Source: CourtListenerOpinion
Date Created: 2010-09-16 22:12:57+00
Date Added: 2024-06-11T17:25:35.158494
License: Public Domain

FILED
                             NOT FOR PUBLICATION                            SEP 16 2010

                                                                        MOLLY C. DWYER, CLERK
                      UNITED STATES COURT OF APPEALS                     U .S. C O U R T OF APPE ALS

                             FOR THE NINTH CIRCUIT

ALASKA AIRLINES INC.,                            No. 09-35979

       Plaintiff/Counter-defendant/Appellee,     D.C. No. 3:07-cv-05711-RBL

  v.
                                                 MEMORANDUM *
BRADLEY CAREY; et al.,

 Defendants/Counter-plaintiffs/Cross-
plaintiffs/Appellants,

  v.

KYLE LEVINE; et al.,

  Cross-defendants/Appellees.

                     Appeal from the United States District Court
                       for the Western District of Washington
                     Ronald B. Leighton, District Judge, Presiding

                        Argued and Submitted August 31, 2010
                                 Seattle, Washington

Before: HAWKINS, McKEOWN and BEA, Circuit Judges.

          *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
      Bradley and Celeste Carey and their travel agency, Carey Travel,

(collectively “Carey”) appeal a final judgment, which (1) granted Alaska Airlines’s

motions for summary judgment and to dismiss portions of Carey’s counterclaim;

(2) denied Carey’s counter-motions to dismiss and for summary judgment; and

(3) permanently enjoined Carey from purchasing, selling, bartering or brokering

frequent flyer miles on Alaska Airlines and its partner airlines. The district court

did not award damages. We have jurisdiction pursuant to 28 U.S.C. §§ 1291,

1292(a)(1), and we affirm.

      We review the district court’s orders de novo. See Kahle v. Gonzales, 487
F.3d 697, 699 (9th Cir. 2007) (standard of review for motion to dismiss);

Continental Airlines, Inc. v. Intra Brokers, Inc., 24 F.3d 1099, 1102 (9th Cir. 1994)

(standard of review for motion for summary judgment and permanent injunction).1

      Like virtually all airlines, Alaska Airlines has a “frequent flyer” program.

Members of the program may use their accumulated miles to obtain free air travel

tickets on Alaska Airlines or one of its partner airlines. One of the conditions of

the program is that members may not sell, purchase or barter miles, other than as

      1
        Because the parties are familiar with the facts and claims involved in this
case, we recite them only as necessary to our disposition.

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allowed under the program. All tickets obtained in violation of the program are

void.

        Alaska Airlines filed this action seeking to enjoin Carey from violating the

terms and conditions of its frequent flyer program. It alleged causes of action, for

computer fraud in violation of 18 U.S.C. § 1030, and state law pendent claims of

common law fraud, violations of the Washington Consumer Protection Act,

tortious interference with contractual and business expectancy relations, unjust

enrichment, aiding and abetting fraud, and breach of contract.

        All allegations were based on Alaska’s contention that Carey was buying

and selling its miles on an illegitimate black market, in violation of its Mileage

Plan. It originally sought damages and a permanent injunction, but then dropped

its request for damages. Carey filed a countersuit against Alaska Airlines and filed

a cross-complaint against Alaska Airlines’s employees Ann Ardizzone (Managing

Director for Customer Experience and Vice President, Inflight Services) and Kyle

Levine (In-House Counsel), and Points International, Inc. (the only authorized

dealer of Alaska Airlines’s mileage points), alleging a number of antitrust and state

law counterclaims.

        Carey admitted all facts necessary for the district court to grant Alaska

Airlines’s motions to dismiss and for summary judgment, including the computer

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fraud claim under 18 U.S.C. § 1030. Carey’s defense and his own allegations

center around his contention that Alaska Airlines’s frequent flyer program

restrictions are not valid.

       The district court correctly granted Alaska Airlines’s motion to dismiss

Carey’s state law claims and denied Carey’s counter-motion to dismiss Alaska

Airlines’s state law claims. Alaska Airlines’s state law claims were brought to

enforce its contractual rights under its Mileage Plan.

       Carey’s state law claims were brought in an effort to invalidate Alaska

Airlines’s Mileage Plan because it allows Alaska Airlines unilaterally to change

the terms of the contract. These claims are pre-empted by the Airline Deregulation

Act of 1978 (ADA). 49 U.S.C. §§ 41712(a), 41713(b)(1); Am. Airlines v. Wolens,

513 U.S. 219, 228 (1995) (holding that state law claims seeking to invalidate an

airline’s frequent flyer program would frustrate the purpose of the Airline

Deregulation Act and were thus preempted).

       Alaska Airlines’s breach of contract and fraud claims against Carey,

however, do not affect the validity of the mileage program and would not frustrate

the purpose of the Airline Deregulation Act. Thus, they are not preempted. Id.

       Carey’s antitrust claims fail because he is buying and selling in a “black

market” of frequent flyer miles, which is not a valid market for purposes of

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antitrust law. See TransWorld Airlines v. Am. Coupon Exch., Inc., 682 F. Supp.
1476, 1487 (C.D. Cal. 1988), rev’d in part on other grounds, 913 F.2d 676 (9th

Cir. 1990).

      Alaska Airlines’s complaint, filed on December 27, 2007, raised allegations

that were not time barred. Wash. Rev. Code § 4.16.080(4) (three year statute of

limitations tort claims, including fraud); § 19.86.120 (four year statute of

limitations for Consumer Protection Act claims). Carey was committing

continuing torts, right through this litigation.

      Under the so-called “stowaway” theory of damages, Alaska Airlines suffered

damages each time Carey redeemed a free ticket for someone other than the

traveler who earned the miles. Bitterman v. Louisville & Nashville R.R., 207 U.S.
205, 221 (1907). Had the person traveling not used the free ticket, he would have

needed to buy a ticket from Alaska Airlines, which consequently lost the sales

revenue of that ticket. Id.; Continental Airlines, 24 F.3d at 1104–05 (holding

Continental was entitled to enforce the “no sale” provision of its discount coupons

for the same reason).

      In Continental, Intra Brokers sold vouchers for discounted airfare on

Continental Airlines despite the vouchers’s condition that they could not be

“bartered, sold or redeemed for cash.” Id. at 1100 (internal quotation marks

                                            5
omitted). We affirmed the district court’s grant of summary judgment for

Continental and the permanent injunction. In doing so, we held Continental had

the right to restrict the transferability of its discount coupons:

         [Continental] is entitled to make its own decisions about whether to give out
         discount coupons, and whether to make them transferable or nontransferable.
         Neither Intra nor the courts are entitled to substitute their business judgment
         for Continental’s, under TransWorld and Bitterman. . . . There is certain
         harm to Continental’s control of its own business, even though the harm to
         its profitability is unproven or perhaps immeasurable.

Id. at 1105.

         We also held an airline is entitled under the law to control the distribution of

its own products. TransWorld Airlines, 682 F. Supp. at 1487 (“Manufacturers are

given wide latitude in establishing a manner of distribution and in choosing their

distributors.”). Its use of Points International to distribute its miles does not

infringe antitrust law. Id. Further, Alaska Airlines’s unilateral right to modify the

terms of the Mileage Plan do not make the plan an illusory contract. Cascade Auto

Glass, Inc. v. Progressive Cas. Ins. Co., 145 P.3d 1254, 1257 (Wash. Ct. App.

2006).

         We do not consider arguments raised for the first time on appeal, such as

Defendant Celeste Carey’s contention that she should be dismissed from the case

                                             6
because of her limited connection to the travel agency’s actions.

AmerisourceBergen, Corp. v. Roden, 495 F.3d 1143, 1157 n.15 (9th Cir. 2007).

      All other issues raised on appeal are denied.

      AFFIRMED.

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