Court Opinion

ID: 4304465
Source: CourtListenerOpinion
Date Created: 2018-08-16 16:00:23.511856+00
Date Added: 2024-06-11T13:11:06.708702
License: Public Domain

United States Court of Appeals
                            For the Eighth Circuit
                        ___________________________

                                No. 17-2554
                        ___________________________

            James W. Ferrell, Individually and as Class Representative

                        lllllllllllllllllllllPlaintiff - Appellant

                                           v.

                                Air EVAC EMS, Inc.

                       lllllllllllllllllllllDefendant - Appellee
                                      ____________

                    Appeal from United States District Court
                 for the Eastern District of Arkansas - Pine Bluff
                                  ____________

                             Submitted: April 11, 2018
                              Filed: August 16, 2018
                                  ____________

Before SMITH, Chief Judge, WOLLMAN and LOKEN, Circuit Judges.
                             ____________

LOKEN, Circuit Judge.

       James Ferrell checked into the emergency room at a hospital in Warren,
Arkansas, experiencing chest pain. Staff arranged for Air EVAC EMS, Inc. (Air
EVAC), an air-ambulance operator, to transport him by helicopter to another hospital
forty-one miles away. A few months after the transport, Air EVAC sent Ferrell a bill
for $30,083.26. His insurer, Arkansas Blue Cross, paid $1000.00, leaving him owing
a balance of $29,083.26. Ferrell brought this putative class action against Air EVAC
asserting three claims for relief under Arkansas law: (i) a declaratory judgment that
any contract between Air EVAC and class members is unenforceable because it lacks
an essential price term; (ii) damages under the Arkansas Deceptive Trade Practices
Act for concealing or omitting disclosure of its price until it completes air-ambulance
transport; and (iii) a declaratory judgment that Air EVAC may not seek restitution
against class members because it lacks clean hands. Air EVAC removed the action
to the Eastern District of Arkansas and moved to dismiss. The district court1
dismissed all claims as preempted by the express preemption provision in the Airline
Deregulation Act (ADA), 49 U.S.C. § 41713(b)(1). We affirm on a narrower basis
than Air EVAC urges on appeal.

                          I. The Preemption Landscape.

       Before Congress enacted the ADA in 1978, the Federal Aviation Act (FAA)
authorized the Civil Aeronautics Board to regulate air carriers’ fares and trade
practices; a savings provision preserved preexisting statutory and common law
remedies. Morales v. Trans World Airlines, Inc., 504 U.S. 374, 378 (1992).
Congress shifted course in the ADA, seeking “to promote ‘efficiency, innovation, and
low prices’ in the airline industry through ‘maximum reliance on competitive market
forces and on actual and potential competition.’” Nw., Inc. v. Ginsberg, 134 S. Ct.
1422, 1428 (2014), quoting 49 U.S.C. §§ 40101(a)(6), 12(A). To this end, the ADA
included a broad preemption provision:

      Except as provided in this subsection, a State . . . may not enact or
      enforce a law, regulation, or other provision having the force and effect
      of law related to a price, route, or service of an air carrier that may
      provide air transportation under this subpart.

      1
       The Honorable D.P. Marshall Jr., United States District Judge for the Eastern
District of Arkansas.

                                         -2-
49 U.S.C. § 41713(b)(1). A primary purpose was to “ensure that the States would not
undo federal deregulation with regulation of their own.” Morales, 504 U.S. at 378.
In place of stifling federal and state price, route, and service regulation, Congress
granted the Department of Transportation (DOT) authority to police “unfair or
deceptive practice[s] or . . . unfair method[s] of competition,” 49 U.S.C. § 41712(a),
terms that have a long federal history in statutes such as Section 5 of the Federal
Trade Commission Act, 15 U.S.C. § 45.

       The Supreme Court has interpreted and applied the ADA’s preemption
provision in three cases. In Morales, commercial airlines sued to enjoin state
attorneys general from enforcing guidelines regulating airlines’ fare advertising. 504
U.S. at 379-80. The guidelines required “clear and conspicuous disclosure” of the
terms on which particular fares were offered. Analogizing the ADA preemption
provision to the “similarly worded” and “deliberately expansive” provision in the
Employee Retirement Income Security Act, the Court held that “[s]tate enforcement
actions having a connection with or reference to airline ‘rates, routes, or services’ are
preempted.” Id. at 383-84 (quotation omitted). The Court observed: “One cannot
avoid the conclusion that [the advertising restrictions in] the guidelines ‘relate to’
airline rates. . . . [B]eyond the guidelines’ express reference to fares, it is clear as an
economic matter that state restrictions on fare advertising have the forbidden
significant effect upon fares.” Id. at 388.

       In American Airlines, Inc. v. Wolens, 513 U.S. 219 (1995), participants in
American Airlines’ frequent flyer program brought a class action alleging that the
airline violated the Illinois Consumer Fraud and Deceptive Business Practices Act
and breached its contract with participants by modifying the program to devalue
mileage credits participants had accumulated. Id. at 224-25. Applying Morales, the
Court held that the ADA preempted plaintiffs’ claim under the Illinois consumer
fraud statute. “This Illinois law, in fact, is paradigmatic of the consumer protection
legislation underpinning the NAAG guidelines” at issue in Morales. Id. at 227.

                                           -3-
However, the Court concluded, the ADA’s preemption clause did not shelter
American Airlines from plaintiffs’ breach of contract claims:

      The ADA’s preemption clause . . . read together with the FAA’s saving
      clause, stops States from imposing their own substantive standards with
      respect to rates, routes, or services, but not from affording relief to a
      party who claims and proves that an airline dishonored a term the airline
      itself stipulated. This distinction between what the State dictates and
      what the airline itself undertakes confines courts, in breach-of-contract
      actions, to the parties’ bargain, with no enlargement or enhancement
      based on state laws or policies external to the agreement.
513 U.S. at 232-33. In explaining this exception to ADA preemption, the Court noted
that Congress did not authorize DOT to establish an administrative process for
adjudicating private contract disputes. “Nor is it plausible that Congress meant to
channel into federal courts the business of resolving, pursuant to judicially fashioned
federal common law, the range of contract claims relating to airline rates, routes, or
services.” Id. at 232.

       Most recently, in Ginsberg, class action plaintiffs alleged that Northwest
Airlines violated its duty of good faith and fair dealing when it revoked their
membership in its frequent flyer program. 134 S. Ct. at 1426-27. The Court held that
the preemption of “provision[s] having the force and effect of law” includes common
law rules when they embody, like statutes and regulations, “binding standards of
conduct that operate irrespective of any private agreement.” Id. at 1429, quoting 49
U.S.C. § 41713(b)(1) and Wolens, 513 U.S. at 229 n.5. Because plaintiffs’ claim
related to Northwest’s rates and services, the Court defined the “central issue” in the
case as being whether the “implied covenant claim is based on a state-imposed
obligation or simply one that the parties voluntarily undertook.” Id. at 1430-31. The
unanimous Court concluded that the implied covenant at issue reflected a state-
imposed obligation under Minnesota law and was therefore preempted. Id. at 1432-

                                         -4-
33. However, the Court noted, plaintiffs had voluntarily dismissed a separate breach
of contract claim after the district court ruled that Northwest had unfettered discretion
to terminate membership in its frequent flyer program. If plaintiffs had appealed that
ruling, an argument that the contract did not give Northwest unfettered discretion
would not have been preempted under Wolens. Id. at 1433.

                              II. The Claims at Issue.

       The district court dismissed Ferrell’s three claims, explaining that they not only
“relate to” an air carrier’s prices but are “in the heartland of price.” The court
concluded that the fairness of Ferrell’s transaction with Air EVAC and the
reasonableness of Air EVAC’s price are governed by federal law. We review de novo
whether the ADA expressly preempts these claims. See Watson v. Air Methods
Corp., 870 F.3d 812, 815 (8th Cir. 2017) (en banc). We base our analysis primarily
on the plain meaning of the statute defining “the ADA’s pre-emptive reach,” as
interpreted by the Supreme Court in Ginsberg, 134 S. Ct. at 1428, Morales, and
Wolens. As the Court did in those cases, we separately analyze each claim.

      A. In our view, preemption applies most obviously to Ferrell’s Second Cause
of Action, which alleges:

             38. Defendant’s concealment, suppression or omission of the
      price it will charge a patient until after the transport of the patient is
      done, as well as Defendant’s concealment, suppression or omission of
      what the patient’s health insurance will pay on Defendant’s air
      ambulance charges, or whether the patients will be subject to a balance
      billing over insurance, constitute violations of the Arkansas Deceptive
      Trade Practices Act, Ark. Code Ann. § 4-88-101, et seq., including,
      without limitation, Ark. Code Ann. §§ 4-88-107, -108.

This claim seeks to impose a state statutory price disclosure obligation beyond the
scope of any agreement Air EVAC had with Ferrell. It obviously relates to Air

                                          -5-
EVAC’s price and service. In both Morales and Wolens, the Supreme Court rejected
similar attempts to use state consumer protection laws to regulate air carrier prices
and services (noting in Morales that air carriers hardly have “carte blanche to lie to
and deceive consumers” given the DOT’s oversight authority). 504 U.S. at 387-88,
390-91; 513 U.S. at 227-28.

       Acknowledging that common law fraud and statutory consumer protection
claims were preempted in Morales and Wolens,2 Ferrell argues that these decisions
should not apply to the unique air-ambulance market. He asserts that, because air-
ambulance providers do not face meaningful price competition and patients often do
not control whether to be transported by an air ambulance, applying the ADA to these
fraud claims would entrench an anti-competitive market, not further the ADA’s
purpose of promoting efficiency and competition. But where a federal statute
contains an express preemption provision, we “focus on the plain wording of the
clause, which necessarily contains the best evidence of Congress’ pre-emptive
intent.” Puerto Rico v. Franklin Cal. Tax-Free Tr., 136 S. Ct. 1938, 1946 (2016)
(quotation omitted). Here, the ADA preempts state law “related to a price, route, or
service of an air carrier that may provide air transportation under this subpart.” 49
U.S.C. § 41713(b)(1). An air-ambulance operator such as Air EVAC is an “air
carrier.” See 49 U.S.C. § 40102(a)(2); Watson, 870 F.3d at 814; Schneberger v. Air
EVAC EMS, Inc., No. Civ-16-843-R, 2017 WL 1026012, at *2 & n.3 (W.D. Okla.
Mar. 15, 2017) (collecting authorities).

      “[W]hen the statute’s language is plain, our inquiry into preemption both
begins and ends with the language of the statute itself.” EagleMed LLC v. Cox, 868
F.3d 893, 903 (10th Cir. 2017). We may not refuse to apply ADA preemption merely

      2
       Both the expressly pleaded Arkansas Deceptive Trade Practices Act claim and
a common law fraud claim Ferrell presses on appeal seek damages for an alleged
breach of Air EVAC’s duty to disclose its prices. Both are preempted. See Musson
Theatrical, Inc. v. Fed. Express Corp., 89 F.3d 1244, 1251 (6th Cir. 1996).

                                         -6-
because we do not believe it would be sound public policy to enforce the statute
Congress enacted. Ferrell’s Second Cause of Action is preempted.

      B. For similar reasons, we conclude the ADA preempts Ferrell’s Third Cause
of Action, which alleges:

             41. Since Defendant attempts to gouge patients with its
      exorbitant charges through concealment, suppression and omission of
      information about those charges from the patients until after they have
      been transported, Defendant does not have the good faith, clean hands,
      and reasonable terms necessary to be eligible for relief under implied
      contract, unjust enrichment, quantum meruit, or other restitutionary
      remedy, and this Court should so declare pursuant to the Arkansas
      Declaratory Judgment Act, Ark. Code Ann. § 16-111-101, et seq., and
      other applicable law.

       In Ginsberg, the Supreme Court held that state common law doctrines such as
good faith that relate to air carrier prices, routes, or services are preempted when they
are employed “to ensure that a party does not violate community standards of
decency, fairness, or reasonableness.” 134 S. Ct. at 1431 (quotation omitted).
Determining whether Air EVAC lacks the “clean hands” necessary to obtain equitable
relief such as restitution under Arkansas law because it “attempts to gouge patients
with its exorbitant charges” would require determining whether Air EVAC’s pricing
practices are “unconscientious or unjust.” Merchs. & Planters Bank & Tr. Co. v.
Massey, 790 S.W.2d 889, 891 (Ark. 1990). It is hard to imagine a state law claim
more at odds with the congressional intent “[t]o ensure that the States would not undo
federal deregulation with regulation of their own.” Morales, 504 U.S. at 378.
Ferrell’s Third Cause of Action, as pleaded, is preempted.

                                          -7-
       C. Ferrell’s First Cause of Action presents the most interesting preemption
issue. After setting forth factual background and class allegations in great detail, the
First Cause of Action alleges:

              29. Because Defendant does not supply pricing information for
      its air ambulance transport services to Plaintiff . . . before providing
      those services, any agreement or contract to pay for such transport is not
      valid or enforceable for want of the essential contract term of price, and
      this Court should so declare pursuant to the Arkansas Declaratory
      Judgment Act, Ark. Code Ann. § 16-111-101, et seq., and other
      applicable law.

             30. Further, Plaintiff . . . had no agreement with Defendant as to
      the price to be charged . . . [nor] any agreement providing a mechanism
      for objectively determining the price to be charged . . . [so] there can be
      no valid contract upon which Defendant might hold Plaintiff . . . liable
      for Defendant’s after-the-fact egregious charges . . . .

In support of its motion to dismiss, Air EVAC submitted an Ambulance Billing
Authorization Form dated November 14, the day Ferrell was provided air-ambulance
transport services, and purporting to be signed by Ferrell and a witness. The Form
recites that the patient acknowledges the services “was [sic] actually received,”
authorizes the services “as being medically necessary,” assigns to Air EVAC any
third party payments for the services, and “agrees that the patient is financially
responsible for, and obligated to pay, the amount charged by [Air EVAC] for the
medical services, including any amount that is not paid by any third-party payor.”3

      3
       We may consider the Form at the 12(b)(6) stage because it is “necessarily
embraced” by Ferrell’s complaint, which denies the existence of an enforceable
contract. See Enervations, Inc. v. Minn. Mining & Mfg. Co., 380 F.3d 1066, 1069
(8th Cir. 2004) (quotation omitted). However, we do not address whether the Form
constitutes a contract enforceable by Air EVAC against Ferrell.

                                          -8-
       Ferrell seeks a declaration that no express or implied contract came into effect
because there was no mutual assent on “the amount of the price.” He rejects the price
term set forth in the Authorization Form -- that he will pay what Air EVAC charges --
because it does not state the price or provide an objective pricing mechanism. He
argues the First Cause of Action falls within the preemption exception recognized in
Wolens because it relies on a basic principle of contract law -- there must be a
meeting of the minds on all essential terms for a contract to be enforceable. Air
EVAC responds that the Wolens exception “saves only contract-law rules aimed at
discerning and enforcing the parties’ bargain.” But Air EVAC acknowledges that
“courts have recognized that it is proper to apply ordinary principles of contract law
to ascertain whether there was a binding agreement between the parties,” citing Lyn-
Lea Travel Corp. v. American Airlines, Inc., 283 F.3d 282, 289-90 (5th Cir.), cert.
denied, 537 U.S. 1044 (2002).

        It is well settled in Arkansas that an indefinite price term or even no price term
does not necessarily render a contract unenforceable. See, e.g., Central Ark. Milk
Producers Ass’n v. Smith, 335 S.W.2d 289, 290-91 (Ark. 1960). Although dressed
in the language of contracts, Ferrell’s First Cause of Action, as pleaded, asserts that,
under Arkansas law, air-ambulance operators have no enforceable contract unless
they disclose the actual price they will charge before transporting a patient, or the
precise formula that will be used to determine that price. This is asserted on a class-
wide basis, independent of the relationship between an air-ambulance operator and
a particular patient. This is not a contract-based claim. Like the preempted fraud
claims in the Second Cause of Action, this claim asserts a price-disclosure rule under
Arkansas law that would apply uniquely and across-the-board to the providers of air-
ambulance services operating as federally regulated air carriers. The rule would
impose a common-law standard of conduct from which Air EVAC may not free itself.
It is therefore a preempted state-imposed obligation. See Ginsberg, 134 S. Ct. at
1432.

                                           -9-
       For these reasons, we conclude that Ferrell’s declaratory judgment claims, like
his fraud claims, are ADA-preempted. A judgment declaring that Air EVAC has no
claim for breach of contract, and no right to recover for services it actually provided
under any equitable theory, because it did not disclose its pricing term before
providing the services, is clearly preempted under the ADA’s express preemption
provision as construed in Morales, Wolens, and Ginsberg.

       Ferrell’s reply brief posits that, if his claims are held to be ADA-preempted, the
price for air-ambulance services will be set unilaterally by the air-ambulance provider
because the DOT does not provide patients an administrative remedy. But this
assumes that, if Ferrell’s across-the-board class action claims are preempted, then Air
EVAC is entitled to recover, as it has argued, the price stated in its Billing
Authorization Form -- “the amount charged” -- free of contract law defenses or
interference. Both Ferrell’s assumption and Air EVAC’s assertion are unsound.
Recall that, in Wolens, the Supreme Court in explaining the contract-based exception
to ADA preemption stated that the ADA did not authorize DOT to adjudicate private
contract disputes, and did not “channel into federal courts the business of resolving,
pursuant to judicially fashioned federal common law, the range of contract claims
relating to airline rates, routes or services.” 513 U.S. at 232. So the question
becomes, in this federally deregulated market, what right does Air EVAC have to
recover payment for services provided to a patient who refuses to pay?

       Three circuit court opinions shed important light on this question. In Data
Manufacturing, Inc. v. United Parcel Service, Inc., 557 F.3d 849, 851 (8th Cir. 2009),
we applied the nearly identical preemption provision in the Federal Aviation
Administration Authorization Act to a claim that UPS had wrongfully assessed a
recurring charge on DMI’s shipment invoices over an extended period. But we
partially reversed the dismissal of the plaintiff’s complaint as entirely preempted:
“DMI cannot argue that the fee is too unconscionably high, a penalty, or void, but it
can proceed with its claim that it did not agree to the fee at all.” Id. at 854 n.3. In

                                          -10-
Lyn-Lea Travel Corp., after American Airlines announced a policy that significantly
reduced commissions paid to travel agencies, the plaintiff travel agency refused to
pay American amounts due under a computer lease agreement and sued American
asserting various claims. American asserted a breach of contract counterclaim to
recover the unpaid lease payments; plaintiff asserted a fraudulent-inducement
defense. 283 F.3d at 284-285. The Fifth Circuit held the defense was not ADA-
preempted:

      When pleaded as a defense to a contract, fraudulent inducement is
      related to the fundamental issue in contract actions: is there an
      enforceable agreement? A fraudulently induced party has not assented
      to an agreement because the fraudulent conduct precludes the requisite
      mutual assent. . . . The Court reasoned in Wolens that because contract
      law is, at its “core,” uniform and non-diverse, there is little risk of
      inconsistent state adjudication of contractual obligations. Fraudulent
      inducement is among those core concepts as it relates to the validity of
      mutual assent. The defense does not reflect a state policy seeking to
      expand or enlarge the parties’ agreement.

Id. at 289-90 (citations omitted). Similarly, in United Airlines, Inc. v. Mesa Airlines,
Inc., the Seventh Circuit ruled: “public bodies must enforce rules against force and
fraud. When all a state does is use these rules to determine whether agreement was
reached, or whether instead one party acted under duress, it transgresses no federal
rule.” 219 F.3d 605, 609-10 (7th Cir.), cert. denied, 531 U.S. 1036 (2000).

       If Ferrell does not pay the amount charged, Air EVAC obviously can bring a
breach of contract claim to recover that amount. See Bailey v. Rocky Mountain
Holdings, LLC, 889 F.3d 1259, 1268 (11th Cir. 2018). Ferrell can assert in defense
that he did not agree to pay that amount, and no enforceable contract was breached.
If that defense prevails, Air EVAC can assert an equitable claim to recover for the
services it provided. If there is no contract, the common law typically provides that
a provider may recover the fair value or reasonable value of the services provided.

                                         -11-
What law applies in resolving these issues? No federal or unpreempted state law
authorizes an agency to determine Air EVAC’s “just and reasonable” rates. Federal
law may apply to the contract action, but Wolens declared that federal common law
will not decide what is a reasonable charge for air-ambulance services. Absent
further federal legislation, it seems obvious that a state or federal court asked to
determine these contract and restitution issues will necessarily look to governing
principles of state law. This is not contrary to the marketplace principles adopted in
the ADA. It is the way disputes between private contracting parties are decided in a
deregulated marketplace. Thus, the determination that Ferrell’s class action
declaratory judgment claims are preempted as pleaded does not leave air-ambulance
patients without potential, unpreempted judicial remedies under Wolens and
Ginsberg.

      The judgment of the district court is affirmed.
                    ______________________________

                                        -12-