OCTOBER TERM, 1994
Syllabus
AMERICAN AIRLINES, INC.
v. WOLENS ET AL.
CERTIORARI TO THE SUPREME COURT OF ILLINOIS
No. 93-1286. Argued November 1, 1994-Decided January 18,
1995
In consolidated state-court class actions brought in Illinois,
plaintiffs (respondents here), as participants in American
Airlines' frequent flyer program, challenged American's retroactive
changes in program terms and conditions-particularly, American's
imposition of capacity controls (limits on seats available to
passengers obtaining tickets with frequent flyer credits) and
blackout dates (restrictions on dates such credits could be used).
Plaintiffs alleged that application of these changes to mileage
credits they had previously accumulated violated the Illinois
Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud
Act or Act) and constituted a breach of contract. American answered
that the Airline Deregulation Act of 1978 (ADA), 49 U. S. C. App. §
1305(a)(1), preempted plaintiffs' claims. The ADA prohibits States
from "enact[ing] or enforc[ing] any law ... or other provision
having the force and effect of law relating to [air carrier] rates,
routes, or services."
While the Illinois class-action litigation was
sub
judice, this Court decided
Morales v.
Trans World
Airlines, Inc., 504 U. S. 374.
Morales defined § 1305(a)(1)'s "relating to" language to
mean "having a connection with, or reference to, airline 'rates,
routes, or services,'"
id., at 384, and held that National
Association of Attorneys General (NAAG) guidelines on airline fare
advertising were preempted under that definition. The Illinois
Supreme Court,
post-Morales, ruled that plaintiffs' monetary
claims survived for state-court adjudication. Those claims related
only "tangential[ly]" or "tenuous[ly]" to "rates, routes, or
services," the Illinois court reasoned, because frequent flyer
programs are "peripheral," not "essential," to an airline's
operation.
Held: The ADA's preemption prescription bars
state-imposed regulation of air carriers, but allows room for court
enforcement of contract terms set by the parties themselves. Pp.
226-235.
(a)
Morales does not countenance the Illinois Supreme
Court's separation of "essential" operations from unessential
programs. Plaintiffs' complaints, accordingly, state claims
"relating to" air carrier "rates" (i.
e., American's
charges, in the form of mileage credits, for tickets and
class-of-service upgrades) and "services" (i.
e., access to
flights and upgrades unlimited by retrospectively applied capacity
controls and blackout dates). P. 226.
220
Syllabus
(b) The full text of the ADA's preemption clause, and the
congressional purpose to leave largely to the airlines themselves,
and not at all to States, the selection and design of marketing
mechanisms appropriate to the furnishing of air transportation
services, impel the conclusion that § 1305(a)(1) preempts
plaintiffs' Consumer Fraud Act claims. The Illinois Act is
prescriptive, controlling the primary conduct of those falling
within its governance; the Act, indeed, is paradigmatic of the
state consumer protection laws that underpin the NAAG guidelines.
Those guidelines highlight the potential for intrusive regulation
of airline business practices inherent in state consumer protection
legislation. The guidelines illustrate that the Illinois Act does
not simply give effect to bargains offered by the airlines and
accepted by customers, but serves as a means to guide and police
airline marketing practices. Pp. 227-228.
(c) The ADA, however, does not bar court adjudication of routine
breach-of-contract claims. The preemption clause leaves room for
suits alleging no violation of state-imposed obligations, but
seeking recovery solely for the airline's breach of its own,
self-imposed undertakings. As persuasively argued by the United
States, terms and conditions airlines offer and passengers accept
are privately ordered obligations and thus do not fit within the
compass of state enactments and directives targeted by §
1305(a)(1). A remedy confined to a contract's terms simply holds
parties to their agreements-in this instance, to business judgments
an airline made public about its rates and services. Court
enforcement of private agreements advances the market efficiency
that the ADA was designed to promote, and comports with provisions
of the Federal Aviation Act of 1958 (FAA) and related Department of
Transportation (DOT) regulations that presuppose the vitality of
contracts governing air carrier transportation. Such enforcement is
responsive to the reality that the DOT lacks the apparatus and
resources required to superintend a contract dispute resolution
regime. Court adjudication of routine breach-of-contract claims,
furthermore, accords due recognition to Congress' retention of the
FAA's saving clause, which preserves "the remedies now existing at
common law or by statute." Nor can it be maintained that
plaintiffs' breach-of-contract claims are identical to, and
therefore should be preempted to the same extent as, their Consumer
Fraud Act claims. The basis for a contract action is the parties'
agreement; to succeed under the state Act, one need not show an
agreement, but must show an unfair or deceptive practice. pp.
228-233.
(d) American's argument that plaintiffs' claims must fail
because they depend on state policies independent of the parties'
intent assumes the answer to the very contract construction issue
on which plaintiffs' claims turn: Did American, by contract,
reserve the right to change the
221
value of already accumulated mileage credits, or only to change
the rules for credits earned from and after the date of the change?
That pivotal question of contract interpretation has not yet had a
full airing and remains open for adjudication on remand. Pp.
233-234.
157 Ill. 2d 466, 626 N. E. 2d 205, affirmed in part, reversed in
part, and remanded.
GINSBURG, J., delivered the opinion of the Court, in which
REHNQUIST, C. J., and KENNEDY, SOUTER, and BREYER, JJ., joined, and
in which STEVENS, J., joined as to Parts I (except for the last
paragraph) and II-B. STEVENS, J., filed an opinion concurring in
part and dissenting in part,
post, p. 235. O'CONNOR, J.,
filed an opinion concurring in the judgment in part and dissenting
in part, in which THOMAS, J., joined except for Part I-B,
post, p. 238. SCALIA, J., took no part in the decision of
the case.
Bruce
J. Ennis, Jr., argued the cause for petitioner.
With him on the briefs were Jerold S. Solovy, Marguerite M.
Tompkins, Donald B. Verrilli, Jr., Richard A. Rothman, Bonnie
Garone, and Michael
J. Rider.
Gilbert W Gordon argued the cause for respondents.
With him on the brief were Robert Marks, Michael
J.
Freed, Michael B. Hyman, Nicholas E. Chimicles, Ira Neil Richards,
and Steven A. Schwartz.
Cornelia T. L. Pillard argued the cause for the United States as
amicus curiae urging reversal. With her on the brief were Solicitor
General Days, Assistant Attorney General Hunger, Deputy Solicitor
General Kneedler, Robert v:
Zener, Jonathan R. Siegel, and Paul M. Geier.
*
JUSTICE GINSBURG delivered the opinion of the Court. The Airline
Deregulation Act of 1978 prohibits States from "enact[ing] or
enforc[ing] any law ... relating to
*Briefs of amici curiae urging reversal were filed for the
Chamber of Commerce of the United States of America by Kenneth B.
Alexander and Stephen A. Bokat; for the Air Transport Association
of America by John G. Roberts, Jr., Walter A. Smith, Jr., Mary E.
Downs, John R. Keys, Jr., and Calvin P. Sawyier; and for United Air
Lines, Inc., by Kenneth W Starr, Paul T. Cappuccio, and
J.
Andrew Langan.
222
[air carrier] rates, routes, or services." 49 U. S. C. App. §
1305(a)(1). This case concerns the scope of that preemptive
provision, specifically, its application to a state-court suit,
brought by participants in an airline's frequent flyer program,
challenging the airline's retroactive changes in terms and
conditions of the program. We hold that the ADA's preemption
prescription bars state-imposed regulation of air carriers, but
allows room for court enforcement of contract terms set by the
parties themselves.
I A
Until 1978, the Federal Aviation Act of 1958 (FAA), 72 Stat.
731, as amended, 49 U. S. C. App. § 1301
et seq. (1988 ed.
and Supp. V), empowered the Civil Aeronautics Board (CAB) to
regulate the interstate airline industry. Although the FAA,
pre-1978, authorized the Board both to regulate fares and to take
administrative action against deceptive trade practices, the
federal legislation originally contained no clause preempting state
regulation. And from the start, the FAA has contained a "saving
clause," § 1106, 49 U. S. C. App. § 1506, stating: "Nothing ... 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."
In 1978, Congress enacted the Airline Deregulation Act (ADA), 92
Stat. 1705, which largely deregulated domestic air transport. "To
ensure that the States would not undo federal deregulation with
regulation of their own,"
Morales v.
Trans World
Airlines, Inc., 504 U. S. 374, 378
(1992), the ADA included a preemption clause which read in relevant
part:
"[N]o State ... shall enact or enforce any law, rule,
regulation, standard, or other provision having the force
223
and effect of law relating to rates, routes, or services of any
air carrier .... " 49 U. S. C. App. § 1305(a)(1).1
This case is our second encounter with the ADA's preemption
clause. In 1992, in
Morales, we confronted detailed Travel
Industry Enforcement Guidelines, composed by the National
Association of Attorneys General (NAAG). The NAAG guidelines
purported to govern,
inter alia, the content and format of
airline fare advertising. See
Morales, 504 U. S., at 393-418
(appendix to Court's opinion setting out NAAG guidelines on air
travel industry advertising and marketing practices). Several
States had endeavored to enforce the N AAG guidelines, under the
States' general consumer protection laws, to stop allegedly
deceptive airline advertisements. The States' initiative, we
determined, " 'relat[ed] to [airline] rates, routes, or services,'"
id., at 378379 (quoting 49 U. S. C. App. § 1305(a)(1));
consequently, we held, the fare advertising provisions of the NAAG
guidelines were preempted by the ADA,
id., at 391.
For aid in construing the ADA words "relating to rates, routes,
or services of any air carrier," the Court in
Morales
referred to the Employee Retirement Income Security Act of 1974
(ERISA), which provides for preemption of state laws "insofar as
they ... relate to any employee benefit plan." 29 U. S. C. §
1144(a). Under the ERISA, we had ruled, a state law "relates to" an
employee benefit plan "if it has a connection with or reference to
such a plan."
Shaw v.
Delta Air Lines, Inc., 463 U. S. 85, 97 (1983).
Morales analogously defined the "relating to" language in
the ADA preemption clause as "having a connection with, or
reference to, airline 'rates, routes, or services.'"
Morales, 504 U. S., at 384.
1 Reenacting Title 49 of the U. S. Code in 1994, Congress
revised this clause to read:
"[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 .... " §41713(b)(1).
Congress intended the revision to make no substantive change. Pub.
L. 103-272, § l(a), 108 Stat. 745.
224
The
Morales opinion presented much more, however, in
accounting for the ADA's preemption of the state regulation in
question. The opinion pointed out that the concerned federal
agencies-the Department of Transportation (DOT) 2 and the Federal
Trade Commission (FTC)-objected to the N AAG fare advertising
guidelines as inconsistent with the ADA's deregulatory purpose;
both agencies,
Morales observed, regarded the guidelines as
state regulatory measures preempted by the ADA. See
id., at
379 (DOT and FTC);
id., at 386 (DOT);
id., at 390
(FTC).
Morales emphasized that the challenged guidelines set
"binding requirements as to how airline tickets may be marketed,"
and "imposed [obligations that] would have a significant impact
upon ... the fares [airlines] charge."
Id., at 388, 390. The
opinion further noted that the airlines would not have
"carte
blanche to lie and deceive consumers," for "the DOT retains the
power to prohibit advertisements which in its opinion do not
further competitive pricing."
Id., at 390-391.
Morales also left room for state actions "too tenuous,
remote, or peripheral ... to have pre-emptive effect."
Id.,
at 390 (internal quotation marks omitted).
B
The litigation now before us, two consolidated state-court class
actions brought in Illinois, was
sub judice when we decided
Morales. Plaintiffs in both actions (respondents here) are
participants in American Airlines' frequent flyer program,
AAdvantage. AAdvantage enrollees earn mileage credits when they fly
on American. They can exchange those credits for flight tickets or
class-of-service upgrades. Plaintiffs complained that AAdvantage
program modifications, instituted by American in 1988, devalued
credits AAd-
2 Deceptive trade practices regulatory authority formerly
residing in the CAB was transferred to the DOT when the CAB was
abolished in 1985. Civil Aeronautics Board Sunset Act of 1984, Pub.
L. 98-443, § 3, 98 Stat. 1703; 49 U. S. C. App. § 1551.
225
vantage members had already earned. Plaintiffs featured
American's imposition of capacity controls (limits on seats
available to passengers obtaining tickets with AAdvantage credits)
and blackout dates (restrictions on dates credits could be used).
Conceding that American had reserved the right to change AAdvantage
terms and conditions, plaintiffs challenged only the retroactive
application of modifications, i.
e., cutbacks on the utility
of credits previously accumulated. These cutbacks, plaintiffs
maintained, violated the Illinois Consumer Fraud and Deceptive
Business Practices Act (Consumer Fraud Act or Act), 815 Ill. Compo
Stat. § 505 (1992) (formerly codified at Ill. Rev. Stat., ch.
1211/2, , 261
et seq. (1991)), and constituted a breach of
contract. Plaintiffs currently seek only monetary relief.3
In March 1992, several weeks before our decision in
Morales, the Illinois Supreme Court rejected plaintiffs'
prayer for an injunction. Such a decree, the Illinois court
reasoned, would involve regulation of an airline's current
rendition of services, a matter preempted by the ADA. That court,
however, allowed the breach-of-contract and Consumer Fraud Act
monetary relief claims to survive. The ADA's preemption clause, the
Illinois court said, ruled out "only those State laws and
regulations that specifically relate to and have more than a
tangential connection with an airline's rates, routes or services."
American Airlines, Inc. v.
Wolens, 147 Ill. 2d 367,
373, 589 N. E. 2d 533, 536 (1992). After our decision in
Morales, American petitioned for certiorari. The airline
charged that the Illinois court, in a decision out of sync with
Morales, had narrowly construed the ADA's broadly preemptive
§ 1305(a)(1). We granted the petition,
3 Plaintiffs no longer pursue requests they originally made for
injunctive relief, or for punitive damages for alleged breach of
contract. See Brief for Respondents 2, n. 2 (plaintiffs do not here
contest holding of Illinois courts that injunctive relief is
preempted);
id., at 6, n. 9 (plaintiffs "concede that
punitive damages traditionally have not been recoverable for a
simple breach of contract").
226
vacated the judgment of the Supreme Court of Illinois, and
remanded for further consideration in light of
Morales. American
Airlines, Inc. v.
Wolens, 506 U. S. 803 (1992).
On remand, the Illinois Supreme Court, with one dissent, adhered
to its prior judgment. Describing frequent flyer programs as not
"essential," 157 Ill. 2d 466, 472, 626 N. E. 2d 205, 208 (1993),
but merely "peripheral to the operation of an airline,"
ibid., the Illinois court typed plaintiffs' state-law claims
for money damages as "relat[ed] to American's rates, routes, and
services" only "tangential[ly]" or "tenuous[ly],"
ibid.
We granted American's second petition for certiorari, 511 U. S.
1017 (1994), and we now reverse the Illinois Supreme Court's
judgment to the extent that it allowed survival of plaintiffs'
Consumer Fraud Act claims; we affirm that judgment, however, to the
extent that it permits plaintiffs' breach-of-contract action to
proceed. In both respects, we adopt the position of the DOT, as
advanced in this Court by the United States.
II
We need not dwell on the question whether plaintiffs' complaints
state claims "relating to [air carrier] rates, routes, or
services."
Morales, we are satisfied, does not countenance
the Illinois Supreme Court's separation of matters "essential" from
matters unessential to airline operations. Plaintiffs' claims
relate to "rates," i.
e., American's charges in the form of
mileage credits for free tickets and upgrades, and to "services,"
i.
e., access to flights and class-of-service upgrades
unlimited by retrospectively applied capacity controls and blackout
dates. But the ADA's preemption clause contains other words in need
of interpretation, specifically, the words "enact or enforce any
law" in the instruction: "[N]o State ... shall enact or enforce any
law ... relating to [air carrier] rates, routes, or services." 49
U. S. C. App. § 1305(a)(1). Taking into account all the words
Congress placed in § 1305(a)(1), we first consider whether
plaintiffs'
227
claims under the Consumer Fraud Act are preempted, and then turn
to plaintiffs' breach-of-contract claims.
A
The Consumer Fraud Act declares unlawful
"[u]nfair methods of competition and unfair or deceptive acts or
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, or the
use or employment of any practice described in Section 2 of the
'Uniform Deceptive Trade Practices Act' ... in the conduct of any
trade or commerce ... whether any person has in fact been misled,
deceived or damaged thereby." Ill. Compo Stat., ch. 815, § 505/2
(1992) (formerly codified at Ill. Rev. Stat., ch. 1211/2, , 262
(1991)).
The Act is prescriptive; it controls the primary conduct of
those falling within its governance. This Illinois law, in fact, is
paradigmatic of the consumer protection legislation underpinning
the NAAG guidelines. The NAAG Task Force on the Air Travel
Industry, on which the Attorneys General of California, Illinois,
Texas, and Washington served, see
Morales, 504 U. S., at
392, reported that the guidelines created no
"new laws or regulations regarding the advertising practices or
other business practices of the airline industry. They merely
explain in detail how existing state laws apply to air fare
advertising and frequent flyer programs." Ibid.
The NAAG guidelines highlight the potential for intrusive
regulation of airline business practices inherent in state consumer
protection legislation typified by the Con-
228
sumer Fraud Act. For example, the guidelines enforcing the
legislation instruct airlines on language appropriate to reserve
rights to alter frequent flyer programs, and they include
transition rules for the fair institution of capacity controls. See
Brief for United States as
Amicus Curiae 13-14, n. 7.
As the NAAG guidelines illustrate, the Consumer Fraud Act serves
as a means to guide and police the marketing practices of the
airlines; the Act does not simply give effect to bargains offered
by the airlines and accepted by airline customers. In light of the
full text of the preemption clause, and of the ADA's purpose to
leave largely to the airlines themselves, and not at all to States,
the selection and design of marketing mechanisms appropriate to the
furnishing of air transportation services,4 we conclude that §
1305(a)(1) preempts plaintiffs' claims under the Consumer Fraud
Act.
B
American maintains, and we agree, that "Congress could hardly
have intended to allow the States to hobble [competition for
airline passengers] through the application of restrictive state
laws." Brief for Petitioner 27. We do not read the ADA's preemption
clause, however, to shelter airlines from suits alleging no
violation of state-imposed obligations, but seeking recovery solely
for the airline's alleged breach of its own, self-imposed
undertakings. As persuasively argued by the United States, terms
and conditions airlines offer and passengers accept are privately
ordered obligations
4 We note again, however, that the DOT retains authority to
investigate unfair and deceptive practices and unfair methods of
competition by airlines, and may order an airline to cease and
desist from such practices or methods of competition. See FAA §411,
49 U. S. C. App. § 1381(a);
Morales, 504 U. S., at 379; see
also Brief for United States as
Amicus Curiae 3, and n. 2
(reporting that in 1993, the DOT issued 34 cease-and-desist orders
and assessed more than $1.8 million in civil penalties in aviation
economic enforcement proceedings).
229
"and thus do not amount to a State's 'enact[ment] or
enforce[ment] [of] any law, rule, regulation, standard, or other
provision having the force and effect of law' within the meaning of
[§ ]1305(a)(1)."5 Brief for United States as
Amicus Curiae
9. Cf.
Cipollone v.
Liggett Group, Inc., 505 U. S. 504, 526 (1992)
(plurality opinion) ("[A] common-law remedy for a contractual
commitment voluntarily undertaken should not be regarded as a
'requirement ...
imposed under State law' within the meaning
of [Federal Cigarette Labeling and Advertising Act] § 5(b)."). A
remedy confined to a contract's terms simply holds parties to their
agreements-in this instance, to business judgments an airline made
public about its rates and services.6
5 The United States recognizes that § 1305(a)(1), because it
contains the word "enforce" as well as "enact," "could perhaps be
read to preempt even state-court enforcement of private contracts."
Brief for United States as
Amicus Curiae 17. But the word
series "law, rule, regulation, standard, or other provision," as
the United States suggests, "connotes official, government-imposed
policies, not the terms of a private contract."
Id., at 16.
Similarly, the phrase "having the force and effect of law" is most
naturally read to "refe[r] to binding standards of conduct that
operate irrespective of any private agreement."
Ibid.
Finally, the ban on enacting or enforcing any law "relating to
rates, routes, or services" is most sensibly read, in light of the
ADA's overarching deregulatory purpose, to mean "States may not
seek to impose their own public policies or theories of competition
or regulation on the operations of an air carrier."
Ibid.
6 American notes that in
Norfolk &
Western R.
Co. v.
Train Dispatchers, 499 U. S. 117, 129
(1991), the Court read the word "law" in a statutory exemption, 49
U. S. C. § 11341(a), to include "laws that govern the obligations
imposed by contract." But that statute and case are not comparable
to the statute and case before us.
Norfolk &
Western concerned the authority of the Interstate Commerce
Commission (ICC) to approve rail carrier consolidations. A carrier
participating in an ICC-approved consolidation is exempt "from the
antitrust laws and from all other law ... as necessary to let [the
participant] carry out the transaction." 49 U. S. C. § 11341(a). We
read the exemption clause to empower the ICC to override,
individually, a carrier's obligations under a collective-bargaining
agreement. Our reading accorded with the ICC's and "ma[de] sense of
the consolidation provisions," 499 U. S., at 132: "If § 11341(a)
did not apply
230
The ADA, as we recognized in
Morales, 504 U. S., at 378,
was designed to promote "maximum reliance on competitive market
forces." 49 U. S. C. App. § 1302(a)(4). Market efficiency requires
effective means to enforce private agreements. See Farber, Contract
Law and Modern Economic Theory, 78 Nw. U. L. Rev. 303, 315 (1983)
(remedy for breach of contract "is necessary in order to ensure
economic efficiency"); R. Posner, Economic Analysis of Law 90-91
(4th ed. 1992) (legal enforcement of contracts is more efficient
than a purely voluntary system). As stated by the United
States:
"The stability and efficiency of the market depend fundamentally
on the enforcement of agreements freely made, based on needs
perceived by the contracting parties at the time." Brief for United
States as
Amicus Curiae 23. That reality is key to sensible
construction of the ADA.
The FAA's text, we note, presupposes the vitality of contracts
governing transportation by air carriers. Section 411(b), 49 U. S.
C. App. § 1381(b), thus authorizes airlines to "incorporate by
reference in any ticket or other written instrument any of the
terms of the contract of carriage" to the extent authorized by the
DOT. And the DOT's regulations contemplate that, upon the January
1, 1983, termination of domestic tariffs, "ticket contracts"
ordinarily would be enforceable under "the contract law of the
States." 47 Fed. Reg. 52129 (1982). Correspondingly, the DOT
requires carriers to give passengers written notice of the time
period within which they may "bring an action against the carrier
for its acts." 14 CFR § 253.5(b)(2) (1994).
American does not suggest that its contracts lack legal force.
American sees the DOT, however, as the exclusively competent
monitor of the airline's undertakings. American
to bargaining agreements ... , rail carrier consolidations would
be difficult, if not impossible, to achieve,"
id., at 133.
Similarly in this case, our reading of the statutory formulation
accords with that of the superintending agency, here, the DOT, and
is necessary to make sense of the statute as a whole.
231
points to the Department's authority to require any airline, in
conjunction with its certification, to file a performance bond
conditioned on the airline's "making appropriate compensation ... ,
as prescribed by the [Department], for failure ... to perform air
transportation services in accordance with agreements therefor."
FAA §401(q)(2), 49 U. S. C. App. § 1371(q)(2).7 But neither the DOT
nor its predecessor, the CAB, has ever construed or applied this
provision to displace courts as adjudicators in air carrier
contract disputes. Instead, these agencies have read the provision
to charge them with a less taxing task: In passing on air carrier
fitness under FAA §401(d), 49 U. S. C. App. § 1371(d)(1), the DOT
and the CAB have used their performance bond authority to ensure
that, when a carrier's financial fitness is marginal, funds will be
available to compensate customers if the carrier goes under before
providing already-paid-for services. See,
e. g.,
U. S.
Bahamas Service Investigation, CAB Order
79-11116, p. 3, 84 CAB Reports 73, 75 (1979) ("We ... find that
Southeast [Airlines] is fit to provide scheduled foreign air
transportation. However, because of Southeast's current financial
condition its operations present an unacceptable risk of financial
loss to consumers. Therefore, we shall require the carrier ... to
procure and maintain a bond for the protection of passengers who
have paid for transportation not yet performed.").
7 The preceding subsection, FAA §401(q)(1), 49 U. S. C. App. §
1371(q)(1), requires an air carrier to have insurance, in an amount
prescribed by the DOT, to cover claims for personal injuries and
property losses "resulting from the operation or maintenance of
aircraft." See Brief for United States as
Amicus Curiae
19-20, and n. 12. American does not urge that the ADA preempts
personal injury claims relating to airline operations. See Tr. of
Oral Arg. 4 (acknowledgment by counsel for petitioner that "safety
claims," for example, a negligence claim arising out of a plane
crash, "would generally not be preempted"); Brief for United States
as
Amicus Curiae 20, n. 12 ("It is ... unlikely that Section
1305(a) (1) preempts safety-related personal-injury claims relating
to airline operations.").
232
The United States maintains that the DOT has neither the
authority nor the apparatus required to superintend a contract
dispute resolution regime. See Brief for United States as
Amicus
Curiae 22. Prior to airline deregulation, the CAB set rates,
routes, and services through a cumbersome administrative process of
applications and approvals. 72 Stat. 731. When Congress dismantled
that regime, the United States emphasizes, the lawmakers indicated
no intention to establish, simultaneously, a new administrative
process for DOT adjudication of private contract disputes. See
Brief for United States as
Amicus Curiae 22. We agree.
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. The ADA contains no hint of
such a role for the federal courts. In this regard, the ADA
contrasts markedly with the ERISA, which does channel civil actions
into federal courts, see ERISA §§ 502(a), (e), 29 U. S. C. §§
1132(a), (e), under a comprehensive scheme, detailed in the
legislation, designed to promote "prompt and fair claims
settlement."
Pilot Life Ins. Co. v.
Dedeaux, 481 U. S. 41, 54 (1987);
see
IngersollRand Co. v.
McClendon, 498 U. S. 133, 143-145
(1990) (finding ERISA's comprehensive civil enforcement scheme a
"special feature" supporting preemption of common-law wrongful
discharge claims).
The conclusion that the ADA permits state-law-based court
adjudication of routine breach-of-contract claims also makes sense
of Congress' retention of the FAA's saving clause, § 1106, 49 U. S.
C. App. § 1506 (preserving "the remedies now existing at common law
or by statute"). The ADA's preemption clause, § 1305(a)(1), 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
233
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.8
American suggests that plaintiffs' breach-of-contract and
Consumer Fraud Act claims differ only in their labels, so that if
Fraud Act claims are preempted, contract claims must be preempted
as well. See Reply Brief 6. But a breach of contract, without more,
"does not amount to a cause of action cognizable under the
[Consumer Fraud] Act and the Act should not apply to simple breach
of contract claims."
Golembiewski v.
Hallberg Ins.
Agency, Inc., 262 Ill. App. 3d 1082, 1093, 635 N. E. 2d 452,
460 (1st Dist. 1994). The basis for a contract action is the
parties' agreement; to succeed under the consumer protection law,
one must show not necessarily an agreement, but in all cases, an
unfair or deceptive practice.
III
American ultimately argues that even under the position on
preemption advanced by the United States-the one we
adopt-plaintiffs' claims must fail because they "inescapably depend
on state policies that are independent of the intent of the
parties." Reply Brief 3. "The state court cannot reach the merits,"
American contends, "unless it first invalidates or limits
[American's] express reservation of the right
8 The United States notes in this regard that "[s]ome state-law
principles of contract law ... might well be preempted to the
extent they seek to effectuate the State's public policies, rather
than the intent of the parties." Brief for United States as
Amicus Curiae 28. Because contract law is not at its core
"diverse, nonuniform, and confusing,"
Cipollone v.
Liggett Group, Inc., 505 U. S. 504, 529 (1992)
(plurality opinion), we see no large risk of nonuniform
adjudication inherent in "[s]tate-court enforcement of the terms of
a uniform agreement prepared by an airline and entered into with
its passengers nationwide." Brief for United States as
Amicus
Curiae 27.
234
to change AAdvantage Program rules contained in AAdvantage
contracts."
Ibid.
American's argument is unpersuasive, for it assumes the answer
to the very contract construction issue on which plaintiffs' claims
turn: Did American, by contract, reserve the right to change the
value of already accumulated mileage credits, or only to change the
rules governing credits earned from and after the date of the
change? See Brief for Respondents 5 (plaintiffs recognize that
American "reserved the right to restrict, suspend, or otherwise
alter aspects of the Program prospectively," but maintain that
American "never reserved the right to retroactively diminish the
value of the credits previously earned by members"). That question
of contract interpretation has not yet had a full airing, and we
intimate no view on its resolution.
Responding to our colleagues' diverse opinions dissenting in
part, we add a final note. This case presents two issues that run
all through the law. First, who decides (here, courts or the DOT,
the latter lacking contract dispute resolution resources for the
task)? On this question, all agree to this extent: None of the
opinions in this case would foist on the DOT work Congress has
neither instructed nor funded the Department to do. Second, where
is it proper to draw the line (here, between what the ADA preempts,
and what it leaves to private ordering, backed by judicial
enforcement)? JUSTICE STEVENS reads our
Morales decision to
demand only minimal preemption; in contrast, JUSTICE O'CONNOR reads
the same case to mandate total preemption.9 The middle course we
adopt seems to us best calculated to carry out the congressional
design; it also bears the approval of the statute's experienced
administrator, the DOT. And while we adhere to our holding in
Morales, we do not overlook that in our system of
adjudication, principles seldom can
9 JUSTICE O'CONNOR'S "all is pre-empted" position leaves room
for personal injury claims, but only by classifying them as matters
not "relating to [air carrier] services." See
post, at
242-243.
235
be settled "on the basis of one or two cases, but require a
closer working out." Pound, Survey of the Conference Problems, 14
U. Cin. L. Rev. 324, 339 (1940) (Conference on the Status of the
Rule of Judicial Precedent).
***
For the reasons stated, the judgment of the Illinois Supreme
Court is affirmed in part and reversed in part, and the case is
remanded for proceedings not inconsistent with this opinion.
It is so ordered.
JUSTICE SCALIA took no part in the decision of the case. JUSTICE
STEVENS, concurring in part and dissenting in part.
Although I agree with the majority that the Airline Deregulation
Act of 1978 (ADA) does not pre-empt respondents' breach-of-contract
claims, I do not agree with the Court's disposition of their
consumer-fraud claims. In my opinion, private tort actions based on
common-law negligence or fraud, or on a statutory prohibition
against fraud, are not pre-empted. Under the broad (and in my
opinion incorrect1) interpretation of the words "law ... relating
to rates, routes, or services" that the Court adopted in
Morales v.
Trans World Airlines, Inc., 504 U. S. 374 (1992),
direct state regulation of airline advertising is pre-empted; but I
would not extend the holding of that case to embrace the private
claims that respondents assert in this case.
Unlike the National Association of Attorneys General (NAAG)
guidelines reviewed in
Morales, the Illinois Consumer Fraud
and Deceptive Business Practices Act (Consumer Fraud Act) does not
instruct the airlines about how they can market their services.
Instead, it merely requires
1 See
Morales v.
Trans World Airlines, Inc.,
504 U. S. 374,
419-427 (1992) (dissenting opinion).
236
all commercial enterprises-airlines included-to refrain from
defrauding their customers. The
Morales opinion said nothing
about pre-empting general state laws prohibiting fraud. The
majority's extension of the ADA's pre-emptive reach from
airline-specific advertising standards to a general background rule
of private conduct represents an alarming enlargement of
Morales' holding.
I see no reason why a state law requiring an airline to honor
its contractual commitments is any less a law relating to its rates
and services than is a state law imposing a "duty not to make false
statements of material fact or to conceal such facts."
Cipollone v.
Liggett Group, Inc., 505 U. S. 504, 528 (1992)
(finding similar claim not to be pre-empted under Federal Cigarette
Labeling and Advertising Act). In this case, the two claims are
grounded upon the exact same conduct and would presumably have an
identical impact upon American's rates, routes, and services. The
majority correctly finds that Congress did not intend to pre-empt a
claim that an airline breached a private agreement. I see no reason
why the ADA should pre-empt a claim that the airline defrauded its
customers in the making and performance of that very same
agreement.
I would analogize the Consumer Fraud Act to a codification of
common-law negligence rules. Under ordinary tort principles, every
person has a duty to exercise reasonable care toward all other
persons with whom he comes into contact. Presumably, if an airline
were negligent in a way that somehow affected its rates, routes, or
services,2 and the victim of the airline's negligence were to sue
in state court, the majority would not hold all common-law
negligence rules to be pre-empted by the ADA. See
ante, at
231, n. 7. Like contract principles, the standard of ordinary care
is a general
2 Indeed, every judgment against an airline will have some
effect on rates, routes, or services, at least at the margin. In
response to adverse judgments, airlines may have to raise rates, or
curtail routes or services, to make up for lost income.
237
background rule against which all individuals order their
affairs. Surely Congress did not intend to give airlines free rein
to commit negligent acts subject only to the supervision of the
Department of Transportation, any more than it meant to allow
airlines to breach contracts with impunity. See
ante, at
230-233. And, if judge-made duties are not preempted, it would make
little sense to find pre-emption of identical rules codified by the
state legislature. The duty imposed by the Consumer Fraud Act is to
refrain from committing fraud in commercial dealings-it is "the
duty not to deceive."
Cipollone, 505 U. S., at 529. This is
neither a novel nor a controversial proscription. It falls no more
heavily upon airlines than upon any other business. It is no more
or less a state-imposed "public policy" than a negligence rule. In
sum, I see no difference between the duty to refrain from deception
and the duty of reasonable care, and I see no meaningful difference
between the enforcement of either duty and the enforcement of a
private agreement.
The majority's extension of
Morales is particularly
untenable in light of the interpretive presumption against
preemption. As in
Cipollone, I believe there is insufficient
evidence of congressional intent to supersede laws of general
applicability to justify a finding that the ADA pre-empts either
the contract or the fraud claim.
Cipollone, 505 U. S., at
525-530; see also
Morales, 504 U. S., at 419-421 (STEVENS,
J., dissenting) (discussing presumption against pre-emption as an
incident of federalism). Indeed, the presumption against
pre-emption is especially appropriate to the ADA because Congress
retained the "saving clause" preserving state "remedies now
existing at common law or by statute." 49 U. S. C. App. § 1506.
Accordingly, while I join the Court's disposition of the
breach-of-contract claims,3 I would affirm the entire judgment of
the Supreme Court of Illinois.
3 Accordingly, I join Part I, except for the last paragraph, and
Part II-B of the Court's opinion.
238
JUSTICE O'CONNOR, with whom JUSTICE THOMAS joins as to all but
Part I-B, concurring in the judgment in part and dissenting in
part.
In permitting respondents' contract action to go forward, the
Court arrives at what might be a reasonable policy judgment as to
when state law actions against airlines should be pre-empted if we
were free to legislate it. It is not, however, consistent with our
controlling precedents, and it requires some questionable
assumptions about the nature of contract law. I would hold that
none of respondents' actions may proceed.
I A
The Airline Deregulation Act of 1978 (ADA) says that "no State
... shall enact or enforce any law, rule, regulation, standard, or
other provision having the force and effect of law relating to
rates, routes, or services of any air carrier." 49 U. S. C. App. §
1305(a)(1).1 We considered the scope of that provision in
Morales v.
Trans World Airlines, Inc., 504 U. S. 374
(1992). We noted the similarity of § 1305's language to the
pre-emption provision in ERISA, 29 U. S. C. § 1144(a), and said
that, like ERISA's § 1144, § 1305's words "express a broad
pre-emptive purpose." 504 U. S., at 383. We concluded that "State
enforcement actions having a connection with, or reference to,
airline 'rates, routes, or services' are pre-empted."
Id.,
at 384.
Applying
Morales to this case, I agree with the Court
that respondents' consumer fraud and contract claims are "related
to" airline "rates" and "services." See
ante, at 226. The
Court says, however, that judicial enforcement of a contract's
1 Congress has recently amended this statute to read: "[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." 49 U. S. C. §41713(b)(1) (1994 ed.).
Congress intended this amendment to be "without substantive
change." See Pub. L. 103-272, § l(a), 108 Stat. 745.
239
terms, in accordance with state contract law, does not amount to
a "State ... enforc[ing] any law," § 1305, but instead is simply a
State "hold[ing] parties to their agreemen[t]." See
ante, at
229, and n. 5. It therefore concludes that § 1305 does not apply to
respondents' contract actions. I cannot agree with that
conclusion.
I do not understand the Court to say that a State only
"enforces" its "law" when some state employee
(e. g., an
attorney general, or a judge) orders someone to do something. If
that were the meaning of "enforce" in this context, then a
diversity action brought by a private party under state law in
federal court would never be subject to § 1305 preemption, because
no state employee is involved, whereas the same action might be
pre-empted in state court. That would make little sense, and
federal courts have routinely considered § 1305 in determining
whether a particular state law claim is pre-empted.
E. g.,
Statland v.
American Airlines, Inc., 998 F.2d
539, 541-542 (CA7) (contract claim preempted), cert. denied,
510 U. S. 1012 (1993);
West v.
Northwest Airlines,
Inc., 995 F.2d
148, 151 (CA9 1993) (tort claim for punitive damages
pre-empted), cert. denied, 510 U. S. 1111 (1994);
Cannava v.
USAir, Inc., No. 91-30003-F, 1993 WL 565341, *6 (D. Mass.,
Jan. 7, 1993) (tort and contract claims pre-empted). Consequently,
one must read "no State ... shall ... enforce any law" to mean that
no one may enforce state law against an airline when the
"enforcement actio[n] ha[s] a connection with, or reference to,
airline 'rates, routes, or services.'"
Morales, supra, at
384. This explains the Court's conclusion, with which I agree, that
private parties such as respondents may not enforce the Illinois
consumer fraud law against petitioner in an action whose subject
matter relates to airline rates and services.
Ante, at
228.
As I read § 1305 and
Morales, however, respondents'
contract claims also must be pre-empted. The Court recognizes,
ante, at 227, that the "guidelines" at issue in
Morales
240
did not" 'create any new laws or regulations' applying to the
airline industry; rather, they claim[ed] to 'explain in detail how
existing state laws apply to air fare advertising and frequent
flyer programs.'"
Morales, 504 U. S., at 379. Nonetheless,
we stated our holding quite clearly: "We hold that the fare
advertising provisions of the NAAG guidelines are pre-empted by [§
1305]."
Id., at 391. How can it be that the guidelines,
which did not themselves constitute "law," were nonetheless
pre-empted by a statute whose coverage is limited to "laws" or
other "provision[s] having the force and effect of law"? The answer
is that in
Morales we held that an action to invoke the
State's coercive power against an airline, by means of a generally
applicable law, when the subject matter of the action related to
airline rates, would constitute "Stat[e] ... enforce[ment]" of a
"law ... relating to rates, routes, or services."
Id., at
383 (internal quotation marks omitted). Accordingly, we held that §
1305 preempted the action. It is not the case, as JUSTICE STEVENS
urges, that
Morales was limited to "airline-specific
advertising standards."
Ante, at 236. We examined the
content of those standards-which had no binding force on their
ownonly to ascertain whether they "related to" airline rates (and
we thought they "quite obviously" did).
Morales, supra, at
387. The only "laws" at issue in
Morales were generally
applicable consumer fraud statutes, not facially related to
airlines, much like the law at issue in respondents' consumer fraud
claims here.
The Court concludes, however, that § 1305 does
not
preempt enforcement, by means of generally applicable state law, of
a private agreement relating to airline rates and services. I
cannot distinguish this case from
Morales. In both, the
subject matter of the action (the guidelines in
Morales, the
contract here) relates to airline rates and services. In both, that
subject matter has no legal force, except insofar as a generally
applicable state law (a consumer fraud law in
241
Morales, state contract law here 2) permits an aggrieved
party to invoke the State's coercive power against someone refusing
to comply with the subject matter's terms (the requirements of the
guidelines in
Morales, the terms of the contract here).
Morales' conclusion that § 1305 pre-empts such an invocation
is dispositive here, both of respondents' consumer fraud claims,
and of their contract claims. The lower courts seem to agree; as
far as I know, no court to have considered ADA pre-emption since we
decided
Morales has suggested that enforcement of state
contract law does not fall within § 1305 if the necessary relation
to airline rates, routes, or services exists. See,
e. g.,
Statland v.
American Airlines, supra, at 541-542
(contract claims pre-empted);
West v.
Northwest Airlines,
supra, at 151-152 (contract claims not pre-empted because "too
tenuously connected" to airline rates or services);
Cannava
v.
USAir, Inc., supra, at *6 (contract claims pre-empted);
Schaefer v.
Delta Airlines, No. 92-1170-E(LSP), 1992
WL 558954, *2 (SD Cal., Sept. 18, 1992) (same);
Vail v.
Pan Am Corp., 260 N. J. Super. 292, 299-300, 616 A. 2d 523,
526-527 (App. Div. 1992) (same);
El-Menshawy v.
Egypt
Air, 276 N. J. Super. 121, 126, 647 A. 2d 491, 493 (Law Div.
1994) (same).
The Court argues that the words "law, rule, regulation,
standard, or other provision" in § 1305 refer only to "'official,
government-imposed policies, not the terms of a private
contract.'''
Ante, at 229, n. 5 (quoting Brief for United
States as
Amicus Curiae 17). To be sure, the terms of
private contracts are not "laws," any more than the guidelines at
issue in
Morales were "laws." But contract law, and
generally applicable consumer fraud statutes,
are laws, and
Morales held that § 1305 prevents enforcement of "any
[state] law" against the airlines when the subject matter of the
action
2 See
Norfolk &
Western R. Co. v.
Train
Dispatchers, 499
U. S. 117, 130 (1991) ("A contract has no legal force apart
from the law that acknowledges its binding character"), discussed
infra, at 243-244.
242
"relates" to airline rates, routes, or services. Thus, where the
terms of a private contract relate to airline rates and services,
and those terms can only be enforced
through state law,
Morales is indistinguishable. As JUSTICE STEVENS persuasively
argues, there is "no reason why a state law requiring an airline to
honor its contractual commitments is any less a law relating to its
rates and services than is a state law imposing a 'duty not to make
false statements of material fact or to conceal such facts,'"
ante, at 236.
As the Court recognizes,
ante, at 234, n. 9, my view of
Morales does not mean that personal injury claims against
airlines are always pre-empted. Many cases decided since
Morales have allowed personal injury claims to proceed, even
though none has said that a State is not "enforcing" its "law" when
it imposes tort liability on an airline. In those cases, courts
have found the particular tort claims at issue not to "relate" to
airline "services," much as we suggested in
Morales that
state laws against gambling and prostitution would be too tenuously
related to airline services to be preempted, see
Morales,
supra, at 390.
E. g., Hodges v.
Delta Airlines,
Inc., 4 F.3d
350, 353-356 (CA5 1993) (arguing that "'services' is not
coextensive with airline 'safety,'" so safety-related tort claim
should not be pre-empted; urging en bane review to bring Circuit
precedent into conformity with that view), rehearing en bane
granted,
12 F.3d
426 (1994); Public Health Trust v.
Lake Aircraft,
Inc., 992 F.2d
291, 294-295 (CAll 1993) (tort claim for defective aircraft
design not pre-empted because not related to airline services);
Cleveland v.
Piper Aircraft Corp., 985 F.2d
1438, 1443, and n. 11, 1444, n. 13 (CAlO) (same), cert. denied,
510 U. S. 908 (1993);
Stagl v.
Delta Air Lines, Inc.,
849 F. Supp. 179, 182 (EDNY 1994) (tort claim against airline for
personal injury not pre-empted because not related to airline
"services" within the meaning of § 1305);
Curley v.
American Airlines, Inc., 846 F. Supp. 280, 284 (SDNY 1994)
(same);
Bayne v.
Adventure Tours USA, Inc., 841 F.
Supp. 206 (ND Tex. 1994)
243
(same);
Fenn v.
American Airlines, Inc., 839 F.
Supp. 1218, 1222-1223 (SD Miss. 1993) (same);
Chouest v.
American Airlines, Inc., 839 F. Supp. 412, 416-417 (ED La.
1993) (same);
O'Hern v.
Delta Airlines, Inc., 838 F.
Supp. 1264, 1267 (ND Ill. 1993) (same);
In re Air Disaster,
819 F. Supp. 1352, 1363 (ED Mich. 1993) (same);
Butcher v.
Houston, 813 F. Supp. 515, 518 (SD Tex. 1993) (same).
Our recent decision in
Norfolk &
Western R.
Co. v.
Train Dispatchers, 499 U. S. 117 (1991), is
relevant. The question in that case was whether a rail carrier's
statutory exemption from "all other law," which we read to mean
"all law as necessary to carry out an ICC-approved
transaction,"
id., at 129, exempted the carrier from
contractually imposed obligations. We held that it did. We noted
that "[a] contract depends on a regime of common and statutory law
for its effectiveness and enforcement,"
id., at 129-130,
that "[a] contract has no legal force apart from the law that
acknowledges its binding character,"
id., at 130, and that"
'[l]aws which subsist at the time and place of the making of a
contract, and where it is to be performed, enter into and form a
part of it, as fully as if they had been expressly referred to or
incorporated in its terms,"
ibid. (quoting
Farmers and
Merchants Bank of Monroe v.
Federal Reserve Bank of
Richmond, 262 U. S. 649, 660 (1923)). Accordingly, we concluded
that "the exemption ... from 'all other law' effects an override of
contractual obligations ... by suspending application of the law
that makes the contract binding." 499 U. S., at 130. In so
concluding, we specifically rejected the Court of Appeals' views
that the "all other law" exemption "[n]owhere ... sa[id] that the
ICC may also override contracts," and that it did not exempt the
carrier from "'all legal obstacles.'''
Brotherhood of R.
Carmen v.
ICC, 880 F.2d
562, 567 (CADC 1989); see
Norfolk &
Western,
supra, at 133-134.
The Court does not dispute this reading of
Norfolk
& Western, which in my view makes clear that a
State is enforcing its "law" when it brings its coercive power to
bear
244
on a party who has violated a contractual obligation. We
reiterated in
Norfolk &
Western that "[t]he
obligation of a contract is the law which binds the parties to
perform their agreement." 499 U. S., at 129 (internal quotation
marks omitted); see also
Sturges v.
Crowninshield, 4
Wheat. 122, 197 (1819) (Marshall, C. J.) ("A contract is an
agreement, in which a party undertakes to do, or not to do, a
particular thing. The law binds him to perform his undertaking, and
this is, of course, the obligation of his contract"). We therefore
read the words "all other law" in the statutory exemption broadly
enough to "suspen[d] application of the law that makes the contract
binding."
Norfolk &
Western, supra, at 130. I
would give the words "any law" in § 1305 a similar reading.
As support for its theory, the Court cites only a statement in
the plurality opinion in
Cipollone v.
Liggett Group,
Inc., 505 U. S.
504 (1992); see
ante, at 229. The
Cipollone
plurality said that "a common-law remedy for a contractual
commitment voluntarily undertaken should not be regarded as a
'requirement ...
imposed under State law' within the meaning
of § 5(b)." 505 U. S., at 526. But the plurality elaborated on this
point in a footnote. In rejecting the argument that specific
warranty obligations are "imposed under State law," the plurality
agreed that pre-emption might be required "if the Act pre-empted
'liability' imposed under state law ... ; but instead the
Act expressly pre-empts only a
'requirement or prohibition'
imposed under state law."
Id., at 526, n. 24. It agreed that
contractual requirements are "only enforceable under state law,"
but argued that those requirements are "'imposed' by the
contracting party upon itself."
Ibid. The plurality thus
distinguished the situation where substantive requirements
contained in a contract are enforceable only under state law from
the situation where state law
itself imposes substantive
requirements, and concluded that the statute before it pre-empted
only the latter kind of state law. Here, as in
Cipollone,
the requirements
245
at issue are contained in a contract, and have no legal force
except insofar as state law makes them enforceable. But we
concluded in
Morales that § 1305
does pre-empt state
law in those circumstances, unlike the statute in
Cipollone.
The difference between this case and
Cipollone is the very
different language in the two pre-emption statutes.
The Court also concludes that § 1305 only "stops States from
imposing their own substantive standards with respect to rates,
routes, or services,"
ante, at 232. In
Morales,
however, we specifically rejected an interpretation of § 1305 that
would have rewritten it to read: No State shall"
'regulate
rates, routes, and services.'" See
Morales, 504 U. S., at
385-386. There is little distinction between "regulating rates,
routes, and services" and "imposing substantive standards with
respect to rates, routes, and services," and the Court does not
explain how
Morales' rejection of the former allows it now
to adopt the latter. The Court relies on the statute's "saving
clause," 49 U. S. C. App. § 1506, see
ante, at 232, but we
said in
Morales that "[a] general 'remedies' saving clause
cannot be allowed to supersede the specific substantive pre-emption
provision," particularly where, as here, "the 'saving' clause is a
relic of the pre-ADA/no pre-emption regime."
Morales, 504 U.
S., at 385.
Without question,
Morales gave § 1305 a broad preemptive
sweep. The dissent in that case argued that such a broad
interpretation went too far by pre-empting areas of traditional
state regulation without a clear expression of congressional intent
to do so.
Id., at 421-424 (STEVENS, J., dissenting); see
also
ante, at 235, 237 (STEVENS, J., concurring in part and
dissenting in part). But the Court rejected the dissent's reading,
holding instead that § 1305's language demonstrated a clear
"statutory intent" to expressly preempt generally applicable state
law as long as the "particularized application" of that law relates
to airline rates, routes, or services.
Morales, supra, at
383, 386, and n. 2.
246
B
Congress has recently revisited § 1305, and said that it "d[id]
not intend to alter the broad preemption interpretation adopted by
the United States Supreme Court in
Morales," H. R. Conf.
Rep. No. 103-677, p. 83 (1994). If the Court nonetheless believes
that
Morales misread § 1305, the proper course of action
would be to overrule that case, despite Congress' apparent approval
of it. The Court's reading of § 1305 is not, in my view, a "'closer
working out'" of ADA pre-emption, see
ante, at 235; rather,
it is a new approach that does not square with our decisions in
Morales and
Norfolk &
Western.
Stare decisis has "special force" in the area of
statutory interpretation, see
Allied-Bruce Terminix Coso v.
Dobson, post, at 284 (O'CONNOR, J., concurring) (internal
quotation marks omitted). It sometimes requires adherence to a
wrongly decided precedent.
Post, at 283-284. Here, however,
Congress apparently does not think that our decision in
Morales was wrong, nor do 1. In the absence of any "'special
justification,'"
post, at 284 (quoting
Arizona v.
Rumsey, 467 U.
S. 203, 212 (1984)), for departing from
Morales, I would
recognize the import of
Morales and
Norfolk &
Western here, and render the decision that the language of §
1305, in light of those cases, compels. If, at the end of the day,
Congress believes we have erred in interpreting § 1305, it remains
free to correct our mistake.
II
Our decisions in
Morales and
Norfolk &
Western suffice to decide this case along the lines I have
described. In addition, however, I disagree with the Court's view
that courts can realistically be confined, "in breach-of-contract
actions, to the parties' bargain, with no enlargement or
enhancement based on state laws or policies external to the
agreement."
Ante, at 233. When they are so confined, the
Court says, courts are "simply hold[ing] parties to their
agreements,"
247
and are not "enforcing" any "law,"
ante, at 229. The
Court also says that "'[s]ome state-law principles of contract law
... might well be preempted to the extent they seek to effectuate
the State's public policies, rather than the intent of the
parties.'"
Ante, at 233, n. 8 (quoting Brief for United
States as
Amicus Curiae 28).
The doctrinal underpinnings of the notion that judicial
enforcement of the "intent of the parties" can be divorced from a
State's "public policy" have been in serious question for many
years. As one author wrote some time ago:
"A contract, therefore, between two or more individuals cannot
be said to be generally devoid of all public interest. If it be of
no interest, why enforce it? For note that in enforcing contracts,
the government does not merely allow two individuals to do what
they have found pleasant in their eyes. Enforcement, in fact, puts
the machinery of the law in the service of one party against the
other. When that is worthwhile and how that should be done are
important questions of public policy .... [T]he notion that in
enforcing contracts the state is only giving effect to the will of
the parties rests upon an ... untenable theory as to what the
enforcement of contracts involves." Cohen, The Basis of Contract,
46 Harv. L. Rev. 553, 562 (1933).
More recent authors have expressed similar views. See,
e.
g., Braucher, Contract Versus Contractarianism: The
Regulatory Role of Contract Law, 47 Wash. & Lee L. Rev. 697,
699 (1990) ("Mediating between private ordering and social
concerns, contract is a socioeconomic institution that requires an
array of normative choices .... The questions addressed by contract
law concern
what social norms to use in the enforcement of
contracts, not whether social norms will be used at all"). Contract
law is a set of policy judgments concerning how to decide the
meaning of private agreements, which private agreements should be
legally enforceable, and
248
what remedy to afford for their breach. The Court fails to
recognize that when a State decides to force parties to comply with
a contract, it does so only because it is satisfied that state
policy, as expressed in its contract law, will be advanced by that
decision.
Thus, the Court's allowance that" '[s]ome state-law principles
of contract law ... might well be preempted to the extent they seek
to effectuate the State's public policies, rather than the intent
of the parties,'"
ante, at 233, n. 8 (quoting Brief for
United States as
Amicus Curiae 28), threatens to swallow all
of contract law. For example, the Court observes that on remand,
the state court will be required to decide whether petitioner
reserved the right to alter the terms of its frequent flyer program
retroactively, or instead only prospectively.
Ante, at 234.
The court will presumably decide that question by looking to the
usual "rules" of contract interpretation to decide what the
contract's language means. If the court finds the language to be
ambiguous, it might invoke the familiar rule that the contract
should be construed against its drafter, and thus that respondents
should receive the benefit of the doubt. See 2 E. Farnsworth,
Farnsworth on Contracts § 7.11, pp. 265268 (1990) (hereinafter
Farnsworth). That rule of contract construction is not essential to
a functional contract system. It is a policy choice that
our
contract system has made. Other such policy choices are that courts
should not enforce agreements unsupported by consideration, see 1
Farnsworth § 2.5; but cf. J. Barton, J. Gibbs, V. Li, & J.
Merryman, Law in Radically Different Cultures 579 (1983) (other
legal systems enforce certain agreements not supported by
consideration); that courts should supply "reasonable" terms to
fill "gaps" in incomplete contracts, see 2 Farnsworth §§ 7.15-7.17;
the method by which courts should decide what terms to supply, see
C. Fried, Contract as Promise 60, 69-73 (1981); Charny,
Hypothetical Bargains: The Normative Structure of Contract
Interpretation, 89 Mich. L. Rev. 1815, 1816, 1820-1823
249
(1991); Ayres & Gertner, Filling Gaps in Incomplete
Contracts: An Economic Theory of Default Rules, 99 Yale L. J. 87,
91 (1989) (all suggesting different policy considerations that
should inform how courts fill contractual gaps); and that a breach
of contract entitles the aggrieved party to expectation damages
most of the time, but specific performance only rarely, see 3
Farnsworth, ch. 12; but cf. R. David & J. Brierley, Major Legal
Systems in the World Today 302 (1985) (former Soviet Union
routinely awarded specific performance). If courts are not
permitted to look to these aspects of contract law in
airline-related actions, they will find the cases difficult to
decide.
Even the doctrine of unconscionability, which the United States
suggests as an aspect of contract law that "might well be
preempted" because it "seek[s] to effectuate the State's public
policies, rather than the intent of the parties," Brief for United
States as
Amicus Curiae 28, cannot be so neatly categorized.
On the one hand, refusing to enforce a contract because it is
"unfair" seems quintessentially policy oriented. But on the other,
"[p]rocedural unconscionability is broadly conceived to encompass
not only the employment of sharp practices and the use of fine
print and convoluted language, but a lack of understanding and an
inequality of bargaining power." 1 Farnsworth § 4.28, at 506-507
(footnotes omitted). In other words, a determination that a
contract is "unconscionable" may in fact be a determination that
one party did not intend to agree to the terms of the contract.
Thus, the unconscionability doctrine, far from being a purely
"policy-oriented" doctrine that courts impose over the will of the
parties, instead demonstrates that state public policy cannot
easily be separated from the methods by which courts are to decide
what the parties "intended."
"[T]he law itself imposes contractual liability on the basis of
a complex of moral, political, and social judgments." Fried,
supra, at 69. The rules laid down by contract law for
determining what the parties intended an agreement to
250
mean, whether that agreement is legally enforceable, and what
relief an aggrieved party should receive, are the end result of
those judgments. Our legal system has decided to allow private
parties to invoke the coercive power of the State in the effort to
enforce those (and only those) private agreements that conform to
rules set by those state policies known collectively as "contract
law." Courts cannot enforce private agreements without reference to
those policies, because those policies define the role of courts in
deciding disputes concerning private agreements.
For these reasons, I would reverse the judgment of the Illinois
Supreme Court.
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