Yours, Mine, Ours – Airline Industry Pre-Emption Update

October 21, 2015
SmithAmundsen Aerospace Alert

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As commonly known in the industry, the Airline Deregulation Act of 1973 (ADA) contains an express prohibition on states enacting or enforcing laws, regulations, or other provisions related to a price, route, or service of an air carrier. However, the goal of deregulating the airline industry to create a unified approach has hit turbulence throughout the years as courts across the country try to interpret the intended scope of “service” and thus, the true reach of ADA pre-emption.

For instance, in April 2014, the Supreme Court reinforced the breadth of ADA’s pre-emption grasp with its holding in Northwest v. Ginsberg. In this case, the airline revoked plaintiff’s membership in its frequent flyer program. As a result, the passenger brought state law claims for breach of the implied covenant of good faith and fair dealing. Ultimately, the Supreme Court held because plaintiff was seeking to enlarge voluntarily adopted contractual obligations and enforce a state-imposed obligation that affects an airline’s rates, routes, and services, the claims were pre-empted by the ADA.

airlineJust this past month, in September 2015, though, the Eleventh Circuit changed the course of the discussion with its ruling in Amerijet Int’l v. Miami-Dade County. Here, it was held a municipality’s living wage ordinance was not pre-empted by the ADA as applied to air carriers. The crux of the decision centers on how the purpose of ADA pre-emption interplays with (1) the nature of the airline’s business and (2) the intent of the ordinance. Namely, the Eleventh Circuit reasoned the airline at issue provided cargo and ground handling services to other airlines, and not consumers. Because there is no “bargained-for” exchange between the cargo handling airline and the consumer, much like a subcontractor does not directly interact with a general contractor’s client, its business does not constitute a “service” within the meaning of the ADA’s pre-emption provision.In addition, the Eleventh Circuit interpreted the living wage ordinance to be a non-discriminatory mandate for all service contractors not specifically targeting the airline industry. Accordingly, the ordinance does not interfere with market forces by dictating the type of services the airline must provide, nor does it bind air carriers to any particular choice constituting a regulation. Instead, the Court found the effect on the airline industry to be indirect, remote, and tenuous. Therefore, the ordinance lacked the requisite “significant impact” to bring it within the ambit of ADA pre-emption. Overall, in contrast to the broad scope from Northwest, Amerijet narrowed ADA pre-emption and excluded a municipality-imposed obligation from its reach.

While ADA pre-emption is in no way a new topic, the idea that municipal ordinances setting minimum wages or other work place rules will not only be enforceable outside the ADA realm, but may also have an effect on the airline industry and its consumers is not a stretch. Accordingly, the ripple effect of these varying rulings is a topic that will require continued analysis as more decisions come down over time. At some point, it will need to be decided what is truly yours, mine, and ours in the airline industry. However, until that time, stay tuned.