Antitrust Law Daily Wrap Up, RICO—11th Cir.: RICO claims concerning airline ticket prices not preempted by federal aviation law, (Sep 24, 2014)

By Jody Coultas, J.D.

The federal regulatory scheme governing the airline industry did not preclude Racketeer Influenced and Corrupt Organizations Act (RICO) claims, the U.S. Court of Appeals in Atlanta has held (Ray v. Spirit Airlines, Inc., September 23, 2014, Marcus, S.).

The complaint centered on Spirit Airlines, Inc.’s alleged concealing and misrepresenting of airfares and user fees. Specifically, Spirit allegedly concealed the existence and purpose of its “Passenger Usage Fee” charged to online ticket purchasers. Spirit argued that the RICO claims were preempted by Congress’s regulation of airline ticket prices and price advertising through the Federal Aviation Act and Airline Deregulation Act of 1978.

A district court dismissed the RICO claims, holding that comprehensive federal regulation of the airline industry preempted the claims. Specifically, the court found that Congress intended the Department of Transportation (DOT) to be the sole legal control on deceptive airfare, fees, and deceptive fee and fare advertising.

The Federal Aviation Act grants the DOT the power to “investigate and decide whether an air carrier . . . has been or is engaged in an unfair or deceptive practice or an unfair method of competition in air transportation or the sale of air transportation.” The DOT has held any price advertising for air transportation that does not state the total price of a ticket a deceptive practice.

Civil RICO claims predicated on mail and wire fraud are not precluded by federal aviation law simply because they involve fraud arising out of pricing, fees, and advertising in the airline industry, according to the court. To state a RICO claim, the consumers were required to establish that Spirit operated or managed an enterprise through a pattern of racketeering activity that included at least two racketeering acts. The consumers were not attempting to enforce FAA restrictions on unfair and deceptive practices or methods of competition, and were not seeking relief based on a violation of the DOT’s full-fare advertising rule. Therefore, there was no preemption issue. Rather, the case involved the “interplay between two statutory schemes created by Congress for different reasons and at different times.” There was no evidence that Congress intended the ADA to interrupt federal RICO actions concerning acts of mail and wire fraud involving airline fees, prices, or advertising.

The court noted that it passed no judgment as to whether the consumers adequately stated the RICO claim and remanded the claims to the district court to make such a determination.

The case is No. 13-15681.

Attorneys: Joel D. Eaton (Podhurst Orseck, PA) Bryan Ray. Daniel T. Graham (Clark Hill, PLC), and Scott Michael Dimond (Dimond Kaplan & Rothstein, PA) for Spirit Airlines, Inc.

Companies: Spirit Airlines, Inc.

Cases: RICO AlabamaNews FloridaNews GeorgiaNews