Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—EDMich: Airline Deregulation Act Preempts State Consumer Protection Law Claims , (Dec 6, 2012)

By Jody Coultas, J.D.

A former airline club member’s Florida Deceptive and Unfair Trade Practices Act (UTPA) class action claims were preempted by the Airline Deregulation Act (ADA), according to the federal district court in Detroit (Marily Madorsky v. Spirit Airlines, December 5, 2012, Borman, P.).

Spirit offered a $9 Fare Club, a discount flight ticket club, which members pay an annual fee to join. After learning that Spirit had charged the former club member an increase annual fee, the former club member cancelled her membership. The former club member alleged that Spirit’s automatic fee increase policy for continued membership in the club, coupled with the policy for cancelling memberships, deprived members who have cancelled their memberships from receiving the benefits of the club for which they have already paid a full annual fee.

All state enforcement actions having a connection with or reference to airline “rates, routes, or services” are pre-empted under the ADA.

The UTPA claims were preempted by the ADA because the claims were connected to the airline’s rates, routes, or services, according to the court. In American Airlines v. Wolens, 513 U.S. 219 (1995), the Supreme Court held that the consumer protection law at issue served as a means to guide and police the marketing practices of the airlines while the selection and design of marketing mechanisms appropriate to the furnishing of air transportation services was regulated by the ADA. Thus, the question of whether the airline reserving the right, in its agreement with club members, to change the rules regarding mileage credits that members had already accumulated (plaintiffs’ breach of contract claim) was a deceptive act was preempted by the ADA. The former club member’s allegations under the UTPA were the same as those involved in American Airlines. The cancellation and refund provisions of the $9 Fare Club have an impact on Spirit’s ability to market its product. Allowing the former club member to question whether the provisions were unconscionable would allow an attack on the business model through which Spirit endeavors to fill every empty seat. Thus, such a holding would require Spirit to change its methods and would impact fares and services, in the court’s view.

The case is No. 11-12662.

Mark S. Baumkel (Provizer & Phillips, P.C) for Marilyn Madorsky. Anthony A. Agosta (Clark Hill) for Spirit Airlines.

Cases: StateUnfairTradePractices MichiganNews