Ferrell v. Air Evac EMS, Inc.

• Decision Date: 16 August 2018
• Docket Number: No. 17-2554,17-2554
• Citation: 900 F.3d 602
• Parties: James W. FERRELL, Individually and as Class Representative, Plaintiff - Appellant v. AIR EVAC EMS, INC., Defendant - Appellee
• Court: U.S. Court of Appeals — Eighth Circuit

900 F.3d 602

James W. FERRELL, Individually and as Class Representative, Plaintiff - Appellant

v.AIR EVAC EMS, INC., Defendant - Appellee

No. 17-2554

United States Court of Appeals, Eighth Circuit.

Submitted: April 11, 2018

Filed: August 16, 2018

Rehearing and Rehearing En Banc Denied September 21, 2018

Lee Douglas Curry, Charles Clifford Gibson, III, GIBSON & KEITH, Monticello, AR, for Plaintiff - Appellant.

Joshua L. Fuchs, JONES & DAY, Houston, TX, Alex T. Gray, Jeremy Y. Hutchinson, Scott E. Poynter, George Nathan Steel, STEEL & WRIGHT, Little Rock, AR, Charlotte Taylor, JONES & DAY, Washington, DC, for Defendant - Appellee.

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, 112 S.Ct. 2031, 119 L.Ed.2d 157 (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, 572 U.S. 273, 134 S.Ct. 1422, 1428, 188 L.Ed.2d 538 (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.

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, 112 S.Ct. 2031. 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, 112 S.Ct. 2031. 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, 112 S.Ct. 2031 (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, 112 S.Ct. 2031.

In American Airlines, Inc. v. Wolens, 513 U.S. 219, 115 S.Ct. 817, 130 L.Ed.2d 715 (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, 115 S.Ct. 817. 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, 115 S.Ct. 817. 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, 115 S.Ct. 817. 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, 115 S.Ct. 817.

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, 115 S.Ct. 817. 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 1432-33. 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 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, 112 S.Ct. 2031 ; 513 U.S. at 227-28, 115 S.Ct. 817.

Acknowledging that common law fraud and statutory consumer protection claims were preempted in Morales and Wolens,² Ferrell argues that these...