In re Korean Air Lines Co.

• Citation: 642 F.3d 685
• Decision Date: 18 April 2011
• Docket Number: No. 08–56385.,08–56385.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)
• Parties: In re KOREAN AIR LINES CO., LTD., ANTITRUST LITIGATION,Soon Ja Chun, Individually and on behalf of all others similarly situated; Bernard Jung Kim, Individually and on behalf of all others similarly situated; Elizabeth Bahn, Plaintiffs–Appellants,v.Korean Airlines Company, Ltd.; Asiana Airlines Inc., Defendants–Appellees.

642 F.3d 685

2011-1 Trade Cases P 77,417

11 Cal. Daily Op. Serv. 4520

2011 Daily Journal D.A.R. 5477

In re KOREAN AIR LINES CO., LTD., ANTITRUST LITIGATION,Soon Ja Chun, Individually and on behalf of all others similarly situated; Bernard Jung Kim, Individually and on behalf of all others similarly situated; Elizabeth Bahn, Plaintiffs–Appellants,

v.Korean Airlines Company, Ltd.; Asiana Airlines Inc., Defendants–Appellees.

No. 08–56385.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Sept. 2, 2010.Filed April 18, 2011.

Patrick J. Coughlin, Joseph D. Daley, Frank J. Janecek, Jr., and Mary Lynne Calkins of Coughlin Stoia Geller Rudman & Robbins LLP, and Christopher M. Burke and Kristen M. Anderson of Scott + Scott LLP, Jared H. Beck and Elizabeth Lee Beck, Beck & Lee, Miami, FL, for the plaintiffs-appellants.Ian Simmons, Sri Srinivasan, Irving L. Gornstein, Alexander Okuliar, Kathryn E. Tarbert, and Anton Metlitsky of O'Melveny & Myers LLP, and Willard K. Tom, Peter E. Halle, J. Clayton Everett, Jr., and Joseph Brooks of Morgan, Lewis & Bockius LLP, for the defendants-appellees.Appeal from the United States District Court for the Central District of California, S. James Otero, District Judge, Presiding.

D.C. No. 2:07–cv–06542–SJO–AGR.Before: ALEX KOZINSKI, Chief Judge, DIARMUID F. O'SCANNLAIN and RONALD M. GOULD, Circuit Judges.

OPINION

GOULD, Circuit Judge:

Plaintiffs Soon Ja Chun, Bernard Jung Kim, and Elizabeth Bahn (“Plaintiffs”), acting individually and on behalf of those similarly situated, appeal the dismissal of their putative class action asserting antitrust claims against Defendants Korean Air Lines Co., Ltd. and Asiana Airlines, Inc. (“Defendants” or “Korean Air and Asiana”). Before its dismissal, their case was one of many similar suits pending against Defendants on the same multidistrict litigation docket. Plaintiffs allege that the fares they paid for airline tickets were unlawfully excessive, in violation of both state and federal antitrust and consumer protection laws. The district court dismissed Plaintiffs' state law claims as preempted by federal law and denied Plaintiffs' motion to amend their complaint to add federal claims, effectively extinguishing Plaintiffs' case. Thereafter, Plaintiffs' complaint was dismissed with prejudice.

We have jurisdiction, pursuant to 8 U.S.C. § 1291, to review the district court's dismissal. We hold, as a matter of first impression, that the Airline Deregulation Act of 1978, 49 U.S.C. § 41713, preempts state regulation of foreign air carriers, and we affirm the district court's dismissal of Plaintiffs' state law claims. We conclude that the district court erred in denying Plaintiffs leave to amend to add federal claims. To the extent that Plaintiffs seek review of the interlocutory case management order governing the pretrial coordination of pending cases in the same multidistrict litigation, however, we lack jurisdiction to review such non-final decisions. We affirm in part, vacate in part, and remand for proceedings consistent with this opinion.

I

Plaintiffs allege that Defendants illegally conspired to impose a surcharge on passenger airfares. Plaintiffs are indirect purchasers of airline tickets; that is, they did not purchase tickets directly from Korean Air or Asiana but instead bought them from direct purchasers such as travel agents and consolidators.

Plaintiffs brought their action for violations of federal antitrust and related state laws in the Central District of California. Their initial complaint sought damages and injunctive relief under the Sherman Act, and under state antitrust and unfair competition laws, on behalf of two putative classes. The case was transferred intradistrict to Judge S. James Otero, to whom similar actions, alleging virtually identical conduct, had been sent for pretrial purposes as part of multidistrict litigation (“MDL”). See In re Korean Airlines Co., Ltd. Antitrust Litig., No. 07–ml–01891 (C.D. Cal. filed Dec. 28, 2007) (hereinafter “MDL No. 1891”).¹ The district court consolidated the case with other pending cases and ordered that all plaintiffs together file an amended consolidated complaint.

Shortly thereafter, Plaintiffs filed an amended complaint, asserting then that their action was “brought only under state laws and only on behalf of indirect purchasers of Korean Air and Asiana passenger tickets” (emphasis in original). In a status report tendered to the district court, Plaintiffs urged that their case differed from the other consolidated MDL cases, in that it was the only case that involved the indirect purchase of tickets from travel agents or consolidators rather than direct purchase from the airlines, and they recommended that the “direct” and “indirect” cases be placed on coordinated but separate tracks for pretrial purposes. At the next status conference, the district court accepted this division and set out parallel briefing schedules for Plaintiffs' indirect purchaser action and the consolidated direct purchaser actions. Plaintiffs' counsel, as the only firm to have brought a case with indirect purchaser plaintiffs, was appointed as interim counsel to pursue indirect purchaser actions. The district court also appointed different co-lead counsel to pursue claims on behalf of the direct purchaser plaintiffs.

Pursuant to the court's briefing schedule, both the direct and indirect purchaser plaintiffs filed second amended complaints. Plaintiffs' Second Amended Indirect Purchaser Class Action Complaint (“Original Second Amended Complaint”) asserted claims predicated not only on state antitrust and unfair competition laws, as their first amended complaint had done, but also on the Sherman Act. The direct purchaser plaintiffs' second amended complaint alleged violations of federal antitrust laws only. As clarified in a subsequent stipulation made to the district court, however, the direct purchaser plaintiffs' second amended complaint included within its proposed class “persons who qualify as direct purchasers under Illinois Brick [ Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977) ] or who would be deemed to be falling within an exception under Illinois Brick so that they have a claim as a direct purchaser under the Sherman Act.” Stated another way, the direct purchasers' consolidated complaint sought to pursue federal claims for direct purchasers as well as for indirect purchasers who had standing under an Illinois Brick exception.

Three days after Plaintiffs filed their Original Second Amended Complaint, the direct purchaser plaintiffs submitted a proposed case management order (“CMO”) intended to encompass all actions asserting Sherman Act claims. The CMO asserted that it would apply to:

all pending actions and all actions later instituted in, removed to, or transferred to this Court as part of MDL No. 1891 or [that] are otherwise related to these actions (collectively, “the Consolidated Actions”) including, but not limited to, actions asserting claims under Section 1 of the Sherman Act, 15 U.S.C. § 1, or foreign law for alleged fixing of prices for passenger air transportation to or from the Republic of Korea, except for actions brought on behalf of indirect purchasers of passenger air transportation under the laws of the several states of the United States, such as Soon Ja Chun, et. al v. Korean Air Lines Co., Ltd., et al., Case No. CV 07–06542 SJO (AGRx). All such indirect purchaser actions shall be coordinated for pretrial purposes with the Consolidated Actions and subject to a separate case management order.

Plaintiffs objected to the CMO on procedural and substantive grounds, contending that they had not been consulted before its filing and that, in light of their Original Second Amended Complaint's reassertion of federal claims, it “potentially usurp[ed] the role of interim class counsel for indirect purchasers.” Plaintiffs filed their own proposed case management order (“proposed CMO”) to govern actions of indirect purchaser plaintiffs.

Through a minute order, the district court approved the direct purchaser plaintiffs' CMO, rejected Plaintiffs' proposed CMO, and clarified its intentions regarding the appointment of interim lead counsel, explaining that it “intended that the Indirect Purchaser Plaintiffs would only represent those claims arising under state law.” The district court struck Plaintiffs' Original Second Amended Complaint and directed Plaintiffs to file an amended complaint consistent with its order.

Plaintiffs thereafter filed a revised complaint (“Second Amended Complaint”) asserting only state law claims, based on California unfair competition and unfair business practices laws, as well as on similar laws of nineteen other states and the District of Columbia. Defendants moved to dismiss the complaint, arguing, among other things, that Plaintiffs' claims for relief arising under state law are preempted by the express preemption provision of the Airline Deregulation Act of 1978 (“ADA”), 49 U.S.C. § 41713. Plaintiffs opposed the motion and later requested leave to reinstate their Sherman Act Claims.

The district court denied Plaintiffs' request to add Sherman Act claims, reaffirming its previous order “that the Indirect Purchaser Plaintiffs may only represent those claims arising under state law.” The next day, the district court granted Defendants' motion to dismiss on preemption grounds. In a footnote, the court reiterated that it had denied Plaintiffs' request for leave to add claims under the Sherman Act on the basis of its “conclu[sion] that Plaintiffs may only assert state law claims.”

Plaintiffs timely appeal the dismissal of their California state law claims, arguing that they are not preempted by federal law.² Plaintiffs also argue that denial of leave to amend was error and that they should be allowed to reinstate their federal antitrust claims on behalf of indirect ticket purchasers.

II

We first address Plaintiffs'...