People by Abrams v. Trans World Airlines, Inc.
| Decision Date | 01 May 1990 |
| Parties | The PEOPLE of the State of New York, by Their Attorney, Robert ABRAMS, Attorney General of the State of New York, Petitioner, v. TRANS WORLD AIRLINES, INC., Respondent. |
| Court | New York Supreme Court |
John Corwin, Robert Abrams, Atty. Gen., New York City, for petitioner.
Marc Dreier, Fulbright Jaworski & Reavis McGrath, New York City, for respondent.
This action raises the issue of federal preemption of airline advertising on price and its relation to New York State's right to protect its consumers from purportedly deceptive advertising. These issues arise from the Attorney General's motion to enjoin T.W.A. from placing advertisements in that it does not state the full roundtrip price of an airline flight. The Attorney General also seeks to restrain T.W.A. from including additional surcharges, such as for fuel, departure taxes, federal inspections, security surcharges since in the advertisements these additional surcharges are noted with an asterisk and mentioned in small type at the bottom of the advertisement. 2
T.W.A. seeks to stay the proceeding before this Court on the basis that there is a pending action brought by it in the United States Court For the Western District of Texas in which the Attorney General of New York has been joined as a party. It states that the issues before the federal court in Texas concern the preemption by the Federal Aviation Act, the Airline Deregulation Act of 1978, 49 U.S.C.App. § 1301 et seq. of Texas' attempt to prevent the same price-related advertising that New York seeks to foreclose in this action.
On September 14, 1988, TWA ran a full page advertisement in The New York Times and other New York newspapers announcing a package trip to London, England that included airfare, hotel, and a rental car. The advertisement's headline read: "London Roundtrip + Hotel + Car = $298." The dollar figure appeared in boldface type approximately five inches high. According to the State, the headline implied that a consumer could travel to London, stay in a hotel, and rent a car for $298.
The small-print text below the headline and a footnote in minuscule type at the bottom of the page indicated that the $298 figure applied to a hotel in the English countryside, not London, and was available only to travelers who first paid for three consecutive nights in a London hotel. Although the footnote indicated that the package required a seven day minimum stay, the text stated that the free rental car applied for only three days, after which the traveler would have to pay "only $17 a day." The footnote stated that the fare did not include United States departure tax, security surcharge, and custom fees totaling $23, and that the car rental charge omitted fuel surcharges, taxes and optional items such as an automatic transmission. According to the State, these additional charges increased the package's cost to a minimum of $792 [$321 (airfare) + $450 (hotel) + $21 (car)] and a maximum of $1,418 [$321 (airfare) + $867 (hotel) + $253 (automatic transmission car) ].
In March 1989, TWA ran another advertisement in The New York Times and other New York newspapers announcing packages to London and other overseas cities. The advertisement contained a large-print headline saying: "Let our low fare bring back the good old days," small-print text and a smaller-print footnote setting forth the applicable restrictions and additional charges, and a boxed insert listing the one-way fares to various destinations, including London ($149), Rome ($299), Paris ($282), Milan ($264), Madrid ($246), Tel Aviv ($339), Lisbon ($246), Athens ($309), Frankfurt ($239), and Amsterdam ($239). The advertisement failed to indicate that--although the figures were for one-way fares--the prices applied only to roundtrip purchases. The small-print set forth the various restrictions and additional charges described above.
In December 1987 the National Association of Attorneys General adopted guidelines which characterized the airline industry's practice of unbundling airfare surcharges as a deceptive practice. Unbundling consists of not including certain fees in the total advertised fare. T.W.A. separately discloses these surcharges in a separate section in smaller print captioned "Fare Conditions." Under 49 U.S.C.App. § 1381, the Department of Transportation has the authority to regulate unfair or deceptive practices in the airline industry. The Department of Transportation has considered the issue of unbundled fares. It has found that these advertisements are not unfair or deceptive so long as they are clear and the total amount paid by the customer can be easily determined adding the separate surcharges, 14 C.F.R. 399.84, orders 85-12-68, 88-3-25, 88-8-2. 3 On November 14, 1988, the Attorney General of Texas sent letters to T.W.A. and other airlines advising them that the practice of not including surcharges in the total advertised fare was a violation of the NAAG guidelines and that if the practice continued he would commence prosecution. On January 23, 1989 T.W.A. and other airlines filed suit in the U.S. District Court For the Western District of Texas to enjoin the Texas Attorney General from enforcing the Texas Deceptive Practices Act based upon a claim that the Texas statute was preempted by the federal law and regulations. On January 30, 1989, Judge Walter Smith granted the injunction and found the airlines had established a likelihood of federal preemption, T.W.A., Inc. v. Mattox, 712 F.Supp. 99 [W.D.Tex.1989]. On March 16, 1989, T.W.A. and the other airlines sought to broaden this injunction to include the other 33 attorneys general, including Attorney General Abrams, who had adopted the NAAG guidelines on airline advertising and who appeared in a hearing. They also sought to amend their complaint to add the other 33 attorneys general as defendants. This motion was granted on April 27, 1989 to the extent of preventing commencement of new actions. However, in the interim period on March 29, 1989 Attorney General Abrams commenced this action in New York State Supreme Court to enjoin T.W.A. pursuant to Executive Law, § 63 [12] from unfair and deceptive practice in airfare advertisements. The action was removed to the United States District Court For the Southern District of New York on April 5, 1989. Judge Robert Sweet remanded the case to this court by order dated December 5, 1989, People of the State of New York v. Trans World Airlines, Inc., 728 F.Supp. 162 [D.C.N.Y.1989]. The Texas federal court's order operated prospectively and did not bar continuation of this action against T.W.A. The Fifth Circuit Court of Appeals has affirmed Judge Smith's order that enjoined any new suits based upon the NAAG guidelines, 897 F.2d 773. It held that T.W.A. had established that 49 U.S.C.App. § 1305 explicitly preempted state deceptive advertising laws relating to airline fare advertisements.
Federal law may preempt state law in three ways. Congress may explicitly define the extent to which it intends to preempt state law, see Shaw v. Delta Airlines, Inc., 463 U.S. 85, 95-96, 103 S.Ct. 2890, 2898-2900, 77 L.Ed.2d 490 [1983]. Secondly, Congress may implicitly indicate an intention to preempt state law in a particular manner. This intention may be inferred by the pervasiveness of the federal regulation in the area or if the federal interest in the area is dominant. Finally, even in those areas where state law is not completely displaced, it is preempted to the extent it conflicts with federal law by virtue of the...
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