On March 13, the U.S. Court of Appeals for the 11th Circuit rejected the latest attempt at circumventing federal preemption to creatively assert a garden-variety consumer fraud claim. As you may know from your family’s holiday vacation, Mexico imposes a Tourism Tax which is collected by airlines at the point of sale. Mexican citizens, passengers under the age of two, and foreigners with resident status in Mexico are exempt from this tax. In Alamanza et al. v. United Airlines et al., plaintiffs sought to represent a class of exempt passengers from whom the carriers nevertheless collected the tax, asserting violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961-68. Yes, seriously, the RICO Act. While the opinion affirming the District Court’s dismissal sets out a very interesting discussion of what constitutes an enterprise under RICO, the collective sigh of relief you heard the airline industry breathe was because this latest attempt at getting around Airline Deregulation Act preemption, its most sacrosanct defense, has failed. Plaintiffs claimed that the airlines charged them for a tax they did not owe, failed to disclose that they did not owe the tax, and failed to conspicuously advertise the procedure for an exempt passenger to obtain a refund of the tax. Why, you ask, did plaintiffs file a RICO case rather than a simple consumer fraud suit? They did so because they had to rely on a federal law. The Airline Deregulation Act of 1978 contains an express preemption provision which prohibits a state from “enact[ing] or enforc[ing] a law, regulation or other provision having the force and effect of law related to a price, route, or service of an air carrier[.]” 49 U.S.C. § 41713(b)(1). As a result, the industry has seen a long line of creative attempts to turn straightforward consumer fraud claims attacking a carrier’s pricing or the way it describes that pricing into something they are not in order to avoid the preemption bar. Fortunately for airlines, the Alamanza court has, for the moment, allayed some concerns that RICO could spell the end of ADA preemption, which had been stoked by the 11th Circuit’s earlier holding in Ray v. Spirit Airlines, Inc., 767 F.3d 1220 (11th Cir. 2014).
To review the Court’s opinion, click here.