This spring, the U.S. Supreme Court granted certiorari to review two decisions that significantly affect the aviation industry, namely airline immunity under the Aviation and Transportation Security Act (ATSA) and preemption under the Airline Deregulation Act (ADA). Such review may result in reversal of the controversial decisions discussed below and provide much-needed guidance to the lower courts in these areas. Both cases will be argued during the October 2013 Term, with decisions expected in 2014.
Air Wisconsin Corp. v. Hoeper, No. 12-315
On June 17, 2013, the Court granted certiorari to review a defamation case involving application of the immunity provision in the Aviation and Transportation Security Act (ATSA). The ATSA, enacted after the terrorist attacks of September 11, 2001, is responsible for various measures to strengthen our national security system, including the creation of the Transportation Security Administration (TSA). Significantly, the ATSA recognizes that airline employees are often the first to receive and report information regarding potential security threats. In addition to requiring airlines to promptly report potential threats to TSA, the ATSA grants airlines and their employees broad immunity from liability subject to the narrow exception where the statements are made "with actual knowledge that the disclosure was false, inaccurate, or misleading" or "with reckless disregard as to the truth or falsity of that disclosure."1
In the Air Wisconsin case, the airline had reported its concerns about the air travel of a soon-to-be-terminated pilot who, during the his fourth proficiency test, exhibited irrational behavior and directed angry outbursts at his instructor. Importantly, the pilot was a Federal Flight Deck Officer (FFDO), which means he was authorized to carry a TSA-issued firearm. An Air Wisconsin manager with knowledge of the pilot's behavior communicated to the TSA that the pilot was about to travel and had been terminated that day, that there were concerns about his mental stability and that, as an FFDO, he might be armed. The pilot sued Air Wisconsin for defamation and was awarded $1.4 million in a jury verdict.
The Colorado Court of Appeals affirmed the verdict, and the Colorado Supreme Court, in a sharply divided 4-3 opinion, also affirmed. Holding that the issue of immunity was a question of law for the court, Colorado's high court determined that Air Wisconsin was not entitled to immunity under the ATSA because the manager should have used more precise wording in reporting the potential threat. A strongly worded dissent criticized the majority for holding that ATSA immunity is lost when a statement is made recklessly even though it is true, for making "hair-splitting distinctions" in the wording of the report that made no difference to TSA's analysis and for undermining the ATSA's objective in urging reporting of potential security threats.
The Supreme Court granted certiorari on the issue of whether a court may deny ATSA immunity without deciding whether the airline's report of suspicious conduct was materially false.
Northwest Airlines, Inc. v. Ginsberg, No. 12-462
On May 20, 2013, the Supreme Court granted certiorari to review a controversial preemption decision by the U.S. Court of Appeals for the Ninth Circuit, which held, in contrast to courts within and outside the Ninth Circuit, that the claim for breach of the implied covenant of good faith and fair dealing is a common law contract claim that is not preempted by the Airline Deregulation Act (ADA).2 In Ginsberg, a Northwest frequent flyer member sued the airline for negligent and intentional misrepresentation, breach of contract and breach of the implied covenant of good faith and fair dealing for his removal from the frequent flyer program, which, by its terms, permitted Northwest, in its "sole judgment," to do so.
Although the district court had dismissed the breach of contract claim for failure to state a claim and the misrepresentation and implied covenant claims as preempted by the ADA, the Ninth Circuit reversed as to the implied covenant claim (the only claim on appeal), finding that this claim was part of the contract laws of the states, and one that does not interfere with the deregulatory purpose of the ADA. The Ninth Circuit followed its prior, pre-Wolens decision in West v. Northwest Airlines,Inc., 995 F.2d 148 (9th Cir. 1993) where it held that the breach of the covenant of good faith and fair dealing was too tenuously connected to airline regulation to trigger preemption. Additionally, the circuit court rejected arguments that this implied common law claim impermissibly enlarges the contract's terms in contravention of the holding in American Airlines, Inc. v. Wolens,3 which expressly limits contract claims to those arising from the parties' "self-imposed undertakings."
The circuit court further held that the claim does not relate to the airline's "prices" and "services" and that the district court used an "overly broad" definition that would effectively subsume all breach of contract claims. This reasoning is at odds with Supreme Court precedent, notably the Wolens case, where the Court found claims arising from an airline's changes to its frequent flyer program related to an airline's services and prices. In addition, the Ninth Circuit has been criticized by the government and other circuits for continuing to follow a narrow definition of "services" as set forth in its much-outdated opinion, Charas v. Trans World Airlines, Inc.4
The Supreme Court granted certiorari on the issue of whether the Ninth Circuit erred in holding that the implied covenant of good faith and fair dealing was not preempted under the ADA because such claims are categorically unrelated to a price, route or service, notwithstanding that the claim arises out of a frequent-flyer program and manifestly enlarges the terms of the parties' contract.