Tuesday, October 13, 2009

A Twist on Preemption

Two weeks ago, a federal court in New Mexico ruled that enforcement of the State's liquor laws with respect to airlines is not preempted by the 1978 Airline Deregulation Act (ADA).  See US Airways, Inc. v. O'Donnell, Civ. No. 07-1235 (D. N.M. Sept. 30, 2009) (order granting summary judgment).  Under the Act, as codified at 49 U.S.C. ยง 41713(b)(1), "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 the relevant federal statute.  This is not the first "high profile" ADA preemption case to come up recently.  Last year, in Air Transp. Assoc. of Am. v. Cuomo, 520 F.3d 218 (2d Cir. 2008), a court struck down a New York State "Passenger Bill of Rights" requiring airlines to provide passengers with basic amenities such as "electric generation service to provide temporary power for fresh air and lights"; "waste removal service in order to service the holding tanks for on-board restrooms"; and "adequate food and drinking water and other refreshments."  See id. at 220 (quoting the statute).  The court ruled that requiring their provision "to passengers during lengthy ground delays does relate to the service of an air carrier and therefore falls within the express terms of the ADA's preemption provision. As a result, the substantive provisions [of the N.Y. statute] are preempted."  Id. at 223.

In the US Airways case, the issue at hand was whether or not New Mexico's liquor licensing regime could be enforced against US Airways.  Under the licensing statute, the State has the power to issue, suspend, or revoke a license to sell liquor within--and according to the court--over its territory.  The court properly noted that the Second, Fifth, Seventh, and Eleventh Circuits have uniformly "adopted a definition of services [under the ADA] that includes the provision of beverages as a 'service[.]'"  US Airways, Inc., at 8.  One Circuit, the Ninth, has departed from this recognition.  Id.  On that basis, the court in the instant case opted to comb the history of the ADA in order to determine whether or not a beverage-inclusive understanding of "service" was warranted.  While it rightly noted that the focus of the ADA was on the economic operation of airlines, never once in the opinion did it emphasize the role of airline services--understood broadly--in facilitating economic competition both before and after the ADA was passed.  Without much in the way of justification, the court blithely followed the Ninth Circuit that "service" should be understood to "refer[] to such things as the frequency and scheduling of transportation."  Id. at 10; but see Eric E. Murphy, Comment, Federal Preemption of State Laws Relating to an Air Carrier's Services, 71 U. Chi. L. Rev. 1197 (2004) (persuasively arguing for a broader definition of "services" consistent both with the ADA and Supreme Court precedent).

Even if the court in US Airways, Inc. been inclined to adopt a broader definition of "services," it still had recourse to the canon "that 'where an otherwise acceptable construction of a statute would raise serious constitutional problems, the Court will construe the statute to avoid such problems unless such construction is plainly contrary to the intent of Congress.'"  US Airways, Inc., at 11 (quoting Edward J. DeBartolo Corp. v. Florida Gulf Coast Bldg. & Constr. Trades Council, 485 U.S. 568, 575 (1988)).  In the court's view, Section 2 of the 21st Amendment of the Constitution prohibits preempting the statute on the grounds that it would violate New Mexico's right to "virtually complete control over whether to permit importation or sale of liquor and how to structure [its] liquor distribution system."  Id. at 12 (quoting California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 110 (1980)) (internal quotations omitted). 

It will be interesting to see what US Airways chooses to do in response to the ruling.  One of US Airways's hubs is in Phoenix, Arizona.  Clearly any flight bound in or out of that hub which has to cross New Mexico's airspace will be curtailed from selling liquor, at least temporarily.  Will this be enough to dissuade passengers from flying on the carrier?  Since deregulation took effect, consumers appear to be overwhelmingly more concerned with access to affordable and frequent flights than any particular service offering.  (Exceptions still exist, particularly for business class passengers on long-haul flights.)  That doesn't mean they don't care for a drink or two (or three).  While the provision of alcoholic beverages is an obvious revenue producer for the airlines, there doesn't appear to be any evidence (yet) that it is in any way tied to significant consumer demand for a particular airline's services.  What ought to worry US Airways and, indeed, all carriers operating within the U.S., is if this ruling results in patchwork enforcement of individual State liquor rules with respect to the airlines.  If this occurs, it's likely that a more concerted challenge to these individual State licensing and oversight schemes may be in order.

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