Thursday, December 5, 2013
Having had a few days to review Tuesday's oral arguments in Northwest v. Ginsberg, I'm ready to share some initial thoughts. I should begin with a quick overview of the case for anyone who isn't familiar. In 2008 Northwest Airlines informed Ginsberg that he would be denied the privileges accompanying his platinum elite status in the airline's frequent flier program and would lose his accumulated miles because he had abused the program through repeated complaints and requests for upgrades and other compensation. Ginsberg's suit alleging that Northwest actions amounted to a breach of contract was dismissed by the district court, largely because the terms of the frequent flier agreement granted the airline sole discretion over whether a flier's actions warranted expulsion from the program. Ginsberg, had however, put forth an additional claim that Northwest violated the implied covenant of good faith and fair dealing recognized under Minnesota common law. This claim was dismissed by the district court which held that such claims were preempted by the Airline Deregulation Act (ADA). On appeal, the Ninth Circuit overruled the district court and ruled that the ADA did not preempt claims brought under the implied covenant of good faith and fair dealing. It is on this point alone that the Supreme Court heard arguments earlier this week, so there won't be any forthcoming decisions on whether Northwest actually breached its contract or violated an implied covenant. Rather the legal question at issue concerns defining the scope of the ADA's preemptive effect.
The ADA prohibits States from enacting or enforcing laws, regulations or other provisions related to price, routes or services. This issue was last addressed by the Supreme Court in American Airlines v. Wolens, which held that the ADA did not preempt common law contract claims in which a plaintiff is "seeking recovery solely for the airline's alleged breach of it's own self-imposed undertakings."
The first, and easiest conclusion to draw from the oral arguments is that the Supreme Court is likely to issue a reversal of the Ninth Circuit opinion. The Ninth Circuit court attempted to analyze the intent of the ADA, concluding that the law was only intended to preempt the types of direct regulation of prices, routes and services that had been common at the State level prior to the ADA's passage. This conclusion whatever it's merits, is difficult to square with the existing Supreme Court precedent set in Wolens, which ruled the ADA preempted the application of a consumer fraud statute to frequent flier programs because of the resulting effect on airline prices. At oral argument the Supreme Court justices gave no consideration to the Ninth Circuit's narrower interpretation of the ADA's preemptive intent. Instead the justices seemed most concerned with applying the Wolens standard to this case and perhaps articulating a new standard which would arguably broaden the ADA's preemptive effect.
It is that latter question, that is most difficult to predict. What will be the standard for determining ADA preemption going forward? My guess is that it won't be significantly altered from Wolens. Most of the justices, as well as the parties, appeared to agree that implied covenants of good faith and fair dealing would not be preempted if used as merely a tool of contract interpretation within a routine breach of contract claim, but would be preempted in cases where they introduced public policy concerns separate from the terms of the contracting parties' voluntary agreement. Justices Roberts and Breyer sounded the most interested in a new standard with broader preemptive effect. Roberts expressed repeated concern that allowing preemption to be determined on a state-by-state basis depending on whether implied covenants were used as interpretive tools or public policy instruments would undermine the uniformity intended by the ADA. Breyer, who helped create the ADA during his time as counsel for the Senate Judiciary Committee, worried about States' ability to regulate airline prices under the guise of contract law, suggesting that even that area of State law claims left available under Wolens might be too broad.
Finally, despite Wolens and now Ginsberg, there remains a real possibility that this won't be the last time the Supreme Court addresses the ADA's preemptive effect on lawsuits involving frequent flier programs. Multiple justices seemed perplexed by the implications of frequent flier programs' expansion into cross-industry consumer benefits operations, where members can earn and redeem points by using credit cards and hotels unconnected to their use of airline services. The justices sounded inclined to reserve the question as to how far the ADA should be read to preempt claims brought against these programs if they are found to promise contractual benefits more expansive than mere airline price discounts, because the argument was not advanced in Ginsberg's complaint. With a different set of facts, we could be back here again in another ten years.
Wednesday, December 4, 2013
The Supreme Court heard oral arguments in Northwest v. Ginsberg yesterday. At issue is whether the Airline Deregulation Act preempts a passenger's state law claim that the airline violated the implied covenant of good faith and fair dealing. The full transcript of the oral arguments is available here. SCOTUSblog's case file is an excellent source for background reading on the case. Tomorrow we will post our thoughts and reactions to the oral arguments, and perhaps offer a prediction about the eventual ruling.
Monday, December 2, 2013
The big aviation news item over the weekend was last night's unveiling of Amazon's Prime Air concept, which would utilize unmanned aerial vehicles to deliver packages within 30 minutes. In a pleasant surprise, a fair share of the subsequent reporting has been appropriately skeptical regarding the near-term feasibility of such an enterprise. The FAA roadmap for integrating unmanned vehicles into U.S. domestic airspace doesn't currently envision widespread usage by private commercial actors in the near future, beginning instead with adoption on a limited basis by public entities such as police and fire departments. More importantly, the FAA will likely require the first iteration of civilian drones to be remotely piloted, as opposed to the completely autonomous operation Amazon envisions. So why did Amazon begin promoting a new business concept that faces such significant obstacles before its eventual realization? The most intriguing answer I've seen to that question was put forth by NY Magazine's Kevin Roose, who suggested that Amazon was trying to garner popular enthusiasm for the idea in order to increase public pressure on the FAA not to impede progress. Given public queasiness about drones, its possible such a campaign could backfire if that is indeed Amazon's intent. However, Roose is right to observe that UAV regulation is a largely under-the-radar public policy issue that could only benefit from more public attention. If Prime Air helps to generate that attention, then we should be grateful.
Tuesday, November 19, 2013
Thursday, November 14, 2013
The latest issue of Issues in Aviation Law and Policy is now available. To see a list of articles and authors, please refer to this earlier post. Subscriptions can be ordered through the website of DePaul University's International Aviation Law Institute or by filling out this form.
Tuesday, November 12, 2013
The breaking news this morning is that the U.S. Department of Justice has reached an agreement with American Airlines and US Airways to allow the two carriers to proceed with their proposed merger. The agreement is now pending court approval. The divestitures are fairly extensive compared to the concessions required in previous airline mergers. The airlines will have to sell 104 slots (52 pairs) at Reagan Washington National, 34 (17 pairs) at New York LaGuardia, and two airport gates and the associated ground facilities at each of Boston Logan, Chicago O'Hare, Dallas Love Field, Los Angeles International and Miami International. The slots at Reagan National aren't a surprise, and speculation that a deal would also require slots at LaGuardia grew last week as details of the negotiations leaked out. But the divestitures from non-slot-constrained airports break new ground, though the DOJ has previously recognized that entry can be difficult at even non-slot-constrained hub airports, and cited that as a consideration in its merger analysis. The DOJ, which will have approval authority over the sale of the slots and gates, has expressed a hope that the assets will end up with LCCs such as Southwest and JetBlue.
Thursday, November 7, 2013
Today the U.S. Federal Aviation Administration released a forward-looking set of plans for the integration of unmanned aircraft systems (UAS) into the nation's airspace. The so-called "roadmap" is intended to inform the public about upcoming regulatory and procedural steps the agency will be taking to enable increased UAS operations over the coming decade. The entire roadmap can be downloaded in pdf form here.
Wednesday, November 6, 2013
Reports of settlement talks between the DOJ and American Airlines and US Airways leaked out earlier this week. It appears to be the government that's pushing the settlement story at the moment, suggesting the DOJ at the very least wants to create a public impression that it made a reasonable attempt to resolve the matter before reaching trial. It's probable that the DOJ actually does want to settle the case, as its prospects of winning in court are highly uncertain. Attorney General Eric Holder's remarks suggest that the DOJ is seeking slot divestitures at Washington Reagan National, which was expected, and at least one other airport, likely New York LaGuardia, which comes as a surprise. Slot divestitures alone would fail to address many of concerns raised in the DOJ complaint, leading to speculation that the merged airline may also be required to continue US Airways' Advantage fares program for a specified duration post-merger.
Wednesday, October 30, 2013
The ongoing controversy over the public revelation that the United States security agencies have been spying on foreign leaders such as German Chancellor Angela Merkel, provides an excellent excuse to share the following excerpt from Jordan A. Schwarz's fine biography of Adolf Berle the president of the 1944 Chicago Conference that produced the Convention on International Civil Aviation. According to Schwarz, compromise between the British and American delegations to Chicago was made more difficult by British awareness that the Americans were intercepting communications between London and the British delegation. From page 250 of Liberal: Adolf A. Berle and the Vision of an American Era:
Yet Beaverbrook knew that London wanted to give Swinton new instructions for compromise, but what he could not say was that London dared not send them because it knew that the Americans were intercepting their messages to Swinton and tapping the telephones. Years later Masefield would recall that "We got totally confused. We had to cover up and reverse ourselves." Beaverbrook did not give Swinton new instructions or advise him of Roosevelt's interest in the Canadian compromise, "Nor could he be told with the Americans listening." London still hoped to bargain around the Canadian compromise and did not want to reveal its flexibility to the Americans. Even Swinton had a hint of the American spying; he later told Beaverbrook that, although he did not show Berle any telegrams from London, "he thought that Mr. Berle was well aware of them. The subject was not pursued any further."
Tuesday, October 29, 2013
The Volume 13, Autumn 2013 issue of the International Aviation Law Institute's journal, Issues in Aviation Law and Policy (IALP) will be available soon. Highlights include a lead commentary from Ruwantissa Abeyratne, recently retired from years of service to ICAO, which provides an unsparing critique of the organization and recommendations for areas in which it can better serve international aviation going forward. Additionally, this issue contains one of the earliest published analyses of the DOJ's challenge to the AMR/US Airways merger and a rare English-language article on the development of civil aviation policy in Kosovo. The full table of contents is as follows:
Ruwantissa Abeyratne, Reinventing ICAO’s Role in Economic Regulation – A Compelling Need
John Q. Mulligan, The End of Prosecutorial Discretion for Airlines: The DOJ’s Challenge to the AMR/US Airways Merger
Nithya Narayanan, Unwinding the Vicious Loop of Aircraft Finance Leases
Jeffrey J. Immel, The Montreal Convention and Recovery for Free-Standing Emotional Distress Under Article 17
P. Paul Fitzgerald, In Search of Greener Commercial Aviation
Md. Tanveer Ahmad, The CJEU’s Radical ETS Judgment: Destabilizing the Chicago Convention System
Eset Berisha, At the Boundaries of the Chicago Convention – ICAO’s Role in Civil Aviation Affairs in Kosovo
Daniel Friedenzohn, Delayed Flights and Delayed Action: The U.S. Department of Transportation’s Tarmac Delay Regulations and Their Impact on Air Travel
Blog readers interested in subscribing to IALP, ordering back issues, or browsing a list of published articles may do so at the Institute's website here.
Friday, October 11, 2013
The European Commission has defied recent precedent by deciding in favor of a proposal by Greece's Aegean Airlines to acquire Olympic Air, creating perhaps an interesting point of comparison to the U.S. Department of Justice's challenge to the proposed merger between American Airlines and US Airways which similarly broke with recent decisions though in the opposite direction.
The Commission had previously prohibited a merger between the two carriers in 2011, and by opening up a phase II investigation into the most recent proposal, provided cause to believe it would again deny the merger. The Commission has been somewhat forgiving of cross-border airline consolidation within the EU, but has taken a more skeptical view toward mergers between two carriers within the same member state, something that can be seen in both its previous decision on Aegean-Olympic as well as its multiple rejections of a combination between Ireland's Ryanair and Aer Lingus. In a speech explaining the decision, Vice President Joaquin Almunias indicated that the Commission has not changed its philosophy and remains concerned about the likely anticompetitive effects this merger will have on certain routes. In this instance though, the Commission appears to have concluded that its hand were tied by Olympic's precarious financial situation, creating a classic "failing firm defense" case. The key paragraph from the speech:
The detailed investigation revealed that, in contrast to its situation 2 years ago, Olympic today is simply not able to continue operating outside of Aegean. Had Olympic been able to continue operations outside the Aegean group, the decision would have been a prohibition. But now, because of both the on-going economic crisis in Greece and Olympic's very difficult financial situation, Olympic would be forced to leave the market soon, with or without merger. If it were not acquired by Aegean, Olympic would simply shut down. This means that on the 5 problematic routes, Aegean would remain in any event the only player.
Wednesday, October 9, 2013
Tuesday, October 8, 2013
Last week, as is done every three years, the ICAO general Assembly elected a new Council. This is highly important as the Council sets the policy agenda for the organization. The importance is magnified this time around because the incoming Council will oversee the development of the global emissions plan to be introduced in 2016.
The Council election process is segregated into three tiers, with the first grouping consisting of States of chief importance in air transport. All of the States in this tier retained their place on the Council. The second grouping consists of States which make the largest contribution to the provision of facilities for international civil air navigation (excluding States in tier 1). Norway, Portugal and Venezuela were newly elected in this grouping. The third tier is used to ensure adequate geographic representation of all areas making up the ICAO community. Most of the turnover on the Council occurs within this grouping. This year, Bolivia, Chile, Dominican Republic, Kenya, Libya, Nicaragua, Poland, and United Republic of Tanzania were newly elected within this category.
The full Council, including incumbents and newly elected States, is as follows: Australia, Argentina, Bolivia, Brazil, Burkina Faso, Cameroon, Canada, Chile, China, Dominican Republic, Egypt, France, Germany, India, Italy, Japan, Kenya, Libya, Malaysia, Mexico, Nicaragua, Nigeria, Norway, Poland, Portugal, Republic of Korea, Russian Federation, Saudi Arabia, Singapore, South Africa, Spain, United Arab Emirates, United Kingdom, United Republic of Tanzania, United States, and Venezuela.
Friday, October 4, 2013
Wednesday, October 2, 2013
Tuesday, October 1, 2013
Texas, one of six states to join the Department of Justice's complaint against the proposed American Airlines/US Airways merger, has withdrawn from the lawsuit after the carriers agreed to continue existing services to the state's airports. Texas' withdrawal is unlikely to have a significant bearing on the trial.
Also today, the presiding judge has denied the DOJ's request for a postponement due to the federal government shutdown. The DOJ attorneys assigned to the case are now expected to continue working on the case despite the shutdown.
Friday, September 27, 2013
Thursday, September 26, 2013
Reuters has a report out today describing the latest developments regarding ICAO's efforts to manage aviation emissions. The proposal currently under consideration appears to be a commitment to some form of global market-based-mechanism, the details of which would be drafted and finalized by 2016, and which would take effect beginning in 2020.
According to the report, there remains disagreement about the interim rules on emissions regulation. As has previously been reported, the EU would be permitted to keep its scheme, but only charge allowances to foreign carriers for the portions of flights over the collective territory of EU member states. The United States is reportedly objecting to plans that would exempt many developing countries from the obligation to comply with the EU regulations.
Wednesday, September 25, 2013
Tuesday, September 24, 2013