Saturday, May 26, 2018
This, the third installment of my air ambulance series—see the other entries here, and here, is a preemption discussion. I’m sorry to inflict it upon you. Feel free to email me privately at the University of Wyoming for clarification. I’ll almost always respond. Really.
Air ambulance carriers charge a lot. So much so that state workers’ compensation regulators try to make them charge less for transporting injured workers within their respective state boundaries. Thus far, that attempt has been blocked by the preemption provision of the Airline Deregulation Act of 1978, 49 U.S.C.App. §1305(a)(1), which expressly pre-empts the States from “enact[ing] or enforc[ing] any law, rule, regulation, standard, or other provision having the force and effect of law relating to rates, routes, or services of any air carrier . . . ” For purposes of this discussion assume that air ambulances are air carriers within the meaning of the Act.
It is common to hear commentators assert that every federal court that has considered the air ambulance preemption question has concluded that the Airline Deregulation Act preempts state attempts to regulate the price of air ambulance services. But it is probably more accurate to say that only two federal circuits, the 10th circuit in EagleMed, LLC v Cox, 868 F.3d 893 (10th Cir. 2017); and the 11th Circuit in Bailey v. Rocky Mountain Holdings, LLC, --- F.3d ---- (11th Cir. 2018), have dealt specifically and substantively with the air ambulance preemption provision enacted in 1994 (quoted and linked above). The other “modern era” (post-1994) reported air ambulance circuit court cases, Air Evac EMS, Incorporated v. Texas, Department of Insurance, Division of Workers' Compensation, 851 F.3d 507 (10th Cir. 2017) and California Shock Trauma Air Rescue v. State Compensation Ins. Fund, 636 F.3d 538 (9th Cir. 2011) concerned jurisdictional or standing issues.
The Airline Deregulation Act preemption language is broad and was meant to be. Essentially, all state laws “relating to” air carriers’ rates, routes, or services are effectively nullified. The language is sufficiently broad, in fact, that plaintiffs have thought it necessary to argue that as to certain state law claims it is “trumped” by another federal law, the McCarran–Ferguson Act, which provides in relevant part: “No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance.” There is more to say about this argument (and about the McCarran-Ferguson Act) than is presently necessary for my purposes. It is enough to say that EagleMed and Bailey rejected the argument because they concluded that setting of air ambulance fee schedules is not “regulation of the business of insurance,” an explicitly protected state sphere. This development was perhaps presaged in the 2003 Supreme Court ERISA case, Kentucky Assoc. of Health Plans, Inc. v. Miller, 538 U.S. 329 (2003). That analysis is too long to include here but, in brief, the Court in that case ceased using the McCarran-Ferguson Act as an interpretive aid for understanding the scope of ERISA’s insurance savings (of state law from preemption) provision.
The lead U.S. Supreme Court case on Airline deregulation Act preemption is Morales v. Trans World Airlines, Inc., 504 U.S. 374 (1992), a case in which airlines sued to enjoin state attorneys general from enforcing state deceptive practices laws against airlines’ advertising. The most important thing to know about Morales is that it utilized Employee Retirement Income Security Act of 1974 (ERISA) preemption principles to assess whether the Airline Deregulation Act preempted state law. Why? ERISA preempts all state laws “relating to” employee benefit plans. The Airline Deregulation Act preempts all state laws “relating to” carrier rates, routes or services. Very similar preemption language; very similar preemption analysis. The Court continued the ERISA analogy in American Airlines v. Wolens, 513 U.S. 219 (1995).
Under ERISA, the Supreme Court once read that statute’s “relating to” language in perhaps the broadest manner possible. A state law was said to relate to employee benefit plans when it had a “connection with” or made any “reference” to them. See Shaw v. Delta Airlines (1983). (the “reference to” line of cases is probably still good law; the “connection with” line of cases is fraught with complexity). After slightly more than a decade, the Supreme Court itself (in New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (1995) ) began making quasi-metaphysical observations that the Shaw language could not possibly be as broad as it seemed:
Section 514(a) marks for preemption “all state laws insofar as they ... relate to any employee benefit plan” covered by ERISA, and one might be excused for wondering, at first blush, whether the words of limitation (“insofar as they ... relate”) do much limiting. If “relate to” were taken to extend to the furthest stretch of its indeterminacy, then for all practical purposes pre-emption would never run its course, for “[r]eally, universally, relations stop nowhere,”. . . But that, of course, would be to read Congress’s words of limitation as mere sham, and to read the presumption against pre-emption out of the law whenever Congress speaks to the matter with generality.
The Court also remarked in Travelers that,
Indeed, in cases like this one, where federal law is said to bar state action in fields of traditional state regulation . . . , we have worked on the “assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.”
Thus, the Supreme Court began to conclude that ERISA could not be deemed to preempt state law unflinchingly because of the facial breadth of the ERISA preemption provision. (And to repeat, the ADA preemption provision also uses the “relate to phraseology). There must be demonstrated a clear and manifest purpose of Congress to preempt where historic state police powers are involved, and the presumption is against preemption of state law. I have seen no language from the Supreme Court suggesting that it will cease using ERISA principles when analyzing Airline Deregulation Act preemption claims. If that is correct, and because Morales preceded Travelers, I do not think EagleMed’s and Bailey’s seemingly perfunctory treatment of the “relate to” phraseology is warranted. If one assumes that regulation of workplace injury is a historic police power of the States—and I do—where is the evidence of Congress’s clear and manifest purpose to preempt traditional state workers’ compensation regulation of air ambulance services? In any event, I suspect this may be the last ground upon which Airline Deregulation Act preemption litigation may be realistically pursued in the circuit courts. The next move would belong to Congress.
The stage for this litigation was perhaps set by the Supreme Court’s opinion in Northwest, Inc. v. Ginsberg, 134 S.Ct. 1422 (2014). In Northwest, a breach of contract case involving an airline’s termination of a customer’s frequent flyer membership for alleged improper conduct, Justice Alito managed to make it through the majority opinion without once citing a single ERISA preemption case (let alone, Travelers), except indirectly through Morales, stating that the relevant state (contract-based) law was preempted if it had “a connection with, or reference to” airline prices, routes, or services. That is obviously ERISA language borrowed from Shaw, but it may not be an accident that Shaw was never cited. (Are there institutional concerns about muddying ERISA preemption law?)
The strongest argument against applying (or even thinking about) Travelers was identified by Justice Thomas's dissent in Wolens. “Congress has recently revisited § 1305 [in 1994], and said that it ‘d[id] not intend to alter the broad pre-emption interpretation adopted by the United States Supreme Court in Morales,’ H.R.Conf.Rep. No. 103-677, p. 83 (1994).” But this does not answer the question of how broad preemption should be under current law because Morales relied on Shaw, which was significantly modified by Travelers with apparent subsequent acquiescence by Congress. Morales, moreover, as had Shaw before it, embraced the proposition that “[s]ome state actions may affect [airline fares] in too tenuous, remote, or peripheral a manner” to have pre-emptive effect.
In the end, the federal courts must decide 1) if they will continue to apply ERISA preemption analysis; and 2) if so, whether that [Shaw] analysis must be updated considering Travelers. Even assuming Shaw [bizarrely] applies, where is the “tenuousness” line, and can there be any convincing argument that Congress meant to preempt state regulation of air ambulance services? So far as I can discern, EagleMed and Bailey failed to analyze these questions adequately.
Michael C. Duff