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Airline Deregulation: Delta Airlines, Inc. v. Black

By DAVID V. WILSON II

The Texas Supreme Court recently addressed an unusual set of facts involving airline deregulation, which may have a potential impact on other areas of the law. Delta Airlines, Inc. v. Black, 46 Tex. Sup. Ct. J. 1147 (2003). On June 23, 1995, Robert Black, an attorney, purchased two Delta airline tickets for travel from Dallas to Las Vegas. His travel agent’s invoice showed two first class reservations for Mr. Black and his wife. Although the invoice assigned Mr. Black first class seats for both directions, Mrs. Black only had an assigned first class for the return flight. His travel agent suggested that Black ask the Delta gate agent if he and his wife could sit together in first class for the Dallas to Las Vegas flight. Id.
When the couple arrived at the departure gate, Mr. Black requested adjacent seats in first class. However, the Blacks were informed that they did not have two confirmed first class seats for the flight. While Delta had a confirmed first class seat for Mr. Black, it only had a confirmed coach seat for his wife. Delta did place Mrs. Black on a priority waiting list for first class. Delta’s gate supervisor informed Mr. Black that his wife could be seated in coach for the three-hour flight. At this point, Delta offered several options: (1) the Blacks could sit in coach on their scheduled flight; (2) they could fly separately on the scheduled flight, one in coach and one in first class; (3) they could fly first class on a later flight to Los Angeles and then connect to Las Vegas, or they could take a direct flight later that day to Las Vegas with a confirmed first class seat. Each of these alternatives included free travel vouchers. The Blacks declined each of these offers, and drove to Love Field Airport. There, they chartered a private jet to and from Las Vegas at a cost of $13,150.00, which included the pilots’ expenses in Las Vegas for two days.
Black then sued Delta for breach of contract, intentional and negligent misrepresentation, as well as suing the gate supervisor for misrepresentation. At the trial court, Delta moved for summary judgment on four grounds, including preemption under the Airline Deregulation Act of 1978 (“ADA”). The trial court granted summary judgment for Delta and Perez without specifying the grounds. On appeal to the Tenth Court of Appeals, the appellate court reversed the trial court’s judgment and remanded the case for trial. The Court of Appeals held that fact issues precluded judgment as a matter of law, and that the Blacks’ claims were not precluded by the ADA because “federal airline regulations allow passengers whose reservations are not honored due to over-booking to seek recovery for damages ‘in a court of law or some other manner’.” Id. The Texas Supreme Court granted Perez and Delta’s Petition for Review, on the single issue of preemption.
The Texas Supreme Court reversed the Court of Appeals, and affirmed the trial court’s grant of summary judgment. In doing so, the Texas Supreme Court went through a lengthy historical discussion of the Airline Deregulation Act of 1978. In enacting the ADA, the United States Congress made a finding that “maximum reliance on competitive forces would best further ‘efficiency, innovation, and low prices as well as variety and quality’ of air transportation services.” Id. To further this aim, Congress included an express preemption provision in the ADA “to ensure that the states would not undo federal regulation with regulation of their own.” Morales v. TransWorld Airlines, 504 U.S. 374, 378 (1992). This preemption clause reads as follows:
“Except as provided in this subsection, a state, political subdivision of the state, or political authority of at least two states 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....” Id.
The Blacks based their claims on the ADA’s savings clause, which provides that “a remedy under this part is in addition to any other remedies provided by law.” 49 U.S.C. § 40120(c). However, the Supreme Court rejected this basis, pointing out that this savings clause has been dismissed as a relic of the FAA, and does not supercede the specific substantive preemption provision in the ADA, citing Morales v. TransWorld Airlines, Inc., 504 U.S. at 385.
In analyzing the U.S. Supreme Court’s analysis of the ADA, the Texas Supreme Court acknowledged that the ADA’s preemption clause does not shield airlines from suits alleging no violation of state imposed obligations, but seeking recovery solely for the airline’s breach of its own, self-imposed undertakings.” Black, 46 Tex. Sup. Ct. J. 1147. Thus, in Continental Airlines, Inc. v. Keifer, 927 S.W.2d 274 (Tex. 1996), the Texas Supreme Court previously concluded that a plaintiff’s personal injury claim under a common law theory of negligence did not amount to enforcement of state law and thus was not preempted. Black seized upon these principles from U.S. and Texas Supreme Court precedent to argue that his breach of contract claim is not subject to preemption. He argued that, by refusing to provide his wife a first class seat on the flight from Dallas to Las Vegas, Delta breached a self-imposed contractual obligation. However, the Texas Supreme Court pointed out that when Black purchased the airline tickets, a binding contract of carriage was created between him and Delta. In this instance, Delta’s contract of carriage incorporated by reference federal regulations for boarding procedures and seating policies. Those federal regulations provide specific remedies to passengers who are denied boarding. The Texas Supreme Court held that Black, by seeking to enforce his remedies for the federal regulations violations in state court, was seeking to modify and enlarge the contract of carriage. Since Black’s breach of contract, contractual misrepresentation and fraud claims are premised upon Delta’s ticketing and boarding procedures, which are directly regulated by the Department of Transportation under the authority of the Airline Deregulation Act, all of Black’s claims were determined to be preempted.
One interesting future impact of this opinion is in the area of environmental regulation of airports. For example, in the year 2000, the Texas National Resource Conservation Commission promulgated a rule governing ground support equipment at airports. This equipment includes the motorized vehicles that carry baggage and move aircraft about on the tarmac at airports. This regulation placed strict controls on the emissions caused by the motors of ground support equipment. The Air Transport Association, a trade group, filed suit against the TNRCC in Air Transport Association, Inc. v. The Texas National Resource Conservation Commission, et al., Cause No. GNO-01483; in the 354th Judicial District Court of Travis County, Texas. Among the claims by the Air Transport Association against the TNRCC was that the ground support equipment rule was preempted by the Airline Deregulation Act. While this case settled prior to any ruling on the merits by an appellate court, future state environmental regulations of the airlines and their equipment may face similar challenges. Industry groups could use the Delta Airlines v. Black opinion, which interprets the scope of the preemption clause quite broadly to include “ticketing, boarding procedures, provision of food and drink, and baggage handling, in addition to the transportation itself.” Black, 46 Tex. Sup. Ct. J. 1147. If the Texas Supreme Court is inclined to interpret the scope of “services” under the ADA so broadly, airline industry groups may have a new weapon in any attempt to resist environmental regulations of their activity by state agencies.

David V. Wilson II is a partner in the firm of Hays, McConn, Rice & Pickering P.C. and a member of The Houston Lawyer editorial board.

Unnamed Class Member Appellate Rights

By MERCY L. CARRASCO-LOWE

In City of San Benito v. Rio Grande Valley Gas Co., 109 S.W.3d 750 (Tex. 2003), the Texas Supreme Court held that unnamed class members do not have to intervene in the trial court to preserve their right to appeal a class settlement and denial of an opt-out request.
This class action was brought on behalf of an alleged class of 80 south Texas cities to recover franchise fees against Rio Grande Valley Gas Company and its successor in interest, Southern Union Gas Company. Six cities, San Benito, Palmview, Alton, La Villa, Port Isabel, and Edcouch, each contracted with Texas Municipal Technical Consultants, Inc. (“TMTCI”) to determine whether the gas companies owed them franchise fees. [A seventh city, Pharr, also appealed, but the Supreme Court did not consider its complaints because it did not request to opt-out of the class or object to the settlement.] Under these contracts, TMTCI was authorized to determine the compensation the gas companies owed the cities and to employ legal counsel on their behalf. Accordingly, TMTCI hired Ramon Garcia to represent the cities.
On June 24, 1996 the trial court authorized class notices to the 80 cities and provided an opt-out deadline of August 1, 1996. In response, Garcia filed opt-out notices on behalf of the six cities before the August deadline. However, four cities did not ratify Garcia’s actions in an open meeting until after the August deadline, and two cities never ratified the opt-out requests in an open meeting.
The trial court ruled that the six cities had not properly opted out. Subsequently, class counsel sent notice of a proposed class settlement. The six cities objected to the settlement and requested reconsideration of their opt-out requests. The trial court overruled the objections, refused reconsideration, approved the settlement, and rendered final judgment.
The six cities appealed and sought mandamus relief. The court of appeals dismissed the appeal for want of jurisdiction and denied mandamus relief. The Texas Supreme Court reversed the court of appeal’s decision and rendered judgment that the cities were not members of the class action.
The Texas Supreme Court reversed on two grounds. First, the Court held that the cities were not required to intervene in the trial court to appeal the judgment. The Court relied on a recent United States Supreme Court case, Devlin v. Scardelletti, 536 U.S. 1, 122 S. Ct. 2005, 153 L.Ed.2d 27 (2002). In Devlin, the Supreme Court observed that the right to appeal is not restricted to a case’s named parties. The label “party” does not indicate an absolute characteristic, but rather a conclusion about the applicability of various procedural rules that may differ based on context. Thus, the procedural rules governing class actions sometimes require unnamed parties to be treated as parties or nonparties in order to ease the administration of class litigation. The most important consideration is whether the unnamed class members will be bound by the class settlement. The Texas Supreme Court applied Devlin and held that the six cities should be considered “parties” for purposes of appeal. Accordingly, they have a right to appeal.
Finally, the Court held that the trial court abused its discretion in refusing the cities’ opt-out requests because they were not required to hold an open meeting specifically authorizing the opt-out requests. Garcia had contractual authority to opt the cities out of the class action because opting out does not, of itself, cause a loss of any substantial rights, as the party can bring its own suit on the same cause of action.

Mercy L. Carrasco-Lowe is an associate in the appellate section at Haynes and Boone, LLP.

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