The Supreme Court/The Supreme Court.iso/pc/ascii/1993/93_1286/93_1286.zx1

Text File | 1995-01-18 | 24.6 KB | 482 lines

SUPREME COURT OF THE UNITED STATES
--------
No. 93-1286
--------
AMERICAN AIRLINES, INC., PETITIONER v.
MYRON WOLENS et al.
on writ of certiorari to the supreme court
of illinois
[January 18, 1995]

  Justice O'Connor, with whom Justice Thomas joins
as to all but Part I-B, concurring in the judgment in
part and dissenting in part.
  In permitting respondents' contract action to go
forward, the Court arrives at what might be a reason-
able policy judgment as to when state law actions
against airlines should be preempted if we were free to
legislate it.  It is not, however, consistent with our
controlling precedents, and it requires some questionable
assumptions about the nature of contract law.  I would
hold that none of respondents' actions may proceed.

                            I

                            A
  The Airline Deregulation Act of 1978 (ADA) says that
-no State . . . shall enact or enforce 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.-  49 U. S. C. App. 1305(a)(1).  We
considered the scope of that provision in Morales v.
Trans World Airlines, Inc., 504 U. S. ___ (1992).  We
noted the similarity of 1305's language to the preemp-
tion provision in ERISA, 29 U. S. C. 1144(a), and said
that, like ERISA's 1144, 1305's words -express a broad
pre-emptive purpose.-  Id., at ___ (slip op., at 7).  We
concluded that -State enforcement actions having a
connection with or reference to airline `rates, routes, or
services' are pre-empted.-  Ibid.
  Applying Morales to this case, I agree with the Court
that respondents' consumer fraud and contract claims
are -related to- airline -rates- and -services.-  See ante,
at 6.  The Court says, however, that judicial enforce-
ment of a contract's terms, in accordance with state
contract law, does not amount to a -State . . .
enforc[ing] any law,- 1305, but instead is simply a
State -hold[ing] parties to their agreemen[t].-  See ante,
at 8-9, and n. 5.  It therefore concludes that 1305 does
not apply to respondents' contract actions.  I cannot
agree with that conclusion.
  I do not understand the Court to say that a State only
-enforces- its -law- when some state employee (e. g., an
attorney general, or a judge) orders someone to do
something.  If that were the meaning of -enforce- in this
context, then a diversity action brought by a private
party under state law in federal court would never be
subject to 1305 preemption, because no state employee
is involved, whereas the same action might be pre-
empted in state court.  That would make little sense,
and federal courts have routinely considered 1305 in
determining whether a particular state law claim is
preempted.  E. g., Statland v. American Airlines, Inc.,
998 F. 2d 539, 541-542 (CA7 1993) (contract claim
preempted), cert. denied, 510 U. S. ___ (1993); West v.
Northwest Airlines, Inc., 995 F. 2d 148, 151 (CA9 1993)
(tort claim for punitive damages preempted), cert.
denied, 510 U. S. ___ (1994); Cannava v. USAir, Inc.,
No. 91-30003-F, 1993 WL 565341, at *6 (D. Mass., Jan.
7, 1993) (tort and contract claims preempted).  Conse-
quently, one must read -no State . . . shall . . . enforce
any law- to mean that no one may enforce state law
against an airline when the -enforcement actio[n] ha[s]
a connection with or reference to airline `rates, routes,
or services.'-  Morales, supra, at ___ (slip op., at 7).
This explains the Court's conclusion, with which I agree,
that private parties such as respondents may not enforce
the Illinois consumer fraud law against petitioner in an
action whose subject matter relates to airline rates and
services.  Ante, at 8.
  As I read 1305 and Morales, however, respondents'
contract claims also must be preempted.  The Court
recognizes, ante, at 7, that the -guidelines- at issue in
Morales did not -`create any new laws or regulations'
applying to the airline industry; rather, they claim[ed]
to `explain in detail how existing state laws apply to air
fare advertising and frequent flyer programs.'-  Morales,
supra, at ___ (slip op., at 2).  Nonetheless, we stated our
holding quite clearly: -We hold that the fare advertising
provisions of the NAAG guidelines are preempted by
[1305].-  Id., at ___ (slip op., at 14).  How can it be
that the guidelines, which did not themselves constitute
-law,- were nonetheless preempted by a statute whose
coverage is limited to -laws- or other -provision[s]
having the force and effect of law-?  The answer is that
in Morales we held that an action to invoke the State's
coercive power against an airline, by means of a generally
applicable law, when the subject matter of the action
related to airline rates, would constitute -State . . .
enforce[ment]- of a -law . . . relating to rates, routes, or
services.-  Accordingly, we held that 1305 preempted
the action.  It is not the case, as Justice Stevens
urges, that Morales was limited to -airline-specific ad-
vertising standards.-  Ante, at 2.  We examined the
content of those standards-which had no binding force
on their own-only to ascertain whether they -related
to- airline rates (and we thought they -quite obviously-
did).  Morales, supra, at ___ (slip op., at 10).  The only
-laws- at issue in Morales were generally applicable
consumer fraud statutes, not facially related to airlines,
much like the law at issue in respondents' consumer
fraud claims here.
  The Court concludes, however, that 1305 does not
preempt enforcement, by means of generally applicable
state law, of a private agreement relating to airline
rates and services.  I cannot distinguish this case from
Morales.  In both, the subject matter of the action (the
guidelines in Morales, the contract here) relates to
airline rates and services.  In both, that subject matter
has no legal force, except insofar as a generally applica-
ble state law (a consumer fraud law in Morales, state
contract law here) permits an aggrieved party to invoke
the State's coercive power against someone refusing to
comply with the subject matter's terms (the require-
ments of the guidelines in Morales, the terms of the
contract here).  Morales' conclusion that 1305 preempts
such an invocation is dispositive here, both of
respondents' consumer fraud claims, and of their con-
tract claims.  The lower courts seem to agree; as far as
I know, no court to have considered ADA preemption
since we decided Morales has suggested that enforce-
ment of state contract law does not fall within 1305 if
the necessary relation to airline rates, routes, or serv-
ices exists.  See, e. g., Statland v. American Airlines,
supra, at 541-542 (contract claims preempted); West v.
Northwest Airlines, supra, at 151-152 (contract claims
not preempted because -too tenuously connected- to
airline rates or services); Cannava, supra, at *6 (con-
tract claims preempted); Schaefer v. Delta Airlines, No.
92-1170-E(LSP), 1992 WL 558954, at *2 (SD Cal., Sept.
18, 1992) (same); Vail v. Pan Am Corp., 260 N. J. Su-
per. 292, 299-300, 616 A. 2d 523, 526-527 (App. Div.
1992) (same); El-Menshawy v. Egypt Air, 276 N. J.
Super. 121, 126, 647 A. 2d 491, 493 (Law Div. 1994)
(same).
  The Court argues that the words -law, rule, regula-
tion, standard, or other provision- in 1305 refer only to
-`official, government-imposed policies, not the terms of
a private contract.'-  Ante, at 9, n. 5 (quoting Brief for
United States as Amicus Curiae 17).  To be sure, the
terms of private contracts are not -laws,- any more than
the guidelines at issue in Morales were -laws.-  But
contract law, and generally applicable consumer fraud
statutes, are laws, and Morales held that 1305 pre-
vents enforcement of -any [state] law- against the air-
lines when the subject matter of the action -relates- to
airline rates, routes, or services.  Thus, where the terms
of a private contract relate to airline rates and services,
and those terms can only be enforced through state law,
Morales is indistinguishable.  As Justice Stevens
persuasively argues, there is -no reason why a state law
requiring an airline to honor its contractual commit-
ments is any less a law relating to its rates and serv-
ices than is a state law imposing a `duty not to make
false statements of material fact or to conceal such
facts,'- ante, at 2.
  As the Court recognizes, ante, at 15, n. 9, my view of
Morales does not mean that personal injury claims
against airlines are always preempted.  Many cases
decided since Morales have allowed personal injury
claims to proceed, even though none has said that a
State is not -enforcing- its -law- when it imposes tort
liability on an airline.  In those cases, courts have
found the particular tort claims at issue not to -relate-
to airline -services,- much as we suggested in Morales
that state laws against gambling and prostitution would
be too tenuously related to airline services to be pre-
empted, see Morales, supra, at ___ (slip op., at 13-14).
E. g., Hodges v. Delta Airlines, Inc., 4 F. 3d 350,
353-356 (CA5 1993) (arguing that -`services' is not
coextensive with airline `safety,'- so safety-related tort
claim should not be preempted; urging en banc review
to bring circuit precedent into conformity with that
view), rehearing en banc granted, 12 F. 3d 426 (1994);
Public Health Trust v. Lake Aircraft, Inc., 992 F. 2d
291, 294-295 (CA11 1993) (tort claim for defective air-
craft design not preempted because not related to airline
services); Cleveland v. Piper Aircraft Corp., 985 F. 2d
1438, 1443, and n. 11, 1444, n. 13 (CA10) (same), cert.
denied, ___ U. S. ___ (1993); Stagl v. Delta Air Lines,
849 F. Supp. 179, 182 (EDNY 1994) (tort claim against
airline for personal injury not preempted because not
related to airline -services- within the meaing of 1305);
Curley v. American Airlines, 846 F. Supp. 280, 284
(SDNY 1994) (same); Bayne v. Adventure Tours USA,
Inc., 841 F. Supp. 206 (ND Tex. 1994) (same); Fenn v.
American Airlines, 839 F. Supp. 1218, 1222-1223 (SD
Miss. 1993) (same); Chouest v. American Airlines, 839
F. Supp. 412, 416-417 (ED La. 1993) (same); O'Hern v.
Delta Airlines, 838 F. Supp. 1264, 1267 (ND Ill. 1993)
(same); In re Air Disaster, 819 F. Supp. 1352, 1363 (ED
Mich. 1993) (same); Butcher v. City of Houston, 813
F. Supp. 515, 518 (SD Tex. 1993) (same).
  Our recent decision in Norfolk & Western R. Co. v.
Train Dispatchers, 499 U. S. 117 (1991), is relevant.
The question in that case was whether a rail carrier's
statutory exemption from -all other law,- which we read
to mean -all law as necessary to carry out an ICC-
approved transaction,- id., at 129, exempted the carrier
from contractually-imposed obligations.  We held that it
did.  We noted that -[a] contract depends on a regime of
common and statutory law for its effectiveness and
enforcement,- id., at 129-130, that -[a] contract has no
legal force apart from the law that acknowledges its
binding character,- id., at 130, and that -`[l]aws which
subsist at the time and place of the making of a con-
tract, and where it is to be performed, enter into and
form a part of it, as fully as if they had been expressly
referred to or incorporated in its terms,- ibid. (quoting
Farmers and Merchants Bank of Monroe v. Federal
Reserve Bank of Richmond, 262 U. S. 649, 660 (1923)).
Accordingly, we concluded that -the exemption . . . from
`all other law' effects an override of contractual obliga-
tions . . . by suspending application of the law that
makes the contract binding.-  Ibid.  In so concluding,
we specifically rejected the Court of Appeals' views that
the -all other law- exemption -[n]owhere . . . sa[id] that
the ICC may also override contracts,- and that it did
not exempt the carrier from -`all legal obstacles.'-
Brotherhood of R. Carmen v. ICC, 880 F. 2d 562, 567
(CADC 1989); see Norfolk & Western, supra, at 133-134.
  The Court does not dispute this reading of Norfolk &
Western, which in my view makes clear that a State is
enforcing its -law- when it brings its coercive power to
bear on a party who has violated a contractual obliga-
tion.  We reiterated in Norfolk & Western that -[t]he
obligation of a contract is the law which binds the
parties to perform their agreement.-  Id., at 129 (inter-
nal quotation marks omitted); see also Sturges v.
Crowninshield, 4 Wheat. 122, 197 (1819) (Marshall,
C. J.) (-A contract is an agreement, in which a party
undertakes to do, or not to do, a particular thing.  The
law binds him to perform his undertaking, and this is,
of course, the obligation of his contract-).  We therefore
read the words -all other law- in the statutory exemp-
tion broadly enough to -suspen[d] application of the law
that makes the contract binding.-  Norfolk & Western,
supra, at 130.  I would give the words -any law- in
1305 a similar reading.
  As support for its theory, the Court cites only a state-
ment in the plurality opinion in Cipollone v. Liggett
Group, Inc., 505 U. S. ___ (1992); see ante, at 8-9.  The
Cipollone plurality said that -a common law remedy for
a contractual commitment voluntarily undertaken should
not be regarded as a `requirement . . . imposed under
State law' within the meaning of 5(b).-  Cipollone,
supra, at ___ (slip op., at 20).  But the plurality elabo-
rated on this point in a footnote.  In rejecting the argu-
ment that specific warranty obligations are -imposed
under State law,- the plurality agreed that preemption
might be required -if the Act pre-empted `liability' im-
posed under state law . . . ; but instead the Act ex-
pressly pre-empts only a `requirement or prohibition'
imposed under state law.-  Id., at ___, n. 24 (slip op., at
20, n. 24).  It agreed that contractual requirements are
-only enforceable under state law,- but argued that
those requirements are -`imposed' by the contracting
party upon itself.-  Ibid.  The plurality thus distin-
guished the situation where substantive requirements
contained in a contract are enforceable only under state
law from the situation where state law itself imposes
substantive requirements, and concluded that the stat-
ute before it preempted only the latter kind of state
law.  Here, as in Cipollone, the requirements at issue
are contained in a contract, and have no legal force
except insofar as state law makes them enforceable.
But we concluded in Morales that 1305 does preempt
state law in those circumstances, unlike the statute in
Cipollone.  The difference between this case and
Cipollone is the very different language in the two
preemption statutes.
  The Court also concludes that 1305 only -stops States
from imposing their own substantive standards with
respect to rates, routes, or services,- ante, at 13.  In
Morales, however, we specifically rejected an interpreta-
tion of 1305 that would have rewritten it to read -No
State shall regulate rates, routes, and services.-  See
Morales, supra, at ___ (slip op., at 8-9).  There is little
distinction between -regulating rates, routes, and
services,- and -imposing substantive standards with
respect to rates, routes, and services,- and the Court
does not explain how Morales' rejection of the former
allows it now to adopt the latter.  The Court relies on
the statute's -saving clause,- 49 U. S. C. App. 1506,
see ante, at 12, but we said in Morales that -[a] general
`remedies' saving clause cannot be allowed to supersede
the specific substantive pre-emption provision,- particu-
larly where, as here, -the `saving' clause is a relic of the
pre-ADA/no pre-emption regime.-  Morales, supra, at ___
(slip op., at 8).
  Without question, Morales gave 1305 a broad preemp-
tive sweep.  The dissent in that case argued that such
a broad interpretation went too far by preempting areas
of traditional state regulation without a clear expression
of congressional intent to do so.  Id., at ___ (slip op., at
1-3) (Stevens, J., dissenting); see also ante, at 1, 3-4
(Stevens, J., concurring in part and dissenting in part).
But the Court rejected the dissent's reading, holding
instead that 1305's language demonstrated a clear
-statutory intent- to expressly preempt generally appli-
cable state law as long as the -particularized applica-
tion- of that law relates to airline rates, routes or ser-
vices.  Morales, supra, at ___, ___, and n. 2 (slip op., at
6, 8-9, and n. 2).

                            B
  Congress has recently revisited 1305, and said that it
-d[id] not intend to alter the broad preemption interpre-
tation adopted by the United States Supreme Court in
Morales,- H. R. Conf. Rep. No. 103-677, at 83 (1994).
If the Court nonetheless believes that Morales misread
1305, the proper course of action would be to overrule
that case, despite Congress' apparent approval of it.
The Court's reading of 1305 is not, in my view, a
-`closer working out'- of ADA preemption, see ante, at
15; rather, it is a new approach that does not square
with our decisions in Morales and Norfolk & Western.
  Stare decisis has -special force- in the area of statu-
tory interpretation, see Allied-Bruce Terminix Cos. v.
Dobson, ___ U. S. ___, ___ (1995) (slip op., at 3)
(O'Connor, J., concurring) (internal quotation marks
omitted).  It sometimes requires adherence to a wrongly-
decided precedent.  Ibid.  Here, however, Congress
apparently does not think that our decision in Morales
was wrong, nor do I.  In the absence of any -`special
justification,'- ibid. (quoting Arizona v. Rumsey, 467
U. S. 203, 212 (1984)), for departing from Morales, I
would recognize the import of Morales and Norfolk &
Western here, and render the decision that the language
of 1305, in light of those cases, compels.  If, at the end
of the day, Congress believes we have erred in inter-
preting 1305, it remains free to correct our mistake.

                           II
  Our decisions in Morales and Norfolk & Western suf-
fice to decide this case along the lines I have described.
In addition, however, I disagree with the Court's view
that courts can realistically be confined, -in breach of
contract actions, to the parties' bargain, with no en-
largement or enhancement based on state laws or poli-
cies external to the agreement.-  Ante, at 13.  When
they are so confined, the Court says, courts are -simply
hold[ing] parties to their agreements,- and are not
-enforcing- any -law,- id., at 8-9.  The Court also says
that -`[s]ome state-law principles of contract law . . .
might well be preempted to the extent they seek to
effectuate the State's public policies, rather than the
intent of the parties.'-  Ante, at 13, n. 8 (quoting Brief
for United States as Amicus Curiae 28).
  The doctrinal underpinnings of the notion that judicial
enforcement of the -intent of the parties- can be di-
vorced from a State's -public policy- have been in seri-
ous question for many years.  As one author wrote some
time ago:
-A contract, therefore, between two or more individ-
uals cannot be said to be generally devoid of all
public interest.  If it be of no interest, why enforce
it?  For note that in enforcing contracts, the govern-
ment does not merely allow two individuals to do
what they have found pleasant in their eyes.  En-
forcement, in fact, puts the machinery of the law in
the service of one party against the other.  When
that is worthwhile and how that should be done are
important questions of public policy. . . . [T]he no-
tion that in enforcing contracts the state is only
giving effect to the will of the parties rests upon an
. . . untenable theory as to what the enforcement of
contracts involves.-  Cohen, The Basis of Contract,
46 Harv. L. Rev. 553, 562 (1933).
More recent authors have expressed similar views.  See,
e. g., Braucher, Contract Versus Contractarianism: The
Regulatory Role of Contract Law, 47 Wash. & Lee L.
Rev. 697, 699 (1990) (-Mediating between private order-
ing and social concerns, contract is a socioeconomic
institution that requires an array of normative choic-
es. . . .  The questions addressed by contract law con-
cern what social norms to use in the enforcement of
contracts, not whether social norms will be used at all-).
Contract law is a set of policy judgments concerning
how to decide the meaning of private agreements, which
private agreements should be legally enforceable, and
what remedy to afford for their breach.  The Court fails
to recognize that when a State decides to force parties
to comply with a contract, it does so only because it is
satisfied that state policy, as expressed in its contract
law, will be advanced by that decision.
  Thus, the Court's allowance that -`[s]ome state-law
principles of contract law . . . might well be preempted
to the extent they seek to effectuate the State's public
policies, rather than the intent of the parties,'- ante, at
13, n. 8 (quoting Brief for United States as Amicus
Curiae 28), threatens to swallow all of contract law.
For example, the Court observes that on remand, the
state court will be required to decide whether petitioner
reserved the right to alter the terms of its frequent
flyer program retroactively, or instead only prospec-
tively.  Ante, at 14.  The court will presumably decide
that question by looking to the usual -rules- of contract
interpretation to decide what the contract's language
means.  If the court finds the language to be ambigu-
ous, it might invoke the familiar rule that the contract
should be construed against its drafter, and thus that
respondents should receive the benefit of the doubt.  See
2 E. A. Farnsworth, Farnsworth on Contracts 7.11, at
265-268 (1990).  That rule of contract construction is
not essential to a functional contract system.  It is a
policy choice that our contract system has made.  Other
such policy choices are that courts should not enforce
agreements unsupported by consideration, see 1
Farnsworth, supra, 2.5; but cf. J. Barton, J. Gibbs, V.
Li, & J. Merryman, Law in Radically Different Cultures
579 (1983) (other legal systems enforce certain agree-
ments not supported by consideration); that courts
should supply -reasonable- terms to fill -gaps- in incom-
plete contracts, see 2 Farnsworth, supra, 7.15-7.17;
the method by which courts should decide what terms to
supply, see C. Fried, Contract as Promise 60, 69-73
(1981); Charny, Hypothetical Bargains: The Normative
Structure of Contract Interpretation, 89 Mich. L. Rev.
1815, 1816, 1820-1823 (1991); Ayres & Gertner, Filling
Gaps in Incomplete Contracts: An Economic Theory of
Default Rules, 99 Yale L. J. 87, 91 (1989) (all suggest-
ing different policy considerations that should inform
how courts fill contractual gaps); and that a breach of
contract entitles the aggrieved party to expectation
damages most of the time, but specific performance only
rarely, see 3 Farnsworth, supra, ch. 12; but cf. R. David
& J. Brierley, Major Legal Systems in the World Today
302 (1985) (former Soviet Union routinely awarded
specific performance).  If courts are not permitted to
look to these aspects of contract law in airline-related
actions, they will find the cases difficult to decide.
  Even the doctrine of unconscionability, which the
United States suggests as an aspect of contract law that
-might well be preempted- because it -seek[s] to effectu-
ate the State's public policies, rather than the intent of
the parties,- Brief for United States as Amicus Curiae
28, cannot be so neatly categorized.  On the one hand,
refusing to enforce a contract because it is -unfair-
seems quintessentially policy-oriented.  But on the
other, -[p]rocedural unconscionability is broadly con-
ceived to encompass not only the employment of sharp
practices and the use of fine print and convoluted lan-
guage, but a lack of understanding and an inequality of
bargaining power.-  1 Farnsworth, supra, 4.28, at
506-507 (footnotes omitted).  In other words, a determi-
nation that a contract is -unconscionable- may in fact be
a determination that one party did not intend to agree
to the terms of the contract.  Thus, the unconscionabil-
ity doctrine, far from being a purely -policy-oriented-
doctrine that courts impose over the will of the parties,
instead demonstrates that state public policy cannot
easily be separated from the methods by which courts
are to decide what the parties -intended.-
  -[T]he law itself imposes contractual liability on the
basis of a complex of moral, political, and social judg-
ments.-  Fried, supra, at 69.  The rules laid down by
contract law for determining what the parties intended
an agreement to mean, whether that agreement is
legally enforceable, and what relief an aggrieved party
should receive, are the end result of those judgments.
Our legal system has decided to allow private parties to
invoke the coercive power of the State in the effort to
enforce those (and only those) private agreements that
conform to rules set by those state policies known col-
lectively as -contract law.-  Courts cannot enforce pri-
vate agreements without reference to those policies,
because those policies define the role of courts in decid-
ing disputes concerning private agreements.

  For these reasons, I would reverse the judgment of the
Illinois Supreme Court.