Saturday, October 18, 2014

RICO to the Rescue?

A recent decision by the United States Eleventh Circuit Court of Appeals may offer a unique path for airline passengers to pursue rights against airlines for issues relating to prices, rates, or services.

As Timothy M. Ravich recently commented in an article by the Daily Business Review, in Ray v. Spirit Airlines, Inc., a class of airline passengers has brought a putative federal class action lawsuit against the airline on the basis of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), alleging that Spirit Airlines conducted an enterprise by means of racketeering activity, e.g., mail and wire fraud involving the concealment and misrepresentation of airfares and user fees.

While the district court dismissed the action on the basis or preemption, the Eleventh Circuit Court of Appeals vacated that decision:

Because federal laws do not preempt other federal laws, subsequent legislation could preclude Plaintiffs’ claims only if Congress had repealed the provisions of RICO, at least insofar as they authorized Plaintiffs’ actions. Congress did not do so expressly through the Airline Deregulation Act of 1978 (ADA) … [a]nd we find no ‘repeal by implication’ because Congress has not exhibited the requisite clear and manifest intent.  The ADA explicitly preempted state laws but, notably, said nothing about any federal cause of action. Moreover, a saving clause found in the ADA did not disturb any other remedies provided by law. Quite simply, the two laws are not irreconcilably in conflict, nor was the ADA clearly intended as a substitute for RICO. Applying the strong presumption against implied repeals, we are constrained to conclude that RICO supplements, rather than subverts, federal regulation of air carriers.

In reaching this conclusion, the court recognized at least one other circumstance in which a federal court found that a RICO action was not precluded by airline deregulation policy.  Cancellation fees charged for flights in the months following September 11, 2001 was the issue in All World Prof’l Travel Servs., Inc. v. Am. Airlines, Inc. where a federal district court in California recognized that a travel agency could have complained to the DOT about an airline’s conduct, but was not required to submit a RICO-type mail and wire fraud claim to the DOT. On this basis, the Eleventh Circuit Court of Appeals wrote that, “we agree with the All World court that civil RICO claims predicated on mail and wire fraud are not precluded by the ADA simply because they involve fraud arising out of pricing, fees, and advertising in the airline industry."

The Ray case is remarkable in that civil lawsuits arising under RICO are seldom used to address consumer complaints against the airline industry. As the Eleventh Circuit’s opinion indicates, only one case relates RICO and the Airline Deregulation Act of 1978.  The theory being tested in Ray appears to be a novel one as applied to airline airfare advertising specifically, and an infrequently litigated theory as applied to the Airline Deregulation Act generally. As a practical matter, traveling under RICO to vindicate alleged violations of airline passengers’ rights is not surprising considering that few private rights of action for the direct use of airline passengers under the Airline Deregulation Act. While consumers might complain to the Department of Transportation for issues relating to airline fares or services, it is usually up to the DOT to enforce penalties. Thus, though still at the pleading stage, Ray (taking the lead of All World Prof’l Travel, Inc.) might establish RICO as a viable strategy for travelers to end-run decades-long frustration with federal passengers’ rights laws that expressly limit or extinguish private causes of action arising from airline prices, routes, and services.

The fact that courts are having to act as customer dispute resolution centers is troubling and Ray may be a case of be careful what you wish for. A victory in that case (however probable or improbable) might compensate a certain class of airline passengers and reward their counsel. But, the commercial airline market will react, possibly in the form of higher fares and ancillary fees. Moreover, the case highlights inconsistencies between talking points broadcast under the banner of a national airline policy and actual airline customer service and conduct. For that matter, where lawmakers are passing specious laws that protect airline passengers without affording passengers any direct rights, the plaintiff bar will continue to think creatively about getting their clients their day in court; for their part, airlines and defense counsel would be well-served to understand that legal victories may be public relations nightmares.