May 1 - BTC U.S. House Testimony Regarding Passenger Protections


 Testimony of 

Kevin Mitchell 

Chairman, Business Travel Coalition 

Regarding 

Consumer Protections In Commercial Aviation 

Submitted to the 

U.S. House Transportation & Infrastructure Committee


Business Travel Coalition (BTC) provides the following statement to the U.S. House Transportation & Infrastructure Committee in the matter of airline consumer protections. The momentous May 2, 2017 hearing comes in the aftermath of recent gross mistreatment on flights of passengers aboard United Airlines, American Airlines and Delta Air Lines.

The root-cause problem of horrifying passenger treatment is major network carriers’ broken corporate cultures that are utterly unaligned with consumers’ interests. The solutions include substantially increased competition, consumer protections and, most importantly, structural reform to legally empower consumers in a massively consolidated domestic U.S. airline industry.

Restoring a private right of action is the one necessary structural solution to provide sufficient industry discipline to prevent airlines from trampling on all the rights and interests of their customers – not just the atrocious recent denied-boarding and other passenger mistreatments on the major network airlines.

BTC provides below, for the Congressional record, the results and analysis of its investigation into consumers being inadvertently stripped of their private right of action with respect to airlines’ unfair or deceptive practices or unfair methods of competition.

I. INTRODUCTION

As is often noted, competition and consumer protection laws increasingly intersect. As a consequence of broad interpretations by courts of Congressional intent with respect to federal preemption, which was stated loosely in the Airline Deregulation Act of 1978, when airlines are detected to be engaging in unfair or deceptive acts or practices or unfair methods of competition they usually only have to face U.S. Department of Transportation (DOT) cease and desist orders, and inconsequential fines.

Now, and going forward, because of massive industry consolidation, consumers are at the highest risk since deregulation of harm from such practices. There are no longer enough maverick competitors or sufficient legal remedies to provide discipline to the system. Essentially, airlines are immunized from the threat of individuals or State Attorneys General (State AGs) suing for damages from deceptive marketing practices or unfair methods of competition.

II. BRIEF LEGISLATIVE BACKGROUND

The full legislative history of the Airline Deregulation Act of 1978 (ADA), including Senate, House and Conference Reports and transcripts of floor discussions can be found at btcnews.co/1yA0kFa (House) and http://btcnews.co/1oNE8Zh (Senate). (BTC's legislative research report is appended.)

After canvassing the lengthy Congressional record, it can be said with complete confidence that there was no discussion – none – of Congress intending or even recognizing that consumers might have no right to sue airlines for damages for unfair or deceptive practices as a result of adoption of the then-new statutory provision preempting State law. That provision is now codified at 49 USC Section 41712. The Congressional objective in passing the preemption provision was instead to prevent duplicative regulation of certain intrastate air services of interstate airlines by State authorities.

There is nothing in the legislative history of the ADA that states or even suggests that in passing the preemption provisions of that Act Congress intended to relegate consumers aggrieved by unfair or deceptive practices of airlines to only an administrative cease-and-desist remedy - and thus deny them the right to recover pecuniary damages that consumers possess vis-à-vis other industries. Rather, the present net result of airlines being shielded from all claims for damages for such practices to a degree that affords them a privileged position appears to be an unintended consequence as courts worked out the scope of ADA preemption of State law.

III. LEGISLATIVE APPROACH

The approach is to create a federal private right of action for conduct that violates 49 USC Section 41712. Aggrieved consumers would have the right to bring suit in State or Federal court but with claims filed in State court being non-removable so long as the dollar amount of the claim was under $25,000. Of course, States would be able to maintain such actions on behalf of their respective citizens.

New Language To Be Added As A New Subsection (d) To 49 USC Section 41712 Is As Follows:

(d) (i) any person alleging a cause of action pursuant to Section 41712 may file a civil suit for damages and/or injunctive relief in federal district court or State court, as such person elects, and United States district courts and the courts of each of the several States shall have jurisdiction of such actions. Such an action may be brought in any federal district court or State court located in the State in which the unlawful act or practice is alleged to have been committed or in the State in which the complaining party resides.

(ii) A civil action in any State court against an air carrier or foreign air carrier pursuant to this Section 41712 may not be removed to any district court of the United States unless the matter in controversy exceeds $25,000, exclusive of interest and costs.

Key considerations of this language include:

·      The small claims courts and state district courts are more accessible, efficient and affordable for consumers with modest claims than federal court.

·      State AGs would have their usual powers to bring cases (likely in federal court) on behalf of their citizens for widespread or significant violations of Section 41712.

·      Class action suits by consumers would be possible.

·      Lawsuits would be sustainable only if the trier of fact finds there have been violations of Section 41712, that is, the airline has engaged in an unfair or deceptive act or practice or an unfair method of competition.

·      The doctrine of primary jurisdiction will remain a potential obstacle to the efficient resolution of cases brought under 41712; the legislative history should make clear that resort to primary jurisdiction should be limited to cases involving substantial issues of national transportation policy.

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BTC Legislative Research Regarding The U.S. Airline Deregulation Act

Overview of Legislative History of the Airline Deregulation Act With Respect to the Issue of Consumers Having No Private Right of Action for Unfair/Deceptive Acts or Practices

The full legislative history of the Airline Deregulation Act of 1978 (ADA), including Senate, House, and Conference Reports and transcripts of floor discussions can be found at http://btcnews.co/1yA0kFa. (For ease of reference, we cite below two particular pages of this comprehensive collection by citing their pagination in this “Legislative History” as well as to the corresponding pages of the Senate and House Reports.)

After canvassing the lengthy Congressional record, it can be said with complete confidence that there was no discussion – none – of Congress intending or even recognizing that consumers might have no right to sue airlines for damages for unfair or deceptive practices as a result of adoption of the then-new statutory provision preempting State law.  That provision is now codified at 49 USC Section 41713.  The Congressional objective in passing the preemption provision was instead to eliminate duplicative regulation of certain intrastate air services of interstate airlines by State and Federal authorities that had recently proved problematic.

In the section by-section analysis of the proposed ADA, the purpose underlying the preemption section was explained on the Senate floor as having “one system of regulation for interstate air transportation.” Legislative History at 467, Remarks of Senator Heinz. That step was needed because, “The dual system of regulation has created an impossible jumble of conflicts between federal and State agencies.” Id.

The problems that had arisen because of this dual system of federal and State regulation of intrastate aviation were detailed at H.R. Rep. No. 95 – 1211 (1978):

Existing law contains no specific provision on the jurisdiction of the States and the Federal Government over airlines which provide both interstate and intrastate service.  The lack of specific provisions has created uncertainties and conflicts, including situations in which carriers have been required to charge different fares for passengers traveling between two cities, depending upon whether these passengers were interstate passengers whose fares were regulated by the CAB, or intrastate passengers, whose fare is regulated by a State.

Id., at 15-16.  (Found at 523-524 of the Legislative History.)[1]

S. Report No. 95-631 (1978) further amplified on the problem to be solved by the preemption provision:

Section 423 [the Senate version of the preemption language] is a new section to the Federal Aviation Act which the committee has adopted to rationalize a confusing system of dual regulation of federally certificated air carriers that has evolved in some States.

***

However, recently several States have involved themselves in regulating the services of interstate airlines between points within their State.  For example, the State of Pennsylvania has, in recent years, disallowed fare increases between Pittsburgh and Philadelphia, which were authorized by the Civil Aeronautics Board.

At page 16, H.R. Rep. No. 95-1211 (Legislative History at 524) further explained how the preemption provision would solve this problem:

“HR 12611 [the version of the preemption language adopted in conference] will prevent conflicts and inconsistent regulations by providing that when a carrier operates under authority granted pursuant to title IV of the Federal Aviation Act, no State may regulate that carrier’s routes, rates or services.”

Importantly, present 49 U.S.C. Section 41712, then Section 411 of the Federal Aviation Act, which provides DOT administrative powers to police unfair and deceptive acts or practices by airlines, was carried forward from the pre-existing Federal Aviation Act of 1958 without modification.  E.g., S. Rep. No. 95-631 at 152-153. (Legislative History at 318-319.)

In sum, there is nothing in the legislative history of the ADA that states or even suggests that in passing the preemption provisions of that Act Congress intended to relegate consumers aggrieved by unfair or deceptive practices of airlines to only an administrative cease-and-desist remedy - and thus deny them the right to recover pecuniary damages that consumers possess vis-à-vis other industries.  Rather, the present net result of airlines being shielded from all claims for damages for such practices to a degree that affords them a privileged position appears to be an unintended consequence as courts worked out the scope of ADA preemption of State law.

To afford consumers the protections they deserve and to treat the airlines like other industries, while avoiding the potential pitfalls of varying State substantive law claims for damages, Congress should amend 49 USC Section 41712 to create a federal private cause of action for consumers aggrieved by acts that violate that Section.  In addition, to make that remedy one meaningfully available to consumers with modest claims, civil suits brought under an amended 49 USC Section 41712 in State court should be made non-removable to federal court unless the amount in controversy exceeds some minimum jurisdictional amount, such as $25,000.

In passing, it is ironic that the authors of airline deregulation felt compelled to act legislatively because the longstanding regulatory approach by CAB of coddling airlines had produced anticompetitive results, observing that, “… five carriers presently control 70% of today’s market.  The committee feels this concentration and dominance is not in the best interest of the industry or the public.”  We say ironic because just over 45 years after the passage of the ADA, the American public confronts an even more concentrated airline industry with just four airlines controlling over 80% of the market.

[1] It was the House version of the preemption language that was ultimately adopted by the Conference Committee, with the only changes to the House bill pertaining to Alaska and not germane for present purposes.  The Conference Report is found at HR 95-1779, page 95 (1978) and at 987 of the Legislative History.

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