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Polansky v. Trans World Airlines Inc.

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT


September 9, 1975

CHARLES POLANSKY, PAULINE POLANSKY, HIS WIFE, NORMAN SHABEL, ARLEEN SHABEL, HIS WIFE, JOHN RIZZI, MRS. JOHN RIZZI, HIS WIFE, AND JENNIE HANNERS AND ELIZABETH HANNERS, APPELLANTS,
v.
TRANS WORLD AIRLINES, INC., A CORPORATION HAVING ITS PRINCIPAL PLACE OF BUSINESS AT 605 THIRD AVENUE, CITY OF NEW YORK, STATE OF NEW YORK, OPERATING IN ALL STATES IN THE UNITED STATES OF AMERICA, INCLUDING THE STATE OF NEW JERSEY, AND MELIA TOURS, INC., WITH ITS PRINCIPAL PLACE OF BUSINESS AT 580 FIFTH AVENUE, CITY OF NEW YORK, STATE OF NEW YORK, APPELLEES

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY. (D. N.J. Civil No. 74-463).

Adams, Hunter and Garth, Circuit Judges.

Author: Hunter

Opinion OF THE COURT

HUNTER, Circuit Judge:

In this case we must decide whether airline passengers who were furnished allegedly inferior ground accommodations in a tour, sponsored by a Civil Aeronautics Board (CAB) regulated air carrier, can maintain an action against the air carrier on the basis of 49 U.S.C. § 1374(b) and § 1381, § 404 and § 411 of the Federal Aviation Act.*fn1 Given the facts of this case, we hold that a private cause of action may not be implied from these statutes. Accordingly, we affirm the district court's Fed. R. Civ. P. 12(b)(6) dismissal of the complaint for failure to state a claim upon which relief can be granted.*fn2

I

Plaintiff-appellants were members of a European tour sponsored by defendant airline, Trans World Airlines, Inc. (TWA) and defendant travel agency, Melia Tours, Inc. They allege that TWA and Melia supplied services different than those warranted in literature, advertising the "Flamenco" tour of Spain and Portugal and that by this advertising, defendants fraudulently induced them to participate in the tour. Plaintiffs specifically charge that their "first-class" hotel accommodations were inferior to tourist accommodations provided to other members of the tour at lesser cost; that pre-planned inter-city travel services were inadequate, that pre-arranged reservations were broken or not honored; and that promised tour guides, hosts and hostesses were not available.

As the basis of the suit,*fn3 plaintiff-appellants relied on two sections of the Federal Aviation Act. 49 U.S.C. § 1374(b), § 404 of the Act, specifically prohibits discrimination by any regulated air carrier. 49 U.S.C. § 1381, § 411 of the Act, in turn, gives the CAB power to investigate and enjoin unfair or deceptive practices. Since neither section provides for private enforcement, plaintiffs sought to imply a private cause of action for damages from these statutes. The district court held that it would be inappropriate to imply a private remedy from § 1374(b) on the facts of this case.*fn4 In reaching this result, the court distinguished a series of precedents in which a private remedy had been implied from § 1374(b). Without further consideration of the issues raised by § 1381, the district court granted defendant-appellees Rule 12(b)(6) motion to dismiss.*fn5 The instant appeal followed.

II

In determining whether a private remedy is implicit in a statute not expressly providing for one, the Supreme Court has indicated that at least four factors must be considered. Cort v. Ash, 422 U.S. 66, 95 S. Ct. 2080, 45 L. Ed. 2d 26, 43 U.S.L.W. 4773, 4776 (1975).*fn6 Specifically, a court must consider: first, whether the statute was designed to protect a class of persons into which plaintiff falls from the harm plaintiff has suffered; second, whether there is any indication of legislative intent to create or deny a private remedy; third, whether implication of a private remedy would be consistent with the purposes of the legislative scheme; and fourth, whether the cause of action is one traditionally relegated to state law such that inference of a federal cause of action would be inappropriate. See also: National Rail Passenger Corp. v. National Association of Rail Passengers, 414 U.S. 453, 38 L. Ed. 2d 646, 94 S. Ct. 690 (1974) (Amtrak)*fn7 and Securities Investor Protection Corporation v. Barbour, 421 U.S. 412, 95 S. Ct. 1733, 44 L. Ed. 2d 263, 43 U.S.L.W. 4630 (1975) (SIPC).*fn8

A. 49 U.S.C. § 1374(b)

49 U.S.C. § 1374(b) provides:

No air carrier or foreign air carrier shall make, give, or cause any undue or unreasonable preference or advantage to any particular person, port, or locality, or description of traffic in air transportation in any respect whatsoever or subject any particular person, port, locality, or description of traffic in air transportation to any unjust discrimination or any undue or unreasonable prejudice or disadvantage in any respect whatsoever. (Emphasis added).

On its face, the statute prohibits an air carrier from unjustly discriminating or acting with prejudice against any person in air transportation. Although § 1374(b) is silent about private enforcement, courts have implied a private remedy for a variety of acts by the air carrier, including racial discrimination,*fn9 and bumping in violation of the airline's own standards.*fn10

It would be a mistake to assume, however, that the implication of a private remedy from § 1374(b) in these cases requires that a private remedy exists for all alleged violations of the act. In our view, each new category of conduct alleged to violate § 1374(b) must be tested against the standards stated by the Supreme Court in Cort v. Ash, supra. The cases previously decided under § 1374(b), however, are illustrative of the kinds of conduct the statute seeks to prevent.

With respect to the first Cort test, we note that plaintiff-appellants, as air passengers, are clearly members of the class § 1374(b) was designed to protect. § 1374(b) prohibits the airline from prejudicing "any . . . person . . . in air transportation. . . ." The decided cases have uniformly held that air passengers may rely on § 1374(b).*fn11 Although members of the proper class, plaintiff-appellants did not suffer the harm the statute was designed to prevent.

In our view, the statute aims to protect the right of access to air facilities from discriminatory interference by the air carrier. The airline is required to treat all potential passengers and users equally. Thus, the airline may not prohibit minority groups from equal access to flights or terminal facilities.*fn12 Similarly, although bumping is not a per se violation of § 1374(b), the airline may not bump in a discriminatory manner violative of the airline's published standards. In all of the cases in which a private remedy has been implied from § 1374(b) there was a discriminatory denial of access to air facilities. In our view, it is this denial of access to air facilities, whether caused directly, by outright refusal of permission to board, or indirectly, by burdening the potential user with special requirements not applied to the general public, which is critical.

The words of the statute and the decided cases suggest that § 1374(b) does not seek to prevent the harm alleged by these plaintiff-appellants. The harm they suffered simply cannot be construed as discriminatory interference with access to air facilities although appellants have attempted to characterize the harm they suffered as a form of discrimination. They allege that tourist class services were superior to their own "first class" accommodations. Although labeled discrimination, the alleged misconduct is at worst a breach of warranty and a fraudulent misrepresentation. And, indeed, if it were discrimination, then every breach of contract by an airline would give rise to a private cause of action under § 1374(b).*fn13 There would always be another unbreached contract to which the disgruntled air passenger could compare the services performed for him. We emphatically decline appellants' invitation to so characterize this alleged breach of contract and, thereby, to widen the application of this statute to forms of conduct it was not enacted to cover.

The legislative history of § 1374(b), which second Cort directs us to examine, sheds little light on the problem of implying a private remedy.*fn14 Nevertheless, within the terms of the third Cort test, the purpose of the statutory scheme is made abundantly clear by examination of other sections of the Federal Aviation Act.

§ 49 U.S.C. § 1302(c) and § 1304 suggest that implication of a private remedy in this case would not be consistent with the policy of the Federal Aviation Act. § 49 U.S.C. § 1302(c) indicates that the purpose of the Act is:

The promotion of adequate, economical, and efficient service by air carriers at reasonable charges, without unjust discriminations, undue preferences or advantages, or unfair or destructive competitive practices. (Emphasis added).

Although the language of this section is general, the intent to prohibit discrimination, or any form of differentiation between classes of similarly situated passengers, is clear. 49 U.S.C. § 1304, in turn, declares "a public right of freedom of transit through the navigable airspace of the United States." This latter section explicitly states that the general purpose of the Act is to insure free access to air facilities. Nowhere does the statute specifically eschew an interest in requiring the airline adequately to perform services as contracted. But protecting passengers from inadequate services would in no way foster the statutory goals stated in § 1302(c) and § 1304. As the Supreme Court stated in Cort v. Ash, 422 U.S. 66 at 84, 43 U.S.L.W. at 4778, "While 'it is the duty of courts to be alert to provide such [implied] remedies as are necessary to make effective the congressional purpose' J. I. Case v. Borak, [377 U.S. 426, 433, 12 L. Ed. 2d 423, 84 S. Ct. 1555 (1964)] in this instance the remedy sought does not aid the primary congressional goal."*fn15 Accordingly, the Supreme Court in Cort v. Ash refused to imply a private remedy. So, too, in this case, where a private remedy would serve no statutory purpose, we shall not imply one.

Within the terms of the fourth Cort test, it would be entirely appropriate to relegate these appellants to whatever remedy has been created by state law. As the premise of this discussion, we recognize that a state remedy for breach of contract, breach of warranty and fraudulent misrepresentation was and, perhaps still is, readily available. Only where there is some countervailing national interest should the federal courts imply a federal private remedy when an adequate state remedy already exists. No countervailing national interest has been brought to the attention of the court in this case.

In J. I. Case v. Borak, 377 U.S. 426, 12 L. Ed. 2d 423, 84 S. Ct. 1555 (1964)*fn16 for example, the Supreme Court implied a federal remedy when relegating the litigants to a state remedy would frustrate the purpose of § 14(a) of the Securities and Exchange Act of 1934, 15 U.S.C. § 78n(a).

In the instant case, the purposes of the Federal Aviation Act would not be fostered by granting a private remedy for this kind of conduct. Thus, any justification for ignoring state remedies which could be derived from J. I. Case v. Borak, supra, is utterly lacking in this case.

Where little reason for implying a federal remedy can be articulated, federal courts should be wary of bringing entirely new areas of conduct under federal control. In the instant case, we see no greater interest for the development of a federal contract law for regulated air carriers than earlier courts have seen for the development of a federal tort law for regulated air carriers. Moungey v. Brandt, 250 F. Supp. 445, 451 (W.D. Wis., 1966).*fn17 In Moungey, the court refused to imply a federal tort remedy for an air accident which was the result of asserted violations of federal safety statutes and regulations. The court pointed out that state remedies had not been characterized as inadequate and further, that the federal government's air safety program would not be improved by creation of a federal tort remedy. In the present case, appellants have never alleged, and could not rightly allege, that state remedies for breach of contract are inadequate. Neither have they suggested any reason why the efficacy of the Federal Aviation Act would be improved by a federal breach of contract remedy in this case.

We note further that in those cases in which a private remedy has been implied from § 1374(b), an adequate state remedy was generally unavailable. In the area of racial discrimination, for example, the federal government has taken the lead in granting relief precisely because many states were unable or unwilling to provide redress for discriminatory mistreatment of minority citizens. Further with respect to boarding priorities at issue in the bumping cases, federal regulatory control has been total.*fn18 In each of these areas, unless a litigant were permitted to imply a federal remedy from § 1374(b), he would be denied all relief.*fn19

The ready availability of state remedies in the instant case, and the absence of any statutory purpose or national interest to justify implication of a federal remedy despite these state remedies, requires us to deny a federal remedy for the alleged breach of § 1374(b).

Under the four tests articulated by the Supreme Court in Cort v. Ash, supra there is no justification for, and no reason to, imply a federal private remedy from § 1374(b) for misconduct which amounts (at the most) to nothing more than a breach of contract, "misrepresentation" or breach of warranty.

B. 49 U.S.C. § 1381

This section of the Federal Aviation Act provides:

The Board may, upon its own initiative or upon complaint by any air carrier, foreign air carrier, or ticket agent, if it considers that such action by it would be in the interest of the public, investigate and determine whether any air carrier, foreign air carrier, or ticket agent has been or is engaged in unfair or deceptive practices or unfair methods of competition in air transportation or the sale thereof. If the Board shall find, after notice and hearing, that such air carrier, foreign air carrier, or ticket agent is engaged in such unfair or deceptive practices or unfair methods of competition, it shall order such air carrier, foreign air carrier, or ticket agent to cease and desist from such practices or methods of competition. (Emphasis added).

§ 1381 gives the CAB power to supervise, in an antitrust sense, the activities of the regulated air carrier. To the extent that the CAB, through investigation, finds that an airline has engaged in unfair practices, the agency can issue a cease and desist order.

Unlike § 1374(b), however, no private cause of action has ever been implied from § 1381. The absence of any cases implying a private remedy from § 1381 may be due to dicta in a 1963 Supreme Court decision. In Pan Am Airways v. United States, 371 U.S. 296, 83 S. Ct. 476, 9 L. Ed. 2d 325 (1963), the Supreme Court analyzed the legislative history of 49 U.S.C. § 1381 and found the statute to be patterned after § 5 of the Federal Trade Commission (FTC) Act, 15 U.S.C. § 45. § 5 of FTC Act gives the FTC power to investigate and enjoin unfair trade practices. In dicta discussing the legislative intent of § 1381, the Pan Am court stated that neither § 1381 nor § 5 of the FTC Act "embrace a remedy for private wrongs but only a means of vindicating the public interest." 371 U.S. at 306.*fn20 Although the implication of a private remedy from § 1381 has apparently not been addressed since this Pan Am dicta, several courts have dealt with implication of a private remedy from the model statute, § 5 of the FTC Act. These courts have consistently refused to imply a private remedy from § 5 on the ground that a private remedy would undercut the statutory scheme which grants the agency discretion to determine what is an unfair practice in any given factual contest. Holloway v. Bristol-Myers Corp., 158 U.S. App. D.C. 207, 485 F.2d 986 (1973)*fn21 and Carlson v. Coca Cola, 483 F.2d 279 (9th Cir., 1973).*fn22

This analysis is equally relevant to § 1381. Through a regulatory scheme even more comprehensive than the one applied by the FTC, the CAB is given control over all facets of one particular industry. The agency is directed to weigh the "interest of the public" in determining what is an unfair practice under § 1381. The considerable discretion required in weighing the public interest can best be exercised by an agency knowledgeable in all aspects of the regulated airline industry. To imply a private remedy from § 1381 could undercut that discretion in antitrust matters.*fn23

Further, the Supreme Court's discussion in Pan Am, supra, of the legislative history of § 1381 suggests that no private remedy was intended by Congress. To vindicate a public right, Congress created a specialized agency, the Civil Aeronautics Board. This agency, alone, is provided with enforcement powers under § 1381.

We conclude that a private remedy may not be implied from § 1381.

III

For the foregoing reasons, the district court's dismissal of the complaint for failure to state a cause of action will be affirmed.

Disposition

The district court's dismissal of the complaint for failure to state a cause of action will be affirmed.


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