United States District Court, N.D. Illinois, Eastern Division
June 8, 2005.
JEROME O'CALLAGHAN and JUDITH O'CALLAGHAN, Plaintiffs
ARM CORP., a foreign corporation, and AMERICAN AIRLINES, INC., a foreign corporation, Defendants.
The opinion of the court was delivered by: WILLIAM J. HIBBLER, District Judge
MEMORANDUM OPINION AND ORDER
Defendants move to dismiss many of the claims in Plaintiffs'
Second Amended Complaint, arguing that they are preempted by the
Airline Deregulation Act and the Warsaw Convention*fn1 or
that the Plaintiffs cannot state a claim. In short, the
Plaintiffs allege that they bought tickets from American Airlines
from Chicago to Rome after hearing that American Airlines offered
more legroom than other airlines, a claim which the O'Callaghans
allege was false. Plaintiffs' Amended Complaint contains five
claims: 1) a breach of contract claim; 2) a claim for common law
fraud; 3) a claim based on a violation of the Illinois Consumer
Fraud and Deceptive Business Practice Act; 4) a class action claim; and 5) a claim based on the Warsaw Convention.
Defendants move to dismiss the first four of these claims.
The Airline Deregulation Act (ADA) was enacted to "ensure that
the States would not undo federal deregulation with regulation of
their own." Morales v. Trans World Airlines, Inc.,
504 U.S. 374, 378, 112 S.Ct. 2031, 2034, 119 L. Ed. 2d 157 (1992). To
achieve that purpose, the ADA includes a preemption clause that
prohibits states from enacting or enforcing 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). The Supreme Court has twice
visited the reach of the ADA's preemption clause. Morales,
504 U.S. 374, 112 S.Ct. 2031; American Airlines, Inc. v. Wolens,
513 U.S. 219, 115 S.Ct. 817, 130 L.Ed.2d 715 (1995). In Wolens,
the Court held that the ADA preempted a Consumer Fraud Act claim
because that act "serve[d] as a means to guide and police the
marketing practices of the airlines . . . [and did] not simply
give effect to bargains offered by the airlines and accepted by
airline customers. Wolens, 513 U.S. at 228, 115 S. Ct. at 823.
The Court also held that the ADA's preemption clause does not bar
suits "seeking recovery solely for the airline's alleged breach
of its own, self-imposed undertakings." Id., 513 U.S. at 228,
115 S. Ct. at 824. Thus, ADA does not preempt suits seeking to
recover for breach of contract.
Here the Plaintiffs fraud claims do more than simply seek to
enforce the parties' bargains they seek to replace those
bargains with damages. See United Airlines, Inc. v. Mesa
Airlines, Inc., 219 F.3d 605, 609-10 (7th Cir. 2000). Thus, they
are the kind of claim that would be preempted if they relate to
the Defendants' rates, routes, or services. Plaintiffs argue that
their claims relate only to the "separate, independent,
intentional wrongful act of Defendants in knowingly making false
representations which they indented persons to rely upon and . . .
not to their rates, routes or services." Pl. Response at 23. The Court disagrees. Morales
teaches that restrictions on advertising "`surely relates to
price.'" Morales, 504 U.S. at 389, 112 S.Ct. at 2039 (quoting
Ill. Corp. Travel v. Am. Airlines, Inc., 889 F.2d 751, 754 (7th
Cir. 1989)) (internal quotations omitted). Wolens concerned a
class of Plaintiffs who believed that the defendant Airline's
advertisements regarding its frequent-flyer program were
deceptive, and the Court held that such claims related to rates
and to services. Wolens, 513 U.S. at 226-27, 115 S.Ct at 823.
Plaintiffs' claims regarding Defendants' advertising regarding
legroom cannot be meaningfully distinguished from the claims of
the plaintiffs in Wolens. Allowing the Plaintiffs to use
consumer fraud laws (both statutory and common) to obtain damages
from the Defendants' advertising has the effect of regulating the
Defendants' rates. The Court therefore holds that Counts II and
III of Plaintiffs' Amended Complaint are preempted by the ADA and
Defendants' motion to dismiss those claims is GRANTED.
The Defendants next argue that Plaintiffs' breach of contract
claim fails to state a claim. The Plaintiffs allege in their
Amended Complaint that the Defendants' advertised that they had
"more room throughout coach" and "more legroom throughout coach."
It is true that an advertisement does not constitute an offer,
merely an invitation to deal on the advertised terms. Steinberg
v. Chicago Med. Sch., 69 Ill.2d 320, 329-30, 371 N.E. 2d 634,
639 (1977). The Plaintiffs further allege that they inquired
about this advertisement. Accepting Plaintiffs' allegations as
true and drawing reasonable inferences in their favor, a
reasonable factfinder could conclude that the Defendant accepted
the Plaintiffs' offer to purchase tickets on the terms stated in
the advertisement. See Steinberg, 69 Ill.2d at 330,
371 N.E.2d at 639 (when merchant takes the money, it accepts the consumer's
Defendants also argue that the Plaintiffs cannot state a claim
for breach of contract because their allegations contradict the
written terms of the contract. The Plaintiffs have attached to
their Amended Complaint the tickets at issue, which state that they are
"subject to Conditions of Contract." Defendants point to Rule
60.B.3 of American's International Passenger Rules tariff, which
states, "Seat Allocation . . . Carrier does not guarantee
allocation of any particular space in the aircraft." Defendants
appear to interpret Rule 60.B.3 as not only suggesting that
American is not obligated to give consumers a particular seat,
but that it is not obligated to give them any particular amount
of space. American's interpretation of Rule 60.B.3 is unavailing.
It is true that Rule 60.B.3 unambiguously contradicts any claim
by the Plaintiffs that Defendants breached the contract by
refusing to reseat them. It does not, however, unambiguously
contradict a claim that the Defendants breached the contract by
failing to provide more legroom than other airlines.
Defendants make a final argument that Plaintiffs have failed to
state a breach of contract claim, but this argument merits little
discussion. Defendants argue that Plaintiffs claim is premised on
the assumption that American's advertisement "more legroom
throughout coach" meant "for every row of coach and for every
coach class seat." (Def. Brief in Support of Mot. to Dismiss at
22) (emphasis in original). Defendants argue that Plaintiffs'
assumption is flawed, and therefore they cannot state a claim for
breach of contract. Defendants' argument tortures the meaning of
throughout, which means "in or to every part; from one end to the
other; everywhere." Webster's Third New International Dictionary,
Unabridged, at 2385 (1986). The Defendants' Motion to Dismiss
Count I of Plaintiffs' Amended Complaint is DENIED.
Defendants argument to dismiss Count IV (class action) is
premised entirely on its argument to dismiss Counts I, II, and
III. Because the Court denied the Motion to Dismiss Count I, the
Motion to Dismiss Count IV is also DENIED. Finally, AMR moves to dismiss the entire complaint against it,
suggesting that it is not responsible for the acts of its
subsidiary, American Airlines. The Court agrees. Plaintiffs
allege in their Amended Complaint that AMR conducts business
through its wholly owned subsidiary, American Airlines.
Corporations are separate legal entities and a parent company is
not generally liable for the acts of its subsidiary. United
States v. Bestfoods, 524 U.S. 51, 118 S.Ct. 1876, 141 L.Ed.2d 43
(1998); Papa v. Katy Industries, Inc., 166 F.3d 937, 940-41
(7th Cir. 1999); IDS Life Ins. Co. v. SunAmerica Life Ins. Co.,
136 F.3d 537, 540 (7th Cir. 1998). Plaintiffs solitary allegation
regarding AMR is that AMR conducts business through its wholly
owned subsidiary, American Airlines. But "[p]arents of wholly
owned subsidiaries necessarily control, direct, and supervise the
subsidiaries to some extent." IDS Life Ins. Co.,
136 F.3d at 540. Plaintiffs have made no allegation to show that there is a
basis for piercing the corporate veil and attributing the acts of
American Airlines to AMR. AMR's motion to dismiss is GRANTED
IT IS SO ORDERED.