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PAN AMERICAN WORLD AIRWAYS v. ABRAMS

May 9, 1991

PAN AMERICAN WORLD AIRWAYS, INC., PLAINTIFF,
v.
ROBERT ABRAMS, AS ATTORNEY GENERAL OF THE STATE OF NEW YORK, DEFENDANT.



The opinion of the court was delivered by: Sweet, District Judge.

OPINION

Plaintiff Pan American World Airways, Inc. ("Pan Am") has moved to dismiss this action pursuant to Fed.R.Civ.P. 41(a)(2), or, in the alternative, for summary judgment on the counterclaims of defendant Robert Abrams, the New York State Attorney General ("the State"). The State has cross-moved to amend its answer to assert two new counterclaims. For the following reasons, the motion under Rule 41(a)(2) is granted, the State's cross-motion is denied, and the case is dismissed.

Prior Proceedings

As set forth in more detail below, Pan Am filed this case on April 11, 1989 seeking declaratory judgment that the State could not enforce its deceptive advertising statutes against Pan Am. The parties and the underlying facts were described more fully in the opinion of November 13, 1989 which dismissed several of Pan Am's claims and remanded two related cases to New York State court. New York v. Trans World Airlines, Inc., 728 F. Supp. 162 (S.D.N.Y. 1989) ("the 1989 Opinion").

On October 22, 1990 Pan Am moved to withdraw its claims against the State and to dismiss the counterclaims for lack of subject matter jurisdiction. Alternatively, Pan Am sought summary judgment on the counterclaims on the grounds of collateral estoppel. The State cross-moved to amend its answer to add two counterclaims, both of which it asserted were originally pled as affirmative defenses to Pan Am's claims. Oral argument on the motions was heard on December 14, 1990. Due to ongoing developments in various related cases, the parties submitted further material and the matter was considered fully submitted as of February 7, 1991.

The Facts

As set forth in the 1989 Opinion, this action concerns the enforcement of New York statutes regulating deceptive advertising to control advertising by airlines. 728 F. Supp. at 165-66. This suit actually constitutes but a small piece of a wide-ranging battle, the result of a coordinated attack on airline advertising involving more than thirty states and their attorneys general. For the purposes of the present motion, it is necessary to review some of the complex chronology of this campaign.

In November, 1988, the Texas Attorney General's office wrote on behalf of California, Massachusetts, New York, Texas and Washington*fn1 to Trans World Airlines, Inc. ("TWA"), Continental Airlines, Inc. ("Continental") and British Airways PLC ("British Air"), suggesting that the states viewed the airlines' advertising practices, particularly the failure to include certain "surcharges" in advertised fares, as violative of their consumer protection laws, and threatening legal action if the practices continued.

In response to this letter, the three airlines sued the Texas Attorney General in January 1989, seeking a preliminary injunction preventing him from enforcing any state laws regulating their advertising practices. Trans World Airlines, Inc. v. Mattox, 712 F. Supp. 99 (W.D.Tex. 1989). The airlines claimed that such regulation was preempted by federal law, primarily § 411 of the Federal Aviation Act of 1958, Pub.L. No. 85-726, 72 Stat. 731 (the "FAA"), (codified as amended at 49 U.S.C. App. § 1381), with authorizes the Department of Transportation ("DOT") to regulate "unfair or deceptive practices or methods of competition in air transportation or the sale thereof."

New York and thirty-two other states joined Texas in opposing the preliminary injunction by filing a "Motion of Specially Appearing States," in which they claimed that they were appearing "specially," "without admitting or submitting to the subject matter jurisdiction of this Court and without admitting that this Court has personal jurisdiction over them. . . ." See 1989 Opinion, 728 F. Supp. at 165.

By order of January 30, 1989, the Honorable Walter S. Smith, Jr. granted the airlines' request for a preliminary injunction, finding that "it is probable that: Plaintiffs will prevail in establishing their claims that any state regulation of advertising of the Plaintiffs' rates, routes, and services has been preempted by the Federal Government." 712 F. Supp. 99, 101 (W.D.Tex. 1989) ("Mattox I"). Shortly after granting the preliminary injunction, Judge Smith ruled that it applied only to the Texas Attorney General. TWA v. Mattox, No. A-89-CA-067 (W.D.Tex. Feb. 27, 1989) (order clarifying scope of preliminary injunction).

Thereafter, several of the states which had participated in the Texas action, including New York, began to pursue various airlines in their own state courts under their states' deceptive advertising laws. In response, the airlines moved in March 1989 to broaden the scope of the Mattox I preliminary injunction to bar litigation by any of the states which had participated in Mattox. At the same time, Pan Am and several other airlines sought to intervene in Mattox. While that motion was pending, the State commenced suit against TWA in New York State court to enforce its false advertising and consumer fraud statutes. Pan Am then initiated this suit, seeking a declaratory judgment that the State's statutes were unconstitutional and were preempted by the FAA. The State responded by filing a second state enforcement action against Pan Am on April 20, 1989.

On April 26, 1989 Judge Smith granted the airlines' motions, allowing Pan Am and the others to intervene and broadening the scope of the preliminary injunction to prevent any of the states which had participated in Mattox from commencing suits against the plaintiffs. Judge Smith also directed the airlines to amend their complaint to join as defendants the attorneys general of the thirty-three states. Mattox I, 712 F. Supp. at 104-05. The New York enforcement action against TWA was one of four actions specifically excluded by Judge Smith from the broadened preliminary injunction. Id. at 106.

Subsequently, both Pan Am and TWA removed the New York State court actions to this Court, and the State moved to remand them and to dismiss Pan Am's federal action for failure to state a claim upon which relief could be granted and for lack of subject matter jurisdiction. TWA and Pan Am cross-moved for an order staying both of the removed state enforcement actions and this lawsuit pending the disposition of Mattox, or alternatively transferring all three cases to the Western District of Texas. In support of its motion to dismiss, the State argued that this Court should abstain from deciding Pan Am's federal claims until after the New York State court had a chance to resolve the issues following remand. See 1989 Opinion, 728 F. Supp. at 173.

On November 13, 1989, the State's motion to remand the two state court actions was granted, based upon a finding that the state laws in question were not preempted by any federal laws. 1989 Opinion, 728 F. Supp. at 184. While this conclusion was contrary to the Mattox I finding that the airlines were likely to prevail on the preemption question, because that case had involved only a preliminary injunction rather than a final adjudication there was no question of whether New York was collaterally estopped from raising the issue in this case. The 1989 Opinion also noted that Mattox I was at that time on appeal to the Fifth Circuit. Id. at 166. In addition to remanding the enforcement actions, the 1989 Opinion dismissed Pan Am's claim for preemption, but preserved its claims under the Commerce Clause and the First Amendment. Id. at 175-85.

On April 3, 1990, the Fifth Circuit affirmed Mattox I. TWA v. Mattox, 897 F.2d 773 (5th Cir. 1990), cert. denied, ___ U.S. ___, 111 S.Ct. 307, 112 L.Ed.2d 261 (1990) ("Mattox II"). The Court of Appeals discussed this Court's prior ruling along with rulings by the Southern District of California, California v. TWA, 720 F. Supp. 826 (S.D.Cal. 1989), and the District of Kansas, Kansas v. TWA, 730 F. Supp. 366 (D.Kan. 1990), all of which had rejected the airlines' preemption arguments, but concluded that

  Unlike the district courts in New York, California
  and Kansas, we believe the history of federal
  legislation regulating airlines demonstrates the
  intent of Congress to expressly preempt state
  regulation of airline fare advertising, leaving no
  right of action that arises under state law only.

Mattox II, 897 F.2d at 782. The court apparently saw no issue of collateral estoppel in the prior district court rulings, although New York directly participated in the appeal in Mattox II.

In affirming the broadening of the preliminary injunction to all of the state attorneys general and the direction to join of them as defendants, the Mattox II court found that they had waived all objections to personal jurisdiction by appearing and seeking "an ...


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