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In Re Air Cargo Shipping Services Antitrust Litigation


October 11, 2012


The opinion of the court was delivered by: Dennis Jacobs, Chief Judge:


In re Air Cargo Shipping Servs. Anitrust Litig.

Argued: April 19, 2012

Before: JACOBS, Chief Judge, KEARSE and HALL, Circuit Judges.

Plaintiffs (indirect purchasers of air freight shipping 22 services) allege that numerous foreign airlines conspired to 23 fix prices in violation of state antitrust, consumer 24 protection, and unfair competition laws. The United States 25 District Court for the Eastern District of New York 26 (Gleeson, J.) accepted, in relevant part, the report and 27 recommendation of Magistrate Judge Pohorelsky, dismissing 28 those claims as expressly preempted by the Federal Aviation 29 Act. 49 U.S.C. § 41713(b)(1). We agree that Plaintiffs' 30 claims are expressly preempted. 31 Affirmed.

Plaintiffs (indirect purchasers of air freight shipping 3 services) brought suit against numerous foreign airlines 4 ("Defendants"), alleging a conspiracy to fix prices in 5 violation of state antitrust, consumer protection, and 6 unfair competition laws. The United States District Court 7 for the Eastern District of New York (Gleeson, J.) dismissed 8 those claims as expressly preempted by federal law. The 9 Federal Aviation Act preempts state-law claims "related to a 10 price, route, or service of an air carrier." 49 U.S.C. 11 § 41713(b)(1). The question is whether "air carrier" in 12 that provision applies to foreign air carriers. We conclude 13 that it does, and affirm.


At least 22 foreign air carriers have been subject to 17 federal criminal charges in the United States in connection 18 with a global price-fixing conspiracy. Some have settled, 19 agreeing to pay fines and penalties totaling almost $2 20 billion.

21 Plaintiffs bring this civil suit alleging that they 22 paid excessive prices when Defendants entered into that 1 conspiracy, beginning in 2000, and began levying a number of 2 surcharges, including a fuel surcharge, a war-risk-insurance 3 surcharge, a security surcharge, and a United States customs 4 surcharge. Plaintiffs, as indirect purchasers of air 5 freight shipping, dealt with the defendant airlines through 6 intermediaries, such as freight forwarders. They bring 7 their claims under state law because indirect purchasers are 8 unable to obtain money damages under federal antitrust law. 9 See Ill. Brick Co. v. Illinois, 431 U.S. 720, 729 (1977).

10 Additional claims were brought by other plaintiffs who were 11 direct purchasers. The claims of those direct-purchaser 12 plaintiffs remain in district court and are not before us. 13 Below, the district court accepted, in relevant part, 14 Magistrate Judge Pohorelsky's recommendation to dismiss 15 Plaintiffs' state claims on the ground that it was expressly 16 preempted by federal law. The district court then entered 17 partial final judgment under Rule 54(b) of the Federal Rules 18 of Civil Procedure, so Plaintiffs could immediately appeal 19 the dismissal decision. This appeal followed.


We review de novo a dismissal for failure to state a 23 claim upon which relief can be granted. Harris v. Mills, 6 1 572 F.3d 66, 71 (2d Cir. 2009). We also review de novo 2 questions of statutory interpretation, Bodansky v. Fifth on 3 the Park Condo, LLC, 635 F.3d 75, 82 (2d Cir. 2011), and 4 questions of preemption, New York SMSA Ltd. Partnership v. 5 Town of Clarkstown, 612 F.3d 97, 103 (2d Cir. 2010). 6 The relevant provision of the Federal Aviation Act is 7 as follows:

8 Except as provided in this subsection, a State, 9 political subdivision of a State, or political 10 authority of at least 2 States may not enact or enforce 11 a law, regulation, or other provision having the force 12 and effect of law related to a price, route, or service 13 of an air carrier that may provide air transportation 14 under this subpart.

15 49 U.S.C. § 41713(b)(1). Plaintiffs' claims undoubtedly 16 arise under state law and are related to "price." Id. The 17 dispositive question, then, is whether foreign air carriers 18 (such as Defendants) are "air carrier[s]" under 19 § 41713(b)(1) (the "preemption provision").


We begin "'with the language employed by Congress and 23 the assumption that the ordinary meaning of that language 1 accurately expresses the legislative purpose.'" United 2 States v. Aleynikov, 676 F.3d 71, 76 (2d Cir. 2012) (quoting 3 United States v. Albertini, 472 U.S. 675, 680 (1985)). The 4 ordinary, everyday meaning of "air carrier" includes both 5 domestic and foreign air carriers.

6 That would usually end the analysis, but "[w]hen a 7 statute includes an explicit definition," we generally 8 follow that definition, "even if it varies from that term's 9 ordinary meaning." Stenberg v. Carhart, 530 U.S. 914, 942 10 (2000). "'Statutory definitions control the meaning of 11 statutory words, of course, in the usual case.'" Nw. Austin 12 Mun. Util. Dist. No. One v. Holder, 557 U.S. 193, 206 (2009) 13 (quoting Lawson v. Suwannee Fruit & S.S. Co., 336 U.S. 198, 14 201 (1949)). The Federal Aviation Act defines an "air 15 carrier" as "a citizen of the United States undertaking by 16 any means, directly or indirectly, to provide air 17 transportation." 49 U.S.C. § 40102(a)(2). A "foreign air 18 carrier" is separately defined as "a person, not a citizen 19 of the United States, undertaking by any means, directly or 20 indirectly, to provide foreign air transportation." Id. 21 § 40102(a)(21).

Plaintiffs contend that this is the "usual case" where 23 the statutory definitions should control. The statutory 1 definitions are consistent with this Court's authority that 2 the terms "air carrier" and "foreign air carrier" are 3 "mutually exclusive" because an entity cannot be both a 4 citizen and not a citizen of the United States. United 5 States v. Keuylian, 602 F.2d 1033, 1040 (2d Cir. 1979).

6 That observation is sound as far as it goes; but there are 7 occasions when statutory definitions yield to context and 8 the development of the statutory wording over time. In any 9 event, while an entity cannot be both an air carrier and a 10 foreign air carrier (i.e., the terms are mutually 11 exclusive), nothing in the statutory definitions prevents 12 the statutory preemption provision from applying to both 13 domestic air carriers and foreign air carriers, which is the 14 matter at issue here.

15 To demonstrate that Congress has been careful to 16 distinguish between the two terms, Plaintiffs cite 51 places 17 in the Federal Aviation Act where Congress distinguished 18 between an "air carrier" and a "foreign air carrier" by 19 using both terms. At the same time, Plaintiffs concede that 20 there are numerous provisions in the Federal Aviation Act 21 where Congress was not so careful and used the term "air 22 carrier" generically to reference air carriers, both 1 domestic and foreign.*fn1 See In re Korean Air Lines Co. Ltd.,

1 Anti-Trust Litig., 642 F.3d 685, 692 (9th Cir. 2011); Port 2 Auth. of N.Y. & N.J. v. Dep't of Transp., 479 F.3d 21, 32 3 (D.C. Cir. 2007).

4 Since the Federal Aviation Act used the statutory 5 definition in some places, and in other places used the 6 normal, everyday meaning, this is the "unusual case" in 7 which the statutory definitions do not have compulsory 8 application. Nw. Austin Mun. Util. Dist. No. One, 557 U.S. 9 at 206-07 (internal quotation marks omitted). Because it 10 has been "'established that a statutorily defined term has 11 different meanings in different sections, the term standing 12 alone is necessarily ambiguous and each section must be 13 analyzed to determine whether the context gives the term a 14 further meaning that would resolve the issue in dispute.'" 15 Korean Air Lines, 642 F.3d at 692-93 (brackets omitted) 16 (quoting Robinson v. Shell Oil Co., 519 U.S. 337, 343-44 17 (1997)). To dispel this ambiguity, we look to "other 18 sources, including the legislative history, to discern 19 Congress's meaning." Slayton v. Am. Express Co., 604 F.3d 20 758, 771 (2d Cir. 2010); accord Nw. Austin Mun. Util. Dist. 21 No. One, 557 U.S. at 206-07; Robinson, 519 U.S. at 343-44;

1 Farmers Reservoir & Irrigation Co. v. McComb, 337 U.S. 755, 2 764 (1949); Lawson, 336 U.S. at 201; see also Philko 3 Aviation, Inc. v. Shacket, 462 U.S. 406, 411 (1983) 4 (refusing to use statutory definition of "conveyance" in the 5 Federal Aviation Act because it would "defeat the primary 6 congressional purpose for" enacting the provision). 7 Resort to context and legislative history is 8 particularly appropriate in this instance. When the Federal 9 Aviation Act was originally enacted, it "defined 'air 10 carrier' as being a U.S. citizen 'unless the context 11 otherwise require[d].'" Korean Air Lines, 642 F.3d at 693 12 n.5 (emphasis added) (quoting Pub.L. No. 85-726, 72 Stat. 13 731 (1958)). The proviso was removed in 1994 in an 14 amendment that was intended to make "'no substantive change 15 in the law.'" Id. (quoting S. Rep. No. 103-265, at 5 16 (1994)); see also Act of July 5, 1994, Pub. L. No. 103-272, 17 § 1, 108 Stat. 745. We therefore consult context and 18 legislative history to ascertain the meaning of "air 19 carrier" in the preemption provision.


A review of the Federal Aviation Act, the various amendments to it, and the legislative history and purpose of 1 the preemption provision confirms that the preemption 2 provision should be read to preempt state-law antitrust 3 suits against foreign as well as domestic air carriers. 4 Korean Air Lines, 642 F.3d at 693-95. We start with the 5 preemption provision.


The preemption provision was part of the Airline 10 Deregulation Act,*fn2 which amended the Federal Aviation Act to 11 "encourage, develop, and attain an air transportation system 12 which relies on competitive market forces to determine the 13 quality, variety, and price of air services," Pub. L. No. 14 95-504, (Preamble) 92 Stat. 1705 (1978), while still 15 preserving the significant regulatory authority of the 16 federal Civil Aeronautics Board ("CAB"), see Morales v. 17 Trans World Airlines, Inc., 504 U.S. 374, 379 (1992); see 18 also 49 U.S.C. §§ 1374(b), 1381 (1982) (providing authority 19 for CAB to, inter alia, bar anti-competitive conduct).

20 Previously, the Federal Aviation Act provided that 21 "[n]othing . . . in this chapter shall in any way abridge or 1 alter the remedies now existing at common law or by statute, 2 but the provisions of this chapter are in addition to such 3 remedies." 49 U.S.C. § 1506 (1978).

4 The preemption provision was included in the Airline 5 Deregulation Act "[t]o ensure that the [s]tates would not 6 undo federal deregulation with regulation of their own." 7 Morales, 504 U.S. at 378; Korean Air Lines, 642 F.3d at 694 8 ("'In addition to protecting consumers, federal regulation 9 insures a uniform system of regulation and preempts 10 regulation by the states' in a field where state-based 11 variations 'would be confusing and burdensome to airline 12 passengers, as well as to the airlines.'") (quoting H.R. 13 Rep. No. 98-793, at 4 (1984), reprinted in 1984 U.S.C.C.A.N. 14 2857, 2860).

This also resolved "uncertainties and 15 conflicts" in the law created by conflicting or overlapping 16 regulations issued by the federal and state governments. 17 H.R. Rep. No. 95-1211 at 16 (1978), reprinted in 1978 18 U.S.C.C.A.N. 3737, 3751. Accordingly, the preemption 19 provision conferred on the federal government exclusive 20 authority to regulate a carrier's routes, rates, and 21 services. Id. at 16 (explaining that the Airline 22 Deregulation Act "will prevent conflicts and inconsistent 23 regulations by providing that when a carrier operates under 1 authority granted pursuant to . . . the Federal Aviation 2 Act, no state may regulate that carrier's routes, rates or 3 services").

4 The Airline Deregulation Act achieved domestic 5 deregulation, and the original preemption provision applied 6 only to "air carrier[s] having authority . . . to provide 7 interstate air transportation." 49 U.S.C. § 1305(a)(1) 8 (1978) (emphasis added). Interstate air transportation is 9 transportation between two states (or the District of 10 Columbia) within the United States. 49 U.S.C. § 1301(24)(a) 11 (1978). Because only domestic air carriers were authorized 12 to engage in "interstate air transportation," 49 U.S.C. 13 § 1301(22) (1978); Korean Air Lines, 642 F.3d at 694, the 14 preemption provision, as originally drafted, was aimed at 15 preemption of state laws and regulations aimed at domestic 16 air carriers, only.


The International Air Transportation Competition Act of 20 1979 ("IATCA"), Pub. L. No. 96-192, 94 Stat. 35 (1980), 21 extended deregulation and the market-oriented regulatory 22 approach of the Airline Deregulation Act to foreign air 23 transportation. Korean Air Lines, 642 F.3d at 694.

1 Although more limited than domestic deregulation, the IATCA 2 was also intended to increase market competition in order to 3 reduce pricing in foreign air transportation. Id. (citing 4 IATCA, § 102(a)(4)).*fn3


The Civil Aeronautics Board Sunset Act of 1984 ("Sunset 8 Act"), Pub. L. No. 98-443, 98 Stat. 1703 (1984), included an 9 amendment to the preemption provision that deleted the term 10 "interstate"; so the provision preempted state laws relating 11 to price, route, or service of "'any air carrier having 12 authority . . . to provide air transportation.'" See Korean 13 Air Lines, 642 F.3d at 694 (alteration in original) (quoting 14 49 U.S.C. § 1305(a)(1) (1984)). The Sunset Act conferred 15 upon the United States Department of Transportation the 16 authority to "'preserve the competitive direction adopted in 1 the [Airline Deregulation Act] and the IATCA,'" which makes 2 "clear that the ramifications of the IATCA were in the minds 3 of the Sunset Act's drafters" when they deleted "interstate" 4 from the preemption provision. Korean Air Lines, 642 F.3d 5 at 695 (quoting H.R. Rep. No. 98-793 at 8, reprinted in 1984 6 U.S.C.C.A.N. at 2864). This legislative history leads to 7 the "conclu[sion] that Congress intended to expand the 8 [Airline Deregulation Act's] preemptive scope to cover state 9 regulation of 'foreign air carriers.'" Id. (internal 10 brackets omitted).

11 The legislative history of the Sunset Act justifies 12 preemption. Although the following text concerns domestic 13 deregulation, the point that is made is just as applicable 14 to foreign air carriers. The House's report explained: 15 Federal regulation insures a uniform system of 16 regulation and preempts regulation by the states. If 17 there was no federal regulation, the states might begin 18 to regulate these areas, and the regulations could vary 19 from state to state. This would be confusing and 20 burdensome to airline passengers, as well as to the 21 airlines. 22 H.R. Rep. No. 98-793 at 4, reprinted in 1984 U.S.C.C.A.N. at 23 2860. By the same token, the "purpose [of deregulation] 1 would be undermined if states could regulate foreign air 2 carriers." Korean Air Lines, 642 F.3d at 694. Reading the 3 statutory scheme to permit "regulation of foreign air 4 carriers would create a confusing patchwork of regulations 5 for airline passengers to navigate . . . . Such a result 6 would not be consonant with Congress's express purpose in 7 enacting the statute." Id.


Plaintiffs argue that the removal of a single word from 11 the preemption provision--"interstate"--cannot support 12 expansion of the preemption provision to cover foreign air 13 carriers. We disagree. It had been beyond dispute that the 14 preemption provision only applied to domestic air carriers. 15 The Sunset Act, however, was enacted on the heels of the 16 IATCA, which expanded deregulation of the domestic airline 17 industry to foreign air carriers. In light of the clear 18 signals from Congress that deregulation was to continue 19 unabated--and not be frustrated by re-regulation by the 20 states--Congress's removal of "interstate" was intended to 21 expand the preemption bar to state regulation of foreign air 22 carriers.

1 Since the removal of "interstate" must be given some 2 effect, Plaintiffs propose a congressional intent to expand 3 the preemption provision to domestic air carriers that only 4 had authority to provide overseas air transportation*fn4 and 5 thus were not protected by the wording of the original 6 enactment ("air carrier[s] having authority . . . to provide 7 interstate air transportation," 49 U.S.C. § 1305(a)(1) 8 (1978)). However, by 1984, that category of domestic air 9 carrier no longer existed. Before 1982, if an air carrier 10 provided overseas--but not interstate--transportation, the 11 CAB would issue an authorizing certificate limited to air 12 transportation overseas. The CAB's authority to issue such 13 certificates expired on December 31, 1981, Airline 14 Deregulation Act of 1978, Publ L. No. 95-504, § 40, 92 stat 15 1705, 1744-47; starting January 1, 1982, the CAB issued 16 certificates for domestic air carriers that authorized 17 "interstate and overseas air transportation . . . between 18 all points in the United States, its territories and 19 possessions (without regard to point listings)." In re 20 Certificate Formats in 1982, CAB Order No. 81-11-23, at 2 (Nov. 3, 1981); see also Proposals to Provide Essential Air 2 Service at Natchez, Mississippi, CAB Order No. 81-12-132, at 3 1 (Dec. 22, 1981) (making final the proposed orders and 4 findings set out in the November 3, 1981, Order).

Plaintiffs also argue that deregulation was a domestic 6 initiative; so an expansion of the preemption provision to 7 protect foreign air carriers does not flow from 8 deregulation. However, the IATCA was aimed at foreign air 9 carriers, and the Sunset Act was intended to preserve the 10 pro-competition policy approach of the IATCA as well as the 11 Airline Deregulation Act. See Korean Air Lines, 642 F.3d at 12 695 (citing H.R. Rep. No. 98-793 at 8, reprinted in 1984 13 U.S.C.C.A.N. at 2864).

14 Plaintiffs argue that the IATCA has no bearing on the 15 question before us because it mainly redistributed the 16 administration of federal regulatory authority among federal 17 agencies, and therefore was not deregulatory. This is 18 incorrect. The IATCA (and, later, the Sunset Act) continued 19 the deregulation of the airline industry and expanded 20 deregulation to foreign air carriers. Some regulatory 21 authority that was deemed critical was preserved and 22 transferred from the CAB to the Department of 23 Transportation, Korean Air Lines, 642 F.3d at 694-95 (citing 1 H.R. Rep. No. 98-793, at 2, 8, 13, reprinted in 1984 2 U.S.C.C.A.N. at 2857, 2858, 2864, 2869), but deregulation is 3 an incremental process, not an annihilation.

Maintaining 4 some federal regulatory authority had the not-incidental 5 effect of filling holes for which state regulation was to be 6 excluded. See Korean Air Lines, 642 F.3d at 694. 7 Finally, Plaintiffs point out that Congress chose to 8 omit from the IATCA any preemption provision specifically 9 for foreign air carriers. That does not matter because we 10 conclude above that Congress achieved that result by other 11 means.*fn5


The legislative history of the preemption provision and 15 the amendments to it confirm that Congress intended the term 16 "air carrier" in the preemption provision to mean domestic and foreign air carriers alike. A contrary result would 2 undermine Congress's purpose in enacting the preemption 3 provision and the various deregulation statutes. See Philko 4 Aviation, 462 U.S. at 411; accord Lawson, 336 U.S. at 201 5 (rejecting mechanical use of a statutory definition that 6 would "destroy one of the major purposes of" enacting the 7 provision).

The intent of Congress in deregulating the industry and 9 in enacting the preemption provision was "[t]o ensure that 10 the [s]tates would not undo federal deregulation with 11 regulation of their own." Morales, 504 U.S. at 378. The 12 preemption provision protects air carriers against state 13 regulation relating to prices, routes, and services, 49 14 U.S.C. § 41713(b)(1); so re-regulation could comprehensively 15 defeat the federal effort to reduce regulation.

16 Plaintiffs' reading of the preemption provision, which 17 would preempt only state regulation of domestic air 18 carriers, would allow states to regulate the routes, prices, 19 and services of foreign air carriers that operate all over 20 the world. That would risk subjecting foreign air carriers 21 and their customers to "a confusing patchwork" of state-by- 22 state regulation, such as different rules for purchase of 23 otherwise identical international flights if one ticket is 1 from an American air carrier and the other from a foreign 2 carrier. See Korean Air Lines, 642 F.3d at 694 (explaining 3 that, in the context of domestic deregulation, state-by- 4 state re-regulation would subject air carriers and their 5 customers to "state-based variations [which] 'would be 6 confusing and burdensome to airline passengers, as well as 7 to the airlines.'" (quoting H.R. Rep. No. 98-793 at 4, 8 reprinted in 1984 U.S.C.C.A.N. at 2860)).

9 Allowing the states to regulate only foreign air 10 carriers would be particularly peculiar since "[f]oreign 11 commerce is pre-eminently a matter of national concern." 12 Japan Line, Ltd. v. Cnty. of L.A., 441 U.S. 434, 448-49 13 (1979). Apart from that oddity, a preemption provision that 14 favors domestic air carriers by subjecting only foreign air 15 carriers to state regulation would likely be viewed as 16 "discriminat[ion] against foreign air carriers" in violation 17 of the United States' treaty obligations. Korean Air Lines, 18 642 F.3d at 696.*fn6 Interpreting the preemption provision in such a manner "offend[s] the longstanding principle that 2 statutes should be construed in accordance with 3 international law." Id. (citing Murray v. Schooner Charming 4 Betsy, 6 U.S. (2 Cranch) 64, 118 (1804)).*fn7

In sum, the ambiguity of Congress's use of the term 9 "air carrier" in the preemption provision necessitates 10 review of the legislative history of the preemption 11 provision and the various statutes deregulating the airline 12 industry. That legislative history (confirmed by additional 13 canons of statutory construction) leads us to conclude that 14 "air carrier" in the preemption provision means both 1 domestic and foreign air carriers. Plaintiffs' state law 2 claims are therefore expressly preempted, and the district 3 court correctly granted Defendants' motion to dismiss. 4 Because Plaintiffs' claims are expressly preempted, we 5 need not consider whether they are impliedly preempted.


For the foregoing reasons, the judgment of the district court is affirmed.

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