American Airlines, Inc. v. Wolens
Does the Airline Deregulation Act's preemption clause, which bars states from enforcing laws 'relating to rates, routes, or services' of airlines, prevent passengers from bringing state consumer-fraud claims and breach-of-contract claims against an airline over changes to its frequent flyer program?
The Decision
6-1-2 decision · Opinion by Ruth Bader Ginsburg · 1995
Majority Opinion— Ruth Bader Ginsburgconcurring ↓dissent ↓
The Supreme Court issued a split decision, authored by Justice Ruth Bader Ginsburg, that drew a careful line between two different types of state-law claims. On the consumer fraud claims, the Court held that the ADA did preempt them. On the breach-of-contract claims, however, the Court held that the ADA did not preempt them. The core majority opinion was joined by Chief Justice Rehnquist and Justices Scalia, Kennedy, Souter, and Breyer.
Regarding the Illinois Consumer Fraud and Deceptive Business Practices Act claims, the Court reasoned that this statute served as a form of state-imposed regulation on airlines. The consumer fraud law set standards of conduct that went beyond what the parties had privately agreed to — it established broad, legislatively imposed obligations about fair dealing and honest practices that applied to businesses generally. Because these state-prescribed standards 'related to' airline rates, routes, or services, they fell squarely within the ADA's preemption clause. Allowing such claims would effectively let states regulate airline marketing and pricing practices through the back door of consumer protection statutes, which was precisely the kind of state regulatory interference Congress had sought to eliminate.
The breach-of-contract claims, however, presented a fundamentally different situation. The Court reasoned that contract claims do not involve the state imposing its own regulatory standards on airlines. Instead, they merely hold an airline to the terms it voluntarily adopted. When American Airlines created the AAdvantage program and set its terms, it made self-imposed undertakings to its members. A lawsuit seeking to enforce those private agreements does not amount to a state 'enacting or enforcing' a law relating to airline services — it is simply asking a court to enforce a bargain the airline itself struck. The Court emphasized that routine breach-of-contract litigation is too far removed from state regulatory power to trigger preemption.
The Court acknowledged that its interpretation drew a meaningful line. The key distinction was between claims that sought to enforce externally imposed state regulatory standards (preempted) and claims that sought to enforce privately ordered, voluntarily assumed obligations (not preempted). The Court noted that this approach preserved the central purpose of the ADA — preventing states from reimposing the kind of regulatory burden that deregulation was designed to lift — while still ensuring that airlines could not make promises to consumers and then hide behind federal law to avoid keeping them. The Court also limited the scope of permissible contract claims, clarifying that they must be based on the parties' actual agreement and not on state policies that would enlarge or enhance contractual obligations beyond what the parties bargained for.
The Illinois Supreme Court's judgment was therefore affirmed in part and reversed in part: reversed as to the consumer fraud claims (which were preempted) and affirmed as to the breach-of-contract claims (which could proceed).
Concurring Opinions
Justice O'Connor's opinion and Justice Stevens's opinion are each technically styled as concurring in part and dissenting in part, since each agreed with one part of the Court's two-part holding while disagreeing with the other. There were no separate concurring opinions that agreed with the majority on both points but offered distinct reasoning.
Dissenting Opinions
Sandra Day O'Connorjoined by Clarence Thomas
Justice O'Connor agreed that the ADA preempted the consumer fraud claims but dissented from the majority's holding that breach-of-contract claims could survive preemption. She argued that contract claims relating to airline rates, routes, or services are just as much a form of state-law enforcement as consumer protection statutes, and that the ADA's broad preemption language makes no distinction between different types of state-law causes of action.
- The ADA's preemption clause prohibits states from enforcing any provision 'having the force and effect of law,' and state contract law — which is itself a body of state law — qualifies under this language when it is used to challenge airline program terms.
- Allowing contract claims creates a significant loophole in the ADA's preemption scheme, because plaintiffs can simply repackage regulatory arguments as contract disputes to circumvent federal deregulation policy.
- The majority's distinction between self-imposed obligations and state-imposed standards is unworkable in practice because state law always supplies the framework for interpreting, enforcing, and supplementing contractual obligations.
John Paul Stevens
Justice Stevens agreed that breach-of-contract claims survived preemption but dissented from the majority's holding that the Illinois Consumer Fraud Act claims were preempted. He argued that the state consumer fraud statute, like contract law, is a generally applicable law that does not specifically target or regulate the airline industry, and therefore should not be considered a state law 'relating to' airline rates, routes, or services.
- The Illinois Consumer Fraud Act is a law of general applicability that governs all businesses, not one specifically aimed at regulating airlines, and Congress did not intend the ADA to immunize airlines from such broadly applicable state consumer protection standards.
- The majority's approach creates an artificial distinction between generally applicable consumer protection laws and generally applicable contract laws, even though both serve similar functions of holding businesses to standards of honest dealing.
Background & Facts
American Airlines operated a popular frequent flyer program called AAdvantage, which allowed members to accumulate mileage credits through flights and other purchases and then redeem those credits for free travel, upgrades, and other benefits. Over time, American Airlines retroactively changed the terms of the program in ways that made previously earned credits less valuable. The airline imposed new restrictions — such as capacity controls on seats available for award travel and blackout dates — that had not existed when the credits were originally earned. For many loyal customers, credits they had accumulated under one set of rules were suddenly subject to new, less favorable rules they had never agreed to.
A class of AAdvantage program members, led by respondent S. Wolens, filed suit in Illinois state court. They brought two types of claims. First, they alleged that American Airlines had violated the Illinois Consumer Fraud and Deceptive Business Practices Act by retroactively devaluing their earned credits through misleading practices. Second, they brought common-law breach-of-contract claims, arguing that the airline had broken its own promises about how the program would work. The plaintiffs sought to recover the value they had lost when the airline changed the rules after the fact.
The case traveled through the Illinois court system. The Illinois trial court initially dismissed both types of claims, finding that the federal Airline Deregulation Act (ADA) preempted them entirely. The Illinois Appellate Court reversed, holding that neither claim was preempted. The Illinois Supreme Court ultimately agreed that both the consumer fraud claims and the breach-of-contract claims could go forward, finding that the ADA's preemption provision did not block either type of lawsuit.
American Airlines petitioned the U.S. Supreme Court for review. The case presented an important question about the scope of federal airline deregulation: Congress had passed the ADA in 1978 to free the airline industry from heavy government regulation, and the statute included a broad preemption clause to prevent states from stepping in with their own regulatory rules. But the question of whether this preemption clause swept away even private contract disputes between airlines and their customers had divided courts and had major implications for millions of frequent flyer program members and airline passengers across the country. The Supreme Court agreed to hear the case to clarify these boundaries.
The specific preemption provision at issue was Section 1305(a)(1) of the ADA (later recodified), which prohibited any state 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.' The central interpretive battle was over how broadly to read the phrase 'relating to' and whether it extended to privately negotiated contract terms as well as state regulatory enactments.
The Arguments
American Airlines argued that the Airline Deregulation Act broadly preempted all state-law claims — including both consumer fraud and breach-of-contract actions — that related to airline rates, routes, or services. According to the airline, Congress intended to completely shield airlines from state-level interference with their pricing, marketing, and service decisions, including how they structured frequent flyer programs.
- The ADA's preemption clause uses expansive language — 'relating to rates, routes, or services' — that Congress deliberately made broad to ensure that states could not impose a patchwork of regulations on a deregulated industry.
- Allowing breach-of-contract claims would effectively permit state courts to regulate the terms of airline programs, which is exactly the kind of state-level interference the ADA was designed to prevent.
- The Supreme Court had already interpreted nearly identical preemption language broadly in the ERISA context (in cases involving employee benefit plans), and should apply that same broad interpretation to the ADA.
The AAdvantage members argued that neither their consumer fraud claims nor their breach-of-contract claims were the type of state action Congress intended to preempt. They maintained that the ADA was designed to prevent states from regulating airlines, not to immunize airlines from all legal accountability — especially when the airline itself had made voluntary promises to its customers.
- Breach-of-contract claims do not impose any external regulation on airlines; they simply hold airlines to their own voluntarily undertaken commitments and the terms they themselves chose to offer.
- The Illinois Consumer Fraud Act serves a general consumer protection purpose and is not specifically aimed at regulating the airline industry, so it should not be treated as a law 'relating to' airline services within the meaning of the ADA.
- Reading the ADA to preempt all private legal remedies would leave consumers with no recourse when airlines break their promises, a result Congress could not have intended.