James Ferrell v. Air EVAC EMS
Opinion
James Ferrell checked into the emergency room at a hospital in Warren, Arkansas, experiencing chest pain. Staff arranged for Air EVAC EMS, Inc. (Air EVAC), an air-ambulance operator, to
transport him by helicopter to another hospital forty-one miles away. A few months after the transport, Air EVAC sent Ferrell a bill for $30,083.26. His insurer, Arkansas Blue Cross, paid $1000.00, leaving him owing a balance of $29,083.26. Ferrell brought this putative class action against Air EVAC asserting three claims for relief under Arkansas law: (i) a declaratory judgment that any contract between Air EVAC and class members is unenforceable because it lacks an essential price term; (ii) damages under the Arkansas Deceptive Trade Practices Act for concealing or omitting disclosure of its price until it completes air-ambulance transport; and (iii) a declaratory judgment that Air EVAC may not seek restitution against class members because it lacks clean hands. Air EVAC removed the action to the Eastern District of Arkansas and moved to dismiss. The district court
1
dismissed all claims as preempted by the express preemption provision in the Airline Deregulation Act (ADA),
I. The Preemption Landscape.
Before Congress enacted the ADA in 1978, the Federal Aviation Act (FAA) authorized the Civil Aeronautics Board to regulate air carriers' fares and trade practices; a savings provision preserved preexisting statutory and common law remedies.
Morales v. Trans World Airlines, Inc.
,
Except as provided in this subsection, a State ... may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of an air carrier that may provide air transportation under this subpart.
The Supreme Court has interpreted and applied the ADA's preemption provision in three cases. In
Morales
, commercial airlines sued to enjoin state attorneys general from enforcing guidelines regulating airlines' fare advertising.
In
American Airlines, Inc. v. Wolens
,
The ADA's preemption clause ... read together with the FAA's saving clause, stops States from imposing their own substantive standards with respect to rates, routes, or services, but not from affording relief to a party who claims and proves that an airline dishonored a term the airline itself stipulated. This distinction between what the State dictates and what the airline itself undertakes confines courts, in breach-of-contract actions, to the parties' bargain, with no enlargement or enhancement based on state laws or policies external to the agreement.
Most recently, in
Ginsberg
, class action plaintiffs alleged that Northwest Airlines violated its duty of good faith and fair dealing when it revoked their membership in its frequent flyer program.
II. The Claims at Issue.
The district court dismissed Ferrell's three claims, explaining that they not only "relate to" an air carrier's prices but are "in the heartland of price." The court concluded that the fairness of Ferrell's transaction with Air EVAC and the reasonableness of Air EVAC's price are governed by federal law. We review
de novo
whether the ADA expressly preempts these claims.
See
Watson v. Air Methods Corp.
,
A. In our view, preemption applies most obviously to Ferrell's Second Cause of Action, which alleges:
38. Defendant's concealment, suppression or omission of the price it will charge a patient until after the transport of the patient is done, as well as Defendant's concealment, suppression or omission of what the patient's health insurance will pay on Defendant's air ambulance charges, or whether the patients will be subject to a balance billing over insurance, constitute violations of the Arkansas Deceptive Trade Practices Act,Ark. Code Ann. § 4-88-101 , et seq. , including, without limitation,Ark. Code Ann. §§ 4-88-107 , -108.
This claim seeks to impose a state statutory price disclosure obligation beyond the scope of any agreement Air EVAC had with Ferrell. It obviously relates to Air EVAC's price and service. In both
Morales
and
Wolens
, the Supreme Court rejected similar attempts to use state consumer protection laws to regulate air carrier prices and services (noting in
Morales
that air carriers hardly have "
carte blanche
to lie to and deceive consumers" given the DOT's oversight authority).
Acknowledging that common law fraud and statutory consumer protection claims were preempted in
Morales
and
Wolens
,
2
Ferrell argues that these decisions should not apply to the unique air-ambulance market. He asserts that, because air-ambulance providers do not face meaningful price competition and patients often do not control whether to be transported by an air ambulance, applying the ADA to these fraud claims would entrench an anti-competitive market, not further the ADA's purpose of promoting efficiency and competition. But where a federal statute contains an express preemption provision, we "focus on the plain wording of the clause, which necessarily contains the best evidence of Congress' pre-emptive intent."
Puerto Rico v. Franklin Cal. Tax-Free Tr.
, --- U.S. ----,
"[W]hen the statute's language is plain, our inquiry into preemption both
begins and ends with the language of the statute itself."
EagleMed LLC v. Cox
,
B. For similar reasons, we conclude the ADA preempts Ferrell's Third Cause of Action, which alleges:
41. Since Defendant attempts to gouge patients with its exorbitant charges through concealment, suppression and omission of information about those charges from the patients until after they have been transported, Defendant does not have the good faith, clean hands, and reasonable terms necessary to be eligible for relief under implied contract, unjust enrichment, quantum meruit , or other restitutionary remedy, and this Court should so declare pursuant to the Arkansas Declaratory Judgment Act,Ark. Code Ann. § 16-111-101 , et seq ., and other applicable law.
In
Ginsberg
, the Supreme Court held that state common law doctrines such as good faith that relate to air carrier prices, routes, or services are preempted when they are employed "to ensure that a party does not violate community standards of decency, fairness, or reasonableness."
C. Ferrell's First Cause of Action presents the most interesting preemption issue. After setting forth factual background and class allegations in great detail, the First Cause of Action alleges:
29. Because Defendant does not supply pricing information for its air ambulance transport services to Plaintiff ... before providing those services, any agreement or contract to pay for such transport is not valid or enforceable for want of the essential contract term of price, and this Court should so declare pursuant to the Arkansas Declaratory Judgment Act,Ark. Code Ann. § 16-111-101 , et seq ., and other applicable law.
30. Further, Plaintiff ... had no agreement with Defendant as to the price to be charged ... [nor] any agreement providing a mechanism for objectively determining the price to be charged ... [so] there can be no valid contract upon which Defendant might hold Plaintiff ... liable for Defendant's after-the-fact egregious charges ....
In support of its motion to dismiss, Air EVAC submitted an Ambulance Billing Authorization Form dated November 14, the day Ferrell was provided air-ambulance transport services, and purporting to be signed by Ferrell and a witness. The Form recites that the patient acknowledges the services "was [sic] actually received," authorizes the services "as being medically necessary," assigns to Air EVAC any third party payments for the services, and "agrees that the patient is financially responsible for, and obligated to pay, the amount charged by [Air EVAC] for the medical services, including any amount that is not paid by any third-party payor." 3
Ferrell seeks a declaration that no express or implied contract came into effect because there was no mutual assent on "the amount of the price." He rejects the price term set forth in the Authorization Form -- that he will pay what Air EVAC charges -- because it does not state the price or provide an objective pricing mechanism. He argues the First Cause of Action falls within the preemption exception recognized in
Wolens
because it relies on a basic principle of contract law -- there must be a meeting of the minds on all essential terms for a contract to be enforceable. Air EVAC responds that the
Wolens
exception "saves only contract-law rules aimed at discerning and enforcing the parties' bargain." But Air EVAC acknowledges that "courts have recognized that it is proper to apply ordinary principles of contract law to ascertain whether there was a binding agreement between the parties," citing
Lyn-Lea Travel Corp. v. American Airlines, Inc.
,
It is well settled in Arkansas that an indefinite price term or even no price term does not necessarily render a contract unenforceable.
See, e.g.
,
Central Ark. Milk Producers Ass'n v. Smith
,
For these reasons, we conclude that Ferrell's declaratory judgment claims, like his fraud claims, are ADA-preempted. A judgment declaring that Air EVAC has no claim for breach of contract, and no right to recover for services it actually provided under any equitable theory, because it did not disclose its pricing term before providing the services, is clearly preempted under the ADA's express preemption provision as construed in Morales , Wolens , and Ginsberg .
Ferrell's reply brief posits that, if his claims are held to be ADA-preempted, the price for air-ambulance services will be set unilaterally by the air-ambulance provider because the DOT does not provide patients an administrative remedy. But this assumes that, if Ferrell's across-the-board class action claims are preempted, then Air EVAC is entitled to recover, as it has argued, the price stated in its Billing Authorization Form -- "the amount charged" -- free of contract law defenses
or interference. Both Ferrell's assumption and Air EVAC's assertion are unsound. Recall that, in
Wolens
, the Supreme Court in explaining the contract-based exception to ADA preemption stated that the ADA did not authorize DOT to adjudicate private contract disputes, and did not "channel into federal courts
the business of resolving
, pursuant to judicially fashioned federal common law, the range of
contract claims relating to airline rates, routes or services
."
Three circuit court opinions shed important light on this question. In
Data Manufacturing, Inc. v. United Parcel Service, Inc.
,
When pleaded as a defense to a contract, fraudulent inducement is related to the fundamental issue in contract actions: is there an enforceable agreement? A fraudulently induced party has not assented to an agreement because the fraudulent conduct precludes the requisite mutual assent. ... The Court reasoned in Wolens that because contract law is, at its "core," uniform and non-diverse, there is little risk of inconsistent state adjudication of contractual obligations. Fraudulent inducement is among those core concepts as it relates to the validity of mutual assent. The defense does not reflect a state policy seeking to expand or enlarge the parties' agreement.
If Ferrell does not pay the amount charged, Air EVAC obviously can bring a breach of contract claim to recover that amount.
See
Bailey v. Rocky Mountain Holdings, LLC
,
The judgment of the district court is affirmed.
The Honorable D.P. Marshall Jr., United States District Judge for the Eastern District of Arkansas.
Both the expressly pleaded Arkansas Deceptive Trade Practices Act claim and a common law fraud claim Ferrell presses on appeal seek damages for an alleged breach of Air EVAC's duty to disclose its prices. Both are preempted.
See
Musson Theatrical, Inc. v. Fed. Express Corp.
,
We may consider the Form at the 12(b)(6) stage because it is "necessarily embraced" by Ferrell's complaint, which denies the existence of an enforceable contract.
See
Enervations, Inc. v. Minn. Mining & Mfg. Co.
,
Reference
- Full Case Name
- James W. FERRELL, Individually and as Class Representative, Plaintiff - Appellant v. AIR EVAC EMS, INC., Defendant - Appellee
- Cited By
- 6 cases
- Status
- Published