Anderson's Business Law and the Legal Environment 20th Edition by David Twomey,Marianne Jennings

Exercise 1

Wolens and others are participants in American Airlines' frequent flyer program, AAdvantage. AAdvantage members earn mileage credits when they fly on American. The members can exchange those credits for flight tickets or class-of-service upgrades. Wolens complained that AAdvantage program modifications, instituted by American in 1988, devalued credits that AAdvantage members had already earned. The examples Wolens gave were American's imposition of capacity controls (limiting the number of seats per flight available to AAdvantage members) and blackout dates (restrictions on dates AAdvantage members could use their credits). Wolens brought suit alleging that these changes and cutbacks violated the Illinois Consumer Fraud and Deceptive Business Practices Act. American Airlines challenged the suit on the grounds that the regulation of airlines was preempted by the Airline Deregulation Act (ADA) of 1978, which deregulated domestic air transportation but also included the following clause on preemption: "[N]o State... shall enact or enforce 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 USC App § 1305(a)] The Illinois Supreme Court found that the rules on the frequent flyer program were only tangentially related to rates, routes, and services and required American Airlines to defend the suit. American Airlines appealed. Is American Airlines correct? Is state regulation preempted here? [ American Airlines, Inc. v Wolens , 513 US 219]