Federal Court Dismisses State Law Claims Alleging Conspiracy Between Boeing and Southwest

Of the many current lawsuits against Boeing arising from the 737 MAX crisis, perhaps one of the more interesting ones was brought by Southwest Airlines passengers against Southwest and Boeing alleging that they were overcharged at the moment that they purchased tickets for travel aboard Southwest’s 737 MAX aircraft.[1]  These passengers, who brought putative class-action claims, alleged that the 737 MAX was fatally defective, that they never would have purchased their tickets on Southwest’s 737 MAX aircraft had they known of the defects, and that Boeing’s and Southwest’s misrepresentations and omissions concerning the safety of the 737 MAX enabled Southwest to overcharge for tickets.  Plaintiffs brought causes of action against both defendants for, broadly speaking: (1) violations of the RICO Act; (2) concealment and misrepresentation; (3) unjust enrichment; and (4) negligence.  Other than the RICO Act claims, Plaintiffs’ claims all were state law claims.

Both Boeing and Southwest moved to dismiss.  First, the defendants contended that the plaintiffs lacked standing, arguing that plaintiffs suffered no injury because they received the benefit of their bargain; namely, plaintiffs received the air travel that they were promised and were not physically injured during that travel.  Plaintiffs countered that had they known of the risk of physical harm attendant to air travel on a 737 MAX, they never would have purchased their tickets, and defendants’ unlawful RICO enterprise and fraudulent actions allowed Southwest to overcharge for those tickets.

The court held that defendants were correct as to plaintiffs’ first theory.  Specifically, it held that a products-liability type claim that is not accompanied by a physical injury was foreclosed by the Fifth Circuit’s decision in Rivera v. Wyeth-Ayerst Labs.[2]  That case established a bright-line rule that a plaintiff cannot establish an injury sufficient to confer standing by pointing to an alleged design defect that injured others, but not the plaintiff.  The 737 MAX’s design defects may have injured those killed in the crashes of Lion Air Flight 610 and Ethiopian Airlines Flight 302, but Southwest’s 737 MAX aircraft did not crash or cause any passenger physical injury.

However, the court held that plaintiffs were correct as to their second theory, that alleged RICO violations enabled Southwest to overcharge for tickets, which may have injured plaintiffs at the time of ticket purchase.  The court surveyed the landscape of cases in which plaintiffs alleged overcharge injuries arising from allegedly defective products that plaintiffs would not have purchased if they had knowledge of the defects but where no physical injury occurred, and held that each case clearly allowed those plaintiffs to establish standing by demonstrating an economic injury incurred by the plaintiff.  The overcharge alleged was a sufficient injury to confer standing here.  Defendants also argued that no economic injury could be established because the plaintiffs’ economic benefit – receiving the travel they paid for – outweighed their alleged economic injury.  But the court held the standing analysis does not engage in cost-benefit accounting; rather, it looks at only whether the plaintiff has alleged a plausible economic injury.  Because the plaintiffs have done so here, they have Article III standing.

The court next weighed the defendants’ motion to dismiss under Rule 12(b)(6), wherein the defendants argued that the plaintiffs failed to plead the elements of their state law and RICO claims.  It held that the plaintiffs properly pleaded all of their claims but for unjust enrichment. 

However, the court held that those state law claims were preempted by the Airline Deregulation Act (ADA).  The court began with the well-known analysis that the ADA preempts state law claims relating to an airline’s routes, prices, or services, but does not preempt claims for violations of an airline’s voluntary undertakings, such as voluntary elements of its conditions of carriage.  Here, potential state law claims for overcharges were preempted because they: (1) related to Southwest’s prices and services; and (2) were not related to an obligation that Southwest voluntarily undertook.  Plaintiffs had argued that Southwest had voluntarily undertaken an obligation by speaking on the subject of 737 MAX aircraft, but then not doing so truthfully and completely.  But the court held that it was not the voluntary speech that plaintiffs seek to recover from, but ticket overcharges.  There was thus no contract with plaintiffs that Southwest breached, which could have unchained plaintiffs’ claims from ADA preemption.  Plaintiffs’ state law claims were thus dismissed.[3]

With plaintiffs’ state law claims dismissed, the court held that all that remains of plaintiffs’ suit was its RICO claims against both defendants.

 


 

[1] Earl et al. v. The Boeing Company and Southwest Airlines Co., No. 4:19-cv-00507-ALM, Dkt. No. 56 (E.D. Tex. February 14, 2020).

[2] 283 F.3d 315 (5th Cir. 2002).

[3] Defendants also argued that plaintiffs’ class claims should be stricken because state law varies, plaintiffs’ alleged violations of several state’s laws, and thus plaintiffs’ state law claims could not serve as the foundation of a class action.  But with those claims dismissed, that no longer was a concern.

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