shl Doc 24 Filed 10/24/12 Entered 10/24/12 17:32:15 Main Document Pg 1 of 21

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1 Pg 1 of 21 Harvey R. Miller Stephen Karotkin Alfredo R. Pérez Stephen A. Youngman WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, New York Telephone: (212) Facsimile: (212) Michael V. Powell (admitted pro hac vice) Cynthia K. Timms (admitted pro hac vice) LOCKE LORD LLP 2200 Ross Avenue, Suite 2200 Dallas, Texas Telephone: (214) Facsimile: (214) HEARING DATE AND TIME: October 30, 2012, 2:00 p.m. (Eastern Time) Attorneys for AMR Corporation and American Airlines, Inc. - Defendants UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK x In re : Chapter 11 Case No. : AMR CORPORATION, et al., : (SHL) : Debtors. : (Jointly Administered) x KAREN ROSS AND STEVEN EDELMAN, : Adversary Proceeding on behalf of themselves : and all others similarly situated, : : Plaintiffs, : Case No (SHL) : v. : : AMR CORPORATION AND AMERICAN : AIRLINES, INC., : : Defendants. : x DEFENDANTS REPLY TO PLAINTIFFS OBJECTION TO DEFENDANTS MOTION TO DISMISS

2 Pg 2 of 21 TABLE OF CONTENTS Page A. The Wolens Settlement Agreement and Final Order Allow American to Make Changes Affecting Old Miles....2 (a) The Settlement Agreement and Final Order Unambiguously Give American the Right to Make Any Change, at Any Time....2 (b) There Are No Carve-Outs for Changes Affecting Old Miles....5 (c) The Particular Allegations in Wolens and Gutterman Do Not Restrict the Scope of the Settlement Agreement and Final Order....6 B. Plaintiffs Preemption Arguments are Wrong....8 (a) (b) All of Plaintiffs Claims Concern American s AAdvantage Program, Which Relates to Price and Service....9 American Did Not Self-Impose an Implied Duty of Good Faith and Fair Dealing C. Plaintiffs Causes of Action Do Not Pass 12(b)(6) Muster (a) (b) No State Other Than Texas Has a Significant Interest in the Law Applied to Plaintiffs Claims Plaintiffs Breach of an Implied Covenant of Good Faith and Fair Dealing Claim Fails (c) Plaintiffs Promissory Estoppel Claim Fails (d) Plaintiffs Fail to State a Claim for Unjust Enrichment i

3 Pg 3 of 21 TABLE OF AUTHORITIES CASES Page(s) 4901 Corp. v. Town of Ciero, 220 F.3d 522 (7th Cir. 2000)...7 Abdu-Brisson v. Delta Airlines, Inc., 128 F.3d 77 (2d Cir. 1997)...9, 10 In re Air Transp. Excise Tax Litig., 37 F. Supp. 2d 1133 (D. Minn. 1999)...11 Aloha Airlines, Inc. v. Mesa Air Group, Inc., CV. No DAE-BMK, 2007 WL (D. Haw. Apr. 2, 2007)...10 Am. Airlines, Inc. v. Wolens, 513 U.S. 219 (1995)... passim In re Am. Express Fin. Advisors Sec. Litig., 672 F.3d 113 (2d Cir. 2011)...6 In re Am. Airlines, Inc. Privacy Litig., 370 F. Supp. 2d 552 (N.D. Tex. 2005)...11 ATA Airlines, Inc. v. Fed. Express Corp., 665 F.3d 882 (7th Cir. 2011)...11 Broder v. Cablevision Sys. Corp., 418 F.3d 187 (2d Cir. 2005)...2 Buck v. Am. Airlines, Inc. 476 F.3d 29 (1st Cir. 2007)...8, 11, 12 City of Clinton v. Pilgrim s Pride Corp., 632 F.3d 148 (5th Cir. 2010)...15 City of Midland v. O Bryant, 18 S.W.3d 209. (Tex. 2000)...14 Cooper v. Fed. Reserve Bank of Richmond, 467 U.S. 867 (1984)...8 Davis v. West, 317 S.W.3d 301 (Tex. App. Houston [1st Dist.] 2009, no pet.)...14 Excess Underwriters at Lloyds v. Frank s Casing Crew & Rental Tools, Inc., 246 S.W.3d 42 (Tex. 2008)...6 ii

4 Pg 4 of 21 Exxon Corp. v. Atl. Richfield Co., 678 S.W.2d 944 (Tex. 1984)...14 Forest Park Pictures v. Universal Television Network, Inc., 683 F.3d 424 (2d Cir. 2012)...13 In re JetBlue Airways Corp. Privacy Litig., 379 F. Supp. 2d 299 (E.D.N.Y. 2005)...10 Joseph v. JetBlue Airways Corp., No. 5:11-cv-1387, 2012 WL (N.D.N.Y. Apr. 11, 2012)...12 Keith v. Aldridge, 900 F.2d 736 (4th Cir. 1990)...7 Matsushita Elec. Indus. Co., Ltd. v. Epstein, 516 U.S. 367 (1996)...8 McWane, Inc. v. Crow Chi. Indus., Inc., 224 F.3d 582 (7th Cir. 2000)...2 Monzingo v. Alaska Air Group, Inc., 112 P.3d 655 (Alaska 2005)...4 Morales v. Trans World Airlines, Inc., 504 U.S. 374 (1992)...9, 10 Newman v. Spirit Airlines, Inc., No. 12 C 2897, 2012 WL (N.D. Ill. July 27, 2012)...12 Norfolk S. Corp. v. Chevron, U.S.A., Inc., 371 F.3d 1285 (11th Cir. 2004)...7 Oswald v. McGarr, 620 F.2d 1190 (7th Cir. 1980)...7 Plaza Nat l Bank v. Walker, 767 S.W.2d 276 (Tex. App. Beaumont 1989, writ denied)...14 Ray v. Am. Airlines, Inc., No , 2008 WL (W.D. Ark. Aug. 22, 2008)...12 Robinson v. Match.com L.L.C., 2012 WL (N.D. Tex. Aug. 10, 2012)...14 Rowe v. N.H. Motor Transp. Ass n, 552 U.S. 364 (2008)...9, 10 iii

5 Pg 5 of 21 Specht v. Netscape Commc ns Corp., 150 F. Supp. 2d 585 (S.D.N.Y. 2001)...14 Strategic Assets, Inc. v. Fed. Express Corp., 190 F. Supp. 2d 1065 (M.D. Tenn. 2001)...10 Wil-Roye Inv. Co. II v. Wash. Mut. Bank, F.A., 142 S.W.3d 393 (Tex. App. El Paso 2004, no pet.)...14 Wolens v. Am. Airlines, Inc. 157 Ill.2d 466 (1993)...9 STATUTES 49 U.S.C (b)(1)...8 OTHER AUTHORITIES 18A Charles Alan Wright, et al., FEDERAL PRACTICE & PROCEDURE 4443 (2d ed. 2002)...7 FED. R. CIV. P. 12(b)(6)...12 iv

6 Pg 6 of 21 DEFENDANTS REPLY TO PLAINTIFFS OBJECTION TO DEFENDANTS MOTION TO DISMISS 1. Plaintiffs underlying theme is that the Old Miles portion of the AAdvantage program existing when the Wolens case was settled could never be changed even though the Wolens class agreed to a reservation of rights that allowed changes. Not only is that factually incorrect, it is conceptually wrong. The Wolens Settlement Agreement ( Settlement Agreement ) and Wolens Final Order ( Final Order ) provided information concerning the then-current state of affairs with regard to Old Miles. Those are the documents on which Plaintiffs rely. But in those very same documents, there is a reservation of rights that described what could happen in the future. That broad reservation of rights decreed that Plaintiffs have no vested rights in their AAdvantage miles and that American may, and is legally permitted to change the rules of the AAdvantage Program at any time, and even though such changes may affect members ability to use their AAdvantage Mileage Credits... already accumulated. The reservation of rights provision told Plaintiffs the future could be different from the present. 2. Plaintiffs attempt several ploys to limit the effect of the Wolens settlement on their alleged claims. First, they focus almost entirely on the reservation of rights in place before Wolens not on the reservation of rights from the Wolens settlement. 1 Second, they attempt to shrink the scope of the Wolens settlement to encompass only claims relating to the institution of capacity controls. Both approaches are misguided and contradict the plain, unambiguous terms of the Wolens Settlement Agreement and Final Order. Plaintiffs cannot avoid the fact that the Wolens reservation of rights expressly allows American to make the very changes about which Plaintiffs complain. This, alone, warrants dismissal of this entire adversary proceeding. See 1 Plaintiffs argue that the pre-wolens reservation of rights provision would not allow for the changes that American is making to Old Miles. American disagrees. Nevertheless, this disagreement is academic because the new reservation of rights plainly allows the changes. 1

7 Pg 7 of 21 Broder v. Cablevision Sys. Corp., 418 F.3d 187, 197 (2d Cir. 2005) (affirming the district court s grant of a motion to dismiss because contract language unambiguously foreclose[d] plaintiff s claims). 3. While the Court need look no further than the Wolens reservation of rights to dismiss this case, Plaintiffs also fail successfully to counter American s other reasons for dismissal. Plaintiffs provide no viable reason why certain claims are not preempted by the Airline Deregulation Act ( ADA ). Incredibly, Plaintiffs devote most of their preemption briefing to arguing the AAdvantage program does not relate to American s prices, routes, and services in direct contradiction to the Supreme Court s holding in Wolens. Finally, none of Plaintiffs claims are pleaded sufficiently, and their Objection attempts to go beyond the pleadings, and the bounds of case law, in an effort to establish a right of action in this case. A. The Wolens Settlement Agreement and Final Order Allow American to Make Changes Affecting Old Miles. 4. The Settlement Agreement in Wolens is a contract. Plaintiffs assert in their Objection that disputes regarding contract interpretation can rarely be resolved at the dismissal stage. Plaintiffs Objection to Motion to Dismiss ( Objection ) at 15. That, of course, is not true. Where the pertinent provisions of the contract are unambiguous, the Court interprets the contract as a matter of law. See McWane, Inc. v. Crow Chi. Indus., Inc., 224 F.3d 582, 584 (7th Cir. 2000). Thus, if the terms of a contract foreclose the plaintiff s claims, the Court must dismiss the complaint. See Broder, 418 F.3d at 197. (a) The Settlement Agreement and Final Order Unambiguously Give American the Right to Make Any Change, at Any Time. 5. The Wolens Settlement Agreement and Final Order are susceptible to only one reasonable interpretation: Plaintiffs have no vested rights in their AAdvantage miles. In fact, the Settlement Agreement and Final Order say just that: members are not entitled to any vested 2

8 Pg 8 of 21 rights.... American can make any change to the AAdvantage Program at any time, including changes affecting Old Miles. The Settlement Agreement provides: Right to Make Changes. The terms and conditions of the AAdvantage Program currently provide: American Airlines may, in its discretion, change the AAdvantage program rules, regulations, travel awards, and special offers at any time with or without notice. This means that the accumulation of mileage credit does not entitle members to any vested rights with respect to such mileage credits, awards or program benefits. In accumulating mileage or awards, members may not rely upon the continued availability of any award or award level, and members may not be able to obtain all offered awards for all destinations or on all flights. Any award may be withdrawn or subject to increased mileage requirements or new restrictions at any time. American Airlines may, among other things (i) withdraw, limit, modify, or cancel any award; (ii) change program benefits, mileage levels, participant affiliations, conditions of participation, rules for earning, redeeming, retaining or forfeiting mileage credit, or rules for the use of travel awards; or (iii) add black out dates, limit the number of seats available for award travel (including, but not limited to, allocating no seats on certain flights) or otherwise restrict the continued availability of travel awards or special offers. American may make any one or more of these changes at any time even though such changes may affect your ability to use the mileage credit or awards that you have already accumulated. American Airlines reserves the right to end the AAdvantage program with six months notice. Accordingly, each Wolens Class Member and Gutterman Class member acknowledges and agrees that American may make any one [or] more of the foregoing changes at any time even though such changes may affect their ability to use their AAdvantage Mileage Credits or awards that the members already have accumulated. The Wolens Class and the Gutterman Class agree to the entry of a declaratory judgment containing the provisions of this sub-paragraph. Defendants Motion to Dismiss ( Mot. to Dismiss ), Ex. 2 at 30 (emphasis added). 6. The quoted language could not be any clearer. Immediately after laying out the reservation of rights, the paragraph reiterates that American can make changes affecting accumulated miles and states each class member acknowledges and agrees that American may make changes to the AAdvantage program at any time even though it affects alreadyaccumulated credits or awards. Id. The Settlement Agreement defines AAdvantage Mileage Credits to mean all mileage credits received by members of American s AAdvantage Program 3

9 Pg 9 of 21 in accordance with the terms and conditions of the AAdvantage Program, not just New Miles. Id. at 7. Thus, Plaintiffs position that the settlement explicitly preserved their right to use Old Miles under the Old Awards structure is wrong. Objection at 13, The language of the Final Order confirms that the parties agreed to allow American to make changes affecting Old Miles. The Final Order states that American may, and is legally permitted to, change the AAdvantage program rules in any way and at any time, but makes an exception for the Wolens settlement awards, which American has agreed not to modify for the duration of the Wolens settlement certificates.... Mot. to Dismiss, Ex. 3 at By stating in the Final Order that American could not make changes impacting the Wolens settlement awards before those certificates expired, the parties and the court demonstrated that they knew how to make exceptions to American s otherwise broad power to make changes to the AAdvantage program. Had the parties intended to make exceptions for changes affecting Old Miles, they would have done so. 8. Plaintiffs cite Monzingo v. Alaska Air Group, Inc., but that case confirms American s contractual right to make the changes at issue here. 112 P.3d 655, (Alaska 2005). In Monzingo, the Alaska Supreme Court interpreted a nearly identical reservation of rights in Alaska Airlines ( Alaska ) frequent flyer program to allow Alaska to make changes to its program that retroactively altered the value of miles members already accumulated. Id. at 661. Alaska s terms and conditions stated that accrued mileage and award certificates do not constitute property of the member, and that Alaska reserves the right to change the Mileage Plan terms, conditions, partners, mileage credits and/or award levels. Id. The language in the Wolens reservation of rights is even more explicit than the one at issue in Monzingo, with respect to American s ability to make changes affecting accumulated miles. So, if Plaintiffs concede 4

10 Pg 10 of 21 that the reservation of rights at issue in Monzingo allowed changes affecting accumulated miles, the same must be true for the Wolens reservation of rights. (b) There Are No Carve-Outs for Changes Affecting Old Miles. 9. Plaintiffs insist that there were carve-outs for Old Miles. There was no such thing. And Plaintiffs insistence to the contrary is disingenuous. Plaintiffs contend the settlement documents carve-out their claims because those documents state in various places that Old Miles do not expire. To support that contention, Plaintiffs quote, out of context, isolated snippets from the Wolens Settlement Agreement, Final Order, and Class Notice. But each of those documents also sets out, in full, the reservation of rights expressly giving American the ability to change its AAdvantage program in any way and expressly stating that members had no vested rights. The Settlement document merely described the situation that then existed; the future-oriented reservation of rights said that could change. There simply were no carve-outs. 10. Plaintiffs first attempt to rely on the definition of Old Award in the Settlement Agreement, which states that Old Award means an AAdvantage award that can still be claimed using Old Miles. Second, Plaintiffs rely on the statements in the Final Order that Old Miles can be used to claim Old Awards and Old Miles do not expire unless the Program is terminated. These statements appear in the Findings of Fact section of the Final Order, where the court is describing the distinction between Old Miles and New Miles created by American s 1988 modifications to the AAdvantage program. Finally, Plaintiffs rely on a statement in the Answers to Commonly Asked Questions section of the Class Notice, which informed the recipients that You may still claim Old Awards using Old Miles. 11. None of these isolated provisions reflects the parties intent to carve anything out of the Wolens release or reservation of rights. When read in context, none of them has anything at all to do with the release or reservation of rights. Rather, they are simply factual statements 5

11 Pg 11 of 21 about the AAdvantage program that were true at the time the Wolens settlement documents were drafted. At that time, Old Miles did not expire. Plaintiffs essentially interpret the statements to mean that Old Miles can never expire despite the direct statements in the reservation of rights that no member has any vested rights in any mileage credits. The very documents from which Plaintiffs quote their various assertions specifically provide that American may change the AAdvantage program at any time, even as to accumulated miles. 12. Plaintiffs cases and theories supporting their carve-out argument are inapposite. Plaintiffs cite holdings that specific terms in a contract override general terms, and they contend that specific statements about Old Miles not expiring should trump the general release language in the Settlement Agreement. Objection at 22. Plaintiffs fail to explain why phrases excised from separate portions of the agreements, serving disparate purposes, should be read to cancel each other out when they can be easily read together and both given effect. AAdvantage members could use Old Miles to claim Old Awards and continued to have that ability for the next eleven or so years until American, acting pursuant to its reservation of rights, changed that program effective November 1. There is nothing contradictory and nothing that requires that a supposedly specific statement cancel out American s carefully bargained-for reservation of rights. 2 (c) The Particular Allegations in Wolens and Gutterman Do Not Restrict the Scope of the Settlement Agreement and Final Order. 13. Unable to maneuver around the plain, unambiguous language of the Settlement Agreement and Final Order, Plaintiffs next attempt to narrow the Wolens settlement by arguing it 2 Plaintiffs also base their carve-out argument on citations to In re Am. Express Fin. Advisors Sec. Litig., 672 F.3d 113 (2d Cir. 2011) and Excess Underwriters at Lloyds v. Frank s Casing Crew & Rental Tools, Inc., 246 S.W.3d 42 (Tex. 2008). Objection at 23. In those cases, the carve-outs were express. See In re Am. Express, 672 F.3d at 136 ( Settlement Agreement goes on to exclude certain claims from its expansive purview); Frank s Casing, 246 S.W.3d at 75 (setting forth dissent s rejected view that agreement was subject to conditions). 6

12 Pg 12 of 21 affects only the specific claims on which the plaintiffs sued in Wolens as if there were no Settlement Agreement or Final Order but only a simple dismissal. In doing so, Plaintiffs ignore the law and the reality of what was settled in Wolens. 14. When parties to a class action agree to settle pursuant to a settlement agreement, it is the settlement agreement, not the pleadings, that determines the scope of the claims settled and released. See 4901 Corp. v. Town of Ciero, 220 F.3d 522, 530 (7th Cir. 2000) (holding the scope of preclusion had been broadened by the settlement agreement); Norfolk S. Corp. v. Chevron, U.S.A., Inc., 371 F.3d 1285, 1289 (11th Cir. 2004) (settlement s preclusive effect should not be determined by the claims specified in the original complaint, but instead by the terms of the Settlement Agreement.... ); Keith v. Aldridge, 900 F.2d 736, (4th Cir. 1990) ( If the parties intended to foreclose through agreement litigation of a claim, assertion of that claim in a later suit, whether or not formally presented in the earlier action, is precluded. ); see also 18A Charles Alan Wright, et al., FEDERAL PRACTICE & PROCEDURE 4443 (2d ed. 2002). Settling parties have wide latitude to set the scope of the settlement s release. A settlement agreement can release claims even if they were not presented and could not have been presented in the settled action. See Oswald v. McGarr, 620 F.2d 1190, 1198 (7th Cir. 1980) ( A settlement offer is a compromise and may include a release of claims not before the court. ). Moreover, by the time of the Wolens settlement, that case had been combined with the Gutterman class action. Both cases were mounting a general assault on American s ability to change its AAdvantage program to address changing competitive challenges. The Settlement Agreement, Release, Final Order, and reservation of rights fit well within what was at issue in those two class actions. 15. Now well after a decade following the Wolens settlement Plaintiffs apparently regret not opting out of that settlement, in which they were represented by class counsel who 7

13 Pg 13 of 21 obtained substantial consideration for the class. Plaintiffs do not dispute that they were members of the Wolens class and that they did not opt-out. They do not argue that they did not have the opportunity to opt out. For the past eleven years, Plaintiffs could have used their Old Miles to claim Old Awards. Instead, they chose not to do so in the face of a Final Order that clearly decreed American may change the Old Miles program any time it wanted. 16. Plaintiffs are bound by the Wolens settlement and the reservation of rights that was made a part of the Final Order and Settlement Agreement. [U]nder elementary principles of prior adjudication, a judgment in a properly entertained class action is binding on class members in any subsequent litigation. Matsushita Elec. Indus. Co., Ltd. v. Epstein, 516 U.S. 367, 379 (1996) (quoting Cooper v. Fed. Reserve Bank of Richmond, 467 U.S. 867, 874 (1984)). As in Matsushita, [Plaintiffs] do not deny that... they were part of the plaintiff class and that they never opted out; they are bound, then, by the judgment. Id. at 379. B. Plaintiffs Preemption Arguments are Wrong. 17. The ADA preempts any law, regulation, or other provision... related to a price, route, or service of an air carrier. 49 U.S.C (b)(1). The Supreme Court s Wolens opinion carved out a narrow exception for breach of contract claims arising from self-imposed undertakings with no enlargement or enhancement based on state laws or policies external to the agreement. Am. Airlines, Inc. v. Wolens, 513 U.S. 219, 228, 233 (1995). Accordingly, in order to avoid preemption, the plaintiffs in this case must demonstrate either that their state-law claims do not constitute state enforcement related to airline prices or services, or that they can navigate the straits of the Wolens exception. Buck v. Am. Airlines, Inc. 476 F.3d 29, 35 (1st Cir. 2007). Plaintiffs claims relate to American s prices, routes, or services; and their claims for unjust enrichment, breach of an implied duty of good faith of fair dealing, punitive damages, and 8

14 Pg 14 of 21 injunctive relief should be dismissed because they do not fall within the Wolens exception. (Plaintiffs present no argument that their prayer for specific performance is not preempted.) (a) All of Plaintiffs Claims Concern American s AAdvantage Program, Which Relates to Price and Service. 18. Plaintiffs attempt to argue that American s AAdvantage program does not relate to prices or services. Objection at 23. But the United States Supreme Court disagrees. The Wolens Court specifically held that state law-based claims concerning American s AAdvantage program relate to rates, i.e., American s charges in the form of mileage credits for free tickets and upgrades, and to services, i.e., access to flights and class-of-service upgrades. 3 American Airlines, Inc. v. Wolens, 513 U.S. 219, 226 (1995). In so holding, the Court expressly rejected the Illinois Supreme Court s characterization of frequent flyer programs as not essential but merely peripheral to the operation of an airline, and thus classifying the state law claims at issue as relat[ed] to American s rates, routes, and services only tangential[ly] or tenuous[ly]. Wolens, 513 U.S. at 226 (quoting Wolens v. Am. Airlines, Inc. 157 Ill.2d 466, 472 (1993) and noting that Morales does not countenance the Illinois Supreme Court s separation of matters essential from matters unessential to airlines operations. ). The Wolens holding regarding the ADA preemption provision was not limited to capacity controls or blackout dates. See 513 U.S. at 226. Rather, the Supreme Court has interpreted the use of the word related as broad, expressing a broad pre-emptive purpose. Morales v. Trans World Airlines, Inc., 504 U.S. 374, 383 (1992). The Supreme Court reaffirmed Morales in Rowe v. N.H. Motor Transport Ass n, 552 U.S. 364, (2008). 4 3 At the time, the statute used the word rates instead of price, but the change was not substantive. Wolens, 513 U.S. at 223 n.1. 4 Plaintiffs also rely upon Abdu-Brisson v. Delta Airlines, Inc., 128 F.3d 77, 82 (2d Cir. 1997). Objection at 23. The Abdu-Brisson court, reading Supreme Court ERISA opinions decided after 9

15 Pg 15 of Next, Plaintiffs rely on American s Motion to this Court to allow American to honor and continue customer programs, including the AAdvantage program. See In re AMR Corporation, 11-cv shl, Dkt. #12. That argument also fails. If anything, American s request highlights the significance of the AAdvantage program as a service American provides to customers and to American s ability to compete with its competitors. Id. at 9 (expressing concerns over customers attitudes and behavior toward [American s] services if the Court did not grant the requested relief) (emphasis added). American s statement that [h]onoring AAdvantage Travel Awards Program obligations... rarely involves any appreciable cash expense (id.) does not change that fact that, the program involves tickets and upgrades that undeniably relate to price and services. Wolens, 513 U.S. at There is simply no basis for disregarding the Supreme Court s direct holding that the AAdvantage program relates to price and services. Because the state law claims at issue in this case pertain to American s AAdvantage program, they relate to price and services. Accordingly, Plaintiffs claims for unjust enrichment, 5 punitive damages, and injunctive relief 6 Morales, concluded in 1997 that the Supreme Court had retreated from the expansive interpretation given in Morales to the phrase related to in the ADA. Consequently, the Abdu- Brisson court developed and applied a different interpretation, concluding that in order for a statute to relate to an air carrier price, route, or service, it must actually interfere with that price, route, or service. 128 F.3d at But in Rowe, decided years after Abdu-Brisson, the Supreme Court adhered completely to its interpretation of the ADA in Morales (Rowe, 552 U.S. at ), thereby rejecting the lessening of Morales erroneously predicted in Abdu-Brisson. 5 Plaintiffs concede their unjust enrichment claim is preempted if it relates to American s prices and services, and the cases they cite do not indicate otherwise. See In re JetBlue Airways Corp. Privacy Litig., 379 F. Supp. 2d 299, 320 (E.D.N.Y. 2005) (holding the claims at issue were not preempted because they had no cognizable relation to rates, routes or services but explaining that [u]njust enrichment claims premised on the imposition of fees or collection of taxes, for example, quite obviously relate to airline rates and are preempted); Strategic Assets, Inc. v. Fed. Express Corp., 190 F. Supp. 2d 1065, 1070 (M.D. Tenn. 2001) (case only addressed removal issues, not whether an unjust enrichment claim was ultimately preempted); see also Aloha Airlines, Inc. v. Mesa Air Group, Inc., CV. No DAE-BMK, 2007 WL , 10

16 Pg 16 of 21 should be dismissed because those claims rely solely on Plaintiffs incorrect argument that their claims do not relate to price, routes or services. Plaintiffs provide no other rationale for why those claims are not preempted. (b) American Did Not Self-Impose an Implied Duty of Good Faith and Fair Dealing. 21. Plaintiffs breach of an implied duty of good faith and fair dealing is not excepted from ADA preemption. By its very nature, an implied duty is not something expressly included or incorporated into a contract. Rather, it is a state policy-driven enlargement or enhancement of a party s self-imposed obligations. The fact that each state makes its own policy determination whether to imply a duty of good faith and fair dealing demonstrates that the cause of action is an expansion beyond self-imposed obligations. See Mot. to Dismiss at 44 (collecting cases). 22. Tellingly, Plaintiffs provide no support to explain why a duty, implied by state law, is not preempted if it relates to airline prices and services. First, Plaintiffs rely on ATA Airlines, Inc. v. Federal Express Corp., 665 F.3d 882 (7th Cir. 2011), but that case specifically deals with a claim for promissory estoppel, which American did not argue is preempted. Id. at Next, Plaintiffs rely on In re American Airlines, Inc. Privacy Litigation, 370 F. Supp. 2d 552 (N.D. Tex. 2005). That court did not address whether an implied duty of good faith and fair at *12 (D. Haw. Apr. 2, 2007) (addressing fact that punitive damages and injunctive relief will be preempted when they relate to airline prices, routes and services ). Plaintiffs also quote extensively from In re Air Transp. Excise Tax Litig., 37 F. Supp. 2d 1133 (D. Minn. 1999). Objection at 29. The only appellate court to consider that case concluded the decision was mistaken. Buck, 476 F.3d at 36 n.8. 6 As with their claim for unjust enrichment, Plaintiffs concede that their prayers for punitive damages and injunctive relief are preempted if they relate to American s prices or services. Objection at As such, those claims are preempted. 7 Plaintiffs provide no basis for arguing that promissory estoppel is sufficiently analogous to a claim for breach of an implied covenant of good faith and fair dealing. Objection at 25 n.13. In contrast to an implied duty, promissory estoppel is based on a party s express promises, which, like express contractual terms, are self-imposed undertakings. ATA Airlines, 65 F.3d at 884, 889 (ultimately holding that the promissory estoppel claim failed for lack of reasonable reliance). 11

17 Pg 17 of 21 dealing claim is preempted by the ADA. Id. Instead, after holding that the plaintiffs actions for trespass, invasion of privacy, deceptive trade practices, and unjust enrichment were expressly preempted, the Court determined that the plaintiffs contract claim based on privacy law was not preempted because the privacy laws were expressly incorporated into the contract at issue. Id. 23. Finally, Plaintiffs most heavily rely on the Ninth Circuit s opinion in Ginsberg that American cited and distinguished in its Motion to Dismiss. However, as previously explained, Ginsberg is a departure from the majority view otherwise holding that the ADA preempts claims for breach of an implied right of action. 8 Mot. to Dismiss 45 & n.6. Plaintiffs provide no other support for their position but only strive to distinguish American s cited cases. American s cases, however, directly address that the ADA preempts implied rights that seek[] to add to the terms of... contractual obligations on matters related to [prices,] routes and services. E.g., Joseph v. JetBlue Airways Corp., No. 5:11-cv-1387, 2012 WL , at *5-6 (N.D.N.Y. Apr. 11, 2012). 9 C. Plaintiffs Causes of Action Do Not Pass 12(b)(6) Muster. 24. Plaintiffs do not provide any coherent argument why their claims for breach of a duty of good faith and fair dealing, promissory estoppel, and unjust enrichment should not be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6). Notably, Plaintiffs do not contest American s arguments for dismissal on their claims for breach and anticipatory breach of 8 The airlines have filed a petition for writ of certiorari in Ginsberg, No in the United States Supreme Court. 9 See Buck, 476 F.3d at 34 ( for the purpose of implying private rights of action... the ADA... is barren soil ); Newman v. Spirit Airlines, Inc., No. 12 C 2897, 2012 WL , at *4 (N.D. Ill. July 27, 2012) (declining to follow Ginsberg and holding that any attempt to enforce the implied covenant rather than a contractual provision is an attempt to enforce a state law, not a voluntary undertaking ); Ray v. Am. Airlines, Inc., No , 2008 WL , at *10 (W.D. Ark. Aug. 22, 2008) (holding a plaintiff s breach of contract claims which allege[d] a breach of the implied covenant of good faith and fair dealing were preempted except to the extent that such claims... [were] covered by specific terms of the contract) (emphasis added). 12

18 Pg 18 of 21 contract. Nor have Plaintiffs presented any argument that they have standing to pursue a claim that American has refused to allow AAdvantage members to book with Old Miles prior to the November 1 conversion date. Accordingly, the Court should dismiss these claims. (a) No State Other Than Texas Has a Significant Interest in the Law Applied to Plaintiffs Claims. 25. Plaintiffs assert that American failed to perform a detailed choice of law analysis before applying Texas law to their claims. Plaintiffs, however, do not argue that the application of Texas law is wrong or what other state s law should be applied instead of Texas. (They do not challenge the application of Texas law to their claim for promissory estoppel.) Under the laws of New York... the first step in a choice of law analysis is to determine whether an actual conflict exists between the laws of the jurisdictions involved and [i]f there is such a conflict, to apply the center of gravity test to determine which law applies. Forest Park Pictures v. Universal Television Network, Inc., 683 F.3d 424, 433 (2d Cir. 2012). Under the center of gravity approach, a court may consider a number of significant contacts, including the place of contracting, the place of performance, the physical location of property that is the subject matter of the contract, and the domiciles or places of businesses of the contracting parties. Id. 26. The center of gravity approach does not list the forum state as one of the contacts to be considered, so there is no basis for applying New York law to govern Plaintiffs claims, as Plaintiffs suggest. When and if a full conflicts of law analysis would need to be done, perhaps Plaintiffs will argue that the law of the state in which each class member resided when he or she acquired Old Miles will control, thus creating a large number of individualized questions within the class Plaintiffs seek to represent. Indeed, Plaintiffs imply that Connecticut and Oregon law apply to them, apparently because that is where they now reside. Opposition at 32. American is headquartered in Texas, and its principal business operations are based there. 13

19 Pg 19 of 21 No other single state would have an interest of comparable strength. Specht v. Netscape Commc ns Corp., 150 F. Supp. 2d 585, 591 (S.D.N.Y. 2001). (b) Plaintiffs Breach of an Implied Covenant of Good Faith and Fair Dealing Claim Fails. 27. Plaintiffs cannot state a claim for breach of a duty of good faith and fair dealing. First, they do not dispute that they have failed to plead the existence of a special relationship. Moreover, Plaintiffs relationship with American plainly does not give rise to a special relationship that would support a claim for an implied duty of good faith and fair dealing. As explained in American s Motion to Dismiss, Texas courts do not imply a duty of good faith and fair dealing into a contract absent a special relationship. Robinson v. Match.com L.L.C., 2012 WL , at *16 (N.D. Tex. Aug. 10, 2012). And, special relationships do not extend to ordinary commercial contractual relationships. Id. Alleged unequal bargaining power between the parties is insufficient to establish the existence of a special relationship, and Texas courts refuse to find a special relationship in situations of much greater importance than a voluntary customer awards program. E.g., id. at * Finally, Plaintiffs ignore the fact that the Texas Supreme Court has refused to imply a covenant of good faith and fair dealing to add a covenant of non-termination when, as here, the contract expressly addresses termination. Exxon Corp. v. Atl. Richfield Co., 678 S.W.2d 944, 947 (Tex. 1984). That is the very thing that Plaintiffs are asking the Court to do here. 10 Plaintiffs cases do not help them. In all but one, courts held that no special relationship existed between the parties. See Plaza Nat l Bank v. Walker, 767 S.W.2d 276, 278 (Tex. App. Beaumont 1989, writ denied). In Plaza, the court concluded that a special relationship existed between a bank and its depositor. More recent cases hold to the contrary. See Davis v. West, 317 S.W.3d 301, 312 (Tex. App. Houston [1st Dist.] 2009, no pet.); Wil-Roye Inv. Co. II v. Wash. Mut. Bank, F.A., 142 S.W.3d 393, 410 (Tex. App. El Paso 2004, no pet.). It is highly doubtful that Plaza National continues to survive after subsequent Texas Supreme Court opinions. See, e.g., City of Midland v. O Bryant, 18 S.W.3d 209., 215 (Tex. 2000). 14

20 Pg 20 of 21 (c) Plaintiffs Promissory Estoppel Claim Fails. 28. American argued for dismissal of Plaintiffs promissory estoppel claim because it is insufficiently pleaded and because Plaintiffs cannot prevail on the justifiable reliance element of this claim given the fact that American has, at all times, reserved the right to make changes or even terminate the AAdvantage program. The alleged promises set forth by Plaintiffs in their Objection do not weaken American s argument because, regardless what statements were made, American had the right to make changes to the program with respect to Old Miles. Dismissal of this claim is appropriate. See City of Clinton v. Pilgrim s Pride Corp., 632 F.3d 148, 155 (5th Cir. 2010) (affirming dismissal of promissory estoppel claim because it was facially apparent that no reasonable City official could have relied on the statements alleged and no facts are alleged which plausibly suggest otherwise. ). (d) Plaintiffs Fail to State a Claim for Unjust Enrichment. 29. Plaintiffs argue they may seek unjust enrichment as an alternative form of relief if the underlying contract is held to be unenforceable. However, Plaintiffs do not plead for unjust enrichment in the alternative. Additionally, there is no dispute that a contract governs the parties relationship. Now that their unjust enrichment claim has been called into question, Plaintiffs, for the first time, allege that the contract might be invalid. In essence, Plaintiffs argue: there is only a valid contract if the Court rules their way; if not, then the contract should be declared invalid. And, obviously, if there were no contract so that there was no self-imposed obligation the unjust enrichment claim would not be within the Wolens exception to ADA preemption. 15

21 Pg 21 of 21 Dated: October 24, 2012 New York, New York /s/ Stephen A. Youngman Harvey R. Miller Stephen Karotkin Alfredo R. Pérez Stephen A. Youngman WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, New York Telephone: (212) Facsimile: (212) Michael V. Powell (admitted pro hac vice) Cynthia K. Timms (admitted pro hac vice) LOCKE LORD LLP 2200 Ross Avenue, Suite 2200 Dallas, Texas Telephone: (214) Facsimile: (214) Attorneys for AMR Corporation and American Airlines Inc. Defendants 16