New legislation to eliminate airline liability shield

The American Economic Liberties Project has announced new legislation to address problems created by federal preemption over state law and the related absence of a private right of action in the original airline deregulation law. from 1978.

The AELP is a non-profit, non-partisan project – essentially a think tank – that works to “combat monopolistic corporations and the systems that entrench their power”.

The legislation was drafted by William J. McGee, senior aviation and travel researcher, and Lee Hepner, legal counsel for AELP. This follows the release of a letter from the National Association of Attorneys General, in which 38 state attorneys general proposed that Congress allow them to enforce state and federal consumer protections for airline passengers.

You may recall that in 1992, the United States Supreme Court ruled that the Airline Deregulation Act prevented airlines from enforcing NAAG guidelines for advertising fares. Morales vs. Trans World Airlines, Inc., 504 U.S. 374, 378 (1992). Numerous other court cases followed as the courts struggled to draw distinctions on the meaning of “related to a price, route or service of an air carrier”, the statutory phrase that delineated what was preempted.

The language used by Congress was vague and left open for judicial decision a wide range of topics that, taken together, would leave airlines free from meaningful discipline by state laws designed to protect consumers. The net result was that the Department of Transport remained the sole arbiter of airline consumer protection. It’s fair to say, I believe, that prior to the pandemic and the dispute over refunds owed to travelers for flights canceled by airlines, DOT’s consumer protection performance was spotty at best. In the context of a pandemic, it was and remains abysmal. Billions of dollars in refunds, clearly due, remain unpaid as 2022 draws to a close.

The NAAG proposal would allow state AGs to enforce their consumer protection laws against airlines. It would shift authority for federal DOT enforcement to the Department of Justice or the Federal Trade Commission. AELP’s proposal is even more comprehensive. It allows private “rights of action” (the right to sue airlines directly for alleged wrongs), prohibits the ownership of multiple airline interests by Wall Street investment groups, and allows MGAs, courts and State legislatures regulate and enforce to protect consumer rights. . The proposed law is endorsed by the Business Travel Coalition, Consumer Action, the Consumer Federation of America, Ed on Travel, the National Consumers League, Public Citizen, the Public Interest Research Group, and the Center for Economic Policy and Research’s Revolving Door Project.

I don’t know of any other industry that benefits from what the AELP accurately calls the “Airline Liability Shield”. Admittedly, the travel counselor industry does not benefit from such protection. Indeed, as you have hopefully read in previous columns, advisors are often treated as fiduciaries to their clients, a much higher standard than that which applies to airlines.

The purpose of the pre-emption provision of the Airline Deregulation Act was to prevent states from inserting their own comprehensive regulatory systems in place of the federal system that Congress was abandoning. The outcome of the chosen language has been disastrous for consumer interests. DOT’s episodic and complex efforts to enact pro-consumer regulations take years to achieve and often fall short of stated goals. As we have seen with the cancellation of regulations that preceded the ongoing proceedings on airline refunds, political interference can also hinder effective action. The AELP is right to say that a structural change in the legal regime is essential to remedy the vacuum that exists in the protection of air travel consumers.

The AELP movement is clearly very impactful. Because of this, it will almost certainly face strong opposition from the airline industry. For the same reason, the support of travel advisors will be very important as the legislative process unfolds. The text of the bill can be read here.

About Michael S. Montanez

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