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Tuesday, December 27, 2011

Ind. Decisions - 7th Circuit decides one Indiana case today, a reversal

In ATA Airlines v, FedEx (SD Ind., Young), a 28-page opinion, Judge Posner writes:

ATA filed this diversity suit for breach of contract against Federal Express (which the parties call “FedEx,” as shall we, even though it’s actually a subsidiary of FedEx Corporation), and obtained a jury verdict in the exact amount it had asked for: $65,998,411. FedEx has appealed. ATA has filed a cross-appeal that is conditional on our reversing the judgment; the crossappeal challenges the district court’s refusal to let ATA present evidence that it incurred $27,842,748 in unrecoverable costs in reliance on a promise by FedEx in the alleged contract, and that it is entitled to recover these costs as reliance damages, either as an alternative to the expectation damages awarded by the jury or pursuant to the doctrine of promissory estoppel. The parties agree that the substantive issues are governed by the law of Tennessee, FedEx’s principal place of business, except that FedEx defends the district court’s ruling that ATA’s promissory estoppel claim is preempted by the federal Airline Deregulation Act. See American Airlines, Inc. v. Wolens, 513 U.S. 219 (1995); Morales v. Trans World Airlines, Inc., 504 U.S. 374 (1992).

We begin there, and can be brief: the ruling was incorrect. Although the Act forbids a state to “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,” 49 U.S.C. § 41713(b)(1), it does not “afford [] 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-ofcontract actions, to the parties’ bargain, with no enlargement or enhancement based on state laws or policies external to the agreement.” American Airlines, Inc. v. Wolens, supra, 513 U.S. at 232-33. * * *

The judgment is reversed with instructions to dismiss the suit with prejudice. REVERSED.

Posted by Marcia Oddi on December 27, 2011 01:51 PM
Posted to Ind. (7th Cir.) Decisions