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Class Action Defense Cases–Sanchez v. Aerovias De Mexico: Ninth Circuit Court Affirms Dismissal Of Class Action Complaint Holding Class Action Claims Preempted By Airline Deregulation Act

District Court Properly Granted Summary Judgment in Favor of Defense in Class Action Arising from Mexican Airline Collection of Tourism Tax from Exempt Individuals because Airline Deregulation Act Preempted Class Action Claims Ninth Circuit Holds

Plaintiff filed a putative class action in California state court against Mexican airline Aerovias De Mexico alleging state law claims for breach of contract, breach of implied covenant and unjust enrichment claims; specifically, the class action complaint challenged a tourism tax collected by the airline for the Mexican government on the grounds that plaintiff was exempt from the tax. Sanchez v. Aerovias De Mexico, S.A. De C.V., 590 F.3d 1027, 1028 (9th Cir. 2010). According to the allegations underlying the class action, “Mexico levies a tourism tax [of approximately $22 per person]…on airline passengers traveling into Mexico on international flights.” Id. Individuals who are citizens or residents of Mexico are exempt from the tax, as are “diplomats, children under the age of two, and those staying in Mexico for less than twenty-four hours,” id. The class action alleged that plaintiff was exempt from the tax because even though she is “a citizen and resident of California,” she holds dual citizenship and is also a citizen of Mexico. Id. Plaintiff alleged that the airline “breached contractual obligations by improperly collecting the tax, and by failing to disclose that the tourism tax was not due from exempt passengers and that exempt passengers are entitled to a refund”; the class action complaint does not allege that plaintiff advised the airline that she was a Mexican citizen or that she requested a refund of the tax. Id. Defense attorneys removed the class action to federal court under the Class Action Fairness Act (CAFA), and then moved for summary judgment on the grounds that class action’s claims were preempted by the Airline Deregulation Act of 1978 (ADA). Id. The district court agreed, concluding that the allegations underlying the class action “relate[d] to the airline’s ‘price[s], route[s], or service[s],’” within the meaning of the statute, and that “Aeromexico had no contractual obligation to advise passengers about the tax or their right to a refund.” Id. In ruling on the motion, the district did not address plaintiff’s request under Rule 56(f) for a continuance in order to conduct discovery. Id., at 1028-29. Plaintiff appealed, and the Ninth Circuit affirmed.

The Circuit Court explained, [Plaintiff’s] principal argument is that no federal law preempts her state law claims based on breach of contract.” Sanchez, at 1029. Plaintiff’s theory is that “by purchasing a ticket, she and Aeromexico entered into a contract whereby Aeromexico became obliged not to collect a tax that was not due from exempt passengers.” Id. According to plaintiff, the ADA preemption clause does not “prevent the states from enforcing contracts between airlines and their passengers,” and that the tax is not part of the “price, route, or service of an air carrier” within the meaning of the statute because it is “a fee separate and apart from the fare for air transportation that has no economic effect on ‘price.’” Id. The Ninth Circuit disagreed, holding that “a state law or enforcement action is ‘related to’ a ‘price, route, or service’ if it ‘as a connection with or reference to’ a ‘price, route, or service,’” id., at 1030 (citation omitted). Plaintiff’s claim was preempted because “[t]he ticketed price included the tourism tax and other fees and surcharges.” Id. The Ninth Circuit then noted at page 1030, “The real question here is whether Aeromexico made a contractual commitment to advise passengers about the Mexico tourism tax, not to collect it from exempt passengers, and to refund that portion of the price attributable to the tax.” The Court found no evidence that defendant assumed such an obligation, id., at 1030-31. Accordingly, it affirmed the judgment of the district court. Id., at 1031.

NOTE: The decision was not unanimous: one judge dissented on the grounds that plaintiff’s claim was not preempted by the Airline Deregulation Act. See Sanchez, at 1031 et seq. We note also that the Ninth Circuit considered plaintiff’s claim that the district court erred in failing to rule on her Rule 56(f) request. See id., at 1029. While the Court agreed that the request should not “have been left hanging,” it held that any error was harmless because the discovery requested by plaintiff concerned matters that were undisputed and because “discovery into the merits was not necessary to oppose [defendant’s] motion that it is entitled to judgment as a matter of law.” Id.

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