Federal Circuit Courts Affirm ADA Preemption of State Law Claims Challenging Air Ambulance Prices
The U.S. Courts of Appeals for the Eighth and Tenth Circuits recently affirmed district court opinions holding that the Airline Deregulation Act (ADA)1 preempted state law claims that challenged prices charged by air ambulance service providers. They join a growing number of federal courts that have similarly found preemption of state statutory and common laws affecting air ambulance operators' prices and services.2
In Ferrell v. Air Evac EMS Inc.,3 the Eighth Circuit unanimously held that the ADA applied to air ambulance operators4 and preempted a patient's putative class action seeking a declaratory judgment and damages under the state consumer protection law. Plaintiff, after signing an Ambulance Billing Authorization Form,5 had been transported by defendant for medical care and charged an amount in excess of what his insurance covered. He sought a declaration that (1) any contract with the operator based on the form was unenforceable because it lacked an essential price term, and (2) any attempt by the operator to recover restitution should be prohibited because the operator lacked "clean hands." Plaintiff also brought a state consumer protection claim, arguing that defendant concealed or omitted disclosure of its prices until after completing its air transport.
The panel found preempted each of plaintiff's three claims. First, it rejected the state consumer protection claim, finding that it "obviously relate[d]" to defendant's prices and services because it sought "to impose a state statutory price disclosure obligation beyond the scope of any agreement [between the parties]." Significantly, the court recognized that it "may not refuse to apply ADA preemption merely because we do not believe it would be sound public policy to enforce the statute Congress enacted."
The panel next dispensed with plaintiff's declaratory claim for lack of good faith because it was based on state common law doctrines of good faith and fairness that would require a determination of whether the operator's pricing practices were unjust. Lastly, the panel found preempted plaintiff's claim to have the contract declared unenforceable, finding the claim called for a "price-disclosure rule" under state law that would apply uniquely to federally-regulated air ambulance operators and "create a common law standard of conduct."6
The Tenth Circuit similarly concluded in Schneberger v. Air Evac EMS, Inc.7 that the ADA preempted a purported class action's claims seeking damages and injunctive relief prohibiting air ambulance operators from charging "unreasonable rates" for their services. The panel agreed with the district court that "an Oklahoma state-law claim that requires a court to determine a reasonable price for air-ambulance services self-evidently affects the price of those services."8
While recognizing the narrow Wolens exception for "voluntarily undertaken" contractual obligations, the panel noted that this exception applies to common law contract doctrines only to the extent they serve to effectuate the parties' intentions, not for reasons of fairness.9 Because plaintiffs' claims in Schneberger (e.g., breach of implied contract, unjust enrichment) relied on “concepts of fairness and reasonableness," the panel determined they fell outside the four corners of the contract. Plaintiffs also failed to point to any state doctrines or authorities that might conclude that a missing price term in the parties' contract should be filled with a reasonable price term. Refusing to assume the role of “advocate" for plaintiffs, the panel found such arguments waived and concluded that the ADA preempted all state law claims.10
1 49 U.S.C. § 41713(b)(1).
2 See, e.g., Bailey v. Rocky Mountain Holdings LLC, 889 F.3d 1259 (11th Cir. 2018); EagleMed LLC v. Cox, 868 F.3d 893 (10th Cir. 2017); Air Evac EMS, Inc. v. Sullivan, __ F. Supp. 3d __, 2018 WL 3677002 (W.D. Tex. Aug. 2, 2018), appeal filed, No. 18-50722 (5th Cir. Sept. 5, 2018); Scarlett v. Air Methods Corp., No. 16-cv-02723-RBJ, 2018 WL 2322075 (D. Colo. May 22, 2018), appeal filed, No. 18-1247 (10th Cir. June 15, 2018); Stout v. Med-Trans Corp., 313 F. Supp. 3d 1289 (N.D. Fla. May 2, 2018); Valley Med Flight, Inc. v. Dwelle, 171 F. Supp. 3d 930 (D.N.D. 2016).
3 900 F.3d 602 (8th Cir. 2018).
4 Plaintiff contended that the ADA should not apply to air ambulance operators because the operators do not face "meaningful price competition" and patients cannot control their choice of transport. As held by the court, the ADA's preemption clause states it applies to an "air carrier," which, as defined, includes air ambulance operators.
5 The form acknowledges that the services are medically necessary, assigns to the operator any third-party payments, and makes the patient financially responsible for, and obligated to pay, amounts charged for the services, including any not paid by third-party payors.
6 The court noted, however, that if the operator sued plaintiff for breach of contract, and he chose not to pay, he could assert a non-preempted defense of an unenforceable contract. If that defense prevails, then the operator could seek equitable recovery for the services it provided.
7 __ Fed. Appx. __, 2018 WL 4183460 (10th Cir. Aug. 31, 2018).
8 Id. at *7. Plaintiffs argued that the parties had entered into implied contracts for services to be rendered at a reasonable price.
9 Citing Northwest, Inc. v. Ginsberg, 572 U.S. 273 (2014) (finding claim for breach of implied covenant of good faith and fair dealing preempted because enlarged parties' contractual obligations).
10 The court further held that plaintiffs waived any argument that defendants should be estopped from claiming ADA preemption because they brought contract claims in state court.