Law360: RICO claim against Spirit Airlines has wings: 11th Circ.

Posted on September 23, 2014

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Law360, Los Angeles (September 23, 2014, 6:39 PM ET) — The Eleventh Circuit on Tuesday revived a proposed class action brought against Spirit Airlines Inc. alleging that the airliner hides flight-related fees, rejecting the district court’s finding that comprehensive federal regulation of the airline industry precluded civil claims brought under the Racketeer Influenced and Corrupt Organizations Act.

The three-judge appellate panel vacated a Florida district court’s dismissal of the RICO claim brought by plaintiff Bryan Ray on behalf of similarly situated passengers, saying that because federal laws do not preempt other federal laws, the only way to bar the claim would be if Congress repealed the provisions of RICO as applied to Ray.

“Congress did not do so expressly through the Airline Deregulation Act of 1978. The ADA explicitly preempted state laws but, notably, said nothing about any federal cause of action,” Circuit Judge Stanley Marcus wrote in the 18-page published opinion. “Applying the strong presumption against implied repeals, we are constrained to conclude that RICO supplements, rather than subverts, federal regulation of air carriers.”

The appellate decision handed down Tuesday marks the most recent development in the long-running case accusing Spirit of hiding fees and then calling itself an “Ultra Low Cost Carrier.” The appeals court found no “irreconcilable conflict” between RICO and ADA and that the ADA wasn’t clearly intended as a substitute for RICO.

The appeals court didn’t address whether Ray and other plaintiffs properly pled the elements of their RICO claim, only whether they could bring it.

“Thus, we have no occasion today to pass any judgment on whether fraud is pled with particularity, or whether Plaintiffs adequately pled the elements of mail and wire fraud, or indeed whether Plaintiffs sufficiently pled a RICO injury,” the appellate opinion says. “All we hold today is that the federal regulatory scheme governing the airline industry does not preclude a claim founded on the civil provisions of RICO.”

The decision comes more than two years after Ray first filed suit against Sprit, accusing the company of hiding so many flight-related fees — up to $40 million worth — that the base ticket fare is merely a “down payment” on the full cost of travel.

Ray, on behalf of himself and others, said Spirit violates the RICO law by including an extra cost it calls a Passenger Usage Fee in a “taxes and fees” category that is displayed when a customer buys a ticket online. The per-ticket fee ranges from $8.99 to $16.99, and Spirit has unlawfully extracted more than $40 million in such unlawful fees from the proposed class since 2008, according to the original complaint.

Ray said the fee is simply additional airfare that Spirit keeps for itself to increase its profit margin and/or induce consumers to purchase air travel through Spirit for what is perceived to be a lower price than those offered by its competitors.

According to the original complaint, Spirit has actively misrepresented the airfare for each flight segment booked by its customers because it unbundles certain fees including, but not limited to, the Passenger Usage Fee.

Representatives for the parties didn’t respond Tuesday to requests for comment.

Circuit Judges Frank M. Hull, Stanley Marcus and James C. Hill joined in the decision.

The plaintiff-appellants are represented by Joel D. Eaton of Podhurst Orseck PA.

Spirit is represented by Daniel T. Graham of Clark Hill PC.

The case is Bryan Ray et al. v. Spirit Airlines Inc., case number 13-15681, in the United States Court of Appeals for the Eleventh Circuit.

–Additional reporting by Juan Carlos Rodriguez. Editing by Richard McVay.