Christine Tramontano is an Associate in our New York office
On December 3, 2010, the U.S. Court of Appeals for the Tenth Circuit issued a significant opinion on federal preemption under the Federal Aviation Act of 1958 (FAA), holding that the FAA impliedly preempts states from regulating an airline's in-flight service of alcoholic beverages. In its opinion, U.S. Airways, Inc. v. O'Donnell, __ F.3d __, No. 09-2271, 2010 WL 4909976 (10th Cir. Dec. 3, 2010), the Court of Appeals determined that the New Mexico Liquor Control Act (NMLCA),1 as applied to airlines, directly implicates aviation safety, a field impliedly preempted by the FAA and its implementing regulations.
The factual background spawning the litigation involved a U.S. Airways passenger who allegedly purchased and drank alcohol during a U.S. Airways flight and, approximately three hours after deplaning at the Albuquerque airport, caused an automobile accident that resulted in his death and the deaths of five other individuals. The New Mexico Regulation and Licensing Department's Alcohol and Gaming Division (AGD) issued a citation to U.S. Airways on the basis that the airline allegedly served alcohol to an intoxicated person. The AGD also issued a cease-and-desist order, directing the airline to refrain from selling alcohol in New Mexico without complying with the NMLCA, which requires, among other things, that every person selling alcoholic beverages to travelers on airplanes within New Mexico secure a public service license. The NMLCA further prohibits any person from serving alcohol on licensed premises unless that person obtained alcohol server training pursuant to the statute.2
After receiving the citation and cease-and-desist order, U.S. Airways applied for the public service license. The AGD rejected the application, citing the the aforementioned incident as well as another drunk driving incident involving a U.S. Airways passenger. U.S. Airways subsequently filed an action in the U.S. District Court for the District of New Mexico seeking to enjoin New Mexico from regulating its in-flight service of alcoholic beverages. The district court granted summary judgment in favor of New Mexico, finding that federal law did not preempt the NMLCA. The district court reasoned that although the Airline Deregulation Act (ADA)3 expressly prohibits state regulation of an airline "price, route, or service," the service of alcohol did not fall within the scope of airline "services" under the ADA. The district court further concluded that the FAA did not impliedly preempt the NMLCA because the field of aviation safety implicated physical and mechanical operation of the aircraft, which did not include the in-flight service of alcohol.
The Tenth Circuit's Reversal
In reversing the district court, the Tenth Circuit held that the FAA's implementing regulations occupy the field of aviation safety and preempt the NMLCA because "regulation of an airline's alcoholic beverage service necessarily implicates the field of airline safety." In support of its reasoning, the Court pointed to the fact that the FAA promulgated specific rules to regulate an airline's service of alcohol on airplanes to address safety concerns associated with the service of alcohol on flights.4 It further held that the FAA preempted the NMLCA's training requirements because the federal regulations pervasively cover flight attendant and crew member training.5 The Court did not comment on whether the ADA expressly preempts state regulation of an airline's "service" of alcoholic beverages.
While the Tenth Circuit's preemption holding is a positive one for airlines, its inquiry did not end with FAA preemption. The Court held that it must also evaluate whether section 2 of the Twenty-first Amendment permits a state's regulatory scheme to override federal policy when applied to the service of alcohol by airlines. Section 2 provides that the transportation of alcohol into a state in violation of that state's law is prohibited. The Court noted that, notwithstanding the Twenty-first Amendment's broad grant of power to the states, the federal government retains power to control interstate commerce of alcohol under the Commerce Clause. In that regard, the Tenth Circuit found that there was a conflict between the Twenty-first Amendment and the Commerce Clause, which necessitated a balancing of state and federal interests. Because the district court had not conducted this balancing test, the Tenth Circuit remanded the case for this purpose.
Footnotes
1. N.M. Stat. § 60-3A-1, et seq.
2. N.M. Stat. § 60-6E-1, et seq.
3. 49 U.S.C. § 41713(b).
4. See 14 C.F.R.§ 121.575 (prohibiting any individual from drinking alcohol on an aircraft unless the alcohol was served by the airline; prohibiting airlines from serving alcohol to escorted prisoners, armed law enforcement officers, Federal Air Marshals, and any person who appears to be intoxicated; prohibiting airlines from permitting persons who appear to be intoxicated from boarding an aircraft; and requiring airlines to report to the FAA any incidents of individuals drinking alcohol that was not served by the airline and of any alcohol-related disturbances on board aircraft).
5. The Court referred to its previous decision in Cleveland v. Piper Aircraft Corp., 985 F.2d 1438 (10th Cir. 1993), which found no FAA preemption of state tort remedies in a product liability action because although the federal government may exclusively regulate safety in a given field, it permits states to maintain tort remedies covering much of the same areas. In contrast, the Court here was addressing a state statute with substantive requirements in determining that federal law "occupies the field of aviation safety to the exclusion of state regulation." While the Court did not expressly overrule Cleveland, it recognized that the analysis in Cleveland has been undermined by subsequent Supreme Court cases and noted that Cleveland "does not dictate the outcome in this case."
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