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Scarlett v. Air Methods Corp.

United States District Court, D. Colorado

May 22, 2018

JEREMY LEE SCARLETT, on behalf of himself and all others similarly situated, Plaintiff,
v.
AIR METHODS CORPORATION and ROCKY MOUNTAIN HOLDINGS, LLC, Defendants.

          ORDER ON MOTIONS TO DISMISS

          R. Brooke Jackson United States District Judge

         This matter is before the Court on defendants Air Methods Corporation's and Rocky Mountain Holdings, LLC's (“defendants”) motion to dismiss plaintiffs Randal Cowen, et al.'s Second Amended Class Action Complaint, ECF No. 62, and defendants' motion to dismiss plaintiff Jeremy Lee Scarlett's Consolidated Class Action Complaint, ECF No. 63. For the reasons stated herein, the motions are GRANTED.

         I. BACKGROUND

         A. Factual Background.

         This is a proposed class action brought on behalf of patients, their legal custodians, or the estates of deceased patients, who allege they were charged exorbitant fees by defendants for medical transport by helicopter. ECF Nos. 59, 60. The named plaintiffs are residents of various states and bring their action on behalf of a class of plaintiffs transported within the 48 contiguous states. ECF No. 60 at 2-3. Defendant Air Methods Corporation (“Air Methods”) is an air ambulance company with a principle place of business in Englewood, Colorado, while defendant Rocky Mountain Holdings, LLC, is the holding company that owns Air Methods and directs collection efforts jointly with Air Methods. ECF No. 59 at 10. Plaintiffs' claims stem from the allegedly unreasonable amounts defendants charge to provide air ambulance transportation despite there being no valid agreement as to price before the transportation occurs. Id. at 4. In general, at the time defendants provide medical air transportation, “the patients are suffering a medical emergency, unable to manifest assent, unable to voluntarily contract, and unable to negotiate any terms or conditions necessary to a voluntary undertaking.” Id.

         Plaintiffs allege that after providing medical air transport, defendants typically invoice patients upwards of $40, 000 for air ambulance transportation services only, excluding any medical services provided en route. Id. at 2; see also ECF No. 60 at 3 (noting the average price charged to the Scarlett plaintiffs was more than $52, 000). In many cases, after defendants send patients an invoice they ask them to provide an “Assignment of Benefits” prepared by defendants, which authorizes direct payment to defendants and assigns them the patients' insurance coverage rights. ECF No. 59 at 3; ECF No. 60 at 17. After patients' insurers pay what they deem to be the reasonable value of the services, defendants typically demand that patients pay the remainder of the charged amount. ECF No. 59 at 4. Plaintiffs claim that defendants have initiated collection efforts against them, and in some cases defendants have filed state-court breach of contract claims and other suits to collect their charges from plaintiffs. ECF No. 59 at 2; ECF No. 60 at 35.

         B. Procedural Background.

         This action is comprised of two separate complaints. The first, Cowen v. Air Method Corporation, et al., No. 17-cv-00791-RBJ, was filed by four plaintiffs on behalf of a class of similarly situated individuals. ECF No. 59. The Cowen plaintiffs raise claims for declaratory and injunctive relief, breach of contract, and equitable restitution. Id. at 19-26. The second complaint, Scarlett v. Air Methods Corporation, et al., No. 16-cv-2723-RBJ, consolidated four similar class actions. ECF No. 60. The Scarlett complaint raises claims for breach of implied contract and for declaratory and injunctive relief. Id. at 38-46.

         Although the two complaints allege nearly identical facts, they rely in part on distinct legal theories. Both sets of plaintiffs argue at least nominally that the Airline Deregulation Act (the “ADA”) should not preempt the application of state common law to determine a reasonable price for defendants' air ambulance services. The Cowen plaintiffs advocate the use of federal common law in the event the ADA is found to preempt state common law. The Scarlett plaintiffs contend the ADA is unconstitutional as applied if it is found to preempt state common law.

         Defendants have moved to dismiss both complaints. These motions have been fully briefed, and the Court heard oral argument on the motions on September 27, 2017. See ECF Nos. 62-67, 70. Following oral argument, the parties provided supplemental briefing. See ECF Nos. 71, 72. The United States Government has intervened to defend the constitutionality of the ADA. ECF No. 87.

         II. STANDARD OF REVIEW

         To survive a Rule 12(b)(6) motion to dismiss the complaints must contain “enough facts to state a claim to relief that is plausible on its face.” Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A plausible claim is a claim that “allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

         While the Court must accept the well-pleaded allegations of the complaint as true and construe them in the light most favorable to the plaintiff, Robbins v. Wilkie, 300 F.3d 1208, 1210 (10th Cir. 2002), purely conclusory allegations are not entitled to be presumed true, Iqbal, 556 U.S. at 681. However, so long as the plaintiff offers sufficient factual allegations such that the right to relief is raised above the speculative level, he has met the threshold pleading standard. See, e.g., Twombly, 550 U.S. at 556; Bryson v. Gonzales, 534 F.3d 1282, 1286 (10th Cir. 2008).

         A court may dismiss a claim “under Federal Rule of Civil Procedure 12(b)(6) on the basis of an affirmative defense like preemption when the law compels that result.” Caplinger v. Medtronic, Inc., 784 F.3d 1335, 1341 (10th Cir. 2015).

         III. ANALYSIS

         A. Overview of Preemption Analysis Under the Airline Deregulation Act.

         Because both motions to dismiss contend that the complaints are preempted by the ADA, an overview of that statute and its preemption provision will assist in assessing the parties' arguments. The ADA was enacted in 1978 to “promote ‘efficiency, innovation, and low prices' in the airline industry through ‘maximum reliance on competitive market forces and on actual and potential competition.'” Northwest, Inc. v. Ginsberg, 134 S.Ct. 1422, 1428 (2014) (quoting 49 U.S.C. §§ 40101(a)(6), (a)(12)). The ADA includes a preemption provision intended to “ensure that the States would not undo federal deregulation with regulation of their own.” Id. at 1428. This provision dictates that a state “may not 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 that may provide air transportation under this part.” 49 U.S.C § 41713(b)(1).

         In Morales v. TransWorld Airlines, Inc., 504 U.S. 374, 383 (1992), the Supreme Court explained that the ADA's preemption clause applies broadly to preempt “state enforcement actions having a connection with or reference to airline ‘rates, routes, or services.'” Thus in Morales, the ADA preempted state consumer laws that regulated airline advertising. Id. State common law rules are similarly preempted because they have “the force and effect of law” just as legislation and regulation do. Ginsberg, 134 S.Ct. at 1430. “What is important . . . is the effect of a state law, regulation, or provision, not its form, and the ADA's deregulatory aim can be undermined just as surely by a state common-law rule as it can by a state statute or regulation.” Id.

         The Supreme Court carved out an exception from ADA preemption for suits “seeking recovery solely for the airline's alleged breach of its own, self-imposed undertakings.” Am. Airlines, Inc. v. Wolens, 513 U.S. 219, 228-29 (1995). The so-called “Wolens exception” is premised on the fact that “[t]erms and conditions airlines offer and passengers accept . . . are privately ordered obligations and thus do not amount to a State's ‘enactment or enforcement of any law, rule, regulation, standard, or other provision having the force and effect of law' within the meaning of the ADA preemption provision.” Ginsberg, 134 S.Ct. at 1429.

         In the context of state common law obligations, such as the implied covenant of good faith and fair dealing, the Ginsberg Court instructed that courts must determine whether the obligation is “a state-imposed obligation or simply one that the parties undertook.” Id. at 1431. The Court explained that “[w]hen the law of a State does not authorize parties to free themselves from the covenant, a breach of covenant claim is preempted under the reasoning of Wolens.” Id. at 1432. According to the state law at issue in Ginsberg, “the implied covenant must be regarded as a state-imposed obligation” because the “parties cannot contract out of the covenant.” Id.

         B. Motion to Dismiss the Scarlett Complaint [ECF No. 63].

         The Scarlett plaintiffs raise claims for breach of implied contract and for declaratory and injunctive relief. In their claim for breach of implied contract, they allege that they entered an implied contract with defendants when defendants transported them without specifying a price for the service, thereby implicitly agreeing to “a price to be determined by operation of law.” ECF No. 60 at 39. Because “these agreements contained an undefined price term they constituted, if anything, an implied contract.” Id. Plaintiffs apparently contend that defendants breached the implied contract by charging more than the implied reasonable price term. See Id. at 41 (“As a result of Defendants' breach of their self-imposed undertaking to provide air ambulance transport service to Plaintiffs . . . they have incurred damages in the amount of the overcharges levied by Defendants.”).

         Thus, they seek a declaration that “the ADA either does not apply to air ambulance carriers or it does not pre-empt the application of state law to Plaintiffs' breach of implied contract claims because such claims fall under the Wolens exception.” ECF No. 60 at 41. In the alternative, they ask the Court to determine that defendants' bills are unenforceable because the implied contracts lack a defined price term. Id. at 42. They ask the Court to determine the proper amount for defendants' services, and they seek equitable restitution for the amount they paid beyond the reasonable charge. Id. They also seek injunctive relief precluding defendants from charging and attempting to collect amounts beyond the proper charges. Id. at 43. Finally, they suggest that if the ADA preempts their breach of contract claim, then the ADA is unconstitutional as applied since its preemptive effect denies them procedural and substantive due process. Id. at 45.

         Defendants move to dismiss the Scarlett complaint for failure to state a claim on the grounds that the complaint is expressly preempted by the ADA. ECF No. 63 at 2. Defendants point out that “[a]s every court, including the Tenth Circuit, to have considered the question has held, attempts to limit air ambulances' prices to a reasonable amount . . . are preempted by the ...


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