Hicks v. Airborne Express, Inc. ( 2006 )

NOTICE NO. 5-04-0793
Decision filed 07/25/06. The text of
this decision may be changed or IN THE
corrected prior to the filing of a
Petition for Rehearing or the APPELLATE COURT OF ILLINOIS
disposition of the same.
FIFTH DISTRICT
________________________________________________________________________
A. JEFFREY HICKS, d/b/a FINANCIAL ) Appeal from the
PLANNING ADVISORS, INC., ) Circuit Court of
Individually and on Behalf of All Others
) Madison County.
Similarly Situated, )
)
Plaintiff-Appellant, )
)
v. ) No. 02-L-1512
)
AIRBORNE EXPRESS, INC., ) Honorable
) Phillip J. Kardis,
Defendant-Appellee. ) Judge, presiding.
________________________________________________________________________
JUSTICE HOPKINS delivered the opinion of the court:
The plaintiff, A. Jeffrey Hicks (Hicks), doing business as Financial Planning
Advisors, Inc., individually and on behalf of all others similarly situated, appeals the circuit
court's order granting a summary judgment in favor of the defendant, Airborne Express, Inc.
(Airborne). On appeal, Hicks argues that the circuit court erred in holding that the parties'
contract limited Hicks's remedy. We affirm.
FACTS
Hicks filed a class-action complaint against Airborne, a courier service that provides
package transportation and delivery services. In his complaint, Hicks alleged that Airborne
breached its shipping contract by charging customers higher rates for express delivery and
failing to deliver the packages by the agreed delivery time. Hicks sought compensation for
the difference in value between the service customers requested and the service they
received.
1
Hicks shipped packages using Airborne's Flight-Ready prepaid shipping service.
Pursuant to this service, Hicks purchased the Flight-Ready shipment envelope used to
package his shipment. Airborne guaranteed that Hicks's Flight-Ready shipment envelope
would be delivered by noon the next day. When Hicks's delivery was delayed, Airborne
provided Hicks with a free Flight-Ready envelope pursuant to the Flight-Ready guarantee.
Airborne's Flight-Ready order form, used to order Flight-Ready envelopes, stated:
"THE FLIGHT-READY GUARANTEE: Airborne Express guarantees that
your pre[]purchased domestic Flight-Ready shipment will arrive on time (as stated in
the current Service Guide)Bor Airborne will give you another Flight-Ready domestic
express envelope free of charge."
Airborne's Flight-Ready envelope stated, in pertinent part:
"Service Conditions
*** Use of Flight-Ready constitutes your agreement to the service conditions
stated here [and] in our published tariffs and current Service Guide (available on
request). No one is authorized to alter or modify those terms.
Limitations of Liability
*** We shall not be liable in any event for special, incidental[,] or
consequential damages, including but not limited to loss of profits or income.
***
Claims
Filing claims for delayed, lost[,] or damaged shipments is subject to time
limits. Consult the Service Guide for full details."
On March 22, 2004, Airborne filed a motion for a summary judgment, arguing that
Airborne provided Hicks with the only contractual remedy to which he was entitled, a
prepaid Flight-Ready envelope. On November 23, 2004, after hearing arguments, the circuit
2
court entered a summary judgment in favor of Airborne, finding that the parties had agreed to
an exclusive remedy, i.e., another Flight-Ready envelope, for Airborne's breach of the
contract to deliver Hicks's package by noon the next day. On December 15, 2004, Hicks
filed a notice of appeal.
ANALYSIS
Airline Deregulation Act Preemption
Initially, we address whether Hicks's breach-of-contract action is preempted by the
Airline Deregulation Act of 1978 (Airline Deregulation Act) (49 U.S.C. '41713(b)(1)
(2000)), an argument raised in Airborne's brief on appeal. Hicks argues that Airborne waived
this argument by failing to raise it as an affirmative defense in the circuit court. However,
the waiver rule is a limitation on the parties and not the jurisdiction of this court. Michigan
Avenue National Bank v. County of Cook, 191 Ill. 2d 493, 518 (2000). We choose to address
the issue.
Pursuant to the preemption doctrine, which arises from the supremacy clause of the
United States Constitution (U.S. Const., art. VI, cl. 2), we examine whether Congress
intended for federal law to preempt state law in a given case. Fidelity Federal Savings &
Loan Ass'n v. de la Cuesta, 458 U.S. 141, 152, 73 L. Ed. 2d 664, 674-75, 102 S. Ct. 3014,
3022 (1982); Cohen v. McDonald's Corp., 347 Ill. App. 3d 627, 633 (2004).
Section 41713(b)(1) of the Airline Deregulation Act expressly preempts the States
from "enact[ing] or enforc[ing] 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." 49 U.S.C. '41713(b)(1) (2000). State common law is considered an "other
provision having the force and effect of law" for purposes of this statute. United Airlines,
Inc. v. Mesa Airlines, Inc., 219 F.3d 605, 607 (7th Cir. 2000). Congress enacted the express-
preemption provision in the Airline Deregulation Act "[t]o ensure that the States would not
3
undo federal deregulation with regulation of their own." Morales v. Trans World Airlines,
Inc., 504 U.S. 374, 378, 119 L. Ed. 2d 157, 164, 112 S. Ct. 2031, 2034 (1992).
The Supreme Court first considered the scope of preemption under the Airline
Deregulation Act in Morales, 504 U.S. 374, 119 L. Ed. 2d 157, 112 S. Ct. 2031. In holding
that the Airline Deregulation Act preempted the application of state consumer protection
statutes to airline advertisements, the Court stated that the statutory phrase "relating to" 1
expressed a broad preemptive purpose so that any claim that has "a connection with[] or
reference to" an airline's prices, routes, or services is preempted under the statute. Morales,
504 U.S. at 384, 119 L. Ed. 2d at 167-68, 112 S. Ct. at 2037. However, the Court noted that
state actions affecting airline prices, routes, or services " 'in too tenuous, remote, or
peripheral a manner' " would not be preempted. Morales, 504 U.S. at 390, 119 L. Ed. 2d at
172, 112 S. Ct. at 2040 (quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 100 n.21, 77 L.
Ed. 2d 490, 503 n.21, 103 S. Ct. 2890, 2901 n.21 (1983)).
The Court next considered the Airline Deregulation Act's preemption clause in
1
In reenacting Title 49 of the United States Code, Congress revised this clause in 1994
to read: "[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 ***."
(Emphasis added.) 49 U.S.C. '41713(b)(1) (1994). Congress intended that the revision
make no substantive change. Pub. L. 103-272, '1(a), 108 Stat. 745 (1994).
4
American Airlines, Inc. v. Wolens, 513 U.S. 219, 130 L. Ed. 2d 715, 115 S. Ct. 817 (1995).
The Court in Wolens held that contract claims against airlines, such as those involving
frequent-flyer programs, even when related to prices, routes, or services, are not preempted
by the Airline Deregulation Act when they merely seek to enforce the parties' "own, self-
imposed undertakings." Wolens, 513 U.S. at 228, 130 L. Ed. 2d at 725-26, 115 S. Ct. at 824.
The Court held that the Airline Deregulation Act's preemption prescription bars state-
imposed regulation of air carriers but allows room for court enforcement of contract terms set
by the parties themselves. Wolens, 513 U.S. at 228-29, 130 L. Ed. 2d at 726, 115 S. Ct. at
824.
The Court in Wolens noted that the word series "law, rule, regulation, standard, or
other provision" connotes official, government-imposed policies, not the terms of a private
contract. Wolens, 513 U.S. at 229 n.5, 130 L. Ed. 2d at 726 n.5, 115 S. Ct. at 824 n.5. The
Court also noted that the phrase "having the force and effect of law" is most naturally read to
reference binding standards of conduct that operate irrespective of private agreements.
Wolens, 513 U.S. at 229 n.5, 130 L. Ed. 2d at 726 n.5, 115 S. Ct. at 824 n.5. The Court held
that the Airline Deregulation Act was designed to promote "maximum reliance on
competitive market forces" (49 U.S.C. App. '1302(a)(4) (1988)) and that market efficiency
requires an effective means to enforce private agreements. Wolens, 513 U.S. at 230, 130 L.
Ed. 2d at 726, 115 S. Ct. at 824. The Court limited its breach-of-contract exception to
actions confined to the terms of the parties' bargain "with no enlargement or enhancement
based on state laws or policies external to the agreement." Wolens, 513 U.S. at 233, 130 L.
Ed. 2d at 728, 115 S. Ct. at 826; see also Smith v. Comair, Inc., 134 F.3d 254, 258 (4th Cir.
1998) (the contract action could only be adjudicated by reference to federal law and policies
external to the parties' bargain and, therefore, was preempted by the Airline Deregulation
Act).
5
Accordingly, in deciding whether contract claims are preempted, we distinguish
between obligations dictated by the state and those voluntarily undertaken by the airline. See
Wolens, 513 U.S. at 233, 130 L. Ed. 2d at 728, 115 S. Ct. at 826. When parties privately
negotiate a contract's terms and an action is later filed in state court for a breach of those
terms, there is generally no specter of state-imposed regulation. Delta Air Lines, Inc. v.
Black, 116 S.W.3d 745, 753 (Tex. 2003). "[T]he enforcement of a contractual commitment
voluntarily undertaken does not amount to state enactment or enforcement of a law that the
[Airline Deregulation Act]'s preemption provision forbids." Delta Air Lines, Inc., 116
S.W.3d at 754.
In the present case, Hicks's breach-of-contract action against Airborne is not
preempted by the Airline Deregulation Act because the court's concern is restricted to the
parties' bargain. Hicks's action is based on Airborne's self-imposed obligation to deliver
packages by a specified time and does not involve external state policy. Accordingly, Hicks's
breach-of-contract claim is based upon Airborne's written and self-imposed undertaking, can
be adjudicated without reference to law and policies external to the parties' bargain, and is
not preempted by the Airline Deregulation Act. See Wolens, 513 U.S. at 232-33, 130 L. Ed.
2d at 728, 115 S. Ct. at 826; see also Travel All Over the World, Inc. v. Kingdom of Saudi
Arabia, 73 F.3d 1423, 1432 (7th Cir. 1996) (the plaintiff's claim that the defendant breached
its agreement to honor confirmed reservations involved privately ordered obligations and was
not preempted by the Airline Deregulation Act); Shubert v. Federal Express Corp., 306 Ill.
App. 3d 1056, 1059 (1999) (the written undertaking of the air carrier was not preempted even
though it related to rates or service).
Breach of Contract
Hicks argues that the contract language guaranteeing delivery by a specified time or a
free Flight-Ready shipment envelope did not create the exclusive remedy for a breach of
6
Airborne's promise to deliver by the specified time. Airborne counters that the contract
between it and Hicks was clear and unambiguous and provided the exclusive remedy for a
delayed deliveryBa free Flight-Ready shipment.
Cargo Airline Association (Cargo) submitted an amicus curiae brief in support of
Airborne. Cargo argues that Hicks is not entitled to common law damages because there was
no difference between the value of the shipped items at the time they arrived and the value of
the shipped items at the time they should have arrived. See Sangamon & Morgan R.R. Co. v.
Henry, 14 Ill. 156, 158 (1852) (the measure of damages for failing to deliver hogs within the
contract time was the difference between the value of the hogs at the time they arrived and
their value at the time they should have arrived). Cargo argues that because Hicks is not
entitled to a common law remedy, he is only entitled to seek the remedy explicitly provided
in his contract with Airborne, i.e., a free Flight-Ready shipment.
A summary judgment is appropriate when the pleadings, depositions, and admissions
on file, together with any affidavits, show that there is no genuine issue regarding any
material fact and that the moving party is entitled to a judgment as a matter of law. 735 ILCS
5/2-1005(c) (West 2004); Shannon v. Boise Cascade Corp., 208 Ill. 2d 517, 523-24 (2004).
The circuit court's decision to grant a summary judgment presents a question of law and is
subject to de novo review. Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill.
2d 90, 102 (1992).
The primary objective in construing a contract is to give effect to the intention of the
parties involved. Schek v. Chicago Transit Authority, 42 Ill. 2d 362, 364 (1969). The parties'
intention must be ascertained from the plain and ordinary meaning of the language of the
contract. O'Shield v. Lakeside Bank, 335 Ill. App. 3d 834, 839 (2002); Board of Regents v.
Wilson, 27 Ill. App. 3d 26, 31 (1975). A contract is to be construed as a whole, giving
meaning and effect to every provision thereof, if possible, since we presume that every clause
7
in the contract was inserted deliberately and for a purpose. Martindell v. Lake Shore
National Bank, 15 Ill. 2d 272, 283 (1958); Board of Regents, 27 Ill. App. 3d at 31.
"[T]he parties' rights under the contract are limited by the terms expressed therein."
O'Shield, 335 Ill. App. 3d at 839. "[P]arties by an express agreement may contract for an
exclusive remedy that limits their rights, duties[,] and obligations." Board of Regents, 27 Ill.
App. 3d at 32; see also O'Shield, 335 Ill. App. 3d at 839. Illinois courts have recognized and
enforced exclusive remedy provisions, even when the contract omits the word "exclusive,"
when the contract as a whole warrants that construction. O'Shield, 335 Ill. App. 3d at 839;
Omnitrus Merging Corp. v. Illinois Tool Works, Inc., 256 Ill. App. 3d 31, 34 (1993); Veath v.
Specialty Grains, Inc., 190 Ill. App. 3d 787, 797 (1989). "An exclusive remedy clause will
be enforced unless it violates public policy or something in the social relationship of the
parties works against upholding the clause." W.E. Erickson Construction, Inc. v. Chicago
Title Insurance Co., 266 Ill. App. 3d 905, 910 (1994).
A slight difference in contract language may justify the interpretation that the contract
provides the buyer an exclusive remedy, as opposed to a privilege in addition to other
remedies that he might have. Standard Oil Co. of Indiana v. Daniel Burkhartsmeier
Cooperage Co., 333 Ill. App. 338, 349 (1948) (each contract must be interpreted, for
unquestionably a contract may provide for a sole remedy). While clauses limiting damages
are not favored and must be strictly construed against a benefiting party, the basis for their
enforcement is the strong public policy favoring the freedom of contract. Rayner Covering
Systems, Inc. v. Danvers Farmers Elevator Co., 226 Ill. App. 3d 507, 512 (1992). Public
policy permits competent parties to contractually allocate business risks as they see fit.
McClure Engineering Associates, Inc. v. Reuben H. Donnelley Corp., 95 Ill. 2d 68, 72-73
(1983).
Pursuant to the parties' contract regarding the Flight-Ready shipment envelope,
8
Airborne guaranteed that it would deliver the shipment on time or provide Hicks with another
Flight-Ready domestic express envelope free of charge. The contract precluded a broad
range of potential damages and provided that no one could alter or modify its terms. See
CogniTest Corp. v. Riverside Publishing Co., 107 F.3d 493, 498 (7th Cir. 1997) (considering
the contract language allowing the retention of outstanding advances if the agreement
terminated prior to publication, in addition to a provision precluding a broad range of
potential damages and the contract's integration clause, the court concluded that the retention
remedy was intended to be exclusive). The contract's express language clearly provides that
the replacement Flight-Ready envelope was Hicks's exclusive remedy if Airborne breached
the contract by failing to deliver the package by noon the next day. See O'Shield, 335 Ill.
App. 3d at 840 (the plaintiffs could not maintain a claim for specific performance because the
contract created the exclusive remedy of terminating the contract); Intrastate Piping &
Controls, Inc. v. Robert-James Sales, Inc., 315 Ill. App. 3d 248, 256 (2000) (the exclusive
remedy provisions of the contract limited the plaintiff to the price of replacement pipe); W.E.
Erickson Construction, Inc., 266 Ill. App. 3d at 910 (the contract created the exclusive
remedy of allowing a recovery for only the losses suffered in reliance on the commitment);
Omnitrus Merging Corp., 256 Ill. App. 3d at 34-35 (the merger agreement created the
exclusive remedy of indemnification); Veath, 190 Ill. App. 3d at 797-98 (the contract limited
the measure of damages that would have otherwise been available under the Uniform
Commercial Code); Schultz v. Jackson, 67 Ill. App. 3d 889, 893 (1979) (the contract
language was sufficient to limit the plaintiff's remedy to the repair or replacement of
defective parts and to rebut a presumption that contract remedies were cumulative to those in
the Uniform Commercial Code); J.D. Pavlak, Ltd. v. William Davies Co., 40 Ill. App. 3d 1, 4
(1976) (the contract language revealed that the parties intended the settlement formula to be
the exclusive remedy); see also Dow Corning Corp. v. Capitol Aviation, Inc., 411 F.2d 622,
9
625-26 (7th Cir. 1969) (the contract language allowing the purchaser to cancel the order and
get a refund of the deposit if the delivery did not occur within 30 days created the exclusive
remedy even though the contract did not use the word "exclusive").
Hicks and Airborne voluntarily chose to distribute the risks in a manner represented
by the contract language. We find no public policy to bar the contract's exclusive remedy
provision (see Rayner Covering Systems, Inc., 226 Ill. App. 3d at 512), and nothing in the
record justifies altering the contractual allocation adopted by the parties (see J.D. Pavlak,
Ltd., 40 Ill. App. 3d at 4). The language of the parties' contract limited Hicks to the exclusive
remedy of a free Flight-Ready envelope if Airborne breached the contract by failing to
deliver his shipment on time. Accordingly, the circuit court properly entered a summary
judgment in favor of Airborne.
CONCLUSION
For the foregoing reasons, the judgment of the circuit court of Madison County is
affirmed.
Affirmed.
GOLDENHERSH and McGLYNN, JJ., concur.
10
NO. 5-04-0793
IN THE
APPELLATE COURT OF ILLINOIS
FIFTH DISTRICT
___________________________________________________________________________________
A. JEFFREY HICKS, d/b/a FINANCIAL ) Appeal from the
PLANNING ADVISORS, INC., ) Circuit Court of
Individually and on Behalf of All Others
) Madison County.
Similarly Situated, )
)
Plaintiff-Appellant, )
)
v. ) No. 02-L-1512
)
AIRBORNE EXPRESS, INC., ) Honorable
) Phillip J. Kardis,
Defendant-Appellee. ) Judge, presiding.
___________________________________________________________________________________
Opinion Filed: July 25, 2006
___________________________________________________________________________________
Justices: Honorable Terrence J. Hopkins, J.
Honorable Richard P. Goldenhersh, J., and
Honorable Stephen P. McGlynn, J.,
Concur
___________________________________________________________________________________
Attorneys Gail G. Renshaw, Gary E. Peel, Gerald Walters, The Lakin Law Firm, P.C., 300
for Evans Avenue, P.O. Box 229, Wood River, IL 62095-0229; Paul M. Weiss, Tod A.
Appellant Lewis, Freed & Weiss, LLC, 111 West Washington Street, Suite 1331, Chicago,
IL 60602; Malik R. Diab, Phillip A. Bock, Diab & Bock, 20 N. Wacker Drive, Suite
1741, Chicago, IL 60610; Timothy Campbell, The Campbell Law Offices, 3017
Godfrey Road, P.O. Box 505, Godfrey, IL 62035
___________________________________________________________________________________
Attorneys Karen L. Kendall, Craig L. Unrath, Heyl, Royster, Voelker & Allen, 124 S.W. Adams,
for Suite 600, Peoria, IL 61602; Robert H. Shultz, Jr., Joseph P. Whyte, Deborah A.
Appellee Hawkins, Heyl, Royster, Voelker & Allen, 103 W. Vandalia Street, Suite 100,
Edwardsville, IL 62025-0467; Edwin V. Woodsome, Jr., D. Barclay Edmundson,
William W. Oxley, T. Jason White, Orrick, Herrington & Sutcliffe LLP., 777 South
Figueroa Street, Suite 3200, Los Angeles, CA 90017-5855
___________________________________________________________________________________
Attorneys Stephen A. Alterman, Cargo Airline Association, 1220 19th Street, NW, Washington,
for DC 20036; Robert K. Spotswood, Kenneth D. Sansom, Michael T. Sansbury, John
Amicus Curiae R. Parker, Jr., Spotswood LLC 940 Concord Center, 2100 Third Avenue North,
Birmingham, AL 35203
______________________________________________________________________________________