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Monzingo v. Alaska Air Group (05/06/2005) sp-5894
Monzingo v. Alaska Air Group (05/06/2005) sp-5894
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
TONY ED MONZINGO, )
individually and on behalf of all ) Supreme Court No. S-
11240
others similarly situated, )
) Superior Court No.
Appellant, ) 3AN-02-04670 CI
)
v. ) O P I N I O N
)
ALASKA AIR GROUP, INC., a ) [No. 5894 - May 6, 2005]
Delaware Corporation, d/b/a )
Alaska Airlines and Horizon Air )
Industries, Inc., and ALASKA )
AIRLINES, INC., an Alaska )
Corporation, )
)
Appellees. )
)
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Sen K. Tan, Judge.
Appearances: Dan K. Coffey, Law Offices of
Dan K. Coffey, Anchorage, Gilbert W. Gordon,
Marks, Marks, & Kaplan, Ltd., Chicago,
Illinois, and Michael B. Hyman, Much Shelist
Freed Denenberg Ament & Rubenstein, P.C.,
Chicago, Illinois, for Appellants. Robert C.
Bundy and Jahna M. Lindemuth, Dorsey &
Whitney LLP, for Appellees.
Before: Bryner, Chief Justice, Matthews,
Fabe, and Carpeneti, Justices. [Eastaugh,
Justice, not participating.]
FABE, Justice.
I. INTRODUCTION
A frequent flyer customer brought a class action
lawsuit against Alaska Airlines seeking damages for changes to
Alaska Airliness frequent flyer program that affected the value
of his previously earned miles. The superior court granted
summary judgment in favor of Alaska Airlines and awarded twenty
percent of actual attorneys fees to the airline. We affirm the
decision of the superior court and hold that: (1) this breach of
contract claim is not preempted by the Airline Deregulation Act;
(2) the plain language of the Mileage Plan and reasonable
expectations of the parties indicate the intent to allow changes
to all aspects of the plan with reasonable notice; and (3) the
parties course of dealing supports the understanding that the
airline has the ability to make changes it deems necessary. We
reverse the superior courts award of attorneys fees against
Monzingo related to the litigation of class certification issues.
II. FACTS AND PROCEEDINGS
A. Factual History
This case arises from an uncertified class action,
filed by Tony Ed Monzingo, on behalf of 3.9 million class
members, seeking over $1 billion in damages. The relevant facts
of the case are undisputed. Monzingo is a member of Alaska
Airliness frequent flyer program, the Alaska Airlines Mileage
Plan (Mileage Plan). The program permits passengers flying on
Alaska Airlines to accumulate mileage credit that can later be
redeemed for free travel or other awards. Monzingo has been a
member of the Mileage Plan since April 23, 1992. From his date
of entry into the program on April 23, 1992 until April 2002,
Monzingo had accumulated a total of 542,484 miles, most of which
had not been redeemed for free travel or other benefits.
Alaska Airlines implemented a number of changes to the
Mileage Plan on September 1, 2001. These changes increased the
number of miles necessary to redeem peak, first class, and some
international travel awards; redemption of awards for off-peak
coach travel remained unchanged. Alaska Airlines maintains that
this adjustment affected only 16.4% of air travel award levels,
accounting for only 21% of all awards redeemed in 2000. The
Mileage Plans changes applied prospectively, to miles to be
accrued in the future, as well as retroactively, to miles already
accrued but not yet redeemed. Mileage Plan members received
their first notice that a change would take place on March 30,
2001. Alaska Airlines issued a press release, posted information
about the changes on their website, and sent members notification
by e-mail in April 2001. Members were also sent a newsletter in
late May 2001 announcing that the changes would go into effect
beginning September 1, 2001. In these various publications,
Alaska Airlines alerted members that they could redeem their
accumulated miles under the old award structure as long as they
booked their airline ticket in the subsequent five months, by
September 1, 2001, for travel prior to August 1, 2002.
It is undisputed that the Terms and Conditions of the
Mileage Plan specifically reserved the right to make prospective
changes to the plan. The parties disagreement centers instead on
whether Alaska Airlines reserved the right to make retroactive
changes to the plan. The Terms and Conditions of the Mileage
Plan, dated January 1991, were sent to every new member of the
frequent flyer program, including Monzingo, who received them in
1992 when he became a member of the plan. The Terms and
Conditions contained the following warnings:
Alaska Airlines reserves the right to change
the Mileage Plan terms, conditions, partners,
mileage credits and/or award levels. This
means with prior notice Alaska Airlines may
raise award levels or lower mileage levels,
add an unlimited number of blackout dates or
limit the number of seats available on any or
all flights. Also, certain destinations may
be restricted to members. Furthermore,
Alaska Airlines reserves the right to
terminate the Mileage Plan with advance
notice. (Emphasis added.)
. . . .
Subject to additions, deletions or revisions
at anytime.
. . . .
Accrued mileage and award certificates do not
constitute property of the member.
. . . .
Alaska Airlines and/or Travel Partners are
the final authority on qualifying mileages.
Alaska Airlines may, at its discretion, elect
to authorize additional mileage credit
between any two points on its route system.
At the end of a section of its Terms and Conditions entitled
Important Reminders, Alaska Airlines includes an additional
warning printed in bold type:
All terms and conditions on Mileage Plan
awards are subject to change, and the Mileage
Plan program is subject to cancellation at
any time by Alaska Airlines.
Although there is no plan language that specifically reserves to
Alaska Airlines the right to devalue previously accumulated
miles, the Mileage Plan does include a term concerning previously
accumulated mileage. This provision states:
Alaska Airlines reserves the right to
disqualify persons from further participation
in the Mileage Plan and to cancel all
previously accumulated mileage if in Alaska
Airlines[s] sole judgement such persons have
violated any of the eligibility, mileage
accumulation, award usage or other terms
governing the Alaska Airlines Mileage Plan.
B. Procedural History
On February 11, 2002, Monzingo filed this lawsuit
alleging breach of contract and breach of the implied covenant of
good faith and fair dealing. He sought certification of a class
of persons who had accumulated miles through the Mileage Plan
prior to September 1, 2001. Monzingo amended his complaint
twice: on April 4, 2002, his first amended complaint included
additional claims for unconscionability and conversion, and on
November 12, 2002, his second amended complaint limited the
action to only one claim for breach of contract.1
Alaska Airlines moved for summary judgment on October
15, 2002. Superior Court Judge Sen K. Tan granted the motion and
entered judgment for the airline on September 2, 2003. Following
the superior courts order, Alaska Airlines brought a motion for
attorneys fees, which was granted on December 17, 2003. Alaska
Airlines was awarded $36,877.15; this amount includes $28,226.40,
twenty percent of actual attorneys fees, and costs of $8,650.75.
A motion for class certification was filed by Monzingo
but was rendered moot by the superior courts grant of summary
judgment. The superior courts attorneys fees award included fees
for time spent on class certification issues. Alaska Airlines
states that a substantial percentage, if not the majority, of
time spent by Alaska Airliness attorneys . . . was devoted to
class certification issues. Monzingo appeals both the order
granting summary judgment and the Alaska Civil Rule 82 fee award.
III. STANDARDS OF REVIEW
[A] grant of summary judgment based upon contract
interpretation is subject to de novo review because
interpretation of contract language is a question of law.2
Drawing all reasonable inferences in favor of the nonmoving
party, we will uphold summary judgment if no genuine issue of
material fact exists and the moving party is entitled to judgment
as a matter of law.3 The intent of the parties when entering a
contract is, however, reviewed under the clearly erroneous
standard.4 [S]ummary judgment is improper when the evidence
before the superior court establishes a factual dispute as to the
intent of the contracting parties.5
Trial courts have broad latitude in their award of
attorneys fees and costs.6 We review such awards under the abuse
of discretion standard.7 Abuse of discretion exists if the
award is arbitrary, capricious, manifestly unreasonable, or the
result of an improper motive.8
IV. DISCUSSION
A. Alaska Airlines Did Not Breach Its Contract with
Monzingo Because It Reserved the Right To Change the
Mileage Plan Retroactively.
1. The breach of contract claim is not preempted by
the Airline Deregulation Act.
We consider first the threshold question whether all
issues in this case are preempted by the Airline Deregulation Act
(ADA).9 The ADA provides 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.10
The United States Supreme Court has addressed whether state law
claims are preempted by the ADA on two occasions: first, in
Morales v. Trans World Airlines, Inc., where the Court held that
[s]tate enforcement actions having a connection with or reference
to airline rates, routes, or services are preempted under the
ADA,11 and three years later in American Airlines, Inc. v. Wolens.12
Wolens was similar to this case in that it involved a suit
against American Airlines for retroactive modification of its
frequent flyer program. The Wolens Court held that the ADA did
preempt the plaintiffs claims that were based on the Illinois
Consumer Fraud and Deceptive Business Practices Act but did not
preempt a state law breach of contract claim.13 The Wolens Court
explained that it did not read the ADAs preemption clause . . .
to shelter airlines from suits . . . seeking recovery solely for
the airlines alleged breach of its own, self-imposed
undertakings.14 Although Wolens was almost identical on its facts
to the instant case, the Wolens Court did not address the
contract claim on the merits, noting that the question of
contract interpretation has not yet had a full airing, and we
intimate no view on its resolution.15
Alaska Airlines contends that state law principles of
contract interpretation should not be applied in this case
because they would enlarge or enhance [Monzingos] rights . . .
based on state laws or policies external to the agreement, as
expressly prohibited by Wolens. While Wolens does forbid
enlargement or enhancement of rights based on state laws or
policies, this prohibition does not extend to such contract
construction issues as whether an airline has reserved the right
to retroactively change rules governing frequent flyer credits.16
The Wolens Court concluded only that state-law principles should
be preempted to the extent they seek to effectuate the States
public policies, rather than the intent of the parties.17
Subsequent decisions have interpreted this language to mean that
contract actions seeking invalidation of express contract terms,18
enforcement of equitable remedies,19 or punitive damages20 are
preempted, because they would impermissibly enlarge[] the scope
of the proceedings beyond the parties agreement.21 But if the
parties seek to enforce a term implied in fact in the agreement
based upon the parties reasonable expectations, no preemption
problem is presented.22
Here, the superior court was asked to interpret the
meaning of the words of the Mileage Plan in order to give effect
to the reasonable expectations of the parties. Rules governing
contract interpretation such as the use of extrinsic evidence to
ascertain the meaning of the parties only attempt to divine the
parties intent and are permissibly applied in resolving state
contract claims. Thus, we examine this contract to determine if
there was a breach of Alaska Airliness self-imposed undertakings.23
2. The mileage plan as a whole reflects the intent to
allow Alaska Airlines the ability to change the
plan retroactively.
When interpreting contracts, the trial courts goal is
to give effect to the reasonable expectations of the parties.24
Courts look to the language of the contract as a whole, the
objects sought to be accomplished by the contract, the
circumstances surrounding its adoption, and case law interpreting
its provisions to ascertain the reasonable expectations of the
parties.25 While extrinsic evidence should be consulted, after
the transaction has been shown in all its length and breadth, the
words of an integrated agreement remain the most important
evidence of intention.26 The parties to this dispute agree that
the Mileage Plan is a contract.27 We must therefore begin by
examining the plain language of the Mileage Plan to determine
whether the terms and conditions of the plan reserve Alaska
Airliness right to make retroactive changes. Next, we analyze
the reasonable expectations of the parties at the time that
Monzingo agreed to the terms of the Mileage Plan. We finally
turn to the parties course of dealing as further evidence of
their reasonable expectations of the Mileage Plan.
a. The plain language of the Mileage Plan
reserves Alaska Airliness right to make
retroactive changes to the plan.
Courts examine the contract as a whole when assessing
the intent of the parties.28 In this case, we must examine the
nature of restrictions that Alaska Airlines informed its members
would apply to the Mileage Plan. The inside front cover of the
Terms and Conditions brochure that is mailed to every new Mileage
Plan member contains the following language to warn members about
possible changes to the plan: Alaska Airlines reserves the right
to change the Mileage Plan terms, conditions, partners, mileage
credits and/or award levels. Additional warnings run throughout
the Terms and Conditions, including: Alaska Airlines may raise
award levels or lower mileage levels, and [s]ubject to additions,
deletions, or revisions at any time. Bold text in the brochure
reiterates that [a]ll terms and conditions on Mileage Plan awards
are subject to change . . . .
Monzingo contends that these terms give Alaska Airlines
the right to change award levels, as long as the changes do not
apply to previously accumulated miles. But, as Alaska Airlines
points out, it has also informed Mileage Plan members in its
Terms and Conditions that [a]ccrued mileage and award
certificates do not constitute property of the member, and that
Alaska Airlines reserves the right to terminate the Mileage Plan
with advance notice. We conclude that these provisions manifest
an intent to clarify that members have no ownership right in the
miles they have earned and thus cannot expect that the value of
these miles will not diminish due to changes in the award levels.
Because these provisions informed members that they have no
vested right in their previously accumulated mileage, when read
in conjunction with the other provisions of the plan, these terms
appear to be an additional way of saying that Alaska Airlines has
the power to alter or change the value of miles.29
b. The parties reasonably expected the Mileage
Plan to allow Alaska Airlines the right to
retroactively change all aspects of the plan.
In interpreting contracts, we also look at the
reasonable expectations of the parties. We aim to give effect to
the meaning of the words which the party . . . should reasonably
have apprehended . . . would be understood by the other party.30
In support of his argument that Alaska Airlines did not
reserve the right to retroactively devalue previously accumulated
miles, Monzingo relies principally on the Illinois Supreme Courts
decision in Wolens.31 There, the court remarked: American chose
to retroactively alter the terms of the frequent flyer program.
This action constituted a breach of contract which entitled
plaintiffs to pursue an available remedy.32 But as Alaska
Airlines points out, this language is dicta.33 And the United
States Supreme Court did not reach this issue when it reviewed
that decision.34
Alaska Airlines relies on Benway v. American Airlines,
Inc.35 and Grossman v. USAir, Inc.36 to support its argument that
it reserved the right to make both prospective and retroactive
changes to the Mileage Plan. In Benway, a Texas trial court
judge granted American Airliness motion for summary judgment
based on the reservation of rights language in Americans frequent
flyer program. Contract interpretation was the only issue raised
on summary judgment. American Airliness AAdvantage Program
states:
American Airlines may find it necessary to
change AAdvantage program rules, regulations,
travel awards and special offers at any time.
This means that American may initiate changes
impacting, for example, participant
affiliations, rules for earning mileage
credit, mileage levels and rules for the use
of travel awards . . . .
Monzingo complains that American Airliness terms are more
explicit than Alaska Airliness. We disagree. The reservation of
rights language in American Airliness program is less clear than
Alaska Airliness. Alaska Airlines uses unequivocal language
stating it reserves the right to change the Mileage Plan, rather
than American Airliness language: may find it necessary to change
AAdvantage program rules.
In Grossman, a Pennsylvania trial court granted a
motion for summary judgment in favor of USAir, finding that the
terms of the contract unambiguously permitted USAir to raise
mileage levels in a manner that reduced the value of previously
accrued miles.37 USAirs reservation of rights language was almost
identical to the language used by Alaska Airlines, informing
program members:
USAir reserves the right to change the
Frequent Traveler Program rules, regulations,
partners, mileage credits, or award levels.
This means that, with notice, USAir may raise
award or mileage levels, add an unlimited
number of blackout days, or limit the number
of seats available to any or all destinations
. . . .
The Grossman court found it significant that USAirs
contract language followed the National Association of Attorneys
General (NAAG) Guidelines.38 NAAG, an organization that is
composed of the attorneys general of all fifty states, adopted
Air Travel Industry Enforcement Guidelines in 1987.39 These
guidelines were drafted following the deregulation of the airline
industry and were designed to explain in detail how existing
state laws apply to air fare advertising and frequent flyer
programs.40 The guidelines provided detailed standards governing
the content and format of airline advertising and addressing the
recommended structure and advertising of frequent flyer programs.
The reservation of rights language in USAirs and Alaska Airliness
frequent flyer programs is modeled on the language of the NAAG
Guidelines.41 Although the Grossman court noted this similarity,
its decision was also based on state law interpretation of USAirs
contract language. The Grossman court concluded that this
language was susceptible to only one reasonable interpretation:
that USAir could devalue accumulated miles by increasing levels
needed to obtain free travel.42
Relying on Morales, Monzingo argues that the NAAG
Guidelines are preempted by the ADA. But in concluding that the
fare advertising provisions of the NAAG Guidelines are pre-empted
by the ADA,43 the Morales Court was careful to narrowly
circumscribe the preempted portion to include only fare
advertising provisions of the NAAG Guidelines not the language
addressing frequent flyer programs.44 More importantly, Alaska
Airlines does not argue that the NAAG Guidelines are enforceable,
and indeed, the task force did not appear to intend them to be
enforceable.45 Alaska Airlines maintains that its adoption of
language nearly identical to that suggested by the guidelines
provided members with additional notice that modification of
award levels could affect previously accumulated miles.46
Although we are reluctant to conclude that the NAAG Guidelines
provided any notice to members, we agree that the guidelines
offer some indication that it was reasonable for Alaska Airlines
to expect that they were reserving the right to retroactively
devalue previously accumulated miles.
When read as a whole, the contract does not envision a
plan in which members redeem awards based on the award structure
in place at the time that particular miles were accrued by the
customer. As Alaska Airlines argues, it would not be reasonable
for a customer to expect this because it would create an
administrative nightmare for the airline and the customer to
track the value of miles relative to the status of the plan at
the time of a particular flight. And there are no provisions in
the detailed language of the plans terms that would lead a member
to believe that Alaska Airlines or the member would be required
to track award amounts with each modification. Read as a whole,
the Mileage Plan is structured to give Alaska Airlines the power
to make changes with adequate prior notice. Here, Monzingo was
given notice of the changes in late March 2001. He had sixteen
months following the date of this announcement to travel on
previously accrued miles, and five months after the announcement
to book this travel.47 Moreover, the NAAG Guidelines provide
evidence that it was reasonable for Alaska Airlines to believe
the contract language was specific enough to convey the intent to
reserve the right to make retroactive changes. We conclude that
the contract was sufficiently unambiguous on the issue of
previously accumulated miles to warrant summary judgment.
c. The course of dealing between the parties
indicates Monzingo understood that Alaska
Airlines reserved the right to make changes
to accumulated miles.
We next turn to the course of dealing between Monzingo
and Alaska Airlines and consider whether the parties previous
dealings supply additional evidence of their reasonable
expectations of the Mileage Plan. Alaska Airlines argues that
the frequent unilateral changes made by Alaska Airlines to the
plan during Monzingos membership indicate Monzingo understood the
plan was subject to retroactive changes. Alaska Airlines
maintains that award levels were increased twelve times since
Monzingo joined the plan, and thirteen travel awards were
discontinued during his membership. At no point prior to this
lawsuit did Monzingo call to complain about the changes, although
he was admittedly aware of them.
Alaska Statute 45.01.205 provides that express terms of
an agreement and an applicable course of dealing or usage of
trade shall be construed where reasonable as consistent with each
other . . . .48 A course of dealing is a sequence of previous
conduct between the parties to a particular transaction which is
fairly to be regarded as establishing a common basis of
understanding for interpreting their expressions and other
conduct.49 We held in Fairbanks North Star Borough v. Tundra
Tours, Inc. that a school districts payment to a school bus
company over two years manifested an assent to the billing
methodology of the bus company and that the parties course of
dealing should govern the interpretation of the billing
methodology.50 As we explained, a course of dealing between
parties must prevail over an industry practice in determining the
reasonable intention of the parties in using particular
terminology.51 In this case, we similarly conclude that Monzingo
assented to the numerous changes made by Alaska Airlines. His
actions provide an additional indication of his reasonable
expectations at the time of drafting: that Alaska Airlines
reserved the right to make changes to the value of previously
accumulated miles. Based on the plain language of the plan, the
reasonable expectations of the parties, and the parties course of
dealing, we hold that Alaska Airlines reserved the right to make
retroactive changes to the Mileage Plan with reasonable notice.
B. It Was Error To Award Attorneys Fees Against Monzingo
for Litigation of Class Certification Issues.
Monzingo contends that the award of attorneys fees in
this case is contrary to the purpose of Alaska Civil Rule 82 and
public policy. At no point does Monzingo contend that the
superior courts award of fees was an abuse of discretion that
warrants reversal. Rather, he argues that we should create a
separate category under Rule 82 for private litigants pursuing
quasi-public issues. Both parties agree that Monzingo is not a
true public interest litigant, and hence is not automatically
exempt from Rule 82 fees.52 The lawsuit was for over $1 billion
in damages and Monzingo had sufficient private economic incentive
to bring the suit. Instead, Monzingo asserts that because so
many Alaska citizens are affected by the contested issue, and the
damages are very small as to each individual, attorneys fees
should not be assessed when the claim is not frivolous and the
class representative acts in good faith. We are unconvinced that
class representatives motivated to bring suit by their own
private economic interests should fall completely outside the
ambit of Rule 82. We are, however, persuaded by Monzingos
argument that a future class representative seeking a small
amount of relief will be dissuaded from becoming a named
plaintiff in a class action suit if he risks high attorneys fees
for litigation that goes beyond that required to adjudicate the
merits of his own case. Thus, the question before us is whether
a class representative should be liable for Rule 82 attorneys
fees arising from litigation on issues related solely to class
certification and notice, when that litigation is for the benefit
of putative class members and offers no monetary benefit to the
named plaintiff.
Alaska is the only state that does not follow the
American rule [pertaining to attorneys fees].53 Under the
American rule, each party pays its attorneys fees, regardless of
who prevails.54 The purpose of Rule 82 is to partially compensate
a prevailing party for the expenses incurred in winning his case.
It is not intended as a vehicle for accomplishing anything other
than providing compensation where it is justified.55 Rule 82 was
not intended to penalize a party for litigating a good-faith
claim.56
Rule 82(b)(3)(I) permits a court to reduce or deny
attorneys fees to a prevailing party if a given fee award may be
so onerous to the non-prevailing party that it would deter
similarly situated litigants from the voluntary use of the
courts.57 We have previously expressed concern that financially
ruinous fee awards against good faith civil litigants could deter
access to the courts.58 Although we recognize that a trial court
does not need to explain its analysis of all possible reasons,
under Rule 82(b)(3), for deviating from the schedule,59 it must
give adequate consideration of the factors when raised by the
parties. Moreover, class representatives are a unique group of
plaintiffs. Named plaintiffs in class actions are particularly
susceptible to financially ruinous or onerous fee awards in the
event of an adverse judgment, especially following our recent
holding in Turner v. Alaska Communications Systems60 that the
costs of litigating should not be born by absent class members.
Hence, fee awards against named class representatives warrant
greater scrutiny and a delicate balancing of the relevant
equitable factors articulated in Rule 82(b)(3).61
We did not address in Turner the extent and sweep of
Rule 82s application to class representatives. We therefore turn
to the narrow issue raised in this case: whether a named
plaintiff can be held liable for attorneys fees and costs
incurred that have no bearing on the merits of the named
plaintiffs lawsuit. This appears to be a novel issue that arises
out of Alaskas unique two-way fee-shifting provision, Rule 82.62
The question posed is whether the policies behind Rule 82 support
imposing attorneys fees on a named plaintiff when those fees
include extensive class certification preparation that falls
outside the substantive merits of the named plaintiffs case.63
The United States Supreme Court recognized in United
States Parole Commission v. Geraghty that a named plaintiff
presents two separate issues for judicial resolution. One is the
claim on the merits; the other is the claim that he is entitled
to represent a class.64 A class representatives interest in
having a class certified is more analogous to the private
attorney general concept than to the type of interest
traditionally thought to satisfy the personal stake requirement.65
The United States Supreme Court further explained in Deposit
Guaranty National Bank v. Roper that the denial of class
certification [is] an example of a procedural ruling, collateral
to the merits of a litigation . . . .66 The Supreme Court in
Roper found that the use of the class action procedure may offer
a substantial advantage for a named plaintiff who may divide
attorneys fees and costs among all members of the class who
benefit from any recovery and therefore achieve a less-costly
means of litigating their single claim.67 But this significant
benefit to claimants . . . of reducing their costs of litigation68
quickly transforms into an economic hardship to the named
plaintiff if class representatives are held liable for all of the
fees incurred in litigating class certification issues. As the
Supreme Court stated in Roper, [t]ypically, the attorneys fees of
a named plaintiff proceeding without reliance on [the federal
class action rule] could exceed the value of the individual
judgment in favor of any one plaintiff.69 In this case, Monzingo
is asked to pay $28,226.40 in attorneys fees and $8,650.75 in
costs. Yet Monzingo argues that [h]is total damages had he
prevailed ranged from a few hundred to a few thousand dollars.
Class representatives will frequently have less at
stake than Monzingo, largely because negative value suits70 are a
primary reason the class device exists.71 Moreover, class action
defendants are highly motivated to vigorously defend any class
action. Not only are the monetary stakes high in most class
actions, but defeat of a class action may preclude later claims
by absent members of the putative class and can often foreclose
devastating public relations and reputation costs for a company.72
Alaska Airlines admitted as much when arguing for enhanced
attorneys fees: Faced with a billion dollar damages claim, a
simultaneous motion to certify a 3.8 million member class, and
expert counsel brought in from the Outside, Alaska Airlines was
forced to respond in a proportionate manner . . . [and] expended
a reasonable number of hours and resources given the magnitude of
Plaintiffs claim.
Rule 82(b)(3)(J) permits variance from the attorneys
fees schedule in situations where the prevailing party may have
been motivated by other considerations such as a desire to
discourage claims by others against the prevailing party or its
insurer.73 As we explained in Catalina Yachts, we must be careful
about allowing fee-shifting provisions to undercut provisions
meant to encourage plaintiffs to bring meritorious claims.74 We
are just as concerned about the chilling effect that Rule 82 may
have on class actions if applied too rigidly against named
plaintiffs as we were about absent class members liability for
fees in Turner.75 In Turner, we distinguished between awards of
fees against named class representatives and awards sought
against absent class members, explaining that our ruling does not
eliminate Rule 82 attorneys fees in class actions; it simply
limits Rule 82s possible reach to named parties, meaning that a
person who has been forced to litigate in order to secure his or
her rights will be reimbursed in part for litigation expenses.76
Monzingos motion for class certification was rendered
moot by the superior courts grant of summary judgment.
Nevertheless, the trial court awarded attorneys fees that
included time spent by Alaska Airlines in preparing for and
arguing the motion to certify the class. Although the superior
court awarded only twenty percent of actual fees in accordance
with the Rule 82(b) schedule, Alaska Airlines admits that a
substantial percentage, if not the majority of time listed on its
invoices was devoted to class certification issues. Monzingo
argues that because the superior court never ruled on the class
certification motion, Alaska Airlines did not prevail on the
class certification issue and thus should not be eligible to
receive fees related to that issue. We disagree. We have
previously held that trial courts are not required to award fees
on an issue-by-issue basis: Rule 82(a) does not require that
attorneys fees be calculated with reference to the disposition of
individual issues . . . . [T]he party who prevails on the
principal dispositive issue is entitled to reasonable costs
calculated according to the trial courts discretion.77
But we are convinced that there is an essential
difference between limiting the attorneys fees for which a class
representative may be liable in litigating the merits of his own
claim and exposing that named plaintiff to the additional risk of
having to pay substantial fees litigating class certification and
notice issues on behalf of absent class members. A named
plaintiff serving as class representative functions in two
distinct roles: to litigate the merits of his own claim and to
litigate on behalf of unnamed class members. He has a financial
incentive to litigate his own claims. But when a class
representative has no personal financial interest in the second
role, he functions in much the same manner as a private attorney
general in a public interest law suit.78 In such situations, it
is necessary to distinguish between the attorneys fees spent by a
prevailing defendant who has incurred fees defending both the
merits of the individual plaintiffs claims and the structure of
the class action litigation. Moreover, fees incurred by a
prevailing defendant litigating procedural motions related solely
to the class action structure of the litigation are often driven
by a defendants desire to limit damages to the named plaintiffs
individual claim. In such a case, the fee award should be varied
under Rule 82(b)(3)(J), since the vigorous defense of a class
certification motion is motivated by the desire to discourage
claims79 that permits variance under Rule 82(b)(3). Permitting
the threat of additional liability for fees and costs related to
defending class-specific procedural claims will discourage
plaintiffs from acting as class representatives. We conclude
that this is a core purpose of permitting a trial court to vary a
fee award under Rule 82(b)(3)(I).
We therefore hold that a named plaintiff should not
ordinarily be held liable for attorneys fees that fall beyond the
scope of litigating the merits of his claim. Our ruling does
not eliminate the award of Rule 82 attorneys fees against
unsuccessful named plaintiffs in class action lawsuits; it simply
limits Rule 82s reach to the substantive merits of their claims.
We note, however, that Monzingo, as non-prevailing party, bears
the burden of showing case-specific circumstances that warrant a
downward variance under Rule 82(b)(3). Thus, it is Monzingos
burden to demonstrate that his motive for serving as class
representative was limited to the value of his individual claim
and was not related to any potential enhanced recovery for his
role as class representative.80
V. CONCLUSION
Because the plain language of Alaska Airliness Mileage
Plan read as a whole reflects the parties reasonable expectations
to allow changes to all aspects of the plan with reasonable
notice, including changes to previously accumulated miles, and
because the parties course of dealing further supports the
understanding that the airline has the ability to make
retroactive changes, we AFFIRM the decision of the superior court
granting summary judgment to Alaska Airlines. Because the
superior courts award of twenty percent of attorneys fees
relating to the litigation of class certification issues was
error, we VACATE the fee award and REMAND for a determination of
Rule 82 attorneys fees arising from litigation of the substantive
merits of Monzingos claim.
_______________________________
1 The second amendment by Monzingo appears to have been
in response to an order by the superior court of King County,
Washington that dismissed another class action brought against
Alaska Airlines for changes to its frequent flyer program. The
superior court of Washington granted Alaska Airliness motion to
dismiss, which argued that plaintiffs claims were preempted by
the Airline Deregulation Act (ADA) and not cognizable under
Washington law. Plaintiffs claims in that case were dismissed
with prejudice. Chapman v. Alaska Airlines, Inc., No. 02-2-22932-
8 SEA (Wash. Super. Ct., Sept. 26, 2002).
2 K&K Recycling, Inc. v. Alaska Gold Co., 80 P.3d 702,
711-12 (Alaska 2003) (citing American Computer Inst., Inc. v.
State, 995 P.2d 647, 651 (Alaska 2000)).
3 Nichols v. State Farm Fire & Cas. Co., 6 P.3d 300, 303
(Alaska 2000); see also Alaska Civil Rule 56(c).
4 K & K Recycling, 80 P.3d at 712 (citing Sykes v. Melba
Creek Mining, Inc., 952 P.2d 1164, 1167 (Alaska 1998)).
5 Id.
6 Bliss v. Bobich, 971 P.2d 141, 147 n.5 (Alaska 1998).
7 McNett v. Alyeska Pipeline Serv. Co., 856 P.2d 1165,
1167 (Alaska 1993).
8 Hughes v. Foster Wheeler Co., 932 P.2d 784, 793 (Alaska
1997) (citing Mt. Juneau Enters., Inc. v. Juneau Empire, 891
P.2d 829, 834 (Alaska 1995)).
9 49 U.S.C. 41713(b)(1) (1996).
10 Id.
11 504 U.S. 374, 384 (1992).
12 513 U.S. 219 (1995).
13 Id. at 219, 227.
14 Id. at 228.
15 Id. at 234.
16 See id. at 233-34.
17 Id. at 233 n.8.
18 See, e.g., Breitling U.S.A. v. Federal Express Corp.,
45 F. Supp. 2d 179, 184 (D. Conn. 1999) (contract claim preempted
when based on doctrines of estoppel and waiver to invalidate
express terms).
19 See, e.g., Osband v. United Airlines, Inc., 981 P.2d
616, 621-22 (Colo. App. 1998) (contract claim preempted when
based on promissory estoppel, a remedy created by state law to
prevent injustice).
20 See, e.g., Travel All Over the World, Inc. v. Saudi
Arabia, 73 F.3d 1423 (7th Cir. 1996) (punitive damages claim
preempted, but claim for failure to honor reservations allowed
because it was a self-imposed commitment of airline).
21 Waul v. American Airlines, Inc., 2003 WL 22719273, at
*3 (Cal. App., Nov. 17, 2003) (finding each cause of action
preempted under the ADA where the complaint did not allege an
independent claim for breach of contract) (citing Travel All Over
the World, 73 F.3d at 1423).
22 Id. at *3. The general purpose of preemption under the
ADA is to avoid state interference with federal deregulation.
Nothing in the Act itself, or its legislative history, indicates
that Congress had a clear and manifest purpose to displace state
[laws] in actions that do not affect deregulation in more than a
peripheral manner. Air Transport Assn of Am. v. City & County
of San Francisco, 266 F.3d 1064, 1070 (9th Cir. 2001) (citing
Charas v. Trans World Airlines, Inc., 160 F.3d 1259, 1265 (9th
Cir. 1998) (en banc)); see also Travel All Over the World, 73
F.3d at 1432 (Morales and Wolens allow us to discern two distinct
requirements for a law to be expressly preempted by the ADA: (1)
A state must enact or enforce a law that (2) relates to airline
rates, routes, or services, either by expressly referring to them
or by having a significant economic effect upon them.).
23 Wolens, 513 U.S. at 228.
24 Stepanov v. Homer Elec. Assn, Inc., 814 P.2d 731, 734
(Alaska 1991) (quoting Mitford v. de Lasala, 666 P.2d 1000, 1005
(Alaska 1983)).
25 Craig Taylor Equip. Co. v. Pettibone Corp., 659 P.2d
594, 597 (Alaska 1983) (citations omitted).
26 Restatement (Second) of Contracts 212, comment b; see
also Still v. Cunningham, 94 P.3d 1104, 1109 (Alaska 2004).
27 Alaska Airlines states that [t]he Mileage Plan is a
marketing and promotional program, but they do not dispute that
it is a contract. Their argument focuses on whether the terms of
the Mileage Plan reserved to them the right to make changes to
the plan.
28 See Craig Taylor Equip. Co., 659 P.2d at 597.
29 We need not address Monzingos arguments that form
contracts and ambiguities in contract language are generally
construed against the drafter. Ambiguities in contractual
language are only to be construed against the drafter in the
absence of other means of ascertaining the reasonable
expectations of the parties. DeCristofaro v. Sec. Natl Bank, 664
P.2d 167, 169 (Alaska 1983).
30 Id. (citing Arctic Contractors, Inc. v. State, 564 P.2d
30 (Alaska 1977)) (additional citations omitted).
31 Wolens v. American Airlines, 626 N.E. 2d 205 (Ill.
1993), revd in part on other grounds, 513 U.S. 219 (1995). He
also relies on oral findings made by an Illinois Circuit Court in
Gutterman v. American Airlines, Inc., No. 95 CH 982 (Ill. Cir.
Ct., March 11, 1996).
32 Wolens, 626 N.E.2d at 208.
33 The Illinois Supreme Court stated that the only issues
before the court were whether certain claims were preempted by
the Airline Deregulation Act. Id. at 206.
34 See Wolens, 513 U.S. at 235.
35 No. 95-01379-L (Tex. Dist. Ct., June 16, 1995).
36 33 Phila. Co. Rptr. 427 (Ct. Com. Pl. 1997).
37 Id. at 432.
38 Id. at 433.
39 Morales, 504 U.S. at 379.
40 Id. (quoting NAAG Guidelines, Introduction (1988)).
41 A copy of the NAAG Guidelines is attached as an
appendix to the Supreme Courts decision in Morales. See Morales,
504 U.S. at 391-419. The key provision of the NAAG Guidelines
relates to vested and nonvested miles. Nonvested miles accrue
after an airline has given adequate notice. The guideliness
suggestion for adequate notice language was found in Grossman to
be nearly identical to USAirs reservation of rights language.
See Grossman, 33 Phila. Co. Rptr. at 433. Alaska Airlines argues
the Mileage Plan provision is also identical. The NAAG guideline
for adequate notice states: (Airline) reserves the right to
change the program rules, regulations and mileage level. This
means that (Airline) may raise mileage levels, add an unlimited
number of blackout days, or limit the number of seats available .
. . . NAAG Guidelines 3.2.3 (1988).
42 Grossman, 33 Phila. Co. Rptr at 433.
43 Morales, 504 U.S. at 391.
44 Id. at 381-89 (holding enforcement of the NAAG fare
advertising guidelines through a States general consumer
protection laws is preempted by the ADA).
45 The introduction to the NAAG Guidelines states: It is
important to note that these Guidelines do not create any new
laws or regulations regarding the advertising practices or other
business practices of the airline industry. They merely explain
in detail how existing state laws apply to air fare advertising
and frequent flyer programs. NAAG Guidelines, Introduction
(1988).
46 Monzingo became a member of the Mileage Plan in 1992,
only four years following the adoption of the NAAG Guidelines.
47 Monzingo could book travel until August 31, 2001, for
travel anytime up to August 1, 2002.
48 AS 45.01.205(d).
49 AS 45.01.205(a).
50 719 P.2d 1020, 1033 (Alaska 1986).
51 Id. at 1033-34.
52 We consider four factors as indicia of public interest
litigation:
(1) the effectuation of strong public
policies;
(2) numerous people will receive
benefits from the lawsuit;
(3) only a private party could have
been expected to bring this action; and
(4) the public interest litigant would
not have sufficient economic incentive to
bring the suit if the action only involved
issues lacking general importance.
Citizens Coalition for Tort Reform, Inc. v. McAlpine, 810 P.2d
162, 171 (Alaska 1991) (citing Anchorage Daily News v. Anchorage
Sch. Dist., 803 P.2d 402, 404 (Alaska 1990)).
53 Edwards v. Alaska Pulp Corp., 920 P.2d 751, 755 (Alaska
1996).
54 Id.
55 Tobeluk v. Lind, 589 P.2d 873, 876 (Alaska 1979)
(citations omitted); see also State v. Abbott, 498 P.2d 712
(Alaska 1972); DeWitt v. Liberty Leasing Co., 499 P.2d 599, 602
(Alaska 1972).
56 See Reid v. Williams, 964 P.2d 453, 462 (Alaska 1998);
see also Malvo v. J.C. Penney Co. Inc., 512 P.2d 575, 586-88
(Alaska 1973).
57 Alaska R. Civ. P. 82(b)(3)(I).
58 Reid, 964 P.2d at 462 (citations omitted).
59 Osborne v. Hurst, 947 P.2d 1356, 1362 n.3 (Alaska 1997)
(If one or more Rule 82(b)(3) factors justifies departure from
the schedule for fee awards, the trial court may base its
decision on those factors, without specifically explaining why
the other factors are not relevant.).
60 See Turner v. Alaska Communications Sys. Inc., 78 P.3d
264 (Alaska 2003) (holding that absent class members could not be
held liable for attorneys fees upon an adverse judgment); see
also Catalina Yachts v. Pierce, 105 P.3d 125, 131 (Alaska 2005)
(holding Rule 68 applies to named class representatives upon an
adverse judgment).
61 See Civil Rule 82(b)(3)(K) (permitting variation in the
attorneys fees award if other equitable factors [are] deemed
relevant by a trial court).
62 We note that most fee-shifting statutes provide
attorneys fees only to plaintiffs for certain causes of action,
usually in order to encourage the filing of smaller claims or
causes of action stemming from civil rights violations. For
additional discussion of the history of Rule 82 and the American
attorneys fee rule see Susanne DiPietro & Teresa W. Carns,
Alaskas English Rule: Attorneys Fee Shifting in Civil Cases, 13
Alaska L. Rev. 33 (1996).
63 One federal district court rejected a prevailing
plaintiffs request for attorneys fees under a fee-shifting civil
rights statute for fees related to an unsuccessful attempt to
obtain class certification; the court separated out all discrete
time that counsel spent on class issues in the case from the fee
award. See Webster Greenthumb Co. v. Fulton County, Ga., 112 F.
Supp. 2d 1339, 1350-51 (N.D. Ga. 2000); see also 4 Alba Conte &
Herbert B. Newberg, Newberg on Class Actions 14.3, at 517-21 (4th
ed. 2002). We note, however, that Fulton County follows the
Eleventh Circuits holding that fee awards may be reduced
following a task-by-task examination of the fees assessed or by a
reduction on a percentage basis. See American Civil Liberties
Union of Georgia v. Barnes, 168 F.3d 423, 427 (11th Cir. 1999).
Rule 82 creates a separate structure for analyzing fee requests.
64 445 U.S. 338, 402 (1980).
65 Id. at 403; see also Love v. Turlington, 733 F.2d 1562,
1565 (11th Cir. 1984) (quoting Geraghty).
66 445 U.S. 326, 336 (1980).
67 Id. at 338 n.9.
68 Id.
69 Id.
70 A negative value suit is one in which class members
claims would be uneconomical to litigate individually. In re
Monumental Life Ins. Co., 365 F.3d 408, 411 n.1 (5th Cir. 2004)
(quoting Phillips Petroleum v. Shutts, 472 U.S. 797, 809 (1985)).
71 See, e.g., Roper, 445 U.S. at 339 ([w]here it is not
economically feasible to obtain relief within the traditional
framework of a multiplicity of small individual suits for
damages, aggrieved persons may be without any effective redress
unless they may employ the class-action device); see also Castano
v. America Tobacco Co., 84 F.3d 734, 748 (5th Cir. 1996) (stating
[t]he most compelling rationale for finding superiority in a
class action [is] the existence of a negative value suit).
72 See Arthur R. Miller, The Pretrial Rush to Judgment:
Are the Litigation Explosion, Liability Crisis, and Efficiency
Clichs Eroding Our Day in Court and Jury Trial Commitments? 78
N.Y.U. L. Rev. 982, 1043-44 (2003) ([T]he defendant may expend a
significant amount of resources on the [summary judgment] motion
in an early case, making it very costly to defend against.
Another, related possible effect of a repeat litigants
development of a reputation for aggressiveness with regard to
summary judgment may be to intimidate or inhibit other potential
plaintiffs who may not have the resources to invest in costly
litigation.).
73 Alaska Civil Rule 82(b)(3)(J) permits a variation in
the fee award to the extent to which the fees incurred by the
prevailing party suggest that they had been influenced by
considerations apart from the case at bar, such as a desire to
discourage claims by others against the prevailing party or its
insurer.
74 105 P.3d at 131.
75 78 P.3d at 269.
76 Id.
77 Tenala, Ltd. v. Fowler, 993 P.2d 447, 450 (Alaska 1999)
(quoting Gold Bondholders Protective Council v. Atchinson, Topeka
& Santa Fe Ry. Co., 658 P.2d 776, 779 (Alaska 1983)).
78 See, e.g., Anchorage v. McCabe, 568 P.2d 986, 990
(Alaska 1977) (stating that awards of attorneys fees to public
interest plaintiffs have long been an exception to that general
no-fee rule and citing Newman v. Piggie Park Enter., Inc., 390
U.S. 400 (1968) as authority to support the award of attorneys
fees to private attorneys general ).
79 Alaska R. Civ. P. 82(b)(3)(J).
80 Alaska Airlines suggests that Monzingo may have been
eligible for an enhanced recovery for agreeing to act as class
representative and cites In re Southern Ohio Correctional
Facility, 175 F.R.D. 270, 272 (S.D. Ohio 1997) as evidence that
courts routinely approve incentive awards to compensate named
plaintiffs for the services they provided and the risks they
incurred during the course of the litigation. Id. Because the
record is silent on whether Monzingo stood to gain additional
monetary benefit for his role as class representative, this is a
determination that can be made by the trial court on remand.
