Argued: October 31, 2018
from the United States District Court for the Southern
District of West Virginia, at Charleston. Thomas E. Johnston,
Chief District Judge. (2:16-cv-05224)
Lindsay Sara See, OFFICE OF THE ATTORNEY GENERAL OF WEST
VIRGINIA, Charleston, West Virginia, for Appellants.
Lee Fuchs, JONES DAY, Houston, Texas, for Appellee.
Patrick Morrisey, Attorney General, Erica N. Peterson,
Assistant Solicitor General, Katherine A. Schultz, Senior
Deputy Attorney General, Sean M. Whelan, Assistant Attorney
General, OFFICE OF THE ATTORNEY GENERAL OF WEST VIRGINIA,
Charleston, West Virginia, for Appellants.
Goodwin, FROST BROWN TODD, LLC, Charleston, West Virginia;
Charlotte H. Taylor, JONES DAY, Washington, D.C., for
Simon Miller, Thomas M. Palumbo, AMERICA'S HEALTH
INSURANCE PLANS, Washington, D.C.; Hyland Hunt, Ruthanne M.
Deutsch, Anne J. Jang, DEUTSCH HUNT PLLC, Washington, D.C.,
for Amicus America's Health Insurance Plans.
Vladeck, WITTLIFF CUTTER AUSTIN PLLC, Austin, Texas; Mary
Nichols, TEXAS MUTUAL INSRUANCE COMPANY, Austin, Texas;
Matthew Baumgartner, GRAVES, DOUGHERTY, HEARON & MOODY,
P.C., Austin, Texas; Paul Schlaud, REEVES & BRIGHTWELL
LLP, Austin, Texas, for Amicus Texas Mutual Insurance
WILKINSON, FLOYD, and RICHARDSON, Circuit Judges.
WILKINSON, Circuit Judge:
Airline Deregulation Act of 1978 (ADA) expressly preempts
state efforts to regulate the prices, routes, and services of
certain air carriers. Beginning in 2011, West Virginia
enacted various laws to limit the reimbursement rates of air
ambulance companies. Air Evac, an air ambulance company and
registered air carrier, sued to enjoin the enforcement of
these provisions, arguing that the state's laws were
preempted by the ADA. The district court agreed with Air Evac
and enjoined the challenged provisions. We now affirm.
market-driven system for commercial air travel, familiar to
travelers today, arose from nearly a century of regulatory
change. In 1938, the federal government developed a
comprehensive scheme to support the growing use of the
nation's skies for commercial aviation. Civil Aeronautics
Act of 1938, Pub. L. No. 75-706, 52 Stat. 973. Since its
inception, this regulatory regime has included both safety
and economic regulations. Id. tit. IV, §§
401-416 (economic regulations); Id. tit. VI,
§§ 601-610 (civil aeronautics safety regulation).
Twenty years later, federal authority over commercial
aviation, which had previously been scattered among different
agencies, was consolidated under the Federal Aviation Agency
(FAA) and Civilian Aeronautics Board (CAB). Federal Aviation
Act, Pub. L. No. 85-726, 72 Stat. 731 (1958); see
also S. Rep. No. 85-1811, at 10 (1958) ("The
proposed legislation abolishes the present unnatural division
subsequent decades, the CAB and the FAA pursued both the
economic and safety goals set by Congress. The CAB continued
setting strict rates for interstate passenger air travel and
controlled entry into the market through its rigorous
approval process for new routes, while the FAA oversaw air
travel safety. State governments, for their part, actively
regulated intrastate air travel as well. The law at the time
contemplated dual regulatory regimes and collaboration
between the federal and state governments. See
Federal Aviation Act of 1958, Pub. L. No. 85-726, §
302(k); H.R. Rep. No. 85-2360, at 14 (1958) ("The
[Federal Aviation Act] gives the Administrator appropriate
administrative powers relating to . . . cooperation with . .
. state governments."). Many airlines operated both
interstate flights and flights within a single state, such as
those from Houston to El Paso. See H.R. Rep. No.
95-1211, at 2-3 (1978). Because the law permitted two layers
of regulation, these airlines were "required to charge
different fares for passengers traveling between cities,
depending on whether these passengers were interstate
passengers whose fares are regulated by the CAB, or
intrastate passengers, whose fare is regulated by a
State." Id. at 16. This administrative system,
which included both independent state and federal regulation
and strict control over prices and market entry, was
"oriented toward the creation and governmental promotion
of [an] air industry" that had not previously existed.
S. Rep. No. 95-631, at 52 (1978). In the decades following
the passage of the Federal Aviation Act, air travel continued
to grow under the dual oversight of federal and state
regulators. Id. at 1-5.
1970s, Congress found that the air industry had outgrown the
old regime. Commercial air travel had become common and
accessible. Air carriers had developed the resources and
infrastructure to compete with one another on open terms in a
free market. In Congress's view, the prior economic
framework, characterized by two layers of regulation and
rigid economic oversight, was ill-suited to the new
competitive landscape. Congress responded by enacting the
Airline Deregulation Act of 1978 (ADA), which applied the
principles of the free market to the commercial aviation
sector. See Pub. L. No. 95-504, 92 Stat. 1705.
Congress's deregulatory goals were embodied in the
statute itself, which directed federal regulators to
"place maximum reliance on competitive market
forces" in carrying out their responsibilities.
Id. § 3.
achieved its market-oriented ends by transforming the federal
economic regulation of air carriers, removing entry barriers
and allowing prices to respond to consumer demand. The ADA
also ensured that these economic reforms would not be unwound
by duplicative and inconsistent state regulation. Instead,
air travel would be subject to only one layer of regulation.
Economic regulation would be overseen by the Department of
Transportation (replacing the CAB), while safety regulations
would remain with the Federal Aviation Administration.
See 49 U.S.C. §§ 40101(a), 40109(a)-(b),
41102, 44103 (2012). Whereas before the states were separate
regulators, they now became partners in a unified regulatory
framework, consulting with the federal government on local
needs. See, e.g., Airline Deregulation Act, §
33, 92 Stat. 1732-34 (providing for consultation on air
service determinations in small communities). In the years
following passage of the ADA, Congress's deregulatory
aims bore fruit as consumer prices fell, even as costs to the
industry rose. See Gov't Accountability Office,
GAO-06-630, Airline Deregulation 18-19 (June 2006); Stephen
Breyer, Regulation and its Reform 197-98 (1982)
("Experience since the passage of the [ADA] suggests
that [Congress'] diagnosis [was] correct, because prices
in real terms have fallen despite rising fuel costs and the
industry's profitability has not been significantly
in this deregulatory context that the ADA's preemption
clause was enacted. The text of the provision now reads:
[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 subpart.
49 U.S.C. § 41713(b)(1).
the U.S. Code was reorganized in 1994, the clause now appears
in Subpart II of the amended Federal Aviation Act, which
includes "economic regulations" and is administered
by the Department of Transportation. Pub. L. No. 103-272
(1994) (amending Title 49 of the U.S. Code "without
substantive change"). As the plain language of the
preemption clause demonstrates, Congress sought to prevent
states from imposing a wide variety of regulations on the
aviation industry. The provision accordingly expressed a
"broad pre-emptive purpose" that is consistent with
the deregulatory aims of the statute. Morales v. Trans
World Airlines, Inc., 504 U.S. 374, 383 (1992).
now forty years since the passage of the ADA, and commercial
aviation has continued to grow with and adapt to market
forces. One area of active innovation has been healthcare
aviation, where air ambulances are now a familiar part of
emergency healthcare response. All over the country, but
particularly in rural areas, air ambulances can play a vital
and life-saving role in responding to medical emergencies. At
the federal level, these companies are regulated as air
carriers. Like all other regulated air carriers, air
ambulances operate under both safety and economic regulation.
The FAA, as the agency responsible for administering federal
safety regulations generally, provides air ambulance safety
authorizations. See 49 U.S.C. § 44702; 14
C.F.R. pt. 135 (2014).
economic authorization for air ambulances is more complex.
Because these companies are considered "air taxi
operators," they are subject to less extensive
regulations than larger carriers, like major commercial
airlines or cargo transportation. Whereas the larger air
carriers must obtain a "certificate of public
convenience and necessity," see 49 U.S.C.
§ 41102(a), the Secretary of Transportation has waived
this requirement for air ambulances. See 14 C.F.R.
§ 298.11. The Secretary's authority to waive the
certification is discretionary. See 49 U.S.C. §
40109(f) ("[T]he Secretary may exempt an air
carrier from another provision of subpart II . . ."
(emphasis added)). As it stands now, air ambulance companies
are exempt from some, but not all, of the economic
regulations contained in subpart II and are registered with
the Secretary of Transportation. See 14 C.F.R.
ambulance services unfortunately do not come cheap. A single
flight can cost tens of thousands of dollars. J.A. 120, 211;
see also EagleMed LLC v. Cox, 868 F.3d 893, 903
(10th Cir. 2017). In response, some insurance companies have
refused to pay the full reimbursement costs. The air
ambulance companies have in turn sought payment directly from
the patients, a practice known as
"balance-billing." To prevent covered patients from
receiving these bills, some insurers have agreed to pay more
to the air ambulance company. For those insurers that did not
agree, covered patients were regrettably often stuck with the
bill for the remainder. The costs of these services have not
gone unnoticed. The Government Accountability Office provided
Congress with a report on air ambulance pricing in July of
2017, specifically noting consumer concerns related to
balance-billing. See Gov't Accountability
Office, GAO-17-637, Air Ambulance: Data Collection and
Transparency Needed to Enhance DOT Oversight (July 2017).
Just a few months ago, Congress took action on the issue. The
FAA Reauthorization Act of 2018, which became law during this
appeal, addresses air ambulances directly. Pub. L. No.
115-254 (2018). First, it empowers the Secretary of
Transportation to collect more data on air ambulance pricing
and provide additional information to consumers. Id.
§ 314. Second, it invites stakeholders, including
states, into the policymaking process by forming a committee
to advise the Secretary of Transportation on air ambulance
billing practices. Id. § 418(a)-(b). Third, the
law gives the Secretary authority to regulate air ambulance
companies directly, both to ensure transparency around costs
and "to provide other consumer protections for customers
of air ambulance operators." Id. §
states have also responded, attempting to both lower their
own costs and prevent the balance-billing of their citizens.
In recent years, states have tried to lower prices either by
regulating the amount that air ambulance companies can charge
private parties, see, e.g., Air Evac EMS, Inc.
v. Sullivan, ___ F.Supp.3d ___, 2018 WL 3677002, at *2
(W.D. Tex. August 2, 2018), or by requiring air ambulance
companies to accept lower reimbursement rates, see,
e.g., Valley Med Flight, Inc. v. Dwelle, 171