In re: Korean Air Lines Co., Ltd., Antitrust Litigation, No.

08-56385 (Ninth Circuit, April 18,

2011)
Plaintiffs Soon Ja Chun, Bernard Jung Kim, and Elizabeth Bahn (“Plaintiffs”) were
representatives of a class comprised of indirect purchasers of airline tickets. Defendants Korean
Air Lines Col, Ltd. and Asiana Airlines, Inc. (Defendants) were Asian air carriers. Plaintiffs
brought an action in the U.S. District Court for the Central District of California for violation of
federal and state antitrust laws, alleging that Defendants conspired to impose a surcharge on
airfares. The district court held, in part, that the Plaintiffs’ state law claims were preempted by
the Airline Deregulation Act of 1978 (“ADA”). Plaintiffs appealed.

The U.S. Court of Appeals for the Ninth Circuit held that the Airline Deregulation Act of 1978
preempted state regulation of both domestic and foreign air carriers and upheld the district
court’s dismissal of state law antitrust claims. The Plaintiffs argued that because Congress used
only the words “air carrier” in the language of the ADA, the ADA only applied to domestic air
carriers. The Plaintiffs argued that Congress often used “air carrier” and “foreign air carrier”
together when Congress wished to have language apply to both foreign and domestic air carriers,
but that Congress did not do that in this case and therefore Congress did not intend ADA to apply
to foreign air carriers.

The court agreed that Congress’s use of the term “air carrier” was ambiguous in the ADA’s
preemption provision. However, the court cited Robinson v. Shell Oil Co., 519 U.S. 337, 343-44
(1977) for the concept that once a term has been established to be ambiguous, each section of the
statute must be analyzed to determine the context and to give the term the correct meaning. The
court analyzed the ADA according to this concept and found that a sensible reading would imply
that the preemption provision was meant to include both domestic and foreign air carriers.

The court also reviewed the ADA preemption provision’s purpose and legislative history. The
court found that the purpose of the ADA was to ensure that states did not undo federal regulation
and to ensure a uniform system of regulation. The court reasoned that this purpose would be
undermined if states could regulate foreign carriers but not domestic carriers, so the preemption
clause must therefore apply to both foreign and domestic carriers. The court further found that
the legislative history behind the ADA demonstrated that Congress meant to preserve its
authority to regulate the airline industry in at least some functions, such as consumer protection.

Finally, the court reasoned that allowing state regulation of foreign carriers would put undue
burdens on foreign carriers such that they would be unable to enter the U.S. market, and that this
would harm consumers who would benefit from more price competition if foreign carriers could
enter the market. Allowing state regulation of foreign carriers would also be in violation of some
U.S. treaty obligations mandating nondiscrimination.