United States v. 2010-09-16 | 09-35979 | ALASKA AIRLINES INC V. BRADLEY CAREY | nonprecedential |…

This disposition is not appropriate for publication and is not precedent*
except as provided by 9th Cir. R. 36-3.
NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
ALASKA AIRLINES INC.,
Plaintiff/Counter-defendant/Appellee,
v.
BRADLEY CAREY; et al.,
Defendants/Counter-plaintiffs/Cross-
plaintiffs/Appellants,
v.
KYLE LEVINE; et al.,
Cross-defendants/Appellees.
No. 09-35979
D.C. No. 3:07-cv-05711-RBL
MEMORANDUM*
Appeal from the United States District Court
for the Western District of Washington
Ronald B. Leighton, District Judge, Presiding
Argued and Submitted August 31, 2010
Seattle, Washington
Before: HAWKINS, McKEOWN and BEA, Circuit Judges.
FILED
SEP 16 2010
MOLLY C. DWYER, CLERK
U .S. C OU R T OF APPE ALS

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Because the parties are familiar with the facts and claims involved in this1
case, we recite them only as necessary to our disposition.
2
Bradley and Celeste Carey and their travel agency, Carey Travel,
(collectively “Carey”) appeal a final judgment, which (1) granted Alaska Airlines’s
motions for summary judgment and to dismiss portions of Carey’s counterclaim;
(2) denied Carey’s counter-motions to dismiss and for summary judgment; and
(3) permanently enjoined Carey from purchasing, selling, bartering or brokering
frequent flyer miles on Alaska Airlines and its partner airlines. The district court
did not award damages. We have jurisdiction pursuant to 28 U.S.C. §§ 1291,
1292(a)(1), and we affirm.
We review the district court’s orders de novo. See Kahle v. Gonzales, 487
F.3d 697, 699 (9th Cir. 2007) (standard of review for motion to dismiss);
Continental Airlines, Inc. v. Intra Brokers, Inc., 24 F.3d 1099, 1102 (9th Cir. 1994)
(standard of review for motion for summary judgment and permanent injunction).1
Like virtually all airlines, Alaska Airlines has a “frequent flyer” program.
Members of the program may use their accumulated miles to obtain free air travel
tickets on Alaska Airlines or one of its partner airlines. One of the conditions of
the program is that members may not sell, purchase or barter miles, other than as

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allowed under the program. All tickets obtained in violation of the program are
void.
Alaska Airlines filed this action seeking to enjoin Carey from violating the
terms and conditions of its frequent flyer program. It alleged causes of action, for
computer fraud in violation of 18 U.S.C. § 1030, and state law pendent claims of
common law fraud, violations of the Washington Consumer Protection Act,
tortious interference with contractual and business expectancy relations, unjust
enrichment, aiding and abetting fraud, and breach of contract.
All allegations were based on Alaska’s contention that Carey was buying
and selling its miles on an illegitimate black market, in violation of its Mileage
Plan. It originally sought damages and a permanent injunction, but then dropped
its request for damages. Carey filed a countersuit against Alaska Airlines and filed
a cross-complaint against Alaska Airlines’s employees Ann Ardizzone (Managing
Director for Customer Experience and Vice President, Inflight Services) and Kyle
Levine (In-House Counsel), and Points International, Inc. (the only authorized
dealer of Alaska Airlines’s mileage points), alleging a number of antitrust and state
law counterclaims.
Carey admitted all facts necessary for the district court to grant Alaska
Airlines’s motions to dismiss and for summary judgment, including the computer

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fraud claim under 18 U.S.C. § 1030. Carey’s defense and his own allegations
center around his contention that Alaska Airlines’s frequent flyer program
restrictions are not valid.
The district court correctly granted Alaska Airlines’s motion to dismiss
Carey’s state law claims and denied Carey’s counter-motion to dismiss Alaska
Airlines’s state law claims. Alaska Airlines’s state law claims were brought to
enforce its contractual rights under its Mileage Plan.
Carey’s state law claims were brought in an effort to invalidate Alaska
Airlines’s Mileage Plan because it allows Alaska Airlines unilaterally to change
the terms of the contract. These claims are pre-empted by the Airline Deregulation
Act of 1978 (ADA). 49 U.S.C. §§ 41712(a), 41713(b)(1); Am. Airlines v. Wolens,
513 U.S. 219, 228 (1995) (holding that state law claims seeking to invalidate an
airline’s frequent flyer program would frustrate the purpose of the Airline
Deregulation Act and were thus preempted).
Alaska Airlines’s breach of contract and fraud claims against Carey,
however, do not affect the validity of the mileage program and would not frustrate
the purpose of the Airline Deregulation Act. Thus, they are not preempted. Id.
Carey’s antitrust claims fail because he is buying and selling in a “black
market” of frequent flyer miles, which is not a valid market for purposes of

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antitrust law. See TransWorld Airlines v. Am. Coupon Exch., Inc., 682 F. Supp.
1476, 1487 (C.D. Cal. 1988), rev’d in part on other grounds, 913 F.2d 676 (9th
Cir. 1990).
Alaska Airlines’s complaint, filed on December 27, 2007, raised allegations
that were not time barred. Wash. Rev. Code § 4.16.080(4) (three year statute of
limitations tort claims, including fraud); § 19.86.120 (four year statute of
limitations for Consumer Protection Act claims). Carey was committing
continuing torts, right through this litigation.
Under the so-called “stowaway” theory of damages, Alaska Airlines suffered
damages each time Carey redeemed a free ticket for someone other than the
traveler who earned the miles. Bitterman v. Louisville & Nashville R.R., 207 U.S.
205, 221 (1907). Had the person traveling not used the free ticket, he would have
needed to buy a ticket from Alaska Airlines, which consequently lost the sales
revenue of that ticket. Id.; Continental Airlines, 24 F.3d at 1104–05 (holding
Continental was entitled to enforce the “no sale” provision of its discount coupons
for the same reason).
In Continental, Intra Brokers sold vouchers for discounted airfare on
Continental Airlines despite the vouchers’s condition that they could not be
“bartered, sold or redeemed for cash.” Id. at 1100 (internal quotation marks

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omitted). We affirmed the district court’s grant of summary judgment for
Continental and the permanent injunction. In doing so, we held Continental had
the right to restrict the transferability of its discount coupons:
[Continental] is entitled to make its own decisions about whether to give out
discount coupons, and whether to make them transferable or nontransferable.
Neither Intra nor the courts are entitled to substitute their business judgment
for Continental’s, under TransWorld and Bitterman. . . . There is certain
harm to Continental’s control of its own business, even though the harm to
its profitability is unproven or perhaps immeasurable.
Id. at 1105.
We also held an airline is entitled under the law to control the distribution of
its own products. TransWorld Airlines, 682 F. Supp. at 1487 (“Manufacturers are
given wide latitude in establishing a manner of distribution and in choosing their
distributors.”). Its use of Points International to distribute its miles does not
infringe antitrust law. Id. Further, Alaska Airlines’s unilateral right to modify the
terms of the Mileage Plan do not make the plan an illusory contract. Cascade Auto
Glass, Inc. v. Progressive Cas. Ins. Co., 145 P.3d 1254, 1257 (Wash. Ct. App.
2006).
We do not consider arguments raised for the first time on appeal, such as
Defendant Celeste Carey’s contention that she should be dismissed from the case

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because of her limited connection to the travel agency’s actions.
AmerisourceBergen, Corp. v. Roden, 495 F.3d 1143, 1157 n.15 (9th Cir. 2007).
All other issues raised on appeal are denied.
AFFIRMED.

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