RICO Suit Against Spirit Airlines Revived by 11th

(CN) - Spirit Airlines may be liable under the RICO act for hiding a "passenger usage fee" among government-imposed fees and taxes, the 11th Circuit ruled.

Spirit Airlines calls itself "the ultra-low cost airline of the Americas," that gives customers "frill control" by letting them choose what options they would like to add to the base travel fare.

But a Florida-based class action says that Spirit's cheap fares are misleading.

When selecting a flight on Spirit's website, travelers see just the base fare prices. Only after selecting a flight does the website show the additional costs of the ticket, an undifferentiated amount called "Taxes & Fees."

Yet another click is required to find out that this figure includes Spirit's usage fee, which is included by other airlines in the price of a ticket, as well as government taxes and fees.

"Spirit is employing an 'ancillary revenue model' which forces consumers to pay unbundled charges that have traditionally been included in the total price of an airline ticket," the lawsuit claims . "Spirit's 'fares,' in effect, are little more than a down payment on air travel."

A federal judge found for Spirit, ruling that the Federal Aviation Act (FAA) pre-empts the Racketeer Influenced and Corrupt Organizations Act (RICO) for claims involving deceptive airfare, fees and fare advertising.

But the 11th Circuit reinstated the class's RICO claims Tuesday.

Spirit insisted that the FAA covers the plaintiffs' claims, pre-empting RICO laws in the field of airline liability. The FAA gives the Department of Transportation the legal authority to decide deceptive practice claims involving airlines.

"The District Court was concerned that the federal statutes [, the FAA and RICO,] overlap," Judge Stanley Marcus wrote for the three-judge panel. "But that is how Congress wrote them. Sometimes a defendant's actions may qualify both as unfair and deceptive advertising under the FAA and as mail or wire fraud under federal criminal statutes. So long as plaintiffs do not argue that violation of the first establishes the second, our precedent does not restrict their RICO action."

Though the plaintiffs could have submitted their complaint to the Department of Transportation, the fact that they did not does not bar their claims, the court said.

"Civil RICO claims predicated on mail and wire fraud are not precluded by the ADA [Airline Deregulation Act] simply because they involve fraud arising out of pricing, fees, and advertising in the airline industry," Marcus concluded.

The Atlanta-based appeals court noted it gave no opinion as to whether plaintiffs have adequately pleaded a RICO claim.

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