Opinion issued February 14, 2013.




                                    In The

                            Court of Appeals
                                    For The

                        First District of Texas
                         ————————————
                            NO. 01-10-01080-CV
                          ———————————
                   DHL EXPRESS (USA), INC., Appellant
                                      V.
          FALCON EXPRESS INTERNATIONAL, INC., Appellee




                  On Appeal from the 157th District Court
                           Harris County, Texas
                     Trial Court Case No. 2008-66394



                                OPINION

      In May 2008, Falcon Express International obtained the rights to buy and

resell DHL package delivery services under a DHL Express (USA) Inc. reseller

agreement. To obtain those rights, which previously belonged to Freight Savers
Express, Inc., Falcon entered into an Assignment and Assumption Agreement with

Freight Savers and DHL, in which Falcon agreed to assume Freight Savers’s

obligations under the reseller agreement, including Freight Savers’s significant

outstanding debt to DHL.

      Over the next few months, DHL sold its package delivery services to Falcon,

which, in turn, resold them to its customers, pursuant to the terms of the reseller

agreement. But Falcon fell behind in its payments to DHL and, on that basis, DHL

terminated the reseller agreement effective November 7, 2008. Three days later,

DHL announced it was discontinuing domestic package delivery services, a large

part of Falcon’s business.

      Falcon sued DHL, seeking rescission of the assumption agreement on the

theory that Falcon was induced to enter into the assumption agreement by DHL’s

deliberately misleading statements that it had “ruled out” a cessation of its U.S.

domestic shipping services. DHL countersued for breach of contract, to recover

amounts it claimed were due from Falcon under the reselling and assumption

agreements. The trial court’s judgment awarded Falcon $1.7 million under a

rescission theory and $3.2 million in punitive damages based on the jury’s finding

that DHL committed fraud by failing to disclose to Falcon a material fact—that

DHL still was contemplating exiting the domestic package delivery services

market—before Falcon entered into the assumption agreement. The trial court’s

                                        2
judgment also recited that DHL shall take nothing on its counterclaim for breach of

contract.

      DHL appeals, contending, among other things, that Falcon’s fraud claim is

preempted by the Airline Deregulation Act of 1978 (49 U.S.C. § 41713(b)(1)) and

the Federal Aviation Administration Authorization Act (id. § 14501(c)(1)), and

that factually insufficient evidence supports the jury’s finding that $0 would

compensate DHL for Falcon’s breach of contract.         Finding both contentions

meritorious, we reverse the trial court’s judgment, dismiss Falcon’s fraud claim,

and remand DHL’s counterclaim for breach of contract.

                                  Background

      DHL Express (USA), Inc. is a federally regulated express package delivery

company that, in 2008, provided domestic and international package delivery

services. While DHL sold its services to larger customers directly, it also sold to

resellers, which, in turn, marketed and sold DHL’s services to smaller customers.

Freight Savers Express, Inc. was one such reseller. It bought and resold DHL’s

services under the terms of a reseller agreement between Freight Savers and DHL.

      In early 2008, DHL had sent Freight Savers notice that it intended to

terminate the reseller agreement because Freight Savers had fallen behind in its

payments. Three Freight Savers employees, James Fisher, Rick Bouse and David

Shavlan, decided to form a new entity, Falcon, and have Falcon take over Freight

                                        3
Savers’s business. The men had heard rumors that DHL was contemplating exiting

the domestic shipping market due to huge financial losses. But there was also

evidence the men knew, before they took over Freight Savers’s business, that high-

level DHL executives had been quoted as saying that DHL had “ruled out the

option of withdrawal,” and that DHL “expects to present a plan for the division

there in May.”    Bouse testified that, the day before Falcon entered into the

assumption agreement, Bouse contacted Beth Taylor, his main contact at DHL, to

ask about the rumors. According to Bouse, Taylor assured Bouse that the plan for

reducing the domestic footprint involved no more than a four percent reduction in

services and that the reduction would affect only rural areas in the U.S. The next

day, May 28, Fisher signed the assumption agreement on behalf of Falcon,

assuming Freight Savers’s rights and obligations under Freight Savers’s reseller

agreement with DHL. The assumption agreement reflects that DHL consented to

the assignment and agreed to withdraw its notice of material breach and contract

termination on the condition that Falcon pay $1,571,426.31 against Freight

Savers’s past due debt by May 29.

      Falcon met that condition and began doing business under the reseller

agreement, but soon fell behind on payments due to DHL. Over the next several

months, Falcon repeatedly promised to catch up, but it never did. On September

29, 2008, four months after entering into the assumption agreement, Falcon sent

                                        4
the last payment it would make to DHL. On that same day, DHL informed Falcon

that DHL would cease domestic shipping “fairly soon.” Despite this news, Falcon

and DHL continued doing business and discussing Falcon’s unpaid invoices. In an

October meeting, Falcon disputed some of DHL’s charges. Shortly thereafter,

Bouse sent DHL an email explaining that Falcon felt it had been defrauded because

it paid “an awful lot of money . . . based on [the] belief that DHL would be in

business in the United States.”

      On October 24, 2008, DHL sent Falcon a Default Notice demanding

payment of approximately $1.6 million. The following week, DHL sent another

notice offering to waive $562,000 of the past due debt in exchange for Falcon’s

agreement to pay $966,348.49, and enter into “a mutual full release of any existing

claims.” Falcon did not agree, and DHL terminated the reseller agreement on

November 7, 2008. Three days later, DHL announced publicly that it would cease

domestic package delivery services.

      Falcon sued DHL for fraudulent inducement and fraud, and DHL

countersued for breach of contract. After a seven-day trial, the jury found DHL

committed “fraud by failure to disclose a material fact prior to [Falcon] entering




                                        5
into the [assumption agreement]” 1 and awarded out-of-pocket damages in the

amount of $1.7 million and punitive damages in the amount of $3.2 million. With

respect to DHL’s counterclaim for breach of contract, the jury found Falcon

breached both the assumption and the reseller agreements, and that $0 would fairly

and reasonably compensate DHL for its damages. The trial court entered judgment

on the jury’s verdict, awarding Falcon the sum of $4.9 million 2 and denying DHL

relief on its counterclaim for breach of contract. DHL appeals.

                    Preemption under the ADA and FAAAA

      In its first issue, DHL contends Falcon’s claim fraud claim is preempted by

the Airline Deregulation Act of 1978 (ADA) and the Federal Aviation

Administration Authorization Act (FAAAA). Under the Supremacy Clause, if a

state law conflicts with federal law, the state law is preempted and without effect.

Maryland v. Louisiana, 451 U.S. 725, 746, 101 S. Ct. 2114, 2128–29 (1981).


1
      The jury answered “yes” to Question 2, which asked whether DHL committed
      fraud by non-disclosure, but it answered “no” to Question 1, which asked whether
      DHL fraudulently induced Falcon to enter into the assumption agreement by
      making a material misrepresentation. Thus, although we refer throughout this
      opinion to the claim on which Falcon prevailed as a “fraud” claim, it is, more
      specifically, a claim of fraud by nondisclosure.
2
      The exact amount of the judgment, $4,918,953.41, is the sum of $1,704,228.79,
      which is the amount of out-of-pocket damages found by the jury in response to
      Question 3, and the punitive damages award of $3,214,724.62. In a post-trial
      motion, Falcon elected the remedy of rescission, and the judgment accordingly
      refers to the $1,704,228.79 award as a “rescission component.” The amount of the
      punitive damage award corresponds exactly to the amount DHL asked the jury, in
      closing argument, to award DHL on its counterclaim for breach of contract.
                                          6
Preemption may be either express or implied. Delta Air Lines, Inc. v. Black, 116

S.W.3d 745, 748 (Tex. 2003), cert. denied, 540 U.S. 1181, 124 S. Ct. 1418 (2004).

Whether a claim is preempted is an issue of law we review de novo. See Meredith

v. La. Fed’n of Teachers, 209 F.3d 398, 404 (5th Cir. 2000); Skilled Craftsmen of

Tex., Inc. v. Tex. Workers’ Comp. Comm’n, 158 S.W.3d 89, 93 (Tex. App.—

Austin 2005, pet. dism’d).

      Both the ADA and FAAAA have express preemption provisions.                  The

ADA’s provides:

      A State, political subdivision of a State, or political authority of 2 or
      more States 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 . . . .

49 U.S.C. § 41713(b)(4)(A).        Through this provision, Congress expressly

preempted state law as applied to the price, route, or service of an air carrier.

Morales v. Trans World Airlines, Inc., 504 U.S. 374, 383, 112 S. Ct. 2031, 2036

(1992). The FAAAA’s preemption provision is similar, but it forbids enactment or

enforcement of laws, regulations, or other provisions having the force and effect of

law related to a price, route, or service of any motor carrier.           49 U.S.C.

§ 14501(a)(1). Both provisions have the same breadth and express a “broad pre-

emptive purpose.” See Morales, 504 U.S. at 384, 112 S. Ct. at 2037 (adopting

standards in other preemption contexts to conclude that ADA preemption occurs

when State enforcement actions have “a connection with or a reference to” airline
                                         7
rates, routes, or services); Rowe v. N.H. Motor Transp. Ass’n, 552 U.S. 364, 3709,

128 S. Ct. 989, 994 (2008) (adopting Morales’s analysis of ADA provisions in

analyzing preemption provisions of FAAAA).

      It is undisputed that DHL is both an air carrier and a motor carrier within the

statutes’ meaning.     The question before us, then, is whether enforcement of

Falcon’s state law fraud claim qualifies as “a law, regulation, or other provision

having the force and effect of law related to a price, route, or service” of DHL.

Several decisions of the United States Supreme Court and the Texas Supreme

Court provide the framework for our analysis.

            1.       U.S. Supreme Court trio: Morales, Wolens, Rowe

      In Morales v. Trans World Airlines, Inc., the Supreme Court construed the

ADA’s preemption provision as having a broad scope. 504 U.S. at 383, 112 S. Ct.

at 2037. The National Association of Attorneys General had promulgated Air

Travel Industry Enforcement Guidelines to address allegedly deceptive airline fare

advertisements. Id. at 379. The guidelines contained detailed standards governing

the content and format of airline advertising, the awarding of premiums to frequent

fliers, and the payment of compensation to passengers who voluntarily give up

seats on overbooked flights.     Id.   Noting that Congress included an express

preemption provision in the ADA “to ensure that the States would not undo federal

deregulation with regulation of their own,” the Court held that the ADA preempted

                                         8
all state enforcement actions that have “a connection with or reference to airline

‘rates, routes, or services.’” Id. at 378, 384, 112 S. Ct. at 2034, 2037. The Court

rejected a reading of the statute that would preempt only state laws prescribing

rates, routes, or services; it likewise rejected the notion that only laws specifically

addressed to the airline industry were preempted. Id. at 385–86, 112 S. Ct. at

2037–38. It reasoned that because the guidelines would impact airlines’ fares and

airlines’ ability to market their product, the guidelines clearly “related to” fares

and, accordingly, were preempted. Id. at 384, 112 S. Ct. at 2037. The Court also

rejected the contention that a finding of preemption would give air carriers “carte

blanche to lie to and deceive consumers” by noting that the Department of

Transportation had regulatory authority to prohibit deceptive or unfair business

practices that hinder competition in the industry. Id. at 390–91, 112 S. Ct. at 2040.

      In American Airlines, Inc. v. Wolens, the Court again found ADA

preemption of claims based on state statutes designed to protect consumers from

fraud in the airline industry. 513 U.S. 219, 115 S. Ct. 817 (1995). Importantly,

Wolens also created an exception to the ADA’s broad preemption provision: it held

that the ADA’s preemption provision does not extend to contract claims “alleging

no violation of state-imposed obligations, but seeking recovery solely for the

airline’s alleged breach of its own, self-imposed undertakings,” provided the

parties did not rely on state laws or policies external to the agreement to enlarge

                                          9
contractual obligations or enhance their bargain. 513 U.S. at 228, 115 S. Ct. at

824. In Wolens, members of a frequent flyer program sued an air carrier for

alleged violations of Illinois consumer fraud statutes and for breach of contract

based on retroactive changes to the frequent flyer program. Id. at 224–25, 115 S.

Ct. at 822. Noting the inherent potential in state consumer protection laws for

intrusive regulation of airline marketing practices, the Court reiterated that the

ADA’s purpose was to leave largely to the airlines themselves, and not at all to the

states, the selection and design of marketing mechanisms appropriate to the

furnishing of air transportation services. Id. at 228, 115 S. Ct. at 823. Because the

Illinois state consumer fraud statutes at issue, like the guidelines at issue in

Morales, “serve[d] as a means to guide and police the marketing practices of the

airlines,” the ADA preempted the plaintiffs’ consumer fraud claims. Id., 115 S. Ct.

at 823.

      Not so for the breach of contract claims. Id., 115 S. Ct. at 824. The Court

reasoned that Congress did not intend the ADA to shield airlines from “suits

alleging no violation of state-imposed obligations, but seeking recovery solely for

the airline’s alleged breach of its own, self-imposed undertakings.” Id. at 227, 115

S. Ct. at 824. Rather, “the ban on enacting or enforcing any law ‘relating to rates,

routes, or services’ is most sensibly read, in light of the ADA’s overarching

deregulatory purpose, to mean ‘States may not seek to impose their own public

                                         10
policies or theories of competition or regulation on the operations of an air

carrier.’” See id. at 229 n.5, 115 S. Ct. at 824 n.5 (quoting brief of United States as

amicus curiae). The Court explained that the parties’ contract was a privately

ordered obligation, and, provided the parties did not rely on state laws or policies

external to the agreement to enlarge the carrier’s contractual obligations or enhance

the parties’ bargain, contract enforcement did not amount to a state’s attempt to

“enact or enforce any law, rule, regulation, standard, or other provision” as

prohibited by the ADA. Id. at 228–29, 115 S. Ct. at 824; see also 49 U.S.C.

§ 41713(b)(1). The DOT’s lack of authority to investigate or resolve breaches of

contract, the court reasoned, supported the conclusion that the ADA did not

preempt claims for breach of an airline’s self-imposed obligations. Wolens, 513

U.S. at 232, 115 S. Ct. at 825 (noting “the DOT has neither the authority nor the

apparatus required to superintend a contract dispute resolution regime”); cf.

Morales, 504 U.S. at 390–91, 112 S. Ct. at 2040 (noting the DOT’s authority to

investigate unfair business practices).

      Most recently, the Court held a Maine statute that imposed “service-

determining” obligations on carriers shipping tobacco was preempted by the

FAAAA. Rowe, 552 U.S. at 373, 128 S. Ct. at 996. Among other things, the

statute required retail recipients of tobacco shipments to use an elaborate recipient-

verification service, and provided that a person is deemed to know that the package

                                          11
contains a tobacco product if it is marked in a certain way or if the sender’s name

appears on a list compiled by the Maine Attorney General. Rowe, 552 U.S. at 368–

69; 128 S. Ct. at 993–94. A group of air carrier associations challenged the

“recipient-verification” and “deemed-to-know” provisions of the law, arguing the

provisions were preempted by the FAAAA. Id. at 369; 128 S. Ct. at 994. The

Court concluded that allowing Maine to require specific actions and services by

carriers “could easily lead to a patchwork of state service-determining laws, rules,

and regulations . . . inconsistent with Congress’ major legislative effort to leave

such decisions, where federally unregulated, to the competitive marketplace.” Id.

at 373, 128 S. Ct. at 996. Accordingly, it found these provisions had a significant

impact on air carriers that interfered with Congress’s objectives: it would produce

“the very effect that the federal law sought to avoid, namely, a State’s direct

substitution of its own governmental commands for ‘competitive market forces.’”

Id. at 372, 128 S. Ct. at 995.

      2.     Texas Supreme Court duo: Kiefer and Black

      Two decisions of the Texas Supreme Court reflect the breadth of ADA

preemption and the narrowness of the Wolens exception for certain breach of

contract claims. Continental Airlines, Inc. v. Kiefer, involved two consolidated

personal injury cases.     In one, a passenger claimed she was injured when a

briefcase fell from an overhead storage bin and struck her head. 920 S.W.2d 274,

                                        12
275 (Tex. 1996). In the second, a passenger claimed he fell and was injured while

trying to make his connecting flight because the airline negligently failed to

provide meet and assist services. Id. at 275–76. Following Morales and Wolens,

the court conducted a two-step inquiry to determine whether the ADA preempted

the passengers’ negligence claims. Id. at 281. The court asked, first, whether the

claims “related to” airline rates, routes, or services and, second, whether the claims

constituted the enactment or enforcement of a state law, rule, regulation, standard,

or other provision.      Id.   The court concluded that, although the plaintiffs’

negligence claims did not relate to airline rates and services as directly as the

claims in Wolens did, “the impact of tort liability on an airline’s services [wa]s no

less real” and was certainly not as “tenuous, remote, or peripheral” as a prohibition

against obscenity in advertising—the example Morales gives of a state law that

likely would lie outside the scope of the ADA’s preemption clause. Id. The court

continued: “Tort liability cannot but have, in Morales’ words, ‘a significant impact

upon the fares [airlines] charge,’ just as the advertising guidelines in that case.” Id.

(citation omitted). The court thus concluded the negligence claims “related to” the

airline’s rates, routes, or services. Id.

       But, the court concluded, the plaintiffs’ negligence actions did not satisfy the

second prong of the preemption analysis. Because negligence actions do not

“carry the same ‘potential for intrusive regulation of airline business practices

                                            13
inherent in state consumer protection legislation,’” they did not amount to the

enforcement of a state law. Id. at 282 (quoting Wolens, 513 U.S. at 227, 115 S. Ct.

at 823). The court explained: “Simple negligence law . . . is far more policy–

neutral than specific–purpose legislation, like consumer protection laws.”          Id.

While the court concluded the negligence claims were not preempted, it stopped

short of declaring that personal injury claims are always saved from preemption.

Id. Rather, it hinted other tort claims—and even some negligence claims—may be

preempted because they carry with them a greater risk that state policies will be too

involved, especially when a claimant seeks punitive or mental anguish damages.

Id. at 282. Observing that neither plaintiff sought such damages, the court held

that “the ADA does not preempt common-law personal-injury negligence claims

against air carriers, subject to the reservations we have expressed as to damages.”

Id. at 283.

      By contrast, in Delta Air Lines, Inc. v. Black, the court held the ADA

preempted Black’s fraud, negligent misrepresentation, and breach of contract

claims. 116 S.W.3d at 747. Black and his wife bought round-trip, first-class

tickets on a flight that Delta had overbooked. Delta denied Black’s wife a first-

class seat for the flight out, but offered several alternatives, each of which included

vouchers for use on a later flight. Id. The Blacks refused these alternatives and

sued. Id. at 748. The court applied the two-part analysis it used in Kiefer. First, it

                                          14
concluded the claims involving boarding and seating procedures “related to”

Delta’s services, noting that “seating policies and boarding procedures are not

peripheral to the operation of an airline, but are inextricably linked to the contract

of carriage between a passenger and the airline and have a definite ‘connection

with, or reference to’ airline services.” Id. at 753 (quoting Morales, 504 U.S. at

384, 112 S. Ct. at 2037).

      Second, the court rejected the court of appeals’s conclusion that federal law

did not preempt Black’s misrepresentation claims. The lower court’s reasoning—

that Black’s claims were not premised on a law imposed by a Texas legislative

body—could not withstand scrutiny, because state common law actions “can be

state enforcement.” Id. at 756. The court reasoned that both Wolens and Kiefer

“suggest that state misrepresentation and fraud claims are preempted by the ADA,”

and that Black’s misrepresentation claim was “comparable” to a claim under a

consumer fraud statute because both “would impose state policies on the operation

of air carriers that are external to the parties’ agreement.” Id. at 757. For these




                                         15
reasons, the court concluded Black’s misrepresentation and fraud claims were

preempted. 3 Id.

      3.     Falcon’s fraud claim

      We now apply these principles, and the two-part Kiefer analysis, to Falcon’s

fraud claim. We determine, first, whether Falcon’s claim is “related to,” or, in the

words of Morales, has “a definite ‘connection with, or reference to’” DHL’s rates,

routes, or services. Morales, 504 U.S. at 384, 112 S. Ct. at 2037; Kiefer, 920

S.W.2d at 281. To do so, we must consider the nature of Falcon’s fraud claim. It

is not “service-determining” in the sense that the Supreme Court used that term in

Rowe. 552 U.S. at 373, 128 S. Ct. at 996. This is because Falcon does not seek, by

its fraud claim, to compel DHL either to perform a particular service or to perform

a service in a particular way, as the Maine legislature did when it passed the statute

at issue in Rowe. Id., 128 S. Ct. at 996. Nor is Falcon’s claim premised on a

complaint about the manner in which DHL performed or failed to perform its

package delivery services. It is not, for example, a claim seeking damages for a

lost or untimely delivered package. In this sense, it is not as directly “related to”

the air and motor carrier’s services as were the claims in Black. Falcon’s claim, in

3
      The court also concluded Black’s breach of contract claim was preempted. Delta
      and Black’s contract expressly incorporated federal regulations providing a
      uniform system of compensation to passengers who, like Black, had been denied
      boarding. But Black sought to ignore the parties’ bargain in that respect and
      instead use state law to enlarge Delta’s obligations to him. Accordingly, it did not
      fit within the Wolens exception and was preempted. Black, 116 S.W.3d at 756.
                                           16
essence, is about what DHL said or, more precisely, failed to say to Falcon about

DHL’s package delivery services before Falcon entered into the assumption

agreement. Falcon summarized its liability theory as follows: “By making false

and misleading disclosures intending to influence those doing business with DHL,

and failing to disclose the whole truth, DHL fraudulently induced Falcon to enter

into a contractual relationship as a reseller and pay off another’s debt to DHL.” In

short, Falcon contends Texas common law imposed a duty on DHL to disclose

fuller information to Falcon, its customer and an intermediary between DHL and

DHL’s end users, about DHL’s future plans for its domestic package delivery

service operations. While the relationship between Falcon’s claim and DHL’s

services is not as direct as Rowe or Black, we nevertheless conclude Falcon’s claim

has “a definite connection with, or reference to”—and is not peripheral to—DHL’s

package delivery services. Morales, 504 U.S. at 384, 112 S. Ct. at 2037 (a claim

relates to rates, routes or services if it has “a definite ‘connection with, or reference

to’” them). Accordingly, Falcon’s fraud claim “relates to” DHL’s prices, routes or

services within the meaning of the ADA and FAAAA. Morales, 504 U.S. at 384,

112 S. Ct. at 2037 (construing “relate to” broadly and holding guidelines governing

airfare advertisements relate to rates, routes or services); Wolens, 513 U.S. at 224–

25, 115 S. Ct. at 822 (claims arising from changes to airline’s frequent flier

program relate to rates, routes, or services); Black, 116 S.W.3d at 749–50

                                           17
(complaint about procedures used for compensating passengers denied boarding

due to overbooking relates to rates, routes, or services).

      We also conclude that Falcon’s recovery on its fraud claim, if permitted,

would constitute the enactment or enforcement of a state law, rule, regulation,

standard, or other provision. Falcon and DHL are parties to two contracts, the

assumption and reseller agreements, which reflect voluntary, self-imposed

obligations of DHL. But Falcon does not seek to enforce its contracts with DHL,

nor did it seek merely to rescind them. What Falcon sought, instead, was to deploy

Texas common law to undo its bargain and punish DHL through a punitive

damages award. We conclude permitting Falcon’s recovery in this circumstance

“would impose state policies on the operation of [DHL] that are external to the

parties’ agreement” in a way that would have too great a regulatory effect on

DHL’s marketing mechanisms, which Congress intended to leave largely to the air

and motor carriers themselves, and not at all to the states. See Black, 116 S.W.3d

at 757 (citing Wolens, 513 U.S. at 229 n.5, 115 S. Ct. at 824 n.5). Indeed, we see

no meaningful distinction between the consumer protection guidelines found

preempted in Morales, on the one hand, and Falcon’s fraud claim, on the other.

Falcon, through its fraud claim, seeks to have our state’s law dictate the content of

Falcon’s disclosures in its arm’s length contract negotiations with a reseller, just as

the guidelines in Morales sought to govern the content of airlines’ fare

                                          18
advertisements. We believe Morales thus compels the conclusion that Falcon’s

fraud claim is preempted.

      Authorities of the Texas Supreme Court also weigh in favor of this

conclusion. Kiefer recognizes that tort law has a greater regulatory effect than

contract law and thus creates a “greater risk that state policies will be too much

involved.” 920 S.W.2d at 282. Albeit in dicta, Kiefer also recognizes that the

presence of a punitive damages claim exacerbates this risk. Id. And Black, decided

seven years after Kiefer, likewise observes that “both Wolens and Kiefer suggest

that state misrepresentation claims are preempted by the ADA.” 116 S.W.3d at

756. Black also supports our reliance on Morales by noting that claims under a

consumer    fraud    statute   are   comparable    to   common   law   claims   for

misrepresentation, because both would impose state policies on the operation of air

carriers that are external to the parties’ agreement. Id.

      Decisions of the federal circuit courts likewise favor preemption of Falcon’s

fraud claim. In a case we find strikingly similar to this one, the Fifth Circuit

concluded the ADA preempted a travel agency’s fraud and other tort claims

against American Airlines. Lyn-Lea Travel Corp. v. Am. Airlines, Inc., 283 F.3d

282, 284 (5th Cir.), cert. denied, 537 U.S. 1044, 123 S. Ct. 659 (2002). Lyn-Lea

Travel, a travel agency, entered into a contract providing for Lyn-Lea’s lease of

terminals that would allow it to book its clients’ flights on American. Id. Two

                                          19
months later, American announced modifications to its domestic commission

schedule that “drastically reduced” the commissions it would pay Lyn-Lea. Id.

Lyn-Lea sued American, asserting fraud and other claims, contending American

knew about and should have disclosed the impending changes when it negotiated

the agreement with Lynn-Lea. Id. at 284–85. American countersued for Lyn-

Lea’s failure to pay amounts due under the agreement and terminated the

agreement. Id. at 285. In response to American’s counterclaim for breach of

contract, Lyn-Lea raised fraudulent inducement as an affirmative defense. Id.

      The Fifth Circuit concluded that Lyn-Lea’s fraud and other tort claims were

preempted. Id. at 289. It noted that American’s relations with travel agents, as

intermediaries between carriers and passengers, plainly fell within the ADA’s

deregulatory concerns.    Id. at 288.    And pointing to the Supreme Court’s

observation in Wolens that the ADA’s purpose was to leave largely to the airlines

themselves, and not at all to the states, the selection and design of market

mechanisms appropriate to the furnishing of airline services, the Fifth Circuit




                                        20
concluded that Lyn-Lea’s claims had the requisite “connection with” American’s

prices and services to be preempted.4 Id.

      Two Seventh Circuit cases have also found analogous fraud claims

preempted. In United Airlines, Inc. v. Mesa Airlines, Inc., Mesa had a code-share

agreement with United under which it flew commuter routes for United. 219 F.3d

605, 606 (7th Cir. 2000). In 1995, the parties added new Mesa routes and extended

the agreement for ten years. Id. As part of this agreement, Mesa was required to

and did purchase a number of planes from United. Id. Two years later, United

replaced Mesa with a rival for several routes, costing Mesa significant revenues.

Id. at 607. Mesa ceased service to some markets, and United terminated the

agreement and sought damages for Mesa’s breach.              Id.   Mesa countersued,

asserting United fraudulently induced Mesa to enter into the ten-year extension

agreement and purchase additional planes. Id.

      The Seventh Circuit noted that Wolens permits suits against an air carrier to

enforce voluntarily undertaken obligations so long as the state action is limited to
4
      The Fifth Circuit, however, reached the opposite conclusion regarding Lyn-Lea’s
      fraudulent inducement defense. Lyn-Lea, 283 F.3d at 290. The court explained
      that in Wolens, the Supreme Court held breach of contract claims were not
      preempted insofar as they sought only to enforce “the parties’ bargain, with no
      enlargement or enhancement based on state laws or policies external to the
      agreement.” Id. at 289 (quoting Wolens, 513 U.S. at 233, 115 S. Ct. at 826). The
      court reasoned that fraudulent inducement, when asserted as a defense to a breach
      of contract claim, does not reflect a state policy seeking to expand or enlarge the
      parties’ agreement; rather, it concerns the issue of whether mutual assent existed
      in the first instance. Therefore, Lyn-Lea’s fraudulent inducement defense was not
      preempted. Id. at 290.
                                          21
enforcing “the parties’ bargain, with no enlargement or enhancement based on

state laws or policies external to the agreement.” Id. at 609 (quoting Wolens, 513

U.S. at 233, 115 S. Ct. at 826). But, the court explained, Mesa’s suit was “not by

any stretch of the imagination a request to enforce the parties’ bargains; it [wa]s a

plea to replace those bargains with something else.” Id. Accordingly, the court

held Mesa’s fraud claim preempted. Id. at 610.

      A recent Seventh Circuit case is similar. In S.C. Johnson & Son, Inc. v.

Transport Corp. of America, Inc., S.C. Johnson, a customer of air carriers, was

injured in a scheme in which its employee took kickbacks from the carriers in

exchange for contracting with them (on S.C. Johnson’s behalf) so as to require S.C.

Johnson to pay the carriers above-market rates. 697 F.3d 544, 546 (7th Cir. 2012).

The court held S.C. Johnson’s fraud and fraud by omission claims preempted

because each sought to “substitute a state policy (embodied in law) for the

agreements that the parties had reached.” Id. at 557. The court noted that, in the

air sector, the DOT remains available to address any problems of this ilk that may

exist, and that one problem with permitting claims such as S.C. Johnson’s is that

“one state’s deceptive practice might be another state’s hard bargain.” Id. It

reasoned that state laws governing deceptive business practices, while well-

meaning, are designed to protect consumers from the rigors of the market, but




                                         22
Congress decided “in both the ADA and FAAAA that it did not want (nor did it

want the states) to displace the market in this way.” Id.

      Finally, the fact that the DOT is authorized to investigate claims of unfair or

deceptive practices by air and motor carriers supports our conclusion. See 49

U.S.C. § 41712; 14 C.F.R §§ 302.403–.404. Falcon contends DOT’s regulations

are inadequate, mostly because the regulations do not provide Falcon a remedy.

See 49 U.S.C. § 41712(a); 14 C.F.R §§ 302.403, 301.404(a) (authorizing DOT to

investigate allegations of “unfair or deceptive practice or an unfair method of

competition” and providing that any person may file a formal or informal

complaint concerning a violation of statute or DOT regulations). Even if the relief

available to Falcon under the DOT’s regulatory authority is not akin to the remedy

Falcon could obtain in a state court, were its claims not preempted, we note that

Morales and Wolens pointed to the DOT’s regulatory authority as a factor that

weighed in favor of preemption in those cases. See Morales, 504 U.S. at 391, 112

S. Ct. at 2040 (noting “DOT retains the power to prohibit advertisements which in

its opinion do not further competitive pricing”); Wolens, 513 U.S. at 228 n.4, 115

S. Ct. at 823 n.4 (“DOT retains authority to investigate unfair and deceptive

practices and unfair methods of competition by airlines, and may order an airline to

cease and desist from such practices or methods of competition.”).




                                         23
      Falcon relies primarily on another federal circuit case, Taj Mahal Travel,

Inc. v. Delta Airlines, Inc., 164 F.3d 186 (3d Cir. 1998), to argue against

preemption.     Taj Mahal held a common law defamation claim and an

accompanying punitive damages claim were not preempted. Taj Mahal Travel,

Inc., 164 F.3d at 195. The Third Circuit reasoned that Morales and Wolens did not

apply to preempt common law, as opposed to statutory, claims and that because the

underlying tort, defamation, was not preempted, the punitive damages claim was

not preempted. Id. We find Falcon’s reliance on Taj Mahal unavailing, both

because (1) unlike the Third Circuit, the Texas Supreme Court, in Black, noted that

common law claims can be preempted, and read Wolens to mean they were, and

(2) following Taj Mahal would require us to ignore Kiefer’s strong suggestion that

punitive damages are preempted. 5

      We hold Falcon’s common law fraud claim and its punitive damage award

are preempted by the ADA and FAAAA because permitting the claims would

allow our State’s law to serve “as a means to guide and police the marketing

practices of” an airline or motor carrier. See Wolens, 513 U.S. at 228, 115 S. Ct. at

5
      Falcon dismisses Kiefer’s discussion regarding punitive damages as dicta. We
      agree that it is, but note that many courts have nevertheless relied on and echoed
      Kiefer’s prescient reasoning. See Henson v. Sw. Airlines Co., 180 S.W.3d 841,
      844–45 (Tex. App.—Dallas 2005, pet. denied); Whitten v. Vehicle Removal Corp.,
      56 S.W.3d 293, 308–09 (Tex. App.—Dallas 2001, pet. denied); see also Travel All
      Over the World v. Kingdom of Saudi Arabia, 73 F.3d 1423, 1432 n.8 (7th Cir.
      1996) (holding that plaintiff’s punitive damages claim was preempted under
      Wolens).
                                          24
823; see also Morales, 504 U.S. at 384, 112 S. Ct. at 2037 (holding ADA

preempted state attorney general guidelines governing airfare advertising); Kiefer,

920 S.W.2d at 281 (suggesting tort claims accompanied by punitive damages

claims are preempted); Lyn-Lea, 283 F.3d at 284 (finding preemption of fraud

clams of travel agent, an intermediary between airline and passengers, based on

airline’s failure to disclose plans to reduce travel agent’s commissions before

airline entered into new lease agreement with travel agent); Mesa, 219 F.3d at 606

(finding fraud claim by commuter airline Mesa against airline United preempted

because Mesa did not seek to enforce United’s self-imposed agreement with Mesa

but, instead, sought to change parties’ bargain by applying state law to agreement

and extract damages from United); see also State ex rel. Grupp v. DHL Express

(USA), Inc., 19 N.Y.3d 278, 282 (N.Y. 2012) (finding preemption under ADA and

FAAAA of plaintiffs’ fraudulent misrepresentation claims premised on alleged

practices relating to improper imposition of fuel surcharges by DHL where

plaintiffs did not sue for breach of contract but, instead, brought qui tam action

under New York False Claims Act).

      We sustain DHL’s first issue. Given our resolution of this issue, we do not

address DHL’s issues two, three, four, and six, or Falcon’s contingent cross-issue.




                                        25
                               DHL’s Counterclaim

      In its fifth issue, DHL contends the jury’s finding that $0 would compensate

DHL for Falcon’s breach of the assumption and reseller agreements is against the

overwhelming weight of the evidence. Evidence is factually insufficient if the

evidence is so weak or if the finding is so against the great weight and

preponderance of the evidence that it is clearly wrong and unjust. Dow Chem. Co.

v. Francis, 46 S.W.3d 237, 242 (Tex. 2001). In determining whether there is

factually sufficient evidence, we must consider and weigh all of the evidence that

supports or contradicts the jury’s findings. Plas–Tex., Inc. v. U.S. Steel Corp., 772

S.W.2d 442, 445 (Tex. 1989).        The jury is the sole judge of the witnesses’

credibility and the weight to be given their testimony. Golden Eagle Archery, Inc.

v. Jackson, 116 S.W.3d 757, 761 (Tex. 2003).

      The jury found that Falcon breached both the assumption and reseller

agreements, and Falcon does not challenge those findings on appeal. In response

to the corollary damages question, the jury awarded no damages. 6


6
      Question 9 asked the jury: Did Falcon fail to comply with either of the following
      agreements? The jury answered “yes” for both the reseller and the assumption
      agreements. No affirmative defense to the breach question was submitted, and,
      having answered yes to Question 9, the jury proceeded to answer the damages
      question, Question 10. It asked: “What sum of money, if any, if paid now in cash,
      would fairly and reasonably compensate DHL for its damages, if any, that resulted
      from such failure to comply?” The jury was instructed to consider only “the
      difference, if any, between the amount due to DHL and the amount paid DHL
      under the agreement between the parties.” It answered “$0.”
                                         26
      The jury heard conflicting evidence about the amount Falcon owed DHL.

Shortly before suit was filed, in a notice dated October 24, 2008, DHL claimed

Falcon owed $1,634,894.18. In a second notice dated a week later, DHL offered to

waive a portion of the amount in dispute if Falcon would stipulate the amount in

dispute was $562,000 and pay $966,348.49. It is undisputed that Falcon made no

payments to DHL after late September 2008 and that it continued buying DHL’s

services for several weeks thereafter. As a result, the amount DHL claimed was

due increased after September and, by the time of trial, DHL told the jury its

damages totaled $3,214,644.62.

      Falcon’s   evidence   demonstrated    that   DHL’s    invoices   and   other

documentation were not a model of clarity. But, as DHL points out in its brief,

there was no evidence that Falcon paid DHL in full. Falcon protested that DHL’s

claimed damages were inflated, but never testified that Falcon owed nothing. By

Bouse’s own admission, the spreadsheet he created showed Falcon owed DHL

$762,361.78 as of October 27, 2008.

      In its response brief, Falcon argues that the jury’s damages finding is

justified because DHL’s damages evidence was internally inconsistent. It asserts

that DHL’s witnesses themselves disagreed—by about $130,000—about the

amount Falcon owed. Falcon also argues the zero damages finding is justified

because, due at least in part to software problems, DHL’s records were incomplete,

                                       27
and what existed was in such disarray that DHL’s damages experts were compelled

to rely on Falcon’s records to form their opinions of damages. While this may be

good reason for the jury to have discounted DHL’s damage model somewhat, there

is no evidence that supports the jury’s finding that Falcon owed nothing.

Accordingly, having reviewed all the evidence, we conclude the jury’s finding that

$0 would compensate DHL for Falcon’s breach of contract is against the great

weight and preponderance of the evidence. See Kitchen v. Frusher, 181 S.W.3d

467, 476 (Tex. App.—Fort Worth 2005, no pet.) (holding evidence insufficient to

support jury’s finding of no value of work in quantum meruit claim when

uncontroverted evidence showed work did have value); see also Dow Chem. Co.,

46 S.W.3d at 242 (quoting Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex.

1986)) (evidence is factually insufficient when “contrary evidence greatly

outweighs the evidence in support of the verdict”).

      We sustain DHL’s fifth issue.

                                    Conclusion

      We hold that Falcon’s fraud claim and punitive damage award are

preempted by the ADA and FAAAA. We further hold the evidence is factually

insufficient to support the jury’s finding that $0 would compensate DHL for

Falcon’s breach of the assumption and reseller agreements.       We reverse that

portion of the trial court’s judgment awarding Falcon damages and other relief on

                                        28
its fraud claim, we dismiss that claim, and we remand DHL’s counterclaim for

breach of contract for further proceedings consistent with this opinion.7




                                              Rebeca Huddle
                                              Justice

Panel consists of Justices Jennings, Massengale, and Huddle.

Justice Jennings, dissenting.




7
      Although we hold that Falcon’s affirmative fraud claim is preempted, we express
      no opinion about whether the ADA or FAAAA would preempt Falcon’s use of
      fraudulent inducement as an affirmative defense to DHL’s breach of contract
      claim, should it assert such a defense on remand. See Lyn-Lea, 283 F.3d at 289
      (travel agency’s fraud claim against airline preempted but fraudulent inducement
      defense asserted in response to airline’s counterclaim for breach of contract not
      preempted).
                                         29
