Court rejects passenger’s “principal and permanent residence” argument in subject matter jurisdiction dispute

February 13, 2014

Razi v. Qatar Airways Q.C.S.C. (S.D. Tex. Feb. 6, 2014).  A passenger traveling on a roundtrip ticket for transportation originating in Pakistan alleged she was burned by a hot beverage served by a flight attendant during a flight from Doha, Qatar, to Houston.  The passenger filed a lawsuit in a Texas state court, which the airline removed to federal court.

Qatar Airways then moved to dismiss on the grounds that the court lacked subject matter jurisdiction under the Montreal Convention.  Pursuant to Article 33 of the Convention, a plaintiff may bring an action for damages in the United States against a carrier only when the United States is (i) “the domicile of the carrier,” (ii) the “principal place of business” of the carrier, (iii) the place where the carrier has a “place of business through which the contract has been made,” (iv) “the place of destination,” or (v) in cases involving the death or injury of a passenger, the “principal and permanent residence” of the passenger at the time of the accident.

The passenger’s only possible shot at defeating the motion was proving that the United States was her “principal and permanent residence,” which the Convention defined as her “one fixed and permanent abode,” at the time of the incident.  She had alleged in her complaint that she resided in Houston, but the court found that, at the time of the incident, she was a citizen of Pakistan, was traveling to the United States under a “Five-Year Multiple-Entry Visa” and had intended to stay in the United States for only three and a half months.  Based on these findings, the court ruled that the passenger’s “one fixed and permanent abode” was Pakistan, not the United States, and granted the airline’s motion.

Note:  Qatar Airways successfully used a similar subject matter jurisdiction argument in a Maryland case (Alemi v. Qatar Airways) in 2012.


“Million Mile Flyer” unable to go the distance in challenge to frequent flyer program changes

February 9, 2014

Lagen v. United Continental Holdings, Inc. (N.D. Ill. Jan. 23, 2014).  As with many, if not all, frequent flyer programs, United’s MileagePlus program rules have always expressly allowed United to change or eliminate the program’s benefits.  In an attempt to get around these rules, and the many opinions upholding an airline’s right to enforce similar rules, the plaintiff contended that United had entered into an additional and separate “Million Mile Flyer” contract with him, and the members of a proposed class, under which the airline was obligated to provide them with certain irreducible “lifetime benefits,” including certain upgrades, bonus miles and seating priority.

In January 2013, the court partially granted United’s motion to dismiss, dismissing the plaintiff’s claims for breach of the implied covenant of good faith and fair dealing and unjust enrichment, leaving only his breach of contract claim.  In its opinion regarding the motion to dismiss, the court warned that, ultimately, the plaintiff would have the burden “to prove (not plead) that a contract exists between Plaintiff’s proposed Million Miler class and United that differs from the Mileage Plus contract United argues is the contract Plaintiff seeks to enforce.”  The case proceeded through discovery, but the plaintiff was unable to prove the existence of a separate Million Mile Flyer contract.  Accordingly, the court granted United’s summary judgment motion.


Conditions of carriage withstand tort claims by delayed passengers

February 1, 2012

Lavine v. American Airlines, Inc. (Md. Special App. Dec. 1, 2011).  Using aa.com, the plaintiffs bought two American Airlines tickets for roundtrip transportation originating and terminating at Reagan National Airport, with an intermediate stop at Key West International Airport.  Their outbound itinerary included a connecting flight from Miami International Airport to Key West.  They received an email confirmation that referred to, incorporated, and contained a link to, American’s Conditions of Carriage.

According to the plaintiffs, American personnel at DCA informed them that the flight to MIA was delayed.  The plaintiffs claimed that they requested seats on another flight or a refund and that they only boarded the delayed flight after having been assured by American personnel that, despite the delay, the airline “would provide” them with the connecting flight to Key West.  The plaintiffs alleged that, upon arrival at MIA, American personnel informed them that they only had 15 minutes to reach the gate for the connecting flight.  The plaintiffs asserted that they ran through the airport, inhaling construction debris along the way, but that American did not permit them to board the connecting flight because they had arrived too late.  American obtained and paid for a hotel room for the plaintiffs and gave them a stipend for dinner and breakfast.  The plaintiffs traveled to Key West on an American flight the next day.

In their lawsuit against American, the plaintiffs alleged five counts based on common law theories of negligent and intentional misrepresentation and demanded $10,000 in compensatory damages and $10,000 in punitive damages.  The plaintiffs appealed after the trial court granted the airline’s motion for summary judgment.

The appeals court affirmed the trial court’s judgment.  First, the appeals court held that American was entitled, under 49 U.S.C. § 41707 and 14 C.F.R. Part 253, to incorporate the Conditions of Carriage by reference, that the airline had in fact done so and that the plaintiffs’ allegation that they had not seen, or agreed to, the Conditions of Carriage did not create a genuine dispute of material fact.

The court then held that the Conditions of Carriage operated to prevent the plaintiffs from being able to prove the “false statement” and “reliance” elements of their negligent and intentional misrepresentation claims.  The court held that the plaintiffs could not prove the “false statement” element due to the limitation of liability clauses of the Conditions of Carriage, which provided as follows:  “American is not responsible for or liable for failure to make connections, or to operate any flight according to schedule, or for a change to the schedule of any flight.  Under no circumstances shall American be liable for any special, incidental or consequential damages arising from the foregoing.”

Next, the court held that the plaintiffs had failed to prove reliance on any alleged verbal representations by American personnel because Mr. Lavine, as “an experienced attorney licensed to practice law in Maryland,” could not have justifiably relied on any such representations in view of the limitation of liability clauses in the Conditions of Carriage and a clause providing that “times shown in timetables or elsewhere are not guaranteed and form no part of this contract.”

The court then held that the plaintiffs had failed to establish the proximate cause element of the causes of action because “it is not foreseeable that [appellants] would inhale construction debris and sustain personal injury as a result of an airline scheduling delay.”

Finally, even if the plaintiffs had been able to establish the elements of their causes of action, their claims would not have made it past 49 U.S.C. § 41713(b)(1), the preemption provision of the Airline Deregulation Act, which provides that “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.”  The court held that this provision preempted the plaintiffs’ tort claims because they were “related to” American’s boarding procedures, which constituted a “service” provided by the airline.

Note:  This opinion has generated interest among non-aviation business litigators and transactional attorneys in Maryland.  In holding that the Conditions of Carriage were part of the parties’ contracts, the court rejected the plaintiffs’ argument that, even if the Conditions were part of the contracts, there was a dispute of fact because American personnel, by their verbal statements at the airport, had modified the Conditions.  The court relied on the “non-modification” clause of the Conditions in rejecting this argument; that clause stated that “[n]o agent, employee or representative of American has authority to alter, modify or waive any provision of the Conditions of Carriage unless authorized in writing by a corporate officer of American,” and the plaintiffs had not offered proof of a corporate officer’s written modification.  Some commentators have opined that this decision appears to conflict with prior Maryland decisions holding that, despite a contractual requirement that any modifications be written, parties can nevertheless verbally modify contracts.  It appears that the more rigorous “corporate officer” written modification requirement gave the court comfort to enforce the non-modification clause in this case.


Ejected passenger’s claims fall, and fail, under Montreal Convention

December 12, 2011

Rogers v. Continental Airlines (D. N.J. Sept. 21, 2011).  The passenger and her daughter boarded the aircraft for a flight from Newark, New Jersey, to Cancun, Mexico, and stood in the forward galley while flight attendants tried to sort out their seat assignments.  While waiting, the passenger answered a call on her mobile phone.  When a flight attendant told her to end the call, she replied that “the pilot didn’t announce not to be on your phone and I’m talking to my Mom” and continued her conversation.  Unimpressed by the passenger’s asserted “mom call” exception to 14 C.F.R. § 91.21, Continental personnel requested that the passenger deplane.  After some resistance by the passenger, and after an airline employee allegedly threw some of her carry-on items from the aircraft onto the jetway, she deplaned.

Continental rebooked the passenger and her daughter on a later flight, and they arrived in Cancun “several hours later than originally scheduled.”

The passenger filed a lawsuit against Continental in state court, alleging claims for intentional infliction of emotional distress, negligent infliction of emotional distress and breach of contract.  The airline removed the case to federal court.

After discovery, the airline moved for summary judgment on the grounds that the Montreal Convention exclusively governed the passenger’s claims and that she had failed to state a viable claim under the Convention.  Under Article 17(1) of the Convention, “[t]he carrier is liable for damage sustained in case of death or bodily injury of a passenger upon condition only that the accident which caused the death or injury took place on board the aircraft or in the course of any of the operations of embarking or disembarking.”

In opposition to the motion, the passenger resisted the application of the Convention, arguing that her injuries had occurred in the terminal after she had deplaned.  The court disagreed, finding that the passenger had admitted, in her complaint and during her deposition, that her injuries had occurred on board the aircraft and while disembarking in the jetway.  Thus, the court concluded, the Convention applied.

The court then analyzed whether the passenger had alleged facts sufficient to support a viable “bodily injury” claim under Article 17(1).  The court found that, although the passenger had complained of “physical manifestations of emotional and mental anguish” in her complaint, she had admitted during her deposition that she had, in fact, not sustained any physical injury as a result of the incident at issue.  Accordingly, the court held that her tort and contract claims failed as a matter of law and granted the airline’s motion.


Passenger not required to prove violation of regulation in order to establish that “accident” under Montreal Convention occurred

November 13, 2011

Phifer v. Icelandair (9th Cir. (Cal.) Sept. 1, 2011).  While boarding a flight from Minneapolis-St. Paul to Reykjavik, Iceland, the passenger struck her head on an overhead video monitor that was extended in the “down” position.  She sued Icelandair, alleging liability under the Montreal Convention.

Under Article 17(1) of the Convention, “[t]he carrier is liable for damage sustained in case of death or bodily injury of a passenger upon condition only that the accident which caused the death or injury took place on board the aircraft or in the course of any of the operations of embarking or disembarking.”  To establish in a U.S. court that an “accident” under Article 17(1) took place, a plaintiff must prove that the injury was caused by “an unexpected or unusual event” that was “external to the passenger.”

The trial court granted the airline’s summary judgment motion on the grounds that the passenger had failed to establish that her injury was caused by an “accident” within the meaning of Article 17(1) because she had failed to prove that the airline had violated any “FAA requirements” by having the video monitor in the down position during boarding.

The Ninth Circuit, in a brief opinion, reversed and remanded the case.  The appeals court held that, although FAA requirements may be relevant to determining whether an “accident” occurred, proving that an airline violated a government regulation is not “a prerequisite to suit under Article 17.”  According to the appeals court, “[t]he Supreme Court has suggested that a per se rule requiring a regulatory violation would be improper.”


ARC case ends up where it started after excursion through federal court

November 4, 2011

Airlines Reporting Corporation v. Sudbury Travel, Ltd. (E.D.V.A. Sept. 28, 2011).  In 2009, ARC initiated an arbitration before the Travel Agent Arbiter seeking amounts owed by accredited agent Sudbury Travel, Ltd.  Less than three weeks later, ARC withdrew its arbitration complaint.  In his dismissal notice, the Arbiter noted that the applicable rule allowed such withdrawal provided that its purpose “is not to litigate the identical claims in a state or federal court or before any other governmental body.”

Over a year later, ARC filed a Virginia state court complaint against Sudbury based on the same events but naming three additional defendants, “officer/director” Lee Goodstone and two other individuals.  The complaint, which sought damages in excess of $240,000, alleged three counts:  breach of contract against Sudbury only and conversion and breach of fiduciary duty against all four defendants.  ARC alleged three forms of conversion – conversion of ticket sales proceeds, conversion of funds in the agent’s bank account securing a letter of credit in ARC’s favor and conversion of ticket stock.  Goodstone removed the case to federal court and filed a counterclaim against ARC.

Six months and over 70 docket entries (including two amended complaints and numerous motions) later, ARC filed a motion to compel arbitration before the Arbiter.  ARC explained that it had withdrawn its previous arbitration complaint because “it appeared the process was getting no traction” with Sudbury.  Sudbury and Goodstone opposed the motion, which the court denied.

In July 2011, the parties filed cross motions for summary judgment.  In its order on the motions, the court first, citing the Arbiter’s 2009 dismissal notice regarding relitigation of identical claims in court, transferred ARC’s claims against Sudbury back to the Arbiter.

Next, the court rejected ARC’s conversion claims against Goodstone for the same reasons the same court rejected them ten years ago in Airlines Reporting Corporation v. Pishvaian, 155 F. Supp.2d 659 (E.D.V.A. 2001).  The court rejected ARC’s sales proceeds conversion claim because the Agent Reporting Agreement, while labeling such proceeds as “trust” funds, did not actually establish a trust relationship because it did not require that sales proceeds be segregated, i.e., it allowed such proceeds to be commingled with general agency assets.  The court rejected ARC’s conversion claim regarding the funds securing the letter of credit for the same reason.  The court rejected the travel documents conversion claim because the facts showed that Goodstone’s conduct, like that of the agency owner in Pishvaian, was only “supervisory and was not directed at the converted ticket stock.”

The court then rejected ARC’s breach of fiduciary duty cause of action as barred by Virginia’s two-year limitation period.  ARC alleged that the misdeeds occurred during a period ending in July 2008, but it filed its complaint in September 2010.

Finally, the court rejected Goodstone’s Fair Debt Collections Practices Act and Massachusetts General Laws Chapter 93A counterclaims because ARC was seeking to collect a business debt, not a consumer debt.

So, at the end of the day, ARC and Sudbury returned to the Arbiter and Goodstone was out of the case.  ARC filed a motion for a default judgment against the other two defendants, but the court has not ruled on it.

Note:  Now pending in the Eastern District of Virginia are four cases – ARC v. Sarrion Travel, Inc. ($152,000+ damages), ARC v. Mundo Travel Corp. ($80,000+ damages), ARC v. Academic Travel Services International ($87,000+ damages) and ARC v. Cartegena Travel and Tours, Inc. ($85,000+ damages) – in which ARC is alleging the same conversion claims against agency principals that were rejected in Sudbury and Pishvaian.  There must be a better way for ARC to pursue claims against agency principals than to be forced to rely on trust-based causes of action that have repeatedly come up short.  In September, ARC announced that it is embarking on an effort to modernize its agent accreditation procedures.  That effort should include modernization of the Agent Reporting Agreement as well.

First, to receive accreditation, an agency’s principals should be required to consent, in their personal capacities, to arbitration or litigation of ARC’s claims against them related to the ARA.  Agency owners might complain about the costs of defending against ARC’s claims, but a provision requiring that the losing party in the proceeding pay the winning party’s attorneys’ fees and expenses would resolve any costs objection.

Second, the ARA should require that agents segregate sales proceeds in a separate account and prohibit them from commingling such proceeds with other funds.  The ARA designates sales proceeds as trust funds – it provides that “[t]he Agent recognizes that the proceeds of the sales, less the Agent’s commissions, if any, on these ARC Traffic Documents are the property of the Carrier and shall be held in trust until accounted for to the Carrier” – so it stands to reason that agents should be required to treat such funds accordingly.  Without a segregation requirement, the ARA’s “trust” language will continue to fail ARC in its pursuit of tort claims arising under Virginia law, which governs the interpretation of the ARA.


Court denies airline’s summary judgment motion in trip and fall case

September 25, 2011

Walsh v. Koninklijke Luchtvaart Maatschappij N.V. (S.D.N.Y. Sept. 12, 2011).  The plaintiff tripped over a metal bar and fell in a departure gate seating area while walking to join a line of persons waiting to board a flight from Amsterdam to New York.  The plaintiff alleged in his complaint that he sustained a fractured elbow as a result of the fall and that, under the Montreal Convention, KLM is liable for $3 million in damages.

Under Article 17(1) of the Convention, “[t]he carrier is liable for damage sustained in case of death or bodily injury of a passenger upon condition only that the accident which caused the death or injury took place on board the aircraft or in the course of any of the operations of embarking or disembarking.”  KLM moved for summary judgment on the grounds that the plaintiff was not injured while “embarking” and that, even if he was, his injury was not caused by an “accident” within the meaning of Article 17(1).

The court denied KLM’s motion.  The court first ruled that a reasonable jury could conclude the plaintiff was injured while “embarking” because the incident occurred while the airline was “exercising control” over the plaintiff.  The court reasoned that the airline had control over the plaintiff because the trip and fall took place in the departure gate seating area and while the plaintiff was walking to join a line in response to the airline’s boarding announcements.

The court then concluded that a reasonable jury could also find that the plaintiff’s trip and fall was an “accident” under Article 17(1), although it admitted that this was the “more difficult question.”  To establish in a U.S. court that an “accident” under Article 17(1) took place, a plaintiff must prove that the injury was caused by “an unexpected or unusual event” that was “external to the passenger.”  The airline contended that the plaintiff’s fall was “his own internal reaction to an inert piece of equipment, installed and operating as intended.”  The court disagreed, ruling that a jury could find that the metal bar was unexpected, and thus “external” to the plaintiff, because the photographs submitted by the plaintiff showed that the bar protruded past the seating area and was similar in color to the floor.


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