Aircraft leasing company stymied by Foreign Sovereign Immunities Act

BCI Aircraft Leasing, Inc. v. Republic of Ghana and Ghana Airways Ltd. (N.D. Ill. Oct. 13, 2006).  BCI, an Illinois company, leased two DC-10 aircraft to Ghana Airways, which is wholly owned by the government of Ghana.  Ghana Airways defaulted on its lease payment obligations, but the government of Ghana repeatedly promised that it would pay the airline’s debts, which exceeded $5 million.

After payment was not made, BCI sued the Republic of Ghana and Ghana Airways in an Illinois federal court.  The defendants moved to dismiss the case under the Foreign Sovereign Immunities Act.  Under that Act, a U.S. court can only obtain jurisdiction over a foreign state if it engaged in commercial activities that bear a significant relation to the U.S. 

The court held that the Republic of Ghana engaged in commercial activities by guaranteeing the airline’s debts but that such activities neither occurred, nor had a direct effect, in the U.S.  Thus, the court dismissed the case on the grounds that the defendants had immunity under the FSIA.

Ouch!

Airline not liable under antitrust statutes by terminating agent agreement

Tokarz v. LOT Polish Airlines (E.D.N.Y. Oct. 3, 2006).  Despite repeated warnings by the airline, the agent continued to discount tickets by passing on front-end override commissions to customers, a practice that violated the parties’ written commission agreement.  After several competing agents complained to the airline about the discounting agent, the airline exercised its right to terminate the agreement with the discounting agent.  The terminated agent sued, alleging that the airline’s termination violated federal and New York antitrust statutes because it was the product of an illegal conspiracy among the airline and the complaining competitors.

After a decade of litigation that culminated in a trial, the court held that the airline had not violated the antitrust statutes because it had acted unilaterally, not as part of any concerted action with the complaining competitors.

In its opinion, the court noted that an airline, like any other company that sells services or products through other entities, “can announce its resale prices in advance and refuse to deal with those who fail to comply.”  This helpful statement confirms an airline’s right to prevent an agent from creating fictional fares on a computer reservation system or engaging in any other kind of fare abuse.

Update:  By an order issued December 21, 2007, the Second Circuit affirmed the trial court’s judgment.

Airlines not liable for passengers’ DVT

Cortez v. Air New Zealand Ltd. (9th Cir. (Cal.) Oct. 2, 2006) & Damon v. Air Pacific Ltd. (9th Cir. (Cal.) Oct. 2, 2006).  In virtually identical opinions, the Ninth Circuit held that neither the passengers’ development of deep vein thrombosis (”DVT”) nor the airlines’ failure to warn the passengers of the risk of DVT constitutes an “accident” as that term is used in Article 17 of the Warsaw Convention.  Since no “accident” had occurred, the airlines were not liable for the passengers’ DVT injuries.

Airline not liable for downgrading passenger tickets

Sobol v. Continental Airlines (S.D.N.Y. Sept. 26, 2006).  Due to overbookings, the airline downgraded some of the first class tickets held by family members to coach class, causing the family to be separated during the international flights at issue.

The family members alleged in their lawsuit that the separation caused them emotional trauma and stress, but no physical injury.  They alleged causes of action for emotional distress, breach of contract, conversion, unjust enrichment and punitive damages, and sought damages totaling over $3 million.

Even though the events at issue took place in 2005, and thus were governed by the Montreal Convention, the court primarily analyzed the issues under the Warsaw Convention.  The court rejected the passengers’ emotional distress claim because the separation of the family did not constitute an “accident” resulting in “bodily injury,” as is required to state a claim under the Warsaw Convention.  The court rejected the passengers’ remaining claims on the grounds that because the Warsaw and Montreal Conventions do not contain a provision dealing directly with the downgrading of a ticket, those claims are preempted.  If a passenger whose travel is subject to the Conventions cannot proceed under the Conventions, he cannot proceed at all.

Airline not liable to passenger for substitute transportation

Oparaji v. Virgin Atlantic Airways, Ltd. (E.D.N.Y. Sept. 19, 2006).  Instead of boarding his flight after being questioned about his passport, the passenger spent time venting his anger to airline personnel, causing him to miss the flight.  The passenger then bought a ticket from another airline.

In his lawsuit, the passenger alleged every cause of action he could dredge up, and the court denied them all.  The court held that the passenger could not recover for personal injuries under Article 17 of the Warsaw Convention because his injuries were purely mental, not bodily.  And the court held that the passenger could not recover delay damages under Article 19 because the airline had no liability for the passenger’s unilateral decision to obtain substitute transportation on another airline.

Update:  By an order issued December 21, 2007, the Second Circuit affirmed the trial court’s judgment.

Passenger state law claims preempted by Montreal Convention

Malek v. Societe Air France (N.Y. City Civil Ct. Sept. 8, 2006).  Due to a late-arriving flight, the passenger missed his connecting flight.  The airline arranged for alternate carriage on a different airline, for which the passenger had to wait eight hours.  He claimed that the delay inconvenienced and exhausted him, and also claimed that the airline damaged his baggage.  The passenger sued for breach of contract and deceptive business practices.

Since the events at issue took place in 2005, the Montreal Convention applied.  The court held that the passenger’s state common law claims were preempted by the Convention, since it specifically addresses delays and lost baggage.   After noting that the Convention allows, but limits, delay and baggage damages, the court picked $1,000 as a nice round figure to award the plaintiff.  The opinion does not disclose any basis for this specific amount; this type of (precedent-setting) “rough justice” is often seen in state courts, which is why airlines often remove even small claims cases to federal court.  This case is troubling not only because the court apparently picked a random number as damages, but because (i) the plaintiff prevailed on his delay claim even though it appears that the airline did everything it could have to avoid the damages caused by the delay, which should have resulted in its exoneration under Article 19, and (ii) the items of baggage allegedly damaged – camera equipment, wine bottles, a vase and paintings – are specifically prohibited from checked baggage by every airline’s conditions of carriage.

Passenger state law claims preempted by Warsaw Convention

Mbaba v. Societe Air France, 457 F.3d 496 (5th Cir. (Tex.) July 25, 2006).  At a layover in Paris, the airline offloaded the passenger’s bags and charged him over $4,000 in excess baggage fees.  The passenger alleged the usual state law causes of action — breach of contract, deceptive trade practices and fraud.

The court held that the Warsaw Convention, as amended by Montreal Protocol No. 4, preempted the passenger’s claims.  The court relied primarily on Article 24, which “specifically preempts claims resulting from the carriage of baggage ‘however founded.’”  The events at issue had taken place in 2002, before the Montreal Convention had gone into effect (in November 2003).  But it is very likely that a court would rule in the same manner under the new treaty, which did not restrict the scope of state law preemption.