Lost baggage damages limited by Montreal Convention

Nunez v. American Airlines (N.Y. App. Jan. 26, 2007).  In a brief opinion, the appeals court upheld the trial court’s decision applying Article 22(2) of the Montreal Convention to limit the two passengers’ damages for loss of their baggage.  The trial court had entered a judgment against the airline for $2,990 (apparently $1,495 per passenger), from which the passengers had appealed.  The appeals court opinion does not explain how the judgment amount had been determined, but I can make a guess.

Article 22(2) provides that “[i]n the carriage of baggage, the liability of the carrier in the case of destruction, loss, damage or delay is limited to 1,000 Special Drawing Rights for each passenger unless the passenger has made, at the time when the checked baggage was handed over to the carrier, a special declaration of interest in delivery at destination and has paid a supplementary sum if the case so requires.”  Article 23(1) provides that “[t]he sums mentioned in terms of Special Drawing Rights in this Convention shall be deemed to refer to the Special Drawing Right as defined by the International Monetary Fund.  Conversion of the sums into national currencies shall, in case of judicial proceedings, be made according to the value of such currencies in terms of the Special Drawing Right at the date of the judgement.”  The “Special Drawing Right” is an artificial currency used by the International Monetary Fund for internal accounting purposes.  As of today’s date (January 30, 2007), one SDR is valued at US$1.49164, which means that an airline’s liability to a passenger for lost baggage under the Convention is currently limited to $1,491.64.  The IMF maintains a web page - imf.org/external/np/fin/rates/rms_sdrv.cfm - where the value of the SDR is updated daily.

Since each of the two passengers in Nunez recovered damages of $1,495, one SDR was apparently valued at US$1.495 on April 25, 2006, the date the trial court entered its judgment.

Airline not liable for failure to warn in DVT case

James v. Delta Air Lines, Inc. (9th Cir. (Cal.) Jan. 22, 2007).  The Ninth Circuit held that the airline’s failure to warn the passenger of the risk of developing deep vein thrombosis was not an “accident” under Article 17 of the Warsaw Convention.  As a result, the court affirmed the district court’s summary judgment for the airline on the passenger’s failure to warn claim.

If a passenger’s travel was subject to the Warsaw or Montreal Convention but the passenger cannot proceed under the applicable Convention because he did not suffer an “accident” resulting in “bodily injury,” the passenger cannot proceed at all against the airline.

Jury returns verdict for passenger in refusal to transport case

Cerqueira v. American Airlines, Inc. (D. Mass. Jan. 12, 2007).  In December 2003, the airline removed three passengers, a man of Portuguese national origin and two Israelis seated nearby, from an aircraft at the departure gate in Boston for questioning by state police officers.  After the questioning, the airline declined to rebook them on another flight to Ft. Lauderdale.

The passenger of Portuguese national origin filed a lawsuit against the airline.  He alleged that airline personnel removed him from the aircraft and then refused to provide him service solely because of his perceived national origin, in violation of Title VI of the Civil Rights Act and a Massachusetts antidiscrimination statute.  The airline alleged that the passengers had been removed for questioning and then refused service solely due to security concerns based on their alleged unusual behavior before and during the boarding process.

After a six-day trial, the jury returned a verdict in favor of the passenger, assessing compensatory damages of $130,000 and punitive damages of $270,000.  The passenger had also requested that the court enter an injunction ordering the airline to take steps “to prevent similar occurrences in the future,” but the court did not take such action.

Update:  As reported here, in January 2008 the First Circuit reversed the trial court’s judgment in this case.

Tardy passengers’ state common law “bumping” claims held preempted

Igwe v. Northwest Airlines, Inc. and KLM Royal Dutch Airlines (S.D. Tex. Jan. 4, 2007).  Because the passengers failed to check in at the gate counter in a timely manner, KLM gave their seats to other passengers.  The passengers were “irate” and refused the airline’s offer of transportation on a later flight on a different airline (plus two $500 credit vouchers).  Instead, the passengers bought tickets on a different airline (on an even later flight).

The passengers filed a lawsuit in which they alleged an array of state common law causes of action.  In its summary judgment motion, KLM contended that these claims were preempted by the Montreal Convention because its Article 19 provides the exclusive remedy for delays in international air transportation.  The critical question was whether the passengers’ ”bumping” claims were for contractual non-performance and thus not covered by the Convention (as the passengers argued) or for delay and thus covered by the Convention (as the airline argued).

When the “bumping” airline proves that the passenger refused the airline’s reasonable offer of alternative transportation, the passenger’s lawsuit begins to emit a “giant sucking sound.”  Hearing that sound, the court held that the passengers’ bumping claims were for delay, and thus preempted by the Convention, because the passengers had repudiated the airline’s effort to perform its contractual obligations.  The court also noted that even if the passengers’ claims were not preempted, they still failed because “[a]ll of [the passengers'] troubles were the direct result of their own tardiness.”  Accordingly, the court granted KLM’s summary judgment motion.

Court confirms arbitration award in favor of “host agency”

Incentive Connection Travel, Inc. v. 1st-Air.Net Inc. (D. Ariz. Dec. 27, 2006).  The parties had entered into a contract in which ICT agreed to act as a “host agency” for 1st-Air.Net, an Internet-based travel broker.  According to ICT, 1st.Air-Net “is required to use host agencies because, among other reasons, United Airlines terminated its Sales Agreement . . . and the Airline [sic] Reporting Corporation terminated the ability of First Air . . . to purchase tickets.”

According to ICT, 1st-Air.Net “engaged in the use of ‘hidden cities’ and ‘throw away’ segments, and other prohibited ticketing practices,” thereby violating the contract between them.  ICT terminated the contract, which contained an arbitration provision.  1st-Air.Net filed a demand for arbitration; ICT filed a counterclaim, as well as a third party claim against 1st-Air.Net’s principals, Jackie DiBella and Robert Laney.

At the arbitration hearing, the parties settled all issues except for the issue of attorneys’ fees.  Finding that “[t]he issuance of hidden city tickets by Laney and DiBella was in breach of the contract with [ICT] because it was contrary to the ordinary custom of the airline industry and a breach of 1st-Air.Net’s duty under the contract,” the arbitrator awarded ICT fees and costs against 1st-Air.Net, DiBella and Laney in the amount of $126,400.  The court granted ICT’s application to confirm the award.

Court sorts out liability in aircraft ground incident case

North American Airlines, Inc. v. Virgin Atlantic Airways, Ltd. (E.D.N.Y. Dec. 22, 2006).  During towing by a tug driver from a hardstand to a terminal departure gate, a wing tip of a Virgin A340 aircraft collided with the tail of a parked North American Airlines aircraft.

NAA sued Virgin, which filed third-party complaints against ASI, which had provided the tug driver and the “wing walker,” and Mach II, which had provided the cockpit-based “brake rider.”  ASI and Mach II filed cross-claims against each other.  NAA moved for summary judgment against Virgin, Virgin moved for summary judgment against ASI, and Mach II moved for summary judgment against ASI.

The court held that Virgin is not liable to NAA under New York Business Law sec. 251 because the phrase ”use or operation” in that statute (which was intended to make aircraft owners liable to crash victims) does not cover situations involving aircraft being towed.  The court ruled that Virgin is not liable to NAA under the principle of vicarious liability because a jury could conclude that ASI and Mach II were Virgin’s independent contractors, not its agents.  The court held that ASI is liable to Virgin for the actual damages to its aircraft because “ASI’s employee clearly operated the tug in a negligent manner.”  Finally, the court declined to grant Mach II’s summary judgment motion against ASI because questions of fact exist as to whether Mach II was partially responsible for the collision.

Airline summary judgment motion granted in boarding discrimination case

Dasrath v. Continental Airlines, Inc. (D. N.J. Dec. 22, 2006).  Three months after September 11, an airline captain had three passengers removed from the aircraft during boarding due to his security concerns.  One of the passengers, a U.S. citizen of West Indian national origin, filed a lawsuit against the airline alleging discrimination in violation of federal and state statutes.

The airline moved for summary judgment on the grounds that it was immune from liability under 49 U.S.C. 44902, which “gives airline personnel broad, but not absolute, discretion to remove passengers purportedly for safety reasons” as long as their decisions “have a rational basis in safety.”

The court granted the airline’s motion.  It held that the captain had acted rationally in removing the passenger because there was undisputed evidence linking him to two passengers (who were also removed) who had been repeatedly moving luggage from one overhead bin to another and changing seats, and that the captain had acted solely for security reasons and not due to the passenger’s race.

Fifth Circuit upholds restitution sentence in certificate fraud case

U.S. v. Klouse (5th Cir. (Tex.) Dec. 15, 2006).  An American Airlines employee fraudulently used the company’s Travel Authorization Certificates to have tickets for 88 flights issued for friends and family members.  The employee pleaded guilty to use of unauthorized access devices in violation of 18 U.S.C. sec. 1029(a)(2).

On appeal, the employee challenged the portion of her sentence requiring restitution in the amount of $166,603, which was the market value of the fraudulent airline tickets (using the lowest applicable fare).  She argued that the figure should be based on American’s internal (apparently lower) valuation of the certificates for tax and insurance purposes.  The court held that certain comments in the Sentencing Guidelines supported the market value loss calculation.

This opinion is important because it gives airlines ammunition against discount and upgrade certificate brokers and others who practice certificate fraud against airlines.  Not only does it confirm that certificate fraud constitutes unauthorized access device use, but it also confirms that airlines can obtain restitution in criminal cases, and damages in civil cases, based on the market value of the fraudulent tickets.

Airline summary judgment motion denied in another trip and fall case

Doris v. Allegheny County Airport Authority and U.S. Airways, Inc. (W.D. Pa. Dec. 8, 2006).  Rather than waiting for the wheelchair he had requested that the airline provide, the elderly passenger decided to walk up the jetway on his own.  He ”retrieved his wife’s walker from the jetway and placed both his and his wife’s carry-on luggage on top of the walker” and then pushed the loaded walker up the jetway.  Not surprisingly, he tripped over an expansion joint on the jetway floor and fell.

In the passenger’s lawsuit, the airline moved for summary judgment on the grounds that the expansion joint was an open and obvious condition, that the passenger had assumed the risk by walking up the jetway and that he had not exercised ordinary care because “he was not looking where he was walking.”  The court denied the motion, holding that there are material facts in dispute as to whether the expansion joint was an obviously dangerous condition, whether the defendants were negligent by not providing a warning sign or handrail near the joint and whether the passenger had exercised ordinary care.

Airline summary judgment motion denied in trip and fall case

Burgos v. American Airlines, Inc. (S.D.N.Y. Dec. 7, 2006).  The passenger allegedly tripped on a plastic cover on the aircraft cabin’s floor while boarding a flight from Puerto Rico to New York.  In the passenger’s lawsuit, the airline moved for summary judgment, arguing that there was no evidence that it created, or had actual or constructive notice of, the allegedly defective condition. 

The denied the airline’s motion.  The court applied New York common law, rather than “the Warsaw Convention/Montreal Agreement,” because Puerto Rico is not a foreign sovereign.  The court refused to apply the res ipsa loquitur doctrine against the airline, held that there is no notice requirement where a defendant has created the allegedly dangerous condition at issue, and held that whether the airline created such condition is an issue of material fact that precluded summary judgment.