Court rules on summary judgment motions in charter flights class action

In re Nigeria Charter Flights Contract Litigation (E.D.N.Y. Oct. 25, 2007).  In 2002, World Airways, Inc. and Ritetime Aviation and Travel Services, Inc. entered into a charter aircraft services agreement under which World agreed to supply Ritetime with round-trip flights between points in the U.S. and Lagos, Nigeria.  The charter flights began but, by the end of 2003, Ritetime owed World over $2 million, leading World to discontinue its U.S.-Nigeria operations.  World’s action stranded hundreds of passengers who had traveled on outbound flights and left others who had bought tickets for 2004 unable to travel at all.

After the passengers sued World, Ritetime and its CEO in courts throughout the U.S., the federal cases were consolidated in the Eastern District of New York, which certified a class of plaintiffs in 2006.  The plaintiffs alleged that World is liable under the Montreal Convention for its failure to transport them, and they also alleged state law claims for breach of contract, negligence and fraud.

World moved for summary judgment, contending that (i) the Montreal Convention preempts the plaintiffs’ state law claims, (ii) even if the plaintiffs’ state law contract claims are not preempted, they should be dismissed because there is no privity of contract between World and the plaintiffs, and (iii) even if the Convention does not preempt the plaintiffs’ negligence and fraud claims, the federal Airline Deregulation Act preempts those claims.  The plaintiffs filed a cross-motion for summary judgment.

The court granted World’s motion as to the plaintiffs’ delay claims under the Convention but denied it as to their breach of contract and tort claims.  The court also denied the plaintiffs’ cross-motion.  The court’s specific rulings are as follows.

Montreal Convention preemption.  Delay in international air transportation is governed by Article 19 of the Convention, and whenever the Convention applies, it preempts all state law claims for matters that fall within the scope of its application.  Article 22(1) limits an airline’s liability for a passenger’s delay claim to 4,150 Special Drawing Rights, or about $6,750.  The Convention does not govern nonperformance of a contract of carriage.  The court held that the Convention did not preempt the plaintiffs’ state law claims, ruling that their claims were for nonperformance, not for delay.  The court reasoned that World had “simply refused to transport” the plaintiffs, without offering them alternate transportation, “rather than merely delaying them.”  Of course, this ruling meant that the plaintiffs could not maintain their delay claims under the Convention, and the court granted World’s motion with respect to such claims.

Privity/agency.  The court held that while the tickets themselves did not establish contracts between the plaintiffs and World, factual issues prevented it from granting summary judgment to either side on the issue of World’s liability for Ritetime’s conduct.  The court ruled that the evidence presented was insufficient for it to decide whether the plaintiffs had bought their tickets directly from World; the plaintiffs presented evidence that they had done so, while World presented contradictory evidence.  Similarly, the court held that the existence of disputed facts prevented it from determining whether, as the plaintiffs alleged, Ritetime was World’s agent under theories of actual or apparent authority or that World had ratified Ritetime’s ticket sales.

ADA preemption.  The court rejected World’s contention that the federal Airline Deregulation Act preempted the plaintiffs’ fraud and negligence claims.  The ADA preempts certain state tort (and other) claims “related to a price, route, or service” of an airline.  However, some New York federal courts will refuse to rule that a tort claim is preempted where an airline has engaged in “outrageous” conduct that went “beyond the scope of normal aircraft operations.”  The court held that the ADA did not preempt the tort claims in this case because World’s refusal to transport the plaintiffs constituted “outrageous” conduct.

Court declines to dismiss complaint in passenger heart attack case

Watts v. American Airlines, Inc. (S.D. Ind. Oct. 10, 2007).  During a flight from Japan to Chicago in 2005, the passenger had a heart attack and died in a lavatory.  He was discovered by cleaning personnel after the aircraft had landed.

The plaintiff, the passenger’s wife, filed a lawsuit against American.  The airline moved to dismiss the complaint on the grounds that the plaintiff had failed to state a claim under the Montreal Convention, which applied to the transportation at issue and thus provided the plaintiff’s exclusive remedy.

Article 17(1) of the Convention governs an airline’s liability for a passenger’s death or bodily injury; it provides as follows:  “The 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.”  The U.S. Supreme Court has defined an “accident” as “an unexpected or unusual event or happening that is external to the passenger,” not ”the passenger’s own internal reaction to the usual, normal, and expected operation of the aircraft.”  In its motion, American contended that no “accident” had occurred because the passenger’s heart attack was caused by his own internal condition that was not related to the operation of the aircraft.

The court disagreed.  Taking the plaintiff’s allegations as true, the court reasoned that “American Airlines’ unusual or unexpected failure to recognize and/or respond to [the passenger’s] heart attack, and its failure to conform to industry custom and practices by responding to his medical emergency, could constitute a link in the chain of the events causing the ill-fated ‘accident’ on board [the flight].”  Accordingly, the court denied American’s motion to dismiss.

Second Circuit grounds New York’s airline passenger “Bill of Rights”

Air Transport Association of America, Inc. v. Andrew Cuomo (2d Cir. (N.Y.) Mar. 25, 2008).  New York’s airline passenger “Bill of Rights” required that airlines provide passengers with food, water, electricity and working restrooms during ground delays over three hours.  The Second Circuit held that 49 U.S.C. § 41713(b)(1), the preemption provision of the Airline Deregulation Act of 1978 (“the ADA”), preempted the Bill of Rights, which had gone into effect on January 1, 2008.  Accordingly, the appeals court reversed the December 20, 2007 decision of the trial court upholding the Bill of Rights.

The ADA’s preemption provision prohibits a state from enacting or enforcing “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 Second Circuit joined the majority of circuit courts in construing the term “service” broadly, as encompassing “matters such as boarding procedures, baggage handling, and food and drink – matters incidental to and distinct from the actual transportation of passengers.”  The court held that the minority circuit court view construing “service” narrowly is inconsistent with the U.S. Supreme Court’s pro-preemption decision in Rowe v. New Hampshire Motor Transport Association, which – in a stroke of very bad timing for Bill of Rights proponents – was issued just two weeks before the oral argument in the Second Circuit case.  In Rowe, the Supreme Court broadly construed a similarly-worded federal preemption statute regarding motor carriers.

In the Bill of Rights case, the trial court had held that “the provision of fresh air, water, food and lavatory access to passengers trapped for hours on a motionless plane is a health and safety issue” that has no bearing on the “service” provided by airlines.  Consistent with its broad construction of the term “service,” the Second Circuit rejected the trial court’s distinction, holding that “onboard amenities, regardless of whether they are luxuries or necessities, still relate to airline service and fall within the express terms of the preemption provision.”

The Second Circuit also reasoned (quoting Rowe) that state statutes like the Bill of Rights could lead to a “patchwork of state service-determining laws, rules, and regulations” that would be inconsistent with Congress’ intent to leave service-related matters “to the competitive marketplace.”  The appeals court concluded its opinion by stating that even though the goals of the Bill of Rights “are laudable,” and that “the circumstances motivating its enactment deplorable,” only the federal government has the authority to enact a law concerning ground delays.

New York’s only recourse is to petition the U.S. Supreme Court to hear the case, but the court is unlikely to accept another preemption case so soon after Rowe.  It will be interesting to see the effect of the Second Circuit’s decision on the ground delay bills now pending in Arizona, California, Florida, Indiana, Michigan, New Jersey, Pennsylvania, Rhode Island and Washington.  If state ground delay legislation is enacted and upheld by other circuit courts (such as the passenger-friendly Ninth Circuit, which includes California), then the preemption issue might ultimately find its way back to the Supreme Court.