McLafferty v. Deutsche Lufthansa A.G. et al. (E.D. Pa. Oct. 16, 2009).  In her class action complaint, the plaintiff alleged that Lufthansa, Air France, KLM and Alitalia had engaged in price fixing in violation of the Sherman Act.  She alleged that, at a 2003 IATA meeting, the airlines agreed to impose surcharges on fares for passenger travel between Europe and Japan.

At the court’s direction, the parties briefed the issue of whether the Foreign Trade Antitrust Improvements Act of 1982, which amended the Sherman Act, excluded the case from the subject matter jurisdiction of the federal courts.

The FTAIA amended the Sherman Act by excluding certain conduct involving trade or commerce with foreign nations from federal courts’ subject matter jurisdiction.  In cases involving alleged restraints on commerce with foreign nations, the court first determines if the defendants’ conduct involved “trade or commerce (other than import trade or import commerce) with foreign nations.”  If so, the court does not have subject matter jurisdiction unless the defendants’ conduct involved a “direct, substantial, and reasonably foreseeable” anticompetitive effect on U.S. commerce that would result in a Sherman Act claim.

The court held that the defendants’ conduct involved “trade or commerce with foreign nations” because they had sold tickets to a U.S. purchaser for foreign travel, but that such purchases did not constitute “import trade or import commerce” because they did not “bring any goods or services to the United States.”  The court ruled that an airline ticket, even if it is delivered in the U.S., is not a “good” because it has no value apart from the service to which its bearer is entitled.

Thus, the plaintiff’s last chance to escape the FTAIA’s jurisdictional bar was to show that she had made sufficient allegations that defendants’ conduct had a direct, substantial and reasonably foreseeable anticompetitive effect on U.S. commerce.  The court held that the plaintiff’s pleadings did not even suggest that the defendants’ conduct had such an effect, that the plaintiff’s injury was in the Europe-Japan fare market and that such injury did not directly affect U.S. commerce.  Accordingly, the court dismissed the case on the grounds that the FTAIA had removed it from the court’s subject matter jurisdiction.

UPS Supply Chain Solutions, Inc. v. American Airlines, Inc. (N.D. Ill. Aug. 14, 2009).  For a cargo damage claim, Article 31(2) of the Montreal Convention requires that “the person entitled to delivery must complain to the carrier forthwith after the discovery of the damage,” and, at the latest, within 14 days from the date of receipt of the cargo.  Article 31(3) requires that such complaint be “in writing.”  Article 31 does not contain any further requirements regarding the contents or form of the complaint.

In this case, American had agreed to transport 80 drums of fish oil for UPS from Japan to Illinois.  Upon arrival, the cargo spoiled because the drums were not refrigerated.  Within the 14-day notice period, a UPS employee sent a letter to American stating as follows:

This is to inform you that our customer is refusing this shipment due to the fact that is [sic] was left in a ULD and not kept cool.  From what I understand the freight was left outside in a container during days reaching 80 degree’s [sic] and the product spoiled. The product was valued well over $80,000 USD.  Please advise what the airline plans to do with this product.  All your help is deeply appreciated.

American moved for summary judgment on the grounds that the letter failed to give adequate notice of UPS’s complaint because it did not contain an express statement of UPS’s intent to hold American liable for the cargo damage.  The court rejected American’s argument, holding that the text of Article 31 only required that the complaint give notice that the cargo had been damaged and that UPS’s letter had adequately done just that.

Travers v. JetBlue Airways Corporation (D. Mass. July 23, 2009).  According to the plaintiff skycaps, JetBlue diverted tip revenue to itself by imposing a $2 fee for each bag checked by a passenger at the curbside.  The skycaps claimed that their compensation, most of which took the form of tips, had decreased substantially because few passengers gave them tips after paying the airline’s $2 curbside check-in fee.

In their amended complaint, the skycaps sought damages and injunctive relief under the federal Fair Labor Standards Act, the Massachusetts Minimum Wage Law, the Massachusetts Tips Law and various state common law tort doctrines.  JetBlue moved to dismiss the state statutory and common law claims on the grounds that they were preempted by the Airline Deregulation Act, 49 U.S.C. § 41713(b)(1), 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 that may provide air transportation under this subpart.”

The court granted JetBlue’s motion.  In its ruling, the court relied on New Hampshire Motor Transport Ass’n v. Rowe, 448 F.3d 66 (1^st Cir. (Me.) 2006), aff’d, 128 S.Ct. 989 (2008), for support of the proposition that the ADA preemption analysis must focus “on the effect that the state law has on airline operations,” not on “the state’s purpose for enacting the law.”  The court in Travers held that because a verdict for the plaintiffs on their state law claims would have a significant effect on the “price” of JetBlue’s curbside check-in “service,” such claims were preempted as “related to a price, route, or service of an air carrier.”

In making his ruling, the judge in Travers disagreed with a decision by another U.S. district judge in Massachusetts, who had ruled in favor of the skycaps on the same ADA preemption issue two years before in a case against a different airline.  In DiFiore v. American Airlines, Inc., 483 F. Supp.2d 121 (D. Mass. 2007), the judge held that the ADA did not preempt the skycaps’ claims, reasoning that the relationship between employee claims and an airline’s “price, route, or service” is “too tenuous to support preemption.”  The judge in Travers disagreed with the judge’s reasoning in DiFiore, ruling instead that a court’s ADA preemption analysis must focus on the effect of the state law on the airline’s prices and services, not on the identity of the particular plaintiff in the case.

Note:  In 2008, a jury in the DiFiore case awarded the skycaps damages exceeding $325,000 on their state statutory and common law claims.

Mullaney v. Delta Air Lines, Inc. (S.D.N.Y. June 3, 2009).  According to the plaintiff, Delta canceled his return flight from Paris to New York due to a strike by employees of Air France (Delta’s codeshare partner) and breached its written promise to reimburse customers who booked substitute flights on other airlines.  In his class action complaint, the plaintiff sought the refund of his unused Paris-New York ticket, the expenses he incurred during the extra days he spent in Paris waiting for a flight to New York, attorneys’ fees and punitive damages.  The complaint set forth causes of action for violation of New York’s consumer protection statute, promissory estoppel and unjust enrichment.

Delta moved to dismiss on the grounds that the Montreal Convention preempts the complaint’s state law causes of action.  The airline characterized the plaintiff’s claims as delay claims, and argued that, as such, they are preempted because Article 19 of the Convention provides that an airline is liable for “damage occasioned by delay in the carriage by air of passengers, baggage or cargo.”

The court sided with the plaintiff, holding that his claims are not preempted because they are not for delay but for non-performance of the airline’s carriage obligation.  The court reasoned that the claims are for non-performance because the plaintiff had tried, without success, to obtain alternative transportation on another Delta flight and that, despite his efforts, the airline was unable to transport him.

In the typical case in which a court holds that a plaintiff’s claims are for delay rather than non-performance, the plaintiff impatiently obtained alternative transportation on a different airline’s flight without waiting to find out whether the defendant airline would be able to transport him.  Here, according to the court, the plaintiff waited three days beyond his scheduled departure date, during which time Delta was unable to transport him, before he departed on a different airline’s flight.  The court noted that, even on the day the plaintiff departed, Delta could not have transported him due to the ongoing strike.

Update:  On July 29, 2009, the court denied the plaintiff’s motion for class certification.  The court held that, because individualized proof would be required to establish the airline’s liability for fraud, the plaintiff, who the court described as “a lawyer who obviously does not have enough client work to keep him busy,” had failed to meet the requirement that the proposed class members’ common questions be susceptible to generalized rather than individualized proof.  In support of its ruling, the court also noted that the plaintiff’s claims might differ from those of the other members of the proposed class because the plaintiff is subject to the “particular defense” that he failed to comply with Delta’s procedure for obtaining a refund.  That procedure, which is set forth in Delta’s Conditions of Carriage, required that the plaintiff turn in the unused portion of his ticket before its expiration, i.e., within one year from the date of travel from the point of origin.

American Airlines, Inc. v. Imhof and Delta Airlines, Inc. (S.D.N.Y. June 3, 2009).  After 22 years as an American employee, the managing director of the airline’s New York Sales Division resigned to accept a similar job with Delta.  During the weeks before he resigned, he copied various documents relating to American’s business, including a PowerPoint presentation involving New York passenger sales, from American’s computers to his personal possession.  He did so by downloading some documents to his personal (and newly-purchased) external hard drive and by emailing other documents to his “family e-mail address.”  He even bought a BlackBerry for the purpose of “transferring the contacts on his American-issued BlackBerry to his own.”

After the employee had started work for Delta, American discovered that he had copied the documents and promptly filed a lawsuit seeking an injunction barring him from continuing to work for Delta and for other relief.  Delta claimed that it had not received any of American’s documents from the employee, who offered to return the documents to American or destroy them.

The court granted American’s motion for a temporary restraining order but denied its motion for a preliminary injunction, primarily on the grounds that American had failed to prove that it was likely to suffer “irreparable injury” in the absence of the injunction.  In support of its ruling as to “irreparable injury,” the court found that there was “no material risk” that the employee would retain copies of the downloaded documents, “much less that he would disclose them to Delta,” that, in any event, the documents contained public information and “fluff” rather than “competitively sensitive information” and that American had failed to prove that it was likely to suffer any “material effect” from the employee’s use of sensitive company information that he may have memorized.

In the final paragraph of its opinion, the court suggested that the lesson of this case is that an employer should get an employee to sign a noncompete agreement to prevent the employee from going to work for a competitor rather than attempt to rely on a court to impose, in essence, “the substantial equivalent by judicial decree without paying for it.”  It seems, however, that American’s primary complaint was not that the employee had departed to work for a competitor, but that he had secretly stuffed his pockets with American’s trade secrets as he was on his way out the door to join the competitor.

Update:  On July 28, 2009, American filed a motion requesting that the court dismiss the case without prejudice, with each party to bear his or its own costs and fees.

Muoneke v. Compagnie Nationale Air France (5th Cir. Tex. May 12, 2009).  In 2004, the passenger traveled from Texas to Nigeria on Air France’s flights.  During a change of aircraft in Paris, Air France personnel required that the passenger check the baggage she had carried onto the prior flight.  The passenger claimed that when she arrived in Nigeria, cash and a camera were missing from her baggage.

The passenger sued Air France in a Texas state court.  Air France removed the case and successfully moved for summary judgment.   As previously reported, the Fifth Circuit reversed and remanded the case in 2007 because a factual issue precluded summary judgment.

On remand, the district court determined that the passenger’s actual loss totaled $1,242 but that the Warsaw Convention limited her recovery to $134.  The passenger then applied for an award of attorneys’ fees and costs but the district court held that fees are not recoverable under the Warsaw Convention.

In its opinion, the Fifth Circuit held that because the Montreal Convention had entered into force on November 4, 2003 and the events at issue had taken place in 2004, the Montreal Convention, not the Warsaw Convention, applied to the case.

Next, the appeals court rejected Air France’s argument that it had no liability to the passenger because its contract of carriage disclaimed liability for cash and cameras (and other valuable items) in checked baggage.  The court reasoned that the contract of carriage provision was inconsistent with Article 17 of the Montreal Convention, which subjected the airline to strict liability for baggage loss and damage (up to Article 22(2)’s limit of 1,000 Special Drawing Rights (“SDR”) per passenger).

The Fifth Circuit then held that Air France’s liability was capped at $1,580 under Article 22(2) of the Montreal Convention, which limits an airline’s liability for baggage loss, damage or delay to 1,000 SDRs per passenger (one SDR was equivalent to $1.58 at the time of the district court trial).  The appeals court then reversed the district court’s judgment and entered judgment for the passenger for $1,242, the amount of actual damages that the district court had determined that she had incurred.

Finally, the Fifth Circuit held that the passenger was not entitled to an award of attorneys’ fees but was entitled to recover her costs.  The court reasoned that, although the Montreal Convention does not prohibit the recovery of fees or costs, it does not provide an independent basis on which a court may award such amounts.  As to fees, the court held that they were not recoverable because the passenger had not identified any independent basis, such as a federal or state statute, for a fee award.  As to costs, the court held that they were recoverable under Federal Rule of Civil Procedure 54(d) and remanded the case to the district court for the sole purpose of calculating such costs (remarking that “[i]t is long past time for this litigation over $1,242.79 to end”).

Note:  The Fifth Circuit’s holding that the airline was liable for the loss of the cash and camera even though its contract of carriage purported to disclaim liability for these items is consistent with the “Guidance on Airline Baggage Liability and Responsibilities of Code-Share Partners Involving International Itineraries” that DOT issued on March 26, 2009.  The Guidance (which the Fifth Circuit did not cite) states as follows:  “Although carriers may wish to have tariff terms that prohibit passengers from including certain items in checked baggage, once a carrier accepts checked baggage, whatever is contained in the checked baggage is protected, subject to the terms of the [Montreal] Convention, up to the limit of 1000 SDRs (Convention, Article 22, para. 2).”  See 74 Fed. Reg. 14837-38 (Apr. 1, 2009).

On January 12, 2009, Senator Barbara Boxer reintroduced the Airline Passenger Bill of Rights Act with co-sponsor Senator Olympia Snowe.  Senator Boxer had introduced a similar bill in 2007, with Senator Snowe as its co-sponsor, but it was not enacted.  The pending bill, S. 213, has been referred to the Committee on Commerce, Science and Transportation.  Representative Mike Thompson introduced the identical House version, H.R. 624, which has been referred to the Committee on Transportation and Infrastructure.

The legislation would require that each “air carrier” (i.e., U.S. airline) submit a contingency plan for DOT review and approval that requires, where “the departure of a flight is delayed or disembarkation of passengers on an arriving flight that has landed is substantially delayed,” the provision of (i) “adequate food and potable water,” (ii) “adequate restroom facilities,” (iii) “cabin ventilation and comfortable cabin temperatures,” and (iv) “access to necessary medical treatment.”

The contingency plan must also “provide passengers with the option of deplaning and returning to the terminal at which such deplaning could be safely completed, or deplaning at the terminal” if “3 hours have elapsed after passengers have boarded the aircraft, the aircraft doors are closed, and the aircraft has not departed,” or “3 hours have elapsed after the aircraft has landed and the passengers on the aircraft have been unable to deplane.”

The option to deplane must be “offered to passengers at a minimum not less often than once during each successive 3-hour period that the plane remains on the ground.”

However, passengers would not have the option to deplane if the pilot “reasonably determines that the aircraft will depart or be unloaded at the terminal not later than 30 minutes after the 3 hour delay” or “that permitting a passenger to deplane would jeopardize passenger safety or security.”

The legislation would also require that airport operators submit contingency plans describing how they would handle passenger deplanements following long ground delays, as well as create a telephone complaint hotline for airline passengers.

In introducing S. 213, Senator Boxer made the following remarks:  “In 1999, the airlines had an opportunity to address the stranding of airline passengers on tarmacs across the country, but despite those efforts little has changed.  Last March a Federal appeals court ruling struck down New York State’s Passenger Bill of Rights law, stating that it is up to the Congress to set a national Federal standard.  Our legislation also includes a few additional provisions from the FAA Reauthorization bill passed by the House in the last Congress.  Our bill requires airports to develop plans to handle stranded passenger aircraft and creates a DOT hotline for consumer complaints.  It would also permit the DOT to levy fines against air carriers or airports that do not submit or adhere to the contingency plans.”

One cannot argue against the concept of access to adequate food, water, restrooms, fresh air and medical attention during a long ground delay.  The battleground will be the passengers’ right to deplane.  The concept of giving passengers the right to deplane looks harmless and plays well with the voting public.  The reality of exercising this right, and its unintended adverse consequences, is a different matter.

Under the legislation, a few passengers, or even a lone passenger, could exercise the right to deplane even if other passengers did not wish to do so.  Thus, one passenger could force the aircraft to leave its place in line on the taxiway and return to the terminal so he or she could deplane even if all the other passengers wished to remain on the aircraft.  Even if the bills were modified to require some form of passenger consensus in order to deplane, what form would that consensus take?  Would a majority of passengers be required?  If so, how would the passengers vote?  Voting might be feasible on a 70-passenger regional jet, but how would voting be conducted on an A380 loaded with 853 passengers?  Who would oversee the voting?  Would flight attendants serve as poll watchers, with the pilots serving as judges to scrutinize the “hanging chads”?

Even if the passengers were to vote to return to the terminal, the typical 75-foot wide taxiway is too narrow to permit an aircraft to make a “u-turn” and taxi past the aircraft in line behind it back to the terminal.  And what would happen if the aircraft did return to the terminal?  The aircraft would lose its place in line and it is likely that the flight would be canceled due to scheduling issues or crew rest requirements.

Some commenters have suggested the use of specialized buses and hardstands to allow deplaning without returning to the terminal, but requiring airlines and airports to make these equipment and infrastructure enhancements is likely to result in higher fares.  These same commenters have argued that taxiway deplanements will not result in canceled flights because only those passengers who wish to deplane would do so, leaving the remaining passengers to continue on the flight.  But what about the checked baggage of those passengers who wish to deplane?  If passengers with checked baggage are allowed to deplane, their baggage will fly without them.  Although the concept of deplaning on a taxiway seems like such a simple solution, it is not so simple after all.

While S. 213 and H.R. 624 move through Congress, DOT is moving along a parallel track with its “Enhancing Airline Passenger Protections” notice of proposed rulemaking (Docket No. DOT-OST-2007-0022).  Like the pending bills, the proposed regulations would only apply to U.S. airlines.  The most controversial element of the proposed regulations is the requirement that airlines adopt a “contingency plan for lengthy tarmac delays” and a “customer service plan” (covering matters such as “offering the lowest fare available” and “notifying consumers of known delays”) and incorporate such plans into their contracts of carriage.  In comments on the NPRM, ATA argued that DOT lacks the authority to dictate contract terms between airlines and their passengers, while passenger advocates criticized the proposed regulations for failing to set minimum standards for the contingency plans.

Frequent Flyer Depot, Inc., George Pirkle and Robert Pirkle v. American Airlines, Inc. (Tex. Ct. App. Feb. 26, 2009).  American’s AAdvantage frequent flyer program prohibits the purchase or sale of the program’s mileage credit or award tickets and makes such mileage or tickets void if transferred for cash or other consideration.  American sued Frequent Flyer Depot, and its owners, George and Robert Pirkle, for brokering AAdvantage mileage credit and award tickets.  In its petition, American stated causes of action for tortious interference with contract, tortious interference with prospective relations, fraud and misappropriation.

In September 2008, the trial court granted the airline’s request for a temporary injunction and issued an order enjoining the brokers from purchasing, brokering, bartering, selling, offering for sale or soliciting AAdvantage mileage credit or award tickets through the completion of the trial.  The brokers appealed the temporary injunction order, disputing its imposition for seven separate reasons:  “the underlying suit is pre-empted by federal law; the injunction does not preserve the status quo; there is no enforceable contract between American and its AAdvantage® members prohibiting members from selling their rewards points to third parties; the hearing on the temporary injunction should have been continued for appellants to obtain discovery on their antitrust-related counterclaims; American failed to show an imminent injury; American has an adequate remedy; and principles of equity bar the imposition of an injunction.”

The appeals court rejected all of the brokers’ arguments.  Most notably, the court held that American’s contract with its AAdvantage members is based on mutuality of obligation and thus is enforceable.  The brokers contended that the contract lacks mutuality of obligation, and thus is unenforceable, because it allows American to unilaterally change the terms of the program with or without notice and to terminate the program with six months notice.  The brokers argued that if the contract is not enforceable, then the airline cannot state a cause of action for interfering with that contract.  The court disagreed, noting that the contract does impose sufficient obligations on American to support a finding of mutuality, including the obligations to provide customers with mileage credit when certain conditions are met and to issue award tickets in exchange for such credit.

The court’s other noteworthy ruling is that American was able to prove irreparable injury by showing that the brokers’ conduct disrupted the airline’s business by forcing it to divert personnel resources to deal with void brokered tickets and that the airline was not required to provide evidence that use of award tickets brokered by the defendants actually resulted in the displacement of fare-paying passengers from specific flights.

Note:  In May 2008, the federal district court in Alaska Airlines v. Carey, which is pending in the state of Washington, rejected a similar mutuality of obligation argument that had been made by the frequent flyer mileage brokers in that case.

Jones v. USA 3000 Airlines (E.D. Mo. Feb. 9, 2009).  During a flight from St. Louis to Jamaica, a flight attendant allegedly pushed a service cart into the passenger’s knee, causing damage to the passenger’s “entire nervous system which had been severely shocked and deranged.”  The passenger filed a lawsuit against the airline in state court.

The airline removed the case to federal court on the grounds that the parties’ rights related to the incident were governed by the Montreal Convention, which completely preempted the passenger’s state law cause of action.  The passenger moved to remand the case, arguing that because Jamaica is not a signatory to the Convention, the flight at issue was not “international carriage” as defined by the Convention.  The passenger’s ticket was for round-trip transportation between St. Louis and Jamaica.

The Convention “applies to all international carriage of persons, baggage or cargo performed by aircraft for reward.”  Article 1(1).  Article 1(2) defines “international carriage” as follows:  “For the purposes of this Convention, the expression international carriage means any carriage in which, according to the agreement between the parties, the place of departure and the place of destination, whether or not there be a break in the carriage or a transhipment, are situated either within the territories of two States Parties, or within the territory of a single State Party if there is an agreed stopping place within the territory of another State, even if that State is not a State Party” (emphasis in original).

The court denied the passenger’s motion.  Citing numerous cases, the court concluded that, for round-trip international travel, “the place of destination” is the same as “the place of departure” and that it was irrelevant that the passenger’s outbound flight was to Jamaica, which is not a party to the Convention.  Thus, the court held that the Convention applied because the passenger’s “place of destination” was St. Louis, not Jamaica, and because the United States is a party to the Convention.  The court also held that the Convention completely preempted the passenger’s state law cause of action.

Note:  Where, as in the passenger’s memorandum in support of her remand motion, your only supporting precedent is a dissenting opinion in a 1977 case, you know your argument is a long shot.  Where the judge who wrote that dissenting opinion relied solely on Homer’s “The Odyssey” as support for his position, you really know your argument is a long shot.  It is not often that one sees a quote like this in an opinion:  “Even Ulysses, that most widely travelled of ancient heroes, was also most intent upon returning home.  Doubtless when he embarked from his home in Ithaca he always intended to return there once he had attended to his business in Troy.  But the fact that one intends to return home does not mean that that is where one is going when one sets out on a voyage.”

Update:  USA 3000 Airlines subsequently moved for summary judgment on the grounds that the passenger’s claims were time-barred under Article 35(1) of the Montreal Convention, which provides as follows:  “The right to damages shall be extinguished if an action is not brought within a period of two years, reckoned from the date of arrival at the destination, or from the date on which the aircraft ought to have arrived, or from the date on which the carriage stopped.”  Because the passenger had arrived at her destination in August 2005 but did not file the lawsuit until October 2008, the court granted the airline’s motion.

Narkiewicz-Laine v. Scandinavian Airlines Systems (N.D. Ill. Sept. 12, 2008).  In his state court complaint, the passenger claimed that (i) the airline’s delay of a certain international flight in March 2008 caused him to miss his connecting flight, and (ii) the airline refused to refund his ticket for an international flight scheduled for June 2006, even though he had called on the day of departure to advise the airline that he was sick and thus unable to travel that day.

The airline removed the case to federal court, contending that the Montreal Convention provided, in Article 19, the exclusive cause of action for the passenger’s delay claim, thus preempting his state law breach of contract claim for delay and giving the court original jurisdiction over such claim, and that the court had supplemental jurisdiction over the passenger’s state law breach of contract refund claim.  The plaintiff moved to remand the case to state court.

The court sided with the passenger.  Citing a recent Seventh Circuit case, the court held that because the Montreal Convention’s conditions and limits, including Article 19, only operate as affirmative defenses to a passenger’s claims, such provisions do not provide a basis for federal question subject matter jurisdiction.  Accordingly, the court remanded the case to state court.

Note:  In making its ruling, the court acknowledged that in Knowlton v. American Airlines, Inc., which is discussed here, the Maryland federal district court took a much broader view of Montreal Convention preemption.