Court’s narrow view of Montreal Convention preemption results in remand to state court

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.

Court requires airline to disclose passenger contact information, but not employee contact information, in refusal to transport case

Nathaniel v. American Airlines (D. Virgin Islands Nov. 20, 2008).  According to the passenger, airline personnel forced her off the aircraft before the domestic flight and refused to transport her because they had determined “she was too fat” and represented a safety “hazard.”  The passenger’s complaint, which set forth causes of action for breach of the duty of good faith and fair dealing, misrepresentation, negligence and negligent and intentional infliction of emotional distress, alleged that the conduct of the airline personnel caused her to suffer humiliation and medical injuries and that the airline was vicariously liable for such conduct.

During discovery, the passenger moved to compel the airline to disclose (i) the home addresses and telephone numbers of the employees who the airline had identified in its initial disclosures as having information about the events at issue, and (ii) the passenger manifest for the flight.  The magistrate judge denied the motion, and the passenger appealed to the district judge.

The district judge ruled that the airline was not obligated to disclose its employees’ home addresses and telephone numbers because Model Rule of Professional Conduct 4.2 prohibited the passenger’s attorneys from contacting such employees ex parte, as their conduct with respect to the passenger could be imputed to the airline for purposes of determining its liability.  As to the passenger manifest, the court ruled that, despite a federal regulation requiring that airlines keep passenger contact information confidential (14 C.F.R. § 243.9), the airline was required to produce such information subject to a protective confidentiality order.  The court reasoned that other passengers on the aircraft had apparently witnessed the incident at issue and that the passenger had no other means of obtaining their contact information, and the court took note of two other cases in which the courts had held passenger manifests to be discoverable subject to confidentiality orders.

Court rules that it lacks subject matter jurisdiction in case against Spanish airline involving passenger in-flight death

Aikpitanhi v. Iberia Airlines of Spain (E.D. Mich. Mar. 31, 2008).  The plaintiffs’ son died during an Iberia flight from Spain to Nigeria in 2007 while being deported.  The plaintiffs sued Iberia, alleging that Spanish law enforcement agents, by their conduct before and during the flight, caused the death of their son and that airline personnel assisted the agents by covering him with a sack.  The plaintiffs are citizens and residents of Nigeria, as was their son.

Iberia 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 in a U.S. court under the Convention only when the U.S. 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) the “principal and permanent residence” of a passenger.  (The fifth jurisdictional basis, which does not exist under the Warsaw Convention, is only available in cases involving the death or injury of a passenger.)

The plaintiffs argued that the court had subject matter jurisdiction under the first basis, “the domicile of the carrier,” because Iberia had been incorporated in Florida as a foreign corporation since 1966.  The court disagreed.  Relying on cases decided under the Warsaw Convention, the court held that Iberia’s “domicile” for purposes of the Montreal Convention is Spain, where the company is incorporated and has its headquarters.  The court sided with earlier cases in holding that, under the Warsaw and Montreal Conventions, an airline has only one “domicile.”

The court also rejected the plaintiffs’ argument that the court had subject matter jurisdiction under the Alien Tort Claims Act, 28 U.S.C. § 1350, holding that because the plaintiffs’ son died during an international flight, the Montreal Convention applied and provided the plaintiffs’ exclusive remedy.

Note:  The plaintiffs did not appeal the court’s ruling, which leads one to wonder whether they refiled this high-profile case in Nigeria or Spain.  If you have information on this matter, please email me at ksn@nvflyer.com and I will update this post.

Court holds that airline met applicable standard of care in disabled passenger slip and fall case

Elassaad v. Independence Air, Inc. (E.D. Pa. Aug. 20, 2008).  After a domestic flight, the passenger “fell down the airplane’s stairway” while disembarking from the aircraft.  At the time of the fall, the passenger “had an above-the-knee amputation of his right leg and relied on two crutches to walk” but did not use a wheelchair.  The fall caused the passenger to suffer a shoulder injury.

Independence Air moved for summary judgment on the grounds that it had met the applicable standard of care, which it asserted was set forth in 14 C.F.R. § 382.39(a).  That regulation provides as follows:  “Carriers shall provide assistance requested by or on behalf of qualified individuals with a disability, or offered by air carrier personnel and accepted by qualified individuals with a disability, in enplaning and deplaning.”  The airline contended that, under this regulation, it would have been obligated to provide the passenger with assistance only if (i) he had asked for it, or (ii) a flight crew member had offered him assistance and he had accepted such offer.

In opposition to the summary judgment motion, the passenger asserted that the applicable standard of care was set forth in 14 C.F.R. § 91.13(a), a more general regulation that applies only where no specific regulation governs.  Section 91.13(a) provides as follows:  “No person may operate an aircraft in a careless or reckless manner so as to endanger the life or property of another.”

The court agreed with the airline that the more specific standard of care applied to the facts of the case.  Because the passenger had admitted that, before his fall, he had not asked for assistance in deplaning and had not been offered any assistance, the court held that the airline had met the applicable standard of care.  The court also held that because the passenger did not use a wheelchair, the airline had no obligation to inform him that a ramp and wheelchair were available to transport him from the aircraft.  Accordingly, the court granted the airline’s motion.

Note:  On September 16, 2008, the passenger noted his appeal of the court’s ruling to the Third Circuit.

Virginia ruling returns to haunt ARC’s collection efforts against agency owner in California

Airlines Reporting Corporation v. Commercial Travel Corporation (S.D. Cal. Aug. 1, 2008).  In 2004, ARC was pursuing two separate lawsuits in the U.S. District Court for the Eastern District of Virginia in which Mario Renda was a defendant, ARC v. Uniglobe Fairway Travel, Inc. and ARC v. Commercial Travel Corporation.  In both cases, ARC alleged that Renda, as an owner and officer of the defendant travel agencies, was personally liable for the agencies’ failure to remit the proceeds from airline ticket sales.

In the Commercial Travel case in Virginia, a magistrate judge issued a report and recommendation in 2004 recommending that the court enter a default judgment against Renda.  The magistrate judge did not analyze whether the court had personal jurisdiction over Renda, a California resident; he simply concluded that, “based on the allegations and facts contained in [ARC’s] Complaint, personal jurisdiction over the Defendants is appropriate pursuant to Va. Code § 8.01-328.1.”  In 2007, after the case had been resolved with respect to the other defendants, the court adopted the report and recommendation and entered a default judgment against Renda for $701,942.

In the Uniglobe case, a different magistrate judge issued a report and recommendation in March 2005 analyzing the court’s personal jurisdiction over Renda in detail and recommending that the court dismiss the case as to Renda on the grounds that it lacked personal jurisdiction over him.  That same month, the court adopted the report and recommendation and issued an order dismissing the Uniglobe case as to Renda.

In February 2008, ARC registered the Commercial Travel default judgment against Renda in the U.S. District Court for the Southern District of California.  Renda moved to vacate the default judgment under FRCP 60 on the grounds that it was void because the Virginia court lacked personal jurisdiction over him.  Renda argued that the Virginia court’s 2005 order as to personal jurisdiction in the Uniglobe case had the effect of collaterally estopping ARC from relitigating the personal jurisdiction issue in the Commercial Travel case before the California court.

The California court agreed with Renda.  It found that Renda had proved the applicability of the collateral estoppel doctrine by showing that (i) both ARC and Renda were parties to the Uniglobe case, (ii) the court in that case actually heard and decided the question of its personal jurisdiction over Renda, and (iii) the court’s ruling was essential to its dismissal of the case as against Renda.  Accordingly, the California court held that it could rely on the Uniglobe ruling as a basis for holding that the default judgment against Renda in the case before it was void.  The court then granted Renda’s motion and vacated the default judgment.

Update:  After the court entered its order vacating the default judgment, Renda moved for an award of attorneys’ fees and costs totaling over $37,000 against ARC under the Agent Reporting Agreement’s fee-shifting clause.  On September 23, 2008, the court denied Renda’s motion.  It ruled that, under the ARA, fees and costs are only recoverable by an “Agent” within the meaning of the ARA and that Renda, as he himself persuasively argued in his motion to vacate, never was an “Agent” under the ARA.

ATPCO not liable to Alitalia for fare coding mistake

Alitalia Linee Aeree Italiane, S.p.A. v. Airline Tariff Publishing Company (S.D.N.Y. Sept. 5, 2008).  ATPCO serves airlines by collecting and distributing their fare data.  Over 500 airlines throughout the world send fare data to ATPCO, which electronically distributes such data to global distribution systems (such as Sabre, Amadeus/System One, Worldspan and Galileo) and computer reservation systems.  ATPCO is owned by 24 domestic and foreign airlines and the company and its predecessor entities have been in existence since 1945.

In 1986, Alitalia and ATPCO entered into a written agreement that governed ATPCO’s provision of fare data services to the airline.  That agreement contained a clause in which ATPCO disclaimed liability for consequential damages resulting from any error made in incorporating or distributing Alitalia’s fare data.  The agreement also contained ATPCO’s agreement to act as Alitalia’s “agent” for purposes of incorporating and distributing the airline’s fare data.

Early in February 2004, Alitalia sent a fax to ATPCO setting forth instructions for reducing fares during the airline’s “low season” (February 21 through April 4).  In entering the fare information into ATPCO’s database, an ATPCO employee made a coding mistake (typing the number “41” rather than “40” into a certain field) that resulted in the reduced fares being entered without any date restriction.  ATPCO then distributed the erroneous fare data to the participating global distribution systems and computer reservation systems.  Three days later, the mistake was caught and corrected, but not before numerous happy customers had bought Alitalia tickets at heavily, and mistakenly, discounted fares.

Alitalia sued ATPCO, alleging causes of action for breach of contract, breach of fiduciary duty, negligence and gross negligence.  Alitalia alleged that ATPCO’s conduct had caused the airline to lose over $3.7 million in revenue.

The parties filed cross-motions for summary judgment on the issue of ATPCO’s liability.  Alitalia argued that ATPCO’s error constituted a breach of the parties’ agreement, a breach of ATPCO’s independent fiduciary duty to Alitalia and, because ATPCO allegedly had a history of similar fare coding mistakes yet had failed to take adequate steps to prevent more mistakes from occurring, gross negligence.  Understandably, ATPCO stood behind the limitation of liability clause, arguing that the court should make Alitalia “lie in the bed it made more than 20 years ago” when it, a sophisticated commercial entity, agreed to the limitation of liability clause as part of the agreement.

The court granted summary judgment in favor of ATPCO.  The court held that the limitation of liability clause applied to ATPCO’s error and precluded Alitalia from recovering its lost revenue consequential damages from ATPCO.  The court also held that even though ATPCO had been acting as Alitalia’s “agent,” Alitalia’s breach of fiduciary duty cause of action was also subject to the contract’s limitation of liability clause.  Finally, the court rejected Alitalia’s negligence and gross negligence causes of action because all of the parties’ duties to each were set forth in their agreement, and ATPCO had no data input duties to the airline that were separate from those set forth in the agreement.  Thus, the court held, all of Alitalia’s claims against ATPCO were contractual in nature, and Alitalia had contracted away its ability to recover consequential damages arising from any ATPCO mistake in incorporating or distributing the airline’s fare data.

Note:  This case did not progress far enough so that damages issues were litigated.  If it had, would Alitalia have been able to prove that, for each ticket sold at an incorrect fare, its damages consisted of the difference between the incorrect and correct fares?  ATPCO probably would have contended that, to recover such damages, Alitalia bore the burden of proving that the customers who bought tickets at the lower, incorrect fares would have purchased tickets at the substantially more costly correct fares or that passengers holding the incorrectly-fared tickets occupied seats that would otherwise have been occupied by passengers who paid the correct fare amounts.  Perhaps the answer to this question would have been found in the frequent flyer mileage brokering opinions of the early 1990’s, including the opinion in American Airlines v. Christensen in which the Tenth Circuit held that the airline was entitled to full fare damages against the mileage brokers.

Another issue, which ATPCO apparently anticipated via the mitigation of damages affirmative defense it asserted, is whether Alitalia had a duty to mitigate its damages by rescinding the incorrectly-fared tickets under the unilateral mistake doctrine described in Restatement (Second) of Contracts § 153.  Unless Alitalia appeals the court’s decision (which seems unlikely given that the airline recently filed for bankruptcy protection and that it has been losing $3 million a day), and wins on appeal (which is even more unlikely), we will never know the answers to these questions.

Passenger ground delay case is trimmed but survives

Ray v. American Airlines, Inc. (W.D. Ark. Aug. 22, 2008).  The passenger’s December 2007 flight on American from Oakland to Dallas was diverted to Austin due to weather conditions.  The passenger claims that she was confined to the aircraft in Austin against her will and that she endured “deplorable conditions” during the 11-hour ground delay.

The passenger filed a lawsuit against American, alleging causes of action for false imprisonment, intentional infliction of emotional distress, negligence, breach of contract and fraud.  American moved to dismiss the passenger’s claims on the grounds that they are preempted by the federal Airline Deregulation Act and the Federal Aviation Act and that, moreover, she failed to allege sufficient facts to state a claim under her various state common law causes of action.

The court rejected most of American’s preemption arguments.  As to the Airline Deregulation Act, the court reasoned that while an “affirmative regulation” that impacts an airline’s “business functions” would be preempted by the ADA, the passenger’s tort claims were not preempted because “allowing an individual to recover for injuries tortiously caused by a carrier does not create any such regulation.”  The court did find, however, that the ADA preempted the passenger’s claims for compensation for lodging, meals and ground transportation, since the U.S. Department of Transportation has implemented regulations requiring such compensation when flights are overbooked but not when flights are canceled for weather-related reasons.  The court also held that the ADA preempted the passenger’s breach of the implied covenant of good faith and fair dealing claim to the extent that it sought to enlarge the scope of the airline’s specific contractual obligations.

As to the Federal Aviation Act, which preempts the field of passenger health and safety on commercial aircraft, the court held that this statute preempted the passenger’s claims regarding the airline’s decision to divert her flight due to safety concerns but that it did not preempt her claims that are based on the airline’s conduct after the flight was diverted and on the ground in Austin.

Next, the court considered whether the passenger had stated a claim under her various state common law tort causes of action.  The court held that the passenger had properly stated claims for false imprisonment, intentional infliction of emotional distress and negligence but that she had failed to state claims for breach of contract and fraud.  The court granted the passenger leave to file a second amended complaint in which she could allege additional facts to remedy the defects in her first amended complaint and add additional claims.

Note:  The court’s preemption rulings in this case are very similar to those that a California federal district court made in April 2008 in Hanni v. American Airlines, Inc.  The Hanni case involves a passenger’s claims regarding a ground delay during a December 2006 flight from San Francisco to Mobile, Alabama.  As a result of her experience, Ms. Hanni not only sued but also founded the Coalition for an Airline Passengers’ Bill of Rights, which operates www.flyersrights.com.

Ninth Circuit again rejects passengers’ deep vein thrombosis arguments

Twardowski v. American Airlines, Inc. (9th Cir. (Cal.) July 30, 2008).  The passengers in these consolidated appeals alleged that they had suffered injuries from deep vein thrombosis (“DVT”) they had developed during flights for which they had bought tickets between 2001 and 2004.  They alleged that the airlines were liable for such injuries because the airlines had not warned the passengers of the risk of developing DVT, despite public statements that the International Air Transport Association (“IATA”), airline medical officers, and even the august English House of Lords, had made, before the flights at issue, suggesting that the airlines issue such warnings.

Before the trial court, the airlines had successfully moved for summary judgment under Article 17 of the Warsaw Convention, which applied to the flights at issue and thus provided the passengers’ exclusive remedy against the airlines.  Article 17 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 the event of the death or wounding of a passenger or any other bodily injury suffered by a passenger, if the accident which caused the damage so sustained 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” under Article 17 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 separate prior decisions, the Ninth Circuit had held that developing DVT during a flight is not an “accident” within the meaning of Article 17, and that an airline’s failure to warn about the risk of DVT is not an “event” within the meaning of the foregoing Supreme Court definition of an “accident.”  In Twardowski, the passengers – reaching for what was almost certainly the last arrow in the DVT quiver – argued that the airlines’ failure to comply with the suggestions by IATA and others to warn passengers about DVT was an unexpected “event” and, thus, an “accident” within the meaning of Article 17.

The Ninth Circuit rejected the passengers’ arguments.  It reasoned that an airline’s failure to warn a passenger about DVT does not become an unexpected “event,” and thus an Article 17 “accident,” just because various groups and individuals have publicly suggested that the airline give such warnings.  The court drew a distinction between the general suggestions made to the airlines in this case and the specific requests for health-related assistance made by passengers to airlines in certain other cases in which the courts held that the airlines’ failure to comply with those requests constituted an unexpected “event.”

Passenger unable to break Montreal Convention baggage liability limit

Bassam v. American Airlines (5th Cir. (La.) July 14, 2008).  Four months after her international flight, American Airlines delivered the passenger’s missing baggage to her.  The passenger claimed that items were missing from the baggage, and she sued the airline in state court for over $5,000 for the value of the missing items.  The airline removed the case to federal court, where the passenger amended her complaint to add a claim for $15,000 for the “embarrassment and upset of not being able to dress and appear in public as was her prior practice.”

American moved for summary judgment on the grounds that (i) the passenger’s recovery for her baggage loss was limited to 1,000 Special Drawing Rights (approximately $1,540 at that time) under Article 22(2) of the Montreal Convention, and (ii) the passenger could not recover anything for her “embarrassment” claim because damages for emotional distress not caused by a physical injury are not recoverable under the Convention.

As to the liability limit issue, the passenger argued that the limit did not apply under Article 22(5) of the Convention; that provision removes the Article 22(2) limit “if it is proved that the damage resulted from an act or omission of the carrier, its servants or agents, done with intent to cause damage or recklessly and with knowledge that damage would probably result” and “it is also proved that such servant or agent was acting within the scope of its employment.”  The passenger contended that “[t]he four (4) month delay in recovery of the luggage, allowing [her] personal belongings to be ransacked and stolen, compounded with [American’s] refusal to take any meaningful steps to help [her] in an obvious time of need, makes [American’s] actions much more egregious, certainly rising to the level of what any impartial traveler would consider ‘willful misconduct’.”  In essence, the passenger argued that, by themselves, the delay in delivery and the losses she incurred eliminated any need for her to prove that the airline actually engaged in the type of conduct described in Article 22(5) that would result in the lifting of the liability limit set forth in Article 22(2).

The trial court rejected the passenger’s arguments and was affirmed by the Fifth Circuit.  On the liability limit issue, the appeals court held that, to break the limit under Article 22(5), a passenger must prove facts showing that airline personnel either (i) intended to cause damage, or (ii) acted recklessly with the subjective knowledge that damage would probably result from their conduct.  The Fifth Circuit held that the passenger had failed to meet this “heavy” burden by merely resting on the allegations in her pleadings regarding the delay in delivery of her baggage and the losses she incurred.  It also affirmed the trial court’s ruling with respect to the passenger’s emotional distress claim.

Note:  Before the trial court, the passenger had also argued that the Article 22(2) limit did not apply because she had not been notified of the limit before her flight.  She cited Article 3(4), which provides that “[t]he passenger shall be given written notice to the effect that where this Convention is applicable it governs and may limit the liability of carriers in respect of death or injury and for destruction or loss of, or damage to, baggage, and for delay.”  The trial court cited the plain language of Article 3(5) in rejecting her argument; that provision states that “[n]on-compliance with the provisions of the foregoing paragraphs shall not affect the existence or the validity of the contract of carriage, which shall, nonetheless, be subject to the rules of this Convention including those relating to limitation of liability.”  The passenger did not raise this issue on appeal.

Court denies passenger recovery against airline for loss of itinerant robot head

Hanson v. America West Airlines, Inc. (C.D. Cal. Mar. 29, 2008).  Sometimes the truth is stranger than fiction or even science fiction.  The passenger in this case, a roboticist, sued the airline for the loss of “an artistically and scientifically valuable robotic head modeled after famous science fiction author Philip K. Dick.”  According to the court, “Dick’s well-known body of work has resulted in movies – such as Total Recall, Blade Runner, Minority Report, and A Scanner Darkly, and a large group of admirers has grown following his death in Orange County, California, in 1982.”

The passenger was traveling from Texas to San Francisco with a connection in Las Vegas.  He lost his head by leaving it in an overhead compartment when he departed the aircraft in Las Vegas to catch his flight to San Francisco.  According to the passenger, the airline found the head and promised to deliver it to him San Francisco, but the head never showed up.  The passenger claimed that he and his head have never come face to face again.  As damages, the passenger sought the value of the head, which he put at $750,000.

The airline moved for summary judgment on the grounds that its contract of carriage, which provided that the airline “assumes no responsibility or liability for baggage, or other items, carried in the passenger compartment of the aircraft,” barred any recovery by the passenger.  The court agreed with the airline, rejecting the passenger’s arguments that (i) the airline materially deviated from the original contract of carriage, and (ii) the airline employee who promised the passenger that the head would be delivered to him in San Francisco had altered the original contract of carriage, causing the airline to become liable for the loss of the head.  The court also held that even if the airline employee had had the authority to alter the contract of carriage, the passenger had presented no evidence that the airline had breached the altered contract, pointing out that the airline “may have done everything as promised, only to fall victim to a head hunting thief or other skullduggery.”

Obviously having fun, and clearly unable to restrain himself, the judge concluded the opinion as follows:  “The Court must GRANT Defendant’s Motion.  But it does so hoping that the android head of Mr. Dick is someday found, perhaps in an Elysian field of Orange County, Dick’s homeland, choosing to dream of electric sheep.”