Airline held liable to passenger for travel agent negligence

Rottman v. El Al Israel Airlines (N.Y. City Civil Ct. Jan. 14, 2008).  The parties in this case reprised a battle that has been fought in many passenger cases over the years:  whether a travel agent was acting as an agent of an airline or as an independent contractor when the travel agent sold the passenger a ticket.  In this case, the passenger prevailed.

The passenger had bought tickets from a travel agent for travel between Baltimore and Tel Aviv.  The passenger was to take a flight from BWI to JFK on a domestic airline and then from JFK to Tel Aviv on El Al.  However, the BWI-JFK ticket issued by the travel agent did not allow the passenger sufficient time to comply with El Al’s rule requiring that passengers check in at least three hours before departure.  As a result, El Al deemed the passenger a “no show,” causing the passenger to forfeit his seat on the flight.  The passenger bought a one-way ticket on a different airline and traveled to Tel Aviv three days later.

The passenger sued El Al for breaching the parties’ contract by refusing to transport him and for the travel agent’s negligence in issuing a ticket that made it impossible for the passenger to comply with the advance check-in rule.  The court held that the airline did not breach the contract because the passenger did not attempt to check in until less than an hour before the flight’s departure, thus violating the check-in rule and allowing the airline to deny him transportation on the flight.

As to the negligence claim, the airline claimed that it was not liable because the travel agent was the airline’s independent contractor, not its agent.  The court disagreed.  Citing two 30-plus year-old cases and the Restatement of Agency, the court held that the travel agent was acting as the airline’s agent when it sold the tickets to the passenger and, thus, that the airline was responsible for the travel agent’s error.  The court awarded the passenger a judgment in the amount of the one-way ticket that the passenger had bought.

Note:  The court’s opinion does not contain any indication that the court, in deciding whether an agency relationship existed between El Al and the travel agent, considered the degree of control that the airline actually had over the travel agent.  As the Ninth Circuit correctly held in Harby v. Saadeh and Kuwait Airways, an agency relationship between an airline and a travel agent only exists where the passenger has met the burden of proving that the airline had agreed to allow the travel agent to act on its behalf and subject to its control.  In Harby, the court held that Kuwait Airways was not liable for a travel agent’s negligence in failing to warn the passenger about the airline’s infrequent flight schedule because the passenger had failed to meet his burden of proving that the airline actually controlled such agent, thus leading the court to conclude that the agent had simply acted as a broker, i.e., an independent contractor.

In Rottman, the court concluded that El Al and the travel agent stood in an agency relationship simply because, in the court’s view, all airlines and travel agents that issue tickets for them do so.  In support of its conclusion, the court in Rottman cited the following sentence from the Restatement of Agency:  “Analogizing them to insurance agents, travel agents have been characterized as the agents of airlines and other service providers for whom they issue tickets to customers.”  But, later in the same paragraph, the Restatement of Agency also states:  “In other situations, courts have analogized a travel agent to an insurance broker or, reasoning differently, have characterized a travel agent as the customer’s agent.”  As Harby and the Restatement indicate, an agency relationship does not always exist between an airline and a travel agent that sells tickets for that airline.

Airline obtains reversal of passenger jury verdict in refusal to transport case

Cerqueira v. American Airlines, Inc. (1st Cir. (Mass.) Jan. 10, 2008).  As previously reported, in December 2003, American Airlines 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.  After the trial court denied American’s motions for a JNOV and a new trial, American appealed.

Only two months after the appeal was argued, the First Circuit issued an opinion reversing the trial court’s judgment and remanding the case to the district court with instructions to enter judgment for American.  The First Circuit’s opinion centered on 49 U.S.C. § 44902, entitled “Refusal to transport passengers and property,” which provides in section (b) as follows:  “Permissive Refusal. – Subject to regulations of the Under Secretary, an air carrier, intrastate air carrier, or foreign air carrier may refuse to transport a passenger or property the carrier decides is, or might be, inimical to safety.”

American had requested that the trial judge give a series of jury instructions regarding section 44902(b), including the well-established standard for liability that the jury must return a verdict for the airline unless its actions with respect to the passenger were “arbitrary or capricious.”  The judge refused to give the requested instructions.  The First Circuit held that the omitted instructions “were essential to the case” and the trial court had erred by refusing to give them.

The First Circuit also held that the instructions that were given were erroneous.  The most serious error was that the trial judge had instructed the jury that American had the burden of proving that its reasons for removing the passenger were legitimate.  The appeals court held that, in a section 44902(b) case, it is the passenger who has the burden of proof, and the passenger must prove that the airline’s conduct was arbitrary or capricious.

Update:  On February 29, 2008, the First Circuit denied the passenger’s petition for rehearing en banc.  Two judges dissented from the denial of the petition.

Court partially grants airline motion to dismiss injured passenger’s complaint

Levy v. Continental Airlines, Inc. (E.D. Pa. Oct. 1, 2007).  During a flight from Houston to Philadelphia, the passenger was injured when a large ceramic bowl fell from a broken or improperly closed overhead compartment and struck her head.  The passenger filed a lawsuit against the airline, alleging that it had negligently violated duties of care established by Pennsylvania statutory and common law and by federal regulations.

Continental moved to dismiss on the grounds that the passenger’s state law claims were preempted by the Federal Aviation Act and that the federal regulations she cited were not applicable to the case.  The court granted part, and denied part, of the motion.  The court agreed that the Federal Aviation Act preempted the state laws pled by the passenger because the Act completely preempts state standards of care in the field of aviation safety.

As to the passenger’s claims based on federal regulations, the court held that the complaint contained sufficient factual allegations to state a cause of action for violation of the standards established in 14 C.F.R. §§ 121.589 and 125.589, which deal with carriage of cargo in the passenger cabin and crewmember training.  But the court dismissed the passenger’s claims based on 14 C.F.R. §§ 25.787 and 25.853, which establish aircraft design and manufacturing standards of care, because the airline only operated the aircraft and had nothing to do with its design or manufacture.

Travel agents come up short in commission cap antitrust case against airlines

In re Travel Agent Commission Antitrust Litigation (N.D. Ohio Oct. 29, 2007).  The travel agent plaintiffs alleged in this case that the airline defendants had violated Section 1 of the Sherman Act (15 U.S.C. § 1) by conspiring to cap or eliminate travel agent commissions at certain times during the period from 1995 to 2002.  The airlines moved to dismiss on the grounds that the agents had failed to meet the requirement set forth by the U.S. Supreme Court (in Bell Atlantic Corp. v. Twombly, a 2007 case) that, to state a Section 1 claim, a plaintiff must plead facts suggesting that the defendants had engaged in “parallel conduct” and that they had entered into a conspiracy prior to such conduct.

The court granted the airlines’ motions.  As to the smaller airlines, the court held that the agents had failed to allege facts suggesting that the airlines had engaged in parallel conduct regarding commissions; the smaller airlines had “either failed to implement the caps entirely or implemented the caps after the larger airlines.”

As to the larger airlines, the court held that the agents had failed to allege facts indicating that the airlines had conspired with each other.  The agents tried to satisfy their pleading obligations by alleging that airline executives had had opportunities to conspire at trade shows and while playing golf, and by making other circumstantial allegations, but the court held that these allegations fell short of suggesting that the airlines had in fact agreed to cap or eliminate commissions.

Warsaw Convention preempts passenger tort claim against airline

Small v. America West Airlines, Inc. (D.N.J. Oct. 30, 2007).  The passenger alleged that the airline was liable under the New Jersey Consumer Fraud Act because it had tortiously denied losing his baggage, thereby preventing him from filing a claim against his insurance company.  The airline argued that the passenger’s state law claim was preempted by the Warsaw Convention.  In response, the passenger contended that his claim was not preempted because he was seeking tort damages, not lost baggage damages, due to the airline’s misrepresentation that it had not lost his baggage.

The court did not buy the passenger’s creative argument.  It held that the passenger’s claim was preempted because the Convention requires that all baggage-related claims arising from international air carriage, sounding “in contract or in tort or otherwise,” be brought exclusively under the Convention.

Federal court upholds legality of New York’s airline passenger “Bill of Rights”

Air Transport Association of America, Inc. v. Andrew Cuomo et al. (N.D.N.Y. Dec. 20, 2007).  In a decision issued yesterday, the U.S. District Court for the Northern District of New York denied the Air Transport Association’s motion for a preliminary injunction enjoining the enforcement of New York’s airline passenger “Bill of Rights.”  Instead, the court granted summary judgment for the State of New York, thereby concluding the case in the State’s favor.

The court held that the Bill of Rights is not preempted by the federal Airline Deregulation Act, which preempts state laws related to the ”service” provided by airlines.  The court reasoned 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.  (I disagree, for the reasons discussed here, but my vote does not count!)

The Bill of Rights will go into effect on January 1, 2008, but it is unlikely that this battle is over.  The ATA will probably file an appeal, and I will report any further developments in this matter.

Update:  The ATA did file an appeal, and on March 25, 2008, the Second Circuit issued a ruling reversing the trial court’s decision on the grounds that the Bill of Rights is preempted by the ADA.  I will be publishing a detailed post on this important ruling soon.

Federal court to rule soon on legality of New York’s airline passenger “Bill of Rights”

Air Transport Association of America, Inc. v. Andrew Cuomo et al. (N.D.N.Y.).  On December 18, 2007, the U.S. District Court for the Northern District of New York will hold a hearing on the Air Transport Association’s motion for a preliminary injunction enjoining the enforcement of New York’s airline passenger “Bill of Rights.”  I will report the court’s ruling on the motion as soon as it is issued. 

My article on the enforceability of New York’s law, which was published in the November 2007 issue of CCH’s Issues in Aviation Law and Policy (¶ 33,031 at 19,111), is reprinted below.

“The Empire State’s New Airline Passenger ‘Bill of Rights’ – Gone in a New York Minute?”

Introduction

In response to the highly-publicized on-board aircraft ground delays that occurred at John F. Kennedy International Airport (“JFK”) in February and March 2007, the New York State Legislature enacted the “Consumer Bill of Rights Regarding Airline Passengers,” which Governor Eliot Spitzer signed into law on August 1, 2007.  The “Bill of Rights,” which takes effect on January 1, 2008, requires that airlines provide passengers on aircraft delayed more than three hours with electricity for fresh air and lighting, food, water and clean lavatories, creates a new “Office of the Airline Consumer Advocate,” and gives state authorities the power to seek substantial civil penalties against airlines for violations.

Faced with the possibility of multiple states having airline passenger “bills of rights,” each differing in various respects, Air Transport Association officials have suggested that 49 U.S.C. § 41713(b)(1), the preemption provision of the Airline Deregulation Act of 1978 (“the ADA”), preempts New York’s Bill of Rights, and have indicated that a court challenge could be forthcoming.  A strong case for preemption could be made.  The preemption provision, which 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,” has been interpreted very broadly by many courts.  However, even a court that interprets the provision narrowly could reasonably conclude that New York’s Bill of Rights significantly affects airlines’ provision of their “service” and thus is preempted.

The Airline Deregulation Act

Before the ADA was enacted, the Civil Aeronautics Board (“CAB”) tightly controlled virtually every aspect of an airline’s economic existence, from the fares it could charge and the routes it could operate to “stipulations about the minimum quality of meals and maximum charges for headsets.”  Alfred E. Kahn, Airline Deregulation, The Concise Encyclopedia of Economics.  Through the ADA, Congress dismantled the CAB’s longstanding regulatory headlock on the airlines.  “To ensure that the States would not undo federal deregulation with regulation of their own” (Morales v. Trans World Airlines, Inc., 504 U.S. 374, 378 (1992), Congress included the following provision in the ADA:

[N]o State or political subdivision thereof and no interstate agency or other political agency of two or more States shall enact or enforce any law, rule, regulation, standard, or other provision having the force and effect of law relating to rates, routes, or services of any air carrier having authority under title IV of this Act.

Pub. L. No. 95-504, 92 Stat. 1705, Sec. 105(a)(1).

Congress has modified the preemption provision over the years, but its scope remains essentially the same.  The current version, which is codified at 49 U.S.C. § 41713(b)(1), provides as follows:

[A] State, political subdivision of a State, or political authority of at least 2 States 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.

A state statute may be preempted even if it does not specifically address the airline industry.  Morales, 504 U.S. at 386.  In addition to state statutes and regulations, section 41713(b)(1) preempts state common law causes of action because “[s]tates can impose their own substantive standards through the common law as well as through statutory enactments.”  Travel All Over the World, Inc. v. Kingdom of Saudi Arabia, 73 F.3d 1423, 1435 (7th Cir. 1996).  The preemption provision applies to both U.S. and foreign air carriers.  Lawal v. British Airways, PLC, 812 F. Supp. 713, 719 (S.D. Tex. 1992).

The scope of the ADA’s preemption provision has been the subject of two U.S. Supreme Court cases, Morales v. Trans World Airlines, Inc., 504 U.S. 374 (1992), and American Airlines, Inc. v. Wolens, 513 U.S. 219 (1995).  In Morales, the Court, noting that the words of the provision “express a broad pre-emptive purpose” (504 U.S. at 383), held that certain state advertising guidelines were preempted because they related to airlines’ “rates.”  In Wolens, the Court held that claims under a state deceptive business practices statute against an airline for making retroactive changes to its frequent flyer program were preempted because such claims related to the airline’s “rates” and “services.”

The ADA does not define the term “service,” and the Court did not define that term in Morales or Wolens.  Since Wolens, conflicts have developed among certain U.S. Circuit Courts of Appeals as to how that term is defined, as discussed below.  In 2000, the Court bypassed an opportunity to define the term “service” by denying a certiorari petition to the Ninth Circuit in Northwest Airlines, Inc. v. Duncan, 531 U.S. 1058 (2000).  Chief Justice Rehnquist and Justices O’Connor and Thomas dissented from the denial of certiorari, expressing their desire to resolve the conflicts that had arisen among the Circuits.

The New York Legislation

The New York State Assembly offered the following justification for the Bill of Rights:

Several incidents that occurred during the winter of 2007 involved airline passengers who were detained on the runway for many hours.  On Valentine’s Day, passengers were held aboard a JetBlue flight at JFK for 10 hours without food, water, fresh air, or the ability to use the rest room.  Several other JetBlue flights were similarly stalled on the runway.  Subsequently, on St. Patrick’s Day, at JFK passengers were stuck on board a Royal Air Maroc flight at JFK for more than 14 hours.  People on a Swiss Air flight to Zurich were trapped on board for eight hours, a Virgin Atlantic flight to London left 9 hours late, and a Cathay Pacific flight to Vancouver was finally canceled after more than nine hours of waiting at JFK.  Passengers were also stuck for seven hours at JFK on board a Korea-bound Asiana Airlines flight.

These episodes demonstrate the need for statutory changes to protect airline consumers from this type of treatment.  In spite of carriers’ voluntary commitments that these episodes will not recur, passengers continue to be subject to lengthy detentions on aircraft without basic services.  New York is home to some of the world’s busiest airports, and so should take the lead in adopting common sense measures that empower consumers and prevent outrageous incidents like these from recurring.  The bill of rights and the creation of an independent advocate for airline passengers will provide a needed measure of consumer protection in New York’s airports (see http://assembly.state.ny.us/leg/?bn=A08406).

The Bill of Rights provides in part as follows:

Whenever airline passengers have boarded an aircraft and are delayed more than three hours on the aircraft prior to takeoff, the carrier shall ensure that passengers are provided as needed with:

(a) electric generation service to provide temporary power for fresh air and lights;

(b) waste removal service in order to service the holding tanks for on-board restrooms; and

(c) adequate food and drinking water and other refreshments.

New York General Business Law § 251-g.

The Bill of Rights also establishes an “Office of the Airline Consumer Advocate,” which has the power to investigate complaints, issue subpoenas for documents and refer complaints to New York’s Attorney General.  The Bill of Rights authorizes the Attorney General to recover civil penalties of up to $1,000 per passenger for a violation, as well as attorneys’ fees and costs from airlines that violate the law.  New York General Business Law § 251-h.  The Bill of Rights requires that airlines give passengers “clear and conspicuous” notice regarding the functions of, and contact information for, the Office of the Airline Consumer Advocate, as well as “explanations of the rights of airline passengers.”  New York General Business Law § 251-g.

The Bill of Rights defines a “carrier” as “any partnership, corporation or other business entity regulated by the Federal Aviation Administration that conducts scheduled passenger air transportation.”  New York General Business Law § 251-f.  This means that the Bill of Rights applies to both U.S. and foreign airlines.

Bill of Rights, Meet the ADA

The sponsor of New York’s Bill of Rights clearly foresaw the possibility of challenges to the legislation on preemption grounds.  In response, he expressed the following position while the bill was pending:  “While federal law places restrictions on what individual states can do when it comes to legislation relating to air travel, federal courts have held that the provision of ‘amenities’ for air travelers is one area that states can legitimately address.”  Senate Passes Bill to Create “Airline Passengers’ Bill of Rights,” www.senate.state.ny.us (June 19, 2007 press release).

The sponsor did not randomly choose to use the word “amenities” in his statement.  That word was used by the Ninth Circuit in Charas v. Trans World Airlines, Inc., 160 F.3d 1259 (1998), a decision in which the court interpreted the word “service” in the ADA’s preemption provision in a very limited, passenger-friendly manner.

Charas consisted of five consolidated cases, all of which involved passengers alleging personal injury state law tort claims against airlines.  One case involved a passenger’s claim that a flight attendant hit him with a service cart, one involved a passenger’s claim that another passenger opened an overhead bin and a piece of luggage fell on her head, one involved a passenger’s claim that she tripped over luggage left in the aisle by a flight attendant, one involved a passenger’s claim that she fell while disembarking, and the fifth case involved a passenger’s claim that she fell while boarding a shuttle bus.  The airline defendants in these cases had contended that the passengers’ claims were preempted by the ADA.

The court in Charas ruled in favor of the passengers; it stated that, while Congress intended to “insulate the industry from possible state economic regulation” in order “to encourage the forces of competition,” Congress “did not intend to immunize the airlines from liability for personal injuries caused by their tortious conduct.”  Accordingly, the court held as follows:

[W]e hold that Congress used the word “service” in the phrase “rates, routes, or service” in the ADA’s preemption clause to refer to the prices, schedules, origins and destinations of the point-to-point transportation of passengers, cargo, or mail.  In the context in which it was used in the Act, “service” was not intended to include an airline’s provision of in-flight beverages, personal assistance to passengers, the handling of luggage, and similar amenities.

160 F.3d at 1261 (emphasis added).  The Third Circuit followed Charas in Taj Mahal Travel, Inc. v. Delta Airlines, Inc., 164 F.3d 186, 194 (1998).

In contrast to Charas, the Fifth Circuit and three other Courts of Appeals have adopted a much broader definition of the term “service.”  The Fifth Circuit defined “service” as follows:

“Services” generally represent a bargained-for or anticipated provision of labor from one party to another.  If the element of bargain or agreement is incorporated in our understanding of services, it leads to a concern with the contractual arrangement between the airline and the user of the service.  Elements of the air carrier service bargain include items such as ticketing, boarding procedures, provision of food and drink, and baggage handling, in addition to the transportation itself.  These matters are all appurtenant and necessarily included with the contract of carriage between the passenger or shipper and the airline.  It is these [contractual] features of air transportation that we believe Congress intended to de-regulate as “services” and broadly to protect from state regulation.

Hodges v. Delta Airlines, Inc., 44 F.3d 334, 336 (1995) (en banc).  The Fourth, Seventh and Eleventh Circuits have also defined the term “service” broadly.  Smith v. Comair, Inc., 134 F.3d 254, 259 (4th Cir. 1998); Travel All Over The World, Inc. v. Kingdom of Saudi Arabia, 73 F.3d 1423, 1433 (7th Cir. 1996); Branche v. Airtran Airways, Inc., 342 F.3d 1248, 1257 (11th Cir. 2003).

If the Second Circuit were to adopt the broader view of the term “service” in a case challenging New York’s Bill of Rights, it is very likely that the court would hold the Bill of Rights to be preempted.  However, even if the Second Circuit were to define “service” narrowly, as the Ninth Circuit did in Charas, it might still hold the Bill of Rights to be preempted.  The Ninth Circuit in Charas held that passengers could use state tort common law causes of action against airlines that do not use due care in the physical boarding, in-flight transportation and disembarking of passengers.  However, state negligence causes of action, and other state common law tort causes of action, do not impose any specific and positive requirements on the airlines; they simply impose a general standard of due care.  State negligence causes of action do not require that airlines conduct their “service” in any particular manner.

By contrast, New York’s Bill of Rights seeks to impose specific and positive requirements on the airlines that would significantly affect their provision of “service” at New York’s airports.  The statute’s prominent use of the word “service” is telling.  For example, the statute requires that airlines perform “waste removal service in order to service the holding tanks for on-board restrooms.”  Performance of this “service” would require that an aircraft return to the gate.  Lavatories cannot be serviced on an active taxiway because an aircraft cannot move during such servicing, and an aircraft must be able to move, if necessary, on an active taxiway.  The statute also requires that airlines provide “electric generation service.”  Provision of this “service” away from a gate, which often has ground electric service, would require that an aircraft use its own auxiliary power unit (“APU”) to provide electricity, and extended APU operations would require that an aircraft be refueled before takeoff.  Refueling an aircraft with passengers onboard requires that a door be open in case an evacuation is necessary.  This would require, of course, that stairs be positioned at the open door.

Clearly, the Bill of Rights goes far beyond imposing a general due care requirement on the airlines, as the court in effect did in Charas.  That is why the Bill of Rights is likely to be considered preempted by any court, even one that defines the term “service” narrowly.

In essence, the Bill of Rights mandates that airlines provide specific forms of “service” in order to make passengers safe and comfortable.  At least two federal courts have held that the ADA preempts any state law-based general duty to provide safe and comfortable “service.”  Anderson v. USAir, Inc., 818 F.2d 49, 56-57 (D.C. Cir. 1987); Cannava v. USAir, Inc., 1993 WL 565341 at *6 (D. Mass.) (“[T]he heart of plaintiff’s claim for breach of contract is that the defendant failed ‘to provide the services required’ and failed to provide ‘safe and comfortable services.’  [Plaintiff] alleges that USAir violated an implied contractual duty to treat passengers courteously.  Here the plaintiff’s claims lie, even more clearly, at the heart of airline ‘services’ and must be preempted by section [41713(b)(1)].”).  If courts hold that state law-based general duties to provide safe and comfortable services are preempted by the ADA, then courts are very likely to hold that state law-based specific duties to provide safe and comfortable services are also preempted by the ADA.

The Bill of Rights provides that it is not to be “construed as requiring any carrier, airport or other entity to take any action in contravention of any written directive of the federal aviation administration or other federal agency having jurisdiction over such entity.”  New York General Business Law § 251-i.  That provision would not save the Bill of Rights from a preemption ruling; its likely effect on airlines’ “service” at New York airports is too far-reaching.

If Legislation Is Needed, Only Congress Should Act

No one can dispute that New York State’s legislators were addressing a valid concern in enacting the Bill of Rights.  No one wants to sit, hot and hungry, for ten hours on a motionless aircraft with overflowing lavatories – and no one should have to endure such conditions.  However, given industry operational trends, the stage may be set for more ground delays at JFK.  According to the Federal Aviation Administration (“FAA”), while total airport operations in the U.S. have decreased by 11 percent since 2000, commercial operations at JFK have increased 27 percent since 2000 and 44 percent since 2004.  Hearing on Airline Delays and Consumer Service at 2, U.S. House of Representatives, Committee on Transportation and Infrastructure, Subcommittee on Aviation Staff (Sept. 25, 2007).  And, according to the Department of Transportation’s (“DOT”) Bureau of Transportation Statistics (“BTS”), there were almost 30 percent more scheduled departures at JFK for the 12-month period ending July 2007 than during the 12-month period ending July 2006.  RITA BTS Airline Data, 2007 Airport Fact Sheet.

Other U.S. airports also could face more ground delays.  According to the BTS, U.S. airlines transported 72.2 million scheduled domestic and international passengers in July 2007, the most ever for a single month and over two percent more than the 70.6 million passengers carried in July 2005, the prior record.  July 2007 Airline Traffic Data:  U.S. Airlines Carried Record Number of Passengers in July, Bureau of Transportation Statistics (Oct. 15, 2007).  Not surprisingly, the load factors in July 2007 were the highest ever, reaching 86.0 percent for combined domestic and international flights.  Id.

But none of the recent ground delays or the aforementioned statistics mean that individual states should be trying to solve the ground delay problem on their own.  A given aircraft might operate in several different states during the course of a single day.  As the dissenters noted in Northwest, “[b]ecause airline companies operate across state lines,” they are particularly vulnerable to “inconsistent state regulations.”  531 U.S. at 1058.  How could American Airlines be expected to ensure that its 600-plus aircraft are properly stocked and serviced each day to meet the various food, beverage and other state airline passenger bill of rights requirements that such aircraft might encounter while operating from state to state?

The proliferation of state airline passenger bills of rights is not a theoretical concern.  According to one report, a state legislator is considering introducing airline passenger bill of rights legislation in New Jersey.  Legislator Calls for an Airline Passenger “Bill of Rights,” New York Times (Sept. 2, 2007).  “I saw that New York passed a similar bill and thought that we should have the same consumer protections here in New Jersey,” [Assemblyman Samuel D.] Thompson, a Republican from Monmouth County, said.”  Id.  Legislators in other states will not be far behind.

In September 2007, DOT’s Inspector General issued a report, entitled “Actions Needed to Minimize Long, On-Board Flight Delays,” that contains eight “best practices” for dealing with long on-board delays.  Office of the Secretary of Transportation, Report No. AV-2007-077 at 14-15 (Sept. 25, 2007).  The Inspector General also suggested in the report that, because “a more comprehensive national plan of action is needed” on the ground delay issue, a national task force composed of airline, airport, FAA and DOT representatives “should be established to develop and coordinate contingency plans to deal with lengthy delays.”  Id. at 15.

If collaborative efforts are not adequate and ground delay legislation is needed, only Congress should act because it is the only legislature that could impose uniform requirements on the airlines, airports and other interested parties.  Passenger bill of rights legislation is now before Congress; the Airline Passenger Bill of Rights Act of 2007 is pending in the Senate and the House of Representatives.

ARC seeks court confirmation of arbitration award against agency

Airlines Reporting Corporation v. Versailles, LLC (E.D. Va. Nov. 26, 2007).  ARC has filed a petition seeking the confirmation of an arbitration award in its favor against Versailles, LLC, a travel agency that does business as Business Travel International and is located in Irvine, California.

According to ARC’s petition, the agency had filed an appeal with the Travel Agent Arbiter after an ARC audit revealed that the agency had violated the Agent Reporting Agreement.  The Arbiter dismissed the appeal, noting in his ruling that “there is clearly the appearance of fraud constituting a clear and present danger of substantial loss to ARC and/or the carriers.”  The Arbiter also ordered that the agency surrender all airline identification plates and traffic documents to ARC and pay $206,400 to ARC, but the agency has failed to comply with such order, according to ARC.  ARC alleges that $192,475 of the amount owed by the agency is from chargebacks by credit card holders claiming that their cards were charged fraudulently.

Update:  On January 25, 2008, the court entered an order confirming the Travel Agent Arbiter’s order.

Magistrate judge recommends that ARC obtain default judgment against agency and owner

Airlines Reporting Corporation v. PVO Travel Corp. and Pete Victor Obuljen (E.D. Va. Sept. 27, 2007).  As previously reported, ARC filed a lawsuit against PVO and Obuljen, the agency’s sole owner, for unreported sales and dishonored drafts.  The defendants failed to respond to the complaint, so ARC moved for a default judgment.

The magistrate judge issued a report recommending entry of a default judgment for $296,947, the amount of damages ARC had demanded plus attorneys’ fees, against the defendants.  However, before issuing his recommendation, the magistrate judge engaged in a lengthy analysis as to whether the Virginia court had personal jurisdiction over the defendants, a California corporation and an individual residing in California.

The magistrate judge concluded that the court did have jurisdiction over the defendants under Virginia’s long-arm statute because they transacted business in Virginia by negotiating and entering into the Agent Reporting Agreement in Virginia, and because the ARA called for the defendants to perform certain obligations in Virginia.  The same court had engaged in a similar personal jurisdiction analysis, and had reached the same result, in Airlines Reporting Corporation v. Cisne Corp., Claudio Menicocci and Olga Menicocci (E.D. Va. Mar. 23, 2000).

Note:  On October 22, 2007, the court adopted the magistrate’s report and entered a default judgment against the defendants.

Fifth Circuit vacates summary judgment against passenger in baggage case

Muoneke v. Air France (5th Cir. Tex. Sept. 17, 2007).  The day after her flight from Texas arrived in Nigeria, the passenger went to the airline’s lost baggage office at the airport and claimed that several items were missing from her checked baggage.  The passenger alleged that she submitted a written claim regarding the missing items during her visit to the baggage office, but the airline alleged that it had no record of having received such claim.

The passenger filed a state court lawsuit against the airline, which removed the case to federal court.  The passenger moved that the case be remanded because the amount in controversy did not exceed $75,000.  The Fifth Circuit affirmed the trial court’s denial of the remand motion, holding that because the passenger’s complaint involved the interpretation and application of a treaty – the Warsaw Convention – the trial court had federal question jurisdiction, which has no dollar-amount requirement.

After the trial court denied the passenger’s remand motion, the airline moved for summary judgment on the grounds that the passenger had failed to submit a timely written claim under Article 26 of the Warsaw Convention and the airline’s contract of carriage, both of which required submission of a written claim within seven days of the passenger’s receipt of her baggage.  The Fifth Circuit vacated the trial court’s summary judgment for the airline, holding that the passenger’s submissions in opposition to the airline’s motion were sufficient to create a genuine issue of material fact as to whether she had submitted a written claim.

Note:  The Warsaw Convention and its successor, the Montreal Convention, impose time limits for submitting written claims for baggage and cargo damage and delay but not for loss.  However, neither Convention prohibits airlines from imposing their own time limits for submitting written loss claims (see, e.g., Khan v. Singapore Airlines, Ltd. (9th Cir. 1997)), and airlines typically impose such limits through their conditions of carriage.  Courts usually regard the delivery of baggage with some items missing, as occurred in the above case, as baggage damage rather than loss for purposes of Article 26.  See Maro Leather Co. v. Aerolineas Argentinas (N.Y.A.D. 1988).