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Pandemic Class Action Refund Lawsuits Against Airlines Ignore Long-Standing Precedent

Alert
04.13.2020
By Roy Goldberg

Class action plaintiffs lawyers have reacted to the COVID-19 pandemic by filing putative class actions against airlines which, in order to conserve desperately needed cash, are offering travel credits in lieu of cash refunds for flights canceled because of the pandemic. The lawsuits include two filed against United Air Lines on April 6 in federal court in Chicago and the following day in federal court in Cleveland and a case filed on April 9 against Mexican carrier Volaris in federal court in Chicago.

Each of the complaints contains state law tort causes of action that for years have been routinely dismissed by courts as preempted by the federal Airline Deregulation Act of 1978 (ADA). The class action counsel are attempting to predicate recoveries on the fact that the U.S. Department of Transportation (DOT) on April 3, 2020, issued an “enforcement notice” regarding airfare refunds. However, there is no private right of action for consumers to bring lawsuits to enforce DOT guidance or the DOT consumer statute. Nor have plaintiffs adequately alleged that the airline contracts of carriage incorporated the DOT guidance. The plaintiffs’ counsel, seeking to capitalize on the pandemic, have “rushed to the courthouse” without regard to the applicable law.

In Rudolph v. United Airlines Holdings, the plaintiff asserts that “between March 31, 2020 and April 1, 2020, United separately and completely denied each plaintiff’s ticket refund request, declaring that the ticket purchases do not qualify for a refund.” Instead, “United represented in writing that the plaintiff was only allowed a rebooking or ticket credit for travel within one year of the original ticket issue date.” The plaintiff contends that United’s failure to refund airfares: (1) violates the Illinois Consumer Fraud and Deceptive Practices Act; (2) is contrary to other state consumer protection laws; (3) constitutes unjust enrichment; (4) is unlawful conversion; and (5) constitutes fraudulent misrepresentation.

The Airline Deregulation Act Preempts State Law Claims Relating to Air Carrier Prices 

When Congress deregulated the domestic airline industry with enactment of the ADA in 1978, it added a new preemption clause to help ensure that states did not re-regulate the industry that was prospectively to be governed largely by “market forces.” The ADA specifically preempts state and local laws (including civil tort claims) “related to a price, route or service of an air carrier.” 

Each of the Five Causes of Action in Rudolph is Preempted by the ADA 

Given that the subject of the Rudolph v. United case is the refund of airfares, it is beyond dispute that the claims relate to an air carrier’s “price.” It is also undeniable that the claims all seek to enforce state laws. Accordingly, the complaint on its face should be dismissed as preempted by the ADA. The Supreme Court has twice held that the ADA preempts state law claims rooted in fraud, including those pursued under state consumer protection laws. See Morales v. TWA (state guidelines which regulated purportedly false advertising by airlines were preempted by the ADA); Am. Airlines v. Wolens (the ADA preempted claims based on the Illinois Consumer Fraud and Deceptive Business Practices Act). Other courts have similarly held that fraud claims against airlines are preempted by the ADA. See, e.g. Weber v. US Airways, Inc.; Cox v. Spirit Airlines, Inc.; Delta Air Lines v. Black. Claims for unjust enrichment are also preempted by the ADA. see Lehman v. USAIR Group, Inc.; In re JetBlue Airways Corp. Privacy Litig.; Gordon v. United Continental Holding, Inc. Claims for conversion are likewise preempted. See Forman v. Fed. Express Corp.; Lehman v. USAIR, supra. 

The Airline Contracts of Carriage Do Not Incorporate the DOT Refund Notice 

Unlike the Rudolph case in Chicago against United, the Ohio case against United – Utley v. United Airlines Holdings, Inc. – and the Chicago case against Volaris – Levey v. Volaris – include claims for breach of contract arising out of the failure to refund airfares. Plaintiffs thus seek to avoid ADA preemption by qualifying for a narrow exception to ADA preemption for airline “self-imposed” contractual obligations. In Wolens, the Supreme Court stated that “the ADA permits state-law-based court adjudication of routine breach-of-contract claims…” “Under Wolens, to avoid preemption, a breach of contract claim must be based on the parties own contract.” Volodarskiy v. Delta Air Lines, Inc. However, neither the Utley v. United complaint nor the Levey v. Volaris complaint cites to language from the United or Volaris contract of carriage which sets forth the carrier’s commitment to refund airfare in the event of a pandemic or other type of force majeure event. 

Both the Utley and the Levey plaintiffs assert liability based on the DOT’s April 3, 2020 “Enforcement Notice Regarding Refunds by Carriers Given Unprecedented Impact of the COVID-19 Public Health Emergency on Air Travel” (DOT Refund Notice). The DOT Refund Notice states that, “carriers have a longstanding obligation to provide a prompt refund to a ticketed passenger when the carrier cancels the passenger’s flight,” and the “longstanding obligation of carriers to provide refunds for flights that carriers cancel or significantly delay does not cease when the flight disruptions are outside the carrier’s control (e.g. a result of government restrictions).” However, the fact that the DOT believes that air carriers must refund airfares for flights canceled because of the pandemic does not support the plaintiffs’ civil claims. Although the DOT may seek to impose a fine against the carrier (a topic beyond the scope of this alert), there is no private right of action under DOT statutes or policies that consumers can pursue in a federal damages case. 

Plaintiffs in both actions assert that the carrier’s contract of carriage incorporates the DOT Refund Notice: Utley, contract of carriage is “subject to applicable laws, regulations, rules and security directives imposed by governmental agencies”; Levey, contract of carriage is subject to “rules issued by the U.S. Department of Transportation.” However, these contract of carriage clauses do not incorporate the DOT Refund Notice because that notice is not a “rule.” The purpose of the refund notice is “to remind the traveling public, and U.S. and foreign carriers…that passengers should be refunded promptly when their scheduled flights are cancelled or significantly delayed.” The DOT has expressly recognized that its “guidance documents cannot create binding requirements that do not already exist by statute or regulation,” and that “the department may not use its enforcement authority to convert agency guidance documents into binding rules.” Admin. Rulemaking, Guidance, and Enforcement Procedures (Final Rule); see also Texas v. EEOC (“the Department may not use its enforcement authority to effectively convert agency guidance into binding rules”). To be a lawful rule, the DOT Refund Notice would have needed to have been preceded by prior public notice and an opportunity for comment as required for administrative rules under the Administrative Procedure Act (APA). Hemp Indus. Ass’n v DEA; Mendoza v. Perez.

Preemption of State Law Claims by the Montreal Convention 

Both the Utley case against United and the Levey case against Volaris involve international air transportation (from the United States to France and Mexico, respectively), and are therefore also subject to preemption under the Convention for the Unification of Certain Rules for International Carriage by Air (Montreal Convention). The Montreal Convention is a multilateral treaty that governs international air carrier liability. It was signed by the United States in 1999 and took effect in September 2003 after it was ratified by the U.S. Senate. The "[Montreal] Convention applies to all international carriage of persons, baggage or cargo performed by aircraft for reward.” Under Article 19 of the Montreal Convention, an air “carrier is liable for damage occasioned by delay in the carriage of passengers, baggage or cargo.” However, the air “carrier shall not be liable for damage occasioned by delay if it proves that it and its servants and agents took all measures that could reasonably be required to avoid the damage or that it was impossible for them to take such measures.Id. (emphasis added). A plaintiff cannot escape application and preemption of the Montreal Convention through artful pleading. Pursuant to Article 29 of the Montreal Convention, “[i]n the carriage of passengers, baggage and cargo, any action for damages, however founded, whether under this convention or in contract or in tort or otherwise, can only be brought subject to the conditions and such limits of liability as set out in this convention…” (emphasis added). Where Article 19 applies, any state law claim based on such injuries, is preempted. 

Courts addressing the new claims filed against airlines should be wary of the plaintiffs’ attempts to disregard decades of established precedent.

Attorney

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