United Can't Ditch Passengers' COVID-19 Refund Suit

By Linda Chiem
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Law360 (February 12, 2021, 9:44 PM EST) -- An Illinois federal judge said on Friday that United Airlines can't use the force majeure clause in its contracts to entirely evade claims that it improperly denied passengers full refunds for flights that were canceled amid the pandemic, saying most of the passengers' claims can move forward.

U.S. District Judge Thomas Durkin partially denied United's motion to dismiss claims in a consolidated proposed class action from Jacob Rudolph, Mark Hansen and Jason Buffer, saying not all of the passengers' canceled flights qualify as a force majeure event in its contract of carriage that would free United from having to give them refunds. United has said it was only obligated to extend a travel credit to affected passengers, which it did.

According to the airline, force majeure events refer to unique occurrences that physically prohibit United from operating flights — acts of God, governmental regulations, strikes and damaged aircrafts, among other things — because doing so would expose passengers to a substantial risk of bodily harm — "riots, terrorist activities, civil commotions, embargoes, wars, hostilities, disturbances, or unsettled international conditions" — or present an "emergency situation requiring immediate care or protection for a person or property."

Ticketed passengers are entitled to a travel credit if United cancels a flight due to a force majeure event, but not a refund. If a cancellation is due to a schedule change or irregular operations, and affected passengers are not rebooked on another flight within the contractually required timeframe, then United must issue a refund "upon request."

Judge Durkin declined to embrace United's broad interpretation of a force majeure event, saying it could mean that any change that was unforeseen or beyond United's control would disqualify affected passengers from receiving refunds.

"The court agrees with plaintiffs that reading 'force majeure event" too broadly could gut the schedule change and irregular operations provisions," Judge Durkin said in Friday's ruling. "Certainly, there must be some point where a force majeure event ends, and a schedule change or irregular operation begins. And to the extent that boundary is unclear, the [contract of carriage], drafted entirely by United, must be construed in plaintiffs' favor."

Buffer bought two roundtrip tickets for a March 19 flight from New York to Greece via Frankfurt, Germany. He was offered flight credits on United after at least one leg of his flight was canceled due to the pandemic, but he declined and asked for a refund, which United denied.

The judge said it is plausible that United canceled Buffer's flights "because of a desire to save on operating expenses," as the complaint alleges, and not because COVID-19 had been declared a public health emergency and global pandemic. United publicly stated at the time that it was making "adjustments" to its flight schedule due to "reduced demand," according to the ruling.

"United does not contend that economic motivations constitute a force majeure event, and nor could it," Judge Durkin explained. "Ultimately, whether the cancellations at issue occurred because of economic considerations, or were due to restrictions and warnings related to the pandemic, can only be answered with discovery."

Judge Durkin also denied United's bid to force plaintiff Hansen to arbitrate his claims just because he bought his tickets from online travel agency Expedia, instead of directly from United.

Hansen argued that United can't enforce the arbitration agreement in Expedia's terms of use because U.S. Department of Transportation regulations make clear that "no carrier may impose any contract of carriage provision containing a choice-of-forum clause that attempts to preclude a passenger, or a person who purchases a ticket for air transportation on behalf of a passenger, from bringing a claim against a carrier in any court of competent jurisdiction, including a court within the jurisdiction of that passenger's residence in the U.S. (provided that the carrier does business within that jurisdiction)."

Furthermore, Expedia's terms of use "expressly indicate that purchasers are bound by the 'full terms and conditions'" of the air carrier's contract of carriage, the judge pointed out.

"The court agrees with Mr. Hansen that United should not be permitted to do indirectly what federal regulations prohibit it from doing directly, particularly given the regulation's purpose to provide protections to consumers," the judge said. "The court will not aid an attempted end-run around the regulation."

Judge Durkin, however, agreed with United that Hansen might not have a plausible breach-of-contract claim for at least part of the trip he booked to travel from Vancouver, British Columbia, with a connection in Houston, to Costa Rica on March 28. Costa Rica had shut its borders to all nonresidents at the time. The judge slashed Hansen's claim to the extent he seeks a refund for the portions of his itinerary that involved his arrival in, or departure from, Costa Rica, but he can proceed with pursuing a refund claim for other legs of his itinerary, according to the order.

"While Mr. Hansen contends that the Costa Rican border closures are 'irrelevant,' the court disagrees," the judge said. "It simply is not plausible that such closures were not a proximate cause of at least the cancellation of Mr. Hansen's travel in and out of Costa Rica in March and April 2020. Indeed, Costa Rica was Mr. Hansen's destination, not a layover, and no reasonable air carrier would agree to transport an American citizen and resident under those circumstances, where he would not be permitted entry on arrival. Such a government ordered closure falls comfortably within the definition of a force majeure event."

The judge said plaintiff Rudolph's claim "fails in full," because Rudolph canceled his flight before United did, but the judge left an opening for that claim to be amended.

Rudolph alleged that he bought three tickets for an April 4 flight from Hilton Head Island, South Carolina, to Minneapolis-St. Paul, Minnesota, with a connecting flight in Chicago. On March 16, however, Rudolph "affirmatively sought a refund before his flight was cancelled," citing "concerns with the COVID-19 pandemic," United had argued in its dismissal bid.

"Here, the complaint alleges only that United made 'public announcements' of 'cuts to its April and May 2020 flight schedules,' and that it 'was planning for domestic bookings to decrease in the weeks to come,'" Judge Durkin said in the order. "These are 'indefinite statement[s],' not repudiation."

Rudolph kicked off the suit in April, and Hansen and Buffer later joined as named plaintiffs. They alleged in a consolidated amended complaint in July that United's refusal to issue COVID-19-related refunds to passengers whose flights were canceled violated federal guidance, the Illinois Consumer Fraud and Deceptive Business Practices Act, as well as the consumer protection laws of the other 49 states. 

While COVID-19 had suppressed demand for flights, rendering United's existing schedule unprofitable, it was the airline that chose not to operate flights at levels well below capacity, because it wanted to avoid operating losses, the passengers alleged. In fact, United continued to operate reduced schedules throughout the pandemic, they said.

United moved to dismantle the litigation in September, defending its policy of issuing credits or vouchers for future flights instead of refunds and insisting that it has acted well within the scope of its contract of carriage. It further argued that each of the named plaintiffs "affirmatively sought a refund for [their] tickets," and suggested that they "voluntarily canceled their nonrefundable tickets," because they were the ones who reached out to United requesting refunds before United ultimately canceled one or more of their flights.

Attorneys for the consumers were not immediately available for comment. A United spokesperson said Friday that the company had no comment.

The plaintiffs are represented by Bryan L. Clobes, Daniel O. Herrera and Nickolas J. Hagman of Cafferty Clobes Meriwether & Sprengel LLP, Steve W. Berman, Daniel J. Kurowski and Whitney K. Siehl of Hagens Berman Sobol Shapiro LLP and Joseph G. Sauder and Joseph B. Kenney of Sauder Schelkopf LLC.

United is represented by Patricia Brown Holmes, Sondra A. Hemeryck and Valerie H. Brummel of Riley Safer Holmes & Cancila LLP.

The case is Jacob Rudolph et al. v. United Airlines Holdings Inc. et al., case number 1:20-cv-02142, in the U.S. District Court for the Northern District of Illinois.

--Additional reporting by Lauren Berg. Editing by Regan Estes.

Update: This story has been updated to include additional counsel information for the plaintiffs.

For a reprint of this article, please contact reprints@law360.com.

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