United Ruling Helps Shape Force Majeure Scope Amid COVID

By Tom Laser, Jared Hawk and Elizabeth Thompson
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Law360 (March 29, 2021, 4:40 PM EDT) --
Tom Laser
Tom Laser
Jared Hawk
Jared Hawk
Elizabeth Thompson
Elizabeth Thompson
In the wake of the extensive governmental travel restrictions issued to minimize the spread of the COVID-19 virus, the U.S. District Court for the Northern District of Illinois recently addressed the applicability of the force majeure provision in United Airlines' contract of carriage as it applied to various instances of flight cancellations.

Despite the general dearth of case law addressing the applicability of force majeure provisions pre-pandemic, courts across the country are beginning to issue decisions at a rapid fire pace addressing the backlog of claims related to the pandemic. The court's decision in Rudolph v. United Airlines Holdings Inc.[1] addresses the issue of whether United Airlines' force majeure clause in its flight purchase contract required it to issue refunds to customers whose flights were canceled as a result of the pandemic.

The court's decision is especially enlightening in that it analyzes the force majeure provision in the context of three travelers' distinct experiences in demanding a refund from United Airlines because the flights that they booked prior to the pandemic were subsequently canceled. The decision illustrates the importance of two bedrock concepts in force majeure litigation.

First, in order to have its performance excused, a party must demonstrate that an event falls within the scope of the force majeure provision contained in the contract.

Second, a party must also establish that the claimed force majeure event was the proximate cause of its inability to perform its contractual duties.

As discussed below, differences in the facts underlying the three named plaintiffs' claims led to different results with respect to United's motion to dismiss.

Plaintiff James Rudolph purchased three tickets for roundtrip travel from Minneapolis to Hilton Head, South Carolina, with connecting flights in Chicago. Rudolph purchased these tickets prior to the onset of the pandemic and requested a refund from United on March 16, 2020, due to his concerns about the pandemic.

His flights had not been officially canceled at that time. United refused his request for a refund, insisting that he did not qualify for one under United's contract, and instead offered a rebooking or travel credit. United subsequently canceled one or more segments of Rudolph's travel itinerary.

Plaintiff James Buffer purchased two roundtrip tickets from New York to Athens, Greece, with connecting flights in Frankfurt, Germany. His trip was scheduled to depart on March 19, 2020. Several days prior to his scheduled departure date, United informed Buffer that at least one segment of his travel itinerary had been canceled due to the pandemic and offered him a rebooking or trip cancellation with travel credit. Buffer demanded a refund of his purchase, but United declined.

Plaintiff Mark Hansen purchased four roundtrip tickets from Vancouver, British Columbia, to Liberia, Costa Rica, originally departing on March 28, 2020. Notably, Hansen purchased his tickets through Expedia rather than directly through United.

Several days before Hansen's scheduled departure, United began to make changes to Hansen's flight itinerary before canceling the remainder of his trip two days before his first flight was scheduled to depart. In fact, Costa Rica closed its borders to noncitizens from March 18, 2020, through April 12, 2020. United issued Hansen a flight credit in the amount of his purchase, and despite Hansen's efforts to obtain a refund from both United and Expedia, he was unsuccessful.

Rudolph, Buffer and Hansen, on behalf of themselves and all others similarly situated brought a putative class action complaint against United alleging that its failure to offer refunds violated the terms of its contract. The plaintiffs also alleged that United failed to abide by several notices issued by the U.S. Department of Transportation in refusing to refund the plaintiffs their respective ticket purchase prices.

United moved to dismiss the complaint for failure to state a cause of action on the grounds that (1) the pandemic constitutes a force majeure event under the terms of United's contract and, as a result, United was not required to provide a refund, and (2) the DOT notices were not incorporated into United's contract and were not otherwise binding on United.

This article focuses only on the court's analysis of the force majeure provision.

In addressing United's motion to dismiss, the court began by examining the language of the contract at issue, which described two categories of flight cancellations: voluntary and involuntary.

In order to obtain a refund for the ticket price in the event of a voluntary cancellation, the customer must have purchased a refundable ticket. For a nonrefundable ticket, the contract did not provide for a refund in the event of a voluntary cancellation. Instead, the contract provided that United may issue the customer a travel credit.

Under the terms of the contract, an involuntary cancellation may fall into one of three categories: (1) a force majeure event, (2) a schedule change, or (3) irregular operations.

In the event that United cancels a customer's flight due to a force majeure event, the customer is entitled to a travel credit only and may not obtain a refund. In the event of a schedule change or irregular operations, on the other hand, United must refund the customer upon request.

The contract defined a force majeure event as follows:

a. Any condition beyond [United's] control including, but not limited to, meteorological or geological conditions, acts of God, riots, terrorist activities, civil commotions, embargoes, wars, hostilities, disturbances, or unsettled international conditions, either actual, anticipated, threatened or reported, or any delay, demand, circumstances, or requirement due directly or indirectly to such condition;

b. Any strike, work stoppage, slowdown, lockout, or any other labor-related dispute involving or affecting [United's] services;

c. Any governmental regulation, demand or requirement;

d. Any shortage of labor, fuel, or facilities of [United] or others;

e. Damage to [United's] Aircraft or equipment caused by another party;

f. Any emergency situation requiring immediate care or protection for a person or property; or

g. Any event not reasonably foreseen, anticipated, or predicted by [United].

The contract also provided definitions for a schedule change and irregular operations.

In its motion to dismiss, United argued that it was not obligated to refund the plaintiffs their ticket purchase price and was justified in only offering a travel credit because the COVID-19 pandemic and surrounding travel restrictions constituted a force majeure event under the contract.

In support of its argument, United cited the various notices and orders issued by governments and health officials across the planet during the weeks leading up to the plaintiffs' scheduled flights, and further argued that these events were conditions beyond United's control and not reasonably foreseen per the language of the force majeure provision.

With particular reference to Buffer, United also argued that Costa Rica had suspended travel into its borders for noncitizens at the time United canceled his flights.

In response, the plaintiffs argued that United's decision to cancel the plaintiffs' various flights was not related to the COVID-19 restrictions, but was for economic reasons instead. Specifically, the plaintiffs contended that United was not entirely prohibited from conducting their flights and indeed could have carried out their flights had it desired to do so.

The plaintiffs' theory was that United, while capable of conducting the plaintiffs' flights, canceled them due to anticipated lower demand because of the pandemic and the corresponding risk to United's profits. The plaintiffs concluded that the cancellations at issue were not related to the COVID-19 pandemic and therefore did not qualify as a force majeure event under the contract.

In deciding the issue, the court was careful not to construe the force majeure provision too broadly so as to eviscerate the effect of the schedule change and irregular operations scenarios.[2] As the court stated:

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], drafted entirely by United, must be construed in Plaintiffs' favor.

Finally, the court noted that the existence of a force majeure event alone is not enough to excuse United's obligation to provide its customers a refund. Rather, the force majeure event must be the proximate cause of the flight cancellation.

With this framework in mind, the court looked to the facts of each plaintiff's case. With respect to Buffer, the court denied United's motion to dismiss because when United canceled Buffer's flights in mid-March, it was possible that the reason behind the cancellation was economic in nature as opposed to legitimate concern regarding the COVID-19 pandemic.

Indeed, the court noted that United had disclosed to the U.S. Securities and Exchange Commission that it was intending to cancel certain flights due to reduced demand. Whether or not this was the case was determined to be a question of fact that would need to be determined in discovery.

Hansen's claim was another story. While Hansen argued that United could have completed his flight to Costa Rica notwithstanding Costa Rica's public health orders barring entry from noncitizens, the court disagreed. The court specifically stated:

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.

For these reasons, the court determined that United canceled Hansen's flight because of a force majeure event and was not obligated to refund him his ticket purchase. As a result, the court granted United's motion to dismiss Hansen's claims.

Finally, with respect to Rudolph's claims, the court determined that his claims failed as well. The court gave particular weight to the fact that Rudolph had alleged that he canceled his tickets voluntarily because of concerns about the COVID-19 pandemic. Moreover, it was not until Rudolph had already canceled his trip entirely that United subsequently canceled the flights.

For these reasons, Rudolph could not allege the necessary proximate cause element of his claims and the court accordingly dismissed them.

In sum, the court's analysis and decision on United's motion to dismiss demonstrate the importance of the particular facts and circumstances of each case and how they fit within the precise language of the force majeure provision at issue. For instance, the court's decision regarding Hansen's entitlement to a refund may have been dramatically different absent the travel restrictions implemented in Costa Rica, his ultimate destination.

Additionally, the court's decision is a helpful reminder that the mere existence of a force majeure event is not enough to justify a party's nonperformance under a contract. Rather, courts also require that the force majeure event be the proximate cause of that party's inability to perform.

The proximate cause requirement was especially impactful on Rudolph's refund claim, considering the fact that he canceled his trip voluntarily — before United declared any cancellation — due to his own concerns about the pandemic.

While the court's decision in Rudolph v. United Airlines was rendered based on the specific facts and circumstances of the named plaintiffs' cases, it provides needed guidance on how courts may interpret the language of force majeure provisions and whether or not issues arising out of the COVID-19 pandemic may fall within those provisions.

In the context of airline flight cancellations, specifically, the court's decision is especially interesting in that the court was forced to draw a line between a force majeure event and other events resulting in travel disruption — such as irregular operations and schedule changes — under the contract.

Moreover, the court's decision serves as a helpful reminder of the difference between legal and factual issues, and at which point said issues can be decided. This distinction had a particular impact on Buffer's claims, in that the court could not definitively determine whether United canceled Buffer's trip from New York to Athens without the benefit of discovery.

The court's guidance on these issues may not be absolute, however, because other jurisdictions may approach and decide similar issues concerning force majeure provisions differently. In any event, and despite the relative absence of modern case law analyzing force majeure provisions prior to the onset of the pandemic, it is clear that force majeure provisions will play a critical role in shaping the body of pandemic-related jurisprudence and contract considerations in the coming years.

Tom A. Laser is an associate, Jared S. Hawk is a partner and Elizabeth A. Thompson is counsel at Saul Ewing Arnstein Lehr LLP.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] Rudolph v. United Airlines, Inc. , 20 C 2142, 2021 WL 534669 (N.D. Ill. February 12, 2021).

[2] See Land of Lincoln Goodwill Indus., Inc. v. PNC Fin. Servs. Grp., Inc. , 762 F.3d 673, 679 (7th Cir. 2014).

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