California Federal Court Holds Airline Deregulation Act Only Preempts Plaintiff’s State Law Rescission Claims for Covid-19 Flight Cancellation Refunds but does not Apply to Plaintiff’s Breach of Contract Claims based on Airline’s Conditions of Carriage

Schnader Harrison Segal & Lewis LLP

Schnader Harrison Segal & Lewis LLPPlaintiff asserted state law claims for breach of contract and rescission on behalf of a putative class in federal court in the Northern District of California against All Nippon Airways Co., Ltd. (“ANA”) for failing to issue refunds to passengers whose flights were cancelled due to Covid-19. ANA’s Conditions of Carriage (“COC”) required a passenger to present proof to ANA that they purchased a ticket and were entitled to a refund. While Plaintiff called ANA multiple times, she did not allege that she spoke with a representative or presented the required proof. Plaintiff sought damages for ANA’s breach of its COC or, in the alternative, rescission of the COC on behalf of herself and a nationwide class.

ANA filed multiple motions to dismiss, including a motion for failure to state a claim. ANA argued Plaintiff’s claims were preempted by the Airline Deregulation Act (“ADA”) because they related directly to rates and services; Plaintiff argued her claims were based on the express terms of ANA’s COC and therefore did not fall within the reach of the ADA’s preemption provision.

The Court denied the motion to dismiss Plaintiff’s breach of contract claims on preemption grounds but granted the motion on the ground that Plaintiff failed to allege that she complied with ANA’s condition precedent for a refund. Plaintiff argued the COC required ANA to provide her with a “prompt refund” upon the cancellation of her flight. The Court concluded that Plaintiff’s claims were not preempted because they were grounded in the express terms of the COC and the ADA does not preempt claims based on contractual obligations that airliners voluntarily assume. While the Court granted the motion to dismiss based on Plaintiff’s failure to plead that she complied with the condition precedent, the Court granted Plaintiff leave to amend to address this issue.

The Court also granted the motion to dismiss Plaintiff’s rescission claims as preempted under the ADA. Per the Court, the ADA does preempt state law rescission claims that would extinguish the COC because such claims would not enforce the parties’ self-imposed obligations; rather, they would do the opposite.

Bugarin shows that airlines can expect to continue to face creative theories of liability arising from service disruptions occasioned by the global Covid-19 pandemic. Bugarin v. All Nippon Airways Co., Ltd., No. 20-cv-3341, 2021 U.S. Dist. LEXIS 10647 (N.D. Cal. Jan. 19, 2021).

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