Court rules on summary judgment motions in charter flights class action

In re Nigeria Charter Flights Contract Litigation (E.D.N.Y. Oct. 25, 2007).  In 2002, World Airways, Inc. and Ritetime Aviation and Travel Services, Inc. entered into a charter aircraft services agreement under which World agreed to supply Ritetime with round-trip flights between points in the U.S. and Lagos, Nigeria.  The charter flights began but, by the end of 2003, Ritetime owed World over $2 million, leading World to discontinue its U.S.-Nigeria operations.  World’s action stranded hundreds of passengers who had traveled on outbound flights and left others who had bought tickets for 2004 unable to travel at all.

After the passengers sued World, Ritetime and its CEO in courts throughout the U.S., the federal cases were consolidated in the Eastern District of New York, which certified a class of plaintiffs in 2006.  The plaintiffs alleged that World is liable under the Montreal Convention for its failure to transport them, and they also alleged state law claims for breach of contract, negligence and fraud.

World moved for summary judgment, contending that (i) the Montreal Convention preempts the plaintiffs’ state law claims, (ii) even if the plaintiffs’ state law contract claims are not preempted, they should be dismissed because there is no privity of contract between World and the plaintiffs, and (iii) even if the Convention does not preempt the plaintiffs’ negligence and fraud claims, the federal Airline Deregulation Act preempts those claims.  The plaintiffs filed a cross-motion for summary judgment.

The court granted World’s motion as to the plaintiffs’ delay claims under the Convention but denied it as to their breach of contract and tort claims.  The court also denied the plaintiffs’ cross-motion.  The court’s specific rulings are as follows.

Montreal Convention preemption.  Delay in international air transportation is governed by Article 19 of the Convention, and whenever the Convention applies, it preempts all state law claims for matters that fall within the scope of its application.  Article 22(1) limits an airline’s liability for a passenger’s delay claim to 4,150 Special Drawing Rights, or about $6,750.  The Convention does not govern nonperformance of a contract of carriage.  The court held that the Convention did not preempt the plaintiffs’ state law claims, ruling that their claims were for nonperformance, not for delay.  The court reasoned that World had “simply refused to transport” the plaintiffs, without offering them alternate transportation, “rather than merely delaying them.”  Of course, this ruling meant that the plaintiffs could not maintain their delay claims under the Convention, and the court granted World’s motion with respect to such claims.

Privity/agency.  The court held that while the tickets themselves did not establish contracts between the plaintiffs and World, factual issues prevented it from granting summary judgment to either side on the issue of World’s liability for Ritetime’s conduct.  The court ruled that the evidence presented was insufficient for it to decide whether the plaintiffs had bought their tickets directly from World; the plaintiffs presented evidence that they had done so, while World presented contradictory evidence.  Similarly, the court held that the existence of disputed facts prevented it from determining whether, as the plaintiffs alleged, Ritetime was World’s agent under theories of actual or apparent authority or that World had ratified Ritetime’s ticket sales.

ADA preemption.  The court rejected World’s contention that the federal Airline Deregulation Act preempted the plaintiffs’ fraud and negligence claims.  The ADA preempts certain state tort (and other) claims “related to a price, route, or service” of an airline.  However, some New York federal courts will refuse to rule that a tort claim is preempted where an airline has engaged in “outrageous” conduct that went “beyond the scope of normal aircraft operations.”  The court held that the ADA did not preempt the tort claims in this case because World’s refusal to transport the plaintiffs constituted “outrageous” conduct.

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