Federal appeals court rules that “nonrefundable” means . . . nonrefundable

Martin v. United Airlines, Inc. (10th Cir. Feb. 21, 2018).  After buying several “nonrefundable” tickets via United’s website, the customers/plaintiffs, a married couple, canceled their reservations before the ticketed departure dates.  They alleged they attempted, without success, to make new reservations within the one-year deadline set forth in United’s Contract of Carriage for booking a new flight, and subsequently, to get United to extend such deadline.

The customers filed a class action complaint in an Oklahoma state court, alleging causes of action for (1) “breach of contract by failure of consideration,” (2) “breach of contract by failure to fulfill reasonable expectations,” (3) “recovery of money wrongfully kept,” and (4) “tortious breach of the covenant of good faith.”  The customers conceded that, in buying the tickets, they had agreed to the CoC, which they described as “a maze of 48 pages of small print” containing “ambiguous,” “unconscionable” and “repugnant” terms.  The CoC provided that United “will not refund any portion of a Ticket that is purchased with a nonrefundable fare” and that a nonrefundable ticket “has no value after ticketed departure time.”  However, if the customer canceled the reservations before the ticketed departure time, the CoC allowed the customer to use, within a one-year period from the issuance of the ticket, the value of that ticket toward another ticket, subject to the applicable change fee.

United removed the case to federal court, then moved to dismiss the complaint.  The district court granted United’s motion to dismiss, holding that the customers’ claims were either preempted by 49 U.S.C. § 41713(b)(1), the preemption provision of the Airline Deregulation Act, or, to the extent they were not preempted, they were not actionable because the pertinent CoC terms were enforceable.  The court remarked that it “does not tout its preemption rulings in this order as representing any semblance of fairness” but that “the Congress of the United States has placed beyond the reach of state law” any ability to attack the subject CoC terms.

Before the Tenth Circuit, the customers pursued their contract claims only.  The appeals court affirmed, noting that “United did nothing more than enforce an enforceable contract.”  First, the court rejected the customers’ argument that the CoC was ambiguous, ruling that they had failed to identify the specific text that supposedly was ambiguous.  Next, the court rejected the customers’ argument that, under the “reasonable-expectations doctrine,” they “expected better terms with a nonrefundable ticket,” as the use of such doctrine is limited to situations, not present, where the contract is ambiguous or the key term is “masked by technical or obscure language.”

The appeals court then rejected the customers’ implied covenant of good faith and fair dealing argument because that doctrine “cannot impose terms that contravene the express terms of the contract.”  Finally, the court rejected the customers’ argument that the restrictions on nonrefundable tickets were unconscionable, explaining that, “[e]very day, thousands of travelers have a choice between purchasing a refundable ticket or a significantly cheaper nonrefundable ticket from a variety of airlines” and that “[a]irlines are hardly oppressive or coercive in offering travelers the choice of cheaper nonrefundable tickets.”

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