Airline prevails on “real party in interest” defense in EU 261 lawsuit brought by claims management company

Click 2 Refund Inc. v. British Airways Plc (C.D. Cal. Nov. 18, 2019).  EU 261’s robust compensation provisions have spawned a thriving industry of web-based “claims management companies” that offer to assist airline customers in obtaining recoveries for canceled or delayed flights on a “no win, no fee” basis.  One such company claims that it has recovered over $90 million from airlines.  Another, Click 2 Refund, promotes its service as having a “98% success rate in court.”

After British Airways refused to pay Click 2 Refund’s demand based on its customers’ EU 261 claim, the company filed a lawsuit, naming itself as the sole plaintiff, in a California state court.  The complaint alleged that British Airways canceled the customers’ flight from Berlin to London, causing them to miss their connecting flight from London and arrive, on a substitute flight, at their Boston destination more than four hours late.  Click claimed damages of over $2,600.  With the complaint, Click submitted documents, apparently e-signed by the customers, that granted Click the “power of attorney” to “institute claim(s) against British Airways pursuant to the airline contract / passenger rights regulation 261/2004.”

British Airways removed the case on federal question grounds, asserting that the U.S. district court had original jurisdiction because the subject claim was for a delay in international transportation and thus governed by Article 19 of the Montreal Convention.  British Airways subsequently moved for judgment on the pleadings on three bases, that (i) Click 2 Refund was not the real party in interest, (ii) claims under EU 261 cannot be brought in U.S. courts, and (iii) the delay claim arose, but failed, under the Convention because there was no allegation that Click’s customers had sustained any compensable damages.  The court agreed and granted the motion.

As to the real party in interest issue, the court explained that an assignee of a claim is a real party interest but that, in this case, the “power of attorney” signed by the customers did not assign any claims and thus was insufficient to give Click the authority to sue in its own name.  The court granted leave for Click to add real parties in interest to its complaint.

As to the EU 261 issue, the court, following a Seventh Circuit decision, ruled that EU 261 claims are not enforceable in U.S. courts.  The court dismissed Click’s EU 261 claim with prejudice.

Finally, the court ruled that Click’s customers were alleging a travel delay claim that arose under Article 19 of the Montreal Convention but that they had failed to allege any out-of-pocket losses or other compensable Article 19 damages; they had alleged only unrecoverable EU 261 damages.  The court granted Click leave to file an amended complaint to state an actionable Article 19 delay claim “if possible.”

On March 11, 2020, the court dismissed the case with prejudice because Click had failed to file an amended complaint by the applicable deadline.

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