March 19, 2018

Tenth Circuit Affirms Airline's Enforcement of Terms Regarding Nonrefundable Tickets

Holland & Knight Aviation Law Blog
Judy R. Nemsick

In Martin v. United Airlines, Inc., __ Fed. App'x __, 2018 WL 992289 (10th Cir. Feb. 21, 2018), Oklahoma residents brought a putative class action asserting various breach of contract theories against the airline arising from their inability to rebook their nonrefundable tickets after they canceled their flight reservations. Under the terms of the contract of carriage, the airline does not refund the value of a nonrefundable fare but allows a passenger to rebook the flight in one year using the value of the canceled flight, subject to applicable change fees and other restrictions. Plaintiffs booked one substitute flight within the one-year period, but failed to book other flights and could not obtain an extension of time. Plaintiffs alleged claims of breach of contract by "failure of consideration," breach of contract by failure to fulfill "reasonable expectations," recovery of money wrongfully kept by United, and tortious breach of the implied covenant of good faith and fair dealing.

The district court held that the Airline Deregulation Act of 1978 (ADA), 49 U.S.C. § 41713(b)(1), preempted those claims that imposed state-law standards not agreed to by the parties, and dismissed the remaining claims for failure to state a claim. On appeal, the Tenth Circuit affirmed, finding that the contract claims preserved on appeal failed to state a claim under Oklahoma law. The panel determined it was unnecessary to address ADA preemption.

As recognized by the panel, the plaintiffs were "in essence" attempting to change the terms of the contract. Finding the contract terms "clear" and lacking any ambiguity, the panel concluded that no one who purchases a nonrefundable ticket "could have any illusions" that he or she could miss or cancel their flight and obtain a full refund.

Additionally, the Tenth Circuit affirmed that the implied covenant of good faith and fair dealing does not afford any relief from the express terms of the contract. Nor are the airline's restrictions on nonrefundable tickets unconscionable. As aptly noted by the panel, "[c]ontracts made on competitive markets are seldom unconscionable" and the airline's terms "do not confront travelers with an absence of choice or unfair surprise and are not oppressively one-sided in light of commercial realities."

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