Are Airlines Treating Consumers Fairly?
by Paul Ruden
Photo: Shutterstock.com
I often see complaints from consumers and travel agents alike that the way airlines treat their customers is unfair and getting worse. Lately, these concerns have focused on issues like reduced seat pitch on planes, ancillary fees that are not adequately disclosed and what is known as “nickel-and-diming.” Personally, I have great sympathy with those complaints. While the safety record of the airlines is remarkable, the market conditions and regulatory regime under which they operate are not producing what many consumers consider to be “fair” treatment.
Given the determination of the Trump administration to reduce the regulatory controls that already exist, the prospect for a more aggressive regulatory solution to the “fairness” problem is nil. This leaves consumers, and their agents, in a precarious situation, as I have noted in previous articles.
I will illustrate just how precarious by reference to a Feb. 2, 2018 decision in the United States Court of Appeals for the Tenth Circuit, the court level just below the Supreme Court. The case is Martin v. United Airlines, Inc. You can read the entire opinion here.
The lawsuit was first filed in Oklahoma state court as a class action, a maneuver that rarely succeeds; the case was transferred to a federal court at United’s behest. Four claims were asserted under Oklahoma law: “(1) breach of contract by “failure of consideration”; (2) breach of contract by failure to fulfill “reasonable expectations”; (3) “recovery of money wrongfully kept by [United]”; and (4) tortious breach of the implied covenant of good faith and fair dealing.”
The plaintiffs were rather creative in conceiving these claims, given the factual situation: the consumers bought two tickets they could not use, succeeded in exchanging one (and paid the required fees and penalties) but could not accomplish the exchange of the second one, for which the airline refused to provide an extension of the one-year deadline.
The airline launched two major lines of defense. First, it argued, the state law claims were preempted by the federal statute that forbids any state from enacting or enforcing a law “related to a price, route, or service of an air carrier.” Anyone suing an airline anywhere and relying on state law will likely face this powerful defense. If it is affirmed, federal preemption is an absolute barrier to any suit based on state claims.
The federal trial court found that since the claims were so “related” and also that “insofar as Plaintiffs’ theories of relief attempted to impose state-law standards to which the parties had not agreed, they were preempted.” [emphasis mine]
Then the airline delivered the real death blow — the argument that even if the claims were not preempted, they failed to state a legal claim under Oklahoma law.
Faced with this, the plaintiffs re-evaluated their situation. On appeal, they conceded that their tort claim based on the covenant of good faith was preempted, and they did not argue further the wrongful-withholding-of-money claim.
The Court of Appeals then addressed the airline’s contract of carriage and decided that the surviving two claims failed as a matter of law. Why? Because, the court said, “United’s contract is not ambiguous. Nor is the nonrefundability of a “nonrefundable” ticket masked by technical or obscure language.” That being so, “No one buying a nonrefundable ticket could have any illusions that he or she could miss the flight and get a full refund.”
Travel agents, of course, know this and routinely explain the meaning of nonrefundable fares to their customers.
The Court of Appeals then rejected the argument that the refund restrictions on nonrefundable tickets were inconsistent with the implied covenant of good faith and fair dealing, because “that covenant cannot impose terms that contravene the express terms of the contract.”
Nor was the contract of carriage “unconscionable,” which the court defined as requiring an “absence of meaningful choice” and “contractual terms which are unreasonably favorable to the other party.” You can see where this is going.
There is a saying in the legal profession that “hard cases make bad law” and that’s often true. But easy cases can also make bad law, and that appears to be the result here as the court went on to say:
Every day, thousands of travelers have a choice between purchasing a refundable ticket or a significantly cheaper nonrefundable ticket from a variety of airlines. Few are out of their senses or delusional. Contracts made on competitive markets are seldom unconscionable. Although the market for air travel is not a model of perfect competition, the commercial context here also argues against finding unconscionability. Airlines can compete against each other, and an airline could certainly obtain a competitive advantage in obtaining customers by making all tickets fully refundable or, as some do, by reducing the burden of exchanging the ticket, but the cost to an airline of doing so may constrain such an effort.
Further, there is certainly no procedural unfairness present here. Airlines are hardly oppressive or coercive in offering travelers the choice of cheaper nonrefundable tickets. And we see nothing morally reprehensible or exploitive in the ultimate contract — a contract that is pervasive in modern society. In short, the terms of United’s nonrefundable tickets do not confront travelers with an absence of choice or unfair surprise and are not oppressively one-sided in light of commercial realities.
The Court of Appeals cited for this market explanation the Supreme Court’s decision from 1992, in which the first broad interpretation of the preemption clause of the Airline Deregulation Act was first set out.
The lesson is that the courts do not hold the airlines’ contracts of carriage in the same low esteem as consumers and travel agents often do. The courts see the contracts in the cold glare of contract law. Absent a compelling showing at the trial level that consumers do not, in fact, now enjoy the choices the court in the Martin case found so compelling, based on a 1992 Supreme Court opinion, the prospects for successful legal attacks on airline conduct are minute at best.
