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Theodoros Giannopoulos, and v. Iberia Lineas Aereas De Espana

July 27, 2011

THEODOROS GIANNOPOULOS, AND
ALEXANDRA GIANNOPOULOS, ON BEHALF
OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
IBERIA LINEAS AEREAS DE ESPANA, S.A., DEFENDANT.



The opinion of the court was delivered by: Hon. Joan H. Lefkow

OPINION AND ORDER

Theodoros and Alexandra Giannopoulos filed this putative class action lawsuit against Iberia Lineas Aereas de Espana, S.A.*fn1 ("Iberia") alleging breach of contract based on Iberia's failure to pay compensation for their delayed flight as required by Iberia's conditions of contract and Regulation No. 261/2004 of the European Parliament and European Council ("EU 261").*fn2

Four other cases founded on similar allegations have been filed in this district by the same plaintiffs' counsel against other airlines. See Polinovsky v. British Airways PLC, No. 11 C 779; Polinovsky v. Deutsche Lufthansa AG, No. 11 C 780; Volodarskiy v. Delta Air Lines, Inc., No. 11 C 782; Gurevich v. Compagnia Aereas Italiana, SPA, No. 11 C 1890. Iberia has moved to dismiss plaintiffs' complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). For the following reasons, the motion [#29] is denied.

BACKGROUND*fn3

Plaintiffs, Illinois residents, purchased tickets to fly on Iberia to Europe. The tickets incorporated Iberia's conditions of contract. The conditions of contract include a notice to passengers that "[a]s established in [EU 261], compensation is fixed in the event of a flight cancellation unless the latter is due to extraordinary circumstances." Ex. 2 to Compl. at 2. They also provide that "[a]s established in [EU 261], in the event of a long delay in relation to the scheduled departure time of flight, passengers are entitled to immediate aid and assistance throughout the duration of the delay." Id. EU 261 applies to passengers with confirmed tickets on flights departing from an airport located in an EU member state and flights departing from a non-EU member state to an airport in an EU member state if the operating carrier has an operating license granted by an EU member state.*fn4 Pursuant to EU 261, passengers on qualifying flights that are cancelled are entitled to a set amount of compensation so long as the cancellation was not caused by unavoidable extraordinary circumstances.*fn5 This compensation is separate from any other right a passenger may have to compensation. Although EU 261 does not explicitly provide compensation for passengers whose flights are delayed, the European Court of Justice ("ECJ") has interpreted EU 261 to require treating passengers whose flights are delayed by three or more hours as passengers whose flights are cancelled for purposes of its compensation provision. Cases C-402/07 & C-432/07, Sturgeon v. Condor Flugdienst GmbH, 2009 E.C.R. I-10923.

Plaintiffs were scheduled to depart on Iberia Flight 6274 on May 9, 2010 from O'Hare International Airport in Chicago, Illinois to Madrid-Barajas Airport in Madrid, Spain. From Madrid, they were to continue to their final destination of Athens, Greece. Flight 6274 was delayed for more than three hours, arriving in Madrid more than three hours after the scheduled arrival time. Plaintiffs were informed of the delay only after their flight was scheduled to depart. They were rerouted through Vienna, Austria, where they were required to stay overnight. They ultimately reached Athens approximately twenty-four hours after their original scheduled arrival time. Plaintiffs filed a complaint seeking compensation through Iberia's website but only received a form email response from Iberia denying their request and indicating that compensation is only available in cases of overbooking.

LEGAL STANDARD

A motion to dismiss under Rule 12(b)(6) challenges a complaint for failure to state a claim upon which relief may be granted. Fed. R. Civ. P. 12(b)(6); Gen. Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1080 (7th Cir. 1997). In ruling on a motion to dismiss, the court accepts as true all well-pleaded facts in the plaintiff's complaint and draws all reasonable inferences in the plaintiff's favor. Nixon v. Page, 291 F.3d 485, 486 (7th Cir. 2002). In order to survive a 12(b)(6) motion, the complaint must not only provide the defendant with fair notice of the claim's basis, but must also establish that the requested relief is plausible on its face. Ashcroft v. Iqbal, --- U.S. ----, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007). The allegations in the complaint must be "enough to raise a right of relief above the speculative level." Twombly, 550 U.S. at 555. At the same time, the plaintiff need not plead legal theories. Hatmaker v. Mem'l Med. Ctr., 619 F.3d 741, 743 (7th Cir. 2010). Rather, it is the facts that count.

ANALYSIS

I. Airline Deregulation Act

Iberia first argues that plaintiffs' claim is preempted by the Airline Deregulation Act ("ADA"), 49 U.S.C. § 41713. The ADA was enacted to promote "maximum reliance on competitive market forces." Morales v. Trans World Airlines, Inc., 504 U.S. 374, 378, 112 S. Ct. 2031, 119 L. Ed. 2d 157 (1992). To ensure that states do not undo federal deregulation of the airline industry, the ADA includes a preemption provision providing that "a State, political subdivision of a State, or political authority of at least 2 States may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of an air carrier that may provide air transportation under this subpart." 49 U.S.C. § 41713(b)(1). Thus, for a claim to be preempted, "(1) [a] state must 'enact or enforce' a law that (2) 'relates to' airline rates, routes, or services, either by expressly referring to them or by having a significant economic effect upon them." Travel All Over the World, Inc. v. Kingdom of Saudi Arabia, 73 F.3d 1423, 1432 (7th Cir. 1996). State common law qualifies as a provision having the force and effect of law for purposes of the first prong of the preemption analysis. United Airlines, Inc. v. Mesa Airlines, Inc., 219 F.3d 605, 607 (7th Cir. 2000). By not addressing it in their response, plaintiffs apparently concede that the second requirement is met.*fn6

The Supreme Court carved out an exception to ADA preemption for certain breach of contract claims. In American Airlines, Inc. v. Wolens, 513 U.S. 219, 115 S. Ct. 817, 130 L. Ed. 2d 715 (1995), the Supreme Court held that the ADA does not "shelter airlines from suits alleging no violation of state-imposed obligations, but seeking recovery solely for the airline's alleged breach of its own, self-imposed undertakings." Id. at 228. Adjudication of the claim must not require "enlargement or enhancement [of the contract] based on state laws or policies external to the agreement." Id. at 233; see also Onoh v. Nw. Airlines, Inc., 613 F.3d 596, 600 (5th Cir. 2000). Thus, for example, the portion of a contract claim seeking punitive damages as allowed by state law would be preempted, while that seeking compensatories would not be. Travel All, 73 F.3d at 1432 n.8; In re Jetblue Airways Corp. Privacy Litig., 379 F. Supp. 2d 299, 317 (E.D.N.Y. 2005). As Wolens explains, "[a] remedy confined to a contract's terms simply holds parties to their agreements-in this instance, to business judgments an airline made public about its rates and services." Wolens, 513 U.S. at 229.

Plaintiffs argue that Iberia voluntarily agreed to abide by EU 261 by incorporating it into the conditions of contract. Their claim, they posit, is therefore based on a self-imposed undertaking and fits within the Wolens exception. Iberia disputes that Wolens applies, arguing that the exception is a narrow one and that adjudicating plaintiffs' claim will require going beyond the contract. This contention is based on the fact that the ECJ has found that, for purposes of compensation under EU 261, a flight delay of over three hours is consideredequivalent to a cancellation. Iberia argues that it only agreed in its contract to provide compensation for cancelled flights, so plaintiffs' claim for compensation for a long delay enlarges Iberia's contractual undertaking. Iberia's argument is unpersuasive, however, for it agreed to pay compensation as established in EU 261. The ECJ has determined that EU 261 establishes a right to compensation in plaintiffs' case, provided that extraordinary circumstances for the delay cannot be shown. This decision is the binding interpretation of EU 261. See Case 69/85, Wunsche Handelsgesellschaft GmbH & Co. v. Germany, 1986 E.C.R. 947, ¶ 13 ("[A] judgment in which the court gives a preliminary ruling on the interpretation or validity of an act of a community institution conclusively determines a question or questions of community law . . . ."); Stephen Breyer, Changing Relationships Among European Constitutional Courts, 21 Cardozo L. Rev. 1045, 1051 (2000) ("[T]he ECJ has final legal authority to interpret an EC law that is binding and 'supreme.'"). Thus, Iberia's agreement to pay compensation according to EU 261 must be read as an agreement to abide by EU 261, as interpreted by the ECJ. The ECJ's decision in Sturgeon, then, cannot be considered external to the contract.

The cases Iberia cites to support its position that paying compensation for delays is not a self-imposed undertaking are distinguishable. In Onoh, the Fifth Circuit concluded that the airline had not expressly incorporated the Schengen Agreements into its contract by mere reference to the need to comply with all applicable law. Onoh, 613 F.3d at 600--01. In McMullen v. Delta Air Lines, Inc., the airline similarly only agreed to comply with any applicable law that is in conflict with its international contract of carriage, leading the district court to find that the airline did not voluntarily undertake to only charge non-exempt customers a foreign tax. No. 08-1523 JSW, 2008 WL 4449587, at *5 (N.D. Cal. Sept. 30, 2008), aff'd, 361 F. App'x 757 (9th Cir. 2010). But see In re Am. Airlines, Inc., Privacy Litig., 370 F. Supp. 2d 552, 565--66 (N.D. Tex. 2005) (breach of contract claim not preempted where laws plaintiffs relied on were considered to be incorporated into contract by reference that airline would be "bound to its privacy policy, except as required by law"). In Buck v. American Airlines, Inc., the First Circuit concluded that the Wolens exception did not apply because the federal regulation plaintiffs sought to enforce was not explicitly incorporated into the contract and considering it to be an implicit term incorporated into every contract would undermine the implied right of action doctrine. 476 F.3d 29, 36--37 (1st Cir. 2007). Unlike generic references to "applicable law" or arguments that certain federal regulations are implicitly part of every contract, in this case, Iberia specifically refers to complying with EU 261 in its conditions of contract. In Delta Air Lines, Inc. v. Black, the Texas Supreme Court held plaintiffs' claim preempted where plaintiffs sought a remedy that was not allowed by federal regulations that were specifically incorporated into the airline's contract. 116 S.W.3d 745, 755--56 (Tex. 2003). But the federal regulations were ...


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