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Andres Lozano et al. v. United Continental Holdings

September 17, 2012

ANDRES LOZANO ET AL.
v.
UNITED CONTINENTAL HOLDINGS, INC. AND CONTINENTAL AIRLINES, INC.



Name of Assigned Judge Sitting Judge if Other or Magistrate Judge John A. Nordberg than Assigned Judge

CASE TITLE

DOCKET ENTRY TEXT

Defendants' motion to dismiss Count I of the amended complaint [34] is granted. Defendants should file their motion to dismiss Count II, along with a supporting brief, within 2 weeks of this order. Plaintiffs' response is due two weeks thereafter, and defendants' reply is due 2 weeks thereafter. The Court will rule by mail.

O[ For further details see text below.] Docketing to mail notices.

STATEMENT

Overview. On July 2, 2011, the Lozanos (two parents plus their four children) were scheduled to fly on Continental Airlines Flight # 37 from Edinburgh, Scotland to Newark, New Jersey with continued travel to their final destination of Charleston, S.C. During a pre-flight safety check, mechanics discovered a problem with the fuel feed governor. The replacement part was not on hand in Edinburgh. The flight therefore was delayed substantially. The Lozanos arrived in Charleston on July 4th, over 50 hours late. During the delay, Continental offered the Lozanos and other passengers hotel rooms and meal vouchers. However, the Lozanos were not happy with their hotel rooms because they were not connecting, which they felt they needed for their young children. So they found a different hotel better to their liking and paid for it themselves.

A few months after the flight, the Lozanos contacted the Civil Aviation Authority in London seeking help in securing compensation for the delay and hotel rooms. The CAA was created to protect airplane passenger rights. The CAA wrote a letter on the Lozanos' behalf asking Continental to pay compensation required by a European Union regulation adopted on February 11, 2004. This regulation, known as EU 261, was passed to bolster passenger rights regarding delays and cancellations on flights departing from, or arriving in, an airport located in the EU. The regulation creates a standardized compensation schedule based on distance of flight. If applicable here, it would require Continental to pay 600 Euros or roughly $800 per person, which is approximately $4,800 for the whole Lozano family.

In response to the CAA letter, Continental wrote back explaining that the delay was caused by a last-minute mechanical problem which Continental believed constituted an "extraordinary circumstance" under EU 261, meaning no compensation is required. Continental noted that it offered passengers hotel rooms and meals, as well as a $300 travel voucher as a goodwill gesture. CAA forwarded the letter to the Lozanos and advised them that they may wish to consider filing a legal claim in the London County Court.

Rather than pursuing their claim there, the Lozanos chose instead to file here in Federal court in Chicago. Perhaps one motivation for switching venues is that the Lozanos (who we'll refer to as plaintiffs from here on out) are bringing this case as a class action, seeking to recover EU 261 damages for every Continental flight since late 2009 which was delayed over 3 hours.

The original complaint contained a single claim for breach of contract. Plaintiffs' theory was that Continental had posted a notice on its website informing passengers about their rights under EU 261 and that this notice was incorporated into Continental's Contract of Carriage. Continental (we use the singular term for both defendants) filed a motion to dismiss. In its 25-page opening brief, it raised four arguments: 1) the contract claim is preempted by the Airline Deregulation Act, 49 U.S.C. § 41713; (2) the claim is preempted by the Montreal Convention; (3) the claim is limited by the Montreal Convention's ban on punitive damages; and (4) EU 261 was never incorporated into the passenger contract.

Before briefing could be completed, plaintiffs filed an amended complaint adding a second claim directly under EU 261. Continental, with plaintiffs' agreement, filed a new motion and brief. But the only additional argument raised against the new count is that it duplicated Count One. Plaintiffs in their response brief disagreed and stated that Count Two differed in that plaintiffs would not be required to show that the website notice was incorporated into the passenger contract. In its reply, Continental complained that because plaintiffs did not give it "proper notice of the precise nature of the second cause of action," Continental was not able to raise arguments directed solely at that count and that it would like the opportunity to do so. In short, there is some confusion about the nature of the two claims; moreover, in reading the briefs, it is not entirely clear whether some or all of the four original arguments relate to one or both claims. However, one argument in the current briefs is clearly directed solely at Count One. It is the incorporation argument. We conclude that the best approach in light of this uncertainty is to address the incorporation argument now in this minute order and then allow additional briefing on arguments directed at the new Count Two.

Analysis. We begin with the legal rules. The specific issue is whether the one-page notice on Continental's website (hereinafter, the "EU 261 Notice") is incorporated into Continental's Contract of Carriage based on a provision stating that the contract includes any "terms and conditions printed on or in any ticket, ticket jacket or eticket receipt, or specified on any internet site, or in published schedules." (Ex. 5 at 1.) Neither side in their briefs takes a position on which state's law should apply to this common law claim. The parties only cite to a few cases, and most of them construe Illinois law. We will therefore likewise use Illinois law as our starting point, although we believe the relevant legal principles likely would not vary from state to state.

As the Seventh Circuit has summarized, "a document is incorporated by reference into the parties' contract only if the parties intended its incorporation." 188 LLC v. Trinity Industries, Inc., 300 F.3d 730, 736 (7th Cir. 2002). Intent is the central criterion, and this intent must be "clear and specific." Id.; see also Jago

v. Miller Fluid Power Corp., 615 N.E.2d 80, 82 (1993) (a separate document will be incorporated into a contract only if "that intention is clearly shown on the face of the contract") (emphasis added); Williston on Contract, ยง30:25 (updated July 2012) (incorporation by reference is permitted "[a]s long as the contract makes clear reference to the document and describes it in such terms that its identity may be ascertained beyond doubt") (footnotes omitted; emphasis added). The party seeking to rely on the ...


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