Airline passengers may not assert statutory compensation claims under European regulation in the United States



April 15, 2015

Aviation Law Alert

Author(s): Kevin P. Shea

Can airline passengers seek, on a class-wide basis, standardized compensation for cancelled or delayed flights under European law in the United States? The Seventh Circuit says no, but there's a catch. This alert discusses what airlines need to know.

In a decision impacting a number of airlines, on April 10, 2015, the United States Court of Appeals for the Seventh Circuit held that airline passengers may not assert statutory compensation claims for flight cancellations and delays under European Regulation No. 261/2004 (“EU 261”) in the United States. See Volodarskiy v. Delta Airlines, Inc., No. 13-3521, 2015 WL 1600448 (7th Cir. April 10, 2015). Instead, passengers may only seek direct statutory redress in the European Union. The decision is significant for airlines because, unlike in the United States, the European Union Member States generally do not allow for class actions. Thus, passenger compensation claims under EU 261 must now be asserted on an individual basis within the Member States of the European Union, rather than on a class-wide basis in the United States.

Please note, however, that an airline may still be subject to EU 261 claims in the United States under a breach of contract theory if a carrier is deemed to have incorporated that regulation into its contract of carriage. Therefore, we recommend that airlines carefully review their contract of carriage on this issue.

Background of EU 261

In 2004, the European Parliament and the Council of the European Union enacted EU 261 to provide standardized passenger compensation rates for flight delays and cancellations on flights departing to or from a Member State of the European Union. The compensation ranges from €250 to €600 per passenger depending on the length of the flight. See EU 261 art. 7. The actual text of EU 261 only requires airlines to pay compensation for cancelled flights, but the European Court of Justice (“ECJ”) has extended the entitlement to flight delays of more than three hours from the scheduled departure time. See Volodarskiy, 2015 WL 1600448 at *2 citing Sturgeon v. Condor Flugdienst GmbH, 2009 E.C.R. I-10923, I-10979-80. Compensation is not owed for flights that are delayed or canceled due to “extraordinary circumstances.” See EU 261 art. 5(3). Under ECJ authority, weather delays typically constitute “extraordinary circumstances” but maintenance delays do not. See e.g., Sturgeon, ¶ 72. Determining whether an airline has an “extraordinary circumstances” defense is a fact-intensive analysis for each particular case.

EU 261 requires each European Member State to designate a national administrative body to handle enforcement responsibilities. See EU 261 art. 16. However, EU 261 also provides that supervision by enforcement bodies “should not affect the rights of passengers and air carriers to seek legal redress from courts under procedures of national law.” See EU 261 preamble ¶ 22.

Passenger class action suits in the United States

After the Sturgeon decision, which significantly expanded the scope of claims under EU 261 from only cancellations to flight delays, plaintiffs’ counsel brought a number of class action lawsuits in the Northern District of Illinois against several airlines. Plaintiffs initially asserted breach of contract claims against the airlines, arguing that EU 261 was expressly incorporated into the carriers’ contracts of carriage. With minor exceptions, the courts dismissed plaintiffs’ breach of contract claims at the pleading stage. At least one carrier, however, had affirmatively incorporated EU 261 into its contract of carriage and was thus forced to defend plaintiffs’ EU 261 claims on the merits.

As to the airlines who prevailed on the contract claims, plaintiffs changed course and asserted direct statutory claims under EU 261, arguing that, based on EU 261’s preamble (referenced above), passengers should be allowed to seek redress in any court for a statutory violation of EU 261. The airlines sought dismissal of plaintiffs’ statutory claims arguing that EU 261 could not be enforced by courts outside of the European Union and, in addition, such claims were preempted by the Airline Deregulation Act, 49 U.S.C. § 41713 (the “ADA”) and Article 19 of the Montreal Convention. While the district courts disagreed with the airlines’ ADA and Montreal Convention preemption arguments, they uniformly agreed that EU 261 may not be judicially enforced outside of the European Union.

The Seventh Circuit rejects plaintiffs’ direct claims under EU 261

In Volodarskiy, the Seventh Circuit addressed whether passengers could assert direct claims under EU 261 against airlines in the United States. Plaintiffs did not appeal the dismissal of their breach of contract claim so the court never addressed that issue. Of note, the Seventh Circuit found that plaintiffs sought relief under EU 261 in an American forum, “no doubt to access the class-action device available under U.S. law.” Volodarskiy, 2015 WL 1600448 at *2. The court also noted that most European nations have not embraced the U.S.-style class action. Id. at n.2. With that background, the court rejected plaintiffs’ argument that the text of EU 261 allows for enforcement in any court in any country. Id. at *5-6. While the court noted that EU 261 provides a private right of action and has no express forum-limitation clause, it held that EU 261 does not empower tribunals in nonmember countries to enforce the compensation system. Id. at *4, 7. Instead, the structure and text of EU 261 indicate that passenger claims for compensation from air carriers must be asserted in the courts of European Union Member States. Because the court affirmed the district court’s dismissal on that ground, the Seventh Circuit did not address the issues of ADA or Montreal Convention preemption.

Conclusion

While Volodarskiy is a significant and beneficial decision for airlines regarding direct statutory claims under EU 261, airlines should also carefully review their contracts of carriage to evaluate potential breach of contract claims based on EU 261.

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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