All World Professional Travel v. American Airlines, No. ED CV 02-849 RT.

CourtUnited States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California
Writing for the CourtTimlin
Citation282 F.Supp.2d 1161
PartiesALL WORLD PROFESSIONAL TRAVEL SERVICES, INC., a corporation, individually and on behalf of others similarly situated, Plaintiffs, v. AMERICAN AIRLINES, INC., Defendant.
Decision Date03 July 2003
Docket NumberNo. ED CV 02-849 RT.
282 F.Supp.2d 1161
ALL WORLD PROFESSIONAL TRAVEL SERVICES, INC., a corporation, individually and on behalf of others similarly situated, Plaintiffs,
v.
AMERICAN AIRLINES, INC., Defendant.
No. ED CV 02-849 RT.
United States District Court, C.D. California, Eastern Division.
July 3, 2003.

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Farley J. Neuman, Jenkins Goodman & Neuman, San Francisco, CA, Gretchen M. Nelson, Gretchen M. Nelson Law Offices, Los Angeles, CA, Linda S. Platisha, Linda S. Platisha Law Offices, Yorba Linda, Dean Browning Webb, Dean Browning Webb Law Offices, Vancouver, WA, for Plaintiffs.

Rodney Joseph Stone, Robert E. Cooper, Robert P. Berry, Gibson Dunn & Crutcher, Los Angeles, CA, for Defendant.

ORDER DENYING DEFENDANT AMERICAN AIRLINES, INC'S MOTION TO DISMISS PURSUANT TO FED.R.CIV.P. 12(b)(6)

TIMLIN, District Judge.


The Court, the Honorable Robert J. Timlin, has read and considered Defendant American Airlines, Inc. ("American")'s motion to dismiss the complaint of All World Professional Travel Services, Inc. ("All World") pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, the opposition filed by All World and American's reply. Based on such consideration, the Court concludes as follows.

I.
BACKGROUND1

On August 14, 2002, All World Professional Travel Services, Inc. ("All World") filed a class action complaint against American Airlines, Inc. ("American") alleging that American violated the Racketeering Influenced and Corrupt Organization Act, 18 U.S.C. § 1961 et seq. ("RICO") and breached a contract with All World.

All World is a travel agency, and in the months following September 11, 2001, and continuing to the present, American, (along with a non-party co-conspirator, AMR Corporation, and a RICO enterprise, the Airline Reporting Corporation ("ARC")), engaged in a pattern of extorting money from All World by forcing it to pay a $200 per ticket fee for processing refunds on behalf of passengers who were unable to use their airline tickets in the days immediately following the tragedies that struck the World Trade Center and elsewhere when air traffic was halted or severely disrupted.

In the aftermath of the September 11 tragedies, the U.S. Department of Transportation ("DOT") issued a directive to all airlines against applying non-refundability/penalty provisions for cancelled flights. American's own rules required American to refund tickets under circumstances such as occurred after September 11.

American initially authorized travel agents to assist in the processing of refunds for passengers. In response to this request, All World processed thousands of refunds for passengers through the ARC.2

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Shortly after All World processed the September 11-related refunds through the ARC, American unilaterally claimed that refund requests for passengers unable to travel as a result of the September 11th tragedies should not be processed through the ARC, but should be sent directly to American instead. All World was unaware of American's purported change in policy, and continued to process refunds through the ARC. Thereafter, American began issuing "Debit Memos" (demands for money), charging All World an "administrative service charge" and "penalty fee" of $100 or $200 per ticket refunded through the ARC.3

Allegedly, in issuing the Debit Memos, American implicitly made the following threats that American would terminate the right of All World to issue airline tickets on American, that American would notify all other airlines that American had terminated its contracts with All World, and that American would impose additional penalties and fees if All World did not pay the Debit Memos When All World contested the Debit Memos and refused to pay them, American demanded payment and threatened economic harm.

All World alleges the following claims in its complaint: 1) violation of RICO, 18 U.S.C. § 1962(c) ("Section 1962(c)"), 2) violation of RICO, 18 U.S.C. § 1962(d) ("Section 1962(d)") (conspiracy to violate Section 1962(c)), 3) breach of contract, 4) unjust enrichment, and 5) declaratory and injunctive relief.

On November 15, 2002, American filed this motion to dismiss All World's complaint pursuant to Rule 12(b)(6).

II.
ANALYSIS

A. STANDARD FOR ANALYZING A MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM

A motion to dismiss pursuant to Rule 12(b)(6) tests the legal sufficiency of the complaint. Rutman Wine Co. v. E. & J. Gallo Winery, 829 F.2d 729, 738 (9th Cir. 1987). Dismissal of an action pursuant to Rule 12(b)(6) is appropriate only where it "appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Levine v. Diamanthuset, Inc., 950 F.2d 1478, 1482 (9th Cir.1991) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). All material allegations in the complaint will be taken as true and construed in the light most favorable to the non-moving party. Chang v. Chen, 80 F.3d 1293, 1296 (9th Cir.1996). A cause of action will be dismissed only where there is either "a lack of cognizable legal theory" or "the absence of sufficient facts alleged under a cognizable theory." Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir.1988).

B. APPLICATION OF DOT REGULATIONS

American raises two threshold issues. First, American maintains that travel agencies must file this complaint with the DOT, not with this court. Second, American maintains that the penalties it charged All World are expressly permissible under federal law and thus cannot serve as the basis for any of All World's alleged claims.

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1. Whether These Claims must be Brought Before the DOT

American maintains that if travel agencies have complaints regarding unfair and deceptive practices by airlines and unfair methods of competition by airlines, such complaints may be filed with the DOT, not in this court. American cites to 49 U.S.C. § 41712 ("Section 41712") for this proposition.

American's position is correct in that § 41712 does give ticket agents the ability to complain to the Secretary of Transportation. 49 U.S.C. § 41712. However, the type of claims in the Complaint are not meant to be covered by § 41712. Section 41712 was designed to bolster and strengthen antitrust enforcement. Pan Am. World Airways, Inc. v. U.S., 371 U.S. 296, 83 S.Ct. 476, 9 L.Ed.2d 325 (1963). The provision is not concerned with private rights but with protection of public interest. American Airlines v. North American Airlines, 351 U.S. 79, 76 S.Ct. 600, 100 L.Ed. 953 (1956). Congress did not intend to require the type of conduct alleged in the Complaint to be submitted to the DOT. In re Air. Transportation Excise Tax Litigation, 37 F.Supp.2d 1133, 1140 (D.Minn.1999)(rejecting the argument that the claims at issue, including claims for breach of contract and unjust enrichment, should have been channeled through the DOT, citing American Airlines, Inc. v. Wolens, 513 U.S. 219, 232, 115 S.Ct. 817, 130 L.Ed.2d 715 (1995)(noting that when Congress "dismantled" the regulatory regime, it did not intend "to establish, simultaneously, a new administrative process for DOT adjudication of private ... disputes")). Accordingly, the Court concludes All World was not required to file its alleged claims in the Complaint for adjudication by the DOT.

2. Whether the Penalties Charged by American were Permissible under Federal Law

The federal law that American claims permits it to impose the subject penalties is 14 C.F.R. § 253.7 ("Section 253.7"). American argues that under this provision, airlines are specifically permitted to set "terms restricting refunds of the ticket price" and to "impos[e] monetary penalties," requiring only "conspicuous written notice" to do so. Thus, according to American, the penalties it charged the travel agencies including All World are expressly permissible under federal law.

American further argues that travel agents, including All World, expressly agreed to be bound by DOT regulations when they executed the Agent Reporting Agreement ("ARC Agreement").4 According to American, one of the provisions of the ARC Agreement requires that travel agents only make refunds in accordance with tariffs, rules, regulations, and instructions issued by the carrier. American's argument seems to be that since travel agents agree in the ARC Agreement to comply with the airlines' rules having to do with refunds, and since Section 253.7 permits airlines to restrict refunds, then travel agents agree to be bound by Section 253.7 including the imposition of penalties if a travel agent violates such restriction.

American's position here is unfounded for two reasons.

First, Section 253.7 applies to the relationship between an air carrier and its passengers, not travel agencies. The provision reads:

A passenger shall not be bound by any terms restricting refunds of the ticket price, imposing monetary penalties on

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passengers, or permitting the carrier to raise the price, unless the passenger receives conspicuous written notice of the salient features of those terms on or with the ticket.

Section 253.7 does not apply to travel agencies.

Second, the regulation only imposes the obligation that air carriers provide conspicuous notice as to any term that restricts a passenger's ability to obtain a refund or imposes a monetary penalty on a passenger. It would be illogical to conclude that because American is permitted by regulation to penalize a passenger for obtaining a refund, it is permitted to do the same to a travel agent for processing the refund.

The logic is even more strained because in the current situation, there is no dispute that passengers were entitled to refunds, All World's Complaint alleges that shortly after the events of September 11th, the DOT issued a directive to air carriers prohibiting them from applying non-refundability provisions for tickets...

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27 practice notes
  • Ray v. Spirit Airlines, Inc., No. 13–15681.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • September 23, 2014
    ...a RICO action like Plaintiffs' found no preclusion from the ADA. See All World Prof'l Travel Servs., Inc. v. Am. Airlines, Inc., 282 F.Supp.2d 1161 (C.D.Cal.2003). In All World, a travel agency sued an airline in a dispute over cancellation fees charged for flights in the months following S......
  • Ray v. Spirit Airlines, Inc., No. 13–15681.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • September 23, 2014
    ...a RICO action like Plaintiffs' found no preclusion from the ADA. See All World Prof'l Travel Servs., Inc. v. Am. Airlines, Inc., 282 F.Supp.2d 1161 (C.D.Cal.2003). In All World, a travel agency sued an airline in a dispute over cancellation fees charged for flights in the months following S......
  • Ray v. Spirit Airlines, Inc., No. 13–15681.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • September 23, 2014
    ...a RICO action like Plaintiffs' found no preclusion from the ADA. See All World Prof'l Travel Servs., Inc. v. Am. Airlines, Inc., 282 F.Supp.2d 1161 (C.D.Cal.2003). In All World, a travel agency sued an airline in a dispute over cancellation fees charged for flights in the months following S......
  • Championsworld, LLC v. U.S. Soccer Fed'n, Inc., Case No. 06 C 5724.
    • United States
    • United States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
    • August 17, 2012
    ...a contract term to obtain unreasonable fees violates the Hobbs Act. Id., citing All World Prof'l Travel Servs., Inc. v. Am. Airlines, 282 F.Supp.2d 1161 (C.D.Cal.2003). All World is distinguishable, however, because that court, considering a motion to dismiss, accepted Plaintiff's allegatio......
  • Request a trial to view additional results
27 cases
  • Ray v. Spirit Airlines, Inc., No. 13–15681.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • September 23, 2014
    ...a RICO action like Plaintiffs' found no preclusion from the ADA. See All World Prof'l Travel Servs., Inc. v. Am. Airlines, Inc., 282 F.Supp.2d 1161 (C.D.Cal.2003). In All World, a travel agency sued an airline in a dispute over cancellation fees charged for flights in the months following S......
  • Ray v. Spirit Airlines, Inc., No. 13–15681.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • September 23, 2014
    ...a RICO action like Plaintiffs' found no preclusion from the ADA. See All World Prof'l Travel Servs., Inc. v. Am. Airlines, Inc., 282 F.Supp.2d 1161 (C.D.Cal.2003). In All World, a travel agency sued an airline in a dispute over cancellation fees charged for flights in the months following S......
  • Ray v. Spirit Airlines, Inc., No. 13–15681.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • September 23, 2014
    ...a RICO action like Plaintiffs' found no preclusion from the ADA. See All World Prof'l Travel Servs., Inc. v. Am. Airlines, Inc., 282 F.Supp.2d 1161 (C.D.Cal.2003). In All World, a travel agency sued an airline in a dispute over cancellation fees charged for flights in the months following S......
  • Championsworld, LLC v. U.S. Soccer Fed'n, Inc., Case No. 06 C 5724.
    • United States
    • United States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
    • August 17, 2012
    ...a contract term to obtain unreasonable fees violates the Hobbs Act. Id., citing All World Prof'l Travel Servs., Inc. v. Am. Airlines, 282 F.Supp.2d 1161 (C.D.Cal.2003). All World is distinguishable, however, because that court, considering a motion to dismiss, accepted Plaintiff's allegatio......
  • Request a trial to view additional results

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