Travel All Over the World, Inc. v. Kingdom of Saudi Arabia

• Decision Date: 03 January 1996
• Docket Number: No. 95-1119,95-1119
• Citation: 73 F.3d 1423
• Parties: TRAVEL ALL OVER THE WORLD, INC., and Ibrahim Y. Elgindy, Plaintiffs-Appellants, v. The KINGDOM OF SAUDI ARABIA and Saudi Arabian Airlines, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1423

73 F.3d 1423

64 USLW 2433

TRAVEL ALL OVER THE WORLD, INC., and Ibrahim Y. Elgindy, Plaintiffs-Appellants, v. The KINGDOM OF SAUDI ARABIA and Saudi Arabian Airlines,

Defendants-Appellees.

No. 95-1119.

United States Court of Appeals,

Seventh Circuit.

Argued Sept. 18, 1995.

Decided Jan. 3, 1996.

Fred Speck (argued), Chicago, IL, for Plaintiffs-Appellants.

Michael H. West (argued), Burke, Weaver & Prell, Chicago, IL, for Defendants-Appellees.

Before FLAUM, KANNE, and ROVNER, Circuit Judges.

FLAUM, Circuit Judge.

The plaintiffs, Travel All Over the World, Inc. ("Travel All") and Ibrahim Y. Elgindy, sought relief in district court, alleging breach of contract and tortious conduct by the defendants, The Kingdom of Saudi Arabia ("The Kingdom") and Saudi Arabian Airlines ("Saudia"). The defendants filed separate motions to dismiss the plaintiffs' Fourth Amended Complaint ("the complaint"). Saudia asserted that the plaintiffs' claims were preempted by Sec. 105(a)(1) of the Airline Deregulation Act of 1978 ("ADA"), 49 U.S.C.App. Sec. 1305(a)(1) (Supp.1994). The district court dismissed the complaint on all counts with prejudice on preemption grounds, and the plaintiffs have appealed the dismissal only with respect to Saudia. ¹ For the reasons discussed below, we reverse the district court's judgment and remand for further proceedings.

I.

On appeal of this motion to dismiss for failure to state a claim, we accept as true the factual allegations of the complaint and draw all reasonable inferences in the plaintiffs' favor. Lashbrook v. Oerkfitz, 65 F.3d 1339, 1343 (7th Cir.1995). Consistent with this approach, we will consider new factual allegations raised for the first time on appeal if such allegations are consistent with the complaint. Highsmith v. Chrysler Credit Corp., 18 F.3d 434, 439-40 (7th Cir.1994).

This dispute arises from an attempt by Travel All, a travel agency, to arrange flights to Saudi Arabia for its clients. In February of 1990, Travel All contracted with Saudia to purchase round-trip airline tickets for approximately 180 clients for an annual religious pilgrimage known as the Haaj. Travel All received confirmed reservations for these clients after meeting various requirements of its contract with Saudia.

Travel All's clients, who were from throughout the United States, planned to rendezvous in New York on June 19, 1990 and then fly to Saudi Arabia via Saudia. Elgindy, the president of Travel All, accompanied Travel All's Chicago contingent on its trip to New York and intended to accompany the entire group of Haaj clients to Saudi Arabia. Saudia was aware that Elgindy was flying into New York to escort the entire group. However, Elgindy and the Chicago clients were delayed by bad weather on their TWA flight into New York, which caused them to miss the departure of the Saudia flight.

In Elgindy's absence, Saudia canceled the confirmed reservations and tickets of the Travel All clients who were in New York and required the clients to repurchase their tickets directly through Saudia. This, in turn, caused Travel All to lose its commissions for the Haaj clients. Travel All's complaint, however, alleges more than the simple cancellation of tickets. Travel All maintains that Saudia's employees made a series of knowingly false verbal and written statements designed to harm the valid business interests of Travel All. ² Saudia told Travel All's clients that Travel All was not a reputable company, that Travel All had not booked seats on Saudia for many of them, that Travel All often lied to its clients about reserving seats for them, and that Elgindy normally did not accompany passengers and would not be available to handle their problems. Saudia repeated these false statements to Travel All's clients after they arrived in Saudi Arabia and required the clients to re-book their return flights directly through Saudia.

After this lawsuit was filed on June 4, 1991, Travel All continued to attempt to conduct business with Saudia. Travel All wished to mitigate the damage Saudia had caused by recapturing its lost Haaj clients and rebuilding its annual Haaj business. Yet Saudia has intentionally impeded Travel All's endeavors to reconstruct its Haaj business.

The seven counts of plaintiffs' complaint charge breach of contract, tortious interference with a business relationship, defamation, slander, fraud, intentional infliction of emotional distress, and additional tortious interference with a business relationship. ³ Saudia filed a motion to "Dismiss Plaintiffs' Claims Which Involve Complaints Regarding Its Rates, Routes, or Services," arguing that such claims were expressly preempted by the ADA. The district court treated Saudia's motion as a motion to dismiss under Fed.R.Civ.P. 12(b)(6) for failure to state a claim. The district court then dismissed the complaint with prejudice, holding that all seven counts related to Saudia's rates, routes, or services.

II.

On appeal, the plaintiffs present three main grounds for reversal. First, they contend that the district court improperly granted a motion to dismiss that neglected to cite a particular rule of procedure and failed to characterize itself as dispositive. Next, they argue that the district court erred by going beyond the "four corners" of the complaint and refusing to accept their well-pled allegations on a 12(b)(6) motion. Finally, the plaintiffs argue that their claims are not preempted by Sec. 1305(a)(1) of the ADA, as interpreted by recent Supreme Court precedent. ⁴

A.

The defendant's motion to dismiss argued that the plaintiffs' claims involved Saudia's rates, routes, or services and accordingly were preempted by the ADA. The defendant, however, did not cite any procedural rule as a basis for dismissal. Furthermore, the motion did not indicate that it was intended to be dispositive; in fact, the defendant acknowledged in the motion's reply brief that perhaps the case was not developed enough to consider the motion fully dispositive. At oral argument the plaintiffs seized upon these facts to contend that the district court improperly dismissed all of their claims with prejudice. However, in their appellate briefs, the plaintiffs raise this argument only perfunctorily and cite no authority in support of their position. We therefore deem this argument waived. Thompson v. Boggs, 33 F.3d 847, 856 (7th Cir.1994), cert. denied, --- U.S. ----, 115 S.Ct. 1692, 131 L.Ed.2d 556 (1995).

In any event, we find no merit in the plaintiffs' position. The Federal Rules should be construed liberally to promote justice. Consistent with this liberal approach, a motion to dismiss does not necessarily need to specify the Federal Rule of Civil Procedure under which it is made. Quabaug Rubber Co. v. Fabiano Shoe Co., 567 F.2d 154, 158 (1st Cir.1977). Similarly, nowhere do the Federal Rules require a motion to be labelled "dispositive." The district court may look beyond the technical nomenclature of motions to dismiss to reach the substance of the movant's contentions. See Peckmann v. Thompson, 966 F.2d 295, 297 (7th Cir.1992) (holding that district court properly treated 12(b)(1) motion that indirectly attacked merits of plaintiff's claim as 12(b)(6) motion); Snyder v. Smith, 736 F.2d 409, 419 (7th Cir.1984) (overlooking erroneous labelling of motion to dismiss), cert. denied, 469 U.S. 1037, 105 S.Ct. 513, 83 L.Ed.2d 403 (1984). Regardless of how Saudia labelled its motion, the plaintiffs were certainly aware that the district court could dismiss their claims with prejudice. Saudia clearly argued in the motion that the plaintiffs' claims were expressly preempted by the ADA. The plaintiffs responded to the merits of this argument before the district court. In fact, the plaintiffs' response indirectly acknowledged that they were facing dismissal for failure to state a claim by citing the standard for reviewing a 12(b)(6) motion--all of the plaintiffs' well-pleaded facts should be taken as true. ⁵ The defendant's reply then recognized that perhaps it was premature to consider the motion fully dispositive but still sought dismissal of any and all claims related to Saudia's rates, routes, or services. In this situation, we find that the district court was not procedurally precluded from dismissing the plaintiffs' claims.

B.

We review the district court's grant of the 12(b)(6) motion de novo, accepting all the well-pleaded allegations in the complaint as true and drawing all reasonable inferences in favor of the plaintiffs. City Nat'l Bank of Florida v. Checkers, Simon & Rosner, 32 F.3d 277, 281 (7th Cir.1994). Dismissal is proper only where it appears beyond a doubt that the plaintiffs can prove no set of facts in support of their claims that would entitle them to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957); Lashbrook v. Oerkfitz, 65 F.3d 1339, 1343 (7th Cir.1995). The plaintiffs contend that the district court improperly relied on a joint status report, which was drafted by the defendant, and thereby failed to draw all reasonable inferences in the plaintiffs' favor. Indeed, if the district court considers matters outside the pleadings in connection with a motion to dismiss, it must treat the motion as one for summary judgment. Fed.R.Civ.P. 12(b); Fleischfresser v. Directors of Sch. Dist. 200, 15 F.3d 680, 684 (7th Cir.1994). Failure to treat such a motion as one for summary judgment and provide the litigants with notice and an opportunity to respond can constitute reversible error. R.J.R. Services, Inc. v. Aetna Casualty & Sur. Co., 895 F.2d 279, 281 (7th Cir.1989). The district court did not convert the motion to dismiss into a motion for summary judgment; therefore, any reliance by the district court on the joint status report would have been erroneous. ⁶ It is unclear from the district court's opinion if it actually relied on the joint status report in deciding to dismiss the plaintiffs' claims. Yet even if ...