Vallarta v. United Airlines, Inc.

Background

Diana Vallarta and Lisa Salmons filed a proposed class action against United Airlines. They alleged that United’s website offered customers optional travel insurance from third-party insurers, first Allianz Global Assistance and later Travel Guard Group, Inc. According to the complaint, United’s website encouraged customers to buy the insurance and required them to make an insurance-selection decision before completing their ticket purchases. The receipts stated that the insurance charges would be billed separately by the third-party insurer.

The plaintiffs alleged that United had an undisclosed financial interest in the insurance sales because the insurer either paid part of the purchase price to United or allowed United to retain part of it. They asserted claims under California’s Unfair Competition Law and Connecticut’s Unfair Trade Practices Act, along with claims for unjust enrichment, conversion, and fraudulent concealment. United moved to dismiss Salmons’s claims for lack of personal jurisdiction, sought to strike the nationwide and Connecticut class allegations, and moved to dismiss the remaining claims for failure to state a legally sufficient claim.

Personal jurisdiction over Salmons

The court held that United’s business activities in California, including its California airports, employees, and website, did not establish general personal jurisdiction. General jurisdiction permits a court to hear claims unrelated to the defendant’s forum activities when the defendant is essentially at home there.

The court also rejected specific jurisdiction over Salmons’s Connecticut claims. Specific jurisdiction requires a connection between the defendant’s forum-related conduct and the particular claims. Salmons was a Connecticut resident, purchased the insurance through United’s website, and appeared to have suffered her alleged injuries in Connecticut. The plaintiffs did not explain how Salmons’s Connecticut-law claims arose from United’s California activities.

The court declined to exercise pendent personal jurisdiction, which can sometimes allow a court to hear related claims lacking an independent jurisdictional basis. The court found that the plaintiffs proposed a novel use of that doctrine because the case involved only state-law claims and no federal claim supporting the additional jurisdiction. It dismissed Salmons’s claims without leave to amend.

Absent class members

United argued that the court lacked personal jurisdiction over non-California members of the proposed nationwide class and Connecticut subclass. The court noted that whether the Supreme Court’s decision in Bristol-Myers Squibb applies to absent members of federal class actions remained an open question. Because no class had yet been certified, the court found it premature to decide jurisdiction over absent class members’ claims. It denied United’s motion to dismiss those claims for lack of personal jurisdiction.

Airline Deregulation Act preemption

United argued that the Airline Deregulation Act preempted the plaintiffs’ state-law claims because they related to airline ticketing and rates. The court rejected that argument. It reasoned that the alleged conduct concerned third-party travel insurance, which customers could choose to purchase separately, and that buying the insurance did not affect United’s flight prices. The court therefore found that the claims were not sufficiently connected to United’s airline rates, routes, or services to be preempted.

Vallarta’s California claims

The court found that Vallarta adequately alleged standing under both Article III of the Constitution and California’s Unfair Competition Law. She alleged that she would not have bought the insurance, or would have paid less for comparable insurance elsewhere, had United disclosed its compensation arrangement. At the motion-to-dismiss stage, the court treated those allegations as sufficient to allege economic injury.

The court rejected Vallarta’s UCL claim under the unlawful-conduct theory. It interpreted the California Insurance Code as allowing travel retailers to disseminate advertising and other information about third-party travel insurance. The court concluded that the website conduct described in the complaint fell within that permission.

The court also dismissed the UCL fraudulent-conduct theory. It found that the plaintiffs had not adequately alleged that United’s failure to disclose its compensation was material to a reasonable consumer or that United’s conduct was likely to deceive a reasonable consumer. The court similarly rejected the unjust-enrichment claim because the plaintiffs had not adequately alleged that United’s compensation was obtained through illegal or fraudulent conduct.

The court dismissed the conversion claim because the complaint alleged that customers chose whether to buy the insurance, received the insurance policy, and were billed by the third-party insurer. The court also dismissed the fraudulent-concealment claim because the plaintiffs had not adequately alleged that United had a duty to disclose its compensation or that the information was material.

Disposition

The court granted in part and denied in part United’s motion to dismiss. It granted the motion in part as to Salmons’s claims and dismissed those claims without leave to amend. It denied the motion to dismiss absent class members’ claims for lack of personal jurisdiction. It denied dismissal of Vallarta’s UCL claim under the unfairness prong and otherwise granted dismissal of Vallarta’s substantive claims. The court nevertheless gave the plaintiffs one opportunity to file an amended complaint within 21 days, if they could do so consistently with their obligations under Federal Rule of Civil Procedure 11.