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 promoted optional travel insurance provided by third-party insurers and did not disclose that an insurer paid United part of the purchase price or allowed United to retain part of it. The plaintiffs called this compensation a commission, brokerage fee, or kickback. They alleged that they would not have bought the insurance, or would have paid less for it, had United disclosed the arrangement.

The complaint asserted claims under California’s Unfair Competition Law and claims for unjust enrichment, conversion, and fraudulent concealment. The plaintiffs proposed a nationwide class, a California subclass, and a Connecticut subclass. United moved to dismiss Salmons’ claims for lack of personal jurisdiction, to strike the nationwide and Connecticut class allegations, and to dismiss the remaining claims for failure to state a legally sufficient claim.

Personal Jurisdiction

The court held that it lacked personal jurisdiction over Salmons’ Connecticut claims. It rejected the plaintiffs’ arguments that United’s business and airport operations in California created general jurisdiction, that Salmons’ claims arose from United’s California activities, or that the court should exercise related-claim jurisdiction. The court emphasized that Salmons was a Connecticut resident, purchased the insurance through United’s website, and alleged injuries occurring in Connecticut. The court therefore dismissed Salmons’ claims without leave to amend.

The court denied United’s motion to dismiss claims belonging to absent members of the proposed nationwide class and Connecticut subclass for lack of personal jurisdiction. Because no class had yet been certified, the court found it premature to decide whether it had jurisdiction over absent class members’ claims. The court also stated that claims under the laws of states in which no named plaintiff resided were dismissed.

Airline Deregulation Act Preemption

The court rejected United’s argument that the Airline Deregulation Act preempted the plaintiffs’ state-law claims. The Act generally prevents states from enforcing laws connected to an airline’s rates, routes, or services. The court concluded that the alleged conduct concerned third-party travel insurance, not United’s airline rates or services. The fact that customers could buy the insurance during the flight-ticketing process was too indirect a connection to trigger preemption.

Vallarta’s California Claims

The court held that Vallarta’s California claims were not adequately pleaded.

For the Unfair Competition Law claim, the court rejected United’s arguments concerning standing. At the pleading stage, Vallarta’s allegation that she would have bought less expensive comparable insurance elsewhere, or would not have bought the insurance, was enough to allege an economic injury.

The court nevertheless found that the complaint did not state a claim under the statute’s illegal or unfair-practice theories. California law permitted a travel retailer to offer and disseminate information about third-party travel insurance, including advertising material. The court concluded that the website’s insurance descriptions, warnings about travel risks, and statements encouraging customers to consider insurance fell within that permission as alleged.

The court also found that Vallarta did not adequately plead a fraudulent-practice claim. The complaint did not explain why United’s failure to disclose that it received compensation was a material fact or why a reasonable consumer would be deceived by the arrangement. The court similarly rejected the fraudulent-concealment claim because the plaintiffs had not adequately alleged a duty to disclose or the materiality of the compensation arrangement.

The unjust-enrichment claim failed because it was based on the same insufficient allegations of illegal or fraudulent conduct. The conversion claim failed because customers chose whether to buy the insurance, received the insurance policy, and were billed by the third-party insurer; the complaint did not adequately allege that United wrongfully took the plaintiffs’ property.

Disposition

The court granted reconsideration of its prior order and granted United’s motion to dismiss Vallarta’s substantive claims. It dismissed Salmons’ claims without leave to amend, denied dismissal of the absent class members’ claims for lack of personal jurisdiction, and gave the plaintiffs one opportunity to file an amended complaint consistent with their obligations under Federal Rule of Civil Procedure 11. The court also continued the telephonic case-management conference.

Classification Note

This is classified as a procedural order because the opinion primarily rules on motions to dismiss for lack of personal jurisdiction and failure to state a claim, even though the court addressed the legal sufficiency of the pleaded claims.