Herrera v. Cathay Pacific Airways Ltd.

Background

Winifredo Herrera and Macaria Herrrera alleged that they bought tickets on Cathay Pacific for travel to the Philippines and a return flight to the United States. Cathay Pacific canceled the return flight during the COVID-19 public health emergency. The Herreras alleged that Cathay Pacific initially told them they would receive a refund but later offered travel vouchers instead. They also alleged that Cathay Pacific made requesting a cash refund difficult and that their efforts to contact the airline went unanswered.

The Herreras asserted one claim for breach of contract on behalf of themselves and a proposed nationwide class. Their complaint quoted refund provisions from the Cathay Dragon General Conditions of Carriage. Cathay Pacific argued that the applicable contract was instead the Cathay Pacific General Conditions of Carriage, and that the complaint should be dismissed under several Federal Rules of Civil Procedure.

Judicial Notice

The court denied Cathay Pacific’s request for judicial notice of the Herreras’ passenger records and ticket information. It took notice of the Cathay Pacific General Conditions of Carriage and considered the Cathay Dragon conditions under the incorporation-by-reference doctrine because the complaint quoted and relied on them. The court also determined that the Department of Transportation refund guidance could be considered, but declined to rely on Cathay Pacific website pages to establish the truth of disputed statements about the airline’s refund practices.

Jurisdictional Challenges

The court rejected Cathay Pacific’s challenge to Article III standing. The Herreras adequately alleged a concrete financial injury by claiming that Cathay Pacific was contractually required to refund their canceled flight and failed to do so. The court held that whether the contract required them to request a refund was a merits issue, not a standing issue.

The court also rejected the ripeness challenge. Because the Herreras alleged a concrete injury, their dispute presented an actual controversy rather than an abstract question. The court rejected the mootness challenge as well, finding that the Herreras had not received refunds and that a dispute remained about whether the contract required them to follow Cathay Pacific’s refund procedures before the airline had to pay.

Airline Deregulation Act Preemption

The Airline Deregulation Act generally preempts state laws or other state-imposed rules related to an airline’s prices, routes, or services, but it permits courts to enforce contract terms voluntarily undertaken by the parties. Cathay Pacific argued that the Herreras’ refund theory improperly expanded the airline’s contractual obligations.

The court rejected that argument. The Herreras conceded that their claim was not based on California Civil Code section 1657 or Department of Transportation regulations, and they relied instead on ordinary contract-interpretation principles. The court held that applying a common-law rule requiring performance within a reasonable time when a contract does not specify a time would not be preempted under the circumstances presented. The court therefore rejected Cathay Pacific’s preemption argument.

Class Allegations

Cathay Pacific asked the court to strike the proposed nationwide class allegations, arguing that the court lacked personal jurisdiction over claims involving certain absent class members. The court held that Cathay Pacific had preserved its personal-jurisdiction defense by including it in its answer.

The court nevertheless denied without prejudice the request to strike the class allegations. It concluded that the issue was more appropriately addressed at the class-certification stage, rather than at the pleading stage before discovery. The court did not decide whether the proposed nationwide class could ultimately be certified.

Breach-of-Contract Claim

Under California law, a breach-of-contract claim requires a contract, the plaintiff’s performance or an excuse for nonperformance, a breach, and resulting damages. The court found that the complaint failed to allege the first element because it cited the Cathay Dragon conditions rather than the Cathay Pacific conditions. At oral argument, the Herreras conceded that the Cathay Pacific conditions applied.

The court also examined the Cathay Pacific conditions. Article 10.2.2 gave passengers a choice among transportation options, including a refund, and Article 11.1.3 stated that refunds would be made only upon surrender of the ticket and unused flight coupons. The court concluded that these provisions established conditions that had to be satisfied before Cathay Pacific’s refund obligation arose. The complaint did not sufficiently allege that the Herreras satisfied those conditions or that Cathay Pacific had prevented them from doing so.

The court noted that the complaint alleged three unanswered emails about the refund, and that the Herreras’ counsel represented that they had requested a refund. It also noted that the Herreras might be able to allege more specific facts showing that Cathay Pacific’s conduct excused compliance with the contractual conditions. Because amendment might cure the deficiencies, the court allowed the Herreras to amend.

Disposition

The court granted in part and denied in part Cathay Pacific’s motion to dismiss or, alternatively, for judgment on the pleadings. It dismissed the complaint with leave to amend, denied without prejudice Cathay Pacific’s request to strike the class allegations, and directed the Herreras to file an amended complaint by March 26, 2021.