Bugarin v. All Nippon Airways Co., Ltd.

Background

Ashley Bugarin brought a putative nationwide class action against All Nippon Airways Co., Ltd. (ANA). She alleged that ANA’s Conditions of Carriage required refunds when ANA canceled a flight or failed to operate it reasonably according to schedule. Bugarin purchased two round-trip tickets through the third-party vendor asaptickets.com, also referred to as ASAP. The return flight was canceled because of the COVID-19 pandemic. Bugarin alleged that ANA failed to provide a refund.

The operative second amended complaint asserted one breach-of-contract claim. Bugarin alleged that she contacted ASAP and was told that obtaining a refund would require paying a $200 fee per ticket. She also alleged that ANA made it difficult to reach a representative and that her calls were placed on hold and then dropped. ANA moved to compel arbitration or, alternatively, to dismiss the complaint for failure to state a claim.

Motion to Compel Arbitration

The Conditions of Carriage did not contain an arbitration provision. ANA instead relied on an arbitration clause in ASAP’s terms and conditions. The court found that ANA proved by a preponderance of the evidence that Bugarin agreed to ASAP’s terms when purchasing the tickets. The evidence included declarations and website information showing that users had to affirmatively accept the terms before completing a purchase, and that the website’s relevant design and content had not materially changed since November 2019.

The court rejected Bugarin’s argument that ANA waived its right to seek arbitration. ANA filed the motion shortly after Bugarin filed the second amended complaint, which added allegations concerning ASAP’s refund fee and conduct. The court concluded that Bugarin had not met her burden to show waiver.

The court nevertheless denied the motion to compel arbitration. It interpreted 14 C.F.R. § 253.10 as prohibiting an airline from including in its contract of carriage a clause that prevents a passenger from bringing a claim in a court of competent jurisdiction. The court concluded that an arbitration provision falls within that prohibition because it would prevent a court from hearing the claim. It further agreed that ANA could not do indirectly, through ASAP’s agreement, what federal regulations prohibited it from doing directly. The court declined to limit the regulation to domestic flights.

The court did not decide ANA’s third-party-beneficiary argument because ANA did not rely on that theory. It also rejected ANA’s equitable-estoppel theory. Equitable estoppel is a doctrine that can sometimes allow a nonparty to enforce an arbitration agreement when a claim depends closely on that agreement or alleges closely connected misconduct. The court found that Bugarin’s contract claim was based solely on ANA’s Conditions of Carriage, not on any obligation in ASAP’s terms. Bugarin’s counsel also clarified that the complaint’s reference to ASAP’s conduct frustrating a required condition was an error and that the alleged frustration was based only on ANA’s conduct.

Motion to Dismiss

The court had previously found that requesting a refund and providing satisfactory evidence of entitlement appeared to be a condition precedent to obtaining a refund under ANA’s Conditions of Carriage. A condition precedent is an event or requirement that must occur before a contractual duty becomes enforceable. The court had allowed Bugarin to amend by alleging either that this requirement was not a condition precedent or that her failure to satisfy it was excused.

The second amended complaint alleged that ANA prevented Bugarin from satisfying the requirement. However, important supporting facts appeared only in Bugarin’s declaration attached to the complaint, not in the complaint itself. For example, the declaration stated that she called ANA’s customer service number up to thirty times over several weeks, while the complaint stated only that she made more than one call.

The court ruled that the declaration was evidentiary material rather than a written instrument forming the basis of the contract claim. It therefore could not be considered as part of the complaint when deciding ANA’s motion to dismiss. The facts pleaded in the complaint itself were insufficient to show that Bugarin’s nonperformance of the condition precedent was excused. The court therefore granted ANA’s motion to dismiss under Rule 12(b)(6), which tests whether a complaint adequately states a legally sufficient claim.

The court viewed the declaration as a proffer of facts that Bugarin might be able to plead and concluded that she could potentially cure the defect. It granted leave to amend but described this as Bugarin’s one final opportunity. Any amended pleading had to be filed by November 16, 2021, was limited to the deficiencies identified in the order, and could not add claims or parties without the court’s permission.

Disposition

The court denied ANA’s motion to compel arbitration. It granted ANA’s motion to dismiss the second amended complaint with leave to amend. The order did not decide whether ANA ultimately breached its Conditions of Carriage or whether Bugarin or the proposed class was entitled to refunds.