Miller v. Travel Guard Group, Inc.

Background

The plaintiffs sued Travel Guard Group, Inc., AIG, and other defendants. The opinion addresses claims concerning travel insurance and an additional fee for travel-assistance services. The opinion refers to the plaintiffs as Miller and Chuanroong in discussing the separate rulings.

AIG and personal jurisdiction

The court dismissed AIG without prejudice for lack of personal jurisdiction. The complaint did not allege that AIG was subject to general jurisdiction in California: it alleged that AIG was incorporated in Delaware and had its principal place of business in New York. The complaint also did not allege that AIG took action in California or directed action to California related to the plaintiffs’ claims. The court stated that the plaintiffs could move to re-join AIG if discovery revealed relevant new facts.

The remaining defendants argued that the plaintiffs lacked Article III standing, meaning a constitutionally sufficient injury to sue in federal court. The court rejected that argument under Ninth Circuit precedent, which recognizes an injury when a customer would have paid less for a product without being misled about the transaction. The court said the defendants’ statutory-standing argument raised a question under Rule 12(b)(6), which concerns whether a complaint adequately states a claim, and should not be resolved before the arbitration motion.

Arbitration of Miller’s claims

The court granted the motion to compel Miller to arbitration against the remaining defendants. Miller agreed to Expedia’s terms of service, which contained an arbitration provision covering Expedia and “travel suppliers or any companies offering products or services through us.” The court found that the defendants were third-party beneficiaries of that provision because they offered services to Miller through Expedia. The opinion also states that Miller bought flights and insurance through Travelocity, which is owned by Expedia, and agreed to the same arbitration provision there.

The court recognized a reasonable argument that the defendants had forfeited, or given up, the right to enforce the arbitration provision. A separate contract entered at the same time allowed arbitration only if both sides accepted it, which could preserve Miller’s right to sue in court. But the Expedia agreement delegated questions of arbitrability—whether a dispute must be arbitrated—to the arbitrator. The court therefore held that the arbitrator, rather than the court, must decide whether the defendants forfeited the right to invoke the provision. The court stated that, if its delegation ruling were incorrect, it would deny the motion to compel because of that potential forfeiture.

Chuanroong’s claims

The court denied the motion to dismiss Chuanroong’s claims. It held that Ninth Circuit precedent foreclosed the defendants’ statutory-standing argument and declined to apply California’s equitable-abstention doctrine.

The court concluded that Chuanroong plausibly stated claims under California’s Unfair Competition Law based on two theories: that the assistance charge was an illegal agent’s fee and that it was an unapproved insurance premium. The allegations included that Travel Guard was the only source of travel insurance on the United website and that the assistance services allegedly did not justify the fee. The court also found plausible allegations that the fee either was an agent’s fee that should have been included in a rate application for preapproval or was automatically included in the insurance price without an opportunity to opt out.

The court further held that the unfair-practices allegations survived under both the balancing and tethering tests. The complaint alleged that customers had difficulty discovering the hidden fee and that the alleged lack of demand for the assistance services was outweighed by the financial burden imposed on customers seeking travel insurance.

The court also held that Chuanroong plausibly stated fraudulent-practices claims under the Unfair Competition Law and California’s False Advertising Law. According to the allegations, the flight-insurance offer did not clearly disclose that the assistance fee was included in the overall price. Customers had to navigate to a disclosures page and email Travel Guard to learn the fee’s exact amount. The court found that this lack of transparency could mislead a reasonable consumer. The common-law fraud claim also survived because the complaint plausibly alleged that Travel Guard intentionally concealed information about the separate fee.

Disposition

The motion to compel Miller to arbitration was granted. AIG was dismissed without prejudice for lack of personal jurisdiction. The motion to dismiss Chuanroong’s claims was denied.