In Re: LATAM Airlines Group S.A.

Background

TM Solutions USA LLC appealed an August 31, 2022 order by the Bankruptcy Court for the Southern District of New York. That order granted LATAM Airlines Group S.A.’s motion to dismiss TM Solutions’ adversary proceeding and denied TM Solutions’ motion to amend its complaint with prejudice.

The complaint concerned two travelers whose assistant purchased roundtrip LATAM tickets through BudgetAir.com. The assistant mistakenly bought the outbound flights for the wrong date and purchased replacement outbound flights from American Airlines. When she later tried to check the travelers in for their LATAM return flight, she learned that the reservation had been canceled under LATAM’s “no-show” policy. The policy required passengers to take the itinerary’s segments in order and stated that failure to take one segment could result in cancellation of the entire ticket without a refund unless the fare conditions allowed one.

TM Solutions alleged that LATAM canceled paid-for return flights without consent and then could resell them. Its complaint asserted claims for declaratory relief, violation of the Montreal Convention, unjust enrichment, and violation of the Florida Deceptive and Unfair Trade Practices Act. TM Solutions withdrew the Montreal Convention claim during the bankruptcy-court proceedings. It also sought class-action treatment. In its proposed amended complaint, TM Solutions sought to add Jazmin Torres as a plaintiff and add a claim under Pennsylvania’s Unfair Trade Practices and Consumer Protection Law.

Standards of review

The district court reviewed legal conclusions by the bankruptcy court without deference and reviewed factual findings for clear error. For the dismissal issue, the court applied the standard for a motion to dismiss for failure to state a claim: accepting the complaint’s factual allegations as true and asking whether they plausibly stated a claim for relief. For the amendment issue, the court considered whether the proposed changes would be futile, meaning they would still fail under the dismissal standard.

Dismissal and federal preemption

The court affirmed the bankruptcy court’s conclusion that the Florida Deceptive and Unfair Trade Practices Act claim, unjust-enrichment claim, and declaratory-judgment claim were preempted by the Airline Deregulation Act. Federal preemption means that federal law displaces or prevents enforcement of certain state-law rules. The Airline Deregulation Act bars states from enforcing laws related to an air carrier’s price, route, or service.

The court held that the Florida deceptive-trade-practices claim concerned LATAM’s prices and services because it challenged LATAM’s retention of payment after canceling part of an itinerary and its alleged ability to resell the canceled tickets. The unjust-enrichment claim was also preempted because it challenged LATAM’s policy under state law rather than seeking to enforce a voluntarily undertaken contractual promise. The court likewise held that the declaratory-judgment claim was preempted because TM Solutions sought declarations that LATAM’s no-show policy was invalid and that LATAM had to obtain customer consent before canceling paid trips.

Standing for injunctive relief

The court separately affirmed the conclusion that TM Solutions lacked standing to seek injunctive relief under the Florida statute. Standing is the legal requirement that a plaintiff show a qualifying injury connected to the challenged conduct and capable of being addressed by the court. A past injury may support a damages claim, but a plaintiff seeking an injunction generally must show a likely future injury. The court found that TM Solutions had not alleged that it expected to board future LATAM flights or otherwise faced a likely repeat of the alleged harm.

Because the court found the asserted claims preempted and found no standing for the requested injunctive relief, it did not decide whether the claims were otherwise pleaded sufficiently.

Motion to amend

The court affirmed denial of TM Solutions’ motion to amend and supplement its complaint. It agreed that amendment would be futile because the proposed complaint did not cure the preemption and standing problems. The court also agreed that the proposed Pennsylvania consumer-protection claim was preempted for the same reasons as the Florida claim and that TM Solutions lacked standing to seek injunctive relief under that proposed claim.

Disposition

The court affirmed the bankruptcy court’s order in its entirety. The clerk was directed to terminate the appeal, docket the decision, and close the case.