United States District Court, N.D. California
ORDER GRANTING MOTION TO DISMISS AND DENYING MOTION
TO STRIKE RE: DKT. NOS. 52, 53
HAYWOOD S. GILLIAM, JR. United States District Judge.
before the Court are two motions brought by Defendant
Southwest Airlines, Co.: (1) a motion to dismiss the first
amended complaint (“FAC”) and (2) a motion to
strike the FAC. Dkt. Nos. 52 (“Mot. to Strike”),
53 (“MTD”). For the reasons articulated below,
the Court GRANTS the motion to dismiss and DENIES the motion
contract dispute, Plaintiffs Jean Shrem and Marni Fischer
allege that Defendant enters into a contract with each of its
ticket-buying customers that permits a customer to cancel a
nonrefundable ticket and still apply the ticket value to
future travel purchases with Southwest for up to 12 months
from the original purchase date. Dkt. No. 51
(“FAC”) ¶ 6. Plaintiffs assert that
Defendant “systematically breaches” this contract
by prematurely forfeiting these travel credits. Specifically,
when customers purchase a ticket using multiple travel
credits, Defendant applies the earliest travel credit
expiration date to the entire ticket. Id. ¶ 8.
If a customer then cancels the ticket and wants to use the
travel credits again for further travel, they are all subject
to the earliest expiration date. Consequently, Defendant may
forfeit some travel credits before 12 months have elapsed
from the original purchase date. Plaintiffs contend that
Defendant erroneously forfeited over $700 of their travel
credits after just seven months because Plaintiffs combined
them with $16 in travel credits purchased at an earlier time.
Id. at ¶ 9.
August 8, 2016, the Court dismissed all of Plaintiffs'
claims when it granted in part and denied in part
Defendant's motion to dismiss Plaintiffs' original
complaint. Dkt. No. 50 (“Dismissal Order”). The
Court dismissed Plaintiffs' claims for negligence, fraud,
and unjust enrichment with prejudice, finding that they were
preempted by the Airline Deregulation Act, 49 U.S.C.
§§ 41701, et seq. (“ADA”).
Id. at 3-6. However, the Court grated Plaintiffs
leave to amend their breach of contract claim if they could
identify the breached provisions of the contract.
Id. at 6.
response, Plaintiffs filed their FAC on August 29, 2016,
asserting a single claim for breach of contract. See
FAC at ¶¶ 40-45. Plaintiffs allege that statements
from Defendant's website, e-tickets, and Contract of
Carriage create a “Reusable Funds Agreement” in
which Defendant promises that customers may cancel their
tickets and use the funds to purchase future travel on
Southwest for at least 12 months from the original date of
payment. Id. ¶¶ 1-7.
acknowledge that the Contract of Carriage explicitly states
that “[i]f a Ticket is purchased with multiple travel
credits, the earliest expiration date will apply to the
entire Ticket.” Id. at ¶ 10.
Nevertheless, Plaintiffs argue that this term is
unenforceable because Defendant did not provide its customers
with conspicuous notice of this limitation on the tickets
themselves, as required under federal law. Id. at
¶ 11. Plaintiff further argues that these
federal notice requirements are incorporated into the
“Reusable Funds Agreement” because the Contract
of Carriage states that it “is subject to applicable
laws, regulations and rules imposed by U.S. or foreign
governmental agencies.” Id. at ¶ 20 (Dkt.
No. 51-3 at 3, ¶ 1.a(1)).
September 12, 2016, Defendant filed both a motion to dismiss
and a motion to strike Plaintiffs' FAC. The Court
addresses each motion in turn.
Motion to Dismiss
breach of contract claim mirrors the arguments that the Court
already rejected in its Dismissal Order finding that the
non-contract claims were preempted by the ADA. See
Dismissal Order at 3-6. In opposing this motion to dismiss,
Plaintiffs contend that Defendant's Contract of Carriage
“expressly incorporates” federal laws and
regulations into each ticketing contract, including the
notice requirements under 14 C.F.R. §§ 253.4,
253.5, and 253.7. Dkt. No. 54 at 6. Under these regulations:
A carrier may not impose any terms restricting refunds of the
ticket price, imposing monetary penalties on passengers, or
raising the ticket price . . . unless the passenger receives
conspicuous written notice of the ...