STONE v. CONTINENTAL AIRLINES (2005)

This matter brings up a bread-and-butter airline issue the measure of damages governing the claims of passengers “bumped” from domestic airline flights an issue rarely explored in detail notwithstanding that more than 30,000 passengers a year could raise similar claims, as permitted by federal statute and regulations (49 U.S.C.S. § 41713, known as the “Airline Deregulation Act” or “ADA”;  14 C.F.R. part 250).

This case has simple facts.   Claimant Thatcher A. Stone, a partner in a New York Law firm and a lecturer in aviation and airline industry law at the University of Virginia School of Law, made arrangements for a Colorado ski trip for himself and his 13-year old daughter for the 2004 Christmas season, to depart New York on December 25th and return from Telluride on January 1st.   Their flights were booked with Continental Airlines (“Continental”).   After their baggage was checked and when the father and daughter were at the airline gate, they were “bumped” from the flight.   The Continental representative who testified at the trial stated that Continental records reveal claimant was offered an alternate flight two or more days later, but claimant only remembers clearly an offer of a flight departing one day before their scheduled return.   Because the airline would not unload their luggage and could give no firm advice regarding how long the airline would take to return the baggage, which included cold-weather sportswear for both and the father's ski equipment, the father and daughter returned home and were unable to make any firm alternate ski or “getaway” plans.   Continental refunded the price of the airline tickets while claimant was in the airline terminal.

Claimant seeks recovery for out-of-pocket losses and deprivation of the use of the contents of luggage, as well as damages under New York's consumer protection statutes and punitive damages.   He testified that his loss included $1,360 for unrecoverable pre-paid ski lodge accommodations, lift tickets and his daughter's equipment rental, and that the entire experience involved inconveniences and stresses upon himself and his daughter because of the “bumping” and the scheduled holiday “that never was.”

“Bumping” Claims and Federal Limitations

As any airline traveler knows, “bumping” of an unlucky passenger occurs when more passengers appear to take a flight than the number of seats available on a given flight, and it arises because tickets are sold above and beyond the airplane's seating capacity.   The United States Supreme Court, addressing an instance in which consumer advocate Ralph Nader was “bumped” from a flight, described overbooking as “a common industry practice, designed to ensure that each flight leaves with as few empty seats as possible” (Nader v. Allegheny Airlines, Inc., 426 U.S. 290, 293, 96 S.Ct. 1978, 48 L.Ed.2d 643 [1976] ).

The claims of “bumped” passengers are governed by federal regulation which require an airline to offer compensation to “bumped” passengers (14 C.F.R. part 250, entitled Oversales, originally published at 41 Fed.Reg. 16,478, and entitled Priority Rules, Denied-Boarding Compensation Tariffs and Reports of Unaccommodated Passengers [Apr. 19, 1976] ).¹  If a “bumped” passenger rejects an airline's offer, the passenger is entitled to “seek to recover damages in a court of law or in some other manner” under 14 C.F.R. § 250.9(b), which language is universally regarded as permitting a claim for contract damages which may exceed the amount of compensation offered by an airline.

All tickets for domestic flights embrace these same rights, for every airline's Contract of Carriage must be consistent with federal rules (14 C.F.R. § 253.4).   As described in a comprehensive law review article with an analysis of the economics of overbooking by Elliott Blanchard, Terminal 250:  Federal Regulation of Airline Overbooking, 79 N.Y.U. L.Rev. 1799, 1807-1808 and fn. 3 (2004), since 1990, on average, almost 900,000 domestic passengers are “bumped” annually, and 2003 study data developed by the United States Department of Transportation indicates that 96 per cent of such passengers accept the compensation offered by airlines, leaving approximately 36,000 “bumped” passengers per year who refuse such offers and are entitled to raise damages claims.

 Any other claim which a passenger asserts arises from “bumping” must be parsed out and separately assessed.   The bulk of other claims are barred by reasons of law, including federal preemption (49 U.S.C.A. § 41713[b][1], local jurisdictions “may not enact or enforce a law ․ related to a price, route, or service of an air carrier”;  see, Anne K. Wooster, Annotation, Construction and Application of § 105 Airline Deregulation Act [49 U.S.C.A. § 41713], Pertaining to Preemption of Authority Over Prices, Routes, and Services, 149 A.L.R. Fed. 299;  see also, Jim Leslie, Passenger Bumping, 3-AUG Nev. Law. 10 [1994], review of available claims relating to carriage and luggage, including claims of discrimination).   Under the federal law, an airline may not be sued for many general matters touching upon airline operation (see, e.g., Smith v. Comair, 134 F.3d 254 [4th Cir.1998], and Delta Air Lines, Inc. v. Black, supra ), but an airline may be sued for some contract issues apart from “bumping” claims (see, American Airlines, Inc. v. Wolens, 513 U.S. 219, 115 S.Ct. 817, 130 L.Ed.2d 715 [1995], frequent flyer program contractually adopted by airline).   Following such a judicial review of the claims asserted in this case, the court is satisfied that New York State's consumer protection statutes cannot serve as the proper basis for claims against the airline.²  Additionally, a punitive damage claim against an airline is barred by federal preemption, even for a “bumped” passenger.³  Accordingly, the court severs and dismisses the consumer protection and punitive damages claims, which leaves only the contract damages claim before the court.

Contract Damages for a “Bumped” Passenger

 A “bumped” passenger is entitled to contract damages upon no greater proof than facts establishing (1) ticket purchase, (2) involuntary denial of boarding within the meaning of the federal regulations, (3) non-acceptance of an airline's offer of compensation, and (4) damages.   Such a claim for contract damages is measured under state law.

As the items to be embraced within contract damages for a passenger “bumped” from a domestic flight, only a handful of cases on point nationwide have granted relief on this issue (see, Smith v. Piedmont Aviation, Inc., 567 F.2d 290, 292 [5th Cir.1978], reciting as a factor in damages, inconvenience and a need to make alternate arrangements, including rental of a car to reach destination, $1,051.80 awarded;  Lopez v. Eastern Airlines, Inc., supra, 677 F.Supp. at 183, “inconvenience, delay and uncertainty are worth something even in the absence of out-of-pocket costs” for passenger arriving at midnight instead of at a mid-evening hour, $450 awarded;  Goranson v. Trans World Airlines, 121 Misc.2d 68, 78 and 80, 467 N.Y.S.2d 774 [City Ct. White Plains, 1983], “courts have held that damages may consist of a wide variety of elements, including expenses for substitute or alternate transportation, meals, compensation for humiliation, outrage and inconvenience” and damages held to include cost of unused pre-paid arrangements where replacement flight delayed departure for two days, $1,500 awarded;  Levy v. Eastern Airlines, 113 Misc.2d 847, 449 N.Y.S.2d 906 [Civ.Ct. N.Y. Co.1982, Hentel, J.], accepting as prima facie measure of damages twice face value of tickets, $1,074 awarded).⁴

In addition to case law, two sets of federal regulations give some guidance as to the dollar amount of damages which an airline should reasonably foresee in a “bumping” situation.   The first regulation is the “bumping” regulation and airlines must contemplate that an impacted passenger would assert a claim exceeding the $400 per ticket lodestar compensation figure adopted in 1978 by the federal regulations, as well the fact that the $400 figure would be adjusted to its current economic value.   Taking judicial notice of inflation (29 Am.Jur.2d Evidence § 68, Current financial data;  interest, discount, and exchange rates, “the effect that inflation has already had on the value of money over a specific period of time is judicially noticeable”), the inflation-adjusted equivalent to the 1978 figure of $400 is equal to $1,219.63 in 2005 dollars for each passenger, according to a U.S. Bureau of Labor Statistics inflation calculator.⁵

And, still along general lines, it can be observed that the airline could also expect a somewhat increased claim where the “bumped” passenger has (1) a round trip scheduled with (2) a return flight date showing an appreciable layover period.   The formula set forth in 14 C.F.R. § 250.5 ignores round-trip passengers, for it refers only to the ticket price to “the Passenger's next Stopover, or if none, to the Passenger's final destination․” It would appear that Continental does not distinguish flyers on a return or one-way ticket from passengers on the first portion of a round-trip a distinction which an airline could add to its priority “bumping” rules, which each airline establishes independently under C.F.R. § 250.3 notwithstanding that such a distinction might reduce costs and inconvenience flowing from disruption of ground arrangements for a round-trip customer.

A second element is that a “bumped” passenger is also often exposed to the problem of lost or delayed luggage, which typically is checked before a passenger is denied boarding privileges.   Under 14 C.F.R. § 254.4, an airline may be liable for “provable direct or consequential damages” for lost, destroyed, or delayed baggage up to the amount of $2,800 per passenger for domestic flights (see, discussing applicable law for claim when amount was $1,250 per passenger, Finestone v. Continental Airlines, Inc., 195 Misc.2d 795, 759 N.Y.S.2d 623 [App. Term 2d Dept.2003] ).

Accordingly, taking together both regulations regarding the loss of the flight boarding privileges and the deprivation of luggage and totaling the dollar figures, a working current economic figure of roughly $4,019 would appear to be within the expectation of an airline per “bumped” passenger, subject to proof of higher or lower damages.   Plaintiff's claim of $4,000 in damages clearly is inside this recognizable ballpark.

 Against this background, the court can turn to a New York definition of cognizable damages.   A starting point is the basic consideration that contract damages can be “general, thus requiring only that plaintiff prove that they flowed naturally from the breach, or ․ special ․ which, to be compensable, must have been foreseeable and within the contemplation of the parties at the time the contract was made” (American List Corp. v. U.S. News and World Report, Inc., 75 N.Y.2d 38, 41, 550 N.Y.S.2d 590, 549 N.E.2d 1161 [1989];  accord, Pakistan Arts & Entertainment Corp. v. Pakistan International Airlines Corp., 232 A.D.2d 29, 660 N.Y.S.2d 741 [2d Dept.1997] ).   There are three identifiable ingredients of such damages.

 First, as to out-of-pocket expenses flowing from the loss of passage, claimant testified that he was unable to recoup $1,360 of pre-paid expenses.   This item falls within the class of traditionally recognized damages for “bumped” passengers.   Had claimant arranged a substitute trip, other supplemental calculations might be required (Wells v. Holiday Inns, Inc., 522 F.Supp. 1023, 1025 [D.C.Mo.1981], involving “overbooking” at a hotel, offsetting savings against increased costs, as well as recognizing an allowance for typical expenses involved in a change of travel plans, such as telephone calls to family members).

 Second, it is well settled that an award for inconvenience, delay and uncertainty is cognizable under New York law.   Here, a father and teenage daughter were bumped on the outward leg of a week-long round trip during the holiday season to a resort location, leaving the claimant father subject to the immediate upset of being denied boarding in a public setting, and with resulting inconvenience continuing for some period of time thereafter.   Inconvenience damages represent compensation for normal reactions and are clearly distinguishable from, and definitively not a disguised award for, severe emotional distress as often pleaded in tort cases.⁶

Although the basis for inconvenience damages was not explored closely in the cases which awarded them to New York passengers, this type of award stems from a well settled exception to the “general rule [that] mental suffering resulting from a breach of contract is not a subject of compensation * * * * [which] does not obtain, however, as between a common carrier or an innkeeper and an insulted and abused passenger or guest, or the proprietor of a public resort and a patron publicly ejected” (Boyce v. Greeley Sq. Hotel Co., 228 N.Y. 106, 111, 126 N.E. 647 [1920], see, Johnson v. Jamaica Hosp., 62 N.Y.2d 523, 528, 478 N.Y.S.2d 838, 467 N.E.2d 502 [1984], recognizing continued viability of exception on proper facts;  Lumauig v. Philippine Airlines, 624 F.Supp. 238 [S.D.N.Y. 1985], considering exception but finding emotional distress claim went beyond its scope;  see also, Pollock v. Holsa Corp., 98 A.D.2d 265, 266-267, 470 N.Y.S.2d 151 [1st Dept.1984], plaintiff's hotel room given to another, resulting in long drive at night to another location, court observing, “The ‘physical discomfort’ experienced by plaintiff as a result of this inconvenience is an item of damage that was within the contemplation of the parties”).   This principle is appropriately applied when a license to use a public accommodation is withdrawn in the presence of others (Aaron v. Ward, 203 N.Y. 351, 354, 96 N.E. 736 [1911], involving a bathhouse, exception applies where “[t]he action is for a breach of the defendant's contract, and not for a tortious expulsion”;  Morningstar v. Lafayette Hotel Co., 211 N.Y. 465, 467, 105 N.E. 656 [1914], cafe, expelled customer perceived to be “a chronic faultfinder”).   On the record presented and the law, inconvenience damages of $1,000 are awarded.

 Third, regarding the deprivation of use of the contents of checked luggage, this factor was also present and claimant testified that, had their baggage been made available, he would have arranged for a local substitute ski trip.   This portion of the claim was unopposed in that the claimant testified, without protest or objection, that the luggage should have been removed from the flight (see, both cases awarding some damages for failure to remove luggage from a flight, Cohen v. Varig Airlines [S.A. Empresa de Viacao Aerea Grandense], supra, and Kupferman v. Pakistan International Airlines, 108 Misc.2d 485, 438 N.Y.S.2d 189 [Civ.Ct. N.Y. Co.1981] ).⁷  Further, given that the father and daughter were scheduled for a week-long trip and that their luggage had already been taken from them, the airline was on notice at the time of “bumping” that special damages could arise (17 N.Y. Jur.2d Carriers § 367, Special damages, “special damages for loss of use of a piece of equipment ․ are not recoverable absent evidence that the carrier knew or should have known that the owner would likely suffer the loss of use if equipment was not delivered as scheduled” or as would have been proper).

 An allowance for the deprivation of use of the contents of the luggage is warranted, bearing in mind that “[m]oney damages are substitutional relief designed in theory ‘to put the injured party in as good a position as he would have been put by full performance of the contract, at the least cost to the defendant and without charging him with harms that he had no sufficient reason to foresee when he made the contract’ ” (Freund v. Washington Square Press, Inc., 34 N.Y.2d 379, 382, 357 N.Y.S.2d 857, 314 N.E.2d 419 [1974], quoting 5 Corbin, Contracts, § 1002, pp. 31-32).   As to valuation, as set forth in Lake v. Dye, 232 N.Y. 209, 214, 133 N.E. 448 (1921), “the amount of the recovery ought not to be restricted to the price which could be realized by a sale in the market” but should consider the owner's “actual money loss, all the circumstances and conditions considered, resulting from his being deprived of the property, not including ․ any sentimental or fanciful value he may ․ place upon [the property].”   The owner of the personal property may give testimony as to such value (N.Y. Jur.2d Damages § 87, Personal articles;  wearing apparel [2005], “The owner of clothing or other personal item who is familiar with its quality and condition is credited with having some knowledge of its value and may give an estimate of its value without having to qualify as an expert”), and clearly may also testify regarding the anticipated use of the items checked.

Recognizing that 14 C.F.R. § 254.4 sets a limit of $2,800 per passenger on claims for lost, destroyed, or delayed baggage, the court awards $750 as rough compensation, giving consideration of a replacement rental value of the father's ski equipment and the replacement cost of purchase of winter sports wear at a non-luxurious quality for temporary use.   Such an amount would have placed claimant in a position that he could have arranged a substitute local ski trip or day-trips for himself and his daughter, as he stated he would have done had he not already been subject to an out-of pocket loss over $1,000 by reason of defendant's conduct.   Given that no such trips were arranged, the court will not attempt to fix a figure for the cost of anything more than adequate compensation for the deprivation of use of the checked materials.

As to the damages testimony, this court had its opportunity to “view the witnesses, hear the testimony and observe demeanor” (People v. Bleakley, 69 N.Y.2d 490, 495, 515 N.Y.S.2d 761, 508 N.E.2d 672 [1987];  see also, Northern Westchester Professional Park Assocs. v. Town of Bedford, 60 N.Y.2d 492, 499, 470 N.Y.S.2d 350, 458 N.E.2d 809 [1983], and Hoover v. Durkee, 212 A.D.2d 839, 841, 622 N.Y.S.2d 348 [3rd Dept.1995] ).   To the extent that there was a dispute as to the facts, the court found claimant credible and credits his version of the facts as true or that, given the explanation he received under pressing circumstances, he was left under the impression were true.   It does appear that claimant was not given an offer of compensation in writing, as required by the federal regulations (14 C.F.R. § 250.9), and that the airline also failed to post the required information regarding its “bumping” policies (14 C.F.R. § 250.11).

Based on the foregoing, judgment shall enter for the total amount of $3,110.00, comprised of the three items as to which damages have been granted above, with interest from December 25, 2004, the date of the “bumping.”   The court determines that such award achieves substantial justice in this Small Claims matter (N.Y.C.C.A. § 1805[a] ).   It is noted that plaintiff did not assert a claim on behalf of the minor daughter.

This decision constitutes the order of the court.

FOOTNOTES

1.   Under 14 C.F.R. § 250.5, a “bumped” passenger is entitled to compensation of $400 per passenger or a lower amount computed “at the rate of 200% of the sum of the value of the passenger's remaining flight coupons up the Passenger's next Stopover, or if none, to the Passenger's final destination”;  an identical text appears in the Continental Contract of Carriage as paragraph (4)(a).   This compensation rule applies only if a passenger is actually “bumped” from the flight because of overbooking (14 C.F.R. § 250.6;  see, Delta Air Lines, Inc. v. Black, 116 S.W.3d 745 [Sup.Ct. Tex.2003], cert. denied 540 U.S. 1181, 124 S.Ct. 1418, 158 L.Ed.2d 84 [2004], passenger not “bumped” who declined coach seat when first class seat not available, and O'Carroll v. American Airlines, Inc., 863 F.2d 11 [5 Cir.1989], cert. denied sub nom. O'Carroll v. Chaparral Airlines, Inc., 490 U.S. 1106, 109 S.Ct. 3158, 104 L.Ed.2d 1021 [1989], intoxicated passengers removed from airplane not “bumped”).

2.   Claimant has raised claims under G.B.L. §§ 349 and 350.   As to G.B.L. § 349, a claim for deceptive consumer practices is prohibited by statute where the airline has complied with federal requirements (G.B.L. § 349[d], “In any such action it shall be a complete defense that the act or practice ․ complies with the rules and regulations of, and the statutes administered by ․ any official department, division, commission or agency of the United States”;  accord, Mendelson v. Trans World Airlines, Inc., 120 Misc.2d 423, 424, 466 N.Y.S.2d 168 [Sup.Ct. Queens Co.1983] ).   As to G.B.L. § 350, which bars false advertising, this statute has been held inapplicable to airlines (People by Abrams v. Trans World Airlines, Inc., 171 A.D.2d 76, 575 N.Y.S.2d 1 [1st Dept.1991];  see also, Morales v. Trans World Airlines, Inc., 504 U.S. 374, 384, 112 S.Ct. 2031, 119 L.Ed.2d 157 [1992], Texas consumer protection statute preempted by federal law).   Even absent federal preemption, it has been observed that overbooking is such a well-known airline practice that it logically cannot serve as a basis for a claim of consumer fraud (Lopez v. Eastern Airlines, Inc., 677 F.Supp. 181 [S.D.N.Y. 1988, Sweet, J.] ).

3.   Preemption precludes punitive damage claims by “bumped” passengers (West v. Northwest Airlines, Inc., 995 F.2d 148, 151 [9th Cir.1993], cert. denied 510 U.S. 1111, 114 S.Ct. 1053, 127 L.Ed.2d 374 [1994] ).   Further, where, as here, the defendant's actions are permitted by statute and regulation, the airline has taken no action violating a “public right,” which showing is necessary to support punitive damages liability (Rocanova v. Eq. Life Assurance Soc. of the U.S., 83 N.Y.2d 603, 613, 612 N.Y.S.2d 339, 634 N.E.2d 940 [1994], punitive damages are awarded “not to remedy private wrongs but to vindicate public rights”;  see also, New York University v. Continental Ins. Co., 87 N.Y.2d 308, 639 N.Y.S.2d 283, 662 N.E.2d 763 [1995] ).

4.   There are a few additional opinions which can only be used to illustrate types of actual or potential damages which could be claimed, for they do not award damages under domestic departure provisions.   Some deny relief on independent substantive grounds (Delta Air Lines, Inc. v. Black, supra, 116 S.W.3d at 748, Dallas husband and wife requested cost of chartering “private jet to and from Las Vegas at a cost of $13,150, which included the aircrew's expenses in Las Vegas for two days”;  Alam v. P.I.A., 1995 WL 17201349, *1 [S.D.N.Y. 1995, Lee, Magis.], report adopted 1995 WL 489709 [S.D.N.Y. 1995], passenger sought cost of an alternate ticket, “ ‘lodging, travel, loss of earnings, and sundry expenses' while his family was delayed”;  Sassouni v. Olympic Airways, 769 F.Supp. 537 [S.D.N.Y. 1991], emotional distress claimed because alternate international passage offered involved travel on a religious holiday).   Two did not set forth the legal basis of liability (Cenci v. Mall Airways, Inc., 140 Misc.2d 907, 531 N.Y.S.2d 743 [City Ct. Albany 1988], partial refund of ticket price directed;  Musso v. Tourlite Intern., Inc., 131 Misc.2d 575, 500 N.Y.S.2d 969 [Civ.Ct. N.Y. Co. Small Claims 1986], damages awarded based upon cost of substitute airline tickets and rental car used for local transportation during delay period).   Older “bumping” cases arising prior to the adoption of the current federal regulations such as Karp v. North Central Air Lines, Inc., 583 F.2d 364 (7th Cir.1978), and Wills v. Trans World Airlines, Inc., 200 F.Supp. 360 (S.D.Cal.1961) are not considered here because of differences in both the available causes of action and the rules governing cognizable damages.

5.   The inflation calculator appears on the Internet at http:// data.bls.gov/ cgi-bin/cpicalc.pl, (accessed Nov. 9, 2005), and is based upon adjustments to the Consumer Price Index (“CPI”), with the current year including CPI data for the most recent available month.   The appropriateness of an inflation adjustment was noted by Elliott Blanchard, Terminal 250:  Federal Regulation of Airline Overbooking, supra, 79 N.Y.U. L.Rev. at 1826.

6.   A full-blown claim for emotional distress is not permitted for a contract-based claim (Cohen v. Varig Airlines [S.A. Empresa de Viacao Aerea Grandense], 62 A.D.2d 324, 405 N.Y.S.2d 44 [1st Dept.1978];  Wehringer v. Standard Sec. Life Ins. Co. of New York, 57 N.Y.2d 757, 758, 454 N.Y.S.2d 984, 440 N.E.2d 1331 [1982], “absent a duty upon which liability can be based, there is no right of recovery for mental distress resulting from the breach of a contract-related duty”;  Fleming v. Allstate Ins. Co., 106 A.D.2d 426, 482 N.Y.S.2d 519 [2d Dept.1984], affd. 66 N.Y.2d 838, 498 N.Y.S.2d 365, 489 N.E.2d 252 [1985], cert. denied 475 U.S. 1096, 106 S.Ct. 1493, 89 L.Ed.2d 894 [1986];  accord, Crowley v. S.S. Arcadia, 244 F.Supp. 597, 598 [D.C.Cal.1964], involving claim by “bumped” cruise ship passenger, “contention that [passengers] are entitled to damages for mental suffering, in this action for breach of contract, is contrary to the great weight of authority” and citing Southern Express Co. v. Byers, 240 U.S. 612, 36 S.Ct. 410, 60 L.Ed. 825 [1916];  see generally, Gregory G. Sarno, Annotation, Recoverability of Compensatory Damages for Mental Anguish or Emotional Distress for Breach of Service Contract, 54 A.L.R.4th 901).   Inconvenience damages, as available under state law, are not barred by the federal statute, regulations, or decisions (see, Atherton v. F.D.I.C., 519 U.S. 213, 226-227, 117 S.Ct. 666, 136 L.Ed.2d 656 [1997], for a discussion of applying federal standards to a state law question).   Such damages may be available for passengers of international flights (Shannon Clark Kief, Annotation, Recovery for Emotional and Mental Injury under Warsaw Convention, 196 A.L.R. Fed. 221, collecting decisions).

7.   In this case, the airline did not argue that any contractual limitation of liability or principle of law limited or barred consideration of this claim.   For a general reference as to this area of “baggage” law, see Stephen C. Fulton, Airline Baggage Claims:  A Tour Through the Legal Minefield, 5 Fla. Int'l L.J. 349 (1990).

DIANE A. LEBEDEFF, J.