### In the



# United States Court of Appeals

For the Seventh Circuit

____________________

No. 19

‐ 3001

B RIAN H UGHES

, individually,

and on behalf of all others similarly situated,

Plaintiff

‐ Appellant

,

v.

S OUTHWEST A IRLINES C OMPANY

,

a foreign corporation,

Defendant

‐ Appellee

.

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 18

‐ cv

‐ 05315

— Sara L. Ellis

, Judge

.

____________________

S UBMITTED M AY 13, 2020 

— D ECIDED J UNE 10, 2020

____________________

 We granted the parties’ joint motion to decide this case without oral

argument because the briefs and record adequately present the facts and

legal arguments, and oral argument would not significantly aid the Court.

Fed. R. App. P. 34(a)(2)(C).2 No. 19

‐ 3001

Before F LAUM

, H AMILTON

, and S T

. E VE

, Circuit Judges

.

F LAUM

, Circuit Judge

. Brian Hughes brought a purported

class action suit against Southwest Airlines for breach of con

‐

tract after it canceled his fl ight to Chicago because it lacked

su ffi cient de

‐ icing solution at Midway Airport. The district

court dismissed the complaint for failure to state a claim and

because the contract barred the claimed damages. Hughes ap

‐ pealed. Because Hughes failed to adequately identify any

breach, we now a ffi rm.

I. Background

Plainti ff Brian Hughes bought a Southwest Airlines ticket

to fl y him from Phoenix to Chicago on February 11, 2018.

Shortly before the scheduled boarding time, Southwest can

‐

celled the fl ight and informed Hughes it might be several

days before it could reschedule his fl ight. Hughes asserts that

Southwest cancelled his fl ight because it ran out of de

‐ icing

fl uid in Chicago, leading the airline to cancel hundreds of

fl ights out of and into Midway Airport. According to Hughes,

no other airline had a similar issue that day. Hughes eventu

‐ ally decided to fl y to Omaha, spend the night at a hotel there,

and proceed to Chicago the next day, incurring consequential

damages for the costs of lodging and the like.

Hughes brought a purported class action against South

‐

west, alleging breach of contract and negligence. 1 He argued

that his ticket obligated Southwest to timely transport him to

his destination, and the airline’s failure to maintain a su ffi‐

cient supply of de

‐ icer entitled him to damages. The district

1 As part of his class claims, Hughes states that Southwest also can

‐

celled flights due to insufficient de

‐ icer on several other days in 2017 and

2018.No. 19

‐ 3001 3

court dismissed the negligence claim with prejudice and

Hughes did not appeal. The court dismissed the breach

‐ of

‐

contract claim without prejudice. Hughes amended his com

‐ plaint, which the court subsequently dismissed with preju

‐

dice. Hughes timely appealed the dismissal of his contract

claim.

II. Discussion

“We review de novo a district court’s grant of a motion to

dismiss for failure to state a claim, accepting all well

‐ pleaded

facts in the complaint as true and drawing all reasonable in

‐

ferences in the plainti ff ’s favor.” Hutchison v. Fi tz gerald Equip.

Co., Inc.

, 910 F.3d 1016, 1025 (7th Cir. 2018) (citation omi tt ed).

The district court found that Hughes failed to plead that

Southwest breached a provision of the contract of carriage

(“Contract”). We agree.

A. Contractual Provisions

The parties’ dispute centers on the Contract, which con

‐

tains a choice of law provision identifying Texas law as con

‐ trolling. The Contract further contains several relevant provi

‐

sions that refer to Southwest as “Carrier.” We reproduce these

provisions below.

Section 4 states:

No person shall be entitled to transportation ex

‐

cept upon presentation of a valid Ticket or proof

of identi fi cation acceptable to Carrier to con fi rm

that transportation has been purchased. Such

Ticket shall entitle the Passenger to transporta

‐

tion subject to this Contract of Carriage and, in

particular, certain terms and conditions as fol

‐

lows.4 No. 19

‐ 3001

...

Delays or Involuntary Cancellations. If a Pas

‐ senger’s scheduled transportation is canceled,

terminated, or delayed before the Passenger has

reached his fi nal destination as a result of a

fl ight cancellation, Carrier

‐ caused missed con

‐

nection, fl ight delay, or omission of a scheduled

stop, Carrier will either transport the Passenger

at no additional charge on another of Carrier’s

fl ights, refund the fare for the unused transpor

‐

tation in accordance with the form of payment

utilized for the Ticket, or provide a credit for

such amount toward the purchase of future

travel.

Section 9(a)(1) further explains:

Canceled Flights or Irregular Operations. In the

event Carrier cancels or fails to operate any

fl ight according to Carrier’s published schedule,

or changes the schedule of any fl ight, Carrier

will, at the request of a Passenger with a con

‐

fi rmed Ticket on such fl ight, take one of the fol

‐ lowing actions:

(i) Transport the Passenger at no additional

charge on Carrier’s next fl ight(s) on which

space is available to the Passenger’s in

‐

tended destination, in accordance with Car

‐

rier’s established reaccommodation prac

‐

tices; or

(ii) Refund the unused portion of the Passen

‐ ger’s fare in accordance with Section 4c.No. 19

‐ 3001 5

Section 9(a)(4) contains a liability

‐ limiting clause:

Limitation of Liability. Except to the extent pro

‐

vided in Section 9a, Carrier shall not be liable for

any failure or delay in operating any fl ight, with

or without notice for reasons of aviation safety

or when advisable, in its sole discretion, due to

Force Majeure Events, including, without limi

‐

tation, acts of God, meteorological events, such

as storms, rain, wind, fi re, fog, fl ooding, earth

‐ quakes, haze, or volcanic eruption. It also in

‐

cludes, without limitation, government action,

disturbances or potentially volatile interna

‐

tional conditions, civil commotions, riots, em

‐ bargoes, wars, or hostilities, whether actual,

threatened, or reported, strikes, work stoppage,

slowdown, lockout or any other labor related

dispute involving or a ff ecting Carrier’s service,

mechanical di ffi culties by entities other than

Carrier, Air Tra ffi c Control, the inability to ob

‐

tain fuel, airport gates, labor, or landing facili

‐

ties for the fl ight in question or any fact not rea

‐ sonably foreseen, anticipated or predicted by

Carrier.

B. Failure to State a Claim

Hughes argues that under Contract § 4 he was entitled to

transportation and that Southwest breached the Contract by

failing to keep su ffi cient de

‐ icer on hand, thus forcing him to

incur damages (such as lodging in Omaha) in his a tt empt to

reach Chicago sooner rather than wait days for an alternate

fl ight. The district court concluded that the Contract did not6 No. 19

‐ 3001

require, explicitly or implicitly, Southwest to maintain su ffi‐

cient reserves of de

‐ icer, and that imposing such a require

‐

ment would constitute an impermissible implied term. We

agree.

To establish a breach

‐ of

‐ contract

‐ claim under Texas law, a

plainti ff must show: “(1) the existence of a valid contract;

(2) performance or tendered performance by the plainti ff ;

(3) breach of the contract by the defendant; and (4) damages

to the plainti ff resulting from that breach.’” Hunn v. Dan Wil

‐

son Homes, Inc.

, 789 F.3d 573, 579 (5th Cir. 2015) (quoting Foley

v. Daniel

, 346 S.W.3d 687, 690 (Tex. App. 2009)).

The primary issue facing Hughes’s claim is that South

‐

west’s cancellation of his fl ight is not itself a breach of the

Contract, because the Contract allows Southwest to ful fi ll its

duties to Hughes by placing him on an alternate fl ight or re

‐ funding his fare. Contract § 4 entitled Hughes to transporta

‐

tion subject to the terms of the Contract ; that same section states

that if Southwest cancels a fl ight, it “will either transport the

Passenger at no additional charge on another of Carrier’s

fl ights, refund the fare for the unused transportation

..., or

provide a credit for such amount toward the purchase of fu

‐

ture travel.” These options are not quali fi ed in any way; they

are not, for instance, limited to circumstances where the can

‐

cellation was beyond Southwest’s control. Likewise, Contract

§ 9(a)(1) reiterates that in the event of a fl ight cancellation,

Southwest will “[t]ransport the Passenger at no additional

charge on Carrier’s next fl ight(s) on which space is available

to the Passenger’s intended destination” or refund the fare.

Again, these options are not quali fi ed or limited in any man

‐

ner.No. 19

‐ 3001 7

The complaint re fl ects that Southwest told Hughes it

could fl y him directly to Chicago in several days, but also of

‐

fered him an earlier fl ight connecting in Omaha, which he ac

‐ cepted. Faced with the fact that the cancellation of the fl ight

itself was not a breach, Hughes argues that Southwest

breached an implied Contract term: maintaining su ffi cient de

‐

icer to avoid fl ight cancellations. The district court was correct

to reject this argument for two reasons.

First, having determined that Southwest did not breach

the Contract by cancelling a scheduled fl ight, it would be

strange to hold that the circumstances underlying the cancel

‐

lation somehow constituted a breach of an unstated contrac

‐

tual duty. It is the cancellation that is the salient fact for the

passenger.

Second, to read in such an implied duty would violate

Texas law regarding contracts. Like many states, Texas disfa

‐

vors reading implied terms into a contract. “Generally, a court

looks only to the wri tt en agreement to determine the obliga

‐

tions of contracting parties.” Universal Health Servs., Inc. v. Re

‐

naissance Women’s Grp., P.A.

, 121 S.W.3d 742, 747 (Tex. 2003).

“In rare circumstances, however, a court may imply a cove

‐

nant in order to re fl ect the parties’ real intentions. Obviously,

courts must be quite cautious in exercising this power.” Id.

Hughes contends that, in cold climates, su ffi cient de

‐ icer is a

necessary condition for fl ying, like having a pilot or fuel;

therefore, the ability to de

‐ ice planes should be considered an

implicit term of the Contract.

“An implied covenant must rest entirely on the presumed

intention of the parties as gathered from the terms as actually

expressed in the wri tt en instrument itself, and it must appear

that it was so clearly within the contemplation of the parties8 No. 19

‐ 3001

that they deemed it unnecessary to express it.” Id. at 748 (cita

‐

tion and internal quotation marks omi tt ed). Reading the Con

‐

tract as a whole, we do not intuit that the parties contemplated

that Southwest would have on hand the resources to fl y 100%

of its fl ights as scheduled. Rather, the Contract contemplates

that the airline may occasionally be unable to do so and pro

‐

vides courses of action in such cases. This is not the “rare cir

‐

cumstance” where the possession of su ffi cient de

‐ icer was “so

clearly within the contemplation of the parties” it need not be

expressed. To hold otherwise would be to implicitly add

countless terms to airlines’ contracts of carriage; not only to

ensure su ffi cient de

‐ icer, but adequate sta ff and fuel (to use

Hughes’s examples), luggage movers and space, and so on. It

is not our place to rewrite contracts.

Finally, Hughes points to the limitation of liability clause

in § 9(a)(4), which states that, beyond providing transporta

‐

tion on the next available fl ight or a refund, “Carrier shall not

be liable for any failure or delay in operating any fl ight, with

or without notice for reasons of aviation safety or when ad

‐

visable, in its sole discretion, due to Force Majeure Events ....”

According to Hughes, we should read this clause to limit the

Contract’s alternate options of a later fl ight or refund to cir

‐

cumstances where the cancellation was caused by force

majeure, or circumstances outside Southwest’s control.

Where Southwest caused the disruption, says Hughes, it is li

‐

able for breach.

The parties debate whether we should read this clause to

refer only to force majeure events or include any events that

implicate aviation safety (including circumstances Southwest

may have caused itself). We need not reach this argument,No. 19

‐ 3001 9

however, because as explained above, Southwest’s cancella

‐

tion of the fl ight alone was not a breach; without a breach,

there is no question of liability. The alternate options in case

of delay or cancellation as laid out in § 4 are unquali fi ed. They

apply regardless of the cause of the disruption. It would be

unreasonable to read the Contract’s limited liability provision

to create liability precisely where an earlier provision lays out

the steps Southwest can take to ful fi ll its duties in the case of

cancellation.

III. Conclusion

Because Southwest ful fi lled its duties under the Contract

by o ff ering Hughes a later fl ight or a refund, the district court

appropriately held that Hughes failed to state a claim for

breach of contract. 2 Accordingly, we A FFIRM the judgment of

the district court.

2 In the alternative, Southwest asks us to hold that the Federal Avia

‐

tion Act preempts suits like Hughes’s, as the claims implicate industry

safety concerns. Like the district court, we decline to address this argu

‐

ment because we affirm the district court’s basis for its decision.10 No. 19

‐ 3001

H AMILTON

, Circuit Judge

, concurring in the judgment. I

agree with my colleagues that we should a ffi rm dismissal,

but we should a ffi rm on a narrower ground. The point of

disagreement hinges on an old and subtle issue in contract

law: the di ff erence between liquidated damages and limited

remedies, on one hand, and alternative modes of perfor

‐

mance on the other.

My colleagues hold that Southwest did not breach its

contract but merely chose an alternative mode of perfor

‐

mance: later fl ights that got the passenger to the same desti

‐

nation. They rely on Section 4(c)(4) of the contract, which

applies to delays and involuntary cancellations generally. It

provides that Southwest will “either transport the Passenger

at no additional charge on another of Carrier’s fl ights, re

‐

fund the fare for the unused transportation in accordance

with the form of payment utilized for the Ticket, or provide a

credit for such amount toward the purchase of future travel .”

(Emphasis added.) My colleagues conclude that cancellation

of plainti ff ’s fl ight was not a breach of the contract at all.

Even Southwest does not argue such an aggressive interpre

‐

tation of Section 4(c)(4).

The narrower ground to a ffi rm is that plainti ff has al

‐ leged su ffi ciently that Southwest breached its promise, but

that it provided all remedies required under the contract.

The di ff erence has li tt le practical e ff ect here, but it could be

important in other cases. Treating Southwest’s cancellation

as a breach with limited remedies fi ts the parties’ expecta

‐

tions be tt er than reading the contract as giving Southwest a

free choice among fl ying on time, fl ying late, not fl ying at all

and refunding the ticket price, or not fl ying and giving the

passenger only credit toward a future fl ight.No. 19

‐ 3001 11

“Interpretations of contracts as a whole are favored so

that none of the language in them is rendered surplusage.”

Ewing Construction Co., Inc. v. Amerisure

, 420 S.W.3d 30, 37

(Tex. 2014). Other contract provisions also address cancella

‐

tions, and speci fi cally weather

‐ related cancellations. They

both overlap and con fl ict with Section 4(c)(4) as interpreted

by my colleagues:

— Section 6(a) says that Southwest has sole discretion to

refuse to transport a passenger for a variety of reasons, in

‐ cluding aviation safety or a “ Force Majeure Event,” de fi ned

very broadly to include “meteorological events, such as

storms.” The passenger’s “sole recourse” under Section 6(a)

for “refused transportation” is a refund, with no “special,

incidental, or consequential damages.” Section 6(a) does not

mention transportation on later fl ights as a remedy, nor does

it mention credit for future trips.

— Section 9(a) applies to “failure to operate as sched

‐

uled.” Subsections 9(a)(1) (“Canceled Flights or Irregular

Operations”) and 9(a)(4) (“Limitation of Liability”) both re

‐

fer to “ Force Majeure Events,” again de fi ned to include all

“meteorological events.” The subsections work together to

say that if a passenger’s fl ight is cancelled or rescheduled,

Southwest will, at the passenger’s request, either transport

the passenger to her intended destination on its next availa

‐

ble fl ight or refund the ticket “in accordance with Section

4c.” Section 9(a) does not mention the future

‐ credit option in

Section 4(c)(4).

How these di ff erent and overlapping provisions are sup

‐ posed to fi t together is a puzzle. In the event of a cancella

‐

tion, is transportation on a later fl ight a su ffi cient remedy or

actual performance? What about a credit for future fl ights?12 No. 19

‐ 3001

And to the extent there is a choice of remedy, does the choice

belong to the passenger or the airline? More abstractly, does

the contract provide for alternative ways to perform, all

without breaching? Or does it provide for limits on liability

in broad and common classes of breaches?

It’s telling that Southwest does not rely on Section 4(c)(4),

as my colleagues do. Instead, Southwest argues primarily

that the contract bars the consequential damages Hughes

seeks here. Appellee’s Br. at 8–9, 17. Southwest relies on the

blend of the broad force majeure language and limitation

‐ of

‐ liability language in Section 9(a). Even for a force majeure

event, this contract does not excuse performance entirely.

Rather, a force majeure event allows Southwest to provide de

‐ layed performance or a refund, and speci fi cally bars conse

‐ quential damages. Delayed performance is what Southwest

provided to Hughes. Under the blend of force majeure and

limited

‐ liability language, his claim was correctly dismissed.

Looking more generally, this Southwest contract illus

‐

trates a common feature in contracts: the parties anticipate

that one might fail to perform as promised, and they spell

out the consequence of such a failure. When the consequence

is a payment by the party failing to perform, the contract can

pose a question in a notoriously murky area of contract law:

the di ff erence between alternative modes of performance

and liquidated damage clauses, seasoned in this case with

the limitation

‐ of

‐ liability language. See Stephen L. Sepinuck,

Liquidated Damages, Alternative Performance, and Ensuring the

Enforceability of Contingent Charges and Fees

, 5 Transactional

Law. 3, 4 (2015) (“the distinction between liquidated damag

‐

es and alternative performance is about as clear as mud”).No. 19

‐ 3001 13

The major contract

‐ law treatises recognize the di ff erence

but provide li tt le guidance in distinguishing between them

in particular cases. See 11 Corbin on Contracts § 58.18 (o ff er

‐ ing four interpretations of such provisions: liquidated dam

‐

ages, penalty, option for not performing, and adjusted con

‐

tract price); 24 Williston on Contracts § 65:7 (suggesting that

di ff erence between alternative performance and liquidated

damages is whether parties intend to continue or terminate

relationship); see also Restatement (Second) of Contracts

§ 361, comment b (distinguishing between liquidated dam

‐

ages and alternative performance).

The di ff erence has no visible practical consequences in

this case, but it could have consequences in other cases. With

a liquidated damages clause, equitable relief or additional

damages might still be available, at least according to

Corbin, Williston, and the Restatement (Second). The possi

‐ bility of additional remedies could be important to South

‐

west passengers whose fl ights are cancelled for reasons not

covered by the broad aviation

‐ safety and force majeure provi

‐

sions in the contract. Treating such cancellations as breaches,

the limitations of liability in Section 9(a)(4) might not apply

(though that result could con fl ict with Section 6(a)—as I said,

the contract can be confusing). But if all cancellations are

covered by Section 4(c)(4), then, according to my colleagues,

there would be no breach and Southwest could merely give

passengers a refund or credit for future travel. That ap

‐ proach turns the contract into a mere option contract:

Southwest can perform if it feels like it, or it can just o ff er a

refund or future credit, no ma tt er the consequences to a pas

‐

senger who was counting on making a particular trip. And if

all cancellations are covered by Section 4(c)(4), other contract14 No. 19

‐ 3001

language becomes redundant, which is of course a result

usually to be avoided in contract interpretation.

One way to think about the choice between alternative

performance and liquidated damages is to ask how much

freedom the promisee intended to give the promisor in

choosing among the alternatives. That question almost an

‐

swers itself here, at least for most passengers. An airline pas

‐

senger (the promisee) wants to arrive at her destination on

time. She recognizes that the world is not perfect, though. If

problems arise, she expects the airline to do its best to take

her there as soon as it can. She does not intend to give the

airline an u tt erly discretionary choice, regardless of reasons,

among (a) fl ying her to her destination on time, (b) fl ying her

to her destination eventually, (c) refunding her money, or (d)

keeping her money and merely o ff ering credit for future

travel, perhaps to some other destination. Yet by fi nding that

Southwest did not even breach its contract here, my col

‐ leagues a tt ribute to these parties the improbable intent to

confer such unfe tt ered discretion on Southwest. I believe it

makes more sense—and stays closer to business realities and

the parties’ intentions—to treat these provisions as a combi

‐

nation of liquidated damages and limitations of damages for

a common form of breach. 1

The option of providing only credit for future travel is

particularly troubling. That might be a good choice for some

1 The Southwest contract is a form contract, of course, but airlines

have long

‐ term relationships with many of their customers. Customers

enter into even contracts of adhesion with expectations about how an

airline will accommodate them in flight delays and cancellations, which

are always a possibility.No. 19

‐ 3001 15

passengers, but what about the passenger who takes an air

‐

line trip to Southwest destinations only once every two,

three, or fi ve years? The credit for future travel might never

be used. At best, the passenger is forced to make an interest

‐

free loan to Southwest for months or years. Not even South

‐

west has argued that we should interpret the contract in

such a lopsided way, and we do not need to. Southwest

drafted this contract with confusing and overlapping provi

‐

sions for the rather routine occurrence of a cancelled fl ight. I

would favor the narrower solution that interprets the ambi

‐ guities posed by the overlaps in favor of the customers. As

‐

sume there was a breach and enforce the limits on damages.