Court Opinion

ID: 4540515
Source: CourtListenerOpinion
Date Created: 2020-06-10 22:01:18.394593+00
Date Added: 2024-06-11T08:00:16.152014
License: Public Domain

In the

        United States Court of Appeals
                   For the Seventh Circuit
                       ____________________
No. 19‐3001
BRIAN HUGHES, individually,
and on behalf of all others similarly situated,

                                                    Plaintiff‐Appellant,

                                    v.

SOUTHWEST AIRLINES COMPANY,
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.
                       ____________________

        SUBMITTED MAY 13, 2020 — DECIDED JUNE 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 FLAUM, HAMILTON, and ST. EVE, Circuit Judges.
    FLAUM, Circuit Judge. Brian Hughes brought a purported
class action suit against Southwest Airlines for breach of con‐
tract after it canceled his flight to Chicago because it lacked
suﬃcient 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 aﬃrm.
                            I. Background
    Plaintiﬀ Brian Hughes bought a Southwest Airlines ticket
to fly him from Phoenix to Chicago on February 11, 2018.
Shortly before the scheduled boarding time, Southwest can‐
celled the flight and informed Hughes it might be several
days before it could reschedule his flight. Hughes asserts that
Southwest cancelled his flight because it ran out of de‐icing
fluid in Chicago, leading the airline to cancel hundreds of
flights out of and into Midway Airport. According to Hughes,
no other airline had a similar issue that day. Hughes eventu‐
ally decided to fly 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 suﬃ‐
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 plaintiﬀ’s favor.” Hutchison v. Fitzgerald Equip.
Co., Inc., 910 F.3d 1016, 1025 (7th Cir. 2018) (citation omitted).
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 identification acceptable to Carrier to confirm
       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 final destination as a result of a
       flight cancellation, Carrier‐caused missed con‐
       nection, flight delay, or omission of a scheduled
       stop, Carrier will either transport the Passenger
       at no additional charge on another of Carrier’s
       flights, 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
       flight according to Carrier’s published schedule,
       or changes the schedule of any flight, Carrier
       will, at the request of a Passenger with a con‐
       firmed Ticket on such flight, take one of the fol‐
       lowing actions:
           (i) Transport the Passenger at no additional
           charge on Carrier’s next flight(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 flight, 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, fire, fog, flooding, 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 aﬀecting Carrier’s service,
      mechanical diﬃculties by entities other than
      Carrier, Air Traﬃc Control, the inability to ob‐
      tain fuel, airport gates, labor, or landing facili‐
      ties for the flight 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 suﬃcient de‐icer on hand, thus forcing him to
incur damages (such as lodging in Omaha) in his attempt to
reach Chicago sooner rather than wait days for an alternate
flight. The district court concluded that the Contract did not
6                                                     No. 19‐3001

require, explicitly or implicitly, Southwest to maintain suﬃ‐
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
plaintiﬀ must show: “(1) the existence of a valid contract;
(2) performance or tendered performance by the plaintiﬀ;
(3) breach of the contract by the defendant; and (4) damages
to the plaintiﬀ 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 flight is not itself a breach of the
Contract, because the Contract allows Southwest to fulfill its
duties to Hughes by placing him on an alternate flight 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 flight, it “will either transport the
Passenger at no additional charge on another of Carrier’s
flights, 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 qualified 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 flight cancellation,
Southwest will “[t]ransport the Passenger at no additional
charge on Carrier’s next flight(s) on which space is available
to the Passenger’s intended destination” or refund the fare.
Again, these options are not qualified or limited in any man‐
ner.
No. 19‐3001                                                      7

    The complaint reflects that Southwest told Hughes it
could fly him directly to Chicago in several days, but also of‐
fered him an earlier flight connecting in Omaha, which he ac‐
cepted. Faced with the fact that the cancellation of the flight
itself was not a breach, Hughes argues that Southwest
breached an implied Contract term: maintaining suﬃcient de‐
icer to avoid flight 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 flight, 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 written 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 reflect the parties’ real intentions. Obviously,
courts must be quite cautious in exercising this power.” Id.
Hughes contends that, in cold climates, suﬃcient de‐icer is a
necessary condition for flying, 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 written instrument itself, and it must appear
that it was so clearly within the contemplation of the parties
8                                                   No. 19‐3001

that they deemed it unnecessary to express it.” Id. at 748 (cita‐
tion and internal quotation marks omitted). Reading the Con‐
tract as a whole, we do not intuit that the parties contemplated
that Southwest would have on hand the resources to fly 100%
of its flights 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 suﬃcient 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 suﬃcient de‐icer, but adequate staﬀ 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 flight or a refund, “Carrier shall not
be liable for any failure or delay in operating any flight, 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 flight 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 flight 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 unqualified. 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 fulfill its duties in the case of
cancellation.
                           III. Conclusion
   Because Southwest fulfilled its duties under the Contract
by oﬀering Hughes a later flight or a refund, the district court
appropriately held that Hughes failed to state a claim for
breach of contract.2 Accordingly, we AFFIRM 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

   HAMILTON, Circuit Judge, concurring in the judgment. I
agree with my colleagues that we should aﬃrm dismissal,
but we should aﬃrm on a narrower ground. The point of
disagreement hinges on an old and subtle issue in contract
law: the diﬀerence 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 flights 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 flights, 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 plaintiﬀ’s flight 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 aﬃrm is that plaintiﬀ has al‐
leged suﬃciently that Southwest breached its promise, but
that it provided all remedies required under the contract.
The diﬀerence has little practical eﬀect here, but it could be
important in other cases. Treating Southwest’s cancellation
as a breach with limited remedies fits the parties’ expecta‐
tions better than reading the contract as giving Southwest a
free choice among flying on time, flying late, not flying at all
and refunding the ticket price, or not flying and giving the
passenger only credit toward a future flight.
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 specifically weather‐related cancellations. They
both overlap and conflict 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,” defined
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 flights 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 defined to include all
“meteorological events.” The subsections work together to
say that if a passenger’s flight is cancelled or rescheduled,
Southwest will, at the passenger’s request, either transport
the passenger to her intended destination on its next availa‐
ble flight 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 diﬀerent and overlapping provisions are sup‐
posed to fit together is a puzzle. In the event of a cancella‐
tion, is transportation on a later flight a suﬃcient remedy or
actual performance? What about a credit for future flights?
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 specifically 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 diﬀerence 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 diﬀerence
but provide little guidance in distinguishing between them
in particular cases. See 11 Corbin on Contracts § 58.18 (oﬀer‐
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
diﬀerence 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 diﬀerence 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 flights 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 conflict 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 oﬀer a
refund or future credit, no matter 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 contract
14                                                        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 utterly discretionary choice, regardless of reasons,
among (a) flying her to her destination on time, (b) flying her
to her destination eventually, (c) refunding her money, or (d)
keeping her money and merely oﬀering credit for future
travel, perhaps to some other destination. Yet by finding that
Southwest did not even breach its contract here, my col‐
leagues attribute to these parties the improbable intent to
confer such unfettered 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 five 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 flight. 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.